<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): July 12, 1996
-------------
CUPERTINO NATIONAL BANCORP
-----------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 0-18015 33-0060898
- ------------------ ----------- -------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
20230 Stevens Creek, Cupertino, CA 95054
- ---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 996-1144
--------------
NONE
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
The Exhibit Index is on Page 4. Page 1 of 64 Pages
<PAGE>
Item 5. Other Events.
------------
The Registrant issued a press release dated June 6, 1996, announcing
the signing of a definitive agreement for a merger of equals of Registrant with
and into Mid-Peninsula Bancorp ("MPB") and that MPB will change its name to
Greater Bay Bancorp ("GBB") concurrent with closing of the merger. Cupertino
shareholders will receive .81522 of a share of GBB's common stock for each share
of Cupertino common stock in a tax-free exchange to be accounted for as a
"pooling-of-interests", resulting in approximately 49% ownership by Registrant
and approximately 51% ownership by MPB of the surviving corporation, Greater Bay
Bancorp.
In connection with the merger, the Registrant and MPB granted
each other options to purchase up to 19% of the outstanding shares of each
other's common stock under certain circumstances in the event the transaction is
terminated. The merger is expected to be completed in the fourth quarter of
1996, subject to shareholder and regulatory approvals.
The foregoing description is qualified by reference to the Amended
and Restated Agreement and Plan of Reorganization and Merger dated June 26, 1996
attached hereto as Exhibit 2.1 and press release dated June 6, 1996 attached
hereto as Exhibit 99.1, each incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
---------------------------------
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
--------
2.1 Amended and Restated Agreement and Plan of Reorganization
and Merger dated June 26, 1996.
99.1 Press Release dated June 6, 1996.
-2-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Bancorp has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MID-PENINSULA BANCORP
Date: July 12, 1996 By: /s/ C. Donald Allen
-----------------------
C. Donald Allen
Chief Executive Officer
-3-
<PAGE>
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------- -----------
<S> <C>
2.1 Amended and Restated
Agreement and Plan of
Reorganization and
Merger dated
June 26, 1996
99.1 Press Release
dated June 6, 1996
</TABLE>
-4-
<PAGE>
EXHIBIT 2.1
AMENDED AND RESTATED
AGREEMENT
AND
PLAN OF REORGANIZATION AND MERGER
BY AND BETWEEN
MID-PENINSULA BANCORP
AND
CUPERTINO NATIONAL BANCORP
JUNE 26, 1996
<PAGE>
AMENDED AND RESTATED
---------------------
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
-----------------------------------------------
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION AND
MERGER, dated as of June 26, 1996, ("Agreement"), amends and restates an
Agreement and Plan of Reorganization and Merger made and entered into as of June
5, 1996, by and between Mid-Peninsula Bancorp, a California corporation ("Mid-
Peninsula"), and Cupertino National Bancorp, a California corporation
("Cupertino").
A. The Boards of Directors of Mid-Peninsula and Cupertino deem it
advisable and in the best interests of Mid-Peninsula, Cupertino, their
subsidiaries and their respective shareholders that Mid-Peninsula and Cupertino
enter into a business combination, with the expectation that the resulting
company will combine the best elements of both Mid-Peninsula and Cupertino.
Pursuant to such business combination, Cupertino shall merge with and into Mid-
Peninsula (the "Merger") and Mid-Peninsula will change its name to Greater Bay
Bancorp ("Bancorp"). Following the Merger, Cupertino's subsidiary, Cupertino
National Bank & Trust ("CNB") and Mid-Peninsula's subsidiary, Mid-Peninsula Bank
("MPB"), shall be wholly-owned subsidiaries of Bancorp.
B. This Agreement and the Merger Agreement attached as Exhibit A
---------
and intended to be filed with the California Secretary of State (the "Merger
Agreement") have been approved by the Boards of Directors of Mid-Peninsula and
Cupertino, and the principal terms will be submitted for approval of the
shareholders of Cupertino and Mid-Peninsula at special meetings of their
respective shareholders.
C. The Merger is intended to qualify as a tax-free reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the "IRC").
D. Pursuant to the Merger, each Cupertino shareholder will receive,
in exchange for each share of Cupertino common stock ("Cupertino Share" or
"Cupertino Shares"), the number of shares of Bancorp common stock ("Bancorp
Share" or "Bancorp Shares") determined in accordance with the Conversion Ratio
as more fully set forth in this Agreement and in the Merger Agreement (the
"Conversion Ratio").
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein and in the Merger Agreement, the parties hereto agree as
follows:
1. THE MERGER.
----------
1.1 Effective Date. Subject to the terms and conditions of this
--------------
Agreement, the Merger shall become effective on the date ("Effective Date") and
at the time ("Effective
1
<PAGE>
Time of the Merger") an executed copy of the Merger Agreement has been filed
with the California Secretary of State.
1.2 Effect of the Merger. Subject to the terms and conditions of this
--------------------
Agreement, at the Effective Time of the Merger, Cupertino shall be merged with
and into Mid-Peninsula and Mid-Peninsula will change its name to Greater Bay
Bancorp ("Bancorp"). All assets, rights, privileges, immunities, powers,
franchises and interests of Cupertino in and to every type of property (real,
personal and mixed) and choses in action, as they exist as of the Effective
Date, including appointments, designations and nominations and all other rights
and interests as trustee, executor, administrator, registrar of stocks and
bonds, guardian of estate, assignee, receiver and in every other fiduciary
capacity, shall pass and be transferred to and vest in Bancorp by virtue of the
Merger at the Effective Time of the Merger without any deed, conveyance or other
transfer; the separate existence of Cupertino shall cease and the corporate
existence of Mid-Peninsula (with the change of its name as described above) as
Bancorp and as a California corporation shall continue unaffected and unimpaired
by the Merger; and Bancorp shall be deemed to be the same entity as each of
Cupertino and Mid-Peninsula and shall be subject to all of their duties and
liabilities of every kind and description. Bancorp shall be responsible and
liable for all the liabilities and obligations of each of Mid-Peninsula and
Cupertino; and any claim existing or action or proceeding pending by or against
Mid-Peninsula or Cupertino may be prosecuted as if the Merger had not taken
place, or Bancorp may be substituted in its place. Neither the rights of
creditors nor any liens upon the property of either Mid-Peninsula or Cupertino
shall be impaired by reason of the Merger.
2. CONVERSION AND CANCELLATION OF SHARES.
-------------------------------------
2.1 Conversion of Cupertino Shares. At the Effective Time of the Merger,
------------------------------
by virtue of the Merger and without any action on the part of any holder of
Cupertino Shares, subject to Section 2.2, 2.3 and 2.5 of this Agreement, each
outstanding Cupertino Share (other than any shares as to which dissenters'
rights have been perfected) shall be converted into the right to receive .81522
Bancorp Shares (the "Conversion Ratio").
2.2 Fractional Shares. Notwithstanding any other provision hereof, no
-----------------
fractional shares of Bancorp Shares shall be issued to holders of Cupertino
Shares. In lieu thereof, each such holder entitled to a fraction of a Bancorp
Share shall receive, at the time of surrender of the certificate or certificates
representing such holder's Cupertino Shares, an amount in cash equal to the
market value per share of the Mid-Peninsula common stock ("Mid-Peninsula
Shares"), calculated (to the nearest hundredth) by taking the average of the
closing bid and asked prices quoted by each brokerage firm then acting as a
market maker of Mid-Peninsula Shares, for each of the twenty (20) consecutive
trading days up to and including the last business day of the month-end
immediately preceding the Closing Date (the "Determination Date") (whether or
not there were any trades in Mid-Peninsula Shares on such days), multiplied by
the fraction of a Bancorp Share to which such holder otherwise
2
<PAGE>
would 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.
2.3 Surrender of Cupertino Shares.
-----------------------------
a. Prior to the Effective Date, Mid-Peninsula shall appoint U.S.
Stock Transfer Corporation or its successor, or any other bank or trust company
(having capital of at least $50 million) mutually acceptable to Cupertino and
Mid-Peninsula, as exchange agent (the "Exchange Agent") for the purpose of
exchanging certificates representing Cupertino Shares and at and after the
Effective Time of the Merger, Bancorp shall issue and deliver to the Exchange
Agent such number of certificates representing Bancorp Shares and cash for
payment of fractional shares, as shall be required to be delivered to holders of
Cupertino Shares pursuant to Article 2 of the Merger Agreement. As soon as
practicable after the Effective Time of the Merger, each holder of Cupertino
Shares converted pursuant to Section 2.1, upon surrender to the Exchange Agent
of one or more certificates for such Cupertino Shares for cancellation, will be
entitled to receive a certificate or certificates representing the number of
Bancorp Shares determined in accordance with Section 2.1 and a payment in cash
with respect to fractional shares, if any, determined in accordance with Section
2.2.
b. No dividends or other distributions of any kind which are
declared payable to shareholders of record of the Bancorp Shares after the
Effective Date will be paid to persons entitled to receive such certificates for
Bancorp Shares until such persons surrender their certificates representing
Cupertino Shares. Upon surrender of such certificates representing Cupertino
Shares, the holder thereof shall be paid, without interest, any dividends or
other distributions with respect to the Bancorp Shares as to which the record
date and payment date occurred on or after the Effective Date and on or before
the date of surrender.
c. If any certificate for Bancorp Shares is to be issued in a name
other than that in which the certificate for Cupertino Shares surrendered in
exchange therefor is registered, any transfer costs or expenses (except taxes)
required by reason of the issuance of certificates for such Bancorp Shares in a
name other than the registered holder of the certificate surrendered shall be
paid by Bancorp.
d. All dividends or distributions, and any cash to be paid
pursuant to Section 2.2 in lieu of fractional shares, if held by the Exchange
Agent for payment or delivery to the holders of unsurrendered certificates
representing Cupertino Shares and unclaimed at the end of one year from the
Effective Date, shall (together with any interest earned thereon) at such time
be paid or redelivered by the Exchange Agent to Bancorp, and after such time any
holder of a certificate representing Cupertino Shares who has not surrendered
such certificate to the Exchange Agent shall, subject to applicable law, look as
a general creditor only to Bancorp for payment or delivery of such dividends or
distributions or cash, as the case may be.
3
<PAGE>
2.4 No Further Transfers of Cupertino Shares. At the Effective Time of
----------------------------------------
the Merger, the stock transfer books of Cupertino shall be closed and no
transfer of Cupertino Shares theretofore outstanding shall thereafter be made.
2.5 Adjustments. If, between the date of this Agreement and the Effective
-----------
Date, the outstanding shares of Mid-Peninsula Shares or Cupertino Shares shall
have been changed into a different number of shares or a different class by
reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment, or a stock dividend thereon shall be
declared with a record date within such period, the number of Bancorp Shares to
be issued and delivered in the Merger in exchange for each outstanding Cupertino
Share shall be correspondingly adjusted.
2.6 Treatment of Stock Options.
--------------------------
a. Each person holding one or more options to purchase Cupertino
Shares ("Cupertino Option" or "Cupertino Options") pursuant to Cupertino's (i)
1985 Stock Option Plan, (ii) 1986 Non-Qualified Stock Option Plan, (iii) 1989
Non-Qualified Stock Option Plan, or (iv) 1995 Stock Option Plan, each as amended
to date ("Cupertino Stock Option Plans") shall have the right, in his or her
discretion, to either:
(i) Exercise any vested portion (including any portion vested
as a result of the Merger) of the Cupertino option to acquire Cupertino Shares
prior to the Effective Date; or
(ii) As of the Effective Time of the Merger, surrender the
Cupertino Option agreement to Mid-Peninsula, in which event such person will be
entitled to receive a substitute option ("Substitute Option") exercisable for
(a) the number of Bancorp Shares equal to the number of Cupertino Shares for
which such person held Cupertino Options multiplied by the Conversion Ratio and
rounded up to the nearest whole share, and (b) the exercise price for the shares
subject to said options shall be adjusted by dividing the pre-Merger exercise
price for such Cupertino Options by the Conversion Ratio, rounded to the nearest
penny.
b. The Substitute Options to be received in exchange for Cupertino
Options shall be, to the greatest extent practicable, vested to the same extent
as before the Merger, shall continue to vest on the same vesting schedule as
provided under the original applicable Cupertino Option agreement, shall be
exercisable as provided in the original applicable Cupertino Option agreement
and shall otherwise preserve the characteristics, terms and conditions of the
original Cupertino Option to the greatest extent possible, subject to the
requirements of law and the rules and regulations of the California Commissioner
of Corporations.
4
<PAGE>
3. COVENANTS OF THE PARTIES.
------------------------
3.1 Covenants of Mid-Peninsula.
--------------------------
a. Amendment of Articles and Bylaws; Vote Requirements. The Board
---------------------------------------------------
of Directors of Mid-Peninsula shall take all necessary corporate action, to be
effective at the Effective Time of the Merger, to amend the Articles of
Incorporation and Bylaws of Mid-Peninsula to the extent required by applicable
law or regulation and subject to any required approvals of shareholders,
government agencies or regulatory authorities, to: (i) change Mid-Peninsula's
name to Greater Bay Bancorp; (ii) provide for a range in the number of
authorized directors of not less than seven (7) and not more than thirteen (13),
and to adopt a resolution fixing the exact number of directors at ten (10);
(iii) establish super-majority vote requirements mutually agreed upon by the
parties equal to a two-thirds vote of the Board of Directors of Bancorp
applicable to certain matters affecting Bancorp, including (a) a merger, sale of
control or sale of material assets of Bancorp, (b) acquisitions by Bancorp, (c)
creation of new business units of Bancorp or its subsidiaries, MPB and CNB, (d)
material changes in operating budgets of Bancorp or its subsidiaries, MPB and
CNB, (e) material changes in the business organization or organizational
structure of Bancorp or its subsidiaries, MPB and CNB, (f) termination of any
executive or senior officer appointed to the Executive Management Committee of
Bancorp, and (g) any change in the authorized range of directors.
b. Amendment of Mid-Peninsula Stock Option Plan. Mid-Peninsula
--------------------------------------------
shall take all necessary corporate action, including any required approval of
the shareholders of Mid-Peninsula, to amend its 1994 Stock Option Plan or
establish a new stock option plan and cause to be filed and become effective
under the Securities Act of 1933, as amended (the "1933 Act"), as of the
Effective Time of the Merger, a registration statement with respect to the
options to be granted and shares to be issued thereunder to fulfill the
obligations to grant Substitute Options to holders of Cupertino Options pursuant
to Section 2.6 of this Agreement.
c. Nasdaq Stock Market Listing. Mid-Peninsula shall take all
---------------------------
necessary action to list with the Nasdaq Stock Market for trading on the Nasdaq
National Market System (i) Mid-Peninsula Shares, as soon as practicable
following the execution of this Agreement and (ii) Bancorp Shares under a symbol
mutually agreed upon by the parties, to be effective from and after the
Effective Time of the Merger.
d. Debenture Agreement. Mid-Peninsula shall take all appropriate
-------------------
action to cause the obligations of Cupertino to the holders of debentures issued
pursuant to certain 11.5% Subordinated Debenture Agreements Due 2005 and related
Subscription Agreements and exhibits thereto, to be assumed by Bancorp in a
supplemental debenture agreement in form and substance reasonably satisfactory
to Mid-Peninsula and Cupertino and their respective counsel, as of the Effective
Time of the Merger. The form of such supplemental debenture agreement shall be
delivered by Mid-Peninsula to Cupertino on or before the Document Delivery Date
(as defined in Section 12b(xii)) of this Agreement.
5
<PAGE>
3.2 Covenants of Cupertino.
----------------------
a. Termination of Cupertino Stock Option Plans. Cupertino shall
-------------------------------------------
take all necessary action to cause the termination of the Cupertino Stock Option
Plans at the Effective Time of the Merger and the exercise or surrender (in
exchange for Substitute Options) of Cupertino Options outstanding thereunder.
b. Termination or Merger of Cupertino Benefit Plans. If requested
------------------------------------------------
by Mid-Peninsula and subject to the mutual agreement of the parties, Cupertino
shall take all necessary action to cause the termination or merger of Cupertino
Benefit Plans at the Effective Time of the Merger.
3.3 Mutual Covenants of Mid-Peninsula and Cupertino.
-----------------------------------------------
a. Appointment of Executive Officers. At the Effective Time of
---------------------------------
the Merger, the following persons shall become the executive officers of Bancorp
and shall be appointed to the positions indicated: (i) David L. Kalkbrenner,
President and Chief Executive Officer, (ii) Steven C. Smith, Executive Vice
President, Chief Operating Officer and Chief Financial Officer, and (iii) David
R. Hood, Executive Vice President and Chief Credit Officer.
b. Appointment of Directors. At the Effective Time of the Merger,
------------------------
the five (5) directors named below of Mid-Peninsula and Cupertino, respectively,
shall become and constitute the Board of Directors of Bancorp, and Duncan L.
Matteson and John M. Gatto shall be appointed as co-chairmen of the Board of
Directors of Bancorp. The parties agree that such persons shall be nominated by
management for election as directors of Bancorp at each annual or special
meeting of shareholders of Bancorp at which directors are elected for a period
of not less than two (2) years from the Effective Date. If any such person
fails or declines to serve as a director, the vacancy created thereby shall be
filled during such two (2) year period by a nominee selected by a majority of
the group consisting of former Mid-Peninsula or Cupertino directors,
respectively, of which such person was a member prior to the Merger.
(i) from Mid-Peninsula: David L. Kalkbrenner, Duncan L.
Matteson, Donald H. Seiler, Warren R. Thoits and Edwin E. van Bronkhorst; and
(ii) from Cupertino: John M. Gatto, James E. Jackson, Rex D.
Lindsay, Glen McLaughlin and Dick J. Randall.
c. Board and Management Committees. The parties shall establish
-------------------------------
(i) such committees of the Board of Directors of Bancorp as may be mutually
agreed upon, and (ii) an Executive Management Committee of Bancorp comprised of
management personnel to facilitate and coordinate operations of Bancorp and such
other matters as the parties may
6
<PAGE>
agree upon. Each party's nominees for appointment to committees of the Board of
Directors of Bancorp shall be identified to the other party on or before the
Determination Date. At the Effective Time of the Merger, the twelve (12) persons
named below shall be appointed to the Executive Management Committee with the
titles and positions held with Bancorp, MPB and CNB as indicated.
(i) from Mid-Peninsula: David L. Kalkbrenner, President and
Chief Executive Officer of Bancorp and MPB, Director of Bancorp, MPB and CNB,
and Chairman of the Executive Management Committee; Murray B. Dey, Executive
Vice President of MPB; Carol R. Rowland, First Vice President and Chief
Financial Officer of MPB; Susan K. Black, Senior Vice President, Relationship
Management Administration, of MPB; and Kimberly S. Burgess, Senior Vice
President, Bank Support Services, of MPB.
(ii) from Cupertino: C. Donald Allen, Chairman of the Board and
Chief Executive Officer of CNB; Steven C. Smith, Executive Vice President and
Chief Operating Officer of Bancorp and CNB, Chief Financial Officer of Bancorp,
and Vice-Chairman of the Executive Management Committee; David R. Hood,
Executive Vice President of Bancorp and CNB, Chief Credit Officer of Bancorp and
Senior Lending Officer of CNB; Hall Palmer, Executive Vice President, Trust
Group of Bancorp and CNB; Kenneth D. Brenner, Executive Vice President,
Marketing and Business Development, of CNB; Heidi R. Wulfe, Senior Vice
President of Bancorp and CNB, Controller of Bancorp and Chief Financial Officer
of CNB; and Daniel R. Michener, Senior Vice President, Venture Lending, of CNB.
d. Board and Management of Subsidiaries. The parties intend that
------------------------------------
the Boards of Directors and management of Bancorp's subsidiary banks, MPB and
CNB, shall remain substantially the same following the Effective Time of the
Merger; provided, that David L. Kalkbrenner shall be appointed to the Board of
Directors of CNB and John M. Gatto shall be appointed to the Board of Directors
of MPB.
e. Approval by Shareholders. Each party shall cause the principal
------------------------
terms of the Merger to be submitted promptly for the approval of its
shareholders at a meeting to be called and held in accordance with applicable
laws. Subject to its continuing fiduciary duty to its shareholders, the Board
of Directors of each party, in authorizing the execution and delivery of this
Agreement, unanimously recommends that the principal terms of the Merger be
approved. In connection with the call of such meeting, each party shall cause
the Joint Proxy Statement/Prospectus to be mailed to its shareholders. Subject
to its continuing fiduciary duty to the shareholders of Mid-Peninsula or
Cupertino, as the case may be, the Board of Directors of each party shall at all
times prior to and during such meeting of its shareholders recommend that the
principal terms of the Merger be approved and, subject to such duty, use its
best efforts to cause such approval (and the Board of Directors of Mid-Peninsula
shall recommend that the amendments to its Articles of Incorporation, Bylaws and
1994 Stock Option Plan be approved).
7
<PAGE>
f. Shareholder Lists and Other Information. After execution
---------------------------------------
hereof, each party shall from time to time make available to the other party,
upon request, a list of its shareholders and their addresses, a list showing all
transfers of its common stock and such other information as the other party
shall reasonably request regarding both the ownership and prior transfers of
each party's common stock, provided that no such information shall be required
for any period prior to the date of this Agreement.
g. Government Approvals. Each party will use its best efforts in
--------------------
good faith to take or cause to be taken as promptly as practicable all such
steps as shall be necessary to obtain (i) the prior approval of the Merger by
the Board of Governors of the Federal Reserve System (the "FRB") under the Bank
Holding Company Act of 1956, as amended, and (ii) all other such consents or
approvals of government agencies and regulatory authorities as shall be required
by law or otherwise desirable, and shall do any and all acts and things
necessary or appropriate in order to cause the Merger to be consummated on the
terms provided in the Merger Agreement and this Agreement as promptly as
practicable. All approvals referred to in this Section 3.3(g) are hereinafter
referred to as the "Government Approvals."
h. Capital Commitments and Expenditures. After the execution of
------------------------------------
this Agreement, no new capital commitments shall be entered into, and no capital
expenditures shall be made by either party in excess of $50,000 in the
aggregate, including but not limited to, creation of any new branches and
acquisitions or leases of real property, except commitments or expenditures
within existing operating and capital budgets heretofore furnished to and
approved in writing by the other party.
i. Notification of Breach of Representations, Warranties and
---------------------------------------------------------
Covenants. Each party shall promptly give written notice to the other party
- ---------
upon becoming aware of the occurrence or impending or threatened occurrence of
any event which would cause or constitute a breach of any of the
representations, warranties or covenants of that party contained or referred to
in the Merger Agreement or this Agreement and shall use its best efforts to
prevent the same or to remedy the same promptly.
j. Financial Statements.
--------------------
(i) Each party has delivered or shall deliver to the other
party prior to the Effective Date true and correct copies of statements of
income, changes in shareholders' equity and statements of cash flows for the
three months ended March 31, 1996 (and any subsequent quarter-end periods), and
for the fiscal years ended December 31, 1995, 1994, 1993, 1992 and 1991, and
balance sheets as of the three month period ended March 31, 1996 (and any
subsequent quarter-end periods), and as of December 31, 1995, 1994, 1993, 1992
and 1991. Such financial statements at December 31, 1995, 1994, 1993, 1992 and
1991 and for the fiscal years ended December 31, 1995, 1994, 1993, 1992 and 1991
have been or shall be audited by KPMG Peat Marwick LLP or its predecessor,
Coopers & Lybrand LLP, as independent public accountants for Mid-Peninsula
during the relevant periods, and
8
<PAGE>
Coopers & Lybrand LLP or its predecessor, Deloitte & Touche LLP, as independent
public accountants for Cupertino during the relevant periods, and include or
shall include an opinion of such accounting firm to the effect that such
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods covered by
such financial statements and present fairly, in all material respects, the
consolidated financial position, results of operations and cash flows of each
party at the dates indicated and for the periods then ending. The opinions of
such accounting firm do not and shall not contain any qualifications.
(ii) Each party shall provide to the other party, at or prior
to the Effective Date, copies of all financial statements and proxy statements
issued or to be issued to its shareholders and/or directors between the date of
this Agreement and the Effective Date.
(iii) Each party has delivered or shall deliver, to the other
party true and complete copies of its Annual Reports to Shareholders for the
years ended December 31, 1995, 1994, 1993, 1992 and 1991, all periodic reports
required to be filed by it pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act") since December 31, 1990, all
proxy statements and other written material furnished to its shareholders since
December 31, 1990, and all other material reports, including call reports,
relating to Mid-Peninsula, MPB, Cupertino and CNB filed by Mid-Peninsula, MPB,
Cupertino, or CNB with the Federal Deposit Insurance Corporation ("FDIC"), FRB,
Office of the Comptroller of the Currency ("OCC"), or California Superintendent
of Banks ("Superintendent") during 1991 through the Effective Date. As of their
respective filing dates, each of the documents described in the preceding
sentence complied or shall comply in all material respects with all legal and
regulatory requirements applicable thereto.
k. Compensation. Except as may be consistent with past practices
------------
disclosed to each party by the other party, neither party shall make or approve
any increase in the compensation payable or to become payable by it to any of
its directors, officers, employees or agents (including but not limited to
compensation through any profit sharing, pension, retirement, severance,
incentive or other employee benefit program or arrangement), nor shall any bonus
payment or any agreement or commitment to make a bonus payment be made, nor
shall any stock option, warrant or other right to acquire capital stock be
granted (except as provided in Section 2.6), or employment agreement (other than
any such employment agreement that may arise by operation of law upon the hiring
of any new employee) or consulting agreement be entered into by either party
with any such directors, officers, employees or agents unless the other party
has given its prior written consent. Nothing herein shall prevent the payment
to either party's officers and employees of regular salary increases, consistent
with past practices in connection with regular salary reviews or bonuses
consistent with past practices, as heretofore disclosed to the other party.
Without the prior written consent of the other party, neither party shall hire
any new employee at an annual rate in excess of that party's current customary
practice.
9
<PAGE>
l. Conduct of Business in the Ordinary Course. Prior to the
------------------------------------------
Effective Time of the Merger:
(i) Both parties shall conduct their businesses (including the
businesses of their subsidiaries) in the ordinary course as heretofore
conducted. For purposes of this Agreement, the "Ordinary Course of Business" of
either party shall consist of the banking and related businesses as presently
conducted by it and its subsidiaries in compliance with customary safe and sound
banking practices and applicable laws and regulations. Unless either party has
given its previous written consent (which shall be deemed to have been given if
no response is provided following written request therefor within three (3)
business days of receipt of such request) to any act or omission to the
contrary, each party shall, and shall cause its subsidiaries to, until the
Effective Date:
(a) preserve its business and business organizations
intact;
(b) preserve the good will of customers and others having
business relations with it and take no action that would impair the benefit to
the other party of the goodwill of it or the other benefits of the Merger;
(c) consult with the other party as to the making of any
decisions or the taking of any actions in matters other than in the Ordinary
Course of Business;
(d) maintain its properties in customary repair, working
order and condition (reasonable wear and tear excepted);
(e) comply with all laws, regulations and decrees
applicable to the conduct of its business;
(f) use its best efforts to keep in force at not less
than its present limits all policies of insurance (including deposit insurance
of the FDIC) to the extent reasonably practicable in light of the prevailing
market conditions in the insurance industry;
(g) use its best efforts to keep available to the other
party the services of its present officers and employees (it being understood
that each party shall have the right to terminate the employment of any of its
officers or employees in accordance with its established employment procedures);
(h) comply with all orders of and agreements or memoranda
of understanding with respect to it made by or with, the FDIC, FRB, OCC,
Superintendent, or any other government agency or regulatory authority of
competent jurisdiction, and promptly forward to the other party all
communications received from any such agency or authority that are not
prohibited by such agency or authority from being so disclosed and inform the
10
<PAGE>
other party of any material restrictions imposed by any government agency or
regulatory authority on its business;
(i) file in a timely manner (taking into account any
extensions duly obtained) all reports, tax returns and other documents required
to be filed with federal, state, local and other authorities;
(j) conduct an environmental audit prior to foreclosure
on any property concerning which it has knowledge, or should have knowledge,
that asbestos or asbestos-containing material, PCB's or PCB-contaminated
materials, any petroleum product, or hazardous substance or waste (as defined
under any applicable environmental laws) was or is present, manufactured,
recycled, reclaimed, released, stored, treated, or disposed of, and provide the
results of such audit to and consult with the other party regarding the
significance of the audit prior to the foreclosure on any such property;
(k) not sell, lease, pledge, assign, encumber or
otherwise dispose of any of its assets except in the Ordinary Course of
Business, for adequate value, without recourse and consistent with its customary
practice;
(l) not take any action to create, relocate or terminate
the operations of any banking office or branch, or to form any new subsidiary or
affiliated entity; and
(m) not settle or otherwise take any action to release or
reduce any of its rights with respect to any litigation involving a claim of
more than $25,000 in which it is a party.
(ii) Neither party shall, without first having obtained the
written consent of the other party (which shall be deemed to have been given if
no response is provided following written request therefor within three (3)
business days of receipt of such request), cause its officers to commit to any
loan which does not comply in all material respects with its credit policies in
effect and as disclosed and provided to the other party prior to the date of
this Agreement (except venture loans originated by CNB which shall be subject to
the venture loan approval procedures in effect at CNB and as disclosed to Mid-
Peninsula prior to the date of this Agreement).
(iii) Each party shall promptly notify the other party in
writing upon the occurrence by it of any of the following:
(a) the classification of any loan as substandard,
doubtful or loss; or
(b) the filing or commencement of any legal action or
other proceeding or investigation against it.
11
<PAGE>
m. Press Releases. Neither party shall issue any press release or
--------------
written statement for general circulation relating to the Merger, this Agreement
or the Merger Agreement unless previously provided to the other party for review
and approval (which approval will not be unreasonably withheld or delayed) and
each party shall cooperate with the other party in the development and
distribution of all news releases and other public information disclosures with
respect to the Merger, this Agreement or the Merger Agreement; provided that
either party may, without the consent of the other party, make any disclosure
with regard to the Merger, this Agreement or the Merger Agreement that it
determines with advice of counsel is required under any applicable law or
regulation.
n. No Merger or Solicitation.
-------------------------
(i) Subject to the continuing fiduciary duty of the Board of
Directors of each party to its shareholders, prior to the Effective Time of the
Merger, neither party shall effect or agree to effect or enter into a
transaction or series of transactions with one or more third persons, groups or
entities providing for the acquisition of all or a substantial part of either
party or their respective subsidiaries, whether by way of merger, exchange of
stock, sale of assets, or otherwise ("Business Combination"), acquire or agree
to acquire any of its own capital stock or the capital stock or asset (except in
a fiduciary capacity or in the Ordinary Course of Business) of any other entity,
or commence any proceedings for winding up and dissolution affecting either of
them.
(ii) Subject to the continuing fiduciary duty of the Board of
Directors of each party to its shareholders, prior to the Effective Time of the
Merger, neither party nor any officer, director or affiliate of either party,
nor any investment banker, attorney, accountant or other agent, advisor or
representative retained by either party shall (a) solicit or encourage, directly
or indirectly, any inquiries, discussions or proposals for, continue, propose or
enter into discussions or negotiations looking toward, or enter into any
agreement or understanding providing for, any Business Combination with any
third party; or (b) disclose, directly or indirectly, any nonpublic information
to any corporation, partnership, person or other entity or group concerning such
party's business and properties or afford any such other party access to its
properties, books or records or otherwise assist or encourage any such other
party in connection with the foregoing, or (c) furnish or cause to be furnished
any information concerning its business, financial condition, operations,
properties or prospects to another person, having any actual or prospective role
with respect to any such Business Combination.
(iii) Each party shall notify the other party immediately of
the details of any indication of interest of any person, corporation, firm,
association or group to acquire by any means a controlling interest in it or
engage in any Business Combination with it.
(iv) Notwithstanding anything to the contrary contained in this
Agreement, in the event the Board of Directors of either party receives a bona
fide unsolicited offer for a Business Combination of it with another entity, and
reasonably
12
<PAGE>
determines, upon advice of counsel, that as a result of such offer, any duty to
act or to refrain from doing any act pursuant to this Agreement is inconsistent
with the continuing fiduciary duties of the Board of Directors to its
shareholders, subject to the provisions of this Agreement including, without
limitation, Section 12e(ii) and the rights accorded a party thereunder which
shall remain in effect, such duty to act or to refrain from doing any act shall
be excused and such failure to act or refrain from doing any act shall not (a)
constitute the failure of any condition, breach of any covenant or otherwise
constitute any breach of this Agreement, or (b) create any claim or cause of
action asserting any liability against any member of the Board of Directors of
that party.
o. Employee Benefit Plans. Both parties agree that other than the
----------------------
Mid-Peninsula 1994 Stock Option Plan (as amended in accordance with Section
3.1(b) of this Agreement) and 401(k) Plan which shall survive as employee
benefit plans of Bancorp, either party's employee benefit plans may be
terminated, frozen, modified or merged into the other party's plans on or after
the Effective Date in accordance with applicable laws and regulations and the
provisions of the IRC, as determined by mutual agreement of the parties or by
Bancorp. On the Effective Date, Mid-Peninsula and Cupertino employees that
become employees of Bancorp will commence participation in Bancorp's employee
benefit plans in accordance with the terms and conditions provided under such
plans; provided, however, that each employee of Mid-Peninsula and each employee
of Cupertino who becomes an employee of Bancorp ("Transferred Employee") shall
receive credit for his or her years of service with Mid-Peninsula or Cupertino,
as applicable, for purposes of eligibility and vesting under Bancorp's employee
benefit plans; provided, further, that each Transferred Employee who elects
coverage under Bancorp's indemnity health plan within thirty (30) days after
coverage is extended to him or her shall not be subject to any pre-existing
condition limitation under such indemnity health plan.
p. Changes in Capital Stock; Dividends. On or after the date
-----------------------------------
hereof and at or prior to the Effective Time of the Merger, except with the
prior written consent of the other party or as otherwise provided in this
Agreement and the Merger Agreement:
(i) Neither party shall amend its Articles of Incorporation or
the Articles of Incorporation or Association of its subsidiary, as the case may
be, or Bylaws of either party or its subsidiary; make any change in their
respective authorized, issued or outstanding capital stock or any other equity
security; issue, grant, sell, pledge, assign or otherwise encumber or dispose
of, or purchase, redeem, retire or otherwise acquire (other than in a fiduciary
capacity), shares of or securities convertible into, capital stock or other
equity securities of their respective companies, or enter into any agreement,
call or commitment of any character so to do; grant or issue any stock option
relating to or right to acquire shares of their capital stock or other equity
security; or agree to do any of the foregoing, except as expressly provided
herein. Nothing herein shall prohibit the issuance of shares upon exercise of
options granted under the Mid-Peninsula Stock Option Plan or Cupertino Stock
Option Plans and outstanding at the time this Agreement is executed; and
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(ii) Neither party shall declare, set aside or pay any dividend
or other distribution in respect of its common stock (including, without
limitation, any stock dividend or distribution) other than regular quarterly or
semi-annual cash dividends on its common stock in amounts substantially
equivalent to cash dividends paid in the two years prior to the date hereof (it
being understood that declaration of a quarterly or semi-annual cash dividend
equal to the most recent previous quarterly or semi-annual cash dividend will be
deemed to meet this standard).
q. Access to Properties, Books and Records; Confidentiality. Prior
--------------------------------------------------------
to the Effective Time of the Merger, each party shall give the other party and
its counsel, accountants and agents, full access during normal business hours
and upon reasonable request, to all of its properties, books, contracts,
commitments and records including, but not limited to, the corporate, financial
and operational records, papers, reports, instructions, procedures, tax returns
and filings tax settlement letters, material contracts or commitments,
regulatory examinations and correspondences, and shall allow the other party to
make copies of such materials and shall furnish the other party with all such
information concerning its affairs as the other party may reasonably request.
Each party shall also use its best efforts to cause its independent accountants
to make available to the other party, its accountants, counsel and other agents,
to the extent reasonably requested in connection with such review, such
independent accountants' work papers and documentation relating to its work
papers and its audits of the books and records of each party. The availability
or actual delivery of such information about either party shall not affect the
covenants, representations and warranties of either party contained in this
Agreement and in the Merger Agreement. Each party shall use its best efforts to
cause its officers, directors, employees, auditors, and attorneys to cooperate
with the other in its reasonable requests for information. Each party shall
treat as confidential all such information in the same manner as each party
treats similar confidential information of its own, and if this Agreement is
terminated, each party shall continue to treat all such information as
confidential and to cause its employees to keep all such information
confidential and shall return such documents theretofore delivered by the other
party as the other party shall request, and shall use such information, or cause
it to be used, solely for the purposes of evaluating and completing the
transactions contemplated hereby; provided that each party may disclose any such
information to the extent required by federal or state securities laws or
otherwise required by any government agency or regulatory authority, or by
generally accepted accounting principles. The foregoing confidentiality
obligations shall not apply in respect of any information publicly available or
to any information previously known to the party in question, the use of which
is not otherwise restricted. Notwithstanding the foregoing, the parties agree to
comply with the terms and provisions of that certain Confidentiality Agreement
entered into between the parties dated May 8, 1996, and any inconsistency
between the terms and provisions of that Confidentiality Agreement and the
foregoing provisions shall be resolved in favor of the terms and provisions
contained in the Confidentiality Agreement.
r. Loan Performance. From and after the date of this Agreement
----------------
until the Effective Date, each party will provide to the other the following
reports for each such
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<PAGE>
month concurrent with the distribution of the monthly board report materials for
the respective Boards of Directors of MPB and CNB:
(i) a status report on all loans classified as substandard,
doubtful or loss;
(ii) past due reports by loan;
(iii) non-accrual reports by loan;
(iv) loss reports by loan;
(v) restructured loans reports; and
(vi) quarterly call reports submitted to regulators during such
month, if any.
s. Loan Review. Prior to the Effective Date, each party will
-----------
submit to the other party (for such party's information only) a loan
approval/credit write-up document for any loan that is all of the following: (i)
a new loan, or a restructured (SFAS 15) loan, or a renewal of an existing loan
previously classified by management or internal policy or procedure of either
party or their subsidiaries, or by any outside review examiner, accountant or
any bank regulatory authority as "Other Loans Specially Mentioned," "Special
Mention," "Substandard," "Doubtful," or "Loss," or classified using categories
or words with similar import, and (ii) in a commitment amount over $1,000,000 or
when the aggregate debt of the borrower and its affiliates and/or related
interests will exceed $1,000,000.
t. Preparation of Joint Proxy Statement/Prospectus. Cupertino
-----------------------------------------------
shall cooperate with Mid-Peninsula in the preparation pursuant to Section 6
hereof of a joint proxy statement and prospectus of Mid-Peninsula to be sent to
the shareholders of Mid-Peninsula and Cupertino (the proxy materials and
prospectus, together with any amendments or supplements thereto, being herein
referred to as the "Joint Proxy Statement/Prospectus").
4. REPRESENTATIONS AND WARRANTIES OF CUPERTINO.
-------------------------------------------
In the following representations and warranties, all references to assets,
liabilities, properties, rights, obligations, financial condition, operations,
knowledge, information and other characteristics of Cupertino shall be deemed to
include reference to those characteristics of CNB on a consolidated basis,
except as the context otherwise indicates or requires. Cupertino represents and
warrants to Mid-Peninsula that, except as set forth on a Schedule delivered to
Mid-Peninsula on or before the Document Delivery Date, in form and substance
satisfactory to Mid-Peninsula and corresponding in number with the applicable
section:
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a. Corporate Status and Power to Enter Into Agreements. (i)
---------------------------------------------------
Cupertino is a corporation duly incorporated, validly existing and in good
standing under California law and is a registered bank holding company under the
Bank Holding Company Act of 1956, as amended, (ii) subject to obtaining the
Government Approvals and approval of the principal terms of the Merger by the
Cupertino shareholders, Cupertino has all necessary corporate power to enter
into this Agreement and the Merger Agreement and to carry out all of the terms
and provisions hereof and thereof to be carried out by it, (iii) CNB holds a
currently valid license issued by the OCC to engage in the commercial banking
business in California at the locations at which it is licensed and currently
conducts business, and (iv) neither Cupertino nor CNB is subject to any
directive, resolution, memorandum of understanding or order of the FDIC, FRB,
OCC or any other regulatory authority having jurisdiction over its business or
any of its assets or properties. Neither the scope of the business of Cupertino
or CNB nor the location of their properties requires either of them to be
licensed to do business in any jurisdiction other than the State of California.
CNB's deposits are insured by the FDIC to the maximum extent permitted by
applicable law and regulation.
b. Articles, Bylaws, Books and Records. The copies of the Articles
-----------------------------------
of Incorporation and Articles of Association and Bylaws of Cupertino and CNB,
respectively, heretofore delivered to Mid-Peninsula are complete and accurate
copies thereof as in effect on the date hereof. The minute books of Cupertino
and CNB made available to Mid-Peninsula contain a complete and accurate record
of all meetings of Cupertino's and CNB's respective Boards of Directors (and
committees thereof) and shareholders. The corporate books and records (including
financial statements) of Cupertino and CNB fairly reflect the material
transactions to which Cupertino and CNB are parties or by which their properties
are subject or bound, and such books and records have been properly kept and
maintained.
c. Compliance With Laws, Regulations and Decrees. Cupertino and
---------------------------------------------
CNB (i) have the corporate power to own or lease their properties and to conduct
their business as currently conducted, (ii) have complied in all material
respects with, and are not in material default of any laws, regulations,
ordinances, orders or decrees applicable to the conduct of their business and
the ownership of their properties, including but not limited to all federal and
state laws (including but not limited to the Bank Secrecy Act), rules and
regulations relating to the offer, sale or issuance of securities, and the
operation of a commercial bank, other than where such noncompliance or default
is not likely to result in a material limitation on the conduct of the business
of Cupertino or CNB or is not likely to otherwise have a material adverse effect
on Cupertino and CNB taken as a whole, (iii) have not failed to file with the
proper federal, state, local or other authorities any material report or other
document required to be filed, and (iv) have all approvals, authorizations,
consents, licenses, clearances and orders of, and have currently effective all
registrations with, all government and regulatory authorities which are
necessary to the business and operations of Cupertino and CNB as now being
conducted.
d. Capitalization. The authorized capital stock of Cupertino
--------------
consists of 6,000,000 shares of Cupertino common stock, no par value, of which
1,882,547 shares are
16
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duly authorized, validly issued, fully paid and nonassessable and currently
outstanding, and 4,000,000 shares of Cupertino preferred stock of which no
shares are outstanding. Said stock has been offered, sold and issued in
compliance with all applicable securities laws. There are currently outstanding
options to purchase 341,382 shares of Cupertino common stock, at a weighted
average exercise price of $7.87 per share, issued pursuant to the Cupertino
Stock Option Plans. Said options were issued and, upon issuance in accordance
with the terms of the outstanding options said shares shall be issued, in
compliance with all applicable securities laws. Otherwise, there are no
outstanding (i) options, agreements, calls or commitments of any character which
would obligate Cupertino to issue, sell, pledge, assign or otherwise encumber or
dispose of, or to purchase, redeem or otherwise acquire, any Cupertino common
stock or any other equity security of Cupertino, or (ii) warrants or options
relating to, rights to acquire, or debt or equity securities convertible into,
shares of Cupertino common stock or any other equity security of Cupertino. The
outstanding common stock of Cupertino is registered with the Securities and
Exchange Commission (the "Commission") pursuant to Section 12(g) of the 1934
Act. Cupertino owns all of the outstanding equity securities of CNB. Except as
collateral for outstanding loans held in their loan portfolios, neither
Cupertino nor CNB owns, directly or indirectly, any equity interest in any bank
(other than Cupertino's ownership of CNB), corporation or other entity.
e. Trademarks and Trade Names. To the best of the knowledge of
--------------------------
Cupertino, Cupertino and CNB (i) own and have the exclusive right to use all
trademarks, trade names, patents, copyrights, service marks, trade secrets, or
other intellectual property rights (collectively, "Intellectual Property
Rights") used in or necessary for the conduct of their businesses as now or
heretofore conducted; and (ii) are not infringing upon the Intellectual Property
Rights of any other person or entity. No claim is pending or threatened by any
person or entity against or otherwise affecting the use by Cupertino or CNB of
any Intellectual Property Rights and, to the best of its knowledge, there is no
valid basis for any such claim.
f. Financial Statements, Regulatory Reports. No financial
----------------------------------------
statement or other document provided or to be provided to Mid-Peninsula as
required by Section 3.3(j) hereof, as of the date of such document, contained,
or as to documents to be delivered after the date hereof, will contain, any
untrue statement of a material fact, or, at the date thereof, omitted or will
omit to state a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which such statements
were or will be made, not misleading; provided, however, that information as of
a later date shall be deemed to modify contrary information as of any earlier
date. Cupertino and CNB have filed all material documents and reports required
to be filed by them with the FDIC, FRB, OCC, the Commission and any other
government agency or regulatory authority having jurisdiction over their
business, assets or properties. All such reports conform in all material
respects with the requirements promulgated by such government agencies and
regulatory authorities. All compliance or corrective action relating to
Cupertino and CNB required by government agencies and regulatory authorities
having jurisdiction over Cupertino or CNB has been taken. Except as disclosed in
such statements, reports or documents, neither Cupertino nor
17
<PAGE>
CNB has received any notification, formally or informally, from any agency or
department of any federal, state or local government or any regulatory authority
or the staff thereof (i) asserting that it is not in compliance with any of the
statutes, regulations or ordinances which such government or regulatory
authority enforces, or (ii) threatening to revoke any license, franchise, permit
or government authorization. Cupertino and CNB have paid all assessments made or
imposed by any government agency. Cupertino has delivered to Mid-Peninsula
copies of all annual management letters and opinions, and has made available to
Mid-Peninsula for inspection all reviews, correspondence and other documents in
the files of Cupertino prepared by Coopers & Lybrand LLP or any other certified
public accountant engaged by Cupertino and delivered to Cupertino since December
31, 1990. The financial records of Cupertino have been, and are being and shall
be, maintained in all material respects in accordance with all applicable legal
and accounting requirements sufficient to insure that all transactions reflected
therein are, in all material respects, executed in accordance with management's
general or specific authorization and recorded in conformity with generally
accepted accounting principles at the time in effect. The data processing
equipment, data transmission equipment, related peripheral equipment and
software used by Cupertino in the operation of its business to generate and
retrieve its financial records are adequate for the current needs of Cupertino.
g. Tax Returns.
-----------
(i) Cupertino and/or CNB has timely filed all federal, state,
county, local and foreign tax returns required to be filed by it, including,
without limitation, estimated tax, use tax, excise tax, real property and
personal property tax reports and returns, employer's withholding tax returns,
other withholding tax returns and Federal Unemployment Tax Returns, and all
other reports or other information required or requested to be filed by either
of them, and each such return, report or other information was, when filed,
complete and accurate in all material respects. Cupertino and/or CNB has paid
all taxes, fees and other government charges, including any interest and
penalties thereon, when they have become due, except those that are being
contested in good faith, which contested matters have been disclosed to Mid-
Peninsula. Cupertino and/or CNB has not been requested to give nor has it given
any currently effective waivers extending the statutory period of limitation
applicable to any tax return required to be filed by it for any period. There
are no claims pending against Cupertino and/or CNB for any alleged deficiency in
the payment of any taxes, and Cupertino does not know of any pending or
threatened audits, investigations or claims for unpaid taxes or relating to any
liability in respect of any taxes. There have been no events, including a change
in ownership, that would result in a reappraisal and establishment of a new
base-year full value for purposes of applicable provisions of the California
Constitution, of any real property owned in whole or in part by Cupertino or CNB
or to the best of Cupertino's knowledge, of any real property leased by
Cupertino or CNB.
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(ii) Cupertino has heretofore delivered to Mid-Peninsula copies
of all its tax returns with respect to taxes payable to the United States of
America and the State of California for the fiscal years ended December 31,
1995, 1994, 1993, 1992 and 1991.
(iii) No consent has been filed relating to Cupertino pursuant
to Section 341(f) of the IRC.
h. Material Adverse Change. Except as heretofore disclosed in
-----------------------
writing by Cupertino to Mid-Peninsula, since December 31, 1995, there has been
(i) no material adverse change in the business, assets, licenses, permits,
franchises, results of operations or financial condition of Cupertino or CNB
(whether or not in the Ordinary Course of Business), (ii) no change in any of
the assets, licenses, permits or franchises of Cupertino or CNB that has had or
can reasonably be expected to have a material adverse effect on any of the items
listed in clause (h)(i) above, (iii) no damage, destruction, or other casualty
loss (whether or not covered by insurance) that has had or can reasonably be
expected to have a material adverse effect on any of the items listed in clause
(h)(i) above, (iv) no amendment, modification, or termination of any existing,
or entering into of any new, contract, agreement, plan, lease, license, permit
or franchise that is material to the business, financial condition, assets,
liabilities or operations of Cupertino and CNB, except in the Ordinary Course of
Business; and (v) no disposition by Cupertino or CNB of one or more assets that,
individually or in the aggregate, are material to Cupertino or CNB, except sales
of assets in the Ordinary Course of Business.
i. No Undisclosed Liabilities. Except for items for which reserves
--------------------------
have been established in the unaudited balance sheets of Cupertino as of March
31, 1996, Cupertino has not incurred or discharged, and is not legally obligated
with respect to, any indebtedness, liability (including, without limitation, a
liability arising out of an indemnification, guarantee, hold harmless or similar
arrangement) or obligation (accrued or contingent, whether due or to become due,
and whether or not subordinated to the claims of its general creditors), other
than as a result of operations in the Ordinary Course of Business after such
date. No agreement pursuant to which any loans or other assets have been or will
be sold by Cupertino or CNB entitles the buyer of such loans or other assets,
unless there is a material breach of a representation or covenant by Cupertino
or CNB, to cause Cupertino or CNB to repurchase such loan or other asset or to
pursue any other form of recourse against Cupertino or CNB. Neither Cupertino
nor CNB has knowingly made or shall make any representation or covenant in any
such agreement that contained or shall contain any untrue statement of a
material fact or omitted or shall omit to state a material fact necessary in
order to make the statements contained therein, in light of the circumstances
under which such representations and/or covenants were made or shall be made,
not misleading. No cash, stock or other dividend or any other distribution with
respect to the Cupertino Shares has been declared, set aside or paid, nor have
any of the Cupertino Shares been purchased, redeemed or otherwise acquired,
directly or indirectly, by Cupertino since December 31, 1995.
19
<PAGE>
j. Properties and Leases.
---------------------
(i) Cupertino and CNB have good and marketable title, free and
clear of all liens and encumbrances and the right of possession, subject to
existing leaseholds, to all real properties and good title, free and clear of
all liens and encumbrances, to all other property and assets, tangible and
intangible, reflected in the Cupertino balance sheet as of March 31, 1996
(except property held as lessee under leases disclosed in writing prior to the
date hereof and except personal property sold or otherwise disposed of since
March 31, 1996, in the Ordinary Course of Business), except for (a) liens for
taxes or assessments not delinquent, (b) such other liens and encumbrances and
imperfections of title as do not materially affect the value of such property as
reflected in the Cupertino balance sheet as of March 31, 1996, or as currently
shown on the books and records of Cupertino and which do not interfere with or
impair its present and continued use, or (c) exceptions disclosed in title
reports and preliminary title reports, copies of which have been provided to
Mid-Peninsula. All tangible properties of Cupertino and CNB conform in all
material respects with all applicable ordinances, regulations and zoning laws.
All tangible properties of Cupertino and CNB are in a good state of maintenance
and repair and are adequate for the current business of Cupertino and CNB. No
properties of Cupertino and CNB, and, to the best of Cupertino's knowledge, no
properties in which Cupertino or CNB holds a collateral or contingent interest
or purchase option, are the subject of any pending or threatened investigation,
claim or proceeding relating to the use, storage or disposal on such property of
or contamination of such property by any toxic or hazardous waste material or
substance. To the best of Cupertino's knowledge, neither Cupertino nor CNB owns,
possesses or has a collateral or contingent interest or purchase option in any
properties or other assets which contain or have located within or thereon any
hazardous or toxic waste material or substance unless the location of such
hazardous or toxic waste material or other substance or its use thereon conforms
in all material respects with all federal, state and local laws, rules,
regulations or other provisions regulating the discharge of materials into the
environment. As to any real property not owned or leased by Cupertino or CNB and
held as security for a loan or in which Cupertino or CNB otherwise has an
interest, neither Cupertino or CNB has controlled, directed or participated in
the operation or management of any such real property or any facilities or
enterprise conducted thereon, such that it has become an owner or operator of
such real property under applicable environmental laws.
(ii) All properties held by Cupertino or CNB under leases are
held under valid, binding and enforceable leases, with such exceptions as are
not material and do not interfere with the conduct of the business of Cupertino
or CNB, and Cupertino and CNB enjoy quiet and peaceful possession of such leased
property. Neither Cupertino nor CNB is in material default in any respect under
any material lease, agreement or obligation regarding its properties to which it
is a party or by which it is bound.
(iii) Except as disclosed to Mid-Peninsula in writing, all of
Cupertino's and CNB's rights and obligations under the leases referred to in
Section 4(j)(ii) above do not require the consent of any other party to the
transaction contemplated by this Agreement and
20
<PAGE>
the Merger Agreement. Where required, Cupertino and CNB shall obtain, prior to
the Effective Date, the consent of such parties to such transaction.
k. Material Contracts. Except as previously disclosed to Mid-
------------------
Peninsula in writing and excluding loans, lines of credit, loan commitments or
letters of credit to which Cupertino or CNB is a party, neither Cupertino nor
CNB is a party to or bound by any contract or other agreement made in the
Ordinary Course of Business which involves aggregate future payments by or to
Cupertino or CNB of more than $20,000 and which is made for a fixed period
expiring more than one year from the date hereof, and neither Cupertino nor CNB
is a party to or bound by any agreement not made in the Ordinary Course of
Business which is to be performed at or after the date hereof. Each of the
contracts and agreements disclosed to Mid-Peninsula pursuant to this Section
4(k) is a legal and binding obligation (subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and subject,
as to enforceability, to equitable principles of general applicability), and no
breach or default (and no condition which, with notice or passage of time, or
both, could become a breach or default) exists with respect thereto.
l. Classified Loans. Except as previously disclosed to Mid-
----------------
Peninsula in writing, there are no loans presently owned by Cupertino or CNB
that have been classified by Cupertino or CNB management or Cupertino or CNB
internal policy or procedure, any outside review examiner, accountant or any
bank regulatory authority as "Other Loans Specially Mentioned," "Special
Mention," "Substandard," "Doubtful," or "Loss" or classified using categories or
words with similar import and all loans or portions thereof so classified shall
have been charged off to the extent required. Cupertino and CNB regularly review
and appropriately classify their loans in accordance with all applicable legal
and regulatory requirements and generally accepted banking practices. All loans
and investments of Cupertino and CNB are legal, valid and binding obligations
enforceable in accordance with their respective terms and are not subject to any
setoffs, counterclaims or disputes (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
disclosed to Mid-Peninsula in writing or reserved for in the unaudited balance
sheet of Cupertino as of March 31, 1996, and were duly authorized under and made
in compliance with applicable federal and state laws and regulations. Neither
Cupertino nor CNB has any extensions 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 Cupertino and CNB.
m. Restrictions on Investments. Except for pledges to secure
---------------------------
public and trust deposits and repurchase agreements in the Ordinary Course of
Business, none of the investments reflected in the Cupertino balance sheet as of
March 31, 1996, and none of the investments made by Cupertino or CNB since March
31, 1996, is subject to any restriction, whether contractual or statutory, which
materially impairs the ability of Cupertino or CNB to freely dispose of such
investment at any time.
21
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n. Employment Benefit Plans/ERISA.
------------------------------
(i) Cupertino has provided to Mid-Peninsula an accurate list
setting forth all bonus, incentive compensation, profit-sharing, pension,
retirement, stock purchase, stock option, deferred compensation, severance,
hospitalization, medical, dental, vision, group insurance, death benefit,
disability and other fringe benefit plans, trust agreements, arrangements and
commitments of Cupertino and CNB (including but not limited to any such plans,
agreements, arrangements and commitments applicable to former employees or
retired employees, or for which such persons are eligible) (collectively,
"Employee Plans"), if any, together with copies of all such Employee Plans that
are documented and any and all contracts of employment, and has made available
to Mid-Peninsula any Board of Directors' minutes (or committee minutes)
authorizing, approving or guaranteeing such Employee Plans and contracts; and
(ii) All contributions, premiums or other payments due from
Cupertino and CNB to (or under) any Employee Plans have been fully paid or
adequately provided for on Cupertino's audited financial statements for the year
ended December 31, 1995 or unaudited financial statements for the three months
ended March 31, 1996. All accruals thereon (including, where appropriate,
proportional accruals for partial periods) have been made in accordance with
generally accepted accounting principles consistently applied on a reasonable
basis; and
(iii) Cupertino has disclosed in writing to Mid-Peninsula the
names of each director, officer and employee of Cupertino and CNB; and
(iv) The Employee Plans have been administered where required
in substantial compliance with ERISA, the IRC and the terms of such Employee
Plans, and there is no pending or threatened litigation relating to any such
Employee Plan; and
(v) Cupertino and CNB have not offered in the past health
benefits for retired employees; and
(vi) Each Employee Plan is in full force and effect, and
neither Cupertino, CNB nor any other party is in material default under any of
them, and there have been no claims of default and there are no facts or
conditions which if continued, or on notice, will result in a material default
under any Employee Plans; and
(vii) Cupertino has provided to Mid-Peninsula a list of all
agreements or other understandings pursuant to which the consummation of the
transactions contemplated hereby will (a) entitle any current or former employee
or officer of Cupertino or CNB to severance pay, unemployment compensation or
any other payment, or (b) accelerate the time of payment or vesting or increase
the amount of compensation due any such employee or officer.
22
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o. Collective Bargaining and Employment Agreements. Except as
-----------------------------------------------
provided in this Agreement or as previously disclosed to Mid-Peninsula in
writing, neither Cupertino nor CNB has any union or collective bargaining or
written employment agreements, contracts or other agreements with any labor
organization or with any member of management, or any management or consultation
agreement not terminable at will by Cupertino or CNB without liability and no
such contract or agreement has been requested by, or is under discussion by
management with, any group of employees, any member of management or any other
person. There are no material controversies pending between Cupertino or CNB and
any current or former employees, and to the best of Cupertino's knowledge, there
are no efforts presently being made by any labor union seeking to organize any
of such employees.
p. Compensation of Officers and Employees. Except as previously
--------------------------------------
disclosed to Mid-Peninsula in writing, (i) no officer or employee of Cupertino
or CNB is receiving aggregate direct remuneration at a rate exceeding $60,000
per annum, and (ii) the consummation of the transactions contemplated by this
Agreement and the Merger Agreement will not (either alone or upon the occurrence
of any additional or further acts or events) result in any payment (whether of
severance pay or otherwise) becoming due from Cupertino, CNB or Mid-Peninsula to
any employee of Cupertino or CNB.
q. Legal Actions and Proceedings. Except as previously disclosed
-----------------------------
to Mid-Peninsula in writing, neither Cupertino nor CNB is a party to, or so far
as known to either of them, threatened with, and to Cupertino's knowledge, there
is no reasonable basis for, any legal action or other proceeding or
investigation before any court, any arbitrator of any kind or any government
agency, and neither Cupertino nor CNB is subject to any potential adverse claim,
the outcome of which could involve the payment or receipt by Cupertino or CNB of
any amount in excess of $50,000, unless an insurer has agreed to defend against
and pay the amount of any resulting liability without reservation, or, if any
such legal action, proceeding, investigation or claim will not involve the
payment by Cupertino or CNB of a monetary amount, which could materially
adversely affect Cupertino or CNB or their business or property or the
transactions contemplated hereby. Cupertino has no knowledge of any pending or
threatened claims or charges under the Community Reinvestment Act, before the
Equal Employment Opportunity Commission, the California Department of Fair
Housing & Economic Development, the California Unemployment Appeals Board, or
any federal or state human relations commission or agency. There is no labor
dispute, strike, slow-down or stoppage pending or, to the best of the knowledge
of Cupertino, threatened against Cupertino or CNB.
r. Execution and Delivery of the Agreement.
---------------------------------------
(i) The execution and delivery of this Agreement and the Merger
Agreement have been duly authorized by the Board of Directors of Cupertino and,
when the principal terms of the Merger, this Agreement and the Merger Agreement
have been duly approved by the affirmative vote of the holders of a majority of
the outstanding Cupertino
23
<PAGE>
Shares at a meeting of shareholders duly called and held, the Merger, this
Agreement and the Merger Agreement will be duly and validly authorized by all
necessary corporate action on the part of Cupertino.
(ii) This Agreement has been duly executed and delivered by
Cupertino and (assuming due execution and delivery by Mid-Peninsula)
constitutes, and the Merger Agreement, upon its execution and delivery by
Cupertino (and assuming due execution and delivery by Mid-Peninsula) will
constitute, a legal and binding obligation of Cupertino in accordance with its
terms.
(iii) The execution and delivery by Cupertino of this Agreement
and the Merger Agreement and the consummation of the transactions herein and
therein contemplated (a) do not violate any provision of the Articles of
Incorporation or Articles of Association or Bylaws of Cupertino or CNB,
respectively, or violate in any material respect any provision of federal or
state law or any government rule or regulation (assuming (1) receipt of the
Government Approvals, (2) receipt of the requisite Cupertino shareholder
approval referred to in Section 4(r)(i) hereof, (3) due registration of the
Bancorp Shares under the 1933 Act, and (4) receipt of appropriate permits or
approvals under state securities or "blue sky" laws, and (b) do not require any
consent of any person under, conflict in any material respect with or result in
a material breach of, or accelerate the performance required by any of the terms
of, any material debt instrument, lease, license, covenant, agreement or
understanding to which Cupertino or CNB is a party or by which it is bound or
any order, ruling, decree, judgment, arbitration award or stipulation to which
Cupertino or CNB is subject, or constitute a material default thereunder or
result in the creation of any lien, claim, security interest, encumbrance,
charge, restriction or right of any third party of any kind whatsoever upon any
of the properties or assets of Cupertino or CNB.
s. Retention of Broker or Consultant. No broker, agent, finder,
---------------------------------
consultant or other party (other than legal, compliance, loan auditors and
accounting advisors) has been retained by Cupertino or CNB or is entitled to be
paid based upon any agreements, arrangements or understandings made by Cupertino
or CNB in connection with any of the transactions contemplated by this Agreement
or the Merger Agreement, except that Cupertino has engaged the firm of Sutro &
Co. Incorporated to render an opinion regarding the fairness of the
consideration to be received by Cupertino shareholders in the Merger. Cupertino
has provided Mid-Peninsula with a true and accurate copy of its agreement(s)
with Sutro & Co. Incorporated.
t. Insurance. Cupertino and CNB are and continuously since their
---------
inception have been, insured with reputable insurers against all risks normally
insured against by bank holding companies and banks, and all of the insurance
policies and bonds maintained by Cupertino and CNB are in full force and effect,
Cupertino and CNB are not in default thereunder and all material claims
thereunder have been filed in due and timely fashion. In the best judgment of
the management of Cupertino and CNB, such insurance coverage is adequate for
Cupertino and CNB. Since December 31, 1995, there has not been any damage
24
<PAGE>
to, destruction of, or loss of any assets of Cupertino or CNB not covered by
insurance that could materially and adversely affect the business, financial
condition, properties, assets or results of operations of Cupertino or CNB.
u. Loan Loss Reserves. The allowance for loan losses in the
------------------
Cupertino balance sheets dated December 31, 1995, March 31, 1996, and as of the
Determination Date are and will be adequate in all material respects under the
requirements of all applicable state and federal laws and regulations to provide
for possible loan losses on outstanding loans, net of recoveries. Cupertino has
disclosed to Mid-Peninsula in writing prior to the date hereof, and will
promptly inform Mid-Peninsula of the amounts of all loans, leases, other
extensions of credit or commitments, or other interest-bearing assets of
Cupertino and CNB, that have been classified as of the date hereof or hereafter
by Cupertino or CNB management or Cupertino or CNB internal policy or procedure,
any outside review examiner, accountant or any bank regulatory authority as
"Other Loans Specially Mentioned," "Special Mention," "Substandard," "Doubtful,"
or "Loss" or classified using categories or words with similar import in the
case of loans (or that would have been so classified, in the case of other
interest-bearing assets, had they been loans). Notwithstanding the above,
Cupertino shall be under no obligation to disclose to Mid-Peninsula any such
classification by any bank regulatory authority where such disclosure would
violate any obligation of confidentiality of Cupertino or CNB imposed by such
bank regulatory authority. Cupertino has furnished and will continue to furnish
to Mid-Peninsula true and accurate information concerning the loan portfolio of
Cupertino and CNB, and no material information with respect to the loan
portfolio has been or will be withheld from Mid-Peninsula.
v. Transactions With Affiliates. Except in the Ordinary Course of
----------------------------
Business, neither Cupertino nor CNB has extended credit, committed itself to
extend credit, or transferred any asset to or assumed or guaranteed any
liability of the employees or directors of Cupertino or CNB, or to 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 1933 Act. Neither Cupertino nor CNB has
entered into any other transactions with the employees or directors of Cupertino
or CNB or any spouse or child of any of them, or any of their affiliates or
associates, except as disclosed in writing to Mid-Peninsula. Any such
transactions have been on terms no less favorable to Cupertino and CNB than
those which would prevail in an arms-length transaction with an independent
third party. Neither Cupertino nor CNB has violated any applicable regulation
of any government agency or regulatory authority having jurisdiction over
Cupertino or CNB in connection with any such transactions described in this
subsection v.
w. Information in Mid-Peninsula Registration Statement. The
---------------------------------------------------
information pertaining to Cupertino which has been or will be furnished to Mid-
Peninsula for or on behalf of Cupertino for inclusion in the Mid-Peninsula
Registration Statement and the Joint Proxy Statement/Prospectus, or in the
applications to be filed to obtain the Government Approvals (the
"Applications"), does not and will not contain any untrue statement of any
material fact or omit or will omit to state any material fact required to be
stated therein or
25
<PAGE>
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading; provided, however, that information of a
later date shall be deemed to modify contrary information as of an earlier date.
All financial statements of Cupertino included in the Mid-Peninsula Registration
Statement and the Joint Proxy Statement/Prospectus, or the Applications, will
present fairly the financial condition and results of operations of Cupertino at
the dates and for the periods covered by such statements in accordance with
generally accepted accounting principles consistently applied throughout the
periods covered by such statements. Cupertino shall promptly advise Mid-
Peninsula in writing if prior to the Effective Time of the Merger Cupertino
shall obtain knowledge of any facts that would make it necessary to amend or
supplement the Mid-Peninsula Registration Statement, the Joint Proxy
Statement/Prospectus or any Application, in order to make the statements therein
not misleading or to comply with applicable law or regulation.
x. Accuracy and Effective Date of Representations and Warranties,
--------------------------------------------------------------
Covenants and Agreements. Each representation, warranty, covenant and agreement
- ------------------------
of Cupertino set forth in this Agreement shall be deemed to be made on and as of
the date hereof (except to the extent that a representation or warranty is
qualified as set forth in a Schedule corresponding in number with the applicable
section of such representation or warranty and delivered on or before the
Document Delivery Date, and upon such delivery it shall be deemed made on and as
of the date of delivery), the Closing Date and the Effective Time of the Merger.
No representation or warranty by Cupertino, and no statement by Cupertino in any
certificate, agreement, schedule or other document furnished or to be furnished
in connection with the transactions contemplated by this Agreement or the Merger
Agreement, was or will be inaccurate, incomplete or incorrect in any material
respect as of the date furnished or contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary to make such representation, warranty or statement not misleading to
Mid-Peninsula.
5. REPRESENTATIONS AND WARRANTIES OF MID-PENINSULA.
-----------------------------------------------
In the following representations and warranties, all references to assets,
liabilities, properties, rights, obligations, financial condition, operations,
knowledge, information and other characteristics of Mid-Peninsula shall be
deemed to include reference to those characteristics of MPB on a consolidated
basis, except as the context otherwise indicates or requires. Mid-Peninsula
represents and warrants to Cupertino that, except as set forth on a Schedule
delivered to Cupertino on or before the Document Delivery Date, in form and
substance satisfactory to Cupertino and corresponding in number with the
applicable section:
a. Corporate Status and Power to Enter Into Agreements. (i) Mid-
---------------------------------------------------
Peninsula is a corporation duly incorporated, validly existing and in good
standing under California law and is a registered bank holding company under the
Bank Holding Company Act of 1956, as amended, (ii) subject to obtaining the
Government Approvals and approval of the principal terms of the Merger by the
Mid-Peninsula shareholders, Mid-Peninsula has
26
<PAGE>
all necessary corporate power to enter into this Agreement and the Merger
Agreement and to carry out all of the terms and provisions hereof and thereof to
be carried out by it, (iii) MPB holds a currently valid license issued by the
Superintendent to engage in the commercial banking business in California at the
locations at which it is licensed and currently conducts business, and (iv)
neither Mid-Peninsula nor MPB is subject to any directive, resolution,
memorandum of understanding or order of the FDIC, FRB, Superintendent or any
other regulatory authority having jurisdiction over its business or any of its
assets or properties. Neither the scope of the business of Mid-Peninsula or MPB
nor the location of their properties requires either of them to be licensed to
do business in any jurisdiction other than the State of California. MPB's
deposits are insured by the FDIC to the maximum extent permitted by applicable
law and regulation.
b. Articles, Bylaws, Books and Records. The copies of the Articles
-----------------------------------
of Incorporation and Bylaws of Mid-Peninsula and MPB, respectively, heretofore
delivered to Cupertino are complete and accurate copies thereof as in effect on
the date hereof. The minute books of Mid-Peninsula and MPB made available to
Cupertino contain a complete and accurate record of all meetings of Mid-
Peninsula's and MPB's respective Boards of Directors (and committees thereof)
and shareholders. The corporate books and records (including financial
statements) of Mid-Peninsula and MPB fairly reflect the material transactions to
which Mid-Peninsula and MPB are parties or by which their properties are subject
or bound, and such books and records have been properly kept and maintained.
c. Compliance With Laws, Regulations and Decrees. Mid-Peninsula
---------------------------------------------
and MPB (i) have the corporate power to own or lease their properties and to
conduct their business as currently conducted, (ii) have complied in all
material respects with, and are not in material default of any laws,
regulations, ordinances, orders or decrees applicable to the conduct of their
business and the ownership of their properties, including but not limited to all
federal and state laws (including but not limited to the Bank Secrecy Act),
rules and regulations relating to the offer, sale or issuance of securities, and
the operation of a commercial bank, other than where such noncompliance or
default is not likely to result in a material limitation on the conduct of the
business of Mid-Peninsula or MPB or is not likely to otherwise have a material
adverse effect on Mid-Peninsula and MPB taken as a whole, (iii) have not failed
to file with the proper federal, state, local or other authorities any material
report or other document required to be filed, and (iv) have all approvals,
authorizations, consents, licenses, clearances and orders of, and have currently
effective all registrations with, all government agencies and regulatory
authorities which are necessary to the business and operations of Mid-Peninsula
and MPB as now being conducted.
d. Capitalization. The authorized capital stock of Mid-Peninsula
--------------
consists of 6,000,000 shares of Mid-Peninsula common stock, no par value, of
which 1,608,443 shares are duly authorized, validly issued, fully paid and
nonassessable and currently outstanding, and 4,000,000 shares of Mid-Peninsula
preferred stock of which no shares are outstanding. Said stock has been
offered, sold and issued in compliance with all applicable securities laws.
There are currently outstanding options to purchase 278,538 shares of Mid-
27
<PAGE>
Peninsula common stock, at a weighted average exercise price of $12.84 per
share, issued pursuant to the Mid-Peninsula Stock Option Plan. Said options
were issued and, upon issuance in accordance with the terms of the outstanding
options said shares shall be issued, in compliance with all applicable
securities laws. Otherwise, there are no outstanding (i) options, agreements,
calls or commitments of any character which would obligate Mid-Peninsula to
issue, sell, pledge, assign or otherwise encumber or dispose of, or to purchase,
redeem or otherwise acquire, any Bancorp common stock or any other equity
security of Mid-Peninsula, or (ii) warrants or options relating to, rights to
acquire, or debt or equity securities convertible into, shares of Bancorp common
stock or any other equity security of Mid-Peninsula. The outstanding common
stock of Mid-Peninsula is registered with the Securities and Exchange Commission
(the "Commission") pursuant to Section 12(g) of the 1934 Act. Mid-Peninsula
owns all of the outstanding equity securities of MPB. Except as collateral for
outstanding loans held in their loan portfolios, neither Mid-Peninsula nor MPB
owns, directly or indirectly, any equity interest in any bank (other than Mid-
Peninsula's ownership of MPB), corporation or other entity.
e. Trademarks and Trade Names. To the best of the knowledge of
--------------------------
Mid-Peninsula, Mid-Peninsula and MPB (i) own and have the exclusive right to
use all Intellectual Property Rights used in or necessary for the conduct of
their businesses as now or heretofore conducted; and (ii) are not infringing
upon the Intellectual Property Rights of any other person or entity. No claim
is pending or threatened by any person or entity against or otherwise affecting
the use by Mid-Peninsula or MPB of any Intellectual Property Rights and, to the
best of its knowledge, there is no valid basis for any such claim.
f. Financial Statements, Regulatory Reports. No financial
----------------------------------------
statement or other document provided or to be provided to Cupertino as required
by Section 3.3(j) hereof, as of the date of such document, contained, or as to
documents to be delivered after the date hereof, will contain, any untrue
statement of a material fact, or, at the date thereof, omitted or will omit to
state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which such statements were or will
be made, not misleading; provided, however, that information as of a later date
shall be deemed to modify contrary information as of any earlier date. Mid-
Peninsula and MPB have filed all material documents and reports required to be
filed by them with the FDIC, FRB, Superintendent, the Commission and any other
government agency or regulatory authority having jurisdiction over their
business, assets or properties. All such reports conform in all material
respects with the requirements promulgated by such government agencies and
regulatory authorities. All compliance or corrective action relating to Mid-
Peninsula and MPB required by government agencies and regulatory authorities
having jurisdiction over Mid-Peninsula or MPB has been taken. Except as
disclosed in such statements, reports or documents, neither Mid-Peninsula nor
MPB has received any notification, formally or informally, from any agency or
department of any federal, state or local government or any regulatory authority
or the staff thereof (a) asserting that it is not in compliance with any of the
statutes, regulations or ordinances which such government or regulatory
authority enforces, or (b) threatening to revoke any license, franchise, permit
or government authorization. Mid-Peninsula and MPB
28
<PAGE>
have paid all assessments made or imposed by any government agency. Mid-
Peninsula has delivered to Cupertino copies of all annual management letters and
opinions, and has made available to Cupertino for inspection all reviews,
correspondence and other documents in the files of Mid-Peninsula prepared by
KPMG Peat Marwick LLP or any other certified public accountant engaged by Mid-
Peninsula and delivered to Mid-Peninsula since December 31, 1990. The financial
records of Mid-Peninsula have been, and are being and shall be, maintained in
all material respects in accordance with all applicable legal and accounting
requirements sufficient to insure that all transactions reflected therein are,
in all material respects, executed in accordance with management's general or
specific authorization and recorded in conformity with generally accepted
accounting principles at the time in effect. The data processing equipment, data
transmission equipment, related peripheral equipment and software used by Mid-
Peninsula in the operation of its business to generate and retrieve its
financial records are adequate for the current needs of Mid-Peninsula.
g. Tax Returns.
-----------
(i) Mid-Peninsula and/or MPB has timely filed all federal,
state, county, local and foreign tax returns required to be filed by it,
including, without limitation, estimated tax, use tax, excise tax, real property
and personal property tax reports and returns, employer's withholding tax
returns, other withholding tax returns and Federal Unemployment Tax Returns, and
all other reports or other information required or requested to be filed by
either of them, and each such return, report or other information was, when
filed, complete and accurate in all material respects. Mid-Peninsula and/or MPB
has paid all taxes, fees and other government charges, including any interest
and penalties thereon, when they have become due, except those that are being
contested in good faith, which contested matters have been disclosed to
Cupertino. Mid-Peninsula and/or MPB has not been requested to give nor has it
given any currently effective waivers extending the statutory period of
limitation applicable to any tax return required to be filed by it for any
period. There are no claims pending against Mid-Peninsula and/or MPB for any
alleged deficiency in the payment of any taxes, and Mid-Peninsula does not know
of any pending or threatened audits, investigations or claims for unpaid taxes
or relating to any liability in respect of any taxes. There have been no events,
including a change in ownership, that would result in a reappraisal and
establishment of a new base-year full value for purposes of applicable
provisions of the California Constitution, of any real property owned in whole
or in part by Mid-Peninsula or MPB or to the best of Mid-Peninsula's knowledge,
of any real property leased by Mid-Peninsula or MPB.
(ii) Mid-Peninsula has heretofore delivered to Cupertino copies
of all its tax returns with respect to taxes payable to the United States of
America and the State of California for the fiscal years ended December 31,
1995, 1994, 1993, 1992 and 1991.
(iii) No consent has been filed relating to Mid-Peninsula
pursuant to Section 341(f) of the IRC.
29
<PAGE>
h. Material Adverse Change. Except as heretofore disclosed in
-----------------------
writing by Mid-Peninsula to Cupertino, since December 31, 1995, there has been
(i) no material adverse change in the business, assets, licenses, permits,
franchises, results of operations or financial condition of Mid-Peninsula or MPB
(whether or not in the Ordinary Course of Business), (ii) no change in any of
the assets, licenses, permits or franchises of Mid-Peninsula or MPB that has had
or can reasonably be expected to have a material adverse effect on any of the
items listed in clause (h)(i) above, (iii) no damage, destruction, or other
casualty loss (whether or not covered by insurance) that has had or can
reasonably be expected to have a material adverse effect on any of the items
listed in clause (h)(i) above, (iv) no amendment, modification, or termination
of any existing, or entering into of any new, contract, agreement, plan, lease,
license, permit or franchise that is material to the business, financial
condition, assets, liabilities or operations of Mid-Peninsula and MPB, except in
the Ordinary Course of Business, and (v) no disposition by Mid-Peninsula or MPB
of one or more assets that, individually or in the aggregate, are material to
Mid-Peninsula or MPB, except sales of assets in the Ordinary Course of Business.
i. No Undisclosed Liabilities. Except for items for which reserves
--------------------------
have been established in the unaudited balance sheets of Mid-Peninsula as of
March 31, 1996, Mid-Peninsula has not incurred or discharged, and is not legally
obligated with respect to, any indebtedness, liability (including, without
limitation, a liability arising out of an indemnification, guarantee, hold
harmless or similar arrangement) or obligation (accrued or contingent, whether
due or to become due, and whether or not subordinated to the claims of its
general creditors), other than as a result of operations in the Ordinary Course
of Business after such date. No agreement pursuant to which any loans or other
assets have been or will be sold by Mid-Peninsula or MPB entitles the buyer of
such loans or other assets, unless there is a material breach of a
representation or covenant by Mid-Peninsula or MPB, to cause Mid-Peninsula or
MPB to repurchase such loan or other asset or to pursue any other form of
recourse against Mid-Peninsula or MPB. Neither Mid-Peninsula nor MPB has
knowingly made or shall make any representation or covenant in any such
agreement that contained or shall contain any untrue statement of a material
fact or omitted or shall omit to state a material fact necessary in order to
make the statements contained therein, in light of the circumstances under which
such representations and/or covenants were made or shall be made, not
misleading. No cash, stock or other dividend or any other distribution with
respect to the Bancorp Shares has been declared, set aside or paid, nor have any
of the Bancorp Shares been purchased, redeemed or otherwise acquired, directly
or indirectly, by Mid-Peninsula since May 22, 1996.
j. Properties and Leases.
---------------------
(i) Mid-Peninsula and MPB have good and marketable title, free
and clear of all liens and encumbrances and the right of possession, subject to
existing leaseholds, to all real properties and good title, free and clear of
all liens and encumbrances, to all other property and assets, tangible and
intangible, reflected in the Mid-Peninsula balance sheet as of March 31, 1996
(except property held as lessee under leases disclosed in writing prior to
30
<PAGE>
the date hereof and except personal property sold or otherwise disposed of since
March 31, 1996, in the Ordinary Course of Business), except for (a) liens for
taxes or assessments not delinquent, (b) such other liens and encumbrances and
imperfections of title as do not materially affect the value of such property as
reflected in the Mid-Peninsula balance sheet as of March 31, 1996, or as
currently shown on the books and records of Mid-Peninsula and which do not
interfere with or impair its present and continued use, or (c) exceptions
disclosed in title reports and preliminary title reports, copies of which have
been provided to Cupertino. All tangible properties of Mid-Peninsula and MPB
conform in all material respects with all applicable ordinances, regulations and
zoning laws. All tangible properties of Mid-Peninsula and MPB are in a good
state of maintenance and repair and are adequate for the current business of
Mid-Peninsula and MPB. No properties of Mid-Peninsula and MPB, and, to the best
of Mid-Peninsula's knowledge, no properties in which Mid-Peninsula or MPB holds
a collateral or contingent interest or purchase option, are the subject of any
pending or threatened investigation, claim or proceeding relating to the use,
storage or disposal on such property of or contamination of such property by any
toxic or hazardous waste material or substance. To the best of Mid-Peninsula's
knowledge, neither Mid-Peninsula nor MPB owns, possesses or has a collateral or
contingent interest or purchase option in any properties or other assets which
contain or have located within or thereon any hazardous or toxic waste material
or substance unless the location of such hazardous or toxic waste material or
other substance or its use thereon conforms in all material respects with all
federal, state and local laws, rules, regulations or other provisions regulating
the discharge of materials into the environment. As to any real property not
owned or leased by Mid-Peninsula or MPB and held as security for a loan or in
which Mid-Peninsula or MPB otherwise has an interest, neither Mid-Peninsula or
MPB has controlled, directed or participated in the operation or management of
any such real property or any facilities or enterprise conducted thereon, such
that it has become an owner or operator of such real property under applicable
environmental laws.
(ii) All properties held by Mid-Peninsula or MPB under leases
are held under valid, binding and enforceable leases, with such exceptions as
are not material and do not interfere with the conduct of the business of Mid-
Peninsula or MPB, and Mid-Peninsula and MPB enjoy quiet and peaceful possession
of such leased property. Neither Mid-Peninsula nor MPB is in material default in
any respect under any material lease, agreement or obligation regarding its
properties to which it is a party or by which it is bound.
(iii) Except as disclosed to Cupertino in writing, all of Mid-
Peninsula's and MPB's rights and obligations under the leases referred to in
Section 5(j)(ii) above do not require the consent of any other party to the
transaction contemplated by this Agreement and the Merger Agreement. Where
required, Mid-Peninsula and MPB shall obtain, prior to the Effective Date, the
consent of such parties to such transactions.
k. Material Contracts. Except as previously disclosed to Cupertino
------------------
in writing and excluding loans, lines of credit, loan commitments or letters of
credit to which
31
<PAGE>
Mid-Peninsula or MPB is a party, neither Mid-Peninsula nor MPB is a party to or
bound by any contract or other agreement made in the Ordinary Course of Business
which involves aggregate future payments by or to Mid-Peninsula or MPB of more
than $20,000 and which is made for a fixed period expiring more than one year
from the date hereof, and neither Mid-Peninsula nor MPB is a party to or bound
by any agreement not made in the Ordinary Course of Business which is to be
performed at or after the date hereof. Each of the contracts and agreements
disclosed to Cupertino pursuant to this Section 5(k) is a legal and binding
obligation (subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject, as to enforceability, to
equitable principles of general applicability), and no breach or default (and no
condition which, with notice or passage of time, or both, could become a breach
or default) exists with respect thereto.
l. Classified Loans. Except as previously disclosed to Cupertino
----------------
in writing, there are no loans presently owned by Mid-Peninsula or MPB that have
been classified by Mid-Peninsula or MPB management or Mid-Peninsula or MPB
internal policy or procedure, any outside review examiner, accountant or any
bank regulatory authority as "Other Loans Specially Mentioned," "Special
Mention," "Substandard," "Doubtful," or "Loss" or classified using categories or
words with similar import and all loans or portions thereof so classified have
been charged off to the extent required. Mid-Peninsula and MPB regularly review
and appropriately classify their loans in accordance with all applicable legal
and regulatory requirements and generally accepted banking practices. All loans
and investments of Mid-Peninsula and MPB are legal, valid and binding
obligations enforceable in accordance with their respective terms and are not
subject to any setoffs, counterclaims or disputes (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 disclosed to Cupertino in writing or reserved for in
the unaudited balance sheet of Mid-Peninsula as of March 31, 1996, and were duly
authorized under and made in compliance with applicable federal and state laws
and regulations. Neither Mid-Peninsula nor MPB has any extensions 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 Mid-Peninsula and MPB.
m. Restrictions on Investments. Except for pledges to secure
---------------------------
public and trust deposits and repurchase agreements in the Ordinary Course of
Business, none of the investments reflected in the Mid-Peninsula balance sheet
as of March 31, 1996, and none of the investments made by Mid-Peninsula or MPB
since March 31, 1996, is subject to any restriction, whether contractual or
statutory, which materially impairs the ability of Mid-Peninsula or MPB to
freely dispose of such investment at any time.
n. Employment Benefit Plans/ERISA.
------------------------------
(i) Mid-Peninsula has provided to Cupertino an accurate list
setting forth all bonus, incentive compensation, profit-sharing, pension,
retirement, stock purchase,
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stock option, deferred compensation, severance, hospitalization, medical,
dental, vision, group insurance, death benefit, disability and other fringe
benefit plans, trust agreements, arrangements and commitments of Mid-Peninsula
and MPB (including but not limited to any such plans, agreements, arrangements
and commitments applicable to former employees or retired employees, or for
which such persons are eligible) (collectively, "Employee Plans"), if any,
together with copies of all such Employee Plans that are documented and any and
all contracts of employment, and has made available to Cupertino any Board of
Directors' minutes (or committee minutes) authorizing, approving or guaranteeing
such Employee Plans and contracts; and
(ii) All contributions, premiums or other payments due from
Mid-Peninsula and MPB to (or under) any Employee Plans have been fully paid or
adequately provided for on Mid-Peninsula's audited financial statements for the
year ended December 31, 1995 or unaudited financial statements for the three
months ended March 31, 1996. All accruals thereon (including, where appropriate,
proportional accruals for partial periods) have been made in accordance with
generally accepted accounting principles consistently applied on a reasonable
basis; and
(iii) Mid-Peninsula has disclosed in writing to Cupertino the
names of each director, officer and employee of Mid-Peninsula and MPB; and
(iv) The Employee Plans have been administered where required
in substantial compliance with ERISA, the IRC and the terms of such Employee
Plans, and there is no pending or threatened litigation relating to any such
Employee Plan; and
(v) Mid-Peninsula and MPB have not offered in the past health
benefits for retired employees; and
(vi) Each Employee Plan is in full force and effect, and
neither Mid-Peninsula, MPB nor any other party is in material default under any
of them, and there have been no claims of default and there are no facts or
conditions which if continued, or on notice, will result in a material default
under any Employee Plans; and
(vii) Mid-Peninsula has provided to Cupertino a list of all
agreements or other understandings pursuant to which the consummation of the
transactions contemplated hereby will (a) entitle any current or former employee
or officer of Mid-Peninsula or MPB to severance pay, unemployment compensation
or any other payment, or (b) accelerate the time of payment or vesting or
increase the amount of compensation due any such employee or officer.
o. Collective Bargaining and Employment Agreements. Except as
-----------------------------------------------
provided in this Agreement or as previously disclosed to Cupertino in writing,
neither Mid-Peninsula nor MPB has any union or collective bargaining or written
employment agreements, contracts or other agreements with any labor organization
or with any member
33
<PAGE>
of management, or any management or consultation agreement not terminable at
will by Mid-Peninsula or MPB without liability and no such contract or agreement
has been requested by, or is under discussion by management with, any group of
employees, any member of management or any other person. There are no material
controversies pending between Mid-Peninsula or MPB and any current or former
employees, and to the best of Mid-Peninsula's knowledge, there are no efforts
presently being made by any labor union seeking to organize any of such
employees.
p. Compensation of Officers and Employees. Except as previously
--------------------------------------
disclosed to Cupertino in writing, (i) no officer or employee of Mid-Peninsula
or MPB is receiving aggregate direct remuneration at a rate exceeding $60,000
per annum, and (ii) the consummation of the transactions contemplated by this
Agreement and the Merger Agreement will not (either alone or upon the occurrence
of any additional or further acts or events) result in any payment (whether of
severance pay or otherwise) becoming due from Mid-Peninsula, MPB or Cupertino to
any employee of Mid-Peninsula or MPB.
q. Legal Actions and Proceedings. Except as previously disclosed
-----------------------------
to Cupertino in writing, neither Mid-Peninsula nor MPB is a party to, or so far
as known to either of them, threatened with, and to Mid-Peninsula's knowledge,
there is no reasonable basis for, any legal action or other proceeding or
investigation before any court, any arbitrator of any kind or any government
agency, and neither Mid-Peninsula nor MPB is subject to any potential adverse
claim, the outcome of which could involve the payment or receipt by Mid-
Peninsula or MPB of any amount in excess of $50,000, unless an insurer has
agreed to defend against and pay the amount of any resulting liability without
reservation, or, if any such legal action, proceeding, investigation or claim
will not involve the payment by Mid-Peninsula or MPB of a monetary amount, which
could materially adversely affect Mid-Peninsula or MPB or their business or
property or the transactions contemplated hereby. Mid-Peninsula has no knowledge
of any pending or threatened claims or charges under the Community Reinvestment
Act, before the Equal Employment Opportunity Commission, the California
Department of Fair Housing & Economic Development, the California Unemployment
Appeals Board, or any federal or state human relations commission or agency.
There is no labor dispute, strike, slow-down or stoppage pending or, to the best
of the knowledge of Mid-Peninsula, threatened against Mid-Peninsula or MPB.
r. Execution and Delivery of the Agreement.
---------------------------------------
(i) The execution and delivery of this Agreement and the Merger
Agreement have been duly authorized by the Board of Directors of Mid-Peninsula
and, when the principal terms of the Merger, this Agreement and the Merger
Agreement have been duly approved by the affirmative vote of the holders of a
majority of the outstanding Bancorp Shares at a meeting of shareholders duly
called and held, the Merger, this Agreement and the Merger Agreement will be
duly and validly authorized by all necessary corporate action on the part of
Mid-Peninsula.
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<PAGE>
(ii) This Agreement has been duly executed and delivered by
Mid-Peninsula and (assuming due execution and delivery by Cupertino)
constitutes, and the Merger Agreement, upon its execution and delivery by Mid-
Peninsula (and assuming due execution and delivery by Cupertino) will
constitute, a legal and binding obligation of Mid-Peninsula in accordance with
its terms.
(iii) The execution and delivery by Mid-Peninsula of this
Agreement and the Merger Agreement and the consummation of the transactions
herein and therein contemplated (a) do not violate any provision of the Articles
of Incorporation or Bylaws of Mid-Peninsula or MPB, respectively, or violate in
any material respect any provision of federal or state law or any government
rule or regulation (assuming (1) receipt of the Government Approvals, (2)
receipt of the requisite Mid-Peninsula shareholder approval referred to in
Section 5(r)(i) hereof, (3) due registration of the Bancorp Shares under the
1933 Act, and (4) receipt of appropriate permits or approvals under state
securities or "blue sky" laws, and (b) do not require any consent of any person
under, conflict in any material respect with or result in a material breach of,
or accelerate the performance required by any of the terms of, any material debt
instrument, lease, license, covenant, agreement or understanding to which Mid-
Peninsula or MPB is a party or by which it is bound or any order, ruling,
decree, judgment, arbitration award or stipulation to which Mid-Peninsula or MPB
is subject, or constitute a material default thereunder or result in the
creation of any lien, claim, security interest, encumbrance, charge, restriction
or right of any third party of any kind whatsoever upon any of the properties or
assets of Mid-Peninsula or MPB.
s. Retention of Broker or Consultant. No broker, agent, finder,
---------------------------------
consultant or other party (other than legal, compliance, loan auditors and
accounting advisors) has been retained by Mid-Peninsula or MPB or is entitled to
be paid based upon any agreements, arrangements or understandings made by Mid-
Peninsula or MPB in connection with any of the transactions contemplated by this
Agreement or the Merger Agreement, except that Mid-Peninsula has engaged the
firm of Alex. Brown & Sons Incorporated to act as its financial advisor and to
render an opinion regarding the fairness of the Conversion Ratio in the Merger,
from a financial point of view, to Mid-Peninsula shareholders. Mid-Peninsula
has provided Cupertino with a true and accurate copy of its agreement(s) with
Alex. Brown & Sons Incorporated.
t. Insurance. Mid-Peninsula and MPB are and continuously since
---------
their inception have been, insured with reputable insurers against all risks
normally insured against by bank holding companies and banks, and all of the
insurance policies and bonds maintained by Mid-Peninsula and MPB are in full
force and effect, Mid-Peninsula and MPB are not in default thereunder and all
material claims thereunder have been filed in due and timely fashion. In the
best judgment of the management of Mid-Peninsula and MPB, such insurance
coverage is adequate for Mid-Peninsula and MPB. Since December 31, 1995, there
has not been any damage to, destruction of, or loss of any assets of Mid-
Peninsula or MPB not covered by insurance that could materially and adversely
affect the business, financial condition, properties, assets or results of
operations of Mid-Peninsula or MPB.
35
<PAGE>
u. Loan Loss Reserves. The allowance for loan losses in the Mid-
------------------
Peninsula balance sheets dated December 31, 1995, March 31, 1996, and as of the
Determination Date are and will be adequate in all material respects under the
requirements of all applicable state and federal laws and regulations to provide
for possible loan losses on outstanding loans, net of recoveries. Mid-Peninsula
has disclosed to Cupertino in writing prior to the date hereof, and will
promptly inform Cupertino of the amounts of all loans, leases, other extensions
of credit or commitments, or other interest-bearing assets of Mid-Peninsula and
MPB, that have been classified as of the date hereof or hereafter by Mid-
Peninsula or MPB management or Mid-Peninsula or MPB internal policy or
procedure, any outside review examiner, accountant or any bank regulatory
authority as "Other Loans Specially Mentioned," "Special Mention,"
"Substandard," "Doubtful," or "Loss" or classified using categories or words
with similar import in the case of loans (or that would have been so classified,
in the case of other interest-bearing assets, had they been loans).
Notwithstanding the above, Mid-Peninsula shall be under no obligation to
disclose to Cupertino any such classification by any bank regulatory authority,
where such disclosure would violate any obligation of confidentiality of Mid-
Peninsula or MPB imposed by such bank regulatory authority. Mid-Peninsula has
furnished and will continue to furnish to Cupertino true and accurate
information concerning the loan portfolio of Mid-Peninsula and MPB, and no
material information with respect to the loan portfolio has been or will be
withheld from Cupertino.
v. Transactions With Affiliates. Except in the Ordinary Course of
----------------------------
Business, neither Mid-Peninsula nor MPB has extended credit, committed itself to
extend credit, or transferred any asset to or assumed or guaranteed any
liability of the employees or directors of Mid-Peninsula or MPB, or to 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 1933 Act. Neither Mid-Peninsula
nor MPB has entered into any other transactions with the employees or directors
of Mid-Peninsula or MPB or any spouse or child of any of them, or any of their
affiliates or associates, except as disclosed in writing to Cupertino. Any such
transactions have been on terms no less favorable to Mid-Peninsula and MPB than
those which would prevail in an arms-length transaction with an independent
third party. Neither Mid-Peninsula nor MPB has violated any applicable
regulation of any government agency or regulatory authority having jurisdiction
over Mid-Peninsula or MPB in connection with any such transactions described in
this subsection v.
w. Information in Mid-Peninsula Registration Statement. The
---------------------------------------------------
information pertaining to Mid-Peninsula which has been or will be included in
the Mid-Peninsula Registration Statement and the Joint Proxy
Statement/Prospectus, or in the Applications to be filed to obtain the
Government Approvals, does not and will not contain any untrue statement of any
material fact or omit or will omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading; provided, however, that
information of a later date shall be deemed to modify contrary information as of
an earlier date. All financial statements of Mid-Peninsula included in the Mid-
Peninsula Registration Statement and the
36
<PAGE>
Joint Proxy Statement/Prospectus, or the Applications, will present fairly the
financial condition and results of operations of Mid-Peninsula at the dates and
for the periods covered by such statements in accordance with generally accepted
accounting principles consistently applied throughout the periods covered by
such statements. Mid-Peninsula shall promptly advise Cupertino in writing if
prior to the Effective Time of the Merger Mid-Peninsula shall obtain knowledge
of any facts that would make it necessary to amend or supplement the Mid-
Peninsula Registration Statement, the Joint Proxy Statement/Prospectus or any
Application, in order to make the statements therein not misleading or to comply
with applicable law or regulation.
x. Accuracy and Effective Date of Representations and Warranties,
--------------------------------------------------------------
Covenants and Agreements. Each representation, warranty, covenant and agreement
- ------------------------
of Mid-Peninsula set forth in this Agreement shall be deemed to be made on and
as of the date hereof (except to the extent that a representation or warranty is
qualified as set forth in a Schedule corresponding in number with the applicable
section of such representation or warranty and delivered on or before the
Document Delivery Date, and upon such delivery it shall be deemed made on and as
of the date of delivery), the Closing Date and the Effective Time of the Merger.
No representation or warranty by Mid-Peninsula, and no statement by Mid-
Peninsula in any certificate, agreement, schedule or other document furnished or
to be furnished in connection with the transactions contemplated by this
Agreement or the Merger Agreement, was or will be inaccurate, incomplete or
incorrect in any material respect as of the date furnished or contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact necessary to make such representation, warranty or statement
not misleading to Cupertino.
6. SECURITIES ACT OF 1933; SECURITIES EXCHANGE ACT OF 1934.
-------------------------------------------------------
a. Preparation and Filing of Registration Statement. Mid-Peninsula
------------------------------------------------
shall promptly prepare and file with the Commission (i) a registration statement
on the appropriate form (the "Mid-Peninsula Registration Statement") under and
pursuant to the provisions of the 1933 Act for the purpose of registering a
sufficient number of Mid-Peninsula Shares to complete the exchange of Bancorp
Shares for the outstanding Cupertino Shares pursuant to the Conversion Ratio and
the provisions of Section 2.1 above, and (ii) in sufficient time to be effective
on or before the Effective Time of the Merger one or more registration
statements or amendments to existing registration statements under the 1933 Act
for the purpose of registering the maximum number of Bancorp Shares to which the
holders of Substitute Options may be entitled pursuant to Section 2.6 above at
or after the Effective Time of the Merger. Mid-Peninsula shall promptly prepare
a Joint Proxy Statement/Prospectus for the purpose of submitting the principal
terms of the Merger, this Agreement and the Merger Agreement to the shareholders
of Mid-Peninsula and Cupertino for approval. Cupertino shall cooperate in all
reasonable respects with regard to the preparation of the Joint Proxy
Statement/Prospectus. The Joint Proxy Statement/Prospectus in definitive form is
expected to serve as the prospectus to be included in the Mid-Peninsula
Registration Statement. Mid-
37
<PAGE>
Peninsula and Cupertino shall each provide promptly to the other such
information concerning its business and financial condition and affairs as may
be required or appropriate for inclusion in the Mid-Peninsula Registration
Statement or the Joint Proxy Statement/Prospectus, and shall cause its counsel
and auditors to cooperate with the other's counsel and auditors in the
preparation of the Mid-Peninsula Registration Statement and the Joint Proxy
Statement/Prospectus.
b. Effectiveness of Registration Statement. Mid-Peninsula and
---------------------------------------
Cupertino shall use their best efforts to have the Mid-Peninsula Registration
Statement and any amendments or supplements thereto declared effective under the
1933 Act as soon as practicable, and thereafter Mid-Peninsula and Cupertino
shall distribute the Joint Proxy Statement/Prospectus to holders of their
respective common stock in accordance with applicable laws and the Articles of
Incorporation and Bylaws of each.
c. Sales and Resales of Common Stock. Mid-Peninsula shall not be
---------------------------------
required to maintain the effectiveness of the Mid-Peninsula Registration
Statement for the purpose of sale or resale of the Bancorp Shares by any person.
d. Rule 145. Securities representing Bancorp Shares issued to
--------
affiliates of Cupertino (as determined by counsel to Mid-Peninsula and
Cupertino) under Rule 145 of the 1933 Act pursuant to the Merger Agreement may
be subject to stop transfer orders which confirm that such securities
representing Bancorp Shares have been issued or transferred to the registered
holder as the result of a transaction to which Rule 145 under the 1933 Act
applies, and that such securities may not be sold, hypothecated, transferred or
assigned, and the issuer or its transfer agent shall not be required to give
effect to any attempted sale, hypothecation, transfer or assignment, except (i)
pursuant to a then current effective registration statement under the 1933 Act,
(ii) in a transaction permitted by Rule 145 as to which the issuer has, in the
opinion of its counsel, received reasonably satisfactory evidence of compliance
with the provisions of Rule 145, or (iii) in a transaction which, in the opinion
of counsel satisfactory to the issuer or as described in a "no action" or
interpretive letter from the staff of the Securities and Exchange Commission, is
not required to be registered under the 1933 Act.
7. CONDITIONS TO THE OBLIGATIONS OF MID-PENINSULA.
----------------------------------------------
The obligations of Mid-Peninsula under this Agreement are, at its option,
subject to fulfillment at or prior to the Effective Time of the Merger of each
of the following conditions; provided, however, that any one or more of such
conditions may be waived by the Board of Directors of Mid-Peninsula at any time
at or prior to the Effective Time of the Merger:
a. Representations and Warranties. The representations and
------------------------------
warranties of Cupertino in Section 4 hereof shall be true and correct in all
material respects on and as of
38
<PAGE>
the date of this Agreement (except to the extent that a representation or
warranty is qualified as set forth in a Schedule corresponding in number with
the applicable section of such representation or warranty and delivered on or
before the Document Delivery Date, and upon such delivery it shall be deemed
made on and as of the date of delivery), the Closing Date and the Effective Time
of the Merger, with the same effect as though such representations and
warranties had been made on and as of each such date or time except as to any
representation or warranty which specifically relates to an earlier date or
time.
b. Compliance and Performance Under Agreement. Cupertino shall
------------------------------------------
have performed and complied in all material respects with all terms, agreements,
covenants and conditions of this Agreement and the Merger Agreement required to
be performed or complied with by it at or prior to the Effective Time of the
Merger.
c. Material Adverse Change. No materially adverse change shall
-----------------------
have occurred since March 31, 1996, in the business, financial condition,
results of operations or assets of Cupertino and CNB, taken as a whole, and
neither Cupertino nor CNB shall be a party to or threatened with, and to the
best of Cupertino'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 legal action or proceeding, in the reasonable judgment
of Mid-Peninsula, could materially adversely affect Cupertino and CNB, taken as
a whole, or their business, financial condition, results of operations or
assets.
d. Approval of Agreement. The principal terms of the Merger, this
---------------------
Agreement and the Merger Agreement shall have been duly approved by (i) the
affirmative vote or consent of the holders of a majority of the outstanding
Cupertino Shares and (ii) the affirmative vote or consent of the holders of a
majority of the outstanding Mid-Peninsula Shares.
e. Officer's Certificate. Mid-Peninsula shall have received a
---------------------
certificate, dated the Effective Date, signed on behalf of Cupertino by its
President and Chief Financial Officer, in substantially the form delivered to
Mid-Peninsula on or before the Document Delivery Date.
f. Opinion of Counsel. Manatt, Phelps & Phillips, LLP, counsel to
------------------
Cupertino, shall have delivered to Mid-Peninsula its opinion dated the Effective
Date in substantially the form delivered to Mid-Peninsula on or before the
Document Delivery Date.
g. Absence of Proceedings. No legal, administrative, arbitration,
----------------------
investigatory or other proceeding by any government agency or regulatory
authority shall have been instituted or threatened to restrain or prohibit the
Merger or the transactions contemplated by this Agreement.
h. Effectiveness of Registration Statement. The Mid-Peninsula
---------------------------------------
Registration Statement and any amendments or supplements thereto shall have
become
39
<PAGE>
effective under the 1933 Act, no stop order suspending the effectiveness of such
Registration Statement shall be in effect and no proceedings for such purpose
shall have been initiated or threatened by or before the Commission and the Mid-
Peninsula Shares registered thereby shall have received all state securities and
"blue sky" permits or approvals required to consummate the transactions
contemplated by this Agreement and the Merger Agreement.
i. Government Approvals. All Government Approvals shall be in
--------------------
effect, and all conditions or requirements prescribed by law or by any such
Approvals shall have been satisfied; provided, however, that no Government
Approval shall be deemed to have been received if it shall require the
divestiture or cessation of any of the present businesses or operations
conducted by either of the parties hereto or shall impose any other condition or
requirement, which condition or requirement Mid-Peninsula in its reasonable
judgment shall deem to be materially burdensome (in which case Mid-Peninsula
shall promptly notify Cupertino). For purposes of this agreement no condition or
requirement shall be deemed to be "materially burdensome" if such condition or
requirement does not materially differ from conditions or requirements regularly
imposed in orders approving transactions of the type contemplated by this
Agreement and compliance with such condition or requirement would not:
(i) require the taking of any action materially inconsistent
with the manner in which Mid-Peninsula or Cupertino has conducted its business
previously;
(ii) have a material adverse effect upon the business,
financial condition or results of operations of Mid-Peninsula or Cupertino; or
(iii) preclude satisfaction of any of the conditions to
consummation of the transactions contemplated by this Agreement.
j. Tax Opinion. Bronson, Bronson & McKinnon LLP, Mid-Peninsula's
-----------
counsel, shall have delivered to Mid-Peninsula and Cupertino a tax opinion
subject to customary assumptions and exceptions included in such opinions and
the prior delivery of certificates from Cupertino and Mid-Peninsula in form and
substance reasonably satisfactory to Mid-Peninsula's counsel, substantially to
the effect that under federal income tax law and California income and franchise
tax law:
(i) The Merger will not result in any recognized gain or loss
to Mid-Peninsula or Cupertino;
(ii) Except for any cash received in lieu of any fractional
share, no gain or loss will be recognized by holders of Cupertino Shares who
receive Bancorp Shares in exchange for the Cupertino Shares which they hold;
(iii) The holding period of Bancorp Shares exchanged for
Cupertino Shares will include the holding period of the Cupertino Shares for
which they are exchanged,
40
<PAGE>
assuming the Cupertino Shares are capital assets in the hands of the holder
thereof at the Effective Date; and
(iv) The basis of the Bancorp Shares received in the exchange
will be the same as the basis of the Cupertino Shares for which they are
exchanged, less any basis attributable to fractional shares for which cash is
received.
k. Accountant's Comfort Letters. On or prior to the date of
----------------------------
effectiveness of the Mid-Peninsula Registration Statement, Mid-Peninsula shall
have received a comfort letter addressed to Mid-Peninsula from Coopers & Lybrand
LLP, independent public accountants for Cupertino, in form and substance
satisfactory to Mid-Peninsula and its counsel. Mid-Peninsula shall also have
received from Coopers & Lybrand LLP a comfort letter dated the Effective Date,
in form and substance satisfactory to Mid-Peninsula and its counsel, as to such
matters, as of a specified date not more than five (5) business days prior to
the Effective Date, as Mid-Peninsula may reasonably request.
l. Dissenting Shares. Holders of not more than nine percent (9%)
-----------------
of the outstanding Bancorp Shares and Cupertino Shares shall have perfected
dissenter's rights pursuant to Chapter 13 of the California General Corporation
Law.
m. Unaudited Financials. Not later than five (5) business days
--------------------
prior to the Effective Date, Cupertino shall have furnished Mid-Peninsula a copy
of its most recently prepared unaudited month-end consolidated financial
statements, including a balance sheet and statement of income of Cupertino.
n. Affiliate Agreements. Mid-Peninsula shall have received signed
--------------------
affiliate agreements on or before the Document Delivery Date, from each person
who, in the opinion of Cupertino's and Mid-Peninsula's counsel, might be deemed
to be an affiliate of Cupertino or Mid-Peninsula under Rule 144 or 145 of the
1933 Act. The agreements will include provisions restricting certain actions by
an affiliate related to Cupertino Shares or Mid-Peninsula and/or Bancorp Shares,
including the sale, purchase, acquisition or transfer of Cupertino Shares or
Mid-Peninsula and/or Bancorp Shares in a manner which may render pooling-of-
interests accounting treatment unavailable in the Merger.
o. Closing Documents. Mid-Peninsula shall have received such
-----------------
certificates and other closing documents as counsel for Mid-Peninsula shall
reasonably request.
p. Consents. Cupertino shall have received, or Mid-Peninsula shall
--------
have satisfied itself that Cupertino will receive, all consents of third parties
as may be required including consents of other parties to and required by
material mortgages, notes, leases, franchises, agreements, licenses and permits
applicable to Cupertino and CNB, in each case in form and substance reasonably
satisfactory to Mid-Peninsula and its counsel, and no such consent or license or
permit shall have been withdrawn or suspended.
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q. Fairness Opinion. The Board of Directors of Mid-Peninsula shall
----------------
have received an opinion of Alex. Brown & Sons Incorporated, dated the date of
this Agreement and the date of mailing or a date within three (3) days prior to
the date of mailing the Joint Proxy Statement/Prospectus, to the effect that the
Conversion Ratio in the Merger is fair, from a financial point of view, to Mid-
Peninsula shareholders, and such opinion shall not have been withdrawn by the
Effective Time of the Merger.
r. Accounting Treatment. Mid-Peninsula shall have received a
--------------------
letter from KPMG Peat Marwick LLP, subject to customary qualifications and
receipt of such certificates as may reasonable and customary in connection with
such letters, satisfactory in form and substance to Mid-Peninsula and its
counsel, to the effect that the Merger shall qualify for the pooling-of-
interests method of accounting in accordance with generally accepted accounting
principles and all applicable rules, regulations and policies of the Commission.
There shall have been no determination by any court, tribunal, regulatory
authority or other government agency, that the Merger fails or will fail to
qualify for pooling-of-interests accounting treatment.
s. Shareholder Agreements. Mid-Peninsula and Cupertino shall have
----------------------
received signed shareholder agreements from members of the Boards of Directors
and the executive officers of Mid-Peninsula and Cupertino on or before the
Document Delivery Date, pursuant to which each such person in their capacity as
a shareholder commits to vote their Mid-Peninsula Shares or Cupertino Shares in
favor of the Merger and the transactions contemplated thereby and pursuant to
this Agreement and the Merger Agreement, and to recommend to shareholders,
subject to the exercise of fiduciary duties, that they vote in favor of the
Merger and the transactions contemplated thereby and pursuant to this Agreement
and the Merger Agreement.
t. Performance Tests. As of the Determination Date, Closing Date
-----------------
and the Effective Date, Cupertino and CNB on a consolidated basis shall have (i)
total shareholders' equity and leverage, tier 1 and total risk-based capital
ratios, respectively, in amounts required to comply with the "well capitalized"
category of applicable FDIC regulations, (ii) total reserves for losses on
outstanding loans to net loans equal to 1.60%, and (iii) total shareholders'
equity of not less than Twenty Million Dollars ($20,000,000).
u. Stock Option Agreement. Mid-Peninsula shall have received a
----------------------
signed and dated stock option agreement from Cupertino on or before the Document
Delivery Date, granting an option to Mid-Peninsula to acquire up to nineteen
percent (19%) of the Cupertino Shares in the event of a Business Combination
between Cupertino and any third party.
v. Nasdaq Listing. Mid-Peninsula shares shall have been listed
--------------
with the Nasdaq Stock Market for trading on the Nasdaq National Market System
and Mid-Peninsula shall have taken all necessary action to similarly list
Bancorp Shares under a symbol mutually agreed upon by the parties to be
effective from and after the Effective Time of the Merger.
42
<PAGE>
w. Employment Agreements. Each person designated to be appointed
---------------------
as a member of the Executive Management Committee of Bancorp (i) shall have
signed and delivered to Mid-Peninsula and Cupertino, on or before thirty (30)
days after the Document Delivery Date, an employment agreement dated the
Effective Date in form and substance reasonably satisfactory to Mid-Peninsula
and Cupertino and their respective counsel, and (ii) shall have had each
existing employment agreement between each such person and Mid-Peninsula, MPB,
Cupertino or CNB, terminated effective as of the Effective Date.
x. Debenture Agreement. The supplemental debenture agreement to be
-------------------
delivered pursuant to Section 3.1 of this Agreement shall have been signed and
delivered to Cupertino together with an opinion of Manatt, Phelps & Phillips,
LLP, in form and substance reasonably satisfactory to Cupertino, Mid-Peninsula
and their respective counsel.
8. CONDITIONS TO THE OBLIGATIONS OF CUPERTINO.
------------------------------------------
The obligations of Cupertino under this Agreement are, at its option,
subject to the fulfillment at or prior to the Effective Time of the Merger of
each of the following conditions provided, however, that any one or more of such
conditions may be waived by the Board of Directors of Cupertino at any time at
or prior to the Effective Time of the Merger:
a. Representations and Warranties. The representations and
------------------------------
warranties of Mid-Peninsula in Section 5 hereof shall be true and correct in all
material respects on and as of the date of this Agreement (except to the extent
that a representation or warranty is qualified as set forth in a Schedule
corresponding in number with the applicable section of such representation or
warranty and delivered on or before the Document Delivery Date, and upon such
delivery it shall be deemed made on and as of the date of delivery), the Closing
Date and the Effective Time of the Merger, with the same effect as though such
representations and warranties had been made on and as of each such date or time
except as to any representation or warranty which specifically relates to an
earlier date or time.
b. Compliance and Performance Under Agreement. Mid-Peninsula shall
------------------------------------------
have performed and complied in all material respects with all terms, agreements,
covenants and conditions of this Agreement and the Merger Agreement required to
be performed or complied with by it at or prior to the Effective Time of the
Merger.
c. Material Adverse Change. No materially adverse change shall
-----------------------
have occurred since March 31, 1996, in the business, financial condition,
results of operations or assets of Mid-Peninsula and MPB, taken as a whole, and
neither Mid-Peninsula nor MPB shall be a party to or threatened with, and to the
best of Mid-Peninsula'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 legal action or proceeding, in the reasonable judgment
of Cupertino, could materially adversely affect Mid-Peninsula and MPB, taken as
a whole, or their business, financial condition, results of operations or
assets.
43
<PAGE>
d. Approval of Agreement. The principal terms of the Merger, this
---------------------
Agreement and the Merger Agreement shall have been duly approved by (i) the
affirmative vote or consent of the holders of a majority of the outstanding Mid-
Peninsula Shares and (ii) the affirmative vote or consent of the holders of a
majority of the outstanding Cupertino Shares.
e. Officer's Certificate. Cupertino shall have received a
---------------------
certificate, dated the Effective Date, signed on behalf of Mid-Peninsula by its
President and Chief Financial Officer, in substantially the form delivered to
Cupertino on or before the Document Delivery Date.
f. Opinion of Counsel. Bronson, Bronson & McKinnon LLP, Mid-
------------------
Peninsula's counsel, shall have delivered to Cupertino its opinion dated the
Effective Date in substantially the form delivered to Cupertino on or before the
Document Delivery Date.
g. Absence of Proceedings. No legal, administrative, arbitration,
----------------------
investigatory or other proceeding by any government agency or regulatory
authority shall have been instituted or threatened to restrain or prohibit the
Merger or the transactions contemplated by this Agreement.
h. Effectiveness of Registration Statement. The Mid-Peninsula
---------------------------------------
Registration Statement and any amendments or supplements thereto shall have
become effective under the 1933 Act, no stop order suspending the effectiveness
of such Registration Statement shall be in effect and no proceedings for such
purpose shall have been initiated or threatened by or before the Commission and
the Bancorp Shares registered thereby shall have received all state securities
and "blue sky" permits or approvals required to consummate the transactions
contemplated by this Agreement and the Merger Agreement.
i. Government Approvals. All Government Approvals shall be in
--------------------
effect, and all conditions or requirements prescribed by law or by any such
Approvals shall have been satisfied; provided, however, that no Government
Approval shall be deemed to have been received if it shall require the
divestiture or cessation of any of the present businesses or operations
conducted by either of the parties hereto or shall impose any other condition or
requirement, which condition or requirement Cupertino in its reasonable judgment
shall deem to be materially burdensome (in which case Cupertino shall promptly
notify Mid-Peninsula). For purposes of this agreement no condition or
requirement shall be deemed to be "materially burdensome" if such condition or
requirement does not materially differ from conditions or requirements regularly
imposed in orders approving transactions of the type contemplated by this
Agreement and compliance with such condition or requirement would not:
(i) require the taking of any action materially inconsistent
with the manner in which Cupertino or Mid-Peninsula has conducted its business
previously;
44
<PAGE>
(ii) have a material adverse effect upon the business,
financial condition or results of operations of Cupertino or Mid-Peninsula; or
(iii) preclude satisfaction of any of the conditions to
consummation of the transactions contemplated by this Agreement.
j. Tax Opinion. Bronson, Bronson & McKinnon LLP, Mid-Peninsula's
-----------
counsel, shall have delivered to Mid-Peninsula and Cupertino a tax opinion
subject to customary assumptions and exceptions included in such opinions and
the prior delivery of certificates from Cupertino and Mid-Peninsula in form and
substance reasonably satisfactory to Mid-Peninsula's counsel, substantially to
the effect that under federal income tax law and California income and franchise
tax law:
(i) The Merger will not result in any recognized gain or loss
to Cupertino or Mid-Peninsula;
(ii) Except for any cash received in lieu of any fractional
share, no gain or loss will be recognized by holders of Cupertino Shares who
receive Bancorp Shares in exchange for the Cupertino Shares which they hold;
(iii) The holding period of Bancorp Shares exchanged for
Cupertino Shares will include the holding period of the Cupertino Shares for
which they are exchanged, assuming the Cupertino Shares are capital assets in
the hands of the holder thereof at the Effective Date; and
(iv) The basis of the Bancorp Shares received in the exchange
will be the same as the basis of the Cupertino Shares for which they are
exchanged, less any basis attributable to fractional shares for which cash is
received.
k. Accountant's Comfort Letters. On or prior to the date of
----------------------------
effectiveness of the Mid-Peninsula Registration Statement, Cupertino shall have
received a comfort letter addressed to Cupertino from KPMG Peat Marwick LLP,
independent public accountants for Mid-Peninsula, in form and substance
satisfactory to Cupertino and its counsel. Cupertino shall also have received
from KPMG Peat Marwick LLP, a comfort letter dated the Effective Date, in form
and substance satisfactory to Cupertino and its counsel, as to such matters, as
of a specified date not more than five (5) business days prior to the Effective
Date, as Cupertino may reasonably request.
l. Dissenting Shares. Holders of not more than nine percent (9%)
-----------------
of the outstanding Cupertino Shares and Bancorp Shares shall have perfected
dissenter's rights pursuant to Chapter 13 of the California General Corporation
Law.
m. Unaudited Financials. Not later than five (5) business days
--------------------
prior to the Effective Date, Mid-Peninsula shall have furnished Cupertino a copy
of its most recently
45
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prepared unaudited month-end consolidated financial statements, including a
balance sheet and statement of income of Mid-Peninsula.
n. Affiliate Agreements. Cupertino shall have received signed
--------------------
affiliate agreements on or before the Document Delivery Date, from each person
who, in the opinion of Cupertino's and Mid-Peninsula's counsel, might be deemed
to be an affiliate of Cupertino or Mid-Peninsula under Rule 144 or 145 of the
1933 Act. The agreements will include provisions restricting certain actions by
an affiliate related to Cupertino Shares or Mid-Peninsula and/or Bancorp Shares,
including the sale, purchase, acquisition or transfer of Cupertino Shares or
Mid-Peninsula and/or Bancorp Shares in a manner which may render pooling-of-
interests accounting treatment unavailable in the Merger.
o. Closing Documents. Cupertino shall have received such
-----------------
certificates and other closing documents as counsel for Cupertino shall
reasonably request.
p. Consents. Mid-Peninsula shall have received, or Cupertino shall
--------
have satisfied itself that Mid-Peninsula will receive, all consents of third
parties as may be required including consents of other parties to and required
by material mortgages, notes, leases, franchises, agreements, licenses and
permits applicable to Mid-Peninsula and MPB, in each case in form and substance
reasonably satisfactory to Cupertino, and no such consent or license or permit
shall have been withdrawn or suspended.
q. Fairness Opinion. The Board of Directors of Cupertino shall
----------------
have received an opinion of Sutro & Co. Incorporated, dated the date of this
Agreement and the date of mailing or a date within three (3) days prior to the
date of mailing the Joint Proxy Statement/Prospectus, to the effect that the
consideration to be received by Cupertino shareholders in the Merger is fair,
from a financial point of view, to Cupertino and its shareholders, and such
opinion shall not have been withdrawn by the Effective Time of the Merger.
r. Accounting Treatment. Mid-Peninsula shall have received a
--------------------
letter from KPMG Peat Marwick LLP, satisfactory in form and substance to
Cupertino and its counsel, to the effect that the Merger shall qualify for the
pooling-of-interests method of accounting in accordance with generally accepted
accounting principles and all applicable rules, regulations and policies of the
Commission. There shall have been no determination by any court, tribunal,
regulatory authority or other government agency, that the Merger fails or will
fail to qualify for pooling-of-interests accounting treatment.
s. Shareholder Agreements. Cupertino and Mid-Peninsula shall have
----------------------
received signed shareholder agreements from members of the Boards of Directors
and the executive officers of Cupertino and Mid-Peninsula on or before the
Document Delivery Date, pursuant to which each such person in their capacity as
a shareholder commits to vote their Cupertino Shares or Mid-Peninsula Shares in
favor of the Merger and the transactions contemplated thereby and pursuant to
this Agreement and the Merger Agreement, and to
46
<PAGE>
recommend to shareholders, subject to the exercise of fiduciary duties, that
they vote in favor of the Merger and the transactions contemplated thereby and
pursuant to this Agreement and the Merger Agreement.
t. Performance Tests. As of the Determination Date, Closing Date
-----------------
and the Effective Date, Mid-Peninsula and MPB on a consolidated basis shall have
(i) total shareholders' equity and leverage, tier 1 and total risk-based capital
ratios, respectively, in amounts required to comply with the "well capitalized"
category of applicable FDIC regulations, (ii) total reserves for losses on
outstanding loans to net loans equal to 1.20%, and (iii) total shareholders'
equity of not less than Twenty-Three Million Dollars ($23,000,000).
u. Stock Option Agreement. Cupertino shall have received a signed
----------------------
and dated stock option agreement from Mid-Peninsula on or before the Document
Delivery Date, granting an option to Cupertino to acquire up to nineteen percent
(19%) of the Mid-Peninsula Shares in the event of a Business Combination between
Mid-Peninsula and any third party.
v. Nasdaq Listing. Mid-Peninsula shares shall have been listed
--------------
with the Nasdaq Stock Market for trading on the Nasdaq National Market System
and Mid-Peninsula shall have taken all necessary action to similarly list
Bancorp Shares under a symbol mutually agreed upon by the parties to be
effective from and after the Effective Time of the Merger.
w. Employment Agreements. Each person designated to be appointed
---------------------
as a member of the Executive Management Committee of Bancorp (i) shall have
signed and delivered to Mid-Peninsula and Cupertino, on or before thirty (30)
days after the Document Delivery Date, an employment agreement dated the
Effective Date in form and substance reasonably satisfactory to Mid-Peninsula
and Cupertino and their respective counsel, and (ii) shall have had each
existing employment agreement between each such person and Mid-Peninsula, MPB,
Cupertino or CNB, terminated effective as of the Effective Date.
x. Debenture Agreement. The supplemental debenture agreement to be
-------------------
delivered pursuant to Section 3.1 of this Agreement shall have been signed and
delivered to Cupertino together with an opinion of Manatt, Phelps & Phillips,
LLP, in form and substance reasonably satisfactory to Cupertino, Mid-Peninsula
and their respective counsel.
9. CLOSING.
-------
a. Closing Date. The closing (the "Closing") shall, unless another
------------
date, time or place is agreed to in writing by Mid-Peninsula and Cupertino, be
held at the offices of Bronson, Bronson & McKinnon LLP, 10 Almaden Blvd., Suite
600, San Jose, California at a time mutually agreed upon between the parties and
as soon as practicable following the Determination Date and the last to occur of
(i) the expiration of any waiting periods under
47
<PAGE>
applicable law or regulation, and (ii) the date on which all conditions to the
obligation of either party to consummate the Merger have been satisfied (the
"Closing Date").
b. Delivery of Documents. At the Closing, the parties shall use
---------------------
their respective best efforts to deliver or cause to be delivered the opinions,
certificates and other documents required to be delivered by this Agreement.
c. Filings. At the Closing, Mid-Peninsula and Cupertino shall
-------
instruct their respective representatives to make or confirm such filings as
shall be required in the opinion of counsel to Mid-Peninsula and Cupertino to
give effect to the Merger.
10. POST-CLOSING MATTERS.
--------------------
Bancorp will prepare and file with the Commission on the appropriate form
as soon as practicable the results of combined operations of Mid-Peninsula and
Cupertino for the first full calendar month after the Effective Date.
11. EXPENSES.
--------
Each party hereto agrees to comply with generally accepted accounting
principles, without right of reimbursement from the other party and whether or
not the transactions contemplated by this Agreement or the Merger Agreement
shall be consummated, relating to the payment of costs and expenses incurred by
such party incident to the performance of its obligations under this Agreement
and the Merger Agreement, including without limitation, costs incident to the
preparation of the Merger Agreement, this Agreement, the Mid-Peninsula
Registration Statement and Joint Proxy Statement/Prospectus (including the
audited financial statements of the parties contained therein) and incident to
the consummation of the Merger and of the other transactions contemplated herein
and in the Merger Agreement, including the fees and disbursements of counsel,
accountants, consultants and financial advisers employed by such party in
connection therewith. Notwithstanding the foregoing, each party shall pay one-
half of (i) the printing costs of the Registration Statement and the Joint Proxy
Statement/Prospectus, (ii) all fees and costs payable pursuant to state "blue-
sky" securities laws, (iii) fees and costs related to obtaining a tax opinion,
(iv) fees and costs related to obtaining a letter from KPMG Peat Marwick LLP
regarding pooling-of-interests accounting treatment, (v) the fee required to be
paid to the Commission to register the Bancorp Shares, (vi) the fees and costs
related to any amendments to the Mid-Peninsula Stock Option Plan or for the
preparation of a new Mid-Peninsula Stock Option Plan including the cost of
obtaining any permits or approvals of government agencies and regulatory
authorities and applicable filing fees, (vii) the fees related to preparation
and filing of applications with government agencies or regulatory authorities
for approval of the transactions contemplated by the Merger, this Agreement and
the Merger Agreement, and (viii) the fees and costs related to the listing of
the Mid-Peninsula Shares and Bancorp Shares
48
<PAGE>
with the Nasdaq Stock Market for trading on the Nasdaq National Market System.
Each party shall bear the costs of distributing the Joint Proxy
Statement/Prospectus and other information relating to these transactions to its
shareholders and of conducting a meeting of its shareholders.
12. AMENDMENT; TERMINATION.
----------------------
a. Amendment. This Agreement and the Merger Agreement may be
---------
amended by Mid-Peninsula and Cupertino at any time prior to the Effective Time
of the Merger without the approval of the shareholders of Mid-Peninsula and
shareholders of Cupertino with respect to any of their terms except the terms
relating to the Conversion Ratio or the form or amount of consideration to be
delivered to the Cupertino shareholders in the Merger or otherwise as required
by applicable law.
b. Termination. This Agreement and the Merger Agreement may be
-----------
terminated as follows:
(i) By the mutual consent of the Boards of Directors of both
Mid-Peninsula and Cupertino at any time prior to the Effective Time of the
Merger.
(ii) By the Boards of Directors of Mid-Peninsula or Cupertino
upon the failure of the shareholders of Mid-Peninsula or Cupertino to give the
requisite approval of this Agreement and the transactions contemplated hereby
including the amendments to the Mid-Peninsula Articles of Incorporation, Bylaws
and 1994 Stock Option Plan.
(iii) By the Boards of Directors of Mid-Peninsula or Cupertino
upon the expiration of thirty (30) days after any government agency or
regulatory authority denies or refuses to grant any approval, consent or
qualification required to be obtained in order to consummate the transactions
contemplated by this Agreement unless, within said thirty (30) day period after
such denial or refusal, Mid-Peninsula and Cupertino agree to submit the
application to the government agency or regulatory authority that has denied or
refused to grant the approval, consent or qualification requested.
(iv) By the Board of Directors of Mid-Peninsula on or after the
Termination Date, if any of the conditions in Section 7 to which the obligations
of Mid-Peninsula are subject have not been fulfilled.
(v) By the Board of Directors of Mid-Peninsula if a materially
adverse change shall have occurred since March 31, 1996, in the business,
financial condition, results of operations or assets of Cupertino or CNB.
(vi) By the Board of Directors of Mid-Peninsula or Cupertino in
the event that Cupertino, CNB or their affiliates enter into a Business
Combination; provided,
49
<PAGE>
that termination based thereon shall not terminate the Stock Option Agreement
signed by Cupertino in accordance with this Agreement.
(vii) By the Board of Directors of Mid-Peninsula upon the
expiration of twenty (20) days from delivery of written notice by Mid-Peninsula
to Cupertino of Cupertino's breach of or failure to satisfy any covenant or
agreement contained in this Agreement resulting in a material impairment of the
benefit reasonably expected to be derived by Mid-Peninsula from the performance
or satisfaction of such covenant or agreement (provided that such breach has not
been waived by Mid-Peninsula or cured by Cupertino prior to expiration of such
twenty (20) day period).
(viii) By the Board of Directors of Cupertino on or after the
Termination Date, if any of the conditions contained in Section 8 to which the
obligations of Cupertino are subject have not been fulfilled.
(ix) By the Board of Directors of Cupertino if a materially
adverse change shall have occurred since March 31, 1996 in the business,
financial condition, results of operations or assets of Mid-Peninsula or MPB.
(x) By the Board of Directors of Cupertino and Mid-Peninsula in
the event Mid-Peninsula, MPB or their affiliates enter into a Business
Combination; provided, that termination based thereon shall not terminate the
Stock Option Agreement signed by Mid-Peninsula in accordance with this
Agreement.
(xi) By the Board of Directors of Cupertino upon the expiration
of twenty (20) days from delivery of written notice by Cupertino to Mid-
Peninsula of Mid-Peninsula's breach of or failure to satisfy any covenant or
agreement contained in this Agreement resulting in a material impairment of the
benefit reasonably expected to be derived by Cupertino from the performance or
satisfaction of such covenant or agreement (provided that such breach has not
been waived by Cupertino or cured by Mid-Peninsula prior to expiration of such
twenty (20) day period).
(xii) By the Board of Directors of Mid-Peninsula in the event
that Cupertino shall fail to deliver or cause to be delivered to Mid-Peninsula
on or before the date which is twenty-seven (27) days after the date of this
Agreement (the "Document Delivery Date") (except in the case of the Employment
Agreements described below which shall be delivered on or before thirty (30)
days after the Document Delivery Date) (i) the Schedules to be delivered
pursuant to Section 4 hereof, in form and substance satisfactory to Mid-
Peninsula and its counsel; (ii) the following signed documents, in form and
substance reasonably acceptable to Mid-Peninsula and its counsel: (a) the
affiliate agreement to be delivered pursuant to Section 7(n) hereof; (b) the
shareholder agreements to be delivered pursuant to Section 7(s) hereof; (d) the
stock option agreement to be delivered pursuant to Section 7(u) hereof; and (e)
the employment agreements to be delivered pursuant to Section 7(w) hereof; and
(iii) the form of the following documents, in form and substance reasonably
50
<PAGE>
acceptable to Mid-Peninsula and its counsel: (a) the officers certificate to be
delivered pursuant to Section 7(e) hereof; (b) the opinion of counsel to
Cupertino to be delivered pursuant to Section 7(f) hereof; and (c) the legal
opinion in connection with the supplemental debenture agreement to be delivered
pursuant to Section 7(x) hereof.
(xiii) By the Board of Directors of Cupertino in the event that
Mid-Peninsula shall fail to deliver or cause to be delivered to Cupertino on or
before the Document Delivery Date (except in the case of the Employment
Agreements described below which shall be delivered on or before thirty (30)
days after the Document Delivery Date) (i) the Schedules to be delivered
pursuant to Section 5 hereof, in form and substance satisfactory to Cupertino
and its counsel; (ii) the following signed documents, in form and substance
reasonably acceptable to Cupertino and its counsel: (a) the affiliate agreement
to be delivered pursuant to Section 8(n) hereof; (b) the shareholder agreements
to be delivered pursuant to Section 8(s) hereof; (d) the stock option agreement
to be delivered pursuant to Section 8(u) hereof; and (e) the employment
agreements to be delivered pursuant to Section 8(w) hereof; and (iii) the form
of the following documents, in form and substance reasonably acceptable to
Cupertino and its counsel: (a) the officers certificate to be delivered pursuant
to Section 8(e) hereof; (b) the opinion of counsel to Mid-Peninsula to be
delivered pursuant to Section 8(f) hereof; and (c) the supplemental debenture
agreement to be delivered pursuant to Section 8(x) hereof.
c. Termination Date. This Agreement shall be terminated if the
----------------
Closing shall not have occurred on or before December 31, 1996; provided,
however, that if the only conditions to the Closing which remain unsatisfied at
December 31, 1996 are the receipt of the Government Approvals or the expiration
of any waiting periods under applicable law or regulation, the Closing Date
shall be automatically extended to February 28, 1997, or such other date as the
parties may mutually agree upon (the "Termination Date"), for the purpose of
obtaining such Government Approvals or the expiration of such waiting periods.
d. Notice. The power of termination hereunder may be exercised by
------
Mid-Peninsula or Cupertino, as the case may be, only by giving written notice,
signed on behalf of such party by its Chairman of the Board or President, to the
other party.
e. Effect of Termination; Liquidated Damages.
-----------------------------------------
(i) If this Agreement is terminated for any reason, the Merger
Agreement shall automatically terminate. Termination of this Agreement shall
not terminate or affect the obligations of the parties to pay expenses as
provided in Section 11, to maintain the confidentiality of the other party's
information obtained pursuant to this Agreement, or the provisions of this
Section 12(e) or applicable provisions of Section 14.
(ii) If Mid-Peninsula or Cupertino terminates this Agreement
pursuant to Section 12(b)(vi), Cupertino shall pay to Mid-Peninsula, on demand,
the sum of Seven Hundred Fifty Thousand Dollars ($750,000). If Cupertino or Mid-
Peninsula terminates this
51
<PAGE>
Agreement pursuant to Section 12(b)(x) Mid-Peninsula shall pay to Cupertino, on
demand, the sum of Seven Hundred Fifty Thousand Dollars ($750,000). In each
case, the amount indicated shall be deemed liquidated damages for expenses
incurred and the lost opportunity cost for time devoted to the transactions
contemplated by this Agreement.
13. INDEMNIFICATION.
---------------
a. By Mid-Peninsula. Mid-Peninsula agrees to defend, indemnify and
----------------
hold harmless Cupertino and CNB, their respective officers and directors,
attorneys, accountants, and each person who controls Cupertino and CNB within
the meaning of the 1933 Act from and against any costs, damages, liabilities and
expenses of any nature, insofar as such costs, damages, liabilities and expenses
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Mid-Peninsula Registration Statement and
Joint Proxy Statement/Prospectus or any amendments or supplements thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that Mid-Peninsula shall
be liable in any such case only to the extent that any such cost, damage,
liability or expense arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in said
Registration Statement and Joint Proxy Statement/Prospectus or amendments or
supplements thereto, in reliance upon and in conformity with information
provided by and with respect to Mid-Peninsula used in preparing the Registration
Statement. If and to the extent such agreement to indemnify may be unenforceable
for any reason, Mid-Peninsula shall make the maximum contribution to the payment
and satisfaction of each of the indemnified liabilities which may be permitted
under applicable law.
b. By Cupertino. Cupertino agrees to defend, indemnify and hold
------------
harmless Mid-Peninsula and MPB, their respective officers and directors,
attorneys, accountants, and each person who controls Mid-Peninsula and MPB
within the meaning of the 1933 Act from and against any costs, damages,
liabilities and expenses of any nature, insofar as such costs, damages,
liabilities and expenses arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Mid-Peninsula
Registration Statement and Joint Proxy Statement/Prospectus or any amendments or
supplements thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
Cupertino shall be liable in any such case only to the extent that any such
cost, damage, liability or expense arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
said Registration Statement and Joint Proxy Statement/Prospectus or amendments
or supplements thereto, in reliance upon and in conformity with information
provided by and with respect to Cupertino used in preparing the Registration
Statement and Joint Proxy Statement/Prospectus. If and to the extent such
agreement to indemnify may be unenforceable for any reason, Cupertino shall make
the maximum contribution to the
52
<PAGE>
payment and satisfaction of each of the indemnified liabilities which may be
permitted under applicable law.
c. Notification. Promptly after receipt by any party to be
------------
indemnified pursuant to this subarticle (the "Indemnified Party") of notice of
(i) any claim or (ii) the commencement of any action or proceeding, the
Indemnified Party will give the other party (the "Indemnifying Party") written
notice of such claim or the commencement of such action or proceeding. The
Indemnifying Party shall have the right, at its option, to compromise or defend,
by its own counsel, any such matter involving the Indemnified Party's asserted
liability. In the event that the Indemnifying Party shall undertake to
compromise or defend any such asserted liability, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party agrees to
cooperate fully with the Indemnifying Party and its counsel in the compromise
of, or defense against, any such asserted liability. In any event, the
Indemnifying Party shall have the right to participate in the defense of such
asserted liability.
14. MISCELLANEOUS.
-------------
a. Notices. Any notice or other communication required or
-------
permitted under this Agreement shall be effective only if it is in writing and
delivered personally, or by Federal Express or similar overnight courier, or by
facsimile or sent by first class United States mail, postage prepaid, registered
or certified mail, addressed as follows:
To Mid-Peninsula: To Cupertino:
David L. Kalkbrenner C. Donald Allen
President President
Mid-Peninsula Bancorp Cupertino National Bancorp
420 Cowper Street 20230 Stevens Creek Blvd.
Palo Alto, CA 94301-1504 Cupertino, California 95014
Telephone: (415) 323-5150 Telephone: (408) 996-1144
Telecopier: (415) 323-7421 Telecopier: (408) 996-0657
With a copy to: With a copy to:
Bronson, Bronson & McKinnon LLP Manatt, Phelps & Phillips, LLP
10 Almaden Blvd., Suite 600 11355 W. Olympic Blvd.
San Jose, California 95113 Los Angeles, California 90064
Attn: Glenn T. Dodd Attn: Paul H. Irving
Telephone: (408) 293-0599 William T. Quicksilver
Telecopier: (408) 999-6553 Telephone: (310) 312-4000
53
<PAGE>
Attn: John W. Carr Telecopier: (310) 312-4224
Telephone: (415) 986-4200
Telecopier: (415) 982-1394
or to such other address as either party may designate by notice to the other,
and shall be deemed to have been given upon receipt.
b. Knowledge. Whenever the term "knowledge" or "to the best of
---------
knowledge" or words of similar import are used in this Agreement in connection
with a party's representations and warranties, it shall mean the actual
knowledge of a party after due inquiry of a party's directors, executive
officers, senior vice presidents, and any officer(s) in charge of or having
responsibility for any department or division of a party or its subsidiaries,
including, without limitation, operations, credit, trust, SBA, mortgage, real
estate, finance, administration, compliance and audit.
c. Binding Agreement. This Agreement is binding upon and is for
-----------------
the benefit of Mid-Peninsula and Cupertino and their respective successors and
permitted assigns. This Agreement is not made for the benefit of any person,
firm, corporation or association not a party hereto, and no other person, firm,
corporation or association shall acquire or have any right under or by virtue of
this Agreement. No party may assign this Agreement or any of its rights,
privileges, duties or obligations hereunder without the prior written consent of
the other party to this Agreement.
d. Survival of Representations and Warranties. No investigation by
------------------------------------------
Mid-Peninsula or Cupertino made before or after the date of this Agreement shall
affect the representations and warranties which are contained in this Agreement
and such representations and warranties shall survive such investigation,
provided that, except with respect to covenants and agreements to be performed
in whole or in part subsequent to the Effective Time of the Merger (as to which
the related representations and warranties shall survive until their
performance) which covenants and agreements shall survive the Effective Time of
the Merger, the representations, warranties, covenants and agreements of Mid-
Peninsula and Cupertino contained in this Agreement shall terminate upon the
Effective Time of the Merger.
e. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California.
f. Attorneys' Fees. In any action at law or suit in equity in
---------------
relation to this Agreement, the prevailing party in such action or suit shall be
entitled to receive a reasonable sum for its attorneys' fees and all other
reasonable costs and expenses incurred in such action or suit.
54
<PAGE>
g. Entire Agreement; Severability. This Agreement and the
------------------------------
documents, certificates, agreements, letters, schedules and exhibits attached or
required to be delivered pursuant hereto set forth the entire agreement and
understandings of the parties in respect of the transactions contemplated
hereby, and supersede all prior agreements, arrangements and understanding
relating to the subject matter hereof, excluding that certain Confidentiality
Agreement between the parties dated May 8, 1996. Each provision of this
Agreement shall be interpreted in a manner to be effective and valid under
applicable law, but if any provision hereof shall be prohibited or ruled invalid
under applicable law, the validity, legality and enforceability of the remaining
provisions shall not, except as otherwise required by law, be affected or
impaired as a result of such prohibition or ruling.
h. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
i. Effect of Restatement. The restatement of this Agreement shall
---------------------
not constitute a waiver of, or otherwise affect, the rights, obligations or
liabilities of the parties hereto as in effect immediately prior to the
restatement of this Agreement (except to the extent that the terms of this
Agreement have been expressly amended from the terms of this Agreement in effect
immediately prior to the date of the restatement of this Agreement). Except as
expressly stated to the contrary herein, all references herein, and in any
documents or agreements executed pursuant hereto, to "the date of this
Agreement," "the date hereof" or similar phrases with reference to this
Agreement shall be deemed to refer to June 5, 1996, and any representations or
warranties made or deemed to be made as of that date shall not be deemed to be
made again at the time of restatement of this Agreement.
55
<PAGE>
IN WITNESS WHEREOF, Mid-Peninsula and Cupertino have each caused this
Amended and Restated Agreement and Plan of Reorganization and Merger to be
signed by its Chairman of the Board and President as of the day and year first
above written.
MID-PENINSULA BANCORP CUPERTINO NATIONAL BANCORP
By: /s/ Duncan L. Matteson By: /s/ John M. Gatto
_________________________ _________________________
Duncan L. Matteson John M. Gatto
Chairman of the Board Chairman of the Board
By: /s/ David L. Kalkbrenner By: /s/ C. Donald Allen
_________________________ _________________________
David L. Kalkbrenner C. Donald Allen
President President
56
<PAGE>
EXHIBIT 99.1
[LETTERHEAD OF MID-PENINSULA BANCORP]
For Immediate Release For Information Contact
- --------------------- -----------------------
June 6, 1996 David L. Kalkbrenner, President
Carol H. Rowland, CFO
(415) 323-5150
MID-PENINSULA BANCORP AND
CUPERTINO NATIONAL BANCORP TO MERGE
PALO ALTO, Calif. -- Mid-Peninsula Bancorp (Nasdaq Bulletin Board: MPBK), Palo
Alto, CA and Cupertino National Bancorp (Nasdaq: CUNB), Cupertino, CA announced
today the signing of a definitive agreement for a "merger of equals" between the
two companies. The merger will result in the formation of the largest multi-
bank holding company based in the San Francisco Peninsula/South Bay region, and
the third-largest publicly traded independent bank holding company in the San
Francisco Bay area, with total assets of approximately $500 million and equity
of over $40 million. The resulting entity will be named Greater Bay Bancorp.
Mid-Peninsula Bank and Cupertino National Bank & Trust will operate as wholly
owned subsidiaries of Greater Bay Bancorp and will focus on serving the greater
Bay area, including the Peninsula and South Bay markets, through their seven
office locations.
The terms of the agreement provide for Cupertino National Bancorp shareholders
to receive .81522 of a share of Mid-Peninsula Bancorp stock for each share of
Cupertino National Bancorp in a tax-free exchange to be accounted for as a
"pooling-of-interests." As part of the agreement, Mid-Peninsula will list its
shares on the Nasdaq National Market System, and, concurrent with closing, will
be renamed Greater Bay Bancorp. Following the merger, the shareholders of Mid-
Peninsula Bancorp will own approximately 51% of the combined company and the
shareholders of Cupertino National Bancorp will own approximately 49% of the
combined company, giving effect to all outstanding options.
The transaction is anticipated to be accretive in 1997 to shareholders of both
companies, based on reductions in duplicative administrative functions and
revenue enhancements resulting from an expanded product line and increased
lending capacity. Management of the organizations believe that significant
opportunities exist to enhance the spectrum of financial services offered to
both existing and potential clients.
<PAGE>
Greater Bay Bancorp's new Board of Directors will consist of five directors from
each company, with Duncan L. Matteson (Chairman of Mid-Peninsula Bancorp) and
John M. Gatto (Chairman of Cupertino National Bancorp) serving as co-Chairmen.
David L. Kalkbrenner, who will serve as President and Chief Executive Officer of
the holding company, will continue as President and Chief Executive Officer of
Mid-Peninsula Bank, and C. Donald Allen will remain as Chairman and Chief
Executive Officer of Cupertino National Bank & Trust. Steven C. Smith, the Chief
Operating Officer of Cupertino National Bancorp, will serve as Chief Operating
Officer and Chief Financial Officer of the holding company.
The adoption of the multi-bank holding company format will facilitate the
addition of other independent banks to the organization and permits the
preservation of the personalized relationship banking philosophy espoused by
community banking organizations. "The combination of these two successful
institutions presents significant benefits for our clients, employees and
shareholders," commented David Kalkbrenner. "This is a rare opportunity to
create one of the largest locally based community bank franchises servicing the
needs of the business and venture community in the greater Bay area. The
complementary nature of our business philosophies, services provided and markets
will position our company for continued growth and profitability. The unique fit
offered by the services Cupertino National Bank has developed, particularly
trust services, will provide the opportunity and resources necessary to expand
and enhance the profitability of our core banking business as well as increase
opportunities to provide financial services not previously available to our
clients. Mid-Peninsula's historical cost-efficiency, combined with the wide
breadth of services offered by Cupertino National, will enable the combined
organization to provide, on a more cost-effective basis, a wider range of
services to an expanded client base."
Cupertino National Bancorp President and Chief Executive Officer Don Allen
commented, "The thrust of Cupertino National Bank & Trust has focused on
providing specific niche services that fit with its vision of becoming a
significant force throughout the Bay Area. The combination of our two banks will
preserve this focus and assure that significantly greater resources are
available for this effort. As a competitor, we have admired Mid-Peninsula Bank's
stellar performance for some time; we look forward to a combined focus on
providing the best client services available anywhere. The ability to leverage
the investment Cupertino National has made in its Trust and Venture Lending
units through the strong client relationships enjoyed by Mid-Peninsula is
expected to yield immediate incremental income. Additionally, the combined
strength of our organization will enable Cupertino National's Venture Lending
unit to compete more aggressively in the technology, life sciences and emerging
growth industries, as a result of increased lending limits and additional
resources."
In connection with the merger agreement, Mid-Peninsula and Cupertino will grant
each other options to purchase up to 19.0% of the outstanding shares of each
other's common stock under certain circumstances in the event the transaction is
terminated. The merger is expected to be completed in the fourth quarter of
1996, subject to shareholder and regulatory approvals.
Mid-Peninsula Bancorp had $233.0 million in assets, $209.2 million in deposits
and $22.0 million in shareholders' equity as of March 31, 1996. Cupertino
National Bancorp had $255.0 million in assets, $231.8 million in deposits and
$19.4 million in shareholders' equity as of that date.
####
<PAGE>
COMBINED SUMMARY FINANCIALS
(Dollars in thousands, except per share data)
MARCH 31, 1996
<TABLE>
<CAPTION>
MPBK CUNB COMBINED (1)
-------- -------- ------------
<S> <C> <C> <C>
Total Assets $232,989 $254,960 $487,949
Total Loans 136,280 174,505 310,785
Total Deposits 209,210 231,830 441,040
Shareholders' Equity 21,983 19,410 41,393
Equity/Assets 9.44% 7.61% 8.48%
Tier I Risk-Based Capital Ratio 13.33% 9.14% 10.96%
Total Risk-Based Capital Ratio 14.46% 11.80% 12.60%
Leverage Ratio 9.86% 7.50% 8.59%
Non-Performing Assets 0 3,422 3,422
Loan Loss Allowance/Non-Performing Loans NM 90.70% 148.0%
F.D. Common Shares Outstanding (2) (3) 1,886,981 2,223,929 3,699,972 (4)
F.D. Book Value/Share (2) (3) $13.55 $9.94 $12.88
Market Capitalization (2) (5) $33,375 $25,885 ---
No. of Offices 3 4 7
- -----------------------------------------------------
</TABLE>
(1) Combined information does not reflect any merger-related expenses
(2) Based on shares outstanding as of May 31, 1996.
(3) Includes all outstanding options.
(4) Reflects exchange ratio of .81522 of a share of Mid-Peninsula Bancorp stock
for each share of Cupertino National Bancorp stock.
(5) Based on closing prices as of June 5, 1996.
