<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 5, 1997
REGISTRATION NO.: 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
<TABLE>
<S> <C>
GREATER BAY BANCORP GBB CAPITAL I
(EXACT NAME OF REGISTRANT AS SPECIFIED (EXACT NAME OF CO-REGISTRANT AS SPECIFIED
IN ITS CHARTER) IN ITS CHARTER)
CALIFORNIA DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION (STATE OR OTHER JURISDICTION OF INCORPORATION
OR ORGANIZATION) OR ORGANIZATION)
6711 6719
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION (PRIMARY STANDARD INDUSTRIAL CLASSIFICATION
CODE NUMBER) CODE NUMBER)
77-0387041 [APPLIED FOR]
(I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.)
C/O GREATER BAY BANCORP
2860 WEST BAYSHORE ROAD 2860 WEST BAYSHORE ROAD
PALO ALTO, CALIFORNIA 94303 PALO ALTO, CALIFORNIA 94303
(415) 813-8200 (415) 813-8200
(ADDRESS INCLUDING ZIP CODE, (ADDRESS INCLUDING ZIP CODE,
AND TELEPHONE NUMBER, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S INCLUDING AREA CODE, OF CO-REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICE) PRINCIPAL EXECUTIVE OFFICE)
</TABLE>
--------------
DAVID L. KALKBRENNER
CHIEF EXECUTIVE OFFICER
GREATER BAY BANCORP
2860 WEST BAYSHORE ROAD
PALO ALTO, CALIFORNIA 94303
(415) 813-8200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
--------------
COPIES TO:
<TABLE>
<S> <C>
WILLIAM T. QUICKSILVER, ESQ. ELIZABETH C. HINCK, ESQ.
MANATT, PHELPS & PHILLIPS, LLP DORSEY & WHITNEY LLP
11355 WEST OLYMPIC BOULEVARD 220 SOUTH SIXTH STREET
LOS ANGELES, CA 90064-1614 MINNEAPOLIS, MINNESOTA 55402
TELEPHONE: (310) 312-4210 TELEPHONE: (612) 340-2600
</TABLE>
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
--------------
CALCULATION OF REGISTRATION FEE
<TABLE>
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- ------------------------------------------------------------------------------------------------------------
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT (1) OFFERING PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
% Cumulative Trust Preferred Securities
of GBB Capital I........................ 800,000 shares $25 $20,000,000 $6,061
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Junior Subordinated Deferrable Interest
Debentures of Greater Bay Bancorp(2).... -- -- -- --
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Greater Bay Bancorp Guarantee with respect
to % Cumulative Trust Preferred
Securities(3)........................... -- -- -- --
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Total(4)................................. -- -- -- $6,061
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</TABLE>
(1) Estimated solely to calculate the registration fee pursuant to Rule
457(a).
(2) The Junior Subordinated Deferrable Interest Debentures will be purchased
by GBB Capital I with the proceeds from the sale of the % Cumulative
Trust Preferred Securities. Such securities may later be distributed for
no additional consideration to the holders of the % Cumulative Trust
Preferred Securities of GBB Capital I upon its dissolution and the
distribution of its assets.
(3) No separate consideration will be received for the Greater Bay Bancorp
Guarantee.
(4) This Registration Statement is deemed to cover the Junior Subordinated
Deferrable Interest Debentures of Greater Bay Bancorp, the rights of
holders of Junior Subordinated Deferrable Interest Debentures of Greater
Bay Bancorp under the Indenture, the rights of holders of Trust Preferred
Securities of GBB Capital I under the Trust Agreement, the rights of
holders of the % Cumulative Trust Preferred Securities under the
Guarantee and the Expense Agreement entered into by Greater Bay Bancorp
and certain backup undertakings as described herein, which taken together,
fully, irrevocably and unconditionally guarantee all of the obligations of
GBB Capital I under the % Cumulative Trust Preferred Securities.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED MARCH 5, 1997
PROSPECTUS
dated , 1997
800,000 Trust Preferred Securities
GBB CAPITAL I
% Cumulative Trust Preferred Securities
(Liquidation Amount $25 per Trust Preferred Security)
Fully and Unconditionally Guaranteed, as Described Herein, by
GREATER BAY BANCORP
The % Cumulative Trust Preferred Securities (the "Trust Preferred
Securities") offered hereby represent undivided beneficial interests in the
assets of GBB Capital I, a statutory business trust formed under the laws of
the State of Delaware ("GBB Capital"). Greater Bay Bancorp, a California
corporation (referred to as the "Company" when such reference includes Greater
Bay Bancorp and its subsidiaries, collectively, or "Greater Bay" when referring
only to the parent company), will be the owner of all of the beneficial
interests represented by common securities of GBB Capital (the "Common
Securities" and, collectively with the Trust Preferred Securities, the "Trust
Securities"). GBB Capital exists for the sole purpose of issuing the Trust
Securities and investing the proceeds thereof in % Junior Subordinated
Deferrable Interest Debentures (the "Junior Subordinated Debentures") to be
issued by Greater Bay. The Junior Subordinated Debentures will mature on
, 2027, which date may be shortened (such date, as it may be shortened,
the "Stated Maturity") to a date not earlier than , 2002 if certain
conditions are met (including Greater Bay having received prior approval of the
Board of Governors of the Federal Reserve System (the "Federal Reserve") to do
so if then required under applicable capital guidelines or policies of the
Federal Reserve). The Trust Preferred Securities will have a preference under
certain circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise over the Common Securities, which will be
held by Greater Bay. See "Description of the Trust Preferred Securities--
Subordination of Common Securities of GBB Capital Held by Greater Bay."
(Continued on next page)
SEE "RISK FACTORS" COMMENCING ON PAGE 11 HEREIN FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, BY ANY OTHER GOVERNMENTAL AGENCY, OR
OTHERWISE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO GBB
PUBLIC COMMISSION(1) CAPITAL(2)(3)
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<S> <C> <C> <C>
Per Trust Preferred Security........ $25.00 (2) $
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Total............................... $ (2) $
</TABLE>
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(1) Greater Bay and GBB Capital have agreed to indemnify the Underwriter
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended the ("Securities Act"). See "Underwriting."
(2) In view of the fact that all of the proceeds of the sale of the Trust
Preferred Securities will be used to purchase the Junior Subordinated
Debentures, Greater Bay has agreed to pay the Underwriters as compensation
for arranging the investment therein of such proceeds, $ per Trust
Preferred Security, or $ in the aggregate. See "Underwriting."
(3) Before deducting offering expenses payable by Greater Bay estimated at
$359,000.
The Trust Preferred Securities are being offered by the Underwriter named
herein subject to prior sale and when, as and if delivered to and accepted by
the Underwriter. It is expected that the Trust Preferred Securities will be
ready for delivery in book-entry form only through the facilities of The
Depository Trust Company in New York, New York, on or about ,
1997, against payment therefor in immediately available funds.
Piper Jaffray Inc.
<PAGE>
(Continued from previous page)
Holders of the Trust Preferred Securities will be entitled to receive
preferential cumulative cash distributions accruing from the date of original
issuance and payable quarterly in arrears on the 15th day of March, June,
September and December of each year (subject to possible deferral as described
below), commencing June 15, 1997, at the annual rate of % of the
Liquidation Amount (as defined herein) of $25 per Trust Preferred Security
("Distributions"). The amount of each Distribution due with respect to the
Trust Preferred Securities will include amounts accrued through the date the
Distribution payment is due. Greater Bay will have the right to defer payments
of interest on the Junior Subordinated Debentures at any time or from time to
time for a period not exceeding 20 consecutive quarters with respect to each
deferral period (each, an "Extension Period"), provided that no Extension
Period may extend beyond the Stated Maturity of the Junior Subordinated
Debentures. Upon the termination of any such Extension Period and the payment
of all amounts then due, Greater Bay may elect to begin a new Extension Period
subject to the requirements set forth herein. If interest payments on the
Junior Subordinated Debentures are so deferred, Distributions on the Trust
Preferred Securities will also be deferred and Greater Bay will not be
permitted, subject to certain exceptions described herein, to declare or pay
any cash distributions with respect to its capital stock or to make any
payment with respect to its debt securities that rank pari passu with or
junior to the Junior Subordinated Debentures. During an Extension Period,
interest on the Junior Subordinated Debentures will continue to accrue (and
the amount of Distributions to which holders of the Trust Preferred Securities
are entitled will accumulate) at the rate of % per annum, compounded
quarterly, and holders of the Trust Preferred Securities will be required to
accrue income and will be required to pay United States federal income tax on
that income. See "Description of Junior Subordinated Debentures--Option to
Defer Interest Payment Period" and "Certain Federal Income Tax Consequences--
Interest Income and Original Issue Discount."
Greater Bay has, through the Guarantee, the Guarantee Agreement, the Trust
Agreement, the Junior Subordinated Debentures, the Indenture and the Expense
Agreement (each as defined herein), taken together, fully, irrevocably and
unconditionally guaranteed all of GBB Capital's obligations under the Trust
Preferred Securities. See "Relationship Among the Trust Preferred Securities,
the Junior Subordinated Debentures and the Guarantee--Full and Unconditional
Guarantee." Under the Guarantee, Greater Bay guarantees the payment of
Distributions by GBB Capital and payments on liquidation of or redemption of
the Trust Preferred Securities (subordinate to the right to payment of Senior
and Subordinated Debt of Greater Bay, as defined herein) to the extent of
funds held by GBB Capital. The Guarantee does not cover payment of
Distributions when GBB Capital does not have sufficient funds to pay such
Distributions. See "Description of Guarantee." If Greater Bay does not make
required payments on the Junior Subordinated Debentures held by GBB Capital,
GBB Capital will have insufficient funds to pay Distributions on the Trust
Preferred Securities. In such event, a holder of the Trust Preferred
Securities may institute a legal proceeding directly against Greater Bay
pursuant to terms of the Indenture to enforce payment of such Distributions to
such holder. See "Description of Junior Subordinated Debentures--Enforcement
of Certain Rights by Holders of the Trust Preferred Securities." The
obligations of Greater Bay under the Guarantee and the Junior Subordinated
Debentures are subordinate and junior in right of payment to all Senior and
Subordinated Debt (as defined in "Description of Junior Subordinated
Debentures--Subordination") of Greater Bay.
The Trust Preferred Securities are subject to mandatory redemption, in whole
or in part, upon repayment of the Junior Subordinated Debentures at the Stated
Maturity or their earlier redemption in each case at a redemption price equal
to the aggregate liquidation preference of the Trust Preferred Securities plus
any accumulated and unpaid Distributions thereon to the date of redemption.
The Junior Subordinated Debentures are redeemable prior to maturity at the
option of Greater Bay, subject to any required prior approval of the Federal
Reserve, (i) on or after , 2002, in whole at any time or in part from
time to time, or (ii) at any time, in whole (but not in part), upon the
occurrence and continuation of a Tax Event, an Investment Company Event or a
Capital Treatment Event (each as defined herein), in each case at a redemption
price equal to the accrued and unpaid interest on the Junior Subordinated
Debentures to the date fixed for redemption, plus 100% of the principal amount
thereof. See "Description of the Trust Preferred Securities--Redemption."
(Continued on next page)
2
<PAGE>
(Continued from previous page)
Greater Bay will have the right at any time to terminate GBB Capital and cause
a Like Amount (as defined herein) of the Junior Subordinated Debentures to be
distributed to the holders of the Trust Securities in liquidation of GBB
Capital, subject to Greater Bay having received prior approval of the Federal
Reserve if then required under applicable capital guidelines or policies of
the Federal Reserve. See "Description of the Trust Preferred Securities--
Liquidation Distribution upon Termination."
The Junior Subordinated Debentures are unsecured and subordinated to all
Senior and Subordinated Debt. As of December 31, 1996, Greater Bay had
approximately $3.0 million aggregate principal amount of Senior and
Subordinated Debt outstanding. The terms of the Junior Subordinated Debentures
place no limitation on the amount of Senior and Subordinated Debt that Greater
Bay can issue. See "Risk Factors--Ranking of Greater Bay's Obligations Under
the Junior Subordinated Debentures and the Guarantee" and "Description of
Junior Subordinated Debentures--Subordination."
In the event of the termination of GBB Capital, after satisfaction of
liabilities to creditors of GBB Capital as required by applicable law, the
holders of Trust Preferred Securities will be entitled to receive a
liquidation amount of $25 per Trust Preferred Security ("Liquidation Amount"),
plus accumulated and unpaid Distributions thereon to the date of payment,
which may be in the form of a Distribution of such Like Amount of Junior
Subordinated Debentures, subject to certain exceptions. See "Description of
the Trust Preferred Securities--Liquidation Distribution Upon Termination."
Application has been made to list the Trust Preferred Securities on the Nasdaq
National Market. Although the Underwriter has indicated an intention to make a
market in the Trust Preferred Securities, the Underwriter is not obligated to
make a market in the Trust Preferred Securities, and any market making may be
discontinued at any time at the sole discretion of the Underwriter. There can
be no assurance that a market will develop for the Trust Preferred Securities.
See "Risk Factors--Absence of Existing Public Market; Market Prices" and
"Underwriting."
The Trust Preferred Securities will be represented by one or more global
certificates registered in the name of The Depository Trust Company (the
"Depositary") or its nominee. Beneficial interests in the Trust Preferred
Securities will be shown on, and transfers thereof will be effected only
through, records maintained by participants in the Depositary. Except as
described herein, the Trust Preferred Securities in certificate form will not
be issued in exchange for global certificates. See "Book-Entry Issuance."
As used herein, (i) the "Indenture" means the Junior Subordinated Indenture
dated as of , 1997, as amended and supplemented from time to time,
between Greater Bay and Wilmington Trust Company, as trustee (the "Indenture
Trustee"), under which the Junior Subordinated Debentures will be issued, (ii)
the "Trust Agreement" means the Amended and Restated Trust Agreement relating
to GBB Capital among Greater Bay, as Depositor, Wilmington Trust Company, as
Property Trustee (the "Property Trustee"), Wilmington Trust Company, as
Delaware Trustee (the "Delaware Trustee"), and the Administrative Trustees
named therein (collectively, with the Property Trustee and Delaware Trustee,
the "Issuer Trustees"), (iii) the "Guarantee Agreement" means the Guarantee
Agreement relating to the Guarantee between Greater Bay and Wilmington Trust
Company, as Guarantee Trustee, and (iv) the "Expense Agreement" means the
Expense Agreement between Greater Bay and GBB Capital.
3
<PAGE>
[MAP OF GREATER BAY BANCORP BANKING LOCATIONS]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE TRUST PREFERRED SECURITIES
ON THE NASDAQ NATIONAL MARKET OR OTHERWISE, AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
4
<PAGE>
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial information appearing elsewhere in this
Prospectus. Unless the context clearly suggests otherwise, references to the
"Company" include Greater Bay Bancorp and its subsidiaries, collectively, and
references to "Greater Bay" include the parent company only. In addition to
the historical information contained herein, certain statements in this
Prospectus constitute "forward-looking statements" under the Private
Securities Litigation Reform Act of 1995 (the "Reform Act") which involve
risks and uncertainties. The Company's actual results may differ significantly
from those discussed herein. Factors that might cause such a difference
include, but are not limited to, those discussed under the captions "Risk
Factors" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" as well as those discussed elsewhere in this
Prospectus. See "Risk Factors--Forward-Looking Statements."
THE COMPANY
Greater Bay is a bank holding company operating Cupertino National Bank &
Trust ("CNB") and Mid-Peninsula Bank (separately, "MPB" and together with CNB,
the "Banks") with seven regional offices in Cupertino, Palo Alto, San Mateo,
San Carlos and San Jose, California. Greater Bay is the result of the merger
(the "Merger"), effective November 27, 1996, of Cupertino National Bancorp
("Cupertino") and Mid-Peninsula Bancorp ("Mid-Peninsula"). At December 31,
1996, the Company had total assets of $622.0 million, total net loans of
$441.6 million and total deposits of $559.3 million.
The Company, through the Banks, provides a wide range of commercial banking
services to small and medium-sized businesses, real estate developers and
property managers, business executives, professionals and other individuals,
primarily in the Santa Clara and San Mateo Counties of California. Services
include personal and business checking and savings accounts, time deposits and
individual retirement accounts, cash management, international trade services
and accounting services and the making of commercial, consumer and real estate
loans, which generally do not include long-term residential mortgage loans.
Additionally, the Company offers several specialized services including a
Small Business Administration ("SBA") Department which makes SBA guaranteed
loans to assist smaller businesses, a venture lending division (the "Venture
Lending Group") that services companies in their start-up and development
phase and a trust department (the "Greater Bay Trust Company") that offers a
full range of fee-based trust services directly to its clients.
In order to meet the demands of the increasingly competitive banking and
financial services industries, management has adopted a business philosophy
referred to as the "Super Community Banking Philosophy." The Super Community
Banking Philosophy is based on management's belief that banking customers
value doing business with locally managed institutions that can provide a full
service commercial banking relationship through an understanding of the
customer's financial needs and the flexibility to customize products and
services to meet those needs. Management further believes that banks are
better able to build successful customer relationships by affiliating with a
holding company that provides cost effective administrative support services
while promoting bank autonomy and flexibility.
To implement this philosophy, Greater Bay operates CNB and MPB as separate
subsidiaries by retaining their independent names along with their individual
Boards of Directors. Both MPB and CNB have established strong reputations and
customer followings in their respective market areas through attention to
client service and an understanding of client needs. In an effort to
capitalize on the identities and reputations of the Banks, the Company will
continue to market its services under the CNB and MPB names, primarily through
each Bank's relationship managers. The primary focus for the Banks'
relationship managers is to cultivate and nurture their client relationships.
Relationship managers are assigned to each borrowing client to provide
continuity in the relationship. This emphasis on personalized relationships
requires that all of the relationship managers maintain close ties to the
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5
<PAGE>
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communities in which they serve, so they are able to capitalize on their
efforts through expanded business opportunities for the Banks.
While client service decisions and day-to-day operations are maintained at
the Banks, Greater Bay offers the advantages of affiliation with a multi-bank
holding company by providing improved access to the capital markets and
expanded client support services, such as business cash management,
international trade services and accounting services. In addition, Greater Bay
provides centralized administrative functions, including support in credit
policy formulation and review, investment management, data processing,
accounting and other specialized support functions thereby allowing the Banks
to focus on client service.
The Company's business strategy is to focus on increasing its market share
within the communities it serves through continued internal growth. As a
result of the Merger, the Company has the opportunity to market the
specialized products and services of the Venture Lending Group, the Greater
Bay Trust Company and the SBA Department to a larger customer base. The
Company believes that these products and services, available prior to the
Merger only to customers of CNB, will be attractive to customers and contacts
of MPB in the venture capital community and the high net worth customers of
MPB. The Company believes that the infrastructure developed by Cupertino to
support the Greater Bay Trust Company, the SBA Department and the Venture
Lending Group will allow the Company to offer the products and services of
these groups without significant additional overhead costs.
The Company also will pursue opportunities to expand its market share
through select acquisitions that management believes complement the Company's
businesses. While management would prefer to make acquisitions which would
expand its presence in its current market areas in Santa Clara and San Mateo
Counties, it will also pursue opportunities to expand its market through
acquisitions in other parts of the South, East, and North Bay Areas of San
Francisco.
The Company was incorporated in California in 1984 under the name San Mateo
County Bancorp. See "Business--History." The Company's principal offices are
located at 2860 West Bayshore Road, Palo Alto, California 94303 and its
telephone number is (415) 813-8200.
GBB CAPITAL
GBB Capital is a statutory business trust formed under Delaware law pursuant
to (i) the Trust Agreement and (ii) the filing of a Certificate of Trust with
the Delaware Secretary of State on March 3, 1997. GBB Capital's business and
affairs are conducted by the Property Trustee, Delaware Trustee and three
individual Administrative Trustees who are officers of the Company. GBB
Capital exists for the exclusive purposes of (i) issuing and selling the Trust
Securities, (ii) using the proceeds from the sale of the Trust Securities to
acquire the Junior Subordinated Debentures issued by Greater Bay, and (iii)
engaging in only those other activities necessary, advisable or incidental
thereto (such as registering the transfer of the Trust Securities).
Accordingly, the Junior Subordinated Debentures will be the sole assets of GBB
Capital, and payments by Greater Bay under the Junior Subordinated Debentures
and the Expense Agreement will be the sole revenues of GBB Capital. All of the
Common Securities will be owned by Greater Bay. The Common Securities will
rank pari passu, and payments will be made thereon pro rata, with the Trust
Preferred Securities, except that upon the occurrence and during the
continuance of an event of default under the Trust Agreement resulting from an
event of default under the Indenture, the rights of Greater Bay as holder of
the Common Securities to payment in respect of Distributions and payments upon
liquidation, redemption or otherwise will be subordinated to the rights of the
holders of the Trust Preferred Securities. See "Description of the Trust
Preferred Securities--Subordination of Common Securities of GBB Capital Held
by Greater Bay." Greater Bay will acquire Common Securities in an aggregate
liquidation amount equal to 3.0% of the total capital of GBB Capital. GBB
Capital has a term of 31 years, but may terminate earlier as provided in the
Trust Agreement.
GBB Capital's principal offices are located at 2860 West Bayshore Road, Palo
Alto, California 94303 and its telephone number is (415) 813-8200.
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6
<PAGE>
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THE OFFERING
<TABLE>
<C> <S>
Trust Preferred Securities
issuer.......................... GBB Capital
Securities offered............... 800,000 Trust Preferred Securities. The
Trust Preferred Securities represent
undivided beneficial interests in GBB
Capital's assets, which will consist solely
of the Junior Subordinated Debentures and
payments thereunder.
Distributions.................... The Distributions payable on each Trust
Preferred Security will be fixed at a rate
per annum of % of the Liquidation Amount
of $25 per Trust Preferred Security, will
be cumulative, will accrue from the date of
issuance of the Trust Preferred Securities,
and will be payable quarterly in arrears on
the 15th day of March, June, September and
December of each year, commencing on June
15, 1997 (subject to possible deferral as
described below). The amount of each
Distribution due with respect to the Trust
Preferred Securities will include amounts
accrued through the date the Distribution
payment is due. See "Description of the
Trust Preferred Securities--Distributions."
Extension periods................ So long as no Debenture Event of Default
(as defined herein) has occurred and is
continuing, Greater Bay will have the
right, at any time, to defer payments of
interest on the Junior Subordinated
Debentures by extending the interest
payment period thereon for a period not
exceeding 20 consecutive quarters with
respect to each deferral period (each an
"Extension Period"), provided that no
Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated
Debentures. If interest payments are so
deferred, Distributions on the Trust
Preferred Securities will also be deferred
and Greater Bay will not be permitted,
subject to certain exceptions described
herein, to declare or pay any cash
distributions with respect to Greater Bay's
capital stock or debt securities that rank
pari passu with or junior to the Junior
Subordinated Debentures. During an
Extension Period, Distributions will
continue to accumulate with income thereon
compounded quarterly. Because interest
would continue to accrue and compound on
the Junior Subordinated Debentures, to the
extent permitted by applicable law, holders
of the Trust Preferred Securities will be
required to accrue income for United States
federal income tax purposes. See
"Description of Junior Subordinated
Debentures--Option to Defer Interest
Payment Period" and "Certain Federal Income
Tax Consequences--Interest Income and
Original Issue Discount."
Maturity......................... The Junior Subordinated Debentures will
mature on , 2027 which date may be
shortened (such date, as it may be
shortened, the "Stated Maturity") to a date
not earlier than , 2002 if certain
conditions are met (including Greater Bay
having received prior approval of the
Federal Reserve to do so if then required
under applicable capital guidelines or
policies of the Federal Reserve).
</TABLE>
7
<PAGE>
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<TABLE>
<C> <S>
Redemption....................... The Trust Preferred Securities are subject
to mandatory redemption upon repayment of
the Junior Subordinated Debentures at their
stated maturity or their earlier redemption
in an amount equal to the amount of Junior
Subordinated Debentures maturing on or
being redeemed at a redemption price equal
to the aggregate Liquidation Amount of the
Trust Preferred Securities plus accumulated
and unpaid Distributions thereon to the
date of redemption. Subject to Federal
Reserve approval, if then required under
applicable capital guidelines or policies
of the Federal Reserve, the Junior
Subordinated Debentures are redeemable
prior to maturity at the option of Greater
Bay (i) on or after , 2002 in whole at
any time or in part from time to time, or
(ii) at any time, in whole (but not in
part), upon the occurrence and during the
continuance of a Tax Event, an Investment
Company Event or a Capital Treatment Event,
in each case at a redemption price equal to
100% of the principal amount of the Junior
Subordinated Debentures so redeemed,
together with any accrued but unpaid
interest to the date fixed for redemption.
See "Description of the Trust Preferred
Securities--Redemption" and "Description of
Junior Subordinated Debentures--
Redemption."
Distribution of Junior
Subordinated Debentures......... Greater Bay has the right at any time to
terminate GBB Capital and cause the Junior
Subordinated Debentures to be distributed
to holders of Trust Preferred Securities in
liquidation of GBB Capital, subject to
Greater Bay having received prior approval
of the Federal Reserve to do so if then
required under applicable capital
guidelines or policies of the Federal
Reserve. See "Description of the Trust
Preferred Securities--Distribution of
Junior Subordinated Debentures."
Guarantee........................ Taken together, Greater Bay's obligations
under various documents described herein,
including the Guarantee Agreement, provide
a full guarantee of payments by GBB Capital
of Distributions and other amounts due on
the Trust Preferred Securities. Under the
Guarantee Agreement, Greater Bay guarantees
the payment of Distributions by GBB Capital
and payments on liquidation of or
redemption of the Trust Preferred
Securities (subordinate to the right to
payment of Senior and Subordinated Debt of
Greater Bay, as defined herein)
to the extent of funds held by GBB Capital.
If GBB Capital has insufficient funds to
pay Distributions on the Trust Preferred
Securities (i.e., if Greater Bay has failed
to make required payments under the Junior
Subordinated Debentures), a holder of the
Trust Preferred Securities would have the
right to institute a legal proceeding
directly against Greater Bay to enforce
payment of such Distributions to such
holder. See "Description of Junior
Subordinated Debentures--Enforcement of
Certain Rights by Holders of the Trust
Preferred Securities," "Description of
Junior Subordinated Debentures--Debenture
Events of Default" and "Description of
Guarantee."
</TABLE>
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8
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<C> <S>
Ranking.......................... The Trust Preferred Securities will rank
pari passu, and payments thereon will be
made pro rata, with the Common Securities
of GBB Capital held by Greater Bay, except
as described under "Description of the
Trust Preferred Securities--Subordination
of Common Securities of GBB Capital Held by
Greater Bay." The obligations of Greater
Bay under the Guarantee, the Junior
Subordinated Debentures and other documents
described herein are unsecured and rank
subordinate and junior in right of payment
to all current and future Senior and
Subordinated Debt, the amount of which is
unlimited. At December 31, 1996, the
aggregate outstanding Senior and
Subordinated Debt of Greater Bay was
approximately $3.0 million. In addition,
because Greater Bay is a holding company,
all obligations of Greater Bay relating to
the securities described herein will be
effectively subordinated to all existing
and future liabilities of Greater Bay's
subsidiaries, including the Banks. Greater
Bay may cause additional Trust Preferred
Securities to be issued by trusts similar
to GBB Capital in the future, and there is
no limit on the amount of such securities
that may be issued. In this event, Greater
Bay's obligations under the Junior
Subordinated Debentures to be issued to
such other trusts and Greater Bay's
guarantees of the payments by such trusts
will rank pari passu with Greater Bay's
obligations under the Junior Subordinated
Debentures and the Guarantee, respectively.
Voting rights.................... The holders of the Trust Preferred
Securities will generally have limited
voting rights relating only to the
modification of the Trust Preferred
Securities, the dissolution, winding-up or
termination of GBB Capital and certain
other matters described herein. See
"Description of the Trust Preferred
Securities--Voting Rights; Amendment of the
Trust Agreement."
Proposed Nasdaq National Market
symbol.......................... GBBXL
Use of proceeds.................. The proceeds to GBB Capital from the sale
of the Trust Preferred Securities offered
hereby will be invested by GBB Capital in
the Junior Subordinated Debentures of
Greater Bay. Greater Bay intends to invest
approximately $10.0 million of the net
proceeds in the Banks to increase their
capital levels to support future growth.
Greater Bay intends to use the remaining
net proceeds for general corporate
purposes, which may include without
limitation, funding additional investments
in, or extensions of credit to, the Banks,
and possible future acquisitions. Greater
Bay expects the Trust Preferred Securities
to qualify as Tier 1 capital under the
capital guidelines of the Federal Reserve.
See "Use of Proceeds."
</TABLE>
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<PAGE>
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SUMMARY CONSOLIDATED FINANCIAL DATA
The following summary consolidated financial data with respect to the
Company's consolidated financial position as of December 31, 1996 and 1995,
and its results of operations for the fiscal years ended December 31, 1996,
1995 and 1994 have been derived from the audited consolidated financial
statements of the Company appearing elsewhere in this Prospectus. This
information should be read in conjunction with such consolidated financial
statements and the notes thereto. The summary consolidated financial data with
respect to the Company's consolidated financial position as of December 31,
1994, 1993 and 1992 and its results of operations for the years ended December
31, 1993 and 1992 have been derived from the audited consolidated financial
statements of the Company, which are not presented herein.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Interest income......... $ 45,037 $ 37,233 $ 27,801 $ 23,857 $ 22,736
Interest expense........ 16,213 13,892 8,512 6,497 7,506
--------- --------- --------- --------- ---------
Net interest income..... 28,824 23,341 19,289 17,360 15,230
Provision for loan
losses................. 2,036 956 1,823 1,945 1,132
--------- --------- --------- --------- ---------
Net interest income
after provision for
loan losses............ 26,788 22,385 17,466 15,415 14,098
Other income............ 3,530 2,306 3,295 3,578 2,127
Other expense........... 23,888 19,686 16,231 15,077 11,255
--------- --------- --------- --------- ---------
Income before income
taxes.................. 6,430 5,005 4,530 3,833 5,028
Provision for income
taxes.................. 2,927 1,971 1,966 1,473 1,825
--------- --------- --------- --------- ---------
Net income.............. $ 3,503 $ 3,034 $ 2,564 $ 2,443 $ 3,145
========= ========= ========= ========= =========
Net income per share ... $ 1.04 $ 0.96 $ 0.85 $ 0.84 $ 1.12
Average common shares
outstanding ........... 3,359,700 3,145,550 3,001,211 2,925,284 2,801,963
OPERATING RATIOS AND
OTHER DATA:
Return on average
assets(1).............. 0.65% 0.70 % 0.68 % 0.70 % 1.08 %
Return on average common
shareholders'
equity(1).............. 8.12% 7.98 % 7.31 % 7.56 % 10.50 %
Net interest margin..... 5.85% 5.83 % 5.62 % 5.61 % 5.54 %
Net (charge-offs)
recoveries to average
loans.................. 0.02% (0.35)% (0.49)% (0.61)% (0.31)%
Ratio of earnings to
fixed charges(2).......
Excluding interest on
deposits.............. 14.37x 6.93x 12.86x 392.6x 2,486x
Including interest on
deposits.............. 1.40x 1.36x 1.53x 1.60x 1.66x
FINANCIAL CONDITION DATA
(AT PERIOD END):
Assets.................. $ 622,044 $ 477,834 $ 401,614 $ 358,576 $ 325,168
Loans, net.............. 441,560 284,579 242,750 231,857 226,334
Investment
securities(3).......... 105,520 116,869 93,169 74,398 45,414
Deposits................ 559,283 431,789 345,294 323,300 292,110
Long-term debt.......... 3,000 3,000 -- -- --
Common shareholders'
equity................. 44,682 40,112 36,040 34,222 31,619
Book value per common
share.................. 13.80 13.17 12.90 13.17 13.07
FINANCIAL CONDITION
RATIOS:
Nonperforming assets to
total loans and OREO... 0.74% 1.17 % 2.23 % 1.59 % 2.01 %
Allowance for loan
losses to total loans.. 1.62% 1.52 % 1.79 % 1.58 % 1.37 %
Allowance for loan
losses to non-
performing loans....... 224.02% 131.59 % 80.24 % 98.84 % 66.93 %
REGULATORY CAPITAL
RATIOS:
Tier 1 capital.......... 8.75% 11.38 % 12.59 % 13.05 % 11.60 %
Total capital........... 10.54% 13.43 % 13.82 % 14.45 % 12.80 %
Leverage ratio.......... 7.27% 8.69 % 9.34 % 9.69 % 9.43 %
</TABLE>
- --------
(1) After excluding merger and other related costs of $2.8 million in 1996,
litigation settlement, closing of mortgage banking business unit and
expenses related to terminated merger discussions of $2.1 million in 1995
and merger and other related costs of $608,000 in 1994 the ROA would have
been 1.02%, 0.99% and 0.78% in 1996, 1995 and 1994, respectively, and the
ROE would have been 12.86%, 11.35% and 8.35% in 1996, 1995 and 1994
respectively.
(2) For purposes of computing the ratio of earnings to fixed charges, earnings
represent income before income taxes, extraordinary items and fixed
charges. Fixed charges represent interest expense.
(3) Includes available-for-sale securities and held-to-maturity securities.
10
<PAGE>
RISK FACTORS
Prospective investors should consider, among other things, the following
factors in connection with a decision to purchase the Trust Preferred
Securities.
RANKING OF GREATER BAY'S OBLIGATIONS UNDER THE JUNIOR SUBORDINATED DEBENTURES
AND THE GUARANTEE
All obligations of Greater Bay under the Guarantee, the Junior Subordinated
Debentures and other documents described herein are unsecured and rank
subordinate and junior in right of payment to all current and future Senior
and Subordinated Debt, the amount of which is unlimited. At December 31, 1996,
the aggregate outstanding Senior and Subordinated Debt of Greater Bay was
approximately $3.0 million. In addition, because Greater Bay is a holding
company, all obligations of Greater Bay relating to the securities described
herein will be effectively subordinated to all existing and future liabilities
of Greater Bay's subsidiaries, including the Banks. As a holding company, the
right of Greater Bay to participate in any distribution of assets of any
subsidiary upon such subsidiary's liquidation or reorganization or otherwise
(and thus the ability of holders of the Trust Preferred Securities to benefit
indirectly from such distribution) is subject to the prior claims of creditors
of that subsidiary, except to the extent that Greater Bay may itself be
recognized as a creditor of that subsidiary. Accordingly, the Junior
Subordinated Debentures and all obligations of Greater Bay relating to the
Trust Preferred Securities will be effectively subordinated to all existing
and future liabilities of the Banks, and holders of the Trust Preferred
Securities should look only to the assets of Greater Bay, and not of its
subsidiaries, for principal and interest payments on the Junior Subordinated
Debentures. None of the Indenture, the Guarantee, the Guarantee Agreement or
the Trust Agreement places any limitation on the amount of secured or
unsecured debt, including Senior and Subordinated Debt, that may be incurred
by Greater Bay or its subsidiaries. Further, there is no limitation on Greater
Bay's ability to issue additional Junior Subordinated Debentures in connection
with any further offerings of Trust Preferred Securities, and such additional
debentures would rank pari passu with the Junior Subordinated Debentures. See
"Description of Junior Subordinated Debentures--Subordination" and
"Description of Guarantee--Status of the Guarantee."
DEPENDENCE ON DIVIDENDS AND INTEREST PAYMENTS FROM THE BANKS
The ability of GBB Capital to pay amounts due on the Trust Preferred
Securities is solely dependent upon Greater Bay making payments on the Junior
Subordinated Debentures as and when required. As a holding company without
significant assets other than its equity interest in the Banks, Greater Bay's
ability to pay interest on the Junior Subordinated Debentures to GBB Capital
(and consequently GBB Capital's ability to pay Distributions on the Trust
Preferred Securities and Greater Bay's ability to pay its obligations under
the Guarantee) depends primarily upon the cash dividends Greater Bay receives
from the Banks. Dividend payments from the Banks are subject to regulatory
limitations, generally based on current and retained earnings, imposed by the
various regulatory agencies with authority over the respective Banks. Payment
of dividends is also subject to regulatory restrictions if such dividends
would impair the capital of the Banks. Payment of dividends by the Banks is
also subject to the respective Bank's profitability, financial condition and
capital expenditures and other cash flow requirements. No assurance can be
given that the Banks will be able to pay dividends at past levels, or at all,
in the future. See "Supervision and Regulation."
OPTION TO DEFER INTEREST PAYMENT PERIOD; TAX CONSEQUENCES OF A DEFERRAL OF
INTEREST PAYMENTS
So long as no Debenture Event of Default (as defined herein) has occurred
and is continuing, Greater Bay has the right under the Indenture to defer
payment of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 20 consecutive quarters with respect
to each Extension Period, provided that no Extension Period may extend beyond
the Stated Maturity of the Junior Subordinated Debentures. As a consequence of
any such deferral, quarterly Distributions on the Trust Preferred Securities
by GBB Capital will be deferred (and the amount of Distributions to which
holders of the Trust Preferred Securities are entitled will accumulate
additional amounts thereon at the rate of % per annum, compounded
quarterly, from the relevant payment date for such Distributions, to the
extent permitted by applicable law) during any such
11
<PAGE>
Extension Period. During any such Extension Period, Greater Bay will be
prohibited from making certain payments or distributions with respect to
Greater Bay's capital stock (including dividends on or redemptions of common
or preferred stock) and from making certain payments with respect to any debt
securities of Greater Bay that rank pari passu with or junior in interest to
the Junior Subordinated Debentures; however, Greater Bay will not be
restricted from (a) paying dividends or distributions in common stock of
Greater Bay, (b) redeeming rights or taking certain other actions under a
shareholders' rights plan, (c) making payments under the Guarantee or (d)
making purchases of common stock related to the issuance of common stock or
rights under any of Greater Bay's benefit plans for its directors, officers or
employees. Further, during an Extension Period, Greater Bay would have the
ability to continue to make payments on Senior and Subordinated Debt. Prior to
the termination of any Extension Period, Greater Bay may further extend such
Extension Period provided that such extension does not cause such Extension
Period to exceed 20 consecutive quarters or to extend beyond the Stated
Maturity. Upon the termination of any Extension Period and the payment of all
interest then accrued and unpaid (together with interest thereon at the annual
rate of %, compounded quarterly, to the extent permitted by applicable
law), Greater Bay may elect to begin a new Extension Period subject to the
above requirements. There is no limitation on the number of times that Greater
Bay may elect to begin an Extension Period. See "Description of the Trust
Preferred Securities--Distributions" and "Description of Junior Subordinated
Debentures--Option to Defer Interest Payment Period."
Because Greater Bay believes the likelihood of it exercising its option to
defer payments of interest is remote, the Junior Subordinated Debentures will
be treated as issued without "original issue discount" for United States
federal income tax purposes. As a result, holders of Trust Preferred
Securities will include interest in taxable income under their own methods of
accounting (i.e., cash or accrual). If Greater Bay exercises its right to
defer payments of interest, the holders of Trust Preferred Securities will be
required to include their pro rata share of original issue discount in gross
income as it accrues for United States federal income tax (and possibly other)
purposes in advance of the receipt of cash. See "Certain Federal Income Tax
Consequences-- Interest Income and Original Issue Discount." Greater Bay has
no current intention of exercising its right to defer payments of interest by
extending the interest payment period on the Junior Subordinated Debentures.
However, should Greater Bay elect to exercise its right to defer payments of
interest in the future, the market price of the Trust Preferred Securities is
likely to be adversely affected. A holder that disposes of such holder's Trust
Preferred Securities during an Extension Period, therefore, might not receive
the same return on such holder's investment as a holder that continues to hold
the Trust Preferred Securities.
TAX EVENT REDEMPTION, INVESTMENT COMPANY ACT REDEMPTION OR CAPITAL TREATMENT
EVENT REDEMPTION
Upon the occurrence and during the continuation of a Tax Event, an
Investment Company Event or a Capital Treatment Event (whether occurring
before or after , 2002), Greater Bay has the right, if certain conditions
are met, to redeem the Junior Subordinated Debentures in whole (but not in
part) at 100% of the principal amount together with accrued but unpaid
interest to the date fixed for redemption within 90 days following the
occurrence of such Tax Event, Investment Company Event or Capital Treatment
Event and therefore cause a mandatory redemption of the Trust Securities. The
exercise of such right is subject to Greater Bay having received prior
approval of the Federal Reserve to do so if then required under applicable
guidelines or policies of the Federal Reserve. See "Description of the Trust
Preferred Securities--Redemption."
A "Tax Event" means the receipt by Greater Bay and GBB Capital of an opinion
of counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such prospective change, pronouncement or decision is announced on or after
the original issuance of the Trust Preferred Securities, there is more than an
insubstantial risk that (i) GBB Capital is, or will be within 90 days of the
date of such opinion, subject to United States federal income tax with respect
to income received or accrued
12
<PAGE>
on the Junior Subordinated Debentures, (ii) interest payable by Greater Bay on
the Junior Subordinated Debentures is not, or within 90 days of such opinion,
will not be, deductible by Greater Bay, in whole or in part, for United States
federal income tax purposes, or (iii) GBB Capital is, or will be within 90
days of the date of the opinion, subject to more than a de minimus amount of
other taxes, duties or other governmental charges. See "--Possible Tax Law
Changes Affecting the Trust Preferred Securities" below for a discussion of
certain legislative proposals that, if adopted, could give rise to a Tax
Event, which may permit Greater Bay to cause a redemption of the Junior
Subordinated Debentures (and therefore the Trust Preferred Securities) prior
to , 2002.
An "Investment Company Event" means the receipt by Greater Bay and GBB
Capital of an opinion of counsel experienced in such matters to the effect
that, as a result of any change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority, GBB Capital is or will be
considered an "investment company" that is required to be registered under the
Investment Company Act, which change becomes effective on or after the
original issuance of the Trust Preferred Securities.
A "Capital Treatment Event" means the reasonable determination by Greater
Bay that, as a result of any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change
is effective or such prospective change, pronouncement or decision is
announced on or after the date of issuance of the Trust Preferred Securities
under the Trust Agreement, there is more than an insubstantial risk of
impairment of Greater Bay's ability to treat the Trust Preferred Securities
(or any substantial portion thereof) as "Tier 1 Capital" (or the then
equivalent thereof) for purposes of the capital adequacy guidelines of the
Federal Reserve, as then in effect and applicable to Greater Bay.
POSSIBLE TAX LAW CHANGES AFFECTING THE TRUST PREFERRED SECURITIES
Recently the Clinton Administration announced its budget proposals for the
fiscal year 1998. That announcement included a proposal that could affect the
tax characteristics of the Junior Subordinated Debentures. Under the
Administration's proposal, no deduction would be allowed for interest or
original issue discount on an instrument issued by a corporation that has a
maximum term of more than 40 years, or is payable in stock of the issuer or a
related party. The budget announcement also states that no such deduction
would be allowed for certain indebtedness that is reflected as equity on the
issuer's balance sheet. The budget announcement states that the effective date
of the first proposal is for instruments issued "after the date of first
committee action," which is not a legally precise term. The budget
announcement is less clear about the proposed effective date of the second
proposal mentioned above.
Similar proposals were made by the Administration last year. The Revenue
Reconciliation Bill of 1996 (the "1996 Bill") would, among other things, have
denied interest deductions for interest on an instrument, issued by a
corporation, that had a maximum term of more than 20 years and that was not
shown as indebtedness on the separate balance sheet of the issuer or, where
the instrument was issued to a related party (other than a corporation), where
the holder or some other related party issued a related instrument that is not
shown as indebtedness on the issuer's consolidated balance sheet. The 1996
Bill was never enacted, but it is likely that the second proposal in the
budget announcement mentioned above will be similar in some respects to the
proposal in the 1996 Bill. Enactment of this proposal could affect deduction
of interest expenses and original issue discount with respect to the Junior
Subordinated Debentures. This, in turn, could create a Tax Event affecting the
Trust Preferred Securities.
In connection with the 1996 Bill, the Chairmen of the Senate Finance and
House Ways and Means Committees issued a joint statement that it was their
intention that the effective date of the Administration's legislative
proposals, if adopted, would be no earlier than the date of appropriate
Congressional action. Senate
13
<PAGE>
Finance Committee Chairman William Roth has been quoted in the news media
recently as stating that the 1997 tax changes generally should be effective on
a prospective basis.
It is intended that the Trust Preferred Securities and the Junior
Subordinated Debentures will be issued prior to any type of Congressional
committee action with respect to the aforementioned budget proposal. However,
due to business considerations, the unpredictability of when Congress will
begin action with respect to the Administration's proposals, and the
imprecision in the public statements concerning the anticipated effective date
of the legislative proposals, there can be no guarantee that these instruments
will not be affected by the aforementioned legislative proposals, if they are
enacted.
There also can be no assurance that other future legislative proposals or
final legislation will not affect the ability of the Company to deduct
interest on the Junior Subordinated Debentures. Such a change could give rise
to a Tax Event, which may permit Greater Bay, upon approval of the Federal
Reserve, if then required under applicable capital guidelines or policies of
the Federal Reserve, to cause a redemption of the Trust Preferred Securities.
See "Description of the Trust Preferred Securities--Redemption--Tax Event
Redemption" and "Description of Junior Subordinated Debentures--Redemption."
See also "Certain Federal Income Tax Consequences--Possible Tax Law Changes
Affecting the Trust Preferred Securities."
POSSIBLE DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF TRUST
PREFERRED SECURITIES
Greater Bay will have the right at any time to terminate GBB Capital and,
after satisfaction of liabilities to creditors of GBB Capital as required by
applicable law, cause the Junior Subordinated Debentures to be distributed to
the holders of the Trust Preferred Securities in liquidation of GBB Capital.
The exercise of such right is subject to Greater Bay having received prior
approval of the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve. Because holders of the Trust
Preferred Securities may receive Junior Subordinated Debentures in liquidation
of GBB Capital and because Distributions are otherwise limited to payments on
the Junior Subordinated Debentures, prospective purchasers of the Trust
Preferred Securities are also making an investment decision with regard to the
Junior Subordinated Debentures and should carefully review all the information
regarding the Junior Subordinated Debentures contained herein. See
"Description of the Trust Preferred Securities--Liquidation Distribution Upon
Termination" and "Description of Junior Subordinated Debentures."
Under current United States federal income tax law and interpretations and
assuming, as expected, GBB Capital is classified as a grantor trust for such
purposes, a distribution of the Junior Subordinated Debentures upon a
liquidation of GBB Capital should not be a taxable event to holders of the
Trust Preferred Securities. However, if a Tax Event were to occur which would
cause GBB Capital to be subject to United States federal income tax with
respect to income received or accrued on the Junior Subordinated Debentures, a
distribution of the Junior Subordinated Debentures by GBB Capital could be a
taxable event to GBB Capital and the holders of the Trust Preferred
Securities. See "Certain Federal Income Tax Consequences--Distribution of
Junior Subordinated Debentures to Holders of Trust Preferred Securities."
SHORTENING OF STATED MATURITY OF JUNIOR SUBORDINATED DEBENTURES
Greater Bay will have the right at any time to shorten the maturity of the
Junior Subordinated Debentures to a date not earlier than five years from the
date of issuance and thereby cause the Trust Preferred Securities to be
redeemed on such earlier date. The exercise of such right is subject to
Greater Bay having received prior approval of the Federal Reserve if then
required under applicable capital guidelines or policies of the Federal
Reserve. See "Description of Junior Subordinated Debentures--Redemption."
LIMITATIONS ON DIRECT ACTIONS AGAINST GREATER BAY AND ON RIGHTS UNDER THE
GUARANTEE
The Guarantee guarantees to the holders of the Trust Preferred Securities
the following payments, to the extent not paid by GBB Capital: (i) any
accumulated and unpaid Distributions required to be paid on the Trust
14
<PAGE>
Preferred Securities, to the extent that GBB Capital has funds on hand
available therefor at such time, (ii) the redemption price with respect to any
Trust Preferred Securities called for redemption, to the extent that GBB
Capital has funds on hand available therefor at such time, and (iii) upon a
voluntary or involuntary dissolution, winding-up or liquidation of GBB Capital
(unless the Junior Subordinated Debentures are distributed to holders of the
Trust Preferred Securities), the lesser of (a) the aggregate of the
Liquidation Amount and all accumulated and unpaid Distributions to the date of
payment to the extent that GBB Capital has funds on hand available therefor at
such time (the "Liquidation Distribution") and (b) the amount of assets of GBB
Capital remaining available for distribution to holders of the Trust Preferred
Securities after satisfaction of liabilities to creditors of GBB Capital as
required by applicable law. The holders of not less than a majority in
aggregate liquidation amount of the Trust Preferred Securities have the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the Guarantee Trustee in respect of the Guarantee or to
direct the exercise of any trust power conferred upon the Guarantee Trustee
under the Guarantee Agreement. Any holder of the Trust Preferred Securities
may institute a legal proceeding directly against Greater Bay to enforce its
rights under the Guarantee without first instituting a legal proceeding
against GBB Capital, the Guarantee Trustee or any other person or entity. If
Greater Bay were to default on its obligation to pay amounts payable under the
Junior Subordinated Debentures, GBB Capital would lack funds for the payment
of Distributions or amounts payable on redemption of the Trust Preferred
Securities or otherwise, and, in such event, holders of the Trust Preferred
Securities would not be able to rely upon the Guarantee for payment of such
amounts. Instead, in the event a Debenture Event of Default shall have
occurred and be continuing and such event is attributable to the failure of
Greater Bay to pay interest on or principal of the Junior Subordinated
Debentures on the payment date on which such payment is due and payable, then
a holder of Trust Preferred Securities may institute a legal proceeding
directly against Greater Bay for enforcement of payment to such holder of the
principal of or interest on such Junior Subordinated Debentures having a
principal amount equal to the aggregate Liquidation Amount of the Trust
Preferred Securities of such holder (a "Direct Action"). In connection with
such Direct Action, Greater Bay will have a right of set-off under the
Indenture to the extent of any payment made by Greater Bay to such holder of
Trust Preferred Securities in the Direct Action. Except as described herein,
holders of Trust Preferred Securities will not be able to exercise directly
any other remedy available to the holders of the Junior Subordinated
Debentures or assert directly any other rights in respect of the Junior
Subordinated Debentures. See "Description of Junior Subordinated Debentures--
Enforcement of Certain Rights by Holders of Trust Preferred Securities" and
"Description of Guarantee." The Trust Agreement provides that each holder of
Trust Preferred Securities by acceptance thereof agrees to the provisions of
the Guarantee Agreement and the Indenture.
UNCERTAINTY OF DEDUCTIBILITY OF INTEREST ON THE JUNIOR SUBORDINATED DEBENTURES
The Company's ability to deduct the interest paid on the Junior Subordinated
Debentures depends upon whether the Junior Subordinated Debentures are
characterized as debt instruments for federal income tax purposes, taking all
the relevant facts and circumstances into account. The Company believes that
the Junior Subordinated Debentures are debt instruments for federal income tax
purposes and that interest on the Junior Subordinated Debentures will,
therefore, be deductible by the Company. There is no clear authority on the
appropriate characterization for federal income tax purposes of instruments
such as the Junior Subordinated Debentures when they are issued in connection
with an offering of securities such as the Trust Preferred Securities. If the
interest on the Junior Subordinated Debentures is not deductible by the
Company, the Company would have significant additional income tax liabilities.
Any such tax liability could adversely affect the ability of Greater Bay to
pay interest on the Junior Subordinated Debentures to GBB Capital (and
consequently GBB Capital's ability to pay Distributions on the Trust Preferred
Securities and Greater Bay's ability to pay its obligations under the
Guarantee).
LIMITED COVENANTS
The covenants in the Indenture are limited, and there are no covenants
relating to Greater Bay in the Trust Agreement. As a result, neither the
Indenture nor the Trust Agreement protects holders of Junior Subordinated
15
<PAGE>
Debentures, or Trust Preferred Securities, respectively, in the event of a
material adverse change in Greater Bay's or the Company's financial condition
or results of operations or limits the ability of Greater Bay or any subsidiary
to incur additional indebtedness. Therefore, the provisions of these governing
instruments should not be considered a significant factor in evaluating whether
Greater Bay will be able to comply with its obligations under the Junior
Subordinated Debentures or the Guarantee.
LIMITED VOTING RIGHTS
Holders of Trust Preferred Securities will generally have limited voting
rights relating only to the modification of the Trust Preferred Securities, the
dissolution, winding-up or liquidation of GBB Capital, and the exercise of GBB
Capital's rights as holder of Junior Subordinated Debentures. Holders of Trust
Preferred Securities will not be entitled to vote to appoint, remove or replace
the Property Trustee or the Delaware Trustee, and such voting rights are vested
exclusively in the holder of the Common Securities except upon the occurrence
of certain events described herein. In no event will the holders of the Trust
Preferred Securities have the right to vote to appoint, remove or replace the
Administrative Trustees; such voting rights are vested exclusively in the
holder of the Common Securities. The Property Trustee, the Administrative
Trustees and Greater Bay may amend the Trust Agreement without the consent of
holders of Trust Preferred Securities to ensure that GBB Capital will be
classified for United States federal income tax purposes as a grantor trust or
to ensure that GBB Capital will not be required to register as an "investment
company," even if such action adversely affects the interests of such holders.
See "Description of Trust Preferred Securities--Voting Rights; Amendment of the
Trust Agreement" and "--Removal of Trustees."
ABSENCE OF EXISTING PUBLIC MARKET; MARKET PRICES
There is no existing market for the Trust Preferred Securities. Application
has been made to list the Trust Preferred Securities on the Nasdaq National
Market. There can be no assurance that an active and liquid trading market for
the Trust Preferred Securities will develop or that a continued listing of the
Trust Preferred Securities will be available on Nasdaq. Although the
Underwriter has informed GBB Capital and the Company that the Underwriter
intends to make a market in the Trust Preferred Securities offered hereby, the
Underwriter is not obligated to do so and any such market making activity may
be terminated at any time without notice to the holders of the Trust Preferred
Securities. Future trading prices of the Trust Preferred Securities will depend
on many factors including, among other things, prevailing interest rates, the
operating results and financial condition of the Company, and the market for
similar securities. As a result of the existence of Greater Bay's right to
defer interest payments on or, subject to prior approval of the Federal Reserve
if then required under applicable capital guidelines or policies of the Federal
Reserve, shorten the Stated Maturity of the Junior Subordinated Debentures, the
market price of the Trust Preferred Securities may be more volatile than the
market prices of debt securities that are not subject to such optional
deferrals or reduction in maturity. There can be no assurance as to the market
prices for the Trust Preferred Securities or the Junior Subordinated Debentures
that may be distributed in exchange for the Trust Preferred Securities if
Greater Bay exercises its right to terminate GBB Capital. Accordingly, the
Trust Preferred Securities that an investor may purchase, or the Junior
Subordinated Debentures that a holder of the Trust Preferred Securities may
receive in liquidation of GBB Capital, may trade at a discount from the price
that the investor paid to purchase the Trust Preferred Securities offered
hereby.
ABILITY OF THE COMPANY TO EXECUTE ITS BUSINESS STRATEGY
The financial performance of the Company will depend in part, on the
Company's ability to successfully integrate the operations and management of
Mid-Peninsula and Cupertino and to implement its Super Community Banking
Philosophy. The Merger was effected in late November, 1996, and integration of
such operations and management are in the early stages. There can be no
assurance that the Company will be able to effectively and profitably integrate
the operations and management of Mid-Peninsula and Cupertino, or that it will
be able to profitably implement its Super Community Banking Philosophy. See
"Business--Super Community Banking Philosophy."
16
<PAGE>
INTEREST RATE RISK
Banking companies' earnings depend largely on the relationship between the
cost of funds, primarily deposits, and the yield on earning assets. This
relationship, known as the interest rate spread, is subject to fluctuation and
is affected by economic and competitive factors which influence interest
rates, the volume and mix of interest-earning assets and interest-bearing
liabilities, and the level of non-performing assets. Fluctuations in interest
rates affect the demand of customers for the Company's products and services.
The Company is subject to interest rate risk to the degree that its interest-
bearing liabilities reprice or mature more slowly or more rapidly or on a
different basis than its interest-earning assets. Given the Company's current
volume and mix of interest-bearing liabilities and interest-earning assets,
the Company's interest rate spread could be expected to increase during times
of rising interest rates and, conversely, to decline during times of falling
interest rates. Although the Company believes its current level of interest
rate sensitivity is reasonable, significant fluctuations in interest rates may
have an adverse effect on the Company's results of operations.
ECONOMIC CONDITIONS AND GEOGRAPHIC CONCENTRATION
The Company's operations are located in Northern California and concentrated
primarily in Santa Clara and San Mateo Counties, which include the area known
as the "Silicon Valley." As a result of the geographic concentration, the
Company's results depend largely upon economic conditions in these areas. A
deterioration in economic conditions in the Company's market areas,
particularly in the technology and real estate industries on which these areas
depend, could have a material adverse impact on the quality of the Company's
loan portfolio and the demand for its products and services, and accordingly,
its results of operations. See "Business--Market Area."
GOVERNMENT REGULATION AND MONETARY POLICY
The banking industry is subject to extensive federal and state supervision
and regulation. Such regulation limits the manner in which Greater Bay and the
Banks conduct their respective businesses, undertake new investments and
activities and obtain financing. This regulation is designed primarily for the
protection of the deposit insurance funds and consumers, and not to benefit
holders of the Company's securities. Financial institution regulation has been
the subject of significant legislation in recent years, and may be the subject
of further significant legislation in the future, none of which is in the
control of the Company. Significant new laws or changes in, or repeals of,
existing laws may cause the Company's results to differ materially. Further,
federal monetary policy, particularly as implemented through the Federal
Reserve System, significantly affects credit conditions for the Company,
primarily through open market operations in United States government
securities, the discount rate for bank borrowings and bank reserve
requirements, and a material change in these conditions would be likely to
have a material impact on the Company's results of operations. See
"Supervision and Regulation."
COMPETITION
The banking and financial services business in California generally, and in
the Banks' market areas specifically, is highly competitive. The increasingly
competitive environment is a result primarily of changes in regulation,
changes in technology and product delivery systems, and the accelerating pace
of consolidation among financial services providers. The Banks compete for
loans, deposits and customers for financial services with other commercial
banks, savings and loan associations, securities and brokerage companies,
mortgage companies, insurance companies, finance companies, money market
funds, credit unions, and other nonbank financial service providers. Many of
these competitors are much larger in total assets and capitalization, have
greater access to capital markets and offer a broader array of financial
services than the Banks. There can be no assurance that the Banks will be able
to compete effectively in their markets and the results of operations of the
Company could be adversely affected if circumstances affecting the nature or
level of competition change. See "Business--Competition."
17
<PAGE>
DEPENDENCE ON KEY PERSONNEL
The Company's success depends substantially on certain members of its senior
management, in particular David L. Kalkbrenner, President and Chief Executive
Officer of Greater Bay and MPB, C. Donald Allen, President and Chief Executive
Officer of CNB, Steven C. Smith, Executive Vice President, Chief Operating
Officer and Chief Financial Officer of Greater Bay and Executive Vice President
and Chief Operating Officer of CNB, David R. Hood, Executive Vice President and
Senior Lending Officer of Greater Bay, Murray B. Dey, Executive Vice President
and Chief Credit Officer of MPB, and Hall Palmer, Executive Vice President and
Senior Trust Officer of Greater Bay. The Company's business and financial
condition could be materially adversely affected by the loss of the services of
any such individuals. The Company does not maintain key man life insurance. See
"Management--Board of Directors and Executive Officers."
CREDIT QUALITY
A significant source of risk for the Company arises from the possibility that
losses will be sustained because borrowers, guarantors and related parties may
fail to perform in accordance with the terms of their loans. The Company has
adopted underwriting and credit monitoring procedures and credit policies,
including the establishment and review of the allowance for credit losses, that
management believes are appropriate to minimize this risk by assessing the
likelihood of nonperformance, tracking loan performance and diversifying the
Company's credit portfolio. Such policies and procedures, however, may not
prevent unexpected losses that could materially adversely affect the Company's
results of operations.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus, including, without
limitation, statements containing the words "believes," "anticipates,"
"intends," "expects" and words of similar import, constitute "forward-looking
statements" within the meaning of the Reform Act. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
that may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economics and business conditions in those
areas in which the Company operates; demographic changes; competition;
fluctuations in interest rates; changes in business strategy or development
plans; changes in governmental regulation; credit quality; the availability of
capital to fund the expansion of the Company's business; and other factors
referenced in this Prospectus, including, without limitation, under the
captions "Prospectus Summary," "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business" and
"Supervision and Regulation." Given these uncertainties, prospective investors
are cautioned not to place undue reliance on such forward-looking statements.
The Company disclaims any obligation to update any such factors or to publicly
announce the results of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
18
<PAGE>
USE OF PROCEEDS
All of the proceeds from the sale of Trust Preferred Securities will be
invested by GBB Capital in the Junior Subordinated Debentures. The net
proceeds to Greater Bay from the sale of the Junior Subordinated Debentures
are estimated to be $ (net of estimated underwriting commission and
other estimated offering expenses). Greater Bay intends to invest
approximately $10.0 million of the net proceeds in the Banks to increase their
capital levels to support future growth. Greater Bay intends to use the
remaining net proceeds for general corporate purposes, which may include,
without limitation, funding additional investments in, or extensions of credit
to, the Banks and possible future acquisitions. The Company is not currently
engaged in negotiations with respect to any acquisitions. Pending their
application, the net proceeds may be invested in short-term investment grade
financial securities.
Greater Bay is required by the Federal Reserve to maintain certain levels of
capital for bank regulatory purposes. On October 21, 1996, the Federal Reserve
announced that certain qualifying amounts of cumulative preferred securities
having the characteristics of the Trust Preferred Securities could be included
as Tier 1 capital for bank holding companies. Such Tier 1 capital treatment,
together with the Company's ability to deduct, for federal income tax
purposes, interest payable on the Junior Subordinated Debentures, will provide
Greater Bay with a cost-effective means of obtaining capital for bank
regulatory purposes.
ACCOUNTING TREATMENT
For financial reporting purposes, GBB Capital will be treated as a
subsidiary of Greater Bay and, accordingly, the accounts of GBB Capital will
be included in the consolidated financial statements of the Company. The Trust
Preferred Securities will be presented as a separate line item in the
consolidated balance sheet of the Company under the caption "Company Obligated
Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely
Junior Subordinated Debentures," and appropriate disclosures about the Trust
Preferred Securities, the Guarantee and the Junior Subordinated Debentures
will be included in the notes to consolidated financial statements. For
financial reporting purposes, the Company will record Distributions payable on
the Trust Preferred Securities as an expense in the consolidated statements of
operations.
Future reports of Greater Bay filed under the Securities Exchange Act of
1934, as amended ("the Exchange Act"), will include a footnote to the
financial statements stating that (i) GBB Capital is wholly-owned, (ii) the
sole assets of GBB Capital are the Junior Subordinated Debentures (specifying
the principal amount, interest rate and maturity date of such Junior
Subordinated Debentures), and (iii) the back-up obligations, in the aggregate,
constitute a full and unconditional guarantee by Greater Bay of the
obligations of GBB Capital under the Trust Preferred Securities. GBB Capital
will not provide separate reports under the Exchange Act.
19
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at December
31, 1996 and as adjusted to give effect to the issuance of the Trust Preferred
Securities by GBB Capital offered hereby.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------
ACTUAL AS ADJUSTED
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt:
11.5% Subordinated Notes due 2005..................... $ 3,000 $ 3,000
Company obligated mandatorily redeemable trust
preferred securities of subsidiary trust holding
solely junior subordinated debentures(1).............. -- 20,000
Shareholders' equity:
Preferred stock, no par value: 4,000,000 shares
authorized, none issued............................... -- --
Common stock, no par value: 6,000,000 shares
authorized, 3,238,887 outstanding..................... 34,884 34,884
Unrealized gain on securities, available for sale,
net................................................... 71 71
Retained earnings..................................... 9,727 9,727
----------- -----------
Total shareholders' equity......................... $ 44,682 $ 44,682
Total capitalization.................................. $ 47,682 $67,682
</TABLE>
- --------
(1) The subsidiary trust is GBB Capital, which will hold the Junior
Subordinated Debentures as its sole asset. The Trust Preferred Securities
are issued by GBB Capital. The sole assets of GBB Capital consist of the
Junior Subordinated Debentures issued by Greater Bay to GBB Capital. The
Junior Subordinated Debentures will bear interest at the rate of % per
annum and will mature on , 2027 which date may be shortened to a date
not earlier than , 2002 if certain conditions are met. The Junior
Subordinated Debentures are redeemable prior to maturity at the option of
Greater Bay, subject to any required prior approval of the Federal
Reserve, (i) on or after , 2002, in whole at any time or in part from
time to time, or (ii) at any time, in whole (but not in part), upon the
occurrence and continuation of a Tax Event, an Investment Company Event or
a Capital Treatment Event (each as defined herein). See "Description of
Junior Subordinated Debentures--Redemption." Greater Bay owns all of the
Common Securities of GBB Capital.
REGULATORY CAPITAL RATIOS
The following sets forth the consolidated capital ratios of the Company at
December 31, 1996 and as adjusted to give effect to the issuance of the Trust
Preferred Securities by GBB Capital offered hereby.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------
ACTUAL AS ADJUSTED(1)
------ --------------
<S> <C> <C>
Tier 1 risk-based capital............................. 8.75% 11.23%
Total risk-based capital.............................. 10.54% 13.91%
Leverage ratio........................................ 7.27% 9.39%
</TABLE>
- --------
(1) Assumes proceeds are invested in 100% risk weighted assets.
20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data with respect to the
Company's consolidated financial position as of December 31, 1996 and 1995,
and its results of operations for the fiscal years ended December 31, 1996,
1995 and 1994 have been derived from the audited consolidated financial
statements, and notes thereto, of the Company appearing elsewhere in this
Prospectus. This information should be read in conjunction with such
consolidated financial statements and the notes thereto. The selected
consolidated financial data with respect to the Company's consolidated
financial position as of December 31, 1994, 1993 and 1992 and its results of
operations for the years ended December 31, 1993, and 1992 have been derived
from the audited consolidated financial statements of the Company, which are
not presented herein.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Interest income......... $ 45,037 $ 37,233 $ 27,801 $ 23,857 $ 22,736
Interest expense........ 16,213 13,892 8,512 6,497 7,506
--------- --------- --------- --------- ---------
Net interest income..... 28,824 23,341 19,289 17,360 15,230
Provision for loan
losses................. 2,036 956 1,823 1,945 1,132
--------- --------- --------- --------- ---------
Net interest income
after provision for
loan losses............ 26,788 22,385 17,466 15,415 14,098
Other income............ 3,530 2,306 3,295 3,578 2,127
Other expense........... 23,888 19,686 16,231 15,077 11,255
--------- --------- --------- --------- ---------
Income before income
taxes.................. 6,430 5,005 4,530 3,833 5,028
Provision for income
taxes.................. 2,927 1,971 1,966 1,473 1,825
--------- --------- --------- --------- ---------
Net income.............. $ 3,503 $ 3,034 $ 2,564 $ 2,443 $ 3,145
========= ========= ========= ========= =========
Net income per share.... $ 1.04 $ 0.96 $ 0.85 $ 0.84 $ 1.12
Average common shares
outstanding ........... 3,359,700 3,145,550 3,001,211 2,925,284 2,801,963
OPERATING RATIOS AND
OTHER DATA:
Return on average
assets(1).............. 0.65% 0.70 % 0.68 % 0.70 % 1.08 %
Return on average common
shareholders'
equity(1).............. 8.12% 7.98 % 7.31 % 7.56 % 10.50 %
Net interest margin..... 5.85% 5.83 % 5.62 % 5.61 % 5.54 %
Net (charge-offs)
recoveries to average
loans.................. 0.02% (0.35)% (0.49)% (0.61)% (0.31)%
Ratio of earnings to
fixed charges(2).......
Excluding interest on
deposits.............. 14.37x 6.93x 12.86x 392.6x 2,486x
Including interest on
deposits.............. 1.40x 1.36x 1.53x 1.60x 1.66x
FINANCIAL CONDITION DATA
(AT PERIOD END):
Assets.................. $ 622,044 $ 477,834 $ 401,614 $ 358,576 $ 325,168
Loans, net.............. 441,560 284,579 242,750 231,857 226,334
Investment
securities(3).......... 105,520 116,869 93,169 74,398 45,414
Deposits................ 559,283 431,789 345,294 323,300 292,110
Long-term debt.......... 3,000 3,000 -- -- --
Common shareholders'
equity................. 44,682 40,112 36,040 34,222 31,619
Book value per common
share.................. 13.80 13.17 12.90 13.17 13.07
FINANCIAL CONDITION
RATIOS:
Nonperforming assets to
total loans and OREO... 0.74% 1.17 % 2.23 % 1.59 % 2.01 %
Allowance for loan
losses to total loans.. 1.62% 1.52 % 1.79 % 1.58 % 1.37 %
Allowance for loan
losses to non-
performing loans....... 224.02% 131.59 % 80.24 % 98.84 % 66.93 %
REGULATORY CAPITAL
RATIOS:
Tier 1 capital.......... 8.75% 11.38 % 12.59 % 13.05 % 11.60 %
Total capital........... 10.54% 13.43 % 13.82 % 14.45 % 12.80 %
Leverage ratio.......... 7.27% 8.69 % 9.34 % 9.69 % 9.43 %
</TABLE>
- --------
(1) After excluding merger and other related costs of $2.8 million in 1996,
litigation settlement, closing of the mortgage banking unit and expenses
related to terminated merger discussions of $2.1 million in 1995 and
merger and other related costs of $608,000 in 1994 the ROA would have been
1.02%, 0.99% and 0.78% in 1996, 1995 and 1994, respectively, and the ROE
would have been 12.86%, 11.35% and 8.35% in 1996, 1995 and 1994,
respectively.
(2) For purposes of computing the ratio of earnings to fixed charges, earnings
represent income before income taxes, extraordinary items and fixed
charges. Fixed charges represent interest expense.
(3) Includes available-for-sale securities and held-to-maturity securities.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Greater Bay Bancorp ("Greater Bay," on a parent-only basis, and the
"Company," on a consolidated basis) was formed as the result of the Merger
between Cupertino, the holding company for CNB, and Mid-Peninsula, the holding
company for MPB. The Merger, which has been accounted for as a pooling of
interests, was consummated in late November 1996. All of the financial
information for the Company for the periods prior to the Merger have been
restated to reflect the pooling of interests as if it occurred at the
beginning of the earliest reporting period presented.
The following discussion and analysis is intended to provide greater details
of the results of operations and financial condition of the Company. The
following discussion should be read in conjunction with the information under
"Selected Consolidated Financial Data" and the Company's consolidated
financial statements and notes thereto and other financial data included
elsewhere in this Prospectus. Certain statements under this caption constitute
"forward-looking statements" under the Reform Act which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in such forward-looking statements. Factors that might cause
such a difference include but are not limited to economic conditions,
competition in the geographic and business areas in which the Company conducts
its operations, fluctuations in interest rates, credit quality and government
regulation. For additional information concerning these and other factors, see
"Risk Factors."
RESULTS OF OPERATIONS
The Company reported net income of $3.5 million in 1996, a 15% increase over
1995 net income of $3.0 million. The net income in 1995 was an 18.3% increase
over 1994 net income of $2.6 million. Net income per share was $1.04 in 1996,
compared with $0.96 in 1995 and $0.85 in 1994. The return on average assets
and return on average shareholders' equity were 0.65% and 8.12% in 1996,
compared with 0.70% and 7.98% in 1995 and 0.68% and 7.31% in 1994,
respectively.
The increase in 1996 net income was the result of significant loan and
deposit growth, which resulted in increased net interest income, and increases
in trust fees, depositors' service fees and other fee income. Operating
expense increases required to service and support the Company's growth
partially offset the increase in revenues. The 1996 operating results included
$2.8 million ($2.0 million net of tax) in merger and other related charges.
Excluding these charges, the Company's net income, net income per share,
return on average assets and return on average shareholders' equity would have
been $5.5 million, $1.63, 1.02% and 12.86%, respectively.
The increase in net income in 1995 over 1994 was due primarily to increased
growth in interest-earning assets, which was partially offset by the growth in
operating expenses. The operating results in 1995 included $2.1 million ($1.3
million net of taxes) in charges related to the settlement of litigation, the
closing of CNB's mortgage banking business unit and expenses related to
terminated merger discussions. Excluding these charges, the Company's net
income, net income per share, return on average assets and return on average
shareholders' equity would have been $4.3 million, $1.37, 1.00% and 11.39%,
respectively.
NET INTEREST INCOME
Net interest income increased 23.8% to $29.2 million in 1996 from $23.6
million in 1995 primarily due to the $95.5 million, or 23.4%, increase in
average interest-earning assets coupled with an 8 basis point increase in the
Company's interest rate spread. Net interest income increased 21.2% in 1995
from $19.5 million in 1994 primarily due to the combined effects of the $58.0
million, or 16.8%, increase in average interest-earning assets and the 2 basis
point increase in the Company's interest rate spread.
22
<PAGE>
The following table presents, for the years indicated, condensed average
balance sheet information for the Company, together with interest income and
yields earned on average interest-earning assets and interest expense and
rates paid on average interest-bearing liabilities. Average balances are
averaged daily balances.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1996 1995 1994
--------------------------- --------------------------- ---------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE AVERAGE AVERAGE YIELD/
BALANCE(1) INTEREST RATE BALANCE(1) INTEREST RATE BALANCE(1) INTEREST RATE
---------- -------- ------- ---------- -------- ------- ---------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans(2)............... $350,679 $36,278 10.35% $260,635 $28,397 10.90% $230,126 $22,112 9.61%
Investment securities,
short term investment
and cash
equivalents(3)........ 148,118 9,115 6.15% 143,665 9,070 6.31% 116,143 5,852 5.04%
-------- ------- -------- ------- -------- -------
Total interest-
earning assets(3)... 498,797 45,393 9.10% 404,300 37,467 9.27% 346,269 27,964 8.08%
Noninterest-earning 40,013 30,448 30,532
assets................. -------- ------- -------- ------- -------- -------
Total assets......... $538,810 $45,393 $434,748 $37,467 $376,801 $27,964
======== ======= ======== ======= ======== =======
INTEREST-BEARING
LIABILITIES:
Deposits:
NOW and MMDA........... $246,183 $ 8,656 3.52% $204,521 $ 7,868 3.85% $173,619 $ 4,945 2.85%
Savings deposits....... 38,429 1,714 4.46% 9,541 539 5.65% 9,599 466 4.85%
Time deposits.......... 99,635 5,362 5.38% 89,539 4,641 5.18% 73,793 2,719 3.68%
-------- ------- -------- ------- -------- -------
Total deposits....... 384,247 15,732 4.09% 303,601 13,048 4.30% 257,011 8,130 3.16%
Borrowings............. 8,191 481 5.87% 13,334 844 6.33% 7,788 382 4.90%
-------- ------- -------- ------- -------- -------
Total interest-
bearing liabilities. 392,438 16,213 4.13% 316,935 13,892 4.38% 264,799 8,512 3.21%
-------- ------- -------- ------- -------- -------
Noninterest-bearing
deposits............... 102,689 77,727 75,244
Other noninterest-
bearing liabilities.... 883 2,038 1,684
Shareholders' equity.... 42,800 38,048 35,074
-------- -------- ------- --------
Total liabilities and
shareholders'
equity.............. $538,810 $16,213 $434,748 $13,892 $376,801 $ 8,512
======== ======= ======== ======= ======== =======
Net interest income..... $29,180 $23,575 $19,452
Interest rate spread.... 4.97% 4.89% 4.87%
Contribution of interest
free funds............. 0.88% 0.94% 0.75%
Net yield on interest-
earnings assets(4)..... 5.85% 5.83% 5.62%
</TABLE>
- -------
(1) Non-accrual loans are included in the average balance; however, only
collected interest is included in the interest column.
(2) Loan fees totaling $2.4 million, $1.5 million and $1.4 million are
included in loan interest income for the years 1996, 1995 and 1994,
respectively.
(3) Interest income includes $356,000, $234,000 and $163,000 in 1996, 1995 and
1994, respectively, to adjust to a fully taxable equivalent basis using
the federal statutory rate of 34%.
(4) Net yield on interest-earning assets during the period equals (a) the
difference between interest income on interest-earning assets and the
interest expense on interest-bearing liabilities, divided by (b) average
interest-earning assets for the period.
23
<PAGE>
The most significant impact on the Company's net interest income between
periods is derived from the interaction of changes in the volume of and rates
earned or paid on interest-earning assets and interest-bearing liabilities.
The volume of earning dollars in loans and investments, compared to the volume
of interest-bearing liabilities represented by deposits and borrowings,
combined with the spread, produces the changes in the net interest income
between periods. The table below sets forth, for the periods indicated, a
summary of the changes in interest income and interest expense resulting from
changes in average asset and liability balances (volume) and changes in
average interest rates (rate). The change in interest attributable to
simultaneous volume and rate changes have been reflected as volume variances.
Non-accrual loans are included in average loans.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1996 1995
COMPARED WITH DECEMBER COMPARED WITH DECEMBER
31, 1995 FAVORABLE 31, 1994 FAVORABLE
(UNFAVORABLE) (UNFAVORABLE)
------------------------- -------------------------
VOLUME RATE NET VOLUME RATE NET
------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNED ON INTER-
EST-EARNING ASSETS:
Interest income on loans. $ 9,811 $(1,930) $ 7,881 $ 2,932 $ 3,353 $ 6,285
Interest income on in-
vestment securities,
short-term investments
and cash equivalents
(1)..................... 281 (236) 45 1,387 1,831 3,218
------- ------- ------- ------- ------- -------
Total interest income.. 10,092 (2,166) 7,926 4,318 5,185 9,503
------- ------- ------- ------- ------- -------
INTEREST EXPENSE ON DE-
POSITS:
NOW and MMDA........... (1,603) 815 (788) (880) (2,043) (2,923)
Savings deposits....... (1,632) 457 (1,175) 3 (76) (73)
Time deposits.......... (523) (198) (721) (580) (1,342) (1,922)
------- ------- ------- ------- ------- -------
Total interest expense on
deposits................ (3,758) 1,074 (2,684) (1,457) (3,461) (4,918)
Interest expense on
borrowings.............. 326 37 363 (272) (190) (462)
------- ------- ------- ------- ------- -------
Total interest expense. (3,432) 1,111 (2,321) (1,729) (3,651) (5,380)
------- ------- ------- ------- ------- -------
Increase (decrease) in
net interest income..... $ 6,660 $(1,055) $ 5,605 $ 2,590 $ 1,533 $ 4,123
======= ======= ======= ======= ======= =======
</TABLE>
- --------
(1) Interest income includes $356,000, $234,000 and $163,000 for 1996, 1995
and 1994, respectively, to adjust to a fully taxable equivalent basis
using the federal statutory rate of 34%.
Interest income in 1996 increased 21.2% to $45.4 million from $37.5 million
in 1995. This was primarily due to the significant increase in loans, the
Company's highest yielding asset. Loan volume increases were the result of an
improving economy in the Company's market areas, as well as the addition of
experienced relationship managers and greater business development efforts by
the Company's relationship managers. This increase was partially offset by a
decline in the yield earned on average interest-earning assets. While average
interest-earning assets increased $94.5, or 23.4% to $498.8 million in 1996,
compared to $404.3 million in 1995, average loans increased $90.0 million, or
34.5%, to $350.7 million, or 70.3% of average interest-earning assets, in 1996
from $260.6 million, or 64.4% of average interest-earning assets, in 1995.
Conversely, other interest-earning assets, consisting of investment
securities, federal funds sold and other short-term investments, increased
only 3.1% to $148.1 million, or 29.7% of average interest-earning assets, in
1996 from $143.7 million, or 35.6% of average interest-earning assets, in
1995.
The average yield on interest-earning assets declined 17 basis points to
9.10% in 1996 from 9.27% in 1995 primarily due to the decline in yields on
loans. Average yields on loans declined 55 basis points to 10.35% in 1996 from
10.90% in 1995 primarily due to competition. The average yield on other
interest-earning assets declined 16 basis points to 6.15% in 1996, compared to
6.31% in 1995.
Interest expense in 1996 increased 16.7% to $16.2 million from $13.9 million
in 1995. This increase was due to greater volumes of interest-bearing
liabilities which was partially offset by lower interest rates paid on
interest-bearing liabilities. Average interest-bearing liabilities increased
23.8% to $392.4 million in 1996 from
24
<PAGE>
$316.9 million in 1995 due to the efforts of the Banks' relationship managers
and deposits derived from the activities of the Greater Bay Trust Company and
the Venture Lending Group. During 1996, the average rate paid on interest-
bearing liabilities declined 25 basis points to 4.13% from 4.38% in 1995 due
to the repricing of deposit accounts.
During 1996, average non-interest bearing deposits increased to $102.7
million from $77.7 million in 1995. As a result of such increase, non-interest
bearing deposits comprised 25.2% of total deposits at year end 1996, compared
to 22.2% at year end 1995.
As a result of the foregoing, the Company's interest rate spread increased
to 4.97% in 1996 from 4.89% in 1995 and the net yield on interest-earning
assets increased slightly in 1996 to 5.85% from 5.83% in 1995.
Interest income increased 34.0% to $37.7 million in 1995 from $28.0 million
in 1994, as a result of the combined effects of increases in average interest-
earning assets and the yields earned on such assets. Average interest-earning
assets increased 16.8% to $404.3 million in 1995 from $346.3 million in 1994
as a result of almost equivalent increases in both loans and other interest-
earning assets. The average yield on the higher volume of average interest-
earning assets increased 119 basis points to 9.27% in 1995 from 8.08% in 1994,
primarily as a result of increases in market rates of interest.
Interest expense in 1995 increased 63.2% to $13.9 million from $8.5 million
in 1994, primarily as a result of the combined effect of increases in rates
paid on interest-bearing liabilities and the volume of interest-bearing
liabilities. As a result of increases in market rates of interest, the average
rate paid on average interest-bearing liabilities increased 117 basis points
to 4.38% in 1995 from 3.21% in 1994. Corresponding to the growth in average
interest-earning assets, average interest-bearing liabilities increased 19.7%
to $316.9 million in 1995 from $264.8 million in 1994.
As a result of the foregoing, the Company's interest rate spread increased
to 4.89% in 1995 from 4.87% in 1994 and the net yield on interest-earning
assets increased to 5.83% in 1995 from 5.62% in 1994.
The Company has noninterest-bearing liabilities on which it pays for certain
client service expenses. These expenses include messenger services, check
supplies and other related items and are included in operating expenses. If
these costs had been included in interest expense, the impact of these
expenses on the Company's net yield on interest-earning assets would have been
as follows for each of the years presented.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1996 1995 1994
-------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Average noninterest-bearing demand deposits. $102,689 $77,727 $75,244
Client services expense..................... 411 337 376
Client services expense annualized.......... 0.40 % 0.43 % 0.50 %
IMPACT ON NET YIELD ON INTEREST-EARNING
ASSETS:
Net yield on interest-earning assets........ 5.85 % 5.83 % 5.62 %
Impact of client services expense........... (0.08)% (0.08)% (0.11)%
-------- ------- -------
Adjusted net yield on interest-earning as-
sets....................................... 5.77 % 5.75 % 5.51 %
======== ======= =======
</TABLE>
- --------
(1) Noninterest-bearing liabilities are included in cost of funds calculations
to determine adjusted net yield on interest-earning assets.
The impact on the net yield on interest-earning assets is caused by off-
setting net interest income by the cost of client services expenses, which
reduces the yield on interest-earning assets. The cost for client services
expense is trending down and reflects the Company's efforts to manage its
client services expense.
25
<PAGE>
PROVISION FOR LOAN LOSSES
The provision for loan losses creates an allowance for future loan losses.
The loan loss provision for each year is dependent on many factors, including
loan growth, net charge-offs, changes in the composition of the loan
portfolio, delinquencies, management's assessment of the quality of the loan
portfolio, the value of the underlying collateral on problem loans and the
general economic conditions in the Company's market area. The Company performs
a monthly assessment of the risk inherent in its loan portfolio, as well as a
detailed review of each asset determined to have identified weaknesses. Based
on this analysis, which includes reviewing historical loss trends, current
economic conditions, industry concentrations and specific reviews of assets
classified with identified weaknesses, the Company makes provisions for
potential loan losses. Specific allocations are made for loans where the
probability of a loss can be defined and reasonably determined, while the
balance of the provisions for loan losses are based on historical data,
delinquency trends, economic conditions in the Company's market area and
industry averages. Annual fluctuation in the provision for loan losses result
from management's assessment of the adequacy of the allowance for loan losses,
and ultimate loan losses may vary from current estimates.
The provision for loan losses in 1996 was $2.0 million, compared to $0.9
million in 1995 and $1.8 million in 1994. In addition, in connection with the
Merger, the Company made an $800,000 additional provision for loan losses to
conform the Banks' reserve allocation methodologies, which is included in
operating expenses. The increased provision for loan losses during 1996
reflects the $160.5 million increase in gross loans outstanding at December
31, 1996 from year-end 1995. Notwithstanding the substantial increase in loans
outstanding, non-performing loans, comprised of non-accrual loans and accruing
loans past due 90 days or more, declined to $3.1 million or 0.69% of loans
outstanding at December 31, 1996 from $3.3 million or 1.15% loans outstanding
at December 31, 1995. The $1.8 million provision for loan losses during 1994
reflected the higher level of non-performing loans experienced by the Company
during 1994. At December 31, 1994, non-performing loans were $5.0 million, or
2.07% of loans outstanding at such date.
For further information on non-performing and classified loans and the
allowance for loan losses, see "--Financial Condition--Non-Performing and
Classified Assets" herein.
OTHER INCOME
Total other income increased to $3.5 million in 1996, compared to $2.3
million in 1995 and $3.3 million in 1994. The following table sets forth
information by category of other income in the years indicated.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
1996 1995 1994
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Trust fees........................................... $1,426 $ 710 $ 593
Depositors' service fees............................. 1,045 671 699
Gain on sale of SBA loans............................ 519 366 685
Gain on sale of mortgage loans....................... -- 137 993
Loan documentation fees, net......................... (42) 103 276
Investment gains/(losses)............................ (263) (113) (266)
Other................................................ 845 432 315
------ ------ ------
Total.............................................. $3,530 $2,306 $3,295
====== ====== ======
</TABLE>
The increase in other income in 1996 is primarily the result of a $716,000
increase in trust fees and a $374,000 increase in depositors' service fees.
The trust fee increase is due to significant growth in assets under management
in Greater Bay Trust Company. Trust assets increased to $418.0 million at
year-end 1996, compared to $270.0 million at December 31, 1995 and $157.0
million at December 31, 1994. Depositors' service fees increased due to growth
in deposits.
The decrease in other income in 1995 from 1994 is due primarily to the
decline in the activities of the mortgage banking business unit. The unit
generated $137,000 in gains on the sale of mortgage loans in 1995, compared to
$993,000 in 1994. In early 1995, the Company closed the mortgage banking
business unit due to the sharp rise in interest rates during 1994 and the
impact the rising rates had on originations.
26
<PAGE>
The fluctuation in gain on sale of SBA loans is due primarily to the mix of
SBA loans originated for sale combined with the effect of market pricing on
loans sold. SBA loans with longer maturities command a higher premium than
loans with shorter maturity periods. In 1996 compared to 1995, the Company
originated and sold fewer long-term real estate loans and the pricing on loans
sold declined slightly. During 1995 compared to 1994, the Company generated
more long-term commercial real estate loans that were sold in the secondary
market, thus causing the increase in gain on sale of SBA loans. In addition,
lower market interest rates in 1994 provided higher premiums on SBA loan
sales.
OPERATING EXPENSES
Operating expenses totaled $23.9 million for 1996, compared to $19.7 million
for 1995 and $16.2 million for 1994. The ratio of operating expenses to
average assets was 4.43% in 1996, 4.53% in 1995, and 4.31% in 1994. Operating
expenses in 1996 and 1994 included $2.8 million and $608,000, respectively, in
merger and other related costs, while 1995 operating expenses included $2.2
million related to the settlement of litigation, the closing of CNB's mortgage
banking unit and expenses related to terminated merger discussions. Excluding
these costs, operating expenses to average assets would have been 3.92% in
1996, 4.04% in 1995 and 4.15% in 1994.
The efficiency ratio is computed by dividing total operating expenses by net
interest income and other income. An increase in the efficiency ratio
indicates that more resources are being utilized to generate the same (or
greater) volume of income while a decrease would indicate a more efficient
allocation of resources. The Company's efficiency ratio for 1996 was 73.83%,
compared to 76.76% in 1995 and 71.87% in 1994. Excluding nonrecurring costs,
the Company's efficiency ratios were 65.21%, 68.43% and 69.18% in 1996, 1995
and 1994, respectively. The decline in the Company's efficiency ratio was due
to the investment in infrastructure in 1994 and early 1995 which allowed the
Company to grow its revenue base in 1995 and 1996 without significant
increases in operating expenses.
The following table represents the major components of operating expenses
for the years indicated.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-------------------------
1996 1995 1994
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Compensation & benefits............................. $11,773 $10,146 $ 8,505
Occupancy & equipment............................... 3,401 2,679 2,226
Merger/Restructuring costs.......................... 2,791 -- 608
Professional services and legal costs............... 1,270 2,968 1,176
FDIC insurance and regulatory assessments........... 102 551 858
Other real estate, net.............................. 35 62 112
Other............................................... 4,105 2,943 2,370
------- ------- -------
Total operating expenses before client services ex-
penses............................................. $23,477 $19,349 $15,855
Client services expenses............................ 411 337 376
------- ------- -------
Total operating expenses.......................... $23,888 $19,686 $16,231
======= ======= =======
Nonrecurring costs(1)............................... 2,791 2,135 608
------- ------- -------
Total operating expenses excluding nonrecurring
costs(1)......................................... $21,097 $17,551 $15,623
======= ======= =======
Efficiency ratio before client services............. 72.56% 75.44% 70.20%
Efficiency ratio.................................... 73.83% 76.76% 71.87%
Efficiency ratio, excluding nonrecurring costs(1)... 65.21% 68.43% 69.18%
Total operating expenses to average assets.......... 4.43% 4.53% 4.31%
Total operating expenses to average assets, exclud-
ing nonrecurring costs(1).......................... 3.92% 4.04% 4.15%
</TABLE>
- --------
(1) Nonrecurring costs include merger and related costs for 1996 and 1994 and
costs related to the settlement of litigation, the closing of CNB's
mortgage banking operations and terminated merger discussions in 1995.
27
<PAGE>
Compensation and benefits expenses increased in 1996 to $11.8 million,
compared to $10.1 million in 1995 and $8.5 million in 1994, primarily due to
the addition of personnel at Greater Bay Trust Company and an increase in the
number of relationship managers at the Banks.
The increase in occupancy and equipment expense in 1996 was primarily due to
the opening of CNB's new Emerson office and the Greater Bay Trust Company
office in downtown Palo Alto, California. The increase in occupancy and
equipment expense in 1995 was due to the installation of a larger data
processing system, which included a local and wide area network to connect all
of the CNB office locations.
Expenses for professional services and legal costs, including consulting and
audit services, decreased to $1.3 million in 1996, compared to $3.0 million in
1995 and $1.2 million in 1994. The decrease in 1996 is primarily attributable
to a one-time charge of $1.8 million in 1995 for a legal settlement related to
trust department activities.
Client services expenses increased to $411,000 in 1996, compared to $337,000
in 1995 and $376,000 in 1994 as a result of an increase in the volume of
noninterest-bearing demand deposits from commercial customers for which the
Company provides services. These expenses include messenger services, check
supplies and other related items. For information concerning the impact of
these expenses on net yield on interest-earning assets, see "--Net Interest
Income" herein.
Federal Deposit Insurance Corporation ("FDIC") deposit insurance and Office
of the Comptroller of the Currency regulatory assessments decreased to
$102,000 in 1996, compared to $551,000 in 1995, and $858,000 in 1994. The
decline in FDIC insurance expense is a result of the lowering of deposit
insurance premiums by the FDIC when the Bank Insurance Fund ("BIF") was fully
funded as of March 1995.
The increase in other operating expense in 1996 was related to the rapid
growth in the Company's loan and deposit portfolios and trust assets. The
principal expense increases were $570,000 in marketing expenses, $80,000 in
trust data processing charges and $236,000 in supplies and postage expenses.
The increase in 1995 over 1994 was also primarily in marketing, trust and
supplies and postage expenses.
INCOME TAXES
The Company's income tax rate for 1996 was 45.5%, compared to 39.4% in 1995
and 36.41% in 1994. The effective rate in 1996 was higher than the statutory
rate due to the impact of nondeductible merger expenses.
FINANCIAL CONDITION
Total assets increased 30.2% to $622.0 million at December 31, 1996,
compared to $477.8 million at December 31, 1995. Total assets increased 19.0%
in 1995 from $401.6 million at December 31, 1994. The increases in 1996 and
1995 were primarily due to increases in the Company's loan portfolio funded by
growth in deposits.
LOANS
Total gross loans increased 55.3% to $450.8 million at December 31, 1996,
compared to $290.3 million at December 31, 1995. Total gross loans increased
19.5% in 1995 from $243.0 million at year-end 1994. The increases in loan
volumes in 1996 and 1995 were due to an improving economy in the Company's
market areas coupled with the business development efforts by the Company's
relationship managers.
The Company's loan portfolio is concentrated in commercial (primarily
manufacturing, service and technology) and real estate lending, with the
balance in consumer loans. While no specific industry concentration is
considered significant, the Company's lending operations are located in the
Company's market areas that are dependent on the technology and real estate
industries and their supporting companies. Thus, the Company's borrowers could
be adversely impacted by a downturn in these sectors of the economy which
could reduce the demand for loans and adversely impact the borrowers'
abilities to repay their loans.
28
<PAGE>
The following table presents the composition of the Company's loan portfolio
at the dates indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
--------------- --------------- --------------- --------------- ---------------
AMOUNT % AMOUNT % AMOUNT % AMOUNT % AMOUNT %
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial.............. $257,042 58.2 % $181,617 63.8 % $158,223 65.2 % $145,673 62.8 % $130,561 57.7 %
Real estate construction
& land.................. 78,278 17.7 32,672 11.5 22,725 9.4 23,742 10.2 33,315 14.7
Commercial real estate
term.................... 72,802 16.5 47,322 16.6 31,666 13.0 12,075 5.2 11,225 5.0
Consumer & other........ 42,702 9.7 28,666 10.1 30,361 12.5 47,768 20.6 50,510 22.3
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total loans, gross..... 450,824 102.1 290,277 102.0 242,975 100.1 229,258 98.9 225,611 99.7
Deferred fees and (1,952) (0.4) (1,299) (0.5) (1,264) (0.5) (1,369) (0.6) (1,019) (0.5)
discounts............... -------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total loans, net of $448,872 101.7 % $288,978 101.5 % $241,711 99.6 % $227,889 98.3 % $224,592 99.2 %
deferred fees......... ======== ===== ======== ===== ======== ===== ======== ===== ======== =====
Allowance for loan (7,312) (1.7) (4,399) (1.5) (4,344) (1.8) (3,657) (1.6) (3,099) (1.4)
losses.................. -------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Net loans.............. $441,560 100.0 % $284,579 100.0 % $237,367 97.8 % $224,232 96.7 % $221,493 97.9 %
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
Loans held for sale..... -- -- -- -- 5,383 2.2 7,625 3.3 4,841 2.1
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total loans............ $441,560 100.0 % $284,579 100.0 % $242,750 100.0 % $231,857 100.0 % $226,334 100.0 %
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
The following table presents the maturity distribution of the Company's
commercial, real estate construction and land and commercial real estate term
portfolios and the sensitivity of such loans to changes and interest rates at
December 31, 1996.
<TABLE>
<CAPTION>
COMMERCIAL
REAL ESTATE REAL
CONSTRUCTION ESTATE
COMMERCIAL & LAND TERM
---------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Loan due in:
One year or less:
Floating rate........................... $186,260 $62,484 $23,257
Fixed rate.............................. 14,918 1,678 2,226
One to five years:
Floating rate........................... 36,552 3,904 10,813
Fixed rate.............................. 5,701 4,534 6,335
After five years:
Floating rate........................... 21 -- --
Fixed rate.............................. 13,590 5,678 30,171
-------- ------- -------
Total $257,042 $78,278 $72,802
======== ======= =======
</TABLE>
For additional information concerning the Company's loan portfolio and its
underwriting and credit administration policies and procedures, see
"Business--Lending Activities."
NON-PERFORMING AND CLASSIFIED ASSETS
Management generally places loans on non-accrual when they become 90 days
past due, unless they are well secured and in the process of collection. When
a loan is placed on non-accrual status, any interest previously accrued but
not collected is reversed from income. Loans are charged off when management
determines that collection has become unlikely. Restructured loans are those
where the Banks have granted a concession on the interest paid or original
repayment terms due to financial difficulties of the borrower. Other real
estate owned consists of real property acquired through foreclosure on the
related collateral underlying defaulted loans.
29
<PAGE>
The following table sets forth information regarding non-performing assets
at the dates indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Non-performing loans
Non-accrual loans.................... $1,875 $2,513 $3,668 $1,179 $ 913
Accruing loans past due 90 days or
more................................ 1,237 830 1,371 1,903 --
Restructured loans................... -- -- -- -- --
------ ------ ------ ------ ------
Total non-performing loans......... 3,112 3,343 5,039 3,082 913
Other real estate owned................ 152 -- 375 618 3,717
------ ------ ------ ------ ------
Total non-performing assets........ $3,264 $3,343 $5,414 $3,700 $4,630
====== ====== ====== ====== ======
Ratio of non-performing assets to total
loans and other real estate owned..... 0.74% 1.17% 2.23% 1.59% 2.01%
</TABLE>
At December 31, 1996, the Company had $1.9 million in non-accrual loans.
Non-accrual loans included 11 loans with aggregate principal balances ranging
from $3,000 to $962,000. Interest income foregone on non-performing loans
outstanding at year end totaled $215,000, $245,000 and $275,000 for the years
ended December 31, 1996, 1995 and 1994, respectively.
The Company records other real estate at the lower of carrying value or fair
value less estimated costs to sell. Estimated losses that result from the
ongoing periodic valuation of these properties are charged to earnings with a
provision for losses on foreclosed property in the period in which they are
identified. At December 31, 1996, other real estate owned consisted of one
property acquired through foreclosure with a carrying value of $152,000.
The policy of the Company is to review each loan in the portfolio to
identify problem credits. There are three classifications for problem loans:
"substandard," "doubtful" and "loss." Substandard loans have one or more
defined weaknesses and are characterized by the distinct possibility that the
Banks will sustain some loss if the deficiencies are not corrected. Doubtful
loans have the weaknesses of substandard loans with the additional
characteristic that the weaknesses make collection or liquidation in full on
the basis of currently existing facts, conditions and values questionable, and
there is a high possibility of loss. A loan classified loss is considered
uncollectible and its continuance as an asset is not warranted.
The following table sets forth classified loans at the dates indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995 1994
------ ------ -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Substandard............................................ $7,759 $7,463 $12,676
Doubtful............................................... 1,664 601 1,781
Loss................................................... -- -- --
------ ------ -------
Total................................................ $9,423 $8,064 $14,457
====== ====== =======
Classified loans to total loans........................ 2.13% 2.83% 5.96%
Allowance for loan losses to classified loans.......... 77.60% 54.55% 30.05%
</TABLE>
With the exception of these classified loans, management is not aware of any
loans as of December 31, 1996 where the known credit problems of the borrower
would cause management to have serious doubts as to the ability of such
borrowers to comply with their present loan repayment terms and which would
result in such loans being included in the non-performing asset table above at
some future date. Management cannot, however, predict the extent to which
economic conditions in the Company's market areas may worsen or the full
impact such an environment may have on the Company's loan portfolio.
Accordingly, there can be no assurance that other loans will not become 90
days or more past due, be placed on non-accrual or become restructured loans,
in substance foreclosures or other real estate owned in the future.
30
<PAGE>
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a provision for loan
losses based on management's evaluation of risk inherent in its loan portfolio
and economic conditions in the Company's market areas. See "--Provision for
Loan Losses" herein. The allowance is increased by provisions charged against
earnings and reduced by net loan charge-offs. Loans are charged off when they
are deemed to be uncollectible; recoveries are generally recorded only when
cash payments are received.
The following table sets forth information concerning the Company's
allowance for loan losses at the dates and for the years indicated.
<TABLE>
<CAPTION>
AT AND FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Average loans $350,679 $260,635 $230,126 $226,384 $207,978
outstanding:........... ======== ======== ======== ======== ========
Allowance for loan
losses:
Balance at beginning of
period................. $ 4,399 $ 4,344 $ 3,657 $ 3,099 $ 2,605
Charge-offs:
Commercial............ (119) (973) (798) (1,264) (539)
Real estate
construction & land.. (60) (7) (308) 0 (62)
Commercial real estate
term................. 0 0 0 (50) 0
Consumer & other...... (120) (101) (141) (159) (145)
-------- -------- -------- -------- --------
Total charge-offs... (299) (1,081) (1,247) (1,473) (746)
-------- -------- -------- -------- --------
Recoveries:
Commercial............ 343 178 57 28 9
Real estate
construction & land... 15 0 0 0 95
Commercial real estate
term.................. 0 0 48 10 0
Consumer & other...... 18 2 6 48 4
-------- -------- -------- -------- --------
Total recoveries.... 376 180 111 86 108
-------- -------- -------- -------- --------
Net (charge-offs)
recoveries............ 77 (901) (1,136) (1,387) (638)
Provision charged to
income.................. 2,836 956 1,823 1,945 1,132
-------- -------- -------- -------- --------
Balance at end of
period.................. $ 7,312 $ 4,399 $ 4,344 $ 3,657 $ 3,099
======== ======== ======== ======== ========
Net (charge-offs)
recoveries to average
loans outstanding
during the period...... 0.02 % (0.35)% (0.49)% (0.61)% (0.31)%
Allowance as a
percentage of average
loans outstanding...... 2.08 % 1.69 % 1.89 % 1.62 % 1.49 %
Allowance as a
percentage of non-
performing loans....... 224.02 % 131.59 % 80.24 % 98.84 % 66.93 %
</TABLE>
Management considers changes in the size and character of the loan
portfolio, changes in non-performing and past due loans, historical loan loss
experience, and the existing and prospective economic conditions when
determining the adequacy of the allowance for loan losses. Although management
believes that the allowance for loan losses is adequate to provide for both
potential losses and estimated inherent losses in the portfolio, future
provisions will be subject to continuing evaluations of the inherent risk in
the portfolio and if the economy declines or asset quality deteriorates,
additional provisions could be required.
31
<PAGE>
The following table provides a summary of the allocation of the allowance
for loan losses for specific loan categories at the dates indicated. The
allocations presented should not be interpreted as an indication that loans
charged to the allowance for loan losses will be incurred in these amounts or
proportions, or that the portion of the allowance allocated to each loan
category represents the total amount available for future losses that may
occur within these categories. The unallocated portion of the allowance for
loan losses and the total allowance is applicable to the entire loan
portfolio.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------------------
1996 1995 1994 1993 1992
--------------- --------------- --------------- --------------- ---------------
% OF % OF % OF % OF % OF
CATEGORY CATEGORY CATEGORY CATEGORY CATEGORY
TO GROSS TO TOTAL TO TOTAL TO TOTAL TO TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial.............. $3,134 57.02% $1,797 62.57% $2,835 63.71% $2,093 61.50% $1,668 56.65%
Real estate--
construction & land.... 1,045 17.36 223 11.26 224 9.15 349 10.02 344 14.46
Commercial real estate--
term................... 532 16.15 696 16.30 132 12.75 391 5.10 56 4.87
Consumer & other........ 383 9.47 466 9.87 543 12.22 270 20.17 459 21.92
Loans held for sale..... -- -- -- -- 14 2.17 27 3.21 23 2.10
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total allocated......... 5,094 3,182 3,748 3,130 2,550
Unallocated............. 2,218 1,217 596 252 217
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total.................. $7,312 100.00% $4,399 100.00% $4,344 100.00% $3,382 100.00% $2,767 100.00%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
INVESTMENT SECURITIES
The Company's investment portfolio is managed to meet the Company's
liquidity needs through proceeds from scheduled maturities and is utilized for
pledging requirements for deposits of state and political subdivisions and
securities sold under repurchase agreements. The portfolio is comprised of
U.S. Treasury securities, U.S. government agency securities, mortgage-backed
securities, obligations of states and political subdivisions and a modest
amount of equity securities including Federal Reserve Bank stock and Federal
Home Loan Bank stock. Federal funds sold are additional investments which are
not classified as investment securities. Investment securities classified as
available-for-sale are recorded at fair market value, while investment
securities classified as held-to-maturity are recorded at cost. Unrealized
gains or losses, net of the deferred tax effect, are reported as increases or
decreases in shareholders' equity for available-for-sale securities.
32
<PAGE>
The amortized cost and estimated market value of investment securities at
December 31, 1996 is summarized below:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Available-for sale securities:
U.S. Treasury obligations......... $ 19,841 $ 52 $ (6) $ 19,887
U.S. Agency obligations:
Mortgage-backed obligations..... 3,604 5 (53) 3,556
Fixed and variable rate notes... 10,568 34 (13) 10,589
Mutual funds...................... 2,000 -- (52) 1,948
Tax exempt securities............. 7,758 154 (11) 7,901
Corporate securities.............. 3,216 7 -- 3,223
-------- ---- ----- --------
Total securities available-
for-sale..................... 46,987 252 (135) 47,104
-------- ---- ----- --------
Held-to-maturity securities:
U.S. Treasury obligations......... 1,005 3 -- 1,008
U.S. Agency obligations:
Mortgage-backed obligations..... 7,086 87 (9) 7,164
Fixed and variable rate notes... 38,390 78 (100) 38,368
Other mortgage-backed obligations. 3,959 54 -- 4,013
Tax exempt securities............. 6,525 219 (3) 6,741
Federal Reserve Bank stock........ 673 -- -- 673
Federal Home Loan Bank stock...... 778 -- -- 778
-------- ---- ----- --------
Total securities held-to-
maturity..................... 58,416 441 (112) 58,745
-------- ---- ----- --------
Total investment securities... $105,403 $693 $(247) $105,849
======== ==== ===== ========
</TABLE>
The tax effected net unrealized gain on available-for-sale securities was
$71,000 for the year ended December 31, 1996.
33
<PAGE>
The following table shows amortized cost and estimated market value of the
Company's investment securities by year of maturity at December 31, 1996.
<TABLE>
<CAPTION>
1998 2002 2007
1997 THROUGH 2001 THROUGH 2007 AND THEREAFTER TOTAL
------- ------------ ------------ -------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
AVAILABLE-FOR-SALE
SECURITIES:
U.S. Treasury
obligations............ $15,003 $ 4,838 $ -- $ -- $ 19,841
U.S. Agency obligations:
Mortgage-backed
obligations(1)....... 599 3,005 -- -- 3,604
Fixed and variable
rate notes(2)........ 1,500 9,068 -- -- 10,568
Mutual funds(3)......... 2,000 -- -- -- 2,000
Tax exempt securities... 453 1,567 3,623 2,115 7,758
Corporate securities.... 1,178 2,038 -- -- 3,216
------- ------- ------- ------- --------
Total securities
available-for-sale. 20,733 20,516 3,623 2,115 46,987
Market value............ 20,708 20,524 3,672 2,200 47,104
HELD-TO-MATURITY
SECURITIES:
U.S. Treasury
obligations............ 503 502 -- -- 1,005
U.S. Agency obligations:
Mortgage-backed
obligations(1)....... -- 69 2,595 4,422 7,086
Fixed and variable
rate notes(2)........ 3,000 17,999 15,391 2,000 38,390
Other mortgage-backed
obligations(1)......... -- -- -- 3,959 3,959
Tax exempt securities... -- 1,040 256 5,229 6,525
Federal Reserve Bank
stock.................. -- -- -- 673 673
Federal Home Loan Bank
stock.................. -- -- -- 778 778
------- ------- ------- ------- --------
Total securities
held-to-maturity... 3,503 19,610 18,242 17,061 58,416
Market value............ 3,493 19,549 18,369 17,334 58,745
COMBINED INVESTMENT
SECURITIES PORTFOLIO:
Total investment
securities............. 24,236 40,126 21,865 19,176 105,403
Total market value...... 24,201 40,073 22,041 19,534 105,849
Weighted average yield-
total portfolio(4)..... 5.32% 6.19% 7.04% 6.77% 6.29%
</TABLE>
- --------
(1) Mortgage-backed securities are shown at contractual maturity; however, the
average life of these mortgage-backed securities may differ due to
principal prepayments.
(2) Certain U.S. Agency fixed and variable rate note obligations may be
called, without penalty, at the discretion of the issuer. This may cause
the actual maturities to differ significantly from the contractual
maturity dates.
(3) Mutual funds with no stated maturity total $2.0 million ($1.9 million
market value).
(4) Yields on tax exempt securities have been computed on a fully tax-
equivalent basis.
For additional information concerning the investment portfolio, see Note 3
of Notes to Consolidated Financial Statements.
DEPOSITS
The Company emphasizes developing total client relationships with its
customers in order to increase its core deposit base. Deposits reached $559.3
million at December 31, 1996, an increase of 29.5% compared to deposits of
$431.8 million at December 31, 1995. In 1995, deposits increased 25.05% from
$345.3 million at December 31, 1994.
34
<PAGE>
Total average interest-bearing deposits increased 21.0% to $384.2 million
for 1996, compared to an average of $303.6 million for 1995. In 1995, average
interest-bearing deposits increased 18.1% over average deposits of $257.0
million in 1994. The increase in deposits was due to the continued marketing
efforts directed at commercial business clients in the Company's market areas,
coupled with an increase in deposits related to the activities of the Greater
Bay Trust Company and the Venture Lending Group.
Noninterest-bearing deposits were $139.9 million at December 31, 1996,
compared to $96.1 million at December 31, 1995 and $81.0 million at December
31, 1994. Average noninterest-bearing deposits in 1996 were $102.7 million,
compared to $77.7 million in 1995 and $75.2 million in 1994. As its regional
offices expand, the Company anticipates this funding source to increase.
Money market and other interest-bearing demand accounts reached $419.3
million at year-end 1996, an increase of 24.9% from the prior year. Money
market and other interest-bearing demand deposits of $335.7 million at
December 31, 1995 were up 26.5% from $265.3 million at December 31, 1994.
Time certificates of deposit of more than $100,000, savings and other time
deposits totaled $68.2 million, or 12.2% of total deposits, at December 31,
1996, compared to $63.8 million, or 14.8% of total deposits, at December 31,
1995 and $54.5 million, or 15.7%, of total deposits at December 31, 1994.
The following table sets forth the maturing distribution of time
certificates of deposit of $100,000 or more at December 31, 1996.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
(IN THOUSANDS)
<S> <C>
Three months or less..................................... $54,233
Three to six months...................................... 9,198
Six to twelve months..................................... 4,252
Over twelve months....................................... 487
-------
Total.................................................. $68,170
=======
</TABLE>
As of December 31, 1996, the Company had $20.6 million in brokered deposits
outstanding.
LIQUIDITY AND CASH FLOW
The objective of liquidity management is to maintain each Bank's ability to
meet the day-to-day cash flow requirements of its clients who either wish to
withdraw funds or require funds to meet their credit needs. The Company must
manage its liquidity position to allow the Banks to meet the needs of their
clients, while maintaining an appropriate balance between assets and
liabilities to meet the return on investment requirements of its shareholders.
The Company monitors the sources and uses of funds on a daily basis to
maintain an acceptable liquidity position. In addition to liquidity from core
deposit growth and repayments and maturities of loans and investments, the
Banks utilize brokered deposit lines, sell securities under agreements to
repurchase and borrow overnight federal funds. In addition, during 1995 the
Company issued $3.0 million of subordinated notes.
Greater Bay is a company separate and apart from the Banks. It must provide
for its own liquidity. Substantially all of Greater Bay's revenues are
obtained from interest received and dividends declared and paid by the Banks.
There are statutory and regulatory provisions that could limit the ability of
the Banks to pay dividends to Greater Bay. See "Supervision and Regulation."
At December 31, 1996, the Banks had approximately $6.3 million in the
aggregate available to be paid as dividends to Greater Bay. Management of
Greater Bay believes that such restrictions will not have an impact on the
ability of Greater Bay to meet its ongoing cash obligations, including those
relating to the Junior Subordinated Debentures. As of December 31, 1996, the
Company did not have any material commitments for capital expenditures.
35
<PAGE>
Net cash provided by operating activities primarily representing net
interest income, totaled $6.2 million for 1996, $10.2 million for 1995 and
$6.4 million for 1994. Cash used for investing activities totaled $150.3
million in 1996, $78.4 million in 1995 and $31.4 million in 1994. The funds
used for investing activities primarily represent increases in loans and
investments for each year reported.
For the year ended December 31, 1996, net cash provided by financing
activities was $139.9 million. Historically, the primary financing activity of
the Company has been deposits and short-term borrowings. Deposits increased
$127.5 million for the year ended December 31, 1996 and short-term borrowings
increased $12.0 million for the same period. For the year ended December 31,
1995, net cash provided by financing activities was $71.4 million. Deposits
increased $85.5 million, while short-term borrowings decreased $17.3 million.
Net proceeds from subordinated notes issued in the third quarter of 1995
provided $3.0 million.
CAPITAL RESOURCES
Shareholders' equity at December 31, 1996 increased to $44.7 million from
$40.1 million at December 31, 1995 and from $36.0 million at December 31,
1994. During 1996, the Company paid aggregate cash dividends of $0.44 per
share.
The Company has provided the majority of its capital requirements through
the retention of earnings. In the third quarter of 1995, the Company increased
its capital base by raising $3.0 million of subordinated notes which qualify
as Tier 2 capital. The private offering was subscribed by the Company's
directors, officers and other accredited investors.
A banking organization's total qualifying capital includes two components,
core capital (Tier 1 capital) and supplementary capital (Tier 2 capital). Core
capital, which must comprise at least half of total capital, includes common
shareholders' equity, qualifying perpetual preferred stock, and minority
interests, less goodwill. Supplementary capital includes the allowance for
loan losses (subject to certain limitations), other perpetual preferred stock,
certain other capital instruments, and term subordinated debt. The Company's
major capital components are shareholders' equity in core capital, and the
allowance for loan losses and subordinated debt in supplementary capital.
At December 31, 1996, the minimum risk-based capital requirements to be
considered adequately capitalized are 4.0% for core capital and 8.0% for total
capital. Federal banking regulators have also adopted leverage capital
guidelines to supplement risk-based measures. The leverage ratio is determined
by dividing Tier 1 capital as defined under the risk-based guidelines by
average total assets (not risk-adjusted) for the preceding quarter. The
minimum leverage ratio is 3.0%, although banking organizations are expected to
exceed that amount by 1.0%, 2.0% or more, depending on their circumstances.
Pursuant to the Federal Deposit Insurance Corporation Improvement Act of
1991, the Federal Reserve, the Comptroller of the Currency and the FDIC have
adopted regulations, effective December 19, 1992, setting forth a five-tier
scheme for measuring the capital adequacy of the financial institutions they
supervise. The capital levels of the Company at December 31, 1996 and the two
highest levels recognized under these regulations are set forth below.
<TABLE>
<CAPTION>
TIER 1 RISK-BASED TOTAL RISK BASED LEVERAGE
CAPITAL RATIO CAPITAL RATIO RATIO
----------------- ---------------- --------
<S> <C> <C> <C>
Company.......................... 8.75% 10.54% 7.27%
Well-capitalized................. 6.0% 10.0% 5.0%
Adequately capitalized........... 4.0% 8.0% 4.0%
</TABLE>
At December 31, 1996, the Company's risk-based capital ratios were 8.75% for
Tier 1 risk-based capital and 10.54% for total risk-based capital, compared to
11.38% and 13.43% as of December 31, 1995, respectively. The Company's
leverage ratio was 7.27% at December 31, 1996, compared to 8.69% at December
31, 1995. These ratios all exceeded the well-capitalized guidelines shown
above.
36
<PAGE>
In addition, at December 31, 1996, each of the Banks had levels of capital
which exceeded the well-capitalized guidelines. However, in order for CNB to
remain well-capitalized during 1997, additional capital will be required. For
additional information on the capital levels and capital ratios of the Company
and each of the Banks, see Note 14 of Notes to the Consolidated Financial
Statements.
The Company anticipates that the economic and business conditions in its
market areas will continue to expand in 1997, resulting in continued growth in
earning assets and deposits. With the proceeds from this offering, the Company
believes that it will have adequate capital to support anticipated growth
while allowing the Company to remain well-capitalized under applicable
regulations. However, should growth exceed expectations or in the event an
acquisition opportunity arises to expand market share, it may be necessary for
the Company to raise additional capital through the sale of either debt or
equity securities. It is anticipated that any such debt securities would
constitute Senior and Subordinated Debt.
INTEREST RATE RISK MANAGEMENT
Interest rate risk management is a function of the repricing characteristics
of the Company's portfolio of assets and liabilities. Interest rate risk
management focuses on the maturity structure of assets and liabilities and
their repricing characteristics during periods of changes in market interest
rates. Effective interest rate risk management seeks to ensure that both
assets and liabilities respond to changes in interest rates within an
acceptable time frame, thereby minimizing the effect of interest rate
movements on net interest income. Interest rate sensitivity is measured as the
difference between the volumes of assets and liabilities in the Company's
current portfolio that are subject to repricing at various time horizons: one
day or immediate, two days to six months, seven to twelve months, one to three
years, three to five years, over five years and on a cumulative basis. The
differences are known as interest sensitivity gaps. The following table shows
interest sensitivity gaps for different intervals as of December 31, 1996.
<TABLE>
<CAPTION>
2 DAYS >1 YEAR >3 YRS TOTAL TOTAL
IMMEDIATE TO 6 MONTHS TO 3 TO 5 RATE NON-RATE
ONE DAY MONTHS 7-12 YRS YRS >5 YRS SENSITIVE SENSITIVE TOTAL
--------- -------- -------- ------- ------- -------- --------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and due from banks. -- -- -- -- -- -- -- $ 39,896 $ 39,896
Short term investments.. $ 14,000 -- -- -- -- -- $ 14,000 -- 14,000
Investment securities... 1,948 $ 14,012 $ 8,016 $23,021 $17,620 $ 39,452 104,069 $ 1,451 $105,520
Loans................... 347,800 10,798 8,385 15,048 10,636 54,326 446,993 3,831 450,824
Loan loss/unearned fees. -- -- -- -- -- -- -- (9,264) (9,264)
Other assets............ -- -- -- -- -- -- -- 21,068 21,068
-------- -------- -------- ------- ------- -------- -------- --------- --------
Total assets........... $363,748 $ 24,810 $ 16,401 $38,069 $28,256 $ 93,778 $565,082 $ 56,982 $622,044
======== ======== ======== ======= ======= ======== ======== ========= ========
LIABILITIES AND EQUITY:
Deposits
Demand................. -- -- -- -- -- -- -- $ 139,940 $139,940
NOW, MMDA, and savings. $312,284 -- -- -- -- -- $312,284 -- 312,284
Time deposits.......... -- $ 99,081 $ 6,938 $ 791 $ 176 $ 73 107,059 -- 107,059
Other borrowings and
subordinated debt...... 15,000 -- -- -- -- -- 15,000 -- 15,000
Other liabilities....... -- -- -- -- -- -- -- 3,079 3,079
Shareholders' equity.... -- -- -- -- -- -- -- 44,682 44,682
-------- -------- -------- ------- ------- -------- -------- --------- --------
Total liabilities and
equity................ $327,284 $ 99,081 $ 6,938 $ 791 $ 176 $ 73 $434,343 $ 187,701 $622,044
======== ======== ======== ======= ======= ======== ======== ========= ========
Gap..................... $ 36,464 $(74,271) $ 9,463 $37,278 $28,080 $ 93,705 $130,719 $(130,719) $ --
Cumulative Gap.......... $ 36,464 $(37,807) $(28,344) $ 8,934 $37,014 $130,719 $130,719 $ -- $ --
Cumulative Gap/total
assets................. 5.86% (6.08)% (4.56)% 1.44% 5.95% 21.01% 21.01% -- --
</TABLE>
The foregoing table demonstrates that the Company had a negative cumulative
one year gap of $28.3 million, or 4.56% of total assets, at December 31, 1996.
In theory, this would indicate that at December 31, 1996, $28.3 million more
in liabilities than assets would reprice if there was a change in interest
rates over the
37
<PAGE>
next 360 days. If interest rates were to increase, the negative gap would tend
to result in a lower net interest margin. However, changes in the mix of
earning assets or supporting liabilities can either increase or decrease the
net interest margin without affecting interest rate sensitivity. In addition,
the interest rate spread between an asset and its supporting liability can
vary significantly while the timing of repricing of both the asset and its
supporting liability can remain the same, thus impacting net interest income.
This characteristic is referred to as a basis risk and, generally, relates to
the repricing characteristics of short-term funding sources such as
certificates of deposit.
The impact of fluctuations in interest rates on the Company's projected next
twelve month net interest income and net income has been evaluated through an
interest rate shock simulation modeling analysis that includes various
assumptions regarding the repricing relationship of assets and liabilities, as
well as the anticipated changes in loan and deposit volumes over differing
rate environments. As of December 31, 1996 the analysis indicates that the
Company's net interest income would increase a maximum of 8.0% if rates rose
200 basis points immediately and would decrease a maximum of 8.0% if rates
declined 200 basis points immediately. In addition, the results indicate that
notwithstanding the Company's negative gap position, which would indicate that
the net interest margin declines when rates rise, the Company's net interest
margin increases during rising rate periods due to the basis risk imbedded in
the Company's interest-bearing liabilities.
Varying interest rate environments can create unexpected changes in
prepayment levels of assets and liabilities which are not reflected in the
interest sensitivity analysis table. These prepayments may have significant
effects on the Company's net interest margin. Because of these factors, an
interest sensitivity gap report may not provide a complete assessment of the
Company's exposure to changes in interest rates.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." This statement establishes a new fair value based
accounting method for stock-based compensation plans and encourages (but does
not require) employers to adopt the new method in place of the provisions of
Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock
Issued to Employees." Under the fair value based method, compensation cost is
measured at the grant date based on the value of the award and is recognized
over the service period. Companies may continue to apply the accounting
provisions of APB 25 in determining net income; however, they must apply the
disclosure requirements of SFAS 123. The recognition provisions and disclosure
requirements of SFAS No. 123 were effective January 1, 1996. The Company has
not adopted the recognition provisions of SFAS No. 123 but has adopted the
disclosure requirements. For further information on SFAS No. 123, see Note 11
of the Notes to Consolidated Financial Statements.
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities." This
statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishment of liabilities. This
statement provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured borrowings. A
transfer of financial assets in which the transferor surrenders control over
those assets is accounted for as a sale to the extent that consideration other
than beneficial interests in the transferred assets is received in exchange.
This statement also requires that liabilities and derivatives incurred or
obtained by transferors as part of a transfer of financial assets be initially
measured at fair value, if practicable. It also requires that servicing assets
and other retained interests in the transferred assets be measured by
allocating the previous carrying amount between the assets sold, if any, and
retained interests, if any, based on their relative fair value at the date of
the transfer. Furthermore, this statement requires that debtors reclassify
financial assets pledged as collateral, and that secured parties recognize
those assets and their obligation to return them in certain circumstances in
which the secured party has taken control of those assets. In addition, the
statement requires that a liability be derecognized if and only if either (a)
the debtor pays the creditor and is relieved of its obligation for the
liability or (b) the debtor is legally released from being the primary obligor
under the liability either judicially or by the creditor. Accordingly, a
liability is not considered extinguished by an in-substance defeasance. SFAS
125 is effective for
38
<PAGE>
transfers and servicing of financial assets and extinguishment of liabilities
occurring after December 31, 1996, and is to be applied prospectively.
Management does not believe that the application of this statement will have a
material impact on the Company's financial statements.
In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights." SFAS 122 amends certain provisions of SFAS No. 65,
"Accounting for Certain Mortgage Banking Activities," to require that a
mortgage banking enterprise recognize as separate assets rights to service
mortgage loans for others, however those servicing rights are acquired. A
mortgage banking enterprise that acquires mortgage servicing rights through
either the purchase or origination of mortgage loans and sells or securitizes
those loans with servicing rights retained should allocate the total cost of
the mortgage loans to the mortgage servicing rights and the loans (without the
mortgage servicing rights) based on their relative fair value, if it is
practicable to estimate those fair values. If it is not practicable to
estimate those fair values, the entire cost of the acquisition should be
allocated to the mortgage loans only. SFAS 122 is effective for years
occurring after December 31, 1995. Adoption of this pronouncement did not have
a material impact on the Company's financial statements.
In March 1995, the FASB issued SFAS No. 121 "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This
statement establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used and for long-lived assets and certain identifiable
intangibles to be disposed of. An impairment loss is measured as the amount by
which the carrying amount of the asset exceeds the fair value of the asset.
After an impairment is recognized, the reduced carrying amount of the asset
shall be accounted for as its new cost. SFAS No. 121 is effective for years
occurring after December 31, 1995. Adoption of this pronouncement did not have
a material impact on the Company's financial statements.
CHANGE IN ACCOUNTANT
Prior to the Merger, Cupertino's independent accountants were Coopers &
Lybrand, L.L.P. ("Coopers & Lybrand") and Mid-Peninsula's independent
accountants were KPMG Peat Marwick, LLP ("Peat Marwick"). On consummation of
the Merger, Mid-Peninsula changed its name to Greater Bay Bancorp, and on
December 17, 1996, Greater Bay changed its independent accountant by
terminating its engagement of Peat Marwick and selecting Coopers & Lybrand as
its independent accountant to audit its financial statements for the year
ended December 31, 1996. The decision to terminate Greater Bay's engagement of
Peat Marwick and select Coopers & Lybrand was unanimously recommended by
Greater Bay's Audit Committee and approved by Greater Bay's Board of
Directors. During the two most recent fiscal years of the Company and any
subsequent interim period preceding the aforesaid change, there were no
disagreements between the Company and Peat Marwick on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure which if not resolved to the satisfaction of Peat Marwick would have
caused them to make reference to the subject matter of the disagreement in
their report. All descriptions contained herein of communications between the
Company and third parties and reports of third parties are qualified in their
entirety by the text of the communications and reports referred to herein.
Peat Marwick's report on the financial statements for 1994 and 1995
contained no adverse opinion or disclaimer of opinion nor was it qualified or
modified as to uncertainty, audit scope, or accounting principles, except
their report dated January 22, 1996, relating to the consolidated balance
sheets of Mid-Peninsula Bancorp and subsidiary as of December 31, 1995 and
1994, and the related consolidated statements of operations, changes in
shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1995, referenced other auditors. On October 7, 1994,
the Company acquired San Mateo County Bancorp on a pooling-of-interests basis.
Peat Marwick did not audit the consolidated financial statements of San Mateo
County Bancorp as of and for the year ended December 31, 1993. These
statements, which were included in the 1993 restated consolidated financial
statements, were audited by other auditors, whose report contained an
explanatory paragraph regarding the adoption SFAS No. 109, "Accounting for
Income Taxes," and SFAS No. 115, "Accounting for Certain Investments, Debt and
Equity Securities." Peat Marwick's report, insofar as it relates to the
amounts included for San Mateo County Bancorp, is based solely on the report
of other auditors.
39
<PAGE>
BUSINESS
In addition to the historical information contained herein, certain
statements under this caption constitute "forward-looking statements" under
the Reform Act which involve risks and uncertainties. The Company's actual
results may differ significantly from those discussed herein. Factors that
might cause such a difference include, but are not limited to, those discussed
under the captions "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" as well as those discussed
elsewhere in this Prospectus.
GREATER BAY
Greater Bay is a bank holding company operating CNB and MPB with seven
regional offices in Cupertino, Palo Alto, San Mateo, San Carlos and San Jose,
California. At December 31, 1996, the Company had total assets of
$622.0 million, total net loans of $441.6 million and total deposits of $559.3
million.
HISTORY
Greater Bay is the result of the Merger of Cupertino and Mid-Peninsula.
Cupertino was formed in 1984 as the holding company for CNB, a national
banking association which began operating in 1985. Mid-Peninsula was formed in
1984 under the name San Mateo County Bancorp ("San Mateo") as the bank holding
company of San Mateo County National Bank, which subsequently changed its name
to WestCal National Bank ("WestCal") in 1991. In 1994, WestCal was merged into
Mid-Peninsula Bank, a California state chartered bank organized in 1987, and
San Mateo concurrently changed its name to Mid-Peninsula Bancorp.
Cupertino and Mid-Peninsula undertook the Merger with the intention of
achieving five primary goals. These goals included (i) developing a greater
banking presence throughout Santa Clara and San Mateo Counties by increasing
the number of banking offices to seven; (ii) reaching a critical mass in the
Company's market areas in order to better meet competitive challenges inherent
in the banking and financial services industries; (iii) enabling the resulting
Company to maximize the utilization of capital by increasing the float and
marketability of its common stock and, by virtue of its larger size, obtaining
access to a lower cost of capital; (iv) providing an opportunity to realize
operating efficiencies made available by the combination of Cupertino and Mid-
Peninsula; and (v) enabling CNB and MPB to cross-sell products.
SUPER COMMUNITY BANKING PHILOSOPHY
In order to meet the demands of the increasingly competitive banking and
financial services industries, management has adopted a business philosophy
referred to as the "Super Community Banking Philosophy." The Super Community
Banking Philosophy is based on management's belief that banking customers
value doing business with locally managed institutions that can provide a full
service commercial banking relationship through an understanding of the
customer's financial needs and the flexibility to customize products and
services to meet those needs. Management further believes that banks are
better able to build successful customer relationships by affiliating with a
holding company that provides cost effective administrative support services
while promoting bank autonomy and flexibility.
To implement this philosophy, Greater Bay operates CNB and MPB as separate
subsidiaries by retaining their independent names along with their individual
Boards of Directors. Both MPB and CNB have established strong reputations and
customer followings in their respective market areas through attention to
client service and an understanding of client needs. In an effort to
capitalize on the identities and reputations of the Banks, the Company will
continue to market its services under the CNB and MPB names, primarily through
each Bank's relationship managers. The primary focus for the Banks'
relationship managers is to cultivate and nurture their client relationships.
Relationship managers are assigned to each borrowing client to provide
continuity in the relationship. This emphasis on personalized relationships
requires that all of the relationship managers maintain close ties to the
communities in which they serve, so they are able to capitalize on their
efforts through expanded business opportunities for the Banks.
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While client service decisions and day-to-day operations are maintained at
the Banks, Greater Bay offers the advantages of affiliation with a multi-bank
holding company by providing improved access to the capital markets and
expanded client support services, such as business cash management,
international trade services and accounting services. In addition, Greater Bay
provides centralized administrative functions, including support in credit
policy formulation and review, investment management, data processing,
accounting and other specialized support functions thereby allowing the Banks
to focus on client service.
CORPORATE GROWTH STRATEGY
The Company's business strategy is to focus on increasing its market share
within the communities it serves through continued internal growth. As a
result of the Merger, the Company has the opportunity to market the
specialized products and services of the Venture Lending Group, the Greater
Bay Trust Company and the SBA Department to a larger customer base. The
Company believes that these products and services, available prior to the
Merger only to customers of CNB, will be attractive to customers and contacts
of MPB in the venture capital community and the high net worth customers of
MPB. The Company believes that the infrastructure developed by Cupertino to
support the Greater Bay Trust Company, the SBA Department and the Venture
Lending Group will allow the Company to offer the products and services of
these groups without significant additional overhead costs.
The Company also will pursue opportunities to expand its market share
through select acquisitions that management believes complement the Company's
businesses. While management would prefer to make acquisitions which would
expand its presence in its current market areas of Santa Clara and San Mateo
Counties, it will also pursue opportunities to expand its market through
acquisitions in other parts of the South, East, and North Bay Areas of San
Francisco.
THE BANKS
CNB
CNB presently has four banking offices. CNB's main office is in Cupertino,
and it has one regional office in San Jose and two regional offices in Palo
Alto. At December 31, 1996, CNB had total assets of $339.7 million, total net
loans of $248.4 million and total deposits of $302.3 million.
MPB
MPB presently has three banking offices. MPB's main office is in Palo Alto.
MPB also has regional offices in San Mateo and in San Carlos. On December 31,
1996, MPB had total assets of $282.3 million, total net loans of $193.1
million and total deposits of $257.5 million.
BANKING SERVICES
Through their networks of regional offices, the Banks provide a wide range
of commercial banking services to small and medium-sized businesses, real
estate developers and property managers, business executives, professionals
and other individuals. In addition, the Greater Bay Trust Company provides
trust services to support the trust needs of the Banks' clients.
The Banks offer a wide range of deposit products. These include the normal
range of personal and business checking and savings accounts, time deposits
and individual retirement accounts. The Banks also offer a wide range of
specialized services designed to attract and service the needs of customers
and include cash management and international trade services for business
clients, traveler's checks, safe deposit and MasterCard and Visa merchant
deposits services.
The Banks also engage in the full complement of lending activities,
including commercial, real estate and consumer loans. The Banks provide
commercial loans for working capital and business expansion to small and
medium-sized businesses with annual revenues generally in the range of $1.0
million to $50.0 million. The
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Banks' commercial customers are drawn from a wide variety of manufacturing,
wholesale and service businesses. The Banks provide interim real estate loans
primarily for construction in the Banks' primary service areas of single-
family residences, which typically range between approximately $500,000 and
$1.0 million, and multi-unit projects, which typically range between
approximately $1.5 million and $4.0 million. The Banks provide medium term
commercial real estate loans or credits for the financing of commercial or
industrial buildings where the properties are either used by the owner for
business purposes or have income derived from tenants, which typically range
between approximately $750,000 and $3.0 million. Loans to professionals and
other individual clients cover a full range of consumer services, such as
automobile, aircraft, home improvement and home equity loans, and other
secured and unsecured lines of credit, including credit cards.
Through the SBA Department, loans are made to smaller businesses and are
generally 65% to 80% guaranteed by the SBA. In 1994, CNB was named a Preferred
Lender by the SBA. Preferred Lender status is awarded by the SBA to lenders
who have demonstrated superior ability to generate, underwrite and service
loans guaranteed by the SBA, and results in more rapid turnaround of loan
applications submitted to the SBA for approval.
In May 1994, the Company organized the Venture Lending Group to serve the
needs of companies in their start-up and development phase. This unit was
developed to meet the needs of such clients in the Company's service area by
allowing them to access a banking relationship early in their development. The
loans to this target group of clients are generally secured by the accounts
receivable, inventory and equipment of the companies. The financial strength
of these companies also tends to be bolstered by the presence of venture
capital investors among the shareholders.
MARKET AREA
The Banks concentrate on marketing their services to small and medium-sized
businesses, professionals and individuals in the Santa Clara and San Mateo
Counties. Santa Clara County, CNB's primary base of operations, encompasses
the geographic area between San Jose to the south and Palo Alto to the north.
Santa Clara County ranks third in California median household income. CNB is
headquartered in Cupertino, California, which is in the center of the
geographical area referred to as the "Silicon Valley." The city of Cupertino
has a population of approximately 51,300, and its average annual household
income exceeds $97,200. MPB's primary market area ranges from Palo Alto to the
south to South San Francisco to the north. MPB is headquartered in Palo Alto,
California. The city of Palo Alto has a population of approximately 60,000,
and its mean annual household income exceeds $75,000.
The commercial base of Santa Clara and San Mateo Counties is diverse and
includes computer and semiconductor manufacturing, professional services,
printing and publishing, aerospace, defense, real estate construction, as well
as wholesale and retail trade. As a result of its geographic concentration,
the Company's results depend largely upon economic conditions in these areas.
While the economy in the Company's market areas have exhibited positive
economic and employment trends, there is no assurance that such trends will
continue. A deterioration in economic conditions could have material adverse
impact on the quality of the Company's loan portfolio and the demand for its
product and services, and accordingly its results of operations. See "Risk
Factors--Economic Conditions and Geographic Concentration."
LENDING ACTIVITIES
UNDERWRITING AND CREDIT ADMINISTRATION
As of the date hereof, the lending activities of each of the Banks is guided
by the basic lending policies established by its Board of Directors. The
Company is currently preparing a new loan policy to govern the lending
activities of both Banks. The new policy is expected to be fully implemented
during the second quarter of 1997. Once implemented, the credit policy will be
approved each year by the Boards of Directors of Greater Bay and each of the
Banks and will be managed through periodic reviews.
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Each loan must meet minimum underwriting criteria established in the Bank's
lending policy. Lending authority is granted to officers of each Bank on a
limited basis. Loan requests exceeding individual officer approval limits are
approved by the Officers Loan Committees of the respective Banks. Loan
requests exceeding these limits are submitted to the Greater Bay Officers Loan
Committee, which consists of the President and Chief Executive Officer of
Greater Bay, the Executive Vice President and Chief Lending Officer of Greater
Bay, the Executive Vice President and Chief Credit Officer of MPB and the
Senior Vice President and Chief Credit Officer of Greater Bay. Loans requests
which exceed the limits of the Greater Bay Officers Loan Committee are
submitted to the Directors Loan Committee for final approval. The Directors
Loan Committee consists of four outside directors. Each of these committees
meet on a regular basis in order to provide timely responses to the Banks'
clients.
The Company's credit administration function includes an internal review and
the regular use of an outside loan review firm. In addition, the Greater Bay
Officers Loan Committee and Chief Financial Officer meet at a minimum of at
least once a month and review delinquencies, non-performing assets, classified
assets and other pertinent information to evaluate credit risk within each
Bank's loan portfolio and to recommend general reserve percentages and
specific reserve allocations. The information reviewed by this committee is
submitted to the Boards of Directors of the Company on a monthly basis.
LOAN PORTFOLIO
Approximately 57.0% of the Company's gross loan portfolio was in commercial
loans at December 31, 1996, and real estate construction and land loans
represented approximately 17.4% of total loans, primarily for residential
projects. In addition, 16.1% of the Company's loans were real estate term
loans, which are primarily secured by commercial properties. The balance of
the portfolio consists of consumer loans.
The interest rates charged for the loans made by the Banks vary with the
degree of risk, size and maturity of the loans. Rates are generally affected
by competition, associated factors stemming from the client's deposit
relationship with the Bank and the Banks' cost of funds.
Commercial Loans. In their commercial loan portfolio, the Banks provide
personalized financial services to the diverse commercial and professional
businesses in their market areas. Commercial loans, including those made by
the Venture Lending Group, consist primarily of short-term loans (normally
with a maturity of under one year) for working capital and business expansion.
Commercial loans typically include revolving lines of credit collateralized by
inventory, accounts receivable and equipment. Emphasis is placed on the
borrower's earnings history, capitalization, secondary sources of repayment,
and in some instances, third party guarantees or highly liquid collateral
(such as time deposits and investment securities). Commercial loan pricing is
generally at a rate tied to the prime rate (as quoted in the Wall Street
Journal) or the Banks' reference rates.
The Venture Lending Group serves the needs of companies in their start-up
and development phase. Typical clients include technology companies, ranging
from multimedia, software and telecommunications providers to bio-technology
and medical device firms. The Venture Lending Group provides innovative
lending products and other financial services, tailored to the needs of start-
up and growth-stage companies. Borrowings are generally secured by minimum
cash balances, accounts receivable, intellectual property rights, inventory
and equipment of the companies. Many of these companies are in the start-up or
development phase and will not generate any revenues for several years. The
Company will often receive warrants from these companies as part of the
compensation for its services.
The Company participates in many SBA programs and, through CNB, is a
"preferred lender." Preferred lender status is granted to a lender which has
made a certain number of SBA loans and which, in the opinion of the SBA has
staff who are qualified and experienced in this area. As a preferred lender,
the Company has the authority to authorize, on behalf of the SBA, the SBA
guaranty on loans under the 7A program. This can represent a substantial
savings in serving a customer's needs. The Company utilizes both the 504
program, which is focused toward longer-term financing of buildings, and other
long-term assets, and the 7A program which is
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primarily used for financing of the equipment, inventory and working capital
needs of eligible businesses generally over a three- to seven-year term. The
Company's collateral position in the SBA loans is enhanced by the SBA guaranty
in the case of 7A loans, and by lower loan-to-value ratios under the 504
program. The Company generally sells the guaranteed portion of its SBA loans
in the secondary market.
Real Estate Construction and Land Loans. The Banks' real estate construction
loan activity has focused on providing short-term (less than one year
maturity) loans to individuals and developers with whom the Banks have
established relationships for the construction primarily of single family
residences in the Banks' market areas. During 1992 and 1993, the Banks
concentrated their construction loan activity on owner-occupied custom
residences. During 1994, as real estate values began to stabilize, the Banks
also entered the construction loan market for multi-unit single family
residential projects. During 1995 and 1996, the Banks continued to expand
their real estate construction portfolio with the help of the improving real
estate market in Northern California.
Residential real estate construction loans are typically secured by first
deeds of trust and require guarantees of the borrower. The economic viability
of the project and the borrower's credit-worthiness are primary considerations
in the loan underwriting decision. Generally, these loans provide an
attractive yield, but may carry a higher than normal risk of loss or
delinquency, particularly if general real estate values decline. The Banks
utilize approved independent local appraisers and loan-to-value ratios which
generally do not exceed 65% to 75% of the appraised value of the property. The
Banks monitor projects during the construction phase through regular
construction inspections and a disbursement program tied to the percentage of
completion of each project.
The Banks also occasionally make land loans to person who intend to
construct a single family residence on the lot generally within twelve months.
In addition, the Banks have occasionally in the past, and may to a greater
extent in the future, make commercial real estate construction loans to high
net worth clients with adequate liquidity for construction of office and
warehouse properties. Such loans are typically secured by first deeds of trust
and require guarantees of the borrower.
Commercial Real Estate Term Loans. The Banks provide medium term commercial
real estate loans secured by commercial or industrial buildings where the
properties are either used by the owner for business purposes ("owner-user
properties") or have income derived from tenants ("investment properties").
The Company's loan policies require the principal balance of the loan,
generally between $750,000 and $1.5 million, to be no more than 70% of the
stabilized appraised value of the underlying real estate collateral. The
loans, which are typically secured by first deeds of trust only, generally
have terms of no more than seven to ten years and are amortized over 20 years.
Most of these loans have rates tied to the prime rate, with many adjusting
whenever the prime rate changes; the remaining loans adjust every two or three
years depending on the term of the loan.
Consumer and Other Loans. The Banks' consumer and other loan portfolio is
divided between installment loans secured by automobiles and aircraft, and
home improvement loans and equity lines of credit which are often secured by
residential real estate. Installment loans tend to be fixed rate and longer-
term (one-to-five year maturity), while the equity lines of credit and home
improvement loans are generally floating rate and are reviewed for renewal on
an annual basis. The Banks also have a minimal portfolio of credit card loans,
issued as an additional service to its clients.
DEPOSITS
The Banks' deposits are obtained primarily from small and medium-sized
businesses, business executives, professionals and other individuals. Each of
the Banks offers the usual and customary range of depository products provided
by commercial banks. The Banks' deposits are not received from a single
depositor or group of affiliated depositors, the loss of any one of which
would have a material adverse effect on the business of the Company or either
of the Banks. Rates paid on deposits vary among the categories of deposits due
to different terms, the size of the individual deposit, and rates paid by
competitors on similar deposits.
CNB has two business units that provide significant support to its deposit
base. The Greater Bay Trust Company has approximately 10% of its trust assets
under management in liquid funds that are retained in CNB
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money market demand accounts. At December 31, 1996, these funds totaled $41.7
million. The Venture Lending Group, which finances companies in their
development stage, is another source of deposits as most of the start-up phase
companies have significant liquidity that is deposited in the bank as part of
the banking relationship. At December 31, 1996, customers of the Venture
Lending Group had $38.1 million in deposits at CNB.
TRUST DEPARTMENT
The Greater Bay Trust Company commenced operations in July 1988. The Greater
Bay Trust Company offers a full range of fee-based trust services directly to
its clients and administers several types of retirement plans, including
corporate pension plans, 401(k) plans and individual retirement plans, with an
emphasis on the investment management, custodianship and trusteeship of such
plans. In addition, the Greater Bay Trust Company acts as executor,
administrator, guardian and/or trustee in the administration of the estates of
individuals. Investment and custodial services are provided for corporations,
individuals and nonprofit organizations. Total assets under management by the
Greater Bay Trust Company were approximately $418.0 million at December 31,
1996, compared to $270.0 million at December 31, 1995 and $157.0 million at
December 31, 1994.
COMPETITION
The banking and financial services business in California generally, and in
the Banks' market areas specifically, is highly competitive. The increasingly
competitive environment is a result primarily of changes in regulation,
changes in technology and product delivery systems, and the accelerating pace
of consolidation among financial services providers. The Banks compete for
loans, deposits and customers for financial services with other commercial
banks, savings and loan associations, securities and brokerage companies,
mortgage companies, insurance companies, finance companies, money market
funds, credit unions, and other nonbank financial service providers. Many of
these competitors are much larger in total assets and capitalization, have
greater access to capital markets and offer a broader array of financial
services than the Banks. In order to compete with the other financial services
providers, the Banks principally rely upon local promotional activities,
personal relationships established by officers, directors and employees with
its customers, and specialized services tailored to meet its customers' needs.
In those instances where the Banks are unable to accommodate a customer's
needs, the Banks may arrange for those services to be provided by its
correspondents. The Bank have seven offices located in the Santa Clara and San
Mateo Counties. Neither the deposits nor loans of the offices of the
respective Banks exceed 1% of all financial services companies located in such
counties.
EMPLOYEES
At December 31, 1996, the Company had 177 full-time employees. None of the
employees are covered by a collective bargaining agreement. The Company
considers its employee relations to be satisfactory.
PROPERTIES
The Company occupies its administrative office under a lease which expires
2002. MPB occupies its offices under leases expiring at various dates
(including options to renew) through 2009. CNB occupies its offices under
leases expiring at various dates (including options to renew) through 2018.
The Company believes its present facilities are adequate for its present
needs and anticipated future growth. The Company believes that, if necessary,
it could secure suitable alternative facilities on similar terms without
adversely affecting operations.
LEGAL PROCEEDINGS
There are no material legal proceedings pending other than ordinary routine
litigation incidental to the business of the Company to which Greater Bay or
the Banks is a party or of which any of their property is a subject.
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SUPERVISION AND REGULATION
Bank holding companies and banks are extensively regulated under both
federal and state law. Set forth below is a summary description of certain
laws which relate to the regulation of Greater Bay and the Banks. The
description does not purport to be complete and is qualified in its entirety
by reference to the applicable laws and regulations.
GREATER BAY
Greater Bay, as a registered bank holding company, is subject to regulation
under the Bank Holding Company Act of 1956, as amended (the "BHCA"). Greater
Bay is required to file with the Federal Reserve quarterly and annual reports
and such additional information as the Federal Reserve may require pursuant to
the BHCA. The Federal Reserve may conduct examinations of Greater Bay and its
subsidiaries.
The Federal Reserve may require that Greater Bay terminate an activity or
terminate control of or liquidate or divest certain subsidiaries or affiliates
when the Federal Reserve believes the activity or the control of the
subsidiary or affiliate constitutes a significant risk to the financial
safety, soundness or stability of any of its banking subsidiaries. The Federal
Reserve also has the authority to regulate provisions of certain bank holding
company debt, including authority to impose interest ceilings and reserve
requirements on such debt. Under certain circumstances, Greater Bay must file
written notice and obtain approval from the Federal Reserve prior to
purchasing or redeeming its equity securities. Further, Greater Bay is
required by the Federal Reserve to maintain certain levels of capital. See "--
Capital Standards" herein.
Greater Bay is required to obtain the prior approval of the Federal Reserve
for the acquisition of more than 5% of the outstanding shares of any class of
voting securities or substantially all of the assets of any bank or bank
holding company. Prior approval of the Federal Reserve is also required for
the merger or consolidation of Greater Bay and another bank holding company.
Greater Bay is prohibited by the BHCA, except in certain statutorily
prescribed instances, from acquiring direct or indirect ownership or control
of more than 5% of the outstanding voting shares of any company that is not a
bank or bank holding company and from engaging directly or indirectly in
activities other than those of banking, managing or controlling banks or
furnishing services to its subsidiaries. However, Greater Bay, subject to the
prior approval of the Federal Reserve, may engage in any, or acquire shares of
companies engaged in, activities that are deemed by the Federal Reserve to be
so closely related to banking or managing or controlling banks as to be a
proper incident thereto. In making any such determination, the Federal Reserve
is required to consider whether the performance of such activities by Greater
Bay or an affiliate can reasonably be expected to produce benefits to the
public, such as greater convenience, increased competition or gains in
efficiency, that outweigh possible adverse effects, such as undue
concentration of resources, decreased or unfair competition, conflicts of
interest or unsound banking practices. The Federal Reserve is also empowered
to differentiate between activities commenced de novo and activities commenced
by acquisition, in whole or in part, of a going concern. In 1996, the Economic
Growth and Regulatory Paperwork Reduction Act of 1996 (the "Budget Act")
eliminated the requirement that bank holding companies seek Federal Reserve
approval before engaging de novo in permissible nonbanking activities listed
in Regulation Y, which governs bank holding companies, if the holding company
and its lead depository institution are well-managed and well-capitalized and
certain other criteria specified in the statute are met. For purposes of
determining the capital levels at which a bank holding company shall be
considered "well-capitalized" under this section of the Budget Act and
Regulation Y, the Federal Reserve adopted, as a rule, risk-based capital
ratios (on a consolidated basis) that are the same as the levels set for
determining that a state member bank is well capitalized under the provisions
established under the prompt corrective action provisions of federal law. See
"--Prompt Corrective Action and Other Enforcement Mechanisms" herein.
Under Federal Reserve regulations, a bank holding company is required to
serve as a source of financial and managerial strength to its subsidiary banks
and may not conduct its operations in an unsafe or unsound
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manner. In addition, it is the Federal Reserve's policy that in serving as a
source of strength to its subsidiary banks, a bank holding company should
stand ready to use available resources to provide adequate capital funds to
its subsidiary banks during periods of financial stress or adversity and
should maintain the financial flexibility and capital-raising capacity to
obtain additional resources for assisting its subsidiary banks. A bank holding
company's failure to meet its obligations to serve as a source of strength to
its subsidiary banks will generally be considered by the Federal Reserve to be
an unsafe and unsound banking practice or a violation of the Federal Reserve's
regulations or both.
Greater Bay is also a bank holding company within the meaning of Section
3700 of the California Financial Code. As such, Greater Bay and its
subsidiaries are subject to examination by, and may be required to file
reports with, the California State Banking Department.
Finally, Greater Bay is subject to the periodic reporting requirements of
the Exchange Act, including, but not limited to, filing annual, quarterly and
other current reports with the Commission.
THE BANKS
CNB, as a national banking association, is subject to primary supervision,
examination and regulation by the Comptroller. MPB, as a California state
chartered bank and member of the Federal Reserve System, is subject to primary
supervision, periodic examination and regulation by the California
Superintendent of Banks ("Superintendent") and the Federal Reserve. If, as a
result of an examination of a bank, the bank regulatory agencies should
determine that the financial condition, capital resources, asset quality,
earnings prospects, management, liquidity or other aspects of the bank's
operations are unsatisfactory or that the bank or its management is violating
or has violated any law or regulation, various remedies are available to the
bank regulatory agencies. Such remedies include the power to enjoin "unsafe or
unsound" practices, to require affirmative action to correct any conditions
resulting from any violation or practice, to issue an administrative order
that can be judicially enforced, to direct an increase in capital, to restrict
the growth of the bank, to assess civil monetary penalties, to remove officers
and directors and ultimately to terminate a bank's deposit insurance, which
would result in a revocation of the bank's charter. Neither CNB nor MPB has
been the subject of any such actions by their respective regulatory agencies.
The deposits of the Banks are insured by the FDIC in the manner and to the
extent provided by law. For this protection, the Banks pay a semiannual
statutory assessment. See "--Premiums for Deposit Insurance" herein.
Various requirements and restrictions under the laws of the State of
California and the United States affect the operations of the Banks. State and
federal statutes and regulations relate to many aspects of the Banks'
operations, including levels of capital, reserves against deposits, interest
rates payable on deposits, loans, investments, mergers and acquisitions,
borrowings, dividends, locations of branch offices and capital requirements.
RESTRICTIONS ON TRANSFERS OF FUNDS TO GREATER BAY BY THE BANKS
Greater Bay is a legal entity separate and distinct from the Banks. Greater
Bay's ability to pay cash dividends is limited by state law.
There are statutory and regulatory limitations on the amount of dividends
which may be paid to Greater Bay by the Banks. California law restricts the
amount available for cash dividends by state chartered banks, such as MPB, to
the lesser of retained earnings or the bank's net income for its last three
fiscal years (less any distributions made to shareholders by the bank or by
any majority-owned subsidiary of the bank during such period). Notwithstanding
this restriction, a bank may, with the prior approval of the Superintendent,
make a distribution to its shareholders in an amount not exceeding the greater
of the retained earnings of the bank, net income for such bank's last fiscal
year or the net income of the bank for its current year. The prior approval of
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the Comptroller is required if the total of all dividends declared by a
national bank, such as CNB, in any calendar year exceeds the bank's net
profits (as defined) for that year combined with its retained net profits (as
defined) for the preceding two years, less any required transfers to surplus
or a fund for the retirement of any preferred stock.
The bank regulatory agencies also have authority to prohibit banks from
engaging in activities that, in their respective opinions, constitute unsafe
or unsound practices in conducting its business. It is possible, depending
upon the financial condition of the bank in question and other factors, that
the bank regulatory agencies could assert that the payment of dividends or
other payments might, under some circumstances, be such an unsafe or unsound
practice. Further, the bank regulatory agencies have established guidelines
with respect to the maintenance of appropriate levels of capital by banks or
bank holding companies under their jurisdiction. Compliance with the standards
set forth in such guidelines and the restrictions that are or may be imposed
under the prompt corrective action provisions of federal law could limit the
amount of dividends which the Banks or Greater Bay may pay. See "--Prompt
Corrective Regulatory Action and Other Enforcement Mechanisms" herein and "--
Capital Standards" herein for a discussion of these additional restrictions on
capital distributions.
Substantially all of Greater Bay's revenues, including funds available for
the payment of dividends and other operating expenses, are, and will continue
to be, dividends paid by the Banks. At December 31, 1996, the Banks had $6.3
million in the aggregate available for the payment of cash dividends.
The Banks are subject to certain restrictions imposed by federal law on any
extensions of credit to, or the issuance of a guarantee or letter of credit on
behalf of, Greater Bay or other affiliates, the purchase of or investments in
stock or other securities thereof, the taking of such securities as collateral
for loans and the purchase of assets of Greater Bay or other affiliates. Such
restrictions prevent Greater Bay and such other affiliates from borrowing from
the Banks unless the loans are secured by marketable obligations or other
acceptable collateral of designated amounts. Further, such secured loans and
investments by the Banks to or in Greater Bay or to or in any other affiliate
is limited to 10% of the respective bank's capital stock and surplus (as
defined by federal regulations) and such secured loans and investments are
limited, in the aggregate, to 20% of the respective banks' capital stock and
surplus (as defined by federal regulations). California law also imposes
certain restrictions with respect to transactions involving Greater Bay and
other controlling persons of the Banks. Additional restrictions on
transactions with affiliates may be imposed on the Banks under the prompt
corrective action provisions of federal law. See "--Prompt Corrective
Regulatory Action and Other Enforcement Mechanisms."
COMMON LIABILITY
Under federal law, a depository institution insured by the FDIC can be held
liable for any loss incurred by, or reasonably expected to be incurred by, the
FDIC in connection with the default of a commonly controlled FDIC-insured
depository institution or any assistance provided by the FDIC to a commonly
controlled FDIC-insured institution in danger of default. These provisions can
have the effect of making one subsidiary bank of Greater Bay responsible for
FDIC-insured losses at another subsidiary bank.
EFFECT OF GOVERNMENTAL POLICIES AND LEGISLATION
Banking is a business that depends on rate differentials. In general, the
difference between the interest rate paid by the Banks on their deposits and
their other borrowings and the interest rate received by the Banks on loans
extended to their customers and securities held in the Banks' portfolios
comprises the major portion of the Banks' earnings. These rates are highly
sensitive to many factors that are beyond the control of the Banks.
Accordingly, the earnings and growth of the Banks are subject to the influence
of domestic and foreign economic conditions, including inflation, recession
and unemployment.
The commercial banking business is not only affected by general economic
conditions but is also influenced by the monetary and fiscal policies of the
federal government and the policies of regulatory agencies, particularly
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the Federal Reserve. The Federal Reserve implements national monetary policies
(with objectives such as curbing inflation and combating recession) by its
open-market operations in United States Government securities, by adjusting
the required level of reserves for financial institutions subject to its
reserve requirements and by varying the discount rates applicable to
borrowings by depository institutions. The actions of the Federal Reserve in
these areas influence the growth of bank loans, investments and deposits and
also affect interest rates charged on loans and paid on deposits. The nature
and impact of any future changes in monetary policies cannot be predicted.
From time to time, legislation is enacted which has the effect of increasing
the cost of doing business, limiting or expanding permissible activities or
affecting the competitive balance between banks and other financial services
providers. Proposals to change the laws and regulations governing the
operations and taxation of banks, bank holding companies and other financial
services provider are frequently made in Congress, in the California
legislature and before various bank regulatory and other professional
agencies. The likelihood of any major legislative changes and the impact such
changes might have on Greater Bay or the Banks are impossible to predict.
CAPITAL STANDARDS
The Federal Reserve, the Comptroller and the FDIC have adopted risk-based
minimum capital guidelines intended to provide a measure of capital that
reflects the degree of risk associated with a banking organization's
operations for both transactions reported on the balance sheet as assets and
transactions, such as letters of credit and recourse arrangements, which are
recorded as off balance sheet items. Under these guidelines, nominal dollar
amounts of assets and credit equivalent amounts of off balance sheet items are
multiplied by one of several risk adjustment percentages, which range from 0%
for assets with low credit risk, such as certain U.S. Treasury securities, to
100% for assets with high credit risk, such as commercial loans.
A banking organization's risk-based capital ratios are obtained by dividing
its qualifying capital by its total risk adjusted assets. The regulators
measure risk-adjusted assets, which includes off balance sheet items, against
both total qualifying capital (the sum of Tier 1 capital and limited amounts
of Tier 2 capital) and Tier 1 capital. Tier 1 capital consists of, among other
things, (i) common shareholders' equity capital (includes common stock and
related surplus, and undivided profits); (ii) noncumulative perpetual
preferred stock (cumulative perpetual preferred stock for bank holding
companies), including any related surplus; and (iii) minority interests in
certain subsidiaries, less most intangible assets. Tier 2 capital may consist
of: (i) a limited amount of the allowance for loan and lease losses ("ALLL");
(ii) cumulative perpetual preferred stock; (iii) perpetual preferred stock
(and any related surplus); (iv) term subordinated debt and certain other
instruments with some characteristics of equity. The inclusion of elements of
Tier 2 capital is subject to certain other requirements and limitations of the
federal banking agencies. The federal banking agencies require a minimum ratio
of qualifying total capital to risk-adjusted assets of 8% and a minimum ratio
of Tier 1 capital to risk-adjusted assets of 4%.
In addition to the risked-based guidelines, federal banking regulators
require banking organizations to maintain a minimum amount of Tier 1 capital
to total assets, referred to as the leverage ratio. For a banking organization
rated in the highest of the five categories used by regulators to rate banking
organizations, the minimum leverage ratio of Tier 1 capital to total assets
must be 3%. For all banking organizations not rated in the highest category,
the minimum leverage ratio must be at least 100 to 200 basis points above the
3% minimum, or 4% to 5%. In addition to these uniform risk-based capital
guidelines and leverage ratios that apply across the industry, the regulators
have the discretion to set individual minimum capital requirements for
specific institutions at rates significantly above the minimum guidelines and
ratios.
In June 1996, the federal banking agencies adopted a joint agency policy
statement to provide guidance on managing interest rate risk. These agencies
indicated that the adequacy and effectiveness of a bank's interest rate risk
management process and the level of its interest rate exposures are critical
factors in the agencies' evaluation of the bank's capital adequacy. A bank
with material weaknesses in its risk management process or high levels of
exposure relative to its capital will be directed by the agencies to take
corrective action. Such actions will
49
<PAGE>
include recommendations or directions to raise additional capital, strengthen
management expertise, improve management information and measurement systems,
reduce levels of exposure, or some combination thereof depending upon the
individual institution's circumstances. This policy statement augments the
August 1995 regulations adopted by the federal banking agencies which
addressed risk-based capital standards for interest rate risk.
In December 1993, the federal banking agencies issued an interagency policy
statement on the ALLL which, among other things, establishes certain benchmark
ratios of loan loss reserves to classified assets. The benchmark set forth by
such policy statement is the sum of (a) assets classified loss; (b) 50 percent
of assets classified doubtful; (c) 15 percent of assets classified
substandard; and (d) estimated credit losses on other assets over the upcoming
12 months. This amount is neither a "floor" nor a "safe harbor" level for an
institution's ALLL.
Federally supervised banks and savings associations are currently required
to report deferred tax assets in accordance with SFAS No. 109. The federal
banking agencies issued final rules governing banks and bank holding
companies, which became effective April 1, 1995 and limit the amount of
deferred tax assets that are allowable in computing an institution's
regulatory capital. Deferred tax assets that can be realized for taxes paid in
prior carryback years and from future reversals of existing taxable temporary
differences are generally not limited. Deferred tax assets that can only be
realized through future taxable earnings are limited for regulatory capital
purposes to the lesser of (i) the amount that can be realized within one year
of the quarter-end report date, based on projected taxable income for that
year or (ii) 10% of Tier 1 Capital. The amount of any deferred tax in excess
of this limit would be excluded from Tier 1 Capital and total assets and
regulatory capital calculations.
Future changes in regulations or practices could further reduce the amount
of capital recognized for purposes of capital adequacy. Such a change could
affect the ability of the Banks to grow and could restrict the amount of
profits, if any, available for the payment of dividends. For information
concerning the capital ratios of Greater Bay and the Banks, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Capital Resources."
PROMPT CORRECTIVE ACTION AND OTHER ENFORCEMENT MECHANISMS
Federal law requires each federal banking agency to take prompt corrective
action to resolve the problems of insured depository institutions, including
but not limited to those that fall below one or more prescribed minimum
capital ratios. In accordance with federal law, each federal banking agency
has promulgated regulations defining the following five categories in which an
insured depository institution will be placed, based on the level of its
capital ratios: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized. An insured
depository institution will be classified in the following categories based,
in part, on the capital measures indicated below:
<TABLE>
<S> <C>
"Well capitalized" "Adequately capitalized"
Total risk-based capital of at
least 10%; Total risk-based capital of at least 8%;
Tier 1 risk-based capital of 6%;
and Tier 1 risk-based capital of 4%; and
Leverage ratio of 5%. Leverage ratio of 4%.
"Undercapitalized" "Significantly undercapitalized"
Total risk-based capital less than
8%; Total risk-based capital less than 6%;
Tier 1 risk-based capital less
than 4%; or Tier 1 risk-based capital less than 3%; or
Leverage ratio less than 4%. Leverage ratio less than 3%.
"Critically undercapitalized"
Tangible equity to total assets
less than 2%.
</TABLE>
50
<PAGE>
An institution that, based upon its capital levels, is classified as "well
capitalized," "adequately capitalized" or "undercapitalized" may be treated as
though it were in the next lower capital category if the appropriate federal
banking agency, after notice and opportunity for hearing, determines that an
unsafe or unsound condition or an unsafe or unsound practice warrants such
treatment. At each successive lower capital category, an insured depository
institution is subject to more restrictions. The federal banking agencies,
however, may not treat a significantly undercapitalized institution as
"critically undercapitalized" unless its capital ratio actually warrants such
treatment.
The law prohibits insured depository institutions from paying management
fees to any controlling persons or, with certain limited exceptions, making
capital distributions if after such transaction the institution would be
undercapitalized. If an insured depository institution is undercapitalized, it
will be closely monitored by the appropriate federal banking agency, subject
to asset growth restrictions and required to obtain prior regulatory approval
for acquisitions, branching and engaging in new lines of business. Any
undercapitalized depository institution must submit an acceptable capital
restoration plan to the appropriate federal banking agency 45 days after
receiving notice, or is deemed to have notice, that the institution is
undercapitalized. The appropriate federal banking agency cannot accept a
capital plan unless, among other things, it determines that the plan: (i)
specifies: (a) the steps the institution will take to become adequately
capitalized; (b) the levels of capital to be attained during each year in
which the plan will be in effect; (c) how the institution will comply with the
applicable restrictions or requirements then in effect of the Federal Deposit
Insurance Act; and (d) the types and levels of activities in which the
institution will engage; (ii) is based on realistic assumptions and is likely
to succeed in restoring the depository institution's capital; and (iii) would
not appreciably increase the risk (including credit risk, interest-rate risk,
and other types of risk) to which the institution is exposed. In addition,
each company controlling an undercapitalized depository institution must
guarantee that the institution will comply with the capital plan until the
depository institution has been adequately capitalized on average during each
of four consecutive calendar quarters and must otherwise provide appropriate
assurances of performance. The aggregate liability of such guarantee is
limited to the lesser of (a) an amount equal to 5% of the depository
institution's total assets at the time the institution became undercapitalized
or (b) the amount which is necessary to bring the institution into compliance
with all capital standards applicable to such institution as of the time the
institution fails to comply with its capital restoration plan. Finally, the
appropriate federal banking agency may impose any of the additional
restrictions or sanctions that it may impose on significantly undercapitalized
institutions if it determines that such action will further the purpose of the
prompt correction action provisions.
An insured depository institution that is significantly undercapitalized, or
is undercapitalized and fails to submit, or in a material respect to
implement, an acceptable capital restoration plan, is subject to additional
restrictions and sanctions. These include, among other things: (i) a forced
sale of voting shares to raise capital or, if grounds exist for appointment of
a receiver or conservator, a forced merger; (ii) restrictions on transactions
with affiliates; (iii) further limitations on interest rates paid on deposits;
(iv) further restrictions on growth or required shrinkage; (v) modification or
termination of specified activities; (vi) replacement of directors or senior
executive officers; (vii) prohibitions on the receipt of deposits from
correspondent institutions; (viii) restrictions on capital distributions by
the holding companies of such institutions; (ix) required divestiture of
subsidiaries by the institution; or (x) other restrictions as determined by
the appropriate federal banking agency. Although the appropriate federal
banking agency has discretion to determine which of the foregoing restrictions
or sanctions it will seek to impose, it is required to: (i) force a sale of
shares or obligations of the bank, or require the bank to be acquired by or
combine with another institution; (ii) impose restrictions on affiliate
transactions and (iii) impose restrictions on rates paid on deposits, unless
it determines that such actions would not further the purpose of the prompt
corrective action provisions. In addition, without the prior written approval
of the appropriate federal banking agency, a significantly undercapitalized
institution may not pay any bonus to its senior executive officers or provide
compensation to any of them at a rate that exceeds such officer's average rate
of base compensation during the 12 calendar months preceding the month in
which the institution became undercapitalized.
Further restrictions and sanctions are required to be imposed on insured
depository institutions that are critically undercapitalized. For example, a
critically undercapitalized institution generally would be prohibited
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<PAGE>
from engaging in any material transaction other than in the ordinary course of
business without prior regulatory approval and could not, with certain
exceptions, make any payment of principal or interest on its subordinated debt
beginning 60 days after becoming critically undercapitalized. Most
importantly, however, except under limited circumstances, the appropriate
federal banking agency, not later than 90 days after an insured depository
institution becomes critically undercapitalized, is required to appoint a
conservator or receiver for the institution. The board of directors of an
insured depository institution would not be liable to the institution's
shareholders or creditors for consenting in good faith to the appointment of a
receiver or conservator or to an acquisition or merger as required by the
regulator.
In addition to measures taken under the prompt corrective action provisions,
commercial banking organizations may be subject to potential enforcement
actions by the federal regulators for unsafe or unsound practices in
conducting their businesses or for violations of any law, rule, regulation or
any condition imposed in writing by the agency or any written agreement with
the agency. See "--Potential Enforcement Actions" herein.
SAFETY AND SOUNDNESS STANDARDS
Effective July 1995, the federal banking agencies adopted final guidelines
establishing standards for safety and soundness, as required by Federal
Deposit Insurance Corporation Improvement Act. These standards are designed to
identify potential safety and soundness concerns and ensure that action is
taken to address those concerns before they pose a risk to the deposit
insurance funds. The standards relate to (i) internal controls, information
systems and internal audit systems; (ii) loan documentation; (iii) credit
underwriting; (iv) asset growth; (v) earnings; and (vi) compensation, fee and
benefits. If a federal banking agency determines that an institution fails to
meet any of these standards, the agency may require the institution to submit
to the agency an acceptable plan to achieve compliance with the standard. In
the event the institution fails to submit an acceptable plan within the time
allowed by the agency or fails in any material respect to implement an
accepted plan, the agency must, by order, require the institution to correct
the deficiency. Effective October 1, 1996, the federal banking agencies
promulgated safety and soundness regulations and accompanying interagency
compliance guidelines on asset quality and earnings standards. These new
guidelines provide six standards for establishing and maintaining a system to
identify problem assets and prevent those assets from deteriorating. The
institution should: (i) conduct periodic asset quality reviews to identify
problem assets; (ii) estimate the inherent losses in those assets and
establish reserves that are sufficient to absorb estimated losses; (iii)
compare problem asset totals to capital; (iv) take appropriate corrective
action to resolve problem assets; (v) consider the size and potential risks of
material asset concentrations; and (vi) provide periodic asset reports with
adequate information for management and the board of directors to assess the
level of asset risk. These new guidelines also set forth standards for
evaluating and monitoring earnings and for ensuring that earnings are
sufficient for the maintenance of adequate capital and reserves. If an
institution fails to comply with a safety and soundness standard, the
appropriate federal banking agency may require the institution to submit a
compliance plan. Failure to submit a compliance plan or to implement an
accepted plan may result in enforcement action.
PREMIUMS FOR DEPOSIT INSURANCE
The FDIC has adopted final regulations implementing a risk-based premium
system required by federal law, which establishes an assessment rate schedule
ranging from 0 cents per $100 of deposits to 27 cents per $100 of deposits
applicable to members of BIF. To determine the risk-based assessment for each
institution, the FDIC will categorize an institution as well capitalized,
adequately capitalized or undercapitalized based on its capital ratios using
the same standards used by the FDIC for its prompt corrective action
regulations. A well-capitalized institution is generally one that has at least
a 10% total risk-based capital ratio, a 6% Tier 1 risk-based capital ratio and
a 5% Tier 1 leverage capital ratio. An adequately capitalized institution will
generally have at least an 8% total risk-based capital ratio, a 4% Tier 1
risk-based capital ratio and a 4% Tier 1 leverage capital ratio. An
undercapitalized institution will generally be one that does not meet either
of the above definitions. The FDIC will also assign each institution to one of
three subgroups based upon reviews by the institution's primary federal or
state regulator, statistical analyses of financial statements and other
information relevant to evaluating the risk
52
<PAGE>
posed by the institution. The three supervisory categories are: financially
sound with only a few minor weaknesses (Group A), demonstrates weaknesses that
could result in significant deterioration (Group B), and poses a substantial
probability of loss (Group C).
The BIF assessment rates are set forth below for institutions based on their
risk-based assessment categorization.
ASSESSMENT RATES EFFECTIVE JANUARY 1, 1996*
<TABLE>
<CAPTION>
GROUP A GROUP B GROUP C
------- ------- -------
<S> <C> <C> <C>
Well Capitalized.................................. 0 3 17
Adequately Capitalized............................ 3 10 24
Undercapitalized.................................. 10 24 27
</TABLE>
- --------
*Assessment figures are expressed in terms of cents per $100 per deposits.
On September 30, 1996, Congress passed the Budget Act which capitalized the
Savings Association Insurance Fund ("SAIF") through a special assessment on
SAIF-insured deposits and required banks to share in part of the interest
payments on the Financing Corporation ("FICO") bonds which were issued to help
fund the federal government costs associated with the savings and loan crisis
of the late 1980's. The special thrift SAIF assessment has been set at 65.7
cents per $100 of deposits insured by SAIF as of March 31, 1995. Effective
January 1, 1997, for the FICO payments, SAIF-insured institutions will pay 3.2
cents per $100 in domestic deposits and BIF-insured institutions, like the
Banks, will pay 0.64 cents per $100 in domestic deposits. Full pro rata
sharing of the FICO interest payments takes effect on January 1, 2000.
The federal banking regulators are also authorized to prohibit depository
institutions and their holding companies from facilitating or encouraging the
shifting of deposits from SAIF to BIF for the purpose of evading thrift
assessment rates. The Budget Act also prohibits the FDIC from setting premiums
under the risk-based schedule above the amount needed to meet the designated
reserve ratio (currently 1.25%).
INTERSTATE BANKING AND BRANCHING
On September 29, 1994, the President signed into law the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate
Act"). Under the Interstate Act, beginning one year after the date of
enactment, a bank holding company that is adequately capitalized and managed
may obtain approval under the BHCA to acquire an existing bank located in
another state without regard to state law. A bank holding company is not
permitted to make such an acquisition if, upon consummation, it would control
(a) more than 10% of the total amount of deposits of insured depository
institutions in the United States or (b) 30% or more of the deposits in the
state in which the bank is located. A state may limit the percentage of total
deposits that may be held in that state by any one bank or bank holding
company if application of such limitation does not discriminate against out-
of-state banks or bank holding companies. An out-of-state bank holding company
may not acquire a state bank in existence for less than a minimum length of
time that may be prescribed by state law, except that a state may not impose
more than a five-year age requirement.
The Interstate Act also permits, beginning June 1, 1997, mergers of insured
banks located in different states and conversion of the branches of the
acquired bank into branches of the resulting bank. Each state may permit such
combinations earlier than June 1, 1997, and may adopt legislation to prohibit
interstate mergers after that date in that state or in other states by that
state's banks. The same concentration limits discussed in the preceding
paragraph apply. The Interstate Act also permits a national or state bank to
establish branches in a state other than its home state if permitted by the
laws of that state, subject to the same requirements and conditions as for a
merger transaction.
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The Interstate Act is likely to increase competition in the Company's market
areas especially from larger financial institutions and their holding
companies. It is difficult to assess the impact such likely increased
competition will have on the Company's operations.
Under the Interstate Act, the extent of a commercial bank's ability to
branch into a new state will depend on the law of the state. In October 1995,
California adopted an early "opt in" statute under the Interstate Act that
permits out-of-state banks to acquire California banks that satisfy a five-
year minimum age requirement (subject to exceptions for supervisory
transactions) by means of merger or purchases of assets, although entry
through acquisition of individual branches of California institutions and de
novo branching into California are not permitted. The Interstate Act and the
California branching statute will likely increase competition from out-of-
state banks in the markets in which the Company operates, although it is
difficult to assess the impact that such increased competition may have on the
Company's operations.
COMMUNITY REINVESTMENT ACT AND FAIR LENDING DEVELOPMENTS
The Banks are subject to certain fair lending requirements and reporting
obligations involving home mortgage lending operations and Community
Reinvestment Act ("CRA") activities. The CRA generally requires the federal
banking agencies to evaluate the record of a financial institution in meeting
the credit needs of its local communities, including low and moderate income
neighborhoods. In addition to substantial penalties and corrective measures
that may be required for a violation of certain fair lending laws, the federal
banking agencies may take compliance with such laws and CRA into account when
regulating and supervising other activities.
In May 1995, the federal banking agencies issued final regulations which
change the manner in which they measure a bank's compliance with its CRA
obligations. The final regulations adopt a performance-based evaluation system
which bases CRA ratings on an institution's actual lending, service and
investment performance, rather than the extent to which the institution
conducts needs assessments, documents community outreach activities or
complies with other procedural requirements.
In March 1994, the federal Interagency Task Force on Fair Lending issued a
policy statement on discrimination in lending. The policy statement describes
the three methods that federal agencies will use to prove discrimination:
overt evidence of discrimination, evidence of disparate treatment and evidence
of disparate impact.
In connection with its assessment of CRA performance, the appropriate bank
regulatory agency assigns a rating of "outstanding," "satisfactory," "needs to
improve" or "substantial noncompliance." Based on an examination conducted
during the first quarter of 1996, MPB was rated outstanding. CNB, which was
rated satisfactory in 1995, is currently undergoing a CRA exam.
POTENTIAL ENFORCEMENT ACTIONS
Commercial banking organizations, such as the Banks, and their institution-
affiliated parties, which include Greater Bay, may be subject to potential
enforcement actions by the Federal Reserve, the FDIC, the Superintendent
and/or the Comptroller for unsafe or unsound practices in conducting their
businesses or for violations of any law, rule, regulation or any condition
imposed in writing by the agency or any written agreement with the agency.
Enforcement actions may include the imposition of a conservator or receiver,
the issuance of a cease-and-desist order that can be judicially enforced, the
termination of insurance of deposits (in the case of the Banks), the
imposition of civil money penalties, the issuance of directives to increase
capital, the issuance of formal and informal agreements, the issuance of
removal and prohibition orders against institution affiliated parties and the
imposition of restrictions and sanctions under the prompt corrective action
provisions of the FDIC Improvement Act. Additionally, a holding company's
inability to serve as a source of strength to its subsidiary banking
organizations could serve as an additional basis for a regulatory action
against the holding company. Neither Greater Bay nor the Banks has been
subject to any such enforcement actions.
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<PAGE>
MANAGEMENT
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth certain information for the directors and certain
executive officers of Greater Bay and where indicated, CNB or MPB, as of
December 31, 1996.
<TABLE>
<CAPTION>
NAME POSITION(S) AGE
---- ----------- ---
<S> <C> <C>
DIRECTORS:
John M. Gatto Co-Chairman of the Board 59
Duncan L. Matteson Co-Chairman of the Board of Greater Bay;
Chairman of the Board of MPB 62
Rex D. Lindsay Vice-Chairman of the Board 71
Edwin E. van Bronkhorst Vice-Chairman of the Board 73
David L. Kalkbrenner Director; Chief Executive Officer and President
of Greater Bay and MPB 57
James E. Jackson Director 62
Glen McLaughlin Director 62
Dick J. Randall Director 65
Donald H. Seiler Director 68
Warren R. Thoits Director 74
EXECUTIVE OFFICERS:
C. Donald Allen Director, Chairman of the Board and Chief
Executive Officer of CNB 62
Murray B. Dey Director, Executive Vice President and Chief
Credit Officer of MPB 54
David R. Hood Executive Vice President; Senior Lending Officer
of Greater Bay and CNB 52
Hall Palmer Executive Vice President and Senior Trust
Officer of Greater Bay Trust Company and CNB 56
Steven C. Smith Executive Vice President; Chief Operating
Officer and Chief Financial Officer of Greater
Bay; Executive Vice President and Chief
Operating Officer of CNB 45
</TABLE>
JOHN M. GATTO, Co-Chairman of Greater Bay since November 1996. He was a
director of Cupertino from 1984 to the date of the Merger and has served as
Chairman of the Board of CNB since 1984. Mr. Gatto has been the sole
proprietor of Maria Enterprises, a development consultant company, since
December 1993. From 1984 to 1993, Mr. Gatto was an architect for Cypress
Properties, a real estate development company.
DUNCAN L. MATTESON, Co-Chairman of the Board of Directors of Greater Bay
since November 1996. He served as Chairman of the Board of Mid-Peninsula from
1994 until the date of the Merger and has served as Chairman of the Board of
MPB since 1987. He is President of the Matteson Companies, a diversified group
of real estate investment and property management corporations located in
Menlo Park. He has been actively involved in the real estate investment and
securities industries in the Palo Alto/Menlo Park Area since 1959. He is a
member of the Executive Committee of the Stanford Heart Council, and serves as
a trustee of the Palo Alto Medical Foundation. As an appointee of the
Governor, Mr. Matteson is Vice President of the board of directors
55
<PAGE>
of the Cow Palace. He is the Immediate Past-Chairman of the National Multi-
Housing Council, a group of the leading apartment owners and managers
throughout the United States.
REX D. LINDSAY, Vice-Chairman of the Board of Directors of Greater Bay since
November 1996. He served as a director of Cupertino from 1984 to the date of
the Merger and has served as a director of CNB since 1984. For approximately
the past five years, Mr. Lindsay has been a rancher and a private investor.
EDWIN E. VAN BRONKHORST, Vice-Chairman of the Board of Directors of Greater
Bay (formerly Mid-Peninsula) since 1994 and a director of MPB since 1987. Mr.
van Bronkhurst retired from the Hewlett-Packard Company in 1984 and was, prior
to his retirement, Senior Vice President, Chief Financial Officer and Treasurer
of that company and served on its board of directors from 1962 to 1984. He
currently serves as a member of the board of directors of the California Water
Service Company and Nellcor Puritan Bennett, a manufacturer of medical
equipment, and is a Trustee and Treasurer of the David & Lucille Packard
Foundation.
DAVID L. KALKBRENNER, President, Chief Executive Officer and a director of
Greater Bay and MPB. He has held such positions with Greater Bay (formerly Mid-
Peninsula) since 1994 and with MPB since 1987. He was employed by Crocker
National Bank from 1963 to 1986. From 1981 to 1986, he served as First Vice
President and Regional Manager of the Mid-Peninsula region, with administrative
offices located in Palo Alto. He was responsible for the administration of 14
full-service branches from San Carlos to Sunnyvale, a business banking center
in Palo Alto and the private banking office, also located in Palo Alto. From
1977 to 1981, he was Vice President and Manager of the main office of Crocker
National Bank in Palo Alto. He is a member of the board of directors of the
College of Notre Dame and is a former director of the Palo Alto Chamber of
Commerce and the Community Association for the Retarded.
JAMES E. JACKSON, director of Greater Bay since November 1996. He served as a
director of Cupertino from 1984 to the date of the Merger and has served as a
director of CNB since 1984. Mr. Jackson has been an attorney-at-law at the law
firm Jackson, Abdalah & Rodriguez, a Professional Corporation, since January
1989.
GLEN MCLAUGHLIN, director of Greater Bay since November 1996. He served as a
director of Cupertino from 1984 to the date of the Merger and has served as a
director of CNB since 1984. Mr. McLaughlin has also served as the Chairman of
Venture Leasing Associates, an equipment leasing company, since December 1986.
DICK J. RANDALL, director of Greater Bay since November 1996. He served as a
director of Cupertino from 1984 to the date of the Merger and has served as a
director of CNB since 1984. Mr. Randall has been a private investor and rancher
since 1993. From 1962 until his retirement in 1993, Mr. Randall served as the
President of The William Lyon Co., a real estate developer and construction
company.
DONALD H. SEILER, director of Greater Bay (formerly Mid-Peninsula) since 1994
and of MPB since 1987. He is the founder and managing partner of Seiler &
Company, Certified Public Accountants, in Redwood City and San Francisco. He
has been a certified public accountant in San Francisco and the Peninsula area
since 1952. He is presently a director of Ross Stores, Inc., serves on the
audit committee of Stanford Health Services, is a past-president of the Jewish
Community Federation of San Francisco, the Peninsula and Marin and Sonoma
Counties. He is on the board of directors of the Peninsula Community
Foundation.
WARREN R. THOITS, director of Greater Bay (formerly Mid-Peninsula) since 1994
and of MPB since 1987. He is a partner with the Palo Alto law firm of Thoits,
Love, Hershberger & McLean. He is a native of Palo Alto and a graduate of
Stanford University and its School of Law. Mr. Thoits has been very active in
community and charitable organizations, having served as President of the Palo
Alto Chamber of Commerce, the Palo Alto Rotary Club and as Chairman of the Palo
Alto Area Chapter of the American Red Cross. He was formerly a member of the
board of directors of Northern California Savings and Loan Association (now
Great Western Bank).
56
<PAGE>
C. DONALD ALLEN, Chairman of the Board and Chief Executive Officer of CNB
since 1990. He served as President and Chief Executive Officer of Cupertino
from 1985 to the date of the Merger. Mr. Allen was a founding Director and
President of CNB.
MURRAY B. DEY, Executive Vice President and Chief Credit Officer of MPB
since 1987. From 1964 to 1986 he worked for Crocker National Bank. From 1975
to 1982, he was the Vice President and Assistant Manager of the main office of
Crocker National Bank in Palo Alto. He became the Manager of that office in
1982 and held that position until 1984. From 1984 to 1986 he was the Area
Market Manager in the Palo Alto/Menlo Park area. He currently serves as a
member of the board of directors of Senior Coordinating Council of Palo Alto,
Inc., is President and Treasurer of the Home Equity Loan Program for Seniors,
Inc., and is a member of the Community Cabinet of the Lucille Packard
Children's Hospital at Stanford.
DAVID R. HOOD, Executive Vice President and Senior Lending Officer of
Greater Bay since November 1996. Since April 1995, he has served as Executive
Vice President and Senior Lending Officer of CNB. From April 1985 to March
1995, he held positions of Vice President, Senior Vice President and Senior
Loan Officer, Executive Vice President and Senior Lending Officer, and
President of University Bank & Trust. From 1967 to 1985 Mr. Hood held various
positions, the most recent of which was Vice President and Manager of the San
Mateo Business Loan Center for Wells Fargo Bank, N.A.
HALL PALMER, Executive Vice President and Senior Trust Officer of the
Greater Bay Trust Company since November 1996. Mr. Palmer joined CNB in May
1995 as Executive Vice President and Senior Trust Officer. Prior to that time,
from May 1987 to May 1995, Mr. Palmer served as Executive Vice President and
Senior Trust Officer for University Bank & Trust. From 1984 to 1987, Mr.
Palmer was Senior Vice President and Executive Trust Officer for Key Bank of
Oregon. From 1968 to 1984, Mr. Palmer was Manager and Trust Officer for Wells
Fargo Bank, N.A.
STEVEN C. SMITH, Executive Vice President, Chief Operating Officer and Chief
Financial Officer of Greater Bay since November 1996 and Executive Vice
President and Chief Operating Officer of CNB since 1995. He is a certified
public accountant who joined Cupertino and CNB in December 1993 as Senior Vice
President and Chief Financial Officer, and in 1995 was named Executive Vice
President and Chief Operating Officer of Cupertino and CNB. From July 1993 to
December 1993, Mr. Smith served as Executive Vice President and Chief
Financial Officer of Commercial Pacific Bank. From 1992 to July 1993, Mr.
Smith served as Executive Vice President and Chief Financial Officer of First
Charter Bank. From 1984 to 1991, Mr. Smith served as Senior Vice President of
Finance and Treasurer of Fidelity Federal Bank, a federal savings bank.
57
<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information concerning the compensation of
the Chief Executive Officer of the Company and five other executive officers
of Greater Bay or the Banks as of December 31, 1996 whose total salary and
bonus for the year ended December 31, 1996 exceeded $100,000. In all cases,
payment was for services in all capacities to Greater Bay (and its
predecessors, Mid-Peninsula and Cupertino) and the Banks during the fiscal
years ended December 31, 1996, 1995 and 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM AWARDS
----------------------- --------------------------
SECURITIES
OTHER UNDERLYING
ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL SALARY(1) BONUS(2) COMPENSATION(3) SARS(4) COMPENSATION(5)
POSITION YEAR ($) ($) ($) (#) ($)
- ------------------ ---- --------- -------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
David L. Kalkbrenner.... 1996 182,083 124,000 8,400 20,000 71,054
President and CEO of 1995 150,000 97,000 8,400 15,000 45,033
Greater Bay and MPB 1994 142,110 74,000 8,400 1,062 13,142
C. Donald Allen......... 1996 185,858 7,500 -- 3,816 69,129
Chairman and CEO 1995 161,177 7,500 -- -- 14,730
of CNB 1994 150,000 -- -- -- 13,020
Steven C. Smith......... 1996 139,020 70,860 6,000 9,131 28,501
Executive Vice 1995 127,250 48,000 6,000 8,968 7,133
President 1994 103,416 30,000 6,000 8,968 830
COO and CFO of Greater
Bay;
EVP and COO of CNB
David Hood.............. 1996 124,120 62,490 6,000 7,131 40,222
Executive Vice 1995 85,462 48,000 6,000 13,453 2,153
President 1994 -- -- -- -- --
Chief Senior Lending
Officer of
Greater Bay and CNB
Murray B. Dey........... 1996 124,425 80,000 6,000 6,000 34,959
Executive Vice 1995 120,000 67,000 6,000 -- 23,891
President and 1994 115,000 42,000 6,000 1,062 10,089
Chief Credit Officer of
MPB
Hall Palmer............. 1996 122,600 62,490 6,000 4,631 33,343
Executive Vice 1995 80,000 48,000 6,000 13,453 2,580
President and 1994 -- -- -- -- --
Senior Trust Officer
</TABLE>
- --------
(1) Annual salary includes cash compensation earned and received by executive
officers as well as amounts earned but deferred at the election of those
officers under the 401(k) Plan.
(2) Amounts indicated as bonus payments were earned for performance during
1996, 1995, and 1994 but paid in the first quarters of 1997, 1996, and
1995, respectively.
(3) No executive officer received perquisites or other personal benefits in
excess of the lesser of $50,000 or 10% of each such officer's total annual
salary and bonus during 1996, 1995, or 1994.
(4) Under the Greater Bay Bancorp 1996 Stock Option Plan (the "1996 Option
Plan"), options may be granted to directors and key, full-time salaried
officers and employees of Greater Bay, MPB and CNB. Options granted under
the 1996 Option Plan are either incentive options or non-statutory
options. Options granted under the 1996 Option Plan become exercisable in
accordance with a vesting schedule established at the time of grant.
Vesting may not extend beyond ten years from the date of grant. Options
granted under the 1996 Option Plan are adjusted to protect against
dilution in the event of certain changes in Greater Bay's
58
<PAGE>
capitalization, including stock splits and stock dividends. All options
granted to the named executive officers were incentive stock options and
have an exercise price equal to the fair market value of Greater Bay's
Common Stock on the date of grant. For David L. Kalkbrenner and Murray B.
Dey, the amounts shown have been adjusted to give effect to a five percent
stock dividend in December 1993, and the conversion ratio pertaining to the
merger transaction whereby WestCal merged with and into MPB and MPB became
a wholly owned subsidiary of the Company, which transaction was consummated
on October 7, 1994. For C. Donald Allen, Steven C. Smith, David R. Hood and
Hall Palmer, the amounts shown give effect to the conversion ratio
pertaining to the Merger between Greater Bay and Cupertino which became
effective on November 27, 1996.
(5) Amounts shown for David L. Kalkbrenner include $2,600 in director fees,
$3,612 in term life insurance premiums and $6,930 in 401(k) plan matching
contributions in 1994; $2,400 in director fees, $3,903 in term life
insurance premiums, $31,800 accrued under his Salary Continuation
Agreement and $6,930 in 401(k) plan matching contributions in 1995; and
$2,400 in director fees, $11,000 in term life insurance premiums, $50,529
accrued under his Salary Continuation Agreement and $7,125 in 401(k) plan
matching contributions in 1996.
Amounts shown for C. Donald Allen include $8,400 in directors' fees and
$4,620 in 401(k) plan matching contributions in 1994; $8,150 in directors'
fees, $4,650 in 401(k) plan matching contributions and $1,930 to fund
retirement benefits in 1995; and $9,734 in directors fees, $4,750 in 401(k)
plan matching contributions and $54,639 to fund retirement benefits in
1996.
Amounts shown for Steven C. Smith include $830 in 401(k) plan matching
contributions in 1994; $4,620 in 401(k) plan matching contributions and
$2,513 to fund retirement benefits in 1995; and $4,750 in 401(k) plan
matching contributions and $23,751 to fund retirement benefits in 1996.
Amounts shown for David C. Hood, who joined the Company in April 1995,
include $2,153 in payments to fund his retirement benefits in 1995; $4,750
in 401(k) plan matching contributions and $33,472 to fund his retirement
benefits in 1996.
Amounts shown for Murray B. Dey include $3,159 in term life insurance
premiums and $6,930 in 401(k) plan matching contributions in 1994; $2,060
in term life insurance premiums, $14,901 accrued under his Salary
Continuation Agreement and $6,930 in 401(k) plan matching contributions in
1995; and $4,155 in term life insurance premiums, $23,679 accrued under his
Salary Continuation Agreement and $7,125 in 401(k) plan matching
contributions in 1996.
Amounts shown for Hall Palmer, who joined the Company in May 1995, include
$2,580 to fund his retirement benefits in 1995; $4,750 in 401(k) plan
matching contributions and $28,593 to fund his retirement benefits in 1996.
59
<PAGE>
OPTION/SAR GRANTS TABLE
The following table provides the specified information concerning grants of
options to purchase Greater Bay's Common Stock made during the year ended
December 31, 1996 to the persons named in the Summary Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS IN FISCAL 1996 FOR OPTION TERM(1)
- -------------------------------------------------------------------- -----------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES IN PRICE(3) EXPIRATION 5% 10%
NAME GRANTED(2) FISCAL YEAR ($/SH) DATE ($) ($)
- ---- ---------- ------------ -------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
David L. Kalkbrenner.... 10,000 16.75 01/11/06 105,340 266,952
10,000 21.75 12/17/06 136,785 346,639
------
20,000 16.12
C. Donald Allen......... 816 15.94 05/16/02 8,180 20,730
3,000 21.75 12/17/06 41,035 103,992
------
3,816 3.08
Steven C. Smith......... 1,631 15.94 05/16/02 16,350 41,434
7,500 21.75 12/17/06 102,588 259,979
------
9,131 7.36
David Hood.............. 1,631 15.94 05/16/02 16,350 41,434
5,500 21.75 12/17/06 75,232 190,651
------
7,131 5.75
Murray B. Dey........... 3,000 16.75 01/17/06 31,602 80,086
3,000 21.75 12/17/06 41,035 103,992
------
6,000 4.84
Hall Palmer............. 1,631 15.94 05/16/02 16,350 41,434
3,000 21.25 12/17/06 41,036 103,992
------
4,631 3.74
</TABLE>
- --------
(1) Potential gains are net of exercise price, but before taxes associated
with exercise. These amounts represent certain assumed rates of
appreciation only, based on Securities and Exchange Commission (the
"Commission") rules. Actual gains, if any, on stock option exercises are
dependent on the future performance of the Common Stock, overall market
conditions and the optionholders' continued employment through the vesting
period. The amounts reflected in this table may not necessarily be
achieved. One share of stock purchased in 1996 at $15.94 would yield
profits of $10.02 per share at 5% appreciation over ten years, or $25.40
per share at 10% appreciation over the same period. One share of stock
purchased in 1996 at $21.75 would yield profits of $13.68 per share at 5%
appreciation over ten years, or $34.66 per share at 10% appreciation over
the same period. One share of stock purchased in 1996 at $16.75 would
yield profits of $10.53 per share at 5% appreciation over ten years, or
$26.70 per share at 10% appreciation over the same period.
(2) Generally, options granted under the 1996 Option Plan vest at the rate of
25% of the options granted for each full year of the optionee's continuous
employment with the Company and are exercisable to the extent vested. See
also "--Employment Contracts and Termination of Employment and Change in
Control Arrangements" herein.
(3) All options listed were granted at the estimated fair market value on the
date of grant.
60
<PAGE>
The following table provides the specified information concerning exercises
of options to purchase Greater Bay's Common Stock in the fiscal year ended
December 31, 1996, and unexercised options held as of December 31, 1996, by
the persons named in the Summary Compensation Table:
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT 12/31/96(#) 12/31/96($)(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David L. Kalkbrenner.... 4,917 27,068 12,307 32,894 161,550 255,302
C. Donald Allen......... -- -- 22,291 3,000 375,135 7,875
Steven C. Smith......... -- -- 20,282 10,489 274,109 61,728
David R. Hood........... -- -- 15,083 5,500 210,358 14,438
Murray B. Dey........... 1,203 6,514 6,550 7,366 89,916 47,554
Hall Palmer............. -- -- 15,083 3,000 210,358 7,875
</TABLE>
- --------
(1) Based on the closing price of Greater Bay's Common Stock on December 31,
1996, the last trading day in 1996, which was $24.375.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Effective March 3, 1992, the Company entered into a two-year employment
agreement with David L. Kalkbrenner which provides for automatic one-year
extensions until the agreement is terminated as described below. The
agreement, as amended, provides for, among other things: (a) a base salary of
$135,000 per year, as adjusted at the discretion of the board of directors;
(b) a discretionary annual bonus based upon the pre-tax net profits of the
Company, (c) payment to Mr. Kalkbrenner of his base salary (reduced by the
amount received by him from state disability insurance or workers'
compensation or other similar insurance through policies provided by the
Company) for a period of six months if he becomes disabled so that he is
unable to perform his duties; (d) four weeks annual vacation leave; (e) a
$500,000 life insurance policy; (f) an automobile allowance; and (g)
reimbursement for ordinary and necessary expenses incurred by Mr. Kalkbrenner
in connection with his employment. The agreement may be terminated with or
without cause, but if the agreement is terminated due to the occurrence of
circumstances that make it impossible or impractical for the Company to
conduct or continue its business, the loss by the Company of its legal
capacity to contract, the Company's breach of the terms of the agreement, or
in the Company's discretion by giving not less than 30 days' prior written
notice of termination, Mr. Kalkbrenner will be entitled to receive severance
compensation equal to 24 months of Mr. Kalkbrenner's then existing base
salary. The agreement further provides that in the event of a "change in
control" as defined therein and within a period of two years following
consummation of such change in control: (a) Mr. Kalkbrenner's employment is
terminated; or (b) any adverse change occurs in the nature and scope of Mr.
Kalkbrenner's position, responsibilities, duties, salary, benefits or location
of employment; or (c) any event occurs which reasonably constitutes a
demotion, significant diminution or constructive termination of
Mr. Kalkbrenner's employment, Mr. Kalkbrenner will be entitled to receive
severance compensation in an amount equal to two and one-half times his
average annual compensation for the five years immediately preceding the
change in control (or for such shorter time as Mr. Kalkbrenner was employed by
the Company).
The Company has entered into an Executive Salary Continuation Agreement with
C. Donald Allen effective as of August 1, 1993. The agreement provides for an
annual benefit of up to $100,000 to be paid to Mr. Allen or his designated
beneficiary over a period of one hundred and eighty (180) months. The benefit
is effective upon: (i) Mr. Allen's attainment of sixty-five (65) years of age
or his death or disability prior to such time if he were
61
<PAGE>
actively employed by the Company at the time; (ii) termination of his
employment by the Company without "cause" (as defined in the agreement); (iii)
termination or constructive termination of his employment by the Company after
the occurrence of a "change of control" in the Company or the Bank as defined
in the agreement. Although this agreement is intended to provide Mr. Allen with
an additional incentive to remain in the employ of the Company the agreement
states it shall not be deemed to constitute a contract of employment between
Mr. Allen and the Bank nor shall any provision of this agreement restrict the
right of Mr. Allen to terminate his employment. The agreement shall have no
impact or effect upon any separate written employment agreement which Mr. Allen
may have with the Company.
The Company has entered into an Employment Severance and Retirement Benefits
Agreements with Steven C. Smith effective as of September 1, 1994, David R.
Hood, effective as of April 14, 1994 and Hall Palmer effective as of May 1,
1995. Each employment agreement sets the officer's beginning annual salary,
subject to annual cost of living adjustments, with the initial salary payable
to Mr. Smith being set at $135,000 and the initial salary payable to Mr. Hood
and Mr. Palmer being set at $120,000. Each of these employment agreements
entitles the officer to severance benefits equal to 12 months' salary in the
event that such officer's employment is terminated for any reasons other than
death, disability, retirement or certain acts of misconduct, or in the event
that such officer resigns within one year after a change in control of the
Company upon a reduction in responsibilities or compensation or certain other
events deemed to be unfavorable to the officer. In addition, the agreements
entitle each officer to certain retirement benefits. See "--Retirement
Benefits" herein.
1996 STOCK OPTION PLAN
Greater Bay's Board of Directors has adopted the 1996 Option Plan for the
purpose of offering selected employees, directors and consultants an
opportunity to acquire a proprietary interest in the success of Greater Bay, or
to increase such interest, by purchasing shares of Common Stock. The 1996
Option Plan provides both for the grant of nonstatutory options as well as
incentive stock options intended to qualify under Section 422 of the Code.
Options granted under the 1996 Option Plan contain provision pursuant to
which, in the event of a Change in Control (as defined herein) of Greater Bay,
all unexercised options will become exercisable in full prior to such event,
unless the surviving corporation substitutes a substantially equivalent option.
The 1996 Option Plan provides that a "Change of Control" will occur in the
event of (i) a change in the composition of the Board of Directors, as a result
of which fewer than half of the incumbent directors are directors who either
(a) had been directors of Greater Bay (including prior service as a director of
either CNB or MPB) 24 months prior to such change or (b) were elected, or
nominated for election, to the Board of Directors with the affirmative votes of
at least a majority of the directors who had been directors of Greater Bay at
the effective time of the Merger or 24 months prior to such change (whichever
is later) and who were still in office at the time of the election or
nomination or (ii) any "person" (as such term is defined in Sections 13(d) and
14(d) of the Exchange Act) who is or become the beneficial owner, directly or
indirectly, of securities of Greater Bay representing 50% or more of the
combined voting power of Greater Bay's then outstanding securities.
RETIREMENT BENEFITS
Pursuant to the employment agreements between the Company and Messrs. Smith,
Hood and Palmer, each such officer or his spouse (should she survive him) is
entitled to retirement benefits based upon the proceeds of a split-dollar life
insurance policy maintained by the Company for each officer's benefit. Each
officer may begin receiving benefits upon reaching "retirement age" (as defined
in each agreement) or upon termination of employment, whichever occurs later.
Benefits are payable in the form of draws against the annual increase in the
cash surrender value of the officer's insurance policy from the time benefits
commence, up to a maximum annual draw of $55,000 for Mr. Hood, $44,000 for Mr.
Palmer and $60,000 for Mr. Smith (or such lesser amount as shall have vested,
as described below) with the increase in value in excess of such amount
becoming the property of the Company. The right to make such draws continues
during the lifetime of the officer and his surviving spouse, but in no case
longer than 40 years. The right to this retirement benefit vests at 1/84 of
such amount
62
<PAGE>
monthly following the effective date of such employment agreement, provided
that vesting is subject to acceleration upon the occurrence of certain events
following a Change in Control, as such term is defined in each employment
agreement. See "--Employment Contracts and Termination of Employment and
Change in Control Arrangements" herein.
COMPENSATION OF DIRECTORS
Directors of MPB received $200 for each board meeting attended during 1996.
Non-employee directors of MPB received $150 for each committee meeting
attended in 1996. Non-employee directors of MPB's Loan Committee received $500
per month retainer as well as $150 for each meeting attended during 1996.
Total compensation for MPB directors in 1996 was $63,590.
For 1996, the Chairman and Vice Chairman of the Board of CNB received annual
retainers of $15,000 and $12,500, respectively. All other directors received
an annual retainer of $10,000. In addition, the Chairman and Vice Chairman of
the Directors' Loan Committee received annual retainers of $4,500, and other
members received annual retainers of $4,000. The Chairman of the Audit
Committee received an annual retainer of $2,000, and Audit Committee members
each received an annual retainer of $1,500. The Trust Committee Chairman
received an annual retainer of $2,000 and Trust Committee members each
received $1,500. The Compensation Committee members each received an annual
retainer of $1,000. Total compensation for CNB directors in 1996 was $158,374.
For 1997, the Co-Chairmen of the Board will receive annual retainers of
$14,000. All other non-officer directors will receive annual retainers of
$9,000. Loan committee members will receive retainers of $6,000, Trust
Oversight Committee members will receive retainers of $3,000, and Audit
Committee and Investment / ALCO Committee members will receive retainers of
$1,000. Members of the Boards of Directors of CNB and MPB will receive
retainers of $1,800 each. The estimated total compensation for the Boards of
Directors in 1997 is $189,500.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Executive Committee acts as the Executive Compensation Committee of
Greater Bay. The members of the Executive Committee are Messrs. Gatto,
Matteson, Lindsay and van Bronkhorst. None of these persons serves or has
served as an officer or employee of the Company or the Banks. Mr. Matteson has
an interest in a building leased by MPB. See "--Certain Relationships and
Related Transactions" herein.
During 1996, the Executive Committee of Mid-Peninsula served as the
Compensation Committee for Mid-Peninsula and MNB. The members of the Committee
are Messrs. Kalkbrenner, Matteson, Seiler, Thoits and van Bronkhorst. No
person who served as a member of the Executive Committee during 1996 has ever
been an officer or employee of Mid-Peninsula or MPB, except Mr. Kalkbrenner.
During 1996, the Executive Committee of Cupertino served as the Compensation
Committee of Cupertino and CNB. The members of the Committee were Messrs.
Gatto, Lindsay, McLaughlin and Randall. No person who served as a member of
the Executive Committee of Cupertino during 1996 has ever been an officer or
employee of Cupertino or CNB.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than ten percent of a request class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the Commission. Executive offices, directors and greater than
ten-percent shareholders are required by Commission regulation to furnish to
the Company with copies of all Section 16(a) forms they file.
63
<PAGE>
Based solely on review of the copies of such forms furnished to the Company,
or written representation that no Form 5 was required, the Company believes
that during the fiscal year ended December 31, 1996 all executive officers,
directors and greater than ten-percent beneficial owners complied with all
Section 16(a) filing requirements applicable to them, except as follows:
Following the consummation of the Merger, a Form 4 reporting the change in
ownership as a result of the consummation of the Merger was filed late for
each of the former directors of Cupertino and executive officers of Cupertino
who became directors and executive officers of Greater Bay after the Merger.
These individuals included Messrs. Allen, Gatto, Hood, Jackson, Lindsay,
McLaughlin, Palmer, Randall and Smith.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company, through the Banks, has had, and expects in the future to have,
banking transactions in the ordinary course of its business with the Company's
directors and officers and their associates, including transactions with
corporations of which such persons are directors, officers or controlling
shareholders, on substantially the same terms (including interest rates and
collateral) as those prevailing for comparable transactions with others.
Management believes that such transactions comprising loans did not involve
more than the normal risk of collectibility or present other unfavorable
features. Loans to executive officers of the Company are subject to
limitations as to amount and purposes prescribed in part by the Federal
Reserve Act, as amended.
MPB leases its offices at 420 Cowper Street, Palo Alto, California 94301
from MPB Associates, a tenant-in-common arrangement in which three directors
of Greater Bay, Messrs. Matteson, Seiler and Thoits, and four other directors
of MPB hold an approximate 51% interest. The acquisition of MPB's leased
premises by MPB Associates in 1990 did not result in a change in the terms of
MPB's lease.
The lease, which originally expired in May 1993, has been extended through
January 2000. MPB pays an annual rental of $560,000 for the entire leased
space. Additionally, MPB pays real property taxes, utilities, and building
insurance, to the extent they exceed, on an annual basis, $1.40 per rentable
square foot, $1.60 per rentable square foot, and $0.17 per rentable square
foot, respectively. The rent will be adjusted every twelve months beginning
June 1, 1997 in accordance with the change in the immediately preceding year
over 1992 in the Consumer Price Index for All Urban Consumers, San
Francisco/Oakland metropolitan Area, All-Items (1967 = 100) as published by
the U.S. Department of Labor, Bureau of Labor Statistics. The lease also
contains a provision granting MPB a right of first refusal to purchase the
building during the term of the lease upon the same terms and conditions that
the landlord is willing to accept from a third party.
64
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information as of December 31, 1996 concerning
beneficial ownership of Greater Bay common stock for the directors and the
executive officers named in the Summary Compensation Table and as a group.
Unless otherwise indicated, each director and executive officer listed below
possesses sole voting power and sole investment power. All of the shares shown
in the following table are owned both of record and beneficially except as
indicated in the notes to the table. Greater Bay has only one class of stock
outstanding, Greater Bay Common Stock. There are no current arrangements known
to Greater Bay that may result in a change in control of Greater Bay. As of
December 31, 1996, no person known to Greater Bay owned more than five percent
(5%) of the outstanding shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(2)
---------------------
NAME AND ADDRESS OF NUMBER OF PERCENTAGE
BENEFICIAL OWNER(1) SHARES OF CLASS
------------------- ---------- ----------
<S> <C> <C>
C. Donald Allen(3)........................................ 55,482 1.70
Murray B. Dey(4).......................................... 21,575 0.67
John M. Gatto(5).......................................... 29,354 0.90
David Hood(6)............................................. 21,272 0.65
James E. Jackson(7)....................................... 49,162 1.51
David L. Kalkbrenner(8)................................... 34,264 1.05
Rex D. Lindsay(9)......................................... 51,141 1.57
Duncan L. Matteson(10).................................... 41,750 1.28
Glen McLaughlin(11)....................................... 45,365 1.39
Hall Palmer(12)........................................... 19,630 0.60
Dick J. Randall(13)....................................... 107,194 3.30
Donald H. Seiler(14)...................................... 26,580 0.82
Steven C. Smith(15)....................................... 30,886 0.95
Warren R. Thoits(16)...................................... 29,065 0.90
Edwin E. van Bronkhorst(17)............................... 25,330 0.78
All Directors and Executive Officers as a Group
(15 Persons)(18)......................................... 588,050 17.30
</TABLE>
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(1) The address for beneficial owners, all of whom are directors or executive
officers of Greater Bay, is the address of Greater Bay, 2860 West Bayshore
Road, Palo Alto, California 94303.
(2) Includes shares subject to stock options exercisable within 60 days of
December 31, 1996.
(3) Includes 414 shares held by Mr. Allen's wife, 3,579 shares held in an IRA
for Mr. Allen, 598 shares held in a 401(k) plan for Mr. Allen and 22,291
shares issuable upon the exercise of options which are exercisable within
60 days of December 31, 1996.
(4) Includes 14,563 shares held jointly with Mr. Dey's spouse as trustees of
the Murray B. Dey and Wendy H. Dey Trust dated April 23, 1982 and 4,889
shares subject to stock options exercisable within 60 days of December 31,
1996.
(5) Includes 12,662 shares issuable upon the exercise of options which are
exercisable within 60 days of December 31, 1996.
(6) Includes 5,526 shares held in Mr. Hood's IRA, 276 shares held jointly by
Mr. Hood and his spouse, 387 shares in his 401(k) plan and 15,083 shares
issuable upon the exercise of options which are exercisable within 60 days
of December 31, 1996.
(7) Includes 31,357 shares held jointly by James E. Jackson and his spouse,
1,522 shares held in an IRA for the benefit of Mr. Jackson's spouse, 7,015
shares held in an IRA for Mr. Jackson, 1,385 shares held in a 401(k) plan
for Mr. Jackson, 567 shares held by Mr. Jackson's spouse and 7,131 shares
issuable upon the exercise of options which are exercisable within 60 days
of December 31, 1996.
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(8) Includes 9,047 shares held in Mr. Kalkbrenner's IRA account and 15,254
shares subject to stock options exercisable within 60 days of December
31, 1996.
(9) Includes 36,927 shares held by the Rex D. and Leanor L. Lindsay Family
Trust, 1,906 shares held by Mr. Lindsay as custodian for his minor
grandchildren and 12,123 shares issuable upon the exercise of options
which are exercisable within 60 days of December 31, 1996.
(10) Includes 30,000 shares jointly with Mr. Matteson's spouse as trustees of
the Matteson Family Trust, 9,000 shares held by the Matteson Realty
Services, Inc. Defined Benefit Employees' Retirement Trust and 2,750
shares subject to stock options exercisable within 60 days of December
31, 1996.
(11) Includes 4,861 shares in Mr. McLaughlin's Keogh account, and 16,418
shares issuable upon the exercise of options which are exercisable within
60 days of December 31, 1996.
(12) Includes 1,548 shares held in Mr. Palmer's IRA, 797 shares in his 401(k)
plan and 15,083 shares subject to stock options exercisable within 60
days of December 31, 1996.
(13) Includes 98,334 shares held by the Dick J. and Carolyn L. Randall Trust
and 8,675 shares issuable upon the exercise of options which are
exercisable within 60 days of December 31, 1996.
(14) Includes 24,580 shares held jointly with Mr. Seiler's spouse as trustees
of the Seiler Family Trust and 2,000 shares subject to stock options
exercisable within 60 days of December 31, 1996.
(15) Includes 2,121 shares held in Mr. Smith's 401(k) plan, 8,743 shares held
jointly by Mr. Smith and his spouse and 20,022 shares issuable upon the
exercise of options which are exercisable within 60 days of December 31,
1996.
(16) Includes 9,832 shares held by Mr. Thoits as Trustee of the Warren R.
Thoits Trust dated December 30, 1983, 5,836 shares held by Thoits
Brothers, Inc., 10,647 shares for which Mr. Thoits is the record holding
trustee and 2,750 shares subject to stock options exercisable within 60
days of December 31, 1996.
(17) Includes 22,580 shares held jointly with Mr. van Bronkhorst's spouse as
Trustees of the E. E. van Bronkhorst Trust dated July 12, 1977 and 2,750
shares subject to stock options exercisable within 60 days of December
31, 1996.
(18) Includes 159,881 options exercisable within 60 days of December 31, 1996.
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
The Trust Preferred Securities and the Common Securities will be issued
pursuant to the terms of the Trust Agreement. The Trust Agreement will be
qualified as an indenture under the Trust Indenture Act. Initially, Wilmington
Trust Company will be the Delaware Trustee and the Property Trustee and will
act as trustee for the purpose of complying with the Trust Indenture Act. The
terms of the Trust Preferred Securities will include those stated in the Trust
Agreement and those made part of the Trust Agreement by the Trust Indenture
Act. This summary of certain terms and provisions of the Trust Preferred
Securities and the Trust Agreement does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all the
provisions of the Trust Agreement, including the definitions therein of
certain terms, and the Trust Indenture Act. Wherever particular defined terms
of the Trust Agreement (as amended or supplemented from time to time) are
referred to herein, such defined terms are incorporated herein. The form of
the Trust Agreement has been filed as an exhibit to the Registration Statement
of which this Prospectus forms a part.
GENERAL
Pursuant to the terms of the Trust Agreement, the Administrative Trustees on
behalf of GBB Capital will issue the Trust Preferred Securities and the Common
Securities (collectively, the "Trust Securities"). The Trust Preferred
Securities will represent preferred undivided beneficial interests in the
assets of GBB Capital and the holders thereof will be entitled to a preference
in certain circumstances with respect to Distributions and amounts payable on
redemption or liquidation over the Common Securities of GBB Capital (which
will be held by Greater Bay), as well as other benefits as described in the
Trust Agreement.
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The Trust Preferred Securities will represent undivided beneficial ownership
interests in GBB Capital and the holders thereof will be entitled to a
preference in certain circumstances with respect to Distributions and amounts
payable on redemption or liquidation over Common Securities, as well as other
benefits enumerated in the Guarantee Agreement. The Trust Preferred Securities
will rank pari passu, and payments will be made thereon pro rata, with the
Common Securities of GBB Capital except as described under "Subordination of
Common Securities of GBB Capital Held by Greater Bay" below.
Legal title to the Junior Subordinated Debentures will be held by the
Property Trustee in trust for the benefit of the holders of the Trust
Securities. The Guarantee executed by Greater Bay for the benefit of the
holders of the Trust Preferred Securities (the "Guarantee") will be a
guarantee on a subordinated basis and will not guarantee payment of
Distributions or amounts payable on redemption of the Trust Preferred
Securities or on liquidation of the Trust Preferred Securities if GBB Capital
does not have funds on hand available to make such payments. See "Description
of Guarantee."
DISTRIBUTIONS
Payment of Distributions. Distributions on the Trust Preferred Securities
will be payable at the annual rate of % of the stated Liquidation Amount of
$25, payable quarterly in arrears on the 15th day of March, June, September
and December in each year, commencing June 15, 1997 to the holders of the
Trust Preferred Securities on the relevant record dates (each date on which
Distributions are payable in accordance with the foregoing, a "Distribution
Date"). The amount of each Distribution due with respect to the Trust
Preferred Securities will include amounts accrued through the date the
Distribution payment is due. Distributions on the Trust Preferred Securities
will be payable to the holders thereof as they appear on the register of GBB
Capital on the relevant record date which, for so long as the Trust Preferred
Securities remain in book-entry form, will be one Business Day (as defined
below) prior to the relevant Distribution Date and, in the event the Trust
Preferred Securities are not in book-entry form, will be the first day of the
month in which the relevant Distribution Date occurs. Distributions will
accumulate from the date of original issuance. The first Distribution Date for
the Trust Preferred Securities will be June 15, 1997.
The amount of Distributions payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. In the event that any date on
which Distributions are payable on the Trust Preferred Securities is not a
Business Day, payment of the Distribution payable on such date will be made on
the next Business Day (and without any interest or other payment in respect to
any such delay) except that, if such Business Day is in the next succeeding
calendar year, payment of such Distribution shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date such payment was originally payable. As used in this Prospectus, a
"Business Day" shall mean any day other than a Saturday or a Sunday, or a day
on which banking institutions in the State of California are authorized or
required by law or executive order to remain closed or a day on which the
corporate trust office of the Property Trustee or the Indenture Trustee is
closed for business.
The funds of GBB Capital available for distribution to holders of its Trust
Preferred Securities will be limited to payments by Greater Bay under the
Junior Subordinated Debentures in which GBB Capital will invest the proceeds
from the issuance and sale of its Trust Preferred Securities. See "Description
of Junior Subordinated Debentures." If Greater Bay does not make interest
payments on the Junior Subordinated Debentures, the Property Trustee will not
have funds available to pay Distributions on the Trust Preferred Securities.
The payment of Distributions (if and to the extent GBB Capital has funds
legally available for the payment of such Distributions and cash sufficient to
make such payments) is guaranteed by Greater Bay. See "Description of
Guarantee."
Extension Period. So long as no Debenture Event of Default has occurred and
is continuing, Greater Bay has the right under the Indenture to defer the
payment of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 20 consecutive quarters with respect
to each such period (each, an "Extension Period"), provided that no Extension
Period may extend beyond the Stated Maturity of the
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Junior Subordinated Debentures. As a consequence of any such election,
quarterly Distributions on the Trust Preferred Securities will be deferred by
GBB Capital during any such Extension Period. Distributions to which holders
of Trust Preferred Securities are entitled will accumulate additional amounts
thereon at the rate per annum of % thereof, compounded quarterly from the
relevant Distribution Date, to the extent permitted under applicable law. The
term "Distributions" as used herein shall include any such additional
accumulated amounts. During any such Extension Period, Greater Bay may not (i)
declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of Greater Bay's
capital stock (which includes common and preferred stock) or (ii) make any
payment of principal, interest or premium, if any, on or repay, repurchase or
redeem any debt securities of Greater Bay that rank pari passu with or junior
in interest to the Junior Subordinated Debentures or make any guarantee
payments with respect to any guarantee by Greater Bay of the debt securities
of any subsidiary of Greater Bay if such guarantee ranks pari passu with or
junior in interest to the Junior Subordinated Debentures (other than (a)
dividends or distributions in common stock of Greater Bay, (b) any declaration
of a dividend in connection with the implementation of a stockholders' rights
plan, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto, (c) payments
under the Guarantee and (d) purchases of common stock for issuance of common
stock or rights under any of Greater Bay's benefit plans for its directors,
officers or employees) as consideration in an acquisition transaction. Prior
to the termination of any such Extension Period, Greater Bay may further
extend such Extension Period, provided that such extension does not cause such
Extension Period to exceed 20 consecutive quarters or extend beyond the Stated
Maturity. Upon the termination of any such Extension Period and the payment of
all amounts then due, and subject to the foregoing limitations, Greater Bay
may elect to begin a new Extension Period. Subject to the foregoing, there is
no limitation on the number of times that Greater Bay may elect to begin an
Extension Period. Greater Bay has no current intention of exercising its right
to defer payments of interest by extending the interest payment period on the
Junior Subordinated Debentures.
REDEMPTION
Mandatory Redemption. Upon the repayment or redemption at any time, in whole
or in part, of any Junior Subordinated Debentures, the proceeds from such
repayment or redemption shall be applied by the Property Trustee to redeem a
Like Amount (as defined below) of the Trust Securities, upon not less than 30
nor more than 60 days' notice of a date of redemption (the "Redemption Date"),
at the Redemption Price (as defined below). See "Description of Junior
Subordinated Debentures--Redemption." If less than all of the Junior
Subordinated Debentures are to be repaid or redeemed on a Redemption Date,
then the proceeds from such repayment or redemption shall be allocated to the
redemption of the Trust Securities pro rata. The amount of premium, if any,
paid by Greater Bay upon the redemption of all or any part of the Junior
Subordinated Debentures to be repaid or redeemed on a Redemption Date shall be
allocated to the redemption pro rata of the Trust Securities.
Optional Redemption. Greater Bay will have the right to redeem the Junior
Subordinated Debentures (i) on or after , 2002, in whole at any time or
in part from time to time at a redemption price equal to the accrued and
unpaid interest on the Junior Subordinated Debentures so redeemed to the date
fixed for redemption, plus 100% of the principal amount thereof, or (ii) at
any time, in whole (but not in part), upon the occurrence of a Tax Event, an
Investment Company Event or a Capital Treatment Event at a redemption price
equal to the accrued and unpaid interest on the Junior Subordinated Debentures
so redeemed to the date fixed for redemption, plus 100% of the principal
amount thereof, in each case subject to receipt of prior approval by the
Federal Reserve if then required under applicable capital guidelines or
policies of the Federal Reserve. See "Description of Junior Subordinated
Debentures--Redemption."
Tax Event Redemption, Investment Company Event Redemption, Capital Treatment
Event Redemption or Distribution of Junior Subordinated Debentures. If a Tax
Event, an Investment Company Event or a Capital Treatment Event shall occur
and be continuing, Greater Bay has the right to redeem the Junior Subordinated
Debentures in whole (but not in part) and thereby cause a mandatory redemption
of the Trust Securities in whole
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(but not in part) at the Redemption Price (as defined below) within 90 days
following the occurrence of such Tax Event, Investment Company Event or
Capital Treatment Event, in each case subject to receipt of prior approval by
the Federal Reserve if then required under applicable capital guidelines or
policies of the Federal Reserve. In the event a Tax Event, an Investment
Company Event or Capital Treatment Event has occurred and is continuing and
Greater Bay does not elect to redeem the Junior Subordinated Debentures and
thereby cause a mandatory redemption of the Trust Securities or to liquidate
GBB Capital and cause the Junior Subordinated Debentures to be distributed to
holders of the Trust Securities in liquidation of GBB Capital as described
below, such Trust Securities will remain outstanding and Additional Sums (as
defined below) may be payable on the Junior Subordinated Debentures.
DEFINITIONS
"Additional Sums" means the additional amounts as may be necessary to be
paid by Greater Bay with respect to the Junior Subordinated Debentures in
order that the amount of Distributions then due and payable by GBB Capital on
the outstanding Trust Securities of GBB Capital shall not be reduced as a
result of any additional taxes, duties and other governmental charges to which
GBB Capital has become subject as a result of a Tax Event.
"Like Amount" means (i) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount (as defined below) equal to that
portion of the principal amount of Junior Subordinated Debentures to be
contemporaneously redeemed in accordance with the Indenture, allocated to the
Common Securities and to the Trust Preferred Securities based upon the
relative Liquidation Amounts of such classes and the proceeds of which will be
used to pay the Redemption Price of such Trust Securities, and (ii) with
respect to a distribution of Junior Subordinated Debentures to holders of
Trust Securities in connection with a dissolution or liquidation of GBB
Capital, Junior Subordinated Debentures having a principal amount equal to the
Liquidation Amount of the Trust Securities of the holder to whom such Junior
Subordinated Debentures are distributed.
"Liquidation Amount" means the stated amount of $25 per Trust Security.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, allocated on a pro rata basis (based on
Liquidation Amounts) among the Trust Securities.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
Subject to Greater Bay and GBB Capital having received an opinion of counsel
to the effect that such distribution will not be a taxable event to the
holders of the Trust Preferred Securities and prior approval of the Federal
Reserve if so required under applicable capital guidelines or policies of the
Federal Reserve, Greater Bay will have the right at any time to liquidate GBB
Capital and, after satisfaction of the liabilities of creditors of GBB Capital
as provided by applicable law, cause the Junior Subordinated Debentures to be
distributed to the holders of Trust Securities in liquidation of GBB Capital.
After the liquidation date fixed for any distribution of Junior Subordinated
Debentures for Trust Preferred Securities (i) such Trust Preferred Securities
will no longer be deemed to be outstanding, (ii) the Depositary or its
nominee, as the record holder of the Trust Preferred Securities, will receive
a registered global certificate or certificates representing the Junior
Subordinated Debentures to be delivered upon such distribution and (iii) any
certificates representing Trust Preferred Securities not held by the
Depositary or its nominee will be deemed to represent the Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of such
Trust Preferred Securities, and bearing accrued and unpaid interest in an
amount equal to the accrued and unpaid Distributions on the Trust Preferred
Securities until such certificates are presented to the Administrative
Trustees or their agent for transfer or reissuance.
There can be no assurance as to the market prices for the Trust Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for the Trust Preferred Securities if a dissolution
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and liquidation of GBB Capital were to occur. Accordingly, the Trust Preferred
Securities that an investor may purchase, or the Junior Subordinated
Debentures that the investor may receive on dissolution and liquidation of GBB
Capital, may trade at a discount to the price that the investor paid to
purchase the Trust Preferred Securities offered hereby.
REDEMPTION PROCEDURES
Trust Preferred Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the applicable proceeds from the
contemporaneous redemption of the Junior Subordinated Debentures. Redemptions
of the Trust Preferred Securities shall be made and the Redemption Price shall
be payable on each Redemption Date only to the extent that GBB Capital has
funds on hand available for the payment of such Redemption Price. See "--
Subordination of Common Securities of GBB Capital Held by Greater Bay" herein
and "Description of Guarantee."
If GBB Capital gives a notice of redemption in respect of the Trust
Preferred Securities, then, by 12:00 noon, California time on the Redemption
Date, to the extent funds are available, the Property Trustee will deposit
with the Depositary funds sufficient to pay the aggregate Redemption Price and
will give the Depositary irrevocable instructions and authority to pay the
Redemption Price to the holders of such Trust Preferred Securities. See "Book-
Entry Issuance." If such Trust Preferred Securities are no longer in book-
entry form, the Property Trustee, to the extent funds are available, will
deposit with the paying agent for such Trust Preferred Securities funds
sufficient to pay the aggregate Redemption Price and will give such paying
agent irrevocable instructions and authority to pay the Redemption Price to
the holders thereof upon surrender of their certificates evidencing such Trust
Preferred Securities. Notwithstanding the foregoing, Distributions payable on
or prior to the Redemption Date shall be payable to the holders of such Trust
Preferred Securities on the relevant record dates for the related Distribution
Dates. If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, all rights of the holders of the
Trust Preferred Securities will cease, except the right of the holders of the
Trust Preferred Securities to receive the applicable Redemption Price, but
without interest on such Redemption Price, and such Trust Preferred Securities
will cease to be outstanding. In the event that any date fixed for redemption
of such Trust Preferred Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day falls in the next calendar year,
such payment will be made on the immediately preceding Business Day. In the
event that payment of the Redemption Price in respect of Trust Preferred
Securities called for redemption is improperly withheld or refused and not
paid either by GBB Capital or by Greater Bay pursuant to the Guarantee,
Distributions on such Trust Preferred Securities will continue to accrue at
the then applicable rate, from the Redemption Date originally established by
GBB Capital for such Trust Preferred Securities to the date such Redemption
Price is actually paid, in which case the actual payment date will be the date
fixed for redemption for purposes of calculating the Redemption Price. See
"Description of Guarantee."
Subject to applicable law (including, without limitation, United States
federal securities law), Greater Bay may at any time and from time to time
purchase outstanding Trust Preferred Securities by tender, in the open market
or by private agreement.
Payment of the Redemption Price on the Trust Preferred Securities and any
distribution of Junior Subordinated Debentures to holders of Trust Preferred
Securities shall be made to the applicable recordholders thereof as they
appear on the register of such Trust Preferred Securities on the relevant
record date, which date shall be one Business Day prior to the relevant
Redemption Date or Liquidation Date, as applicable; provided, however, that in
the event that any Trust Preferred Securities are not in book-entry form, the
relevant record date for such Trust Preferred Securities shall be a date at
least 15 days prior to the Redemption Date or Liquidation Date, as applicable.
In the case of a liquidation, the record date shall be no more than 45 days
before the Liquidation Date.
If less than all of the Trust Securities issued by GBB Capital are to be
redeemed on a Redemption Date, then the aggregate Redemption Price for such
Trust Securities to be redeemed shall be allocated pro rata to the
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Trust Preferred Securities and Common Securities based upon the relative
Liquidation Amounts of such classes. The particular Trust Preferred Securities
to be redeemed shall be selected by the Property Trustee from the outstanding
Trust Preferred Securities not previously called for redemption, by such
method as the Property Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions (equal to $25 or an
integral multiple thereof) of the Liquidation Amount of Trust Preferred
Securities. The Property Trustee shall promptly notify the Security registrar
in writing of the Trust Preferred Securities selected for redemption and, in
the case of any Trust Preferred Securities selected for partial redemption,
the Liquidation Amount thereof to be redeemed. For all purposes of the Trust
Agreement, unless the context otherwise requires, all provisions relating to
the redemption of Trust Preferred Securities shall relate to the portion of
the aggregate Liquidation Amount of Trust Preferred Securities which has been
or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Trust Securities at such
holder's registered address. Unless GBB Capital defaults in payment of the
applicable Redemption Price, on and after the Redemption Date, Distributions
will cease to accrue on such Trust Preferred Securities called for redemption.
SUBORDINATION OF COMMON SECURITIES OF GBB CAPITAL HELD BY GREATER BAY
Payment of Distributions on, and the Redemption Price of, the Trust
Preferred Securities and Common Securities, as applicable, shall be made pro
rata based on the Liquidation Amounts of the Trust Preferred Securities and
Common Securities; provided, however, that if on any Distribution Date or
Redemption Date a Debenture Event of Default shall have occurred and be
continuing, no payment of any Distribution on, or applicable Redemption Price
of, any of the Common Securities, and no other payment on account of the
redemption, liquidation or other acquisition of the Common Securities, shall
be made unless payment in full in cash of all accumulated and unpaid
Distributions on all of the outstanding Trust Preferred Securities for all
Distribution periods terminating on or prior thereto, or in the case of
payment of the applicable Redemption Price the full amount of such Redemption
Price on all of the outstanding Trust Preferred Securities then called for
redemption, shall have been made or provided for, and all funds available to
the Property Trustee shall first be applied to the payment in full in cash of
all Distributions on, or Redemption Price of, the Trust Preferred Securities
then due and payable.
In the case of any Event of Default under the Trust Agreement resulting from
a Debenture Event of Default, Greater Bay as holder of the Common Securities
will be deemed to have waived any right to act with respect to any such Event
of Default until the effect of all such Events of Default have been cured,
waived or otherwise eliminated. Until any such Events of Default have been so
cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the holders of the Trust Preferred Securities and not on behalf
of Greater Bay as holder of the Common Securities, and only the holders of the
Trust Preferred Securities will have the right to direct the Property Trustee
to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
Greater Bay will have the right at any time to terminate GBB Capital and
cause the Junior Subordinated Debentures to be distributed to the holders of
the Trust Preferred Securities. Such right is subject to Greater Bay having
received prior approval of the Federal Reserve if then required under
applicable capital guidelines or policies of the Federal Reserve. See "--
Distribution of Junior Subordinated Debentures" below.
In addition, pursuant to the Trust Agreement, GBB Capital shall
automatically terminate upon expiration of its term and shall earlier
terminate on the first to occur of: (i) certain events of bankruptcy,
dissolution or liquidation of Greater Bay; (ii) the distribution of a Like
Amount of the Junior Subordinated Debentures to the holder of its Trust
Securities, if Greater Bay, as Depositor, has delivered written direction to
the Property Trustee to terminate GBB Capital (which direction is optional
and, except as described above, wholly within the discretion of Greater Bay,
as Depositor); (iii) redemption of all of the Trust Preferred Securities as
described under "-- Redemption--Mandatory Redemption;" (iv) expiration of the
term of GBB Capital; and (v) the entry of an order for the dissolution of GBB
Capital by a court of competent jurisdiction.
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If an early termination occurs as described in clause (i), (ii), (iv) or (v)
above, GBB Capital shall be liquidated by the Trustees as expeditiously as the
Trustees determine to be possible by distributing, after satisfaction of
liabilities to creditors of GBB Capital as provided by applicable law, to the
holders of such Trust Securities a Like Amount of the Junior Subordinated
Debentures, unless such distribution is determined by the Property Trustee not
to be practical, in which event such holders will be entitled to receive out
of the assets of GBB Capital available for distribution to holders, after
satisfaction of liabilities to creditors of GBB Capital as provided by
applicable law, an amount equal to, in the case of holders of Trust Preferred
Securities, the aggregate of the Liquidation Amount plus accrued and unpaid
Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution can be paid only
in part because GBB Capital has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by
GBB Capital on the Trust Preferred Securities shall be paid on a pro rata
basis. The holder(s) of the Common Securities will be entitled to receive
distributions upon any such liquidation pro rata with the holders of the Trust
Preferred Securities, except that if a Debenture Event of Default has occurred
and is continuing, the Trust Preferred Securities shall have a priority over
the Common Securities.
Under current United States federal income tax law and interpretations and
assuming, as expected, GBB Capital is treated as a grantor trust, a
distribution of the Junior Subordinated Debentures should not be a taxable
event to holders of the Trust Preferred Securities. Should there be a change
in law, a change in legal interpretation, a Tax Event or other circumstances,
however, the distribution could be a taxable event to holders of the Trust
Preferred Securities. See "Certain Federal Income Tax Consequences." If
Greater Bay elects neither to redeem the Junior Subordinated Debentures prior
to maturity nor to liquidate GBB Capital and distribute the Junior
Subordinated Debentures to holders of the Trust Preferred Securities, the
Trust Preferred Securities will remain outstanding until the repayment of the
Junior Subordinated Debentures.
If Greater Bay elects to liquidate GBB Capital and thereby causes the Junior
Subordinated Debentures to be distributed to holders of the Trust Preferred
Securities in liquidation of GBB Capital, Greater Bay shall continue to have
the right to shorten the maturity of such Junior Subordinated Debentures,
subject to certain conditions. See "Description of Junior Subordinated
Debentures--General."
EVENTS OF DEFAULT; NOTICE
Any one of the following events that has occurred and is continuing
constitutes an "Event of Default" under the Trust Agreement (an "Event of
Default") with respect to the Trust Preferred Securities (whatever the reason
for such Event of Default and whether it shall be voluntary or involuntary or
be effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body):
(i) the occurrence of a Debenture Event of Default (see "Description of
Junior Subordinated Debentures--Debenture Events of Default"); or
(ii) default by the Property Trustee in the payment of any Distribution
when it becomes due and payable, and continuation of such default for a
period of 30 days; or
(iii) default by the Property Trustee in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Trustees in the Trust Agreement (other than
a default or breach in the performance of a covenant or warranty which is
addressed in clause (ii) or (iii) above), and continuation of such default
or breach, for a period of 60 days after there has been given, by
registered or certified mail, to the defaulting Issuer Trustee or Trustees
by the holders of at least 25% in aggregate Liquidation Amount of the
outstanding Trust Preferred Securities, a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by Greater Bay to appoint a
successor Property Trustee within 60 days thereof.
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Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Trust Preferred
Securities, the Administrative Trustees and Greater Bay, as Depositor, unless
such Event of Default shall have been cured or waived. Greater Bay as
Depositor, and the Administrative Trustees are required to file annually with
the Property Trustee a certificate as to whether or not they are in compliance
with all the conditions and covenants applicable to them under the Trust
Agreement.
If a Debenture Event of Default has occurred and is continuing, the Trust
Preferred Securities shall have a preference over the Common Securities upon
termination of GBB Capital as described above. See "--Liquidation Distribution
upon Termination" herein. Upon a Debenture Event of Default, unless the
principal of all the Junior Subordinated Debentures has already become due and
payable, either the Property Trustee or the holders of not less than 25% in
aggregate principal amount of the Junior Subordinated Debentures then
outstanding may declare all of the Junior Subordinated Debentures to be due
and payable immediately by giving notice in writing to Greater Bay (and to the
Property Trustee, if notice is given by holders of the Junior Subordinated
Debentures). If the Property Trustee or the holders of the Junior Subordinated
Debentures fail to declare the principal of all of the Junior Subordinated
Debentures due and payable upon a Debenture Event of Default, the holders of
at least 25% in Liquidation Amount of the Trust Preferred Securities then
outstanding shall have the right to declare the Junior Subordinated Debentures
immediately due and payable. In either event, payment of principal and
interest on the Junior Subordinated Debentures shall remain subordinated to
the extent provided in the Indenture. In addition, holders of the Trust
Preferred Securities have the right in certain circumstances to bring a Direct
Action (as hereinafter defined). See "Description of Junior Subordinated
Debentures--Enforcement of Certain Rights by Holders of Trust Preferred
Securities."
REMOVAL OF TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any of the Property Trustee, the Depositary Trustee or the Administrative
Trustees may be removed at any time by the holder of the Common Securities. If
a Debenture Event of Default has occurred and is continuing, the Property
Trustee and the Delaware Trustee may be removed at such time by the holders of
a majority in Liquidation Amount of the outstanding Trust Preferred
Securities. In no event will the holders of the Trust Preferred Securities
have the right to vote to appoint, remove or replace the Administrative
Trustees, which voting rights are vested exclusively in Greater Bay as the
holder of the Common Securities. No resignation or removal of a Trustee and no
appointment of a successor trustee shall be effective until the acceptance of
appointment by the successor trustee in accordance with the provisions of the
Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of Trust Property may
at the time be located, Greater Bay, as the holder of the Common Securities,
and the Administrative Trustees shall have power to appoint one or more
persons either to act as a co-trustee, jointly with the Property Trustee, of
all or any part of such Trust Property, or to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such person or persons in such
capacity any property, title, right or power deemed necessary or desirable,
subject to the provisions of the Trust Agreement. In case a Debenture Event of
Default has occurred and is continuing, the Property Trustee alone shall have
power to make such appointment.
MERGER OR CONSOLIDATION OF TRUSTEES
Any Person (as defined in the Trust Agreement) into which the Property
Trustee, the Delaware Trustee or any Administrative Trustee that is not a
natural person may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which such Issuer Trustee shall be a party, or any person
succeeding to all or substantially all the corporate trust business of such
Issuer Trustee, shall be the successor of such Issuer Trustee under the Trust
Agreement, provided such corporation shall be otherwise qualified and
eligible.
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MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF GBB CAPITAL
GBB Capital may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below. GBB Capital may, at the request of Greater Bay, with the
consent of the Administrative Trustees and without the consent of the holders
of the Trust Preferred Securities, merge with or into, consolidate,
amalgamate, or be replaced by or convey, transfer or lease its properties and
assets substantially as an entirety to a trust organized as such under the
laws of any State; provided, that (i) such successor entity either (a)
expressly assumes all of the obligations of GBB Capital with respect to the
Trust Preferred Securities or (b) substitutes for the Trust Preferred
Securities other securities having substantially the same terms as the Trust
Preferred Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Trust Preferred Securities rank in priority
with respect to distributions and payments upon liquidation, redemption and
otherwise, (ii) Greater Bay expressly appoints a trustee of such successor
entity possessing the same powers and duties as the Property Trustee as the
holder of the Junior Subordinated Debentures, (iii) the Successor Securities
are listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or other organization on which
the Trust Preferred Securities are then listed, if any, (iv) such merger,
consolidation, amalgamation, conveyance, transfer or lease does not cause the
Trust Preferred Securities to be downgraded by any nationally recognized
statistical rating organization which gives ratings to the Trust Preferred
Securities; (v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Trust Preferred Securities
(including any Successor Securities) in any material respect, (vi) such
successor entity has a purpose identical to that of GBB Capital, (vii) the
Successor Securities will be listed or traded on any national securities
exchange or other organization on which the Trust Preferred Securities may
then be listed, (viii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, Greater Bay has received an
opinion from independent counsel to GBB Capital experienced in such matters to
the effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Trust Preferred Securities
(including any Successor Securities) in any material respect, and (b)
following such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, neither GBB Capital nor such successor entity will be
required to register as an investment company under the Investment Company Act
and (ix) Greater Bay or any permitted successor or designee owns all of the
common securities of such successor entity and guarantees the obligations of
such successor entity under the Successor Securities at least to the extent
provided by the Guarantee. Notwithstanding the foregoing, GBB Capital shall
not, except with the consent of holders of 100% in Liquidation Amount of the
Trust Preferred Securities, consolidate, amalgamate, merge with or into, or be
replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or
lease would cause GBB Capital or the successor entity to be classified as
other than a grantor trust for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided below and under "Description of Guarantee--Amendments and
Assignment" and as otherwise required by law and the Trust Agreement, the
holders of the Trust Preferred Securities will have no voting rights.
The Trust Agreement may be amended from time to time by Greater Bay, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities, (i) to cure any ambiguity, correct or
supplement any provisions in the Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters
or questions arising under the Trust Agreement, which shall not be
inconsistent with the other provisions of the Trust Agreement, or (ii) to
modify, eliminate or add to any provisions of the Trust Agreement to such
extent as shall be necessary to ensure that GBB Capital will be classified for
United States federal income tax purposes as a grantor trust at all times that
any Trust Securities are outstanding or to ensure that GBB Capital will not be
required to register as an "investment company" under
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the Investment Company Act; provided, however, that in the case of clause (i),
such action shall not adversely affect in any material respect the interests
of any holder of Trust Securities, and any amendments of the Trust Agreement
shall become effective when notice thereof is given to the holders of the
Trust Securities. The Trust Agreement may be amended by the Issuer Trustees
and the Company with (i) the consent of holders representing not less than a
majority of the aggregate Liquidation Amount of the outstanding Trust
Securities, and (ii) receipt by the Issuer Trustees of an opinion of counsel
to the effect that such amendment or the exercise of any power granted to the
Issuer Trustees in accordance with such amendment will not affect GBB
Capital's status as a grantor trust for United States federal income tax
purposes or GBB Capital's exemption from status as an "investment company"
under the Investment Company Act, provided that without the consent of each
holder of Trust Securities, the Trust Agreement may not be amended to (i)
change the amount or timing of any Distribution on the Trust Securities or
otherwise adversely affect the amount of any Distribution required to be made
in respect of the Trust Securities as of a specified date or (ii) restrict the
right of a holder of Trust Securities to institute suit for the enforcement of
any such payment on or after such date.
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Issuer Trustees shall not (i) direct the time, method and place
of conducting any proceeding for any remedy available to the Indenture
Trustee, or executing any trust or power conferred on the Property Trustee
with respect to the Junior Subordinated Debentures, (ii) waive any past
default that is waivable under the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the Junior
Subordinated Debentures shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture or the Junior
Subordinated Debentures, where such consent shall be required, without, in
each case, obtaining the prior approval of the holders of a majority in
aggregate Liquidation Amount of all outstanding the Trust Preferred
Securities; provided, however, that where a consent under the Indenture would
require the consent of each holder of Junior Subordinated Debentures affected
thereby, no such consent shall be given by the Property Trustee without the
prior consent of each holder of the Trust Preferred Securities. The Issuer
Trustees shall not revoke any action previously authorized or approved by a
vote of the holders of the Trust Preferred Securities except by subsequent
vote of the holders of the Trust Preferred Securities. The Property Trustee
shall notify each holder of the Trust Preferred Securities of any notice of
default with respect to the Junior Subordinated Debentures. In addition to
obtaining the foregoing approvals of such holders of the Trust Preferred
Securities, prior to taking any of the foregoing actions, the Issuer Trustees
shall obtain an opinion of counsel experienced in such matters to the effect
that GBB Capital will not be classified as other than a grantor trust for
United States federal income tax purposes.
Any required approval of holders of the Trust Preferred Securities may be
given at a meeting of holders of Trust Preferred Securities convened for such
purpose or pursuant to written consent. The Property Trustee will cause a
notice of any meeting at which holders of the Trust Preferred Securities are
entitled to vote, or of any matter upon which action by written consent of
such holders is to be taken, to be given to each holder of record of the Trust
Preferred Securities in the manner set forth in the Trust Agreement.
No vote or consent of the holders of the Trust Preferred Securities will be
required for GBB Capital to redeem and cancel the Trust Preferred Securities
in accordance with the Trust Agreement.
Notwithstanding that holders of the Trust Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Trust Preferred Securities that are owned by Greater Bay, the Trustees or any
affiliate of Greater Bay or any Trustees, shall, for purposes of such vote or
consent, be treated as if they were not outstanding.
GLOBAL TRUST PREFERRED SECURITIES
The Trust Preferred Securities will be represented by one or more global
certificates registered in the name of the Depositary or its nominee ("Global
Trust Preferred Security"). Beneficial interests in the Trust Preferred
Securities will be shown on, and transfers thereof will be effected only
through, records maintained by
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participants in the Depositary. Except as described below, Trust Preferred
Securities in certificated form will not be issued in exchange for the global
certificates. See "Book-Entry Issuance."
A global security shall be exchangeable for Trust Preferred Securities
registered in the names of persons other than the Depositary or its nominee
only if (i) the Depositary notifies Greater Bay that it is unwilling or unable
to continue as a depositary for such global security and no successor
depositary shall have been appointed, or if at any time the Depositary ceases
to be a clearing agency registered under the Exchange Act, at a time when the
Depositary is required to be so registered to act as such depositary, (ii)
Greater Bay in its sole discretion determines that such global security shall
be so exchangeable, or (iii) there shall have occurred and be continuing an
Event of Default under the Indenture. Any global security that is exchangeable
pursuant to the preceding sentence shall be exchangeable for definitive
certificates registered in such names as the Depositary shall direct. It is
expected that such instructions will be based upon directions received by the
Depositary with respect to ownership of beneficial interests in such global
security. In the event that Trust Preferred Securities are issued in
definitive form, such Trust Preferred Securities will be in denominations of
$25 and integral multiples thereof and may be transferred or exchanged at the
offices described below.
Unless and until it is exchanged in whole or in part for the individual
Trust Preferred Securities represented thereby, a Global Trust Preferred
Security may not be transferred except as a whole by the Depositary to a
nominee of such the Depositary or by a nominee of such the Depositary to such
Depositary or another nominee of such Depositary or by the Depositary or any
nominee to a successor Depositary or any nominee of such successor.
Payments on Trust Preferred Securities represented by a global security will
be made to the Depositary, as the depositary for the Trust Preferred
Securities. In the event the Trust Preferred Securities are issued in
definitive form, Distributions will be payable, the transfer of the Trust
Preferred Securities will be registrable, and Trust Preferred Securities will
be exchangeable for Trust Preferred Securities of other denominations of a
like aggregate Liquidation Amount, at the corporate office of the Property
Trustee, or at the offices of any paying agent or transfer agent appointed by
the Administrative Trustees, provided that payment of any Distribution may be
made at the option of the Administrative Trustees by check mailed to the
address of the persons entitled thereto or by wire transfer. In addition, if
the Trust Preferred Securities are issued in certificated form, the record
dates for payment of Distributions will be the first day of the month in which
the relevant Distribution Date occurs. For a description of the terms of the
depositary arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "Book-Entry Issuance."
Upon the issuance of a Global Trust Preferred Security, and the deposit of
such Global Trust Preferred Security with or on behalf of the Depositary, the
Depositary for such Global Trust Preferred Security or its nominee will
credit, on its book-entry registration and transfer system, the respective
aggregate Liquidation Amounts of the individual Trust Preferred Securities
represented by such Global Trust Preferred Securities to the accounts of
Participants. Such accounts shall be designated by the dealers, underwriters
or agents with respect to such Trust Preferred Securities. Ownership of
beneficial interests in a Global Trust Preferred Security will be limited to
Participants or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global Trust Preferred Security will
be shown on, and the transfer of that ownership will be effected only through,
records maintained by the applicable Depositary or its nominee (with respect
to interests of Participants) and the records of Participants (with respect to
interests of persons who hold through Participants). The laws of some states
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and such laws may impair the
ability to transfer beneficial interests in a Global Trust Preferred Security.
So long as the Depositary for a Global Trust Preferred Security, or its
nominee, is the registered owners of such Global Trust Preferred Security,
such Depositary or such nominee, as the case may be, will be considered the
sole owner or holder of the Trust Preferred Securities represented by such
Global Trust Preferred Security for all purposes under the Trust Agreement
governing such Trust Preferred Securities. Except as provided below, owners of
beneficial interests in a Global Trust Preferred Security will not be entitled
to have any of the
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individual Trust Preferred Securities represented by such Global Trust
Preferred Security registered in their names, will not receive or be entitled
to receive physical delivery of any such Trust Preferred Securities in
definitive form and will not be considered the owners or holders thereof under
the Trust Agreement.
None of Greater Bay, the Property Trustee, any Paying Agent, or the
Securities Registrar (defined below) for such Trust Preferred Securities will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests of the Global
Trust Preferred Security representing such Trust Preferred Securities or for
maintaining supervising or reviewing any records relating to such beneficial
ownership interests.
Greater Bay expects that the Depositary for Trust Preferred Securities or
its nominee, upon receipt of any payment of the Liquidation Amount or
Distributions in respect of a permanent Global Trust Preferred Security
immediately will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interest in the aggregate
Liquidation Amount of such Global Trust Preferred Security as shown on the
records of such Depositary or its nominee. Greater Bay also expects that
payments by Participants to owners of beneficial interests in such Global
Trust Preferred Security held through such Participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name." Such payments will be the responsibility of such Participants.
If the Depositary for the Trust Preferred Securities is at any time
unwilling, unable or ineligible to continue as depositary and a successor
depositary is not appointed by Greater Bay within 90 days, GBB Capital will
issue individual Trust Preferred Securities in exchange for the Global Trust
Preferred Security. In addition, GBB Capital may at any time and in its sole
discretion, subject to any limitations described herein relating to such Trust
Preferred Securities, determine not to have any Trust Preferred Securities
represented by one or more Global Trust Preferred Securities and, in such
event, will issue individual Trust Preferred Securities in exchange for the
Global Trust Preferred Security or Securities representing the Trust Preferred
Securities. Further, if GBB Capital so specifies with respect to the Trust
Preferred Securities, an owner of a beneficial interest in a Global Trust
Preferred Security representing Trust Preferred Securities may, on terms
acceptable to Greater Bay, the Property Trustee and the Depositary for such
Global Trust Preferred Security, receive individual Trust Preferred Securities
in exchange for such beneficial interests, subject to any limitations
described herein. In any such instance, an owner of a beneficial interest in a
Global Trust Preferred Security will be entitled to physical delivery of
individual Trust Preferred Securities represented by such Global Trust
Preferred Security equal in Liquidation Amount to such beneficial interest and
to have such Trust Preferred Securities registered in its name. Individual
Trust Preferred Securities so issued will be issued in denominations, unless
otherwise specified by GBB Capital, of $25 and integral multiples thereof.
PAYMENT AND PAYING AGENCY
Payments in respect of the Trust Preferred Securities shall be made to the
Depositary, which shall credit the relevant accounts at the Depositary on the
applicable Distribution Dates or, if any of the Trust Preferred Securities are
not held by the Depositary, such payments shall be made by check mailed to the
address of the holder entitled thereto as such address shall appear on the
Register. The paying agent (the "Paying Agent") shall initially be the
Property Trustee and any co-paying agent chosen by the Property Trustee and
acceptable to the Administrative Trustees and Greater Bay. The Paying Agent
shall be permitted to resign as Paying Agent upon 30 days' written notice to
the Property Trustee and Trust Preferred. In the event that the Property
Trustee shall no longer be the Paying Agent, the Administrative Trustees shall
appoint a successor (which shall be a bank or trust company acceptable to the
Administrative Trustees and Greater Bay) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as registrar and transfer agent for the Trust
Preferred Securities. Registration of transfers of the Trust Preferred
Securities will be effected without charge by or on behalf of GBB Capital, but
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upon payment of any tax or other governmental charges that may be imposed in
connection with any transfer or exchange. GBB Capital will not be required to
register or cause to be registered the transfer of the Trust Preferred
Securities after such Trust Preferred Securities have been called for
redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than upon the occurrence and during the
continuance of an Event of Default, undertakes to perform only such duties as
are specifically set forth in the Trust Agreement and, after such Event of
Default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to
this provision, the Property Trustee is under no obligation to exercise any of
the powers vested in it by the Trust Agreement at the request of any holder of
Trust Preferred Securities unless it is offered reasonable indemnity against
the costs, expenses and liabilities that might be incurred thereby. If no
Event of Default has occurred and is continuing and the Property Trustee is
required to decide between alternative causes of action, construe ambiguous
provisions in the Trust Agreement or is unsure of the application of any
provision of the Trust Agreement, and the matter is not one on which holders
of the Trust Preferred Securities are entitled under the Trust Agreement to
vote, then the Property Trustee shall take such action as is directed by
Greater Bay and if not so directed, shall take such action as it deems
advisable and in the best interests of the holders of the Trust Securities and
will have no liability except for its own bad faith, negligence or willful
misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate GBB Capital in such a way that GBB Capital will not
be deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a
corporation for United States federal income tax purposes and so that the
Junior Subordinated Debentures will be treated as indebtedness of Greater Bay
for United States federal income tax purposes. In this connection, Greater Bay
and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust of GBB Capital or
the Trust Agreement, that Greater Bay and the Administrative Trustees
determine in their discretion to be necessary or desirable for such purposes,
as long as such action does not materially adversely affect the interests of
the holders of the Trust Preferred Securities. Holders of the Trust Preferred
Securities have no preemptive or similar rights.
GBB Capital may not borrow money or issue debt or mortgage or pledge any of
its assets.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures will be issued under the Junior
Subordinated Indenture, dated as of , 1997 (the "Indenture"),
between Greater Bay and the Indenture Trustee. The following summary of the
terms and provisions of the Junior Subordinated Debentures and the Indenture
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, the Indenture, which has been filed as an exhibit to
the Registration Statement of which this Prospectus forms a part, and to the
Trust Indenture Act. The Indenture is qualified under the Trust Indenture Act.
Whenever particular defined terms of the Indenture are referred to herein,
such defined terms are incorporated herein or therein by reference.
Concurrently with the issuance of the Trust Preferred Securities, GBB
Capital will invest the proceeds thereof, together with the consideration paid
by Greater Bay for the Common Securities, in Junior Subordinated Debentures
issued by Greater Bay. The Junior Subordinated Debentures will be issued as
unsecured debt under the Indenture.
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GENERAL
The Junior Subordinated Debentures will bear interest at the annual rate of
% of the principal amount thereof, payable quarterly in arrears on the 15th
day of March, June, September and December of each year (each, an "Interest
Payment Date"), commencing June 15, 1997, to the person in whose name each
Junior Subordinated Debenture is registered, subject to certain exceptions, at
the close of business on the Business Day next preceding such Interest Payment
Date. Notwithstanding the above, in the event that either the (i) Junior
Subordinated Debentures are held by the Property Trustee and the Trust
Preferred Securities are no longer in book-entry only form or (ii) the Junior
Subordinated Debentures are not represented by a Global Subordinated Debenture
(as defined herein), the record date for such payment shall be the first day
of the month in which such payment is made. The amount of each interest
payment due with respect to the Junior Subordinated Debentures will include
amounts accrued through the date the interest payment is due. It is
anticipated that, until the liquidation, if any, of GBB Capital, each Junior
Subordinated Debenture will be held in the name of the Property Trustee in
trust for the benefit of the holders of the Trust Preferred Securities. The
amount of interest payable for any period will be computed on the basis of a
360-day year of twelve 30-day months. In the event that any date on which
interest is payable on the Junior Subordinated Debentures is not a Business
Day, then payment of the interest payable on such date will be made on the
next Business Day (and without any interest or other payment in respect of any
such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on the
date such payment was originally payable. Accrued interest that is not paid on
the applicable Interest Payment Date will bear additional interest on the
amount thereof (to the extent permitted by law) at the rate per annum of %
thereof, compounded quarterly. The term "interest" as used herein shall
include quarterly interest payments, interest on quarterly interest payments
not paid on the applicable Interest Payment Date and Additional Sums (as
defined below), as applicable.
The Junior Subordinated Debentures will mature on , 2026
(such date, as it may be shortened as hereinafter described, the "Stated
Maturity"). Such date may be shortened once at any time by Greater Bay to any
date not earlier than , 2002 subject to Greater Bay having
received prior approval of the Federal Reserve if then required under
applicable capital guidelines or policies of the Federal Reserve. In the event
that Greater Bay elects to shorten the Stated Maturity of the Junior
Subordinated Debentures, it shall give notice to the Indenture Trustee, and
the Indenture Trustee shall give notice of such shortening to the holders of
the Junior Subordinated Debentures no less than 90 days prior to the
effectiveness thereof.
The Junior Subordinated Debentures will be unsecured and will rank junior
and be subordinate in right of payment to all Senior and Subordinated Debt of
Greater Bay. Because Greater Bay is a holding company, the right of Greater
Bay to participate in any distribution of assets of any subsidiaries,
including Greater Bay's Banks, upon any such subsidiaries' liquidation or
reorganization or otherwise (and thus the ability of holders of the Trust
Preferred Securities to benefit indirectly from such distribution), is subject
to the prior claims of creditors of that subsidiary, except to the extent that
Greater Bay may itself be recognized as a creditor of that subsidiary.
Accordingly, the Junior Subordinated Debentures will be effectively
subordinated to all existing and future liabilities of the Banks, and holders
of Junior Subordinated Debentures should look only to the assets of Greater
Bay for payments on the Junior Subordinated Debentures. The Indenture does not
limit the incurrence or issuance of other secured or unsecured debt of Greater
Bay, including Senior and Subordinated Debt, whether under the Indenture or
any existing or other indenture that Greater Bay may enter into in the future
or otherwise. See "--Subordination" below.
OPTION TO DEFER INTEREST PAYMENT PERIOD
So long as no Debenture Event of Default has occurred and is continuing,
Greater Bay has the right under the Indenture at any time during the term of
the Junior Subordinated Debentures to defer the payment of interest at any
time or from time to time for a period not exceeding 20 consecutive quarters
(each such period an "Extension Period"), provided that no Extension Period
may extend beyond the Stated Maturity. At the end of such Extension Period,
Greater Bay must pay all interest then accrued and unpaid (together with
interest thereon
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at the annual rate of %, compounded quarterly, to the extent permitted by
applicable law). During an Extension Period, interest will continue to accrue
and holders of Junior Subordinated Debentures will be required to accrue
interest income for United States federal income tax purposes. See "Certain
Federal Income Tax Consequences--Interest Income and Original Issue Discount."
During any such Extension Period, Greater Bay may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of Greater Bay's capital stock or
(ii) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of Greater Bay (including other
Junior Subordinated Debentures) that rank pari passu with or junior in
interest to the Junior Subordinated Debentures or (iii) make any guarantee
payments with respect to any guarantee by Greater Bay of the debt securities
of any subsidiary of Greater Bay if such guarantee ranks pari passu with or
junior in interest to the Junior Subordinated Debentures (other than (a)
dividends or distributions in common stock of Greater Bay, (b) any declaration
of a dividend in connection with the implementation of a stockholders' rights
plan, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto, (c) payments
under the Guarantee, and (d) purchases of common stock related to the issuance
of common stock or rights under any of Greater Bay's benefit plans for its
directors, officers or employees). Prior to the termination of any such
Extension Period, Greater Bay may further extend such Extension Period,
provided that such extension does not cause such Extension Period to exceed 20
consecutive quarters or extend beyond the Stated Maturity. Upon the
termination of any such Extension Period and the payment of all amounts then
due on any Interest Payment Date, Greater Bay may elect to begin a new
Extension Period subject to the above requirements. No interest shall be due
and payable during an Extension Period, except at the end thereof. Greater Bay
must give the Property Trustee, the Administrative Trustees and the Indenture
Trustee notice of its election of any Extension Period at least one Business
Day prior to the earlier of (i) the date the Distributions on the Trust
Preferred Securities would have been payable except for the election to begin
or extend such Extension Period or (ii) the date the Administrative Trustees
are required to give notice to the New York Exchange, the Nasdaq National
Market or any applicable stock exchange or automated quotation system on which
the Trust Preferred Securities are then listed or quoted or to the holders of
the Trust Preferred Securities of the record date or the date such
Distributions are payable, but in any event not less than one Business Day
prior to such record date. The Indenture Trustee shall give notice of Greater
Bay's election to begin or extend a new Extension Period the holders of the
Trust Preferred Securities. There is no limitation on the number of times that
Greater Bay may elect to begin an Extension Period.
Distributions on the Trust Preferred Securities will be deferred by GBB
Capital during any such Extension Period. See "Description of the Trust
Preferred Securities--Distributions." For a description of certain federal
income tax consequences and special considerations applicable to any such
Junior Subordinated Debentures, see "Certain Federal Income Tax Consequences."
ADDITIONAL SUMS
If GBB Capital is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, Greater Bay will pay as
additional amounts on the Junior Subordinated Debentures such amounts
("Additional Sums") as shall be required so that the Distributions payable by
GBB Capital shall not be reduced as a result of any such additional taxes,
duties or other governmental charges.
REDEMPTION
Subject to Greater Bay having received prior approval of the Federal
Reserve, if then required under applicable capital guidelines or policies of
the Federal Reserve, the Junior Subordinated Debentures are redeemable prior
to maturity at the option of Greater Bay (i) on or after , 2002, in
whole at any time or in part from time to time, or (ii) at any time in whole
(but not in part), upon the occurrence and during the continuance of a Tax
Event, an Investment Company Event or a Capital Treatment Event, in each case
at a
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redemption price equal to the accrued and unpaid interest on the Junior
Subordinated Debentures so redeemed to the date fixed for redemption, plus
100% of the principal amount thereof.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Junior Subordinated
Debentures to be redeemed at such holder's registered address. Unless Greater
Bay defaults in payment of the redemption price, on and after the redemption
date interest ceases to accrue on such Junior Subordinated Debentures or
portions thereof called for redemption.
If GBB Capital is required to pay additional taxes, duties or other
governmental charges as a result of a Tax Event, Greater Bay will pay as
additional amounts on the Junior Subordinated Debentures the Additional Sums
(as defined herein).
The Junior Subordinated Debentures will not be subject to any sinking fund.
DISTRIBUTION UPON LIQUIDATION
As described under "Description of the Trust Preferred Securities--
Liquidation Distribution Upon Termination," under certain circumstances
involving the termination of GBB Capital, the Junior Subordinated Debentures
may be distributed to the holders of the Trust Preferred Securities in
liquidation of GBB Capital after satisfaction of liabilities to creditors of
GBB Capital as provided by applicable law. If distributed to holders of the
Trust Preferred Securities in liquidation, the Junior Subordinated Debentures
will initially be issued in the form of one or more global securities and the
Depositary, or any successor depositary for the Trust Preferred Securities,
will act as depositary for the Junior Subordinated Debentures. It is
anticipated that the depositary arrangements for the Junior Subordinated
Debentures would be substantially identical to those in effect for the Trust
Preferred Securities. If the Junior Subordinated Debentures are distributed to
the holders of Trust Preferred Securities upon the liquidation of GBB Capital.
Greater Bay will use its best efforts to list the Junior Subordinated
Debentures on the Nasdaq National Market or such other stock exchanges or
automated quotation system, if any, on which the Trust Preferred Securities
are then listed or quoted. There can be no assurance as to the market price of
any Junior Subordinated Debentures that may be distributed to the holders of
Trust Preferred Securities.
RESTRICTIONS ON CERTAIN PAYMENTS
If at any time (i) there shall have occurred any event of which Greater Bay
has actual knowledge that (a) with the giving of notice or the lapse of time,
or both, would constitute a Debenture Event of Default and (b) in respect of
which Greater Bay shall not have taken reasonable steps to cure, or (ii)
Greater Bay shall have given notice of its election of an Extension Period as
provided in the Indenture with respect to the Junior Subordinated Debentures
and shall not have rescinded such notice, or such Extension Period, or any
extension thereof, shall be continuing, or (iii) while the Junior Subordinated
Debentures are held by GBB Capital, Greater Bay shall be in default with
respect to its payment of any obligation under the Guarantee, then Greater Bay
will not (1) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of
Greater Bay's capital stock or (2) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities of
Greater Bay (including other Junior Subordinated Debt) that rank pari passu
with or junior in interest to the Junior Subordinated Debentures or make any
guarantee payments with respect to any guarantee by Greater Bay of the debt
securities of any subsidiary of Greater Bay if such guarantee ranks pari passu
with or junior in interest to the Junior Subordinated Debentures (other than
(a) dividends or distributions in Common Stock, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future or the redemption
or repurchase of any such rights pursuant thereto, (c) payments under the
Guarantee and (d) purchases of Common Stock related to issuance of common
stock or rights under any of Greater Bay's benefit plans for its directors,
officers or employees) or related to the issuance of common stock (or
securities convertible into or exchangeable for common stock) as consideration
in an acquisition transaction.
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SUBORDINATION
In the Indenture, Greater Bay has covenanted and agreed that any Junior
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior and Subordinated Debt to the extent provided in
the Indenture. Upon any payment or distribution of assets to creditors upon
any liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of Greater Bay, the holders of Senior and Subordinated
Debt will first be entitled to receive payment in full of principal of all
Allocable Amounts (as defined below) on such Senior and Subordinated Debt
before the holders of Junior Subordinated Debentures will be entitled to
receive or retain any payment in respect thereof.
In the event of the acceleration of the maturity of any Junior Subordinated
Debentures, the holders of all Senior and Subordinated Debt outstanding at the
time of such acceleration will first be entitled to receive payment in full of
all amounts due thereon (including any amounts due upon acceleration) before
the holders of Junior Subordinated Debentures will be entitled to receive or
retain any payment in respect of the Junior Subordinated Debentures.
No payments on account of principal or interest, if any, in respect of the
Junior Subordinated Debentures may be made if there shall have occurred and be
continuing a default in any payment with respect to Senior and Subordinated
Debt or an event of default with respect to any Senior and Subordinated Debt
resulting in the acceleration of the maturity thereof, or if any judicial
proceeding shall be pending with respect to any such default.
"Allocable Amounts," when used with respect to any Senior and Subordinated
Debt, means all amounts due or to become due on such Senior and Subordinated
Debt less, if applicable, any amount which would have been paid to, and
retained by, the holders of such Senior and Subordinated Debt (whether as a
result of the receipt of payments by the holders of such Senior and
Subordinated Debt from Greater Bay or any other obligor thereon or from any
holders of, or trustee in respect of, other indebtedness that is subordinate
and junior in right of payment to such Senior and Subordinated Debt pursuant
to any provision of such indebtedness for the payment over of amounts received
on account of such indebtedness to the holders of such Senior and Subordinated
Debt or otherwise) but for the fact that such Senior and Subordinated Debt is
subordinated or junior in right of payment to (or subject to a requirement
that amounts received on such Senior and Subordinated Debt be paid over to
obligees on) trade accounts payable or accrued liabilities arising in the
ordinary course of business.
"Debt" means with respect to any person, whether recourse is to all or a
portion of the assets of such person and whether or not contingent: (i) every
obligation of such person for money borrowed; (ii) every obligation of such
person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such person with
respect to letters of credit, bankers' acceptances or similar facilities
issued for the account of such person; (iv) every obligation of such person
issued or assumed as the deferred purchase price of property or services (but
excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business); (v) every capital lease obligation of such
person; (vi) all indebtedness of such person whether incurred on or prior to
the date of the Indenture or thereafter incurred, for claims in respect of
derivative products including interest rate, foreign exchange rate and
commodity forward contracts, options and swaps and similar arrangements; and
(vii) every obligation of the type referred to in clauses (i) through (vi) of
another person and all dividends of another person the payment of which, in
either case, such person has guaranteed or is responsible or liable, directly
or indirectly, as obligor or otherwise.
"Senior and Subordinated Debt" means the principal of (and premium, if any)
and interest, if any (including interest accruing on or after the filing of
any petition in bankruptcy or for reorganization relating to Greater Bay
whether or not such claim for post-petition interest is allowed in such
proceeding), on Debt of Greater Bay whether incurred on or prior to the date
of the Indenture or thereafter incurred, unless, in the
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instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are not superior in right of
payment to the Junior Subordinated Debentures or to other Debt which is pari
passu with, or subordinated to, the Junior Subordinated Debentures; provided,
however, that Senior and Subordinated Debt shall not be deemed to include (i)
any Debt of Greater Bay which when incurred and without respect to any
election under section 1111(b) of the United States Bankruptcy Code of 1978,
as amended, was without recourse to Greater Bay, (ii) any Debt of Greater Bay
to any of its subsidiaries, (iii) Debt to any employee of Greater Bay, and
(iv) any other debt securities issued pursuant to the Indenture.
The Indenture places no limitation on the amount of additional Senior and
Subordinated Debt that may be incurred by Greater Bay. Greater Bay expects
from time to time to incur additional indebtedness constituting Senior and
Subordinated Debt.
DENOMINATIONS, REGISTRATION AND TRANSFER
The Junior Subordinated Debentures will be represented by global
certificates registered in the name of the Depositary or its nominee ("Global
Subordinated Debenture"). Beneficial interests in the Junior Subordinated
Debentures will be shown on, and transfers thereof will be effected only
through, records maintained by the Depositary. Except as described below,
Junior Subordinated Debentures in certificated form will not be issued in
exchange for the global certificates. See "Book-Entry Issuance."
Unless and until a Global Subordinated Debenture is exchanged in whole or in
part for the individual Junior Subordinated Debentures represented thereby, it
may not be transferred except as a whole by the Depositary for such Global
Subordinated Debenture to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by the
Depositary or any nominee to a successor Depositary or any nominee of such
successor.
A global security shall be exchangeable for Junior Subordinated Debentures
registered in the names of persons other than the Depositary or its nominee
only if (i) the Depositary notifies Greater Bay that it is unwilling or unable
to continue as a depositary for such global security and no successor
depositary shall have been appointed, or if at any time the Depositary ceases
to be a clearing agency registered under the Securities Exchange Act, at a
time when the Depositary is required to be so registered to act as such
depositary, (ii) Greater Bay in its sole discretion determines that such
global security shall be so exchangeable or (iii) there shall have occurred
and be continuing a Debenture Event of Default with respect to such global
security. Any global security that is exchangeable pursuant to the preceding
sentence shall be exchangeable for definitive certificates registered in such
names as the Depositary shall direct. It is expected that such instructions
will be based upon directions received by the Depositary from its Participants
with respect to ownership of beneficial interests in such global security. In
the event that Junior Subordinated Debentures are issued in definitive form,
such Junior Subordinated Debentures will be in denominations of $25 and
integral multiples thereof and may be transferred or exchanged at the offices
described below.
Payments on Junior Subordinated Debentures represented by a global security
will be made to the Depositary, as the depositary for the Junior Subordinated
Debentures. In the event Junior Subordinated Debentures are issued in
definitive form, principal and interest will be payable, the transfer of the
Junior Subordinated Debentures will be registrable, and Junior Subordinated
Debentures will be exchangeable for Junior Subordinated Debentures of other
denominations of a like aggregate principal amount, at the corporate office of
the Indenture Trustee, or at the offices of any paying agent or transfer agent
appointed by Greater Bay, provided that payment of interest may be made at the
option of Greater Bay by check mailed to the address of the persons entitled
thereto or by wire transfer. In addition, if the Junior Subordinated
Debentures are issued in certificated form, the record dates for payment of
interest will be the first day of the month in which such payment is to be
made. For a description of the Depositary and the terms of the depositary
arrangements relating to payments, transfers, voting rights, redemptions and
other notices and other matters, see "Book-Entry Issuance."
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Greater Bay will appoint the Indenture Trustee as securities registrar under
the Indenture (the "Securities Registrar"). Junior Subordinated Debentures may
be presented for exchange as provided above, and may be presented for
registration of transfer (with the form of transfer endorsed thereon, or a
satisfactory written instrument of transfer, duly executed), at the office of
the Securities Registrar. Greater Bay may at any time rescind the designation
of any such transfer agent or approve a change in the location through which
any such transfer agent acts, provided that Greater Bay maintains a transfer
agent in the place of payment. Greater Bay may at any time designate
additional transfer agents with respect to the Junior Subordinated Debentures.
In the event of any redemption, neither Greater Bay nor the Indenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures during a period beginning at the opening of
business 15 days before the day of selection for redemption of Junior
Subordinated Debentures and ending at the close of business on the day of
mailing of the relevant notice of redemption or (ii) transfer or exchange any
Junior Subordinated Debentures so selected for redemption, except, in the case
of any Junior Subordinated Debentures being redeemed in part, any portion
thereof not to be redeemed.
GLOBAL SUBORDINATED DEBENTURES
Upon the issuance of the Global Subordinated Debenture, and the deposit of
such Global Subordinated Debenture with or on behalf of the Depositary, the
Depositary for such Global Subordinated Debenture or its nominee will credit,
on its book-entry registration and transfer system, the respective principal
amounts of the individual Junior Subordinated Debentures represented by such
Global Subordinated Debenture to the accounts of persons that have accounts
with such Depositary ("Participants"). Ownership of beneficial interests in a
Global Subordinated Debenture will be limited to Participants or persons that
may hold interests through Participants. Ownership of beneficial interests in
such Global Subordinated Debenture will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the applicable
Depositary or its nominee (with respect to interests of Participants) and the
records of Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests
in a Global Subordinated Debenture.
So long as the Depositary for a Global Subordinated Debenture, or its
nominee, is the registered owner of such Global Subordinated Debenture, such
Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Junior Subordinated Debentures represented by such
Global Subordinated Debenture for all purposes under the Indenture governing
such Junior Subordinated Debentures. Except as provided below, owners of
beneficial interests in a Global Subordinated Debenture will not be entitled
to have any of the individual Junior Subordinated Debentures represented by
such Global Subordinated Debenture registered in their names, will not receive
or be entitled to receive physical delivery of any such Junior Subordinated
Debentures in definitive form and will not be considered the owners or holders
thereof under the Indenture.
Payments of principal of and interest on individual Junior Subordinated
Debentures represented by a Global Subordinated Debenture registered in the
name of the Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global
Subordinated Debenture representing such Junior Subordinated Debentures. None
of Greater Bay, the Indenture Trustee, any Paying Agent, or the Securities
Registrar for such Junior Subordinated Debentures will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests of the Global Subordinated Debenture
representing such Junior Subordinated Debentures or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
Greater Bay expects that the Depositary or its nominee, upon receipt of any
payment of principal or interest in respect of a permanent Global Subordinated
Debenture representing the Junior Subordinated Debentures, immediately will
credit Participants' accounts with payments in amounts proportionate to their
respective beneficial interest in the principal amount of the Global
Subordinated Debenture as shown on the records of such
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Depositary or its nominee. Greater Bay also expects that payments by
Participants to owners of beneficial interests in such Global Subordinated
Debenture held through such Participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name."
Such payments will be the responsibility of such Participants.
If the Depositary is at any time unwilling, unable or ineligible to continue
as depositary and a successor depositary is not appointed by Greater Bay
within 90 days, Greater Bay will issue individual Junior Subordinated
Debentures in exchange for the Global Subordinated Debenture. In addition,
Greater Bay may at any time and in its sole discretion, determine not to have
the Junior Subordinated Debentures represented by one or more Global Junior
Subordinated Debentures and, in such event, will issue individual Junior
Subordinated Debentures in exchange for the Global Subordinated Debenture.
Further, if Greater Bay so specifies with respect to the Junior Subordinated
Debentures, an owner of a beneficial interest in a Global Subordinated
Debenture representing Junior Subordinated Debentures may, on terms acceptable
to Greater Bay, the Indenture Trustee and the Depositary for such Global
Subordinated Debenture, receive individual Junior Subordinated Debentures in
exchange for such beneficial interests. In any such instance, an owner of a
beneficial interest in a Global Subordinated Debenture will be entitled to
physical delivery of individual Junior Subordinated Debentures equal in
principal amount to such beneficial interest and to have such Junior
Subordinated Debentures registered in its name. Individual Junior Subordinated
Debentures so issued will be issued in denominations, unless otherwise
specified by Greater Bay, of $25 and integral multiples thereof.
PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on the Junior Subordinated
Debentures will be made at the office of the Indenture Trustee, except that at
the option of Greater Bay payment of any interest may be made (i) except in
the case of Global Junior Subordinated Debentures, by check mailed to the
address of the person entitled thereto as such address shall appear in the
securities register or (ii) by transfer to an account maintained by the person
entitled thereto as specified in the securities register, provided that proper
transfer instructions have been received by the regular record date. Payment
of any interest on Junior Subordinated Debentures will be made to the person
in whose name such Junior Subordinated Debenture is registered at the close of
business on the regular record date for such interest. Greater Bay may at any
time designate additional Paying Agents or rescind the designation of any
Paying Agent; however Greater Bay will at all times be required to maintain a
Paying Agent in each place of payment for the Junior Subordinated Debentures.
Any moneys deposited with the Indenture Trustee or any Paying Agent, or then
held by Greater Bay in trust, for the payment of the principal of or interest
on the Junior Subordinated Debentures and remaining unclaimed for two years
after such principal or interest has become due and payable shall, at the
request of Greater Bay, be repaid to Greater Bay and the holder of such Junior
Subordinated Debenture shall thereafter look, as a general unsecured creditor,
only to Greater Bay for payment thereof.
MODIFICATION OF INDENTURE
From time to time Greater Bay and the Indenture Trustee may, without the
consent of the holders of the Junior Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies (provided that any such
action does not materially adversely affect the interests of the holders of
the Junior Subordinated Debentures or the Trust Preferred Securities so long
as they remain outstanding) and qualifying, or maintaining the qualification
of, the Indenture under the Trust Indenture Act. The Indenture contains
provisions permitting Greater Bay and the Indenture Trustee, with the consent
of the holders of not less than a majority in principal amount of the
outstanding Junior Subordinated Debentures, to modify the Indenture in a
manner affecting the rights of the holders of the Junior Subordinated
Debentures; provided, that no such modification may, without the consent of
the holder of each outstanding Subordinated Debenture, (i) change the Stated
Maturity of the Junior Subordinated Debentures, or reduce the principal amount
thereof, or reduce the rate or extend the time of payment of interest thereon
or (ii) reduce the percentage of principal amount of Junior Subordinated
Debentures, the holders of which
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are required to consent to any such modification of the Indenture, provided
that so long as any of the Trust Preferred Securities remain outstanding, no
such modification may be made that adversely affects the holders of such Trust
Preferred Securities in any material respect, and no termination of the
Indenture may occur, and no waiver of any Debenture Event of Default or
compliance with any covenant under the Indenture may be effective, without the
prior consent of the holders of at least a majority of the aggregate
Liquidation Amount of the Trust Preferred Securities unless and until the
principal of the Junior Subordinated Debentures and all accrued and unpaid
interest thereon have been paid in full and certain other conditions are
satisfied. Where a consent under the Indenture would require the consent of
each holder of Junior Subordinated Debentures, no such consent shall be given
by the Property Trustee without the prior consent of each holder of Trust
Preferred Securities. In addition, Greater Bay and the Indenture Trustee may
execute, without the consent of any holder of Junior Subordinated Debentures,
any supplemental Indenture for the purpose of creating any new series of
Junior Subordinated Debentures.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debentures that has occurred
and is continuing constitutes a "Debenture Event of Default" with respect to
the Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on the Junior Subordinated
Debentures, when due (subject to the deferral of any due date in the case
of an Extension Period); or
(ii) failure to pay any principal on the Junior Subordinated Debentures
when due whether at maturity, upon redemption by declaration or otherwise;
or
(iii) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice to
Greater Bay from the Indenture Trustee or to Greater Bay and the Indenture
Trustee by the holders of at least 25% in aggregate outstanding principal
amount of the Junior Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of
Greater Bay.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Indenture
Trustee. The Indenture Trustee or the holders of not less than 25% in
aggregate outstanding principal amount of the Junior Subordinated Debentures
may declare the principal due and payable immediately upon a Debenture Event
of Default. If the Indenture Trustee or such holders of such Junior
Subordinated Debentures fail to make such declaration, the holders of at least
25% in aggregate Liquidation Amount of the Trust Preferred Securities shall
have such right. The holders of a majority in aggregate outstanding principal
amount of the Junior Subordinated Debentures may annul such declaration and
waive the default if the default (other than the non-payment of the principal
of the Junior Subordinated Debentures which has become due solely by such
acceleration) has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Indenture Trustee. Should the holders of the Junior
Subordinated Debentures fail to annul such declaration and waive such default,
the holders of a majority in aggregate Liquidation Amount of the Trust
Preferred Securities shall have such right.
The holders of a majority in aggregate outstanding principal amount of
Junior Subordinated Debentures affected thereby may, on behalf of the holders
of all the Junior Subordinated Debentures, waive any past default, except a
default in the payment of principal or interest (unless such default has been
cured and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited with the
Indenture Trustee) or a default in respect of a covenant or provision which
under the Indenture cannot be modified or amended without the consent of the
holder of each outstanding Junior Subordinated Debenture.
In case a Debenture Event of Default shall occur and be continuing as to the
Junior Subordinated Debentures, the Property Trustee will have the right to
declare the principal of and the interest on such Junior
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Subordinated Debentures, and any other amounts payable under the Indenture, to
be forthwith due and payable and to enforce its other rights as a creditor with
respect to such Junior Subordinated Debentures.
Greater Bay is required to file annually with the Indenture Trustee a
certificate as to whether or not Greater Bay is in compliance with all the
conditions and covenants applicable to it under the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TRUST PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and such event
is attributable to the failure of Greater Bay to pay interest or principal on
the Junior Subordinated Debentures on the date such interest or principal is
otherwise payable, a holder of Trust Preferred Securities may institute a legal
proceeding directly against Greater Bay for enforcement of payment to such
holder of the principal of or interest on such Junior Subordinated Debentures
having a principal amount equal to the aggregate Liquidation Amount of the
Trust Preferred Securities of such holder ("Direct Action"). Greater Bay may
not amend the Indenture to remove the foregoing right to bring a Direct Action
without the prior written consent of the holders of all of the Trust Preferred
Securities outstanding. If the right to bring a Direct Action is removed, GBB
Capital may become subject to the reporting obligations under the Exchange Act.
Greater Bay shall have the right under the Indenture to set-off any payment
made to such holder of Trust Preferred Securities by Greater Bay in connection
with a Direct Action.
The holders of the Trust Preferred Securities would not be able to exercise
directly any remedies other than those set forth in the preceding paragraph
available to the holders of the Junior Subordinated Debentures unless there
shall have been an Event of Default under the Trust Agreement. See "Description
of the Trust Preferred Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that Greater Bay shall not consolidate with or merge
into any other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, and no Person shall consolidate
with or merge into Greater Bay or convey, transfer or lease its properties and
assets substantially as an entirety to Greater Bay, unless (i) in case Greater
Bay consolidates with or merges into another Person or conveys or transfers its
properties and assets substantially as an entirety to any Person, the successor
Person is organized under the laws of the United States or any state or the
District of Columbia, and such successor Person expressly assumes Greater Bay's
obligations on the Junior Subordinated Debentures issued under the Indenture;
(ii) immediately after giving effect thereto, no Debenture Event of Default,
and no event which, after notice or lapse of time or both, would become a
Debenture Event of Default, shall have occurred and be continuing; (iii) such
transaction is permitted under the Trust Agreement and the Guarantee Agreement;
and does not give rise to any breach or violation of the Trust Agreement or
Guarantee Agreement; and (iv) certain other conditions as prescribed in the
Indenture are met.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving Greater Bay that may adversely affect holders of the
Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Junior Subordinated
Debentures not previously delivered to the Indenture Trustee for cancellation
(i) have become due and payable or (ii) will become due and payable at their
Stated Maturity within one year, and Greater Bay deposits or causes to be
deposited with the Indenture Trustee trust funds, in trust, for the purpose and
in an amount in the currency or currencies in which the Junior Subordinated
Debentures are payable sufficient to pay and discharge the entire indebtedness
on the Junior Subordinated Debentures not previously delivered to the Indenture
Trustee for cancellation, for the principal and interest to the date of the
deposit or to the Stated Maturity, as the case may be, then the Indenture will
cease to be of further effect (except as to Greater Bay's obligations to pay
all other sums due pursuant to the Indenture and to provide the officers'
certificates and opinions of counsel described therein), and Greater Bay will
be deemed to have satisfied and discharged the Indenture.
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COVENANTS OF GREATER BAY
Greater Bay will covenant in the Indenture, as to the Junior Subordinated
Debentures, that if and so long as (i) GBB Capital is the holder of all such
Junior Subordinated Debentures, (ii) a Tax Event in respect of GBB Capital has
occurred and is continuing and (iii) Greater Bay has elected, and has not
revoked such election, to pay Additional Sums (as defined under "Description
of the Trust Preferred Securities--Redemption") in respect of the Trust
Preferred Securities, Greater Bay will pay to GBB Capital such Additional
Sums. Greater Bay will also covenant, as to the Junior Subordinated
Debentures, (i) to maintain directly or indirectly 100% ownership of the
Common Securities of GBB Capital to which Junior Subordinated Debentures have
been issued, provided that certain successors which are permitted pursuant to
the Indenture may succeed to Greater Bay's ownership of the Common Securities,
(ii) not to voluntarily terminate, wind up or liquidate GBB Capital, except
upon prior approval of the Federal Reserve if then so required under
applicable capital guidelines or policies of the Federal Reserve, and except
(a) in connection with a distribution of Junior Subordinated Debentures to the
holders of the Trust Preferred Securities in liquidation of GBB Capital or (b)
in connection with certain mergers, consolidations, or amalgamations permitted
by the Trust Agreement and (iii) to use its reasonable efforts, consistent
with the terms and provisions of the Trust Agreement, to cause GBB Capital to
remain classified as a grantor trust and not as an association taxable as a
corporation for United States federal income tax purposes.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by and
construed in accordance with the laws of the State of California.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the
Trust Indenture Act. Subject to such provisions, the Indenture Trustee is
under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Junior Subordinated Debentures,
unless offered reasonable indemnity by such holder against the costs, expenses
and liabilities which might be incurred thereby. The Indenture Trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Indenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
BOOK-ENTRY ISSUANCE
The Depositary will act as securities depositary for all of the Trust
Preferred Securities and the Junior Subordinated Debentures. The Trust
Preferred Securities and the Junior Subordinated Debentures will be issued
only as fully-registered securities registered in the name of Cede & Co. (the
Depositary's nominee). One or more fully-registered global certificates will
be issued for the Trust Preferred Securities and the Junior Subordinated
Debentures and will be deposited with the Depositary.
The Depositary is a limited purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depositary holds securities that its Participants deposit with the
Depositary. The Depositary also facilitates the settlement among Participants
of securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in Participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. "Direct Participants" include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations.
The Depositary is owned by a number of its Direct Participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
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National Association of Securities Dealers, Inc. Access to the Depositary
system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain custodial
relationships with Direct Participants, either directly or indirectly
("Indirect Participants"). The rules applicable to the Depositary and its
Participants are on file with the Commission.
Purchases of Trust Preferred Securities or Junior Subordinated Debentures
within the Depositary system must be made by or through Direct Participants,
which will receive a credit for the Trust Preferred Securities or Junior
Subordinated Debentures on the Depositary's records. The ownership interest of
each actual purchaser of each Trust Preferred Securities and each Subordinated
Debenture ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from the Depositary of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which the Beneficial Owners purchased
Trust Preferred Securities or Junior Subordinated Debentures. Transfers of
ownership interests in the Trust Preferred Securities or Junior Subordinated
Debentures are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in Trust Preferred
Securities or Junior Subordinated Debentures, except in the event that use of
the book-entry system for the or Junior Subordinated Debentures is
discontinued.
The Depositary has no knowledge of the actual Beneficial Owners of the Trust
Preferred Securities or Junior Subordinated Debentures; the Depositary's
records reflect only the identity of the Direct Participants to whose accounts
such Trust Preferred Securities or Junior Subordinated Debentures are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners
will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder of
the Trust Preferred Securities or Junior Subordinated Debentures. If less than
all of the Trust Preferred Securities or the Junior Subordinated Debentures
are being redeemed, the Depositary will determine by lot or pro rata the
amount of the Trust Preferred Securities of each Direct Participant to be
redeemed.
Although voting with respect to the Trust Preferred Securities or the Junior
Subordinated Debentures is limited to the holders of record of the Trust
Preferred Securities or Junior Subordinated Debentures, as applicable, in
those instances in which a vote is required, neither the Depositary nor Cede &
Co. will itself consent or vote with respect to Trust Preferred Securities or
Junior Subordinated Debentures. Under its usual procedures, the Depositary
would mail an omnibus proxy (the "Omnibus Proxy") to the relevant Trustee as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts
such Trust Preferred Securities or Junior Subordinated Debentures are credited
on the record date (identified in a listing attached to the Omnibus Proxy).
Distribution payments on the Trust Preferred Securities or the Junior
Subordinated Debentures will be made by the relevant Trustee to the
Depositary. The Depositary's practice is to credit Direct Participants'
accounts on the relevant payment date in accordance with their respective
holdings shown on the Depositary's records unless the Depositary has reason to
believe that it will not receive payments on such payment date. Payments by
Participants to Beneficial Owners will be governed by standing instructions
and customary practices and will be the responsibility of such Participant and
not of the Depositary, the relevant Trustee, GBB Capital or Greater Bay,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of Distributions to the Depositary is the responsibility
of the relevant Trustee, disbursement of such payments to
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Direct Participants is the responsibility of the Depositary, and disbursements
of such payments to the Beneficial Owners is the responsibility of Direct and
Indirect Participants.
The Depositary may discontinue providing its services as securities
depositary with respect to any of the Trust Preferred Securities or the Junior
Subordinated Debentures at any time by giving reasonable notice to the
relevant Trustee and Greater Bay. In the event that a successor securities
depositary is not obtained, definitive Trust Preferred Securities or
Subordinated Debenture certificates representing such Trust Preferred
Securities or Junior Subordinated Debentures are required to be printed and
delivered. Greater Bay, at its option, may decide to discontinue use of the
system of book-entry transfers through the Depositary (or a successor
depositary). After a Debenture Event of Default, the holders of a majority in
liquidation preference of Trust Preferred Securities or aggregate principal
amount of Junior Subordinated Debentures may determine to discontinue the
system of book-entry transfers through the Depositary. In any such event,
definitive certificates for such Trust Preferred Securities or Junior
Subordinated Debentures will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that GBB Capital
and Greater Bay believe to be accurate, but GBB Capital and Greater Bay assume
no responsibility for the accuracy thereof. Neither GBB Capital nor Greater
Bay has any responsibility for the performance by the Depositary or its
Participants of their respective obligations as described herein or under the
rules and procedures governing their respective operations.
DESCRIPTION OF GUARANTEE
The Guarantee Agreement will be executed and delivered by Greater Bay
concurrently with the issuance of the Trust Preferred Securities for the
benefit of the holders of the Trust Preferred Securities. Wilmington Trust
Company will act as Guarantee Trustee under the Guarantee Agreement for the
purposes of compliance with the Trust Indenture Act, and the Guarantee will be
qualified as an Indenture under the Trust Indenture Act. The following summary
of certain provisions of the Guarantee does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all of the
provisions of the Guarantee Agreement, including the definitions therein of
certain terms, and the Trust Indenture Act. The form of the Guarantee has been
filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. The Guarantee Trustee will hold the Guarantee for the benefit of
the holders of the Trust Preferred Securities.
GENERAL
The Guarantee will be an irrevocable guarantee on a subordinated basis of
GBB Capital's obligations under the Trust Preferred Securities, but will apply
only to the extent that GBB Capital has funds sufficient to make such
payments, and is not a guarantee of collection.
Greater Bay will irrevocably agree to pay in full on a subordinated basis,
to the extent set forth herein, the Guarantee Payments (as defined below) to
the holders of the Trust Preferred Securities, as and when due, regardless of
any defense, right of set-off or counterclaim that GBB Capital may have or
assert other than the defense of payment. The following payments with respect
to the Trust Preferred Securities, to the extent not paid by or on behalf of
GBB Capital (the "Guarantee Payments"), will be subject to the Guarantee: (i)
any accumulated and unpaid Distributions required to be paid on the Trust
Preferred Securities, to the extent that GBB Capital has funds on hand
available therefor at such time, (ii) the redemption price with respect to any
Trust Preferred Securities called for redemption, to the extent that GBB
Capital has funds on hand available therefor at such time, and (iii) upon a
voluntary or involuntary dissolution, winding up or liquidation of GBB Capital
(unless the Junior Subordinated Debentures are distributed to holders of the
Trust Preferred Securities), the lesser of (a) the Liquidation Distribution
and (b) the amount of assets of GBB Capital remaining available for
distribution to holders of Trust Preferred Securities after satisfaction of
liabilities to creditors of GBB Capital as required by law. Greater Bay's
obligation to make a Guarantee Payment may be satisfied by direct payment of
the required amounts by Greater Bay to the holders of the Trust Preferred
Securities or by causing GBB Capital to pay such amounts to such holders.
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If Greater Bay does not make interest payments on the Junior Subordinated
Debentures held by GBB Capital, GBB Capital will not be able to pay
Distributions on the Trust Preferred Securities and will not have funds
legally available therefor. The Guarantee will rank subordinate and junior in
right of payment to all Senior and Subordinated Debt of Greater Bay. See
"Status of the Guarantee" below. Because Greater Bay is a holding company, the
right of Greater Bay to participate in any distribution of assets of any
subsidiary upon such subsidiary's liquidation or reorganization or otherwise,
is subject to the prior claims of creditors of that subsidiary, except to the
extent Greater Bay may itself be recognized as a creditor of that subsidiary.
Accordingly, Greater Bay's obligations under the Guarantee will be effectively
subordinated to all existing and future liabilities of Greater Bay's
subsidiaries, and claimants should look only to the assets of Greater Bay for
payments thereunder. Except as otherwise described herein, the Guarantee does
not limit the incurrence or issuance of other secured or unsecured debt of
Greater Bay, including Senior and Subordinated Debt whether under the
Indenture, any other indenture that Greater Bay may enter into in the future,
or otherwise.
Greater Bay has, through the Guarantee, the Guarantee Agreement, the Trust
Agreement, the Junior Subordinated Debentures, the Indenture and the Expense
Agreement, taken together, fully, irrevocably and unconditionally guaranteed
all of GBB Capital's obligations under the Trust Preferred Securities. No
single document standing alone or operating in conjunction with fewer than all
of the other documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of GBB Capital's obligations under the
Trust Preferred Securities. See "Relationship Among the Trust Preferred
Securities, the Junior Subordinated Debentures and the Guarantee."
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of Greater Bay and
will rank subordinate and junior in right of payment to all Senior and
Subordinated Debt in the same manner as the Junior Subordinated Debentures.
The Guarantee will constitute a guarantee of payment and not of collection.
For example, the guaranteed party may institute a legal proceeding directly
against Greater Bay to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity. The
Guarantee will be held for the benefit of the holders of the Trust Preferred
Securities. The Guarantee will not be discharged except by payment of the
Guarantee Payments in full to the extent not paid by GBB Capital or upon
distribution to the holders of the Trust Preferred Securities of the Junior
Subordinated Debentures to the holders of the Trust Preferred Securities. The
Guarantee does not place a limitation on the amount of additional Senior and
Subordinated Debt that may be incurred by Greater Bay. Greater Bay expects
from time to time to incur additional indebtedness constituting Senior and
Subordinated Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the Trust Preferred Securities (in which case no vote
will be required), the Guarantee Agreement may not be amended without the
prior approval of the holders of not less than a majority of the aggregate
Liquidation Amount of such outstanding Trust Preferred Securities. See
"Description of the Trust Preferred Securities--Voting Rights; Amendment of
the Trust Agreement." All guarantees and agreements contained in the Guarantee
Agreement shall bind the successors, assigns, receivers, trustees and
representatives of Greater Bay and shall inure to the benefit of the holders
of the Trust Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee Agreement will occur upon the
failure of Greater Bay to perform any of its payment or other obligations
thereunder. The holders of not less than a majority in aggregate Liquidation
Amount of the Trust Preferred Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Guarantee or to
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direct the exercise of any trust or power conferred upon the Guarantee Trustee
under the Guarantee Agreement. Any holder of the Trust Preferred Securities
may institute a legal proceeding directly against Greater Bay to enforce its
rights under the Guarantee without first instituting a legal proceeding
against GBB Capital, the Guarantee Trustee or any other person or entity.
Greater Bay, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not Greater Bay is in compliance with
all the conditions and covenants applicable to it under the Guarantee
Agreement.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of a
default by Greater Bay in performance of the Guarantee, undertakes to perform
only such duties as are specifically set forth in the Guarantee Agreement and,
after default with respect to the Guarantee, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the Guarantee Trustee is under
no obligation to exercise any of the powers vested in it by the Guarantee
Agreement at the request of any holder of the Trust Preferred Securities
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon full
payment of the Redemption Price of the Trust Preferred Securities, upon full
payment of the amounts payable upon liquidation of GBB Capital or upon
distribution of Junior Subordinated Debentures to the holders of the Trust
Preferred Securities. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of the Trust
Preferred Securities must restore payment of any sums paid under the Trust
Preferred Securities or the Guarantee.
GOVERNING LAW
The Guarantee Agreement will be governed by and construed in accordance with
the laws of the State of California.
THE EXPENSE AGREEMENT
Pursuant to the Expense Agreement entered into by Greater Bay under the
Trust Agreement, Greater Bay will irrevocably and unconditionally guarantee to
each person or entity to whom GBB Capital becomes indebted or liable, the full
payment of any costs, expenses or liabilities of GBB Capital, other than
obligations of GBB Capital to pay to the holders of the Trust Preferred
Securities or other similar interests in GBB Capital of the amounts due such
holders pursuant to the terms of the Trust Preferred Securities or such other
similar interests, as the case may be.
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE
JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Trust Preferred
Securities (to the extent GBB Capital has funds available for the payment of
such Distributions) are irrevocably guaranteed by Greater Bay as and to the
extent set forth under "Description of Guarantee." Taken together, Greater
Bay's obligations under the Junior Subordinated Debentures, the Indenture, the
Trust Agreement, the Expense Agreement, the Guarantee Agreement and the
Guarantee provide, in the aggregate, a full, irrevocable and unconditional
guarantee of payments of distributions and other amounts due on the Trust
Preferred Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is
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only the combined operation of those documents that has the effect of
providing a full, irrevocable and unconditional guarantee of GBB Capital's
obligations under the Trust Preferred Securities. If and to the extent that
Greater Bay does not make payments on the Junior Subordinated Debentures, GBB
Capital will not pay Distributions or other amounts due on the Trust Preferred
Securities. The Guarantee does not cover payment of Distributions when GBB
Capital does not have sufficient funds to pay such Distributions. In such
event, the remedy of a holder of the Trust Preferred Securities is to
institute a legal proceeding directly against Greater Bay for enforcement of
payment of such Distributions to such holder. The obligations of Greater Bay
under the Guarantee are subordinate and junior in right of payment to all
Senior and Subordinated Debt.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Trust Preferred Securities,
primarily because: (i) the aggregate principal amount of the Junior
Subordinated Debentures will be equal to the sum of the aggregate Liquidation
Amount of the Trust Preferred Securities and Common Securities; (ii) the
interest rate and interest and other payment dates on the Junior Subordinated
Debentures will match the Distribution rate and Distribution and other payment
dates for the Trust Preferred Securities; (iii) Greater Bay shall pay for all
and any costs, expenses and liabilities of GBB Capital except GBB Capital's
obligations to holders of Trust Preferred Securities; and (iv) the Trust
Agreement further provides that GBB Capital will not engage in any activity
that is not consistent with its limited purposes.
Notwithstanding anything to the contrary in the Indenture, Greater Bay has
the right to set-off any payment it is otherwise required to make thereunder
with and to the extent Greater Bay has theretofore made, or is concurrently on
the date of such payment making, a payment under the Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF THE TRUST PREFERRED SECURITIES UNDER THE
GUARANTEE
A holder of any the Trust Preferred Securities may institute a legal
proceeding directly against Greater Bay to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, GBB Capital or any other person or entity.
A default or event of default under any Senior and Subordinated Debt would
not constitute a default or Event of Default. However, in the event of payment
defaults under, or acceleration of, Senior and Subordinated Debt, the
subordination provisions of the Indenture provide that no payments may be made
in respect of the Junior Subordinated Debentures until such Senior and
Subordinated Debt has been paid in full or any payment default thereunder has
been cured or waived. Failure to make required payments on Junior Subordinated
Debentures would constitute an Event of Default.
LIMITED PURPOSE OF GBB CAPITAL
The Trust Preferred Securities evidence a beneficial interest in GBB
Capital, and GBB Capital exists for the sole purpose of issuing the Trust
Securities and investing the proceeds thereof in Junior Subordinated
Debentures. A principal difference between the rights of a holder of the Trust
Preferred Securities and a holder of a Junior Subordinated Debenture is that a
holder of a Junior Subordinated Debenture is entitled to receive from Greater
Bay the principal amount of and interest accrued on Junior Subordinated
Debentures held, while a holder of the Trust Preferred Securities is entitled
to receive Distributions from GBB Capital (or from Greater Bay under the
Guarantee) if and to the extent GBB Capital has funds available for the
payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
GBB Capital involving the liquidation of the Junior Subordinated Debentures,
the holders of Trust Preferred Securities will be entitled to receive, out of
assets held by GBB Capital, the Liquidation Distribution in cash. See
"Description of the Trust Preferred Securities--Liquidation Distribution Upon
Termination." Upon any voluntary or involuntary
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liquidation or bankruptcy of Greater Bay, the Property Trustee, as holder of
the Junior Subordinated Debentures, would be a subordinated creditor of
Greater Bay, subordinated in right of payment to all Senior and Subordinated
Debt as set forth in the Indenture, but entitled to receive payment in full of
principal and interest, before any stockholders of Greater Bay receive
payments or distributions. Since Greater Bay is the guarantor under the
Guarantee and has agreed to pay for all costs, expenses and liabilities of GBB
Capital (other than GBB Capital's obligations to the holders of its Trust
Preferred Securities), the positions of a holder of the Trust Preferred
Securities and a holder of Junior Subordinated Debentures relative to other
creditors and to stockholders of Greater Bay in the event of liquidation or
bankruptcy of Greater Bay are expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Manatt, Phelps & Phillips, LLP, counsel to the Company
("Counsel"), the following summary accurately describes the material United
States federal income tax consequences that may be relevant to the purchase,
ownership and disposition of Trust Preferred Securities. Unless otherwise
stated, this summary deals only with Trust Preferred Securities held as
capital assets by United States Persons (defined below) who purchase the Trust
Preferred Securities upon original issuance at their original offering price.
As used herein, a "United States Person" means a person that is (i) a citizen
or resident of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, (iii) an estate the income of which is subject
to United States federal income taxation regardless of its source, or (iv) a
trust the income of which is subject to United States federal income taxation
regardless of its source; provided, however, that for taxable years beginning
after December 31, 1996 (or, if a trustee so elects, for taxable years ending
after August 20, 1996), a "United States Person" shall include any trust if a
court is able to exercise primary supervision over the administration of such
trust and one or more United States fiduciaries have the authority to control
all substantial decisions of such trust. The tax treatment of holders may vary
depending on their particular situation. This summary does not address all the
tax consequences that may be relevant to a particular holder or to holders who
may be subject to special tax treatment, such as banks, real estate investment
trusts, regulated investment companies, insurance companies, dealers in
securities or currencies, tax-exempt investors, or foreign investors. In
addition, this summary does not include any description of any alternative
minimum tax consequences or the tax laws of any state, local or foreign
government that may be applicable to a holder of Trust Preferred Securities.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), the Treasury regulations promulgated thereunder and administrative
and judicial interpretations thereof, as of the date hereof, all of which are
subject to change, possibly on a retroactive basis.
The following discussion does not discuss the tax consequences that might be
relevant to persons that are not United States Persons ("non-United States
Persons"). Non-United States Persons should consult their own tax advisors as
to the specific United States federal income tax consequences of the purchase,
ownership and disposition of Trust Preferred Securities.
The authorities on which this summary is based are subject to various
interpretations and the opinions of Counsel are not binding on the Internal
Revenue Service ("Service") or the courts, either of which could take a
contrary position. Moreover, no rulings have been or will be sought from the
Service with respect to the transactions described herein. Accordingly, there
can be no assurance that the Service will not challenge the opinions expressed
herein or that a court would not sustain such a challenge. Nevertheless,
Counsel has advised that it is of the view that, if challenged, the opinions
expressed herein would be sustained by a court with jurisdiction in a properly
presented case.
Holders should consult their own tax advisors with respect to the tax
consequences to them of the purchase, ownership and disposition of the Trust
Preferred Securities, including the tax consequences under state, local,
foreign, and other tax laws and the possible effects of changes in united
states federal or other tax laws. For a discussion of the possible redemption
of the Trust Preferred Securities upon the occurrence of certain tax events,
see "Description of the Trust Preferred Securities--Redemption."
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CLASSIFICATION OF GBB CAPITAL
In connection with the issuance of the Trust Preferred Securities, Counsel
is of the opinion that, under current law and assuming compliance with the
terms of the Trust Agreement, and based on certain facts and assumptions
contained in such opinion, GBB Capital will be classified as a grantor trust
and not as an association taxable as a corporation for United States federal
income tax purposes. As a result, each beneficial owner of the Trust Preferred
Securities (a "Securityholder") will be treated as owning an undivided
beneficial interest in the Junior Subordinated Debentures. Accordingly, each
Securityholder will be required to include in its gross income its pro rata
share of the interest income or original issue discount that is paid or
accrued on the Junior Subordinated Debentures. See "--Interest Income and
Original Issue Discount" herein. No amount included in income with respect to
the Trust Preferred Securities will be eligible for the dividends received
deduction.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
The Company intends to take the position that the Junior Subordinated
Debentures will be classified for United States federal income tax purposes as
indebtedness of the Company under current law, and, by acceptance of a Trust
Preferred Security, each holder covenants to treat the Junior Subordinated
Debentures as indebtedness and the Trust Preferred Securities as evidence of
an indirect beneficial ownership interest in the Junior Subordinated
Debentures. No assurance can be given, however, that such position of the
Company will not be challenged by the Internal Revenue Service or, if
challenged, that such a challenge will not be successful. The remainder of
this discussion assumes that the Junior Subordinated Debentures will be
classified for United States federal income tax purposes as indebtedness of
the Company. See "Risk Factors--Uncertainty of Deductibility of Interest on
the Junior Subordinated Debentures."
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Except as set forth below, stated interest on the Junior Subordinated
Debentures generally will be included in income by a Securityholder at the
time such interest income is paid or accrued in accordance with such
Securityholder's regular method of tax accounting.
Greater Bay believes that, under the applicable Treasury regulations, the
Junior Subordinated Debentures will not be considered to have been issued with
"original issue discount" ("OID") within the meaning of Section 1273(a) of the
Code. If, however, Greater Bay exercises its right to defer Payments of
interest on the Junior Subordinated Debentures, the Junior Subordinated
Debentures will become OID instruments at such time and all Securityholders
will be required to accrue the stated interest on the Junior Subordinated
Debentures on a daily basis during the Extension Period, even though Greater
Bay will not pay such interest until the end of the Extension Period, and even
though some Securityholders may use the cash method of tax accounting.
Moreover, thereafter the Junior Subordinated Debentures will be taxed as OID
instruments for as long as they remain outstanding. Thus, even after the end
of the Extension Period, all Securityholders would be required to continue to
include the stated interest on the Junior Subordinated Debentures in income on
a daily economic accrual basis, regardless of their method of tax accounting
and in advance of receipt of the cash attributable to such interest income.
Under the OID economic accrual rules, a Securityholder would accrue an amount
of interest income each year that approximates the stated interest payments
called for under the Junior Subordinated Debentures, and actual cash payments
of interest on the Junior Subordinated Debentures would not be reported
separately as taxable income.
The Treasury regulations described above have not yet been addressed in any
rulings or other interpretations by the Service, and it is possible that the
Service could take a contrary position. If the Service were to assert
successfully that the stated interest on the Junior Subordinated Debentures
was OID regardless of whether Greater Bay exercises its right to defer
payments of interest on such debentures, all Securityholders would be required
to include such stated interest in income on a daily economic accrual basis as
described above.
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DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF TRUST PREFERRED
SECURITIES
Under current law, a distribution by GBB Capital of the Junior Subordinated
Debentures as described under the caption "Description of the Trust Preferred
Securities--Liquidation Distribution Upon Termination" will be non-taxable and
will result in the Securityholder receiving directly its pro rata share of the
Junior Subordinated Debentures previously held indirectly through GBB Capital,
with a holding period and aggregate tax basis equal to the holding period and
aggregate tax basis such Securityholder had in its Trust Preferred Securities
before such distribution. If, however, the liquidation of GBB Capital were to
occur because GBB Capital is subject to United States federal income tax with
respect to income accrued or received on the Junior Subordinated Debentures as
a result of a Tax Event or otherwise, the distribution of Junior Subordinated
Debentures to Securityholders by GBB Capital could be a taxable event to GBB
Capital and each Securityholder, and a Securityholder would recognize gain or
loss as if the Securityholder had exchanged its Trust Preferred Securities for
the Junior Subordinated Debentures it received upon the liquidation of GBB
Capital. A Securityholder would recognize interest income in respect of Junior
Subordinated Debentures received from GBB Capital in the manner described
above under "--Interest Income and Original Issue Discount" herein.
SALES OR REDEMPTION OF TRUST PREFERRED SECURITIES
Gain or loss will be recognized by a Securityholder on a sale of Trust
Preferred Securities (including a redemption for cash) in an amount equal to
the difference between the amount realized (which for this purpose, will
exclude amounts attributable to accrued interest or OID not previously
included in income) and the Securityholder's adjusted tax basis in the Trust
Preferred Securities sold or so redeemed. Gain or loss recognized by a
Securityholder on Trust Preferred Securities held for more than one year will
generally be taxable as long-term capital gain or loss. Amounts attributable
to accrued interest with respect to a Securityholder's pro rata share of the
Junior Subordinated Debentures not previously included in income will be
taxable as ordinary income.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of OID accrued on the Trust Preferred Securities held of record
by United States Persons (other than corporations and other exempt
Securityholders), if any, will be reported to the Service. "Backup"
withholding at a rate of 31% will apply to payments of interest to non-exempt
United States Persons unless the Securityholder furnishes its taxpayer
identification number in the manner prescribed in applicable Treasury
Regulations, certifies that such number is correct, certifies as to no loss of
exemption from backup withholding and meets certain other conditions. Any
amounts withheld from a Securityholder under the backup withholding rules will
be allowed as a refund or a credit against such Securityholder's United States
federal income tax liability, provided the required information is furnished
to the Service.
POSSIBLE TAX LAW CHANGES AFFECTING THE TRUST PREFERRED SECURITIES
Recently the Clinton Administration announced its budget proposals for the
fiscal year 1998. That announcement included a proposal that could affect the
tax characteristics of the Junior Subordinated Debentures. Under the
Administration's proposal, no deduction would be allowed for interest or
original issue discount on an instrument issued by a corporation that has a
maximum term of more than 40 years, or is payable in stock of the issuer or a
related party. The budget announcement also states that no such deduction
would be allowed for certain indebtedness that is reflected as equity on the
issuer's balance sheet. The budget announcement states that the effective date
of the first proposal is for instruments issued "after the date of first
committee action," which is not a legally precise term. The budget
announcement is less clear about the proposed effective date of the second
proposal mentioned above.
Similar proposals were made by the Administration last year. The Revenue
Reconciliation Bill of 1996 (the "1996 Bill") would, among other things, have
denied interest deductions for interest on an instrument, issued by a
corporation, that had a maximum term of more than 20 years and that was not
shown as indebtedness on the separate balance sheet of the issuer or, where
the instrument was issued to a related party (other than a
96
<PAGE>
corporation), where the holder or some other related party issued a related
instrument that is not shown as indebtedness on the issuer's consolidated
balance sheet. The 1996 Bill was never enacted, but it is likely that the
second proposal in the budget announcement mentioned above will be similar in
some respects to the proposal in the 1996 Bill. Enactment of this proposal
could affect deduction of interest expenses and original issue discount with
respect to the Junior Subordinated Debentures. This, in turn, could create a
Tax Event affecting the Trust Preferred Securities.
In connection with the 1996 Bill, the Chairmen of the Senate Finance and
House Ways and Means Committees issued a joint statement that it was their
intention that the effective date of the Administration's legislative
proposals, if adopted, would be no earlier than the date of appropriate
Congressional action. Senate Finance Committee Chairman William Roth has been
quoted in the news media recently as stating that the 1997 tax changes
generally should be effective on a prospective basis.
It is intended that the Trust Preferred Securities and the Junior
Subordinated Debentures will be issued prior to any type of Congressional
committee action with respect to the aforementioned budget proposal. However,
due to business considerations, the unpredictability of when Congress will
begin action with respect to the Administration's proposals, and the
imprecision in the public statements concerning the anticipated effective date
of the legislative proposals, there can be no guarantee that these instruments
will not be affected by the aforementioned legislative proposals, if they are
enacted.
There also can be no assurance that other future legislative proposals or
final legislation will not affect the ability of the Company to deduct
interest on the Junior Subordinated Debentures. Such a change could give rise
to a Tax Event, which may permit Greater Bay, upon approval of the Federal
Reserve, if then required under applicable capital guidelines or policies of
the Federal Reserve, to cause a redemption of the Trust Preferred Securities.
See "Description of the Trust Preferred Securities--Redemption--Tax Event
Redemption" and "Description of Junior Subordinated Debentures--Redemption."
DESCRIPTION OF GREATER BAY BANCORP CAPITAL STOCK
The authorized capital stock of Greater Bay consists of 6,000,000 shares of
common stock, no par value ("Common Stock"), and 4,000,000 shares of preferred
stock, no par value ("Preferred Stock"). As of December 31, 1996, 3,238,887
shares of Common Stock were outstanding. No shares of Preferred Stock are
outstanding.
COMMON STOCK
Each share of Common Stock is entitled to participate pro rata in
distributions upon liquidation. Holders of Common Stock may receive dividends
as declared by the Board of Directors out of funds legally available therefor.
Holders of Common Stock have no preemptive, subscription, conversion,
redemption or similar rights. All outstanding shares of Common Stock have
voting power to approve mergers, sales of substantially all of Greater Bay's
assets and similar material corporate transactions. Holders of Common Stock
are entitled to one vote for each share of Common Stock they hold on all
matters submitted to a vote of shareholders, except that for the election of
directors each shareholder has cumulative voting rights and is entitled to as
many votes as shall equal the number of shares held by such shareholder
multiplied by the number of directors to be elected, and such shareholder may
cast all his or her votes for a single candidate or distribute such votes
among any or all of the candidates (that is, to cast for any candidate a
number of votes greater than the number of shares of stock held by such
shareholder) unless such candidate's name has been placed in nomination prior
to the voting and the shareholder has given notice at the meeting prior to the
voting of the shareholder's intention to cumulate votes. The rights,
privileges and preferences of the holders of Common Stock are subject to the
rights of the holders of any Preferred Stock that may be designated and issued
by Greater Bay in the future.
97
<PAGE>
PREFERRED STOCK
The Greater Bay Board of Directors has the authority, without further
shareholder action, to issue from time to time a maximum of 4,000,000 shares
of Preferred Stock in one or more series and with such terms and at such times
and for such consideration as the Board of Directors may determine. The
authority of the Board of Directors includes the determination or fixing of
the following with respect to shares of such class or any series thereof: (i)
the number of shares and designation or title thereof; (ii) rights as to
dividends; (iii) whether and upon what terms, including sinking funds, the
shares are to be redeemable; (iv) whether and upon what terms, the shares are
convertible; (v) the voting rights, if any, which shall apply; provided,
however, that in no event shall any holder of any series of the Preferred
Stock be entitled to more than one vote for each share of Preferred Stock held
by such holder; and (vi) the rights of the holders upon the dissolution, or
upon the distribution of assets, of Greater Bay. Any shares of Preferred Stock
which may be issued may rank prior to the Common Stock as to payment of
dividends and upon liquidation. No Preferred Stock is currently outstanding.
98
<PAGE>
UNDERWRITING
Piper Jaffray Inc. (the "Underwriter"), has agreed, subject to the terms and
conditions of a Purchase Agreement to be entered into by the Underwriter,
Greater Bay and GBB Capital to purchase from GBB Capital 800,000 Trust
Preferred Securities. The Underwriter is committed to purchase and pay for all
such Trust Preferred Securities if any are purchased.
The Underwriter has advised Greater Bay and GBB Capital that it proposes to
offer the Trust Preferred Securities directly to the public initially at the
public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $ per
Trust Preferred Security. The Underwriters may allow and such dealers may
reallow a concession not in excess of $ per Trust Preferred Security to
certain other brokers and dealers. After the public offering, the public
offering price, concession and reallowance, and other selling terms may be
changed by the Underwriter.
In view of the fact that the proceeds from the sale of the Trust Preferred
Securities will be used to purchase the Junior Subordinated Debentures issued
by Greater Bay, the Purchase Agreement provides that Greater Bay will pay as
compensation for the Underwriter's arranging the investment therein of such
proceeds an amount of $ per Trust Preferred Security.
Each of Greater Bay and GBB Capital has agreed to indemnify the Underwriter
and its controlling persons against certain liabilities, including liabilities
under the Securities Act of 1933, as amended, or to contribute to payments the
Underwriter may be required to make in respect thereof.
The Underwriters have advised GBB that they do not intend to confirm sales
to any account over which it exercises discretionary authority in excess of 5%
of the number of Trust Preferred Securities offered hereby.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Trust
Preferred Securities, the enforceability of the Trust Agreement and the
formation of GBB Capital will be passed upon by Richards, Layton & Finger,
P.A., Wilmington, Delaware, special counsel to Greater Bay and GBB Capital.
The validity of the Guarantee and the Junior Subordinated Debentures will be
passed upon for the Company by Manatt, Phelps & Phillips, LLP, Los Angeles,
California, counsel to the Company. Certain legal matters in connection with
this Offering will be passed upon for the Underwriters by Dorsey & Whitney
LLP, Minneapolis, Minnesota. Manatt, Phelps & Phillips, LLP and Dorsey &
Whitney LLP will rely on the opinions of Richards, Layton & Finger, P.A. as to
matters of Delaware law. Certain matters relating to United States federal
income tax considerations will be passed upon for the Company by Manatt,
Phelps & Phillips, LLP.
EXPERTS
The consolidated balance sheets as of December 31, 1996 and 1995 and the
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1996, included in
this Prospectus and Registration Statement have been included herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
AVAILABLE INFORMATION
Greater Bay and GBB Capital have jointly filed with the Commission a
Registration Statement on Form S-1 (together with all amendments and exhibits
thereto the "Registration Statement") under the Securities Act, with respect
to the offering of the securities offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
99
<PAGE>
regulations of the Commission. For further information with respect to the
Company, GBB Capital and the securities offered hereby, reference is made to
the Registration Statement and the exhibits and the financial statements, notes
and schedules filed as a part thereof or incorporated by reference therein,
which may be inspected at the public reference facilities of the Commission, at
the addresses set forth below. Statements made in this Prospectus concerning
the contents of any documents referred to herein are not necessarily complete,
and in each instance are qualified in all respects by reference to the copy of
such document filed as an exhibit to the Registration Statement.
Greater Bay is subject to the informational requirements of the Exchange Act,
and in accordance therewith files reports, proxy statements and other
information with the Commission. Reports, proxy statements and other
information filed by Greater Bay (and its predecessors, Mid-Peninsula Bancorp
and Cupertino National Bancorp) can be inspected and copies of such material
can be obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Room 1024, Judiciary Plaza, Washington,
D.C. 20549, and at the following Regional Offices of the Commission: Chicago
Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and New York Regional Office, 7 World Trade Center, Suite 1300,
New York, New York 10048. The Commission also maintains a Web site
(http://www.sec.gov) at which reports, proxy and information statements and
other information regarding Greater Bay (and its predecessors, Mid-Peninsula
Bancorp and Cupertino National Bancorp) may be accessed. In addition, such
reports, proxy statements and other information can also be inspected at the
offices of The Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C.
20006.
No separate financial statements of GBB Capital have been included herein.
Greater Bay and GBB Capital do not consider that such financial statements
would be material to holders of the Trust Preferred Securities because GBB
Capital is a newly formed special purpose entity, has no operating history or
independent operations and is not engaged in and does not propose to engage in
any activity other than holding as trust assets the Junior Subordinated
Debentures of Greater Bay and issuing the Trust Securities. See "Prospectus
Summary--GBB Capital," "Description of the Trust Preferred Securities,"
"Description of Junior Subordinated Debentures" and "Description of Guarantee."
100
<PAGE>
GREATER BAY BANCORP
AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORT OF INDEPENDENT ACCOUNTANTS......................................... F-2
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets at December 31, 1995 and 1996............... F-3
Consolidated Statements of Operations for the Years Ended December 31,
1996, 1995 and 1994.................................................... F-4
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1996, 1995 and 1994....................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1996, 1995 and 1994.................................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
Greater Bay Bancorp:
We have audited the accompanying consolidated balance sheets of Greater Bay
Bancorp (formerly Mid-Peninsula Bancorp) and subsidiaries (the Company) as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, changes in shareholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1996. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, based on our audits, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 1996 and 1995, and the results of
its operations and its cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P
San Francisco, California
February 27, 1997
F-2
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1995*
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks.................................... $ 39,896 $ 29,511
Federal funds sold......................................... 14,000 28,600
-------- --------
Cash and cash equivalents................................ 53,896 58,111
Investment securities...................................... 105,520 116,869
Total loans, net........................................... 441,560 284,579
Premises and equipment, net................................ 4,688 2,912
Interest receivable and other assets....................... 16,380 15,363
-------- --------
Total assets........................................... $622,044 $477,834
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Total deposits............................................. $559,283 $431,789
Other borrowings........................................... 12,000 --
Subordinated debt.......................................... 3,000 3,000
Other liabilities.......................................... 3,079 2,933
-------- --------
Total liabilities...................................... 577,362 437,722
Commitments (Note 13)
SHAREHOLDERS' EQUITY
Preferred stock, no par value: 4,000,000 shares authorized;
none issued
Common stock, no par value: 6,000,000 shares authorized;
shares outstanding: 3,238,887 in 1996 and 3,046,320 in
1995...................................................... 34,884 33,105
Unrealized gain (loss) on available-for-sale securities,
net of taxes.............................................. 71 (621)
Retained earnings.......................................... 9,727 7,628
-------- --------
Total shareholders' equity............................. 44,682 40,112
-------- --------
Total liabilities and shareholders' equity............. $622,044 $477,834
======== ========
</TABLE>
- --------
* Restated on an historical basis to reflect the merger with Cupertino
National Bancorp on a pooling of interests basis.
See notes to consolidated financial statements.
F-3
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------------
1996 1995* 1994*
------- ------- -------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
INTEREST INCOME:
Interest on loans........... $36,278 $28,397 $22,112
Interest on investment
securities:
Taxable................... 6,433 6,204 4,248
Tax-exempt................ 690 497 411
------- ------- -------
Total interest on
investment securities.. 7,123 6,701 4,659
Other interest income....... 1,636 2,135 1,030
------- ------- -------
Total interest income..... 45,037 37,233 27,801
------- ------- -------
INTEREST EXPENSE:
Interest on deposits........ 15,732 13,048 8,130
Interest on short-term
borrowings................. 126 769 382
Interest on subordinated
debt....................... 355 75 --
------- ------- -------
Total interest expense.... 16,213 13,892 8,512
------- ------- -------
Net interest income..... 28,824 23,341 19,289
Provision for loan losses... 2,036 956 1,823
------- ------- -------
Net interest income after
provision for loan losses.. 26,788 22,385 17,466
------- ------- -------
OTHER INCOME:
Service charges and other
fees....................... 1,848 1,206 1,290
Trust fees.................. 1,426 710 593
Gain on sale of SBA loans... 519 366 685
Gain on sale of mortgage
loans...................... -- 137 993
Gains (losses) on
investments, net........... (263) (113) (266)
------- ------- -------
Total other income........ 3,530 2,306 3,295
------- ------- -------
OPERATING EXPENSES:
Compensation and benefits... 11,773 10,146 8,505
Occupancy and equipment..... 3,401 2,679 2,266
Merger and related non-
recurring costs............ 2,791 -- 608
Other....................... 5,923 6,861 4,852
------- ------- -------
Total operating expenses.. 23,888 19,686 16,231
------- ------- -------
Income before income tax
expense................ 6,430 5,005 4,530
Income tax expense........ 2,927 1,971 1,966
------- ------- -------
Net Income.................. $ 3,503 $ 3,034 $ 2,564
======= ======= =======
Net income per common and
common equivalent share.... $ 1.04 $ 0.96 $ 0.85
======= ======= =======
</TABLE>
- --------
* Restated on an historical basis to reflect the merger with Cupertino
National Bancorp on a pooling of interests basis.
See notes to consolidated financial statements.
F-4
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND
1994
----------------------------------------------------
COMMON STOCK EARNINGS TOTAL
----------------- ------------------- SHAREHOLDERS'
SHARES AMOUNT UNREALIZED RETAINED EQUITY
--------- ------- ---------- -------- -------------
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
Balances as of December 31,
1993:
Mid-Peninsula Bancorp
prior to pooling........ 1,455,665 $14,216 $ (48) $ 3,672 $17,840
Shares issued to
Cupertino National
Bancorp shareholders.... 1,142,797 13,582 -- -- 13,582
Cupertino National
Bancorp retained
earnings prior
to pooling.............. -- -- -- 2,637 2,637
--------- ------- ------- ------- -------
Balance, December 31,
1993, as restated to
reflect pooling....... 2,598,462 27,798 (48) 6,309 34,059
Stock options exercised.. 128,614 1,114 -- -- 1,114
Stock issued in Employee
Stock Purchase Plan..... 6,716 69 -- -- 69
Adoption of SFAS No.
115--unrealized loss on
available-for-sale
securities.............. -- -- (1,272) -- (1,272)
Two 5% stock dividends--
fractional shares paid
in cash................. 58,914 705 -- (708) (3)
Cash dividend $0.18 per
share................... -- -- (491) (491)
Net Income............... -- -- -- 2,564 2,564
--------- ------- ------- ------- -------
Balance, December 31,
1994*................. 2,792,706 29,686 (1,320) 7,674 36,040
Stock options exercised,
including related tax
benefit................. 104,454 1,109 -- -- 1,109
Stock issued in Employee
Stock Purchase Plan..... 8,537 80 -- -- 80
401K Employee Stock
Purchase................ 6,731 95 -- -- 95
Cash dividends of $0.30
per share............... -- -- -- (942) (942)
10% stock dividend--
fractional shares paid
in cash................. 133,892 2,135 -- (2,138) (3)
SFAS No. 115 change in
unrealized loss on
available-for-sale
securities.............. -- 699 -- 699
Net Income............... -- -- -- 3,034 3,034
--------- ------- ------- ------- -------
Balance, December 31,
1995*................. 3,046,320 33,105 (621) 7,628 $40,112
Stock options exercised,
including related tax
benefit................. 176,657 1,555 -- -- 1,555
Stock issued in Employee
Stock Purchase Plan..... 10,632 137 -- -- 137
401K Employee Stock
Purchase................ 5,278 87 -- -- 87
Cash dividends of $0.44
per share............... -- -- -- (1,404) (1,404)
SFAS No. 115--change in
unrealized loss on
available-for-sale
securities.............. -- 692 -- 692
Net Income............... -- -- -- 3,503 3,503
--------- ------- ------- ------- -------
Balance, December 31,
1996.................. 3,238,887 $34,884 $ 71 $ 9,727 $44,682
========= ======= ======= ======= =======
</TABLE>
- --------
* Restated on an historical basis to reflect the merger with Cupertino
National Bancorp on a pooling of interests basis.
See notes to consolidated financial statements.
F-5
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1996 1995* 1994*
--------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows--Operating Activities:
Net Income................................... $ 3,503 $ 3,034 $ 2,564
Reconciliation of net income to net cash from
operations:
Provision for loan losses.................. 2,036 956 1,823
Depreciation and leasehold amortization.... 1,125 899 777
Deferred income taxes...................... (1,145) 181 75
Accrued interest receivables and other
assets.................................... (128) (1,234) (1,828)
Accrued interest payable and other
liabilities............................... 146 909 807
Deferred loan fees and discounts, net...... 653 27 (105)
Proceeds from sale of loans held for sale.. -- 16,364 125,342
Origination of loans for resale............ -- (10,981) (123,100)
--------- -------- ---------
Operating cash flows, net...................... 6,190 10,155 6,355
--------- -------- ---------
Cash Flows--Investing Activities:
Maturities of investment securities and other
short-term investments:
Held-to-maturity........................... 24,956 29,130 13,048
Available-for-sale......................... 28,737 10,441 1,510
Purchase of investment securities and other
short-term investments
Held-to-maturity........................... (26,439) (54,561) (36,504)
Available-for-sale......................... (39,389) (8,388) (2,000)
Proceeds from sale of available-for-sale
securities.................................. 26,635 -- 6,734
Loans, net................................... (161,845) (48,195) (14,556)
Investment in other real estate owned........ -- (476) (485)
Sale of other real estate owned.............. 217 1,054 1,733
Premises and equipment....................... (2,906) (1,388) (1,000)
Purchase of insurance policies............... (240) (6,004) --
Other, net................................... -- -- 84
--------- -------- ---------
Cash flows, net................................ (150,274) (78,387) (31,436)
--------- -------- ---------
Cash Flows--Financing Activities:
Net change in deposits....................... 127,494 85,495 22,994
Net change in short-term borrowings.......... 12,000 (17,256) 17,256
Subordinated debt issued..................... -- 3,000 --
Proceeds from the sale of stock.............. 1,779 1,127 1,028
Fractional shares paid in cash............... -- (3) (3)
Cash dividends............................... (1,404) (942) (491)
--------- -------- ---------
Financing cash flows, net...................... 139,869 71,421 40,784
--------- -------- ---------
Net increase in cash and cash equivalents...... (4,215) 3,189 15,703
Cash and cash equivalents at beginning of year. 58,111 54,922 39,219
--------- -------- ---------
Cash and cash equivalents at end of year....... $ 53,896 $ 58,111 $ 54,922
--------- -------- ---------
Cash flows--supplemental disclosures:
Cash paid during the period for:
Interest on deposits and other borrowings.. $ 16,228 $ 13,827 $ 8,278
--------- -------- ---------
Income taxes............................... $ 3,970 $ 2,105 $ 1,878
--------- -------- ---------
Non-cash transactions:
Additions to other real estate owned......... $ 152 $ 130 $ 1,047
--------- -------- ---------
</TABLE>
- --------
* Restated on an historical basis to reflect the merger with Cupertino
National Bancorp on a pooling of interests basis.
See notes to consolidated financial statements.
F-6
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF OPERATIONS
Greater Bay Bancorp ("GBB" or the "Company") is a California corporation and
bank holding company that was incorporated on November 14, 1984 as San Mateo
County Bancorp. The name was changed to Mid-Peninsula Bancorp on October 7,
1994 as a result of the merger between Mid-Peninsula Bank and San Mateo County
Bancorp and its wholly owned subsidiary, WestCal National Bank. The name was
further changed to Greater Bay Bancorp on November 27, 1996 as a result of the
merger between Mid-Peninsula Bancorp and Cupertino National Bancorp (see Note
2). Upon consummation of the merger with Cupertino National Bancorp, GBB
became a multi-bank holding company of two wholly owned bank subsidiaries,
Mid-Peninsula Bank ("MPB") and Cupertino National Bank & Trust ("CNB"),
collectively the "Banks". MPB commenced operations in October 1987 and is a
state chartered bank regulated by the Federal Reserve Bank (FRB) and the
California State Banking Department. CNB commenced operations in May 1985 and
is a national banking association regulated by the Office of the Comptroller
of Currency (OCC).
The Company provides a wide range of commercial banking services to small
and medium-sized businesses, real estate developers and property managers,
business executives, professionals and other individuals. The Company operates
through seven regional offices in Cupertino, Palo Alto, San Mateo, San Carlos
and San Jose, California.
CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of GBB and its
wholly-owned subsidiaries, CNB and MPB. All significant intercompany
transactions and balances have been eliminated. Certain reclassifications have
been made to prior years' consolidated financial statements to conform to the
1996 presentation. The accounting and reporting policies of the Company
conform to generally accepted accounting principles and to prevailing
practices within the banking industry.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of certain assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of certain revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand, amounts due from banks and federal funds sold. Generally, federal
funds are sold for one-day periods. CNB and MPB are required by the Federal
Reserve System to maintain non-interest earning cash reserves against certain
of their deposit accounts. At December 31, 1996, the required combined
reserves totaled approximately $2.9 million.
INVESTMENT SECURITIES
Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting
for Certain Investments in Debt and Equity Securities", which was adopted by
the Company in 1994, requires that investment securities be classified into
three portfolios, and be accounted for as follows: 1) debt and equity
securities for which the Company has the positive intent and ability to hold
to maturity are classified as held-to-maturity and reported at
F-7
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
amortized cost; 2) debt and equity securities that are bought and held
principally for the purpose of selling in the near term are classified as
trading securities and reported at fair value, with unrealized gains and
losses included in earnings; and 3) debt and equity securities not classified
as either held-to-maturity or trading securities are classified as available-
for-sale securities and reported at fair value, with unrealized gains and
losses excluded from earnings and reported as a separate component of
shareholders' equity.
A decline in the market value of any available-for-sale or held-to-maturity
security below cost that is deemed other than temporary, results in a charge
to earnings and the corresponding establishment of a new cost basis for the
security.
Premiums and discounts are amortized or accreted over the life of the
related security as an adjustment to yield using the effective interest
method. Dividend and interest income are recognized when earned. Realized
gains and losses for securities classified as available-for-sale and held-to-
maturity are included in earnings and are derived using the specific
identification method for determining the cost of securities sold.
The required investment of 3% of capital stock and surplus in Federal
Reserve Bank stock, for both MPB and CNB, is recorded at cost.
LOANS
Loans held for investment are carried at amortized cost. The Company's loan
portfolio consists primarily of commercial and real estate loans generally
collateralized by first and second deeds of trust on real estate as well as
business assets and personal property.
Interest income is accrued on the outstanding loan balances using the simple
interest method. Loans are generally placed on nonaccrual status when the
borrowers are past due 90 days and when full payment of principal or interest
is not expected. At the time a loan is placed on nonaccrual status, any
interest income previously accrued but not collected is reversed. Interest
accruals are resumed on such loans only when they are brought fully current
with respect to interest and principal and when, in the judgment of
management, the loans are estimated to be fully collectible as to both
principal and interest.
The Company charges loan origination and commitment fees. Net loan
origination fees and costs are deferred and amortized to interest income over
the life of the loan, using the effective interest method. Loan commitment
fees are amortized to interest income over the commitment period.
SALES AND SERVICING OF SMALL BUSINESS ADMINISTRATION ("SBA") LOANS
The Company originates loans to customers under SBA programs that generally
provide for SBA guarantees of 70% to 90% of each loan. The Company generally
sells the guaranteed portion of each loan to an investor and retains the
unguaranteed portion and servicing rights in its own portfolio. Funding for
the SBA programs depend on annual appropriations by the U.S. Congress.
Gains on these sales are earned through the sale of the guaranteed portion
of the loan for an amount in excess of the adjusted carrying value of the
portion of the loan sold. The Company allocates the carrying value of such
loans between the portion sold, the portion retained and a value assigned to
the right to service the loan. The difference between the adjusted carrying
value of the portion retained and the face amount of the portion retained is
amortized to interest income over the life of the related loan using a method
which approximates the interest method. The value assigned to the right to
service is also amortized over the estimated life of the loan.
ALLOWANCE FOR LOAN LOSSES
The Company adopted SFAS No. 114, Accounting by Creditors for Impairment of
a Loan, as amended by SFAS No. 118, on January 1, 1995. Under these standards,
a loan is considered impaired, based on current
F-8
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
information and events, if it is probable that the Company will be unable to
collect the scheduled payments of principal and interest when due according to
the contractual terms of the loan agreement. Under these standards, any
allowance on impaired loans is generally based on one of three methods. It
requires that impaired loans be measured at either, (1) the present value of
expected cash flows at the loan's effective interest rate, (2) the loan's
observable market price, or (3) the fair market value of the collateral of the
loan. In general, these statements are not applicable to large groups of
smaller-balance loans that are collectively evaluated for impairment such as
credit cards, residential mortgage and/or consumer installment loans. Adoption
of SFAS No. 114 and No. 118 did not have a material effect on the financial
statements of the Company in 1995. Income recognition on impaired loans
conforms to the method the Company uses for income recognition on nonaccrual
loans.
The allowance for loan losses is maintained at a level deemed appropriate by
management to adequately provide for known and unidentified losses in the loan
portfolio. The allowance is based upon a number of factors, including
prevailing and anticipated economic trends, industry experience, industry and
geographic concentrations, estimated collateral values, management's
assessment of credit risk inherent in the portfolio, delinquency trends,
historical loss experience, specific problem loans and other relevant factors.
Additions to the allowance, in the form of provisions, are reflected in
current operating results, while charge-offs to the allowance are made when a
loss is determined to have occurred. Because the allowance for loan losses is
based on estimates, ultimate losses may vary from the current estimates.
When a loan is sold, unamortized fees and capitalized direct costs are
recognized in the consolidated statements of operations. Other loan fees and
charges representing service costs for the repayment of loans, for delinquent
payments or for miscellaneous loan services are recognized when earned.
OTHER REAL ESTATE OWNED
Other real estate owned (OREO) consists of properties acquired through
foreclosure and is stated at the lower of cost or fair value less estimated
costs to sell. Development and improvement costs relating to the property are
capitalized. Estimated losses that result from the ongoing periodic valuation
of these properties are charged to current earnings with a provision for
losses on foreclosed property in the period in which they are identified. The
resulting allowance for OREO losses is decreased when the property is sold.
Operating expenses of such properties, net of related income, are included in
other expenses. Gains and losses on disposition of OREO are included in other
income.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are computed on a straight-line
basis over the shorter of the lease terms or estimated useful lives of the
assets, which are generally 3 to 10 years.
INCOME TAXES
Deferred income taxes reflect the estimated future tax effects of temporary
differences between the amount of assets and liabilities for financial
reporting purposes and such amounts as measured by tax laws and regulations.
PER SHARE DATA
Net income per common and common equivalent share is based on the weighted
average number of shares of common stock outstanding during the year plus the
effect of dilutive stock options. All years presented include the effect of
stock dividends declared in 1995 and 1994. The weighted average common and
common equivalent shares outstanding for 1996, 1995 and 1994 were 3,359,700;
3,144,550 and 3,001,211, respectively.
F-9
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Fully diluted earnings per share were approximately equal to primary
earnings per share in each of the years in the three-year period ended
December 31, 1996.
Weighted average shares outstanding and all per share amounts included in
the consolidated financial statements and notes thereto are based upon the
increased number of shares giving retroactive effect to the 1994 merger with
San Mateo County Bancorp at a 1.0617 conversion ratio, and the 1996 merger
with Cupertino National Bancorp at a 0.81522 conversion ratio.
NOTE 2--MERGERS
On November 27, 1996, the Company consummated a merger between Mid-Peninsula
Bancorp and Cupertino National Bancorp. As discussed in Note 1, concurrently
with the merger the name of the holding company was changed to Greater Bay
Bancorp. Following the terms of the merger agreement, the Company issued
approximately 1,586,000 shares of its common stock in exchange for the
outstanding common stock of Cupertino National Bancorp at an exchange ratio of
0.81522 of the Company's common stock for each share of Cupertino National
Bancorp's common stock. The merger has been accounted for as a pooling of
interests business combination and, accordingly, the consolidated financial
statements and the financial data for the periods prior to the merger have
been restated to include the accounts and results of operations of Cupertino
National Bancorp.
On October 7, 1994, San Mateo County Bancorp's wholly owned subsidiary,
WestCal National Bank, was merged with and into Mid-Peninsula Bank, and San
Mateo County Bancorp concurrently changed its name to Mid-Peninsula Bancorp.
The merger was accounted for as a pooling of interests. All periods have been
restated to reflect the results of the combination. The accompanying
consolidated financial statements reflect the issuance of the Company's common
stock in exchange for all of MPB's common stock outstanding as of October 7,
1994, based upon the exchange ratio of 1.0617 shares of the Company's common
stock for each share of MPB's common stock.
In both mergers, certain reclassifications have been made to conform to the
Company's presentation. The results of operations previously reported by the
separate enterprises for the period before the merger was consummated and that
are included in the current combined amounts presented in the accompanying
consolidated financial statements are summarized below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996 (UNAUDITED) 1995 1994
----------------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net Interest Income:
Mid-Peninsula Bancorp................... $ 8,878 $10,402 $ 8,207
Cupertino National Bancorp.............. 11,487 12,939 11,082
------- ------- -------
Combined.............................. $20,365 $23,341 $19,289
------- ------- -------
Provision for Loan Losses:
Mid-Peninsula Bancorp................... $ 427 $ 275 $ 203
Cupertino National Bancorp.............. 864 681 1,620
------- ------- -------
Combined.............................. $ 1,291 $ 956 $ 1,823
------- ------- -------
Net Income:
Mid-Peninsula Bancorp................... $ 2,373 $ 2,721 $ 1,201
Cupertino National Bancorp.............. 1,548 313 1,363
------- ------- -------
Combined.............................. $ 3,921 $ 3,034 $ 2,564
------- ------- -------
</TABLE>
F-10
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the composition of the combined operations of
San Mateo County Bancorp and its wholly-owned subsidiary, WestCal National
Bank, and MPB for the nine months ended September 30, 1994 prior to the
consummation of the merger on October 7, 1994.
<TABLE>
<CAPTION>
NET INTEREST PROVISION FOR NET
INCOME LOAN LOSSES INCOME
------------ ------------- ------
(DOLLARS IN THOUSANDS) UNAUDITED
<S> <C> <C> <C>
Mid-Peninsula Bank........................ $4,657 $235 $ 867
San Mateo County Bancorp.................. 1,293 (32) 217
------ ---- ------
$5,950 $203 $1,084
------ ---- ------
</TABLE>
There were no significant transactions between Mid-Peninsula Bancorp and
Cupertino National Bancorp, and between San Mateo County Bancorp and Mid-
Peninsula Bank prior to the mergers. All intercompany transactions have been
eliminated.
NOTE 3--INVESTMENT SECURITIES
The amortized cost and estimated market value of investment securities is
summarized below:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Available-for-sale securities:
U.S. Treasury obligations............. $ 19,841 $ 52 $ (6) $ 19,887
U.S. Agency obligations:
Mortgage-backed obligations......... 3,604 5 (53) 3,556
Fixed and variable rate notes....... 10,568 34 (13) 10,589
Mutual funds.......................... 2,000 (52) 1,948
Tax exempt securities................. 7,758 154 (11) 7,901
Corporate securities.................. 3,216 7 -- 3,223
-------- ---- ----- --------
Total securities available-for-sale. 46,987 252 (135) 47,104
-------- ---- ----- --------
Held-to-maturity securities:
U.S. Treasury obligations............. 1,005 3 1,008
U.S. Agency obligations:
Mortgage-backed obligations......... 7,086 87 (9) 7,164
Fixed and variable rate notes....... 38,390 78 (100) 38,368
Other mortgage-backed obligations..... 3,959 54 -- 4,013
Tax exempt securities................. 6,525 219 (3) 6,741
Federal Reserve Bank stock............ 673 -- -- 673
Federal Home Loan Bank stock.......... 778 -- -- 778
-------- ---- ----- --------
Total securities held-to-maturity... 58,416 441 (112) 58,745
-------- ---- ----- --------
Total investment securities......... $105,403 $693 $(247) $105,849
======== ==== ===== ========
</TABLE>
The tax effected net unrealized gain on available-for-sale securities was
$71,000 for the year ended December 31, 1996.
F-11
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1995
----------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Available-for-sale securities:
U.S. Treasury obligations............. $ 7,778 $ 62 $ (3) $ 7,837
U.S. Agency obligations:
Mortgage-backed obligations......... 4,131 22 (58) 4,095
Fixed and variable rate notes....... 19,431 54 (18) 19,467
Mutual funds.......................... 16,458 (929) 15,529
Tax exempt securities................. 11,662 462 (20) 12,104
Corporate securities.................. 2,990 20 3,010
-------- ------ ------- --------
Total securities available-for-sale. 62,450 620 (1,028) 62,042
-------- ------ ------- --------
Held-to-maturity securities:
U.S. Treasury obligations............. 5,987 24 -- 6,011
U.S. Agency obligations:
Mortgage-backed obligations......... 8,190 159 -- 8,349
Fixed and variable rate notes....... 35,056 145 (19) 35,182
Other mortgage-backed obligations..... 4,195 102 -- 4,297
Federal Reserve Bank stock............ 660 -- -- 660
Federal Home Loan Bank stock.......... 739 -- -- 739
-------- ------ ------- --------
Total securities held-to-maturity... 54,827 430 (19) 55,238
-------- ------ ------- --------
Total investment securities......... $117,277 $1,050 $(1,047) $117,280
======== ====== ======= ========
</TABLE>
In November 1995, the FASB issued a special report, "A Guide to
Implementation of Statement No. 115, on Accounting for Certain Investments in
Debt and Equity Securities--Questions and Answers" (the "Special Report"). The
Special Report allowed companies to reassess the appropriateness of the
classifications of all securities held and account for any resulting
reclassifications at fair value. Reclassifications from this one-time
reassessment will not call into question the intent of an enterprise to hold
other debt securities to maturity in the future, provided that
reclassification was performed by December 31, 1995. The Company adopted the
reclassification provision of the Special Report prior to December 31, 1995
and transferred $36.4 million of held-to-maturity securities into the
available-for-sale category. The unrealized pretax gain upon transfer was
$512,000 as of December 31, 1995.
F-12
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table shows amortized cost and estimated market value of the
Company's investment securities by year of maturity at December 31, 1996.
<TABLE>
<CAPTION>
1998 2002
THROUGH THROUGH 2007 AND
1997 2001 2007 THEREAFTER TOTAL
------- ------- ------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Available-for-sale securities:
U.S. Treasury obligations....... $15,003 $ 4,838 -- -- $ 19,841
U.S. Agency obligations:
Mortgage-backed
obligations(1)............... 599 3,005 -- -- 3,604
Fixed and variable rate
notes(2)..................... 1,500 9,068 -- -- 10,568
Mutual Funds(3)................. 2,000 -- -- -- 2,000
Tax exempt securities........... 453 1,567 3,623 2,115 7,758
Corporate securities............ 1,178 2,038 -- -- 3,216
------- ------- ------ ------ --------
Total securities available-
for-sale..................... 20,733 20,516 3,623 2,115 46,987
------- ------- ------ ------ --------
Market value.................... 20,708 20,524 3,672 2,200 47,104
------- ------- ------ ------ --------
Held-to-maturity securities:
U.S. Treasury obligations....... 503 502 -- -- 1,005
U.S. Agency obligations:
Mortgage-backed
obligations(1)............... -- 69 2,595 4,422 7,086
Fixed and variable rate
notes(2)..................... 3,000 17,999 15,391 2,000 38,390
Other mortgage-backed
obligations(1)................. -- -- -- 3,959 3,959
Tax exempt securities........... -- 1,040 256 5,229 6,525
Federal Reserve Bank stock...... -- -- -- 673 673
Federal Home Loan Bank stock.... -- -- -- 778 778
------- ------- ------ ------ --------
Total securities held-to-
maturity..................... 3,503 19,610 18,242 17,061 58,416
------- ------- ------ ------ --------
Market value.................... 3,493 19,549 18,369 17,334 58,745
------- ------- ------ ------ --------
Total investment securities..... 24,236 40,126 21,865 19,176 105,403
------- ------- ------ ------ --------
Total market value.............. 24,201 40,073 22,041 19,534 105,849
------- ------- ------ ------ --------
Weighted average yield-total
portfolio(4)................... 5.32% 6.19% 7.04% 6.77% 6.29%
------- ------- ------ ------ --------
</TABLE>
- --------
(1) Mortgage-backed securities are shown at contractual maturity; however, the
average life of these mortgage-backed securities may differ due to
principal prepayments.
(2) Certain U.S. Agency fixed and variable rate note obligations may be
called, without penalty, at the discretion of the issuer. This may cause
the actual maturities to differ significantly from the contractual
maturity dates.
(3) Mutual funds with no stated maturity total $2.0 million ($1.9 million
market value).
(4) Yields on tax exempt securities have been computed on a fully tax-
equivalent basis.
Investment securities with a carrying value of $23.5 million and $16.5
million as of December 31, 1996 and 1995, respectively, were pledged to secure
deposits and for other purposes as required by law or contract.
The Company does not hold any investments of any one issuer where the
aggregate with that issuer exceeds 10% of stockholders' equity. Investments in
the Federal Reserve Bank and the Federal Home Loan Bank are required in order
to maintain membership and support activity levels.
F-13
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Proceeds and realized losses and gains on sales of investment securities for
the years ended December 31, 1996, 1995, and 1994 are presented below:
<TABLE>
<CAPTION>
1996 1995 1994
------- ----- ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Proceeds from sale of available-for-sale
securities........................................ $26,635 -- $6,734
Available-for-sale securities--losses(1)........... $ (729) $(113) $ (266)
</TABLE>
- --------
(1) Includes $466,000 of charges in 1996 to conform accounting practices,
which is included in merger and related non-recurring costs.
NOTE 4--LOANS
The following is a summary of loans by category as of December 31, 1996 and
1995:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Commercial............................................... $257,042 $181,617
Real estate construction and land........................ 78,278 32,672
Commercial real estate term and other.................... 72,802 47,322
Consumer and other....................................... 42,702 28,666
-------- --------
Total loans, gross....................................... 450,824 290,277
Deferred loan fees and discounts....................... (1,952) (1,299)
-------- --------
Total loans, net of deferred fees........................ 448,872 288,978
Allowance for loan losses.............................. (7,312) (4,399)
-------- --------
Total loans, net....................................... $441,560 $284,579
======== ========
</TABLE>
The following summarizes the activity in the allowance for loan losses for
the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance, January 1................................ $4,399 $ 4,344 $ 3,657
Provision for loan losses(1).................... 2,836 956 1,823
Loans charged off............................... (299) (1,081) (1,247)
Recoveries...................................... 376 180 111
------ ------- -------
Balance, December 31.............................. $7,312 $ 4,399 $ 4,344
====== ======= =======
</TABLE>
- --------
(1) Includes $800,000 of charges in 1996 to conform accounting practices for
the Banks' reserve methodologies which is included in merger and related
costs.
F-14
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth non-performing loans as of December 31, 1996,
1995 and 1994. Non-performing loans are defined as loans which are on non-
accrual status, loans which have been restructured, and loans which are 90
days past due but are still accruing interest. Interest income foregone on
non-performing loans outstanding at year-end totaled $215,000, $245,000 and
$275,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
Interest income recognized on the non-performing loans approximated $95,000,
$63,000 and $50,000 for the years ended December 31, 1996, 1995 and 1994,
respectively. There were no restructured loans at December 31, 1996, 1995 and
1994.
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Non-accrual loans...................................... $1,875 $2,513 $3,668
Accruing loans past due 90 days or more................ 1,237 830 1,371
------ ------ ------
Total non-performing loans............................. $3,112 $3,343 $5,039
====== ====== ======
</TABLE>
At December 31, 1996 and 1995, the recorded investment in loans, for which
impairment has been recognized in accordance with SFAS No. 114 and No. 118,
was approximately $1.9 million and $2.5 million, respectively with
corresponding valuation allowances of $1.0 million and $0.5 million,
respectively. For the years ended December 31, 1996 and 1995, the average
recorded investment in impaired loans was approximately $2.2 million and $2.6
million, respectively. The Company did not recognize interest income on
impaired loans during the twelve months ended December 31, 1996 and 1995.
NOTE 5--OTHER REAL ESTATE OWNED
At December 31, 1996, other real estate owned consisted of one property
acquired through foreclosure with a carrying value of $152,000 and is included
in interest receivable and other assets in the accompanying consolidated
balance sheets. There was no allowance for estimated losses. The Company had
no other real estate owned at December 31, 1995.
The following summarizes other real estate operations, which are included in
operating expenses, for the years ended December 31, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- -----
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Income (loss) from:
Real estate operations, net.............................. $(35) $(45) $ (70)
Provision for estimated losses........................... -- (17) (42)
---- ---- -----
Net loss from other real estate operations............... $(35) $(62) $(112)
==== ==== =====
</TABLE>
NOTE 6--PREMISES AND EQUIPMENT
Premises and equipment at December 31, 1996 and 1995 are comprised of the
following:
<TABLE>
<CAPTION>
1996 1995
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Leasehold improvements..................................... $ 2,774 $ 1,613
Furniture and equipment.................................... 6,510 4,988
Automobiles................................................ 134 157
------- -------
Total.................................................... 9,418 6,758
------- -------
Accumulated depreciation and amortization.................. (4,730) (3,846)
------- -------
Premises and equipment, net.............................. $ 4,688 $ 2,912
======= =======
</TABLE>
F-15
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Depreciation and amortization amounted to $1,125,000, $899,000 and $777,000
for the years ended December 31, 1996, 1995 and 1994, respectively, and have
been included in occupancy and equipment expense in the accompanying
consolidated statements of operations.
NOTE 7--DEPOSITS
Deposits as of December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Demand, noninterest-bearing............................... $139,940 $ 96,063
NOW....................................................... 26,936 22,084
Money Market Demand Accounts.............................. 271,749 211,654
Savings................................................... 13,599 12,486
Other time certificates................................... 38,889 25,716
Time certificates, $100 and over.......................... 68,170 63,786
-------- --------
Total Deposits.......................................... $559,283 $431,789
======== ========
</TABLE>
NOTE 8--OTHER BORROWINGS
Short-term borrowings are detailed as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal funds purchased
Balance at December 31.......................... $12,000 $ -- $ 7,000
Average Balance................................. 669 1,120 1,800
Maximum amount outstanding at any month-end..... 12,000 5,600 12,000
Average interest rate:
During the year............................... 5.42% 5.96% 4.18%
At December 31................................ 6.63% -- 6.50%
Securities sold under agreements to repurchase
Balance at December 31.......................... $ -- $ -- $10,256
Average Balance................................. 1,556 11,486 5,908
Maximum amount outstanding at any month-end..... 14,994 26,994 24,153
Average interest rate:
During the year............................... 5.74% 6.12% 5.13%
At December 31................................ -- -- 6.29%
</TABLE>
Federal funds purchased generally mature the following day after the
purchase while securities sold under agreements to repurchase generally mature
within 30 days from the various dates of sale.
In 1995, the Company consummated a private offering of $3.0 million of 11.5%
subordinated notes. The notes, which will mature on September 15, 2005, were
offered to members of the Board of Directors, bank officers and other
accredited investors within the definition of Rule 501 under the Securities
Act of 1933, as amended. The debentures are redeemable by the Company any time
after September 30, 1998 at a premium ranging from 0% to 5%. The notes qualify
as Tier 2 capital of the Company.
F-16
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9--INCOME TAXES
Income tax expense was comprised of the following for the years ended
December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Current:
Federal........................................... $ 3,308 $1,227 $1,425
State............................................. 764 563 466
------- ------ ------
Total current expense (benefit)................... 4,072 1,790 1,891
------- ------ ------
Deferred:
Federal........................................... (966) 221 71
State............................................. (179) (40) 4
------- ------ ------
Total deferred expense (benefit).................. (1,145) 181 75
------- ------ ------
Total expense....................................... $ 2,927 $1,971 $1,966
------- ------ ------
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes. Significant components
of the Company's deferred income tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------
1996 1995
------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Loan loss reserves........................................... $2,145 $1,278
Deferred compensation........................................ 102 92
State income taxes........................................... 653 339
Unrealized gains............................................. (35) (214)
Other........................................................ (118) (72)
------ ------
Net deferred tax asset....................................... $2,747 $1,423
------ ------
</TABLE>
A reconciliation from the statutory income tax rate to the consolidated
effective income tax rate follows, for the years ended December 31:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1996 1995 1994
---- ---- ----
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Statutory federal tax rate................................ 35.0% 35.0% 35.0%
California franchise tax expense, net of federal income
tax benefit.............................................. 7.6 6.9 5.7
Tax exempt income......................................... (4.9) (3.2) (3.3)
Non-deductible merger and restructuring costs............. 3.9 0.0 3.8
Other, net................................................ 3.9 0.7 (4.8)
---- ---- ----
Effective income tax rate................................. 45.5% 39.4% 36.4%
---- ---- ----
</TABLE>
F-17
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10--OPERATING EXPENSES
Other operating expenses were comprised of the following:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------
1996 1995 1994
------ ------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Professional and legal fees............................ $1,270 $2,968 $1,176
FDIC insurance and regulatory assessments.............. 102 551 858
Other real estate, net................................. 35 62 112
Supplies and postage................................... 592 356 269
Telephone.............................................. 232 213 198
Director fees.......................................... 227 207 236
Insurance.............................................. 105 205 194
Correspondent bank charges............................. 43 158 118
Marketing.............................................. 859 289 118
Client services........................................ 411 337 376
Other.................................................. 2,047 1,515 1,197
------ ------ ------
Total.................................................. $5,923 $6,861 $4,852
====== ====== ======
</TABLE>
Merger and other related non-recurring costs incurred in connection with the
merger consummated in November 1996 (see Note 2) totaling $2.8 million include
$1.1 million of professional fees related to the transaction, $1.2 million of
charges to conform accounting practices of the two merged entities, with the
balance related to severance and compensation costs.
NOTE 11--EMPLOYEE BENEFIT PLANS
STOCK OPTIONS PLANS
Effective November 27, 1996, the Company's shareholders approved the Greater
Bay Bancorp 1996 Stock Option Plan ("the Bancorp Plan") and authorized an
increase in the number of shares available for issuance from 457,037 to
967,890 shares. Under the terms of the merger, all stock option plans of
Cupertino National Bancorp and Mid-Peninsula Bancorp were terminated at the
time of the merger and all outstanding options from these plans were assumed
by the Bancorp Plan. Outstanding options from the Mid-Peninsula Bancorp plan
of 216,326 and outstanding options from the Cupertino National Bancorp plan of
251,073 (converted at a ratio of 0.81522) were assumed by the Bancorp Plan.
Options issued under the Bancorp Plan may be granted to employees and
nonemployee directors and may be either incentive stock options or
nonqualified stock options as defined under current tax laws. The exercise
price of each option must equal the market price of the Company's stock on the
date of grant. The term of an option may not exceed 10 years.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123 "Accounting for Stock-Based Compensation". Under the provisions
of SFAS No. 123, the Company is encouraged, but not required, to measure
compensation costs related to its employee stock compensation plans under the
fair market value method. If the Company elects not to recognize compensation
expense under this method, it is required to disclose the pro forma net income
and earnings per share effects based on the SFAS No. 123 fair value
methodology. The Company implemented the requirements of SFAS No. 123 in 1996
and has elected to adopt the disclosure provisions of this statement.
F-18
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1996, the Company had one stock option plan, which is
described above. The Company applies Accounting Pronouncements Bulletin (APB)
Opinion No. 25 and related interpretations in accounting for its Plan.
Accordingly, no compensation cost has been recognized for its stock option
plan. Had compensation for the Company's stock option plan been determined
consistent with SFAS No. 123, the Company's net income and earnings per share
would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net Income:
As reported....................................... $3,503 $3,034
Pro Forma......................................... $3,351 $2,979
Primary earnings per share
As reported....................................... $1.04 $0.96
Pro Forma......................................... $1.00 $0.94
</TABLE>
The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option-pricing model with the following weighted
average assumptions for grants in 1996 and 1995, respectively; dividend yield
of 2.0% for all years; expected volatility of 19.3% for both years; risk free
rates of 6.0% and 6.9%. No adjustments have been made for forfeitures. The
actual value, if any, that the option holder will realize from these options
will depend solely on the increase in the stock price over the option price
when the options are exercised.
A summary of the Company's fixed stock option plan as of December 31, 1996,
1995, and 1994 and changes during the years ended on those dates is presented
below:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------- --------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED-
SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE
(000) EXERCISE PRICE (000) EXERCISE PRICE (000) EXERCISE PRICE
------ -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 558 $10.78 542 $ 9.55 463 $ 8.04
Granted................. 183 19.27 175 12.65 252 13.03
Exercised............... (184) 7.78 (124) 8.49 (133) 8.14
Forfeited............... (8) 8.58 (35) 10.30 (40) 8.98
---- ------ ---- ------ ---- ------
Outstanding at end of
year................... 549 $13.14 558 $10.78 542 $ 9.55
---- ------ ---- ------ ---- ------
Options exercisable at
year-end............... 284 $12.90 365 $ 9.30 378 $ 9.94
---- ------ ---- ------ ---- ------
Weighted average fair
value of options
granted during the
year................... $ 4.20 $ 2.48 NA
------ ------ ------
</TABLE>
All stock option information has been adjusted for stock dividends in 1995 and
1994.
401(K) SAVINGS PLAN
The Company has a 401(k) tax deferred savings plan under which eligible
employees may elect to defer a portion of their salary (up to 15%) as a
contribution to the plan. The Company matches the employee contributions at a
rate set by the Board of Directors (currently 62.5% of the first 8% of
deferral of an individual's total compensation). The matching contribution
vests ratably over the first four years of employment. The Company contributed
$282,000 to the plan in 1996, $212,000 in 1995, and $153,200 in 1994.
F-19
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
EMPLOYEE STOCK PURCHASE PLAN
The Company has established an Employee Stock Purchase Plan, as amended,
under section 423(b) of the Internal Revenue Code which allows eligible
employees to set aside up to 15% of their compensation toward the purchase of
the Company's stock for an aggregate total of 133,934 shares. Under the plan,
the purchase price is 85% of the lower of the fair market value at the
beginning or end of each three month offering period. During 1996, employees
purchased 10,633 shares of common stock for an aggregate purchase price of
$136,500 compared to the purchase of 8,536 shares of common stock for an
aggregate purchase price of $80,400 in 1995. There are 82,318 shares remaining
in the plan available for purchase by employees at December 31, 1996.
SALARY COMPENSATION PLAN
During 1993 and 1995, the Company entered into salary continuation
agreements with certain executive officers. Under these agreements, the
Company is generally obligated to provide for each such employee or their
beneficiaries, during a period of up to 40 years after the employee's death,
disability or retirement, annual benefits ranging from $36,000 to $85,000. The
estimated present value of future benefits to be paid is being accrued over
the vesting period of the participants. Expenses accrued for this plan for the
years ended December 31, 1996, 1995 and 1994 totaled $310,000, $173,000, and
$72,000, respectively. Depending on the agreement, the Company and the
employees are the beneficiaries of life insurance policies that have been
purchased as a method of financing the benefits under the agreements. At
December 31, 1996 and 1995, the Company's cash surrender value of these
policies was $8.9 million and $8.3 million, respectively, and is included in
other assets.
NOTE 12--RELATED PARTY TRANSACTIONS
Loans made to executive officers, directors and their affiliates, are made
subject to approval by the Directors' Loan Committee and the Board of
Directors. An analysis of total loans to related parties for the years ended
December 31, 1996 and 1995 is shown as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Balance, January 1......................................... $ 9,873 $ 7,788
Additions.................................................. 1,346 4,694
Repayments................................................. (3,671) (2,609)
------- -------
Balance, December 31....................................... $ 7,548 $ 9,873
======= =======
Undisbursed commitments, at year end....................... $ 1,866 $ 432
======= =======
</TABLE>
NOTE 13--COMMITMENTS AND CONTINGENT LIABILITIES
LEASE COMMITMENTS
The Company leases the facilities from which it operates all of its
activities. The main headquarters of MPB in Palo Alto is leased from a group
of investors, which includes three of the Company's directors. Future minimum
lease commitments under all non-cancelable operating leases as of December 31,
1996 are below:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
(DOLLARS IN THOUSANDS)
<S> <C>
1997................................................ $ 2,146
1998................................................ 2,154
1999................................................ 2,068
2000................................................ 1,482
2001................................................ 1,457
Thereafter.......................................... 2,505
-------
Total............................................... $11,812
-------
</TABLE>
F-20
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company subleases that portion of the available space that is not
utilized. Sublease rental income for the years ended December 31, 1996, 1995,
and 1994 was $309,000, $398,000, and $447,000 respectively. Gross rental
expense for the years ended December 31, 1996, 1995, and 1994 was $1.69
million, $1.43 million, and $1.26 million respectively.
OTHER COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, various commitments and contingent
liabilities are outstanding, such as guarantees and commitments to extend
credit, that are not reflected in the accompanying consolidated financial
statements. At December 31, 1996, commitments to fund loans and outstanding
standby letters of credit were approximately $202.8 million and $16.9 million,
respectively. The Company's exposure to credit loss is limited to amounts
funded or drawn; however, at December 31, 1996, no losses are anticipated as a
result of these commitments.
Loan commitments which have fixed expiration dates and require the payment
of a fee are typically contingent upon the borrower meeting certain financial
and other covenants. Approximately $60.0 million of these commitments relate
to real estate construction and land loans and are expected to fund within the
next 12 months. However, the remainder relate primarily to revolving lines of
credit or other commercial loans, and many of these commitments are expected
to expire without being drawn upon, therefore the total commitments do not
necessarily represent future cash requirements. Cupertino National Bank and
Mid-Peninsula Bank evaluate each potential borrower and the necessary
collateral on an individual basis. Collateral varies, but may include real
property, bank deposits, debt or equity securities, or business assets.
Stand-by letters of credit are conditional commitments written by the Banks
to guarantee the performance of a client to a third party. These guarantees
are issued primarily relating to purchases of inventory by the Banks'
commercial clients, and are typically short-term in nature. Credit risk is
similar to that involved in extending loan commitments to clients, and the
Banks accordingly use evaluation and collateral requirements similar to those
for loan commitments. Virtually all such commitments are collateralized.
In the ordinary course of business there are various assertions, claims and
legal proceedings pending against the Company. Management is of the opinion
that the ultimate resolution of these proceedings will not have a material
adverse effect on the consolidated financial position or results of operations
of the Company.
In July 1995, the Company settled a lawsuit for $1.1 million (net of tax)
which alleged that the Company did not perform its fiduciary duties and, as a
result, the plaintiff incurred losses on real estate investments that were
purchased. The Company believes that insurance coverage for this settlement is
available to the Company under various insurance policies and the Company is
currently in the process of pursuing recovery under these policies. However,
due to the uncertainty associated with the recovery, the Company reflected the
settlement expense in 1995 earnings.
NOTE 14--REGULATORY MATTERS
The Company and the Banks are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have
a direct material effect on the Company's consolidated financial statements.
Under capital adequacy guidelines and regulatory framework for prompt
corrective action, the Banks must meet specific capital guidelines that
involve quantitative measures of the Banks' assets, liabilities and certain
off-balance sheet items as calculated under regulatory accounting practices.
The Banks' capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings and other
factors.
F-21
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum capital amounts and ratios (as defined in
the regulations) and are set forth in the table below. At December 31, 1996,
the Bank meets all capital adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification from all of the
Company's and the Banks' regulators, categorized the Company and the Banks as
well capitalized under the regulatory framework for prompt corrective action.
To be categorized as well capitalized, the Company and the Banks must maintain
minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set
forth in the following table. There are no conditions or events since that
determination that management believes have changed the institution's
category. The Company and the Banks' actual 1996 and 1995 capital amounts and
ratios are as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
-----------------------------------------------------------------------------------------------
TO BE WELL
CAPITALIZED
UNDER PROMPT
FOR CAPITAL CORRECTIVE
ADEQUACY ACTION
ACTUAL PURPOSES PROVISIONS
------------- -------------------- ------------------ -------------------- ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ----- -------------------- ------------------ -------------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total Capital (To Risk
Weighted Assets):
GREATER BAY BANCORP.......... $53,638 10.54% greater than greater than N/A
or equal to $40,720 or equal to 8.00%
Mid-Peninsula Bank........... 25,415 11.07 greater than greater than greater than greater than
or equal to 18,359 or equal to 8.00 or equal to $22,949 or equal to 10.00%
Cupertino National Bank and
Trust....................... 28,022 10.03 greater than greater than greater than greater than
or equal to 22,346 or equal to 8.00 or equal to 27,932 or equal to 10.00
Tier 1 Capital (To Risk
Weighted Assets):
GREATER BAY BANCORP.......... $44,530 8.75% greater than greater than N/A
or equal to $20,360 or equal to 4.00%
Mid-Peninsula Bank........... 22,810 9.94 greater than greater than greater than greater than
or equal to 9,179 or equal to 4.00 or equal to $13,769 or equal to 6.00%
Cupertino National Bank and
Trust....................... 21,515 7.70 greater than greater than greater than greater than
or equal to 11,173 or equal to 4.00 or equal to 16,759 or equal to 6.00
Tier 1 Capital (To Average
Assets):
GREATER BAY BANCORP.......... $44,530 7.27% greater than greater than N/A
or equal to $24,496 or equal to 4.00%
Mid-Peninsula Bank........... 22,810 8.23 greater than greater than greater than greater than
or equal to 8,312 or equal to 3.00 or equal to $13,853 or equal to 5.00%
Cupertino National Bank and
Trust....................... 21,515 6.42 greater than greater than greater than greater than
or equal to 13,412 or equal to 4.00 or equal to 16,765 or equal to 5.00
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
-----------------------------------------------------------------------------------------------
TO BE WELL
CAPITALIZED
UNDER PROMPT
FOR CAPITAL CORRECTIVE
ADEQUACY ACTION
ACTUAL PURPOSES PROVISIONS
------------- -------------------- ------------------ -------------------- ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ----- -------------------- ------------------ -------------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total Capital (To Risk
Weighted Assets):
GREATER BAY BANCORP.......... $47,369 13.43% greater than greater than N/A
or equal to $28,208 or equal to 8.00%
Mid-Peninsula Bank........... 22,280 14.90 greater than greater than greater than greater than
or equal to 11,959 or equal to 8.00 or equal to $14,949 or equal to 10.00%
Cupertino National Bank and
Trust....................... 23,088 11.35 greater than greater than greater than greater than
or equal to 16,267 or equal to 8.00 or equal to 20,334 or equal to 10.00
Tier 1 Capital (To Risk
Weighted Assets):
GREATER BAY BANCORP.......... $40,112 11.38% greater than greater than N/A
or equal to $14,104 or equal to 4.00%
Mid-Peninsula Bank........... 20,564 13.76 greater than greater than greater than greater than
or equal to 5,979 or equal to 4.00 or equal to $ 8,969 or equal to 6.00%
Cupertino National Bank and
Trust....................... 17,546 8.62 greater than greater than greater than greater than
or equal to 8,134 or equal to 4.00 or equal to 12,201 or equal to 6.00
Tier 1 Capital (To Average
Assets):
GREATER BAY BANCORP.......... $40,112 8.69% greater than greater than N/A
or equal to $18,464 or equal to 4.00%
Mid-Peninsula Bank........... 20,564 9.31 greater than greater than greater than greater than
or equal to 6,628 or equal to 3.00 or equal to $11,046 or equal to 5.00%
Cupertino National Bank and
Trust....................... 17,546 7.32 greater than greater than greater than greater than
or equal to 9,591 or equal to 4.00 or equal to 11,989 or equal to 5.00
</TABLE>
F-22
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 15--RESTRICTIONS ON SUBSIDIARY TRANSACTIONS
One of the principal sources of cash for the Company is dividends from its
subsidiary Banks. Total dividends which may be declared by the Banks without
receiving prior approval from regulatory authorities are limited to the lesser
of the Banks' retained earnings or the net income of the Banks for the latest
three fiscal years, less dividends previously declared during that period.
Under these restrictions and considering minimum regulatory capital
requirements, the Banks are able to declare combined dividends of up to
approximately $6.3 million as of December 31, 1996.
The Banks are subject to certain restrictions under the Federal Reserve Act,
including restrictions on the extension of credit to affiliates. In
particular, the Banks are prohibited from lending to the Company unless the
loans are secured by specified types of collateral. Such secured loans and
other advances from the Banks are limited to 10% of the Banks' shareholders'
equity, or a maximum of $4.4 million at December 31, 1996. No such advances
were made during 1996 or exist as of December 31, 1996.
NOTE 16--PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS
The financial statements of Greater Bay Bancorp (parent company only)
follow:
PARENT COMPANY ONLY--BALANCE SHEETS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------
1996 1995
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Assets:
Cash and cash equivalents.................................. $ 567 $ 1,848
Investment in subsidiaries................................. 44,475 38,214
Subordinated debentures purchased by subsidiary............ 3,000 3,000
Other assets............................................... 69 209
------- -------
Total....................................................... $48,111 $43,271
======= =======
Liabilities and shareholders' equity:
Subordinated debt.......................................... 3,000 3,000
Other liabilities.......................................... 429 159
------- -------
Total liabilities........................................... 3,429 3,159
Shareholders' equity
Common stock............................................... 34,884 33,105
Unrealized gain (loss)..................................... 71 (621)
Retained earnings.......................................... 9,727 7,628
------- -------
Total shareholders' equity.................................. 44,682 40,112
------- -------
Total liabilities and shareholders' equity.................. $48,111 $43,271
======= =======
</TABLE>
F-23
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
PARENT COMPANY ONLY--STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------------
1996 1995 1994
------ ------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Income:
Interest income.................................... $ 531 $ 61 $ 24
Other income....................................... 142 631 949
------ ------ ------
Total............................................... 673 692 973
------ ------ ------
Expenses:
Occupancy and equipment............................ 460 441 410
Less rentals received from the Banks............... (460) (441) (409)
Other expenses...................................... 1,436 75 689
------ ------ ------
Total............................................... 1,436 75 690
------ ------ ------
Income before taxes and equity in undistributed net
income of subsidiaries............................. (763) 617 283
Income tax expense.................................. 20 -- --
------ ------ ------
Income (loss) before equity in undistributed net
income of subsidiaries............................. (783) 617 283
Equity in undistributed net income of subsidiaries.. 4,286 2,417 2,281
------ ------ ------
Net income.......................................... $3,503 $3,034 $2,564
====== ====== ======
</TABLE>
F-24
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
PARENT COMPANY ONLY--STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows--operating activities:
Net income........................................ $ 3,503 $ 3,034 $ 2,564
Reconciliation of net income to net cash from
operations:
Equity in undistributed net income of
subsidiaries................................... (4,286) (2,417) (2,281)
Net change in other assets...................... (140) 28 (205)
Net change in other liabilities................. 270 25 91
------- ------- -------
Operating cash flows, net........................... (653) 670 169
------- ------- -------
Cash flows--investing activities:
Principal repayment of loans receivable........... -- 150 --
Purchase of subordinated debentures from CNB...... -- (3,000) --
Capital contribution to the subsidiaries.......... (1,003) (402) (415)
------- ------- -------
Investing cash flows, net........................... (1,003) (3,252) (415)
------- ------- -------
Cash flows--financing activities:
Proceeds from issuance of subordinated debt....... -- 3,000 --
Proceeds from exercise of stock options and
employee stock purchases......................... 1,779 1,127 1,028
Cash paid in lieu of fractional shares on stock
dividends........................................ -- (3) (4)
Payment of cash dividends........................... (1,404) (942) (491)
------- ------- -------
Financing cash flows, net........................... 375 3,182 533
------- ------- -------
Net increase in cash and cash equivalents........... (1,281) 600 287
Cash and cash equivalents at the beginning of the
year............................................... 1,848 1,248 961
------- ------- -------
Cash and cash equivalents at the end of the year.... $ 567 $ 1,848 $ 1,248
======= ======= =======
</TABLE>
F-25
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 17--FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates, methods and assumptions are set forth below for the
Company's financial instruments. The estimated fair value of financial
instruments of the Company as of December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents................. $ 53,896 $ 53,896 $ 58,111 $ 58,111
Investment securities..................... 105,520 105,849 116,869 117,280
Loans, net................................ 441,560 445,718 284,579 286,090
Financial liabilities:
Deposits:
Demand, noninterest-bearing............. $139,940 $139,940 $ 96,063 $ 96,063
NOW..................................... 26,936 26,936 22,084 22,084
Money Market Demand Accounts............ 271,749 271,749 211,654 211,654
Savings................................. 13,599 13,599 12,486 12,486
Other time certificates................. 38,889 39,104 25,716 25,789
Time certificates, $100 and over........ 68,170 68,227 63,786 64,032
-------- -------- -------- --------
Total deposits.......................... $559,283 $559,555 $431,789 $432,108
-------- -------- -------- --------
Subordinated debt......................... $ 3,000 $ 3,000 $ 3,000 $ 3,000
Short term borrowings..................... $ 12,000 $ 12,000 -- --
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.
CASH AND CASH EQUIVALENTS
The carrying value reported in the balance sheet for cash and cash
equivalents approximates fair value.
INVESTMENT SECURITIES
The carrying amounts for short-term investments approximate fair value
because they mature in 90 days or less and do not present unanticipated credit
concerns. The fair value of longer term investments, except certain state and
municipal securities, is estimated based on bid prices published in financial
newspapers or bid quotations received from securities dealers. The fair value
of certain state and municipal securities is not readily available through
market sources other than dealer quotations, as such fair value estimates are
based on quoted market prices of similar instruments, adjusted for differences
between the quoted instruments and the instruments being valued.
LOANS
Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type such as commercial, commercial
real estate, residential mortgage and consumer. Each loan category is further
segmented into fixed and adjustable rate interest terms.
The fair value of performing fixed rate loans is calculated by discounting
scheduled cash flows through the estimated maturity using estimated market
discount rates that reflect the credit and interest rate risk inherent in the
loan. The estimate of maturity is based on the Company's historical experience
with repayments for each
F-26
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
loan classifications, modified, as required, by an estimate of the effect of
current economic and lending conditions. The fair value of performing variable
rate loans is judged to approximate book value for those loans whose rates
reprice in less than 90 days. Rate floors and rate ceilings are not considered
for fair value purposes as the number of loans with such limitations is not
significant.
Fair value for significant nonperforming loans is based on recent external
appraisals. If appraisals are not available, estimated cash flows are
discounted using a rate commensurate with the risk associated with the
estimated cash flows. Assumptions regarding credit risk, cash flows, and
discount rates are judgmentally determined using available market information
and specific borrower information.
DEPOSIT LIABILITIES AND BORROWINGS
The fair value for all deposits without fixed maturities and short term
borrowings is considered to be equal to the carrying value. The fair value for
fixed rate time deposits and subordinated debt are estimated by discounting
future cash flows using interest rates currently offered on time deposits or
subordinated debt with similar remaining maturities.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTER OF CREDIT
The majority of the Company's commitments to extend credit carry current
market interest rates if converted to loans. Because these commitments are
generally unassignable by either the Company or the borrower, they only have
value to the Company and the borrower. The estimated fair value approximates
the recorded deferred fee amounts and is excluded from the table.
LIMITATIONS
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from
offering for sale, at one time, the Company's entire holdings of a particular
financial instrument. Fair value estimates are based on judgments regarding
future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not
considered financial instruments. In addition, the tax ramifications related
to the realization of the unrealized gains and losses can have a significant
effect on fair value estimates and have not been considered in many of the
estimates.
NOTE 18--QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
------------- -------------- -------------- ---------------
1996 1995 1996 1995 1996 1995 1996 1995
------ ------ ------- ------ ------- ------ ------- ------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income......... $9,964 $8,657 $10,367 $9,312 $11,577 $9,448 $13,129 $9,816
Net interest income..... 6,292 5,452 6,680 5,768 7,393 5,926 8,459 6,195
Provision for loan
losses................. 320 506 365 165 606 145 745 140
Non-interest income..... 811 587 904 554 872 602 943 563
Non-interest expense.... 4,691 4,349 5,072 6,151 5,328 4,544 8,797 4,642
Income before taxes..... 2,092 1,184 2,147 6 2,331 1,839 (140) 1,976
Net income.............. 1,250 730 1,308 23 1,363 1,098 (418) 1,183
Net income per share.... $ 0.35 $ 0.22 $ 0.36 $ 0.01 $ 0.37 $ 0.32 $ (0.13) $ 0.37
</TABLE>
F-27
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE
CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
--------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 5
Risk Factors.............................................................. 11
Use of Proceeds........................................................... 19
Accounting Treatment...................................................... 19
Capitalization............................................................ 20
Regulatory Capital Ratios................................................. 20
Selected Consolidated Financial Data...................................... 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 22
Business.................................................................. 40
Supervision and Regulation................................................ 46
Management................................................................ 55
Certain Relationships and Related Transactions............................ 64
Security Ownership of Certain Beneficial Owners and Management............ 65
Description of the Trust Preferred Securities............................. 66
Description of Junior Subordinated Debentures............................. 78
Book-Entry Issuance....................................................... 88
Description of Guarantee.................................................. 90
Relationship among the Trust Preferred Securities, the Junior Subordinated
Debentures and the Guarantee............................................. 92
Certain Federal Income Tax Consequences................................... 94
Description of Greater Bay Bancorp Capital Stock.......................... 97
Underwriting.............................................................. 99
Legal Matters............................................................. 99
Experts................................................................... 99
Available Information..................................................... 99
Index to Consolidated Financial Statements................................ F-1
</TABLE>
--------------------
Until , 1997 (25 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
800,000 TRUST PREFERRED SECURITIES
GBB Capital I
% Cumulative Trust Preferred Securities
(Liquidation Amount $25 per Trust Preferred Security)
Fully and Unconditionally Guaranteed,
as Described Herein, by
GREATER BAY BANCORP
-----------------
P R O S P E C T U S
-----------------
Piper Jaffray Inc.
, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 6,061
NASD fee......................................................... 2,500
Nasdaq fees...................................................... 4,000
Trustees' fees and expenses...................................... 11,000
Legal fees and expenses.......................................... 135,000*
Blue Sky fees and expenses....................................... 10,000*
Accounting fees and expenses..................................... 75,000*
Printing expenses................................................ 90,000*
Miscellaneous expenses........................................... 25,439*
--------
Total........................................................ 359,000*
========
</TABLE>
- --------
* Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Greater Bay's Articles of Incorporation provide that the liability of the
directors of Greater Bay for monetary damages shall be eliminated to the
fullest extent permissible under California law and that Greater Bay is
authorized to provide for the indemnification of agents (as defined in Section
317 of the California General Corporation Law) of the corporation in excess of
that expressly permitted by such Section 317 for breach of duty to the
corporation and its shareholders to the fullest extent permissible under
California law.
Section 317 sets forth the provisions pertaining to the indemnification of
corporate "agents." For purposes of this law, an agent is any person who is or
was a director, officer, employee or other agent of a corporation, or is or
was serving at the request of the corporation in such capacity with respect to
any other corporation, partnership, joint venture, trust or other enterprise.
Indemnification for expenses, including amounts paid on settling or otherwise
disposing of a threatened or pending action or defending against the same can
be made in certain circumstances by action of Greater Bay through: (1) a
majority vote of a quorum of Greater Bay's Board of Directors consisting of
directors who are not party to the proceedings; (2) approval of the
shareholders, with the shares owned by the person to be indemnified not being
entitled to vote thereon; or (3) such court in which the proceeding is or was
pending upon application by designated parties. Under certain circumstances,
an agent can be indemnified, even when found liable. Indemnification is
mandatory where the agent's defense is successful on the merits. The law
allows Greater Bay to make advances of expenses for certain actions upon the
receipt of an undertaking that the agent will reimburse the corporation if the
agent is found liable.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Greater Bay,
pursuant to the foregoing provisions or otherwise, Greater Bay understands
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by Greater Bay of expenses incurred or paid by a director,
officer or controlling person of Greater Bay in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, Greater
Bay will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against a public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
Provisions regarding indemnification of officers and directors of Greater
Bay are contained in Greater Bay's Bylaws (Exhibit 3.2 to this Registration
Statement).
II-1
<PAGE>
Under the Trust Agreement, Greater Bay will agree to indemnify each of the
Trustees of GBB Capital I or any predecessor Trustee for GBB Capital I, and to
hold each Trustee harmless against any loss, damage, claims, liability or
expense incurred without negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of the Trust Agreement,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers
or duties under the Trust Agreement.
Greater Bay and GBB Capital I have agreed to indemnify the Underwriter, and
the Underwriter has agreed to indemnify GBB Capital I and Greater Bay against
certain civil liabilities, including liabilities under the Securities Act of
1933, as amended. Reference is made to the Purchase Agreement filed as Exhibit
1.1 herewith.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In September 1995, Cupertino National Bancorp, which merged into Greater Bay
effective November 27, 1996, issued $3.0 million of Subordinated Debt in
reliance on Section 4(2) of the Securities Act.
ITEM 16. EXHIBITS
(a) Exhibits
<TABLE>
<C> <S>
1.1 Form of Purchase Agreement.
3.1 Articles of Incorporation of Greater Bay Bancorp.
3.2 Bylaws of Greater Bay Bancorp, as amended; incorporated herein by
reference from Exhibit 3.2 to Registration Statement on Form S-4
(Registration No. 33-79798), filed with the Commission on June 6,
1994.
4.1 Form of Subordinated Indenture dated , 1997 to be entered
into between Greater Bay Bancorp and Wilmington Trust Company, as
Indenture Trustee.
4.2 Form of Officers' Certificate and Company Order, dated March ,
1997.
4.3 (Reserved.)
4.4 Certificate of Trust of GBB Capital I.
4.5 Trust Agreement of GBB Capital I dated as of February 28, 1997.
4.6 Form of Amended and Restated Trust Agreement of GBB Capital I, dated
, 1997.
4.7 Form of Trust Preferred Certificate of GBB Capital I (included as an
exhibit to Exhibit 4.6).
4.8 Form of Common Securities Certificate of GBB Capital I (included as
an exhibit to Exhibit 4.6).
4.9 Form of Trust Preferred Securities Guarantee Agreement.
4.10 Form of Agreement as to Expenses and Liabilities (included as an
exhibit to Exhibit 4.6).
4.11 Form of Subordinated Debentures; incorporated herein by reference
from Exhibit 1 of Cupertino National Bancorp's Form 8-K (File No. 0-
18015), filed with the Commission on October 25, 1995.
4.12 Supplemental Debenture Agreement of Cupertino National Bancorp dated
as of November 22, 1996.
4.13 Supplemental Debenture Agreement dated November 27, 1996 between
Cupertino National Bancorp and Mid-Peninsula Bancorp.
5.1 Opinion of Manatt, Phelps & Phillips, LLP.*
5.2 Opinion and Consent of Richards, Layton & Finger, P.A.*
8.1 Opinion and Consent of Manatt, Phelps & Phillips, LLP, counsel to
Greater Bay Bancorp, as to certain federal income tax matters.*
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.1 WestCal Agreement of Lease dated April 24, 1989 related to premises
located at 100 South Ellsworth Avenue, San Mateo, California;
incorporated herein by reference from Exhibit 10.6 to Registration
Statement on Form S-4 (Registration No. 33-79798), filed with the
Commission on July 15, 1994.
10.2 WestCal Commercial Lease and Deposit Receipt dated November 26,
1993 related to premises located at 1313 Laurel Street, San Carlos,
California; incorporated herein by reference from Exhibit 10.7 to
Registration Statement on Form S-4 (Registration
No. 33-79798), filed with the Commission on July 15, 1994.
10.3 Mid-Peninsula Bank Lease Agreement dated March 11, 1987 and
associated documents relating to premises located at 420 Cowper
Street, Palo Alto, California; incorporated herein by reference
from Exhibit 10.13 to Mid-Peninsula Bancorp's Annual Report on Form
10-K for the year ended December 31, 1994 (File No. 0-25034), filed
with the Commission on March 30, 1995.
10.4 David L. Kalkbrenner Employment Agreement, dated March 3, 1992;
incorporated herein by reference from Exhibit 10.15 to Mid-
Peninsula Bancorp's Annual Report on Form 10-K for the year ended
December 31, 1994 (File No. 0-25034), filed with the Commission on
March 30, 1995.
10.5 Form of Mid-Peninsula Bank Indemnification Agreement for directors
and executive officers; incorporated herein by reference from
Exhibit 10.16 to Mid-Peninsula Bancorp's Annual Report on Form 10-K
for the year ended December 31, 1994 (File No. 0-25034), filed with
the Commission on March 30, 1995.
10.6 Addendum to Lease Agreement dated March 11, 1987 for premises
located at 420 Cowper Street, Palo Alto, California; incorporated
herein by reference from Exhibit 10.18 to Mid-Peninsula Bancorp's
Annual Report on Form 10-K for the year ended December 31, 1995,
filed with the Commission on March 29, 1996.
10.7 Addendum to Lease Agreement dated November 26, 1993 for premises
located at 1313 Laurel Street, San Carlos, California; incorporated
herein by reference from Exhibit 10.19 to Mid-Peninsula Bancorp's
Annual Report on Form 10-K for the year ended December 31, 1995,
filed with the Commission on March 29, 1996.
10.8 Salary Continuation Agreement entered into with David L.
Kalkbrenner dated April 26, 1995; incorporated herein by reference
from Exhibit 10.20 to Mid-Peninsula Bancorp's Annual Report on Form
10-K for the year ended December 31, 1995, filed with the
Commission on March 29, 1996.**
10.9 Salary Continuation Agreement entered into with Murray B. Dey dated
April 26, 1995; incorporated herein by reference from Exhibit 10.21
to Mid-Peninsula Bancorp's Annual Report on Form 10-K for the year
ended December 31, 1995, filed with the Commission on March 29,
1996.**
10.10 Salary Continuation Agreement entered into with Carol H. Rowland
dated April 26, 1995; incorporated herein by reference from Exhibit
10.22 of Mid-Peninsula Bancorp's Annual Report on Form 10-K for the
year ended December 31, 1995, filed with the Commission on March
29, 1996.**
10.11 Non-management Officer Salary Continuation Agreement entered into
with Susan K. Black dated April 26, 1995; incorporated herein by
reference from Exhibit 10.23 to Mid-Peninsula Bancorp's Annual
Report on Form 10-K for the year ended December 31, 1995, filed
with the Commission on March 29, 1996.**
10.12 Non-management Officer Salary Continuation Agreement entered into
with Kimberly S. Burgess dated April 26, 1995; incorporated herein
by reference from Exhibit 10.24 to Mid-Peninsula Bancorp's Annual
Report on Form 10-K for the year ended December 31, 1995, filed
with the Commission on March 29, 1996.**
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.13 Non-management Officer Salary Continuation Agreement entered into
with Jonas H. Stafford dated April 26, 1995; incorporated herein by
reference from Exhibit 10.25 to Mid-Peninsula Bancorp's Annual
Report on Form 10-K for the year ended December 31, 1995, filed
with the Commission on March 29, 1996.**
10.14 Non-management Officer Salary Continuation Agreement entered into
with Charles P. Banavac dated March 21, 1996; incorporated herein
by reference from Exhibit 10.26 of Mid-Peninsula Bancorp's Annual
Report on Form 10-K for the year ended December 31, 1995, filed
with the Commission on March 29, 1996.**
10.15 Greater Bay Bancorp 1996 Stock Option Plan; incorporated herein by
reference from Exhibit 10.24 to Registration Statement No. 333-
10781 on Form S-4, filed with the Commission on August 23, 1996.**
10.16 Lease--Banking Facility; incorporated herein by reference from
Exhibit 10.1 to Cupertino National Bancorp's Amendment No. 1 to
Form S-18 Registration Statement (No. 2-94390), filed with the
Commission on December 11, 1984.
10.17 Employment Agreement with C. Donald Allen dated July 1, 1990;
incorporated herein by reference from Exhibit 10.9 to Cupertino
National Bancorp's Annual Report on Form 10-K for the year ended
December 31, 1990 (File No. 0-18015), filed with the Commission on
March 30, 1991.**
10.18 Salary Continuation Agreement with C. Donald Allen dated August 1,
1993; incorporated herein by reference from Exhibit 10.10 to
Cupertino National Bancorp's Annual Report on Form 10-K for the
year ended December 31, 1993 (File No. 0-18015), filed with the
Commission on March 25, 1994.**
10.19 Litigation Settlement; incorporated herein by reference from
Exhibit 10.12 to Cupertino National Bancorp's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995 (File No. 0-
18015).
10.20 Emerson Lease; incorporated herein by reference from Exhibit 10.13
to Cupertino National Bancorp's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1995 (File No. 0-18015).
10.21 Cupertino National Bancorp 401(k) Profit Sharing Plan; incorporated
herein by reference from Exhibit 10.15 to Cupertino National
Bancorp's Registration Statement on Form S-8 (Registration No. 33-
62429), filed with the Commission on September 8, 1995.**
10.22 Amendment to the Cupertino National Bancorp 401(k) Profit Sharing
Plan.**
10.23 Amendment Number 2 to the Cupertino National Bancorp 401(k) Profit
Sharing Plan.**
10.24 Cupertino National Bancorp Employee Stock Purchase Plan;
incorporated herein by reference from Exhibit 10.16 to Cupertino
National Bancorp's Registration Statement on Form S-8 (Registration
No. 33-62429), filed with the Commission on September 8, 1995.**
10.25 Salary Continuation Agreement with Ken Brenner dated July 31,
1995.**
10.26 Salary Continuation Agreement with David Hood dated July 31,
1995.**
10.27 Salary Continuation Agreement with Hall Palmer dated July 31,
1995.**
10.28 Salary Continuation Agreement with Steven C. Smith dated July 31,
1995.**
10.29 Form of Indemnification Agreement between Greater Bay Bancorp and
with directors and certain executive officers.
12.1 Statement re Computation of Ratios.
21.1 Subsidiaries of the registrants.
23.1 Consent of Coopers & Lybrand, LLP.
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
23.6 Consent of Manatt, Phelps & Phillips, LLP (included in Exhibit 5.1
above).*
23.7 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2
above).*
24.1 A power of attorney is set forth on the signature page of the
Registration Statement.
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company to act
as trustee under the Subordinated Indenture.
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company to act
as trustee under the Amended and Restated Trust Agreement.
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company to act
as trustee under the Trust Preferred Securities Guarantee Agreement.
</TABLE>
- --------
* To be filed by amendment.
** Represents executive compensation plans and arrangements of the Company.
ITEM 17. UNDERTAKINGS
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the foregoing provisions, or otherwise, the
Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrants of expenses incurred or paid by a director, officer or controlling
person of the Registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrants will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(i) The Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
a registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF PALO ALTO, STATE OF
CALIFORNIA, ON MARCH 4, 1997.
GREATER BAY BANCORP
By: /s/ David L. Kalkbrenner
----------------------------------
David L. Kalkbrenner
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
WE, THE UNDERSIGNED DIRECTORS AND OFFICERS OF GREATER BAY BANCORP, DO HEREBY
SEVERALLY CONSTITUTE AND APPOINT DAVID L. KALKBRENNER AND STEVEN C. SMITH, AND
EACH OF THEM SINGLY, OUR TRUE AND LAWFUL ATTORNEYS AND AGENTS, TO DO ANY AND
ALL THINGS AND ACTS IN OUR NAMES IN THE CAPACITIES INDICATED BELOW AND TO
EXECUTE ANY ALL INSTRUMENTS FOR US AND IN OUR NAMES IN THE CAPACITIES INDICATED
BELOW WHICH SAID DAVID L. KALKBRENNER AND STEVEN C. SMITH, OR EITHER OF THEM,
MAY DEEM NECESSARY OR ADVISABLE TO ENABLE GREATER BAY BANCORP TO COMPLY WITH
THE SECURITIES ACT OF 1993, AS AMENDED, AND ANY RULES, REGULATIONS AND
REQUIREMENTS OF THE SECURITIES AND EXCHANGE COMMISSION, IN CONNECTION WITH THE
OFFERING CONTEMPLATED BY THIS REGISTRATION STATEMENT ON FORM S-1, INCLUDING
SPECIFICALLY, BUT NOT LIMITED TO, POWER AND AUTHORITY TO SIGN FOR US OR ANY OF
US IN OUR NAMES IN THE CAPACITIES INDICATED BELOW THE REGISTRATION STATEMENT
AND ANY AND ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) THERETO; AND
WE HEREBY RATIFY AND CONFIRM ALL THAT SAID DAVID L. KALKBRENNER AND STEVEN C.
SMITH, OR EITHER OF THEM, SHALL DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW ON THE 4TH DAY OF MARCH, 1997, BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ David L. Kalkbrenner President and Chief Executive
- ------------------------------------ Officer and Director
David L. Kalkbrenner (Principal Executive Officer)
/s/ Steven C. Smith Executive Vice President, Chief
- ------------------------------------ Operating Officer and Chief
Steven C. Smith Financial Officer (Principal
Financial and Accounting
Officer)
/s/ John M. Gatto
- ------------------------------------
John M. Gatto Director
- ------------------------------------
James E. Jackson Director
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Rex D. Lindsay
- ------------------------------------
Rex D. Lindsay Director
/s/ Duncan L. Matteson
- ------------------------------------
Duncan L. Matteson Director
/s/ Glen McLaughlin
- ------------------------------------
Glen McLaughlin Director
- ------------------------------------
Dick J. Randall Director
/s/ Donald H. Seiler
- ------------------------------------
Donald H. Seiler Director
/s/ Warren R. Thoits
- ------------------------------------
Warren R. Thoits Director
/s/ Edwin E. van Bronkhorst
- ------------------------------------
Edwin E. van Bronkhorst Director
</TABLE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF PALO ALTO, STATE OF
CALIFORNIA, ON MARCH 4, 1997.
GBB CAPITAL I
By: /s/ David L. Kalkbrenner
----------------------------------
David L. Kalkbrenner,
TRUSTEE
By: /s/ Steven C. Smith
----------------------------------
Steven C. Smith
TRUSTEE
By: /s/ James R. Ramsey
----------------------------------
James R. Ramsey,
TRUSTEE
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION SEQUENTIALLY
NO. ----------- NUMBERED PAGE
------- -------------
<C> <S> <C>
1.1 Form of Purchase Agreement.
3.1 Articles of Incorporation of Greater Bay Bancorp.
3.2 Bylaws of Greater Bay Bancorp, as amended; incorporated herein by
reference from Exhibit 3.2 to Registration Statement on Form S-4
(Registration No. 33-79798), filed with the Commission on June 6, 1994.
4.1 Form of Subordinated Indenture dated , 1997 to be entered into
between Greater Bay Bancorp and Wilmington Trust Company, as Indenture
Trustee.
4.2 Form of Officers' Certificate and Company Order, dated March , 1997.
4.3 (Reserved.)
4.4 Certificate of Trust of GBB Capital I.
4.5 Trust Agreement of GBB Capital I dated as of February 28, 1997.
4.6 Form of Amended and Restated Trust Agreement of GBB Capital I, dated
, 1997.
4.7 Form of Trust Preferred Certificate of GBB Capital I (included as an
exhibit to Exhibit 4.6).
4.8 Form of Common Securities Certificate of GBB Capital I (included as an
exhibit to Exhibit 4.6).
4.9 Form of Trust Preferred Securities Guarantee Agreement.
4.10 Form of Agreement as to Expenses and Liabilities (included as an exhibit
to Exhibit 4.6).
4.11 Form of Subordinated Debentures; incorporated herein by reference from
Exhibit 1 of Cupertino National Bancorp's Form 8-K (File No. 0-18015),
filed with the Commission on October 25, 1995.
4.12 Supplemental Debenture Agreement of Cupertino National Bancorp dated as of
November 22, 1996.
4.13 Supplemental Debenture Agreement dated November 27, 1996 between Cupertino
National Bancorp and Mid-Peninsula Bancorp.
5.1 Opinion of Manatt, Phelps & Phillips, LLP.*
5.2 Opinion and Consent of Richards, Layton & Finger, P.A.*
8.1 Opinion and Consent of Manatt, Phelps & Phillips, LLP, counsel to Greater
Bay Bancorp, as to certain federal income tax matters.*
10.1 WestCal Agreement of Lease dated April 24, 1989 related to premises
located at 100 South Ellsworth Avenue, San Mateo, California; incorporated
herein by reference from Exhibit 10.6 to Registration Statement on Form S-
4 (Registration No. 33-79798), filed with the Commission on July 15, 1994.
10.2 WestCal Commercial Lease and Deposit Receipt dated November 26, 1993
related to premises located at 1313 Laurel Street, San Carlos, California;
incorporated herein by reference from Exhibit 10.7 to Registration
Statement on Form S-4 (Registration No. 33-79798), filed with the
Commission on July 15, 1994.
10.3 Mid-Peninsula Bank Lease Agreement dated March 11, 1987 and associated
documents relating to premises located at 420 Cowper Street, Palo Alto,
California; incorporated herein by reference from Exhibit 10.13 to Mid-
Peninsula Bancorp's Annual Report on Form 10-K for the year ended December
31, 1994 (File No. 0-25034), filed with the Commission on March 30, 1995.
</TABLE>
<PAGE>
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<TABLE>
<CAPTION>
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10.4 David L. Kalkbrenner Employment Agreement, dated March 3, 1992;
incorporated herein by reference from Exhibit 10.15 to Mid-Peninsula
Bancorp's Annual Report on Form 10-K for the year ended December 31, 1994
(File No. 0-25034), filed with the Commission on March 30, 1995.
10.5 Form of Mid-Peninsula Bank Indemnification Agreement for directors and
executive officers; incorporated herein by reference from Exhibit 10.16 to
Mid-Peninsula Bancorp's Annual Report on Form 10-K for the year ended
December 31, 1994 (File No. 0-25034), filed with the Commission on March
30, 1995.
10.6 Addendum to Lease Agreement dated March 11, 1987 for premises located at
420 Cowper Street, Palo Alto, California; incorporated herein by reference
from Exhibit 10.18 to Mid-Peninsula Bancorp's Annual Report on Form 10-K
for the year ended December 31, 1995, filed with the Commission on March
29, 1996.
10.7 Addendum to Lease Agreement dated November 26, 1993 for premises located
at 1313 Laurel Street, San Carlos, California; incorporated herein by
reference from Exhibit 10.19 to Mid-Peninsula Bancorp's Annual Report on
Form 10-K for the year ended December 31, 1995, filed with the Commission
on March 29, 1996.
10.8 Salary Continuation Agreement entered into with David L. Kalkbrenner dated
April 26, 1995; incorporated herein by reference from Exhibit 10.20 to
Mid-Peninsula Bancorp's Annual Report on Form 10-K for the year ended
December 31, 1995, filed with the Commission on March 29, 1996.**
10.9 Salary Continuation Agreement entered into with Murray B. Dey dated April
26, 1995; incorporated herein by reference from Exhibit 10.21 to Mid-
Peninsula Bancorp's Annual Report on Form 10-K for the year ended December
31, 1995, filed with the Commission on March 29, 1996.**
10.10 Salary Continuation Agreement entered into with Carol H. Rowland dated
April 26, 1995; incorporated herein by reference from Exhibit 10.22 of
Mid-Peninsula Bancorp's Annual Report on Form 10-K for the year ended
December 31, 1995, filed with the Commission on March 29, 1996.**
10.11 Non-management Officer Salary Continuation Agreement entered into with
Susan K. Black dated April 26, 1995; incorporated herein by reference from
Exhibit 10.23 to Mid-Peninsula Bancorp's Annual Report on Form 10-K for
the year ended December 31, 1995, filed with the Commission on March 29,
1996.**
10.12 Non-management Officer Salary Continuation Agreement entered into with
Kimberly S. Burgess dated April 26, 1995; incorporated herein by reference
from Exhibit 10.24 to Mid-Peninsula Bancorp's Annual Report on Form 10-K
for the year ended December 31, 1995, filed with the Commission on March
29, 1996.**
10.13 Non-management Officer Salary Continuation Agreement entered into with
Jonas H. Stafford dated April 26, 1995; incorporated herein by reference
from Exhibit 10.25 to Mid-Peninsula Bancorp's Annual Report on Form 10-K
for the year ended December 31, 1995, filed with the Commission on March
29, 1996.**
10.14 Non-management Officer Salary Continuation Agreement entered into with
Charles P. Banavac dated March 21, 1996; incorporated herein by reference
from Exhibit 10.26 of Mid-Peninsula Bancorp's Annual Report on Form 10-K
for the year ended December 31, 1995, filed with the Commission on March
29, 1996.**
10.15 Greater Bay Bancorp 1996 Stock Option Plan; incorporated herein by
reference from Exhibit 10.24 to Registration Statement No. 333-10781 on
Form S-4, filed with the Commission on August 23, 1996.**
</TABLE>
<PAGE>
EXHIBIT INDEX--(CONTINUED)
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10.16 Lease--Banking Facility; incorporated herein by reference from Exhibit
10.1 to Cupertino National Bancorp's Amendment No. 1 to Form S-18
Registration Statement (No. 2-94390), filed with the Commission on
December 11, 1984.
10.17 Employment Agreement with C. Donald Allen dated July 1, 1990; incorporated
herein by reference from Exhibit 10.9 to Cupertino National Bancorp's
Annual Report on Form 10-K for the year ended December 31, 1990 (File No.
0-18015), filed with the Commission on March 30, 1991.**
10.18 Salary Continuation Agreement with C. Donald Allen dated August 1, 1993;
incorporated herein by reference from Exhibit 10.10 to Cupertino National
Bancorp's Annual Report on Form 10-K for the year ended December 31, 1993
(File No. 0-18015), filed with the Commission on March 25, 1994.**
10.19 Litigation Settlement; incorporated herein by reference from Exhibit 10.12
to Cupertino National Bancorp's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995 (File No. 0-18015).
10.20 Emerson Lease; incorporated herein by reference from Exhibit 10.13 to
Cupertino National Bancorp's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995 (File No. 0-18015).
10.21 Cupertino National Bancorp 401(k) Profit Sharing Plan; incorporated herein
by reference from Exhibit 10.15 to Cupertino National Bancorp's
Registration Statement on Form S-8 (Registration No. 33-62429), filed with
the Commission on September 8, 1995.**
10.22 Amendment to the Cupertino National Bancorp 401(k) Profit Sharing Plan.**
10.23 Amendment Number 2 to the Cupertino National Bancorp 401(k) Profit Sharing
Plan.**
10.24 Cupertino National Bancorp Employee Stock Purchase Plan; incorporated
herein by reference from Exhibit 10.16 to Cupertino National Bancorp's
Registration Statement on Form S-8 (Registration No. 33-62429), filed with
the Commission on September 8, 1995.**
10.25 Salary Continuation Agreement with Ken Brenner dated July 31, 1995.**
10.26 Salary Continuation Agreement with David Hood dated July 31, 1995.**
10.27 Salary Continuation Agreement with Hall Palmer dated July 31, 1995.**
10.28 Salary Continuation Agreement with Steven C. Smith dated July 31, 1995.**
10.29 Form of Indemnification Agreement between Greater Bay Bancorp and with
directors and certain executive officers.
12.1 Statement re Computation of Ratios.
21.1 Subsidiaries of the registrants.
23.1 Consent of Coopers & Lybrand, LLP.
23.6 Consent of Manatt, Phelps & Phillips, LLP (included in Exhibit 5.1
above).*
23.7 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2
above).*
24.1 A power of attorney is set forth on the signature page of the Registration
Statement.
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as
trustee under the Subordinated Indenture.
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as
trustee under the Amended and Restated Trust Agreement.
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as
trustee under the Trust Preferred Securities Guarantee Agreement.
</TABLE>
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* To be filed by amendment.
** Represents executive compensation plans and arrangements of the Company.
<PAGE>
EXHIBIT 1.1
Capital Securities
GBB Capital I
[ ]% Cumulative Capital Securities
(Liquidation Preference of $25 per Capital Security)
PURCHASE AGREEMENT
------------------
, 1997
PIPER JAFFRAY INC.
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402
Ladies and Gentlemen:
Greater Bay Bancorp., a California corporation (the "Company"), and
its fiduciary subsidiary, GBB Capital I, a statutory business trust organized
under the Delaware Business Trust Act (the "Delaware Act") (the "Trust" and
together with the Company, the "Offerors"), propose that the Trust issue and
sell to Piper Jaffray Inc. (the "Underwriter") an aggregate of __________ of the
Trust's ___% Cumulative Capital Securities, with a liquidation preference of
$25.00 per capital security (the "Capital Securities"), the terms of which are
more fully described in the Prospectus (as hereinafter defined). The Offerors
propose that the Trust issue the Capital Securities pursuant to an Amended and
Restated Trust Agreement among Wilmington Trust Company, as Property Trustee and
Indenture Trustee, the administrative trustees named therein (the
"Administrative Trustees") and the Company (the "Trust Agreement"). The Capital
Securities will be guaranteed by the Company with respect to distributions and
payments upon liquidation, redemption and otherwise (the "Guarantee") pursuant
to a Guarantee Agreement (the "Guarantee Agreement"), to be dated ________,
1997, between the Company and Wilmington Trust Company, as trustee (the
"Guarantee Trustee"), and entitled to the benefits of certain backup
undertakings described in the Prospectus (as defined herein) with respect to the
Company's agreement pursuant to the Expense Agreement (as defined herein) to pay
all expenses relating to administration of the Trust.
The proceeds of the sale of the Capital Securities will be used to
purchase junior subordinated deferrable interest debentures (the "Junior
Subordinated Debentures") issued by the Company pursuant to an Indenture, to be
dated _______,
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<PAGE>
1997, between the Company and Wilmington Trust Company as trustee (the
"Indenture").
The Offerors hereby confirm their agreement with respect to the sale
of the Capital Securities to the Underwriter.
1. Registration Statement and Prospectus. A registration
-------------------------------------
statement on Form S-1 (File No. 333-____) with respect to the Capital
Securities, the Guarantee and the Junior Subordinated Debentures, including a
preliminary form of prospectus, has been prepared by the Offerors in conformity
with the requirements of the Securities Act of 1933, as amended (the "Act"), and
the rules and regulations ("Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act") and the rules and regulations
thereunder and has been filed with the Commission; and, if the Offerors have
elected to rely upon Rule 462(b) of the Rules and Regulations to increase the
size of the offering registered under the Act, the Offerors will prepare and
file with the Commission a registration statement with respect to such increase
pursuant to Rule 462(b). Copies of such registration statement(s) and
amendments and each related preliminary prospectus have been delivered to the
Underwriter.
If the Offerors have elected not to rely upon Rule 430A of the Rules
and Regulations, the Offerors have prepared and will promptly file an amendment
to the registration statement and an amended prospectus (including a term sheet
meeting the requirements of Rule 434 of the Rules and Regulations) if necessary
to complete the Prospectus. If the Offerors have elected to rely upon Rule 430A
of the Rules and Regulations, they will prepare and file a prospectus (or a term
sheet meeting the requirements of Rule 434) pursuant to Rule 424(b) that
discloses the information previously omitted from the prospectus in reliance
upon Rule 430A. Such registration statement, as amended at the time it is or was
declared effective by the Commission, and, in the event of any amendment thereto
after the effective date and prior to the Closing Date (as hereinafter defined),
such registration statement as so amended (but only from and after the
effectiveness of such amendment), including a registration statement (if any)
filed pursuant to Rule 462(b) of the Rules and Regulations increasing the size
of the offering registered under the Act and information (if any) deemed to be
part of the registration statement at the time of effectiveness pursuant to
Rules 430A(b) and 434(d) of the Rules and Regulations, is hereinafter called the
"Registration Statement". The prospectus included in the Registration Statement
at the time it is or was declared effective by the Commission is hereinafter
called the "Prospectus", except that if any prospectus (including any term sheet
meeting the requirements of Rule 434 of the Rules and Regulations provided by
the Offerors for use with a prospectus subject to completion within the meaning
of Rule 434 in order to meet the requirements of Section 10(a) of the Rules and
Regulations) filed by the Offerors with the Commission pursuant to Rule 424(b)
(and Rule 434, if applicable) of the Rules and Regulations or any
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<PAGE>
other such prospectus provided to the Underwriter by the Offeror for use in
connection with the offering of the Capital Securities (whether or not required
to be filed by the Offeror with the Commission pursuant to Rule 424(b) of the
Rules and Regulations) differs from the prospectus on file at the time the
Registration Statement is or was declared effective by the Commission, the term
"Prospectus" shall refer to such differing prospectus (including any term sheet
within the meaning of Rule 434 of the Rules and Regulations) from and after the
time such prospectus is filed with the Commission or transmitted to the
Commission for filing pursuant to such Rule 424(b) (and Rule 434, if applicable)
or from and after the time it is first provided to the Underwriter by the
Offeror for such use. The term "Preliminary Prospectus" as used herein means the
preliminary prospectus included in any Registration Statement prior to the time
it becomes or became effective under the Act and any prospectus subject to
completion as described in Rule 430A or 434 of the Rules and Regulations.
In connection with the offer and sale of the Capital Securities, the
Underwriter will comply with Rule 2810 under the NASD Conduct Rules.
2. Representations and Warranties of the Company.
---------------------------------------------
(a) The Offerors represent and warrant to, and agree with, the
Underwriter as follows:
(i) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and the Preliminary Prospectus, at
the time of filing thereof, did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; except that the foregoing shall not apply to
statements in or omissions from the Preliminary Prospectus in reliance upon, and
in conformity with, written information furnished to the Company by or on behalf
of the Underwriter for use in the preparation thereof.
(ii) As of the time the Registration Statement (or any post-effective
amendment thereto, including a registration statement (if any) filed pursuant to
Rule 462(b) of the Rules and Regulations increasing the size of the offering
registered under the Act) is or was declared effective by the Commission, upon
the filing or first delivery to the Underwriter of the Prospectus (or any
supplement to the Prospectus (including any term sheet meeting the requirements
of Rule 434 of the Rules and Regulations)) and at the Closing Date (as
hereinafter defined), (A) the Registration Statement and Prospectus (in each
case, as so amended and/or supplemented) conformed or will conform in all
material respects to the requirements of the Act and the Rules and Regulations
and the Registration Statement and Prospectus (in each case as so amended
-3-
<PAGE>
and/or supplemented) conformed or will conform in all material respects to the
requirements of the Trust Indenture Act and the rules and regulations
thereunder, (B) the Registration Statement (as so amended) did not or will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and (C) the Prospectus (as so supplemented) did not or will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they are or were made, not misleading;
except that the foregoing shall not apply to (i) statements in or omissions from
any such document in reliance upon, and in conformity with, written information
furnished to the Offerors by or on behalf of the Underwriter specifically for
use in the preparation thereof and (ii) that part of the Registration Statement
which constitutes the Statement of Eligibility and Qualification ("Form T-1")
under the Trust Indenture Act. If the Registration Statement has been declared
effective by the Commission, no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceeding for that purpose has
been initiated or, to the Offeror's knowledge, threatened by the Commission.
(iii) The documents of the Company incorporated by reference in the
Registration Statement and the Prospectus, when they were filed with the
Commission conformed in all material respects to the requirements of the
Exchange Act and the rules and regulations of the Commission thereunder, and
none of such documents contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and any further documents so filed
and incorporated by reference in the Registration Statement and the Prospectus
or any further amendment or supplement thereto, when such documents are filed
with the Commission will conform in all material respects to the requirements of
the Exchange Act and the rules and regulations of the Commission thereunder, and
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.
(iv) The consolidated financial statements of the Company, together with
the notes thereto, contained in or incorporated by reference in the Registration
Statement, Preliminary Prospectus and Prospectus comply in all material respects
with the requirements of the Act and the Exchange Act and fairly present the
consolidated financial condition of the Company and its consolidated
subsidiaries as of the dates indicated and the results of operations and changes
in cash flows for the periods therein specified in conformity with generally
accepted accounting principles consistently applied throughout the periods
involved (except as otherwise stated in the Registration Statement and
-4-
<PAGE>
Prospectus) and the independent public accountants whose reports are contained
therein are independent public accountants as required by the Act and the Rules
and Regulations. The summary financial information included in the Preliminary
Prospectus and Prospectus under the caption "Summary Consolidated Financial
Data" present fairly the information required to be stated therein.
(v) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of California and is
duly registered as a bank holding company under the Bank Holding Company Act of
1956, as amended (the "BHC Act"), supervised by the Board of Governors of the
Federal Reserve System (the "FRB"). Other than the Trust, Mid-Peninsula Bank, a
state bank chartered under the banking laws of the State of California, and
Cupertino National Bank and Trust, a national banking association chartered
under the federal laws of the United States (each a "Subsidiary" and
collectively the "Subsidiaries"), constitute the only subsidiaries of the
Company. Each Subsidiary has been duly organized and is validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization, as the case may be. Each of the Company and its Subsidiaries has
full corporate power and authority to own its properties and conduct its
business as currently being carried on and as described in the Registration
Statement and Prospectus, and is duly qualified to do business as a foreign
corporation in good standing under the corporation and financial services laws
of each jurisdiction in which the conduct of its business or ownership or lease
of its properties requires such qualification and where the failure to be so
qualified would, individually or in the aggregate, have a material adverse
effect on the condition (financial or otherwise), earnings, business, prospects,
assets, results of operations or properties of the Company and its Subsidiaries,
taken as a whole. Other than the foregoing Subsidiaries and the Trust, the
Company owns no capital stock or other equity, ownership or proprietary interest
in any company, partnership, association, trust or other entity. The accounts
of each Subsidiary are insured by the Bank Insurance Fund of the Federal Deposit
Insurance Corporation (the "FDIC") up to the maximum applicable amount in
accordance with the rules and regulations of the FDIC, and no proceedings for
the termination or revocation of such membership or insurance are pending, or,
to the knowledge of the Company, threatened.
(vi) The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Act with full trust power and
authority to own property and to conduct its business as described in the
Registration Statement and Prospectus and to enter into and perform its
obligations under this Agreement, the Capital Securities, the Common Securities
and the Trust Agreement and is authorized to do business in each jurisdiction in
which such qualification is required, except where the failure to so qualify
would
-5-
<PAGE>
not have a material adverse effect on the Company's condition (financial or
otherwise), earnings, business, prospects, assets, results of operations or
properties taken as a whole; the Trust has conducted and will conduct no
business other than the transactions contemplated by the Trust Agreement and
described in the Prospectus; the Trust is not a party to or otherwise bound by
any agreement other than those described in the Prospectus; the Trust is and
will be classified for United States federal income tax purposes as a grantor
trust and not as an association taxable as a corporation; and the Trust is and
will be treated as a consolidated subsidiary of the Company pursuant to
generally accepted accounting principles.
(vii) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, none of the Trust, the Company or the Subsidiaries has
incurred any material liabilities or obligations, direct or contingent, or
entered into any material transactions, or declared or paid any dividends or
made any distribution of any kind with respect to its capital stock (other than
dividends paid in the ordinary course with respect to shares of the Company's
Common Stock, no par value (the "Common Stock") or the common stock of the
Subsidiaries as described in the Registration Statement or the Prospectus); and
there has not been any change in the capital stock (other than a change in the
number of outstanding shares of Common Stock due to the issuance of shares upon
the exercise of options, warrants or rights under an employee stock purchase
plan disclosed in the Registration Statement or the Prospectus), or any material
change in the short-term or long-term debt, or any issuance of options,
warrants, convertible securities or other rights to purchase the capital stock,
of the Trust, the Company or any Subsidiary, or any material adverse change, or
any development involving a prospective material adverse change, in the general
affairs, condition (financial or otherwise), business, key personnel, property,
prospects, net worth or results of operations of the Trust or the Company and
its Subsidiaries, taken as a whole.
(viii) Except as set forth in the Registration Statement and the Prospectus
or in the documents incorporated therein by reference, there is not pending or,
to the knowledge of the Trust or the Company, threatened or contemplated, any
action, suit or proceeding to which the Trust, the Company or any Subsidiary is
a party or to which either of their assets may be subject, before or by any
court or governmental agency, authority or body, or any arbitrator, which might
result in any material adverse change in the condition (financial or otherwise),
business, prospects, net worth or results of operations of the Trust or the
Company and its Subsidiaries, taken as a whole.
-6-
<PAGE>
(ix) There are no contracts or documents of the Trust, the Company or any
Subsidiary that are required to be filed or incorporated by reference as
exhibits to the Registration Statement by the Act or by the Rules and
Regulations which contracts or documents have not been so filed or incorporated
by reference as required.
(x) Each of this Agreement, the Indenture, the Trust Agreement, the
Guarantee and the Agreement as to Expenses and Liabilities (the "Expense
Agreement") has been duly authorized, executed and delivered by the Company
and/or the Trust, as the case may be, and constitutes a valid, legal and binding
obligation of the Company and/or the Trust, as the case may be, enforceable in
accordance with its terms, except as rights to indemnity hereunder may be
limited by federal or state securities laws and except as such enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting the rights of creditors generally and subject to general principles of
equity. The execution, delivery and performance of this Agreement, the
Indenture, the Trust Agreement, the Guarantee Agreement and the Expense
Agreement and the consummation of the transactions herein or therein
contemplated will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute, any agreement or
instrument to which the Company or the Trust is a party or by which it is bound
or to which any of its property is subject, the Company's charter or bylaws, the
Trust's Trust Agreement or its certificate of trust filed with the State of
Delaware on ________, 1997 (the "Certificate of Trust") or any order, rule,
regulation or decree of any court or governmental agency or body having
jurisdiction over the Company or the Trust or any of the properties of either
the Company or the Trust; no consent, approval, authorization or order of, or
filing with, any court or governmental agency or body is required for the
execution, delivery and performance of this Agreement, the Indenture, the Trust
Agreement, the Guarantee and the Expense Agreement or for the consummation of
the transactions contemplated hereby or thereby, including the issuance or sale
of the Junior Subordinated Debentures by the Company and the Capital Securities
by the Trust, except such as may be required under the Act or state securities
or blue sky laws; each of the Company and the Trust has full power and authority
to enter into this Agreement, the Indenture, the Trust Agreement, the Guarantee
and the Expense Agreement, and to authorize, issue and sell the Capital
Securities as contemplated by this Agreement; and each of the Indenture, the
Trust Agreement and the Guarantee Agreement has been duly qualified under the
Trust Indenture Act and will conform in all material respects to the statements
relating thereto in the Registration Statement and the Prospectus.
(xi) All of the issued and outstanding shares of capital stock of the
Company are duly authorized and are validly issued, fully paid and
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<PAGE>
nonassessable, have been issued, in compliance with all federal and state
securities laws, were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities, and the holders
thereof are not subject to personal liability by reason of being such holders;
and the capital stock of the Company conforms to the description thereof in the
Registration Statement and Prospectus. Except as otherwise stated in the
Registration Statement and Prospectus, there are no preemptive rights or other
rights to subscribe for or to purchase, or any restriction upon the voting or
transfer of, any shares of Common Stock pursuant to the Company's charter,
bylaws or any agreement or other instrument to which the Company is a party or
by which the Company is bound. Neither the filing of the Registration Statement
nor the offering or sale of the Junior Subordinated Debentures or Capital
Securities as contemplated by this Agreement gives rise to any rights for or
relating to the registration of any shares of Common Stock or other capital
stock of the Company. All of the issued and outstanding shares of capital stock
of each Subsidiary have been duly and validly authorized and issued and are
fully paid and nonassessable, and, except for any directors' qualifying shares,
the Company owns of record and beneficially, free and clear of any security
interests, claims, liens, proxies, equities or other encumbrances, all of the
issued and outstanding shares of such stock. Except as described in the
Registration Statement and the Prospectus, there are no options, warrants,
agreements, contracts or other rights in existence to purchase or acquire from
the Company or any Subsidiary of the Company any shares of the capital stock of
the Company or any Subsidiary. The Company has an authorized and outstanding
capitalization as set forth in the Registration Statement and the Prospectus
under the caption "Capitalization".
(xii) The Junior Subordinated Debentures have been duly authorized by the
Company and at the Closing Date will have been duly executed by the Company and,
when authenticated in the manner provided for in the Indenture and delivered
against payment therefor as described in the Prospectus, will constitute valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms except to the extent that enforcement thereof may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting the
rights of creditors generally and subject to general principles of equity, will
be in the form contemplated by, and entitled to the benefits of, the Indenture
and will conform in all material respects to the statements relating thereto in
the Prospectus.
(xiii) The Common Securities have been duly authorized by the Trust
Agreement and, when issued and delivered by the Trust to the Company against
payment therefor as described in the Registration Statement and Prospectus, will
be validly issued and (subject to the terms of the Trust Agreement) fully paid
and
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<PAGE>
nonassessable undivided beneficial interests in the assets of the Trust and will
conform to all statements relating thereto contained in the Prospectus; the
issuance of the Common Securities is not subject to preemptive or other similar
rights; and at the Closing Date all of the issued and outstanding Common
Securities of the Trust will be directly owned by the Company free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim or equity.
(xiv) The Capital Securities have been duly authorized by the Trust
Agreement and, when issued and delivered pursuant to this Agreement against
payment of the consideration set forth herein, will be validly issued and fully
paid and non-assessable undivided beneficial interests in the Trust, will be
entitled to the benefits of the Trust Agreement and will in all material
respects conform to the statements relating thereto contained in the Prospectus;
the issuance of the Capital Securities is not subject to preemptive or other
similar rights; and holders of Capital Securities will be entitled to the same
limitation of personal liability under Delaware law as extended to stockholders
of private corporations for profit.
(xv) The Indenture, the Trust Agreement, the Guarantee Agreement and the
Expense Agreement are in substantially the respective forms filed as exhibits to
the Registration Statement.
(xvi) The Company's obligations under the Guarantee are subordinated and
junior in right of payment to all "Senior and Subordinated Debt" (as defined in
the Indenture) of the Company.
(xvii) The Junior Subordinated Debentures are subordinate and
junior in right of payment to all "Senior and Subordinated Debt" of the Company.
(xviii) Each of the Administrative Trustees of the Trust is an employee of
the Company and has been duly authorized by the Company to execute and deliver
the Trust Agreement.
(xix) The Trust, the Company and each Subsidiary holds, and is operating
in compliance in all material respects with, all franchises, grants,
authorizations, licenses, permits, easements, consents, certificates and orders
of any governmental or self-regulatory body required for the conduct of its
business and all such franchises, grants, authorizations, licenses, permits,
easements, consents, certifications and orders are valid and in full force and
effect, and the Trust, the Company and each Subsidiary is and has been in
compliance in all material respects with all applicable federal, state, local
and foreign laws, regulations, orders and decrees, except to the extent that the
failure to comply would not have a material adverse effect on the condition
(financial or
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otherwise), earnings, business, prospects, assets, results of operations or
properties of the Company and its Subsidiaries, taken as a whole.
(xx) Each of the Company and its Subsidiaries has good title to all
property (and good and marketable title to all real property) described in the
Registration Statement and Prospectus as being owned by them, in each case free
and clear of all liens, claims, security interests or other encumbrances except
such as are described in the Registration Statement and the Prospectus or which
do not interfere in any material respect with the use of the property on the
conduct of the business of the Company and its Subsidiaries; the property held
under lease by the Company and its Subsidiaries is held by them under valid,
subsisting and enforceable leases with only such exceptions with respect to any
particular lease as do not interfere in any material respect with the conduct of
the business of the Company or any Subsidiary; each of Company and its
Subsidiaries owns or possesses all patents, patent applications, trademarks,
service marks, tradenames, trademark registrations, service mark registrations,
copyrights, licenses, inventions, trade secrets and rights necessary for the
conduct of the business of the Company and its Subsidiaries as currently carried
on and as described in the Registration Statement and Prospectus; except as
stated in the Registration Statement and Prospectus, to the best of the
Company's knowledge, no name which the Company or any Subsidiary uses and no
other aspect of the business of the Company or any Subsidiary will involve or
give rise to any infringement of, or license or similar fees for, any patents,
patent applications, trademarks, service marks, tradenames, trademark
registrations, service mark registrations, copyrights, licenses, inventions,
trade secrets or other similar rights of others material to the business or
prospects of the Company and its Subsidiaries, taken as a whole, and neither the
Company nor any Subsidiary has received any notice alleging any such
infringement or fee.
(xxi) Neither the Company nor any Subsidiary is in violation of its
respective charter or bylaws; the Trust is not in violation of the Trust
Agreement or its Certificate of Trust; none of the Trust, the Company or any
Subsidiary is in breach of or otherwise in default in the performance of any
material obligation, agreement or condition contained in any bond, debenture,
note, indenture, loan agreement or any other material contract, lease or other
instrument to which it is subject or by which any of them may be bound, or to
which any of the material property or assets of the Trust, the Company or any
Subsidiary is subject.
(xxii) Each of the Trust, the Company and each Subsidiary has filed all
federal, state, local and foreign income and franchise tax returns required to
be filed and are not in default in the payment of any taxes which were payable
pursuant to said returns or any assessments with respect thereto, other than any
which the Company or any Subsidiary is contesting in good faith.
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(xxiii) The Offerors have not distributed and will not distribute any
prospectus or other offering material in connection with the offering and sale
of the Capital Securities and the Common Stock other than any Preliminary
Prospectus or the Prospectus or other materials permitted by the Act to be
distributed by the Company.
(xxiv) Each of the Company and its Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(xxv) Other than as contemplated by this Agreement or described in the
Registration Statement, the Company has not incurred any liability for any
finder's or broker's fee or agent's commission in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(xxvi) None of the Trust, the Company or any Subsidiary is an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, or an "investment adviser"
within the meaning of the Investment Advisers Act of 1940, as amended.
(xxvii) No report or application filed by the Company or any Subsidiary
with the FRB, the OCC, the California Superintendent of State Banks (the
"Superintendent"), the FDIC or other regulatory authority having jurisdiction
over it (each such report of application, together with all exhibits thereto, a
"Regulatory Report"), as of the date it was filed, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading when made or
failed to comply with the applicable requirements of the FRB, the OCC, the
Superintendent, the FDIC or such other regulatory authority (the "Banking
Regulators"), as the case may be. The Company and each Subsidiary has filed each
Regulatory Report that it was required to file with any Banking Regulator.
(xxviii) The proceeds from the sale of the Capital Securities will
constitute "tier 1" capital (as defined in 12 C.F.R. Part 325).
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<PAGE>
(xxix) Neither of the Offerors nor any of their affiliates is presently
doing business with the government of Cuba or with any person or affiliate
located in Cuba.
(xxx) Each of the Subsidiaries has properly administered, in all respects
material and which could reasonably be expected to be material to the business,
operations or financial condition of the Company and its Subsidiaries, taken as
a whole, all accounts for which it acts as a fiduciary, including but not
limited to accounts for which it serves as a trustee, agent, custodian, personal
representative, guardian, conservator or investment advisor, in accordance with
the terms of the governing documents and applicable state and federal law and
regulation and common law. Neither of the Subsidiaries nor any director, officer
or employee of either Subsidiary has committed any breach of trust with respect
to any such fiduciary account which is material to or could reasonably be
expected to be material to the general affairs, condition (financial or
otherwise), business, key personnel, property, prospects, net worth or results
of operations of the Company and its Subsidiaries, taken as a whole, and the
accountings for each such fiduciary account are true and correct in all material
respects and accurately reflect the assets of such fiduciary account in all
material respects.
(xxxi) The conditions for use of Form S-1, as set forth in the
General Instructions thereto, have been satisfied.
(xxxii) Each of the Company and its Subsidiaries is in compliance in all
material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder ("ERISA"); no "reportable event" (as
defined in ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) which could have a material adverse effect on the general affairs,
management, financial position, stockholders' equity or results of operations of
the Company and its Subsidiaries for which the Company or any Subsidiary would
have any liability; neither the Company nor any Subsidiary has incurred or
expects to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"), in each case which could
have a material adverse effect on the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and its
Subsidiaries, taken as a whole; and each "pension plan" for which the Company or
any Subsidiary would have any liability that is intended to be qualified under
Section 501(a) of the Code is so qualified in all material respects and nothing
has occurred, whether by action or by failure to act, which would
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<PAGE>
cause the loss of such qualification, except for such loss as would not
have a material adverse effect on the general affairs, management,
financial position, stockholders' equity or results of operations of the
Company and its Subsidiaries, taken as a whole.
(xxxiii) No hazardous substances, hazardous wastes, pollutants or
contaminants have been deposited or disposed of in, on or under the
properties of the Company or any Subsidiary (including properties owned,
managed or controlled by a Subsidiary in connection with its lending
operations) during the period in which the Company or any Subsidiary has
owned, occupied, managed, controlled or operated such properties in
violation of any applicable law, ordinance, rule, regulation, order,
judgment, decree or permit or which would require remedial action under any
applicable law, ordinance, rule, regulation, order, judgment, decree or
permit, except for any violation or remedial action which would not have,
or could not be reasonably likely to have, singularly or in the aggregate
with all such violations or remedial actions, a material adverse effect on
the general affairs, condition (financial or otherwise), business, key
personnel, property, prospects, net worth or results of operations of the
Company and its Subsidiaries, taken as a whole.
(b) Any certificate signed by any officer of the Company or a trustee
of the Trust and delivered to the Underwriter or to counsel for the Underwriter
shall be deemed a representation and warranty by the Company to the Underwriter
as to the matters covered thereby.
3. Purchase, Sale and Delivery of Capital Securities; Advisory Fee.
---------------------------------------------------------------
On the basis of the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein set forth, the Trust
agrees to issue and sell ________ Capital Securities to the Underwriter, and the
Underwriter agrees to purchase the Capital Securities from the Trust at a
purchase price per Capital Security of $25.00 per share. As compensation to the
Underwriter for its commitments hereunder and in view of the fact that the
proceeds of the sale of the Capital Securities (together with the entire
proceeds from the sale by the Trust to the Company of the Common Securities)
will be used to purchase the Junior Subordinated Debentures, the Company hereby
agrees to pay at the Closing Date to the Underwriter, a commission per Capital
Security equal in amount to _________ percent (___%) of the gross proceeds from
the sale of the Capital Securities to be delivered by the Trust hereunder at the
Closing Date.
The Capital Securities will be delivered by the Company to the
Underwriter against payment of the purchase price therefor by certified or
official bank check or wire transfer of same day funds payable to the Company at
the offices of Piper
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<PAGE>
Jaffray Inc., Piper Jaffray Tower, 222 South Ninth Street, Minneapolis,
Minnesota, or such other location as may be mutually acceptable, at 9:00 a.m.
Central time on the third (or if the Capital Securities are priced, as
contemplated by Rule 15c6-1(c) under the Exchange Act, after 4:30 p.m. Eastern
time, on the fourth) full business day following the date hereof, or at such
other time and date as the Underwriter and the Company determine pursuant to
Rule 15c6-1(a) under the Exchange Act, such time and date of delivery being
herein referred to as the "Closing Date." Delivery of the Capital Securities may
be made by credit through full fast transfer to the accounts at The Depository
Trust Company designated by the Underwriter. Certificates representing the
Capital Securities, in definitive form and in such denominations and registered
in such names as the Underwriter may request upon at least two business days'
prior notice to the Company shall be prepared and will be made available for
checking and packaging, not later than 10:30 a.m., Central time, on the business
day next preceding the Closing Date at the offices of Piper Jaffray Inc., Piper
Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota, or such other
location as may be mutually acceptable.
Nothing herein contained shall constitute the Underwriter an
unincorporated association or partner with either or both Offerors.
4. Covenants.
---------
(a) The Offerors jointly and severally covenant and agree with the
Underwriter as follows:
(i) If the Registration Statement has not already been declared
effective by the Commission, the Company will use its best efforts to cause the
Registration Statement and any post-effective amendments thereto to become
effective as promptly as possible; the Company will notify the Underwriter
promptly of the time when the Registration Statement or any post-effective
amendment to the Registration Statement has become effective or any supplement
to the Prospectus (including any term sheet within the meaning of Rule 434 of
the Rules and Regulations) has been filed and of any request by the Commission
for any amendment or supplement to the Registration Statement or Prospectus or
additional information; if the Company has elected to rely on Rule 430A of the
Rules and Regulations, the Company will prepare and file a Prospectus (or term
sheet within the meaning of Rule 434 of the Rules and Regulations) containing
the information omitted therefrom pursuant to Rule 430A of the Rules and
Regulations with the Commission within the time period required by, and
otherwise in accordance with the provisions of, Rules 424(b), 430A and 434, if
applicable, of the Rules and Regulations; if the Company has elected to rely
upon Rule 462(b) of the Rules and Regulations to increase the size of the
offering registered under the Act, the Company will prepare and file a
registration statement with respect to such increase with the Commission within
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<PAGE>
the time period required by, and otherwise in accordance with the provisions of,
Rule 462(b); the Offerors will prepare and file with the Commission, promptly
upon the Underwriter's request, any amendments or supplements to the
Registration Statement or Prospectus (including any term sheet within the
meaning of Rule 434 of the Rules and Regulations) that, in the Underwriter's
opinion, may be necessary or advisable in connection with the Underwriter's
distribution of the Capital Securities; and the Offerors will not file any
amendment or supplement to the Registration Statement or Prospectus (including
any term sheet within the meaning of Rule 434 of the Rules and Regulations) to
which the Underwriter shall reasonably object by notice to the Company after
having been furnished a copy a reasonable time prior to the filing.
(ii) The Offerors will advise the Underwriter, promptly after they shall
receive notice or obtain knowledge thereof, of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement, of
the suspension of the qualification of the Capital Securities for offering or
sale in any jurisdiction, or of the initiation or threatening of any proceeding
for any such purpose; and the Offerors will promptly use their best efforts to
prevent the issuance of any stop order or to obtain its withdrawal if such a
stop order should be issued.
(iii) Within the time during which a prospectus (including any term sheet
within the meaning of Rule 434 of the Rules and Regulations) relating to the
Capital Securities is required to be delivered under the Act, the Offerors will
comply as far as it is able with all requirements imposed upon it by the Act, as
now and hereafter amended, and by the Rules and Regulations, as from time to
time in force, so far as necessary to permit the continuance of sales of or
dealings in the Capital Securities as contemplated by the provisions hereof and
the Prospectus. If during such period any event occurs as a result of which the
Prospectus would include an untrue statement of a material fact or omit to state
a material fact necessary to make the statements therein, in the light of the
circumstances then existing, not misleading, or if during such period it is
necessary to amend the Registration Statement or supplement the Prospectus to
comply with the Act, the Offerors will promptly notify the Underwriter and will
amend the Registration Statement or supplement the Prospectus (at the expense of
the Company) so as to correct such statement or omission or effect such
compliance.
(iv) The Offerors will use their best efforts to qualify the Capital
Securities, the Junior Subordinated Debentures and the Guarantee for sale under
the securities laws of such jurisdictions as the Underwriter may reasonably
designate and to continue such qualifications in effect so long as required for
the
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<PAGE>
distribution of the Capital Securities, except that the Offerors shall not
be required in connection therewith to qualify as a foreign corporation or to
execute a general consent to service of process in any state.
(v) The Offerors will furnish to the Underwriter copies of the
Registration Statement (three of which will be signed and will include all
exhibits), each of the Preliminary Prospectuses, the Prospectus, and all
amendments and supplements (including any term sheet within the meaning of Rule
434 of the Rules and Regulations) to such documents, in each case as soon as
available and in such quantities as the Underwriter may from time to time
reasonably request.
(vi) During a period of five years commencing with the date hereof the
Company will furnish to the Underwriter copies of all periodic and special
reports furnished to the stockholders of the Company and all information,
documents and reports filed with the Commission.
(vii) The Company will make generally available to its
security holders and holders of the Capital Securities as soon as practicable,
but in any event not later than 15 months after the end of the Company's current
fiscal quarter, an earnings statement (which need not be audited) covering a 12-
month period beginning after the effective date of the Registration Statement
that shall satisfy the provisions of Section 11(a) of the Act and Rule 158 of
the Rules and Regulations.
(viii) The Company, whether or not the transactions contemplated hereunder
are consummated or this Agreement is prevented from becoming effective under the
provisions of Section 8(a) hereof or is terminated, will pay or cause to be paid
(A) all expenses (including transfer taxes allocated to the respective
transferees) incident to the performance of the obligations of each Offeror
under this agreement, (B) all expenses and fees (including, without limitation,
fees and expenses of each Offeror's accountants and counsel but, except as
otherwise provided below, not including fees of the Underwriter's counsel) in
connection with the preparation printing, filing, delivery, and shipping of the
Registration Statement (including the financial statements therein and all
amendments, schedules, and exhibits thereto), the Capital Securities, each
Preliminary Prospectus, the Prospectus, and any amendment thereof or supplement
thereto, and the printing, delivery, and shipping of this Agreement and other
underwriting documents, including Blue Sky Memoranda, (C) all filing fees and
fees and disbursements of the Underwriter's counsel incurred in connection with
the qualification of the Capital Securities for offering and sale by the
Underwriter or by dealers under the securities or blue sky laws of the states
and other jurisdictions which the Underwriter shall designate, (D) the fees and
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<PAGE>
expenses of any transfer agent or registrar, (E) the filing fees incident to any
required review by the National Association of Capital Securities Dealers, Inc.
("NASD") of the terms of the sale of the Capital Securities, (E) listing fees,
if any, (G) the fees and expenses of the Indenture Trustee, including the fees
and disbursements of counsel for the Indenture Trustee in connection with the
Indenture and Junior Subordinated Debentures, (H) the fees and expenses of the
Property Trustee, including the fees and disbursements of counsel for the
Property Trustee in connection with the Trust Agreement and the Certificate of
Trust, and (I) all other costs and expenses incident to the performance of the
Offerors' obligations hereunder that are not otherwise specifically provided for
herein. If the sale of the Capital Securities provided for herein is not
consummated by reason of action by either Offeror pursuant to Section 8(a)
hereof which prevents this Agreement from becoming effective, or by reason of
any failure, refusal or inability on the part of either Offeror to perform any
agreement on its part to be performed, or because any other condition of the
Underwriter's obligations hereunder required to be fulfilled by either Offeror
is not fulfilled, the Company will reimburse the Underwriter for all out-of-
pocket disbursements (including fees and disbursements of counsel) incurred by
the Underwriter in connection with its investigation, preparing to market and
marketing the Capital Securities or in contemplation of performing their
obligations hereunder. Neither Offeror shall in any event be liable to the
Underwriter for loss of anticipated profits from the transactions covered by
this Agreement.
(ix) The Offerors will apply the net proceeds from the sale of the Capital
Securities to be sold by the Trust hereunder for the purposes set forth in the
Prospectus and will file such reports with the Commission with respect to the
sale of the Capital Securities and the application of the proceeds therefrom as
may be required in accordance with Rule 463 of the Rules and Regulations.
(x) The Offerors have not taken and will not take, directly or indirectly,
any action designed to or which might reasonably be expected to cause or result
in, or which has constituted, the stabilization or manipulation of the price of
any security of either Offeror to facilitate the sale or resale of the Capital
Securities, and has not effected any sales of Common Stock which are required to
be disclosed in response to Item 701 of Regulation S-K under the Act which have
not been so disclosed in the Registration Statement.
(xi) Neither Offeror will incur any liability for any finder's or broker's
fee or agent's commission in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
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(xii) The Offerors will inform the Florida Department of Banking and
Finance at any time prior to the consummation of the distribution of the Capital
Securities by the Underwriter if it commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba. Such
information will be provided within 90 days after the commencement thereof or
after a change occurs with respect to previously reported information.
5. Conditions of Underwriter's Obligations. The obligations of the
---------------------------------------
Underwriter hereunder are subject to the accuracy, as of the date hereof and at
the Closing Date (as if made at the Closing Date), of and compliance with all
representations, warranties and agreements of the Offerors contained herein, to
the performance by each Offeror of its obligations hereunder and to the
following additional conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 p.m., Central time, on the date of this Agreement, or such later time
and date as the Underwriter shall approve and all filings required by Rules 424,
430A and 434 of the Rules and Regulations shall have been timely made; no stop
order suspending the effectiveness of the Registration Statement or any
amendment thereof shall have been issued and no proceedings for the issuance of
such an order shall have been initiated or threatened; and any request of the
Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to the
Underwriter's satisfaction.
(b) The Underwriter shall not have advised the Company or the Trust
that the Registration Statement or the Prospectus, or any amendment thereof or
supplement thereto (including any term sheet within the meaning of Rule 434 of
the Rules and Regulations), contains an untrue statement of fact which, in the
Underwriter's opinion, is material, or omits to state a fact which, in the
Underwriter's opinion, is material and is required to be stated therein or
necessary to make the statements therein not misleading.
(c) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, none of the Trust, the Company nor any Subsidiary shall have
incurred any material liabilities or obligations, direct or contingent, or
entered into any material transactions, or declared or paid any dividends or
made any distribution of any kind with respect to its capital stock; and there
shall not have been any change in the capital stock (other than a change in the
number of outstanding shares of Common Stock due to the issuance of shares upon
the exercise of options, warrants or rights under any employee stock purchase
plan disclosed in the Registration Statement or the Prospectus), or any material
change in the short-term or long-term debt of the Company, or any issuance of
options, warrants, convertible securities or other rights to
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purchase the capital stock of the Company or any of its subsidiaries, or any
material adverse change or any development involving a prospective material
adverse change (whether or not arising in the ordinary course of business), in
the general affairs, condition (financial or otherwise), business, key
personnel, property, prospects, net worth or results of operations of the Trust
or the Company and its Subsidiaries, taken as a whole, that, in the
Underwriter's judgment, makes it impractical or inadvisable to offer or deliver
the Capital Securities on the terms and in the manner contemplated in the
Prospectus.
(d) On the Closing Date, there shall have been furnished to the
Underwriter the opinion of Manatt, Phelps & Phillips, LLP, counsel for the
Company, dated the Closing Date and addressed to the Underwriter, to the effect
that:
(i) Each of the Company and its Subsidiaries has been duly organized
and is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation or organization. The Company has been duly
organized and is validly existing as a corporation in good standing under the
laws of the State of California and is duly registered as a bank holding company
under the BHC Act. Mid-Peninsula Bank has been duly organized and is validly
existing as a state bank in good standing under the banking laws of the State of
California. Cupertino National Bank and Trust has been duly organized and is
validly existing as a national banking association in good standing under the
federal laws of the United States. Each of the Company and its Subsidiaries has
the corporate power and authority to own its properties and conduct its business
as currently being carried on and as described in the Registration Statement and
Prospectus, and is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which its ownership or lease of real
property or the conduct of its business makes such qualification necessary and
in which the failure to so qualify would have a material adverse effect upon the
business, condition (financial or otherwise) or properties of the Company and
its Subsidiaries, taken as a whole.
(ii) The statements in the Prospectus under the caption "Description
of the Trust Preferred", "Description of Junior Subordinated Debentures",
"Description of Guarantee", and "Relationship among the Trust Preferred
Securities, the Junior Subordinated Debentures and the Guarantee", insofar as
such statements constitute matters of law applicable to the Offerors or
summaries of documents, fairly present the information required to be included
therein in all material respects. All of the issued and outstanding shares of
the capital stock of the Company have been duly authorized and validly issued
and are fully paid and nonassessable, and the holders thereof are not subject to
personal liability by reason of being such holders. Except as otherwise stated
in the Registration Statement and Prospectus, there are no preemptive or other
similar rights or
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options, warrants, agreements, contracts or other rights in existence to
purchase or acquire from the Company any shares of the capital stock of the
Company pursuant to the Company's charter, bylaws or any agreement or other
instrument known to such counsel to which the Company is a party or by which the
Company is bound. To the best of such counsel's knowledge, neither the filing of
the Registration Statement nor the offering or sale of the Junior Subordinated
Debentures or Capital Securities as contemplated by this Agreement gives rise to
any rights for or relating to the registration of any shares of Common Stock or
other securities of the Company.
(iii) All of the issued and outstanding shares of capital stock of each
Subsidiary have been duly and validly authorized and issued and are fully paid
and nonassessable, and, to the best of such counsel's knowledge, except as
otherwise described in the Registration Statement and Prospectus and except for
directors' qualifying shares, the Company owns of record and beneficially, free
and clear of any security interests, claims, liens, proxies, equities or other
encumbrances all of the issued and outstanding shares of capital stock of each
Subsidiary. To the best of such counsel's knowledge, except as described in the
Registration Statement and Prospectus, there are no options, warrants,
agreements, contracts or other rights in existence to purchase or acquire from
the Company or any Subsidiary any shares of the capital stock of any Subsidiary.
(iv) All of the issued and outstanding Common Securities of the Trust are
owned by the Company, free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equitable right.
(v) The Trust Agreement has been duly qualified under the Trust Indenture
Act.
(vi) The Junior Subordinated Debentures are in the form contemplated by
the Indenture, have been duly authorized, executed and delivered by the Company
and, when authenticated by the Indenture Trustee in the manner provided for in
the Indenture and delivered against payment therefor, will constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, except to the extent that enforcement thereof may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting
the rights of creditors generally and subject to general principles of equity.
(vii) The Junior Subordinated Debentures are subordinate and junior in
right of payment to all Senior and Subordinated Debts (as defined in the
Indenture) of the Company.
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(viii) Neither the Company nor the Trust is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the 1940
Act.
(ix) The statements set forth in the Prospectus under the caption
"Certain Federal Income Tax Consequences" constitute a fair and accurate summary
of the matters addressed therein, based upon current law and the assumptions
stated or referred to therein.
(x) Under current law, the Trust will be classified for United States
federal income tax purposes as a grantor trust and not as an association taxable
as a corporation; accordingly, for United States federal income tax purposes
each beneficial owner of Capital Securities will be treated as owning an
undivided beneficial interest in the Junior Subordinated Debentures, and stated
interest on the Junior Subordinated Debentures generally will be included in
income by a holder of Capital Securities at the time such interest income is
paid or accrued in accordance with such holder's regular method of tax
accounting.
(xi) For federal income tax purposes, (a) the Junior Subordinated
Debentures will constitute indebtedness of the Company and (b) the interest on
the Junior Subordinated Debentures will be deductible by the Company on an
economic accrual basis in accordance with Section 163(e) of the Internal Revenue
Code of 1986, as amended, and Treasury Regulation Section 1.163-7.
(xii) To the best of such counsel's knowledge and information after due
inquiry, the Trust is not required to be authorized to do business in any other
jurisdiction and the Trust is not a party to or otherwise bound by any agreement
other than those described in the Prospectus.
(xiii) The Trust Agreement has been duly authorized, executed and delivered
by the Company and the Administrative Trustees.
(xiv) The Registration Statement has become effective under the Act and,
to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceeding
for that purpose has been instituted or, to the knowledge of such counsel,
threatened by the Commission.
(xv) The descriptions in the Registration Statement and Prospectus of
statutes, legal and governmental proceedings or rulings, contracts and other
documents are accurate in all material respects and fairly present the
information required to be shown; and such counsel does not know of any statutes
or legal or governmental proceedings required to be described in the
Prospectuses that are
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not described as required, or of any contracts or documents of a character
required to be described in the Registration Statement or Prospectus or included
as exhibits to the Registration Statement that are not described or included as
required.
(xvi) The reports of the Company incorporated by reference in the
Registration Statement and the Prospectus or any further amendment or supplement
thereto made by the Company (other than the financial statements, other
financial data and related schedules therein, as to which such counsel need
express no opinion), when they were filed with the Commission, complied as to
form in all material respects with the requirements of the Exchange Act and the
rules and regulations of the Commission thereunder.
(xvii) The Company has full corporate power and authority and the Trust has
full trust power and authority to enter into this Agreement, the Indenture, the
Trust Agreement, the Guarantee Agreement and the Expense Agreement to which it
is a party and to issue the Junior Subordinated Debentures and Capital
Securities, as the case may be, and to effect the transactions contemplated by
this Agreement, the Indenture, the Trust Agreement, the Guarantee Agreement and
the Expense Agreement to which it is a party. This Agreement has been duly
authorized, executed and delivered by the Company, and each of the Indenture,
the Trust Agreement, the Guarantee Agreement and the Expense Agreement has been
duly authorized, executed and delivered by the Company and constitutes a valid,
legal and binding obligation of the Company enforceable in accordance with its
terms (except as rights to indemnity hereunder may be limited by federal or
state securities laws and except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity). The execution,
delivery and performance of this Agreement, the Indenture, the Trust Agreement,
the Guarantee Agreement, the Capital Securities, the Common Securities, the
Junior Subordinated Debentures and the Guarantee and the consummation of the
transactions herein or therein contemplated will not result in a breach or
violation of any of the terms and provisions of, or constitute a default under,
(A) any statute, rule or regulation of the United States or the State of
California, or any rule or regulation of any Banking Regulator, or (B) any
agreement or instrument know to such counsel to which the Company or the Trust
is a party or by which either is bound or to which any of their property is
subject which agreement or instrument is material to the Company and its
Subsidiaries, taken as a whole, or (C) the charter or bylaws of the Company or
any Subsidiary, or the Trust's Certificate, or (D) any order or decree known to
such counsel of any court, governmental agency or body or Banking Regulator
having jurisdiction over the Company, any Subsidiary or the Trust or any of its
respective properties, except for any breach, violation or default which would
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not have a material adverse effect on the Company and its Subsidiaries,
taken as a whole, or the ability of the Company or the Trust to perform its
obligations hereunder; and no consent, approval, authorization or order of,
or filing with, any court or governmental agency or body is required for
the execution, delivery and performance of this Agreement, the Indenture,
the Trust Agreement, the Guarantee Agreement, the Expense Agreement, the
Capital Securities, the Junior Subordinated Debentures, or the Guarantee or
for the consummation of the transactions contemplated hereby or thereby,
including the issuance or sale of the Junior Subordinated Debentures by the
Company and the Common Securities and Capital Securities by the Trust,
except (a) such as may be required under the Act, which has been obtained,
or under state securities or blue sky laws, and (b) the qualification of
the Trust Agreement, the Guarantee Agreement and the Indenture under the
Trust Indenture Act and the rules and regulations thereunder.
(xviii) The Registration Statement and the Prospectus, and any
amendment thereof or supplement thereto (including any term sheet within
the meaning of Rule 434 of the Rules and Regulations), comply as to form in
all material respects with the requirements of the Act and the Rules and
Regulations; and on the basis of conferences with officers of the Company,
examination of documents referred to in the Registration Statement and
Prospectus and such other procedures as such counsel deemed appropriate,
nothing has come to the attention of such counsel that causes such counsel
to believe that the Registration Statement or any amendment thereof, at the
time such Registration Statement became effective and as of the Closing
Date (including any Registration Statement filed under Rule 462(b) of the
Rules and Regulations), contained any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus (as of their respective dates and as of the Closing Date), as
amended or supplemented, includes any untrue statement of material fact or
omits to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; it
being understood that such counsel need express no opinion as to the
financial statements or other financial data included in any of the
documents mentioned in this clause.
In rendering such opinion such counsel may rely (i) as to matters of
law other than California and federal law, upon the opinion or opinions of local
counsel provided that the extent of such reliance is specified in such opinion
and that such counsel shall state that such opinion or opinions of local counsel
are satisfactory to them and that they believe they and the Underwriter are
justified in relying thereon and (ii) as to matters of fact, to the extent such
counsel deems reasonable upon certificates of
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officers of the Company and its subsidiaries and of public officials provided
that the extent of such reliance is specified in such opinion.
(e) The favorable opinion, dated as of Closing Date, of Richards,
Layton & Finger, counsel to Wilmington Trust Company, as Property Trustee under
the Trust Agreement, Indenture Trustee under the Indenture, and Guarantee
Trustee under the Guarantee Agreement, in form and substance satisfactory to
counsel for the Underwriter, to the effect that:
(i) Wilmington Trust Company is duly incorporated and is validly
existing in good standing as a banking corporation under the laws of the
State of Delaware.
(ii) Wilmington Trust Company has the power and authority to execute,
deliver and perform its obligations under the Trust Agreement, the
Indenture and the Guarantee Agreement.
(iii) Each of the Trust Agreement, the Indenture and the Guarantee
Agreement have been duly authorized, executed and delivered by Wilmington
Trust Company and constitutes a legal, valid and binding obligation of
Wilmington Trust Company, enforceable against Wilmington Trust Company, in
accordance with its terms.
(iv) The execution, delivery and performance by Wilmington Trust
Company of the Trust Agreement, the Indenture and the Guarantee Agreement
do not conflict with or constitute a breach of the charter or by-laws of
Wilmington Trust Company.
(v) No consent, approval or authorization of, or registration with
or notice to, any governmental authority or agency of the State of Delaware
or the United States of America governing the banking or trust powers of
Wilmington Trust Company is required for the execution, delivery or
performance by the Wilmington Trust Company of the Trust Agreement, the
Indenture and the Guarantee Agreement.
(f) The favorable opinion, dated as of Closing Date, of Richards,
Layton & Finger, P.A. as special Delaware counsel for the Offerors, in form and
substance satisfactory to counsel for the Underwriter, to the effect that:
(i) The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Act, and all filings
required as of the date hereof under the Delaware Act with respect to the
creation and valid existence of the Trust as a business trust have been
made.
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(ii) Under the Trust Agreement and the Delaware Act, the Trust has
the trust power and authority to own property and to conduct its business,
all as described in the Prospectus.
(iii) The Trust Agreement constitutes a valid and binding obligation
of the Company and each of the Property Trustee and the Administrative
Trustees, and is enforceable against the Company and each of the Property
Trustee and the Administrative Trustees, in accordance with its terms.
(iv) Under the Trust Agreement and the Delaware Act, the Trust has
the trust power and authority (i) to execute and deliver, and to perform
its obligations under, this Agreement, and (ii) to issue, and to perform
its obligations under, the Capital Securities and the Common Securities.
(v) Under the Trust Agreement and the Delaware Act, the execution
and delivery by the Trust of this Agreement, and the performance by the
Trust of its obligations under this Agreement, have been duly authorized by
all necessary trust action on the part of the Trust.
(vi) Under the Delaware Act, the certificate attached to the Trust
Agreement as Exhibit E is an appropriate form of certificate to evidence
ownership of the Capital Securities. The Capital Securities and the Common
Securities have been duly authorized by the Trust Agreement and are duly
and validly issued and, subject to the qualifications hereinafter expressed
in this paragraph (vi), fully paid and non-assessable undivided beneficial
interests in the assets of the Trust. The respective holders of the Capital
Securities and the Common Securities, as beneficial owners of the Trust,
will be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the respective
holders of the Capital Securities and the Common Securities may be
obligated, pursuant to the Trust Agreement, to make certain payments under
the Trust Agreement.
(vii) Under the Trust Agreement and the Delaware Act, the issuance of
the Capital Securities and the Common Securities is not subject to
preemptive or similar rights.
(viii) The issuance and sale by the Trust of the Capital Securities
and the Common Securities, the purchase by the Trust of the Junior
Subordinated Debentures, the execution, delivery and performance by the
Trust of this Agreement and the Guarantee Agreement, the consummation by
the Trust of the transactions contemplated by this Agreement and compliance
by the Trust with
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its obligations under this Agreement do not violate (a) any of the
provisions of the Certificate of Trust or the Trust Agreement, or (b) any
applicable Delaware law or Delaware administrative regulation.
(g) On the Closing Date, there shall have been furnished such opinion
or opinions from Dorsey & Whitney LLP, counsel for the Underwriter, dated the
Closing Date and addressed to the Underwriter, with respect to the formation of
the Company, the validity of the Capital Securities, the Indenture, the
Guarantee Agreement, this Agreement, the Registration Statement, the Prospectus
and other related matters as the Underwriter reasonably may request, and such
counsel shall have received such papers and information as they request to
enable them to pass upon such matters.
(h) On the Closing Date the Underwriter shall have received a letter
from Coopers & Lybrand L.L.P., dated the Closing Date and addressed to the
Underwriter, confirming that they are independent public accountants within the
meaning of the Act and are in compliance with the applicable requirements
relating to the qualifications of accountants under Rule 241 of Regulation S-X
of the Commission, that the Trust is and will be treated as a consolidated
Subsidiary of the Company pursuant to generally accepted accounting principles,
and stating, as of the date of such letter (or, with respect to matters
involving changes or developments since the respective dates as of which
specified financial information is given in the Prospectus, as of a date not
more than five days prior to the date of such letter), the conclusions and
findings of each said firm with respect to the financial information and other
matters covered by its letter delivered to the Underwriter concurrently with the
execution of this Agreement, and the effect of the letter so to be delivered on
the Closing Date shall be to confirm the conclusions and findings set forth in
such prior letter.
(i) On the Closing Date, there shall have been furnished to the
Underwriter, a certificate, dated the Closing Date and addressed to the
Underwriter, signed by the chief executive officer and by the chief financial
officer of the Company, to the effect that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, in all material respects, as if made at and
as of the Closing Date, and the Offerors have complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing Date;
(ii) No stop order or other order suspending the effectiveness of the
Registration Statement or any amendment thereof or the qualification of the
Capital Securities for offering or sale has been issued, and no proceeding
for that
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purpose has been instituted or, to the best of their knowledge, is
contemplated by the Commission or any state or regulatory body; and
(iii) The signers of said certificate have carefully examined
the Registration Statement and the Prospectus, and any amendments thereof
or supplements thereto (including any term sheet within the meaning of Rule
434 of the Rules and Regulations), and (A) such documents contain all
statements and information required to be included therein, the
Registration Statement, or any amendment thereof, does not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading, and the Prospectus, as amended or supplemented, does not
include any untrue statement of material fact or omit to state a material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, (B) since the
effective date of the Registration Statement, there has occurred no event
required to be set forth in an amended or supplemented prospectus which has
not been so set forth, (C) subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
neither the Trust, the Company nor any of its Subsidiaries has incurred any
material liabilities or obligations, direct or contingent, or entered into
any material transactions, not in the ordinary course of business, or
declared or paid any dividends or made any distribution of any kind with
respect to its capital stock (other than dividends paid in the ordinary
course as disclosed in the Registration Statement or the Prospectus with
respect to shares of the Company's Common Stock or any of its Subsidiaries'
common stock), and except as disclosed in the Prospectus, there has not
been any change in the capital stock (other than a change in the number of
outstanding shares of Common Stock due to the issuance of shares upon the
exercise of outstanding options, warrants or rights under any employee
stock purchase plan disclosed in the Registration Statement or the
Prospectus), or any material change in the short-term or long-term debt, or
any issuance of options, warrants, convertible securities or other rights
to purchase the capital stock, of the Company, or any of its Subsidiaries,
or any material adverse change or any development involving a prospective
material adverse change (whether or not arising in the ordinary course of
business), in the general affairs, condition (financial or otherwise),
business, key personnel, property, prospects, net worth or results of
operations of the Trust or the Company and its Subsidiaries, taken as a
whole, and (D) except as stated in the Registration Statement and the
Prospectus, there is not pending, or, to the knowledge of the Company or
the Trust, threatened or contemplated, any action, suit or proceeding to
which the Trust, the Company or any of its Subsidiaries is a party before
or by any court or governmental agency, authority or body, or any
arbitrator, which might result in any material adverse change in the
condition (financial or otherwise), business,
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<PAGE>
prospects or results of operations of the Company and its subsidiaries,
taken as a whole.
(j) On the Closing Date, there shall have been furnished to the
Underwriter, a certificate, dated the Closing Date and addressed to the
Underwriter, signed by the Administrative Trustees, to the effect that:
(i) The representations and warranties of the Trust in this Agreement
are true and correct, in all material respects, as if made at and as of the
Closing Date, and the Trust has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied at or
prior to the Closing Date;
(ii) No stop order or other order suspending the effectiveness of the
Registration Statement or any amendment thereof or the qualification of the
Capital Securities for offering or sale has been issued, and no proceeding
for that purpose has been instituted or, to the best of their knowledge, is
contemplated by the Commission or any state or regulatory body; and
(iii) The signers of said certificate have carefully examined
the Registration Statement and the Prospectus, and any amendments thereof
or supplements thereto (including any term sheet within the meaning of Rule
434 of the Rules and Regulations), and (a) such documents contain all
statements and information required to be included therein, the
Registration Statement, or any amendment thereof, does not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading, and the Prospectus, as amended or supplemented, does not
include any untrue statement of material fact or omit to state a material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, (B) since the
effective date of the Registration Statement, there has occurred no event
required to be set forth in an amended or supplemented prospectus which has
not been so set forth, (C) subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, the
Trust has not incurred any material liabilities or obligations, direct or
contingent, or entered into any material transactions, not in the ordinary
course of business, or declared or paid any dividends or made any
distribution of any kind with respect to its capital securities, and except
as disclosed in the Prospectus, there has not been any change in the
capital securities, or any material change in the short-term or long-term
debt, or any issuance of options, warrants, convertible securities or other
rights to purchase the capital securities, of the Trust or any material
adverse change or any development involving a prospective material adverse
change (whether or not arising in the ordinary course of business), in the
general affairs, condition (financial or otherwise), business, key
personnel, property, prospects,
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net worth or results of operations of the Trust, and (D) except as stated
in the Registration Statement and the Prospectus, there is not pending, or,
to the knowledge of the Trust, threatened or contemplated, any action, suit
or proceeding to which the Trust is a party before or by any court or
governmental agency, authority or body, or any arbitrator, which might
result in any material adverse change in the condition (financial or
otherwise), business, prospects or results of operations of the Trust.
(k) The Company shall have furnished to the Underwriter and to the
Underwriter's counsel such additional documents, certificates and evidence as
the Underwriter or they may have reasonably requested.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are satisfactory in form
and substance to the Underwriter and the Underwriter's counsel.
6. Indemnification and Contribution.
--------------------------------
(a) The Offerors agree to indemnify and hold harmless the Underwriter
against any losses, claims, damages or liabilities to which the Underwriter may
become subject, under the Act or otherwise (including in settlement of any
litigation if such settlement is effected with the written consent of the
Company), insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement,
including the information deemed to be a part of the Registration Statement at
the time of effectiveness pursuant to Rules 430A and 434(d) of the Rules and
Regulations, if applicable, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto (including any term sheet within the meaning of
Rule 434 of the Rules and Regulations), 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, and
will reimburse the Underwriter for any legal or other expenses reasonably
incurred by it in connection with investigating or defending against such loss,
claim, damage, liability or action; provided, however, that the Offerors shall
not be liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Offerors by or on behalf of the Underwriter
specifically for use in the preparation thereof.
In addition to its other obligations under this Section 6(a), each of
the Company and the Trust agree that, as an intern measure during the pendency
of any
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claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or omission,
described in this Section 6(a), it will reimburse the Underwriter on a monthly
basis for all reasonable legal tees or other expenses incurred in connection
with investigating or defending any such claim, action, investigation, inquiry
or other proceeding, notwithstanding the absence of a judicial determination as
to the propriety and enforceability of the Offerors' obligation to reimburse the
Underwriter for such expenses and the possibility that such payments might later
be held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, the Underwriter shall promptly return it to the party or parties that
made such payment, together with interest, compounded daily, determined on the
basis of the prime rate (or other commercial lending rate for borrowers of the
highest credit standing) announced from time to time by Norwest Bank Minnesota,
N.A. (the "Prime Rate"). Any such interim reimbursement payments which are not
made to the Underwriter within 30 days of a request for reimbursement shall bear
interest at the Prime Rate from the date of such request. This indemnity
agreement shall be in addition to any liabilities which the Company may
otherwise have.
(b) The Underwriter will indemnify and hold harmless the Company and
the Trust against any losses, claims, damages or liabilities to which the
Company and the Trust may become subject, under the Act or otherwise (including
in settlement of any litigation, if such settlement is effected with the
Underwriter's written consent), insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto (including any term sheet within the meaning of
Rule 434 of the Rules and Regulations), 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, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Underwriter for use
in the preparation thereof, and will reimburse the Company and the Trust for any
legal or other expenses reasonably incurred by the Company and the Trust in
connection with investigating or defending against any such loss, claim, damage,
liability or action.
(c) The Company agrees to indemnify the Trust against all loss,
liability, claim damage and expense whatsoever, which may become due from the
Trust under subsection (a).
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(d) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve the indemnifying party from any liability
that it may have to any indemnified party. In case any such action shall be
brought against any indemnified party, and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate in, and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of the indemnifying party's
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided, however,
that if, in the sole judgment of the Underwriter, it is advisable for it to be
represented by separate counsel, the Underwriter shall have the right to employ
a single counsel to represent all persons who may be subject to a liability
arising from any claim in respect of which indemnity may be sought by the
Underwriter under this Section 6, in which event the reasonable fees and
expenses of such separate counsel shall be borne by the indemnifying party or
parties and remitted to the Underwriter for payment to such counsel as such fees
and expenses are incurred (in accordance with the provisions of the second
paragraph in subsection (a) above). An indemnifying party shall not be
obligated under any settlement agreement relating to any action under this
Section 6 to which it has not agreed in writing.
(e) If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above, (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company or the Trust on the one hand and the Underwriter on the other
from the offering of the Capital Securities or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Trust on the one hand
and the Underwriter on the other in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Trust on the one hand and the Underwriter on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriter, in each case
as set forth in the table on the cover page of the Prospectus. The relative
fault
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<PAGE>
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company, the
Trust or the Underwriter and the parties' relevant intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The Company and the Trust and the Underwriter agree that it would not
be just and equitable if contributions pursuant to this subsection (e) were to
be determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the first
sentence of this subsection (e). The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (e) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending against any action or claim which is the subject of
this subsection (e). Notwithstanding the provisions of this subsection (e), the
Underwriter shall not be required to contribute any amount in excess of the
amount by which the total price at which the Capital Securities underwritten by
it and distributed to the public were offered to the public exceeds the amount
of any damages that such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11 (f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(f) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company and the Trust may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any, who
controls the Underwriter within the meaning of the Act; and the obligations of
the Underwriter under this Section 6 shall be in addition to any liability that
the Underwriter may otherwise have and shall extend, upon the same terms and
conditions, to each director of the Company (including any person who, with his
or her consent, is named in the Registration Statement as about to become a
director of the Company), to each officer of the Company who has signed the
Registration Statement and to each person, if any, who controls the Company or
the Trust within the meaning of the Act.
7. Representations and Agreements to Survive Delivery. All
--------------------------------------------------
representations, warranties, and agreements of the Offerors herein or in
certificates delivered pursuant hereto, and the agreements of the Offerors and
the Underwriter contained in Section 6 hereof shall remain operative and in full
force and effect regardless of any investigation made by the Underwriter or on
the Underwriter's behalf or any controlling person thereof, or the Company or
any of its officers, directors, or controlling persons or the Trust or any if
its trustees, or controlling persons and shall survive delivery of, and payment
for, the Capital Securities to and by the Underwriter hereunder.
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8. Effective Date of this Agreement and Termination.
------------------------------------------------
(a) This Agreement shall become effective at 10:00 a.m., Central time,
on the first full business day following the effective date of the Registration
Statement, or at such earlier time after the effective time of the Registration
Statement as the Underwriter in its discretion shall first release the Capital
Securities for sale to the public; provided, that if the Registration Statement
is effective at the time this Agreement is executed, this Agreement shall become
effective at such time as the Underwriter in its discretion shall first release
the Capital Securities for sale to the public. For the purpose of this Section,
the Capital Securities shall be deemed to have been released for sale to the
public upon release by the Underwriter of the publication of a newspaper
advertisement relating thereto or upon release by the Underwriter of telexes
offering the Capital Securities for sale to securities dealers, whichever shall
first occur. By giving notice as hereinafter specified before the time this
Agreement becomes effective, the Underwriter, the Trust or the Company may
prevent this Agreement from becoming effective without liability of any party to
any other party, except that the provisions of Section 4(a)(viii) and Section 6
hereof shall at all times be effective.
(b) The Underwriter shall have the right to terminate this Agreement
by giving notice as hereinafter specified at any time at or prior to the Closing
Date, if (i) either Offeror shall have failed, refused or been unable, at or
prior to the Closing Date, to perform any agreement on its part to be performed
hereunder, (ii) any other condition of the Underwriter's obligations hereunder
is not fulfilled, (iii) trading in securities on the New York Stock Exchange or
the Nasdaq Stock Market shall have been suspended or limited or minimum prices
shall have been established on such Exchange or System, (iv) a banking
moratorium shall have been declared by Federal, California, Minnesota or New
York authorities, or (v) there has occurred any material adverse change in the
financial markets in the United States or an outbreak of major hostilities (or
an escalation thereof) in which the United States is involved, a declaration of
war by Congress, any other substantial national or international calamity or any
other event or occurrence of a similar character shall have occurred since the
execution of this Agreement that, in the Underwriter's judgment, makes it
impractical or inadvisable to proceed with the completion of the sale of and
payment for the Capital Securities. Any such termination shall be without
liability of any party to any other party except that the provisions of Section
4(a)(viii) and Section 6 hereof shall at all times be effective.
(c) If the Underwriter elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section, the
Company shall be notified promptly by the Underwriter by telephone or telegram,
confirmed by letter. If the Trust or the Company elects to prevent this
Agreement from becoming effective, the Underwriter shall be notified by the
Trust or the Company by telephone or telegram, confirmed by letter.
-33-
<PAGE>
9. Default by the Company. If the Trust shall fail at the Closing Date to
----------------------
sell and deliver the number of Capital Securities which it is obligated to sell
hereunder or the Company fails to deliver the number of Junior Subordinated
Debentures required to be delivered pursuant to the Trust Agreement, then this
Agreement shall terminate without any liability on the part of any non-
defaulting party. No action taken pursuant to this Section shall relieve the
Trust or the Company so defaulting from liability, if any, in respect of such
default.
10. Information Furnished by Underwriter. The statements set forth in the
------------------------------------
last paragraph of the cover page and in the [list relevant paragraphs] under the
caption "Underwriting" in any Preliminary Prospectus and in the Prospectus
constitute the written information furnished by the Underwriter or on its behalf
referred to in Section 2 and Section 6 hereof.
11. Notices. Except as otherwise provided herein, all communications
-------
hereunder shall be in writing or by telegraph and, if to the Underwriter, shall
be mailed, telegraphed or delivered to Piper Jaffray Inc., Piper Jaffray Tower,
222 South Ninth Street, Minneapolis, Minnesota 55402; if to the Company, shall
be mailed, telegraphed or delivered to it at, 2860 West Bayshore Road, Palo
Alto, California 94303, Attention: Steven C. Smith; if to the Trust, shall be
mailed, telegraphed or delivered to it at Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890 0001, Attention: Corporate Trust
Administration. All notices given by telegram shall be promptly confirmed by
letter. Any notice to the Trust shall also be copied to the Company at the
address previously stated, Attention: Steven C. Smith. Any party to this
Agreement may change such address for notices by sending to the parties to this
Agreement written notice of a new address for such purpose.
12. Persons Entitled to Benefit of Agreement. This Agreement shall inure
----------------------------------------
to the benefit of and be binding upon the parties hereto and their respective
successors and assigns and the controlling persons, officers and directors
referred to in Section 6. Nothing in this Agreement is intended or shall be
construed to give to any other person, firm or corporation any legal or
equitable remedy or claim under or in respect of this Agreement or any provision
herein contained. The term "successors and assigns" as herein used shall not
include any purchaser, as such purchaser, of any of the Capital Securities from
the Underwriter.
13. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Minnesota.
[Signature Page Follows]
-34-
<PAGE>
Please sign and return to the Company the enclosed duplicates of this
letter whereupon this letter will become a binding agreement between the Company
and the Underwriter in accordance with its terms.
Very truly yours,
GREATER BAY BANCORP.
By____________________________
Its_________________________
GBB CAPITAL I
By____________________________
Its_________________________
Confirmed as of the date first
above mentioned.
PIPER JAFFRAY INC.
By____________________________
Managing Director
-35-
<PAGE>
Exhibit 3.1
ARTICLE OF INCORPORATION
OF
SAN MATEO COUNTY BANCORP
ONE: NAME.
- ---
The name of the corporation is San Mateo County Bancorp.
TWO: PURPOSE.
- ---
The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the
trust company business, or the practice of a profession permitted to
be incorporated by the California Corporation Code.
THREE: AGENT FOR SERVICE OF PROCESS.
- -----
The name and address of the corporation's initial agent for
service of process is: Fred R. Brinkop, 500 Allerton Street, Redwood
City, CA 94063.
FOUR: AUTHORIZED STOCK.
- ----
(a) The corporation is authorized to issue two classes of shares
designated "Preferred Stock" and "Common Stock", respectively. The
number of shares of Preferred Stock authorized to be issued is
4,000,000 and the number of shares of Common Stock authorized to be
issued is 6,000,000.
<PAGE>
(b) The Preferred Stock may be divided into such number of series
as the board of directors may determine. The board of directors is
authorized to determine and alter the rights, preferences, privileges
and restrictions granted to or imposed upon any wholly unissued series
of Preferred Stock, and to fix the number of shares of any series of
Preferred Stock and the designation of any such series of Preferred
Stock. The board of directors, within the limits and restrictions
stated in any resolution or resolutions of the board of directors
originally fixing the number of shares constituting any series, may
increase or decrease (but not below the number of shares of such
series then outstanding) the number of shares of any series subsequent
to the issue of shares of that series.
IN WITNESS WHEREOF, for the purpose of forming this corporation under
the laws of the State of California, the undersigned, constituting the sole
incorporator of this corporation, has executed these Articles of Incorporation.
/s/ Fred R. Brinkop
--------------------------
Fred R. Brinkop
Sole Incorporator
The undersigned declares under penalty or perjury that h is the person
who executed these Articles of Incorporation and that this instrument is the act
and dead of the undersigned.
Executed this 7 day of Nov, 1984, at San Francisco, California.
/s/ Fred R. Brinkop
--------------------------
Fred R. Brinkop
<PAGE>
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION OF
SAN MATEO COUNTY BANCORP
Leo D. Taylor and Douglas S. McGlashan hereby certify that:
1. They are the President and Secretary, respectively, of SAN MATEO COUNTY
BANCORP, a California corporation.
2. The Articles of Incorporation of this corporation are amended to add
the following Article Five:
"FIVE: INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS.
----
(a) Limitation of Directors' Liability. The liability of the directors
----------------------------------
of the corporation for monetary damages shall be eliminated to the fullest
extent permissible under California law.
(b) Indemnification of Corporate Agents. The corporation is authorized
-----------------------------------
to provide indemnification of its agents (as defined in Section 317 of the
California General Corporation Law) for breach of their duty to the corporation
and its shareholders through bylaw provisions or through agreements with the
agents, or both, in excess of the indemnification otherwise permitted by such
Section 317, subject to the limits on such excess indemnification set forth in
Section 204 of the California General Corporation Law.
(c) Repeal or Modification. Any repeal or modification of the
----------------------
foregoing provisions of this Article V shall not adversely affect any right of
indemnification or limitation of liability of an agent of the corporation
relating to acts or omissions occurring prior to such repeal or modification."
1.
<PAGE>
3. The foregoing Certificate of Amendment of Articles of Incorporation
has been duly approved by the Board of Directors.
4. The foregoing Certificate of Amendment of Articles of Incorporation
has been duly approved by the required vote of shareholders in accordance with
Section 902 of the California General Corporation Law. The total number of
outstanding shares of capital stock of the corporation is 347,675 shares of
Common Stock. The number of shares voting in favor of the Certificate of
Amendment of Articles of Incorporation equaled or exceeded the vote required.
The percentage vote required was more than 50% of the outstanding Common Stock.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this Certificate of Amendment of
Articles of Incorporation are true of our own knowledge.
Executed at San Mateo, California this 21st day of June, 1988.
---- ----
/s/ Leo D. Taylor
-------------------------------
Leo D. Taylor, President
/s/ Douglas S. McGlashan
-------------------------------
Douglas S. McGlashan, Secretary
2.
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
Owen D. Conley and Robert M. Lubin certify that:
1. They are the Chairman of the Board and Secretary, respectively, of San Mateo
County Bancorp, a California corporation.
2. Article One of the articles of incorporation of this corporation is amended
to read as follows:
"The name of this corporation shall be Mid-Peninsula Bancorp."
3. The foregoing amendment of articles of incorporation has been duly approved
by the board of directors.
4. The foregoing amendment of articles of incorporation has been duly approved
by the required vote of shareholders in accordance with Section 902 of the
Corporations Code. The total number of outstanding shares of common stock of
the corporation is 465,369. The number of shares voting in favor of the
amendment equaled or exceeded the vote required. The percentage vote
required was more than 50%. There are no shares of preferred stock
outstanding.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
DATE: October 3, 1994
/s/ OWEN D. CONLEY
---------------------------
Owen D. Conley
Chairman of the Board
/s/ ROBERT M. LUBIN
---------------------------
Robert M. Lubin
Secretary
<PAGE>
MERGER AGREEMENT
THIS MERGER AGREEMENT (the "Merger Agreement") is made and entered into as
of November 15, 1996, by and between MID-PENINSULA BANCORP, a California
corporation ("Mid-Peninsula"), and CUPERTINO NATIONAL BANCORP, a California
corporation ("Cupertino").
RECITALS
A. Mid-Peninsula is a corporation duly organized, validly existing and
doing business in good standing under the laws of the State of California with
authorized capital stock of six million (6,000,000) shares of no par value
common stock of which, on the date hereof, there are One Million, Six Hundred
Thirty-Seven Thousand, Five Hundred Ninety-Three (1,637,593) shares issued and
outstanding (individually, a "Mid-Peninsula Share" and together the "Mid-
Peninsula Shares") and four million (4,000,000) shares of preferred stock of
which, on the date hereof, there are no shares issued and outstanding.
B. Cupertino is a corporation duly organized, validly existing and doing
business in good standing under the laws of the State of California with
authorized capital stock of six million (6,000,000) shares of no par value
common stock of which, on the date hereof, there are One Million Nine Hundred
Five Thousand, Nine Hundred Fifty-Eight (1,905,958) shares issued and
outstanding (individually a "Cupertino Share" and together the "Cupertino
Shares") and 4,000,000 shares of preferred stock of which, on the date hereof,
there are no shares issued and outstanding.
C. Mid-Peninsula and Cupertino have entered into a Second Amended
Agreement and Plan of Reorganization and Merger, dated August 20, 1996 (the
"Agreement"), which contemplates the merger of Cupertino with and into Mid-
Peninsula (the "Merger") upon and in accordance with the terms and conditions
set forth in the Agreement and this Merger Agreement.
D. The respective Boards of Directors of Mid-Peninsula and Cupertino deem
it desirable and in the best interests of Mid-Peninsula and Cupertino and their
respective shareholders that Cupertino be merged with and into Mid-Peninsula as
provided in the Agreement and this Merger Agreement pursuant to the laws of the
State of California and that Mid-Peninsula change its name to Greater Bay
Bancorp ("Bancorp") which shall be the surviving corporation ("Surviving
Corporation").
E. The respective Boards of Directors of Mid-Peninsula and Cupertino have
adopted resolutions approving this Merger Agreement and the Agreement and have
recommended that the Merger be approved by the shareholders of their respective
corporations.
F. The respective shareholders of each of Mid-Peninsula and Cupertino, at
meetings duly held, have duly approved and adopted this Merger Agreement, the
Agreement and approved the Merger.
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein set forth and for the purpose of prescribing
the terms and conditions of the Merger, the parties hereto agree as follows:
ARTICLE I
THE MERGER
----------
1.1 Effect of Merger. At the Effective Time of the Merger (as defined in
----------------
Article VII hereof), Cupertino shall be merged with and into Mid-Peninsula,
Mid-Peninsula shall change its name to Greater Bay Bancorp, which shall
thereupon be the Surviving Corporation, and the separate corporate existence of
Cupertino shall cease.
1.2 Rights and Duties of Surviving Corporation. At and after the Effective
------------------------------------------
Time of the Merger, all rights, privileges, powers and franchises and all
property and assets of every kind and description of Cupertino shall be vested
in and be held and enjoyed by Bancorp as the Surviving Corporation, without
further act or deed; all the estates and interests of every kind of Cupertino,
including all debts due to it, shall be as effectively the property of Bancorp
as the Surviving Corporation as they were of Cupertino; the title to any real
estate vested by deed or otherwise in Cupertino shall not revert or be in any
way impaired by reason of 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. All rights of
creditors and liens upon any property of Mid-Peninsula or Cupertino shall be
preserved unimpaired and all debts, liabilities and duties of Mid-Peninsula or
Cupertino shall be the debts, liabilities and duties of Bancorp as the Surviving
Corporation and may be enforced against it to the same extent as if such debts,
liabilities and duties had been incurred or contracted by it.
ARTICLE II
CONVERSION OF SHARES
--------------------
2.1 Conversion of Shares. In and by virtue of the Merger and at the
--------------------
Effective Time of the Merger, pursuant to this Merger Agreement, each
Mid-Peninsula Share and each Cupertino Share issued and outstanding immediately
prior to the Effective time of the Merger shall, at the Effective Time of the
Merger, be converted.
a. Effect on Mid-Peninsula Shares. At the Effective Time of the
------------------------------
Merger, each Mid-Peninsula Share issued and outstanding immediately prior to the
Effective Time of the Merger shall, on and after the Effective Time of the
Merger, remain issued and outstanding and shall automatically and for all
purposes be deemed to represent one share of the common stock, without par
value, of Bancorp as the Surviving Corporation ("Bancorp Shares").
b. Conversion of Cupertino Shares. At the Effective Time of the
------------------------------
Merger, each Cupertino Share outstanding immediately prior to the Effective Time
of the Merger shall, by virtue of the Merger and without any action on the part
of the holder thereof, be exchanged for
2
<PAGE>
and converted into .81522 (the "Conversion Ratio") of a Bancorp Share. From and
after the Effective Time of the Merger, each holder of Cupertino Shares
immediately prior to the Effective Time of the Merger (other than holders of
Dissenting Shares, as defined below) shall have the right to receive, upon
surrender of the certificates theretofore representing such Cupertino Shares,
one or more certificates representing shares of Bancorp Shares equal to the
number of Cupertino Shares represented by each surrendered certificate
multiplied by the Conversion Ratio.
2.2 Fractional Shares. No fractional Bancorp Shares shall be issued in the
-----------------
Merger. In lieu thereof, each record holder of Cupertino Shares who would
otherwise be entitled to receive a fractional Bancorp Share shall receive,
subject to prior surrender of certificates representing Cupertino Shares, an
amount in cash equal to the product (calculated to the nearest hundredth)
obtained by multiplying the average of the bid and asked prices quoted by each
brokerage firm acting as a market maker of Mid-Peninsula Shares for a Mid-
Peninsula Share for each of the twenty (20) consecutive trading days up to and
including the last business day of the calendar month end immediately prior to
the Closing Date (as defined in the Agreement), by the fraction of a Bancorp
Share to which such holder would otherwise be entitled. No such holder shall be
entitled to dividends, voting rights, interest, or any other rights in respect
of any such fractional share.
2.3 Exchange Procedures.
-------------------
a. At and after the Effective Time of the Merger, Mid-Peninsula will
deliver or cause to be delivered to U.S. Stock Transfer Corporation, which shall
serve as exchange agent (the "Exchange Agent"), such number of blank
certificates representing Bancorp Shares sufficient to issue the number of
Bancorp Shares issuable in the Merger and an amount of cash sufficient for
payment of any fractional shares.
b. As soon as practicable after the Effective Time of the Merger, the
Exchange Agent will send written notice of exchange procedures to each record
holder of certificates representing Cupertino Shares converted pursuant to
Section 2.1(b) of this Merger Agreement.
c. Upon surrender for cancellation to the Exchange Agent of one or
more certificates evidencing Cupertino Shares ("Cupertino Certificates"),
accompanied by a duly executed letter of transmittal in proper form, the
Exchange Agent shall promptly deliver to each holder of such surrendered
Cupertino Certificates one or more new certificates representing the appropriate
number of Bancorp Shares ("Bancorp Certificates") to which such holder is
entitled, together with one or more checks for payment of cash in lieu of
fractional interests to be issued in respect of the Cupertino Shares so
surrendered.
d. Until Cupertino Certificates have been surrendered and exchanged
for Bancorp Certificates as herein provided, each outstanding Cupertino
Certificate shall represent, on and after the Effective Time of the Merger, the
right to receive the number of Bancorp Shares into which the number of Cupertino
Shares shown thereon have been converted. No dividends or other distributions of
any kind which are declared payable to holders of record of the Bancorp
3
<PAGE>
Shares after the Effective Time of the Merger will be paid to persons otherwise
entitled to receive the same until such persons have surrendered their Cupertino
Certificates in exchange for Bancorp Certificates in the Manner herein provided,
but upon such surrender, such dividends or other distributions, from and after
the Effective Time of the Merger, will be paid to such persons in accordance
with the terms of such Bancorp Shares. In no event shall the persons entitled to
receive such dividends or other distributions be entitled to receive interest on
such dividends or other distributions.
e. No. transfer taxes shall be payable by any holder of Cupertino
Shares in respect of the issuance of Bancorp Certificates for Bancorp Shares,
except that if any Bancorp Certificate for Bancorp Shares is to be issued in a
name other than that in which the Cupertino Certificate surrendered shall be
been registered, it shall be a condition of such issuance that the person
requesting such issuance shall properly endorse the certificate or certificates
and shall pay to Bancorp any transfer taxes payable by reason thereof, or of any
prior transfer of such surrendered certificate, or establish to the satisfaction
of Bancorp that such taxes have been paid or are not payable.
f. Any Bancorp Shares delivered to the Exchange Agent and not issued
pursuant hereto at the end of one (1) year from the Effective Time of the Merger
shall be returned to Bancorp, in which event the persons, if any, entitled
thereto shall look only to Bancorp for payment thereof.
g. Notwithstanding anything to the contrary set forth herein, if any
holder of Cupertino Shares shall be unable to surrender his or her Cupertino
Certificates because such certificates have been lost or destroyed, such holder
may deliver in lieu thereof an indemnity bond in form and substance and with
surety satisfactory to Bancorp.
h. The Exchange Agent shall not be entitled to vote or exercise any
rights of ownership with respect to the Bancorp Shares held by it from time to
time hereunder, except that it shall receive and hold all dividends or other
distributions paid or distributed with respect to such Bancorp Shares for the
account of the persons entitled thereto. All dividends or distributions, and any
cash to be paid 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 (1) year from the Effective
Time of the Merger, 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 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.
2.4 Dissenting Shareholders. Notwithstanding the provisions of this
-----------------------
Article II to the contrary, any Cupertino Shares held by persons who have
satisfied the requirements of Chapter 13 of the California General Corporation
Law (the "GCL") and who have not effectively withdrawn or lost their dissenters'
rights under Chapter 13 (such shares being referred to as "Dissenting Shares"),
shall not be converted pursuant to this Merger Agreement, but the holders
4
<PAGE>
thereof shall be entitled only to such rights as are afforded them by Chapter 13
of the GCL. Each dissenting shareholder who is entitled to payment for his or
her Cupertino Shares pursuant to Chapter 13 of the GCL shall receive payment in
an amount determined pursuant to Chapter 13 of the GCL.
ARTICLE III
ARTICLES OF INCORPORATION
-------------------------
At the Effective Time of the Merger, the Articles of Incorporation of
Mid-Peninsula, as in effect immediately prior to the Effective Time of the
Merger, shall be amended (a) to change its name to Greater Bay Bancorp, (b) to
establish a super-majority vote requirement of the Board of Directors equal to a
two-thirds vote on certain matters, and (c) to limit the liability of the
directors and provide expanded indemnification rights of agents of the
Surviving Corporation to the maximum extent permitted by law, as set forth in
Exhibit I attached hereto and incorporated herein by this reference, and, as so
- ---------
amended, shall hereto and incorporated herein by this reference, and, as
amended, shall be the Articles of Incorporation of Bancorp as the Surviving
Corporation from and after the Effective Time of the Merger until amended in
accordance with its provisions and as provided by law.
ARTICLE IV
BYLAWS
------
At the Effective Time of the Merger, the Bylaws of Mid-Peninsula as in
effect immediately prior to the Effective time of the Merger shall be amended
(a) to provide for a range in the number of authorized directors of not less
than seven (7) and not more than thirteen (13), with the exact number of
directors fixed at ten (10); and (b) to require a two-thirds (2/3rds vote of the
Board of Directors of Bancorp to approve certain matters affecting Bancorp,
including (i) a merger, sale of control or sale of material assets of Bancorp,
(ii) acquisitions by Bancorp, (iii) creation of new business units of Bancorp or
its subsidiaries, (iv) material changes in operating budgets of Bancorp or its
subsidiaries, (v) material changes in the business organization or
organizational structure of Bancorp or its subsidiaries, (vi) termination of any
executive officer or senior officer appointed to the Executive Management
Committee of Bancorp, and (vii) any change in the authorized range of directors;
and, as so amended, the Bylaws of Mid-Peninsula shall, at and after the
Effective Time of the Merger, be the Bylaws of Bancorp as the Surviving
Corporation until further amended as provided by law.
ARTICLE V
DIRECTORS
---------
At the Effective Time of the Merger, the Board of Directors of Bancorp as
the Surviving Corporation shall consist of five (5) members appointed by the
Board of Directors of Mid-Peninsula and five (5) members appointed by the Board
of Directors of Cupertino, in each case as designated in the Agreement. Such
persons shall serve as the Directors of the Surviving Corporation until such
time as their successors have been duly elected and qualified.
5
<PAGE>
ARTICLE VI
FURTHER ACTION
--------------
The parties shall deliver, or cause to be delivered, such documents or
certificates as may be necessary, in the reasonable opinion of counsel for any
of the parties, to effectuate the transactions set forth in this Merger
Agreement. If, at any time after the Effective Time of the Merger, Bancorp as
the Surviving Corporation or its successors or assigns shall determine that any
further conveyance, assignment or other documents or any further action is
necessary or desirable to further effectuate the transactions set forth herein
or contemplated hereby, the officers and directors of the parties hereto shall
execute and deliver, or cause to be executed and delivered, all such documents
as may be reasonably required to effectuate such transactions.
ARTICLE VII
EFFECTIVE TIME OF THE MERGER
----------------------------
The Merger will become effective upon the filing, in accordance with
Section 1103 of the GCL, of an executed copy of this Merger Agreement and all
other requisite accompanying certificates in the office of the California
Secretary of State. The date and time of such filing with the California
Secretary of State is referred to herein as the "Effective Time of the Merger."
ARTICLE VIII
CONDITIONS TO MERGER
--------------------
The filing of this Merger Agreement with the California Secretary of State
as provided in Article VII above is conditioned upon the fulfillment, prior to
such filing, of all the conditions to the Merger set forth in the Agreement.
ARTICLE IX
TERMINATION
-----------
This Merger Agreement may, by the mutual consent and action of the Boards
of Directors of Mid-Peninsula and Cupertino, be abandoned at any time before or
after approval thereof by the shareholders of Mid-Peninsula and Cupertino, but
not later than the filing of this Merger Agreement with the California Secretary
of State pursuant to Section 1103 of the GCI. This Merger Agreement shall
automatically be terminated and of no further force and effect if, prior to the
filing of an executed copy hereof with the California Secretary of State as
provided in Article VII hereof, the Agreement is terminated in accordance with
the terms thereof.
ARTICLE X
GENERAL PROVISIONS
------------------
10.1 Successors and Assigns. This Merger Agreement shall be binding upon
and enforceable by the parties hereto and their respective successors, assigns
and transferees, but this Merger Agreement may not be assigned by any party
without the written consent of the other parties.
6
<PAGE>
10.2 Governing Law. This Merger Agreement has been executed in the State
-------------
of California, and the laws of the State of California shall govern the validity
and interpretation hereof and the performance by the parties hereto.
10.3 Amendments. This Agreement, when duly executed and delivered, may
----------
be modified or amended by action of the Board of Directors of Mid-Peninsula and
Cupertino to the extent permitted by law without action by their respective
shareholders. This Merger Agreement may be modified or amended only by an
instrument of equal formality signed by the parties or their duly authorized
agents.
10.4 Entire Agreement. This Merger Agreement and the Agreement,
----------------
together with all exhibits hereto and thereto and all documents referenced
herein and therein, constitute the entire agreement of Mid-Peninsula and
Cupertino, and supersede any prior written or oral negotiations, discussions,
understandings and agreements between them, concerning the subject matter
contained herein and therein.
10.5 Counterparts. This Merger Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original instrument, but
all of which together shall constitute but one and the same agreement.
IN WITNESS WHEREOF, Mid-Peninsula and Cupertino, pursuant to the approval
and authority duly given by resolution of their respective Boards of Directors,
have caused this Merger Agreement to be signed by their respective Presidents
and Secretaries on the day and year first above written.
CUPERTINO NATIONAL BANCORP, MID-PENINSULA BANCORP,
a California corporation a California corporation
By /s/ C. Donald Alien By /s/ David L. Kalkbrenner
---------------------------- -----------------------------
C. Donald Alien, President David L. Kalkbrenner, President
and Chief Executive Officer and Chief Executive Officer
By /s/ Steven C. Smith By /s/ Warren R. Thoits
---------------------------- -----------------------------
Steven C. Smith, Secretary Warren R. Thoits, Secretary
7
<PAGE>
EXHIBIT 1
---------
AMENDMENT TO ARTICLES OF INCORPORATION
OF
MID-PENINSULA BANCORP
1. Article One of the Articles of Incorporation is amended to read as
follows:
"ONE: NAME.
---
The name of the corporation is Greater Bay Bancorp."
2. Article Five of the Articles of Incorporation is amended to read as
follows:
"FIVE DIRECTOR LIABILITY; INDEMNIFICATION OF AGENTS.
----
(a) The liability of the directors of the corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
(b) The indemnification of an agent [as defined in California
Corporations Code section 317(a)] of this corporation, whether by bylaws,
agreement or otherwise, for breach of duty to this corporation and its
stockholders, may, to the extent not prohibited under California Corporations
Code sections 317 and 204(a) , exceed the indemnification otherwise
permitted by section 317 of the Corporations Code."
3. The following Article Six is added to the Articles of Incorporation:
"SIX: SUPER-MAJORITY VOTING BY DIRECTORS.
---
The vote of not less than two-thirds of all members of the
board of directors shall be required to approve any of the following types of
matters affecting the corporation.
(a) Any merger, sale of control or sale of material assets of the
corporation.
(b) Any material acquisition by the corporation.
(c) The creation of any new business unit of the corporation or any
subsidiary of the corporation.
(d) Any operating budget, or any material change therein, of the
corporation or any subsidiary of the corporation.
(e) Any material change in the business organization or
organizational structure of the corporation or any subsidiary of the
corporation.
(f) Termination of the employment of any executive or senior officer
appointed to the Executive Management Committee of the corporation.
(g) Any change in the authorized range of the number of directors of
the corporation."
<PAGE>
Certificate of Officers
Pursuant to Section 1103 of the
California Corporations Code
Mid-Peninsula Bancorp
David L. Kalkbrenner and Carol H. Rowland certify that:
1. They are the duly elected and acting Chief Executive Officer and Chief
Financial Officer, respectively, of Mid-Peninsula Bancorp.
2. This certificate is attached to the Merger Agreement dated as of
November 15, 1996, providing for the merger of Mid-Peninsula Bancorp and
Cupertino National Bancorp, with Mid-Peninsula Bancorp being the surviving
corporation of the merger and changing its name to Greater Bay Bancorp.
3. The Merger Agreement in the form attached has been approved by the
Board of Directors of the Corporation.
4. The principal terms of the Merger Agreement in the form attached were
approved by the corporation by the vote of a number of shares of each class
entitled to vote on the merger which equaled or exceeded the vote required, such
classes, the total number of outstanding shares of each class entitled to vote
on the merger and the percentage vote required of each class being as follows:
<TABLE>
<CAPTION>
Name of Class Shares Outstanding Vote Required
- ------------- ------------------ -------------
<S> <C> <C>
Common Stock 1,637,593 Majority of shares outstanding
</TABLE>
IN WITNESS WHEREOF, the undersigned have executed this certificate on
November 15, 1996.
/s/ DAVID L. KALKBRENNER /s/ CAROL H. ROWLAND
-------------------------- --------------------------
David L. Kalkbrenner Carol H. Rowland
Chief Executive Officer Chief Financial Officer
The undersigned, Chief Executive Officer and Chief Financial Officer,
respectively, of Mid-Peninsula Bancorp, a California corporation, each declares
under penalty of perjury that the matters set out in the foregoing Certificate
are true of his or her own knowledge.
Executed at Palo Alto, California on November 15, 1996.
/s/ DAVID L. KALKBRENNER /s/ CAROL H. ROWLAND
-------------------------- --------------------------
David L. Kalkbrenner Carol H. Rowland
Chief Executive Officer Chief Financial Officer
<PAGE>
Certificate of Officers
Pursuant to Section 1103 of the
California Corporations Code
Cupertino National Bancorp
C. Donald Allen and Heidi R. Wulfe certify that:
1. They are the duly elected and acting Chief Executive Officer and Chief
Financial Officer, respectively, of Cupertino National Bancorp.
2. This certificate is attached to the Merger Agreement dated as of
November 15, 1996, providing for the merger of Cupertino National Bancorp with
and into Mid-Peninsula Bancorp, with Mid-Peninsula Bancorp being the surviving
corporation of the merger and changing its name to Greater Bay Bancorp.
3. The Merger Agreement in the form attached has been approved by the
Board of Directors of the corporation.
4. The principal terms of the Merger Agreement in the form attached were
approved by the corporation by the vote of a number of shares of each class
entitled to vote on the merger which equaled or exceeded the vote required, such
classes, the total number of outstanding shares of each class entitled to vote
on the merger and the percentage vote required of each class being as follows:
<TABLE>
<CAPTION>
Name of class Shares Outstanding Vote Required
- ------------- ------------------ -------------
<S> <C> <C>
Common Stock 1,905,958 Majority of shares outstanding
</TABLE>
IN WITNESS WHEREOF, the undersigned have executed this certificate on
November 15, 1996.
/s/ C. Donald Allen /s/ Heidi R. Wulfe
-------------------------- --------------------------
C. Donald Allen Heidi R. Wulfe
Chief Executive Officer Chief Executive Officer
The undersigned, Chief Executive Officer and Chief Executive Officer,
respectively, of Cupertino National Bancorp, a California corporation, each
declares under penalty of perjury that the matters set out in the foregoing
Certificate are true of his or her own knowledge.
Executed at Cupertino, California on November 15, 1996.
/s/ C. Donald Allen /s/ Heidi R. Wulfe
-------------------------- --------------------------
C. Donald Allen Heidi R. Wulfe
Chief Executive Officer Chief Executive Officer
<PAGE>
EXHIBIT 4.1
D&W DRAFT 2/21/97
-------------------------------------------------------------------------
GREATER BAY BANCORP
TO
[WILMINGTON TRUST COMPANY]
TRUSTEE
____________________________
JUNIOR SUBORDINATED INDENTURE
DATED AS OF _________, 1997
- -------------------------------------------------------------------------
<PAGE>
GREATER BAY BANCORP
Reconciliation and tie between the Trust Indenture Act of 1939 (including
cross-references to provisions of Sections 310 to and including 317 which,
pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended by the
Trust Reform Act of 1990, are a part of and govern the Indenture whether or not
physically contained therein) and the Junior Subordinated Indenture, dated as of
, 1997.
- ---------
<TABLE>
<CAPTION>
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
----------- -------
<S> <C>
(S) 310(a) (1), (2) and (5).......... Not Applicable
(a) (3) ...................... Not Applicable
(a) (4) ...................... Not Applicable
(b) .......................... 6.8
............................. 6.10
(c) .......................... Not Applicable
(S) 311(a) .......................... 6.13(a)
(b) .......................... 6.13(b b)(2)
7.3(a)(2)
.............................. 7.3(a)(2)
(S) 312(a) .......................... 7.1
.............................. 7.2(a)
(b) .......................... 7.2(b)
.............................. (c) 7.2(c)
(S) 313(a) .......................... 7.3(a)
(b) .......................... 7.3(b)
(c) .......................... 7.3(a), 7.3(b)
(d) .......................... 7.3(c)
(S) 314(a) (1), (2) and (3).......... 7.4
(a) (4) ...................... 10.5
(b) .......................... Not Applicable
(c) (1) ...................... 1.2
(c) (2) ...................... 1.2
(c) (3) ...................... Not Applicable
(d) .......................... Not Applicable
(e) .......................... 1.2
(f) .......................... Not Applicable
(S) 315(a) .......................... 6.1(a)
(b) .......................... 6.2
.............................. 7.3(a)(6)
(c) .......................... 6.1(b)
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
----------- -------
<S> <C>
(d) ..................... 6.1 (c)
(d) (1) ................. 6.1(a) (1)
(d) (2) ................. 6.1(c) (2)
(d) (3) ................. 6.1(c) (3)
(e) ..................... 5.14
(S) 316(a) ..................... 1.1
(a) (1) (A).............. 5.12
(a) (1) (B).............. 5.13
(a) (2) ................. Not Applicable
(b) ..................... 5.8
(c) ..................... 1.4(f)
(S) 317(a) (1).................. 5.3
(a) (2) ................. 5.4
(b) ..................... 10.3
(S)318 (a) ..................... 1.7
- --------------
</TABLE>
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Junior Subordinated Indenture.
-ii-
<PAGE>
TABLE OF CONTENTS
ARTICLE I
<TABLE>
<S> <C>
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION...... 1
Section 1.1 Definitions.............................. 1
Section 1.2 Compliance Certificate and Opinions...... 10
Section 1.3 Forms of Documents Delivered to Trustee.. 11
Section 1.4 Acts of Holders.......................... 12
Section 1.5 Notices, Etc. to Trustee and Company..... 14
Section 1.6 Notice to Holders; Waiver................ 14
Section 1.7 Conflict with Trust Indenture Act........ 15
Section 1.8 Effect of Headings and Table of Contents. 15
Section 1.9 Successors and Assigns................... 15
Section 1.10 Separability Clause...................... 15
Section 1.11 Benefits of Indenture.................... 15
Section 1.12 Governing Law............................ 16
Section 1.13 Non-Business Days........................ 16
ARTICLE II
SECURITY FORMS............................................... 16
Section 2.1. Forms Generally.......................... 16
Section 2.2. Form of Face of Security................. 17
Section 2.3. Form of Reverse of Security.............. 20
Section 2.4. Additional Provisions Required in Global
Security................................. 24
Section 2.5. Form of Trustee's Certificate of
Authentication........................... 24
ARTICLE III
THE SECURITIES............................................... 24
Section 3.1. Title and Terms.......................... 24
Section 3.2. Denominations............................ 27
Section 3.3. Execution, Authentication, Delivery and
Dating................................... 27
Section 3.4. Temporary Securities..................... 29
Section 3.5. Registration, Transfer and Exchange...... 30
Section 3.6. Mutilated, Destroyed, Lost and Stolen
Securities............................... 32
Section 3.7. Payment of Interest; Interest Rights
Preserved................................ 32
Section 3.8. Persons Deemed Owners.................... 34
Section 3.9. Cancellation............................. 34
Section 3.10. Computation of Interest.................. 34
Section 3.11. Deferrals of Interest Payment Dates...... 35
Section 3.12. Right of Set-Off......................... 36
Section 3.13. Agreed Tax Treatment..................... 36
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
Section 3.14. Shortening of Stated Maturity......... 36
Section 3.15. CUSIP Numbers......................... 37
ARTICLE IV
SATISFACTION AND DISCHARGE................................. 37
Section 4.1. Satisfaction and Discharge of Indenture 37
Section 4.2. Application of Trust Money............. 38
ARTICLE V
REMEDIES................................................... 38
Section 5.1 Events of Default...................... 38
Section 5.2. Acceleration of Maturity; Rescission
and Annulment.......................... 40
Section 5.3. Collection of Indebtedness and Suits
for Enforcement by Trustee............. 41
Section 5.4. Trustee May File Proofs of Claim....... 42
Section 5.5. Trustee May Enforce Claim Without
Possession of Securities............... 43
Section 5.6. Application of Money Collected......... 43
Section 5.7. Limitation on Suits.................... 44
Section 5.8. Unconditional Right of Holders to
Receive Principal, Premium and
Interest; Direct Action by Holders of
Preferred Securities................... 44
Section 5.9. Restoration of Rights and Remedies..... 45
Section 5.10. Rights and Remedies Cumulative......... 45
Section 5.11. Delay or Omission Not Waiver........... 45
Section 5.12. Control by Holders..................... 46
Section 5.13. Waiver of Past Defaults................ 46
Section 5.14. Undertaking for Costs.................. 47
Section 5.15. Waiver of Usury, Stay or Extension Laws 47
ARTICLE VI
THE TRUSTEE................................................ 47
Section 6.1. Certain Duties and Responsibilities.... 47
Section 6.2. Notice of Defaults..................... 49
Section 6.3. Certain Rights of Trustee.............. 49
Section 6.4. Not Responsible for Recitals or Issuance
of Securities.......................... 50
Section 6.5. May Hold Securities.................... 50
Section 6.6. Money Held in Trust.................... 50
Section 6.7. Compensation and Reimbursement......... 51
Section 6.8. Disqualification; Conflicting Interests 51
Section 6.9. Corporate Trustee Required; Eligibility 51
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
Section 6.10. Resignation and Removal; Appointment
of Successor........................ 52
Section 6.11. Acceptance of Appointment by Successor 54
Section 6.12. Merger, Conversion, Consolidation or
Succession to Business................ 55
Section 6.13. Preferential Collection of Claims
Against Company....................... 55
Section 6.14. Appointment of Authenticating Agent... 55
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY......... 57
Section 7.1. Company to Furnish Trustee Names and
Addresses of Holders.................. 57
Section 7.2. Preservation of Information,
Communications to Holders............. 58
Section 7.3. Reports by Trustee.................... 58
Section 7.4. Reports by Company.................... 58
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE...... 59
Section 8.1. Company May Consolidate, Etc.,
Only on Certain Terms................. 59
Section 8.2. Successor Corporation Substituted..... 60
ARTICLE IX
SUPPLEMENTAL INDENTURES.................................... 60
Section 9.1. Supplemental Indentures without
Consent of Holders..................... 60
Section 9.2. Supplemental Indentures with Consent
of Holders............................. 62
Section 9.3. Execution of Supplemental Indentures... 63
Section 9.4. Effect of Supplemental Indentures...... 64
Section 9.5. Conformity with Trust Indenture Act.... 64
Section 9.6. Reference in Securities to Supplemental
Indentures............................. 64
ARTICLE X
COVENANTS................................................... 64
Section 10.1. Payment of Principal, Premium and
Interest................................ 64
Section 10.2. Maintenance of Office or Agency......... 65
Section 10.3. Money for Security Payments to be
Held in Trust........................... 65
Section 10.4. Statement as to Compliance.............. 67
Section 10.5. Waiver of Certain Covenants............. 67
Section 10.6. Additional Sums......................... 67
Section 10.7. Additional Covenants.................... 68
</TABLE>
-iii-
<PAGE>
ARTICLE XI
<TABLE>
<S> <C>
REDEMPTION OF SECURITIES......................................... 69
Section 11.1 Applicability of This Article............... 69
Section 11.2. Election to Redeem; Notice to Trustee....... 69
Section 11.3. Selection of Securities to be Redeemed...... 70
Section 11.4. Notice of Redemption........................ 70
Section 11.5. Deposit of Redemption Price................. 71
Section 11.6. Payment of Securities Called for
Redemption.................................. 71
Section 11.7. Right of Redemption of Securities
Initially Issued to a
GBB Trust................................... 72
ARTICLE XII
SINKING FUNDS.................................................... 72
Section 12.1. Applicability of Article.................... 72
Section 12.2. Satisfaction of Sinking Fund Payments
with Securities............................. 73
Section 12.3. Redemption of Securities for Sinking Fund... 73
ARTICLE XIII
SUBORDINATION OF SECURITIES...................................... 75
Section 13.1. Securities Subordinate to Senior and
Subordinated Debt........................... 75
Section 13.2. Payment Over of Proceeds Upon Dissolution,
Etc......................................... 75
Section 13.3. Prior Payment to Senior and Subordinated
Debt Upon Acceleration of Securities........ 76
Section 13.4. No Payment When Senior and Subordinated
Debt in Default............................. 77
Section 13.5. Payment Permitted If No Default............. 78
Section 13.6. Subrogation to Rights of Holders of Senior
and Subordinated Debt....................... 78
Section 13.7. Provisions Solely to Define Relative Rights. 79
Section 13.8. Trustee to Effectuate Subordination......... 79
Section 13.9. No Waiver of Subordination Provisions....... 79
Section 13.10. Notice to Trustee........................... 80
Section 13.11. Reliance on Judicial Order or Certificate
of Liquidating Agent........................ 81
Section 13.12. Trustee Not Fiduciary for Holders of Senior
and Subordinated Debt....................... 81
Section 13.13. Rights of Trustee as Holder of Senior and
Subordinated Debt; Preservation of Trustee's
Rights...................................... 81
Section 13.14. Article Applicable to Paying Agents......... 81
Section 13.15. Certain Conversions or Exchanges Deemed
Payment..................................... 82
</TABLE>
-iv-
<PAGE>
JUNIOR SUBORDINATED INDENTURE, dated as of ________, 1997, between
GREATER BAY BANCORP, a California corporation (hereinafter called the "Company")
having its principal office at 2860 West Bayshore Road, Palo Alto, California
94303, and [WILMINGTON TRUST COMPANY],, a Delaware banking corporation, as
Trustee (hereinafter called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured junior
subordinated debt securities in series (hereinafter called the "Securities") of
substantially the tenor hereinafter provided, including, without limitation,
Securities issued to evidence loans made to the Company of the proceeds from the
issuance from time to time by one or more business trusts (each a "GBB Trust,"
and, collectively, the "GBB Trusts") of preferred trust interests in such Trusts
(the Preferred Securities") and common interests in such Trusts (the "Common
Securities" and, collectively with the Preferred Securities, the Trust
Securities), and to provide the terms and conditions upon which the Securities
are to be authenticated, issued and delivered.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the Company
the valid obligations of the Company, and to make this Indenture a valid
agreement of the Company, in accordance with their and its terms, have been
done.
NOW THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of
the premises and the purchase of the Securities by the Holders thereof, it is
mutually covenanted and agreed, for the equal and proportionate benefit of all
Holders of the Securities or of any series thereof, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.1. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) The terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(2) All other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
<PAGE>
(3) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and the term "generally accepted accounting principles" with respect
to any computation required or permitted hereunder shall mean such accounting
principles which are generally accepted at the date or time of such computation;
provided, that when two or more principles are so generally accepted, it shall
mean that set of principles consistent with those in use by the Company; and
(4) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"1940 Act" means the Investment Company Act of 1940, as amended.
"Act" when used with respect to any Holder has the meaning specified
in Section 1.4.
"Additional Interest" means the interest, if any, that shall accrue on
any interest on the Securities of any series the payment of which has not been
made on the applicable Interest Payment Date and which shall accrue at the rate
per annum specified or determined as specified in such Security.
"Additional Sums" has the meaning specified in Section 10.6.
"Additional Taxes" means the sum of any additional taxes, duties and
other governmental charges to which a GBB Trust has become subject from time to
time as a result of a Tax Event.
"Administrative Trustee" means, in respect of any GBB Trust, each
Person identified as an "Administrative Trustee" or an "Administrative Agent" in
the related Trust Agreement, solely in such Person's capacity as Administrative
Trustee or an Administrative Agent, as the case may be, of such GBB Trust under
such Trust Agreement and not in such Person's individual capacity, or any
successor administrative trustee or successor administrative agent, as the case
may be, appointed as therein provided.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, no GBB Trust to which
Securities have been issued shall be deemed to be an Affiliate of the Company.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or
-2-
<PAGE>
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Allocable Amounts," when used with respect to any Senior and
Subordinated Debt, means all amounts due or to become due on such Senior and
Subordinated Debt less, if applicable, any amount which would have been paid to,
and retained by, the holders of such Senior and Subordinated Debt (whether as a
result of the receipt of payments by the holders of such Senior and Subordinated
Debt from the Company or any other obligor thereon or from any holders of, or
trustee in respect of, other indebtedness that is subordinate and junior in
right of payment to such Senior and Subordinated Debt pursuant to any provision
of such indebtedness for the payment over of amounts received on account of such
indebtedness to the holders of such Senior and Subordinated Debt or otherwise)
but for the fact that such Senior and Subordinated Debt is subordinate or junior
in right of payment to (or subject to a requirement that amounts received on
such Senior and Subordinated Debt be paid over to obligees on) trade accounts
payable or accrued liabilities arising in the ordinary course of business.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate
Securities of one or more series.
"Board of Directors" means either the board of directors of the
Company or any committee of that board duly authorized to act hereunder.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors, or such committee of the Board of Directors or officers
of the Company to which authority to act on behalf of the Board of Directors has
been delegated, and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day other than (i) a Saturday or Sunday, (ii)
a day on which banking institutions in the State of California are authorized or
required by law or executive order to remain closed or (iii) a day on which the
Corporate Trust Office of the Trustee, or, with respect to the Securities of a
series initially issued to a GBB Trust, the principal office of the Property
Trustee under the related Trust Agreement, is closed for business.
"Capital Treatment Event" means the reasonable determination by the
Company that, as a result of any amendment to, or change (including any
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial decision
interpreting or
-3-
<PAGE>
applying such laws or regulations, which amendment or change is effective or
such prospective change, pronouncement or decision is announced on or after the
date of issuance of the Preferred Securities of such GBB Trust, there is more
than an insubstantial risk of impairment of the Company's ability to treat the
Preferred Securities (or any substantial portion thereof) as "Tier I Capital"
(or the then equivalent thereof) for purposes of the capital adequacy guidelines
of the Federal Reserve, as then in effect and applicable to the Company.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties on such date.
"Common Securities" has the meaning specified in the first recital of
this Indenture.
"Common Stock" means the common stock, par value $_______ per share,
of the Company.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Company Request" and "Company Order" mean, respectively, the written
request or order signed in the name of the Company by the Chairman of the Board
of Directors, the Vice Chairman of the Board of Directors, its President or a
Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or
an Assistant Secretary of the Company, and delivered to the Trustee.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered.
"Corporation" includes a corporation, association, company, joint-
stock company or business trust.
"Debt" means, with respect to any Person, whether recourse is to all
or a portion of the assets of such Person and whether or not contingent, (i)
every obligation of such Person for money borrowed; (ii) every obligation of
such Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of
-4-
<PAGE>
such Person; (iv) every obligation of such Person issued or assumed as the
deferred purchase price of property or services (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business); (v)
every capital lease obligation of such Person; (vi) all indebtedness of such
Person whether incurred on or prior to the date of this Indenture or thereafter
incurred, for claims in respect of derivative products, including interest rate,
foreign exchange rate and commodity forward contracts, options and swaps and
similar arrangements; and (vii) every obligation of the type referred to in
clauses (i) through (vi) of another Person and all dividends of another Person
the payment of which, in either case, such Person has guaranteed or is
responsible or liable for, directly or indirectly, as obligor or otherwise.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Depositary" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more Global
Securities, the Person designated as Depositary by the Company pursuant to
Section 3.1 with respect to such series (or any successor thereto).
"Discount Security" means any security which provides for an amount
less than the principal amount thereof to be due and payable upon a declaration
of acceleration of the Maturity thereof pursuant to Section 5.2.
"Distributions," with respect to the Trust Securities issued by a GBB
Trust, means amounts payable in respect of such Trust Securities as provided in
the related Trust Agreement and referred to therein as "Distributions."
"Dollar" or "U.S. $" means the currency of the United States of
America that, as at the time of payment, is legal tender for the payment of
public and private debts.
"Event of Default" has the meaning specified in Article V unless
otherwise specified in the supplemental indenture or the Officers' Certificate
delivered pursuant to Section 3.1 hereof creating a series of Securities.
"Exchange Act" means the Securities Exchange Act of 1934 and any
statute successor thereto, in each case as amended from time to time.
"Extension Period" has the meaning specified in Section 3.11.
"Global Security" means a Security in the form prescribed in Section
2.4 evidencing all or part of a series of Securities, issued to the Depositary
or its nominee for such series, and registered in the name of such Depositary or
its nominee.
-5-
<PAGE>
"GBB Guarantee" means the guarantee by the Company of distributions on
the Preferred Securities of a GBB Trust to the extent provided in the related
Guarantee Agreement.
"GBB Trust" has the meaning specified in the first recital of this
Indenture.
"Guarantee Agreement" means the Guarantee Agreement substantially in
the form attached hereto as Annex C, or substantially in such form as may be
specified as contemplated by Section 3.1 with respect to the Securities of any
series, in each case as amended from time to time.
"Holder" means a Person in whose name a Security is registered in the
Securities Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof or
one or more Officers' Certificates delivered pursuant to Section 3.1 and shall
include the terms of each particular series of Securities established as
contemplated by Section 3.1.
"Interest Payment Date" means as to each series of Securities the
Stated Maturity of an installment of interest on such Securities.
"Investment Company Event" means, in respect of a GBB Trust, the
receipt by a GBB Trust of an Opinion of Counsel, rendered by a law firm
experienced in such matters, to the effect that, as a result of change in law or
regulation or a change in interpretation or application of law or regulation by
any legislative body, court, governmental agency or regulatory authority, such
GBB Trust is or will be considered an "investment company" that is required to
be registered under the 1940 Act, which change becomes effective on or after the
date of original issuance of the Preferred Securities of such GBB Trust.
"Junior Subordinated Payment" has the meaning specified in Section
13.2.
"Maturity" when used with respect to any Security means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Notice of Default" means a written notice of the kind specified in
Section 5.1(3).
-6-
<PAGE>
"Officers' Certificate" means a certificate signed by the Chairman of
the Board of Directors, a Vice Chairman of the Board of Directors, the President
or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary
or an Assistant Secretary of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee.
"Original Issue Date" means the date of issuance specified as such in
each Security.
"Outstanding" means, when used in reference to any Securities, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Securities for whose payment money in the necessary amount has
been theretofore deposited with the Trustee or any Paying Agent in trust for the
Holders of such Securities; and
(iii) Securities in substitution for or in lieu of which other
Securities have been authenticated and delivered or which have been paid
pursuant to Section 3.6, unless proof satisfactory to the Trustee is presented
that any such Securities are held by Holders in whose hands such Securities are
valid, binding and legal obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction of
the Trustee the pledgee's right so to act with respect to such Securities and
that the pledgee is not the Company or any other obligor upon the Securities or
any Affiliate of the Company or such other obligor. Upon the written request of
the Trustee, the Company shall furnish to the Trustee promptly an Officers'
Certificate listing and identifying all Securities, if any, known by the Company
to be owned or held by or for the account of the Company, or any other obligor
on the Securities or any
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Affiliate of the Company or such obligor, and, subject to the provisions of
Section 6.1, the Trustee shall be entitled to accept such Officers' Certificate
as conclusive evidence of the facts therein set forth and of the fact that all
Securities not listed therein are Outstanding for the purpose of any such
determination.
"Paying Agent" means the Trustee or any Person authorized by the
Company to pay) the principal of or interest on any Securities on behalf of the
Company.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Place of Payment" means, with respect to the Securities of any
series, the place or places where the principal of (and premium, if any) and
interest on the Securities of such series are payable pursuant to Sections 3.1
and 3.11.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any security
authenticated and delivered under Section 3.6 in lieu of a lost, destroyed or
stolen Security shall be deemed to evidence the same debt as the lost, destroyed
or stolen Security.
"Preferred Securities" has the meaning specified in the first recital
of this Indenture.
"Proceeding" has the meaning specified in Section 13.2.
"Property Trustee" means, in respect of any GBB Trust, the commercial
bank or trust company identified as the "Property Trustee" in the related Trust
Agreement, solely in its capacity as Property Trustee of such GBB Trust under
such Trust Agreement and not in its individual capacity, or its successor in
interest in such capacity, or any successor property trustee appointed as
therein provided.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date with respect to the Securities of a series means, unless otherwise provided
pursuant to Section 3.1 with respect to Securities of a series, (i) in the case
of Securities of a series represented by one or more Global Securities, the
Business Day next preceding
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such Interest Payment Date and (ii) in the case of Securities of a series not
represented by one or more Global Securities, the date which is fifteen days
next preceding such Interest Payment Date (whether or not a Business Day).
"Responsible Officer" when used with respect to the Trustee means any
officer of the Trustee assigned by the Trustee from time to time to administer
its corporate trust matters.
"Securities" or "Security" means any debt securities or debt security,
as the case may be, authenticated and delivered under this Indenture.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 3.5.
"Senior and Subordinated Debt" means the principal of (and premium, if
any) and interest, if any (including interest accruing on or after the filing of
any petition in bankruptcy or for reorganization relating to the Company whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt of the Company, whether incurred on or prior to the date of this Indenture
or thereafter incurred, unless, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Securities, provided,
however, that Senior and Subordinated Debt shall not be deemed to include (a)
any Debt of the Company which, when incurred and without respect to any election
under Section 1111(b) of the Bankruptcy Reform Act of 1978, as amended, was
without recourse to the Company, (b) any Debt of the Company to any of its
Subsidiaries, (c) Debt to any employee of the Company, and (d) any Securities.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity" when used with respect to any Security or any
installment of principal thereof or interest thereon means the date specified
pursuant to the terms of such Security as the date on which the principal of
such Security or such installment of interest is due and payable, in the case of
such principal, as such date may be shortened or extended as provided pursuant
to the terms of such Security and this Indenture.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For purposes of this definition, "voting stock" means stock which
ordinarily has voting power for the election of directors, whether at all times
or only so long as no senior class of stock has such voting power by reason of
any contingency.
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"Tax Event" means the receipt by the Company and the GBB Trust of an
Opinion of Counsel (as defined in the relevant GBB Trust Agreement) experienced
in such matters to the effect that, as a result of any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or such prospective change,
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities of such GBB Trust, there is more than an insubstantial risk
that (i) such GBB Trust is, or will be within 90 days of the date of such
Opinion of Counsel, subject to United States Federal income tax with respect to
income received or accrued on the corresponding series of Securities, (ii)
interest payable by the Company on such corresponding series of Securities is
not, or within 90 days of the date of such Opinion of Counsel, will not be,
deductible by the Company, in whole or in part, for United States Federal income
tax purposes or (iii) such GBB Trust is, or will be within 90 days of the date
of such Opinion of Counsel, subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
"Trust" has the meaning specified in the first recital of this
Indenture.
"Trust Agreement" means the Trust Agreement substantially in the form
attached hereto as Annex A, as amended by the form of Amended and Restated Trust
Agreement substantially in the form attached hereto as Annex B, or substantially
in such form as may be specified as contemplated by Section 3.1 with respect to
the Securities of any series, in each case as amended from time to time.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder and,
if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean the Trustee with respect to
Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C.
(S)(S) 77aaa-77bbb), as amended and as in effect on the date as of this
Indenture, except as provided in Section 9.5.
"Trust Securities" has the meaning specified in the first recital of
this Indenture.
"Vice President" when used with respect to the Company, means any duly
appointed vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."
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Section 1.2. Compliance Certificate and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent
(including covenants, compliance with which constitutes a condition precedent),
if any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent (including covenants compliance with which
constitute a condition precedent), if any, have been complied with, except that
in the case of any such application or request as to which the furnishing of
such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than the
certificates provided pursuant to Section 10.5) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
Section 1.3. Forms of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
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Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions, or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 1.4. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given to or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent or
proxy duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
is or are delivered to the Trustee, and, where it is hereby expressly required,
to the Company. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 6.1) conclusive in favor of
the Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a Person acting in other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority.
(c) The fact and date of the execution by any Person of any such
instrument or writing, or the authority of the Person executing the same, may
also
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be proved in any other manner which the Trustee deems sufficient and in
accordance with such reasonable rules as the Trustee may determine.
(d) The ownership of Securities shall be proved by the Securities
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon the
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Security.
(f) The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to
give, make or take any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Indenture to be
given, made or taken by Holders of Securities of such series, provided that the
Company may not set a record date for, and the provisions of this paragraph
shall not apply with respect to, the giving or making of any notice,
declaration, request or direction referred to in the next paragraph. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of the relevant series on such record date, and no other Holders,
shall be entitled to take the relevant action, whether or not such Holders
remain Holders after such record date, provided that no such action shall be
effective hereunder unless taken on or prior to the applicable Expiration Date
by Holders of the requisite principal amount of Outstanding Securities of such
series on such record date. Nothing in this paragraph shall be construed to
prevent the Company from setting a new record date for any action for which a
record date has previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action by any Person
be canceled and of no effect), and nothing in this paragraph shall be construed
to render ineffective any action taken by Holders of the requisite principal
amount of Outstanding Securities of the relevant series on the date such action
is taken. Promptly after any record date is set pursuant to this paragraph, the
Company, at its own expense, shall cause notice of such record date, the
proposed action by Holders and the applicable Expiration Date to be given to the
Trustee in writing and to each Holder of Securities of the relevant series in
the manner set forth in Section 1.6.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to join
in the giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 5.2, (iii) any request to institute
proceedings referred to in Section 5.7(2) or (iv) any direction referred to in
Section 5.12, in each case with respect to Securities of such series. If any
record date is set pursuant to this paragraph, the Holders of
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Outstanding Securities of such series on such record date, and no other Holders,
shall be entitled to join in such notice, declaration, request or direction,
whether or not such Holders remain Holders after such record date, provided that
no such action shall be effective hereunder unless taken on or prior to the
applicable Expiration Date by Holders of the requisite principal amount of
Outstanding Securities of such series on such record date. Nothing in this
paragraph shall be construed to prevent the Trustee from setting a new record
date for any action for which a record date has previously been set pursuant to
this paragraph (whereupon the record date previously set shall automatically and
with no action by any Person be canceled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Trustee, at the Company's expense, shall cause
notice of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Company in writing and to each Holder of
Securities of the relevant series in the manner set forth in Section 1.6.
With respect to any record date set pursuant to this Section, the
party hereto which sets such record dates may designate any day as the
"Expiration Date" and from time to time may change the Expiration Date to any
earlier or later day, provided that no such change shall be effective unless
notice of the proposed new Expiration Date is given to the other party hereto in
writing, and to each Holder of Securities of the relevant series in the manner
set forth in Section 10.6, on or prior to the existing Expiration Date. If an
Expiration Date is not designated with respect to any record date set pursuant
to this Section, the party hereto which set such record date shall be deemed to
have initially designated the 180th day after such record date as the Expiration
Date with respect thereto, subject to its right to change the Expiration Date as
provided in this paragraph. Notwithstanding the foregoing, no Expiration Date
shall be later than the 180th day after the applicable record date.
(g) Without limiting the foregoing, a Holder entitled hereunder to
take any action hereunder with regard to any particular Security may do so with
regard to all or any part of the principal amount of such Security or by one or
more duly appointed agents each of which may do so pursuant to such appointment
with regard to all or any part of such principal amount.
Section 1.5. Notices, Etc. to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
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(1) the Trustee by any Holder, any holder of Preferred Securities or
the Company shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at its Corporate Trust
office, or
(2) the Company by the Trustee, any Holder or any holder of Preferred
Securities shall be sufficient for every purpose (except as otherwise provided
in Section 5.1) hereunder if in writing and mailed, first class, postage
prepaid, to the Company, addressed to it at the address of its principal office
specified in the first paragraph of this instrument or at any other address
previously furnished in writing to the Trustee by the Company.
Section 1.6. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first class postage prepaid, to each Holder affected
by such event, at the address of such Holder as it appears in the Securities
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
Section 1.7. Conflict with Trust Indenture Act.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by any of Sections 310 to 317, inclusive, of the Trust
Indenture Act through operation of Section 318(c) thereof, such imposed duties
shall control.
Section 1.8. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 1.9. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
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Section 1.10. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 1.11 Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors and
assigns, the Holders of Senior and Subordinated Debt, the Holders of the
Securities and, to the extent expressly provided in Sections 5.2, 5.8, 5.9,
5.11, 5.13, 9.1 and 9.2, the holders of Preferred Securities, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
Section 1.12. Governing Law.
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of California.
Section 1.13. Non-Business Days.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or the Securities) payment of interest or
principal (and premium, if any) need not be made on such date, but may be made
on the next succeeding Business Day (and no interest shall accrue for the period
from and after such Interest Payment Date, Redemption Date or Stated Maturity,
as the case may be, until such next succeeding Business Day except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day (in each case with the same force and
effect as if made on the Interest Payment Date or Redemption Date or at the
Stated Maturity)).
ARTICLE II
SECURITY FORMS
Section 2.1. Forms Generally.
The Securities of each series shall be in substantially the forms set
forth in this Article, or in such other form or forms as shall be established by
or pursuant to a Board Resolution or in one or more indentures supplemental
hereto, in each case with such appropriate insertions, omissions, substitutions
and other variations as are required or permitted by this Indenture and may have
such letters, numbers or
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other marks of identification and such legends or endorsements placed thereon as
may be required to comply with applicable tax laws or the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such securities, as evidenced by their execution of the
Securities. If the form of Securities of any series is established by action
taken pursuant to a Board Resolution, a copy of an appropriate record of such
action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the Company
Order contemplated by Section 3.3 with respect to the authentication and
delivery of such Securities.
The Trustee's certificates of authentication shall be substantially in
the form set forth in this Article.
The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods, if required by any securities
exchange on which the Securities may be listed, on a steel engraved border or
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such securities.
Section 2.2. Form of Face of Security.
GREATER BAY BANCORP
__% JUNIOR SUBORDINATED DEBENTURE DUE
Registered Principal Amount:
No. CUSIP No.:
Greater Bay Bancorp, a corporation organized and existing under the
laws of California (hereinafter called the "Company", which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to __________, or registered assigns, the
principal sum of $_______ Dollars on _____________; provided that the Company
may shorten the Stated Maturity of the principal of this Security to a date not
earlier than _____________. The Company further promises to pay interest on
said principal sum from _______________ or from the most recent interest
payment date (each such date, an "Interest Payment Date") on which interest has
been paid or duly provided for, quarterly (subject to deferral as set forth
herein) in arrears on the last day of_____ and_____ of each year commencing
__________________ at the rate of ____% per annum, until the
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principal hereof shall have become due and payable, plus Additional Interest, if
any, until the principal hereof is paid or duly provided for or made available
for payment and on any overdue principal and (without duplication and to the
extent that payment of such interest is enforceable under applicable law) on any
overdue installment of interest at the rate of ____% per annum, compounded
quarterly. The amount of interest payable for any period shall be computed on
the basis of twelve 30-day months and a 360-day year. The amount of interest
payable for any partial period shall be computed on the basis of the number of
days elapsed in a 360-day year of twelve 30-day months. In the event that any
date on which interest is payable on this Security is not a Business Day, then a
payment of the interest payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day is in the next
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on the date the
payment was originally payable. A "Business Day" shall mean any day other than a
Saturday or Sunday a day on which banking institutions in the State of
California are authorized or required by law or executive order to remain closed
or on a day on which the Corporate Trust Office of the Trustee, or the principal
office of the Property Trustee under the Trust Agreement (hereinafter referred
to) for [NAME OF TRUST] is closed for business. The interest installment so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in the Indenture, be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest installment, which shall
be[insert Record Date] next preceding such Interest Payment Date. Any such
interest installment not so punctually paid or duly provided for shall forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not less than
_____ days prior to such Special Record Date, or be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities of this series may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in said
Indenture.
[If applicable insert--So long as no Event of Default has occurred and
is continuing, the Company shall have the right at any time during the term of
this Security to defer payment of interest on this Security, at any time or from
time to time, for up to 20 consecutive quarterly interest payment periods with
respect to each deferral period (each an "Extension Period"), (during which
Extension Periods the Company shall have the right to make partial payments of
interest on any Interest Payment Date, and at the end of which the Company shall
pay all interest then accrued and unpaid (together with Additional Interest
thereon to the extent permitted by applicable law)); provided, however, that no
Extension Period shall
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extend beyond the Stated Maturity of the principal of this Security; provided,
further, that during any such Extension Period, the Company shall not, and shall
not permit any Subsidiary of the Company to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common and
preferred stock), or (ii) make any payment of principal of or interest or
premium, if any, on or repay, repurchase or redeem any debt security of the
Company (including Securities issued by the Company pursuant to the Indenture
other than the Securities represented by this certificate) that ranks pari passu
with or junior in interest to this Security, or (iii) make any guarantee
payments with respect to any guarantee by the Company of the debt securities of
any Subsidiaries of the Company (if such guarantee ranks pari passu in all
respects with or junior in interest to this Security (other than (a) dividends
or distributions in capital stock of the Company (which includes common and
preferred stock), (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the GBB Guarantee related to the Preferred
Securities issued by [NAME OF TRUST], and (d) purchases of Common Stock related
to the issuance of Common Stock or rights under any of the Company's benefit
plans for its directors, officers or employees or related to the issuance of
common stock (or securities convertible into or exchangeable for common stock)
as consideration in an acquisition transaction. Prior to the termination of any
such Extension Period, the Company may further extend such Extension Period,
provided that such extension does not cause such Extension Period to exceed
_______ consecutive interest payment periods or to extend beyond the Stated
Maturity. Upon the termination of any such Extension Period and upon the payment
of all amounts then due on any Interest Payment Date, and subject to the
foregoing limitation, the Company may elect to begin a new Extension Period. No
interest shall be due and payable during an Extension Period except at the end
thereof. The Company shall give the Trustee, the Property Trustee and the
Administrative Trustees of [NAME OF TRUST] notice of its election to begin any
Extension Period at least ___ Business Days prior to the earlier of (i) the date
on which Distributions on the Preferred Securities would be payable except for
the election to begin such Extension Period, or (ii) the date the Administrative
Trustees are required to give notice to the New York Stock Exchange, the Nasdaq
National Market or other applicable stock exchange or automated quotation system
on which the Preferred Securities are then listed or quoted or to holders of
such Preferred Securities of the record date or (iii) the date such
Distributions are payable, but in any event not less than _____ Business Days
prior to such record date. The Trustee shall give notice of the Company's
election to begin a new Extension Period to the holders of the Preferred
Securities. There is no limitation on the number of times that the Company may
elect to begin an Extension Period.]
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Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Trustee or at the office of
such paying agent or paying agents as the Company may designate from time to
time, maintained for that purpose in the United States, in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that at the option of
the Company payment of interest may be made (i) by check mailed to the address
of the Person entitled thereto as such address shall appear in the Securities
Register or (ii) by transfer to an account maintained by the person entitled
thereto, in immediately available funds, at such place and to such account as
may be designated by the Person entitled thereto as specified in the Securities
Register.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, unsecured and will rank junior and subordinate and subject in
right of payments to the prior payment in full of all Senior and Subordinated
Debt, and this Security is issued subject to the provisions of the Indenture
with respect thereto. Each Holder of this Security, by accepting the same, (a)
agrees to and shall be bound by such provisions, (b) authorizes and directs the
Trustee on his behalf to take such actions as may be necessary or appropriate to
effectuate the subordination so provided and (c) appoints the Trustee his
attorney-in-fact for any and all such purposes. Each Holder hereof, by his
acceptance hereof, waives all notice of the acceptance of the subordination
provisions contained herein and in the Indenture by each holder of Senior and
Subordinated Debt, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
GREATER BAY BANCORP
By:
------------------------------
[President or Vice President]
Attest:
- ------------------------------------
[Secretary or Assistant Secretary]
Section 2.3. Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under a Junior Subordinated Indenture, dated as of ________, 1997 (herein
called the "Indenture"), between the Company and __________ as Trustee (herein
called the "Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Trustee, the Company and the Holders of
the Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the face hereof, limited in aggregate principal amount to $_________.
All terms used in this Security that are defined in the Indenture and
in the Trust Agreement, dated as of _____________, ____, as amended (the "Trust
Agreement"), for [insert name of trust] among Greater Bay Bancorp, as Depositor,
and the Trustees named therein, shall have the meanings assigned to them in the
Indenture or the Trust Agreement, as the case may be.
[If applicable, insert--The Company may at any time, at its option, on
or after ________, and subject to the terms and conditions of Article XI of the
Indenture], [if applicable insert--and subject to the Company having received
prior approval of the Board of Governors of the Federal Reserve System (the
"Federal Reserve") if then required under applicable capital guidelines or
policies of the Federal Reserve] redeem this Security [in whole at any time] [or
in part from time to time], without premium or penalty, at a redemption price
equal to [insert redemption price] to the Redemption Date.]
[If applicable, insert--Upon the occurrence and during the
continuation of a Tax Event, Investment Company Event or Capital Treatment Event
in respect of a
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GBB Trust, the Company may, at its option, at any time within 90udays of the
occurrence of such Tax Event, Investment Company Event or Capital Treatment
Event redeem this Security, [if applicable, insert--in whole but not in part],
subject to the provisions of Section 11.7 and the other provisions of Article XI
of the Indenture, at a redemption price equal to [insert redemption price] to
the Redemption Date.
[If applicable, insert--In the event of redemption of this Security in
part only, a new Security or Securities of this series for the portion hereof
not redeemed will be issued in the name of the Holder hereof upon the
cancellation hereof.
The Indenture contains provisions for satisfaction and discharge of
the entire indebtedness of this Security upon compliance by the Company with
certain conditions set forth in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the Company and the Trustee at any time to enter into a supplemental indenture
or indentures for the purpose of modifying in any manner the rights and
obligations of the Company and of the Holders of the Securities, with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series to be affected by such supplemental
indenture. The Indenture also contains provisions permitting Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
[If the Security is not a Discount Security,--As provided in and
subject to the provisions of the Indenture, if an Event of Default with respect
to the Securities of this series at the time Outstanding occurs and is
continuing, then and in every such case the Trustee or the Holders of not less
than 25% in principal amount of the Outstanding Securities of this series may
declare the principal amount of all the Securities of this series to be due and
payable immediately, by a notice in writing to the Company (and to the Trustee
if given by Holders), provided that, in the case of the Securities of this
series issued to a GBB Trust, if upon an Event of Default, the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Securities
of this series fails to declare the principal of all the Securities of this
series to be immediately due and payable, the holders of at least 25% in
aggregate Liquidation Amount of the Preferred Securities then outstanding shall
have such right by a notice in writing to the Company and the Trustee; and upon
any such
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declaration the principal amount of and the accrued interest (including any
Additional Interest) on all the Securities of this series shall become
immediately due and payable, provided that the payment of principal and interest
(including any Additional Interest) on such Securities shall remain subordinated
to the extent provided in Article XIII of the Indenture.]
[If the Security is a Discount Security,--As provided in and subject
to the provisions of the Indenture, if an Event of Default with respect to the
Securities of this series at the time Outstanding occurs and is continuing, then
and in every such case the Trustee or the Holders of not less than such portion
of the principal amount as may be specified in the terms of this series may
declare an amount of principal of the Securities of this series to be due and
payable immediately, by a notice in writing to the Company (and to the Trustee
if given by Holders), provided that, in the case of the Securities of this
series issued to a GBB Trust, if upon an Event of Default, the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Securities
of this series fails to declare the principal of all the Securities of this
series to be immediately due and payable, the holders of at least 25% in
aggregate Liquidation Amount of the Preferred Securities then outstanding shall
have such right by a notice in writing to the Company and the Trustee. Such
amount shall be equal to [insert formula for determining the amount]. Upon any
such declaration, such amount of the principal of and the accrued interest
(including any Additional Interest) on all the Securities of this series shall
become immediately due and payable, provided that the payment of principal and
interest (including any Additional Interest) on such Securities shall remain
subordinated to the extent provided in Article XIII of the Indenture. Upon
payment (i) of the amount of principal so declared due and payable and (ii) of
interest on any overdue principal and overdue interest (in each case to the
extent that the payment of such interest shall be legally enforceable), all of
the Company's obligations in respect of the payment of the principal of and
interest, if any, on this Security shall terminate.]
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the
Securities Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company maintained under Section 10.2 of
the Indenture duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Securities Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities of this series, of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees. No service charge
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shall be made for any such registration of transfer or exchange, but the Company
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Securities of this series are issuable only in registered form
without coupons in denominations of minimum denominations of $[25] and any
integral multiples of $[25] in excess thereof. As provided in the Indenture and
subject to certain limitations therein set forth, Securities of this series are
exchangeable for a like aggregate principal amount of Securities of such series
of a different authorized denomination, as requested by the Holder surrendering
the same.
The Company and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agree that for United States Federal, state and local
tax purposes it is intended that this Security constitute indebtedness.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES THEREOF.
Section 2.4. Additional Provisions Required in Global Security.
Any Global Security issued hereunder shall, in addition to the
provisions contained in Sections 2.2 and 2.3, bear a legend in substantially the
following form:
"THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY
OR A NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY
OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY."
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Section 2.5. Form of Trustee's Certificate of Authentication.
This is one of the Securities referred to in the within mentioned
Indenture.
Dated:
[WILMINGTON TRUST COMPANY]
as Trustee
By:
------------------------------
Authorized Officer
ARTICLE III
THE SECURITIES
Section 3.1. Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution, and set forth in an Officers'
Certificate (such Officers' Certificate shall have the effect of a supplemental
indenture for all purposes hereunder), or established in one or more indentures
supplemental hereto, prior to the issuance of Securities of a series:
(a) the title of the securities of such series, which shall
distinguish the Securities of the series from all other Securities;
(b) the limit, if any, upon the aggregate principal amount of the
Securities of such series which may be authenticated and delivered under this
Indenture (except for Securities authenticated and delivered upon registration
of transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.6 and except for any
Securities which, pursuant to Section 3.3, are deemed never to have been
authenticated and delivered hereunder); provided, however, that the authorized
aggregate principal amount of such series may be increased above such amount by
a Board Resolution to such effect;
(c) the Stated Maturity or Maturities on which the principal of the
Securities of such series is payable or the method of determination thereof;
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(d) the rate or rates, if any, at which the Securities of such series
shall bear interest, if any, the rate or rates and extent to which Additional
Interest, if any, shall be payable in respect of any Securities of such series,
the Interest Payment Dates on which such interest shall be payable, the right,
pursuant to Section 3.11 or as otherwise set forth therein, of the Company to
defer or extend an Interest Payment Date, and the Regular Record Date for the
interest payable on any Interest Payment Date or the method by which any of the
foregoing shall be determined;
(e) the place or places where the principal of (and premium, if any)
and interest on the Securities of such series shall be payable, the place or
places where the Securities of such series may be presented for registration of
transfer or exchange, and the place or places where notices and demands to or
upon the Company in respect of the Securities of such series may be made;
(f) the period or periods within or the date or dates on which, if
any, the price or prices at which and the terms and conditions upon which the
Securities of such series may be redeemed, in whole or in part, at the option of
the Company;
(g) the obligation or the right, if any, of the Company to prepay,
repay or purchase the Securities of such series pursuant to any sinking fund,
amortization or analogous provisions, or at the option of a Holder thereof, and
the period or periods within which, the price or prices at which, the currency
or currencies (including currency unit or units) in which and the other terms
and conditions upon which Securities of the series shall be redeemed, repaid or
purchased, in whole or in part, pursuant to such obligation;
(h) the denominations in which any Securities of such series shall be
issuable, if other than denominations of $25 and any integral multiples of $25
in excess thereof;
(i) if other than Dollars, the currency or currencies (including
currency unit or units) in which the principal of (and premium, if any) and
interest, if any, on the Securities of the series shall be payable, or in which
the Securities of the series shall be denominated;
(j) the additions, modifications or deletions, if any, in the Events
of Default or covenants of the Company set forth herein with respect to the
Securities of such series;
(k) if other than the principal amount thereof, the portion of the
principal amount of Securities of such series that shall be payable upon
declaration of acceleration of the Maturity thereof;
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(l) the additions or changes, if any, to this Indenture with respect
to the Securities of such series as shall be necessary to permit or facilitate
the issuance of the Securities of such series in bearer form, registrable or not
registrable as to principal, and with or without interest coupons;
(m) any index or indices used to determine the amount of payments of
principal of and premium, if any, on the Securities of such series or the manner
in which such amounts will be determined;
(n) whether the Securities of the series, or any portion thereof,
shall initially be issuable in the form of a temporary Global Security
representing all or such portion of the Securities of such series and provisions
for the exchange of such temporary Global Security for definitive Securities of
such series;
(o) if applicable, that any Securities of the series shall be issuable
in whole or in part in the form of one or more Global Securities and, in such
case, the respective Depositaries for such Global Securities, the form of any
legend or legends which shall be borne by any such Global Security in addition
to or in lieu of that set forth in Section 2.4 and any circumstances in addition
to or in lieu of those set forth in Section 3.5 in which any such Global
Security may be exchanged in whole or in part for Securities registered, and any
transfer of such Global Security in whole or in part may be registered, in the
name or names of Persons other than the Depositary for such Global Security or a
nominee thereof;
(p) the appointment of any Paying Agent or Agents for the Securities
of such series;
(q) the terms of any right to convert or exchange Securities of such
series into any other securities or property of the Company, and the additions
or changes, if any, to this Indenture with respect to the Securities of such
series to permit or facilitate such conversion or exchange;
(r) the form or forms of the Trust Agreement, Amended and Restated
Trust Agreement and Guarantee Agreement, if different from the forms attached
hereto as Annexes A, B and C, respectively;
(s) the relative degree, if any, to which the Securities of the series
shall be senior to or be subordinated to other series of Securities in right of
payment, whether such other series of Securities are Outstanding or not; and
(t) any other terms of the Securities of such series (which terms
shall not be inconsistent with the provisions of this Indenture).
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All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided herein or in
or pursuant to such Board Resolution and set forth in such Officers' Certificate
or in any such indenture supplemental hereto.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
The Securities shall be subordinated in right of payment to Senior and
Subordinated Debt as provided in Article XIII.
Section 3.2. Denominations.
The Securities of each series shall be in registered form without
coupons and shall be issuable in minimum denominations of $25 and integral
multiples of $25 in excess thereof, unless otherwise specified as contemplated
by Section 3.1.
Section 3.3. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
President or one of its Vice Presidents under its corporate seal reproduced or
impressed thereon and attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Securities may be
manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities. At any time and from time to
time after the execution and delivery of this Indenture, the Company may deliver
Securities of any series executed by the Company to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Securities, and the Trustee in accordance with the Company
Order shall authenticate and deliver such Securities. If the form or terms of
the Securities of the series have been established by or pursuant to one or more
Board Resolutions as permitted by Sections 2.1 and 3.1, in authenticating such
Securities, and accepting the additional responsibilities under this Indenture
in relation to such Securities, the Trustee shall be entitled to receive, and
(subject to Section 6.1) shall be fully protected in relying upon, an Opinion of
Counsel stating,
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(1) if the form of such Securities has been established by or pursuant
to Board Resolution as permitted by Section 2.1, that such form has been
established in conformity with the provisions of this Indenture;
(2) if the terms of such Securities have been established by or
pursuant to Board Resolution as permitted by Section 3.1, that such terms have
been established in conformity with the provisions of this Indenture; and
(3) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any conditions
specified in such Opinion of Counsel, will constitute valid and legally binding
obligations of the Company enforceable in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles.
If such form or terms have been so established, the Trustee shall not
be required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 3.1 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 3.1 or the Company Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the
authentication of each Security of such series if such documents are delivered
at or prior to the authentication upon original issuance of the first Security
of such series to be issued.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose, unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
officers, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder. Notwithstanding the foregoing, if any Security shall have
been authenticated and delivered hereunder but never issued and sold by the
Company, and the Company shall deliver such Security to the Trustee for
cancellation as provided in Section 3.9, for all purposes of this Indenture such
Security shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.
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Section 3.4. Temporary Securities.
Pending the preparation of definitive Securities of any series, the
Company may execute, and upon Company Order the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any denomination, substantially of the
tenor of the definitive Securities of such series in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Securities may determine, as evidenced
by their execution of such Securities.
If temporary Securities of any series are issued, the Company will
cause definitive Securities of such series to be prepared without unreasonable
delay. After the preparation of definitive Securities, the temporary Securities
shall be exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for that purpose
without charge to the Holder. Upon surrender for cancellation of any one or
more temporary Securities, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor one or more definitive Securities
of the same series of authorized denominations having the same Original Issue
Date and Stated Maturity and having the same terms as such temporary Securities.
Until so exchanged, the temporary Securities of any series shall in all respects
be entitled to the same benefits under this Indenture as definitive Securities
of such series.
Section 3.5. Registration, Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of Securities and
of transfers of Securities. Such register is herein sometimes referred to as
the "Securities Register." The Trustee is hereby appointed "Securities
Registrar" for the purpose of registering Securities and transfers of Securities
as herein provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated for that purpose the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of the same
series of any authorized denominations, of a like aggregate principal amount, of
the same Original Issue Date and Stated Maturity and having the same terms.
At the option of the Holder, Securities may be exchanged for other
Securities of the same series of any authorized denominations, of a like
aggregate principal amount, of the same Original Issue Date and Stated Maturity
and having the same terms, upon surrender of the Securities to be exchanged at
such office or agency.
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Whenever any securities are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver, the Securities which
the Holder making the exchange is entitled to receive.
All Securities issued upon any transfer or exchange of Securities
shall be the valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Securities
surrendered upon such transfer or exchange.
Every Security presented or surrendered for transfer or exchange shall
(if so required by the Company or the Securities Registrar) be duly endorsed, or
be accompanied by a written instrument of transfer in form satisfactory to the
Company and the Securities Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing.
No service charge shall be made to a Holder for any transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Securities.
No service charge shall be made to a Holder for any transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Securities.
The provisions of Clauses (1), (2), (3) and (4) below shall apply only
to Global Securities:
(1) Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated for such Global Security or
a nominee thereof and delivered to such Depositary or a nominee thereof or
custodian therefor, and each such Global Security shall constitute a single
Security for all purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered, and no
transfer of a Global Security in whole or in part may be registered, in the
name of any Person other than the Depositary for such Global Security or a
nominee thereof unless (A) such Depositary (i) has notified the Company that it
is unwilling or unable to continue as Depositary for such Global Security or
(ii) has ceased to be a clearing agency registered under the Exchange Act at a
time when the Depositary is required to be so registered to act as depositary,
in each case unless the Company has approved a successor Depositary within 90
days, (B) there shall have occurred and be continuing an Event of Default with
respect to such
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Global Security, (C) the Company in its sole discretion determines that such
Global Security will be so exchangeable or transferable or (D) there shall
exist such circumstances, if any, in addition to or in lieu of the foregoing as
have been specified for this purpose as contemplated by Section 3.1.
(3) Subject to Clause (2) above, any exchange of a Global Security for
other Securities may be made in whole or in part, and all Securities issued in
exchange for a Global Security or any portion thereof shall be registered in
such names as the Depositary for such Global Security shall direct.
(4) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any portion
thereof, whether pursuant to this Section, Section 3.4, 3.6, 9.6 or 11.6 or
otherwise, shall be authenticated and delivered in the form of, and shall be, a
Global Security, unless such Security is registered in the name of a Person
other than the Depositary for such Global Security or a nominee thereof.
Neither the Company nor the Trustee shall be required, pursuant to the
provisions of this Section, (a) to issue, transfer or exchange any Security of
any series during a period beginning at the opening of business 15 days before
the day of selection for redemption of Securities pursuant to Article XI and
ending at the close of business on the day of mailing of notice of redemption or
(b) to transfer or exchange any Security so selected for redemption in whole or
in part, except, in the case of any Security to be redeemed in part, any portion
thereof not to be redeemed.
Section 3.6. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee together with
such security or indemnity as may be required by the Company or the Trustee to
save each of them harmless, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Security of the same issue
and series of like tenor and principal amount, having the same Original Issue
Date and Stated Maturity, and bearing a number not contemporaneously
outstanding.
If there shall be delivered to the Company and to the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security, and (ii) such security or indemnity as may be required by them to save
each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute and upon its request the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of the same issue and series of like tenor and principal amount, having the same
Original Issue Date and Stated Maturity as such destroyed, lost or stolen
Security, and bearing a number not contemporaneously outstanding.
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In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section 3.6 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 3.7. Payment of Interest; Interest Rights Preserved.
Interest on any Security of any series which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date, shall be
paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest in respect of Securities of such series, except that, unless
otherwise provided in the Securities of such series, interest payable on the
Stated Maturity of the principal of a Security shall be paid to the Person to
whom principal is paid. The initial payment of interest on any Security of any
series which is issued between a Regular Record Date and the related Interest
Payment Date shall be payable as provided in such Security or in the Board
Resolution pursuant to Section 3.1 with respect to the related series of
Securities.
Any interest on any Security which is payable, but is not timely paid
or duly provided for, on any Interest Payment Date for Securities of such series
(herein called "Defaulted Interest"), shall forthwith cease to be payable to the
registered Holder on the relevant Regular Record Date by virtue of having been
such Holder, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities of such series in respect of which
interest is in default (or their respective Predecessor Securities) are
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in
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writing of the amount of Defaulted Interest proposed to be paid on each Security
and the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this Clause
provided. Thereupon, the Trustee shall fix a Special Record Date for the payment
of such Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less than 10 days
after the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date and, in
the name and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to be
mailed, first class, postage prepaid, to each Holder of a Security of such
series at the address of such Holder as it appears in the Securities Register
not less than 10 days prior to such Special Record Date. The Trustee may, in its
discretion, in the name and at the expense of the Company, cause a similar
notice to be published at least once in a newspaper, customarily published in
the English language on each Business Day and of general circulation in the
[BOROUGH OF ______, THE CITY OF ______], but such publication shall not be a
condition precedent to the establishment of such Special Record Date. Notice of
the proposed payment of such Defaulted Interest and the Special Record Date
therefor having been mailed as aforesaid, such Defaulted Interest shall be paid
to the Persons in whose names the Securities of such series (or their respective
Predecessor Securities) are registered on such Special Record Date and shall no
longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities of the series in respect of which interest is
in default may be listed and, upon such notice as may be required by such
exchange (or by the Trustee if the Securities are not listed), if, after notice
given by the Company to the Trustee of the proposed payment pursuant to this
Clause, such payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 3.7, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Security shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Security.
Section 3.8. Persons Deemed Owners.
The Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name any Security is registered as the owner of
such
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Security for the purpose of receiving payment of principal of and (subject to
Section 3.7) any interest on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
Section 3.9. Cancellation.
All Securities surrendered for payment, redemption, transfer or
exchange shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee, and any such Securities and Securities surrendered
directly to the Trustee for any such purpose shall be promptly canceled by it.
The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly canceled by the Trustee. No Securities shall be authenticated
in lieu of or in exchange for any Securities canceled as provided in this
Section, except as expressly permitted by this Indenture. All canceled
Securities shall be destroyed by the Trustee and the Trustee shall deliver to
the Company a certificate of such destruction.
Section 3.10. Computation of Interest.
Except as otherwise specified as contemplated by Section 3.1 for
Securities of any series, interest on the Securities of each series for any
period shall be computed on the basis of a 360-day year of twelve 30-day months
and interest on the Securities of each series for any partial period shall be
computed on the basis of the number of days elapsed in a 360-day year of twelve
30-day months.
Section 3.11. Deferrals of Interest Payment Dates.
If specified as contemplated by Section 2.1 or Section 3.1 with
respect to the Securities of a particular series, so long as no Event of Default
has occurred and is continuing, the Company shall have the right, at any time
during the term of such series, from time to time to defer the payment of
interest on such Securities for such period or periods as may be specified as
contemplated by Section 3.1 (each, an "Extension Period") during which Extension
Periods the Company shall have the right to make partial payments of interest on
any Interest Payment Date. No Extension Period shall end on a date other than an
Interest Payment Date. At the end of any such Extension Period the Company shall
pay all interest then accrued and unpaid on the Securities (together with
Additional Interest thereon, if any, at the rate specified for the Securities of
such series to the extent permitted by applicable law); provided, however, that
no Extension Period shall extend beyond the Stated Maturity of the principal of
the Securities of such series; provided, further, that during any such Extension
Period, the Company shall not, and shall not permit any Subsidiary to,
(i) declare or pay any dividends or distributions on, or
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redeem, purchase, acquire or make a liquidation payment with respect to, any of
the Company's capital stock (which includes common and preferred stock), or (ii)
make any payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company (including Securities
other than the Securities of such series) that ranks pari passu in all respects
with or junior in interest to the Securities of such series or make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any Subsidiary of the Company if such guarantee rank pari passu in
all respects with or junior in interest to the securities of such series (other
than (a) dividends or distributions in capital stock of the Company (which
includes common and preferred stock), (b) any declaration of a dividend in
connection with the implementation of a stockholders' rights plan, or the
redemption or repurchase of any such rights pursuant thereto, (c) payments under
the GBB Guarantee related to the Preferred Securities issued by the GBB Trust
holding Securities of such series, and (d) purchases of Common Stock related to
the issuance of Common Stock or rights under any of the Company's benefit plans
for its directors, officers or employees). Prior to the termination of any such
Extension Period, the Company may further extend such Extension Period, provided
that such extension does not cause such Extension Period to extend beyond the
Stated Maturity of the principal of such Securities. Upon termination of any
Extension Period and upon the payment of all accrued and unpaid interest and any
Additional Interest then due on any Interest Payment Date, the Company may elect
to begin a new Extension Period, subject to the above requirements. No interest
shall be due and payable during an Extension Period, except at the end thereof.
The Company shall give the Trustee, the Property Trustee and the Administrative
Trustees of the GBB Trust holding Securities of such series notice of its
election of any Extension Period (or an extension thereof) at least one Business
Day prior to the earlier of (i) the next succeeding date on which Distributions
on the Preferred Securities of such GBB Trust would be payable except for the
election to begin or extend such Extension Period or (ii) the date the
Administrative Trustees are required to give notice to the New York Stock
Exchange, the Nasdaq National Market or other applicable stock exchange or
automated quotation system on which the Preferred Securities are then listed or
quoted or to holders of such Preferred Securities of the record date or (iii)
the date such Distributions are payable, but in any event not less than one
Business Day prior to such record date. The Trustee shall give notice of the
Company's election to begin a new Extension Period to the holders of the Junior
Subordinated Debentures. There is no limitation on the number of times that the
Company may elect to begin an Extension Period.
The Trustee shall promptly give notice of the Company's election to
begin any such Extension Period to the Holders of the Outstanding Securities of
such series.
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Section 3.12. Right of Set-Off.
With respect to the Securities of a series issued to a GBB Trust,
notwithstanding anything to the contrary in the Indenture, the Company shall
have the right to set-off any payment it is otherwise required to make
thereunder in respect of any such Security to the extent the Company has
theretofore made, or is concurrently on the date of such payment making, a
payment under the Guarantee Agreement relating to such Security or under Section
5.8 of the Indenture.
Section 3.13. Agreed Tax Treatment.
Each Security issued hereunder shall provide that the Company and, by
its acceptance of a Security or a beneficial interest therein, the Holder of,
and any Person that acquires a beneficial interest in, such Security agree that
for United States Federal, state and local tax purposes it is intended that such
Security constitute indebtedness.
Section 3.14. Shortening of Stated Maturity.
If specified as contemplated by Section 2.1 or Section 3.1 with
respect to the Securities of a particular series, the Company shall have the
right to shorten the Stated Maturity of the principal of the Securities of such
series at any time to any date not earlier than the first date on which the
Company has the right to redeem the Securities of such series.
Section 3.15. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.
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ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.1. Satisfaction and Discharge of Indenture.
This Indenture shall, upon Company Request, cease to be of further
effect (except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for and as otherwise provided
in this Section 4.1) and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other than
(i) Securities which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 3.6 and (ii) Securities for whose
payment money has theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or discharged from
such trust, as provided in Section 10.3) have been delivered to the Trustee for
cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year of the date of deposit, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company,
and the Company, in the case of Clause (B) (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in trust for
such purpose an amount in the currency or currencies in which the Securities of
such series are payable sufficient to pay and discharge the entire indebtedness
on such Securities not theretofore delivered to the Trustee for cancellation,
for principal (and premium, if any) and interest (including any Additional
Interest) to the date of such deposit (in the case of Securities which have
become due and payable) or to the Stated Maturity or Redemption Date, as the
case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
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(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.7, the obligations of
the Trustee to any Authenticating Agent under Section 6.14 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Section 4.2 and the last
paragraph of Section 10.3 shall survive.
Section 4.2. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in trust
and applied by the Trustee, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for the payment of which such money or obligations have been
deposited with or received by the Trustee.
ARTICLE V
REMEDIES
Section 5.1 Events of Default.
"Event of Default", wherever used herein with respect to the
Securities of any series, means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest upon any Security of that
series, including any Additional Interest in respect thereof, when it becomes
due and payable, and continuance of such default for a period of 30 days
(subject to the deferral of any due date in the case of an Extension Period); or
(2) default in the payment of the principal of (or premium, if any,
on) any Security of that series at its Maturity; or
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(3) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Company in this Indenture (other than a covenant
or warranty a default in the performance of which or the breach of which is
elsewhere in this Section 5.1 specifically dealt with), and continuance of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities of that series a written notice specifying such default
or breach and requiring it to be remedied; or
(4) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law, or appointing
a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property or ordering
the winding up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 60 consecutive days; or
(5) the institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law, or the
consent by it to the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit for creditors, or the admission by
it in writing of its inability to pay its debts generally as they become due and
its willingness to be adjudicated a bankrupt, or the taking of corporate action
by the Company in furtherance of any such action; or
(6) any other Event of Default provided with respect to Securities of
that series.
Section 5.2. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 5.1(4) or 5.1(5)) with respect to Securities of any series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series may declare the principal amount (or, if the
Securities of that series are Discount Securities, such portion of the principal
amount as may be specified in the terms of that series) of all the Securities of
that series to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by
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Holders), provided that, in the case of the Securities of a series issued to a
GBB Trust, if, upon an Event of Default, the Trustee or the Holders of not less
than 25% in principal amount of the Outstanding Securities of that series fail
to declare the principal of all the Securities of that series to be immediately
due and payable, the holders of at least 25% in aggregate liquidation amount of
the corresponding series of Preferred Securities then outstanding shall have
such right by a notice in writing to the Company and the Trustee; and upon any
such declaration such principal amount (or specified portion thereof) of and the
accrued interest (including any Additional Interest) on all the Securities of
such series shall become immediately due and payable. Payment of principal and
interest (including any Additional Interest) on such Securities shall remain
subordinated to the extent provided in Article XIII notwithstanding that such
amount shall become immediately due and payable as herein provided. If an Event
of Default specified in Section 5.1(4) or 5.1(5) with respect to Securities of
any series at the time Outstanding occurs, the principal amount of all the
Securities of that series (or, if the Securities of that series are Discount
Securities, such portion of the principal amount of such Securities as may be
specified by the terms of that series) shall automatically, and without any
declaration or other action on the part of the Trustee or any Holder, become
immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay:
(A) all overdue installments of interest (including any Additional
Interest) on all Securities of that series,
(B) the principal of (and premium, if any, on) any Securities of that
series which have become due otherwise than by such declaration of acceleration
and interest thereon at the rate borne by the Securities, and
(C) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel; and
(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series which
has become
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due solely by such acceleration, have been cured or waived as provided in
Section 5.13.
In the case of Securities of a series issued to a GBB Trust, the
holders of a majority in aggregate Liquidation Amount (as defined in the Trust
Agreement under which such GBB Trust is formed) of the related series of
Preferred Securities issued by such GBB Trust shall also have the right to
rescind and annul such declaration and its consequences by written notice to the
Company and the Trustee subject to the satisfaction of the conditions set forth
in Clauses (1) and (2) above of this Section 5.2.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Section 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if:
(1) default is made in the payment of any installment of interest
(including any Additional Interest) on any Security when such interest becomes
due and payable and such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of (and premium,
if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal, including any sinking fund payment or
analogous obligations (and premium, if any) and interest (including any
Additional Interest); and, in addition thereto, all amounts owing the Trustee
under Section 6.7.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this
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Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.
Section 5.4. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors,
(a) the Trustee (irrespective of whether the principal of the
Securities of any series shall then be due and payable as therein expressed or
by declaration or otherwise and irrespective of whether the Trustee shall have
made any demand on the Company for the payment of overdue principal (and
premium, if any) or interest (including any Additional Interest)) shall be
entitled and empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest (including any Additional Interest) owing and
unpaid in respect to the Securities and to file such other papers or documents
as may be necessary or advisable and to take any and all actions as are
authorized under the Trust Indenture Act in order to have the claims of the
Holders and any predecessor to the Trustee under Section 6.7 allowed in any such
judicial proceedings; and
(ii) in particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same in accordance with Section 5.6; and
(b) any custodian, receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee for
distribution in accordance with Section 5.6, and in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it and any predecessor Trustee under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; provided, however,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors' or
other similar committee.
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Section 5.5. Trustee May Enforce Claim Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of all the amounts owing the Trustee and any
predecessor Trustee under Section 6.7, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
Section 5.6. Application of Money Collected.
Any money or property collected or to be applied by the Trustee with
respect to a series of Securities pursuant to this Article shall be applied in
the following order, at the date or dates fixed by the Trustee and, in case of
the distribution of such money or property on account of principal (or premium,
if any) or interest (including any Additional Interest), upon presentation of
the Securities and the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any
predecessor Trustee under Section 6.7;
SECOND: Subject to Article XIII, to the payment of the amounts then
due and unpaid upon such series of Securities for principal (and premium, if
any) and interest (including any Additional Interest), in respect of which or
for the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and payable on
such series of Securities for principal (and premium, if any) and interest
(including any Additional Interest), respectively; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto.
Section 5.7. Limitation on Suits.
No Holder of any Securities of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture
or for the appointment of a receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) or for any other remedy hereunder,
unless:
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that series;
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(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request:
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing itself of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Securities, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all such Holders.
Section 5.8. Unconditional Right of Holders to Receive Principal, Premium and
Interest; Direct Action by Holders of Preferred Securities.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right which is absolute and unconditional to receive
payment of the principal of (and premium, if any) and (subject to Section 3.7)
interest (including any Additional Interest) on such Security on the respective
Stated Maturities expressed in such Security (or, in the case of redemption, on
the Redemption Date) and to institute suit for the enforcement of any such
payment, and such right shall not be impaired without the consent of such
Holder. In the case of Securities of a series issued to a GBB Trust, any holder
of the corresponding series of Preferred Securities issued by such GBB Trust
shall have the right, upon the occurrence of an Event of Default described in
Section 5.1(1) or 5.1(2), to institute a suit directly against the Company for
enforcement of payment to such holder of principal of (premium, if any) and
(subject to Section 3.7) interest (including any Additional Interest) on the
Securities having a principal amount equal to the aggregate Liquidation Amount
(as defined in the Trust Agreement under which such GBB Trust is formed) of such
Preferred Securities of the corresponding series held by such holder.
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Section 5.9. Restoration of Rights and Remedies.
If the Trustee, any Holder or any holder of Preferred Securities has
instituted any proceeding to enforce any right or remedy under this Indenture
and such proceeding has been discontinued or abandoned for any reason, or has
been determined adversely to the Trustee, such Holder or such holder of
Preferred Securities, then and in every such case the Company, the Trustee, the
Holders and such holder of Preferred Securities shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee, the Holders and the holders of Preferred Securities shall continue as
though no such proceeding had been instituted.
Section 5.10. Rights and Remedies Cumulative.
Except as otherwise provided in the last paragraph of Section 3.6, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee, any Holder of any Security or any
holder of any Preferred Security to exercise any right or remedy accruing upon
any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee
or to the Holders and the right and remedy given to the holders of Preferred
Securities by Section 5.8 may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee, the Holders or the holders of Preferred
Securities, as the case may be.
Section 5.12. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of such series, provided that:
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(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
(3) subject to the provisions of Section 6.1, the Trustee shall have
the right to decline to follow such direction if a Responsible Officer or
Officers of the Trustee shall, in good faith, determine that the proceeding so
directed would be unjustly prejudicial to the Holders not joining in any such
direction or would involve the Trustee in personal liability.
Section 5.13. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series and, in the case of any Securities of a
series issued to a GBB Trust, the holders of Preferred Securities issued by such
GBB Trust may waive any past default hereunder and its consequences with respect
to such series except a default:
(1) in the payment of the principal of (or premium, if any) or
interest (including any Additional Interest) on any Security of such series, or
(2) in respect of a covenant or provision hereof which under
ArticleuIX cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected.
Any such waiver shall be deemed to be on behalf of the Holders of all
the Securities of such series or, in the case of a waiver by holders of
Preferred Securities issued by such GBB Trust, by all holders of Preferred
Securities issued by such GBB Trust.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 5.14. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs
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of such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to any
suit instituted by the Trustee, to any suit instituted by any Holder, or group
of Holders, holding in the aggregate more than 10% in principal amount of the
Outstanding Securities of any series, or to any suit instituted by any Holder
for the enforcement of the payment of the principal of (or premium, if any) or
interest (including any Additional Interest) on any Security on or after the
respective Stated Maturities expressed in such Security.
Section 5.15. Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE VI
THE TRUSTEE
Section 6.1. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default;
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture; but in the case of
any such certificates or opinions which by any provisions hereof are
specifically required to be furnished to the Trustee, the Trustee shall be under
a duty to examine the same to determine whether or not they conform to the
requirements of this Indenture.
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(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction of
Holders pursuant to Section 5.12 relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee, under this Indenture with respect
to the Securities of such series.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if there shall be reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 6.1.
Section 6.2. Notice of Defaults.
Within 90 days after actual knowledge by a Responsible Officer of the
Trustee of the occurrence of any default hereunder with respect to the
Securities of any series, the Trustee shall transmit by mail to all Holders of
Securities of such series, as their names and addresses appear in the Securities
Register, notice of such default, unless such default shall have been cured or
waived; provided, however, that, except in the case of a default in the payment
of the principal of (or premium, if any) or interest (including any Additional
Interest) on any Security of such series, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or
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Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders of Securities of
such series; and provided, further, that, in the case of any default of the
character specified in Section 5.1(3), no such notice to Holders of Securities
of such series shall be given until at least 30 days after the occurrence
thereof. For the purpose of this Section, the term "default" means any event
which is, or after notice or lapse of time or both would become, an Event of
Default with respect to Securities of such series.
Section 6.3. Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
Security or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, indenture,
Security or other paper or document, but the Trustee in its discretion may make
such inquiry or investigation into such facts or matters as it may see fit, and,
if the Trustee shall
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determine to make such inquiry or investigation, it shall be entitled to examine
the books, records and premises of the Company, personally or by agent or
attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
Section 6.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities. Neither
the Trustee nor any Authenticating Agent shall be accountable for the use or
application by the Company of the Securities or the proceeds thereof.
Section 6.5. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any
Securities Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
Sections 6.8 and 6.13, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Authenticating Agent, Paying Agent,
Securities Registrar or such other agent.
Section 6.6. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
Section 6.7. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time compensation for all
services rendered by it hereunder in such amounts as the Company and the Trustee
shall agree from time to time (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
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(2) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to its
negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense (including the reasonable compensation and the
expenses and disbursements of its agents and counsel) incurred without
negligence or bad faith, arising out of or in connection with the acceptance or
administration of this trust or the performance of its duties hereunder,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder. This indemnification shall survive the termination of this
Agreement.
To secure the Company's payment obligations in this Section 6.7, the
Company and the Holders agree that the Trustee shall have a lien prior to the
Securities on all money or property held or collected by the Trustee. Such lien
shall survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.1(4) or (5) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under the Bankruptcy Reform Act of 1978 or any successor statute.
Section 6.8. Disqualification; Conflicting Interests.
The Trustee for the Securities of any series issued hereunder shall be
subject to the provisions of Section 310(b) of the Trust Indenture Act. Nothing
herein shall prevent the Trustee from filing with the Commission the application
referred to in the second to last paragraph of said Section 301(b).
Section 6.9. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
(a) a corporation organized and doing business under the laws of the
United States of America or of any State or Territory or the District of
Columbia, authorized under such laws to exercise corporate trust powers and
subject to supervision or examination by Federal, State, Territorial or District
of Columbia authority, or
(b) a corporation or other Person organized and doing business under
the laws of a foreign government that is permitted to act as Trustee pursuant to
a
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rule, regulation or order of the Commission, authorized under such laws to
exercise corporate trust powers, and subject to supervision or examination by
authority of such foreign government or a political subdivision thereof
substantially equivalent to supervision or examination applicable to United
States institutional trustees,
in either case having a combined capital and surplus of at least $50,000,000,
subject to supervision or examination by Federal or State authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then,
for the purposes of this Section 6.9, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section
6.9, it shall resign immediately in the manner and with the effect hereinafter
specified in this Article VI. Neither the Company nor any Person directly or
indirectly controlling, controlled by or under common control with the Company
shall serve as Trustee for the Securities of any series issued hereunder.
Section 6.10. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article VI shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time with respect to the Securities
of one or more series by giving written notice thereof to the Company. If an
instrument of acceptance by a successor Trustee shall not have been delivered to
the Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series, delivered to the Trustee and to
the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after written
request therefor by the Company or by any Holder who has been a bona fide Holder
of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.9 and shall
fail to resign after written request therefor by the Company or by any such
Holder, or
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(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property shall be
appointed or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (i) the Company, acting pursuant to the authority of a
Board Resolution, may remove the Trustee with respect to all Securities, or (ii)
subject to Section 5.14, any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the removal
of the Trustee with respect to all Securities and the appointment of a successor
Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause with
respect to the Securities of one or more series, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee with respect to the
Securities of that or those series. If, within one year after such resignation,
removal or incapability, or the occurrence of such vacancy, a successor Trustee
with respect to the Securities of any series shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities of such
series delivered to the Company and the retiring Trustee, the successor Trustee
so appointed shall, forthwith upon its acceptance of such appointment, become
the successor Trustee with respect to the Securities of such series and
supersede the successor Trustee appointed by the Company. If no successor
Trustee with respect to the Securities of any series shall have been so
appointed by the Company or the Holders and accepted appointment in the manner
hereinafter provided, any Holder who has been a bona fide Holder of a Security
for at least six months may, subject to Section 5.14, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities of such
series.
(f) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Securities of any series and each appointment
of a successor Trustee with respect to the Securities of any series by mailing
written notice of such event by first-class mail, postage prepaid, to the
Holders of Securities of such series as their names and addresses appear in the
Securities Register. Each notice shall include the name of the successor
Trustee with respect to the Securities of such series and the address of its
Corporate Trust Office.
Section 6.11. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the
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retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on the request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts, and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates; but, on request of the Company or any successor Trustee, such
retiring Trustee shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder with
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all rights, powers and trusts referred to
in paragraph (a) or (b) of this Section 6.11, as the case may be.
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(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article VI.
Section 6.12. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article VI, without the execution or filing of any paper or any further act on
the part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated, and in case any
Securities shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor Trustee or in
the name of such successor Trustee, and in all cases the certificate of
authentication shall have the full force which it is provided anywhere in the
Securities or in this Indenture that the certificate of the Trustee shall have.
Section 6.13. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
Section 6.14. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect
to one or more series of Securities which shall be authorized to act on behalf
of the Trustee to authenticate Securities of such series issued upon original
issue and upon exchange, registration of transfer or partial redemption thereof
or pursuant to Section 3.6, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, or of any State or Territory or
the District of Columbia, authorized under such laws to act
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as Authenticating Agent, having a combined capital and surplus of not less than
$50,000,000 and subject to supervision or examination by Federal or State
authority. If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section 6.14 the combined
capital and surplus of such Authenticating Agent shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time an Authenticating Agent shall cease to be eligible
in accordance with the provisions of this Section 6.14, such Authenticating
Agent shall resign immediately in the manner and with the effect specified in
this Section 6.14.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of an Authenticating Agent shall be the successor
Authenticating Agent hereunder, provided such corporation shall be otherwise
eligible under this Section, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.14, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall give
notice of such appointment in the manner provided in Section 1.6 to all Holders
of Securities of the series with respect to which such Authenticating Agent will
serve. Any successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provision of this Section 6.14.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section 6.14, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 6.7.
If an appointment with respect to one or more series is made pursuant
to this Section 6.14, the Securities of such series may have endorsed thereon,
in addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
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This is one of the Securities referred to in the within mentioned
Indenture.
Dated:
[WILMINGTON RUST COMPANY]
As Trustee
By:
---------------------------------
As Authenticating Agent
By:
---------------------------------
Authorized Officer
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.1. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not more than 15 days after _____ and _____ in each
year, a list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders as of _____ and _____ of such year, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished,
excluding from any such list names and addresses received by the Trustee in its
capacity as Securities Registrar.
Section 7.2. Preservation of Information, Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Securities
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
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(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided in the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of the
disclosure of information as to the names and addresses of the Holders made
pursuant to the Trust Indenture Act.
Section 7.3. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act, at the times and in the manner provided pursuant thereto.
(b) Reports so required to be transmitted at stated intervals of not
more than 12 months shall be transmitted no later than July 15 in each calendar
year, commencing with the first July 15 after the first issuance of Securities
under this Indenture.
(c) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed and also with the Commission. The Company will notify the
Trustee when any Securities are listed on any stock exchange.
Section 7.4. Reports by Company.
The Company shall file with the Trustee and with the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided in the Trust Indenture Act; provided that any
such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act shall be filed with
the Trustee within 15 days after the same is required to be filed with the
Commission. Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall continue to file with the Commission and provide the
Trustee with the annual reports and the information, documents and other reports
which are specified in Sections 13 and 15(d) of the Exchange Act. The Company
also shall comply with the other provisions of Trust Indenture Act Section
314(a).
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ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 8.1. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and no Person shall consolidate with or merge into the
Company or convey, transfer or lease its properties and assets substantially as
an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, the corporation formed by such consolidation or into
which the Company is merged or the Person which acquires by conveyance or
transfer, or which leases, the properties and assets of the Company
substantially as an entirety shall be a corporation, partnership or trust
organized and existing under the laws of the United States of America or any
State or the District of Columbia, and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form satisfactory
to the Trustee, the due and punctual payment of the principal of (and premium,
if any) and interest (including any Additional Interest) on all the Securities
and the performance of every covenant of this Indenture on the part of the
Company to be performed or observed;
(2) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be continuing;
(3) in the case of the Securities of a series issued to a GBB Trust,
such consolidation, merger, conveyance, transfer or lease is permitted under the
related Trust Agreement and related GBB Guarantee and does not give rise to any
breach or violation of the related Trust Agreement or related GBB Guarantee; and
(4) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and any such supplemental indenture comply with
this Article and that all conditions precedent herein provided for relating to
such transaction have been complied with; and the Trustee, subject to Section
6.1, may rely upon such Officers' Certificate and Opinion of Counsel as
conclusive evidence that such transaction complies with this Section 8.1.
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Section 8.2. Successor Corporation Substituted.
Upon any consolidation or merger by the Company with or into any other
Person, or any conveyance, transfer or lease by the Company of its properties
and assets substantially as an entirety to any Person in accordance with Section
8.1, the successor corporation formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein; and in the event of any such
conveyance, transfer or lease the Company shall be discharged from all
obligations and covenants under the Indenture and the Securities and may be
dissolved and liquidated.
Such successor Person may cause to be signed, and may issue either in
its own name or in the name of the Company, any or all of the Securities
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee; and, upon the order of such successor Person
instead of the Company and subject to all the terms, conditions and limitations
in this Indenture prescribed, the Trustee shall authenticate and shall deliver
any Securities which previously shall have been signed and delivered by the
officers of the Company to the Trustee for authentication pursuant to such
provisions and any Securities which such successor Person thereafter shall cause
to be signed and delivered to the Trustee on its behalf for the purpose pursuant
to such provisions. All the Securities so issued shall in all respects have the
same legal rank and benefit under this Indenture as the Securities theretofore
or thereafter issued in accordance with the terms of this Indenture as though
all of such Securities had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form may be made in the Securities thereafter to
be issued as may be appropriate.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.1. Supplemental Indentures without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, provided, however, that the form and terms of Securities of any series
may be established by a Board Resolution, as set forth in the Officers'
Certificate delivered
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to the Trustee pursuant to Section 3.1, without entering into a supplemental
indenture for all purposes hereunder, for any of the following purposes:
(1) to evidence the succession of another Person to the Company, and
the assumption by any such successor of the covenants of the Company herein and
in the Securities contained; or
(2) to convey, transfer, assign, mortgage or pledge any property to or
with the Trustee or to surrender any right or power herein conferred upon the
Company; or
(3) to establish the form or terms of Securities of any series as
permitted by Sections 2.1 or 3.1; or
(4) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be for
the benefit of less than all series of Securities, stating that such covenants
are expressly being included solely for the benefit of such series) or to
surrender any right or power herein conferred upon the Company; or
(5) to add any additional Events of Default for the benefit of the
Holders of all or any series of Securities (and if such additional Events of
Default are to be for the benefit of less than all series of Securities, stating
that such additional Events of Default are expressly being included solely for
the benefit of such series); or
(6) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only when
there is no Security Outstanding of any series created prior to the execution of
such supplemental indenture which is entitled to the benefit of such provision;
or
(7) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision herein,
or to make any other provisions with respect to matters or questions arising
under this Indenture, provided that such action pursuant to this clause (7)
shall not adversely affect the interest of the Holders of Securities of any
series in any material respect or, in the case of the Securities of a series
issued to a GBB Trust and for so long as any of the corresponding series of
Preferred Securities issued by such GBB Trust shall remain outstanding, the
holders of such Preferred Securities; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or more
series and to add to or change any of the provisions of this Indenture as shall
be necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, pursuant to the requirements of Section
6.11(b); or
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(9) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust Indenture
Act.
Section 9.2. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities of such series under this Indenture; provided, however,
that no such supplemental indenture shall, without the consent of the Holder of
each Outstanding Security affected thereby,
(1) except to the extent permitted by Sections 3.11 or 3.14 or as
otherwise specified as contemplated by Section 2.1 or Section 3.1 with respect
to the deferral of the payment of interest on the Securities of any series or
the shortening of the Stated Maturity of the Securities of any series, change
the Stated Maturity of the principal of, or any installment of interest
(including any Additional Interest) on, any Security, or reduce the principal
amount thereof or the rate of interest thereon or reduce any premium payable
upon the redemption thereof, or reduce the amount of principal of a Discount
Security that would be due and payable upon a declaration of acceleration of the
Maturity thereof pursuant to Section 5.2, or change the place of payment where,
or the coin or currency in which, any Security or interest thereon is payable,
or impair the right to institute suit for the enforcement of any such payment on
or after the Stated Maturity thereof (or, in the case of redemption, on or after
the Redemption Date), or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 5.13 or
Section 10.5, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Security affected thereby; or
(4) modify the provisions in Article XIII of this Indenture with
respect to the subordination of Outstanding Securities of any series in a manner
adverse to the Holders thereof;
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provided, further, that, in the case of the Securities of a series issued to a
GBB Trust, so long as any of the corresponding series of Preferred Securities
issued by such GBB Trust remains outstanding, (i) no such amendment shall be
made that adversely affects the holders of such Preferred Securities in any
material respect, and no termination of this Indenture shall occur, and no
waiver of any Event of Default or compliance with any covenant under this
Indenture shall be effective, without the prior consent of the holders of at
least a majority of the aggregate liquidation preference of such Preferred
Securities then outstanding unless and until the principal (and premium, if any)
of the Securities of such series and all accrued and, subject to Section 3.7,
unpaid interest (including any Additional Interest) thereon have been paid in
full and (ii) no amendment shall be made to Section 5.8 of this Indenture that
would impair the rights of the holders of Preferred Securities provided therein
without the prior consent of the holders of each Preferred Security then
outstanding unless and until the principal (and premium, if any) of the
Securities of such series and all accrued and (subject to Section 3.7) unpaid
interest (including any Additional Interest) thereon have been paid in full.
A supplemental indenture that changes or eliminates any covenant or
other provision of this Indenture that has expressly been included solely for
the benefit of one or more particular series of Securities or Preferred
Securities, or which modifies the rights of the Holders of Securities or holders
of Preferred Securities of such series with respect to such covenant or other
provision, shall be deemed not to affect the rights under this Indenture of the
Holders of Securities or holders of Preferred Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 9.3. Execution of Supplemental Indentures.
In executing or accepting the additional series of Securities created
by any supplemental indenture permitted by this Article or the modifications
thereby of any series of Securities previously created by this Indenture, the
Trustee shall be entitled to receive, and (subject to Section 6.1) shall be
fully protected in relying upon, an Officers' Certificate and an Opinion of
Counsel stating that the execution of such supplemental indenture is authorized
or permitted by this Indenture, and that all conditions precedent have been
complied with. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
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Section 9.4. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article IX
or delivery to the Trustee of the Officers' Certificate pursuant to Section 3.1
hereof (which Officers' Certificate shall have the effect of a supplemental
indenture for all purposes hereunder), this Indenture shall be modified in
accordance therewith, and such supplemental indenture shall form a part of this
Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.
Section 9.5. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article IX and
every Officers' Certificate delivered to the trustee pursuant to Section 3.1
hereof shall conform to the requirements of the Trust Indenture Act as then in
effect.
Section 9.6. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article IX or delivery to the Trustee of
the Officers' Certificate pursuant to Section 3.1 hereof (which Officers'
Certificate shall have the effect of a supplemental indenture for all purposes
hereunder) may, and shall if required by the Company, bear a notation in form
approved by the Company as to any matter provided for in such supplemental
indenture or such Officers' Certificate. If the Company shall so determine, new
Securities of any series so modified as to conform, in the opinion of the
Company, to any such supplemental indenture or such Officers's Certificate may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
ARTICLE X
COVENANTS
Section 10.1. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of each series of
securities that it will duly and punctually pay the principal of (and premium,
if any) and interest on the Securities of that series in accordance with the
terms of such Securities and this Indenture.
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Section 10.2. Maintenance of Office or Agency.
The Company will maintain in each Place of Payment for any series of
Securities, an office or agency where Securities of that series may be presented
or surrendered for payment and an office or agency where Securities of that
series may be surrendered for transfer or exchange and where notices and demands
to or upon the Company in respect of the Securities of that series and this
Indenture may be served. The Company initially appoints the Trustee, acting
through its Corporate Trust Office, as its agent for said purposes. The Company
will give prompt written notice to the Trustee of any change in the location of
any such office or agency. If at any time the Company shall fail to maintain
such office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, surrenders,
notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all of such purposes, and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in each
Place of Payment for Securities of any series for such purposes. The Company
will give prompt written notice to the Trustee of any such designation and any
change in the location of any such office or agency.
Section 10.3. Money for Security Payments to be Held in Trust.
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of (and premium, if any) or interest on any of the Securities of such
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided, and will promptly notify the Trustee of its
failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to 10:00 a.m. [______ CITY] time on each due date of the principal of or
interest on any Securities, deposit with a Paying Agent a sum sufficient to pay
the principal (and premium, if any) or interest so becoming due, such sum to be
held in trust for the benefit of the Persons entitled to such principal and
premium (if any) or interest, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its failure so to act.
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The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section 10.3,
that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of principal
(and premium, if any) or interest:
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent; and
(4) comply with the provisions of the Trust Indenture Act applicable
to it as a Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall (unless otherwise required by mandatory provision of applicable escheat or
abandoned or unclaimed property law) be paid on Company Request to the Company,
or (if then held by the Company) shall (unless otherwise required by mandatory
provision of applicable escheat or abandoned or unclaimed property law) be
discharged from such trust; and the Holder of such Security shall thereafter, as
an unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and
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of general circulation in the [BOROUGH OF ________, THE CITY OF __________],
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the
Company.
Section 10.4. Statement as to Compliance.
The Company shall deliver to the Trustee, within 120 days after the
end of each calendar year of the Company ending after the date hereof, an
Officers' Certificate covering the preceding calendar year, stating whether or
not to the best knowledge of the signers thereof the Company is in default in
the performance, observance or fulfillment of or compliance with any of the
terms, provisions, covenants and conditions of this Indenture, and if the
Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge. For the purpose of this
Section 10.4, compliance shall be determined without regard to any grace period
or requirement of notice provided pursuant to the terms of this Indenture.
Section 10.5. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
covenant or condition provided pursuant to Sections 3.1, 9.1(3), or 9.1(4) with
respect to the Securities of any series, if before or after the time for such
compliance the Holders of at least a majority in principal amount of the
Outstanding Securities of such series shall, by Act of such Holders, either
waive such compliance in such instance or generally waive compliance with such
covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company in respect of any
such covenant or condition shall remain in full force and effect.
Section 10.6. Additional Sums.
In the case of the Securities of a series issued to a GBB Trust, so
long as no Event of Default has occurred and is continuing and except as
otherwise specified as contemplated by Section 2.1 or Section 3.1, in the event
that (i) such GBB Trust is the Holder of all of the Outstanding Securities of
such series, (ii) a Tax Event in respect of such GBB Trust shall have occurred
and be continuing and (iii) the Company shall not have (A) redeemed the
Securities of such series pursuant to Section 11.7(b) or (B) terminated such GBB
Trust pursuant to Section 9.2(b) of the related Trust Agreement, the Company
shall pay to such GBB Trust (and its permitted successors or assigns under the
related Trust Agreement) for so long as such GBB Trust (or its permitted
successor or assignee) is the registered holder of any Securities of such
series, such additional amounts as may be necessary in order that the amount of
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Distributions (including any Additional Amounts (as defined in such Trust
Agreement)) then due and payable by such GBB Trust on the related Preferred
Securities and Common Securities that at any time remain outstanding in
accordance with the terms thereof shall not be reduced as a result of any
Additional Taxes (the "Additional Sums"). Whenever in this Indenture or the
Securities there is a reference in any context to the payment of principal of or
interest on the Securities, such mention shall be deemed to include mention of
the payments of the Additional Sums provided for in this paragraph to the extent
that, in such context, Additional Sums are, were or would be payable in respect
thereof pursuant to the provisions of this paragraph and express mention of the
payment of Additional Sums (if applicable) in any provisions hereof shall not be
construed as excluding Additional Sums in those provisions hereof where such
express mention is not made; provided, however, that the deferral of the payment
of interest pursuant to Section 3.11 or the Securities shall not defer the
payment of any Additional Sums that may be due and payable.
Section 10.7. Additional Covenants.
The Company covenants and agrees with each Holder of Securities of any
series that it shall not, and it shall not permit any Subsidiary of the Company
to, (a) declare or pay any dividends or distributions on, or redeem purchase,
acquire or make a liquidation payment with respect to, any shares of the
Company's capital stock (which includes common and preferred stock), or (b) make
any payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company (including Securities
other than the Securities of such series) that rank pari passu in all respects
with or junior in interest to the Securities of such series or make any
guarantee payments with respect to any guarantee by the Company of debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
in all respects with or junior in interest to the Securities (other than (a)
dividends or distributions in capital stock of the Company (which includes
common and preferred stock), (b) any declaration of a dividend in connection
with the implementation of a rights plan or the redemption or repurchase of any
such rights pursuant thereto, (c) payments under the GBB Guarantee related to
the Preferred Securities issued by the GBB Trust holding Securities of such
series, and (d) purchases of Common Stock related to the issuance of Common
Stock or rights under any of the Company's benefit plans for its directors,
officers or employees or related to the issuance of Common Stock (or securities
convertible into or exchangeable for common stock) as consideration in an
acquisition transaction) if at such time (i) there shall have occurred any event
of which the Company has actual knowledge that (A) with the giving of notice or
the lapse of time or both, would constitute an Event of Default with respect to
the Securities of such series and (B) in respect of which the Company shall not
have taken reasonable steps to cure, (ii) if the Securities of such series are
held by a GBB Trust, the Company shall be in default with respect to its payment
of any obligations
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under the GBB Guarantee relating to the Preferred Securities issued by such GBB
Trust or (iii) the Company shall have given notice of its election to begin an
Extension Period with respect to the Securities of such series as provided
herein and shall not have rescinded such notice, or such Extension Period, or
any extension thereof, shall be continuing.
The Company also covenants with each Holder of Securities of a series
issued to a GBB Trust (i) to maintain directly or indirectly 100% ownership of
the Common Securities of such GBB Trust; provided, however, that any permitted
successor of the Company hereunder may succeed to the Company's ownership of
such Common Securities, (ii) not to voluntarily terminate, wind-up or liquidate
such GBB Trust, except (a) in connection with a distribution of the Securities
of such series to the holders of Trust Securities in liquidation of such GBB
Trust or (b) in connection with certain mergers, consolidations or amalgamations
permitted by the related Trust Agreement and (iii) to use its reasonable
efforts, consistent with the terms and provisions of such Trust Agreement, to
cause such GBB Trust to remain classified as a grantor trust and not an
association taxable as a corporation for United States federal income tax
purposes.
ARTICLE XI
REDEMPTION OF SECURITIES
Section 11.1 Applicability of This Article.
Redemption of Securities of any series (whether by operation of a
sinking fund or otherwise) as permitted or required by any form of Security
issued pursuant to this Indenture shall be made in accordance with such form of
Security and this Article; provided, however, that if any provision of any such
form of Security shall conflict with any provision of this Article, the
provision of such form of Security shall govern. Except as otherwise set forth
in the form of Security for such series, each Security of such series shall be
subject to partial redemption only in the amount of $25 or, in the case of the
Securities of a series issued to a GBB Trust, $25, or integral multiples of $25
in excess thereof.
Section 11.2. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be
evidenced by or pursuant to a Board Resolution. In case of any redemption at
the election of the Company of less than all of the Securities of any particular
series and having the same terms, the Company shall, not less than 30 nor more
than 60 days prior to the Redemption Date (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such date and of the
principal amount of Securities of that series to be redeemed. In the case of
any redemption of Securities prior to the expiration of any
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restriction on such redemption provided in the terms of such Securities, the
Company shall furnish the Trustee with an Officers' Certificate and an Opinion
of Counsel evidencing compliance with such restriction.
Section 11.3. Selection of Securities to be Redeemed.
If less than all the Securities of any series are to be redeemed
(unless all the Securities of such series and of a specified tenor are to be
redeemed or unless such redemption affects only a single Security), the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series not previously called for redemption, by such method as the Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of a portion of the principal amount of any Security of such series,
provided that the portion of the principal amount of any Security not redeemed
shall be in an authorized denomination (which shall not be less than the minimum
authorized denomination) for such Security. If less than all the Securities of
such series and of a specified tenor are to be redeemed (unless such redemption
affects only a single Security), the particular Securities to be redeemed shall
be selected not more than 60 days prior to the Redemption Date by the Trustee,
from the Outstanding Securities of such series and specified tenor not
previously called for redemption in accordance with the preceding sentence.
The Trustee shall promptly notify the Company in writing of the
Securities selected for partial redemption and the principal amount thereof to
be redeemed. For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security which has been or is to be
redeemed. If the Company shall so direct, Securities registered in the name of
the Company, any Affiliate or any Subsidiary thereof shall not be included in
the Securities selected for redemption.
Section 11.4. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not later than the thirtieth day, and not earlier than the
sixtieth day, prior to the Redemption Date, to each Holder of Securities to be
redeemed, at the address of such Holder as it appears in the Securities
Register.
With respect to Securities of each series to be redeemed, each notice
of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
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(c) if less than all Outstanding Securities of such particular series
and having the same terms are to be redeemed, the identification (and, in the
case of partial redemption, the respective principal amounts) of the particular
Securities to be redeemed;
(d) that on the Redemption Date, the Redemption Price will become due
and payable upon each such Security or portion thereof, and that interest
thereon, if any, shall cease to accrue on and after said date;
(e) the place or places where such Securities are to be surrendered
for payment of the Redemption Price; and
(f) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall not be
irrevocable. The notice if mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the Holder
receives such notice. In any case, a failure to give such notice by mail or any
defect in the notice to the Holder of any Security designated for redemption as
a whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security.
Section 11.5. Deposit of Redemption Price.
Prior to 10:00 a.m. [______ CITY] time on the Redemption Date
specified in the notice of redemption given as provided in Section 11.4, the
Company will deposit with the Trustee or with one or more Paying Agents (or if
the Company is acting as its own Paying Agent, the Company will segregate and
hold in trust as provided in Section 10.3) an amount of money sufficient to pay
the Redemption Price of, and any accrued interest (including Additional
Interest) on, all the Securities which are to be redeemed on that date.
Section 11.6. Payment of Securities Called for Redemption.
If any notice of redemption has been given as provided in Section
11.4, the Securities or portion of Securities with respect to which such notice
has been given shall become due and payable on the date and at the place or
places stated in such notice at the applicable Redemption Price. On presentation
and surrender of such Securities at a Place of Payment in said notice specified,
the said securities or the specified portions thereof shall be paid and redeemed
by the Company at the applicable Redemption Price, together with accrued
interest (including any Additional Interest) to the Redemption Date; provided,
however, that, unless
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otherwise specified as contemplated by Section 3.1, installments of interest
whose Stated Maturity is on or prior to the Redemption Date will be payable to
the Holders of such Securities, or one or more Predecessor Securities,
registered as such at the close of business on the relevant Record Dates
according to their terms and the provisions of Section 3.7.
Upon presentation of any Security redeemed in part only, the Company
shall execute and the Trustee shall authenticate and deliver to the Holder
thereof, at the expense of the Company, a new Security or Securities of the same
series, of authorized denominations, in aggregate principal amount equal to the
portion of the Security not redeemed so presented and having the same Original
Issue Date, Stated Maturity and terms. If a Global Security is so surrendered,
such new Security will also be a new Global Security.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal of and premium, if any, on such
Security shall, until paid, bear interest from the Redemption Date at the rate
prescribed therefor in the Security.
Section 11.7. Right of Redemption of Securities Initially Issued to a GBB
Trust.
In the case of the Securities of a series initially issued to a GBB
Trust, except as otherwise specified as contemplated by Section 3.1, the
Company, at its option, may redeem such Securities (i) on or after the date five
years after the Original Issue Date of such Securities, in whole at any time or
in part from time to time, or (ii) upon the occurrence and during the
continuation of a Tax Event, Investment Company Event, or Capital Treatment
Event, at any time within 90udays following the occurrence of such Tax Event,
Investment Company Event or Capital Treatment Event in respect of such GBB
Trust, in whole (but not in part), in each case at a Redemption Price equal to
100% of the principal amount thereof.
ARTICLE XII
SINKING FUNDS
Section 12.1. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of any series except as otherwise specified as
contemplated by Section 3.1 for such Securities.
The minimum amount of any sinking fund payment provided for by the
terms of any Securities of any series is herein referred to as a "mandatory
sinking fund payment", and any sinking fund payment in excess of such minimum
amount
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which is permitted to be made by the terms of such Securities of any series is
herein referred to as an "optional sinking fund payment". If provided for by the
terms of any Securities of any series, the cash amount of any sinking fund
payment may be subject to reduction as provided in Section 12.2. Each sinking
fund payment shall be applied to the redemption of Securities of any series as
provided for by the terms of such Securities.
Section 12.2. Satisfaction of Sinking Fund Payments with Securities.
In lieu of making all or any part of a mandatory sinking fund payment
with respect to any Securities of a series in cash, the Company may at its
option, at any time no more than 16 months and no less than 30 days prior to the
date on which such sinking fund payment is due, deliver to the Trustee
Securities of such series (together with the unmatured coupons, if any,
appertaining thereto) theretofore purchased or otherwise acquired by the
Company, except Securities of such series that have been redeemed through the
application of mandatory or optional sinking fund payments pursuant to the terms
of the Securities of such series, accompanied by a Company Order instructing the
Trustee to credit such obligations and stating that the Securities of such
series were originally issued by the Company by way of bona fide sale or other
negotiation for value; provided that the Securities to be so credited have not
been previously so credited. The Securities to be so credited shall be received
and credited for such purpose by the Trustee at the redemption price for such
Securities, as specified in the Securities so to be redeemed, for redemption
through operation of the sinking fund and the amount of such sinking fund
payment shall be reduced accordingly.
Section 12.3. Redemption of Securities for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
such Securities pursuant to the terms of such Securities, the portion thereof,
if any, which is to be satisfied by payment of cash in the currency in which the
Securities of such series are payable (except as provided pursuant to Section
3.1) and the portion thereof, if any, which is to be satisfied by delivering and
crediting Securities pursuant to Section 12.2 and will also deliver to the
Trustee any Securities to be so delivered. Such Officers' Certificate shall be
irrevocable and upon its delivery the Company shall be obligated to make the
cash payment or payments therein referred to, if any, on or before the
succeeding sinking fund payment date. In the case of the failure of the Company
to deliver such Officers' Certificate (or, as required by this Indenture, the
Securities and coupons, if any, specified in such Officers' Certificate), the
sinking fund payment due on the succeeding sinking fund payment date for such
series shall be paid entirely in cash and shall be sufficient to redeem the
principal amount of the Securities of such series subject to a mandatory sinking
fund payment without the right to deliver or
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credit securities as provided in Section 12.2 and without the right to make the
optional sinking fund payment with respect to such series at such time.
Any sinking fund payment or payments (mandatory or optional) made in
cash plus any unused balance of any preceding sinking fund payments made with
respect to the Securities of any particular series shall be applied by the
Trustee (or by the Company if the Company is acting as its own Paying Agent) on
the sinking fund payment date on which such payment is made (or, if such payment
is made before a sinking fund payment date, on the sinking fund payment date
immediately following the date of such payment) to the redemption of Securities
of such series at the Redemption Price specified in such Securities with respect
to the sinking fund. Any sinking fund moneys not so applied or allocated by the
Trustee (or, if the Company is acting as its own Paying Agent, segregated and
held in trust by the Company as provided in Section 10.3) for such series and
together with such payment (or such amount so segregated) shall be applied in
accordance with the provisions of this Section 12.3. Any and all sinking fund
moneys with respect to the Securities of any particular series held by the
Trustee (or if the Company is acting as its own Paying Agent, segregated and
held in trust as provided in Section 10.3) on the last sinking fund payment date
with respect to Securities of such series and not held for the payment or
redemption of particular Securities of such series shall be applied by the
Trustee (or by the Company if the Company is acting as its own Paying Agent),
together with other moneys, if necessary, to be deposited (or segregated)
sufficient for the purpose, to the payment of the principal of the Securities of
such series at Maturity. The Trustee shall select the Securities to be redeemed
upon such sinking fund payment date in the manner specified in Section 11.3 and
cause notice of the redemption thereof to be given in the name of and at the
expense of the Company in the manner provided in Section 11.4. Such notice
having been duly given, the redemption of such Securities shall be made upon the
terms and in the manner stated in Section 11.6. On or before each sinking fund
payment date, the Company shall pay to the Trustee (or, if the Company is acting
as its own Paying Agent, the Company shall segregate and hold in trust as
provided in Section 10.3) in cash a sum in the currency in which Securities of
such series are payable (except as provided pursuant to Section 3.1) equal to
the principal and any interest accrued to the Redemption Date for Securities or
portions thereof to be redeemed on such sinking fund payment date pursuant to
this Section 12.3.
Neither the Trustee nor the Company shall redeem any Securities of a
series with sinking fund moneys or mail any notice of redemption of Securities
of such series by operation of the sinking fund for such series during the
continuance of a default in payment of interest, if any, on any Securities of
such series or of any Event of Default (other than an Event of Default occurring
as a consequence of this paragraph) with respect to the Securities of such
series, except that if the notice of redemption shall have been provided in
accordance with the provisions hereof, the Trustee (or the Company, if the
Company is then acting as its own Paying Agent)
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shall redeem such Securities if cash sufficient for that purpose shall be
deposited with the Trustee (or segregated by the Company) for that purpose in
accordance with the terms of this Article XII. Except as aforesaid, any moneys
in the sinking fund for such series at the time when any such default or Event
of Default shall occur and any moneys thereafter paid into such sinking fund
shall, during the continuance of such default or Event of Default, be held as
security for the payment of the Securities and coupons, if any, of such series;
provided, however, that in case such default or Event of Default shall have been
cured or waived herein, such moneys shall thereafter be applied on the next
sinking fund payment date for the Securities of such series on which such moneys
may be applied pursuant to the provisions of this Section 12.3.
ARTICLE XIII
SUBORDINATION OF SECURITIES
Section 13.1. Securities Subordinate to Senior and Subordinated Debt.
The Company covenants and agrees, and each Holder of a Security, by
its acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article XIII, the payment of the
principal of (and premium, if any) and interest (including any Additional
Interest) on each and all of the Securities are hereby expressly made
subordinate and subject in right of payment to the prior payment in full of all
amounts then due and payable in respect of all Senior and Subordinated Debt.
Section 13.2. Payment Over of Proceeds Upon Dissolution, Etc.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company (each such event, if any, herein
sometimes referred to as a "Proceeding"), then the holders of Senior and
Subordinated Debt shall be entitled to receive payment in full of Allocable
Amounts of such Senior and Subordinated Debt, or provision shall be made for
such payment in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of Senior and Subordinated Debt, before the Holders of the
Securities are entitled to receive or retain any payment or distribution of any
kind or character, whether in cash, property or securities (including any
payment or distribution which may be payable or deliverable by reason of the
payment of any other Debt of the Company subordinated to the payment of the
Securities, such payment or distribution being hereinafter referred to as a
"Junior Subordinated Payment"), on account of principal of (or premium, if any)
or interest (including any Additional Interest) on the Securities or on account
of the purchase or other acquisition of Securities by the Company or any
Subsidiary and to that end the holders of Senior and Subordinated
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Debt shall be entitled to receive, for application to the payment thereof, any
payment or distribution of any kind or character, whether in cash, property or
securities, including any Junior Subordinated Payment, which may be payable or
deliverable in respect of the Securities in any such Proceeding.
In the event that, notwithstanding the foregoing provisions of this
Section 13.2, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, including any Junior Subordinated
Payment, before all Allocable Amounts of all Senior and Subordinated Debt are
paid in full or payment thereof is provided for in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of Senior and Subordinated
Debt, and if such fact shall, at or prior to the time of such payment or
distribution, have been made known to the Trustee or, as the case may be, such
Holder, then and in such event such payment or distribution shall be paid over
or delivered forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other Person making payment or
distribution of assets of the Company for application to the payment of all
Allocable Amounts of all Senior and Subordinated Debt remaining unpaid, to the
extent necessary to pay all Allocable Amounts of all Senior and Subordinated
Debt in full, after giving effect to any concurrent payment or distribution to
or for the holders of Senior and Subordinated Debt.
For purposes of this Article XIII only, the words "any payment or
distribution of any kind or character, whether in cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment which securities are subordinated in
right of payment to all then outstanding Senior and Subordinated Debt to
substantially the same extent as the Securities are so subordinated as provided
in this Article XIII. The consolidation of the Company with, or the merger of
the Company into, another Person or the liquidation or dissolution of the
Company following the sale of all or substantially all of its properties and
assets as an entirety to another Person upon the terms and conditions set forth
in Article VIII shall not be deemed a Proceeding for the purposes of this
Section 13.2 if the Person formed by such consolidation or into which the
Company is merged or the Person which acquires by sale such properties and
assets as an entirety, as the case may be, shall, as a part of such
consolidation, merger, or sale comply with the conditions set forth in Article
VIII.
Section 13.3. Prior Payment to Senior and Subordinated Debt Upon Acceleration
of Securities.
In the event that any Securities are declared due and payable before
their Stated Maturity, then and in such event the holders of the Senior and
Subordinated
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Debt outstanding at the time such Securities so become due and payable shall be
entitled to receive payment in full of all Allocable Amounts due on or in
respect of such Senior and Subordinated Debt (including any amounts due upon
acceleration), or provision shall be made for such payment in cash or cash
equivalents or otherwise in a manner satisfactory to the holders of Senior and
Subordinated Debt, before the Holders of the Securities are entitled to receive
any payment or distribution of any kind or character, whether in cash,
properties or securities (including any Junior Subordinated Payment) by the
Company on account of the principal of (or premium, if any) or interest
(including any Additional Interest) on the Securities or on account of the
purchase or other acquisition of Securities by the Company or any Subsidiary;
provided, however, that nothing in this Section 13.3 shall prevent the
satisfaction of any sinking fund payment in accordance with this Indenture or as
otherwise specified as contemplated by Section 3.1 for the Securities of any
series by delivering and crediting pursuant to Section 12.2 or as otherwise
specified as contemplated by Section 3.1 for the Securities of any series
Securities which have been acquired (upon redemption or otherwise) prior to such
declaration of acceleration.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section 13.3, and if such fact shall, at or prior
to the time of such payment, have been made known to the Trustee or, as the case
may be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section 13.3 shall not apply to any payment
with respect to which Section 13.2 would be applicable.
Section 13.4. No Payment When Senior and Subordinated Debt in Default.
(a) In the event and during the continuation of any default in the
payment of principal of (or premium, if any) or interest on any Senior and
Subordinated Debt, or in the event that any event of default with respect to any
Senior and Subordinated Debt shall have occurred and be continuing and shall
have resulted in such Senior and Subordinated Debt becoming or being declared
due and payable prior to the date on which it would otherwise have become due
and payable, unless and until such event of default shall have been cured or
waived or shall have ceased to exist and such acceleration shall have been
rescinded or annulled, or (b) in the event any judicial proceeding shall be
pending with respect to any such default in payment or such event or default,
then no payment or distribution of any kind or character, whether in cash,
properties or securities (including any Junior Subordinated Payment) shall be
made by the Company on account of principal of (or premium, if any) or interest
(including any Additional Interest), if any, on the Securities or on account of
the purchase or other acquisition of Securities by the
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Company or any Subsidiary, in each case unless and until all Allocable Amounts
of such Senior and Subordinated Debt are paid in full; provided, however, that
nothing in this Section 13.4 shall prevent the satisfaction of any sinking fund
payment in accordance with this Indenture or as otherwise specified as
contemplated by Section 3.1 for the Securities of any series by delivering and
crediting pursuant to Section 12.2 or as otherwise specified as contemplated by
Section 3.1 for the Securities of any series Securities which have been acquired
(upon redemption or otherwise) prior to such default in payment or event of
default.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section 13.4, and if such fact shall, at or prior
to the time of such payment, have been made known to the Trustee or, as the case
may be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section 13.4 shall not apply to any payment
with respect to which Section 13.2 would be applicable.
Section 13.5. Payment Permitted If No Default.
Nothing contained in this Article XIII or elsewhere in this Indenture
or in any of the Securities shall prevent (a) the Company, at any time except
during the pendency of any Proceeding referred to in Section 13.2 or under the
conditions described in Sections 13.3 and 13.4, from making payments at any time
of principal of (and premium, if any) or interest (including Additional
Interest) on the Securities, or (b) the application by the Trustee of any money
deposited with it hereunder to the payment of or on account of the principal of
(and premium, if any) or interest (including any Additional Interest) on the
Securities or the retention of such payment by the Holders, if, at the time of
such application by the Trustee, it did not have knowledge that such payment
would have been prohibited by the provisions of this Article XIII.
Section 13.6. Subrogation to Rights of Holders of Senior and Subordinated Debt.
Subject to the payment in full of all amounts due or to become due on
all Senior and Subordinated Debt, or the provision for such payment in cash or
cash equivalents or otherwise in a manner satisfactory to the holders of Senior
and Subordinated Debt, the Holders of the Securities shall be subrogated to the
extent of the payments or distributions made to the holders of such Senior and
Subordinated Debt pursuant to the provisions of this Article XIII (equally and
ratably with the holders of all indebtedness of the Company which by its express
terms is subordinated to Senior and Subordinated Debt of the Company to
substantially the
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same extent as the Securities are subordinated to the Senior and Subordinated
Debt and is entitled to like rights of subrogation by reason of any payments or
distributions made to holders of such Senior and Subordinated Debt) to the
rights of the holders of such Senior and Subordinated Debt to receive payments
and distributions of cash, property and securities applicable to the Senior and
Subordinated Debt until the principal of (and premium, if any) and interest on
the Securities shall be paid in full. For purposes of such subrogation, no
payments or distributions to the holders of the Senior and Subordinated Debt of
any cash, property or securities to which the Holders of the Securities or the
Trustee would be entitled except for the provisions of this Article, and no
payments over pursuant to the provisions of this Article XIII to the holders of
Senior and Subordinated Debt by Holders of the Securities or the Trustee, shall,
as among the Company, its creditors other than holders of Senior and
Subordinated Debt, and the Holders of the Securities, be deemed to be a payment
or distribution by the Company to or on account of the Senior and Subordinated
Debt.
Section 13.7. Provisions Solely to Define Relative Rights.
The provisions of this Article XIII are and are intended solely for
the purpose of defining the relative rights of the Holders of the Securities on
the one hand and the holders of Senior and Subordinated Debt on the other hand.
Nothing contained in this Article XIII or elsewhere in this Indenture or in the
Securities is intended to or shall (a) impair, as between the Company and the
Holders of the Securities, the obligations of the Company, which are absolute
and unconditional, to pay to the Holders of the Securities the principal of (and
premium, if any) and interest (including any Additional Interest) on the
Securities as and when the same shall become due and payable in accordance with
their terms; or (b) affect the relative rights against the Company of the
Holders of the Securities and creditors of the Company other than their rights
in relation to the holders of Senior and Subordinated Debt; or (c) prevent the
Trustee or the Holder of any Security from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture including, without
limitation, filing and voting claims in any Proceeding, subject to the rights,
if any, under this Article XIII of the holders of Senior and Subordinated Debt
to receive cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder.
Section 13.8. Trustee to Effectuate Subordination.
Each Holder of a Security by his or her acceptance thereof authorizes
and directs the Trustee on his or her behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination provided
in this Article XIII and appoints the Trustee his or her attorney-in-fact for
any and all such purposes.
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Section 13.9. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior and
Subordinated Debt to enforce subordination as herein provided shall at any time
in any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof that any such holder may
have or be otherwise charged with.
Without in any way limiting the generality of the immediately
preceding paragraph, the holders of Senior and Subordinated Debt may, at any
time and from to time, without the consent of or notice to the Trustee or the
Holders of the Securities, without incurring responsibility to the Holders of
the Securities and without impairing or releasing the subordination provided in
this Article or the obligations hereunder of the Holders of the Securities to
the holders of Senior and Subordinated Debt, do any one or more of the
following: (i) change the manner, place or terms of payment or extend the time
of payment of, or renew or alter, Senior and Subordinated Debt, or otherwise
amend or supplement in any manner Senior and Subordinated Debt or any instrument
evidencing the same or any agreement under which Senior and Subordinated Debt is
outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior and Subordinated Debt;
(iii) release any Person liable in any manner for the collection of Senior and
Subordinated Debt; and (iv) exercise or refrain from exercising any rights
against the Company and any other Person.
Section 13.10. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities. Notwithstanding the provisions of
this Article XIII or any other provision of this Indenture, the Trustee shall
not be charged with knowledge of the existence of any facts which would prohibit
the making of any payment to or by the Trustee in respect of the Securities,
unless and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior and Subordinated Debt or from any trustee, agent
or representative therefor; provided, however, that if the Trustee shall not
have received the notice provided for in this Section 13.10 at least two
Business Days prior to the date upon which by the terms hereof any monies may
become payable for any purpose (including, without limitation, the payment of
the principal of (and premium, if any) or interest (including any Additional
Interest) on any Security), then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive such
monies and to apply the same to the purpose for
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which they were received and shall not be affected by any notice to the contrary
which may be received by it within two Business Days prior to such date.
Subject to the provisions of Section 6.1, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior and Subordinated Debt (or a
trustee therefor) to establish that such notice has been given by a holder of
Senior and Subordinated Debt (or a trustee therefor). In the event that the
Trustee determines in good faith that further evidence is required with respect
to the right of any Person as a holder of Senior and Subordinated Debt to
participate in any payment or distribution pursuant to this Article, the Trustee
may request such Person to furnish evidence to the reasonable satisfaction of
the Trustee as to the amount of Senior and Subordinated Debt held by such
Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article, and if such evidence is not furnished, the Trustee
may defer any payment to such Person pending judicial determination as to the
right of such Person to receive such payment.
Section 13.11. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to
in this Article XIII, the Trustee, subject to the provisions of Section 6.1, and
the Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such Proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, delivered to the Trustee or to the Holders
of Securities, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior and
Subordinated Debt and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article XIII.
Section 13.12. Trustee Not Fiduciary for Holders of Senior and Subordinated
Debt.
The Trustee, in its capacity as trustee under this Indenture, shall
not be deemed to owe any fiduciary duty to the holders of Senior and
Subordinated Debt and shall not be liable to any such holders if it shall in
good faith mistakenly pay over or distribute to Holders of Securities or to the
Company or to any other Person cash, property or securities to which any holders
of Senior and Subordinated Debt shall be entitled by virtue of this Article or
otherwise.
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Section 13.13. Rights of Trustee as Holder of Senior and Subordinated Debt;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XIII with respect to any Senior and
Subordinated Debt which may at any time be held by it, to the same extent as any
other holder of Senior and Subordinated Debt, and nothing in this Indenture
shall deprive the Trustee of any of its rights as such holder.
Section 13.14. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article XIII shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article XIII in addition to or in place of the Trustee.
Section 13.15. Certain Conversions or Exchanges Deemed Payment.
For the purposes of this Article XIII only, (a) the issuance and
delivery of junior securities upon conversion or exchange of Securities shall
not be deemed to constitute a payment or distribution on account of the
principal of (or premium, if any) or interest (including any Additional
Interest) on Securities or on account of the purchase or other acquisition of
Securities, and (b) the payment, issuance or delivery of cash, property or
securities (other than junior securities) upon conversion or exchange of a
Security shall be deemed to constitute payment on account of the principal of
such security. For the purposes of this Section 13.15, the term "junior
securities" means (i) shares of any stock of any class of the Company and (ii)
securities of the Company which are subordinated in right of payment to all
Senior and Subordinated Debt which may be outstanding at the time of issuance or
delivery of such securities to substantially the same extent as, or to a greater
extent than, the Securities are so subordinated as provided in this Article
XIII.
* * * *
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
GREATER BAY BANCORP
By:
----------------------------
Its:
---------------------------
Attest:
By
---------------------------
Its
------------------------
[WILMINGTON TRUST COMPANY]
as Trustee
By:
---------------------------
Its:
---------------------------
Attest:
By
---------------------------
Its
------------------------
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STATE OF CALIFORNIA )
) SS.
COUNTY OF )
On the _______ day of _________, 1997 before me personally came
______________ to me known, who, being by me duly sworn, did depose and say that
he is ____________ of Greater Bay Bancorp, one of the corporations described in
and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
and that he signed his name thereto by authority of the Board of Directors of
said corporation.
[SEAL]
------------------------------
Notary Public
STATE OF DELAWARE )
) SS.
COUNTY OF _______ )
On the _______ day of _________, 1997 before me personally came
______________ to me known, who, being by me duly sworn, did depose and say that
he is ____________ of [WILMINGTON TRUST COMPANY], one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; and that he signed his name thereto by authority of the Board of Directors
of said corporation.
[SEAL]
------------------------------
Notary Public
-85-
<PAGE>
EXHIBIT 4.2
GREATER BAY BANCORP
_____% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES DUE ________
OFFICERS' CERTIFICATE AND COMPANY ORDER
---------------------------------------
Pursuant to the Indenture dated as of March _____, 1997 (the "Indenture"),
between Greater Bay Bancorp, a California corporation (the "Company") and
Wilmington Trust Company, as Debenture Trustee (the "Debenture Trustee") and
resolutions adopted by the Company's Board of Directors on ________________;
this Officers' Certificate is being delivered to the Debenture Trustee to
establish the terms of a series of Securities in accordance with Section 3.1 of
the Indenture, to establish the form of the Securities of such series in
accordance with Section 2.1 of the Indenture, to request the authentication and
delivery of the Securities of such series pursuant to Section 3.3 of the
Indenture and to comply with the provisions of Section 1.2 of the Indenture.
This Officers' Certificate shall be treated for all purposes under the Indenture
as a supplemental indenture thereto.
All conditions precedent provided for in the Indenture relating to the
establishment of (i) a series of Securities and (ii) the form of Securities of
such series have been complied with.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned to them in the Indenture.
A. Establishment of a Series of Securities pursuant to Section 3.1 of the
----------------------------------------------------------------------
Indenture.
- ---------
There are hereby established pursuant to Section 3.1 of the Indenture a
series of Securities which shall have the following terms:
(1) The Securities of such series shall bear the title "_________%
Junior Subordinated Deferrable Interest Debentures Due _________________."
(2) The aggregate principal amount of such series of Securities to be
issued pursuant to this Officers' Certificate and Company Order shall be limited
to $_______ (except for Securities authenticated and delivered upon registration
of, transfer of, or in exchange for, or in lieu of, other Securities of such
series pursuant to Sections 3.4, 3.5, 3.6, 9.6 or 11.7 of the Indenture and
except for any Securities which, pursuant to Section 3.3 of the Indenture, are
deemed never to have been authenticated and delivered thereunder).
-1-
<PAGE>
(3) The date on which the principal of the Securities is due and
payable shall be __________________.
(4) The Securities shall bear interest at the rate of _________% per
annum (based upon a 360-day year of twelve 30-day months), from and including
___________ or from and including the most recent Interest Payment Date to which
interest has been paid or duly provided for, as the case may be, payable
quarterly in arrears on ________________, _________________,______________ and
_______________ in each year, commencing _____________, until the principal
thereof is paid or made available for payment. Each such ______________,
_______________,_________________ or _________________ shall be an
"Interest Payment Date" for the Securities of such series, and the Business Day
next preceding an Interest Payment Date shall be the "Regular Record Date" for
the interest payable on such Interest Payment Date. Accrued interest that is
not paid on such applicable Interest Payment Date will bear additional interest
on the amount thereof (to the extent permitted by law) at a rate per annum of
_________% thereof compounded quarterly.
In addition, so long as no Event of Default with respect to the Securities
has occurred or is continuing, the Company has the right under the Indenture at
any time during the term of such Securities to defer the payment of interest at
any time or from time to time for a period not exceeding 20 consecutive
quarterly periods (each such period an "Extension Period"), provided that no
Extension Period may extend beyond the Stated Maturity. At the end of such
Extension Period, the Company must pay all interest then accrued and unpaid
(together with interest thereon at the annual rate of ___________%, compounded
quarterly, to the extent permitted by applicable law).
(5) Principal of (and premium, if any) and interest on the Securities
will be payable, and, except as provided in Section 3.5 of the Indenture with
respect to a Global Security (as defined below), the transfer of the Securities
will be registrable and Securities will be exchangeable for Securities bearing
identical terms and provisions at the corporate trust office of Wilmington Trust
Company, in the City of New York, New York.
(6) The Securities will be redeemable in whole at any time and in part
from time to time, at the option of the Company at any time on or after
___________, subject to the Company having received prior approval of the Board
of Governors of the Federal Reserve System (the "Federal Reserve"), at a
redemption price equal to the accrued and unpaid interest on the Securities so
redeemed to the date fixed for redemption, plus 100% of the principal amount
thereof.
In addition, upon the occurrence of a Capital Treatment Event, an
Investment Company Event or a Tax Event (as defined below) the Company may, at
its option and subject to receipt of prior approval of the Federal Reserve if
then required under applicable capital guidelines or policies of the Federal
Reserve, redeem the Securities in whole (but not in part) at any time within 90
days of the occurrence of such Capital Treatment Event,
-2-
<PAGE>
Investment Company Event or Tax Event, at a redemption price equal to the
accrued and unpaid interest on the Securities so redeemed to the date fixed for
redemption, plus 100% of the principal amount thereof.
"Capital Treatment Event" means the reasonable determination by the Company
that, as a result of any amendment to, or change (including any prospective
change) in, the laws (or any regulations thereunder) of the United States or any
political subdivision thereof or therein, or as a result of any official or
administrative pronouncement or action or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such prospective change, pronouncement or decision is announced on or after the
date of issuance of the ________ % Cumulative Trust Preferred Securities
(Liquidation Amount $25 per Trust Preferred Security) (the "Preferred
Securities") of GBB Capital I, a statutory business trust formed under the laws
of the State of Delaware ("GBB Capital"), there is more than an insubstantial
risk of impairment of the Company's ability to treat the Preferred Securities
(or any substantial portion thereof) as "Tier I Capital" (or the then equivalent
thereof) for purposes of the capital adequacy guidelines of the Federal Reserve,
as then in effect and applicable to the Company.
"Investment Company Event" "means the receipt by the Company and GBB
Capital of an opinion of counsel, rendered by a law firm experienced in such
matters, to the effect that, as a result of any change in law or regulation or a
change in interpretation or application of law or regulation by any legislative
body, court, governmental agency or regulatory authority, GBB Capital is or will
be considered an "investment company" that is required to be registered under
the Investment Company Act of 1940, as amended, which change becomes effective
on or after the date of original issuance of the Preferred Securities of GBB
Capital.
"Tax Event" means the receipt by the Company and GBB Capital of an opinion
of counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such prospective change, pronouncement or decision is announced on or after the
date of issuance of the Preferred Securities of GBB Capital, there is more than
an insubstantial risk that (i) GBB Capital is, or will be within 90 days of the
date of such opinion of counsel, subject to United States Federal income tax
with respect to income received or accrued on the Securities, (ii) interest
payable by the Company on the Securities is not, or within 90 days of the date
of such opinion of counsel, will not be, deductible by the Company, in whole or
in part, for United States Federal income tax purposes or (iii) GBB Capital is,
or will be within 90 days of the date of such opinion of counsel, subject to
more than a de minimis amount of other taxes, duties or other governmental
charges.
-3-
<PAGE>
(7) The Company shall not be obligated to prepay, repay or purchase
any Securities pursuant to any sinking fund, amortization or analogous
provisions or at the option of the Holder.
(8) The Securities will be issued only in fully registered form and
the authorized minimum denomination of the Securities shall be $25 and any
integral multiple of $25 in excess thereof.
(9) The Securities shall be denominated, and payments of principal of
(and premium, if any) and interest on the Securities of such series will be
payable, in United States dollars.
(10) The Securities shall be subject to the Events of Default
specified in Section 5.1, paragraphs (1) through (7), of the Indenture.
(11) The portion of the principal amount of the Securities which shall
be payable upon declaration of acceleration of maturity thereof shall not be
other than the principal amount thereof, provided, that, if such acceleration is
declared by the Holders of at least 25% in aggregate liquidation amount of the
Preferred Securities of GBB Capital then outstanding, then, upon such
declaration of acceleration, the Securities which shall be payable shall be the
principal amount thereof plus accrued interest (including any Additional
Interest).
(12) The Securities will be issued in fully registered form, without
coupons. The Securities will not be issued in bearer form.
(13) The amount of payments of principal of and any premium or
interest on the Securities will not be determined with reference to an index.
(14) The Securities shall not be issued in the form of a temporary
Global Security (as defined below).
(15) The Securities will initially be in certificated form registered
in the name of the name of Wilmington Trust Company, as Property Trustee (the
"Certificated Securities"). The Securities may, in the sole discretion of the
Company, be deposited with, and on behalf of, The Depository Trust Company, New
York, New York, as Depositary, and will be represented by a global security (a
"Global Security") registered in the name of a nominee of the Depositary. If,
and so long as the Depositary or its nominee is the registered holder of any
Global Security, the Depositary or its nominee, as the case may be, will be
considered the sole Holder of the Securities of such series represented by such
Global Security for all purposes under the Indenture and the Securities. The
Certificated Securities or the Global Securities, as the case may be, shall bear
no legends.
-4-
<PAGE>
(16) The Trustee shall be Paying Agent.
(17) The Securities will not be convertible into any other securities
or property of the Company. The Securities of any series may not be exchanged
for Securities of any other series.
(18) The Trust Agreement, the Amended and Restated Trust Agreement and
the Guarantee Agreement are in the forms attached hereto as Exhibits A, B and C
respectively.
(19) The Securities are subordinate and subject in right of payment to
the prior payment in full of all amounts then due and payable in respect of all
Senior and Subordinated Debt, as provided in the Indenture.
(20) The Securities of such series shall have such other terms and
provisions as are provided in the form set forth in Exhibit D hereto.
B. Establishment of Forms of Securities Pursuant to Section 2.1 of
---------------------------------------------------------------
Indenture.
- ---------
It is hereby established pursuant to Section 2.1 of the Indenture that the
Global Security representing the Securities shall be substantially in the form
attached as Exhibit D hereto.
C. Order for the Authentication and Delivery of Securities Pursuant to
-------------------------------------------------------------------
Section 3.3 of the Indenture.
- ----------------------------
It is hereby ordered pursuant to Section 3.3 of the Indenture that the
Trustee authenticate, in the manner provided by the Indenture, Securities in the
aggregate principal amount of $_____________ registered in the name of
Wilmington Trust Company, as Property Trustee, which Securities have been
heretofore duly executed by the proper officers of the Company and delivered to
you as provided in the Indenture, and to deliver said authenticated Securities
to Wilmington Trust Company or its custodian on or before 9:30 a.m.
on _____________.
D. Other Matters.
-------------
Attached as Exhibit E hereto are true and correct copies of resolutions
adopted by the Board of Directors of the Company at a meeting on ______________;
such resolutions have not been further amended, modified or rescinded and remain
in full force and effect; and such resolutions (together with this Officer's
Certificate) are the only resolution or other action adopted by the Company's
Board of Directors or any committee thereof or by any Authorized Officers
relating to the offering and sale of the Securities.
-5-
<PAGE>
The undersigned have read the pertinent sections of the Indenture including
the related definitions contained therein. The undersigned have examined the
resolutions adopted by the Board of Directors of the Company. In the opinion of
the undersigned, the undersigned have made such examination or investigation as
is necessary to enable the undersigned to express an informed opinion as to
whether or not the conditions precedent to the establishment of (i) a series of
Securities, (ii) the forms of such Securities and (iii) authentication of such
series of Securities, contained in the Indenture have been complied with. In
the opinion of the undersigned, such conditions have been complied with.
-6-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Certificate this
______th day of March, 1997.
GREATER BAY BANCORP
By____________________________
-7-
<PAGE>
Exhibit 4.4
CERTIFICATE OF TRUST
OF
GBB CAPITAL I
This Certificate of Trust of GBB Capital I (the "Trust"), dated February
__, 1997, is being duly executed and filed by the undersigned, as trustees, to
form a business trust under the Delaware Business Trust Act (12 Del. C. ((S))
3801 et seq.).
1. Name. The name of the business trust being formed hereby is GBB Capital
I.
2. Delaware Trustee. The name and business address of the trustee of the
Trust in the State of Delaware are Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
Corporate Trust Administrator.
3. Effective Date. This Certificate of Trust shall be effective upon its
filing.
In Witness Whereof, the undersigned, being the trustees of the Trust, have
executed this Certificate of Trust as of the date first above written.
Wilmington Trust Company,
as Trustee
By: /s/ Emmett R. Harmon
-------------------------
Name: Emmett R. Harmon
Title: Vice President
/s/ David L. Kalkbrenner
-----------------------------
David L. Kalkbrenner,
Administrative Trustee
/s/ Steven C. Smith
-----------------------------
Steven C. Smith,
Administrative Trustee
/s/ James R. Ramsey
-----------------------------
James R. Ramsey,
Administrative Trustee
<PAGE>
EXHIBIT 4.5
TRUST AGREEMENT
This TRUST AGREEMENT, dated as of February __, 1997 (this "Trust
Agreement"), among (i) Greater Bay Bancorp, a California corporation (the
"Depositor"), (ii) Wilmington Trust Company, a Delaware banking corporation, as
trustee, and (iii) David L. Kalkbrenner, Steven C. Smith and James R. Ramsey,
each an individual, as trustees (each of such trustees in (ii) and (iii) a
"Trustee" and collectively, the "Trustees"). The depositor and the Trustees
hereby agree as follows:
1. The trust created hereby (the "Trust") shall be known as "GBB
Capital I" in which name the Trustees, or the Depositor to the extent provided
herein, may engage in the transactions contemplated hereby, make and execute
contracts, and sue and be sued.
2. The Depositor hereby assigns, transfers, conveys and sets over to
the Trustees the sum of Ten Dollars ($10.00). The Trustees hereby acknowledge
receipt of such amount in trust from the Depositor, which amount shall
constitute the initial trust estate. The Trustees hereby declare that they will
hold the trust estate in trust for the Depositor. It is the intention of the
parties hereto that the Trust created hereby constitute a business trust under
Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. Section 3801, et seq.
(the "Business Trust Act"), and that this document constitutes the governing
instrument of the Trust. The Trustees are hereby authorized and directed to
execute and file a certificate of trust with the Delaware Secretary of State in
accordance with the provisions of the Business Trust Act.
3. The Depositor and the Trustees will enter into an amended and
restated Trust Agreement, satisfactory to each such party and substantially in
the form included as an exhibit to the 1933 Act Registration Statement (as
defined below), to provide for the contemplated operation of the Trust created
hereby and the issuance of the Trust Preferred Securities and Common Securities
referred to therein. Prior to the execution and delivery of such amended and
restated Trust Agreement, the Trustees shall not have any duty or obligation
hereunder or with respect to the trust estate, except as otherwise required by
applicable law or as may be necessary to obtain prior to such execution and
delivery any licenses, consents or approvals required by applicable law or
otherwise.
4. The Depositor and the Trustees hereby authorize and direct the
Depositor, as the sponsor of the Trust, (i) to file with the Securities and
Exchange Commission (the "Commission") and execute, in each case on behalf of
the Trust, (a) the Registration Statement on Form S-1 (the "1933 Act
Registration Statement"), including any pre-effective or post-effective
amendments to the 1933 Act Registration Statement, relating to the registration
under the Securities Act of 1933, as amended, of the Trust Preferred Securities
of the Trust and possibly certain other securities and (b) if required, a
Registration Statement on Form 8-A (the "1934 Act Registration Statement")
(including all pre-effective and post-effective amendments thereto)
1
<PAGE>
relating to the registration of the Trust Preferred Securities of the Trust
under the Securities Exchange Act of 1934, as amended; (ii) to file with the
Nasdaq National Market or a national stock exchange (each, an "Exchange") and
execute on behalf of the Trust one or more listing applications and all other
applications, statements, certificates, agreements and other instruments as
shall be necessary or desirable to cause the Trust Preferred Securities to be
listed on any of the Exchanges; (iii) to file and execute on behalf of the Trust
such applications, reports, surety bonds, irrevocable consents, appointments of
attorney for service of process and other papers and documents as shall be
necessary or desirable to register the Capital Securities under the securities
or blue sky laws of such jurisdictions as the Depositor, on behalf of the Trust,
may deem necessary or desirable; and (iv) to execute on behalf of the Trust that
certain Underwriting Agreement relating to the Trust Preferred Securities, among
the Trust, the Depositor and the Underwriter named therein, substantially in the
form included as an exhibit to the 1933 Act Registration Statement. In the event
that any filing referred to in clauses (i), (ii) and (iii) above is required by
the rules and regulations of the Commission, an Exchange or state securities or
blue sky laws to be executed on behalf of the Trust by one or more of the
Trustees, each of the Trustees in such Trustee's capacity as a Trustee of the
Trust, is hereby authorized and, to the extent so required, directed to join in
any such filing and to execute on behalf of the Trust any and all of the
foregoing, it being understood that Wilmington Trust Company in its capacity as
a Trustee of the Trust shall not be required to join in any such filing or
execute on behalf of the Trust any such document unless required by the rules
and regulations of the Commission, the Exchange or state securities or blue sky
laws. In connection with the filings referred to above, the Depositor and David
L. Kalkbrenner, Steven C. Smith and James R. Ramsey, each as Trustees and not in
their individual capacities, hereby constitutes and appoints David L.
Kalkbrenner, Steven C. Smith and James R. Ramsey, and each of them, as the
Depositor's or such Trustee's true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for the Depositor or such Trustee
or in the Depositor's or such Trustee's name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to the 1933 Act Registration Statement and the 1934 Act Registration Statement
(if required) and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Commission, the Exchange and
administrators of the state securities or blue sky laws, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully and to all intents and purposes as the Depositor or such Trustee might
or could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or their respective substitute or
substitutes, shall do or cause to be done by virtue hereof.
5. This Trust Agreement may be executed in one or more counterparts.
6. The number of Trustees initially shall be four (4) and thereafter
the number of Trustees shall be such number as shall be fixed from time to time
by a written instrument signed by the Depositor which may increase or decrease
the number of Trustees; provided, however, that to the extent required by the
Business Trust Act, one Trustee shall either be a natural person who is a
resident of the State of Delaware or, if not a natural person, an entity which
has its principal
2
<PAGE>
place of business in the State of Delaware and otherwise meets the requirements
of applicable Delaware law. Subject to the foregoing, the Depositor is entitled
to appoint or remove without cause any Trustee at any time. The Trustees may
resign upon thirty (30) days' prior notice to the Depositor.
7. This Trust Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without regard to conflict
of laws of principles).
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed as of the day and year first above written.
GREATER BAY BANCORP
as Depositor
By: /s/ David L. Kalkbrenner
------------------------
Name: David L. Kalkbrenner
Title: Chief Executive Officer
WILMINGTON TRUST COMPANY,
as Trustee
By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
By: /s/ David L. Kalkbrenner
------------------------
David L. Kalkbrenner, as Trustee
By: /s/ Steven C. Smith
-------------------
Steven C. Smith, as Trustee
By: /s/ James R. Ramsey
-------------------
James R. Ramsey, as Trustee
3
<PAGE>
Exhibit 4.6
AMENDED AND RESTATED
TRUST AGREEMENT
among
Greater Bay Bancorp, as Depositor,
Wilmington Trust Company,
as Property Trustee,
Wilmington Trust Company,
as Delaware Trustee,
and
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
Dated as of ___________, 1997
GBB CAPITAL I
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
PAGE
----
<S> <C>
AMENDED AND RESTATED TRUST AGREEMENT
(this "Trust Agreement") ..................................... 2
ARTICLE I. Defined Terms ..................................... 2
Section 1.1. Definitions .................................. 2
ARTICLE II. Establishment of the Trust ........................ 11
Section 2.1. Name ......................................... 11
Section 2.2. Office of the Delaware Trustee; Principal
Place of Business ................................. 11
Section 2.3. Initial Contribution of Trust Property;
Organizational Expenses ........................... 11
Section 2.4. Issuance of the Preferred Securities ......... 12
Section 2.5. Issuance of the Common Securities;
Subscription and Purchase of Debentures............ 12
Section 2.6. Declaration of Trust ......................... 12
Section 2.7. Authorization to Enter into Certain
Transactions ...................................... 13
Section 2.8. Assets of Trust .............................. 16
Section 2.9. Title to Trust Property ...................... 16
ARTICLE III. Payment Account .................................. 16
Section 3.1. Payment Account .............................. 16
ARTICLE IV. Distributions; Redemption ......................... 17
Section 4.1. Distributions ............................... 17
Section 4.2. Redemption .................................. 18
Section 4.3. Subordination of Common Securities .......... 20
Section 4.4. Payment Procedures .......................... 20
Section 4.5. Tax Returns and Reports ..................... 20
Section 4.6. Payment of Taxes, Duties, Etc. of the Trust . 21
Section 4.7. Payments under Indenture or Pursuant to
Direct Actions ................................... 21
ARTICLE V. Trust Preferred Securities Certificates ........... 21
Section 5.1. Initial Ownership ........................... 21
Section 5.2. The Trust Preferred Securities Certificates . 21
Section 5.3. Execution and Delivery of Trust Preferred
Securities Certificates .......................... 22
Section 5.4. Registration of Transfer and Exchange of
Preferred Securities Certificates................. 22
</TABLE>
i
<PAGE>
<TABLE>
PAGE
----
<S> <C>
Section 5.5. Mutilated, Destroyed, Lost or
Stolen Trust Preferred Securities Certificates .. 23
Section 5.6. Persons Deemed Securityholders ............. 23
Section 5.7. Access to List of Securityholders' Names
and Addresses ................................... 23
Section 5.8. Maintenance of Office or Agency ............ 24
Section 5.9. Appointment of Paying Agent ................ 24
Section 5.10. Ownership of Common Securities by Depositor 25
Section 5.11. Book-Entry Preferred Securities
Certificates; Common Securities Certificate...... 25
Section 5.12. Notices to Clearing Agency ................ 26
Section 5.13. Definitive Preferred Securities Certificates 26
Section 5.14. Rights of Securityholders ................. 26
ARTICLE VI. Acts of Securityholders; Meetings; Voting .......... 28
Section 6.1. Limitations on Voting Rights ............... 28
Section 6.2. Notice of Meetings ......................... 29
Section 6.3. Meetings of Preferred Security holders ..... 30
Section 6.4. Voting Rights .............................. 30
Section 6.5. Proxies, etc ............................... 30
Section 6.6. Securityholder Action by Written Consent ... 30
Section 6.7. Record Date for Voting and Other Purposes .. 31
Section 6.8. Acts of Securityholders .................... 31
Section 6.9. Inspection of Records ...................... 32
ARTICLE VII. Representations and Warranties .................... 32
Section 7.1. Representations and Warranties of the
Property Trustee and the Delaware Trustee ....... 32
Section 7.2. Representations and Warranties of Depositor 33
ARTICLE VIII. The Trustees ..................................... 34
Section 8.1. Certain Duties and Responsibilities ........ 34
Section 8.2. Certain Notices ............................ 35
Section 8.3. Certain Rights of Property
Trustee ......................................... 36
Section 8.4. Not Responsible for
Recitals or Issuance of Securities .............. 38
Section 8.5. May Hold Securities ........................ 38
Section 8.6. Compensation; Indemnity;
Fees ............................................ 38
Section 8.7. Corporate Property Trustee
Required; Eligibility of Trustees ............... 39
Section 8.8. Conflicting Interests ...................... 39
Section 8.9. Co-Trustees and Separate Trustee ........... 40
Section 8.10. Resignation and Removal Appointment of
Successor ....................................... 41
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 8.11. Acceptance of Appointment
by Successor ............................... 42
Section 8.12. Merger, Conversion, Consolidation
or Succession to Business................... 43
Section 8.13. Preferential Collection of Claims
Against Depositor or Trust ................. 43
Section 8.14. Reports by Property Trustee........... 44
Section 8.15. Reports to the Property Trustee ...... 45
Section 8.16. Evidence of Compliance with Conditions
Precedent ................................... 45
Section 8.17. Number of Trustees .................... 45
Section 8.18. Delegation of Power ................... 45
Section 8.19. Voting ................................ 46
ARTICLE IX. Termination, Liquidation and Merger ........... 46
Section 9.1. Termination Upon Expiration Date ....... 46
Section 9.2. Early Termination ...................... 46
Section 9.3. Termination ............................ 46
Section 9.4. Liquidation ............................ 47
Section 9.5. Mergers, Consolidations, Amalgamations
or Replacements of the Trust ................ 48
ARTICLE X. Miscellaneous Provisions ....................... 49
Section 10.1. Limitation of Rights of Security
holders ..................................... 49
Section 10.2. Amendment ............................. 49
Section 10.3. Separability .......................... 50
Section 10.4. Governing Law ......................... 51
Section 10.5. Payments Due on Non-Business Day ...... 51
Section 10.6. Successors ............................ 51
Section 10.7. Headings .............................. 51
Section 10.8. Reports, Notices and Demands .......... 51
Section 10.9. Agreement Not to Petition ............. 52
Section 10.10. Trust Indenture Act; Conflict with
Trust Indenture Act ......................... 52
Section 10.11. Acceptance of Terms of Trust Agreement,
Guarantee and Indenture ..................... 53
EXHIBIT A .................................................. 55
EXHIBIT B .................................................. 56
EXHIBIT C .................................................. 61
EXHIBIT D .................................................. 62
EXHIBIT E .................................................. 66
</TABLE>
iii
<PAGE>
GBB CAPITAL I
Certain Sections of this Trust Agreement relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Trust Agreement
Act Section Section
----------- --------
<S> <C> <C>
(S) 310 (a) (1) 8.7
(a) (2) 8.7
(a) (3) 8.7
(a) (4) 2.7 (a) (ii)
(b)
(S) 311 (a) 8.13
(b) 8.13
(S) 312 (a) 5.7
(b) 5.7
(c) 5.7
(S) 313 (a) 8.14 (a)
(a) (4) 8.14 (b)
(b) 8.14 (b)
(c) 10.8
(d) 8.14 (c)
(S) 314 (a) 8.15
(b) Not Applicable
(c) (1) 8.16
(c) (2) 8.16
(c) (3) Not Applicable
(d) Not Applicable
(e) 1.1, 8.16
(S) 315 (a) 8.1 (a), 8.3 (a)
(b) 8.2, 10.8
(c) 8.1 (a)
(d) 8.1, 8.3
(e) Not Applicable
(S) 316 (a) Not Applicable
(a) (1) (A) Not Applicable
(a) (1) (B) Not Applicable
(a) (2) Not Applicable
(b) 5.14
(c) 6.7
(S) 317 (a) (1) Not Applicable
(a) (2) Not Applicable
(b) 5.9
(S) 318 (a) 10.10
- ------------
</TABLE>
Note: This reconciliation and tie sheet shall not, for any purpose, be deemed to
be a part of the Trust Agreement.
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT (this "Trust Agreement"), dated as of
______________, 1997, among (i) Greater Bay Bancorp, a California corporation
(including any successors or assigns, the "Depositor"), (ii) Wilmington Trust
Company, a Delaware banking corporation duly organized and existing under the
laws of the State of Delaware, as property trustee, (in such capacity, the
"Property Trustee" and, in its separate corporate capacity and not in its
capacity as Property Trustee, the "Bank"), (iii) Wilmington Trust Company, a
Delaware banking corporation organized under the laws of the State of Delaware,
as Delaware trustee (the "Delaware Trustee"), (iv) David L. Kalkbrenner, an
individual, Steven C. Smith, an individual, and James R. Ramsey, an individual,
each of whose address is c/o Greater Bay Bancorp, 2860 West Bayshore Road, Palo
Alto, California 94303 (each an "Administrative Trustee" and collectively the
"Administrative Trustees") (the Property Trustee, the Delaware Trustee and the
Administrative Trustees are referred to collectively herein as the "Trustees")
and (v) the several Holders, as hereinafter defined.
Witnesseth
Whereas, the Depositor, the Delaware Trustee and David L. Kalkbrenner and
Steven C. Smith and James R. Ramsey, each as an Administrative Trustee, have
heretofore duly declared and established a business trust pursuant to the
Delaware Business Trust Act by the entering into that certain Trust Agreement,
dated as of __________, 1997 (the "Original Trust Agreement"), and by the
execution and filing by the Delaware Trustee with the Secretary of State of the
State of Delaware of the Certificate of Trust, filed on _________, 1997,
attached as Exhibit A; and
Whereas, the Depositor and the Trustees desire to amend and restate the
Original Trust Agreement in its entirety as set forth herein to provide for,
among other things, (i) the issuance of the Common Securities by the Trust to
the Depositor, (ii) the issuance and sale of the Preferred Securities by the
Trust pursuant to the Underwriting Agreement, (iii) the acquisition by the Trust
from the Depositor of all of the right, title and interest in the Debentures and
(iv) the appointment of the Administrative Trustees;
Now Therefore, in consideration of the agreements and obligations set forth
herein and for other good and valuable consideration, the sufficiency of which
is hereby acknowledged, each party, for the benefit of the other parties and for
the benefit of the Securityholders, hereby amends and restates the Original
Trust Agreement in its entirety and agrees as follows:
ARTICLE I
Defined Terms
Section 1.1. Definitions.
For all purposes of this Trust Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
2
<PAGE>
(a) the terms defined in this Article have the meanings assigned to them in
this Article and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
(c) unless the context otherwise requires, any reference to an "Article" or
a "Section" refers to an Article or a Section, as the case may be, of this Trust
Agreement; and
(d) the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Trust Agreement as a whole and not to any particular
Article, Section or other subdivision.
"Act" has the meaning specified in Section 6.8.
"Additional Amount" means, with respect to Trust Preferred Securities of a
given Liquidation Amount and/or a given period, the amount of Additional
Interest (as defined in the Indenture) paid by the Depositor on a Like Amount of
Debentures for such period.
"Additional Sums" has the meaning specified in Section 10.6 of the
Indenture.
"Administrative Trustee" means each of the Persons identified as an
"Administrative Trustee" in the preamble to this Trust Agreement solely in such
Person's capacity as Administrative Trustee of the Trust formed and continued
hereunder and not in such Person's individual capacity, or such Administrative
Trustee's successor in interest in such capacity, or any successor trustee
appointed as herein provided.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Bank" has the meaning specified in the preamble to this Trust Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction in the
premises judging such Person a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjudication or
composition of or in respect of such Person under any applicable Bankruptcy Law,
or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of such Person or of any substantial part of its property or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 90 consecutive
days; or
3
<PAGE>
(b) the institution by such Person of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable Bankruptcy Law,
or the consent by it to the filing of any such petition or to the appointment of
a receiver, liquidator, assignee, trustee, sequestrator (or similar official) of
such Person or of any substantial part of its property, or the making by it of
an assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due and its willingness
to be adjudicated a bankrupt, or the taking of corporate action by such Person
in furtherance of any such action.
"Bankruptcy Law" means any Federal or state bankruptcy, insolvency,
reorganization or similar law.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Depositor to have been duly adopted by the
Depositor's Board of Directors, or such committee of the Board of Directors or
officers of the Depositor to which authority to act on behalf of the Board of
Directors has been delegated, and to be in full force and effect on the date of
such certification, and delivered to the appropriate Trustees.
"Book-Entry Preferred Securities Certificates" means a beneficial interest
in the Preferred Securities Certificates, ownership and transfers of which shall
be made through book entries by a Clearing Agency as described in Section 5.11.
"Business Day" means a day other than (a) a Saturday or Sunday, (b) a day
on which banking institutions in the State of California are authorized or
required by law or executive order to remain closed, or (c) a day on which the
Property Trustee's Corporate Trust Office or the Corporate Trust Office of the
Debenture Trustee is closed for business.
"Certificate Depository Agreement" means the agreement among the Trust, the
Depositor and The Depository Trust Company, as the initial Clearing Agency,
dated as of the Closing Date, relating to the Trust Preferred Securities
Certificates, substantially in the form attached as Exhibit B, as the same may
be amended and supplemented from time to time.
"Certificate of Trust" means the certificate of trust filed with the
Secretary of State of the State of Delaware with Respect to the Trust, as
amended or restated from time to time.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act. The Depository Trust Company will
be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"Closing Date" means the date of execution and delivery of this Trust
Agreement.
4
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, as amended, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Security" means an undivided beneficial interest in the assets of
the Trust, having a Liquidation Amount of $25 and having the rights provided
therefor in this Trust Agreement, including the right to receive Distributions
and a Liquidation Distribution as provided herein.
"Common Securities Certificate" means a certificate evidencing ownership of
Common Securities, substantially in the form attached as Exhibit C.
"Corporate Trust Office" means (i) when used with respect to the Property
Trustee, the principal office of the Property Trustee located at Rodney Square
North, 1100 North Market Street, Wilmington, Delaware, 19890, Attention:
Corporate Trust Administration, and (ii) when used with respect to the Debenture
Trustee, the principal office of the Debenture Trustee located at Rodney Square
North, 1100 North Market Street, Wilmington, Delaware, 19890, Attention:
_______________.
"Debenture Event of Default" means an "Event of Default" as defined in the
Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to be
redeemed under the Indenture, the date fixed for redemption under the Indenture.
"Debenture Tax Event" means a "Tax Event" as defined in the Indenture.
"Debenture Trustee" means Wilmington Trust Company, a Delaware banking
corporation organized under the laws of the State of Delaware and any successor
thereto, as trustee under the Indenture.
"Debentures" means the aggregate principal amount of the Depositor's _____%
Junior Subordinated Deferrable Interest Debentures, issued pursuant to the
Indenture.
"Definitive Preferred Securities Certificates" means either or both (as the
context requires) of (a) Preferred Securities Certificates issued as Book-Entry
Preferred Securities Certificate as provided in Section 5.11(a) and (b)
Preferred Securities Certificates issued in certificated, fully registered form
as provided in Section 5.13.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. C. ((S)) 3801, et seq., as it may be amended from time to time.
"Delaware Trustee" means the Person identified as the "Delaware Trustee" in
the preamble to this Trust Agreement solely in its capacity as Delaware Trustee
of the Trust formed and continued
5
<PAGE>
hereunder and not in its individual capacity, or its successor in interest in
such capacity, or any successor trustee appointed as herein provided.
"Depositor" has the meaning specified in the preamble to this Trust
Agreement.
"Distribution Date" has the meaning specified in Section 4.1(a).
"Distributions" means amounts payable in respect of the Trust Preferred
Securities as provided in Section 4.1.
"Early Termination Event" has the meaning specified in Section 9.2.
"Event of Default" means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Trust in the payment of any Distribution when it becomes
due and payable, and continuation of such default for a period of 30 days; or
(c) default by the Trust in the payment of any Redemption Price of any
Trust Security when it becomes due and payable; or
(d) default in the performance, or breach, in any material respect, of any
covenant or warranty of the Property Trustee in this Trust Agreement (other than
a covenant or warranty a default in the performance or breach of which is dealt
with in clause (b) or (c) above) and continuation of such default or breach for
a period of 60 days after there has been given, by registered or certified mail,
to the defaulting Property Trustee by the Holders of at least 25% in aggregate
liquidation preference of the Outstanding Preferred Securities a written notice
specifying such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the Property
Trustee and the failure by the Depositor to appoint a successor Property Trustee
within 60 days thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expense Agreement" means the Agreement as to Expenses and Liabilities
between the Depositor and the Trust, substantially in the form attached as
Exhibit D, as amended from time to time.
"Expiration Date" has the meaning specified in Section 9.1.
6
<PAGE>
"Guarantee" means the Guarantee Agreement executed and delivered by the
Depositor and Wilmington Trust Company, as trustee, contemporaneously with the
execution and delivery of this Trust Agreement, for the benefit of the holders
of the Preferred Securities, as amended from time to time.
"Holder" means a Securityholder.
"Indenture" means the Junior Subordinated Indenture, dated as of
___________, 1997, between the Depositor and the Debenture Trustee, as trustee,
as amended or supplemented from time to time.
"Investment Company Event" means the receipt by the Depositor and the Trust
of an Opinion of Counsel experienced in such matters to the effect that, as a
result of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in Investment
Company Act Law"), the Trust is or will be considered an "investment company"
that is required to be registered under the Investment Company Act, which Change
in Investment Company Act Law becomes effective on or after the date or original
issuance of the Preferred Securities under this Trust Agreement.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, adverse claim, hypothecation, assignment,
security interest or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust Preferred
Securities, Trust Preferred Securities having a Liquidation Amount equal to the
principal amount of Debentures to be contemporaneously redeemed in accordance
with the Indenture the proceeds of which will be used to pay the Redemption
Price of such Trust Preferred Securities, and (b) with respect to a distribution
of Debentures to Holders of Trust Preferred Securities in connection with a
dissolution or liquidation of the Trust, Debentures having a principal amount
equal to the Liquidation Amount of the Trust Preferred Securities of the Holder
to whom such Debentures are distributed.
"Liquidation Amount" means the stated amount of $25 per Trust Security.
"Liquidation Date" means the date on which Debentures are to be distributed
to Holders of Trust Preferred Securities in connection with a termination and
liquidation of the Trust pursuant to Section 9.4(a).
"Liquidation Distribution" has the meaning specified in Section 9.4(d).
"1940 Act" means the Investment Company Act of 1940, as amended.
"Officers' Certificate" means a certificate signed by the Chairman and
Chief Executive Officer, President or a Vice President, and by the Treasurer, an
Associate Treasurer, an Assistant Treasurer, the Controller, the Secretary or an
Assistant Secretary, of the Depositor, and delivered to
7
<PAGE>
the appropriate Trustee. One of the officers signing an Officers' Certificate
given pursuant to Section 8.16 shall be the principal executive, financial or
accounting officer of the Depositor. Any Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in this Trust
Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such officer, such
condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Trust, the Property Trustee, the Delaware Trustee or the Depositor, but
not an employee of any thereof, and who shall be reasonably acceptable to the
Property Trustee.
"Original Trust Agreement" has the meaning specified in the recitals to
this Trust Agreement.
"Outstanding", when used with respect to Trust Preferred Securities, means,
as of the date of determination, all Trust Preferred Securities theretofore
executed and delivered under this Trust Agreement, except:
(a) Trust Preferred Securities theretofore canceled by the Property Trustee
or delivered to the Property Trustee for cancellation;
(b) Trust Preferred Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Property Trustee or any
Paying Agent for the Holders of such Trust Preferred Securities; provided that,
if such Trust Preferred Securities are to be redeemed, notice of such redemption
has been duly given pursuant to this Trust Agreement; and
(c) Trust Preferred Securities which have been paid or in exchange for or
in lieu of which other Preferred Securities have been executed and delivered
pursuant to Sections 5.4, 5.5, 5.11 and 5.13; provided, however, that in
determining whether the Holders of the requisite Liquidation Amount of the
Outstanding Preferred Securities have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Preferred Securities owned by
the Depositor, any Trustee or any Affiliate of the Depositor or any Trustee
shall be disregarded and deemed not to be Outstanding, except that (a) in
determining whether any Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Preferred Securities that such Trustee knows to be so owned shall be so
disregarded and (b) the foregoing shall not apply at
8
<PAGE>
any time when all of the outstanding Preferred Securities are owned by the
Depositor, one or more of the Trustees and/or any such Affiliate. Preferred
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Administrative
Trustees the pledgee's right so to act with respect to such Preferred Securities
and that the pledgee is not the Depositor or any Affiliate of the Depositor.
"Owner" means each Person who is the beneficial owner of a Book-Entry
Preferred Securities Certificate as reflected in the records of the Clearing
Agency or, if a Clearing Agency Participant is not the Owner, then as reflected
in the records of a Person maintaining an account with such Clearing Agency
(directly or indirectly, in accordance with the rules of such Clearing Agency).
"Paying Agent" means any paying agent or co-paying agent appointed pursuant
to Section 5.9 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing corporate trust
account maintained by the Property Trustee with the Bank in its trust department
for the benefit of the Securityholders in which all amounts paid in respect of
the Debentures will be held and from which the Property Trustee, through the
Paying Agent, shall make payments to the Securityholders in accordance with
Sections 4.1 and 4.2.
"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company or corporation, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Security" means an undivided beneficial interest in the assets
of the Trust, having a Liquidation Amount of $25 and having the rights provided
therefor in this Trust Agreement, including the right to receive Distributions
and a Liquidation Distribution as provided herein.
"Preferred Securities Certificate" means a certificate evidencing ownership
of Preferred Securities, substantially in the form attached as Exhibit E.
"Property Trustee" means the Person identified as the "Property Trustee" in
the preamble to this Trust Agreement solely in its capacity as Property Trustee
of the Trust heretofore formed and continued hereunder and not in its individual
capacity, or its successor in interest in such capacity, or any successor
property trustee appointed as herein provided.
"Redemption Date" means, with respect to any Trust Security to be redeemed,
the date fixed for such redemption by or pursuant to this Trust Agreement;
provided that each Debenture Redemption Date and the stated maturity of the
Debentures shall be a Redemption Date for a Like Amount of Trust Preferred
Securities.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, plus the related amount of the premium, if
any, paid by the Depositor upon the concurrent redemption of a
9
<PAGE>
Like Amount of Debentures, allocated on a pro rata basis (based on Liquidation
Amounts) among the Trust Preferred Securities.
"Relevant Trustee" shall have the meaning specified in Section 8.10.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 5.4.
"Securityholder" means a Person in whose name a Trust Security or Trust
Preferred Securities is registered in the Securities Register; any such Person
shall be deemed to be a beneficial owner within the meaning of the Delaware
Business Trust Act; provided, however, that in determining whether the Holders
of the requisite amount of Preferred Securities have voted on any matter
provided for in this Trust Agreement, then for the purpose of any such
determination, so long as Definitive Preferred Securities Certificates have not
been issued, the term Securityholders or Holders as used herein shall refer to
the Owners.
"Tax Event" means the receipt by the Trust of an Opinion of Counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities under this Trust Agreement, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days after the
date of such Opinion of Counsel, subject to United States Federal income tax
with respect to income received or accrued on the Debentures, (ii) interest
payable by the Depositor on the Debentures is not, or within 90 days after the
date of such Opinion of Counsel, will not be, deductible by the Depositor, in
whole or in part, for United States Federal income tax purposes or (iii) the
Trust is, or will be within 90 days after the date of such Opinion of Counsel,
subject to more than a de minimis amount of other taxes, duties, assessments or
other governmental charges.
"Trust" means the Delaware business trust created and continued hereby and
identified on the cover page to this Trust Agreement.
"Trust Agreement" means this Amended and Restated Trust Agreement, as the
same may be modified, amended or supplemented in accordance with the applicable
provisions hereof, including (i) all exhibits hereto and (ii) for all purposes
of this Trust Agreement and any such modification, amendment or supplement, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
this Trust Agreement and any such modification, amendment or supplement,
respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
10
<PAGE>
"Trust Property" means (a) the Debentures, (b) the rights of the Property
Trustee under the Guarantee, (c) any cash on deposit in, or owing to, the
Payment Account and (d) all proceeds and rights in respect of the foregoing and
any other property and assets for the time being held or deemed to be held by
the Property Trustee pursuant to the trusts of this Trust Agreement.
"Trust Security" means any one of the Common Securities or the Preferred
Securities.
"Trust Preferred Securities Certificate" means any one of the Common
Securities Certificates or the Preferred Securities Certificates.
"Trustees" means, collectively, the Property Trustee, the Delaware Trustee
and the Administrative Trustees.
"Underwriting Agreement" means the Agreement, dated as of ______________,
1997, among the Trust, the Depositor and the underwriters named therein.
ARTICLE II.
Establishment of the Trust
Section 2.1. Name.
The Trust continued hereby shall be known as "GBB Capital I," as such name
may be modified from time to time by the Administrative Trustees following
written notice to the Holders of Trust Preferred Securities and the other
Trustees, in which name the Trustees may conduct the business of the Trust, make
and execute contracts and other instruments on behalf of the Trust and sue and
be sued.
Section 2.2. Office of the Delaware Trustee; Principal Place of Business.
The address of the Delaware Trustee in the State of Delaware is c/o
Wilmington Trust Company, 1100 North Market Street, Wilmington, Delaware 19890,
Attention: Corporate Trust Administrator, or such other address in the State of
Delaware as the Delaware Trustee may designate by written notice to the
Securityholders and the Depositor. The principal executive office of the Trust
is c/o Greater Bay Bancorp, 2860 West Bayshore Road, Palo Alto, California,
94303.
Section 2.3. Initial Contribution of Trust Property; Organizational
Expenses.
The Trustees acknowledges receipt in trust from the Depositor in connection
with the Original Trust Agreement of the sum of $10, which constituted the
initial Trust Property. The Depositor shall pay organizational expenses of the
Trust as they arise or shall, upon request of any Trustee, promptly reimburse
such Trustee for any such expenses paid by such Trustee. The Depositor shall
make no claim upon the Trust Property for the payment of such expenses.
11
<PAGE>
Section 2.4. Issuance of the Preferred Securities.
On ___________, 1997 the Depositor and an Administrative Trustee, on behalf
of the Trust and pursuant to the Original Trust Agreement, executed and
delivered the Underwriting Agreement. Contemporaneously with the execution and
delivery of this Trust Agreement, an Administrative Trustee, on behalf of the
Trust, shall execute in accordance with Section 5.2 and deliver to the
Underwriters named in the Underwriting Agreement Preferred Securities
Certificates, registered in the name of the nominee of the initial Clearing
Agency, in an aggregate amount of ___________ Preferred Securities having an
aggregate Liquidation Amount of $___________, against receipt of such aggregate
purchase price of such Preferred Securities of $___________, which amount the
Administrative Trustee shall promptly deliver to the Property Trustee.
Section 2.5. Issuance of the Common Securities; Subscription and Purchase
of Debentures.
Contemporaneously with the execution and delivery of this Trust Agreement,
an Administrative Trustee, on behalf of the Trust, shall execute in accordance
with Section 5.2 and deliver to the Depositor Common Securities Certificates,
registered in the name of the Depositor, in an aggregate amount of _______
Common Securities having an aggregate Liquidation Amount of $____________
against payment by the Depositor of such amount, which amount such
Administrative Trustee shall promptly deliver to the Property Trustee.
Contemporaneously therewith, an Administrative Trustee, on behalf of the Trust,
shall subscribe to and purchase from the Depositor Debentures, registered in the
name of the Trust and having an aggregate principal amount equal to $_________,
and, in satisfaction of the purchase price for such Debentures, the Property
Trustee, on behalf of the Trust, shall deliver to the Depositor the sum of
$_________ (being the sum of the amounts delivered to the Property Trustee
pursuant to (i) the second sentence of Section 2.4 and (ii) the first sentence
of this Section 2.5).
Section 2.6. Declaration of Trust.
The exclusive purposes and functions of the Trust are (a) to issue and sell
Trust Preferred Securities and use the proceeds from such sale to acquire the
Debentures, and (b) to engage in those activities necessary, advisable or
incidental thereto. The Depositor hereby appoints the Trustees as trustees of
the Trust, to have all the rights, powers and duties to the extent set forth
herein, and the Trustees hereby accept such appointment. The Property Trustee
hereby declares that it will hold the Trust Property in trust upon and subject
to the conditions set forth herein for the benefit of the Trust and the
Securityholders. The Administrative Trustees shall have all rights, powers and
duties set forth herein and in accordance with applicable law with respect to
accomplishing the purposes of the Trust. The Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities, of the Property Trustee or the Administrative
Trustees set forth herein. The Delaware Trustee shall be one of the Trustees of
the Trust for the sole and limited purpose of fulfilling the requirements of
Section 3807 of the Delaware Business Trust Act.
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<PAGE>
Section 2.7. Authorization to Enter into Certain Transactions.
(a) The Trustees shall conduct the affairs of the Trust in accordance with
the terms of this Trust Agreement. Subject to the limitations set forth in
paragraph (b) of this Section and Section 2.6, and in accordance with the
following provisions (i) and (ii), the Trustees shall have the authority to
enter into all transactions and agreements determined by the Trustees to be
appropriate in exercising the authority, express or implied, otherwise granted
to the Trustees under this Trust Agreement, and to perform all acts in
furtherance thereof, including without limitation, the following:
(i) As among the Trustees, each Administrative Trustee shall have the power
and authority to act on behalf of the Trust with respect to the following
matters:
(A) the issuance and sale of the Trust Preferred Securities;
(B) to cause the Trust to enter into, and to execute, deliver and perform
on behalf of the Trust, the Expense Agreement and the Certificate Depository
Agreement and such other agreements as may be necessary or desirable in
connection with the purposes and function of the Trust;
(C) assisting in the registration of the Preferred Securities under the
Securities Act of 1933, as amended, and under state securities or blue sky laws,
and the qualification of this Trust Agreement as a trust indenture under the
Trust Indenture Act;
(D) assisting in the listing of the Preferred Securities upon such
securities exchange or exchanges as shall be determined by the Depositor and the
registration of the Preferred Securities under the Securities Exchange Act of
1934, as amended, and the preparation and filing of all periodic and other
reports and other documents pursuant to the foregoing;
(E) the sending of notices (other than notices of default) and other
information regarding the Trust Preferred Securities and the Debentures to the
Securityholders in accordance with this Trust Agreement;
(F) the appointment of a Paying Agent, authenticating agent and Securities
Registrar in accordance with this Trust Agreement;
(G) registering transfer of the Trust Preferred Securities in accordance
with this Trust Agreement;
(H) to the extent provided in this Trust Agreement, the winding up of the
affairs of and liquidation of the Trust and the preparation, execution and
filing of the certificate of cancellation with the Secretary of State of the
State of Delaware;
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(I) unless otherwise determined by the Depositor, the Property Trustee or
the Administrative Trustees, or as otherwise required by the Delaware Business
Trust Act or the Trust Indenture Act, to execute on behalf of the Trust (either
acting alone or together with any or all of the Administrative Trustees) any
documents that the Administrative Trustees have the power to execute pursuant to
this Trust Agreement; and
(J) the taking of any action incidental to the foregoing as the Trustees
may from time to time determine is necessary or advisable to give effect to the
terms of this Trust Agreement for the benefit of the Securityholders (without
consideration of the effect of any such action on any particular
Securityholder).
(ii) As among the Trustees, the Property Trustee shall have the power, duty
and authority to act on behalf of the Trust with respect to the following
matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and any other payments made in
respect of the Debentures in the Payment Account;
(D) the distribution through the Paying Agent of amounts owed to the
Securityholders in respect of the Trust Preferred Securities;
(E) the exercise of all of the rights, powers and privileges of a holder of
the Debentures;
(F) the sending of notices of default and other information regarding the
Trust Preferred Securities and the Debentures to the Securityholders in
accordance with this Trust Agreement;
(G) the distribution of the Trust Property in accordance with the terms of
this Trust Agreement;
(H) to the extent provided in this Trust Agreement, the winding up of the
affairs of and liquidation of the Trust and the preparation, execution and
filing of the certificate of cancellation with the Secretary of State of the
State of Delaware;
(I) after an Event of Default (other than under paragraph (b), (c), (d) or
(e) of the definition of such term if such Event of Default is by or with
respect to the Property Trustee) the taking of any action incidental to the
foregoing as the Property Trustee may from time to time determine is necessary
or advisable to give effect to the terms of this Trust Agreement and protect and
conserve the Trust Property for the
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benefit of the Securityholders (without consideration of the effect of any such
action on any particular Securityholder); and
(J) so long as the Property Trustee is the Securities Registrar,
registering transfers of the Trust Preferred Securities in accordance with this
Trust Agreement; and
(K) except as otherwise provided in this Section 2.7(a)(ii), the Property
Trustee shall have none of the duties, liabilities, powers or the authority of
the Administrative Trustees set forth in Section 2.7(a)(i).
(b) So long as this Trust Agreement remains in effect, the Trust (or the
Trustees acting on behalf of the Trust) shall not undertake any business,
activities or transaction except as expressly provided herein or contemplated
hereby. In particular, the Trustees shall not (i) acquire any investments or
engage in any activities not authorized by this Trust Agreement, (ii) sell,
assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of
any of the Trust Property or interests therein, including to Securityholders,
except as expressly provided herein, (iii) take any action that would cause the
Trust to fail or cease to qualify as a "grantor trust" for United States Federal
income tax purposes, (iv) incur any indebtedness for borrowed money or issue any
other debt or (v) take or consent to any action that would result in the
placement of a Lien on any of the Trust Property. The Administrative Trustees
shall defend all claims and demands of all Persons at any time claiming any Lien
on any of the Trust Property adverse to the interest of the Trust or the
Securityholders in their capacity as Securityholders.
(c) In connection with the issue and sale of the Preferred Securities, the
Depositor shall have the right and responsibility to assist the Trust with
respect to, or effect on behalf of the Trust, the following (and any actions
taken by the Depositor in furtherance of the following prior to the date of this
Trust Agreement are hereby ratified and confirmed in all respects):
(i) the preparation and filing by the Trust with the Commission and the
execution on behalf of the Trust of a registration statement on the appropriate
form in relation to the Preferred Securities, including any amendments thereto;
(ii) the determination of the States in which to take appropriate action to
qualify or register for sale all or part of the Preferred Securities and the
determination of any and all such acts, other than actions which must be taken
by or on behalf of the Trust, and the advice to the Trustees of actions they
must take on behalf of the Trust, and the preparation for execution and filing
of any documents to be executed and filed by the Trust or on behalf of the
Trust, as the Depositor deems necessary or advisable in order to comply with the
applicable laws of any such States;
(iii) the preparation for filing by the Trust and execution on behalf of
the Trust of an application to [the New York Stock Exchange or any other
national stock exchange or the Nasdaq National Market] for listing upon notice
of issuance of any Preferred Securities;
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(iv) the preparation for filing by the Trust with the Commission and the
execution on behalf of the Trust of a registration statement on Form 8-A
relating to the registration of the Preferred Securities under Section 12(b) or
12(g) of the Exchange Act, including any amendments thereto;
(v) the negotiation of the terms of, and the execution and delivery of, the
Underwriting Agreement providing for the sale of the Preferred Securities; and
(vi) the taking of any other actions necessary or desirable to carry out
any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the Administrative
Trustees are authorized and directed to conduct the affairs of the Trust and to
operate the Trust so that the Trust will not be deemed to be an "investment
company" required to be registered under the 1940 Act, or fail to be classified
as a grantor trust for United States Federal income tax purposes and so that the
Debentures will be treated as indebtedness of the Depositor for United States
Federal income tax purposes. In this connection, the Depositor and the
Administrative Trustees are authorized to take any action, not inconsistent with
applicable law, the Certificate of Trust or this Trust Agreement, that each of
the Depositor and any Administrative Trustee determines in its discretion to be
necessary or desirable for such purposes, as long as such action does not
adversely affect in any material respect the interests of the holders of the
Preferred Securities.
Section 2.8. Assets of Trust.
The assets of the Trust shall consist of the Trust Property.
Section 2.9. Title to Trust Property.
Legal title to all Trust Property shall be vested at all times in the
Property Trustee (in its capacity as such) and shall be held and administered by
the Property Trustee for the benefit of the Trust and the Securityholders in
accordance with this Trust Agreement.
ARTICLE III.
Payment Account
Section 3.1. Payment Account.
(a) On or prior to the Closing Date, the Property Trustee shall establish
the Payment Account. The Property Trustee and any agent of the Property Trustee
shall have exclusive control and sole right of withdrawal with respect to the
Payment Account for the purpose of making deposits in and withdrawals from the
Payment Account in accordance with this Trust Agreement. All monies and other
property deposited or held from time to time in the Payment Account shall be
held by the Property Trustee in the Payment Account for the exclusive benefit of
the Securityholders and for
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distribution as herein provided, including (and subject to) any priority of
payments provided for herein.
(b) The Property Trustee shall deposit in the Payment Account, promptly
upon receipt, all payments of principal of or interest on, and any other
payments or proceeds with respect to, the Debentures. Amounts held in the
Payment Account shall not be invested by the Property Trustee pending
distribution thereof.
ARTICLE IV.
Distributions; Redemption
Section 4.1. Distributions.
(a) The Trust Preferred Securities represent undivided beneficial interests
in the Trust Property, and Distributions (including of Additional Amounts) will
be made on the Trust Preferred Securities at the rate and on the dates that
payments of interest (including of Additional Interest, as defined in the
Indenture) are made on the Debentures. Accordingly:
(i) Distributions on the Trust Preferred Securities shall be cumulative,
and will accumulate whether or not there are funds of the Trust available for
the payment of Distributions. Distributions shall accrue from ___________,
1997, and, except in the event (and to the extent) that the Depositor exercises
its right to defer the payment of interest on the Debentures pursuant to the
Indenture, shall be payable quarterly in arrears on March 31, June 30, September
30 and December 31 of each year, commencing on ____________, 1997. If any date
on which a Distribution is otherwise payable on the Trust Preferred Securities
is not a Business Day, then the payment of such Distribution shall be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay) except that, if such Business Day is
in the next succeeding calendar year, payment of such Distribution shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such date (each date on which distributions are payable in
accordance with this Section 4.1(a), a "Distribution Date").
(ii) Assuming payments of interest on the Debentures are made when due (and
before giving effect to Additional Amounts, if applicable), Distributions on the
Trust Preferred Securities shall be payable at a rate of ____% per annum of the
Liquidation Amount of the Trust Preferred Securities. The amount of
Distributions payable for any full period shall be computed on the basis of a
360-day year of twelve 30-day months. The amount of Distributions for any
partial period shall be computed on the basis of the number of days elapsed in a
360-day year of twelve 30-day months. The amount of Distributions payable for
any period shall include the Additional Amounts, if any.
(iii) Distributions on the Trust Preferred Securities shall be made by the
Property Trustee from the Payment Account and shall be payable on each
Distribution Date only to the
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extent that the Trust has funds then on hand and available in the Payment
Account for the payment of such Distributions.
(b) Distributions on the Trust Preferred Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they appear on the
Securities Register for the Trust Preferred Securities on the relevant record
date, which shall be one Business Day prior to such Distribution Date; provided,
however, that in the event that the Preferred Securities do not remain in book-
entry-only form, the relevant record date shall be the date 15 days prior to the
relevant Distribution Date.
Section 4.2. Redemption.
(a) On each Debenture Redemption Date and on the stated maturity of the
Debentures, the Trust will be required to redeem, subject to Section 4.3, a Like
Amount of Trust Preferred Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by first-
class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior
to the Redemption Date to each Holder of Trust Preferred Securities to be
redeemed, at such Holder's address appearing in the Security Register. All
notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Preferred Securities are to be
redeemed, the identification and the total Liquidation Amount of the particular
Trust Preferred Securities to be redeemed; and
(v) that on the Redemption Date the Redemption Price will become due and
payable upon each such Trust Security to be redeemed and that Distributions
thereon will cease to accrue on and after said date.
(c) The Trust Preferred Securities redeemed on each Redemption Date shall
be redeemed at the Redemption Price with the proceeds from the contemporaneous
redemption of Debentures. Redemptions of the Trust Preferred Securities shall be
made and the Redemption Price shall be payable on each Redemption Date only to
the extent that the Trust has funds then on hand and available in the Payment
Account for the payment of such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect of any
Preferred Securities, then, by 12:00 noon, New York City time, on the Redemption
Date, subject to Section 4.2(c), with respect to Preferred Securities held in
book-entry form, the Property Trustee will irrevocably deposit with the Clearing
Agency for the Preferred Securities funds sufficient to pay the applicable
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Redemption Price and will give such Clearing Agency irrevocable instructions and
authority to pay the Redemption Price to the holders thereof. With respect to
Preferred Securities held in certificated form, the Property Trustee, subject to
Section 4.2(c), will irrevocably deposit with the Paying Agent funds sufficient
to pay the applicable Redemption Price and will give the Paying Agent
irrevocable instructions and authority to pay the Redemption Price to the
Holders thereof upon surrender of their Preferred Securities Certificates.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Trust Preferred Securities called for redemption shall
be payable to the Holders of such Trust Preferred Securities as they appear on
the Register for the Trust Preferred Securities on the relevant record dates for
the related Distribution Dates. If notice of redemption shall have been given
and funds deposited as required, then upon the date of such deposit, all rights
of Securityholders holding Trust Preferred Securities so called for redemption
will cease, except the right of such Securityholders to receive the Redemption
Price and any Distribution payable on or prior to the Redemption Date, but
without interest, and such Securities will cease to be outstanding. In the event
that any date on which any Redemption Price is payable is not a Business Day,
then payment of the Redemption Price payable on such date will be made on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day falls
in the next calendar year, such payment will be made on he immediately preceding
Business Day, in each case, with the same force and effect as if made on such
date. In the event that payment of the Redemption Price in respect of any Trust
Preferred Securities called for redemption is improperly withheld or refused and
not paid either by the Trust or by the Depositor pursuant to the Guarantee,
Distributions on such Trust Preferred Securities will continue to accrue, at the
then applicable rate, from the Redemption Date originally established by the
Trust for such Trust Preferred Securities to the date such Redemption Price is
actually paid, in which case the actual payment date will be the date fixed for
redemption for purposes of calculating the Redemption Price.
(e) Payment of the Redemption Price on the Trust Preferred Securities shall
be made to the recordholders thereof as they appear on the Securities Register
for the Trust Preferred Securities on the relevant record date, which shall be
one Business Day prior to the relevant Redemption Date; provided, however, that
in the event that the Preferred Securities do not remain in book-entry-only
form, the relevant record date shall be the date fifteen days prior to the
relevant Redemption Date.
(f) Subject to Section 4.3(a), if less than all the Outstanding Trust
Preferred Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Preferred Securities to be redeemed shall be
allocated on a pro rata basis (based on Liquidation Amounts) among the Common
Securities and the Preferred Securities. The particular Preferred Securities to
be redeemed shall be selected on a pro rata basis (based upon Liquidation
Amounts) not more than 60 days prior to the Redemption Date by the Property
Trustee from the Outstanding Preferred Securities not previously called for
redemption, by such method (including, without limitation, by lot) as the
Property Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to $25 or an integral multiple of
$25 in excess thereof) of the Liquidation Amount of Preferred Securities of a
denomination larger than $25. The Property Trustee shall promptly notify the
Security Registrar in writing of the Preferred Securities selected for
redemption and, in the case of any Preferred Securities selected for partial
redemption, the Liquidation Amount thereof to be redeemed. For all purposes of
this Trust Agreement, unless the
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context otherwise requires, all provisions relating to the redemption of
Preferred Securities shall relate, in the case of any Preferred Securities
redeemed or to be redeemed only in part, to the portion of the Liquidation
Amount of Preferred Securities that has been or is to be redeemed.
Section 4.3. Subordination of Common Securities.
(a) Payment of Distributions (including Additional Amounts, if applicable)
on, and the Redemption Price of, the Trust Preferred Securities, as applicable,
shall be made, subject to Section 4.2(f), pro rata among the Common Securities
and the Preferred Securities based on the Liquidation Amount of the Trust
Preferred Securities; provided, however, that if on any Distribution Date or
Redemption Date any Event of Default resulting from a Debenture Event of Default
shall have occurred and be continuing, no payment of any Distribution (including
Additional Amounts, if applicable) on, or Redemption Price of, any Common
Security, and no other payment on account of the redemption, liquidation or
other acquisition of Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions (including Additional Amounts,
if applicable) on all Outstanding Preferred Securities for all Distribution
periods terminating on or prior thereto, or in the case of payment of the
Redemption Price the full amount of such Redemption Price on all Outstanding
Preferred Securities, shall have been made or provided for, and all funds
immediately available to the Property Trustee shall first be applied to the
payment in full in cash of all Distributions (including Additional Amounts, if
applicable) on, or the Redemption Price of, Preferred Securities then due and
payable.
(b) In the case of the occurrence of any Event of Default resulting from
any Debenture Event of Default, the Holder of Common Securities will be deemed
to have waived any right to act with respect to any such Event of Default under
this Trust Agreement until the effect of all such Events of Default with respect
to the Preferred Securities have been cured, waived or otherwise eliminated.
Until any such Event of Default under this Trust Agreement with respect to the
Preferred Securities has been so cured, waived or otherwise eliminated, the
Property Trustee shall act solely on behalf of the Holders of the Preferred
Securities and not the Holder of the Common Securities, and only the Holders of
the Preferred Securities will have the right to direct the Property Trustee to
act on their behalf.
Section 4.4. Payment Procedures.
Payments of Distributions (including Additional Amounts, if applicable) in
respect of the Preferred Securities shall be made by check mailed to the address
of the Person entitled thereto as such address shall appear on the Securities
Register or, if the Preferred Securities are held by a Clearing Agency, such
Distributions shall be made to the Clearing Agency in immediately available
funds, which shall credit the relevant Persons' accounts at such Clearing Agency
on the applicable Distribution Dates. Payments in respect of the Common
Securities shall be made in such manner as shall be mutually agreed between the
Property Trustee and the Common Securityholder.
Section 4.5. Tax Returns and Reports.
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The Administrative Trustees shall prepare (or cause to be prepared), at the
Depositor's expense, and file all United States Federal, state and local tax and
information returns and reports required to be filed by or in respect of the
Trust. In this regard, the Administrative Trustees shall (a) prepare and file
(or cause to be prepared and filed) the appropriate Internal Revenue Service
Form required to be filed in respect of the Trust in each taxable year of the
Trust and (b) prepare and furnish (or cause to be prepared and furnished) to
each Securityholder the appropriate Internal Revenue Service form required to be
provided on such form. The Administrative Trustees shall provide the Depositor
and the Property Trustee with a copy of all such returns and reports promptly
after such filing or furnishing. The Trustees shall comply with United States
Federal withholding and backup withholding tax laws and information reporting
requirements with respect to any payments to Securityholders under the Trust
Preferred Securities.
Section 4.6. Payment of Taxes, Duties, Etc. of the Trust.
Upon receipt under the Debentures of Additional Sums, the Property Trustee
shall promptly pay any taxes, duties or governmental charges of whatsoever
nature (other than withholding taxes) imposed on the Trust by the United States
or any other taxing authority.
Section 4.7. Payments under Indenture or Pursuant to Direct Actions.
Any amount payable hereunder to any Holder of Preferred Securities (and any
Owner with respect thereto) shall be reduced by the amount of any corresponding
payment such Holder (and Owner) has directly received pursuant to Section 5.8 of
the Indenture or Section 5.14 of this Trust Agreement.
ARTICLE V.
Trust Preferred Securities Certificates
Section 5.1. Initial Ownership.
Upon the formation of the Trust and the contribution by the Depositor
pursuant to Section 2.3 and until the issuance of the Trust Preferred
Securities, and at any time during which no Trust Preferred Securities are
outstanding, the Depositor shall be the sole beneficial owner of the Trust.
Section 5.2. The Trust Preferred Securities Certificates.
The Preferred Securities Certificates shall be issued in minimum
denominations of $25 Liquidation Amount and integral multiples of $25 in excess
thereof, and the Common Securities Certificates shall be issued in denominations
of $25 Liquidation Amount and integral multiples thereof. The Trust Preferred
Securities Certificates shall be executed on behalf of the Trust by manual
signature of at least one Administrative Trustee. Trust Preferred Securities
Certificates bearing the manual signatures of individuals who were, at the time
when such signatures shall have been affixed, authorized to sign on behalf of
the Trust, shall be validly issued and entitled to the benefits of this Trust
Agreement, notwithstanding that such individuals or any of them shall have
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ceased to be so authorized prior to the delivery of such Trust Preferred
Securities Certificates or did not hold such offices at the date of delivery of
such Trust Preferred Securities Certificates. A transferee of a Trust Preferred
Securities Certificate shall become a Securityholder, and shall be entitled to
the rights and subject to the obligations of a Securityholder hereunder, upon
due registration of such Trust Preferred Securities Certificate in such
transferee's name pursuant to Sections 5.4, 5.11 and 5.13.
Section 5.3. Execution and Delivery of Trust Preferred Securities
Certificates.
At the Closing Date, the Administrative Trustees shall cause Trust
Preferred Securities Certificates, in an aggregate Liquidation Amount as
provided in Section 2.4, to be executed on behalf of the Trust and delivered to
or upon the written order of the Depositor, signed by its chairman of the board,
its president, any executive vice president or any vice president, treasurer or
assistant treasurer or controller without further corporate action by the
Depositor, in authorized denominations.
Section 5.4. Registration of Transfer and Exchange of Preferred Securities
Certificates.
The Depositor shall keep or cause to be kept, at the office or agency
maintained pursuant to Section 5.8, a register or registers for the purpose of
registering Trust Preferred Securities Certificates and transfers and exchanges
of Preferred Securities Certificates (the "Securities Register") in which, the
registrar designated by the Depositor (the "Securities Registrar"), subject to
such reasonable regulations as it may prescribe, shall provide for the
registration of Preferred Securities Certificates and Common Securities
Certificates (subject to Section 5.10 in the case of the Common Securities
Certificates) and registration of transfers and exchanges of Preferred
Securities Certificates as herein provided. The Bank shall be the initial
Securities Registrar.
Upon surrender for registration of transfer of any Preferred Securities
Certificate at the office or agency maintained pursuant to Section 5.8, the
Administrative Trustees or any one of them shall execute and deliver, in the
name of the designated transferee or transferees, one or more new Preferred
Securities Certificates in authorized denominations of a like aggregate
Liquidation Amount dated the date of execution by such Administrative Trustee or
Trustees.
The Securities Registrar shall not be required to register the transfer of
any Preferred Securities that have been called for redemption. At the option of
a Holder, Preferred Securities Certificates may be exchanged for other Preferred
Securities Certificates in authorized denominations of the same class and of a
like aggregate Liquidation Amount upon surrender of the Preferred Securities
Certificates to be exchanged at the office or agency maintained pursuant to
Section 5.8.
Every Preferred Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to an Administrative Trustee and the
Securities Registrar duly executed by the Holder or his attorney duly authorized
in writing. Each Preferred Securities Certificate surrendered for registration
of transfer or exchange shall be canceled and subsequently disposed of by an
Administrative Trustee in accordance with such Person's customary practice. The
Trust shall not be required to (i) issue,
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register the transfer of, or exchange any Preferred Securities during a period
beginning at the opening of business 15 calendar days before the date of mailing
of a notice of redemption of any Preferred Securities called for redemption and
ending at the close business on the day of such mailing or (ii) register the
transfer of or exchange any Preferred Securities so selected for redemption, in
whole or in part, except the unredeemed portion of any such Preferred Securities
being redeemed in part.
No service charge shall be made for any registration of transfer or
exchange of Preferred Securities Certificates, but the Securities Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Preferred
Securities Certificates.
Section 5.5. Mutilated, Destroyed, Lost or Stolen Trust Preferred
Securities Certificates.
If (a) any mutilated Trust Preferred Securities Certificate shall be
surrendered to the Securities Registrar, or if the Securities Registrar shall
receive evidence to its satisfaction of the destruction, loss or theft of any
Trust Preferred Securities Certificate and (b) there shall be delivered to the
Securities Registrar and the Administrative Trustees such security or indemnity
as may be required by them to save each of them harmless, then in the absence of
notice that such Trust Preferred Securities Certificate shall have been acquired
by a bona fide purchaser, the Administrative Trustees, or any one of them, on
behalf of the Trust shall execute and make available for delivery, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Trust Preferred
Securities Certificate, a new Trust Preferred Securities Certificate of like
class, tenor and denomination. In connection with the issuance of any new Trust
Preferred Securities Certificate under this Section, the Administrative Trustees
or the Securities Registrar may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection
therewith. Any duplicate Trust Preferred Securities Certificate issued pursuant
to this Section shall constitute conclusive evidence of an undivided beneficial
interest in the assets of the Trust, as if originally issued, whether or not the
lost, stolen or destroyed Trust Preferred Securities Certificate shall be found
at any time.
Section 5.6. Persons Deemed Securityholders.
The Trustees or the Securities Registrar shall treat the Person in whose
name any Trust Preferred Securities Certificate shall be registered in the
Securities Register as the owner of such Trust Preferred Securities Certificate
for the purpose of receiving Distributions and for all other purposes
whatsoever, and neither the Trustees nor the Securities Registrar shall be bound
by any notice to the contrary.
Section 5.7. Access to List of Securityholders' Names and Addresses.
At any time when the Property Trustee is not also acting as the Securities
Registrar, the Administrative Trustees or the Depositor shall furnish or cause
to be furnished to the Property Trustee (a) semi-annually on or before January 1
and July 1 in each year, a list, in such form as the Property Trustee may
reasonably require, of the names and addresses of the Security holders as of the
most recent Record Date and (b) promptly after receipt by any Administrative
Trustee or the Depositor of a request therefor from the Property Trustee, such
other information as the Property
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Trustee may reasonably require in order to enable the Property Trustee to
discharge its obligations under this Trust Agreement, in each case to the extent
such information is in the possession or control of the Administrative Trustees
or the Depositor and is not identical to a previously supplied list or has not
otherwise been received by the Property Trustee in its capacity as Securities
Registrar. The rights of Security holders to communicate with other Security
holders with respect to their rights under this Trust Agreement or under the
Trust Preferred Securities, and the corresponding rights of the Trustee shall be
as provided in the Trust Indenture Act. Each Holder, by receiving and holding a
Trust Preferred Securities Certificate, and each Owner shall be deemed to have
agreed not to hold the Depositor, the Property Trustee or the Administrative
Trustees accountable by reason of the disclosure of its name and address,
regardless of the source from which such information was derived.
Section 5.8. Maintenance of Office or Agency.
The Administrative Trustees shall maintain an office or offices or agency
or agencies where Preferred Securities Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Trustees in respect of the Trust Preferred Securities Certificates may be
served. The Administrative Trustees initially designate the principal corporate
trust office of the Property Trustee, Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administrator, as
the principal corporate trust office for such purposes. The Administrative
Trustees shall give prompt written notice to the Depositor and to the
Securityholders of any change in the location of the Securities Register or any
such office or agency.
Section 5.9. Appointment of Paying Agent.
The Paying Agent shall make Distributions to Securityholders from the
Payment Account and shall report the amounts of such Distributions to the
Property Trustee and the Administrative Trustees. Any Paying Agent shall have
the revocable power to withdraw funds from the Payment Account for the purpose
of making the Distributions referred to above. The Administrative Trustees may
revoke such power and remove the Paying Agent if such Trustees determine in
their sole discretion that the Paying Agent shall have failed to perform its
obligations under this Trust Agreement in any material respect. The Paying
Agent shall initially be the Property Trustee, and any co-paying agent chosen by
the Property Trustee, and acceptable to the Administrative Trustees and the
Depositor. Any Person acting as Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Administrative Trustees, the
Property Trustee and the Depositor. In the event that the Property Trustee shall
no longer be the Paying Agent or a successor Paying Agent shall resign or its
authority to act be revoked, the Administrative Trustees shall appoint a
successor that is acceptable to the Property Trustee and the Depositor to act as
Paying Agent (which shall be a bank or trust company). The Administrative
Trustees shall cause such successor Paying Agent or any additional Paying Agent
appointed by the Administrative Trustees to execute and deliver to the Trustees
an instrument in which such successor Paying Agent or additional Paying Agent
shall agree with the Trustees that as Paying Agent, such successor Paying Agent
or additional Paying Agent will hold all sums, if any, held by it for payment to
the Securityholders in trust for the benefit of the Securityholders entitled
thereto until such sums shall be paid to such Securityholders. The Paying Agent
shall return all unclaimed funds to the Property Trustee and upon removal of a
Paying Agent
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such Paying Agent shall also return all funds in its possession to the Property
Trustee. The provisions of Sections 8.1, 8.3 and .6 herein shall apply to the
Bank also in its role as Paying Agent, for so long as the Bank shall act as
Paying Agent and, to the extent applicable, to any other paying agent appointed
hereunder. Any reference in this Agreement to the Paying Agent shall include any
co-paying agent unless the context requires otherwise.
Section 5.10. Ownership of Common Securities by Depositor.
At the Closing Date, the Depositor shall acquire and retain beneficial and
record ownership of the Common Securities. To the fullest extent permitted by
law, other than a transfer in connection with a consolidation or merger of the
Depositor into another corporation, or any conveyance, transfer or lease by the
Depositor of its properties and assets substantially as an entirety to any
Person, pursuant to Section 8.1 of the Indenture, any attempted transfer of the
Common Securities shall be void. The Administrative Trustees shall cause each
Common Securities Certificate issued to the Depositor to contain a legend
stating "THIS CERTIFICATE IS NOT TRANSFERABLE".
Section 5.11. Book-Entry Preferred Securities Certificates; Common
Securities Certificate.
(a) The Preferred Securities Certificates, upon original issuance, will be
issued in the form of a typewritten Preferred Securities Certificate or
Certificates representing Book-Entry Preferred Securities Certificates, to be
delivered to The Depository Trust Company, the initial Clearing Agency, by, or
on behalf of, the Trust. Such Preferred Securities Certificate or Certificates
shall initially be registered on the Securities Register in the name of Cede &
Co., the nominee of the initial Clearing Agency, and no Owner will receive a
Definitive Preferred Securities Certificate representing such Owner's interest
in such Preferred Securities, except as provided in Section 5.13. Unless and
until Definitive Preferred Securities Certificates have been issued to Owners
pursuant to Section 5.13:
(i) the provisions of this Section 5.11(a) shall be in full force and
effect;
(ii) the Securities Registrar, the Paying Agent and the Trustees shall be
entitled to deal with the Clearing Agency for all purposes of this Trust
Agreement relating to the Book-Entry Preferred Securities Certificates
(including the payment of the Liquidation Amount of and Distributions on the
Preferred Securities evidenced by Book-Entry Preferred Securities Certificates)
the Book-Entry Preferred Securities Certificates and shall have no obligations
to the Owners thereof;
(iii) to the extent that the provisions of this Section 5.11 conflict with
any other provisions of this Trust Agreement, the provisions of this Section
5.11 shall control; and
(iv) the rights of the Owners of the Book-Entry Preferred Securities
Certificates shall be exercised only through the Clearing Agency and shall be
limited to those established by law and agreements between such Owners and the
Clearing Agency and/or the Clearing Agency Participants. Pursuant to the
Certificate Depository Agreement, unless and until Definitive Preferred
Securities Certificates are issued pursuant to Section 5.13, the initial
Clearing Agency will make book-entry transfers among the Clearing Agency
Participants and receive
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and transmit payments on the Preferred Securities to such Clearing Agency
Participants. Any Clearing Agency designated pursuant here to will not be deemed
an agent of the Trustee for any purpose.
(b) A single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.
Section 5.12. Notices to Clearing Agency.
To the extent that a notice or other communication to the Owners is
required under this Trust Agreement, unless and until Definitive Preferred
Securities Certificates shall have been issued to Owners pursuant to Section
5.13, the Trustees shall give all such notices and communications specified
herein to be given to Owners to the Clearing Agency, and shall have no
obligations to the Owners.
Section 5.13. Definitive Preferred Securities Certificates.
If (a) the Depositor advises the Trustees in writing that the Clearing
Agency is no longer willing or able to properly discharge its responsibilities
with respect to the Preferred Securities Certificates, and the Depositor is
unable to locate a qualified successor, (b) the Depositor at its option advises
the Trustees in writing that it elects to terminate the book-entry system
through the Clearing Agency or (c) after the occurrence of a Debenture Event of
Default, Owners of Preferred Securities Certificates representing beneficial
interests aggregating at least a majority of the Liquidation Amount advise the
Property Trustee in writing that the continuation of a book-entry system through
the Clearing Agency is no longer in the best interest of the Owners of Preferred
Securities Certificates, then the Property Trustee shall notify the Clearing
Agency and the Clearing Agency shall notify all Owners of Preferred Securities
Certificates and the other Trustees of the occurrence of any such event and of
the availability of the Definitive Preferred Securities Certificates to Owners
of such class or classes, as applicable, requesting the same. Upon surrender to
the Property Trustee of the typewritten Preferred Securities Certificate or
Certificates representing the Book Entry Preferred Securities Certificates by
the Clearing Agency, accompanied by registration instructions, the
Administrative Trustees, or any one of them, shall execute the Definitive
Preferred Securities Certificates in accordance with the instructions of the
Clearing Agency. Neither the Securities Registrar nor the Trustees shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions. Upon the issuance
of Definitive Preferred Securities Certificates, the Trustees shall recognize
the Holders of the Definitive Preferred Securities Certificates as
Securityholders. The Definitive Preferred Securities Certificates shall be
printed, lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Administrative Trustees, as evidenced by the
execution thereof by the Administrative Trustees or any one of them.
Section 5.14. Rights of Securityholders.
(a) The legal title to the Trust Property is vested exclusively in the
Property Trustee (in its capacity as such) in accordance with Section 2.9, and
the Securityholders shall not have any right or
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title therein other than the undivided beneficial interest in the assets of the
Trust conferred by their Trust Preferred Securities and they shall have no right
to call for any partition or division of property, profits or rights of the
Trust except as described below. The Trust Preferred Securities shall be
personal property giving only the rights specifically set forth therein and in
this Trust Agreement. The Trust Preferred Securities shall have no preemptive or
similar rights and when issued and delivered to Securityholders against payment
of the purchase price therefor will be fully paid and nonassessable by the
Trust. The Holders of the Trust Preferred Securities, in their capacities as
such, shall be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware.
(b) For so long as any Preferred Securities remain Outstanding, if, upon a
Debenture Event of Default, the Debenture Trustee fails or the holders of not
less than 25% in principal amount of the outstanding Debentures fail to declare
the principal of all of the Debentures to be immediately due and payable, the
Holders of at least 25% in Liquidation Amount of the Preferred Securities then
Outstanding shall have such right by a notice in writing to the Depositor and
the Debenture Trustee; and upon any such declaration such principal amount of
and the accrued interest on all of the Debentures shall become immediately due
and payable, provided that the payment of principal and interest on such
Debentures shall remain subordinated to the extent provided in the Indenture.
At any time after such a declaration of acceleration with respect to the
Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as in the Indenture
provided, the Holders of a majority in Liquidation Amount of the Preferred
Securities, by written notice to the Property Trustee, the Depositor and the
Debenture Trustee, may rescind and annul such declaration and its consequences
if:
(i) the Depositor has paid or deposited with the Debenture Trustee a sum
sufficient to pay
(A) all overdue installments of interest (including any Additional Interest
(as defined in the Indenture)) on all of the Debentures,
(B) the principal of (and premium, if any, on) any Debentures which have
become due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Debentures, and
(C) all sums paid or advanced by the Debenture Trustee under the Indenture
and the reasonable compensation, expenses, disbursements and advances of the
Debenture Trustee and the Property Trustee, their agents and counsel; and
(ii) all Events of Default with respect to the Debentures, other than the
non-payment of the principal of the Debentures which has become due solely by
such acceleration, have been cured or waived as provided in Section 5.13 of the
Indenture.
The holders of a majority in aggregate Liquidation Amount of the Preferred
Securities may, on behalf of the Holders of all the Preferred Securities, waive
any past default under the Indenture,
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except a default in the payment of principal or interest (unless such default
has been cured and a sum sufficient to pay all matured installments of interest
and principal due otherwise than by acceleration has been deposited with the
Debenture Trustee) or a default in respect of a covenant or provision which
under the Indenture cannot be modified or amended without the consent of the
holder of each outstanding Debenture. No such rescission shall affect any
subsequent default or impair any right consequent thereon.
Upon receipt by the Property Trustee of written notice declaring such an
acceleration, or rescission and annulment thereof, by Holders of the Preferred
Securities all or part of which is represented by Book-Entry Preferred
Securities Certificates, a record date shall be established for determining
Holders of Outstanding Preferred Securities entitled to join in such notice,
which record date shall be at the close of business on the day the Property
Trustee receives such notice. The Holders on such record date, or their duly
designated proxies, and only such Persons, shall be entitled to join in such
notice, whether or not such Holders remain Holders after such record date;
provided, that, unless such declaration of acceleration, or rescission and
annulment, as the case may be, shall have become effective by virtue of the
requisite percentage having joined in such notice prior to the day which is 90
days after such record date, such notice of declaration of acceleration, or
rescission and annulment, as the case may be, shall automatically and without
further action by any Holder be canceled and of no further effect. Nothing in
this paragraph shall prevent a Holder, or a proxy of a Holder, from giving,
after expiration of such 90-day period, a new written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be, that is
identical to a written notice which has been canceled pursuant to the proviso to
the preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 5.14(b).
(c) For so long as any Preferred Securities remain Outstanding, to the
fullest extent permitted by law and subject to the terms of this Trust Agreement
and the Indenture, upon a Debenture Event of Default specified in Section 5.1(1)
or 5.1(2) of the Indenture, any Holder of Preferred Securities shall have the
right to institute a proceeding directly against the Depositor, pursuant to
Section 5.8 of the Indenture, for enforcement of payment to such Holder of the
principal amount of or interest on Debentures having a principal amount equal to
the Liquidation Amount of the Preferred Securities of such Holder (a "Direct
Action"). Except as set forth in Section 5.14(b) and this Section 5.14(c), the
Holders of Preferred Securities shall have no right to exercise directly any
right or remedy available to the holders of, or in respect of, the Debentures.
ARTICLE VI.
Acts of Securityholders; Meetings; Voting
Section 6.1. Limitations on Voting Rights.
(a) Except as provided in this Section, in Sections 5.14, 8.10 and 10.2 and
in the Indenture and as otherwise required by law, no Holder of Preferred
Securities shall have any right to vote or in any manner otherwise control the
administration, operation and management of the Trust or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the terms
of the
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Trust Preferred Securities Certificates, be construed so as to constitute the
Securityholders from time to time as partners or members of an association.
(b) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Debenture Trustee with respect to such
Debentures, (ii) waive any past default which is waivable under Section 5.13 of
the Indenture, (iii) exercise any right to rescind or annul a declaration that
the principal of all the Debentures shall be due and payable or (iv) consent to
any amendment, modification or termination of the Indenture or the Debentures,
where such consent shall be required, without, in each case, obtaining the prior
approval of the Holders of at least a majority in Liquidation Amount of all
Outstanding Preferred Securities, provided, however, that where a consent under
the Indenture would require the consent of each Holder of Debentures affected
thereby, no such consent shall be given by the Property Trustee without the
prior written consent of each Holder of Preferred Securities. The Trustees
shall not revoke any action previously authorized or approved by a vote of the
Holders of Preferred Securities, except by a subsequent vote of the Holders of
Preferred Securities. The Property Trustee shall notify all Holders of the
Preferred Securities of any notice of default received from the Debenture
Trustee with respect to the Debentures. In addition to obtaining the foregoing
approvals of the Holders of the Preferred Securities, prior to taking any of the
foregoing actions, the Trustees shall, at the expense of the Depositor, obtain
an Opinion of Counsel experienced in such matters to the effect that such action
shall not cause the Trust to fail to be classified as a grantor trust for United
States Federal income tax purposes.
(c) If any proposed amendment to the Trust Agreement provides for, or the
Trustees otherwise propose to effect, (i) any action that would adversely affect
in any material respect the powers, preferences or special rights of the
Preferred Securities, whether by way of amendment to the Trust Agreement or
otherwise, or (ii) the dissolution, winding-up or termination of the Trust,
other than pursuant to the terms of this Trust Agreement, then the Holders of
Outstanding Preferred Securities as a class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of the Holders of at least a majority in Liquidation
Amount of the Outstanding Preferred Securities. Notwithstanding any other
provision of this Trust Agreement, no amendment to this Trust Agreement may be
made if, as a result of such amendment, it would cause the Trust to fail to be
classified as a grantor trust for United States Federal income tax purposes.
Section 6.2. Notice of Meetings.
Notice of all meetings of the Preferred Securityholders, stating the time,
place and purpose of the meeting, shall be given by the Property Trustee
pursuant to Section 10.8 to each Preferred Securityholder of record, at his
registered address, at least 15 days and not more than 90 days before the
meeting. At any such meeting, any business properly before the meeting may be
so considered whether or not stated in the notice of the meeting. Any adjourned
meeting may be held as adjourned without further notice.
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Section 6.3. Meetings of Preferred Securityholders.
No annual meeting of Securityholders is required to be held. The
Administrative Trustees, however, shall call a meeting of Preferred
Securityholders to vote on any matter upon the written request of Holders of
record of 25% of the Outstanding Preferred Securities (based upon their
Liquidation Amount) and the Administrative Trustees or the Property Trustee may,
at any time in their discretion, call a meeting of Preferred Securityholders to
vote on any matters as to which Preferred Securityholders are entitled to vote.
Holders of record of 50% of the Outstanding Preferred Securities (based
upon their Liquidation Amount), present in person or by proxy, shall constitute
a quorum at any meeting of Securityholders.
If a quorum is present at a meeting, an affirmative vote by the Preferred
Securityholders of record present, in person or by proxy, holding more than a
majority of the Preferred Securities (based upon their Liquidation Amount) held
by the Preferred Securityholders of record present, either in person or by
proxy, at such meeting shall constitute the action of the Preferred
Securityholders, unless this Trust Agreement requires a greater number of
affirmative votes.
Section 6.4. Voting Rights.
Securityholders shall be entitled to one vote for each $25 of Liquidation
Amount represented by their Trust Preferred Securities in respect of any matter
as to which such Securityholders are entitled to vote.
Section 6.5. Proxies, etc.
At any meeting of Securityholders, any Securityholder entitled to vote
thereat may vote by proxy, provided that no proxy shall be voted at any meeting
unless it shall have been placed on file with the Administrative Trustees, or
with such other officer or agent of the Trust as the Administrative Trustees may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a resolution of the Property Trustee, proxies may be solicited in
the name of the Property Trustee or one or more officers of the Property
Trustee. Only Securityholders of record shall be entitled to vote. When Trust
Preferred Securities are held jointly by several persons, any one of them may
vote at any meeting in person or by proxy in respect of such Trust Preferred
Securities, but if more than one of them shall be present at such meeting in
person or by proxy, and such joint owners or their proxies so present disagree
as to any vote to be cast, such vote shall not be received in respect of such
Trust Preferred Securities. A proxy purporting to be executed by or on behalf
of a Securityholder shall be deemed valid unless challenged at or prior to its
exercise, and the burden of proving invalidity shall rest on the challenger. No
proxy shall be valid more than three years after its date of execution.
Section 6.6. Securityholder Action by Written Consent.
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Any action which may be taken by Securityholders at a meeting may be taken
without a meeting if Securityholders holding more than a majority of all
Outstanding Trust Preferred Securities (based upon their aggregate Liquidation
Amount) entitled to vote in respect of such action (or such larger proportion
thereof as shall be required by any express provision of this Trust Agreement)
shall consent to the action in writing (based upon their aggregate Liquidation
Amount).
Section 6.7. Record Date for Voting and Other Purposes.
For the purposes of determining the Securityholders who are entitled to
notice of and to vote at any meeting or by written consent, or to participate in
any Distribution on the Trust Preferred Securities in respect of which a record
date is not otherwise provided for in this Trust Agreement, or for the purpose
of any other action, the Administrative Trustees may from time to time fix a
date, not more than 90 days prior to the date of any meeting of Securityholders
or the payment of a Distribution or other action, as the case may be, as a
record date for the determination of the identity of the Securityholders of
record for such purposes.
Section 6.8. Acts of Securityholders.
Any request, demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by this Trust Agreement to be given, made or
taken by Securityholders or Owners may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such Securityholders
or Owners in person or by an agent duly appointed in writing; and, except as
otherwise expressly provided herein, such action shall become effective when
such instrument or instruments are delivered to an Administrative Trustee. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Securityholders or
Owners signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Trust Agreement and (subject to Section 8.1) conclusive in favor
of the Trustees, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such instrument or
writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is
by a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which any Trustee receiving the same deems sufficient.
The ownership of Preferred Securities shall be proved by the Securities
Register.
Any request, demand, authorization, direction, notice, consent, waiver or
other Act of the Securityholder of any Trust Security shall bind every future
Securityholder of the same Trust Security and the Securityholder of every Trust
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or suffered to
be done by
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the Trustees or the Trust in reliance thereon, whether or not notation of such
action is made upon such Trust Security.
Without limiting the foregoing, a Securityholder entitled hereunder to take
any action hereunder with regard to any particular Trust Security may do so with
regard to all or any part of the Liquidation Amount of such Trust Security or by
one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such liquidation amount.
If any dispute shall arise between the Securityholders and the
Administrative Trustees or among such Securityholders or Trustees with respect
to the authenticity, validity or binding nature of any request, demand,
authorization, direction, consent, waiver or other Act of such Securityholder or
Trustee under this Article VI, then the determination of such matter by the
Property Trustee shall be conclusive with respect to such matter.
A Securityholder may institute a legal proceeding directly against the
Depositor under the Guarantee to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee (as defined
in the Guarantee), the Trust or any Person.
Section 6.9. Inspection of Records.
Upon reasonable notice to the Administrative Trustees and the Property
Trustee, the records of the Trust shall be open to inspection by Securityholders
during normal business hours for any purpose reasonably related to such
Securityholder's interest as a Securityholder.
ARTICLE VII.
Representations and Warranties
Section 7.1. Representations and Warranties of the Property Trustee and
the Delaware Trustee.
The Property Trustee and the Delaware Trustee, each severally on behalf of
and as to itself, hereby represents and warrants for the benefit of the
Depositor and the Securityholders that:
(a) the Property Trustee is a Delaware banking corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware;
(b) the Property Trustee has full corporate power, authority and legal
right to execute, deliver and perform its obligations under this Trust Agreement
and has taken all necessary action to authorize the execution, delivery and
performance by it of this Trust Agreement;
(c) the Delaware Trustee is a Delaware corporation duly organized, validly
existing and in good standing in the State of Delaware;
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(d) the Delaware Trustee has full corporate power, authority and legal
right to execute, deliver and perform its obligations under this Trust Agreement
and has taken all necessary action to authorize the execution, delivery and
performance by it of this Trust Agreement;
(e) this Trust Agreement has been duly authorized, executed and delivered
by the Property Trustee and the Delaware Trustee and constitutes the valid and
legally binding agreement of each of the Property Trustee and the Delaware
Trustee enforceable against each of them in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles;
(f) the execution, delivery and performance of this Trust Agreement has
been duly authorized by all necessary corporate or other action on the part of
the Property Trustee and the Delaware Trustee and does not require any approval
of stockholders of the Property Trustee and the Delaware Trustee and such
execution, delivery and performance will not (i) violate the Charter or By-laws
of the Property Trustee or the Delaware Trustee, (ii) violate any provision of,
or constitute, with or without notice or lapse of time, a default under, or
result in the creation or imposition of, any Lien on any properties included in
the Trust Property pursuant to the provisions of, any indenture, mortgage,
credit agreement, license or other agreement or instrument to which the Property
Trustee or the Delaware Trustee is a party or by which it is bound, or (iii)
violate any law, governmental rule or regulation of the United States or the
State of Delaware, as the case may be, governing the banking, trust or general
powers of the Property Trustee or the Delaware Trustee (as appropriate in
context) or any order, judgment or decree applicable to the Property Trustee or
the Delaware Trustee;
(g) neither the authorization, execution or delivery by the Property
Trustee or the Delaware Trustee of this Trust Agreement nor the consummation of
any of the transactions by the Property Trustee or the Delaware Trustee (as
appropriate in context) contemplated herein or therein requires the consent or
approval of, the giving of notice to, the registration with or the taking of any
other action with respect to any governmental authority or agency under any
existing Federal law governing the banking, trust or general powers of the
Property Trustee or the Delaware Trustee, as the case may be, under the laws of
the United States or the State of Delaware;
(h) there are no proceedings pending or, to the best of each of the
Property Trustee's and the Delaware Trustee's knowledge, threatened against or
affecting the Property Trustee or the Delaware Trustee in any court or before
any governmental authority, agency or arbitration board or tribunal which,
individually or in the aggregate, would materially and adversely affect the
Trust or would question the right, power and authority of the Property Trustee
or the Delaware Trustee, as the case may be, to enter into or perform its
obligations as one of the Trustees under this Trust Agreement.
Section 7.2. Representations and Warranties of Depositor.
The Depositor hereby represents and warrants for the benefit of the
Securityholders that:
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(a) the Trust Preferred Securities Certificates issued at the Closing Date
on behalf of the Trust have been duly authorized and will have been, duly and
validly executed, issued and delivered by the Trustees pursuant to the terms and
provisions of, and in accordance with the requirements of, this Trust Agreement
and the Securityholders will be, as of each such date, entitled to the benefits
of this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges payable by the
Trust (or the Trustees on behalf of the Trust) under the laws of the State of
Delaware or any political subdivision thereof in connection with the execution,
delivery and performance by the Bank, the Property Trustee or the Delaware
Trustee, as the case may be, of Bank, this Trust Agreement.
ARTICLE VIII.
The Trustees
Section 8.1. Certain Duties and Responsibilities.
(a) The duties and responsibilities of the Trustees shall be as provided by
this Trust Agreement and, in the case of the Property Trustee, by the Trust
Indenture Act. Notwithstanding the foregoing, no provision of this Trust
Agreement shall require the Trustees to expend or risk their own funds or
otherwise incur any financial liability in the performance of any of their
duties hereunder, or in the exercise of any of their rights or powers, if they
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. Whether or not therein expressly so provided, every provision of this Trust
Agreement relating to the conduct or affecting the liability of or affording
protection to the Trustees shall be subject to the provisions of this Section.
Nothing in this Trust Agreement shall be construed to release an Administrative
Trustee from liability for its own gross negligent action, its own gross
negligent failure to act, or its own willful misconduct. To the extent that, at
law or in equity, an Administrative Trustee has duties (including fiduciary
duties) and liabilities relating thereto to the Trust or to the Securityholders,
such Administrative Trustee shall not be liable to the Trust or to any
Securityholder for such Trustee's good faith reliance on the provisions of this
Trust Agreement. The provisions of this Trust Agreement, to the extent that
they restrict the duties and liabilities of the Administrative Trustees
otherwise existing at law or in equity, are agreed by the Depositor and the
Securityholders to replace such other duties and liabilities of the
Administrative Trustees.
(b) All payments made by the Property Trustee or a Paying Agent in respect
of the Trust Preferred Securities shall be made only from the revenue and
proceeds from the Trust Property and only to the extent that there shall be
sufficient revenue or proceeds from the Trust Property to enable the Property
Trustee or a Paying Agent to make payments in accordance with the terms hereof.
Each Securityholder, by its acceptance of a Trust Security, agrees that it will
look solely to the revenue and proceeds from the Trust Property to the extent
legally available for distribution to it as herein provided and that the
Trustees are not personally liable to it for any amount distributable in respect
of any Trust Security or for any other liability in respect of any Trust
Security. This Section 8.1(b)
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does not limit the liability of the Trustees expressly set forth elsewhere in
this Trust Agreement or, in the case of the Property Trustee, in the Trust
Indenture Act.
(c) No provision of this Trust Agreement shall be construed to relieve the
Property Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(i) the Property Trustee shall not be liable for any error of judgment made
in good faith by an authorized officer of the Property Trustee, unless it shall
be proved that the Property Trustee was negligent in ascertaining the pertinent
facts;
(ii) the Property Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of not less than a majority in Liquidation Amount of
the Trust Preferred Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Property Trustee, or
exercising any trust or power conferred upon the Property Trustee under this
Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the custody, safe
keeping and physical preservation of the Debentures and the Payment Account
shall be to deal with such Property in a similar manner as the Property Trustee
deals with similar property for its own account, subject to the protections and
limitations on liability afforded to the Property Trustee under this Trust
Agreement and the Trust Indenture Act;
(iv) the Property Trustee shall not be liable for any interest on any money
received by it except as it may otherwise agree with the Depositor; and money
held by the Property Trustee need not be segregated from other funds held by it
except in relation to the Payment Account maintained by the Property Trustee
pursuant to Section 3.1 and except to the extent otherwise required by law; and
(v) the Property Trustee shall not be responsible for monitoring the
compliance by the Administrative Trustees or the Depositor with their respective
duties under this Trust Agreement, nor shall the Property Trustee be liable for
the default or misconduct of the Administrative Trustees or the Depositor.
Section 8.2. Certain Notices.
(a) Within 5 Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit, in
the manner and to the extent provided in Section 10.8, notice of such Event of
Default to the Securityholders, the Administrative Trustees and the Depositor,
unless the Event of Default shall have been cured or waived. For purposes of
this Section the term "Event of Default" means any event that is, or after
notice or lapse of time or both would become, and Event of Default.
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(b) The Administrative Trustees shall transmit, to the Securityholders in
the manner and to the extent provided in Section 10.8, notice of the Depositor's
election to begin or further extend an Extension Period on the Debentures
(unless such election shall have been revoked) within the time specified for
transmitting such notice to the holders of the Debentures pursuant to the
Indenture as originally executed.
Section 8.3. Certain Rights of Property Trustee.
Subject to the provisions of Section 8.1:
(a) the Property Trustee may rely and shall be protected in acting or
refraining from acting in good faith upon any resolution, Opinion of Counsel,
certificate, written representation of a Holder or transferee, certificate of
auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) if (i) in performing its duties under this Trust Agreement the Property
Trustee is required to decide between alternative courses of action or (ii) in
construing any of the provisions of this Trust Agreement the Property Trustee
finds the same ambiguous or inconsistent with any other provisions contained
herein or (iii) the Property Trustee is unsure of the application of any
provision of this Trust Agreement, then, except as to any matter as to which the
Preferred Securityholders are entitled to vote under the terms of this Trust
Agreement, the Property Trustee shall deliver a notice to the Depositor
requesting written instructions of the Depositor as to the course of action to
be taken and the Property Trustee shall take such action, or refrain from taking
such action, as the Property Trustee shall be instructed in writing to take, or
to refrain from taking, by the Depositor; provided, however, that if the
Property Trustee does not receive such instructions of the Depositor within ten
Business Days after it has delivered such notice, or such reasonably shorter
period of time set forth in such notice (which to the extent practicable shall
not be less than two Business Days), it may, but shall be under no duty to, take
or refrain from taking such action not inconsistent with this Trust Agreement as
it shall deem advisable and in the best interests of the Securityholders, in
which event the Property Trustee shall have no liability except for its own bad
faith, negligence or willful misconduct;
(c) any direction or act of the Depositor or the Administrative Trustees
contemplated by this Trust Agreement shall be sufficiently evidenced by an
Officers' Certificate;
(d) whenever in the administration of this Trust Agreement, the Property
Trustee shall deem it desirable that a matter be established before undertaking,
suffering or omitting any action hereunder, the Property Trustee (unless other
evidence is herein specifically prescribed) may, in the absence of bad faith on
its part, request and rely upon an Officers' Certificate which, upon receipt of
such request, shall be promptly delivered by the Depositor or the Administrative
Trustees;
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(e) the Property Trustee shall have no duty to see to any recording, filing
or registration of any instrument (including any financing or continuation
statement or any filing under tax or securities laws) or any rerecording,
refiling or registration thereof;
(f) the Property Trustee may consult with counsel (which counsel may be
counsel to the Depositor or any of its Affiliates, and may include any of its
employees) and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon and in accordance with
such advice, such counsel may be counsel to the Depositor or any of its
Affiliates, and may include any of its employees; the Property Trustee shall
have the right at any time to seek instructions concerning the administration of
this Trust Agreement from any court of competent jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Trust Agreement at the request or
direction of any of the Securityholders pursuant to this Trust Agreement, unless
such Securityholders shall have offered to the Property Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(h) the Property Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
debenture, note or other evidence of indebtedness or other paper or document,
unless requested in writing to do so by one or more Securityholders, but the
Property Trustee may make such further inquiry or investigation into such facts
or matters as it may see fit;
(i) the Property Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through its agents or
attorneys, provided that the Property Trustee shall be responsible for its own
negligence or recklessness with respect to selection of any agent or attorney
appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the Property
Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder the Property
Trustee (i) may request instructions from the Holders of the Trust Preferred
Securities which instructions may only be given by the Holders of the same
proportion in Liquidation Amount of the Trust Preferred Securities as would be
entitled to direct the Property Trustee under the terms of the Trust Preferred
Securities in respect of such remedy, right or action, (ii) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be protected in acting in accordance
with such instructions; and
(k) except as otherwise expressly provided by this Trust Agreement, the
Property Trustee shall not be under any obligation to take any action that is
discretionary under the provisions of this Trust Agreement.
No provision of this Trust Agreement shall be deemed to impose any duty or
obligation on the Property Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it, in any jurisdiction
in which it shall be illegal, or in which the Property
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Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Property Trustee
shall be construed to be a duty.
Section 8.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Trust Preferred Securities
Certificates shall be taken as the statements of the Trust, and the Trustees do
not assume any responsibility for their correctness. The Trustees shall not be
accountable for the use or application by the Depositor of the proceeds of the
Debentures.
Section 8.5. May Hold Securities.
Except as provided in the definition of the term "Outstanding" in Article
I, any Trustee or any other agent of any Trustee or the Trust, in its individual
or any other capacity, may become the owner or pledgee of Trust Preferred
Securities and, subject to Sections 8.8 and 8.13, may otherwise deal with the
Trust with the same rights it would have if it were not a Trustee or such other
agent.
Section 8.6. Compensation; Indemnity; Fees.
The Depositor agrees:
(a) to pay to the Trustees from time to time reasonable compensation for
all services rendered by them hereunder (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an express
trust) as specified in a separate agreement between any of the Trustees and the
Depositor;
(b) except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all reasonable expenses, disbursements and advances
incurred or made by the Trustees in accordance with any provision of this Trust
Agreement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence, bad faith or willfulness;
and
(c) to the fullest extent permitted by applicable law, to indemnify and
hold harmless (i) each Trustee, (ii) any Affiliate of any Trustee, (iii) any
officer, director, shareholder, employee, representative or agent of any
Trustee, and (iv) any employee or agent of the Trust or its Affiliates,
(referred to herein as an "Indemnified Person") from and against any loss,
damage, liability, tax, penalty, expense or claim of any kind or nature
whatsoever incurred by such Indemnified Person by reason of the creation,
operation or termination of the Trust or any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and in a
manner such Indemnified Person reasonably believed to be within the scope of
authority conferred on such Indemnified Person by this Trust Agreement, except
that no Indemnified Person shall be entitled to be indemnified in respect of any
loss, damage or claim incurred by such Indemnified Person by reason of
negligence, bad faith or willful misconduct with respect to such acts or
omissions.
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The provisions of this Section 8.6 shall survive the termination of this
Trust Agreement.
No Trustee may claim any lien or charge on any Trust Property as a result
of any amount due pursuant to this Section 8.6.
The Depositor and any Trustee may engage in or possess an interest in other
business ventures of any nature or description, independently or with others,
similar or dissimilar to the business of the Trust, and the Trust and the
Holders of Trust Preferred Securities shall have no rights by virtue of this
Trust Agreement in and to such independent ventures or the income or profits
derived therefrom, and the pursuit of any such venture, even if competitive with
the business of the Trust, shall not be deemed wrongful or improper. Neither
the Depositor, nor any Trustee, shall be obligated to present any particular
investment or other opportunity to the Trust even if such opportunity is of a
character that, if presented to the Trust, could be taken by the Trust, and the
Depositor or any Trustee shall have the right to take for its own account
(individually or as a partner or fiduciary) or to recommend to others any such
particular investment or other opportunity. Any Trustee may engage or be
interested in any financial or other transaction with the Depositor or any
Affiliate of the Depositor, or may act as depository for, trustee or agent for,
or act on any committee or body of holders of, securities or other obligations
of the Depositor or its Affiliates.
Section 8.7. Corporate Property Trustee Required; Eligibility of Trustees.
(a) There shall at all times be a Property Trustee hereunder with respect
to the Trust Preferred Securities. The Property Trustee shall be a Person that
is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000. If any such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of its supervising or examining authority, then for the purposes of
this Section, the combined capital and surplus of such Person shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Property Trustee with respect to the
Trust Preferred Securities shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
(b) There shall at all times be one or more Administrative Trustees
hereunder with respect to the Trust Preferred Securities. Each Administrative
Trustee shall be either a natural person who is at least 21 years of age or a
legal entity that shall act through one or more persons authorized to bind that
entity.
(c) There shall at all times be a Delaware Trustee with respect to the
Trust Preferred Securities. The Delaware Trustee shall either be (i) a natural
person who is at least 21 years of age and a resident of the State of Delaware
or (ii) a legal entity with its principal place of business in the State of
Delaware and that otherwise meets the requirements of applicable Delaware law
that shall act through one or more persons authorized to bind such entity.
Section 8.8. Conflicting Interests.
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If the Property Trustee has or shall acquire a conflicting interest within
the meaning of the Trust Indenture Act, the Property Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Trust
Agreement.
Section 8.9. Co-Trustees and Separate Trustee.
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the Trust Property may
at the time be located, the Depositor and the Administrative Trustees, by agreed
action of the majority of such Trustees, shall have power to appoint, and upon
the written request of the Administrative Trustees, the Depositor shall for such
purpose join with the Administrative Trustees in the execution, delivery, and
performance of all instruments and agreements necessary or proper to appoint,
one or more Persons approved by the Property Trustee either to act as co-
trustee, jointly with the Property Trustee, of all or any part of such Trust
Property, or to the extent required by law to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons in the capacity
aforesaid, any property, title, right or power deemed necessary or desirable,
subject to the other provisions of this Section. If the Depositor does not join
in such appointment within 15 days after the receipt by it of a request so to
do, or in case a Debenture Event of Default has occurred and is continuing, the
Property Trustee alone shall have power to make such appointment. Any co-
trustee or separate trustee appointed pursuant to this Section shall either be
(i) a natural person who is at least 21 years of age and a resident of the
United States or (ii) a legal entity with its principal place of business in the
United States that shall act through one or more persons authorized to bind such
entity.
Should any written instrument from the Depositor be required by any co-
trustee or separate trustee so appointed for more fully confirming to such co-
trustee or separate trustee such property, title, right, or power, any and all
such instruments shall, on request, be executed, acknowledged and delivered by
the Depositor.
Every co-trustee or separate trustee shall, to the extent permitted by law,
but to such extent only, be appointed subject to the following terms, namely:
(a) The Trust Preferred Securities shall be executed and delivered and all
rights, powers, duties, and obligations hereunder in respect of the custody of
securities, cash and other personal property held by, or required to be
deposited or pledged with, the Trustees specified hereunder shall be exercised
solely by such Trustees and not by such co-trustee or separate trustee.
(b) The rights, powers, duties, and obligations hereby conferred or imposed
upon the Property Trustee in respect of any property covered by such appointment
shall be conferred or imposed upon and exercised or performed by the Property
Trustee or by the Property Trustee and such co-trustee or separate trustee
jointly, as shall be provided in the instrument appointing such co-trustee or
separate trustee, except to the extent that under any law of any jurisdiction in
which any particular act is to be performed, the Property Trustee shall be
incompetent or unqualified to perform such act,
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in which event such rights, powers, duties and obligations shall be exercised
and performed by such co-trustee or separate trustee.
(c) The Property Trustee at any time, by an instrument in writing executed
by it, with the written concurrence of the Depositor, may accept the resignation
of or remove any co-trustee or separate trustee appointed under this Section,
and, in case a Debenture Event of Default has occurred and is continuing, the
Property Trustee shall have power to accept the resignation of, or remove, any
such co-trustee or separate trustee without the concurrence of the Depositor.
Upon the written request of the Property Trustee, the Depositor shall join with
the Property Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to effectuate such resignation or
removal. A successor to any co-trustee or separate trustee so resigned or
removed may be appointed in the manner provided in this Section.
(d) No co-trustee or separate trustee hereunder shall be personally liable
by reason of any act or omission of the Property Trustee or any other trustee
hereunder.
(e) The Property Trustee shall not be liable by reason of any act of a co-
trustee or separate trustee.
(f) Any Act of Holders delivered to the Property Trustee shall be deemed to
have been delivered to each such co-trustee and separate trustee.
Section 8.10. Resignation and Removal; Appointment of Successor.
No resignation or removal of any Trustee (the "Relevant Trustee") and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 8.11.
Subject to the immediately preceding paragraph, the Relevant Trustee may
resign at any time by giving written notice thereof to the Securityholders. If
the instrument of acceptance by the successor Trustee required by Section 8.11
shall not have been delivered to the Relevant Trustee within 30 days after the
giving of such notice of resignation, the Relevant Trustee may petition, at the
expense of the Trust, any court of competent jurisdiction for the appointment of
a successor Relevant Trustee.
Unless a Debenture Event of Default shall have occurred and be continuing,
any Trustee may be removed at any time by Act of the Common Securityholder. If
a Debenture Event of Default shall have occurred and be continuing, the Property
Trustee or the Delaware Trustee, or both of them, may be removed at such time by
Act of the Holders of a majority in Liquidation Amount of the Preferred
Securities, delivered to the Relevant Trustee (in its individual capacity and on
behalf of the Trust). In no event will the Holders of the Preferred Securities
have the right to vote to appoint, remove or replace the Administrative Trustee.
An Administrative Trustee may be removed by the Common Securityholder at any
time.
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If any Trustee shall resign, be removed or become incapable of acting as
Trustee, or if a vacancy shall occur in the office of any Trustee for any cause,
at a time when no Debenture Event of Default shall have occurred and be
continuing, the Common Securityholder, by Act of the Common Securityholder
delivered to the retiring Trustee, shall promptly appoint a successor Trustee or
Trustees, and the retiring Trustee shall comply with the applicable requirements
of Section 8.11. If the Property Trustee or the Delaware Trustee shall resign,
be removed or become incapable of continuing to act as the Property Trustee or
the Delaware Trustee, as the case may be, at a time when a Debenture Event of
Default shall have occurred and be continuing, the Preferred Securityholders, by
Act of the Securityholders of a majority in Liquidation Amount of the Preferred
Securities then Outstanding delivered to the retiring Relevant Trustee, shall
promptly appoint a successor Relevant Trustee or Trustees, and such successor
Trustee shall comply with the applicable requirements of Section 8.11. If an
Administrative Trustee shall resign, be removed or become incapable of acting as
Administrative Trustee, at a time when a Debenture Event of Default shall have
occurred and be continuing, the Common Securityholder by Act of the Common
Securityholder delivered to the Administrative Trustee shall promptly appoint a
successor Administrative Trustee or Administrative Trustees and such successor
Administrative Trustee or Trustees shall comply with the applicable requirements
of Section 8.11. If no successor Relevant Trustee shall have been so appointed
by the Common Securityholder or the Preferred Securityholders and accepted
appointment in the manner required by Section 8.11, any Securityholder who has
been a Securityholder of Trust Preferred Securities for at least six months may,
on behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Relevant Trustee.
The Property Trustee shall give notice of each resignation and each removal
of a Trustee and each appointment of a successor Trustee to all Securityholders
in the manner provided in Section 10.8 and shall give notice to the Depositor.
Each notice shall include the name of the successor Relevant Trustee and the
address of its Corporate Trust Office if it is the Property Trustee.
Notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event any Administrative Trustee or a Delaware Trustee who is
a natural person dies or becomes, in the opinion of the Depositor, incompetent
or incapacitated, the vacancy created by such death, incompetence or incapacity
may be filled by (a) the unanimous act of the remaining Administrative Trustees
if there are at least two of them or (b) otherwise by the Depositor (with the
successor in each case being a Person who satisfies the eligibility requirement
for Administrative Trustees or Delaware Trustee, as the case may be, set forth
in Section 8.7).
Section 8.11. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Trustee such successor
Trustee so appointed shall execute, acknowledge and deliver to the Trust and to
the retiring Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Trustee;
but, on the request of the Depositor or the successor Trustee, such retiring
Trustee shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
retiring Trustee and if the Property Trustee is the resigning
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Trustee shall duly assign, transfer and deliver to the successor Trustee all
property and money held by such retiring Property Trustee hereunder.
In case of the appointment hereunder of a successor Relevant Trustee, the
retiring Relevant Trustee and each successor Relevant Trustee with respect to
the Trust Preferred Securities shall execute and deliver an amendment hereto
wherein each successor Relevant Trustee shall accept such appointment and which
(a) shall contain such provisions as shall be necessary or desirable to transfer
and confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Trust Preferred Securities and the Trust and (b) shall add to or change any of
the provisions of this Trust Agreement as shall be necessary to provide for or
facilitate the administration of the Trust by more than one Relevant Trustee, it
being understood that nothing herein or in such amendment shall constitute such
Relevant Trustees co-trustees and upon the execution and delivery of such
amendment the resignation or removal of the retiring Relevant Trustee shall
become effective to the extent provided therein and each such successor Relevant
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Relevant Trustee; but,
on request of the Trust or any successor Relevant Trustee such retiring Relevant
Trustee shall duly assign, transfer and deliver to such successor Relevant
Trustee all Trust Property, all proceeds thereof and money held by such retiring
Relevant Trustee hereunder with respect to the Trust Preferred Securities and
the Trust.
Upon request of any such successor Relevant Trustee, the Trust shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Relevant Trustee all such rights, powers and trusts
referred to in the first or second preceding paragraph, as the case may be.
No successor Relevant Trustee shall accept its appointment unless at the
time of such acceptance such successor Relevant Trustee shall be qualified and
eligible under this Article.
Section 8.12. Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Property Trustee or the Delaware Trustee may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which such Relevant
Trustee shall be a party, or any corporation succeeding to all or substantially
all the corporate trust business of such Relevant Trustee, shall be the
successor of such Relevant Trustee hereunder, provided such corporation shall be
otherwise qualified and eligible under this Article, without the execution or
filing of any paper or any further act on the part of any of the parties hereto.
Section 8.13. Preferential Collection of Claims Against Depositor or
Trust.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative to the Trust or any other obligor upon the
Trust Preferred Securities or the property of the Trust or of such other obligor
or their creditors, the Property Trustee (irrespective of whether any
Distributions
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on the Trust Preferred Securities shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the
Property Trustee shall have made any demand on the Trust for the payment of any
past due Distributions) shall be entitled and empowered, to the fullest extent
permitted by law, by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of any Distributions
owing and unpaid in respect of the Trust Preferred Securities and to file such
other papers or documents as may be necessary or advisable in order to have the
claims of the Property Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
agents and counsel) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Property Trustee and, in the event the Property Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Property Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Property Trustee, its agents and counsel, and
any other amounts due the Property Trustee.
Nothing herein contained shall be deemed to authorize the Property Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement adjustment or compensation affecting the Trust
Preferred Securities or the rights of any Holder thereof or to authorize the
Property Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 8.14. Reports by Property Trustee.
(a) Not later than ___________ of each year commencing with ___________,
1997, the Property Trustee shall transmit to all Securityholders in accordance
with Section 10.8, and to the Depositor, a brief report dated as of the
immediately preceding December 31 with respect to:
(i) its eligibility under Section 8.7 or, in lieu thereof, if to the best
of its knowledge it has continued to be eligible under said Section, a written
statement to such effect;
(ii) a statement that the Property Trustee has complied with all of its
obligations under this Trust Agreement during the twelve-month period (or, in
the case of the initial report, the period since the Closing Date) ending with
such December 31 or, if the Property Trustee has not complied in any material
respect with such obligations, a description of such noncompliance; and
(iii) any change in the property and funds in its possession as Property
Trustee since the date of its last report and any action taken by the Property
Trustee in the performance of its duties hereunder which it has not previously
reported and which in its opinion materially affects the Trust Preferred
Securities.
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(b) In addition the Property Trustee shall transmit to Securityholders such
reports concerning the Property Trustee and its actions under this Trust
Agreement as may be required pursuant to the Trust Indenture Act at the times
and in the manner provided pursuant thereto.
(c) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Property Trustee with each national stock exchange, the
Nasdaq National Market or such other interdealer quotation system or self-
regulatory organization upon which the Trust Preferred Securities are listed or
traded, with the Commission and with the Depositor.
Section 8.15. Reports to the Property Trustee.
The Depositor and the Administrative Trustees on behalf of the Trust shall
provide to the Property Trustee such documents, reports and information as
required by Section 314 of the Trust Indenture Act (if any) and the compliance
certificate required by Section 314(a) of the Trust Indenture Act in the form,
in the manner and at the times required by Section 314 of the Trust Indenture
Act.
Section 8.16. Evidence of Compliance with Conditions Precedent.
Each of the Depositor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Trust Agreement that relate
to any of the matters set forth in Section 314 (c) of the Trust Indenture Act.
Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an
Officers' Certificate.
Section 8.17. Number of Trustees.
(a) The number of Trustees shall be five (5) provided that the Holder of
all of the Common Securities by written instrument may increase or decrease the
number of Administrative Trustees. The Property Trustee and the Delaware Trustee
may be the same Person.
(b) If a Trustee ceases to hold office for any reason and the number of
Administrative Trustees is not reduced pursuant to Section 8.17(a), or if the
number of Trustees is increased pursuant to Section 8.17(a), a vacancy shall
occur. The vacancy shall be filled with a Trustee appointed in accordance with
Section 8.10.
(c) The death, resignation, retirement, removal, bankruptcy, incompetence
or incapacity to perform the duties of a Trustee shall not operate to annul the
Trust. Whenever a vacancy in the number of Administrative Trustees shall occur,
until such vacancy is filled by the appointment of an Administrative Trustee in
accordance with Section 8.10, the Administrative Trustees in office, regardless
of their number (and notwithstanding any other provision of this Agreement),
shall have all the powers granted to the Administrative Trustees and shall
discharge all the duties imposed upon the Administrative Trustees by this Trust
Agreement.
Section 8.18. Delegation of Power.
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(a) Any Administrative Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purpose of executing any documents contemplated in Section
2.7(a), including any registration statement or amendment thereto filed with the
Commission, or making any other governmental filing; and
(b) The Administrative Trustees shall have power to delegate from time to
time to such of their number or to the Depositor the doing of such things and
the execution of such instruments either in the name of the Trust or the names
of the Administrative Trustees or otherwise as the Administrative Trustees may
deem expedient, to the extent such delegation is not prohibited by applicable
law or contrary to the provisions of this Trust Agreement, as set forth herein.
Section 8.19. Voting.
Except as otherwise provided in this Trust Agreement, the consent or
approval of the Administrative Trustees shall require consent or approval by not
less than a majority of the Administrative Trustees, unless there are only two,
in which case both must consent.
ARTICLE IX.
Termination, Liquidation and Merger
Section 9.1. Termination Upon Expiration Date.
Unless terminated earlier, the Trust shall automatically terminate on
December 31, 2___ (the "Expiration Date"), following the distribution of the
Trust Property in accordance with Section 9.4.
Section 9.2. Early Termination.
The first to occur of any of the following events is an "Early Termination
Event":
(a) the occurrence of a Bankruptcy Event in respect of, or the dissolution
or liquidation of, the Depositor;
(b) the written direction to the Property Trustee from the Depositor at any
time to terminate the Trust and distribute Debentures to Securityholders in
exchange for a Like Amount of the Preferred Securities (which direction is
optional and wholly within the discretion of the Depositor);
(c) the redemption of all of the Preferred Securities in connection with
the redemption of all the Debentures; and
(d) the entry of an order for dissolution of the Trust by a court of
competent jurisdiction.
Section 9.3. Termination.
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The respective obligations and responsibilities of the Trustees and the
Trust created and continued hereby shall terminate upon the latest to occur of
the following: (a) the distribution by the Property Trustee to Securityholders
upon the liquidation of the Trust pursuant to Section 9.4, or upon the
redemption of all of the Trust Preferred Securities pursuant to Section 4.2, of
all amounts required to be distributed hereunder upon the final payment of the
Trust Preferred Securities; (b) the payment of any expenses owed by the Trust;
and (c) the discharge of all administrative duties of the Administrative
Trustees, including the performance of any tax reporting obligations with
respect to the Trust or the Securityholders, and (d) the filing of a Certificate
of Cancellation by the Administrative Trustee under the Business Trust Act.
Section 9.4. Liquidation.
(a) If an Early Termination Event specified in clause (a), (b) or (d) of
Section 9.2 occurs or upon the Expiration Date, the Trust shall be liquidated by
the Trustees as expeditiously as the Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to each Securityholder a Like Amount of Debentures,
subject to Section 9.4(d). Notice of liquidation shall be given by the Property
Trustee by first-class mail, postage prepaid mailed not later than 30 nor more
than 60 days prior to the Liquidation Date to each Holder of Trust Preferred
Securities at such Holder's address appearing in the Securities Register. All
notices of liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the Trust Preferred
Securities will no longer be deemed to be Outstanding and any Trust Preferred
Securities Certificates not surrendered for exchange will be deemed to represent
a Like Amount of Debentures; and
(iii) provide such information with respect to the mechanics by which
Holders may exchange Trust Preferred Securities Certificates for certificates
representing the Like Amount of the Debentures, or if Section 9.4(d) applies
receive a Liquidation Distribution, as the Administrative Trustees or the
Property Trustee shall deem appropriate.
(b) Except where Section 9.2(c) or 9.4(d) applies, in order to effect the
liquidation of the Trust and distribution of the Debentures to Securityholders,
the Administrative Trustees shall establish a record date for such distribution
(which shall be not more than 45 days prior to the Liquidation Date) and, either
itself acting as exchange agent or through the appointment of a separate
exchange agent, shall establish such procedures as it shall deem appropriate to
effect the distribution of Debentures in exchange for the Outstanding Trust
Preferred Securities Certificates.
(c) Except where Section 9.2(c) or 9.4(d) applies, after the Liquidation
Date, (i) the Trust Preferred Securities will no longer be deemed to be
Outstanding, (ii) certificates representing a Like Amount of Debentures will be
issued to holders of Trust Preferred Securities Certificates, upon surrender of
such certificates to the Administrative Trustees or their agent for exchange,
(iii) the Depositor shall use its best efforts to have the Debentures listed on
the New York Stock Exchange or on such other exchange, interdealer quotation
system or self-regulatory organization as the
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Preferred Securities are then listed, (iv) any Trust Preferred Securities
Certificates not so surrendered for exchange will be deemed to represent a Like
Amount of Debentures, accruing interest at the rate provided for in the
Debentures from the last Distribution Date on which a Distribution was made on
such Trust Preferred Securities Certificates until such certificates are so
surrendered (and until such certificates are so surrendered, no payments of
interest or principal will be made to Holders of Debentures represented by such
certificates) and (v) all rights of Securityholders holding Trust Preferred
Securities will cease, except the right of such Securityholders to receive a
Like Amount of Debentures upon surrender of Trust Preferred Securities
Certificates.
(d) In the event that, notwithstanding the other provisions of this Section
9.4, whether because of an order for dissolution entered by a court of competent
jurisdiction or otherwise, distribution of the Debentures in the manner provided
herein is determined by the Property Trustee not to be practical, the Trust
Property shall be liquidated, and the Trust shall be dissolved, wound-up or
terminated, by the Property Trustee in such manner as the Property Trustee
determines. In such event, on the date of the dissolution, winding-up or other
termination of the Trust, Securityholders will be entitled to receive out of the
assets of the Trust available for distribution to Securityholders, after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law, an amount equal to the Liquidation Amount per Trust Security plus
accumulated and unpaid Distributions thereon to the date of payment (such amount
being the "Liquidation Distribution"). If, upon any such dissolution, winding up
or termination, the Liquidation Distribution can be paid only in part because
the Trust has insufficient assets available to pay in full the aggregate
Liquidation Distribution, then, subject to the next succeeding sentence, the
amounts payable by the Trust on the Trust Preferred Securities shall be paid on
a pro rata basis (based upon Liquidation Amounts). The holder of the Common
Securities will be entitled to receive Liquidation Distributions upon any such
dissolution, winding-up or termination pro rata (determined as aforesaid) with
Holders of Preferred Securities, except that, if a Debenture Event of Default
has occurred and is continuing, Holders of the Preferred Securities shall have a
priority over the Holders of Common Securities.
Section 9.5. Mergers, Consolidations, Amalgamations or Replacements of the
Trust.
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except pursuant
to this Section 9.5. At the request of the Depositor, with the consent of the
Administrative Trustees and without the consent of the Holders of the Preferred
Securities, the Property Trustee or the Delaware Trustee, the Trust may merge
with or into, consolidate, amalgamate, or be replaced by or convey, transfer or
lease its properties and assets substantially as an entirety to a trust
organized as such under the laws of any State; provided, that (i) such successor
entity either (a) expressly assumes all of the obligations of the Trust with
respect to the Preferred Securities or (b) substitutes for the Preferred
Securities other securities having substantially the same terms as the Preferred
Securities (the "Successor Securities") so long as the Successor Securities rank
the same as the Preferred Securities rank in priority with respect to
distributions and payments upon liquidation, redemption and otherwise, (ii) the
Depositor expressly appoints a trustee of such successor entity possessing the
same powers and duties as the Property Trustee as the holder of the Debentures,
(iii) the Successor Securities are listed or traded, or any Successor Securities
will be listed upon notification of issuance, on any national securities
exchange or other organization on
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which the Preferred Securities are then listed or traded, if any, (iv) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease
does not cause the Preferred Securities (including any Successor Securities) to
be downgraded by any nationally recognized statistical rating organization, (v)
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
holders of the Preferred Securities (including any Successor Securities) in any
material respect, (vi) such successor entity has a purpose identical to that of
the Trust, (vii) prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the Depositor has received an Opinion of Counsel
to the effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Preferred Securities (including any
Successor Securities) in any material respect, and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
the Trust nor such successor entity will be required to register as an
investment company under the 1940 Act and (viii) the Depositor owns all of the
Common Securities of such successor entity and guarantees the obligations of
such successor entity under the Successor Securities at least to the extent
provided by the Guarantee. Notwithstanding the foregoing, the Trust shall not,
except with the consent of holders of 100% in Liquidation Amount of the
Preferred Securities, consolidate, amalgamate, merge with or into, or be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety to any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause the
Trust or the successor entity to be classified as other than a grantor trust for
United States Federal income tax purposes. [See Prospectus description.]
ARTICLE X.
Miscellaneous Provisions
Section 10.1. Limitation of Rights of Securityholders.
The death or incapacity of any person having an interest, beneficial or
otherwise, in Trust Preferred Securities shall not operate to terminate this
Trust Agreement, nor entitle the legal representatives or heirs of such person
or any Securityholder for such person, to claim an accounting, take any action
or bring any proceeding in any court for a partition or winding up of the
arrangements contemplated hereby, nor otherwise affect the rights, obligations
and liabilities of the parties hereto or any of them.
Section 10.2. Amendment.
(a) This Trust Agreement may be amended from time to time by the Property
Trustee, the Administrative Trustees and the Depositor, without the consent of
any Securityholders, (i) to cure any ambiguity, correct or supplement any
provision herein which may be inconsistent with any other provision herein, or
to make any other provisions with respect to matters or questions arising under
this Trust Agreement, which shall not be inconsistent with the other provisions
of this Trust Agreement, or (ii) to modify, eliminate or add to any provisions
of this Trust Agreement to such
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extent as shall be necessary to ensure that the Trust will be classified for
United States Federal income tax purposes as a grantor trust at all times that
any Trust Preferred Securities are outstanding or to ensure that the Trust will
not be required to register as an investment company under the 1940 Act;
provided, however, that in the case of clause (i), such action shall not
adversely affect in any material respect the interests of any Securityholder,
and any amendments of this Trust Agreement shall become effective when notice
thereof is given to the Securityholders.
(b) Except as provided in Section 10.2(c) hereof, any provision of this
Trust Agreement may be amended by the Trustees and the Depositor with (i) the
consent of Trust Securityholders representing not less than a majority (based
upon Liquidation Amounts) of the Trust Preferred Securities then Outstanding and
(ii) receipt by the Trustees of an Opinion of Counsel to the effect that such
amendment or the exercise of any power granted to the Trustees in accordance
with such amendment will not affect the Trust's status as a grantor trust for
United States Federal income tax purposes or the Trust's exemption from status
of an investment company under the 1940 Act.
(c) In addition to and notwithstanding any other provision in this Trust
Agreement, without the consent of each affected Securityholder (such consent
being obtained in accordance with Section 6.3 or 6.6 hereof), this Trust
Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Preferred Securities or otherwise adversely affect the
amount of any Distribution required to be made in respect of the Trust Preferred
Securities as of a specified date or (ii) restrict the right of a Securityholder
to institute suit for the enforcement of any such payment on or after such date;
notwithstanding any other provision herein, without the unanimous consent of the
Securityholders (such consent being obtained in accordance with Section 6.3 or
6.6 hereof), this paragraph (c) of this Section 10.2 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Trustee shall enter into or consent to any amendment to this Trust Agreement
which would cause the Trust to fail or cease to qualify for the exemption from
status of an investment company under the 1940 Act or fail or cease to be
classified as a grantor trust for United States Federal income tax purposes.
(e) Notwithstanding anything in this Trust Agreement to the contrary,
without the consent of the Depositor, this Trust Agreement may not be amended in
a manner which imposes any additional obligation on the Depositor.
(f) In the event that any amendment to this Trust Agreement is made, the
Administrative Trustees shall promptly provide to the Depositor a copy of such
amendment.
(g) Neither the Property Trustee nor the Delaware Trustee shall be required
to enter into any amendment to this Trust Agreement which affects its own
rights, duties or immunities under this Trust Agreement. The Property Trustee
shall be entitled to receive an Opinion of Counsel and an Officers' Certificate
stating that any amendment to this Trust Agreement is in compliance with this
Trust Agreement.
Section 10.3. Separability.
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In case any provision in this Trust Agreement or in the Trust Preferred
Securities Certificates shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 10.4. Governing Law.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE
SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT
AND THE TRUST PREFERRED SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES).
Section 10.5. Payments Due on Non-Business Day.
If the date fixed for any payment on any Trust Security shall be a day that
is not a Business Day, then such payment need not be made on such date but may
be made on the next succeeding day that is a Business Day (except as otherwise
provided in Sections 4.1(a) and 4.2(d)), with the same force and effect as
though made on the date fixed for such payment, and no interest shall accrue
thereon for the period after such date.
Section 10.6. Successors.
This Trust Agreement shall be binding upon and shall inure to the benefit
of any successor to the Depositor, the Trust or the Relevant Trustee, including
any successor by operation of law. Except in connection with a consolidation,
merger or sale involving the Depositor that is permitted under Article Eight of
the Indenture and pursuant to which the assignee agrees in writing to perform
the Depositor's obligations hereunder, the Depositor shall not assign its
obligations hereunder.
Section 10.7. Headings.
The Article and Section headings are for convenience only and shall not
affect the construction of this Trust Agreement.
Section 10.8. Reports, Notices and Demands.
Any report, notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
any Securityholder or the Depositor may be given or served in writing by deposit
thereof, first-class postage prepaid, in the United States mail, hand delivery
or facsimile transmission, in each case, addressed, (a) in the case of a
Preferred Securityholder, to such Preferred Securityholder as such
Securityholder's name and address may appear on the Securities Register; and (b)
in the case of the Common Securityholder or the Depositor, to Greater Bay
Bancorp, 2860 West Bayshore Road, Palo Alto, California, 94303,
Attention:__________, facsimile number: (415) 494-9193. Any notice to
Preferred Securityholders shall also be given to such owners as have, within two
years preceding the giving of such notice, filed their names and addresses with
the Property Trustee for that purpose. Such notice, demand or other
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communication to or upon a Securityholder shall be deemed to have been
sufficiently given or made, for all purposes, upon hand delivery, mailing or
transmission.
Any notice, demand or other communication which by any provision of this
Trust Agreement is required or permitted to be given or served to or upon the
Trust, the Property Trustee, the Delaware Trustee or the Administrative Trustees
shall be given in writing addressed (until another address is published by the
Trust) as follows: (a) with respect to the Property Trustee to Wilmington Trust
Company, Rodney Square North, 1100 North Market Street, Wilmington , Delaware
19890, Attention: Corporate Trust Administration; (b) with respect to the
Delaware Trustee, to Wilmington Trust Company, Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890; and (c) with respect to the
Administrative Trustees, to them at the address above for notices to the
Depositor, marked "Attention Administrative Trustees of GBB Capital I." Such
notice, demand or other communication to or upon the Trust or the Property
Trustee shall be deemed to have been sufficiently given or made only upon actual
receipt of the writing by the Trust or the Property Trustee.
Section 10.9. Agreement Not to Petition.
Each of the Trustees and the Depositor agree for the benefit of the
Securityholders that, until at least one year and one day after the Trust has
been terminated in accordance with Article IX, they shall not file, or join in
the filing of, a petition against the Trust under any Bankruptcy Laws or
otherwise join in the commencement of any proceeding against the Trust under any
Bankruptcy Law. In the event the Depositor takes action in violation of this
Section 10.9, the Property Trustee agrees, for the benefit of Securityholders,
that at the expense of the Depositor, it shall file an answer with the
bankruptcy court or otherwise properly contest the filing of such petition by
the Depositor against the Trust or the commencement of such action and raise the
defense that the Depositor has agreed in writing not to take such action and
should be stopped and precluded therefrom and such other defenses, if any, as
counsel for the Trustee or the Trust may assert. The provisions of this Section
10.9 shall survive the termination of this Trust Agreement.
Section 10.10. Trust Indenture Act; Conflict with Trust Indenture Act.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Trust Agreement and shall, to
the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a trustee for
the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Trust Agreement by any
of the provisions of the Trust Indenture Act, such required provision shall
control. If any provision of this Trust Agreement modifies or excludes any
provision of the Trust Indenture Act which may be so modified or excluded, the
latter provision shall be deemed to apply to this Trust Agreement as so modified
or excluded, as the case may be.
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(d) The application of the Trust Indenture Act to this Trust Agreement
shall not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
Section 10.11. Acceptance of Terms of Trust Agreement, Guarantee and
Indenture.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY
OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE
OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL
ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN
SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND
AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND
THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH
SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS
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TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST
AND SUCH SECURITYHOLDER AND SUCH OTHERS.
Greater Bay Bancorp
By:
_____________________________________
Name:
Title:
Wilmington Trust Company,
as Property Trustee
By:
____________________________________
Name:
Title:
Wilmington Trust Company,
as Delaware Trustee
By:
_____________________________________
Name:
Title:
/s/ David L. Kalkbrenner
----------------------------------------
David L. Kalkbrenner,
as Administrative Trustee
/s/ Steven C. Smith
----------------------------------------
Steven C. Smith,
as Administrative Trustee
/s/ James R. Ramsey
----------------------------------------
James R. Ramsey,
as Administrative Trustee
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EXHIBIT A
CERTIFICATE OF TRUST
OF
GBB CAPITAL I
This Certificate of Trust of GBB Capital I (the "Trust"), dated __________,
1997, is being duly executed and filed by the undersigned, as trustees, to form
a business trust under the Delaware Business Trust Act (12 Del. C. ((S)) 3801 et
seq.).
1. Name. The name of the business trust being formed hereby is GBB
Capital I.
2. Delaware Trustee. The name and business address of the trustee of the
Trust in the State of Delaware are Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
Corporate Trust Administrator.
3. Effective Date. This Certificate of Trust shall be effective upon its
filing.
In Witness Whereof, the undersigned, being the trustees of the Trust, have
executed this Certificate of Trust as of the date first above written.
Wilmington Trust Company,
as Trustee
By:
____________________________________
Name:
Title:
/s/ David L. Kalkbrenner
----------------------------------------
David L. Kalkbrenner,
Administrative Trustee
/s/ Steven C. Smith
----------------------------------------
Steven C. Smith,
Administrative Trustee
/s/ James R. Ramsey
----------------------------------------
James R. Ramsey,
Administrative Trustee
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EXHIBIT B
The Depository Trust Company,
55 Water Street, 49th Floor,
New York, New York 10041-0099
__________, 1997
Attention: _______________
General Counsel's Office
Re: GBB Capital I ____% Cumulative Trust Preferred Securities
Ladies and Gentlemen:
The purpose of this letter is to set forth certain matters relating to the
issuance and deposit with The Depository Trust Company ("DTC") of the GBB
Capital I ____% Cumulative Trust Preferred Securities, (the "Trust Preferred
Securities"), of GBB Capital I, a Delaware business trust (the "Issuer"), formed
pursuant to a Trust Agreement between Greater Bay Bancorp ("Greater Bay
Bancorp") and Wilmington Trust Company, as Property Trustee, Wilmington Trust
Company, as Delaware Trustee, and the Administrative Trustees named therein.
The payment of distributions on the Trust Preferred Securities, and payments due
upon liquidation of the Issuer or redemption of the Trust Preferred Securities,
to the extent the Issuer has funds available for the payment thereof are
guaranteed by Greater Bay Bancorp to the extent set forth in a Guarantee
Agreement dated ____________, 1997 by Greater Bay Bancorp with respect to the
Trust Preferred Securities. Greater Bay Bancorp and the Issuer propose to sell
the Trust Preferred Securities to certain Underwriters (the "Underwriters")
pursuant to an Underwriting Agreement dated ____________, 1997 by and among the
Underwriters, the Issuer and Greater Bay Bancorp dated ____________, 1997, and
the Underwriters wish to take delivery of the Trust Preferred Securities through
DTC. Wilmington Trust Company is acting as transfer agent and registrar with
respect to the Trust Preferred Securities (the "Transfer Agent and Registrar").
To induce DTC to accept the Trust Preferred Securities as eligible for
deposit at DTC, and to act in accordance with DTC's rules with respect to the
Trust Preferred Securities, the Issuer, the Transfer Agent and Registrar and DTC
agree among each other as follows:
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1. Prior to the closing of the sale of the Trust Preferred Securities to
the Underwriters, which is expected to occur on or about ____________, 1997,
there shall be deposited with DTC one or more global certificates (individually
and collectively, the "Global Certificate") registered in the name of DTC's
Trust Preferred Securities nominee, Cede & Co., representing an aggregate of
____________ Trust Preferred Securities and bearing the following legend:
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the Issuer or its agent for registration of
transfer, exchange, or payment, and any certificate issued is
registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
inasmuch as the registered owner hereof, Cede & Co., has an
interest herein.
2. The Amended and Restated Trust Agreement of the Issuer provides for the
voting by holders of the Trust Preferred Securities under certain limited
circumstances. The Issuer shall establish a record date for such purposes and
shall, to the extent possible, give DTC notice of such record date not less than
15 calendar days in advance of such record date.
3. In the event of a stock split, conversion, recapitalization,
reorganization or any other similar transaction resulting in the cancellation of
all or any part of the Trust Preferred Securities outstanding, the Issuer or the
Transfer Agent and Registrar shall send DTC a notice of such event at least 5
business days prior to the effective date of such event.
4. In the event of distribution on, or an offering or issuance of rights
with respect to, the Trust Preferred Securities outstanding, the Issuer or the
Transfer Agent and Registrar shall send DTC a notice specifying: (a) the amount
of and conditions, if any, applicable to the payment of any such distribution or
any such offering or issuance of rights; (b) any applicable expiration or
deadline date, or any date by which any action on the part of the holders of
Trust Preferred Securities is required; and (c) the date any required notice is
to be mailed by or on behalf of the Issuer to holders of Trust Preferred
Securities or published by or on behalf of the Issuer (whether by mail or
publication, the "Publication Date"). Such notice shall be sent to DTC by a
secure means (e.g., legible telecopy, registered or certified mail, overnight
delivery) in a timely manner designed to assure that such notice is in DTC's
possession no later than the close of business on the business day before the
Publication Date. The Issuer or the Transfer Agent and Registrar will forward
such notice either in a separate secure transmission for each CUSIP number or in
a secure transmission of multiple CUSIP numbers (if applicable) that includes a
manifest or list of each CUSIP number submitted in that transmission. (The party
sending such notice shall have a method to verify subsequently the use of such
means and the timeliness of such notice.) The Publication Date shall be not less
than 30 calendar days nor more than 60 calendar days prior to the payment of any
such distribution or any such offering or issuance of rights with respect to the
Trust Preferred Securities. After establishing the amount of payment to be made
on the Trust Preferred Securities, the Issuer or the Transfer Agent and
Registrar will notify DTC's Dividend Department of such payment 5 business days
prior to payment date. Notices to
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DTC's Dividend Department by telecopy shall be sent to (212) 709-1723. Such
notices by mail or by any other means shall be sent to:
Manager, Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004-2695
The Issuer or the Transfer Agent and Registrar shall confirm DTC's receipt
of such telecopy by telephoning the Dividend Department at (212) 709-1270.
5. In the event of a redemption by the Issuer of the Trust Preferred
Securities, notice specifying the terms of the redemption and the Publication
Date of such notice shall be sent by the Issuer or the Transfer Agent and
Registrar to DTC not less than 30 calendar days prior to such event by a secure
means in the manner set forth in paragraph 4. Such redemption notice shall be
sent to DTC's Call Notification Department at (516) 227-4164 or (516) 227-4190,
and receipt of such notice shall be confirmed by telephoning (516) 227-4070.
Notice by mail or by any other means shall be sent to:
Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, New York 11530-4719
6. In the event of any invitation to tender the Trust Preferred Securities,
notice specifying the terms of the tender and the Publication Date of such
notice shall be sent by the Issuer or the Transfer Agent and Registrar to DTC by
a secure means and in a timely manner as described in paragraph 4. Notices to
DTC pursuant to this paragraph and notices of other corporate actions (including
mandatory tenders, exchanges and capital changes) shall be sent, unless
notification to another department is expressly provided for herein, by telecopy
to DTC's Reorganization Department at (212) 709-1093 or (212) 709-1094 and
receipt of such notice shall be confirmed by telephoning (212) 709-6884, or by
mail or any other means to:
Manager, Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004-2695
7. All notices and payment advices sent to DTC shall contain the CUSIP
number or numbers of the Trust Preferred Securities and the accompanying
designation of the Trust Preferred Securities, which, as of the date of this
letter, is "GBB Capital I ____% Cumulative Trust Preferred Securities.
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8. Distribution payments or other cash payments with respect to the Trust
Preferred Securities evidenced by the Global Certificate shall be received by
Cede & Co., as nominee of DTC, or its registered assigns in next day funds on
each payment date (or in accordance with existing arrangements between the
Issuer or the Transfer Agent and Registrar and DTC). Such payments shall be
made payable to the order of Cede & Co., and shall be addressed as follows:
NDFS Redemption Department
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004-2695
9. DTC may by prior written notice direct the Issuer and the Transfer Agent
and Registrar to use any other telecopy number or address of DTC as the number
or address to which notices or payments may be sent.
10. In the event of a conversion, redemption, or any other similar
transaction (e.g., tender made and accepted in response to the Issuer's or the
Transfer Agent and Registrar's invitation) necessitating a reduction in the
aggregate number of Trust Preferred Securities outstanding evidenced by Global
Certificates, DTC, in its discretion: (a) may request the Issuer or the Transfer
Agent and Registrar to issue and countersign a new Global Certificate; or (b)
may make an appropriate notation on the Global Certificate indicating the date
and amount of such reduction.
11. DTC may discontinue its services as a securities depositary with
respect to the Trust Preferred Securities at any time by giving at least 90
days' prior written notice to the Issuer and the Transfer Agent and Registrar
(at which time DTC will confirm with the Issuer or the Transfer Agent and
Registrar the aggregate number of Trust Preferred Securities deposited with it)
and discharging its responsibilities with respect thereto under applicable law.
Under such circumstances, the Issuer may determine to make alternative
arrangements for book-entry settlement for the Trust Preferred Securities, make
available one or more separate global certificates evidencing Trust Preferred
Securities to any Participant having Trust Preferred Securities credited to its
DTC account, or issue definitive Trust Preferred Securities to the beneficial
holders thereof, and in any such case, DTC agrees to cooperate fully with the
Issuer and the Transfer Agent and Registrar, and to return the Global
Certificate, duly endorsed for transfer as directed by the Issuer or the
Transfer Agent and Registrar, together with any other documents of transfer
reasonably requested by the Issuer or the Transfer Agent and Registrar.
12. In the event that the Issuer determines that beneficial owners of Trust
Preferred Securities shall be able to obtain definitive Trust Preferred
Securities, the Issuer or the Transfer Agent and Registrar shall notify DTC of
the availability of certificates. In such event, the Issuer or the Transfer
Agent and Registrar shall issue, transfer and exchange certificates in
appropriate amounts, as required by DTC and others, and DTC agrees to cooperate
fully with the Issuer and the Transfer Agent and Registrar and to return the
Global Certificate, duly endorsed for transfer as directed by the Issuer or the
Transfer Agent and Registrar, together with any other documents of transfer
reasonably requested by the Issuer or the Transfer Agent and Registrar.
59
<PAGE>
13. This letter may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
Nothing herein shall be deemed to require the Transfer Agent and Registrar
to advance funds on behalf of GBB Capital I.
Very truly yours,
GBB Capital I
(as Issuer)
Wilmington Trust Company,
as Trustee
By:
____________________________________
Name:
Title:
(As Transfer Agent and Registrar)
Wilmington Trust Company,
as Trustee
By:
____________________________________
Name:
Title:
Received and Accepted:
The Depository Trust Company
By:
______________________________________
Authorized Officer
60
<PAGE>
EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE
CERTIFICATE NUMBER C-1 NUMBER OF COMMON SECURITIES ____
CERTIFICATE EVIDENCING COMMON SECURITIES
OF
GBB CAPITAL I
____% COMMON SECURITIES
(LIQUIDATION AMOUNT $25 PER COMMON SECURITY)
GBB Capital I, a statutory business trust formed under the laws of the
State of Delaware (the "Trust"), hereby certifies that Greater Bay Bancorp (the
"Holder") is the registered owner of ( ) common securities of the
Trust representing beneficial interests of the Trust and designated the ____%
Common Securities (liquidation amount $25 per Common Security) (the "Common
Securities"). In accordance with Section 5.10 of the Trust Agreement (as
defined below) the Common Securities are not transferable and any attempted
transfer hereof shall be void. The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities are set forth in, and this certificate and the Common Securities
represented hereby are issued and shall in all respects be subject to the terms
and provisions of, the Amended and Restated Trust Agreement of the Trust dated
as of ___________,1997, as the same may be amended from time to time (the "Trust
Agreement") including the designation of the terms of the Common Securities as
set forth therein. The Trust will furnish a copy of the Trust Agreement to the
Holder without charge upon written request to the Trust at its principal place
of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
In Witness Whereof, one of the Administrative Trustees of the Trust has
executed this certificate this ____ day of ______________,1997.
GBB Capital I
By:
______________________
Name:
Administrative Trustee
61
<PAGE>
EXHIBIT D
AGREEMENT AS TO EXPENSES AND LIABILITIES
Agreement As To Expenses And Liabilities (this "Agreement"), dated as of
____________, 1997, between Greater Bay Bancorp, a California corporation
("GBB), and GBB Capital I, a Delaware business trust (the "Trust").
Whereas, the Trust intends to issue its Common Securities (the "Common
Securities") to and receive Debentures from GBB and to issue and sell ____%
Cumulative Trust Preferred Securities (the "Trust Preferred Securities") with
such powers, preferences and special rights and restrictions as are set forth in
the Amended and Restated Trust Agreement of the Trust dated as of _________,
1997 as the same may be amended from time to time (the "Trust Agreement");
Whereas, GBB will directly or indirectly own all of the Common Securities
of the Trust and will issue the Debentures;
Now, Therefore, in consideration of the purchase by each holder of the
Trust Preferred Securities, which purchase GBB hereby agrees shall benefit GBB
and which purchase GBB acknowledges will be made in reliance upon the execution
and delivery of this Agreement, GBB and Trust hereby agree as follows:
ARTICLE I
Section 1.1. Guarantee by GBB.
Subject to the terms and conditions hereof, GBB hereby irrevocably and
unconditionally guarantees to each person or entity to whom the Trust is now or
hereafter becomes indebted or liable (the "Beneficiaries") the full payment,
when and as due, of any and all Obligations (as hereinafter defined) to such
Beneficiaries. As used herein, "Obligations" means any costs, expenses or
liabilities of the Trust, other than obligations of the Trust to pay to holders
of any Trust Preferred Securities or other similar interests in the Trust the
amounts due such holders pursuant to the terms of the Trust Preferred Securities
or such other similar interests, as the case may be. This Agreement is intended
to be for the benefit of, and to be enforceable by, all such Beneficiaries,
whether or not such Beneficiaries have received notice hereof.
Section 1.2. Term of Agreement.
This Agreement shall terminate and be of no further force and effect upon
the later of (a) the date on which full payment has been made of all amounts
payable to all holders of all the Trust Preferred Securities (whether upon
redemption, liquidation, exchange or otherwise) and (b) the date on which there
are no Beneficiaries remaining; provided, however, that this Agreement shall
continue to be effective or shall be reinstated, as the case may be, if at any
time any holder of Trust Preferred
62
<PAGE>
Securities or any Beneficiary must restore payment of any sums paid under the
Trust Preferred Securities, under any Obligation, under the Guarantee Agreement
dated the date hereof by GBB and Wilmington Trust Company, a Delaware banking
corporation, as guarantee trustee or under this Agreement for any reason
whatsoever. This Agreement is continuing, irrevocable, unconditional and
absolute.
Section 1.3. Waiver of Notice.
GBB hereby waives notice of acceptance of this Agreement and of any
Obligation to which it applies or may apply, and GBB hereby waives presentment,
demand for payment, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
Section 1.4. No Impairment.
The obligations, covenants, agreements and duties of GBB under this
Agreement shall in no way be affected or impaired by reason of the happening
from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all or any
portion of the Obligations or for the performance of any other obligation under,
arising out of, or in connection with, the obligations;
(b) any failure, omission, delay or lack of diligence on the part of the
Beneficiaries to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Beneficiaries with respect to the Obligations or any
action on the part of the Trust granting indulgence or extension of any kind; or
(c) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Trust or any of the assets of the
Trust.
There shall be no obligation of the Beneficiaries to give notice to, or obtain
the consent of, GBB with respect to the happening of any of the foregoing.
Section 1.5. Enforcement.
A Beneficiary may enforce this Agreement directly against GBB and GBB
waives any right or remedy to require that any action be brought against the
Trust or any other person or entity before proceeding against GBB.
Section 1.6. Subrogation.
GBB shall be subrogated to all (if any) rights of the Trust in respect of
any amounts paid to the Beneficiaries by GBB under this Agreement; provided,
however, that GBB shall not (except to the extent required by mandatory
provisions of law) be entitled to enforce or exercise any rights
63
<PAGE>
which it may acquire by way of subrogation or any indemnity, reimbursement or
other agreement, in all cases as a result of payment under this Agreement, if,
at the time of any such payment, any amounts are due and unpaid under this
Agreement.
ARTICLE II
Section 2.1. Binding Effect.
All guarantees and agreements contained in this Agreement shall bind the
successors, assigns, receivers, trustees and representatives of GBB and shall
inure to the benefit of the Beneficiaries.
Section 2.2. Amendment.
So long as there remains any Beneficiary or any Trust Preferred Securities
of any series are outstanding, this Agreement shall not be modified or amended
in any manner adverse to such Beneficiary or to the holders of the Trust
Preferred Securities.
Section 2.3. Notices.
Any notice, request or other communication required or permitted to be
given hereunder shall be given in writing by delivering the same against receipt
therefor by facsimile transmission (confirmed by mail), telex or by registered
or certified mail, addressed as follows (and if so given, shall be deemed given
when mailed or upon receipt of an answer-back, if sent by telex):
GBB Capital I
c/o Greater Bay Bancorp
2860 West Bayshore Road
Palo Alto, California 94303
Facsimile No.: (415) 813-8211
Attention: _________________
Greater Bay Bancorp
2860 West Bayshore Road
Palo Alto, California 94303
Facsimile No.: (415) 813-8211
Attention: _________________
Section 2.4. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA (WITHOUT
REGARD TO CONFLICT OF LAW PRINCIPLES).
64
<PAGE>
This Agreement is executed as of the day and year first above written.
GREATER BAY BANCORP
By:
_____________________________
Name:
Title:
GBB Capital I
By: ____________________________
Name:
Administrative Trustee
65
<PAGE>
EXHIBIT E
This Preferred Security is a Global Certificate within the meaning of the Trust
Agreement hereinafter referred to and is registered in the name of The
Depository Trust Company (the "Depository") or a nominee of the Depository.
This Preferred Security is exchangeable for Trust Preferred Securities
registered in the name of a person other than the Depository or its nominee only
in the limited circumstances described in the Trust Agreement and no transfer of
this Preferred Security (other than a transfer of this Preferred Security as a
whole by the Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository) may be
registered except in limited circumstances.
Unless this Preferred Security is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York) to GBB Capital I or its
agent for registration of transfer, exchange or payment, and any Preferred
Security issued is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of The Depository Trust Company and
any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
CERTIFICATE NUMBER P- NUMBER OF TRUST PREFERRED SECURITIES _____
CUSIP NO.
CERTIFICATE EVIDENCING TRUST PREFERRED SECURITIES
OF
GBB CAPITAL I
____% CUMULATIVE TRUST PREFERRED SECURITIES,
SERIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GBB Capital I, a statutory business trust formed under the laws of the State
of Delaware (the "Trust"), hereby certifies that ________________ (the "Holder")
is the registered owner of ________ ( ) Trust Preferred Securities of the
Trust representing an undivided beneficial interest in the assets of the Trust
and designated the GBB Capital I ____% Cumulative Trust Preferred Securities,
(liquidation amount $25 per Preferred Security) (the "Trust Preferred
Securities"). The Trust Preferred Securities are transferable on the books and
records of the Trust, in person or by a duly authorized attorney, upon surrender
of this certificate duly endorsed and in proper form for transfer as provided in
Section 5.4 of the Trust Agreement (as defined below). The designations,
rights, privileges, restrictions, preferences and other terms and provisions of
the Trust Preferred
66
<PAGE>
Securities are set forth in, and this certificate and the Trust Preferred
Securities represented hereby are issued and shall in all respects be subject to
the terms and provisions of, the Amended and Restated Trust Agreement of the
Trust dated as of __________, 1997, as the same may be amended from time to time
(the "Trust Agreement") including the designation of the terms of Trust
Preferred Securities as set forth therein. The Holder is entitled to the
benefits of the Guarantee Agreement entered into by Greater Bay Bancorp, a
California corporation, and [insert name of Guarantee Trustee], as guarantee
trustee, dated as of ___________, 1997, (the "Guarantee"), to the extent
provided therein. The Trust will furnish a copy of the Trust Agreement and the
Guarantee to the Holder without charge upon written request to the Trust at its
principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust Agreement
and is entitled to the benefits thereunder.
In Witness Whereof, one of the Administrative Trustees of the Trust has
executed this certificate this ___ day of ___________, 1997.
GBB Capital I
By:
____________________________________
Name:
Administrative Trustee
67
<PAGE>
ASSIGNMENT
For Value Received, the undersigned assigns and transfers this Preferred
Security to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints
agent to transfer this Preferred Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date:
________________
Signature:
___________________________________________________________________
(Sign exactly as your name appears on the other side of this Preferred
Security Certificate)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
SEC Rule 17Ad-15.
68
<PAGE>
EXHIBIT 4.9
D&W DRAFT 2/21/97
__________________________________________________________
GUARANTEE AGREEMENT
BETWEEN
GREATER BAY BANCORP
(AS GUARANTOR)
AND
[WILMINGTON TRUST COMPANY]
(AS TRUSTEE)
DATED AS OF
_________________________________ , 1997
__________________________________________________________
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Section of Trust Section of
Indenture Act of 1939, as amended Guarantee Agreement
--------------------------------- -------------------
<S> <C>
310(a). 4.1(a)
310(b). 4.1(c), 2.8
310(c). Inapplicable
311(a). 2.2(b)
311(b). 2.2(b)
311(c). Inapplicable
312(a). 2.2(a)
312(b). 2.2(b)
313. 2.3
314(a). 2.4
314(b). Inapplicable
314(c). 2.5
314(d). Inapplicable
314(e). 1.1, 2.5, 3.2
314(f). 2.1, 3.2
315(a). 3.1(d)
315(b). 2.7
315(c). 3.1
315(d). 3.1(d)
316(a). 1.1, 2.6, 5.4
316(b). 5.3
316(c). 9.2
317(a). Inapplicable
317(b). Inapplicable
318(a). 2.1(b)
318(b). 2.1
318(c). 2.1(a)
</TABLE>
- ---------------
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS
Section 1.1. Definitions 1
ARTICLE II. TRUST INDENTURE ACT 1
Section 2.1. Trust Indenture Act; Application 3
Section 2.2. List of Holders 3
Section 2.3. Reports by the Guarantee Trustee 4
Section 2.4. Periodic Reports to Guarantee Trustee 4
Section 2.5. Evidence of Compliance with Conditions Precedent 4
Section 2.6. Events of Default; Waiver 4
Section 2.7. Event of Default; Notice 4
Section 2.8. Conflicting Interests 4
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE GUARANTEE
TRUSTEE 5
Section 3.1. Powers and Duties of the Guarantee Trustee 5
Section 3.2. Certain Rights of Guarantee Trustee 5
Section 3.3. Indemnity 6
ARTICLE IV. GUARANTEE TRUSTEE 8
Section 4.1. Guarantee Trustee; Eligibility 8
Section 4.2. Appointment, Removal and Resignation of the
Guarantee Trustee 8
ARTICLE V. GUARANTEE 8
Section 5.1. Guarantee 8
Section 5.2. Waiver of Notice and Demand 8
Section 5.3. Obligations Not Affected 9
Section 5.4. Rights of Holders 9
Section 5.5. Guarantee of Payment 10
Section 5.6. Subrogation 10
Section 5.7. Independent Obligations 10
ARTICLE VI. COVENANTS AND SUBORDINATION 10
Section 6.1. Subordination 11
Section 6.2. Pari Passu Guarantees 11
ARTICLE VII. CONSOLIDATION, MERGER, SALE OF ASSETS
AND OTHER TRANSACTIONS 11
Section 7.1. Guarantor May Consolidate, Etc., Only on
Certain Terms 11
Section 7.2. Successor Guarantor Substituted 12
ARTICLE VIII. TERMINATION
Section 8.1. Termination 12
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE IX. MISCELLANEOUS 12
Section 9.1. Successors and Assigns 12
Section 9.2. Amendments 12
Section 9.3. Notices 12
Section 9.4. Benefit 13
Section 9.5. Interpretation 13
Section 9.6. Governing Law 14
</TABLE>
<PAGE>
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT, dated as of ____________, 1997, is executed and
delivered by GREATER BAY BANCORP, a California corporation (the "Guarantor")
having its principal office at 2860 West Bayshore Road, Palo Alto, California
94303, and [WILMINGTON TRUST COMPANY], a Delaware banking corporation, as
trustee (the "Guarantee Trustee"), for the benefit of the Holders from time to
time of the Preferred Securities (as defined herein) of GBB CAPITAL I, a
Delaware statutory business trust (the "Trust").
WHEREAS, pursuant to an Amended and Restated Trust Agreement, dated as of
____________, 1997 (the "Trust Agreement") among the Guarantor, as Depositor,
[WILMINGTON TRUST COMPANY], as Property Trustee, [WILMINGTON TRUST COMPANY], as
Delaware Trustee and the Administrative Trustees named therein and the Holders
from time to time of undivided beneficial interests in the assets of the Trust,
the Trust issued $__________ aggregate Liquidation Amount (as defined in the
Trust Agreement) of its _____% Cumulative Trust Preferred Securities,
Liquidation Amount $25 per Trust Preferred Security (the "Preferred Securities")
representing preferred undivided beneficial interests in the assets of the Trust
and having the terms set forth in the Trust Agreement;
WHEREAS, the Preferred Securities will be issued by the Trust and the
proceeds thereof, together with the proceeds from the issuance of the Trust's
Common Securities (as defined below), will be used to purchase the Debentures
(as defined in the Trust Agreement) of the Guarantor which was deposited with
Wilmington Trust Company, as Property Trustee under the Trust Agreement, as
trust assets;
WHEREAS, as an incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionlly to agree, to
the extent set forth herein, to pay to the Holders of the Preferred Securities
the Guarantee Payments (as defined herein) and to make certain other payments on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Guarantee Agreement and
pursuant to Section 5.1 hereof extends the Guarantee for the benefit of the
Holders from time to time of the Preferred Securities.
ARTICLE 1. DEFINITIONS
SECTION 1.1. Definitions.
As used in this Guarantee Agreement, the terms set forth below shall,
unless the context otherwise requires, have the following meanings. Capitalized
or otherwise defined terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Trust Agreement and the Indenture (as
defined herein), each as in effect on the date hereof.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, that an Affiliate of the
Guarantor shall not be deemed to be an Affiliate of the Trust. For the purposes
of this definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Board of Directors" means either the board of directors of the Guarantor
or any committee of that board duly authorized to act hereunder.
<PAGE>
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Trust.
"Event of Default" means a default by the Guarantor on any of its payment
or other obligations under this Guarantee Agreement; provided, however, that,
except with respect to a default in payment of any Guarantee Payments, the
Guarantor shall have received notice of default and shall not have cured such
default within 60 days after receipt of such notice.
"Guarantee" has the meaning set forth in Section 5.1.
"Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Preferred Securities, to the extent not paid or
made by or on behalf of the Trust: (i) any accrued and unpaid Distributions (as
defined in the Trust Agreement) required to be paid on the Preferred Securities,
to the extent the Trust shall have funds on hand available therefor at such
time, (ii) the applicable Redemption Price (as defined in the Trust Agreement),
to the extent the Trust shall have funds on hand available therefor at such
time, and (iii) upon a voluntary or involuntary termination, winding up or
liquidation of the Trust, unless Debentures are distributed to the Holders, the
lesser of (a) the aggregate of the Liquidation Distribution (as defined in the
Trust Agreement) and (b) the amount of assets of the Trust remaining available
for distribution to Holders of Preferred Securities after satisfaction of
liabilities to creditors of the Trust as required by applicable law.
"Guarantee Trustee" means [WILMINGTON TRUST COMPANY], until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee Agreement, and thereafter means each such
Successor Guarantee Trustee.
"Holder" means any holder, as registered on the books and records of the
Trust, of any Preferred Securities; provided, however, that in determining
whether the holders of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor, the Guarantee Trustee, or any Affiliate of the Guarantor
or the Guarantee Trustee.
"Indenture" means the Junior Subordinated Indenture dated as of
_____________, 1997, as supplemented and amended between the Guarantor and
[WILMINGTON TRUST COMPANY], as trustee.
"List of Holders" has the meaning specified in Section 2.2(a).
"Majority in Liquidation Amount of the Preferred Securities" means, except
as provided by the Trust Indenture Act, a vote by the Holder(s), voting
separately as a class, of more than 50% of the Liquidation Amount of all then
outstanding Preferred Securities issued by the Trust.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chairman or a Vice Chairman of the Board of Directors of such
Person or the President or a Vice President of such Person, and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of
such Person, and delivered to the Guarantee Trustee. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Guarantee Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;
-2-
<PAGE>
(c) a statement that each officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each officer, such
condition or covenant has been complied with.
"Other Guarantees" means any guarantees similar to the Guarantee issued,
from time to time, by the Guarantor on behalf of holders of one or more series
of Preferred Securities issued by one or more GBB Trusts (as defined in the
Indenture) other than the Trust.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Responsible Officer" means, with respect to the Guarantee Trustee, any
officer of the Corporate Trust Department of the Guarantee Trustee and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of that officer's knowledge of and
familiarity with the particular subject.
"Securities Act" means the Securities Act of 1933, as amended.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
ARTICLE II. TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application.
(a) This Guarantee Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Guarantee Agreement
limits, qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
SECTION 2.2. List of Holders.
(a) The Guarantor shall furnish or cause to be furnished to the Guarantee
Trustee (a) semiannually, on or before January 15 and July 15 of each year, a
list, in such form as the Guarantee Trustee may reasonably require, of the names
and addresses of the Holders ("List of Holders") as of a date not more than 15
days prior to the delivery thereof, and (b) at such other times as the Guarantee
Trustee may request in writing, within 30 days after the receipt by the
Guarantor of any such request, a List of Holders as of a date not more than 15
days prior to the time such list is furnished, in each case to the extent such
information is in the possession or control of the Guarantor and is not
identical to a previously supplied list of Holders or has not otherwise been
received by the Guarantee Trustee in its capacity as such. The Guarantee Trustee
may destroy any List of Holders previously given to it on receipt of a new List
of Holders.
-3-
<PAGE>
(b) The Guarantee Trustee shall comply with its obligations under Section
311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.3. Reports by the Guarantee Trustee.
Not later than July 15 of each year, commencing July 15, 1997, the
Guarantee Trustee shall provide to the Holders such reports as are required by
Section 313 of the Trust Indenture Act, if any, in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4. Periodic Reports to the Guarantee Trustee.
The Guarantor shall provide to the Guarantee Trustee, the Securities and
Exchange Commission and the Holders such documents, reports and information, if
any, as required by Section 314 of the Trust Indenture Act and the compliance
certificate required by Section 314 of the Trust Indenture Act, in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.
SECTION 2.5. Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Guarantee Trustee, on an annual basis,
such evidence of compliance with such conditions precedent, if any, provided for
in this Guarantee Agreement that relate to any of the matters set forth in
Section 314(c) of the Trust Indenture Act. Any certificate or opinion required
to be given by an officer pursuant to Section 314(c)(1) may be given in the form
of an Officers' Certificate.
SECTION 2.6. Events of Default; Waiver.
The Holders of a Majority in Liquidation Amount of the Preferred Securities
may, by vote, on behalf of the Holders, waive any past Event of Default and its
consequences. Upon such waiver, any such Event of Default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Guarantee Agreement, but no such waiver shall extend
to any subsequent or other default or Event of Default or impair any right
consequent therefrom.
SECTION 2.7. Event of Default; Notice.
(a) The Guarantee Trustee shall, within 90 days after the occurrence of an
Event of Default, transmit by mail, first class postage prepaid, to the Holders,
notices of all Events of Default known to the Guarantee Trustee, unless such
defaults have been cured before the giving of such notice, provided, that,
except in the case of a default in the payment of a Guarantee Payment, the
Guarantee Trustee shall be protected in withholding such notice if and so long
as the Board of Directors, the executive committee or a trust committee of
directors and/or Responsible Officers of the Guarantee Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders.
(b) The Guarantee Trustee shall not be deemed to have knowledge of any
Event of Default unless the Guarantee Trustee shall have received written
notice, or a Responsible Officer charged with the administration of this
Guarantee Agreement shall have obtained written notice, of such Event of
Default.
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SECTION 2.8. Conflicting Interests.
The Trust Agreement shall be deemed to be specifically described in this
Guarantee Agreement for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 3.1. Powers and Duties of the Guarantee Trustee.
(a) This Guarantee shall be held by the Guarantee Trustee for the benefit
of the Holders, and the Guarantee Trustee shall not transfer this Guarantee to
any Person except to a Holder exercising his or her rights pursuant to Section
5.4(iv) or to a Successor Guarantee Trustee on acceptance by such Successor
Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The
right, title and interest of the Guarantee Trustee shall automatically vest in
any Successor Guarantee Trustee, upon acceptance by such Successor Guarantee
Trustee of its appointment hereunder, and such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the Guarantee
Trustee shall enforce this Guarantee for the benefit of the Holders.
(c) The Guarantee Trustee, before the occurrence of any Event of Default
and after the curing of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Guarantee Agreement, and no implied covenants shall be read into this Guarantee
Agreement against the Guarantee Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.6), the
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement, and use the same degree of care and skill in its
exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee Agreement shall be construed to relieve
the Guarantee Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after the
curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Guarantee Trustee shall
be determined solely by the express provisions of this Guarantee
Agreement, and the Guarantee Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set
forth in this Guarantee Agreement; and
(B) in the absence of bad faith on the part of the Guarantee
Trustee, the Guarantee Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Guarantee
Trustee and conforming to the requirements of this Guarantee
Agreement; but in the case of any such certificates or opinions that
by any provision hereof or of the Trust Indenture Act are specifically
required to be furnished to the Guarantee Trustee, the Guarantee
Trustee shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Guarantee Agreement;
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(ii) the Guarantee Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer of the Guarantee Trustee, unless it
shall be proved that the Guarantee Trustee was negligent in ascertaining the
pertinent facts upon which such judgment was made;
(iii) the Guarantee Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of not less than a Majority in Liquidation Amount of
the Preferred Securities relating to the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee, or exercising
any trust or power conferred upon the Guarantee Trustee under this Guarantee
Agreement; and
(iv) no provision of this Guarantee Agreement shall require the Guarantee
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if the Guarantee Trustee shall have reasonable grounds for
believing that the repayment of such funds or liability is not reasonably
assured to it under the terms of this Guarantee Agreement or adequate indemnity
against such risk or liability is not reasonably assured to it.
SECTION 3.2. Certain Rights of Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Guarantee Trustee may rely and shall be fully protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
reasonably believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this Guarantee
Agreement shall be sufficiently evidenced by an Officers' Certificate unless
otherwise prescribed herein.
(iii) Whenever, in the administration of this Guarantee Agreement, the
Guarantee Trustee shall deem it desirable that a matter be proved or established
before taking, suffering or omitting to take any action hereunder, the Guarantee
Trustee (unless other evidence is herein specifically prescribed) may, in the
absence of bad faith on its part, request and rely upon an Officers' Certificate
which, upon receipt of such request from the Guarantee Trustee, shall be
promptly delivered by the Guarantor.
(iv) The Guarantee Trustee may consult with legal counsel, and the written
advice or opinion of such legal counsel with respect to legal matters shall be
full and complete authorization and protection in respect of any action taken,
suffered or omitted to be taken by it hereunder in good faith and in accordance
with such advice or opinion. Such legal counsel may be legal counsel to the
Guarantor or any of its Affiliates and may be one of its employees. The
Guarantee Trustee shall have the right at any time to seek instructions
concerning the administration of this Guarantee Agreement from any court of
competent jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Guarantee Agreement at the request or
direction of any Holder, unless such Holder shall have provided to the Guarantee
Trustee such adequate security and
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indemnity as would satisfy a reasonable person in the position of the Guarantee
Trustee, against the costs, expenses (including attorneys' fees and expenses)
and liabilities that might be incurred by it in complying with such request or
direction, including such reasonable advances as may be requested by the
Guarantee Trustee; provided that, nothing contained in this Section 3.2(a)(v)
shall be taken to relieve the Guarantee Trustee, upon the occurrence of an Event
of Default, of its obligation to exercise the rights and powers vested in it by
this Guarantee Agreement.
(vi) The Guarantee Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document, but
the Guarantee Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit.
(vii) The Guarantee Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through its
agents or attorneys, and the Guarantee Trustee shall not be responsible for any
misconduct or negligence on the part of any such agent or attorney appointed
with due care by it hereunder.
(viii) Whenever in the administration of this Guarantee Agreement the
Guarantee Trustee shall deem it desirable to receive instructions with respect
to enforcing any remedy or right or taking any other action hereunder, the
Guarantee Trustee (A) may request instructions from the Holders, (B) may refrain
from enforcing such remedy or right or taking such other action until such
instructions are received, and (C) shall be protected in acting in accordance
with such instructions.
(b) No provision of this Guarantee Agreement shall be deemed to impose any
duty or obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty to act in accordance with such power and
authority.
SECTION 3.3. Indemnity.
The Guarantor agrees to indemnify the Guarantee Trustee for, and to hold it
harmless against, any loss, liability or expense incurred without negligence or
bad faith on the part of the Guarantee Trustee, arising out of or in connection
with the acceptance or administration of this Guarantee Agreement, including the
costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder.
ARTICLE IV. GUARANTEE TRUSTEE
SECTION 4.1. Guarantee Trustee: Eligibility.
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
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(ii) be a Person that is eligible pursuant to the Trust Indenture Act to
act as such and has a combined capital and surplus of at least $50,000,000, and
shall be a corporation meeting the requirements of Section 310(a) of the Trust
Indenture Act. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the supervising or examining
authority, then, for the purposes of this Section 4.1(a)(ii) and to the extent
permitted by the Trust Indenture Act, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published.
(b) If at any time the Guarantee Trustee shall cease to be eligible to so
act under Section 4.1(a), the Guarantee Trustee shall immediately resign in the
manner and with the effect set out in Section 4.2(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee and Guarantor shall in all respects comply with the provisions
of Section 310(b) of the Trust Indenture Act.
SECTION 4.2. Appointment, Removal and Resignation of the Guarantee
Trustee.
(a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed or
removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed until a Successor Guarantee
Trustee has been appointed and has accepted such appointment by written
instrument executed by such Successor Guarantee Trustee and delivered to the
Guarantor.
(c) The Guarantee Trustee appointed hereunder shall hold office until a
Successor Guarantee Trustee shall have been appointed or until its removal or
resignation. The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument in writing executed by the
Guarantee Trustee and delivered to the Guarantor, which resignation shall not
take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition, at the expense of the Guarantor, any court of
competent jurisdiction for appointment of a Successor Guarantee Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Guarantee Trustee.
ARTICLE V. GUARANTEE
SECTION 5.1. Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in full on a
subordinated basis to the Holders the Guarantee Payments (without duplication of
amounts theretofore paid by or on behalf of the Trust), as and when due,
regardless of any defense, right of set-off or counterclaim which the Trust may
have or assert other than the defense of payment (the "Guarantee"). The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Trust to pay such amounts to the Holders.
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<PAGE>
SECTION 5.2. Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of the Guarantee and of
any liability to which it applies or may apply, presentment, demand for payment,
any right to require a proceeding first against the Guarantee Trustee, Trust or
any other Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.
SECTION 5.3. Obligations Not Affected.
The obligations, covenants, agreements and duties of the Guarantor under
this Guarantee Agreement shall in no way be affected or impaired by reason of
the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Trust of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Trust;
(b) the extension of time for the payment by the Trust of all or any
portion of the Distributions (other than an extension of time for payment of
Distributions that results from the extension of any interest payment period on
the Debentures as provided in the Indenture), Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Preferred
Securities or the extension of time for the performance of any other obligation
under, arising out of, or in connection with, the Preferred Securities;
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Trust granting indulgence or extension of any
kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Trust or any of the assets of the
Trust;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.3 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain the
consent of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 5.4. Rights of Holders.
The Guarantor expressly acknowledges that: (i) this Guarantee will be
deposited with the Guarantee Trustee to be held for the benefit of the Holders;
(ii) the Guarantee Trustee has the right to enforce this Guarantee on behalf of
the Holders; (iii) the Holders of a Majority in Liquidation Amount
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of the Preferred Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Guarantee Trustee
in respect of this Guarantee Agreement or exercising any trust or power
conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv)
any Holder may institute a legal proceeding directly against the Guarantor to
enforce its rights under this Guarantee Agreement, without first instituting a
legal proceeding against the Guarantee Trustee, the Trust or any other Person.
SECTION 5.5. Guarantee of Payment.
This Guarantee creates a guarantee of payment and not of collection. This
Guarantee will not be discharged except by payment of the Guarantee Payments in
full (without duplication of amounts theretofore paid by the Trust) or upon
distribution of Debentures to Holders as provided in the Trust Agreement.
SECTION 5.6. Subrogation.
The Guarantor shall be subrogated to all (if any) rights of the Holders
against the Trust in respect of any amounts paid to the Holders by the Guarantor
under this Guarantee Agreement and shall have the right to waive payment by the
Trust pursuant to Section 5.1; provided, however, that the Guarantor shall not
(except to the extent required by mandatory provisions of law) be entitled to
enforce or exercise any rights which it may acquire by way of subrogation or any
indemnity, reimbursement or other agreement, in all cases as a result of payment
under this Guarantee, if, at the time of any such payment, any amounts are due
and unpaid under this Guarantee. If any amount shall be paid to the Guarantor
in violation of the preceding sentence, the Guarantor agrees to hold such amount
in trust for the Holders and to pay over such amount to the Holders.
SECTION 5.7. Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Trust with respect to the Preferred Securities and
that the Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Guarantee Agreement
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.3 hereof.
ARTICLE VI. COVENANTS AND SUBORDINATION
SECTION 6.1. Subordination.
The obligations of the Guarantor under this Guarantee will constitute
unsecured obligations of the Guarantor and will rank subordinate and junior in
right of payment to all Senior and Subordinated Debt (as defined in the
Indenture) in the same manner as Debentures (as defined in the Trust Agreement).
SECTION 6.2. Pari Passu Guarantees.
The obligations of the Guarantor under this Guarantee shall rank pari passu
with the obligations of the Guarantor under all Other Guarantees.
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ARTICLE VII. CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 7.1. Guarantor May Consolidate, Etc., Only on Certain Terms.
The Guarantor shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, and no Person shall consolidate with or merge into the Guarantor
or convey, transfer or lease its properties and assets substantially as an
entirety to the Guarantor, unless:
(1) in case the Guarantor shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, the Person formed by such consolidation or into which
the Guarantor is merged or the Person which acquires by conveyance or transfer,
or which leases, the properties and assets of the Guarantor substantially as an
entirety shall be a corporation, partnership or trust organized and existing
under the laws of the United States of America or any State or the District of
Columbia, and shall expressly assume the Guarantor's obligations under this
Guarantee;
(2) immediately after giving effect thereto, no Event of Default, and no
event which, after notice or lapse of time, or both, would become an Event of
Default, shall have happened and be continuing;
(3) such consolidation, merger, conveyance, transfer or lease is permitted
under the Trust Agreement and the Indenture and does not give rise to any breach
or violation of the Trust Agreement or the Indenture; and
(4) the Guarantor has delivered to the Guarantee Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and assumption of the Guarantor's
obligations under this Guarantee Agreement comply with this Article and that all
conditions precedent herein provided for relating to such transaction have been
complied with; and the Guarantee Trustee, subject to Section 3.1 hereof, may
rely upon such Officers' Certificate and Opinion of Counsel as conclusive
evidence that such transaction complies with this Section 7.1.
SECTION 7.2. Successor Guarantor Substituted.
Upon any consolidation or merger by the Guarantor with or into any other
Person, or any conveyance, transfer or lease by the Guarantor of its properties
and assets substantially as an entirety to any Person in accordance with Section
7.1, the successor Person formed by such consolidation or into which the
Guarantor is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Guarantor under this Guarantee Agreement with the same effect as if such
successor Person had been named as the Guarantor herein; and in the event of any
such conveyance, transfer or lease the Guarantor shall be discharged from all
obligations and covenants under this Guarantee Agreement.
ARTICLE VIII. TERMINATION
SECTION 8.1. Termination.
This Guarantee Agreement shall terminate and be of no further force and
effect upon the earliest of (i) full payment of the applicable Redemption Price
of all Preferred Securities, (ii) the distribution of Debentures to the Holders
in exchange for all of the Preferred Securities or (iii) full payment of the
amounts payable in accordance with the Trust Agreement upon liquidation of the
Trust.
<PAGE>
Notwithstanding the foregoing clauses (i) through (iii), this Guarantee
Agreement will continue to be effective or will be reinstated if it has been
terminated pursuant to one of such clauses (i) through (iii), as the case may
be, if at any time any Holder must restore payment of any sums paid with respect
to Preferred Securities or this Guarantee Agreement.
ARTICLE IX. MISCELLANEOUS
SECTION 9.1. Successors and Assigns.
All guarantees and agreements contained in this Guarantee Agreement shall
bind the successors, assigns, receivers, trustees and representatives of the
Guarantor and shall inure to the benefit of the Holders of the Preferred
Securities then outstanding. Except in connection with a consolidation, merger
or sale involving the Guarantor that is permitted under Article VII hereof and
Article VIII of the Indenture, the Guarantor shall not assign its obligations
hereunder.
SECTION 9.2. Amendments.
Except with respect to any changes which do not adversely affect the rights
of the Holders in any material respect (in which case no vote will be required),
this Guarantee Agreement may not be amended without the prior approval of the
Holders of not less than a Majority in Liquidation Amount of the Preferred
Securities. The provisions of Article VI of the Trust Agreement concerning
meetings of the Holders shall apply to the giving of such approval.
SECTION 9.3. Notices.
Any notice, request or other communication required or permitted to be
given hereunder shall be in writing, duly signed by the party giving such
notice, and delivered, telecopied or mailed by first class mail as follows:
(a) if given to the Guarantor, to the address set forth below or such other
address, facsimile number or to the attention of such other Person as the
Guarantor may give notice to the Holders:
Greater Bay Bancorp
2860 West Bayshore Road
Palo Alto, California 94303
Facsimile No.: (415) ___________________
Attention:
(b) if given to the Trust, in care of the Guarantee Trustee, at the Trust's
(and the Guarantee Trustee's) address set forth below or such other address as
the Guarantee Trustee on behalf of the Trust may give notice to the Holders:
GBB Capital I
c/o Greater Bay Bancorp
2860 West Bayshore Road
Palo Alto, California 94303
Facsimile No.: (415) __________________
Attention:
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with a copy to:
[WILMINGTON TRUST COMPANY
1100 NORTH MARKET
WILMINGTON, DELAWARE 19890
FACSIMILE NO.: (302) 651-1000
ATTENTION: CORPORATE TRUST ADMINISTRATION]
(c) if given to any Holder, at the address set forth on the books and
records of the Trust.
All notices hereunder shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 9.4. Benefit.
This Guarantee is solely for the benefit of the Holders and is not
separately transferable from the Preferred Securities.
SECTION 9.5. Interpretation.
In this Guarantee Agreement, unless the context otherwise requires:
(a) capitalized terms used in this Guarantee Agreement but not defined in
the preamble hereto have the respective meanings assigned to them in Section
1.1;
(b) a term defined anywhere in this Guarantee Agreement has the same
meaning throughout;
(c) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or amended
from time to time;
(d) all references in this Guarantee Agreement to Articles and Sections are
to Articles and Sections of this Guarantee Agreement unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Guarantee Agreement unless otherwise defined in this Guarantee
Agreement or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice versa; and
(g) the masculine, feminine or neuter genders used herein shall include the
masculine, feminine and neuter genders.
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<PAGE>
SECTION 9.6. Governing Law.
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
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<PAGE>
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
GREATER BAY BANCORP
By:
----------------------------
Name:
Title:
[WILMINGTON TRUST COMPANY]
as Guarantee Trustee
By:
----------------------------
Name:
Title:
<PAGE>
EXHIBIT 4.12
SUPPLEMENTAL DEBENTURE AGREEMENT
--------------------------------
THIS SUPPLEMENTAL DEBENTURE AGREEMENT, dated as of November 22, 1996, is
made pursuant to Article VIII.2 of the Debenture Agreement dated as of September
27, 1995 (the "Debenture Agreement") pursuant to which Cupertino National
Bancorp, a California corporation ("Cupertino"), has issued 11.5% Senior
Subordinated Debentures due 2005 (the "Debentures"). All capitalized terms used
herein and not otherwise defined shall have the meaning given to them in the
Debenture Agreement.
RECITALS
WHEREAS, Article III of the Debenture Agreement provides that the aggregate
principal amount of Debentures which may be delivered under the Debenture
Agreement is limited to $2,500,000, except for Debentures delivered upon
registration or transfer of, or in exchange for, or in lieu of, other
Debentures, as provided therein.
WHEREAS, Article VIII.2 of the Debenture Agreement provides that Cupertino
may, when authorized by a Board Resolution and with the consent of the Holders
of the Outstanding Debentures, enter into a Supplemental Debenture Agreement for
the purpose of changing in any manner or eliminating any of the provisions of
the Debenture Agreement.
WHEREAS, on September 21, 1995, the Board of Directors of Cupertino
authorized and approved an increase in the aggregate amount of Debentures to be
offered by Cupertino pursuant to the Debenture Agreement to $3,000,000.
WHEREAS, Cupertino obtained the consent of the Holders of the Outstanding
Debentures, each of whom is listed on Exhibit A-1 hereto, that any limitation
imposed by the Debenture Agreement, Debenture, Private Placement Offering
Memorandum, Subscription Agreement or any other documents concerning the
Debentures which provides that the aggregate principal amount of Debentures is
limited to $2,500,000, be amended to reflect that the aggregate amount of
Debentures to be offered by Cupertino pursuant to the Debenture Agreement shall
be $3,000,000.
WHEREAS, Cupertino desires to amend the Debenture Agreement to reflect that
the aggregate amount of Debentures to be issued under and pursuant to the
Debenture Agreement by Cupertino shall be $3,000,000.
AMENDMENT
NOW, THEREFORE, Cupertino hereby amends the Debenture Agreement to reflect
that the aggregate amount of Debentures to be issued under and pursuant to the
Debenture Agreement by Cupertino shall be $3,000,000 by substituting
"$3,000,000", wherever "$2,500,000" appears in the Debenture Agreement.
<PAGE>
GENERAL PROVISIONS
As amended by this Supplemental Debenture Agreement, the Debenture
Agreement is in all respects ratified and confirmed and, as amended by this
Supplemental Debenture Agreement, shall be read, taken and construed as one and
the same instrument.
This Supplemental Debenture Agreement shall become a legally effective
and binding instrument as of the date hereof.
This Supplemental Debenture Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all of such counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, Cupertino has caused this Supplemental Debenture
Agreement to be duly signed and acknowledged by its officers all as of the day
and year first above written.
CUPERTINO NATIONAL CORPORATION
By: /s/ Steven C. Smith
-------------------
Steven C. Smith, Executive Vice
President and Chief Operating
Officer
Attest:
- --------------------------
Secretary
See Exhibit A-1 hereto, which supersedes Exhibit A, for the list of
Debentureholders who duly executed Subscription Agreements that were accepted by
Cupertino and pursuant to which they agreed to be bound by the terms of the
Debenture Agreement and are deemed to have executed and delivered the Debenture
Agreement by virtue of their execution and delivery of such Subscription
Agreements.
<PAGE>
EXHIBIT 4.13
SUPPLEMENTAL DEBENTURE AGREEMENT
This Supplemental Debenture Agreement, dated November 27, 1996 (the
"Supplemental Debenture Agreement"), is made by and between Cupertino National
Bancorp, a California corporation ("Cupertino"), and Mid-Peninsula Bancorp, a
California corporation ("Mid-Peninsula").
RECITALS
A. Cupertino is the issuer of those certain 11.5% Subordinated Debentures
Due 2005 (the "Debentures") pursuant to the terms and conditions set forth in
that certain Debenture Agreement, dated as of September 27, 1995, as amended by
that certain Supplemental Debenture Agreement dated as of November 22, 1996 (the
"Debenture Agreement"), and that certain Private Placement Offering Memorandum,
dated August 22, 1995 to the Debenture holders.
B. Cupertino and Mid-Peninsula have entered into a Second Amended and
Restated Agreement and Plan of Reorganization and Merger, dated as of August 20,
1996 (the "Reorganization Agreement") and a Merger Agreement, dated November 15,
1996, pursuant to which Cupertino shall, by operation of law, be merged with and
into Mid-Peninsula (the "Merger"), the name of Mid-Peninsula shall be changed to
Greater Bay Bancorp ("GB Bancorp"), and GB Bancorp shall be the surviving
entity.
C. Section 9.1 of the Debenture Agreement prohibits Cupertino from, inter
alia, merging with any other corporation unless (i) the corporation into which
Cupertino is merged shall be a corporation organized and existing under the laws
of the United States of America or any State or the District of Columbia; (ii)
the corporation into which Cupertino is merged shall expressly assume, by a
supplemental debenture agreement in form reasonably satisfactory to Cupertino,
the obligations of Cupertino under the Debenture Agreement; (iii) immediately
after giving effect to the merger, no event of default shall have occurred or be
continuing; (iv) immediately after giving effect to the merger, Cupertino
National Bank & Trust ("CNB"), a wholly-owned subsidiary of Cupertino, shall be
in compliance with all applicable minimum capital requirements; and (iv)
Cupertino shall have obtained an opinion of counsel stating that such merger and
such supplemental debenture agreement complies with the requirements of Section
9.1 of the Debenture Agreement and that all conditions precedent therein have
been complied with.
D. Cupertino and Mid-Peninsula desire, by this Supplemental Debenture
Agreement, to evidence the assumption, by Mid-Peninsula, of the obligations of
Cupertino under the Debenture Agreement and Debentures, as required by Section
9.1 of the Debenture Agreement, effective upon the Effective Time of the Merger
(as such term is defined in the Reorganization Agreement).
<PAGE>
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is acknowledged, Cupertino and Mid-Peninsula, intending to
be legally bound, agree as follows:
1. Assumption. At and after the Effective Time of the Merger,
----------
Mid-Peninsula assumes and agrees to perform, satisfy, discharge and observe each
and every obligation, liability, duty and covenant on the part to be performed
or observed by Cupertino under the Debenture Agreement and the Debentures,
including, without limitation, the due and punctual payment of the principal of
and any interest on the Debentures as and when due.
2. Representations and Warranties.
(a) By Cupertino. Cupertino hereby represents and warrants to
------------
Mid-Peninsula as follows:
(i) Cupertino is a corporation duly organized, validly existing
and in good standing under the laws of California;
(ii) the copy of the Debenture Agreement attached as Exhibit A
---------
hereto is a complete and accurate copy of the Debenture Agreement as currently
in effect;
(iii) At the date hereof, Cupertino is not in default under the
Debenture Agreement, no event has occurred and is continuing which, after notice
or lapse of time or both, would constitute a default under the Debenture
Agreement and, immediately after giving effect to the Merger, Cupertino shall
not be in default under the Debenture Agreement and no event shall have occurred
and be continuing which, after notice or lapse of time or both would constitute
a default under the Debenture Agreement.
(iv) At the date hereof, CNB is and, immediately after giving
effect to the Merger, CNB shall be, in compliance with all applicable minimum
capital requirements.
(b) By Mid-Peninsula. Mid-Peninsula hereby represents and warrants to
----------------
Cupertino that Mid-Peninsula is a corporation duly organized, validly existing
and in good standing under the laws of California.
3. Effect of Assumption. From and after the Effective Time of the Merger,
--------------------
GB Bancorp shall succeed to, and be substituted for, and may exercise every
right and power of, Cupertino under the Debenture Agreement with the same effect
as if GB Bancorp had been originally named in the place and stead of Cupertino
in the Debenture Agreement, and the
<PAGE>
Debenture holders shall look solely and exclusively to GB Bancorp for the
performance and discharge of the obligations of Cupertino under the Debenture
Agreement and the Debentures.
4. No Other Amendments. The Debenture Agreement, as expressly modified by
-------------------
the terms of this Supplemental Debenture Agreement, shall remain in full force
and effect in accordance with its terms.
5. General Provisions.
(a) This Supplemental Debenture Agreement may be executed in two or
more counterparts, each of which shall be deemed an original as against the
party whose signature is affixed thereto, and together which shall constitute
but one and the same document.
(b) This Supplemental Debenture Agreement, being adopted without the
consent of the Debenture holders pursuant to Section 8.1 of the Debenture
Agreement, shall be binding on and shall inure to the benefit of the parties
hereto, their respective successors, assigns and legal representatives, and each
and every Debenture holder.
(c) This Supplemental Debenture Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts to be performed wholly within such State.
(d) The captions and headings used in this Supplemental Debenture
Agreement are for covenience of reference only and shall not affect the meaning
or interpretation of any provision of this Supplemental Debenture Agreement.
IN WITNESS WHEREOF, Cupertino and Mid-Peninsula have caused this
Supplemental Debenture Agreement to be executed by their respective duly
authorized officers, effective as of the Effective Time of the Merger.
CUPERTINO NATIONAL BANCORP MID-PENINSULA BANCORP
By /s/ C. Donald Allen By /s/ David L. Kalkbrenner
------------------------ --------------------------
C. Donald Allen David L. Kalkbrenner
President President
2
<PAGE>
EXHIBIT 10.22
AMENDMENT TO THE
CUPERTINO NATIONAL BANCORP 401(k) PROFIT SHARING PLAN
The Cupertino National Bancorp 401(k) Profit Sharing Plan (the "Plan") is
comprised of the Jordan & Andrews, Consultants and Actuaries Defined
Contribution Prototype Plan and Trust Agreement and the Adoption Agreement #006
for Nonstandardized Code 401(k) Profit Sharing Plan (the "Adoption Agreement").
Effective January 1, 1996, the provisions of Section 2.01 of the Adoption
Agreement relating to Eligibility Conditions and Plan Entry Date shall be
amended as follows:
2.01 ELIGIBILITY
-----------
ELIGIBILITY CONDITIONS. To become a Participant in the Plan, an Employee
must satisfy the following eligibility conditions: (Choose (a) or (b) or
both; (c) is optional as additional election)
[X] (b) Service requirement. (Choose one of (1) through (3))
[ ] (1) One Year of Service.
[ ] (2) months (not exceeding 12) following the Employee's
--
Employment Commencement Date.
[X] (3) One Hour of Service.
PLAN ENTRY DATE. "Plan Entry Date" means the Effective Date and: (Choose
(d), (e) or (f))
[ ] (d) Semi-annual Entry Dates: The first day of the Plan Year and
the first day of the seventh month of the Plan Year.
[ ] (e) The first day of the Plan Year.
[X] (f) Specify entry dates: The first day of each calendar quarter.
---------------------------------------
For newly hired Employees, the Plan Entry Date is the first
-----------------------------------------------------------
day of the calendar quarter immediately following completion
------------------------------------------------------------
of one hour of service with the Employer. For rehired
-----------------------------------------------------
employees, the Plan Entry Date is the date of re-
-------------------------------------------------
employment."
----------
This Amendment is executed this 21st day of December 1995.
CUPERTINO NATIONAL BANCORP
By: /s/ Shelly Binnebose
------------------------------------
Shelly Binnebose, Asst. Secretary
<PAGE>
EXHIBIT 10.23
AMENDMENT NUMBER 2
TO THE
CUPERTINO NATIONAL BANK
401(k) PROFIT SHARING PLAN
Under the provisions of Article 13 of the Cupertino National Bank 401(k)
Profit Sharing Plan, the plan is hereby amended effective December 31, 1996,
except as otherwise provided, as follows:
1. Section 5.03(b) of the Adoption Agreement is hereby amended to include
the following additional sentence:
Any Participant hired by December 31, 1996 will be 100% vested in all
accounts.
Except as hereby amended, Cupertino National Bank 401(k) Profit Sharing
Plan and all provisions thereof not in conflict with this amendment shall remain
in full force and effect.
IN WITNESS WHEREOF, the Company and the Trustee have caused this amendment
to be executed by their respective authorized officers on the ------- day of
- ----------------, 19---.
GREATER BAY BANCORP, INC.
------------------------
PRESIDENT
------------------------
SECRETARY
1
<PAGE>
TRUSTEE:
by -----------------------------
by -----------------------------
<PAGE>
EXHIBIT 10.25
CUPERTINO NATIONAL BANK & TRUST
EMPLOYMENT, SEVERANCE AND
RETIREMENT BENEFITS AGREEMENT
THIS EMPLOYMENT, SEVERANCE AND RETIREMENT BENEFITS AGREEMENT (the
"Agreement") is made and entered on this 31st day of JUly, 1995 and is effective
as of September 1, 1994, by and between CUPERTINO NATIONAL BANCORP (the
"Corporation"), its wholly owned subsidiary CUPERTINO NATIONAL BANK & TRUST (the
"Bank") and KEN BRENNER (the "Employee").
The Corporation, Bank and Employee agree as follows:
1. DEFINITIONS
-----------
1.1 "Agreement" means only the agreement contained in this document and as
modified in writing pursuant to section 10.5 herein.
1.2 "Anniversary Date" means the date one (1) year from the Effective
Date.
1.3 "Bank" means Cupertino National Bank & Trust, and any successor to its
business or assets which executes and delivers the Agreement as provided by
section 10.2 herein or which becomes bound by this Agreement by operation of
law.
1.4 "Board" means the Board of Directors of the Bank.
1.5 "Cause" means (1) Employee's acts of personal dishonesty; willful
misconduct; breach of fiduciary duty or violation of banking law involving an
intent to obtain personal or family profit; willful violation of any law, rule,
or regulation which results in action against or restrictions imposed on the
Bank by regulatory authorities; habitual abuse of substances (as corroborated by
a physician) or extended unexcused absence form work; or (2) Employee's
continued failure to substantially perform Employee's duties (which failure may
be determined by the Board by reference to the quality of the Company's
financial condition or operating performance) with the Bank (other than any
failure resulting from Disability) after a written demand for substantial
performance is given to Employee by the Board which demand specifically
identifies the manner in which the Board believes that Employee has not
substantially performed Employee's duties. The definition of "Cause" as set
forth in subsection (1) hereof is sometimes referred to separately herein as
"Personal Conduct/Cause," and the definition of "Cause" as set forth in
subsection (2) is sometimes referred to separately herein as
"Performance/Cause." The term "Cause," standing alone, shall mean either
Personal Conduct/Cause or Performance/Cause or both. For purposes of the
definition of Personal Conduct/Cause, an act, or failure to act, on the
Employee's part shall be
<PAGE>
considered "willful" only if done, or omitted to be done, by him without
reasonable belief that such act, or failure to act, is in the best interests of
the Employer.
1.6 "Change in Control" means a change in the Board of Directors, or the
Corporation or the Bank following:
1.6.1 The acquisition, directly or indirectly, of more than 25% of
the outstanding shares of any class of voting securities of the Corporation or
the Bank by any Person; or
1.6.2 A merger, consolidated or sale of all or substantially all of
the assets of the Corporation or the Bank, such that the individuals
constituting the Corporation Board or the Board of the Bank immediately prior to
such period shall cease to constitute a majority of such Board, unless the
election of each director who was not a director prior thereto was approved by
vote of at least two-thirds of the directors then in office who were directors
prior to such period.
1.6.3 Notwithstanding the foregoing, any change in the Board of
either the Corporation or the Bank which occurs within the twenty-four (24)
month period following the Effective Date as a result of a merger with South
Valley Bancorporation, shall NOT constitute a Change in Control for purposes of
this Agreement.
1.7 "Control" means the possession, direct or indirect, by any Person or
"group" (as defined in section 13(d)(3) of the Securities Exchange Act of 1934,
as amended) of the power to direct or cause the direction of the management
policies of the Corporation or the Bank, whether through ownership of voting
securities, by contract, or otherwise, and in any case means the ability to
determine the election of a majority of the directors of the Corporation or the
Bank.
1.8 "Corporation" means Cupertino National Bancorp and any successor to
its business or assets which executes and delivers the agreement as provided by
section 10.2 herein, or which becomes bound by this Agreement by operation of
law.
1.9 "Corporation Board" means the Board of Directors of Cupertino National
Bancorp.
1.10 "Disability" means physical or mental illness resulting in absence on
a full-time basis from Employee's duties with Employer for one-hundred eighty
(180) consecutive calendar days. Disability shall be deemed to have occurred
only after the following procedure has been satisfied: If within thirty (30)
days after written notice of proposed Termination for Disability is given to
Employee by Employer, Employee has
2
<PAGE>
not returned to the full-time performance of Employee's duties, Employer may
terminate Employee by giving written notice of Termination for Disability. Such
notice may be given by Employer following Employee's absence from Employee's
duties by reason of physical or mental disability for one-hundred fifty (150)
consecutive calendar days.
1.11 "Effective Date" means September 1, 1994. - Salary Continuation
Agreement.
1.12 "Employee" means Ken Brenner.
1.13 "Employer" means the Corporation, the Bank or one of their
subsidiaries which is Employee's employer on the date of a Change in Control. If
Employee has more than one such employer on the date of a Change in Control, it
means the employer who makes payment of Employee's monthly salary, and if two or
more employers do so, each shall be deemed to be Employer for the purposes of
this Agreement on a pro rata basis as to the amount of Employee's working time
devoted to each, as a percentage of Employee's salary. "Employer" shall include
any successor to the business or assets of an Employer and which executes the
agreement provided by section 10.2 or which becomes bound by this Agreement by
operation of law.
1.14 "Person" means an individual, a corporation, a partnership, an
association, a joint stock company, a trust, any unincorporated organization or
a government or political subdivision thereof.
1.15 "Resignation for Good Reason" or "Resign for Good Reason" means the
cessation of Employee's employment upon written notice given by Employee to
Employer as provided in section 5.4.1 herein.
1.16 "Retirement" or "Retire" means voluntary termination by Employee of
his/her employment with Employer other than for reason of death, Disability or
Resignation for Good Reason, as those terms are defined herein.
1.17 "Salary" shall mean regular annual base cash compensation exclusive
of incentive or bonus compensation or noncash compensation benefits.
1.18 "Retirement Age" for purposes of this Agreement is sixty (60) years
of age.
1.19 "Termination" or "Terminated" means cessation of Employee's
employment upon written notice (with or without Cause) given to Employee, by
Employer or the Board, or their successors.
3
<PAGE>
2. POSITION AND DUTIES
-------------------
2.1 Employee shall be employed by the Bank as its Executive Vice
President/Sales and Marketing reporting to the Executive Management Committee,
of which Employee will be a member, effective September 1, 1994 ("the
Commencement Date"). As Executive Vice President/Sales and Marketing, Employee
agrees to devote his full business time, energy and skill to his duties at the
Bank. These duties shall include, but not be limited to, any duties consistent
with his position which may be assigned to Employee from time to time by the
Bank's President.
2.2 CODE OF PERSONAL AND BUSINESS CONDUCT. Employee agrees to abide by
-------------------------------------
the terms and conditions of the Bank's standard employee Code of Personal &
Business Conduct executed by Employee and attached here as Exhibit A.
3. TERM
----
3.1 The term of this Agreement shall commence as of the Effective Date and
shall continue until the Termination, Retirement, Resignation for Good Reason
(as defined in section 5.4.1) or death of Employee, whichever occurs first.
This Agreement and all of its terms and conditions may be terminated upon
written agreement by the parties. Notwithstanding the foregoing, nothing
contained herein shall imply the existence of a contract or assurance of
employment between Employee and Employer, nor shall this Agreement alter
Employer's personnel policies and practices, including the right to terminate
Employee at any time with or without cause.
3.2 Notwithstanding the right of Bank to terminate Employee, any such
Termination shall be governed by section 5 below.
4. COMPENSATION
------------
4.1 SALARY. Employee shall be paid a monthly salary of $10,000.00
------
($120,000.00 on an annual basis), subject to applicable withholding, in
accordance with the Bank's normal payroll procedures.
4.2 BENEFITS. Employee shall have the right, on the same basis as other
--------
members of senior management of the Bank, to participate in and to receive
benefits under any of the Bank's employee benefits plans, including medical,
dental, life and disability group insurance plans as well as the Bank's 401(k)
Plan and Employee Stock Purchase Plan.
4
<PAGE>
4.3 VACATION. Employee shall accrue vacation at a rate of 2.083 days per
--------
month, the equivalent of five (5) weeks over a one (1) year period.
4.4 STOCK OPTIONS. Stock options will be granted at the discretion of the
-------------
Board of Directors. The shares will vest under the provisions of the Bank's 1995
Stock Option Plan.
4.5 PERFORMANCE BONUS. Employee will be eligible for a performance bonus
-----------------
up to 75% of base salary based upon goals, which will be set annually by the
Board.
4.6 CAR ALLOWANCE. $500.00 per month.
-------------
4.7 DEFERRED COMPENSATION. The Bank will provide Retirement Compensation
---------------------
benefits as provided in paragraph 6 set forth below.
4.9 COMPENSATION FREEZE. Subject to the terms and conditions herein, and
-------------------
for a period for three (3) years from the Effective Date, Employee's total
annual Salary and standard employee benefits from Employer set forth above shall
remain the same; provided, however, that Employee's Salary shall be increased
annually to allow for a cost of living increase, such increase to be determined
based on the U.S. Department of Labor Bureau of Labor Statistics Consumer Price
Index for All Urban Consumers in the San Francisco, Oakland and Bay Area. In
addition, it is within the complete discretion of the Employer to increase such
amount of total compensation at any time and for any reason, including a
promotion of Employee to a new position or title; however, other than the
cost-of-living increase to Salary as provided for herein, nothing in this
Agreement shall suggest or imply that the Board is under any duty or obligation
to increase Employee's Salary or other compensation or standard employee
benefits at any time during the three (3) year period following the Effective
Date. Employee's current salary, his current participation in incentive
compensation programs of the Employer and a description of current standard
employee benefits are set forth above.
5. TERMINATION OF EMPLOYMENT
-------------------------
5.1 The provisions of this section 5 shall govern the benefits, if any,
which Employee shall receive upon Termination of his Employment.
5.2 BENEFITS UPON VOLUNTARY TERMINATION. In the event that Employee
-----------------------------------
voluntarily resigns from his employment with the Bank, or in the event that his
employment terminates as a result of his death or disability, Employee shall be
entitled to
5
<PAGE>
no compensation or benefits from the Bank other than those earned under
paragraph 4 above through the date of his termination.
5.3 BENEFITS UPON OTHER TERMINATION. Employee agrees that his employment
-------------------------------
may be terminated by the Bank at any time, with or without cause. In the event
of the termination of Employee's employment by the Bank for the reasons set
forth below, he shall be entitled to the following:
5.3.1 TERMINATION FOR PERSONAL CONDUCT/CAUSE. The payments set forth
--------------------------------------
in section 5.3.2 hereof shall not apply if at any time Employee is terminated
upon a good faith finding of Personal Conduct/Cause by the Board; provided,
however, that Employee shall be given written notice of the Board's finding of
conduct by Employee amounting to Personal Conduct/Cause for such Termination.
Such notice shall be accompanied by a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the members of the Board adopted
at a duly-noticed meeting of the Board, and finding in good faith that Employee
engaged in conduct amounting to Personal Conduct/Cause and specifying the
particulars thereof.
5.3.2 If the Employee is Terminated for Performance/Cause or other
than by reason of death, Retirement, Disability or Personal Conduct/Cause, as
set forth herein, or if Employee Resigns for Good Reason, as defined in section
5.4.1 below, the Bank shall pay to Employee twelve (12) months' Salary
("Severance Payment") at a rate equivalent to the then-current Salary of
Employee.
5.3.3 The Bank shall have the option of paying Severance Payments in
a lump-sum payment, or by salary continuation payments made under the Bank's
normal employee compensation schedule. If the Bank chooses the lump-sum payment
option, such payment shall be made not later than the tenth (10th) day following
the date of cessation of employment, Termination or Resignation for Good Reason.
5.3.4 Although a payment triggering such section is not intended
hereby, amounts otherwise due under this section will be reduced if, and to the
extent that, such reduction will increase the net amount Employee will receive
under this Agreement after taking into account the imposition of the excise tax
under section 4999 of the Internal Revenue Code, if applicable.
5.4 If a Change in Control occurs during the Term of this Agreement,
Employee may thereafter be entitled to a payment set forth in section 5.3.2 in
accordance with the terms hereof, subject to the following limitations:
6
<PAGE>
5.4.1 RESIGNATION FOR GOOD REASON. The payments set forth in
---------------------------
section 5.3.2 hereof shall apply if, after a Change of Control but within one
year thereafter, Employee Resigns for Good Reason, upon the happening of one or
more of the following events (unless such event or occurrence is applied
generally to all officers and employees of Employer and any parent or successor
of any of them), any of which will constitute Good Reason for Employee's
Resignation:
5.4.1.1. Without Employee's express written consent,
Employee's assignment to any duties substantially inconsistent with Employee's
position, duties, responsibilities and status with Employer immediately prior to
a Change in Control, or any removal of Employee from any such position to a
position substantially inferior to such prior position;
5.4.1.2 A reduction by Employer of Employee's Salary or of
any bonus compensation formula applicable to Employee as in effect prior to a
Change in Control;
5.4.1.3 A failure by Employer to maintain any of the
employee benefits to which Employee was entitled prior to a Change in Control at
a level substantially similar to or greater than that in effect prior to a
Change in Control, through the continuation of the same or substantially similar
plans, programs and policies;
5.4.1.4 The failure by Employer to provide Employee with
the same number of paid vacation days and leave to which Employee would be
entitled as salaried employee of Employer, or any parent or successor of
Employer;
5.4.1.5 Employer requiring Employee to travel on
employer's business to an extent substantially greater than Employee's present
business travel obligations; or the relocation of Employee's office at least
sixty (60) miles from its current location, without Employee's consent; and
5.4.1.6 The failure of the Bank to obtain the assumption
of this Agreement by any successor of Employer as contemplated in section 10.2
below.
5.4.2 The events described above are the only events which shall
constitute Good Reason.
6. CERTAIN RETIREMENT BENEFITS
---------------------------
6.1 Subject to the special terms and conditions contained below, upon
cessation of Employee's employment with Employer, if the Employee has reached
the Retirement
7
<PAGE>
Age, or as soon thereafter as Employee reaches the Retirement Age, the Bank
hereby agrees that the Employee and Employee's spouse shall become the joint
owners (with right of survival) with the Bank of the annual increase of the cash
surrender value of the policy thereafter arising; however, the Employee's (and
Employee's spouse's) right to draw against such increase (such draw to reduce
eventual death benefits) shall never exceed $55,000 per 12-month period (the
"Retirement Draw Benefit"). The shared right to ownership of this increase shall
continue for the lifetime of the Employee and the lifetime of the Employee's
surviving spouse, but in no event longer than 40 years.
6.1.1 The Retirement Draw Benefit will be made available by means of
a split-dollar insurance policy which is to be purchased by the Bank within
thirty (30) days of the date of this Agreement, and for which the premium
payment split between the Bank and Employee and the payment terms are outlined
in Exhibit B to this Agreement.
6.1.2 Subject to the provisions of section 6.1.3 and 6.1.4 herein,
Employee's right to the Retirement Draw Benefit shall not fully vest unless he
has been employed by Employer for seven (7) years from the Effective Date. If
Employee's employment with Employer ends any time before a date one (1) year
from the date of this Agreement (the "Anniversary Date"), Employee will not have
any right to, or interest in, the Retirement Draw Benefit. If Employee's
employment ends at any time after the Anniversary Date, but prior to the seven
(7) year date of full vesting, Employee's right to one-seventh (1/7) of the
Retirement Draw Benefit-i.e., the right to draw $7,143, or one-seventh of
$50,000, per 12-month period-will vest on the Anniversary Date, and Employee's
right to the Retirement Draw Benefit will continue to proportionately vest
thereafter on a monthly basis, on the first date of each month following the
Anniversary Date, until employment ends.
6.1.3 Subject to the provisions of section 6.1.2 herein, if prior to
a Change in Control and during the Term hereof, Employee is Terminated for any
reason other than Disability, the vesting of Employee's right to the Retirement
Draw Benefit will cease as of the date of termination. If prior to a Change of
Control and during the Term hereof, Employee is Terminated by reason of
Disability, the vesting of Employees's right to the Retirement Draw Benefit will
cease as of the date of termination unless the Board in its sole and absolute
discretion approves additional vesting.
6.1.4 Notwithstanding the provisions of section 6.1.2 herein, if
after a Change in Control and during the Term hereof, Employee is Terminated, or
Resigns for Good Reason, as provided in section 5.4.1 herein, Employee's right
to the Retirement Draw Benefit shall immediately vest in full, and such benefit
shall become available to Employee when Employee reaches Retirement Age.
8
<PAGE>
7. FEDERAL INCOME TAX WITHHOLDING
------------------------------
7.1 The Bank shall withhold from any compensation or benefits payable
under this Agreement all federal, state, city or other taxes or deductions as
shall be required pursuant to any law, governmental regulation or ruling.
8. ARBITRATION
-----------
8.1 Any controversy between the parties hereto, including the
construction, application or breach of any of the terms, covenants or conditions
of this Agreement, and all claims relating to or arising from Employee's
employment or Termination, including all statutory claims (including but not
limited to all statutes dealing with employment discrimination), shall on a
timely written request of one party served upon the other, be submitted to
arbitration and be governed by the California Arbitration Act as set forth in
the California Code of Civil Procedure (presently sections 1280 et seq.). The
-- ---
parties agree that any written request for arbitration must be made within one
year after the initiating party first learned or should have learned in the
exercise of reasonable diligence of the essential facts upon which the claim is
based, or first suffered any harm, or first learned or should have learned in
the exercise of reasonable diligence of the breach of this Agreement, whichever
is earlier. Any claim not raised within such time limitation shall be waived and
forever barred. The arbitration shall take place in Santa Clara County,
California.
8.2 The parties may agree upon one arbitrator, but in the event they
cannot agree, there shall be three (3), one named in writing by each of the
parties within ten (10) days after demand for arbitration is given, and a third
chosen by the two so appointed; provided further that if the two appointed
cannot agree on the choice, then application shall be made to a presiding judge
of the Santa Clara County Superior Court for the purpose of designating a third
arbitrator. The applying party (who may suggest in such application the names of
a suitable third arbitrator) shall provide the other party at least 48 hours
prior notice of the application so that such other party may have the
opportunity to submit one or more names of persons suitable to serve as the
designated third arbitrator. The presiding judge shall have discretion to
designate the third arbitrator from among the names suggested by either party or
from among any other persons such judge deems appropriate. The cost of such
arbitration, including reasonable attorneys' fees, shall be borne by the losing
party or in such proportions as the arbitrator(s) shall decide. Arbitration
shall be the exclusive remedy of the parties and the award of the arbitrator(s)
shall be final and binding upon the parties.
9
<PAGE>
9. GENERAL PROVISIONS
-------------------
9.1 NONASSIGNABILITY. Neither this Agreement nor any right or interest
----------------
hereunder shall be assignable by Employee, provided, however, that nothing in
this section 10 shall preclude (i) Employee from designating a beneficiary to
receive any benefits payable hereunder upon Employee's death, or (ii) Employee's
executors, administrators, or other legal representatives of Employee's estate
from assigning any rights hereunder to the person or persons entitled thereto.
9.2 ASSUMPTION. The Bank shall require any successor in interest (whether
----------
direct or indirect or as a result of purchase, merger, consolidation, Change in
Control or otherwise) to all or substantially all of the business and/or assets
of the Corporation or the Bank to expressly assume and agree to perform the
obligations under this Agreement.
9.3 NO ATTACHMENT. Except as required or permitted by law, no right to
-------------
receive payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge, pledge, or
hypothecation or to execution, attachment, levy, or similar process of
assignment by operation of law, and any attempt, voluntary or involuntary, to
effect any such action shall be null, void and of no effect. The payments due
Employee under section 5 herein shall not be deemed earned until the conditions
set forth in section 5 occur, if ever.
9.4 BINDING AGREEMENT. This Agreement contains the entire understanding
-----------------
among the parties regarding Employee's relationship with Bank and Corporation
and supersedes any prior employment agreements. This Agreement shall be binding
upon, and inure to the benefit of, Employee, the Bank and the Corporation, and
respective heirs, successors and assigns. Each party acknowledges that no
representations, inducements, promises, or agreements have been made by any
party, or anyone acting on behalf of any party, which are not embodied herein
and that no other agreement, statement, or promise not contained in this
Agreement shall be valid or binding on either party except as provided herein.
9.5 AMENDMENT OR AUGMENTATION OF AGREEMENT. This Agreement may not
--------------------------------------
be modified or amended except by an instrument in writing signed by the parties
hereto. Unless expressly agreed to in writing by the parties hereto, no
additional rights or compensation, even if given or accepted, shall be deemed to
modify or otherwise affect the express terms and conditions of this Agreement.
9.6 WAIVER. No term or condition of this Agreement shall be deemed to
------
have been waived, nor shall there be any estoppel against the enforcement of any
provision of
10
<PAGE>
this Agreement except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each waiver shall operate only as to the
specific term or condition waived and shall not constitute a waiver of such term
or condition for the future or as to any act other than that specifically
waived.
9.7 CONDITION OF THE BANK AND THE CORPORATION. Notwithstanding anything
-----------------------------------------
in this Agreement, no payment shall be made under section 5 without regulatory
approval if any of the following events or circumstances exist: (i) the Bank is
insolvent or a conservator or receiver has been appointed for it; (ii) the
Comptroller of the Currency or other appropriate federal banking agency has made
a determination that the Bank or the Corporation is in a "troubled condition" as
defined by applicable regulations of such federal banking agency; (iii) the Bank
of the Corporation is assigned a composite rating of 4 or 5 by the appropriate
federal banking agency or is informed in writing by the OCC that is rated a 4 or
5 under the Uniform Financial Institution's Rating System of the Federal
Financial Institution's Examination Council; or (iv the OCC has initiated a
proceeding against the Bank to terminate or suspend deposit insurance for the
Bank.
9.8 SEVERABILITY. If, for any reason, any provisions of this Agreement is
------------
held invalid, such invalidity shall not affect any other provision of this
Agreement not held invalid, and each such other provision shall to the full
extent consistent with law continue if full force and effect. If any provision
of this Agreement shall be held invalid in part, such invalidity shall in no way
affect the rest of such provision not held invalid, and the rest of such
provision together with all other provisions of this Agreement shall, to the
full extent consistent with law, continue in full force and effect. (If this
Agreement is held totally invalid or cannot be enforced, then to the full extent
permitted by law any prior employment agreement, whether oral or written,
express or implied, between the Bank and/or its affiliates, (or any successor
thereof) and Employee shall be deemed reinstated as if this Agreement had not
been executed.)
9.9 NOTICES. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or if mailed by United States certified or registered mail,
prepaid, to the parties or their permitted assignees at the following addresses
(or at such other address as shall be given in writing by either party to the
other):
To: Cupertino National Bank & Trust
20230 Stevens Creek Boulevard
Cupertino, CA 95014-2244
Attention: Chairman of the Board
11
<PAGE>
To: Employee at the last known address contained in the personnel
records of the Bank.
9.10 HEADINGS. The headings of paragraphs herein are included solely for
--------
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
9.11 GOVERNING LAW. This Agreement has been executed and delivered in the
-------------
State of California, and its validity, interpretation, performance, and
enforcement shall be governed by the laws of said State.
9.12 ADVICE OF COUNSEL. Employee has been encouraged to consult with
-----------------
legal counsel of Employee's choosing concerning the terms of this Agreement
prior to executing this Agreement. Any failure by Employee to consult with
competent counsel prior to executing this Agreement shall not be a basis for
rescinding or otherwise avoiding the binding effect of this Agreement. The
parties acknowledge that they are entering into this Agreement freely and
voluntarily, with full understanding of the terms of the Agreement.
Interpretation of the terms of this Agreement shall not be construed
12
<PAGE>
for or against either party on the basis of the identity of the party who
drafted the provision in question.
CORPORATION: BANK
CUPERTINO NATIONAL BANCORP CUPERTINO NATIONAL BANK & TRUST
By: /s/ Alex D. Lindiay By: /s/ Sam C Smith
-------------------------- ----------------------------
__________________________ ____________________________
Its: Vice-Chair Its: EVP & CEO
-------------------------- ----------------------------
__________________________ ____________________________
EMPLOYEE:
/s/ Ken Brenner
- ------------------------------
KEN BRENNER
13
<PAGE>
EXHIBIT A
As of the Effective Date, September 1, 1994, Employee's:
1. Annual Salary was $120,000;
2. Participation in incentive compensation was (described basis/formula):
Subjective based on performance of Bank and individual plus business
development commissions (or other similar arrangement) as defined in
sales commission program on an annual basis; and
3. Standard employee benefits were comprised of: 401(k), ESPP, Medical
insurance, life insurance, automobile, stock options, plus any
benefits added for EMC members or all employees.
<PAGE>
EXHIBIT B
Policy Premium: $584,679
Employee's Share of Premium: $216,355
The Employee's share of the premium shall be payable pursuant to a
promissory note in the form attached hereto as Attachment 1 (the "Premium
Payment Note"), which note shall be paid annually by offsetting against
Employee's incentive or bonus compensation at the following rates:
================================================================================
IF BONUS COMPENSATION IS PAYMENT/OFFSET IS
- --------------------------------------------------------------------------------
0 to $20,000 0
- --------------------------------------------------------------------------------
$20,001 to $40,000 $5,000
- --------------------------------------------------------------------------------
$40,001 to $60,000 $8,000
- --------------------------------------------------------------------------------
$60,001 to $80,000 $12,000
- --------------------------------------------------------------------------------
greater than $80,000 $16,000
================================================================================
The balance, if any, of the Premium Payment Note at Employee's death shall
be paid out of the policy's death benefit proceeds; provided, that if the death
benefit proceeds are less than such balance, the unpaid amount shall be paid by
the Bank and shall not be an obligation of Employee or Employee's estate.
Employee shall not be required to pay interest on the unpaid balance of the
Premium Payment Note until Employee reaches Retirement Age; in consideration
therefor, Employee waives all rights to any increases in the cash surrender
value of the policy which arise on or before Employee reaches Retirement Age.
<PAGE>
ATTACHMENT 1
PROMISSORY NOTE
$216,355 Cupertino, California
April 28, 1995
1. Obligation. Ken Brenner, an individual ("Maker") who is currently
----------
an executive employee of Cupertino National Bank & Trust (the "Bank"), for value
received, hereby promises to pay to the Bank at 20230 Stevens Creek Boulevard,
Cupertino, California 95014, the principal amount of two hundred sixteen
thousand, three hundred fifty-five dollars ($216,355). This Note is delivered by
Maker in payment of Marker's share of a life insurance premium for life
insurance being purchased by the Bank (the "Life Insurance") pursuant to that
certain Severance and Retirement Benefits Agreement between Maker and Bank dated
April 28, 1995 (the "Benefits Agreement"). The terms of the Benefits Agreement
are incorporated herein by this reference. Caplitalized terms used herein
without definition shall have the meanings assigned to them in the Benefits
Agreement.
2. Interest Rate. This Note shall bear simple interest from and
-------------
after the date Maker reaches Retirement Age at an annual interest rate of eight
percent (8%). In the event this Note is not paid pursuant to the terms of
Section 3 below, any late payments shall bear interest until fully paid at an
annual rate of five (5) points above the Bank's prime rate--which shall be
defined as the then prevailing rate charged by the Bank for commercial borrowers
of highest credit quality.
3. Payment Schedule. Maker agrees to make payments on this Note
----------------
annually out of incentive or bonus compensation, if any, earned by Maker under
any Bank plan for such compensation, and hereby authorizes Bank to obtain such
payments from Maker annually by deducting from incentive or bonus compensation
(at such time as such compensation would otherwise be paid to Maker) in
accordance with the following schedule:
================================================================================
IF BONUS COMPENSATION IS PAYMENT APPLIED TO NOTE IS
- --------------------------------------------------------------------------------
0 to $20,000 0
- --------------------------------------------------------------------------------
$20,001 to $40,000 $5,000
- --------------------------------------------------------------------------------
$40,001 to $60,000 $8,000
- --------------------------------------------------------------------------------
$60,001 to $80,000 $12,000
- --------------------------------------------------------------------------------
greater than $80,000 $16,000
================================================================================
<PAGE>
If Maker ceases to be employed by Bank before Retirement Age, such
that incentive or bonus compensation is no longer earned by Maker under any
Bank plan, Maker shall have no obligation to make further payments on this Note
until the death benefit provision is implemented.
Maker further agrees that the balance of this Note, if any, unpaid at
Maker's death shall be due and payable upon such death, and Maker hereby
authorizes Bank to obtain from Maker the payoff of such unpaid balance by
applying the death benefit proceeds under the Life Insurance. To the extent such
death benefit proceeds are insufficient to pay in full the unpaid balance of
this Note, any remaining balance after application of the entire death benefit
proceeds shall be deemed extinguished and no longer an obligation of Maker or
Maker's estate.
All payments received shall be applied first to interest, if any, then
accrued, and then to principal.
4. Prepayments; Application. This Note may be prepaid in whole or in
------------------------
part any time without penalty or premium.
5. Events of Default. There shall be an "Event of Default" under
-----------------
this Note if Maker shall fail to make a payment to Bank when due and such
default shall continue for thirty (30) days after Bank provides written notice
to Maker of such default.
6. Remedies. If an Event of Default shall occur, any indebtedness of
--------
Maker under this Note shall, at Bank's option and without notice, become
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by Maker; and Holder shall
have all of the rights, powers and remedies available under this Note, all of
which rights, powers and remedies may be exercised at any time by Bank and from
time to time after the occurrence of an Event of Default. All of the rights,
powers and remedies of Bank in connection with this Note are cumulative and not
exclusive and shall be in addition to any other rights, powers or remedies
provided by law or equity.
7. Costs of Collection. If this Note is not paid when due, whether
-------------------
at maturity or by acceleration, Maker promises to pay all costs incurred by the
Bank collecting the amounts due hereunder, including reasonable attorney's fees.
8. Waiver. Presentment, demand, protest, notices of protest,
------
dishonor and non-payment of this Note and all notices of every kind are hereby
waived, except notices required by this Note. No single or partial exercise of
or forbearance from exercising any power hereunder or under any guaranty
pertaining to this Note shall preclude other or further exercises thereof or the
exercise of any other power.
9. Special Principal/Interest Reduction. Maker and Holder agree that
------------------------------------
if Maker ceases to be employed by Bank on or before November 1, 2001, under
circumstances where Maker is not, under the terms of the Benefits Agreement,
fully vested with respect to the Retirement Draw Benefit, there shall be at the
time of Maker's
-2-
<PAGE>
cessation of employment a one-time reduction of principal and interest (if any)
owed by Maker hereunder to reflect the unvested portion of the Retirement Draw
Benefit which will be foregone by Maker as a result of ceasing employment
before full vesting. By way of example only, if Maker ceases employment when he
is vested with respect to one-seventh of the Retirement Draw Benefit and
unvested with respect to six-sevenths, there shall be a one-time reduction of
sex-sevenths of the principal of this Note; all other terms and conditions shall
remain in effect with respect to payment of the balance.
10. Form of Payment; Governing Law. Principal is payable in lawful
------------------------------
money of the United States to the Bank. This Note has been executed and
delivered by Maker in the State of California and shall be governed by and
construed in accordance with the laws of the State of California.
11. Authority. The undersigned individuals signing this Note
---------
represent and warrant that the undersigned individuals are duly authorized and
empowered to execute and deliver this Note on behalf of Maker and Bank.
12. Notice. For purposes of giving notices under this Note, all
------
notices shall be in writing and shall be deemed to have been duly given on the
date of delivery, if personally delivered to the party to whom notice is to be
given, or on the second (2nd) day after mailing, if mailed to the party to
whom notice is to be given by first-class mail, postage prepaid and properly
addressed as follows:
TO MAKER: Ken Brenner
________________________________
________________________________
TO BANK: Cupertino National Bank & Trust
20230 Stevens Creek Blvd.
Cupertino, CA 95014
Attn: Chairman of the Board
Any party named above may change its address for purposes of this
Section 12 by giving written notice of the new address to the Maker, and Bank,
in the manner set forth above.
-3-
<PAGE>
13. Successors and Assigns. This Note shall be binding upon and
----------------------
inure to the benefit of Maker, Bank and their respective successors and
permitted assigns.
IN WITNESS WHEREOF, the undersigned have executed this Note as of the
date first appearing hereinabove.
MAKER:
/s/ Ken Brenner
-----------------------------------
Ken Brenner
BANK:
CUPERTINO NATIONAL BANK & TRUST
a national banking association
By: _______________________________
C. Donald Allen, Chairman & CEO
-4-
<PAGE>
EXHIBIT 10.26
CUPERTINO NATIONAL BANK & TRUST
EMPLOYMENT, SEVERANCE AND
RETIREMENT BENEFITS AGREEMENT
THIS EMPLOYMENT, SEVERANCE AND RETIREMENT BENEFITS AGREEMENT (the
"Agreement") is made and entered on this 31st day of July, 1995 and is effective
as of April 14, 1995, by and between CUPERTINO NATIONAL BANCORP (the
"Corporation"), its wholly owned subsidiary CUPERTINO NATIONAL BANK & TRUST (the
"Bank") and DAVID HOOD ("Employee").
The Corporation, Bank and Employee agree as follows:
1. DEFINITIONS
-----------
1.1 "Agreement" means only the agreement contained in this document and
as modified in writing pursuant to section 10.5 herein.
1.2 "Anniversary Date" means the date one (1) year from the Effective
Date.
1.3 "Bank" means Cupertino National Bank & Trust, and any successor to
its business or assets which executes and delivers the Agreement as provided by
section 10.2 herein or which becomes bound by this Agreement by operation of
law.
1.4 "Board" means the Board of Directors of the Bank.
1.5 "Cause" means (1) Employee's acts of personal dishonesty;
willful misconduct; breach of fiduciary duty or violation of banking law
involving an intent to obtain personal or family profit; willful violation of
any law, rule, or regulation which results in action against or restrictions
imposed on the Bank by regulatory authorities; habitual abuse of substances (as
corroborated by a physician) or extended unexcused absence from work; or (2)
Employee's continued failure to substantially perform Employee's duties (which
failure may be determined by the Board by reference to the quality of the
Company's financial condition or operating performance) with the Bank (other
than any failure resulting from Disability) after a written demand for
substantial performance is given to Employee by the Board which demand
specifically identifies the manner in which the Board believes that Employee has
not substantially performed Employee's duties. The definition of "Cause" as set
forth in subsection (1) hereof is sometimes referred to separately herein as
"Personal Conduct/Cause," and the definition of "Cause" as set forth in
subsection (2) is sometimes referred to separately herein as
"Performance/Cause." The term "Cause," standing alone, shall mean either
Personal Conduct/Cause or Performance/Cause or both. For purposes of the
definition of Personal Conduct/Cause, an act, or failure to act, on the
Employee's part shall be
<PAGE>
considered "willful" only if done, or omitted to be done, by him without
reasonable belief that such act, or failure to act, is in the best interests of
the Employer.
1.6 "Change in Control" means a change in the Board of Directors, or the
Corporation or the Bank following:
1.6.1 The acquisition, directly or indirectly, of more than 25% of
the outstanding shares of any class of voting securities of the Corporation or
the Bank by any Person; or
1.6.2 A merger, consolidated or sale of all or substantially all of
the assets of the Corporation or the Bank, such that the individuals
constituting the Corporation Board or the Board of the Bank immediately prior to
such period shall cease to constitute a majority of such Board, unless the
election of each director who was not a director prior thereto was approved by
vote of at least two-thirds of the directors then in office who were directors
prior to such period.
1.6.3 Notwithstanding the foregoing, any change in the Board
of either the Corporation or the Bank which occurs within the twenty-four (24)
month period following the Effective Date as a result of a merger with South
Valley Bancorporation, shall NOT constitute a Change in Control for purposes of
this Agreement.
1.7 "Control" means the possession, direct or indirect, by any Person or
"group" (as defined in section 13(d)(3) of the Securities Exchange Act of 1934,
as amended) of the power to direct or cause the direction of the management
policies of the Corporation or the Bank, whether through ownership of voting
securities, by contract, or otherwise, and in any case means the ability to
determine the election of a majority of the directors of the Corporation or the
Bank.
1.8 "Corporation" means Cupertino National Bancorp and any successor to
its business or assets which executes and delivers the agreement as provided by
section 10.2 herein, or which becomes bound by this Agreement by operation of
law.
1.9 "Corporation Board" means the Board of Directors of Cupertino
National Bancorp.
1.10 "Disability" means physical or mental illness resulting in absence
on a full-time basis from Employee's duties with Employer for one-hundred eighty
(180) consecutive calendar days. Disability shall be deemed to have occurred
only after the following procedure has been satisfied: If within thirty (30)
days after written notice of proposed Termination for Disability is given to
Employee by Employer, Employee has
2
<PAGE>
not returned to the full-time performance of Employee's duties, Employer may
terminate Employee by giving written notice of Termination for Disability. Such
notice may be given by Employer following Employee's absence from Employee's
duties by reason of physical or mental disability for one-hundred fifty (150)
consecutive calendar days.
1.11 "Effective Date" means April 14, 1995.
1.12 "Employee" means DAVID HOOD.
1.13 "Employer" means the Corporation, the Bank or one of their
subsidiaries which is Employee's employer on the date of a Change in Control. If
Employee has more than one such employer on the date of a Change in Control, it
means the employer who makes payment of Employee's monthly salary, and if two or
more employers do so, each shall be deemed to be Employer for the purposes of
this Agreement on a pro rata basis as to the amount of Employee's working time
devoted to each, as a percentage of Employee's salary. "Employer" shall include
any successor to the business or assets of an Employer and which executes the
agreement provided by section 10.2 or which becomes bound by this Agreement by
operation of law.
1.14 "Person" means an individual, a corporation, a partnership, an
association, a joint stock company, a trust, any unincorporated organization or
a government or political subdivision thereof.
1.15 "Resignation for Good Reason" or "Resign for Good Reason" means the
cessation of Employee's employment upon written notice given by Employee to
Employer as provided in section 5.4.1 herein.
1.16 "Retirement" or "Retire" means voluntary termination by Employee of
his/her employment with Employer other than for reason of death, Disability or
Resignation for Good Reason, as those terms are defined herein.
1.17 "Salary" shall mean regular annual base cash compensation exclusive
of incentive or bonus compensation or noncash compensation benefits.
1.18 "Retirement Age" for purposes of this Agreement is sixty-two (62)
years of age.
1.19 "Termination" or "Terminated" means cessation of Employee's
employment upon written notice (with or without Cause) given to Employee, by
Employer or the Board, or their successors.
3
<PAGE>
2. POSITION AND DUTIES
-------------------
2.1 Employee shall be employed by the Bank as its Executive Vice
President and Senior Loan Officer reporting to the Executive Management
Committee, of which Employee will be a member, effective April 14, 1995 ("the
Commencement Date"). As Executive Vice President and Senior Loan Officer,
Employee agrees to devote his full business time, energy and skill to his duties
at the Bank. These duties shall include, but not be limited to, any duties
consistent with his position which may be assigned to Employee from time to time
by the Bank's President.
2.2 CODE OF PERSONAL AND BUSINESS CONDUCT. Employee agrees to abide by
-------------------------------------
the terms and conditions of the Bank's standard employee Code of Personal &
Business Conduct executed by Employee and attached here as Exhibit A.
3. TERM
----
3.1 The term of this Agreement shall commence as of the Effective Date
and shall continue until the Termination, Retirement, Resignation for Good
Reason (as defined in section 5.4.1) or death of Employee, whichever occurs
first. This Agreement and all of its terms and conditions may be terminated upon
written agreement by the parties. Notwithstanding the foregoing, nothing
contained herein shall imply the existence of a contract or assurance of
employment between Employee and Employer, nor shall this Agreement alter
Employer's personnel policies and practices, including the right to terminate
Employee at any time with or without cause.
3.2 Notwithstanding the right of Bank to terminate Employee, any such
Termination shall be governed by section 5 below.
4. COMPENSATION
------------
4.1 SALARY. Employee shall be paid a monthly salary of $10,000.00
------
($120,000.00 on an annual basis), subject to applicable withholding, in
accordance with the Bank's normal payroll procedures.
4.2 BENEFITS. Employee shall have the right, on the same basis as other
--------
members of senior management of the Bank, to participate in and to receive
benefits under any of the Bank's employee benefits plans, including medical,
dental, life and disability group insurance plans as well as the Bank's 401(k)
Plan and Employee Stock Purchase Plan.
4
<PAGE>
4.3 VACATION. Employee shall accrue vacation at a rate of 2.083 days per
--------
month, the equivalent of five (5) weeks over a one (1) year period.
4.4 STOCK OPTIONS. Upon joining the Bank, Employee will receive an
-------------
initial grant of options to acquire 15,000 shares of Corporation common stock.
The shares will vest under the provisions of the Bank's 1995 Stock Option Plan.
4.5 PERFORMANCE BONUS. Employee will be eligible for a performance bonus
-----------------
up to 75% of base salary based upon goals, which will be set annually by the
Board.
4.6 CAR ALLOWANCE. $500.00 per month.
-------------
4.7 DEFERRED COMPENSATION. The Bank will provide Retirement compensation
---------------------
benefits as provided in paragraph 6 set forth below.
4.8 In the event that Employee's acceptance of employment with the Bank at
this time causes Employee to lose stock option rights with University National
Bank and Trust ("University") that he would have had if he remained employed by
University through the consummation of the "second stage" of University's plan
merger into Comerica Bank, then the Bank will reimburse Employee for the fair
market value of such stock option rights less the exercise price of the stock
calculated as of the closing date of University's "first stage" merger with
Interim Comerica on or about April 3, 1995, in a total amount not to exceed
$175,000. Such reimbursement for lost stock option rights shall be paid to
employee in two equal installments, the first on February 28, 1996 and the
second on February 28, 1997, provided that no such payment shall be due or made
unless Employee is an officer or employee of the Bank at such time payment is to
be made. If Employee receives compensation for the loss of his stock option
rights subsequent to the Bank's payment to employee, he will be required to
reimburse the Bank the payment amount.
4.9 COMPENSATION FREEZE. Subject to the terms and conditions herein, and
-------------------
for a period for three (3) years from the Effective Date, Employee's total
annual Salary and standard employee benefits from Employer set forth above shall
remain the same; provided, however, that Employee's Salary shall be increased
annually to allow for a cost of living increase, such increase to be determined
based on the U.S. Department of Labor Bureau of Labor Statistics Consumer Price
Index for All Urban Consumers in the San Francisco, Oakland and Bay Area. In
addition, it is within the complete discretion of the Employer to increase such
amount of total compensation at any time and for any reason, including a
promotion of Employee to a new position or title; however, other than the cost-
of-living increase to Salary as provided for herein, nothing in this Agreement
shall
5
<PAGE>
suggest or imply that the Board is under any duty or obligation to increase
Employee's Salary or other compensation or standard employee benefits at any
time during the three (3) year period following the Effective Date. Employee's
current salary, his current participation in incentive compensation programs of
the Employer and a description of current standard employee benefits are set
forth above.
5. TERMINATION OF EMPLOYMENT
-------------------------
5.1 The provisions of this section 5 shall govern the benefits, if any,
which Employee shall receive upon Termination of his Employment.
5.2 BENEFITS UPON VOLUNTARY TERMINATION. In the event that Employee
-----------------------------------
voluntarily resigns from his employment with the Bank, or in the event that his
employment terminates as a result of his death or disability, Employee shall be
entitled to no compensation or benefits from the Bank other than those earned
under paragraph 4 above through the date of his termination.
5.3 BENEFITS UPON OTHER TERMINATION. Employee agrees that his
-------------------------------
employment may be terminated by the Bank at any time, with or without cause. In
the event of the termination of Employee's employment by the Bank for the
reasons set forth below, he shall be entitled to the following:
5.3.1 TERMINATION FOR PERSONAL CONDUCT/CAUSE. The payments
--------------------------------------
set forth in section 5.3.2 hereof shall not apply if at any time Employee is
terminated upon a good faith finding of Personal Conduct/Cause by the Board;
provided, however, that Employee shall be given written notice of the Board's
finding of conduct by Employee amounting to Personal Conduct/Cause for such
Termination. Such notice shall be accompanied by a copy of a resolution duly
adopted by the affirmative vote of not less than a majority of the members of
the Board adopted at a duly-noticed meeting of the Board, and finding in good
faith that Employee engaged in conduct amounting to Personal Conduct/Cause and
specifying the particulars thereof.
5.3.2 If the Employee is Terminated for Performance/Cause or
other than by reason of death, Retirement, Disability or Personal Conduct/Cause,
as set forth herein, or if Employee Resigns for Good Reason, as defined in
section 5.4.1 below, the Bank shall pay to Employee twelve (12) months' Salary
("Severance Payment") at a rate equivalent to the then-current Salary of
Employee.
5.3.3 The Bank shall have the option of paying Severance
Payments in a lump-sum payment, or by salary continuation payments made under
the Bank's normal
6
<PAGE>
employee compensation schedule. If the Bank chooses the lump-sum payment option,
such payment shall be made not later than the tenth (10th) day following the
date of cessation of employment, Termination or Resignation for Good Reason.
5.3.4 Although a payment triggering such section is not intended
hereby, amounts otherwise due under this section will be reduced if, and to the
extent that, such reduction will increase the net amount Employee will receive
under this Agreement after taking into account the imposition of the excise tax
under section 4999 of the Internal Revenue Code, if applicable.
5.4 If a Change in Control occurs during the Term of this Agreement,
Employee may thereafter be entitled to a payment set forth in section 5.3.2 in
accordance with the terms hereof, subject to the following limitations:
5.4.1 RESIGNATION FOR GOOD REASON. The payments set forth in
---------------------------
section 5.3.2 hereof shall apply if, after a Change of Control but within one
year thereafter, Employee Resigns for Good Reason, upon the happening of one or
more of the following events (unless such event or occurrence is applied
generally to all officers and employees of Employer and any parent or successor
of any of them), any of which will constitute Good Reason for Employee's
Resignation:
5.4.1.1 Without Employee's express written consent, Employee's
assignment to any duties substantially inconsistent with Employee's position,
duties, responsibilities and status with Employer immediately prior to a Change
in Control, or any removal of Employee from any such position to a position
substantially inferior to such prior position;
5.4.1.2 A reduction by Employer of Employee's Salary or of any
bonus compensation formula applicable to Employee as in effect prior to a Change
in Control;
5.4.1.3 A failure by Employer to maintain any of the employee
benefits to which Employee was entitled prior to a Change in Control at a level
substantially similar to or greater than that in effect prior to a Change in
Control, through the continuation of the same or substantially similar plans,
programs and policies;
5.4.1.4 The failure by Employer to provide Employee with the same
number of paid vacation days and leave to which Employee would be entitled as
salaried employee of Employer, or any parent or successor of Employer;
7
<PAGE>
5.4.1.5 Employer requiring Employee to travel on employer's
business to an extent substantially greater than Employee's present business
travel obligations; or the relocation of Employee's office at least sixty (60)
miles from its current location, without Employee's consent; and
5.4.1.6 The failure of the Bank to obtain the assumption of
this Agreement by any successor of Employer as contemplated in section 10.2
below.
5.4.2 The events described above are the only events which shall
constitute Good Reason.
6. CERTAIN RETIREMENT BENEFITS
---------------------------
6.1 Subject to the special terms and conditions contained below, upon
cessation of Employee's employment with Employer, if the Employee has reached
the Retirement Age, or as soon thereafter as Employee reaches the Retirement
Age, the Bank hereby agrees that the Employee and Employee's spouse shall become
the joint owners (with right of survival) with the Bank of the annual increase
of the cash surrender value of the policy thereafter arising; however, the
Employee's (and Employee's spouse's) right to draw against such increase (such
draw to reduce eventual death benefits) shall never exceed $55,000 per 12-month
period (the "Retirement Draw Benefit"). The shared right to ownership of this
increase shall continue for the lifetime of the Employee and the lifetime of the
Employee's surviving spouse, but in no event longer than 40 years.
6.1.1 The Retirement Draw Benefit will be made available by means of
a split-dollar insurance policy which is to be purchased by the Bank within
thirty (30) days of the date of this Agreement, and for which the premium
payment split between the Bank and Employee and the payment terms are outlined
in Exhibit B to this Agreement.
6.1.2 Subject to the provisions of sections 6.1.3 and 6.1.4 herein,
Employee's right to the Retirement Draw Benefit shall not fully vest unless he
has been employed by Employer for seven (7) years from the Effective Date. If
Employee's employment with Employer ends any time before a date one (1) year
from the date of this Agreement (the "Anniversary Date"), Employee will not have
any right to, or interest in, the Retirement Draw Benefit. If Employee's
employment ends at any time after the Anniversary Date, but prior to the seven
(7) year date of full vesting, Employee's right to one-seventh (1/7) of the
Retirement Draw Benefit--i.e., the right to draw $7,857, or one-seventh of
$55,000, per 12-month period--will vest on the Anniversary Date, and Employee's
right to the Retirement Draw Benefit will continue to proportionately vest
thereafter on a monthly basis, on the first date of each month following the
Anniversary Date, until employment ends.
8
<PAGE>
6.1.3 Subject to the provisions of section 6.1.2 herein, if prior to
a Change in Control and during the Term hereof, Employee is Terminated for any
reason other than Disability, the vesting of Employee's right to the Retirement
Draw Benefit will cease as of the date of termination. If prior to a Change of
Control and during the Term hereof, Employee is Terminated by reason of
Disability, the vesting of Employee's right to the Retirement Draw Benefit will
cease as of the date of termination unless the Board in its sole and absolute
discretion approves additional vesting.
6.1.4 Notwithstanding the provisions of section 6.1.2 herein, if
after a Change in Control and during the Term hereof, Employee is Terminated, or
Resigns for Good Reason, as provided in section 5.4.1 herein, Employee's right
to the Retirement Draw Benefit shall immediately vest in full, and such benefit
shall become available to Employee when Employee reaches Retirement Age.
7. FEDERAL INCOME TAX WITHHOLDING
------------------------------
7.1 The Bank shall withhold from any compensation or benefits payable
under this Agreement all federal, state, city or other taxes or deductions as
shall be required pursuant to any law, governmental regulation or ruling.
8. ARBITRATION
-----------
8.1 Any controversy between the parties hereto, including the
construction, application or breach of any of the terms, covenants or conditions
of this Agreement, and all claims relating to or arising from Employee's
employment or Termination, including all statutory claims (including but not
limited to all statutes dealing with employment discrimination), shall on a
timely written request of one party served upon the other, be submitted to
arbitration and be governed by the California Arbitration Act as set forth in
the California Code of Civil Procedure (presently sections 1280 et seq.). The
-- ---
parties agree that any written request for arbitration must be made within one
year after the initiating party first learned or should have learned in the
exercise of reasonable diligence of the essential facts upon which the claim is
based, or first suffered any harm, or first learned or should have learned in
the exercise of reasonable diligence of the breach of this Agreement, whichever
is earlier. Any claim not raised within such time limitation shall be waived
and forever barred. The arbitration shall take place in Santa Clara County,
California.
8.2 The parties may agree upon one arbitrator, but in the event they
cannot agree, there shall be three (3), one named in writing by each of the
parties within ten (10) days after demand for arbitration is given, and a third
chosen by the two so appointed;
9
<PAGE>
provided further that if the two appointed cannot agree on the choice, then
application shall be made to a presiding judge of the Santa Clara County
Superior Court for the purpose of designating a third arbitrator. The applying
party (who may suggest in such application the names of a suitable third
arbitrator) shall provide the other party at least 48 hours prior notice of the
application so that such other party may have the opportunity to submit one or
more names of persons suitable to serve as the designated third arbitrator. The
presiding judge shall have discretion to designate the third arbitrator from
among the names suggested by either party or from among any other persons such
judge deems appropriate. The cost of such arbitration, including reasonable
attorneys' fees, shall be borne by the losing party or in such proportions as
the arbitrator(s) shall decide. Arbitration shall be the exclusive remedy of the
parties and the award of the arbitrator(s) shall be final and binding upon the
parties.
9. GENERAL PROVISIONS
------------------
9.1 NONASSIGNABILITY. Neither this Agreement nor any right or interest
----------------
hereunder shall be assignable by Employee, provided, however, that nothing in
this section 10 shall preclude (i) Employee from designating a beneficiary to
receive any benefits payable hereunder upon Employee's death, or (ii) Employee's
executors, administrators, or other legal representatives of Employee's estate
from assigning any rights hereunder to the person or persons entitled thereto.
9.2 ASSUMPTION. The Bank shall require any successor in interest (whether
----------
direct or indirect or as a result of purchase, merger, consolidation, Change in
Control or otherwise) to all or substantially all of the business and/or assets
of the Corporation or the Bank to expressly assume and agree to perform the
obligations under this Agreement.
9.3 NO ATTACHMENT. Except as required or permitted by law, no right to
-------------
receive payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge, pledge, or
hypothecation or to execution, attachment, levy, or similar process of
assignment by operation of law, and any attempt, voluntary or involuntary, to
effect any such action shall be null, void and of no effect. The payments due
Employee under section 5 herein shall not be deemed earned until the conditions
set forth in section 5 occur, if ever.
9.4 BINDING AGREEMENT. This Agreement contains the entire understanding
-----------------
among the parties regarding Employee's relationship with Bank and Corporation
and supersedes any prior employment agreements. This Agreement shall be binding
upon, and inure to the benefit of, Employee, the Bank and the Corporation, and
their respective heirs, successors and assigns. Each party acknowledges that no
representations, inducements, promises, or agreements have been made by any
party, or anyone acting on
10
<PAGE>
behalf of any party, which are not embodied herein and that no other agreement,
statement, or promise not contained in this Agreement shall be valid or binding
on either party except as provided herein.
9.5 AMENDMENT OR AUGMENTATION OF AGREEMENT. This Agreement may not be
--------------------------------------
modified or amended except by an instrument in writing signed by the parties
hereto. Unless expressly agreed to in writing by the parties hereto, no
additional rights or compensation, even if given or accepted, shall be deemed to
modify or otherwise affect the express terms and conditions of this Agreement.
9.6 WAIVER. No term or condition of this Agreement shall be deemed to
------
have been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
9.7 CONDITION OF THE BANK AND THE CORPORATION. Notwithstanding anything
-----------------------------------------
in this Agreement, no payment shall be made under section 5 without regulatory
approval if any of the following events or circumstances exist: (i) the Bank is
insolvent or a conservator or receiver has been appointed for it; (ii) the
Comptroller of the Currency or other appropriate federal banking agency has made
a determination that the Bank or the Corporation is in a "troubled condition" as
defined by applicable regulations of such federal banking agency; (iii) the Bank
or the Corporation is assigned a composite rating of 4 or 5 by the appropriate
federal banking agency or is informed in writing by the OCC that it is rated a 4
or 5 under the Uniform Financial Institution's Rating System of the Federal
Financial Institution's Examination Council; or (iv) the OCC has initiated a
proceeding against the Bank to terminate or suspend deposit insurance for the
Bank.
9.8 SEVERABILITY. If, for any reason, any provision of this Agreement is
------------
held invalid, such invalidity shall not affect any other provision of this
Agreement not held invalid, and each such other provision shall to the full
extent consistent with law continue in full force and effect. If any provision
of this Agreement shall be held invalid in part, such invalidity shall in no way
affect the rest of such provision not held invalid, and the rest of such
provision together with all other provisions of this Agreement shall, to the
full extent consistent with law, continue in full force and effect. (If this
Agreement is held totally invalid or cannot be enforced, then to the full extent
permitted by law any prior employment agreement, whether oral or written,
express or implied, between the Bank and/or its affiliates, (or any successor
thereof) and Employee shall be deemed reinstated as if this Agreement had not
been executed.)
11
<PAGE>
9.9 NOTICES. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or if mailed by United States certified or registered mail,
prepaid, to the parties or their permitted assignees at the following addresses
(or at such other address as shall be given in writing by either party to the
other):
To: Cupertino National Bank & Trust
20230 Stevens Creek Boulevard
Cupertino, CA 95014-2244
Attention: Chairman of the Board
To: Employee at the last known address contained in the personnel
records of the Bank
9.10 HEADINGS. The headings of paragraphs herein are included solely for
--------
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
9.11 GOVERNING LAW. This Agreement has been executed and delivered in the
-------------
State of California, and its validity, interpretation, performance, and
enforcement shall be governed by the laws of said State.
9.12 ADVICE OF COUNSEL. Employee has been encouraged to consult with legal
-----------------
counsel of Employee's choosing concerning the terms of this Agreement prior to
executing this Agreement. Any failure by Employee to consult with competent
counsel prior to executing this Agreement shall not be a basis for rescinding or
otherwise avoiding the binding effect of this Agreement. The parties
acknowledge that they are entering into this Agreement freely and voluntarily,
with full understanding of the terms of the Agreement. Interpretation of the
terms of this Agreement shall not be construed
12
<PAGE>
for or against either party on the basis of the identity of the party who
drafted the provision in question.
CORPORATION: BANK:
CUPERTINO NATIONAL BANCORP CUPERTINO NATIONAL BANK & TRUST
By: /s/ Alex D. Lindiay By: /s/ Sam C. Smith
------------------------------- ----------------------------
_______________________________ ____________________________
Its: Vice Chairman Its: EVP & CEO
------------------------------- ----------------------------
_______________________________ ____________________________
EMPLOYEE:
/s/ David R. Hood
- ---------------------------------------
DAVID R. HOOD
13
<PAGE>
EXHIBIT A
As of the Effective Date, April 14, 1995, Employee's:
1. Annual Salary was $120,000;
2. Participation in incentive compensation was (describe basis/formula):
Subjective based on performance of Bank and individual; and
3. Standard employee benefits were comprised of: 401(K), ESPP, medical
insurance, life insurance, automobile allowance, stock options,
capital club members, plus any benefits added for EMC members or all
employees.
<PAGE>
EXHIBIT B
Policy Premium: $554,911
Employee's Share of Premium: $218,386
The Employee's share of the premium shall be payable pursuant to a
promissory note in the form attached hereto as Attachment 1 (the "Premium
Payment Note"), which note shall be paid annually by offsetting against
Employee's incentive or bonus compensation at the following rates:
================================================================================
IF BONUS COMPENSATION IS PAYMENT/OFFSET IS
- --------------------------------------------------------------------------------
0 to $20,000 0
- --------------------------------------------------------------------------------
$20,001 to $40,000 $5,000
- --------------------------------------------------------------------------------
$40,001 to $60,000 $8,000
- --------------------------------------------------------------------------------
$60,001 to $80,000 $12,000
- --------------------------------------------------------------------------------
greater than $80,000 $16,000
================================================================================
The balance, if any, of the Premium Payment Note at Employee's death shall
be paid out of the policy's death benefit proceeds; provided, that if the death
benefit proceeds are less than such balance, the unpaid amount shall be paid by
the Bank and shall not be an obligation of Employee or Employee's estate.
Employee shall not be required to pay interest on the unpaid balance of the
Premium Payment Note until Employee reaches Retirement Age; in consideration
therefor, Employee waives all rights to any increases in the cash surrender
value of the policy which arise on or before Employee reaches Retirement Age.
<PAGE>
ATTACHMENT 1
PROMISSORY NOTE
$218,386 Cupertino, California
April 14, 1995
1. Obligation. David Hood, an individual ("Maker") who is currently
----------
an executive employee of Cupertino National Bank & Trust (the "Bank"), for value
received, hereby promises to pay to the Bank at 20230 Stevens Creek Boulevard,
Cupertino, California 95014, the principal amount of two hundred eighteen
thousand three hundred eight-six dollars ($218,386). This Note is delivered by
Maker in payment of Marker's share of a life insurance premium for life
insurance being purchased by the Bank (the "Life Insurance") pursuant to that
certain Severance and Retirement Benefits Agreement between Maker and Bank dated
April 14, 1995 (the "Benefits Agreement"). The terms of the Benefits Agreement
are incorporated herein by this reference. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Benefits Agreement.
2. Interest Rate. This Note shall bear simple interest from and
-------------
after the date Maker reaches Retirement Age at an annual interest rate of eight
percent (8%). In the event this Note is not paid pursuant to the terms of
Section 3 below, any late payments shall bear interest until fully paid at an
annual rate of five (5) points above the Bank's prime rate--which shall be
defined as the then prevailing rate charged by the Bank for commercial borrowers
of highest credit quality.
3. Payment Schedule. Maker agrees to make payments on this Note
----------------
annually out of incentive or bonus compensation, if any, earned by Maker under
any Bank plan for such compensation, and hereby authorizes Bank to obtain such
payments from Maker annually by deducting from incentive or bonus compensation
(at such time as such compensation would otherwise be paid to Maker) in
accordance with the following schedule:
================================================================================
IF BONUS COMPENSATION IS PAYMENT APPLIED TO NOTE IS
- --------------------------------------------------------------------------------
0 to $20,000 0
- --------------------------------------------------------------------------------
$20,001 to $40,000 $5,000
- --------------------------------------------------------------------------------
$40,001 to $60,000 $8,000
- --------------------------------------------------------------------------------
$60,001 to $80,000 $12,000
- --------------------------------------------------------------------------------
greater than $80,000 $16,000
================================================================================
<PAGE>
If Maker ceases to be employed by Bank before Retirement Age, such
that incentive or bonus compensation is no longer earned by Maker under any Bank
plan, Maker shall have no obligation to make further payments on this Note until
the death benefit provision is implemented.
Maker further agrees that the balance of this Note, if any, unpaid at
Maker's death shall be due and payable upon such death, and Maker hereby
authorizes Bank to obtain from Maker the payoff of such unpaid balance by
applying the death benefit proceeds from under the Life Insurance. To the extent
such death benefit proceeds are insufficient to pay in full the unpaid balance
of this Note, any remaining balance after application of the entire death
benefit proceeds shall be deemed extinguished and no longer an obligation of
Maker or Maker's estate.
All payments received shall be applied first to interest, if any, then
accrued, and then to principal.
4. Prepayments; Application. This Note may be prepaid in whole or in
------------------------
part any time without penalty or premium.
5. Events of Default. There shall be an "Event of Default" under
-----------------
this Note if Maker shall fail to make a payment to Bank when due and such
default shall continue for thirty (30) days after Bank provides written notice
to Maker of such default.
6. Remedies. If an event of Default shall occur, any indebtedness of
--------
Maker under this Note shall, at Bank's option and without notice, become
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by Maker; and Holder shall
have all of the rights, powers and remedies available under this Note, all of
which rights, powers and remedies may be exercised at any time by Bank and from
time to time after the occurrence of an Event of Default. All of the rights,
powers and remedies of Bank in connection with this Note are cumulative and not
exclusive and shall be in addition to any other rights, powers or remedies
provided by law or equity.
7. Costs of Collection. If this Note is not paid when due, whether
-------------------
at maturity or by acceleration, Maker promises to pay all costs incurred by the
Bank collecting the amounts due hereunder, including reasonable attorneys' fees.
8. Waiver. Presentment, demand, protest, notices of protest,
------
dishonor and non-payment of this Note and all notices of every kind are hereby
waived, except notices required by this Note. No single or partial exercise of
or forbearance from exercising any power hereunder or under any guaranty
pertaining to this Note shall preclude other or further exercises thereof or the
exercise of any other power.
9. Special Principal/Interest Reduction. Maker and Holder agree that
------------------------------------
is Maker ceases to be employed by Bank on or before November 1, 2001, under
circumstances where Maker is not, under the terms of the Benefits Agreement,
fully vested with respect to the Retirement Draw Benefit, there shall be at the
time of Maker's
-2-
<PAGE>
cessation of employment a one-time reduction of principal and interest (if any)
owed by Maker hereunder to reflect the unvested portion of the Retirement Draw
Benefit which will be foregone by Maker as a result of ceasing employment before
full vesting. By way of example only, if Maker ceases employment when he
is vested with respect to one-seventh of the Retirement Draw Benefit and
unvested with respect to six-sevenths, there shall be a one-time reduction of
six-sevenths of the principal of this Note; all other terms and conditions shall
remain in effect with respect to payment of the balance.
10. Form of Payment; Governing Law. Principal is payable in lawful
------------------------------
money of the United States to the Bank. This Note has been executed and
delivered by Maker in the State of California and shall be governed by and
construed in accordance with the laws of the State of California.
11. Authority. The undersigned individuals signing this Note
---------
represent and warrant that the undersigned individuals are duly authorized and
empowered to execute and deliver this Note on behalf of Maker and Bank.
12. Notice. For purposes of giving notices under this Note, all
------
notices shall be in writing and shall be deemed to have been duly given on the
date of delivery, if personally delivered to the party to whom notice is to be
given, or on the second (2nd) day after mailing, if mailed to the party to whom
notice is to be given by first-class mail, postage prepaid and properly
addressed as follows:
TO MAKER: David R. Hood
_____________________________
_____________________________
TO BANK: Cupertino National Bank & Trust
20230 Stevens Creek Blvd.
Cupertino, CA 95014
Attn: Chairman of the Board
Any party named above may change its address for purposes of this
Section 12 by giving written notice of the new address to the Maker, and Bank,
in the manner set forth above.
-3-
<PAGE>
13. Successors and Assigns. This Note shall be binding upon and inure
----------------------
to the benefit of Maker, Bank and their respective successors and permitted
assigns.
IN WITNESS WHEREOF, the undersigned have executed this Note as of the
date first appearing hereinabove.
MAKER:
________________________________
David R. Hood
BANK
CUPERTINO NATIONAL BANK & TRUST
a national banking association
By: _______________________________
C. Donald Allen, Chairman, CEO
-4-
<PAGE>
EXHIBIT 10.27
CUPERTINO NATIONAL BANK & TRUST
EMPLOYMENT, SEVERANCE AND
RETIREMENT BENEFITS AGREEMENT
THIS EMPLOYMENT, SEVERANCE AND RETIREMENT BENEFITS AGREEMENTS (the
"Agreement") is made and entered on this 31st day of July, 1995 and is effective
as of May 1, 1995, by and between CUPERTINO NATIONAL BANCORP (the
"Corporation"), its wholly owned subsidiary CUPERTINO NATIONAL BANK & TRUST (the
"Bank") and HALL PALMER (Employee").
The Corporation, Bank and Employee agree as follows:
1 DEFINITIONS
-----------
1.1 "Agreement" means only the agreement contained in this document and as
modified in writing pursuant to section 10.5 herein.
1.2 "Anniversary Date" means the date one (1) year from the Effective
Date.
1.3 "Bank" means Cupertino National Bank & Trust, and any successor to its
business or assets which executes and delivers the Agreement as provided by
section 10.2 herein or which becomes bound by this Agreement by operation of
law.
1.4 "Board" means the Board of Directors of the Bank.
1.5 "Cause" means (1) Employee's acts of personal dishonesty; willful
misconduct; breach of fiduciary duty or violation of banking law involving an
intent to obtain personal or family profit; willful violation of any law, rule,
or regulation which results in action against or restrictions imposed on the
Bank by regulatory authorities; habitual abuse of substances (as corroborated by
a physician) or extended unexcused absence from work; or (2) Employee's
continued failure to substantially perform Employee's duties (which failure may
be determined by the Board by reference to the quality of the Company's
financial condition or operating performance) with the Bank (other than any
failure resulting from Disability) after a written demand for substantial
performance is given to Employee by the Board which demand specifically
identifies the manner in which the Board believes that Employee has not
substantially performed Employee's duties. The definition of "Cause" as set
forth in subsection (1) hereof is sometimes referred to separately herein as
"Personal Conduct/Cause," and the definition of "Cause" as set forth in
subsection (2) is sometimes referred to separately herein as
"Performance/Cause." The term "Cause," standing alone, shall mean either
Personal Conduct/Cause or Performance cause or both. For purposes of the
definition of Personal Conduct/Cause, an act, or failure to act, on the
Employee's part shall be
<PAGE>
considered "willful" only if done, or omitted to be done, by him without
reasonable belief that such act, or failure to act, is in the best interests of
the Employer.
1.6 "Change in Control" means a change in the Board of Directors, or the
Corporation or the Bank following:
1.6.1 The acquisition, directly or indirectly, of more than 25% of
the outstanding shares of any class of voting securities of the Corporation or
the Bank by any Person; or
1.6.2 A merger, consolidated or sale of all or substantially all of
the assets of the Corporation or the Bank, such that the individuals
constituting the Corporation Board or the Board of the Bank immediately prior to
such period shall cease to constitute a majority of such Board, unless the
election of each director who was not a director prior thereto was approved by
vote of at least two-thirds of the directors then in office who were directors
prior to such period.
1.6.3 Notwithstanding the foregoing, any change in the Board of
either the Corporation or the Bank which occurs within the twenty-four (24)
month period following the Effective Date as a result of a merger with South
Valley Bancorporation, shall NOT constitute a Change in Control for purposes of
this Agreement.
1.7 "Control" means the possession, direct or indirect, by any Person or
"group" (as defined in section 13(d)(3) of the Securities Exchange Act of 1934,
as amended) of the power to direct or cause the direction of the management
policies of the Corporation or the Bank, whether through ownership of voting
securities, by contract, or otherwise, and in any case means the ability to
determine the election of a majority of the directors of the Corporation or the
Bank.
1.8 "Corporation" means Cupertino National Bancorp and any successor to
its business or assets which executes and delivers the agreement as provided by
section 10.2 herein, or which becomes bound by this Agreement by operation of
law.
1.9 "Corporation Board" means the Board of Directors of Cupertino National
Bancorp.
1.10 "Disability" means physical or mental illness resulting in absence on
a full-time basis from Employee's duties with Employer for one-hundred eighty
(180) consecutive calendar days. Disability shall be deemed to have occurred
only after the following procedure has been satisfied: If within thirty (30)
days after written notice of proposed Termination for Disability is given to
Employee by Employer, Employee has
2
<PAGE>
not returned to the full-time performance of Employee's duties, Employer may
terminate Employee by giving written notice of Termination for Disability. Such
notice may be given by Employer following Employee's absence from Employee's
duties by reason of physical or mental disability for one-hundred fifty (150)
consecutive calendar days.
1.11 "Effective Date" means May 1, 1995.
1.12 "Employee" means Hall Palmer.
1.13 "Employer" means the Corporation, the Bank or one of their
subsidiaries which is Employee's employer on the date of a Change in Control. If
Employee has more than one such employer on the date of a Change in Control, it
means the employer who makes payment of Employee's monthly salary, and if two or
more employers do so, each shall be deemed to be Employer for the purposes of
this Agreement on a pro rata basis as to the amount of Employee's working time
devoted to each, as a percentage of Employee's salary. "Employer" shall include
any successor to the business or assets of an Employer and which executes the
agreement provided by section 10.2 or which becomes bound by this Agreement by
operation of law.
1.14 "Person" means an individual, a corporation, a partnership, an
association, a joint stock company, a trust, any unincorporated organization or
a government or political subdivision thereof.
1.15 "Resignation for Good Reason" or "Resign for Good Reason" means
the cessation of Employee's employment upon written notice given by Employee to
Employer as provided in section 5.4.1 herein.
1.16 "Retirement" or "Retire" means voluntary termination by Employee of
his/her employment with Employer other than for reason of death, Disability or
Resignation for Good Reason, as those terms are defined herein.
1.17 "Salary" shall mean regular annual base cash compensation exclusive of
incentive or bonus compensation or noncash compensation benefits.
1.18 "Retirement Age" for purposes of this Agreement is sixty-two
(62) years of age.
1.19 "Termination" or "Terminated" means cessation of Employee's
employment upon written notice (with or without Cause) given to Employee, by
Employer or the Board, or their successors.
3
<PAGE>
2. POSITION AND DUTIES
-------------------
2.1 Employee shall be employed by the Bank as its Executive Vice President
& Senior Trust Officer reporting to the Executive Management Committee, of which
Employee will be a member, effective May 1, 1995 ("the Commencement Date"). As
Executive Vice President & Senior Trust Officer, Employee agrees to devote his
full business time, energy and skill to his duties at the Bank. These duties
shall include, but not be limited to, any duties consistent with his position
which may be assigned to Employee from time to time by the Bank's President.
2.2 CODE OF PERSONAL AND BUSINESS CONDUCT. Employee agrees to abide by the
-------------------------------------
terms and conditions of the Bank's standard employee Code of Personal & Business
Conduct executed by Employee and attached here as Exhibit A.
3. TERM
----
3.1 The term of this Agreement shall commence as of the Effective Date and
shall continue until the Termination, Retirement, Resignation for Good Reason
(as defined in section 5.4.1) or death of Employee, whichever occurs first. This
Agreement and all of its terms and conditions may be terminated upon written
agreement by the parties. Notwithstanding the foregoing, nothing contained
herein shall imply the existence of a contract or assurance of employment
between Employee and Employer, nor shall this Agreement alter Employer's
personnel policies and practices, including the right to terminate Employee at
any time with or without cause.
3.2 Notwithstanding the right of Bank to terminate Employee, any such
Termination shall be governed by section 5 below.
4. COMPENSATION
------------
4.1 Salary. Employee shall be paid a monthly salary of $10,000.00
-----
($120,000.00 on an annual basis), subject to applicable withholding, in
accordance with the Bank's normal payroll procedures.
4.2. BENEFITS. Employee shall have the right, on the same basis as other
--------
members of senior management of the Bank, to participate in and to receive
benefits under any of the Bank's employee benefits plans, including medical,
dental, life and disability group insurance plans as well as the Bank's 401(k)
Plan and Employee Stock Purchase Plan.
4
<PAGE>
4.3 VACATION. Employee shall accrue vacation at a rate of 2.083 days per
--------
month, the equivalent of five (5) weeks over a one (1) year period.
4.4 STOCK OPTIONS. Upon joining the Bank, Employee will receive an initial
-------------
grant of options to acquire 15,000 shares of Corporation common stock. The
shares will vest under the provisions of the Bank's 1995 Stock Option Plan.
4.5 PERFORMANCE BONUS. Employee will be eligible for a performance bonus
-----------------
up to 75% of base salary based upon goals, which will be set annually by the
Board.
4.6 CAR ALLOWANCE. $500.00 per month.
-------------
4.7 DEFERRED COMPENSATION. The Bank will provide Retirement compensation
---------------------
benefits as provided in paragraph 6 set forth below.
4.8 In the event that Employee's acceptance of employment with the Bank at
this time causes Employee to lose stock option rights with University National
Bank and Trust ("University") that he would have had if he remained employed by
University through the consummation of the "second stage" of University's plan
merger into Comerica Bank, then the Bank will reimburse Employee for the fair
market value of such stock option rights less the exercise price of the stock
calculated as of the closing date of University's "first stage" merger with
Interim Comerica on or about April 3, 1995, in a total amount not to exceed
$175,000. Such reimbursement for lost stock option rights shall be paid to
employee in two equal installments, the first on February 28, 1996 and the
second on February 28, 1997, provided that no such payment shall be due or made
unless Employee is an officer or employee of the Bank at such time payment is to
be made. If Employee receives compensation for the loss of his stock option
rights subsequent to the Bank's payment to employee, he will be required to
reimburse the Bank the payment amount.
4.9 COMPENSATION FREEZE. Subject to the terms and conditions herein, and
-------------------
for a period for three (3) years from the Effective Date, Employee's total
annual Salary and standard employee benefits from Employer set forth above shall
remain the same; provided, however, that Employee's Salary shall be increased
annually to allow for a cost of living increase, such increase to be determined
based on the U.S. Department of Labor Bureau of Labor Statistics Consumer Price
Index for All Urban Consumers in the San Francisco, Oakland and Bay Area. In
addition, it is within the complete discretion of the Employer to increase such
amount of total compensation at any time and for any reason, including a
promotion of Employee to a new position or title; however, other than the
cost-of-living increase to Salary as provided for herein, nothing in this
Agreement shall
5
<PAGE>
suggest or imply that the Board is under any duty or obligation to increase
Employee's Salary or other compensation or standard employee benefits at any
time during the three (3) year period following the Effective Date. Employee's
current salary, his current participation in incentive compensation programs of
the Employer and a description of current standard employee benefits are set
forth above.
5. TERMINATION OF EMPLOYMENT
-------------------------
5.1 The provisions of this section 5 shall govern the benefits, if any,
which Employee shall receive upon Termination of his Employment.
5.2 BENEFITS UPON VOLUNTARY TERMINATION. In the event that Employee
-----------------------------------
voluntarily resigns from his employment with the Bank, or in the event that his
employment terminates as a result of his death or disability, Employee shall be
entitled to no compensation or benefits from the Bank other than those earned
under paragraph 4 above through the date of his termination.
5.3 BENEFITS UPON OTHER TERMINATION. Employee agrees that his employment
-------------------------------
may be terminated by the Bank at any time, with or without cause. In the event
of the termination of Employee's employment by the Bank for the reasons set
forth below, he shall be entitled to the following:
5.3.1 TERMINATION FOR PERSONAL CONDUCT/CAUSE. The payments set
--------------------------------------
forth in section 5.3.2 hereof shall not apply if at any time Employee is
terminated upon a good faith finding of Personal Conduct/Cause by the Board;
provided, however, that Employee shall be given written notice of the Board's
finding of conduct by Employee amounting to Personal Conduct/Cause for such
Termination. Such notice shall be accompanied by a copy of a resolution duly
adopted by the affirmative vote of not less than a majority of the members of
the Board adopted at a duly-noticed meeting of the Board, and finding in good
faith that Employee engaged in conduct amounting to Personal Conduct/Cause and
specifying the particulars thereof.
5.3.2 If the Employee is Terminated for Performance/Class or
other than by reason of death, Retirement, Disability or Personal Conduct/Cause
as set forth herein, or if Employee Resigns for Good Reason, as defined in
section 5.4.1 below, the Bank shall pay to Employee twelve (12) months' Salary
("Severance Payment") at a rate equivalent to the then-current Salary of
Employee.
5.3.3 The Bank shall have the option of paying Severance Payments in
a lump-sum payment, or by salary continuation payments made under the Bank's
normal
6
<PAGE>
employee compensation schedule. If the Bank chooses the lump-sum payment
option, such payment shall be made not later than the tenth (10th) day following
the date of cessation of employment, Termination or Resignation for Good Reason.
5.3.4 Although a payment triggering such section is not intended
hereby, amounts otherwise due under this section will be reduced if, and to the
extent that, such reduction will increase the net amount Employee will receive
under this Agreement after taking into account the imposition of the excise tax
under section 4999 of the Internal Revenue Code, if applicable.
5.4 If a Change in Control occurs during the Term of this Agreement,
Employee may thereafter be entitled to a payment set forth in section 5.3.2 in
accordance with the terms hereof, subject to the following limitations:
5.4.1 RESIGNATION FOR GOOD REASON. The payments set forth in section
---------------------------
5.3.2 hereof shall apply if, after a Change of Control but within one year
thereafter, Employee Resigns for Good Reason, upon the happening of one or more
of the following events (unless such event or occurrence is applied generally to
all officers and employees of Employer and any parent or successor of any of
them), any of which will constitute Good Reason for Employee's Resignation:
5.4.1.1 Without Employee's express written consent, Employee's
assignment to any duties substantially inconsistent with Employee's position,
duties, responsibilities and status with Employer immediately prior to a Change
in Control, or any removal of Employee from any such position to a position
substantially inferior to such prior position;
5.4.1.2 A reduction by Employer of Employee's Salary or of any
bonus compensation formula applicable to Employee as in effect prior to a Change
in Control;
5.4.1.3 A failure by Employer to maintain any of the employee
benefits to which Employee was entitled prior to a Change in Control at a level
substantially similar to or greater than that in effect prior to a Change in
Control, through the continuation of the same or substantially similar plans,
programs and policies;
5.4.1.4 The failure by Employer to provide Employee with the
same number of paid vacation days and leave to which Employee would be entitled
as salaried employee of Employer, or any parent or successor of Employer;
7
<PAGE>
5.4.1.5 Employer requiring Employee to travel on employer's
business to an extent substantially greater than Employee's present business
travel obligations; or the relocation of Employee's office at least sixty (60)
miles from its current location, without Employee's consent; and
5.4.1.6 The failure of the Bank to obtain the assumption of
this Agreement by any successor of Employer as contemplated in section 10.2
below.
5.4.2 The events described above are the only events which shall
constitute Good Reason.
6. CERTAIN RETIREMENT BENEFITS
---------------------------
6.1 Subject to the special terms and conditions contained below, upon
cessation of Employee's employment with Employer, if the Employee has reached
the Retirement Age, or as soon thereafter as Employee reaches the Retirement
Age, the Bank hereby agrees that the Employee and Employee's spouse shall become
the joint owners (with right of survival) with the Bank of the annual increase
of the cash surrender value of the policy thereafter arising; however, the
Employee's (and Employee's spouse's) right to draw against such increase (such
draw to reduce eventual death benefits) shall never exceed $55,000 per 12-month
period (the "Retirement Draw Benefit"). The shared right to ownership of this
increase shall continue for the lifetime of the Employee and the lifetime of the
Employee's surviving spouse, but in no event longer than 40 years.
6.1.1 The Retirement Draw Benefit will be made available by means of
a split-dollar insurance policy which is to be purchased by the Bank within
thirty (30) days of the date of this Agreement, and for which the premium
payment split between the Bank and Employee and the payment terms are outlined
in Exhibit B to this Agreement.
6.1.2 Subject to the provisions of sections 6.1.3 and 6.1.4
herein, Employee's right to the Retirement Draw Benefit shall not fully vest
unless he has been employed by Employer for seven (7) years from the Effective
Date. If Employee's employment with Employer ends any time before a date one (1)
year from the date of this Agreement (the "Anniversary Date"), Employee will not
have any right to, or interest in, the Retirement Draw Benefit. If Employee's
employment ends at any time after the Anniversary Date, but prior to the seven
(7) year date of full vesting, Employee's right to one-seventh (1/7) of the
Retirement Draw Benefit--i.e., the right to draw $6,285, or one-seventh of
$44,000, per 12-month period--will vest on the Anniversary Date, and Employee's
right to the Retirement Draw Benefit will continue to proportionately vest
thereafter on a monthly basis, on the first date of each month following the
Anniversary Date, until employment ends.
8
<PAGE>
6.1.3 Subject to the provisions of section 6.1.2 herein, if prior to
a Change in Control and during the Term hereof, Employee is Terminated for any
reason other than Disability, the vesting of Employee's right to the Retirement
Draw Benefit will cease as of the date of termination. If prior to a change of
Control and during the Term hereof, Employee is Terminated by reason of
Disability, the vesting of Employee's right to the Retirement Draw Benefit will
cease as of the date of termination unless the Board in its sole and absolute
discretion approves additional vesting.
6.1.4 Notwithstanding the provisions of Section 6.1.2 herein, if
after a Change in Control and during the Term hereof, Employee is Terminated, or
Resigns for Good Reason, as provided in section 5.4.1 herein, Employee's right
to the Retirement Draw Benefit shall immediately vest in full, and such benefit
shall become available to Employee when Employee reaches Retirement Age.
7. FEDERAL INCOME TAX WITHHOLDING
------------------------------
7.1 The Bank shall withhold from any compensation or benefits payable
under this Agreement all federal, state, city or other taxes or deductions as
shall be required pursuant to any law, governmental regulation or ruling.
8. ARBITRATION
-----------
8.1 Any controversy between the parties hereto, including the
construction, application or breach of any of the terms, covenants or conditions
of this Agreement, and all claims relating to or arising from Employee's
employment or Termination, including all statutory claims (including but not
limited to all statutes dealing with employment discrimination), shall on a
timely written request of one party served upon the other, be submitted to
arbitration and be governed by the California Arbitration Act as set forth in
the California Code of Civil Procedure (presently sections 1280 et seq.). The
-- ---
parties agree that any written request for arbitration must be made within one
year after the initiating party first learned or should have learned in the
exercise of reasonable diligence of the essential facts upon which the claim is
based, of first suffered any harm, or first learned or should have learned in
the exercise of reasonable diligence of the breach of this Agreement, whichever
is earlier. Any claim not raised within such time limitation shall be waived and
forever barred. The arbitration shall take place in Santa Clara County,
California.
8.2 The parties may agree upon one arbitrator, but in the event they
cannot agree, there shall be three (3), one named in writing by each of the
parties within ten (10) days after demand for arbitration is given, and a third
chosen by the two so appointed;
<PAGE>
provided further that if the two appointed cannot agree on the choice, then
application shall be made to a presiding judge of the Santa Clara County
Superior Court for the purpose of designating a third arbitrator. The applying
party (who may suggest in such application the names of a suitable third
arbitrator) shall provide the other party at least 48 hours prior notice of the
application so that such other party may have the opportunity to submit one or
more names of persons suitable to serve as the designated third arbitrator. The
presiding judge shall have discretion to designate the third arbitrator from
among the names suggested by either party or from among any other persons such
judge deems appropriate. The cost of such arbitration, including reasonable
attorneys' fees, shall be borne by the losing party or in such proportions as
the arbitrator(s) shall decide. Arbitration shall be the exclusive remedy of the
parties and the award of the arbitrator(s) shall be final and binding upon the
parties.
9. GENERAL PROVISIONS
------------------
9.1 NONASSIGNABILITY. Neither this Agreement nor any right or interest
----------------
hereunder shall be assignable by Employee, provided, however, that nothing in
this section 10 shall preclude (i) Employee from designating a beneficiary to
receive any benefits payable hereunder upon Employee's death, or (ii) Employee's
executors, administrators, or other legal representatives of Employee's estate
from assigning any rights hereunder to the person or persons entitled thereto.
9.2 ASSUMPTION. The Bank shall require any successor in interest (whether
----------
direct or indirect or as a result of purchase, merger, consolidation, Change in
Control or otherwise) to all or substantially all of the business and/or assets
of the Corporation or the Bank to expressly assume and agree to perform the
obligations under this Agreement.
9.3 NO ATTACHMENT. Except as required or permitted by law, no right to
-------------
receive payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge , pledge, or
hypothecation or to execution, attachment, levy, or similar process of
assignment by operation of law, and any attempt, voluntary or involuntary, to
effect any such action shall be null, void and of no effect. The payments due
Employee under section 5 herein shall not be deemed earned until the conditions
set forth in section 5 occur, if ever.
9.4 BINDING AGREEMENT. This Agreement contains the entire understanding
-----------------
among the parties regarding Employee's relationship with Bank and Corporation
and supersedes any prior employment agreements. This Agreement shall be binding
upon, and inure to the benefit of, Employee, the Bank and the Corporation, and
their respective heirs, successors and assigns. Each party acknowledges that no
representations, inducements, promises, or agreements have been made by any
party, or anyone acting on
10
<PAGE>
behalf of any party, which are not embodied herein and that no other agreement,
statement, or promise not contained in this Agreement shall be valid or binding
on either party except as provided herein.
9.5 AMENDMENT OR AUGMENTATION OF AGREEMENT. This Agreement may not be
--------------------------------------
modified or amended except by an instrument in writing signed by the parties
hereto. Unless expressly agreed to in writing by the parties hereto, no
additional rights or compensation, even if given or accepted, shall be deemed to
modify or otherwise affect the express terms and conditions of this Agreement.
9.6 WAIVER. No term or condition of this Agreement shall be deemed to
------
have been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specially stated therein, and each waiver shall operate
only as to the specific term or condition waived and shall not constitute a
waiver of such term or condition for the future or as to any act other than that
specifically waived.
9.7 CONDITION OF THE BANK AND THE CORPORATION. Notwithstanding anything
-----------------------------------------
in this Agreement, no payment shall be made under section 5 without regulatory
approval if any of the following events or circumstances exist: (i) the Bank is
insolvent or a conservator or receiver has been appointed for it; (ii) the
Comptroller of the Currency or other appropriate federal banking agency has made
a determination that the Bank or the Corporation is in a "troubled condition" as
defined by applicable regulations of such federal banking agency; (iii) the Bank
or the Corporation is assigned a composite rating of 4 or 5 by the appropriate
federal banking agency or is informed in writing by the OCC that it is rated a 4
or 5 under the Uniform Financial Institution's Rating System of the Federal
Financial Institution's Examination Council; or (iv) the OCC has initiated a
proceeding against the Bank to terminate or suspend deposit insurance for the
Bank.
9.8 SEVERABILITY. If, for any reason, any provision of this Agreement is
------------
held invalid, such invalidity shall not affect any other provision of this
Agreement not held invalid, and each such other provision shall to the full
extent consistent with the law continue in full force and effect. If any
provision of this Agreement shall be held invalid in part, such invalidity shall
in no way affect the rest of such provision not held invalid, and the rest of
such provision together with all other provisions of this Agreement shall, to
the full extent consistent with law, continue in full force and effect. (If
this Agreement is held totally invalid or cannot be enforced, then to the full
extent permitted by law any prior employment agreement, whether oral or written,
express or implied, between the Bank and/or its affiliates, (or any successor
thereof) and Employee shall be deemed reinstated as if this Agreement had not
been executed.)
11
<PAGE>
9.9 NOTICES. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or if mailed by United States certified or registered mail,
prepaid, to the parties or their permitted assignees at the following addresses
(or at such other address as shall be given in writing by either party to the
other):
To: Cupertino National Bank & Trust
20230 Stevens Creek Boulevard
Cupertino, CA 95014-2244
Attention: Chairman of the Board
To: Employee at the last known address contained in the personnel
records of the Bank
9.10 HEADINGS. The headings of paragraphs herein are included solely for
--------
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
9.11 GOVERNING LAW. This Agreement has been executed and delivered in the
--------------
State of California, and its validity, interpretation, performance, and
enforcement shall be governed by the laws of said State.
9.12 ADVICE OF COUNSEL. Employee has been encouraged to consult with legal
-----------------
counsel of Employee's choosing concerning the terms of this Agreement prior to
executing this Agreement. Any failure by Employee to consult with competent
counsel prior to executing this Agreement shall not be a basis for rescinding or
otherwise avoiding the binding effect of this Agreement. The parties acknowledge
that they are entering into this Agreement freely and voluntarily, with full
understanding of the terms of the Agreement. Interpretation of the terms of this
Agreement shall not be construed
12
<PAGE>
for or against either party on the basis of the identity of the party who
drafted the provision in question.
CORPORATION: BANK:
CUPERTINO NATIONAL BANCORP CUPERTINO NATIONAL BANK & TRUST
By: SIGNATURE ILLEGIBLE By: Steven C. Smith
------------------- -------------------
___________________ ___________________
Its: Vice Chair Its: EVP + CEO
------------------- -------------------
___________________ ___________________
EMPLOYEE:
/s/ HALL PALMER
- ---------------
HALL PALMER
13
<PAGE>
EXHIBIT 10.28
CUPERTINO NATIONAL BANK & TRUST
EMPLOYMENT, SEVERANCE AND
RETIREMENT BENEFITS AGREEMENT
THIS EMPLOYMENT, SEVERANCE AND RETIREMENT BENEFITS AGREEMENT (the
"Agreement") is made and entered on this 31st day of July, 1995 and is effective
as of September 1, 1994, by and between CUPERTINO NATIONAL BANCORP (the
"Corporation"), its wholly owned subsidiary CUPERTINO NATIONAL BANK & TRUST (the
"Bank") and STEVEN C. SMITH ("Employee").
The Corporation, Bank and Employee agree as follows:
1. DEFINITIONS
-----------
1.1 "Agreement" means only the agreement contained in this document and as
modified in writing pursuant to section 10.5 herein.
1.2 "Anniversary Date" means the date one (1) year from the Effective
Date.
1.3 "Bank" means Cupertino National Bank & Trust, and any successor to its
business or assets which executes and delivers the Agreement as provided by
section 10.2 herein or which becomes bound by this Agreement by operation of
law.
1.4 "Board" means the Board of Directors of the Bank.
1.5 "Cause" means (1) Employees acts of personal dishonesty; willful
misconduct; breach of fiduciary duty or violation of banking law involving an
intent to obtain personal or family profit; willful violation of any law, rule,
or regulation which results in action against or restrictions imposed on the
Bank by regulatory authorities; habitual abuse of substances (as corroborated by
a physician) or extended unexcused absence from work; or (2) Employee's
continued failure to substantially perform Employee's duties (which failure may
be determined by the Board by reference to the quality of the Company's
financial condition or operating performance) with the Bank (other than any
failure resulting from Disability) after a written demand for substantial
performance is given to Employee by the Board which demand specifically
identifies the manner in which the Board believes that Employee has not
substantially performed Employee's duties. The definition of "Cause" as set
forth in subsection (1) hereof is sometimes referred to separately herein as
"Personal Conduct/ Cause," and the definition of "Cause" as set forth in
subsection (2) is sometimes referred to separately herein as
"Performance/Cause." The term "Cause," standing alone, shall mean either
Personal Conduct/Cause or Performance/Cause or both. For purposes of the
definition of Personal Conduct/Cause, an act, or failure to act, on the
Employee's part shall be
<PAGE>
considered "willful" only if done, or omitted to be done, by him without
reasonable belief that such act, or failure to act, is in the best interests of
the Employer.
1.6 "Change in Control" means a change in the Board of Directors, or the
Corporation or the Bank following:
1.6.1 The acquisition, directly or indirectly, of more than 25% of the
outstanding shares of any class of voting securities of the Corporation of the
Bank by any Person; or
1.6.2 A merger, consolidated or sale of all or substantially all of
the assets of the Corporation or the Bank, such that the individuals
constituting the Corporation Board or the Board of the Bank immediately prior to
such period shall cease to constitute a majority of such Board, unless the
election of each director who was not a director prior thereto was approved by
vote of at least two-thirds of the directors then in office who were directors
prior to such period.
1.6.3 Notwithstanding the foregoing, any change in the Board of either
the Corporation or the Bank which occurs within the twenty-four (24) month
period following the Effective Date as a result of a merger with South Valley
Bancorporation, shall NOT constitute a Change in Control for purposes of this
Agreement.
1.7 "Control" means the possession, direct or indirect, by any Person or
"group" (as defined in section 13(d)(3) of the Securities Exchange Act of 1934,
as amended) of the power to direct or cause the direction of the management
policies of the Corporation or the Bank, whether through ownership of voting
securities, by contract, or otherwise, and in any case means the ability to
determine the election of a majority of the directors of the Corporation or the
Bank.
1.8 "Corporation" means Cupertino National Bancorp and any successor to
its business or assets which executes and delivers the agreement as provided by
section 10.2 herein, or which becomes bound by this Agreement by operation of
law.
1.9 "Corporation Board" means the Board of Directors of Cupertino National
Bancorp.
1.10 "Disability" means physical or mental illness resulting in absence on
a full-time basis from Employee's duties with Employer for one-hundred eighty
(180) consecutive calendar days. Disability shall be deemed to have occurred
only after the following procedure has been satisfied: If within thirty (30)
days after written notice of proposed Termination for Disability is given to
Employee by Employer, Employees has
2
<PAGE>
not returned to the full-time performance of Employee's duties, Employer may
terminate Employee by giving written notice of Termination for Disability. Such
notice may be given by Employer following Employee's absence from Employee's
duties by reason of physical or mental disability for one-hundred fifty (150)
consecutive calendar days.
1.11 "Effective Date" means September 1, 1994 - Salary Continuation
Agreement.
1.12 "Employee" means STEVEN C. SMITH.
1.13 "Employer" means the Corporation, the Bank or one of their
subsidiaries which is Employee's employer on the date of a Change in Control. If
Employee has more than one such employer on the date of a Change in Control, it
means the employer who makes payment of Employee's monthly salary, and if two or
more employers do so, each shall be deemed to be Employer for the purposes of
this Agreement on a pro rata basis as to the amount of Employee's working time
devoted to each, as a percentage of Employee's salary. "Employer" shall include
any successor to the business or assets of an Employer and which executes the
agreement provided by section 10.2 or which becomes bound by this Agreement by
operation of law.
1.14 "Person" means an individual, a corporation, a partnership, an
association, a joint stock company, a trust, any unincorporated organization or
a government or political subdivision thereof.
1.15 "Resignation for Good Reason" or "Resign for Good Reason" means
the cessation of Employee's employment upon written notice given by Employee to
Employer as provided in section 5.4.1 herein.
1.16 "Retirement" or "Retire" means voluntary termination by Employee
of his/her employment with Employer other than for reason of death, Disability
or Resignation for Good Reason, as those terms are defined herein.
1.17 "Salary" shall mean regular annual base cash compensation
exclusive of incentive or bonus compensation or noncash compensation benefits.
1.18 "Retirement Age" for purposes of this Agreement is sixty (60)
years of age.
1.19 "Termination" or "Terminated" means cessation of Employee's
employment upon written notice (with or without Cause) given to Employee, by
Employer or the Board, or their successors.
3
<PAGE>
2. POSITION AND DUTIES
-------------------
2.1 Employee shall be employed by the Bank as its Executive Vice
President, Chief Financial Officer and Chief Operating Officer reporting to the
Executive Management Committee, of which Employee will be a member, effective
September 1, 1994 ("the Commencement Date"). As Executive Vice President, Chief
Financial Officer and Chief Operating Officer, Employee agrees to devote his
full business time, energy and skill to his duties at the Bank. These duties
shall include, but not be limited to, any duties consistent with his position
which may be assigned to Employee from time to time by the Bank's President.
2.2 CODE OF PERSONAL AND BUSINESS CONDUCT. Employee agrees to abide by the
-------------------------------------
terms and conditions of the Bank's standard employee Code of Personal & Business
Conduct executed by Employee and attached here as Exhibit A.
3. TERM
----
3.1 The term of this Agreement shall commence as of the Effective Date and
shall continue until the Termination, Retirement, Resignation for Good Reason
(as defined in section 5.4.1) or death of Employee, whichever occurs first. This
Agreement and all of its terms and conditions may be terminated upon written
agreement by the parties. Notwithstanding the foregoing, nothing contained
herein shall imply the existence of a contract or assurance of employment
between Employee and Employer, nor shall this Agreement alter Employer's
personnel policies and practices, including the right to terminate Employee at
any time with or without cause.
3.2 Notwithstanding the right of Bank to terminate Employee, any such
Termination shall be governed by section 5 below.
4. COMPENSATION
------------
4.1 SALARY. Employee shall be paid a monthly salary of $11,250.00
------
($135,000.00 on an annual basis), subject to applicable withholding, in
accordance with the Bank's normal payroll procedures.
4.2 BENEFITS. Employee shall have the right, on the same basis as other
--------
members of senior management of the Bank, to participate in and to receive
benefits under any of the Bank's employee benefits plans, including medical,
dental, life and disability group insurance plans as well as the Bank's 401(k)
Plan and Employee Stock Purchase Plan.
4
<PAGE>
4.3 VACATION. Employee shall accrue vacation at a rate of 2.083 days per
--------
month, the equivalent of five (5) weeks over a one (1) year period.
4.4 STOCK OPTIONS. Stock options will be granted at the discretion of the
-------------
Board of Directors. The shares will vest under the provisions of the Bank's 1995
Stock Option Plan.
4.5 PERFORMANCE BONUS. Employee will be eligible for a performance bonus
-----------------
up to 75% of base salary based upon goals, which will be set annually by the
Board.
4.6 CAR ALLOWANCE. $500.00 per month.
-------------
4.7 DEFERRED COMPENSATION. The Bank will provide Retirement compensation
---------------------
benefits as provided in paragraph 6 set forth below.
4.9 COMPENSATION FREEZE. Subject to the terms and conditions herein,
-------------------
and for a period for three (3) years from the Effective Date, Employee's total
annual Salary and standard employee benefits from Employer set forth above shall
remain the same; provided, however, that Employee's Salary shall be increased
annually to allow for a cost of living increase, such increase to be determined
based on the U.S. Department of Labor Bureau of Labor Statistics Consumer Price
Index for All Urban Consumers in the San Francisco, Oakland and Bay Area. In
addition, it is within the complete discretion of the Employer to increase such
amount of total compensation at any time and for any reason, including a
promotion of Employee to a new position or title; however, other than the cost-
of-living increase to Salary as provided for herein, nothing in this Agreement
shall suggest or imply that the Board is under any duty or obligation to
increase Employee's Salary or other compensation or standard employee benefits
at any time during the three (3) year period following the Effective Date.
Employee's current salary, his current participation in incentive compensation
programs of the Employer and a description of current standard employee benefits
are set forth above.
5. TERMINATION OF EMPLOYMENT
-------------------------
5.1 The provisions of this section 5 shall govern the benefits, if any,
which Employee shall receive upon Termination of his Employment.
5.2 BENEFITS UPON VOLUNTARY TERMINATION. In the event that Employee
-----------------------------------
voluntarily resigns from his employment with the Bank, or in the event that his
employment terminates as a result of his death or disability, Employee shall be
entitled to no compensation or benefits from the Bank other than those earned
under paragraph 4 above through the date of his termination.
5
<PAGE>
5.3 BENEFITS UPON OTHER TERMINATION. Employee agrees that his employment
-------------------------------
may be terminated by the Bank at any time, with or without cause. In the event
of the termination of Employee's employment by the Bank for the reasons set
forth below, he shall be entitled to the following:
5.3.1 TERMINATION FOR PERSONAL CONDUCT/CAUSE. The payments set
--------------------------------------
forth in section 5.3.2 hereof shall not apply if at any time Employee is
terminated upon a good faith finding of Personal Conduct/Cause by the Board;
provided, however, that Employee shall be given written notice of the Board's
finding of conduct by Employee amounting to Personal Conduct/Cause for such
Termination. Such notice shall be accompanied by a copy of a resolution duly
adopted by the affirmative vote of not less than a majority of the members of
the Board adopted at a duly-noticed meeting of the Board, and finding in good
faith that Employee engaged in conduct amounting to Personal Conduct/Cause and
specifying the particulars thereof.
5.3.2 If the Employee is Terminated for Performance/Cause or
other than by reason of death, Retirement, Disability or Personal Conduct/Cause,
as set forth herein, or if Employee Resigns for Good Reason, as defined in
section 5.4.1 below, the Bank shall pay to Employee twelve (12) months' Salary
("Severance Payment") at a rate equivalent to the then-current Salary of
Employee.
5.3.3 The Bank shall have the option of paying Severance Payments
in a lump-sum payment, or by salary continuation payments made under the Bank's
normal employee compensation schedule. If the Bank chooses the lump-sum payment
option, such payment shall be made not later than the tenth (10th) day following
the date of cessation of employment, Termination or Resignation for Good Reason.
5.3.4 Although a payment triggering such section is not intended
hereby, amounts otherwise due under this section will be reduced if, and to the
extent that, such reduction will increase the net amount Employee will receive
under this Agreement after taking into account the imposition of the excise tax
under section 4999 of the Internal Revenue Code, if applicable.
5.4 If a Change in Control occurs during the Term of this Agreement,
Employee may thereafter be entitled to a payment set forth in section 5.3.2 in
accordance with the terms hereof, subject to the following limitations:
5.4.1 RESIGNATION FOR GOOD REASON. The payments set forth in section
---------------------------
5.3.2 hereof shall apply if, after a Change of Control but within one year
thereafter,
6
<PAGE>
Employee Resigns for Good Reason, upon the happening of one or more of the
following events (unless such event or occurrence is applied generally to all
officers and employees of Employer and any parent or successor of any of them),
any of which will constitute Good Reason for Employee's Resignation:
5.4.1.1 Without Employee's express written consent, Employee's
assignment to any duties substantially inconsistent with Employee's position,
duties, responsibilities and status with Employer immediately prior to a Change
in Control, or any removal of Employee from any such position to a position
substantially inferior to such prior position;
5.4.1.2 A reduction by Employer of Employee's Salary or of any
bonus compensation formula applicable to Employee as in effect prior to a Change
in Control;
5.4.1.3 A failure by Employer to maintain any of the employee
benefits to which Employee was entitled prior to a Change in Control at a level
substantially similar to or greater than that in effect prior to a Change in
Control, through the continuation of the same or substantially similar plans,
programs and policies;
5.4.1.4 The failure by Employer to provide Employee with the
same number of paid vacation days and leave to which Employee would be entitled
as salaried employee of Employer, or any parent or successor of Employer;
5.4.1.5 Employer requiring Employee to travel on employer's
business to an extent substantially greater than Employee's present business
travel obligations; or the relocation of Employee's office at least sixty (60)
miles from its current location, without Employee's consent; and
5.4.1.6 The failure of the Bank to obtain the assumption of
this Agreement by any successor of Employer as contemplated in section 10.2
below.
5.4.2 The events described above are the only events which shall
constitute Good Reason.
6. CERTAIN RETIREMENT BENEFITS
---------------------------
6.1 Subject to the special terms and conditions contained below, upon
cessation of Employee's employment with Employer, if the Employee has reached
the Retirement Age, or as soon thereafter as Employee reaches the Retirement
Age, the Bank hereby agrees that the Employee and Employee's spouse shall become
the joint owners (with
7
<PAGE>
right of survival) with the Bank of the annual increase of the cash surrender
value of the policy thereafter arising; however, the Employee's (and Employee's
spouse's) right to draw against such increase (such draw to reduce eventual
death benefits) shall never exceed $60,000 per 12-month period (the "Retirement
Draw Benefit"). The shared right to ownership of this increase shall continue
for the lifetime of the Employee and the lifetime of the Employee's surviving
spouse, but in no event longer than 40 years.
6.1.1 The Retirement Draw Benefit will be made available by
means of a split-dollar insurance policy which is to be purchased by the Bank
within thirty (30) days of the date of this Agreement, and for which the premium
payment split between the Bank and Employee and the payment terms are outlined
in Exhibit B to this Agreement.
6.1.2 Subject to the provisions of sections 6.1.3 and 6.1.4
herein, Employee's right to the Retirement Draw Benefit shall not fully vest
unless he has been employed by Employer for seven (7) years from the Effective
Date. If Employee's employment with Employer ends any time before a date one (1)
year from the date of this Agreement (the "Anniversary Date"), Employee will not
have any right to, or interest in, the Retirement Draw Benefit. If Employee's
employment ends at any time after the Anniversary Date, but prior to the seven
(7) year date of full vesting, Employee's right to one-seventh (1/7) of the
Retirement Draw Benefit--i.e., the right to draw $8,572, or one-seventh of
$60,000, per 12-month period--will vest on the Anniversary Date, and Employee's
right to the Retirement Draw Benefit will continue to proportionately vest
thereafter on a monthly basis, on the first date of each month following the
Anniversary Date, until employment ends.
6.1.3 Subject to the provisions of section 6.1.2 herein, if
prior to a Change in Control and during the Term hereof, Employee is Terminated
for any reason other than Disability, the vesting of Employee's right to the
Retirement Draw Benefit will cease as of the date of termination. If prior to a
Change of Control and during the Term hereof, Employee is Terminated by reason
of Disability, the vesting of Employee's right to the Retirement Draw Benefit
will cease as of the date of termination unless the Board in its sole and
absolute discretion approves additional vesting.
6.1.4 Notwithstanding the provisions of section 6.1.2 herein,
if after a Change in Control and during the Term hereof, Employee is Terminated,
or Resigns for Good Reason, as provided in section 5.4.1 herein, Employee's
right to the Retirement Draw Benefit shall immediately vest in full, and such
benefit shall become available to Employee when Employee reaches Retirement Age.
8
<PAGE>
7. FEDERAL INCOME TAX WITHHOLDING
------------------------------
7.1 The Bank shall withhold from any compensation or benefits payable
under this Agreement all federal, state, city or other taxes or deductions as
shall be required pursuant to any law, governmental regulation or ruling.
8. ARBITRATION
-----------
8.1 Any controversy between the parties hereto, including the
construction, application or breach of any of the terms, covenants or conditions
of this Agreement, and all claims relating to or arising from Employee's
employment or Termination, including all statutory claims (including but not
limited to all statutes dealing with employment discrimination), shall on a
timely written request of one party served upon the other, be submitted to
arbitration and be governed by the California Arbitration Act as set forth in
the California Code of Civil Procedure (presently sections 1280 et seq.). The
-- ---
parties agree that any written request for arbitration must be made within one
year after the initiating party first learned or should have learned in the
exercise of reasonable diligence of the essential facts upon which the claim is
based, or first suffered any harm, or first learned or should have learned in
the exercise of reasonable diligence of the breach of this Agreement, whichever
is earlier. Any claim not raised within such time limitation shall be waived
and forever barred. The arbitration shall take place in Santa Clara County,
California.
8.2 The parties may agree upon one arbitrator, but in the event they
cannot agree, there shall be three (3), one named in writing by each of the
parties within ten (10) days after demand for arbitration is given, and a third
chosen by the two so appointed; provided further that if the two appointed
cannot agree on the choice, then application shall be made to a presiding judge
of the Santa Clara County Superior Court for the purpose of designating a third
arbitrator. The applying party (who may suggest in such application the names of
a suitable third arbitrator) shall provide the other party at least 48 hours
prior notice of the application so that such other party may have the
opportunity to submit one or more names of persons suitable to serve as the
designated third arbitrator. The presiding judge shall have discretion to
designate the third arbitrator from among the names suggested by either party or
from among any other persons such judge deems appropriate. The cost of such
arbitration, including reasonable attorneys' fees, shall be borne by the losing
party or in such proportions as the arbitrator(s) shall decide. Arbitration
shall be the exclusive remedy of the parties and the award of the arbitrator(s)
shall be final and binding upon the parties.
9
<PAGE>
9. GENERAL PROVISIONS
------------------
9.1 NONASSIGNABILITY. Neither this Agreement nor any right or
----------------
interest hereunder shall be assignable by Employee, provided, however, that
nothing in this section 10 shall preclude (i) Employee from designating a
beneficiary to receive any benefits payable hereunder upon Employee's death, or
(ii) Employee's executors, administrators, or other legal representatives of
Employee's estate from assigning any rights hereunder to the person or persons
entitled thereto.
9.2 ASSUMPTION. The Bank shall require any successor in interest
----------
(whether direct or indirect or as a result of purchase, merger, consolidation,
Change in Control or otherwise) to all or substantially all of the business
and/or assets of the Corporation or the Bank to expressly assume and agree to
perform the obligations under this Agreement.
9.3 NO ATTACHMENT. Except as required or permitted by law, no right
-------------
to receive payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge, pledge, or
hypothecation or to execution, attachment, levy, or similar process of
assignment by operation of law, and any attempt, voluntary or involuntary, to
effect any such action shall be null, void and of no effect. The payments due
Employee under section 5 herein shall not be deemed earned until the conditions
set forth in section 5 occur, if ever.
9.4 BINDING AGREEMENT. This Agreement contains the entire
-----------------
understanding among the parties regarding Employee's relationship with Bank and
Corporation and supersedes any prior employment agreements. This Agreement shall
be binding upon, and inure to the benefit of, Employee, the Bank and the
Corporation, and their respective heirs, successors and assigns. Each party
acknowledges that no representations, inducements, promises, or agreements have
been made by any party, or anyone acting on behalf of any party, which are not
embodied herein and that no other agreement, statement, or promise not contained
in this Agreement shall be valid or binding on either party except as provided
herein.
9.5 AMENDMENT OR AUGMENTATION OF AGREEMENT. This Agreement may not be
--------------------------------------
modified or amended except by an instrument in writing signed by the parties
hereto. Unless expressly agreed to in writing by the parties hereto, no
additional rights or compensation, even if given or accepted, shall be deemed to
modify or otherwise affect the express terms and conditions of this Agreement.
9.6 WAIVER. No term or condition of this Agreement shall be deemed to
------
have been waived, nor shall there be any estoppel against the enforcement of any
provision of
10
<PAGE>
this Agreement except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each waiver shall operate only as to the
specific term or condition waived and shall not constitute a waiver of such term
or condition for the future or as to any act other than that specifically
waived.
9.7 CONDITION OF THE BANK AND THE CORPORATION. Notwithstanding
-----------------------------------------
anything in this Agreement, no payment shall be made under section 5 without
regulatory approval if any of the following events or circumstances exist: (i)
the Bank is insolvent or a conservator or receiver has been appointed for it;
(ii) the Comptroller of the Currency or other appropriate federal banking agency
has made a determination that the Bank or the Corporation is in a "troubled
condition" as defined by applicable regulations of such federal banking agency;
(iii) the Bank or the Corporation is assigned a composite rating of 4 or 5 by
the appropriate federal banking agency or is informed in writing by the OCC that
it is rated a 4 or 5 under the Uniform Financial Institution's Rating System of
the Federal Financial Institution's Examination Council; or (iv) the OCC has
initiated a proceeding against the Bank to terminate or suspend deposit
insurance for the Bank.
9.8 SEVERABILITY. If, for any reason, any provision of this Agreement
------------
is held invalid, such invalidity shall not affect any other provision of this
Agreement not held invalid, and each such other provision shall to the full
extent consistent with law continue in full force and effect. If any provision
of this Agreement shall be held invalid in part, such invalidity shall in no way
affect the rest of such provision not held invalid, and the rest of such
provision together with all other provisions of this Agreement shall, to the
full extent consistent with law, continue in full force and effect. (If this
Agreement is held totally invalid or cannot be enforced, then to the full extent
permitted by law any prior employment agreement, whether oral or written,
express or implied, between the Bank and/or its affiliates, (or any successor
thereof) and Employee shall be deemed reinstated as if this Agreement had not
been executed.)
9.9 NOTICES. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or if mailed by United States certified or registered mail,
prepaid, to the parties or their permitted assignees at the following addresses
(or at such other address as shall be given in writing by either party to the
other):
To: Cupertino National Bank & Trust
20230 Stevens Creek Boulevard
Cupertino, CA 95014-2244
Attention: Chairman of the Board
11
<PAGE>
To: Employee at the last known address contained in the personnel
records of the Bank
9.10 HEADINGS. The headings of paragraphs herein are included solely for
--------
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
9.11 GOVERNING LAW. This Agreement has been executed and delivered in the
-------------
State of California, and its validity, interpretation, performance, and
enforcement shall be governed by the laws of said State.
9.12 ADVICE OF COUNSEL. Employee has been encouraged to consult with legal
-----------------
counsel of Employee's choosing concerning the terms of this Agreement prior to
executing this Agreement. Any failure by Employee to consult with competent
counsel prior to executing this Agreement shall not be a basis for rescinding or
otherwise avoiding the binding effect of this Agreement. The parties acknowledge
that they are entering into this Agreement freely and voluntarily, with full
understanding of the terms of the Agreement. Interpretation of the terms of this
Agreement shall not be construed
12
<PAGE>
for or against either party on the basis of the identity of the party who
drafted the provision in question.
CORPORATION: BANK:
CUPERTINO NATIONAL BANCORP CUPERTINO NATIONAL BANK & TRUST
By: /s/ Rex D. Linsey By: /s/ Donald Allen
------------------------- ----------------------------
_________________________ ____________________________
Its: Vice-Chair Its: Chairman/CEO
------------------------- ----------------------------
_________________________ ____________________________
EMPLOYEE:
/s/ Steven C. Smith
- ----------------------------
STEVEN C. SMITH
13
<PAGE>
EXHIBIT A
As of the Effective Date, September 1, 1994, Employee's:
1. Annual Salary was $120,000;
2. Participation in incentive compensation was (describe basis/formula):
Subjective based on performance of Bank and individual; and
3. Standard employee benefits were comprised of: 401(K), ESPP, medical
insurance, life insurance, vacation, disability, automobile allowance,
stock options, Saratoga Country Club membership, plus any benefits
added for EMC members or all employees.
<PAGE>
EXHIBIT B
Policy Premium: $557,221
Employee's Share of Premium: $190,186
The Employee's share of the premium shall be payable pursuant to a
promissory note in the form attached hereto as Attachment 1 (the "Premium
Payment Note"), which note shall be paid annually by offsetting against
Employee's incentive or bonus compensation at the following rates:
==============================================================================
IF BONUS COMPENSATION IS PAYMENT/OFFSET IS
- ------------------------------------------------------------------------------
0 to $20,000 0
- ------------------------------------------------------------------------------
$20,001 to $40,000 $5,000
- ------------------------------------------------------------------------------
$40,001 to $60,000 $8,000
- ------------------------------------------------------------------------------
$60,001 to $80,000 $12,000
- ------------------------------------------------------------------------------
greater than $80,000 $16,000
==============================================================================
The balance, if any, of the Premium Payment Note at Employee's death shall
be paid out of the policy's death benefit proceeds; provided, that if the death
benefit proceeds are less than such balance, the unpaid amount shall be paid by
the Bank and shall not be an obligation of Employee or Employee's estate.
Employee shall not be required to pay interest on the unpaid balance of the
Premium Payment Note until Employee reaches Retirement Age; in consideration
therefor, Employee waives all rights to any increases in the cash surrender
value of the policy which arise on or before Employee reaches Retirement Age.
<PAGE>
ATTACHMENT 1
PROMISSORY NOTE
$190,186 Cupertino, California
April 28, 1995
1. Obligation. Steven C. Smith, an individual ("Maker") who is
----------
currently an executive employee of Cupertino National Bank & Trust (the "Bank"),
for value received, hereby promises to pay to the Bank at 20230 Stevens Creek
Boulevard, Cupertino, California 95014, the principal amount of one hundred
ninty thousand, one hundred eighty-six dollars ($190,186). This Note is
delivered by Maker in payment of Maker's share of a life insurance premium for
life insurance being purchased by the Bank (the "Life Insurance") pursuant to
that certain Severance and Retirement Benefits Agreement between Maker and Bank
dated April 28, 1995 (the "Benefits Agreements"). The terms of the Benefits
Agreement are incorporated herein by this reference. Caplitalized terms used
herein without definition shall have the meanings assigned to them in the
Benefits Agreement.
2. Interest Rate. This Note shall bear simple interest from and
-------------
after the date Maker reaches Retirement Age at an annual interest rate of eight
percent (8%). In the event this Note is not paid pursuant to the terms of
Section 3 below, any late payments shall bear interest until fully paid at an
annual rate of five (5) points above the Bank's prime rate--which shall be
defined as the then prevailing rate charged by the Bank for commercial borrowers
of highest credit quality.
3. Payment Schedule. Maker agrees to make payments on this Note
----------------
annually out of incentive or bonus compensation, if any, earned by Maker under
any Bank plan for such compensation, and hereby authorizes Bank to obtain such
payments from Maker annually by deducting from incentive or bonus compensation
(at such time as such compensation would otherwise be paid to Maker) in
accordance with the following schedule:
================================================================================
IF BONUS COMPENSATION IS PAYMENT APPLIED TO NOTE IS
- --------------------------------------------------------------------------------
0 to $20,000 0
- --------------------------------------------------------------------------------
$20,001 to $40,000 $5,000
- --------------------------------------------------------------------------------
$40,001 to $60,000 $8,000
- --------------------------------------------------------------------------------
$60,001 to $80,000 $12,000
- --------------------------------------------------------------------------------
greater than $80,000 $16,000
================================================================================
<PAGE>
If Maker ceases to be employed by Bank before Retirement Age, such
that incentive or bonus compensation is no longer earned by Maker under any Bank
plan, Maker shall have no obligation to make further payments on this Note until
the death benefit provision is implemented.
Maker further agrees that the balance of this Note, if any, unpaid at
Maker's death shall be due and payable upon such death, and Maker hereby
authorizes Bank to obtain from Maker the payoff of such unpaid balance by
applying the death benefit proceeds under the Life Insurance. To the extent
such death benefit proceeds are insufficient to pay in full the unpaid balance
of this Note, any remaining balance after application of the entire death
benefit proceeds shall be deemed extinguished and no longer an obligation of
Maker or Maker's estate.
All payments received shall be applied first to interest, if any, then
accrued, and then to principal.
4. Prepayments; Application. This Note may be prepaid in whole or
-----------------------
in part any time without penalty or premium.
5. Events of Default. There shall be an "Event of Default" under
-----------------
this Note if Maker shall fail to make a payment to Bank when due and such
default shall continue for thirty (30) days after Bank provides written notice
to Maker of such default.
6. Remedies. If an Event of Default shall occur, any indebtedness of
--------
Maker under this Note shall, at Bank's option and without notice, become
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by Maker; and Holder shall
have all of the rights, powers and remedies available under this Note, all of
which rights, powers and remedies may be exercised at any time by Bank and from
time to time after the occurrence of an Event of Default. All of the rights,
powers and remedies of Bank in connection with this Note are cumulative and not
exclusive and shall be in addition to any other rights, powers or remedies
provided by law or equity.
7. Costs of Collection. If this Note is not paid when due, whether
-------------------
at maturity or by acceleration, Maker promises to pay all costs incurred by the
Bank collecting the amounts due hereunder, including reasonable attorneys' fees.
8. Waiver. Presentment, demand, protest, notices of protest,
------
dishonor and non-payment of this Note and all notices of every kind are hereby
waived, except notices required by this Note. No single or partial exercise of
or forbearance from exercising any power hereunder or under any guaranty
pertaining to this Note shall preclude other or further exercises thereof or the
exercise of any other power.
9. Special Principal/Interest Reduction. Maker and Holder agree that
------------------------------------
if Maker ceases to be employed by Bank on or before November 1, 2001, under
circumstances where Maker is not, under the terms of the Benefits Agreement,
fully vested with respect to the Retirement Draw Benefit, there shall be at the
time of Maker's
-2-
<PAGE>
cessation of employment a one-time reduction of principal and interest (if any)
owned by Maker hereunder to reflect the unvested portion of the Retirement Draw
Benefit which will be foregone by Maker as a result of ceasing employment before
full vesting. By way of example only, if Maker ceases employment when he is
vested with respect to one-seventh of the Retirement Draw Benefit and unvested
with respect to six-sevenths, there shall be a one-time reduction of
six-sevenths of the principal of this Note; all other terms and conditions shall
remain in effect with respect to payment of the balance.
10. Form of Payment; Governing Law. Principal is payable in lawful
------------------------------
money of the United States to the Bank. This Note has been executed and
delivered by Maker in the State of California and shall be governed by and
constructed in accordance with the laws of the State of California.
11. Authority. The undersigned individuals signing this Note
---------
represent and warrant that the undersigned individuals are duly authorized and
empowered to execute and deliver this Note on behalf of Maker and Bank.
12. Notice. For purposes of giving notices under this Note, all
------
notices shall be in writing and shall be deemed to have been duly given on the
date of delivery, if personally delivered to the party to whom notice is to be
given, or on the second (2nd) day after mailing, if mailed to the party to whom
notice is to be given by first-class mail, postage prepaid and properly
addressed as follows:
TO MAKER: Steven C. Smith
____________________________
____________________________
TO BANK: Cupertino National Bank & Trust
20230 Stevens Creek Blvd.
Cupertino, CA 95014
Attn: Chairman of the Board
Any party named above may change its address for purpose of this
Section 12 by given written notice of the new address to the Maker, and Bank,
in the manner set forth above.
-3-
<PAGE>
13. Successors and Assigns. This Note shall be binding upon and inure
----------------------
to the benefit of Maker, Bank and their respective successors and permitted
assigns.
IN WITNESS WHEREOF, the undersigned have executed this Note as of the
date first appearing hereinabove.
MAKER:
/s/ Steven C. Smith
------------------------------------
Steven C. Smith
BANK
CUPERTINO NATIONAL BANK & TRUST
a national banking association
By: _________________________________
C. Donald Allen, Chairman & CEO
-4-
<PAGE>
EXHIBIT 10.29
APPENDIX J
FORM OF INDEMNIFICATION AGREEMENT
THIS AGREEMENT dated 199 , for reference purposes, is entered into
between Greater Bay Bancorp, a California corporation ("Bancorp"), and
("Indemnitee"), with reference to the following facts.
RECITALS
A. Bancorp believes that it is essential to its best interests to attract
and retain highly capable persons to serve as directors, and officers of
Bancorp.
B. Indemnitee is or has been selected to be a director and/or officer of
Bancorp.
C. Bancorp and Indemnitee recognize the increased risk of litigation and
other claims being asserted against directors of corporations.
D. In recognition of Indemnitee's need for substantial protection against
personal liability, in order to enhance Indemnitee's continued service to
Bancorp, and in order to induce Indemnitee to continue to provide services to
Bancorp as a director and/or officer, Bancorp wishes to provide in this
Agreement for the indemnification of and the advancement of expenses to
Indemnitee to the fullest extent permitted by law as set forth in this
Agreement, and to the extent applicable insurance is maintained, for the
coverage of Indemnitee under Bancorp's policies of directors' and officers'
liability insurance.
IN CONSIDERATION of the foregoing and of Indemnitee's continuing to provide
services to Bancorp directly or, at its request, with another enterprise, the
parties agree as follows:
Section 1. DEFINITIONS
(a) Board: the Board of Directors of Bancorp
(b) Change in Control: a state of affairs that shall be deemed to have
occurred if:
(i) any person is or becomes the "beneficial owner" (as that term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), directly or indirectly, of securities representing 20 percent
or more of the total voting power of Bancorp's then-outstanding voting
securities; or
(ii) during any period of two consecutive years, individuals who, at the
beginning of such period, constitute the Board together with any new director
whose election by the Board or nomination for election by Bancorp's shareholders
was approved by a vote of at least two thirds of the directors then in office
who either were directors at the beginning of the two-year period, or whose
election or nomination was previously so approved, cease for any reason to
constitute a majority of the Board, provided that, prior service as a director
of Mid-Peninsula Bancorp or Cupertino National Bancorp, California corporations,
shall be counted in the calculation of such two-year period; or
(iii) the shareholders of Bancorp approve a merger or consolidation of
Bancorp with any other corporation, other than a merger or consolidation that
would result in the voting securities of Bancorp outstanding immediately prior
to such merger or consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 80 percent of the total voting power represented by the voting
securities of Bancorp or such surviving entity outstanding immediately after
such merger or consolidation; or
(iv) the shareholders of Bancorp approve a plan of complete liquidation
of Bancorp, or an agreement for the sale or disposition by Bancorp (whether in
one transaction or a series of transactions) of all or substantially all of
Bancorp's assets.
J-1
<PAGE>
(c) Expenses:
(i) Any expense, liability, or loss, including attorneys' fees,
judgments, fines, ERISA excise taxes and penalties, amounts paid or to be
paid in settlement;
(ii) any interest, assessments, or other charges imposed on any of
the items in part (i) of this subsection (c); and
(iii) any federal, state, local, or foreign taxes imposed as a result
of the actual or deemed receipt of any payment sunder this Agreement paid
or incurred in connection with investigating, defending, being a witness
in, or participating in (including on appeal), or preparing for any of the
foregoing in, any Proceeding relating to any Indemnifiable Event.
(d) Indemnifiable Event: any event or occurrence that takes place either
before or after the execution of this Agreement and that is related to
(i) the fact that Indemnitee is or was a director or an officer of
Bancorp, or while a director or officer is or was serving at the request of
Bancorp as a director, officer, employee, trustee, agent, or fiduciary of
another foreign or domestic corporation, partnership, joint venture,
employee benefit plan, trust or other enterprise, or was a director,
officer, employee or agent of a foreign or domestic corporation that was a
predecessor corporation of Bancorp or another enterprise at the request of
such predecessor corporation, or
(ii) anything done or not done by Indemnitee in any such capacity,
whether or not the basis of the Proceeding is an alleged action in an
official capacity as a director, officer, employee, or agent, or in any
other capacity while serving as a director, officer, employee, or agent of
Bancorp, as described in this subsection(d).
(e) Independent Counsel: the person or body appointed in connection with
section 3.
(f) Person: "person" (as that term is used in sections 13(d) and 14(d) of
the Exchange Act), other than a trustee or other fiduciary holding securities
under an employee benefit plan of Bancorp acting in such capacity, or a
corporation owned directly or indirectly by the shareholders of Bancorp in
substantially the same proportions as their ownership of shares of Bancorp at
the date of this Agreement.
(g) Participant: a person who is a party to, or witness or other
participant (including on appeal) in, a Proceeding.
(h) Potential Change in Control: a state of affairs that shall be deemed
to exist if:
(i) Bancorp enters into an agreement or arrangement, the
consummation of which would result in the occurrence of a Change in
Control; or
(ii) any Person (including Bancorp) announces publicly an intention
to take or to consider taking actions that, if consummated, would
constitute a Change in Control; or
(iii) any Person who is or becomes the beneficial owner, directly or
indirectly, of securities of Bancorp representing 10 percent or more of the
combined voting power of Bancorp's then-outstanding voting securities ,
increases his or her beneficial ownership of such securities by 5 percent
or more over the percentage owned by such Person on the date of this
Agreement; or
(iv) the Board adopts a resolution to the effect that, for purposes
of this Agreement, a Potential Change in Control has occurred.
(i) Proceeding: any threatened, pending, or completed action, suit, or
proceeding, or any inquiry, hearing, or investigation, whether conducted by
Bancorp or any other party, that Indemnitee in good faith believes might lead to
the institution or any such action, suit, or proceeding, whether civil,
criminal, administrative, investigative,or other.
(j) Reviewing Party: the person or body appointed in accordance with
section 3.
J-2
<PAGE>
(k) Voting Securities: any securities of Bancorp that have the right to
vote generally in the election of directors.
Section 2. AGREEMENT TO INDEMNIFY
(a) General Agreement. In the meantime Indemnitee was, is, or becomes a
Participant in, or is threatened to be made a Participant in, a Proceeding by
reason of (or arising in part out of) an Indemnifiable Event, Bancorp shall
indemnify Indemnitee from and against any and all Expenses to the fullest extent
permitted by law, as the same exists or may hereafter be amended or interpreted
(but in the case of any such amendment or interpretation, only to the extent
that such amendment or interpretation permits Bancorp to provide broader
indemnification rights than were permitted prior to that amendment or
interpretation). The parties to this Agreement intend that this Agreement shall
provide for indemnification in excess of that expressly permitted by the
California Corporations Code, including, without limitation, any indemnification
provided by Bancorp's articles of incorporation, its bylaws, a vote of its
shareholders or disinterested directors, or applicable law. Without limiting the
generality of the foregoing, in a Proceeding initiated by a third party, or by
or in the right of Bancorp, the Indemnitee shall be entitled to indemnification
if the Indemnitee acted in a manner he or she did not believe to be contrary to
the best interests of Bancorp. In addition, in any proceeding initiated by or in
the right of Bancorp which is settled with respect to the Indemnitee, Bancorp
shall indemnify the Indemnitee against any and all Expenses if the Indemnitee
met the standards of conduct set forth in the sentence immediately above, and
court approval of such indemnification will not be required.
(b) Initiation of Proceeding. Notwithstanding anything in this Agreement
to the contrary, Indemnitee shall not be entitled to Indemnification under this
Agreement in connection with any Proceeding initiated by Indemnitee against
Bancorp or any director or officer of Bancorp unless:
(i) Bancorp has joined in or the Board has consented to the
initiation of such Proceeding;
(ii) the Proceeding is one to enforce indemnification rights under
section 5; or
(iii) the Proceeding is instituted after a Change in Control and
Independent Counsel has approved its initiation.
(c) Expense Advances. If so requested by Indemnitee, Bancorp shall,
within ten business days of such request, advance all Expenses to Indemnitee (an
"Expense Advance"). Notwithstanding the foregoing, to the extent that the
Reviewing Party determines that Indemnitee would not be permitted to be so
indemnified under applicable law, Bancorp shall be entitled to be reimbursed by
Indemnitee for all such amounts, and Indemnitee hereby agrees to reimburse
Bancorp promptly for the same. If Indemnitee has commenced legal proceedings in
a court of competent jurisdiction to secure a determination that Indemnitee
should be indemnified under applicable law, as provided in section 4, any
determination made by the Reviewing Party that Indemnitee would not be permitted
to be indemnified under applicable law shall not be binding, and Indemnitee
shall not be required to reimburse Bancorp for any Expense Advance until a final
judicial determination is made with respect thereto and all rights of appeal
therefrom have been exhausted or have lapsed. Indemnitee's obligations to
reimburse Bancorp for Expense Advances shall be unsecured and no interest shall
be charged thereon.
(d) Mandatory Indemnification. Notwithstanding any other provision of
this Agreement, to the extent that Indemnitee has been successful on the merits
in defense of any Proceeding relating in whole or in part to an Indemnifiable
Event or in defense of any issue or matter in such Proceeding, Indemnitee shall
be indemnified against all Expenses incurred in connection with that Proceeding.
(e) Partial Indemnification. The Indemnitee also shall be entitled to
indemnification by Bancorp for a portion of Expenses of Indemnitee is not
entitled to full indemnification under any applicable law.
(f) Prohibited Indemnification. No indemnification under this Agreement
shall be paid by Bancorp on account of any Proceeding (i) in which judgment is
rendered against Indemnitee for an accounting of profits made from the purchase
or sale by Indemnitee or securities of Bancorp under the
J-3
<PAGE>
provisions of section 16(b) of the Exchange Act, or similar provisions of any
federal, state or local laws, or (ii) if Bancorp is expressly prohibited from
making payments under this Agreement pursuant to any applicable federal or state
statutes, or any rules or regulations adopted by the FDIC or any other federal
or state governmental agency which as the power to regulate Bancorp's business.
Section 3. REVIEWING PARTY
Before any Change in Control, the Reviewing Party shall be any appropriate
person or body consisting of a member or members of the Board or any other
person or body appointed by the Board who is not a party to the Proceeding for
which Indemnitee is seeking indemnification; after a Change in Control, the
Reviewing Party shall be the Independent Counsel. On all matters arising after a
Change in Control (other than a Change in Control approved by a majority of the
directors of the Board who were directors immediately before such a Change in
Control) concerning the rights of Indemnitee to indemnity payments and Expense
Advances under this Agreement, any other agreement, applicable law, or Bancorp's
articles of incorporation or bylaws now or hereafter in effect relating to
indemnification for Indemnifiable Events, Bancorp shall seek legal advice only
from Independent Counsel selected by Indemnitee and approved by Bancorp (which
approval shall not be unreasonably withheld), and who has not otherwise
performed services for Bancorp or the Indemnitee (other than in connection with
indemnification matters) within the previous five years. The Independent Counsel
shall not include any person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in representing
either Bancorp or Indemnitee in an action to determine Indemnitee's rights under
this Agreement. Such counsel, among other things, shall render a written opinion
to Bancorp and Indemnitee on whether and to what extent the Indemnitee should be
permitted to be indemnified under applicable law. Bancorp agrees to pay the
reasonable fees of the Independent Counsel and to indemnify fully such counsel
against any and all Expenses, including attorneys' fees, claims, liabilities,
loss, and damages arising out of or relating to this Agreement or the engagement
of Independent Counsel under this Agreement.
Section 4. INDEMNIFICATION PROCESS AND APPEAL
(a) INDEMNIFICATION PAYMENT. Indemnitee shall receive indemnification of
Expenses from Bancorp in accordance with this Agreement as soon as practicable
after Indemnitee has made written demand on Bancorp for indemnification, unless
the Reviewing Party has given a written opinion to Bancorp that Indemnitee is
not entitled to indemnification under this Agreement or applicable law.
(b) SUIT TO ENFORCE RIGHTS. Regardless of any action by the Reviewing
Party, if Indemnitee has not received full indemnification within 30 days after
making a demand in accordance with section 4(a), Indemnitee shall have the right
to enforce its indemnification rights under this Agreement by commencing
litigation in any court in the State of California seeking an initial
determination by the court or challenging any determination by the Reviewing
Party or any aspect thereof. Bancorp hereby consents to service of process and
to appear in any such Proceeding. Any determination by the Reviewing Party not
challenged by the Indemnitee shall be binding on Bancorp and Indemnitee. The
remedy provided for in this section 4 shall be in addition to any other remedies
available to Indemnitee in law or equity.
(c) DEFENSE TO INDEMNIFICATION, BURDEN OF PROOF AND PRESUMPTIONS. It
shall be a defense to any action brought by Indemnitee against Bancorp to
enforce this Agreement (other than an action brought to enforce a claim for
Expenses incurred in defending a Proceeding in advance of its final disposition)
that it is not permissible, under this Agreement or applicable law, for Bancorp
to indemnify Indemnitee for the amount claimed. In connection with any such
action or any determination by the Reviewing Party or otherwise on whether
Indemnitee is entitled to be indemnified under this Agreement, the burden of
proving such a defense or determination shall be on Bancorp. Neither the
failure of the Reviewing Party or Bancorp (including its Board, independent
legal counsel, or its shareholders) to have made a determination before the
commencement of such action by Indemnitee that indemnification is proper under
the circumstances because the Indemnitee has met the standard of conduct set
forth in this Agreement or under applicable law, as the case may be, nor an
actual
J-4
<PAGE>
determination by the Reviewing Party or Bank (including its Board, independent
legal counsel, or its shareholders) that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
For purposes of this Agreement, the termination of any claim, action, suite, or
proceeding, by judgment, order settlement (whether with or without court
approval), conviction, or on a plea of nolo contendere, or its equivalent, shall
not create a presumption that Indemnitee did not meet any particular standard of
conduct or have any particular belief or that a court has determined that
indemnification is not permitted by applicable law.
Section 5. INDEMNIFICATION FOR EXPENSES INCURRED IN ENFORCING RIGHTS.
Bancorp shall indemnify Indemnitee against any and all Expenses incurred by
the Indemnitee in enforcing his or her rights under this Agreement. If
requested by Indemnitee, Bancorp shall, within ten business days of such
request, advance to Indemnitee such Expenses as are incurred by Indemnitee in
connection with any claim asserted against or action brought by Indemnitee for:
(a) Indemnification of Indemnitee by Bancorp under this Agreement, or
any other agreement, or under applicable law, or Bancorp's articles of
incorporation or bylaws now or hereafter in effect relating to
indemnification for Indemnifiable Events, and/or
(b) recovery under directors' and officers' liability insurance
policies maintained by Bancorp, for amounts paid in settlement if the
Independent Counsel has approved the settlement.
Bancorp shall not settle any Proceeding in any manner that would impose any
penalty or limitation on Indemnitee without Indemnitee's written consent.
Neither Bancorp nor the Indemnitee will unreasonably withhold its consent to any
proposed settlement. Bancorp shall not be liable to indemnify the Indemnitee
under this Agreement with regard to any judicial award if Bancorp was not given
a reasonable and timely opportunity, at its expense, to participate in the
defense of such action; however, Bancorp's liability under this Agreement shall
not be excused if participation in the Proceeding by Bancorp was barred by this
Agreement.
Section 6. ESTABLISHMENT OF TRUST
In the event of a Change in Control or a Potential Change in Control,
Bancorp shall, on written request by Indemnitee, create a trust for the benefit
of the Indemnitee ("the Trust") and from time to time on written request of
Indemnitee shall fund the Trust in an amount sufficient to satisfy any and all
Expenses reasonably anticipated at the time of each such request to be incurred
in connection with investigating, preparing for, participating in, and/or
defending any Proceeding relating to an Indemnifiable Event. The amount or
amounts to be deposited in the Trust under the foregoing funding obligation
shall be determined by the Reviewing Party. The terms of the Trust shall
provide that on a Change in Control:
(a) The Trust shall not be revoked or the principal invaded without
the written consent of the Indemnitee.
(b) The Trustee shall advance, within ten business days of a request
by Indemnitee, all Expenses to the Indemnitee (provided that the Indemnitee
hereby agrees to reimburse the Trust under the same circumstances for which
the Indemnitee would be required to reimburse Bancorp under section 2(c) of
this Agreement).
(c) The Trust shall continue to be funded by Bancorp in accordance
with the funding obligation set forth in this section 6.
(d) The Trustee shall promptly pay to the Indemnitee all amounts for
which the Indemnitee shall be entitled to indemnification under this
Agreement or otherwise.
(e) All unexpended funds in the Trust shall revert to Bancorp on a
final determination by the Reviewing Party or a court of competent
jurisdiction that the Indemnitee has been fully indemnified under the terms
of this Agreement.
J-5
<PAGE>
The Trustee shall be chosen by the Indemnitee subject to the approval of the
Reviewing Party. Nothing in this section 6 shall relieve Bancorp of any of its
obligations under this Agreement. All income earned on the assets held in the
Trust shall be reported as income by Bancorp for federal, state, local and
foreign tax purposes. Bancorp shall pay all costs of establishing and
maintaining the Trust and shall indemnify the Trustee against any and all
Expenses, including attorneys' fees, claims, liabilities, loss, and damages
arising out of or relating to this Agreement or the establishment and
maintenance of the Trust.
Section 7. NOTIFICATION AND DEFENSE OF CLAIM
Promptly after receipt by Indemnitee of notice of the commencement of any
Proceeding against Indemnitee for which Indemnitee will seek indemnification
under this Agreement, Indemnitee will notify Bancorp of the commencement
thereof; but the omission to so notify Bancorp will not relieve it from any
liability which it may have to Indemnitee otherwise than under this Agreement.
With respect to any Proceeding as to which Indemnitee so notifies Bancorp:
(a) Bancorp will be entitled to participate in the Proceeding at its
own expense.
(b) Except as otherwise provided below, to the extent that it may
wish, Bancorp jointly with any other indemnifying party similarly notified,
will be entitled, provided it is advancing to Indemnitee all of the costs
and expenses required under this Agreement, to assume the defense of the
Proceeding with counsel satisfactory to Indemnitee. After notice from
Bancorp to Indemnitee of its election to assume the defense of the
Proceeding, Bancorp will not be liable to Indemnitee under this Agreement
for any legal or other expenses subsequently incurred by Indemnitee in
connection such defense other than reasonable costs of investigation or as
otherwise provided below. Indemnitee shall have the right to employ his or
her counsel in such Proceeding, but the fees and expenses of such counsel
incurred after notice from Bancorp of its assumption of such defense shall
be at the expense of Indemnitee unless (i) the employment of counsel by
Indemnitee has been authorized by Bancorp, (ii) Indemnitee shall have
reasonably concluded that there may be a conflict of interest between
Bancorp and Indemnitee in the conduct of the defense of the proceeding or
(iii) Bancorp shall not, in fact, have employed counsel to assume the
defense of the Proceeding, in each of which cases the fees and expenses of
counsel shall be at the expense of Bancorp. Bancorp shall not be entitled
to assume the defense of any Proceeding brought by or on behalf of Bancorp
or as to which Indemnitee shall have made the conclusion provided for in
(ii) above.
(c) Bancorp shall not be liable to indemnify Indemnitee under this
Agreement for any amounts paid in settlement of any Proceeding without
Bancorp's written consent. Bancorp shall not settle any action or claim in
any manner which would impose any obligation or limitation on Indemnitee
without Indemnitee's written consent. Neither Bancorp nor Indemnitee will
unreasonably withhold its/his/her consent to any proposed settlement.
Section 8. NONEXCLUSIVITY
The rights of Indemnitee under this Agreement shall be in addition to any
other rights Indemnitee may have under Bancorp's articles of incorporation,
bylaws, applicable law, or otherwise. To the extent that a change in applicable
law (whether by statute or judicial decision) permits greater indemnification by
agreement than would be afforded currently under Bancorp's articles of
incorporation, bylaws, applicable law, or this Agreement, it is the intent of
the parties that Indemnitee enjoy by this Agreement the greater benefits
afforded by such change.
Section 9. LIABILITY INSURANCE
To the extent Bancorp maintains an insurance policy or policies providing
directors' and officers' liability insurance, Indemnitee shall be covered by
such policy or policies, in accordance with its or their terms, to the maximum
extent of the coverage available for any Bank director or officer.
J-6
<PAGE>
Section 10. PERIOD OF LIMITATIONS
No legal action shall be brought, and no cause of action shall be asserted,
by or on behalf of Bancorp or any affiliate of Bancorp against Indemnitee,
Indemnitee's spouse, heirs, executors, or personal or legal representatives,
after the expiration of two years from the date of accrual of such cause of
action, or such longer period as may be required by state law under the
circumstances. Any claim or cause of action of Bancorp or its affiliate shall
be extinguished and deemed released unless asserted by the timely filing of a
legal action within such period; provided, that if any shorter period of
limitations is otherwise applicable to any such cause of action, this shorter
period shall govern.
Section 11. AMENDMENT OF THIS AGREEMENT
No supplement, modification, or amendment of this Agreement shall be
binding unless executed in writing by both of the parties to it. No waiver of
any of the provisions of this Agreement shall operate was a waiver of any other
provisions of this Agreement (whether or not similar), nor shall such waiver
constitute a continuing waiver. Except as specifically provided in this
Agreement, no failure to exercise or delay in exercising any right or remedy
under it shall constitute a waiver of the right or remedy.
Section 12. SUBROGATION
In the event of payment under this Agreement, Bancorp shall be subordinated
to the extent that payment to all of the rights or recovery of Indemnitee, who
shall execute all papers required and shall do everything that may be necessary
to secure such rights, including the execution of any documents necessary to
enable Bancorp effectively to bring suit to enforce such rights.
Section 13. NO DUPLICATION OF PAYMENTS
Bancorp shall not be liable under this Agreement to make any payment in
connection with any claim made against Indemnitee to the extent Indemnitee has
otherwise received payment (under any insurance policy, bylaw, or otherwise) of
the amounts otherwise indemnifiable under this Agreement.
Section 14. BINDING EFFECT
This Agreement shall be binding on and inure to the benefit of and be
enforceable by the parties to it and their respective successors (including any
direct or indirect successor by purchase, merger, consolidation, or otherwise to
all or substantially all of Bancorp's business or assets or both), assigns,
spouses, heirs, and personal and legal representatives. Bancorp shall require
and cause any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all, substantially all, or a substantial part,
of Bancorp's business or assets or both, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that Bancorp would be
required to perform if no such succession had taken place. The indemnification
provided under this Agreement shall continue for Indemnitee for any action taken
or not taken while serving in an indemnified capacity pertaining to an
Indemnifiable Event even though Indemnitee may have ceased to serve in such
capacity at the time of any proceeding.
Section 15. SEVERABILITY
If any portion of this Agreement shall be held by a court of competent
jurisdiction to be invalid, void, or otherwise unenforceable, the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of this Agreement containing any
provision held to be invalid, void, or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, void, or unenforceable.
J-7
<PAGE>
SECTION 16. GOVERNING LAW
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of California applicable to contracts made
and to be performed in such State without giving effect to the principles of
conflicts of laws.
SECTION 17. NOTICES
All notices, demands, and other communications required or permitted under
this Agreement shall be made in writing and shall be deemed to have been duly
given if delivered by hand against receipt, or mailed, first class postage
prepaid, certified or registered mail; return receipt requested and addressed to
Bancorp at:
420 Cowper Street
Palo Alto, California 94301-1504
Attn: Chairman of the Board
and to Indemnitee at:
- ---------------------------------
, California 9
- --------------- ----
Notice of change of address shall be effective only when given in accordance
with this section. All notices complying with this section shall be deemed to
have been received on the date of delivery or on the third business day after
mailing.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day specified above.
GREATER BAY BANCORP INDEMNITEE
By:
------------------------------- --------------------------------
Its:
<PAGE>
EXHIBIT 12.1
Greater Bay Bancorp and Subsidiaries
Statement Regarding Computation of Ratios
<TABLE>
<CAPTION>
Information for Ratio Calculation 1996 1995 1994 1993 1992
- ---------------------------------------------- ---------- ---------- ---------- --------- ---------
<S> <C>
Interest on deposits $15,732 $13,048 $ 8,130 $ 6,487 $ 7,504
Interest on borrowings A 481 844 382 10 2
--------- ---------- ---------- --------- ---------
Total interest expense B $16,213 $13,892 $ 8,512 $ 6,497 $ 7,506
Pretax income before nonrecurring costs 9,221 7,140 5,138 3,916 4,970
Nonrecurring costs 2,791 2,135 608 0 0
--------- ---------- ---------- --------- ---------
Pretax income $ 6,430 $ 5,005 $ 4,530 $ 3,916 $ 4,970
========= ========== ========== ========= =========
Pretax income + total interest expense C $22,643 $18,897 $13,042 $10,413 $12,476
========= ========== ========== ========= =========
Pretax income + total interest expense
less interest on deposits D $ 6,911 $ 5,849 $ 4,912 $ 3,926 $ 4,972
========= ========== ========= ========= =========
<CAPTION>
Ratios 1996 1995 1994 1993 1992
- ---------------------------------------------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges:
- ----------------------------------
Excluding interest on deposit (D/A) 14.37 x 6.93 x 12.86 x 392.60 x 2,486.00 x
Including interest on deposits (C/B) 1.40 x 1.36 x 1.53 x 1.60 x 1.66 x
</TABLE>
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Greater Bay Bancorp, a California Corporation
Cupertino National Bank & Trust,
a national banking association
Mid-Peninsula Bank, a California
state chartered bank
GBB Capital I, a Delaware
statuatory business trust
<PAGE>
[LETTERHEAD OF COOPERS & LYBRAND]
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of our
report dated February 27, 1997, on our audits of the consolidated financial
statements of Greater Bay Bancorp and Subsidiaries. We also consent to the
reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
San Francisco, California
March 3, 1997
<PAGE>
EXHIBIT 25.1
Registration No.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) ___
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
GREATER BAY BANCORP
(Exact name of obligor as specified in its charter)
California 77-0387041
(State of incorporation) (I.R.S. employer identification no.)
2860 West Bayshore Road
Palo Alto, California 94303
(Address of principal executive offices) (Zip Code)
Junior Subordinated Deferrable Interest Debentures of
Greater Bay Bancorp
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. GENERAL INFORMATION.
- -------- --------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee and
upon information furnished by the obligor, the obligor is not an affiliate
of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to
exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 21st day
of February, 1997.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ Donald G. MacKelcan By:/s/ Emmett R. Harmon
----------------------------- -----------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE>
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the General
Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware
Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which
company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed in the
Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act
of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend its Charter or
Act of Incorporation so that the same as so altered and amended shall in its
entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is WILMINGTON TRUST COMPANY whose address
is Rodney Square North, in said City. In addition to such principal
office, the said corporation maintains and operates branch offices in the
City of Newark, New Castle County, Delaware, the Town of Newport, New
Castle County, Delaware, at Claymont, New Castle County, Delaware, at
Greenville, New Castle County Delaware, and at Milford Cross Roads, New
Castle County, Delaware, and shall be empowered to open, maintain and
operate branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of Wilmington,
New Castle County, Delaware, and such other branch offices or places of
business as may be authorized from time to time by the agency or agencies
of the government of the State of Delaware empowered to confer such
authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold, purchase, convey, mortgage or otherwise deal in
real and personal estate and property, and to appoint such officers
and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with the
Constitution or laws of the United States or of this State, to
discount bills, notes or other evidences of debt, to receive deposits
of money, or securities for money, to buy gold and silver bullion and
foreign coins, to buy and sell bills of exchange, and generally to
use, exercise and enjoy all the powers, rights, privileges and
franchises incident to a corporation which are proper or necessary
for the transaction of the business of the Corporation hereby
created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort
and kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation,
association, state or municipality, and may receive and manage any
sinking fund therefor on such terms as may be agreed upon between the
two parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
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(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit,
order, or decree to be entered in any court of record within the
State of Delaware or elsewhere, or which may now or hereafter be
required by any law, judge, officer or court in the State of Delaware
or elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity in the receiving, holding, managing, and disposing of any
and all estates and property, real, personal or mixed, and to be
appointed as such trustee, trustee in bankruptcy, receiver, assignee,
assignee in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority, in the
State of Delaware or elsewhere; and whenever this Corporation is so
appointed by any person, corporation, court, officer or authority
such trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian, bailee, or in any
other trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as security for
the performance of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for
the assumption of any responsibility the said Corporation may be
entitled to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any private,
public or municipal corporation within and without the State of
Delaware, or of the Government of the United States, or of any state,
territory, colony, or possession thereof, or of any foreign
government or country; to receive, collect, receipt for, and dispose
of interest, dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other property
held and owned by it, and to exercise in respect of all such bonds,
mortgages, debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other property,
any and all the rights, powers and privileges of individual
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owners thereof, including the right to vote thereon; to invest and
deal in and with any of the moneys of the Corporation upon such
securities and in such manner as it may think fit and proper, and
from time to time to vary or realize such investments; to issue bonds
and secure the same by pledges or deeds of trust or mortgages of or
upon the whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when the Board
of Directors shall determine, and in the promotion of its said
corporate business of investment and to the extent authorized by law,
to lease, purchase, hold, sell, assign, transfer, pledge, mortgage
and convey real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that
the said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in
any manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount,
execute and issue promissory notes, drafts, bills of exchange,
warrants, bonds, debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any
foreign country or place.
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(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or
restricted by reference to or inference from the terms of any other
clause of this or any other paragraph in this charter, but that the
objects, purposes and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes and
powers.
FOURTH: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including,
but without limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of
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stock and whether such dividends shall be cumulative or non-
cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject
to redemption, and the redemption price or prices and the time or
times at which, and the terms and conditions on which, Preferred
Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section
(b) of this Article FOURTH), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article FOURTH), and subject further to any conditions which may
be fixed in accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time by
the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article FOURTH), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to
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receive all of the remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common
Stock held by them respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article FOURTH, each holder
of Common Stock shall have one vote in respect of each share of
Common Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any such
unissued stock, additional authorized issue of shares of any class or
series of stock or securities convertible into or exchangeable for stock,
or carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons, firms,
corporations or associations, whether such holders or others, and upon
such terms as may be deemed advisable by the Board of Directors in the
exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section (b) of this
Article FOURTH and the consent, by class or series vote or otherwise, of
the holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the
powers, preferences and rights of such other series shall be fixed by the
Board of Directors as senior to, or on a parity with, the powers,
preferences and rights of such outstanding series, or any of them;
provided, however, that the Board of Directors may provide in the
resolution or resolutions as to any series of Preferred Stock adopted
pursuant to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be therein
fixed) of the outstanding shares of such series voting thereon shall be
required for the issuance of any or all other series of Preferred Stock.
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(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board
of Directors of the Corporation shall determine and on such terms and for
such consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased from
time to time by the affirmative vote of the holders of a majority of the
stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of directors shall not be
reduced so as to shorten the term of any director at the time in office,
and provided further, that the number of directors constituting the whole
Board shall be twenty-four until otherwise fixed by a majority of the
whole Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the
next succeeding annual meeting, directors of the second class shall be
elected to hold office for a term expiring at the second succeeding annual
meeting and directors of the third class shall be elected to hold office
for a term expiring at the third succeeding annual meeting. Any vacancies
in the Board of Directors for any reason, and any newly created
directorships resulting from any increase in the directors, may be filled
by the Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen shall
hold office until the next annual election of directors. At such
election, the stockholders shall elect a successor to such director to
hold office until the next election of the class for which such director
shall have been chosen and until his successor shall be elected and
qualified. No decrease in the number of directors shall shorten the term
of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the
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Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the outstanding
shares of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class) cast
at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered
or mailed, as prescribed, to the Secretary of the Corporation not later
than the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on
behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such
nominee and (iii) the number of shares of stock of the Corporation which
are beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
SIXTH: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find
necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized
under the Act entitled "An Act Providing a General Corporation Law",
approved March 10, 1899, as from time to time amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
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NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may be
adopted only by the affirmative vote of the holders of two-thirds or more
of the outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors (considered for this purpose
as one class).
FOURTEENTH: - Meetings of the Directors may be held outside of the State
of Delaware at such places as may be from time to time designated by the
Board, and the Directors may keep the books of the Company outside of the
State of Delaware at such places as may be from time to time designated by
them.
FIFTEENTH: - (a) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this
Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or
not itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
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(C) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of related transactions) of any
securities of the Corporation or any Subsidiary to any Interested
Stockholder or any Affiliate of any Interested Stockholder in
exchange for cash, securities or other property (or a combination
thereof) having an aggregate fair market value of $1,000,000 or more,
or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly
or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible securities
of the Corporation or any Subsidiary which is directly or indirectly
owned by any Interested Stockholder, or any Affiliate of any
Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
FIFTEENTH shall mean any transaction which is referred to any one or
more of clauses (A) through (E) of paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH shall
not be applicable to any particular business combination and such
business combination shall require only such affirmative vote as is
required by law and any other provisions of the Charter or Act of
Incorporation of By-Laws if such business combination has been
approved by a majority of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation of any
such transaction:
(A) is the beneficial owner, directly or indirectly, of more than
10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course
of a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately
or only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,00,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be construed
to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or
SIXTEENTH of this Charter or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10 days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its
<PAGE>
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more than nine
members who shall be selected by the Board of Directors from its own members and
who
2
<PAGE>
shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the Board of
Directors when it is not in session to transact all business for and in behalf
of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The
majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be
held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be kept
and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity to
prevent the conduct and management of the affairs and business of the Company by
its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
3
<PAGE>
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than thirteen
members who shall be selected by the Board of Directors, a majority of whom
shall be members of the Board of Directors and who shall hold office during the
pleasure of the Board.
(B) The Trust Committee shall have general supervision over the Trust
Department and the investment of trust funds, in all matters, however, being
subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be kept and
promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint Committees
and/or designate officers or employees of the Company to whom supervision over
the investment of trust funds may be delegated when the Trust Committee is not
in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who shall
be selected by the Board of Directors from its own members, none of whom shall
be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over the Audit
Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the majority
of its members shall deem it to be proper for the transaction of its business,
and a majority of its Committee shall constitute a quorum.
4
<PAGE>
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more than
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any time
by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by the
Board of Directors as an associate director, to serve during the pleasure of the
Board.
(B) An associate director shall be entitled to attend all directors
meetings and participate in the discussion of all matters brought to the Board,
with the exception that he would have no right to vote. An associate director
will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any Committee
created under Article III of the By-Laws of this Company, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absence or
disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such
5
<PAGE>
powers and perform such duties as may from time to time be agreed upon between
himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
-------------------------------
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute or assigned
to him by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however denominated
by the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 6. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
6
<PAGE>
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of
stock shall be issued only upon giving such security as may be satisfactory to
the Board of Directors or the Executive
7
<PAGE>
Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and
8
<PAGE>
validity as although expressly authorized by the Board of Directors and/or the
Executive Committee.
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the Company, shall be
paid such reasonable honoraria or fees for services as members of committees as
the Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services as
the Board of Directors may from time to time determine and shall be paid for
such special services so performed reasonable compensation as may be determined
by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in defending any
proceeding in advance of its final disposition, provided, however, that the
-------- -------
payment of expenses incurred by a Director officer in his capacity as a Director
or officer in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the Director or officer to repay all
amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses, under this
Article X is not paid in full within ninety days after a written claim therefor
has been
9
<PAGE>
received by the Corporation the claimant may file suit to recover the unpaid
amount of such claim and, if successful in whole or in part, shall be entitled
to be paid the expense of prosecuting such claim. In any such action the
Corporation shall have the burden of proving that the claimant was not entitled
to the requested indemnification of payment of expenses under applicable law.
(D) The rights conferred on any person by this Article X shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Charter or Act of Incorporation, these By-
Laws, agreement, vote of stockholders or disinterested Directors or otherwise.
(E) Any repeal or modification of the foregoing provisions of this
Article X shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
10
<PAGE>
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: February 21, 1997 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings
banks with state publication requirements. It has not been approved by
any state banking authorities. Refer to your appropriate state banking
authorities for your state publication requirements.
REPORT OF CONDITION
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- --------------------------------------------- --------------
Name of Bank City
in the State of DELAWARE, at the close of business on December 31, 1996.
--------
<TABLE>
<CAPTION>
Thousands of dollars
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins................ 213,895
Interest-bearing balances.......................................... 0
Held-to-maturity securities.............................................. 465,818
Available-for-sale securities............................................ 752,297
Federal funds sold....................................................... 95,000
Securities purchased under agreements to resell.......................... 39,190
Loans and lease financing receivables:
Loans and leases, net of unearned income....... 3,634,003
LESS: Allowance for loan and lease losses..... 51,847
LESS: Allocated transfer risk reserve......... 0
Loans and leases, net of unearned income, allowance, and reserve... 3,582,156
Assets held in trading accounts.......................................... 0
Premises and fixed assets (including capitalized leases)................. 89,129
Other real estate owned.................................................. 3,520
Investments in unconsolidated subsidiaries and associated companies...... .52
Customers' liability to this bank on acceptances outstanding............. 0
Intangible assets........................................................ 4,593
Other assets............................................................. 114,300
Total assets............................................................. 5,359,950
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices...................................................... 3,749,697
Noninterest-bearing............... 852,790
Interest-bearing.................. 2,896,907
Federal funds purchased.................................................. 77,825
Securities sold under agreements to repurchase........................... 192,295
Demand notes issued to the U.S. Treasury................................. 53,526
Trading liabilities...................................................... 0
Other borrowed money:.................................................... ///////
With original maturity of one year or less......................... 714,000
With original maturity of more than one year....................... 43,000
Mortgage indebtedness and obligations under capitalized leases........... 0
Bank's liability on acceptances executed and outstanding................. 0
Subordinated notes and debentures........................................ 0
Other liabilities........................................................ 98,756
Total liabilities........................................................ 4,929,099
Limited-life preferred stock and related surplus......................... 0
</TABLE>
<TABLE>
EQUITY CAPITAL
<S> <C>
Perpetual preferred stock and related surplus............................ 0
Common Stock............................................................. 500
Surplus.................................................................. 62,118
Undivided profits and capital reserves................................... 367,371
Net unrealized holding gains (losses) on available-for-sale securities... 862
Total equity capital..................................................... 430,851
Total liabilities, limited-life preferred stock, and equity capital...... 5,359,950
</TABLE>
<PAGE>
EXHIBIT 25.2
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) ___
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
GREATER BAY BANCORP
GBB CAPITAL I
(Exact name of obligor as specified in its charter)
California 77-0387041
Delaware Applied For
(State of incorporation) (I.R.S. employer identification no.)
2860 West Bayshore Road
Palo Alto, California 94303
(Address of principal executive offices) (Zip Code)
___% Cumulative Trust Preferred Securities of
GBB Capital I
(Title of the indenture securities)
================================================================================
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee and
upon information furnished by the obligor, the obligor is not an affiliate
of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to
exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 21st day
of February, 1997.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ Donald G. MacKelcan By:/s/ Emmett R. Harmon
----------------------------- -----------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE>
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the General
Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware
Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which
company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed in the
Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act
of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend its Charter or
Act of Incorporation so that the same as so altered and amended shall in its
entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is WILMINGTON TRUST COMPANY whose address
is Rodney Square North, in said City. In addition to such principal
office, the said corporation maintains and operates branch offices in the
City of Newark, New Castle County, Delaware, the Town of Newport, New
Castle County, Delaware, at Claymont, New Castle County, Delaware, at
Greenville, New Castle County Delaware, and at Milford Cross Roads, New
Castle County, Delaware, and shall be empowered to open, maintain and
operate branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of Wilmington,
New Castle County, Delaware, and such other branch offices or places of
business as may be authorized from time to time by the agency or agencies
of the government of the State of Delaware empowered to confer such
authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold, purchase, convey, mortgage or otherwise deal in
real and personal estate and property, and to appoint such officers
and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with the
Constitution or laws of the United States or of this State, to
discount bills, notes or other evidences of debt, to receive deposits
of money, or securities for money, to buy gold and silver bullion and
foreign coins, to buy and sell bills of exchange, and generally to
use, exercise and enjoy all the powers, rights, privileges and
franchises incident to a corporation which are proper or necessary
for the transaction of the business of the Corporation hereby
created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort
and kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation,
association, state or municipality, and may receive and manage any
sinking fund therefor on such terms as may be agreed upon between the
two parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit,
order, or decree to be entered in any court of record within the
State of Delaware or elsewhere, or which may now or hereafter be
required by any law, judge, officer or court in the State of Delaware
or elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity in the receiving, holding, managing, and disposing of any
and all estates and property, real, personal or mixed, and to be
appointed as such trustee, trustee in bankruptcy, receiver, assignee,
assignee in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority, in the
State of Delaware or elsewhere; and whenever this Corporation is so
appointed by any person, corporation, court, officer or authority
such trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian, bailee, or in any
other trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as security for
the performance of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for
the assumption of any responsibility the said Corporation may be
entitled to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any private,
public or municipal corporation within and without the State of
Delaware, or of the Government of the United States, or of any state,
territory, colony, or possession thereof, or of any foreign
government or country; to receive, collect, receipt for, and dispose
of interest, dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other property
held and owned by it, and to exercise in respect of all such bonds,
mortgages, debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other property,
any and all the rights, powers and privileges of individual
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owners thereof, including the right to vote thereon; to invest and
deal in and with any of the moneys of the Corporation upon such
securities and in such manner as it may think fit and proper, and
from time to time to vary or realize such investments; to issue bonds
and secure the same by pledges or deeds of trust or mortgages of or
upon the whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when the Board
of Directors shall determine, and in the promotion of its said
corporate business of investment and to the extent authorized by law,
to lease, purchase, hold, sell, assign, transfer, pledge, mortgage
and convey real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that
the said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in
any manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount,
execute and issue promissory notes, drafts, bills of exchange,
warrants, bonds, debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any
foreign country or place.
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(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or
restricted by reference to or inference from the terms of any other
clause of this or any other paragraph in this charter, but that the
objects, purposes and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes and
powers.
FOURTH: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and
the preferences and relative, participating, optional and other special
rights of each such series, and the qualifications, limitations or
restrictions thereof, if any, may differ from those of any and all other
series at any time outstanding; and, subject to the provisions of
subparagraph 1 of Paragraph (c) of this Article FOURTH, the Board of
Directors of the Corporation is hereby expressly granted authority to fix
by resolution or resolutions adopted prior to the issuance of any shares
of a particular series of Preferred Stock, the voting powers and the
designations, preferences and relative, optional and other special rights,
and the qualifications, limitations and restrictions of such series,
including, but without limiting the generality of the foregoing, the
following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of
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stock and whether such dividends shall be cumulative or non-
cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject
to redemption, and the redemption price or prices and the time or
times at which, and the terms and conditions on which, Preferred
Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section
(b) of this Article FOURTH), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article FOURTH), and subject further to any conditions which may
be fixed in accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time by
the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article FOURTH), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to
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receive all of the remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common
Stock held by them respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article FOURTH, each holder
of Common Stock shall have one vote in respect of each share of
Common Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any such
unissued stock, additional authorized issue of shares of any class or
series of stock or securities convertible into or exchangeable for stock,
or carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons, firms,
corporations or associations, whether such holders or others, and upon
such terms as may be deemed advisable by the Board of Directors in the
exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section (b) of this
Article FOURTH and the consent, by class or series vote or otherwise, of
the holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the
powers, preferences and rights of such other series shall be fixed by the
Board of Directors as senior to, or on a parity with, the powers,
preferences and rights of such outstanding series, or any of them;
provided, however, that the Board of Directors may provide in the
resolution or resolutions as to any series of Preferred Stock adopted
pursuant to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be therein
fixed) of the outstanding shares of such series voting thereon shall be
required for the issuance of any or all other series of Preferred Stock.
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(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board
of Directors of the Corporation shall determine and on such terms and for
such consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased from
time to time by the affirmative vote of the holders of a majority of the
stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of directors shall not be
reduced so as to shorten the term of any director at the time in office,
and provided further, that the number of directors constituting the whole
Board shall be twenty-four until otherwise fixed by a majority of the
whole Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the
next succeeding annual meeting, directors of the second class shall be
elected to hold office for a term expiring at the second succeeding annual
meeting and directors of the third class shall be elected to hold office
for a term expiring at the third succeeding annual meeting. Any vacancies
in the Board of Directors for any reason, and any newly created
directorships resulting from any increase in the directors, may be filled
by the Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen shall
hold office until the next annual election of directors. At such
election, the stockholders shall elect a successor to such director to
hold office until the next election of the class for which such director
shall have been chosen and until his successor shall be elected and
qualified. No decrease in the number of directors shall shorten the term
of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the
8
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Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the outstanding
shares of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class) cast
at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered
or mailed, as prescribed, to the Secretary of the Corporation not later
than the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on
behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such
nominee and (iii) the number of shares of stock of the Corporation which
are beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
SIXTH: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find
necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized
under the Act entitled "An Act Providing a General Corporation Law",
approved March 10, 1899, as from time to time amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
9
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NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may be
adopted only by the affirmative vote of the holders of two-thirds or more
of the outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors (considered for this purpose
as one class).
FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from
time to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this
Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or
not itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
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(C) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of related transactions) of any
securities of the Corporation or any Subsidiary to any Interested
Stockholder or any Affiliate of any Interested Stockholder in
exchange for cash, securities or other property (or a combination
thereof) having an aggregate fair market value of $1,000,000 or more,
or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly
or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible securities
of the Corporation or any Subsidiary which is directly or indirectly
owned by any Interested Stockholder, or any Affiliate of any
Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
FIFTEENTH shall mean any transaction which is referred to any one
or more of clauses (A) through (E) of paragraph 1 of the section
(a).
(b) The provisions of section (a) of this Article FIFTEENTH shall
not be applicable to any particular business combination and such
business combination shall require only such affirmative vote as is
required by law and any other provisions of the Charter or Act of
Incorporation of By-Laws if such business combination has been
approved by a majority of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation of any
such transaction:
(A) is the beneficial owner, directly or indirectly, of more than
10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course
of a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately
or only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,00,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be construed
to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or
SIXTEENTH of this Charter or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10 days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its
<PAGE>
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine members who shall be selected by the Board of Directors from its own
members and who
2
<PAGE>
shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the Board of
Directors when it is not in session to transact all business for and in behalf
of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The
majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be
held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be kept
and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity to
prevent the conduct and management of the affairs and business of the Company by
its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
3
<PAGE>
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than thirteen
members who shall be selected by the Board of Directors, a majority of whom
shall be members of the Board of Directors and who shall hold office during the
pleasure of the Board.
(B) The Trust Committee shall have general supervision over the Trust
Department and the investment of trust funds, in all matters, however, being
subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be kept and
promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint Committees
and/or designate officers or employees of the Company to whom supervision over
the investment of trust funds may be delegated when the Trust Committee is not
in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who shall
be selected by the Board of Directors from its own members, none of whom shall
be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over the Audit
Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the majority
of its members shall deem it to be proper for the transaction of its business,
and a majority of its Committee shall constitute a quorum.
4
<PAGE>
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more than
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any time
by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by the
Board of Directors as an associate director, to serve during the pleasure of the
Board.
(B) An associate director shall be entitled to attend all directors
meetings and participate in the discussion of all matters brought to the Board,
with the exception that he would have no right to vote. An associate director
will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any Committee
created under Article III of the By-Laws of this Company, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absence or
disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such
5
<PAGE>
powers and perform such duties as may from time to time be agreed upon between
himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
-------------------------------
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute or assigned
to him by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however denominated
by the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 6. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
6
<PAGE>
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of
stock shall be issued only upon giving such security as may be satisfactory to
the Board of Directors or the Executive
7
<PAGE>
Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and
8
<PAGE>
validity as although expressly authorized by the Board of Directors and/or the
Executive Committee.
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the Company, shall be
paid such reasonable honoraria or fees for services as members of committees as
the Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services as
the Board of Directors may from time to time determine and shall be paid for
such special services so performed reasonable compensation as may be determined
by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in defending any
proceeding in advance of its final disposition, provided, however, that the
-------- -------
payment of expenses incurred by a Director officer in his capacity as a Director
or officer in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the Director or officer to repay all
amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses, under this
Article X is not paid in full within ninety days after a written claim therefor
has been
9
<PAGE>
received by the Corporation the claimant may file suit to recover the unpaid
amount of such claim and, if successful in whole or in part, shall be entitled
to be paid the expense of prosecuting such claim. In any such action the
Corporation shall have the burden of proving that the claimant was not entitled
to the requested indemnification of payment of expenses under applicable law.
(D) The rights conferred on any person by this Article X shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Charter or Act of Incorporation, these By-
Laws, agreement, vote of stockholders or disinterested Directors or otherwise.
(E) Any repeal or modification of the foregoing provisions of this
Article X shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
10
<PAGE>
EXHIBIT C
SECTION 321(B) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: February 21, 1997 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- --------------------------------------------- ----------------------
Name of Bank City
in the State of DELAWARE , at the close of business on December 31, 1996.
------------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
<S> <C>
Noninterest-bearing balances and currency and coins................ 213,895
Interest-bearing balances.......................................... 0
Held-to-maturity securities.............................................. 465,818
Available-for-sale securities............................................ 752,297
Federal funds sold....................................................... 95,000
Securities purchased under agreements to resell.......................... 39,190
Loans and lease financing receivables:
Loans and leases, net of unearned income......... 3,634,003
LESS: Allowance for loan and lease losses....... 51,847
LESS: Allocated transfer risk reserve........... 0
Loans and leases, net of unearned income, allowance, and reserve... 3,582,156
Assets held in trading accounts.......................................... 0
Premises and fixed assets (including capitalized leases)................. 89,129
Other real estate owned.................................................. 3,520
Investments in unconsolidated subsidiaries and associated companies...... 52
Customers' liability to this bank on acceptances outstanding............. 0
Intangible assets........................................................ 4,593
Other assets............................................................. 114,300
Total assets............................................................. 5,359,950
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices...................................................... 3,749,697
Noninterest-bearing................................................ 852,790
Interest-bearing................................................... 2,896,907
Federal funds purchased.................................................. 77,825
Securities sold under agreements to repurchase........................... 192,295
Demand notes issued to the U.S. Treasury................................. 53,526
Trading liabilities...................................................... 0
Other borrowed money:.................................................... ///////
With original maturity of one year or less......................... 714,000
With original maturity of more than one year....................... 43,000
Mortgage indebtedness and obligations under capitalized leases........... 0
Bank's liability on acceptances executed and outstanding................. 0
Subordinated notes and debentures........................................ 0
Other liabilities........................................................ 98,756
Total liabilities........................................................ 4,929,099
Limited-life preferred stock and related surplus......................... 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus............................ 0
Common Stock............................................................. 500
Surplus.................................................................. 62,118
Undivided profits and capital reserves................................... 367,371
Net unrealized holding gains (losses) on available-for-sale securities... 862
Total equity capital..................................................... 430,851
Total liabilities, limited-life preferred stock, and equity capital...... 5,359,950
</TABLE>
2
<PAGE>
EXHIBIT 25.3
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) ___
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
GREATER BAY BANCORP
(Exact name of obligor as specified in its charter)
California 77-0387041
(State of incorporation) (I.R.S. employer identification no.)
2860 West Bayshore Road
Palo Alto, California 94303
(Address of principal executive offices) (Zip Code)
Greater Bay Bancorp Guarantee With Respect to
the ___% Cumulative Trust Preferred Securities
(Title of the indenture securities)
================================================================================
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee and
upon information furnished by the obligor, the obligor is not an affiliate
of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to
exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 21st day
of February, 1997.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ Donald G. MacKelcan By:/s/ Emmett R. Harmon
----------------------------- -----------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE>
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the General
Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware
Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which
company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed in the
Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act
of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend its Charter or
Act of Incorporation so that the same as so altered and amended shall in its
entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is WILMINGTON TRUST COMPANY whose address
is Rodney Square North, in said City. In addition to such principal
office, the said corporation maintains and operates branch offices in the
City of Newark, New Castle County, Delaware, the Town of Newport, New
Castle County, Delaware, at Claymont, New Castle County, Delaware, at
Greenville, New Castle County Delaware, and at Milford Cross Roads, New
Castle County, Delaware, and shall be empowered to open, maintain and
operate branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of Wilmington,
New Castle County, Delaware, and such other branch offices or places of
business as may be authorized from time to time by the agency or agencies
of the government of the State of Delaware empowered to confer such
authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold, purchase, convey, mortgage or otherwise deal in
real and personal estate and property, and to appoint such officers
and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with the
Constitution or laws of the United States or of this State, to
discount bills, notes or other evidences of debt, to receive deposits
of money, or securities for money, to buy gold and silver bullion and
foreign coins, to buy and sell bills of exchange, and generally to
use, exercise and enjoy all the powers, rights, privileges and
franchises incident to a corporation which are proper or necessary
for the transaction of the business of the Corporation hereby
created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort
and kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation,
association, state or municipality, and may receive and manage any
sinking fund therefor on such terms as may be agreed upon between the
two parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit,
order, or decree to be entered in any court of record within the
State of Delaware or elsewhere, or which may now or hereafter be
required by any law, judge, officer or court in the State of Delaware
or elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity in the receiving, holding, managing, and disposing of any
and all estates and property, real, personal or mixed, and to be
appointed as such trustee, trustee in bankruptcy, receiver, assignee,
assignee in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority, in the
State of Delaware or elsewhere; and whenever this Corporation is so
appointed by any person, corporation, court, officer or authority
such trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian, bailee, or in any
other trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as security for
the performance of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for
the assumption of any responsibility the said Corporation may be
entitled to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any private,
public or municipal corporation within and without the State of
Delaware, or of the Government of the United States, or of any state,
territory, colony, or possession thereof, or of any foreign
government or country; to receive, collect, receipt for, and dispose
of interest, dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other property
held and owned by it, and to exercise in respect of all such bonds,
mortgages, debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other property,
any and all the rights, powers and privileges of individual
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owners thereof, including the right to vote thereon; to invest and
deal in and with any of the moneys of the Corporation upon such
securities and in such manner as it may think fit and proper, and
from time to time to vary or realize such investments; to issue bonds
and secure the same by pledges or deeds of trust or mortgages of or
upon the whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when the Board
of Directors shall determine, and in the promotion of its said
corporate business of investment and to the extent authorized by law,
to lease, purchase, hold, sell, assign, transfer, pledge, mortgage
and convey real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that
the said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in
any manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount,
execute and issue promissory notes, drafts, bills of exchange,
warrants, bonds, debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any
foreign country or place.
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(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or
restricted by reference to or inference from the terms of any other
clause of this or any other paragraph in this charter, but that the
objects, purposes and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes and
powers.
FOURTH: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and
the preferences and relative, participating, optional and other special
rights of each such series, and the qualifications, limitations or
restrictions thereof, if any, may differ from those of any and all other
series at any time outstanding; and, subject to the provisions of
subparagraph 1 of Paragraph (c) of this Article FOURTH, the Board of
Directors of the Corporation is hereby expressly granted authority to fix
by resolution or resolutions adopted prior to the issuance of any shares
of a particular series of Preferred Stock, the voting powers and the
designations, preferences and relative, optional and other special rights,
and the qualifications, limitations and restrictions of such series,
including, but without limiting the generality of the foregoing, the
following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of
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stock and whether such dividends shall be cumulative or non-
cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject
to redemption, and the redemption price or prices and the time or
times at which, and the terms and conditions on which, Preferred
Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section
(b) of this Article FOURTH), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article FOURTH), and subject further to any conditions which may
be fixed in accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time by
the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article FOURTH), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to
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receive all of the remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common
Stock held by them respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article FOURTH, each holder
of Common Stock shall have one vote in respect of each share of
Common Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any such
unissued stock, additional authorized issue of shares of any class or
series of stock or securities convertible into or exchangeable for stock,
or carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons, firms,
corporations or associations, whether such holders or others, and upon
such terms as may be deemed advisable by the Board of Directors in the
exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section (b) of this
Article FOURTH and the consent, by class or series vote or otherwise, of
the holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the
powers, preferences and rights of such other series shall be fixed by the
Board of Directors as senior to, or on a parity with, the powers,
preferences and rights of such outstanding series, or any of them;
provided, however, that the Board of Directors may provide in the
resolution or resolutions as to any series of Preferred Stock adopted
pursuant to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be therein
fixed) of the outstanding shares of such series voting thereon shall be
required for the issuance of any or all other series of Preferred Stock.
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(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board
of Directors of the Corporation shall determine and on such terms and for
such consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased from
time to time by the affirmative vote of the holders of a majority of the
stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of directors shall not be
reduced so as to shorten the term of any director at the time in office,
and provided further, that the number of directors constituting the whole
Board shall be twenty-four until otherwise fixed by a majority of the
whole Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the
next succeeding annual meeting, directors of the second class shall be
elected to hold office for a term expiring at the second succeeding annual
meeting and directors of the third class shall be elected to hold office
for a term expiring at the third succeeding annual meeting. Any vacancies
in the Board of Directors for any reason, and any newly created
directorships resulting from any increase in the directors, may be filled
by the Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen shall
hold office until the next annual election of directors. At such
election, the stockholders shall elect a successor to such director to
hold office until the next election of the class for which such director
shall have been chosen and until his successor shall be elected and
qualified. No decrease in the number of directors shall shorten the term
of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the
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Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the outstanding
shares of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class) cast
at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered
or mailed, as prescribed, to the Secretary of the Corporation not later
than the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on
behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such
nominee and (iii) the number of shares of stock of the Corporation which
are beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
SIXTH: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find
necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized
under the Act entitled "An Act Providing a General Corporation Law",
approved March 10, 1899, as from time to time amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
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NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may be
adopted only by the affirmative vote of the holders of two-thirds or more
of the outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors (considered for this purpose
as one class).
FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from
time to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this
Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or
not itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
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(C) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of related transactions) of any
securities of the Corporation or any Subsidiary to any Interested
Stockholder or any Affiliate of any Interested Stockholder in
exchange for cash, securities or other property (or a combination
thereof) having an aggregate fair market value of $1,000,000 or more,
or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly
or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible securities
of the Corporation or any Subsidiary which is directly or indirectly
owned by any Interested Stockholder, or any Affiliate of any
Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
FIFTEENTH shall mean any transaction which is referred to any one
or more of clauses (A) through (E) of paragraph 1 of the section
(a).
(b) The provisions of section (a) of this Article FIFTEENTH shall
not be applicable to any particular business combination and such
business combination shall require only such affirmative vote as is
required by law and any other provisions of the Charter or Act of
Incorporation of By-Laws if such business combination has been
approved by a majority of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation of any
such transaction:
(A) is the beneficial owner, directly or indirectly, of more than
10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course
of a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately
or only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,00,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be construed
to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or
SIXTEENTH of this Charter or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10 days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its
<PAGE>
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more than nine
members who shall be selected by the Board of Directors from its own members and
who
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shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the Board of
Directors when it is not in session to transact all business for and in behalf
of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The
majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be
held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be kept
and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity to
prevent the conduct and management of the affairs and business of the Company by
its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
3
<PAGE>
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than thirteen
members who shall be selected by the Board of Directors, a majority of whom
shall be members of the Board of Directors and who shall hold office during the
pleasure of the Board.
(B) The Trust Committee shall have general supervision over the Trust
Department and the investment of trust funds, in all matters, however, being
subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be kept and
promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint Committees
and/or designate officers or employees of the Company to whom supervision over
the investment of trust funds may be delegated when the Trust Committee is not
in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who shall
be selected by the Board of Directors from its own members, none of whom shall
be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over the Audit
Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the majority
of its members shall deem it to be proper for the transaction of its business,
and a majority of its Committee shall constitute a quorum.
4
<PAGE>
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more than
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any time
by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by the
Board of Directors as an associate director, to serve during the pleasure of the
Board.
(B) An associate director shall be entitled to attend all directors
meetings and participate in the discussion of all matters brought to the Board,
with the exception that he would have no right to vote. An associate director
will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any Committee
created under Article III of the By-Laws of this Company, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absence or
disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such
5
<PAGE>
powers and perform such duties as may from time to time be agreed upon between
himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
-------------------------------
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute or assigned
to him by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however denominated
by the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 6. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
6
<PAGE>
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of
stock shall be issued only upon giving such security as may be satisfactory to
the Board of Directors or the Executive
7
<PAGE>
Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and
8
<PAGE>
validity as although expressly authorized by the Board of Directors and/or the
Executive Committee.
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the Company, shall be
paid such reasonable honoraria or fees for services as members of committees as
the Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services as
the Board of Directors may from time to time determine and shall be paid for
such special services so performed reasonable compensation as may be determined
by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in defending any
proceeding in advance of its final disposition, provided, however, that the
-------- -------
payment of expenses incurred by a Director officer in his capacity as a Director
or officer in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the Director or officer to repay all
amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses, under this
Article X is not paid in full within ninety days after a written claim therefor
has been
9
<PAGE>
received by the Corporation the claimant may file suit to recover the unpaid
amount of such claim and, if successful in whole or in part, shall be entitled
to be paid the expense of prosecuting such claim. In any such action the
Corporation shall have the burden of proving that the claimant was not entitled
to the requested indemnification of payment of expenses under applicable law.
(D) The rights conferred on any person by this Article X shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Charter or Act of Incorporation, these By-
Laws, agreement, vote of stockholders or disinterested Directors or otherwise.
(E) Any repeal or modification of the foregoing provisions of this
Article X shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
10
<PAGE>
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: February 21, 1997 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- --------------------------------------------- ---------------
Name of Bank City
in the State of DELAWARE , at the close of business on December 31, 1996.
---------------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
<S> <C>
Noninterest-bearing balances and currency and coins................ 213,895
Interest-bearing balances.......................................... 0
Held-to-maturity securities.............................................. 465,818
Available-for-sale securities............................................ 752,297
Federal funds sold....................................................... 95,000
Securities purchased under agreements to resell.......................... 39,190
Loans and lease financing receivables:
Loans and leases, net of unearned income............. 3,634,003
LESS: Allowance for loan and lease losses........... 51,847
LESS: Allocated transfer risk reserve............... 0
Loans and leases, net of unearned income, allowance, and reserve... 3,582,156
Assets held in trading accounts.......................................... 0
Premises and fixed assets (including capitalized leases)................. 89,129
Other real estate owned.................................................. 3,520
Investments in unconsolidated subsidiaries and associated companies...... 52
Customers' liability to this bank on acceptances outstanding............. 0
Intangible assets........................................................ 4,593
Other assets............................................................. 114,300
Total assets............................................................. 5,359,950
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices...................................................... 3,749,697
Noninterest-bearing................ 852,790
Interest-bearing................... 2,896,907
Federal funds purchased.................................................. 77,825
Securities sold under agreements to repurchase........................... 192,295
Demand notes issued to the U.S. Treasury................................. 53,526
Trading liabilities...................................................... 0
Other borrowed money:.................................................... ///////
With original maturity of one year or less......................... 714,000
With original maturity of more than one year....................... 43,000
Mortgage indebtedness and obligations under capitalized leases........... 0
Bank's liability on acceptances executed and outstanding................. 0
Subordinated notes and debentures........................................ 0
Other liabilities........................................................ 98,756
Total liabilities........................................................ 4,929,099
Limited-life preferred stock and related surplus......................... 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus............................ 0
Common Stock............................................................. 500
Surplus.................................................................. 62,118
Undivided profits and capital reserves................................... 367,371
Net unrealized holding gains (losses) on available-for-sale securities... 862
Total equity capital..................................................... 430,851
Total liabilities, limited-life preferred stock, and equity capital...... 5,359,950
</TABLE>
2
