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Filed Pursuant to Rule 424(b)(1)
Registration No. 333-64797
PROSPECTUS
[LOGO]
GBB CAPITAL II
Offer to Exchange Its
Floating Rate Capital Securities, Series B
(Liquidation Amount $1,000 Per Exchange Capital Security)
Which Have Been Registered Under The Securities Act of 1933
For Any and All Of Its Outstanding
Floating Rate Capital Securities, Series A
(Liquidation Amount $1,000 Per Original Capital Security)
Fully And Unconditionally Guaranteed, as Described Herein, By
GREATER BAY BANCORP
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., EASTERN TIME ON NOVEMBER 23, 1998, UNLESS EXTENDED.
GBB Capital II, a trust formed under the laws of the state of Delaware (the
"Trust" or "GBB Capital II"), hereby offers, upon the terms and subject to the
conditions set forth in this prospectus (as the same may be amended or
supplemented from time to time, the "Prospectus") and in the accompanying
Letter of Transmittal (which together constitute the "Exchange Offer"), to
exchange up to and including $30,000,000 aggregate Liquidation Amount of its
Floating Rate Capital Securities, Series B (the "Exchange Capital
Securities"), which have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement of which
this Prospectus constitutes a part, for a like Liquidation Amount of its
outstanding Floating Rate Capital Securities, Series A (the "Original Capital
Securities"), of which $30,000,000 aggregate Liquidation Amount are issued and
outstanding.
This Prospectus and the Letter of Transmittal are first being mailed to all
holders of Original Capital Securities on or about October 23, 1998.
(Continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 23 FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY HOLDERS IN DECIDING WHETHER TO TENDER
ORIGINAL CAPITAL SECURITIES IN THE EXCHANGE OFFER.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A
BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
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.
The date of this Prospectus is October 23, 1998.
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(Continued from previous page)
Pursuant to the Exchange Offer, Greater Bay Bancorp, a California
corporation (the "Company" or "Greater Bay"), is also offering to exchange (i)
its guarantee (the "Exchange Guarantee") of payments of cash distributions and
payments on liquidation of the Trust or redemption of the Exchange Capital
Securities for a like guarantee (the "Original Guarantee") in respect of the
Original Capital Securities and (ii) $30,000,000 aggregate principal amount of
its Floating Rate Junior Subordinated Deferrable Interest Debentures, Series B
due September 15, 2028 (the "Exchange Junior Subordinated Debentures") for a
like aggregate principal amount of its Floating Rate Junior Subordinated
Deferrable Interest Debentures, Series A due September 15, 2028 (the "Original
Junior Subordinated Debentures"). The Exchange Guarantee and Exchange Junior
Subordinated Debentures also have been registered under the Securities Act.
The Original Capital Securities, the Original Guarantee and the Original
Junior Subordinated Debentures are collectively referred to herein as the
"Original Securities;" the Exchange Capital Securities, the Exchange Guarantee
and the Exchange Junior Subordinated Debentures are collectively referred to
herein as the "Exchange Securities;" the Original Capital Securities and the
Exchange Capital Securities are collectively referred to herein as the
"Capital Securities;" the Original Guarantee and the Exchange Guarantee are
collectively referred to herein as the "Guarantees;" and the Original Junior
Subordinated Debentures and the Exchange Junior Subordinated Debentures are
collectively referred to herein as the "Junior Subordinated Debentures."
The terms of the Exchange Securities are identical in all material respects
to the respective terms of the Original Securities, except that (i) the
Exchange Securities have been registered under the Securities Act and
therefore will not be subject to certain restrictions on transfer applicable
to the Original Securities, (ii) the Exchange Capital Securities will not
provide for any increase in the Distribution Rate (as defined herein) thereon,
and (iii) the Exchange Junior Subordinated Debentures will not provide for any
Liquidated Damages, (as defined herein), thereon. See "Description of Exchange
Securities" and "Description of Original Securities." Accordingly, except as
otherwise expressly provided herein, description of the terms of the Exchange
Securities and the rights of the holders thereof will apply to the Original
Securities and the right of the holders thereof.
The Exchange Capital Securities are being offered for exchange in order to
satisfy certain obligations of Greater Bay and the Trust under the
Registration Rights Agreement dated August 7, 1998 (the "Registration Rights
Agreement") among Greater Bay, the Trust and Sandler O'Neill & Partners, L.P.
(the "Initial Purchaser"). In the event that the Exchange Offer is
consummated, any Original Capital Securities that remain outstanding after
consummation of the Exchange Offer and the Exchange Capital Securities issued
in the Exchange Offer will vote together as a single class for purposes of
determining whether holders of the requisite percentage in outstanding
Liquidation Amount thereof have taken certain actions or exercised certain
rights under the Trust Agreement (as defined herein).
The Capital Securities represent beneficial interests in the assets of the
Trust. Greater Bay is the owner of all of the beneficial interests represented
by common securities of the Trust (the "Common Securities," and together with
the Capital Securities, the "Trust Securities"). Wilmington Trust Company is
the Property Trustee (the "Property Trustee") of the Trust. The Trust exists
for the sole purpose of issuing the Trust Securities and investing the
proceeds thereof in the Junior Subordinated Debentures. The Exchange Junior
Subordinated Debentures will mature on September 15, 2028 (the "Stated
Maturity Date"). The Exchange Capital Securities will have a preference over
the Common Securities under certain circumstances with respect to cash
distributions and amounts payable on liquidation, redemption or otherwise. See
"Description of Exchange Securities--Description of Exchange Capital
Securities--Subordination of Common Securities."
As used herein, (i) the "Indenture" means the Indenture, dated as of August
12, 1998, as amended and supplemented from time to time, between Greater Bay
and Wilmington Trust Company, as trustee (the "Debenture Trustee"), relating
to the Exchange Junior Subordinated Debentures, (ii) the "Trust Agreement"
means the Amended and Restated Trust Agreement relating to the Trust among
Greater Bay, as Sponsor, Wilmington Trust Company, as 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") and (iii) the "Common
Guarantee" means the Common Securities Guarantee Agreement relating to the
Common Securities by Greater Bay.
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Holders of the Trust Securities will be entitled to receive cumulative cash
distributions ("Distributions") arising from the payment of interest on the
Original Junior Subordinated Debentures (to the extent that such Original
Junior Subordinated Debentures have not been exchanged for Exchange Junior
Subordinated Debentures), and on the Exchange Junior Subordinated Debentures
(to the extent that the Original Junior Subordinated Debentures have been
exchanged for Exchange Junior Subordinated Debentures), accumulating from
August 12, 1998, and payable quarterly in arrears on March 15, June 15,
September 15 and December 15 of each year, commencing December 15, 1998, at a
rate per annum, reset quarterly, equal to 3-month LIBOR (as defined below)
plus 150 basis points ("Distribution Rate"). The amount of each Distribution
with respect to Trust Securities will include amounts accrued to, but
excluding the date the Distribution is due. So long as no Debenture Event of
Default (as defined herein) has occurred and is continuing, Greater Bay has
the right to defer payments of interest on the Exchange Junior Subordinated
Debentures for a period not exceeding 20 consecutive quarterly periods with
respect to each deferral period (each, an "Extension Period"), provided that
an Extension Period must end on an Interest Payment Date (as defined herein)
and may not extend beyond the Stated Maturity Date.
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 and for so long as interest
payments on the Exchange Junior Subordinated Debentures are so deferred,
Distributions on the Trust Securities also will 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 to make any payment with respect to debt securities of Greater Bay
that rank pari passu with or junior to the Exchange Junior Subordinated
Debentures. During an Extension Period, interest on the Exchange Junior
Subordinated Debentures will continue to accrue (and the amount of
Distributions to which holders of the Trust Securities are entitled will
continue to accumulate) at the applicable periodic Distribution Rate,
compounded quarterly from the relevant payment date for such interest, and
holders of Trust Securities will be required to include deferred interest
income in their gross income for federal income tax purposes prior to the
receipt of the cash attributable to such income. See "Description of Exchange
Securities--Description of Exchange Capital Securities--Option to Extend
Interest Payment Date--Description of Exchange Junior Subordinated
Debentures--Option to Extend Interest Payment Date" and "Certain Federal
Income Tax Consequences--Interest Income and Original Issue Discount."
Greater Bay has, through the Guarantees, the Common Guarantee, the Trust
Agreement, the Junior Subordinated Debentures and the Indenture guaranteed all
of the Trust's obligations under the Trust Securities. See "Relationship Among
the Exchange Capital Securities, the Exchange Junior Subordinated Debentures
and the Exchange Guarantee--Full and Unconditional Guarantee." The Exchange
Guarantee and the Common Guarantee will guarantee payments of Distributions
and payments upon liquidation of the Trust or redemption of the Trust
Securities, but in each case only to the extent that the Trust has funds
legally available therefor and has failed to make such payments, as described
herein. See "Description of Exchange Securities--Description of Exchange
Guarantee." If Greater Bay fails to make a required payment on the Exchange
Junior Subordinated Debentures, the Trust will not have sufficient funds to
make the related payments, including Distributions, on the Trust Securities.
The Exchange Guarantee and the Common Guarantee will not cover any such
payment when the Trust does not have sufficient funds legally available
therefor. In such event, a holder of Exchange Capital Securities may institute
a legal proceeding directly against Greater Bay to enforce its rights in
respect of such payment. See "Description of Exchange Securities--Description
of Exchange Junior Subordinated Debentures--Enforcement of Certain Rights by
Holders of Exchange Capital Securities." The obligations of Greater Bay under
the Exchange Guarantee, the Common Guarantee, and the Exchange Junior
Subordinated Debentures will be unsecured and will rank subordinate and junior
in right of payment to all Senior Indebtedness (as defined in "Description of
Exchange Securities--Description of Exchange Junior Subordinated Debentures--
Subordination"). See "Risk Factors--Ranking of Subordinated Obligations under
the Exchange Guarantee and the Exchange Junior Subordinated Debentures;
Limitation on Source of Funds."
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The Trust Securities will be subject to mandatory redemption in a Like
Amount (as defined herein), (i) in whole but not in part, on the Stated
Maturity Date upon repayment of the Exchange Junior Subordinated Debentures,
(ii) in whole but not in part, at any time prior to September 15, 2008 (the
"Initial Optional Redemption Date"), contemporaneously with the optional
prepayment of the Exchange Junior Subordinated Debentures by Greater Bay, upon
the occurrence and continuation of a Special Event (as defined herein), and
(iii) in whole or in part, on or after the Initial Optional Redemption Date,
contemporaneously with the optional prepayment by Greater Bay of all or part
of the Exchange Junior Subordinated Debentures, in each case at a redemption
price equal to 100% of the corresponding principal amount of the Exchange
Junior Subordinated Debentures so repaid or prepaid, as the case may be, plus
accrued and unpaid interest thereon and additional Distributions (as defined
herein), if any, to the date of redemption (the "Redemption Price"). See
"Description of Exchange Securities--Description of Exchange Capital
Securities--Redemption."
Subject to Greater Bay having received any required regulatory approvals,
the Exchange Junior Subordinated Debentures will be prepayable prior to the
Stated Maturity Date at the option of Greater Bay (i) on or after the Initial
Optional Redemption Date, in whole or in part, or (ii) at any time prior to
the Initial Optional Redemption Date, in whole but not in part, upon the
occurrence and continuation of a Special Event, in either case at a prepayment
price equal to 100% of the principal amount of Exchange Junior Subordinated
Debentures so prepaid plus accrued and unpaid interest thereon and Liquidated
Damages (as defined herein), if any, to the date of prepayment (the
"Prepayment Price"). See "Description of Exchange Securities--Description of
Exchange Junior Subordinated Debentures--Optional Prepayment" and "--Special
Event Prepayment."
Greater Bay has the right at any time to terminate the Trust and, after
satisfaction of liabilities of creditors of the Trust as required by
applicable law, to cause a Like Amount of the Exchange Junior Subordinated
Debentures to be distributed to the holders of the Trust Securities in
liquidation of the Trust, subject to (i) the Administrative Trustees having
received an opinion of counsel to the effect that such distribution will not
cause the holders of Exchange Capital Securities to recognize gain or loss for
federal income tax purposes and (ii) the receipt by Greater Bay of any
required regulatory approvals. Unless the Exchange Junior Subordinated
Debentures are distributed to the holders of the Trust Securities, in the
event of a liquidation of the Trust as described herein, after satisfaction of
liabilities to creditors of the Trust as required by applicable law, the
holders of the Trust Securities generally will be entitled to receive a
Liquidation Amount of $1,000 per Trust Security plus accumulated and unpaid
Distributions thereon to the date of payment. See "Description of Exchange
Securities--Description of Exchange Capital Securities--Liquidation of the
Trust and Distribution of Exchange Junior Subordinated Debentures."
THE CAPITAL SECURITIES, INCLUDING THE EXCHANGE CAPITAL SECURITIES, MAY BE
TRANSFERRED ONLY IN A BLOCK HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN
$100,000 (100 CAPITAL SECURITIES). ANY TRANSFER OF EXCHANGE CAPITAL SECURITIES
IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED
TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH TRANSFEREE SHALL BE
DEEMED NOT TO BE THE HOLDER OF SUCH EXCHANGE CAPITAL SECURITIES FOR ANY
PURPOSE, INCLUDING BUT NOT LIMITED TO THE RECEIPT OF DISTRIBUTIONS ON SUCH
EXCHANGE CAPITAL SECURITIES, AND SUCH TRANSFEREE SHALL BE DEEMED TO HAVE NO
INTEREST WHATSOEVER IN SUCH EXCHANGE CAPITAL SECURITIES.
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The Trust is making the Exchange Offer of the Exchange Capital Securities in
reliance on the position of the staff of the Division of Corporation Finance
(the "Staff") of the Securities and Exchange Commission (the "Commission") as
set forth in certain interpretive letters addressed to third parties in other
transactions. However, neither Greater Bay nor the Trust has sought its own
interpretive letter and there can be no assurance that the Staff of the
Commission would make a similar determination with respect to the Exchange
Offer as it
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has in such interpretive letters to third parties. Based on these
interpretations by the Staff of the Commission, and subject to the two
immediately following sentences, Greater Bay and the Trust believe that
Exchange Capital Securities issued pursuant to this Exchange Offer in exchange
for Original Capital Securities may be offered for resale, resold and
otherwise transferred by a holder thereof (other than a holder who is a
broker-dealer) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange
Capital Securities are acquired in the ordinary course of such holder's
business and that such holder is not participating, and has no arrangement or
understanding with any person to participate, in a distribution (within the
meaning of the Securities Act) of such Exchange Capital Securities. However,
any holder of Original Capital Securities who is an "affiliate" of Greater Bay
or the Trust or who intends to participate in the Exchange Offer for the
purpose of distributing Exchange Capital Securities, or any broker-dealer who
purchased Original Capital Securities from the Trust to resell pursuant to
Rule 144A under the Securities Act ("Rule 144A") or any other available
exemption under the Securities Act, (i) will not be able to rely on the
interpretations of the Staff of the Commission set forth in the above-
mentioned interpretive letters, (ii) will not be permitted or entitled to
tender such Original Capital Securities in the Exchange Offer and (iii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or other transfer of such Original
Capital Securities unless such sale is made pursuant to an exemption from such
requirements. In addition, as described herein, if any broker-dealer holds
Original Capital Securities acquired for its own account as a result of
market-making or other trading activities and exchanges such Original Capital
Securities for Exchange Capital Securities, then such broker-dealer must
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of such Exchange Capital Securities.
Each holder of Original Capital Securities who wishes to exchange Original
Capital Securities for Exchange Capital Securities in the Exchange Offer will
be required to represent that (i) it is not an "affiliate" of Greater Bay or
the Trust, (ii) any Exchange Capital Securities to be received by it are being
acquired in the ordinary course of its business, (iii) it has no arrangement
or understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such Exchange Capital Securities, and (iv)
if such holder is not a broker-dealer, such holder is not engaged in, and does
not intend to engage in, a distribution (within the meaning of the Securities
Act) of such Exchange Capital Securities. In addition, Greater Bay and the
Trust may require such holder, as a condition to such holder's eligibility to
participate in the Exchange Offer, to furnish to Greater Bay and the Trust (or
an agent thereof) in writing information as to the number of "beneficial
owners" (within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), on behalf of whom such holder holds
the Original Capital Securities to be exchanged in the Exchange Offer. Each
broker-dealer that receives Exchange Capital Securities for its own account
pursuant to the Exchange Offer must acknowledge that it acquired the Original
Capital Securities for its own account as the result of market-making
activities or other trading activities and must agree that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such Exchange Capital Securities. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. Based on the position taken by the Staff of the
Commission in the interpretive letters referred to above, Greater Bay and the
Trust believe that broker-dealers who acquired Original Capital Securities for
their own accounts, as a result of market-making activities or other trading
activities ("Participating Broker-Dealers"), may fulfill their prospectus
delivery requirements with respect to the Exchange Capital Securities received
upon exchange of such Original Capital Securities (other than Original Capital
Securities which represent an unsold allotment from the initial sale of the
Original Capital Securities) with a prospectus meeting the requirements of the
Securities Act, which may be the prospectus prepared for an exchange offer so
long as it contains a description of the plan of distribution with respect to
the resale of such Exchange Capital Securities. Each broker-dealer that
receives Exchange Capital Securities for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Capital Securities. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Capital Securities received in exchange for Original
Capital Securities acquired by such broker-dealer as a result of market-making
activities or other
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trading activities. The Trust and Greater Bay have agreed that, ending on the
close of business on the 90th day following the Expiration Date, it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution." However, a Participating Broker-
Dealer who intends to use this Prospectus in connection with the resale of
Exchange Capital Securities received in exchange for Original Capital
Securities pursuant to the Exchange Offer must notify Greater Bay or the
Trust, or cause Greater Bay or the Trust to be notified, on or prior to the
Expiration Date, that it is a Participating Broker-Dealer. Such notice may be
given in the space provided for that purpose in the Letter of Transmittal or
may be delivered to Wilmington Trust Company (the "Exchange Agent") at the
address set forth herein under "The Exchange Offer--Exchange Agent." Any
Participating Broker-Dealer who is an "affiliate" of Greater Bay or the Trust
may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. See "The Exchange Offer--Resales of
Exchange Capital Securities."
In that regard, each Participating Broker-Dealer who surrenders Original
Capital Securities pursuant to the Exchange Offer will be deemed to have
agreed, by execution of the Letter of Transmittal, that upon receipt of notice
from Greater Bay or the Trust of the occurrence of any event or the discovery
of any fact that makes any statement contained or incorporated by reference in
this Prospectus untrue in any material respect or that causes this Prospectus
to omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence of certain
other events specified in the Registration Rights Agreement, such
Participating Broker-Dealer will suspend the sale of Exchange Capital
Securities (or the Exchange Guarantee or the Exchange Junior Subordinated
Debentures, as applicable) pursuant to this Prospectus until Greater Bay or
the Trust has amended or supplemented this Prospectus to correct such
misstatement or omission and has furnished copies of the amended or
supplemented Prospectus to such Participating Broker-Dealer, or Greater Bay or
the Trust has given notice that the sale of the Exchange Capital Securities
(or the Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be. If Greater Bay or the Trust
gives such notice to suspend the sale of the Exchange Capital Securities (or
the Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable), it shall extend the 90-day period referred to above during which
Participating Broker-Dealers are entitled to use this Prospectus in connection
with the resale of Exchange Capital Securities by the number of days during
the period from and including the date of the giving of such notice to and
including the date when Participating Broker-Dealers shall have received
copies of the amended or supplemented Prospectus necessary to permit resales
of the Exchange Capital Securities or to and including the date on which
Greater Bay or the Trust has given notice that the sale of Exchange Capital
Securities (or the Exchange Guarantee or the Exchange Junior Subordinated
Debentures, as applicable) may be resumed, as the case may be.
Prior to the Exchange Offer, there has been only a limited, if any,
secondary market, and no public market for the Original Capital Securities.
The Exchange Capital Securities will be a new issue of securities for which
there currently is no market. Accordingly, there can be no assurance as to the
development or liquidity of any market for the Exchange Capital Securities.
Greater Bay and the Trust currently do not intend to apply for listing of the
Exchange Capital Securities on any securities exchange or for quotation
through the National Association of Securities Dealers Automated Quotation
System.
Any Original Capital Securities not tendered and accepted in the Exchange
Offer will remain outstanding and will be entitled to all the same rights and
will be subject to the same limitations applicable thereto under the Trust
Agreement (except for those rights which terminate upon consummation of the
Exchange Offer). Following consummation of the Exchange Offer, the holders of
Original Capital Securities will continue to be subject to all of the existing
restrictions upon transfer thereof and neither Greater Bay nor the Trust will
have any further obligation to such holders (other than under certain limited
circumstances) to provide for registration under the Securities Act of the
Original Capital Securities held by them. To the extent that Original Capital
Securities are tendered and accepted in the Exchange Offer, a holder's ability
to sell untendered Original Capital Securities could be adversely affected.
See "Risk Factors--Consequences of a Failure to Exchange Original Capital
Securities."
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THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF ORIGINAL CAPITAL SECURITIES ARE URGED TO READ THIS
PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE EXCHANGE
OFFER.
Original Capital Securities may be tendered for exchange on or prior to 5:00
p.m., Eastern time, on November 23, 1998 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is
extended by Greater Bay or the Trust (in which case the term "Expiration Date"
shall mean the latest date and time to which the Exchange Offer is extended).
Tenders of Original Capital Securities may be withdrawn at any time on or
prior to the Expiration Date. The Exchange Offer is not conditioned upon any
minimum Liquidation Amount of Original Capital Securities being tendered for
exchange. However, the Exchange Offer is subject to certain events and
conditions which may be waived by Greater Bay or the Trust and to the terms
and provisions of the Registration Rights Agreement. Original Capital
Securities may be tendered in whole or in part having an aggregate Liquidation
Amount of not less than $100,000 (100 Capital Securities) or any integral
multiple of $1,000 Liquidation Amount (one Capital Security) in excess
thereof. Greater Bay has agreed to pay all expenses of the Exchange Offer. See
"The Exchange Offer--Fees and Expenses." Holders of the Exchange Capital
Securities will be entitled to receive cumulative Distributions arising from
the payment of interest on the Exchange Junior Subordinated Debentures,
accumulating from August 12, 1998, and payable quarterly in arrears on each
Distribution Date (as defined herein), commencing on December 15, 1998. The
record dates will be the first day of the month in which the relevant payment
occurs. In the event the Exchange Offer is consummated prior to the first
record date, December 1, 1998, each Exchange Capital Security will pay
cumulative Distributions from and after August 12, 1998. However, in the event
the Exchange Offer is consummated after December 1, 1998, Distributions will
be paid on the Original Capital Securities accumulated from and after August
12, 1998, and the Exchange Capital Securities then will pay Distributions and
from and after December 15, 1998. The amount of each Distribution with respect
to Capital Securities will include amounts accrued to, but excluding the date
the Distribution is due. Because of the foregoing procedures regarding
Distributions, the amount of the Distributions received by holders whose
Original Capital Securities are accepted for exchange will not be affected by
the exchange. See "The Exchange Offer--Distributions on the Exchange Capital
Securities."
Neither Greater Bay nor the Trust will receive any cash proceeds from the
issuance of the Exchange Capital Securities offered hereby. No dealer-manager
is being used in connection with this Exchange Offer. See "Use of Proceeds"
and "Plan of Distribution."
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AVAILABLE INFORMATION
Greater Bay is subject to certain informational requirements pursuant to
Section 13 of the Exchange Act and in accordance therewith, files reports and
other information with the Commission. Such reports and other information may
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's regional offices at 7 World Trade Center, 13th Floor, Suite
1300, New York, New York 10048 and Suite 1400, Citicorp Center, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such material may also be
obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. If available,
such information also may be accessed through the Commission's electronic data
gathering, analysis and retrieval system ("EDGAR") via electronic means,
including the Commission's home page on the Internet (http://www.sec.gov).
Greater Bay's common stock is quoted on the Nasdaq National Market under the
symbol "GBBK."
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No separate financial statements of the Trust have been included herein.
Greater Bay and the Trust do not consider that such financial statements would
be material to holders of the Exchange Capital Securities because the Trust 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, issuing the Trust Securities and engaging in incidental
activities. See "GBB Capital II," "Description of Exchange Securities--
Description of Exchange Capital Securities," "Description of Exchange
Securities--Description of Exchange Junior Subordinated Debentures" and
"Description of Exchange Securities--Description of Exchange Guarantee." In
addition, Greater Bay does not expect that the Trust will file reports, proxy
statements and other information under the Exchange Act with the Commission.
This Prospectus constitutes a part of a Registration Statement on Form S-4
(the "Registration Statement") filed by Greater Bay and the Trust with the
Commission under the Securities Act. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission,
and reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to Greater Bay and the
Exchange Securities. Any statements contained herein concerning the provisions
of any document are not necessarily complete, and, in each instance, reference
is made to the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference.
INFORMATION DELIVERED AND INCORPORATED BY REFERENCE
The following documents filed by Greater Bay with the SEC under the Exchange
Act are hereby incorporated in this Prospectus by reference: (i) the Annual
Report on Form 10-K, as amended, of Greater Bay for the year ended December
31, 1997; (ii) Greater Bay's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1998, and June 30, 1998; and (iii) Greater Bay's Current
Reports on Form 8-K filed on January 7, 1998, as amended, May 20, 1998, July
17, 1998, August 28, 1998 and September 30, 1998.
All documents subsequently filed by Greater Bay pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of the offering of the Capital Securities offered hereby shall be
deemed to be incorporated by reference into this Offering Memorandum and to be
a part of this Offering Memorandum from the date of filing of such document.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of
any contract or other document referred to herein do not purport to be
complete, and where reference is made to the particular provisions of such
contract or other document, such provisions are qualified in all respects by
reference to all of the provisions of such contract or other document.
Greater Bay will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference herein
(other than exhibits unless such exhibits are specifically incorporated by
reference in such documents). Requests for such documents should be directed
to: Investor Relations Department, Greater Bay Bancorp, 2860 West Bayshore
Road, Palo Alto, California 94303. Greater Bay's telephone number is (650)
813-8200.
8
<PAGE>
FORWARD LOOKING STATEMENTS
Information contained in this Prospectus contains "forward-looking
statements" which can be identified by the use of forward-looking terminology
such as "believes," "expects," "may," "will," "should," "projected,"
"contemplates" or "anticipates" or the negative thereof or other variations
thereon or comparable terminology. Such forward-looking statements are
inherently uncertain, and no assurance can be given that the future results
covered by the forward-looking statements will be achieved. Factors that may
cause actual results to vary materially from the future results covered by the
forward-looking statements include, but are not limited to, those discussed
under the caption "Risk Factors" as well as those discussed elsewhere herein
or incorporated by reference in this Prospectus. The Statements in "Risk
Factors constitute cautionary statements identifying important factors with
respect to such forward-looking statements, including certain risks and
uncertainties, that could cause actual results to vary materially from the
future results covered in such forward-looking statements. Other factors, such
as the general state of the economy, could also cause actual results to vary
materially from the future results covered in such forward-looking statements.
9
<PAGE>
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10
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus. Reference is made to, and
this summary is qualified in its entirety by, the more detailed information and
financial statements, including the notes thereto, contained elsewhere in this
Prospectus and in documents incorporated by reference hereto.
GREATER BAY BANCORP
Greater Bay is a bank holding company operating Cupertino National Bank
("CNB"), Mid-Peninsula Bank ("MPB"), Peninsula Bank of Commerce ("PBC") and
Golden Gate Bank ("GGB," together with CNB, MPB and PBC, the "Banks"). The
Banks operate through ten regional offices in Cupertino, Millbrae, Palo Alto,
Redwood City, San Bruno, San Mateo, San Jose and San Francisco, California.
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 clients value
doing business with locally managed institutions that can provide a full
service commercial banking relationship through an understanding of the
client'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 client 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 each Bank as a separate
subsidiary by retaining its independent name along with its individual Board of
Directors. The Banks have established strong reputations and client 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, Greater Bay will continue to market its services
under each Bank's name, 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.
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 finance 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 Banks have various operating divisions. These divisions include the
Greater Bay Trust Company, the Venture Banking Group, the Small Business
Administration ("SBA") Department, and the asset-based speciality finance
division, Pacific Business Funding Company ("PBFC"). In addition, consistent
with Greater Bay's operating philosophy and growth strategy, the Company
recently announced that it has formed the Greater Bay Bank Santa Clara Valley
Commercial Banking Group, the Greater Bay Corporate Finance Group, and the
Greater Bay International Banking Division. For a description of the
acquisition of PBFC, see "Recent Developments."
Greater Bay provides a wide range of commercial banking and financial
services to small and medium-sized businesses, real estate developers and
property managers, business executives, professionals and other individuals.
11
<PAGE>
The Banks offer a variety of deposit products focusing principally on
business clients. These products include personal and business checking and
savings accounts, time deposits and individual retirement accounts. The Banks
also offer an array of specialized services designed to attract and service the
needs of its business and personal clients. These include cash management,
international trade finance services and MasterCard and Visa merchant deposit
services.
The Banks also engage in the full complement of lending activities, including
commercial, real estate and construction 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
$100.0 million, with a focus on business clients with borrowing needs between
$2.0 million and $10.0 million. The Banks' commercial clients are drawn from a
wide range 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.
The Company's trust division, the Greater Bay Trust Company, provides trust
services to support the trust needs of the Banks' business and personal
clients. These services include, but are not limited to, custodial, investment
management, estate planning resources and employee benefit plan services.
Through the SBA Department, loans are made to small 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
that 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.
The Venture Banking Group serves the needs of companies in their start-up and
development phase. This unit meets the needs of such clients in Greater Bay's
service area by allowing them to access a banking relationship early in their
development. The initial relationship with these clients is generally focused
on deposit accounts and cash management services, with a lending relationship
developing as the companies mature and have an increasing need for a working
capital line of credit or other bank financing. 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 their
shareholders.
Through PBFC, Greater Bay continues to develop its asset-based lending and
factoring business. In addition, the Greater Bay Bank Santa Clara Valley
Commercial Banking Group and the Greater Bay Corporate Finance Group provide
commercial banking products and specialized corporate finance services to the
Company's clients. The Greater Bay International Banking Division provides a
wide range of financial services to support the international banking needs of
the Banks' clients, including identifying certain risks of conducting business
abroad, providing international letters of credit and trade finance services.
The Company's goal is to become the preeminent financial services company
headquartered in the San Francisco Bay Area. Greater Bay's business strategy is
to focus principally on increasing its market share within the communities it
serves through continued internal growth. The Company also will pursue
opportunities to expand its market share through select acquisitions that
management believes complement Greater Bay's businesses. Management will
consider acquisitions which would expand its presence in its current market
areas of San Francisco, Santa Clara and San Mateo Counties, and pursue
appropriate opportunities to expand its market through acquisitions in other
parts of the Bay Area and elsewhere. Consistent with the Company's operating
philosophy and growth strategy, Greater Bay regularly evaluates opportunities
to acquire banks and other financial service companies that complement the
Company's existing business, expand its market coverage and share and enhance
its client product offerings.
12
<PAGE>
Greater Bay was incorporated in California in 1984 under the name San Mateo
County Bancorp. Greater Bay's principal offices are located at 2860 West
Bayshore Road, Palo Alto, California 94303 and its telephone number is (650)
813-8200.
GBB CAPITAL II
The Trust 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 May 18, 1998. The Trust's business and affairs
are conducted by the Property Trustee, Delaware Trustee and three individual
Administrative Trustees who are officers of Greater Bay. The Trust 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. The Junior
Subordinated Debentures are the sole assets of GBB Capital II, and payments by
Greater Bay under the Junior Subordinated Debentures are the sole revenues of
GBB Capital II. All of the Common Securities are owned by Greater Bay.
THE EXCHANGE OFFER
The Exchange Offer........ Up to and including $30,000,000 aggregate
Liquidation Amount of Exchange Capital Securities
are being offered in exchange for a like aggregate
Liquidation Amount of Original Capital Securities.
Original Capital Securities may be tendered for
exchange in whole or in part in a Liquidation
Amount of $100,000 (100 Original Capital
Securities) or any integral multiple of $1,000 (one
Original Capital Security) in excess thereof.
Greater Bay and the Trust are making the Exchange
Offer in order to satisfy their obligations under
the Registration Rights Agreement relating to the
Original Capital Securities. For a description of
the procedures for tendering Original Capital
Securities, see "The Exchange Offer--Procedures for
Tendering Original Capital Securities."
Expiration Date........... 5:00 p.m., Eastern time, on November 23, 1998
unless the Exchange Offer is extended by Greater
Bay and the Trust (in which case the Expiration
Date will be the latest date and time to which the
Exchange Offer is extended). See "The Exchange
Offer--Terms of the Exchange Offer."
Conditions to the The Exchange Offer is subject to certain
Exchange Offer............ conditions, which may be waived by Greater Bay and
the Trust in their sole discretion. The Exchange
Offer is not conditioned upon any minimum
Liquidation Amount of Original Capital Securities
being tendered. See "The Exchange Offer--Conditions
to the Exchange Offer."
Terms of the Exchange Greater Bay and the Trust reserve the right in
Offer..................... their sole and absolute discretion, subject to
applicable law, at any time and from time to time,
(i) to delay the acceptance of the Original Capital
Securities, (ii) to
13
<PAGE>
terminate the Exchange Offer if certain specified
conditions have not been satisfied, (iii) to extend
the Expiration Date of the Exchange Offer and
retain all Original Capital Securities tendered
pursuant to the Exchange Offer, subject, however,
to the right of holders of Original Capital
Securities to withdraw their tendered Original
Capital Securities, or (iv) to waive any condition
or otherwise amend the terms of the Exchange Offer
in any respect. See "The Exchange Offer--Terms of
the Exchange Offer."
Withdrawal Rights......... Tenders of Original Capital Securities may be
withdrawn at any time on or prior to the Expiration
Date by delivering a written notice of such
withdrawal to the Exchange Agent in conformity with
certain procedures as set forth herein under "The
Exchange Offer--Withdrawal Rights."
Procedures for Tendering
Original Capital Certain brokers, dealers, commercial banks, trust
Securities................ companies and other nominees who hold Original
Capital Securities through The Depository Trust
Company ("DTC") must effect tenders by book-entry
transfer through DTC's Automated Tender Offer
Program ("ATOP"). Beneficial owners of Original
Capital Securities registered in the name of a
broker, dealer, commercial bank, trust company or
other nominee are urged to contact such person
promptly if they wish to tender Original Capital
Securities pursuant to the Exchange Offer.
Tendering holders of Original Capital Securities
that do not use ATOP must complete and sign a
Letter of Transmittal in accordance with the
instructions contained therein and forward the same
by mail, facsimile transmission or hand delivery,
together with any other required documents, to the
Exchange Agent, either with the certificates of the
Original Capital Securities to be tendered or in
compliance with the specified procedures for
guaranteed delivery of Original Capital Securities.
Tendering holders of Original Capital Securities
that use ATOP will, by so doing, acknowledge that
they are bound by the terms of the Letter of
Transmittal. See "The Exchange Offer--Procedures
for Tendering Original Capital Securities."
Letters of Transmittal and certificates
representing Original Capital Securities should not
be sent to Greater Bay or Trust. Such documents
should only be sent to the Exchange Agent.
Resales of Exchange
Capital Securities........ Greater Bay and the Trust are making the Exchange
Offer in reliance on the position of the Staff of
the Commission as set forth in certain interpretive
letters addressed to third parties in other
transactions. However, neither Greater Bay nor the
Trust has sought its own interpretive letter and
there can be no assurance that the Staff of the
Commission would make a similar determination with
respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on
these interpretations by the Staff of the
Commission, and subject to the two immediately
following sentences, Greater Bay and
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<PAGE>
the Trust believe that Exchange Capital Securities
issued pursuant to this Exchange Offer in exchange
for Original Capital Securities may be offered for
resale, resold and otherwise transferred by a
holder thereof (other than a holder who is a
broker-dealer) without further compliance with the
registration and prospectus delivery requirements
of the Securities Act, provided that such Exchange
Capital Securities are acquired in the ordinary
course of such holder's business and that such
holder is not participating, and has no arrangement
or understanding with any person to participate, in
a distribution (within the meaning of the
Securities Act) of such Exchange Capital
Securities. However, any holder of Original Capital
Securities who is an "affiliate" of Greater Bay or
the Trust or who intends to participate in the
Exchange Offer for the purpose of distributing the
Exchange Capital Securities, or any broker-dealer
who purchased the Original Capital Securities from
the Trust to resell pursuant to Rule 144A or any
other available exemption under the Securities Act,
(i) will not be able to rely on the interpretations
of the Staff of the Commission set forth in the
above-mentioned interpretive letters, (ii) will not
be permitted or entitled to tender such Original
Capital Securities in the Exchange Offer and (iii)
must comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any sale or other transfer of such
Original Capital Securities unless such sale is
made pursuant to an exemption from such
requirements. In addition, as described herein, if
any broker-dealer holds Original Capital Securities
acquired for its own account as a result of market-
making or other trading activities and exchanges
such Original Capital Securities for Exchange
Capital Securities, then such broker-dealer must
deliver a prospectus meeting the requirements of
the Securities Act in connection with any resales
of such Exchange Capital Securities.
Each holder of Original Capital Securities who
wishes to exchange Original Capital Securities for
Exchange Capital Securities in the Exchange Offer
will be required to represent that (i) it is not an
"affiliate" of Greater Bay or the Trust, (ii) any
Exchange Capital Securities to be received by it
are being acquired in the ordinary course of its
business, (iii) it has no arrangement or
understanding with any person to participate in a
distribution (within the meaning of the Securities
Act) of such Exchange Capital Securities, and (iv)
if such holder is not a broker-dealer, such holder
is not engaged in, and does not intend to engage
in, a distribution (within the meaning of the
Securities Act) of such Exchange Capital
Securities. Each broker-dealer that receives
Exchange Capital Securities for its own account in
exchange for Original Capital Securities, where
such Original Capital Securities were acquired by
such broker-dealer as a result of market-making
activities or other trading activities, must
acknowledge that it will deliver a prospectus
meeting the requirements of the Exchange Act in
connection with any resale of such Exchange Capital
Securities. See "Plan of Distribution." The Letter
of Transmittal states that, by so acknowledging and
by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter"
within the meaning of
15
<PAGE>
the Securities Act. Based on the position taken by
the Staff of the Commission in the interpretive
letters referred to above, Greater Bay and the
Trust believe that Participating Broker-Dealers who
acquired Original Capital Securities for their own
accounts as a result of market-making activities or
other trading activities may fulfill their
prospectus delivery requirements with respect to
the Exchange Capital Securities received upon
exchange of such Original Capital Securities (other
than Original Capital Securities that represent an
unsold allotment from the initial sale of the
Original Capital Securities) with a prospectus
meeting the requirements of the Securities Act,
which may be the prospectus prepared for an
exchange offer so long as it contains a description
of the plan of distribution with respect to the
resale of such Exchange Capital Securities.
Accordingly, this Prospectus, as it may be amended
or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with
resales of Exchange Capital Securities received in
exchange for Original Capital Securities where such
Original Capital Securities were acquired by such
Participating Broker-Dealer for its own account as
a result of market-making or other trading
activities. Subject to certain provisions set forth
in the Registration Rights Agreement and to the
limitations described herein under "The Exchange
Offer--Resales of Exchange Capital Securities,"
Greater Bay and the Trust have agreed that this
Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating
Broker-Dealer in connection with resales of such
Exchange Capital Securities for a period ending 90
days after the Expiration Date (subject to
extension under certain limited circumstances) or,
if earlier, when all such Exchange Capital
Securities have been disposed of by such
Participating Broker-Dealer. See "Plan of
Distribution." Any Participating Broker-Dealer who
is an "affiliate" of Greater Bay or the Trust may
not rely on such interpretive letters and must
comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any resale transaction. See "The
Exchange Offer--Resales of Exchange Capital
Securities."
Exchange Agent............ The Exchange Agent with respect to the Exchange
Offer is Wilmington Trust Company. The address, and
telephone and facsimile number of the Exchange
Agent are set forth in "The Exchange Offer--
Exchange Agent" and in the Letter of Transmittal.
Use of Proceeds........... Neither Greater Bay nor the Trust will receive any
cash proceeds from the issuance of the Exchange
Capital Securities. See "Use of Proceeds."
Federal Income Tax The exchange of Original Capital Securities for
Considerations............ Exchange Capital Securities will not be a taxable
exchange for federal income tax purposes, and
holders should not recognize any taxable gain or
loss or any interest income as a result of such
exchange. See "Certain Federal Income Tax
Consequences--Exchange of Capital Securities."
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<PAGE>
ERISA Considerations...... Holders of Original Capital Securities should
review the information set forth under "ERISA
Considerations" prior to tendering Original Capital
Securities in the Exchange Offer.
THE EXCHANGE CAPITAL SECURITIES
Securities Offered........ Up to $30,000,000 aggregate Liquidation Amount of
Exchange Capital Securities (Liquidation Amount
$1,000 per Exchange Capital Security) will have
been registered under the Securities Act. The
Exchange Capital Securities will be issued as were
the Original Capital Securities under the Trust
Agreement. The Exchange Capital Securities and any
Original Capital Securities that remain outstanding
after consummation of the Exchange Offer will vote
together as a single class for purposes of
determining whether holders of the requisite
percentage in outstanding Liquidation Amount
thereof have taken certain actions or exercised
certain rights under the Trust Agreement. See
"Description of Exchange Securities--Description of
Exchange Capital Securities--Voting Rights;
Amendment of the Trust Agreement." The terms of the
Exchange Capital Securities are identical in all
material respects to the terms of the Original
Capital Securities, except that the Exchange
Capital Securities have been registered under the
Securities Act, will not be subject to certain
restrictions on transfer applicable to the Original
Capital Securities and will not provide for any
increase in the Distribution Rate thereon. See "The
Exchange Offer--Purpose and Effect of the Exchange
Offer," "Description of Exchange Securities" and
"Description of Original Securities."
Distributions............. Holders of the Capital Securities will be entitled
to receive cumulative Distributions arising from
the payment of interest on the Junior Subordinated
Debentures, accumulating from August 12, 1998, and
payable quarterly in arrears on March 15, June 15,
September 15 and December 15 of each year,
commencing on December 15, 1998. The record dates
will be the first day of the month in which the
relevant payment occurs. In the event the Exchange
Offer is consummated prior to the first record
date, December 1, 1998, each Exchange Capital
Security will pay cumulative Distributions from and
after August 12, 1998 through December 15, 1998.
However, in the event the Exchange Offer is
consummated after December 1, 1998, Distributions
will be paid on the Original Capital Securities
accumulated from and after August 12, 1998, and the
Exchange Capital Securities then will pay
Distributions and from and after December 15, 1998.
The amount of each Distribution with respect to
Exchange Capital Securities will include amounts
accrued to, but excluding the date the Distribution
is due. Because of the foregoing procedures
regarding Distributions, the amount of the
Distributions received by holders whose Original
Capital Securities are accepted for exchange will
not be affected by the exchange.
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<PAGE>
Extension Periods......... So long as no Debenture Event of Default has
occurred and is continuing, Distributions on
Exchange Capital Securities will be deferred for
the duration of any Extension Period elected by
Greater Bay with respect to the payment of interest
on the Exchange Junior Subordinated Debentures. No
Extension Period will exceed 20 consecutive
quarterly periods, end on a date other than an
Interest Payment Date or extend beyond the Stated
Maturity Date. See "Description of Exchange
Securities--Description of Exchange Junior
Subordinated Debentures--Option to Extend Interest
Payment Date" and "Certain Federal Income Tax
Consequences--Interest Income and Original Issue
Discount."
Ranking................... The Exchange Capital Securities will rank pari
passu, and payments thereon will be made pro rata,
with the Original Capital Securities and the Common
Securities except as described under "Description
of Exchange Securities--Description of Exchange
Capital Securities--Subordination of Common
Securities." The Exchange Junior Subordinated
Debentures will rank pari passu with the Original
Junior Subordinated Debentures, Greater Bay's 9.75%
Junior Subordinated Interest Debentures, maturing
on March 31, 2027 (the "1997 Junior Subordinated
Debentures"), and all other junior subordinated
debentures (if any) issued by Greater Bay (the
"Other Debentures"), which are issued and sold (if
at all) to other trusts to be established by
Greater Bay (if any), in each case similar to the
Trust ("Other Trusts"), and will constitute
unsecured obligations of Greater Bay and will rank
subordinate and junior in right of payment to all
Senior Indebtedness to the extent and in the manner
set forth in the Indenture. See "Description of
Exchange Securities--Description of Exchange Junior
Subordinated Debentures." The Exchange Guarantee
will rank pari passu with the Original Guarantee,
Greater Bay's guarantee issued pursuant to the
offering of trust preferred securities of GBB
Capital I ("GBB Capital I"), and all other
guarantees (if any) issued by Greater Bay with
respect to capital securities (if any) issued by
Other Trusts ("Other Guarantees") and will
constitute an unsecured obligation of Greater Bay
and will rank subordinate and junior in right of
payment to all Senior Indebtedness to the extent
and in the manner set forth in the Guarantee
Agreement. See "Description of Exchange
Securities--Description of Exchange Guarantee." In
addition, because Greater Bay is a holding company,
the Exchange Junior Subordinated Debentures and the
Exchange Guarantee will be effectively subordinated
to all existing and future liabilities of Greater
Bay's subsidiaries, including the Bank's deposit
liabilities. See "Description of
Exchange Securities--Description of Exchange Junior
Subordinated Debentures--Subordination."
Redemption................ The Trust Securities are subject to mandatory
redemption in a Like Amount, (i) in whole but not
in part, on the Stated Maturity Date upon repayment
of the Exchange Junior Subordinated Debentures,
(ii) in whole but not in part, at any time prior to
September 15, 2008 (the "Initial Optional
Redemption Date"), contemporaneously with the
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<PAGE>
optional prepayment of the Exchange Junior
Subordinated Debentures by Greater Bay upon the
occurrence and continuation of a Special Event and
(iii) in whole or in part, on or after the Initial
Optional Redemption Date, contemporaneously with
the optional prepayment by Greater Bay of all or
part of the Exchange Junior Subordinated
Debentures, in each case at the applicable
Redemption Price. See "Description of Exchange
Securities--Description of Exchange Capital
Securities --Redemption" and "--Description of
Exchange Junior Subordinated Debentures--Special
Event Prepayment."
Transfer Restrictions.....
The Exchange Capital Securities will be issued, and
may be transferred, only in blocks having a
Liquidation Amount of not less than $100,000 (100
Exchange Capital Securities). See "Description of
Exchange Securities--Description of Exchange
Capital Securities--Restrictions on Transfer." Any
such transfer of Exchange Capital Securities in a
block having a Liquidation Amount of less than
$100,000 shall be deemed to be void and of no legal
effect whatsoever.
ERISA Considerations...... Prospective purchasers must carefully consider the
restrictions on purchase set forth under "ERISA
Considerations."
Absence of Market for the
Exchange Capital The Exchange Capital Securities will be a new issue
Securities................ of securities for which there currently is no
market. Accordingly, there can be no assurance as
to the development or liquidity of any market for
the Exchange Capital Securities. The Trust and
Greater Bay do not intend to apply for listing of
the Exchange Capital Securities on any securities
exchange or for quotation through the Nasdaq Stock
Market, Inc. See "Plan of Distribution."
Voting Rights.............
The holders of the Exchange Capital Securities will
have no voting rights, except in limited
circumstances. See "Description of Securities
Description of Exchange Capital Securities--Voting
Rights; Amendment of the Trust Agreement" and "--
Removal of Issuer Trustees."
Risk Factors.............. For a discussion of the considerations relevant to
an investment in the Capital Securities or the
exchange of Original Capital Securities for
Exchange Capital Securities, see "Risk Factors."
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected financial data set forth below for the five-year periods ended
December 31, 1997, 1996, 1995, 1994 and 1993 have been derived from the
consolidated financial statements of Greater Bay, and should be read in
conjunction with Greater Bay's financial statements, including the related
notes thereto and discussion thereof, included in Greater Bay's Current Report
on Form 8-K filed with the SEC on September 30, 1998. The consolidated
financial statements of Greater Bay included in the Current Report on Form 8-K
have been restated on a historical basis to reflect the merger with Pacific Rim
Bancorporation ("PRB"), the former holding company of GGB, which was
consummated on May 8, 1998 on a pooling-of-interests basis. The selected
financial data set forth below for the six-month periods ended June 30, 1998
and 1997 have been derived from the unaudited interim consolidated financial
statements of Greater Bay and include all adjustments, consisting only of
normal recurring accruals, which management considers necessary for a fair
presentation of such financial information for those periods. The results for
these six-month periods are not necessarily indicative of the results which may
be expected for any other interim or annual period. See "Available
Information."
All share and per share information has been adjusted as of each date
presented to reflect the two-for-one stock split to holders of record on April
30, 1998. The following information has been restated on a historical basis to
reflect the mergers with Cupertino National Bancorp, PBC and PRB on a pooling-
of-interests basis.
20
<PAGE>
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS AS OF OR FOR THE
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------------- ------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Interest income.......... $ 51,387 $ 39,191 $ 85,399 $ 60,713 $ 52,090 $ 39,832 $ 35,365
Interest expense......... 21,310 15,136 32,872 21,701 18,589 11,747 10,313
---------- ---------- ---------- --------- --------- --------- ---------
Net interest income...... 30,077 24,055 52,527 39,012 33,501 28,085 25,052
Provision for loan
losses.................. 2,243 2,868 4,043 (1) 2,419 1,160 1,963 2,315
---------- ---------- ---------- --------- --------- --------- ---------
Net interest income after
provision for loan
losses.................. 27,834 21,187 48,484 36,593 32,341 26,122 22,737
Other income, recurring.. 3,039 3,595 5,423 4,658 3,075 4,124 4,138
Operating expenses,
excluding nonrecurring
items................... 18,706 14,264 33,099 28,608 25,402 22,563 21,791
---------- ---------- ---------- --------- --------- --------- ---------
Income before income tax
expense and nonrecurring
items................... 12,167 10,518 20,808 12,643 10,014 7,683 5,084
Income tax expense....... 4,225 3,849 7,515 4,774 3,669 2,793 1,825
---------- ---------- ---------- --------- --------- --------- ---------
Income before
nonrecurring items...... 7,942 6,669 13,293 7,869 6,345 4,890 3,259
Nonrecurring items, net
of tax.................. 1,314 854 2,282 1,991 1,335 608 --
---------- ---------- ---------- --------- --------- --------- ---------
Net income............... $ 6,628 $ 5,815 $ 11,011 $ 5,878 $ 5,010 $ 4,282 $ 3,259
========== ========== ========== ========= ========= ========= =========
Net income per share
Basic................... $ 0.73 $ 0.65 $ 1.24 $ 0.69 $ 0.62 $ 0.57 $ 0.45
Diluted................. 0.67 0.61 1.15 0.64 0.59 0.52 0.41
Dividends per share(2)... 0.19 0.15 0.30 0.22 0.24 0.17 0.11
Average common and common
equivalent shares
outstanding............. 9,924,158 9,594,479 9,594,480 9,144,776 8,515,404 8,187,104 8,021,340
OPERATING RATIOS AND
OTHER DATA
Return on average
assets(3)............... 1.04 % 1.19 % 1.07 % 0.80% 0.83 % 0.81 % 0.63 %
Return on average common
shareholders'
equity(3)............... 17.04 % 16.72 % 14.94 % 9.14% 8.78 % 8.47 % 7.13 %
Net interest margin(4)... 5.00 % 5.33 % 5.45 % 5.81% 6.07 % 5.81 % 5.44 %
Efficiency ratio(5)...... 62.90 % 51.58 % 59.45 % 71.90% 75.29 % 71.94 % 74.65 %
Net (charge-offs)
recoveries to average
loans................... (0.21)% (0.20)% (0.27)% 0.04% (0.41)% (0.32)% (0.55)%
Ratio of earnings to
fixed charges(6)........
Excluding interest on
deposits............... 3.88x 7.10x 6.71 x 9.47x 6.49 x 8.70 x 10.69 x
Including interest on
deposits............... 1.46x 1.52x 1.44x 1.41 x 1.58 x 1.47 x
FINANCIAL CONDITION DATA
(AT PERIOD END)
Assets................... $1,470,867 $1,014,314 $1,200,319 $ 909,092 $ 654,176 $ 549,871 $ 513,847
Loans, net............... 786,980 637,306 718,529 553,603 388,504 345,267 335,408
Investment
securities(7)........... 558,335 299,133 213,127 135,671 141,024 117,738 79,221
Deposits................. 1,284,615 908,533 1,071,148 821,133 584,355 475,047 462,654
Subordinated debt........ 3,000 3,000 3,000 3,000 3,000 -- --
Trust Preferred
Securities.............. 20,000 20,000 20,000 -- -- -- --
Common shareholders'
equity.................. 82,333 72,684 76,257 66,726 60,629 52,776 48,280
Book value per common
share................... 8.96 8.16 8.47 7.65 7.29 6.81 6.56
FINANCIAL CONDITION
RATIOS
Nonperforming assets to
total assets............ 0.35 % 0.85 % 0.46 % 1.03% 1.48 % 2.24 % 1.94 %
Allowance for loan losses
to total loans.......... 2.19 % 2.09 % 2.18 % 1.77% 1.66 % 1.99 % 1.81 %
Allowance for loan losses
to non-performing
assets.................. 345.19 % 150.32 % 292.91 % 106.86% 68.33 % 56.38 % 60.86 %
REGULATORY CAPITAL RATIOS
Tier 1 Risk-Based
Capital................. 10.22 % 12.14 % 10.90 % 9.97% 12.63 % 13.19 % 13.36 %
Total Risk-Based
Capital................. 11.79 % 13.39 % 12.49 % 11.62% 14.48 % 14.52 % 14.71 %
Leverage................. 7.50 % 9.12 % 8.48 % 7.84% 9.61 % 9.95 % 10.10 %
</TABLE>
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- --------
(1) Does not include $2.4 million of non-recurring charges in 1997 to conform
accounting practices for the reserve methodologies as part of the 1997
acquisition of PBC by Greater Bay. Including these charges, the total
provision for loan losses was $6.4 million.
(2) Includes only those dividends declared by Greater Bay, and excludes those
dividends paid by Cupertino National Bancorp prior to the 1996 acquisition,
PBC prior to the 1997 acquisition and PRB prior to the 1998 acquisition of
GGB. In 1996, Cupertino National Bancorp declared and paid dividends of
$0.10 to its shareholders. PBC declared annual dividends of $3.20 and $1.35
per share, in 1997 and 1996, respectively to its shareholders. In 1997, PRB
declared and paid a cash dividend of $100,000 to its sole shareholder. On a
consolidated basis, Greater Bay has declared dividends of $0.52 and $0.30
per share in 1997 and 1996, respectively.
(3) Excluding nonrecurring items, net of tax, of $2.4 million in 1997, $2.0
million in 1996, $1.3 million in 1995 and $0.6 million in 1994, ROA for
1997, 1996, 1995 and 1994 would have been 1.29%, 1.07%, 1.06% and 0.61%,
respectively, and ROE for 1997, 1996, 1995 and 1994 would have been 18.03%,
12.24%, 11.12% and 6.36%, respectively.
(4) Net interest margin for the six month periods ended June 30, 1998 and 1997
and for the years ended December 31, 1997 and 1996 includes the lower
spread earned on the PBC Special Deposit (see Note 7 of the Notes to the
Consolidated Financial Statements, included in the Current Report on Form
8-K filed with the SEC on September 29, 1998 and incorporated herein by
reference, for details). Excluding the PBC Special Deposit, net interest
margin would have been 5.07% and 5.43% for the six month periods ended
June 30, 1998 and 1997 and 5.78% and 6.08% for the years ended December 31,
1997 and 1996, respectively.
(5) The efficiency ratio is computed by dividing total operating expenses by
the sum of net interest income before provision for loan losses and other
income. The efficiency ratio excluding non recurring costs for the six
month periods ended June 30, 1998 and 1997 and for the years ended December
31, 1997, 1996, 1995, 1994 and 1993 was 55.20%, 58.60%, 55.99%, 65.51%,
69.45%, 70.05% and 74.65%, respectively.
(6) 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 total interest expense, including and
excluding interest on deposits, as applicable, as well as the interest
component of rental expense.
(7) Includes available-for-sale securities and held-to-maturity securities.
RECENT DEVELOPMENTS
On August 31, 1998, Greater Bay consummated its acquisition of PBFC, an
asset-based specialty finance company. The acquisition was structured as a
merger transaction in which Greater Bay acquired PBFC as a wholly owned
subsidiary, in consideration of the issuance of approximately 298,000 shares of
Greater Bay common stock to the shareholders of PBFC. PBFC had total assets of
approximately $17.1 million as of June 30, 1998. The transaction was accounted
for as a pooling-of-interests.
In addition, consistent with the Company's operating philosophy and growth
strategy, the Company recently announced that it has formed the Greater Bay
Bank Santa Clara Valley Commercial Banking Group and established an
International Banking Division.
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<PAGE>
RISK FACTORS
Prospective investors should consider carefully, in addition to the other
information contained in this Prospectus, the following factors in connection
with the Exchange Offer and the Exchange Capital Securities offered hereby.
Investors should consider all of these factors to be important.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE EXCHANGE GUARANTEE AND THE
EXCHANGE JUNIOR SUBORDINATED DEBENTURES; LIMITATIONS ON SOURCE OF FUNDS
The obligations of Greater Bay under the Exchange Guarantee issued by it for
the benefit of the holders of Exchange Capital Securities, as well as under
the Exchange Junior Subordinated Debentures, are unsecured and rank
subordinate and junior in right of payment to all Senior Indebtedness to the
extent and in the manner set forth in the Exchange Guarantee and the
Indenture, respectively. No payment may be made of the principal of, or
interest on the Exchange Junior Subordinated Debentures, or in respect of any
redemption, retirement, purchase or other acquisition of any of the Exchange
Junior Subordinated Debentures, at any time when (i) there shall have occurred
and be continuing a default in any payment in respect of any Senior
Indebtedness, or there has been an acceleration of the maturity thereof
because of a default, or (ii) in the event of the acceleration of the maturity
of the Exchange Junior Subordinated Debentures, until payment has been made on
all Senior Indebtedness to the extent and in the manner set forth in the
Indenture. At June 30, 1998, Greater Bay had $3.0 million of Senior
Indebtedness outstanding.
Greater Bay is a bank holding company regulated by the Board of Governors of
the Federal Reserve System (the "FRB"), and almost all of the operating assets
of Greater Bay are owned by Greater Bay's subsidiaries. Greater Bay relies
primarily on dividends from the Banks to meet its obligations for payment of
principal and interest on its outstanding debt obligations and corporate
expenses. 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. Bank regulatory
agencies have authority to prohibit the Banks or Greater Bay from engaging in
an unsafe or unsound practice in conducting their business. The payment of
dividends, depending upon the financial condition of the Banks or Greater Bay,
could be deemed to constitute such an unsafe or unsound practice. The FRB has
stated that, as a matter of prudent banking, a bank or bank holding company
should not maintain its existing rate of cash dividends on common stock unless
(i) the organization's net income available to common shareholders over the
past year has been sufficient to fund fully the dividends; and (ii) the
prospective rate of earnings retention appears consistent with the
organization's capital needs, asset quality, and overall financial condition.
No assurance can be given that the Banks will be able to pay dividends at past
levels, or at all, in the future. See the section entitled "Supervision and
Regulation" in Greater Bay's Annual Report on Form 10-K for the year ended
December 31, 1997, which is incorporated herein by reference.
In addition to restrictions on the payment of dividends, the Banks are
subject to certain restrictions imposed by federal law on any extensions of
credit to, and certain other transactions with, Greater Bay and certain other
affiliates, and on investments in stock or other securities thereof. Such
restrictions prevent Greater Bay and such other affiliates from borrowing from
the Banks, unless the loans are secured by various types of collateral.
Furthermore, such secured loans, other transactions and investments by the
Banks are generally limited in amount as to Greater Bay and as to each of such
other affiliate to 10% of each Bank's capital and surplus and as to Greater
Bay and all of such other affiliates to an aggregate of 20% of the each Bank's
capital and surplus. As of June 30, 1998, approximately $11.5 million of
credit was available to Greater Bay under this limitation. During the six
months ended June 30, 1998, the Banks paid $1.6 million in dividends to
Greater Bay, which reflected approximately 9.3% of the total amount of
dividends the Banks were permitted to pay as of June 30, 1998 under existing
supervisory practices.
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<PAGE>
Under the Federal Deposit Insurance Act ("FDIA"), insured depository
institutions such as the Banks are prohibited from making capital
distributions, including the payment of dividends, if, after making any such
distribution, the institution would become "undercapitalized" (as such term is
used in the statute). Based on the Banks' current financial conditions,
Greater Bay does not expect that this provision will have any impact on its
ability to obtain dividends from the Banks.
Further, 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 Exchange Capital Securities to benefit indirectly from such distribution)
is subject to the prior claims of creditors of that subsidiary (including
depositors, in the case of the Banks), except to the extent that Greater Bay
may itself be recognized as a creditor of that subsidiary. At June 30, 1998,
the subsidiaries of Greater Bay had aggregate total liabilities, including
deposits, of $1.3 billion. Accordingly, the Exchange Junior Subordinated
Debentures effectively will be subordinated to all existing and future
liabilities of Greater Bay's subsidiaries, including the Banks' deposit
liabilities, and holders of Exchange Junior Subordinated Debentures should
look only to the assets of Greater Bay for payments on the Exchange Junior
Subordinated Debentures. The Exchange Guarantee will constitute an unsecured
obligation of Greater Bay and will rank subordinate and junior in right of
payment to all Senior Indebtedness in the same manner as the Exchange Junior
Subordinated Debentures.
None of the Indenture, the Exchange Guarantee or the Trust Agreement places
any limitation on the amount of secured or unsecured debt, including Senior
Indebtedness, that may be incurred by Greater Bay or any of its subsidiaries.
See "Description of Exchange Securities--Description of Exchange Junior
Subordinated Debentures--General," "--Subordination" and "Description of
Exchange Securities--Description of Exchange Guarantee--Status of the Exchange
Guarantee."
The ability of the Trust to pay amounts due on the Exchange Capital
Securities is solely dependent upon Greater Bay making payments on the
Exchange Junior Subordinated Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES; MARKET PRICE
CONSEQUENCES
So long as no Debenture Event of Default has occurred and is continuing,
Greater Bay has the right under the Indenture to defer payments of interest on
the Exchange Junior Subordinated Debentures for a period not exceeding 20
consecutive quarterly periods with respect to each Extension Period, provided
that an Extension Period must end on an Interest Payment Date and may not
extend beyond the Stated Maturity Date. As a consequence of any such deferral,
quarterly Distributions on the Trust Securities will be deferred from the
relevant payment date for such Distributions during any such Extension Period,
and the amount of Distributions to which holders of the Trust Securities are
entitled will accumulate additional Distributions thereon at the applicable
Distribution Rate, compounded quarterly, but not exceeding the interest rate
then accruing on the Exchange Junior Subordinated Debentures. The term
"Distribution" as used herein shall include any such additional Distributions.
During an Extension Period, Greater Bay generally will be prohibited from
(i) declaring or paying dividends on Greater Bay's capital stock, (ii) making
any payments of principal, or interest on, or repaying, repurchasing or
redeeming any debt securities ranking pari passu with or junior in right of
payment to the Exchange Junior Subordinated Debentures or (iii) making any
guarantee payments with respect to debt securities of any subsidiary of
Greater Bay if such guarantee ranks pari passu with or junior in right of
payment to the Exchange Junior Subordinated Debentures, subject to certain
exceptions. See "Description of Exchange Securities--Description of Exchange
Capital Securities--Distributions--Option to Extend Interest Payment Date."
Before the end of an Extension Period, Greater Bay may further extend such
Extension Period, provided that such extension does not cause such Extension
Period to exceed 20 consecutive quarterly periods, end on a date other than an
Interest Payment Date or extend beyond the Stated Maturity Date. Upon the
termination of any Extension Period and the payment of all interest then
accrued and unpaid on the Exchange Junior Subordinated Debentures (together
with interest thereon at the applicable periodic Interest Rate, compounded
quarterly, to the extent permitted by applicable law), Greater Bay may begin a
new Extension Period, subject to
24
<PAGE>
the above requirements. There is no limitation on the number of times that
Greater Bay may begin an Extension Period. See "Description of Exchange
Securities--Description of Exchange Capital Securities--Distributions" and "--
Description of Exchange Junior Subordinated Debentures--Option to Extend
Interest Payment Date."
Greater Bay has no plan to exercise its right to defer payments of interest
on the Exchange Junior Subordinated Debentures. However, should Greater Bay
exercise its right to defer payments of interest on the Junior Subordinated
Debentures, each holder of Trust Securities will be required to accrue income
(as original issue discount ("OID")) in respect of the deferred stated
interest allocable to its Trust Securities for federal income tax purposes,
which will be allocated but not distributed to holders of Trust Securities. As
a result, each holder of Capital Securities will recognize income for federal
income tax purposes in advance of the receipt of cash and will not receive the
cash related to such income from the Trust if the holder disposes of the
Capital Securities prior to the record date for the payment of Distributions
thereafter. See "Certain Federal Income Tax Consequences--Interest Income and
Original Issue Discount" and "--Sales of Capital Securities."
If Greater Bay exercises its right to defer payments of interest on the
Exchange Junior Subordinated Debentures, the market price of the Exchange
Capital Securities is likely to be affected. A holder that disposes of its
Exchange Capital Securities during an Extension Period, therefore, might not
receive the same return on its investment as a holder that continues to hold
its Exchange Capital Securities. In addition, the mere existence of Greater
Bay's right to defer payments of interest on the Exchange Junior Subordinated
Debentures may cause the market price of the Exchange Capital Securities to be
more volatile than the market prices of other securities on which OID accrues
and that are not subject to such deferrals.
SPECIAL EVENT REDEMPTION
If a Special Event, including an Investment Company Event, a Tax Event or a
Regulatory Capital Event (in each case as defined under "Description of
Exchange Securities--Description of Exchange Junior Subordinated Debentures--
Special Event Prepayment"), occurs before September 15, 2008, Greater Bay will
have the right to prepay the Exchange Junior Subordinated Debentures in whole,
but not in part, at the Prepayment Price within 90 days following the
occurrence of such Special Event and therefore cause a mandatory redemption of
the Trust Securities at the Special Event Redemption Price. The exercise of
such right is subject to Greater Bay having received any required regulatory
approvals. See "Description of Exchange Securities--Description of Exchange
Capital Securities--Redemption."
PENDING TAX LITIGATION
Prospective investors should be aware that Enron Corporation has filed a
petition in the United States Tax Court challenging the proposed disallowance
by the Internal Revenue Service ("IRS") of the deduction of interest expense
on securities issued by Enron Corporation in 1993 and 1994 that are similar
to, although different in a number of respects from, the Exchange Junior
Subordinated Debentures. A decision of the Tax Court in the Enron matter
upholding the position of the IRS would not necessarily affect the tax
treatment of interest paid on the Exchange Junior Subordinated Debentures
because such a decision may be based on factors that differ from those
pertaining to the Exchange Junior Subordinated Debentures, the Trust or
Greater Bay. However, it is possible that such a decision would result in the
receipt by Greater Bay or the Trust of an opinion of counsel that there is a
more than insubstantial risk that interest payable on the Exchange Junior
Subordinated Debentures is not or will not be deductible. The receipt of such
an opinion would constitute a Tax Event, which would permit Greater Bay to
cause a redemption of the Capital Securities. See "Description of Exchange
Capital Securities--Redemption" and "Description of Exchange Junior
Subordinated Debentures--Special Event Prepayment."
POSSIBLE TAX LAW CHANGES AFFECTING THE EXCHANGE CAPITAL SECURITIES
Congress and the Clinton Administration have from time to time considered
proposals that would deny an issuer a deduction for United States income tax
purposes for the payment of interest on instruments with
25
<PAGE>
characteristics similar to the Exchange Junior Subordinated Debentures. Such
proposals have been considered in connection with recent legislation,
including the recently enacted Taxpayer Relief Act of 1997 (the "Relief Act").
While no such proposals have been included in the final provisions of recent
legislation, including the Relief Act, and no such legislation is currently
pending, there can be no assurance that similar legislation proposed and
enacted after the date hereof would not adversely affect the tax treatment of
the Exchange Junior Subordinated Debentures, potentially on a retroactive
basis. Such a change would give rise to a Tax Event which may permit Greater
Bay to cause a redemption of the Exchange Capital Securities by electing to
prepay the Exchange Junior Subordinated Debentures.
LIQUIDATION DISTRIBUTION OF EXCHANGE JUNIOR SUBORDINATED DEBENTURES
Greater Bay will have the right to terminate the Trust and, after
satisfaction of liabilities of creditors of the Trust as required by
applicable law, to cause the Exchange Junior Subordinated Debentures to be
distributed to the holders of the Trust Securities in liquidation of the
Trust. Under current federal income tax law, a distribution of Exchange Junior
Subordinated Debentures upon the dissolution of the Trust would not be a
taxable event to holders of the Exchange Capital Securities. Upon the
occurrence of a Special Event, however, a dissolution of the Trust in which
holders of the Exchange Capital Securities receive cash would be a taxable
event to such holders. See "Certain Federal Income Tax Considerations--Receipt
of Exchange Junior Subordinated Debentures or Cash Upon Liquidation of the
Trust."
POSSIBLE ADVERSE EFFECT ON MARKET PRICES
There can be no assurance as to the market prices for Exchange Capital
Securities or the Exchange Junior Subordinated Debentures that may be
distributed in exchange for Exchange Capital Securities if a dissolution of
the Trust were to occur. Accordingly, the Exchange Capital Securities or the
Exchange Junior Subordinated Debentures may trade at a discount from the price
that the investor paid to purchase the Exchange Capital Securities offered
hereby. Because holders of Exchange Capital Securities may receive Exchange
Junior Subordinated Debentures in liquidation of the Trust and because
Distributions are otherwise limited to payments on the Exchange Junior
Subordinated Debentures, prospective purchasers of Exchange Capital Securities
are also making an investment decision with regard to the Exchange Junior
Subordinated Debentures and should carefully review all the information
regarding the Exchange Junior Subordinated Debentures contained herein. See
"Description of Exchange Securities--Description of Exchange Capital
Securities--Liquidation of the Trust and Distribution of Exchange Junior
Subordinated Debentures" and "--Description of Exchange Junior Subordinated
Debentures."
RIGHTS UNDER THE EXCHANGE GUARANTEE
The Exchange Guarantee guarantees to the holders of the Exchange Capital
Securities the following payments, to the extent not paid by or on behalf of
the Trust: (i) any accumulated and unpaid Distributions required to be paid on
the Exchange Capital Securities, to the extent that the Trust has funds
legally available therefor at such time, (ii) the applicable Redemption Price
with respect to the Exchange Capital Securities called for redemption, to the
extent that the Trust has funds legally available therefor at such time and
(iii) upon a voluntary or involuntary dissolution, winding up or liquidation
of the Trust (unless the Exchange Junior Subordinated Debentures are
distributed to holders of the Exchange Capital 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 the Trust has funds
legally available therefor at such time and (b) the amount of assets of the
Trust remaining available for distribution to holders of the Exchange Capital
Securities at such time, after the satisfaction of liabilities to creditors of
the Trust as provided by applicable law.
The holders of not less than a majority in aggregate Liquidation Amount of
the Exchange Capital 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 Exchange Guarantee or to direct the exercise of any
trust power conferred upon the Guarantee Trustee under the Exchange Guarantee.
Any holder of the Exchange Capital Securities may
26
<PAGE>
institute a legal proceeding directly against Greater Bay to enforce its
rights under the Exchange Guarantee without first instituting a legal
proceeding against the Trust, the Guarantee Trustee or any other person or
entity. If Greater Bay defaults on its obligation to pay amounts payable under
the Exchange Junior Subordinated Debentures, the Trust would not have
sufficient funds for the payment of Distributions or amounts payable on
redemption of the Exchange Capital Securities or otherwise, and, in such
event, holders of the Exchange Capital Securities would not be able to rely
upon the Exchange Guarantee for payment of such amounts. Instead, if a
Debenture Event of Default has occurred and is continuing and such event is
attributable to the failure of Greater Bay to pay the principal of or interest
(including Additional Sums and Compounded Interest, if any, each as defined
herein) on the Exchange Junior Subordinated Debentures when such payment is
due and payable, then a holder of Exchange Capital Securities may institute a
legal proceeding directly against Greater Bay for enforcement of payment to
such holder of the principal of or interest (including Additional Sums and
Compounded Interest, if any) on such Exchange Junior Subordinated Debentures
having a principal amount equal to the Liquidation Amount of the Exchange
Capital Securities of such holder (a "Direct Action"). Notwithstanding any
payments made to a holder of Exchange Capital Securities by Greater Bay in
connection with a Direct Action, Greater Bay shall remain obligated to pay the
principal of and interest (including Additional Sums and Compounded Interest,
if any) on the Exchange Junior Subordinated Debentures, and Greater Bay shall
be subrogated to the rights of the holder of such Exchange Capital Securities
with respect to payments on the Exchange Capital Securities to the extent of
any payments made by Greater Bay to such holder in any Direct Action. Except
as described herein, holders of Exchange Capital Securities will not be able
to exercise directly any other remedy available to the holders of the Exchange
Junior Subordinated Debentures or to assert directly any other rights in
respect of the Exchange Junior Subordinated Debentures. See "Description of
Exchange Securities--Description of Exchange Junior Subordinated Debentures--
Enforcement of Certain Rights by Holders of Exchange Capital Securities," "--
Debenture Events of Default" and "Description of Exchange Securities--
Description of Exchange Guarantee." The Trust Agreement provides that each
holder of Exchange Capital Securities by acceptance thereof agrees to the
provisions of the Indenture and the Exchange Guarantee. Wilmington Trust
Company will act as Guarantee Trustee under the Exchange Guarantee and will
hold the Exchange Guarantee for the benefit of the holders of the Exchange
Capital Securities. Wilmington Trust Company also acts as Property Trustee
under the Trust Agreement and as Debenture Trustee under the Indenture.
LIMITED VOTING RIGHTS
Holders of Exchange Capital Securities generally will have voting rights
relating only to the modification of the Exchange Capital Securities and the
exercise of the Trust's rights as holder of Exchange Junior Subordinated
Debentures. Holders of Exchange Capital Securities will not be entitled to
vote to appoint, remove or replace, or to increase or decrease the number of,
the Issuer Trustees, which voting rights are vested exclusively in the holder
of the Common Securities except upon the occurrence of certain events
described herein. The Property Trustee, the Administrative Trustees and
Greater Bay may amend the Trust Agreement without the consent of holders of
Exchange Capital Securities to ensure that the Trust will be classified for
United States federal income tax purposes as a grantor trust. Holders of
Exchange Capital Securities will have no voting rights with respect to any
matters submitted to a vote of Greater Bay's stockholders. See "Description of
Exchange Securities--Description of Exchange Capital Securities--Voting
Rights; Amendment of the Trust Agreement" and "--Removal of Issuer Trustees."
TRADING CHARACTERISTICS OF THE EXCHANGE CAPITAL SECURITIES
The Exchange Capital Securities may trade at a price that does not fully
reflect the value of accrued but unpaid interest with respect to the
underlying Exchange Junior Subordinated Debentures. A holder who uses the
accrual method of accounting for tax purposes (and a cash method holder, if
the Exchange Junior Subordinated Debentures are deemed to have been issued
with OID) and who disposes of its Exchange Capital Securities between record
dates for payments of Distributions thereon will be required to include
accrued but unpaid interest on the Exchange Junior Subordinated Debentures
through the date of disposition in income as ordinary income (i.e., interest
or, possibly, OID), and to add such amount to its adjusted tax basis in its
share of the underlying Exchange Junior Subordinated Debentures deemed
disposed of. If the selling price is less than the
27
<PAGE>
holder's adjusted tax basis (which will include all accrued but unpaid
interest), a holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
federal income tax purposes. See "Certain Federal Income Tax Considerations--
Interest Income and Original Issue Discount" and "--Sales of Exchange Capital
Securities."
CONSEQUENCES OF A FAILURE TO EXCHANGE ORIGINAL CAPITAL SECURITIES
The Original Capital Securities have not been registered under the
Securities Act or any state securities laws and therefore may not be offered,
sold or otherwise transferred except in compliance with the registration
requirements of the Securities Act and any other applicable securities laws,
or pursuant to an exemption therefrom or in a transaction not subject thereto,
and in each case in compliance with certain other conditions and restrictions.
Original Capital Securities that remain outstanding after consummation of the
Exchange Offer will continue to bear a legend reflecting such restrictions on
transfer. In addition, upon consummation of the Exchange Offer, holders of
Original Capital Securities that remain outstanding will not be entitled to
any rights to have such Original Capital Securities registered under the
Securities Act or to any similar rights under the Registration Rights
Agreement (subject to certain limited exceptions). Greater Bay and the Trust
do not intend to register under the Securities Act any Original Capital
Securities that remain outstanding after consummation of the Exchange Offer
(subject to such limited exceptions, if applicable). To the extent that
Original Capital Securities are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered Original Capital Securities could be
adversely affected.
The Exchange Capital Securities and any Original Capital Securities that
remain outstanding after consummation of the Exchange Offer will vote together
as a single class for purposes of determining whether holders of the requisite
percentage in outstanding Liquidation Amount thereof have taken certain
actions or exercised certain rights under the Trust Agreement. See
"Description of Exchange Securities--Description of Exchange Capital
Securities--Voting Rights; Amendment of the Trust Agreement."
ABSENCE OF RATINGS OR PUBLIC MARKET; RESTRICTIONS ON RESALE
The Original Capital Securities and the Exchange Capital Securities have not
been rated by any rating agency. The Original Capital Securities were issued
to, and Greater Bay believes such securities are currently owned by, a
relatively small number of beneficial owners. The Original Capital Securities
have not been registered under the Securities Act and will be subject to
restrictions on transferability if they are not exchanged for the Exchange
Capital Securities. Although the Exchange Capital Securities may be resold or
otherwise transferred by the holders (who are not affiliates of Greater Bay or
the Trust) without compliance with the registration requirements under the
Securities Act, they will constitute a new issue of securities with no
established trading market. Capital Securities may be transferred by the
holders thereof only in blocks having a Liquidation Amount of not less than
$100,000 (100 Capital Securities). In addition, any market-making activity, if
it should develop, will be subject to the limits imposed by the Securities Act
and the Exchange Act and may be limited during the Exchange Offer.
Accordingly, no assurance can be given that an active public or other market
will develop for the Capital Securities, or as to the liquidity of or the
trading market for the Capital Securities. If an active public market does not
develop, the market price and liquidity of the Exchange Capital Securities may
be adversely affected.
If a public trading market develops for the Exchange Capital Securities,
future trading prices will depend on many factors, including, among other
things, prevailing interest rates, the financial condition of Greater Bay and
the market for similar securities. Depending on these and other factors, the
Exchange Capital Securities may trade at a discount.
Notwithstanding the registration of the Exchange Capital Securities in the
Exchange Offer, holders who are "affiliates" (as defined under Rule 405 of the
Securities Act) of Greater Bay or the Trust may publicly offer for sale or
resell the Exchange Capital Securities only in compliance with the provisions
of Rule 144 under the Securities Act.
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<PAGE>
Each broker-dealer that receives Exchange Capital Securities for its own
account in exchange for Original Capital Securities, where such Original
Capital Securities were acquired by such broker-dealer as a result of market-
making activities or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Capital
Securities. See "Plan of Distribution."
EXCHANGE OFFER PROCEDURES
Subject to conditions set forth under "The Exchange Offer--Conditions to the
Exchange Offer," issuance of the Exchange Capital Securities in exchange for
Original Capital Securities pursuant to the Exchange Offer will be made only
after a timely receipt by the Trust of (i)a book-entry confirmation evidencing
the tender of such Original Capital Securities through ATOP or
(ii)certificates representing such Original Capital Securities, a properly
completed and duly executed Letter of Transmittal, with any required signature
guarantees, and all other required documents. See "The Exchange Offer--
Acceptance for Exchange and Issuance of Exchange Capital Securities" and "--
Procedures for Tendering Original Capital Securities." Therefore, holders of
the Original Capital Securities desiring to tender such Original Capital
Securities in exchange for Exchange Capital Securities should allow sufficient
time to ensure timely delivery. Neither Greater Bay nor the Trust is under any
duty to give notification of defects or irregularities with respect to the
tenders of Original Capital Securities for exchange.
ABILITY OF GREATER BAY TO EXECUTE ITS BUSINESS STRATEGY
The financial performance and profitability of Greater Bay will depend on
its ability to execute its business strategy and manage its recent and
possible future growth. Although Greater Bay believes that it has
substantially integrated the business and operations of the recently acquired
Banks and PBFC into Greater Bay, there can be no assurance that unforeseen
issues relating to the assimilation of these Banks and PBFC will not adversely
affect Greater Bay. In addition, any future acquisitions or other possible
future growth may present operating and other problems that could have a
material adverse effect on Greater Bay's business, financial condition and
results of operations. Greater Bay's financial performance will also depend on
Greater Bay's ability to maintain profitable operations through implementation
of its Super Community Banking Philosophy. Accordingly, there can be no
assurance that Greater Bay will be able to continue the growth or maintain the
level of profitability it has recently experienced.
INTEREST RATE RISK
Greater Bay's 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 clients for Greater Bay's products and services.
Greater Bay 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 Greater Bay's current
volume and mix of interest-bearing liabilities and interest-earning assets,
Greater Bay'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 Greater Bay believes its current level of interest
rate sensitivity is reasonable, significant fluctuations in interest rates may
have an adverse effect on Greater Bay's results of operations.
ECONOMIC CONDITIONS AND GEOGRAPHIC CONCENTRATION
Greater Bay's operations are located in Northern California and concentrated
in San Francisco, Santa Clara and San Mateo Counties, which include the area
known as the "Silicon Valley." As a result of the geographic concentration,
Greater Bay's results depend largely upon economic conditions in these areas.
A deterioration in economic conditions in Greater Bay'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 Greater Bay's
loan portfolio and the demand for its products and services, and accordingly,
its results of operations.
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<PAGE>
GOVERNMENT REGULATION AND MONETARY POLICY
The banking industry is subject to extensive federal and state supervision
and regulation. Such regulation limits the manner in which 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 Greater Bay'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 Greater Bay. Significant new laws or changes in, or repeals of,
existing laws may cause Greater Bay's results to differ materially. Further,
federal monetary policy, particularly as implemented through the Federal
Reserve System, significantly affects credit conditions for Greater Bay,
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 Greater Bay's results of operations.
COMPETITION
The banking and financial services business environment in California, as
well as the rest of the United States, is highly and increasingly competitive.
The Banks compete for client loans, deposits and other financial products and
services with other commercial banks, savings and loan associations,
securities and brokerage companies, mortgage companies, insurance companies,
finance companies, money market and other mutual funds, credit unions, and
other non-bank financial services 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 products and services than the
Banks. The increasingly competitive environment is primarily a result of
changes in regulation, changes in technology and product delivery systems, and
the accelerating pace of consolidation among financial services providers. In
order to compete with other financial services providers, the Banks
principally rely upon promotional activities and industry knowledge in its
market areas, personal relationships with clients and other service providers,
referral sources established by officers, directors and employees, and
specialized services tailored to meet the Banks' clients' needs. In those
instances where the Banks are unable to accommodate a client's needs, the
Banks will seek to arrange for those services to be provided by their network
of correspondents and other service providers.
CREDIT QUALITY
A significant source of risk for Greater Bay 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.
Greater Bay 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 Greater Bay's credit portfolio. Such policies and procedures,
however, may not prevent unexpected losses that could materially adversely
affect Greater Bay's results of operations.
YEAR 2000 COMPLIANCE
Greater Bay and third parties with which the Company does business rely on
numerous computer programs in their day-to-day operations. Greater Bay has
completed a review of its internal information systems and believes such
systems are either year 2000 compliant or will be year 2000 compliant by the
first half of 1999 without any significant interruption to Greater Bay's
operations. While Greater Bay believes its planning efforts are adequate to
address its year 2000 concerns and that the costs and efforts of its year 2000
initiatives are not expected to be material to the Company's business,
financial condition or operating results, there can be no assurance that
Greater Bay will be able to effectively address its year 2000 issues in a
timely and cost-efficient
30
<PAGE>
manner and without interruption to its business. Greater Bay has initiated
discussions with its significant suppliers regarding their plans to remediate
year 2000 issues where their systems interface with the Company's systems or
otherwise impact its operations. There can be no assurance that year 2000
difficulties encountered by its suppliers and other third parties with whom it
does business will not have a material adverse impact on Greater Bay's
business, financial condition or operating results. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Year
2000 Compliance," included the Company's Current Report on Form 8-K filed with
the SEC on September 30, 1998 and incorporated by reference herein.
OTHER RISK FACTORS
For a discussion of other risk factors that should be considered by
potential investors, please see the sections entitled "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Greater Bay's Annual Report on Form 10-K for the year ended
December 31, 1997 which is incorporated herein by reference.
GREATER BAY BANCORP
Greater Bay is a bank holding company operating CNB, MPB, PBC and GGB. The
Banks operate through ten regional offices in Cupertino, Millbrae, Palo Alto,
Redwood City, San Bruno, San Mateo, San Jose and San Francisco, California.
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 clients value
doing business with locally managed institutions that can provide a full
service commercial banking relationship through an understanding of the
client'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 client 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 each Bank as a separate
subsidiary by retaining its independent name along with its individual Board
of Directors. The Banks have established strong reputations and client
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, Greater Bay will continue to
market its services under each Bank's name, 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.
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 finance 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 Banks have various operating divisions. These divisions include the
Greater Bay Trust Company, the Venture Banking Group, the SBA Department, and
the asset-based speciality finance division, PBFC. In addition, consistent
with Greater Bay's operating philosophy and growth strategy, the Company
recently announced that it has formed the Greater Bay Bank Santa Clara Valley
Commercial Banking Group, the Greater Bay Corporate Finance Group, and the
Greater Bay International Banking Division. For a description of the
acquisition of PBFC, see "Recent Developments."
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<PAGE>
Greater Bay provides a wide range of commercial banking and financial
services to small and medium-sized businesses, real estate developers and
property managers, business executives, professionals and other individuals.
The Banks offer a variety of deposit products focusing principally on
business clients. These products include personal and business checking and
savings accounts, time deposits and individual retirement accounts. The Banks
also offer an array of specialized services designed to attract and service
the needs of its business and personal clients. These include cash management,
international trade finance services and MasterCard and Visa merchant deposit
services.
The Banks also engage in the full complement of lending activities,
including commercial, real estate and construction 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 $100.0 million, with a focus on business clients with borrowing
needs between $2.0 million and $10.0 million. The Banks' commercial clients
are drawn from a wide range 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.
The Company's trust division, the Greater Bay Trust Company, provides trust
services to support the trust needs of the Banks' business and personal
clients. These services include, but are not limited to, custodial, investment
management, estate planning resources and employee benefit plan services.
Through the SBA Department, loans are made to small 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
that 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.
The Venture Banking Group serves the needs of companies in their start-up
and development phase. This unit meets the needs of such clients in Greater
Bay's service area by allowing them to access a banking relationship early in
their development. The initial relationship with these clients is generally
focused on deposit accounts and cash management services, with a lending
relationship developing as the companies mature and have an increasing need
for a working capital line of credit or other bank financing. 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 their shareholders.
Through PBFC, Greater Bay continues to develop its asset-based lending and
factoring business. In addition, the Greater Bay Bank Santa Clara Valley
Commercial Banking Group and the Greater Bay Corporate Finance Group provide
commercial banking products and specialized corporate finance services to the
Company's clients. The Greater Bay International Banking Division provides a
wide range of financial services to support the international banking needs of
the Banks' clients, including identifying certain risks of conducting business
abroad, providing international letters of credit and trade finance services.
The Company's goal is to become the preeminent financial services company
headquartered in the San Francisco Bay Area. Greater Bay's business strategy
is to focus principally on increasing its market share within the communities
it serves through continued internal growth. The Company also will pursue
opportunities to expand its market share through select acquisitions that
management believes complement Greater Bay's businesses. Management will
consider acquisitions which would expand its presence in its current market
areas of San Francisco, Santa Clara and San Mateo Counties, and pursue
appropriate opportunities to expand its market
32
<PAGE>
through acquisitions in other parts of the Bay Area and elsewhere. Consistent
with the Company's operating philosophy and growth strategy, Greater Bay
regularly evaluates opportunities to acquire banks and other financial service
companies that complement the Company's existing business, expand its market
coverage and share and enhance its client product offerings.
Greater Bay was incorporated in California in 1984 under the name San Mateo
County Bancorp. Greater Bay's principal offices are located at 2860 West
Bayshore Road, Palo Alto, California 94303 and its telephone number is (650)
813-8200.
GBB CAPITAL II
The Trust is a statutory business trust formed under Delaware law upon the
filing of a certificate of trust with the Delaware Secretary of State. The
Trust exists for the exclusive purposes of (i) issuing and selling the Trust
Securities, (ii) using the proceeds from the sale of Trust Securities to
acquire the Junior Subordinated Debentures and (iii) engaging in only those
other activities necessary, advisable or incidental thereto, such as
registering the transfer of the Trust Securities and the Exchange Offer.
Accordingly, the Junior Subordinated Debentures are the sole assets of the
Trust, and payments under the Junior Subordinated Debentures are the sole
revenues of the Trust. All of the Common Securities are owned by Greater Bay.
The Common Securities rank pari passu, and payments are and will be made
thereon pro rata, with the Exchange Capital Securities, except that if there
is an Event of Default under the Trust Agreement resulting from a Debenture
Event of Default, the rights of Greater Bay as holder of the Common Securities
to payments in respect of Distributions and payments upon liquidation,
redemption or otherwise will be subordinated to the rights of the holders of
the Exchange Capital Securities. See "Description of Exchange Capital
Securities--Subordination of Common Securities." Greater Bay acquired Common
Securities in a Liquidation Amount equal to at least 3% of the total capital
of the Trust. The Trust has a term of approximately 38 years, but may
terminate earlier as provided in the Trust Agreement. The Trust's business and
affairs are conducted by the Issuer Trustees, each appointed by Greater Bay as
holder of the Common Securities. The Issuer Trustees for the Trust are
Wilmington Trust Company, as the Property Trustee, Wilmington Trust Company,
as the Delaware Trustee and three individual Administrative Trustees who are
officers or other employees of Greater Bay. Wilmington Trust Company also acts
as guarantee trustee under the Guarantee and as debenture trustee under the
Indenture. See "Description of Exchange Securities--Description of Exchange
Guarantee" and "--Description of Exchange Junior Subordinated Debentures."
The holder of the Common Securities or, if an Event of Default under the
Trust Agreement has occurred and is continuing, the holders of not less than a
majority in Liquidation Amount of the Capital Securities, are entitled to
appoint, remove or replace the Property Trustee and/or the Delaware Trustee.
In no event will the holders of the Exchange Capital Securities have the right
to vote to appoint, remove or replace the Administrative Trustees; such voting
rights will be vested exclusively in the holder of the Common Securities. The
duties and obligations of each Issuer Trustee are governed by the Trust
Agreement. Greater Bay, as issuer of the Exchange Junior Subordinated
Debentures, has and will continue pay all fees, expenses, debts and
obligations (other than the payment of principal, interest and premium, if
any, on the Trust Securities) related to the Trust and the offering of the
Exchange Capital Securities and has and will continue pay, directly or
indirectly, all ongoing costs, expenses and liabilities (other than the
payment of principal, interest and premium, if any, on the Trust Securities)
of the Trust.
GBB Capital II's principal offices are located at 2860 West Bayshore Road,
Palo Alto, California 94303 and its telephone number is (650) 813-8200.
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<PAGE>
USE OF PROCEEDS
Neither Greater Bay nor the Trust will receive any cash proceeds from the
issuance of the Exchange Capital Securities and the Exchange Guarantee offered
hereby. In consideration for issuing the Exchange Capital Securities in
exchange for Original Capital Securities as described in this Prospectus, the
Trust will receive Original Capital Securities in like Liquidation Amount. The
Original Capital Securities surrendered in exchange for the Exchange Capital
Securities will be retired and canceled.
The proceeds to the Trust (without giving effect to expenses of the offering
payable by Greater Bay) from the offering of the Original Capital Securities
was $30,000,000. All of the proceeds from the sale of the Original Capital
Securities were invested by the Trust in the Original Junior Subordinated
Debentures. The net proceeds to Greater Bay from the sale of the Original
Junior Subordinated Debentures were approximately $28,750,000, net of
estimated commissions and other estimated offering expenses. Greater Bay
invested approximately $10.0 million of the net proceeds in the Banks to
increase their capital levels, has or will use the remaining net proceeds for
general corporate purposes including, without limitation, redemption of all of
the $3.0 million outstanding Subordinated Notes, funding additional
investments in, or extensions of credit to, the Banks and possible future
acquisitions. The Subordinated Notes mature in 2005 and bear interest at the
rate of 11.5% per annum. Initially, the net proceeds have been invested in
short-term investment grade financial securities.
REGULATORY CAPITAL RATIOS
The following table sets forth the consolidated capital ratios of Greater
Bay at June 30, 1998, and as adjusted to give effect to the issuance of the
Original Capital Securities by GBB Capital II.
<TABLE>
<CAPTION>
JUNE 30, 1998
----------------
AS
ACTUAL ADJUSTED
------ --------
<S> <C> <C>
Tier 1 Risk-Based Capital...................................... 10.22% 11.29%
Total Risk-Based Capital....................................... 11.79% 14.90%
Leverage....................................................... 7.50% 8.04%
</TABLE>
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ACCOUNTING TREATMENT
For financial reporting purposes, the Trust is treated as a subsidiary of
Greater Bay and, accordingly, the accounts of the Trust are included in the
consolidated financial statements of Greater Bay. The Capital Securities are
shown in the consolidated balance sheets of Greater Bay, as "Company-Obligated
Mandatorily Redeemable Trust Preferred Securities of Subsidiary Trust Holding
Solely Junior Subordinated Debentures," and appropriate disclosures about the
Capital Securities, the Guarantees and the Junior Subordinated Debentures will
be included in the notes to the consolidated financial statements. For
financial reporting purposes, Greater Bay records Distributions payable on the
Capital Securities as a minority interest expense in its consolidated
statements of operations.
Future reports of Greater Bay filed under the Exchange Act will include a
footnote to the financial statements stating that: (i) GBB Capital II is
wholly owned; (ii) the sole assets of GBB Capital II 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 II under the Capital
Securities. GBB Capital II will not provide separate reports under the
Exchange Act.
CAPITALIZATION
The following table sets forth the capitalization of Greater Bay as of June
30, 1998, and as adjusted to give effect to the issuance of the Original
Capital Securities by GBB Capital II. Consummation of the Exchange Offer will
have no effect on such capitalization. This data should be read in conjunction
with the consolidated financial statements of Greater Bay, including the
related notes thereto and discussion thereof.
<TABLE>
<CAPTION>
JUNE 30, 1998
-----------------
AS
ACTUAL ADJUSTED
-------- --------
<S> <C> <C>
Long-term debt............................................... $ 3,000 $ --
Company obligated mandatory redeemable trust preferred
securities of subsidiary trusts holding solely junior
subordinated debentures(1).................................. 20,000 50,000
Preferred Stock, no par value, 4,000,000 shares authorized,
none issued................................................. -- --
Common Stock, no par value, 24,000,000 shares authorized,
9,189,961 shares outstanding................................ 54,247 54,247
Accumulated other comprehensive income(2).................... 186 186
Retained earnings............................................ 27,900 27,900
-------- --------
Total shareholders' equity................................. 82,333 82,333
-------- --------
Total capitalization....................................... $105,333 $132,333
======== ========
</TABLE>
- --------
(1) The subsidiary trusts are (i) GBB Capital I, which issued the trust
preferred securities on March 31, 1997 and holds $20 million in 9.75%
Junior Subordinated Deferrable Interest Debentures issued by Greater Bay,
and (ii) GBB Capital II, which holds the Junior Subordinated Debentures as
its sole asset. The Capital Securities are issued by GBB Capital II. The
Junior Subordinated Debentures bear interest at the rate per annum, reset
quarterly, equal to 3-month LIBOR (as defined herein) plus 150 basis
points, and will mature on September 15, 2028. The Junior Subordinated
Debentures are redeemable at any time prior to the Initial Optional
Redemption Date, upon the occurrence of a Special Event, and on or after
the Initial Optional Redemption Date, at the option of Greater Bay,
subject to Greater Bay having received prior approval of the FRB if then
required under applicable capital guidelines or policies of the FRB as
described under "Description of Exchange Junior Subordinated Debentures--
Optional Prepayment" and "Special Event Prepayment" Greater Bay owns all
of the Common Securities of GBB Capital.
(2) Includes only net unrealized gain on securities available for sale.
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<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the sale of the Original Capital Securities, Greater Bay
and the Trust entered into the Registration Rights Agreement with the Initial
Purchaser, pursuant to which Greater Bay and the Trust agreed to file and use
commercially reasonable efforts to cause to become effective with the
Commission a Registration Statement relating to the exchange of the Original
Capital Securities for capital securities with terms identical in all material
respects to the terms of the Original Capital Securities.
The Exchange Offer is being made to satisfy the contractual obligations of
Greater Bay and the Trust under the Registration Rights Agreement. The form
and terms of the Exchange Capital Securities are the same as the form and
terms of the Original Capital Securities except that the Exchange Capital
Securities have been registered under the Securities Act and will not be
subject to certain restrictions on transfer applicable to the Original Capital
Securities, and will not provide for any increase in the Distribution Rate
thereon. In that regard, the Original Capital Securities provide that, if the
Trust has not exchanged Exchange Capital Securities for all Original Capital
Securities validly tendered on or prior to the 45th day after the date on
which the Registration Statement is declared effective, the Distribution Rate
borne by the Original Capital Securities will increase by .25% per annum for
the period from the occurrence of such event until the Exchange Offer has been
consummated. Upon consummation of the Exchange Offer, holders of Original
Capital Securities will not be entitled to any increase in the Distribution
Rate thereon or any further registration rights under the Registration Rights
Agreement, except under limited circumstances. See "Risk Factors--Consequences
of a Failure to Exchange Original Capital Securities" and "Description of
Original Securities."
The Exchange Offer is not being made to, nor will the Trust accept tenders
for exchange from, holders of Original Capital Securities in any jurisdiction
in which the Exchange Offer or the acceptance thereof would not be in
compliance with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to the
Exchange Offer means any person in whose name the Original Capital Securities
are registered on the books of the Trust or any other person who has obtained
a properly completed bond power from the registered holder, or any person
whose Original Capital Securities are held of record by DTC who desires to
deliver such Original Capital Security by book-entry transfer at DTC.
Pursuant to the Exchange Offer, Greater Bay will exchange as soon as
practicable after the date hereof, the Original Guarantee for the Exchange
Guarantee and the Original Junior Subordinated Debentures, in an amount
corresponding to the Original Capital Securities accepted for exchange, for a
like aggregate principal amount of the Exchange Junior Subordinated
Debentures.
The Exchange Guarantee and the Exchange Junior Subordinated Debentures have
been registered under the Securities Act.
TERMS OF THE EXCHANGE OFFER
The Trust hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to and including $30,000,000 aggregate Liquidation Amount of
Exchange Capital Securities for a like aggregate Liquidation Amount of
Original Capital Securities properly tendered on or prior to the Expiration
Date and not properly withdrawn in accordance with the procedures described
herein. The Trust will issue, promptly after the Expiration Date, an aggregate
Liquidation Amount of up to $30,000,000 of Exchange Capital Securities in
exchange for a like principal amount of outstanding Original Capital
Securities tendered and accepted in connection with the Exchange Offer.
Holders may tender their Original Capital Securities in whole or in part in a
Liquidation Amount of not less than $100,000 (100 Original Capital Securities)
or any integral multiple of $1,000 Liquidation Amount (one Capital Security)
in excess thereof.
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<PAGE>
The Exchange Offer is not conditioned upon any minimum Liquidation Amount of
Original Capital Securities being tendered. As of the date of this Prospectus,
$30,000,000 aggregate Liquidation Amount of the Original Capital Securities is
outstanding.
Holders of Original Capital Securities do not have any appraisal or
dissenters' rights in connection with the Exchange Offer. Original Capital
Securities that are not tendered for or are tendered but not accepted in
connection with the Exchange Offer will remain outstanding and be entitled to
the benefits of the Trust Agreement, but will not be entitled to any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Risk Factors--Consequences of a Failure to
Exchange Original Capital Securities" and "Description of Original
Securities."
If any tendered Original Capital Securities are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Original Capital
Securities will be returned, without expense, to the tendering holder thereof
promptly after the Expiration Date.
Holders who tender Original Capital Securities in connection with the
Exchange Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer taxes with
respect to the exchange of Original Capital Securities in connection with the
Exchange Offer. Greater Bay will pay all charges and expenses, other than
certain applicable taxes described herein, in connection with the Exchange
Offer. See "--Fees and Expenses."
NEITHER GREATER BAY, THE BOARD OF DIRECTORS OF GREATER BAY NOR ANY ISSUER
TRUSTEE OF THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF ORIGINAL CAPITAL
SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY
PORTION OF THEIR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER.
IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. EACH
HOLDER OF ORIGINAL CAPITAL SECURITIES MUST DECIDE WHETHER TO TENDER PURSUANT
TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF ORIGINAL CAPITAL
SECURITIES TO TENDER BASED ON SUCH HOLDER'S OWN FINANCIAL POSITION AND
REQUIREMENTS.
EXPIRATION DATE, EXTENSIONS, AMENDMENTS
The term "Expiration Date" means 5:00 p.m., Eastern time, on November 23 ,
1998 unless the Exchange Offer is extended by Greater Bay or the Trust (in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended).
Greater Bay and the Trust expressly reserve the right in their sole and
absolute discretion, subject to applicable law, at any time and from time to
time, (i) to delay the acceptance of the Original Capital Securities for
exchange, (ii) to terminate the Exchange Offer (whether or not any Original
Capital Securities have theretofore been accepted for exchange) if the Trust
determines, in its sole and absolute discretion, that any of the events or
conditions referred to under "--Conditions to the Exchange Offer" have
occurred or exist or have not been satisfied, (iii) to extend the Expiration
Date of the Exchange Offer and retain all Original Capital Securities tendered
pursuant to the Exchange Offer, subject, however, to the right of holders of
Original Capital Securities to withdraw their tendered Original Capital
Securities as described under "--Withdrawal Rights," and (iv) to waive any
condition or otherwise amend the terms of the Exchange Offer in any respect.
If the Exchange Offer is amended in a manner determined by Greater Bay and the
Trust to constitute a material change, or if Greater Bay and the Trust waive a
material condition of the Exchange Offer, Greater Bay and the Trust will
promptly disclose such amendment by means of a prospectus supplement that will
be distributed to the holders of the Original Capital Securities, and Greater
Bay and the Trust will extend the Exchange Offer to the extent required by
Rule 14e-1 under the Exchange Act.
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Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and
by making a public announcement thereof, and such announcement in the case of
an extension will be made no later than 9:00 a.m., Eastern time, on the next
Business Day after the previously scheduled Expiration Date. Without limiting
the manner in which Greater Bay and the Trust may choose to make any public
announcement and subject to applicable laws, Greater Bay and the Trust shall
have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by issuing a release to an appropriate news
agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE CAPITAL SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer, the
Trust will exchange, and will issue to the Exchange Agent, Exchange Capital
Securities for Original Capital Securities validly tendered and not withdrawn
promptly after the Expiration Date.
In all cases, delivery of Exchange Capital Securities in exchange for
Original Capital Securities tendered and accepted for exchange pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
(i) the book-entry confirmation described below under "--Procedures for
Tendering Original Capital Securities--Book-Entry Transfer" or (ii)
certificates representing such Original Capital Securities, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, and any other documents required by the
Letter of Transmittal.
Subject to the terms and conditions of the Exchange Offer, the Trust will be
deemed to have accepted for exchange, and thereby exchanged, Original Capital
Securities validly tendered and not withdrawn as, if and when the Trust gives
oral or written notice to the Exchange Agent (any such oral notice to be
promptly confirmed in writing) of the Trust's acceptance of such Original
Capital Securities for exchange pursuant to the Exchange Offer. The Exchange
Agent will act as agent for the Trust for the purpose of receiving tenders of
book-entry confirmations or certificates representing Original Capital
Securities, Letters of Transmittal and related documents, and as agent for
tendering holders for the purpose of receiving book-entry confirmations or
certificates representing Original Capital Securities, Letters of Transmittal
and related documents and transmitting Exchange Capital Securities to validly
tendered holders. Such exchange will be made promptly after the Expiration
Date. If for any reason whatsoever, acceptance for exchange or the exchange of
any Original Capital Securities tendered pursuant to the Exchange Offer is
delayed (whether before or after the Trust's acceptance for exchange of
Original Capital Securities) or the Trust extends the Exchange Offer or is
unable to accept for exchange or exchange Original Capital Securities tendered
pursuant to the Exchange Offer, then, without prejudice to the Trust's rights
set forth herein, the Exchange Agent may, nevertheless, on behalf of the Trust
and subject to Rule14e-1(c) under the Exchange Act, retain tendered Original
Capital Securities and such Original Capital Securities may not be withdrawn
except to the extenttendering holders are entitled to withdrawal rights as
described under "--Withdrawal Rights."
Pursuant to the Letter of Transmittal, a holder of Original Capital
Securities will warrant and agree that it has full power and authority to
tender, exchange, sell, assign and transfer Original Capital Securities, that
the Trust will acquire good, marketable and unencumbered title to the tendered
Original Capital Securities, free and clear of all liens, restrictions,
charges and encumbrances, and the Original Capital Securities tendered for
exchange are not subject to any adverse claims or proxies. The holder also
will warrant and agree that it will, upon request, execute and deliver any
additional documents deemed by the Trust or the Exchange Agent to be necessary
or desirable to complete the exchange, sale, assignment, and transfer of the
Original Capital Securities tendered pursuant to the Exchange Offer. Tendering
holders of Original Capital Securities that use ATOP will, by doing so,
acknowledge that they are bound by the terms of the Letter of Transmittal.
PROCEDURES FOR TENDERING ORIGINAL CAPITAL SECURITIES
Valid Tender
Except as set forth herein, in order for Original Capital Securities to be
validly tendered pursuant to the Exchange Offer, a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any
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required signature guarantees and any other required documents, must be
received by the Exchange Agent at its address set forth under "--Exchange
Agent," and either (i) tendered Original Capital Securities must be received
by the Exchange Agent, or (ii) such Original Capital Securities must be
tendered pursuant to the procedures for book-entry transfer set forth herein
and a book-entry confirmation must be received by the Exchange Agent, in each
case on or prior to the Expiration Date, or (iii) the guaranteed delivery
procedures set forth herein must be complied with.
If less than all of the Original Capital Securities are tendered, a
tendering holder should fill in the amount of Original Capital Securities
being tendered in the appropriate box on the Letter of Transmittal or so
indicate in an Agent's Message in lieu of the Letter of Transmittal. The
entire amount of Original Capital Securities delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF THE BOOK-ENTRY CONFIRMATIONS OR CERTIFICATES, THE
LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND
SOLE RISK OF THE TENDERING HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED
MAIL, RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY
SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
Book-Entry Transfer
For purposes of the Exchange Offer, the Exchange Agent will establish an
account with respect to the Original Capital Securities at DTC within two
Business Days after the date of this Prospectus. Any tendering financial
institution that is a participant in DTC's book-entry transfer facility system
must make a book-entry delivery of the Original Capital Securities by causing
DTC to transfer such Original Capital Securities into the Exchange Agent's
account at DTC in accordance with DTC's ATOP procedures for transfers. Such
holder of Original Capital Securities using ATOP should transmit its
acceptance to DTC on or prior to the Expiration Date (or comply with the
guaranteed delivery procedures set forth below). DTC will verify such
acceptance, execute a book-entry transfer of the tendered Original Capital
Securities into the Exchange Agent's account at DTC and then send to the
Exchange Agent confirmation of such book-entry transfer, including an agent's
message confirming that DTC has received an express acknowledgment from such
holder that such holder has received and agrees to be bound by the Letter of
Transmittal and that the Trust and Greater Bay may enforce the Letter of
Transmittal against such holder (a "book-entry confirmation").
A beneficial owner of Original Capital Securities that are held by or
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee or custodian is urged to contact such entity promptly if such
beneficial owner wishes to participate in the Exchange Offer.
Certificates
If the tender is not made through ATOP, certificates representing Original
Capital Securities, as well as the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, and any other required documents required by the Letter of
Transmittal, must be received by the Exchange Agent at its address set forth
under "--Exchange Agent" on or prior to the Expiration Date in order for such
tender to be effective (or the guaranteed delivery procedure set forth herein
must be complied with).
If less than all of the Original Capital Securities are tendered, a
tendering holder should fill in the amount of Original Capital Securities
being tendered in the appropriate box on the Letter of Transmittal. The entire
amount of Original Capital Securities delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated.
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Signature Guarantees
Certificates for the Original Capital Securities need not be endorsed and
signature guarantees on the Letter of Transmittal are unnecessary unless (i) a
certificate for the Original Capital Securities is registered in a name other
than that of the person surrendering the certificate or (ii) holder completes
the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" in the Letter of Transmittal. In the case of (i) or (ii) above,
such certificates for Original Capital Securities must be duly endorsed or
accompanied by a properly executed bond power, with the endorsement or
signature on the bond power and on the Letter of Transmittal guaranteed by a
firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an
"eligible guarantor institution," including (as such terms are defined
therein): (a) a bank; (b) a broker, dealer, municipal securities broker or
dealer or government securities broker or dealer; (c) a credit union; (d) a
national securities exchange, registered securities association or clearing
agency; or (e) a savings association that is a participant in a Securities
Transfer Association (an "Eligible Institution"), unless surrendered on behalf
of such Eligible Institution. See Instruction 1 to the Letter of Transmittal.
Delivery
The method of delivery of the book-entry confirmation or certificates
representing tendered Original Capital Securities, the Letter of Transmittal,
and all other required documents is at the option and sole risk of the
tendering holder, and delivery will be deemed made only when actually received
by the Exchange Agent. If delivery is by mail, registered mail, return receipt
requested, properly insured, or an overnight delivery service is recommended.
In all cases, sufficient time should be allowed to ensure timely delivery.
Notwithstanding any other provision hereof, the delivery of Exchange Capital
Securities in exchange for Original Capital Securities tendered and accepted
for exchange pursuant to the Exchange Offer will in all cases be made only
after timely receipt by the Exchange Agent of (i) a book-entry confirmation
with respect to such Original Capital Securities or (ii) certificates
representing Original Capital Securities and a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), together with any
required signature guarantees and any other documents required by the Letter
of Transmittal. Accordingly, the delivery of Exchange Capital Securities might
not be made to all tendering holders at the same time, and will depend upon
when book-entry confirmations with respect to Original Capital Securities or
certificates representing Original Capital Securities and other required
documents are received by the Exchange Agent.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT
Guaranteed Delivery
If a holder desires to tender Original Capital Securities pursuant to the
Exchange Offer and the certificates for such Original Capital Securities are
not immediately available or time will not permit all required documents to
reach the Exchange Agent on or prior to the Expiration Date, or the procedure
for book-entry transfer cannot be completed on a timely basis, such Original
Capital Securities may nevertheless be tendered, provided that all of the
following guaranteed delivery procedures are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) properly completed and duly executed notice to the Exchange Agent
guaranteeing delivery to the Exchange Agent of either certificates
representing Original Capital Securities or a book-entry confirmation in
compliance with the requirements set forth herein (the "Notice of
Guaranteed Delivery"), substantially in the form accompanying the Letter of
Transmittal, is received by the Exchange Agent, as provided herein, on or
prior to Expiration Date; and
(iii) a book-entry confirmation or the certificates representing all
tendered Original Capital Securities, in proper form for transfer, together
with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees and any other
documents required by the Letter of Transmittal, are, in any case, received
by the Exchange Agent within three New York Stock Exchange trading days
after the date of execution of such Notice of Guaranteed Delivery.
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The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
The Trust's acceptance for exchange of Original Capital Securities tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering holder and the Trust upon the terms and
subject to the conditions of the Exchange Offer.
Determination of Validity
All questions as to the form of documents, validity, eligibility (including
time of receipt) and acceptance for exchange of any tendered Original Capital
Securities will be determined by Greater Bay and the Trust, in their sole
discretion, whose determination shall be final and binding on all parties.
Greater Bay and the Trust reserve the absolute right, in their sole and
absolute discretion, to reject any and all tenders determined by them not to
be in proper form or the acceptance of which, or exchange for, may, in the
opinion of counsel to Greater Bay and the Trust, be unlawful. Greater Bay and
the Trust also reserve the absolute right, subject to applicable law, to waive
any of the conditions of the Exchange Offer as set forth under "--Conditions
to the Exchange Offer" or any condition or irregularity in any tender of
Original Capital Securities of any particular holder whether or not similar
conditions or irregularities are waived in the case of other holders.
The interpretation by Greater Bay and the Trust of the terms and conditions
of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding. No tender of Original Capital
Securities will be deemed to have been validly made until all irregularities
with respect to such tender have been cured or waived. None of Greater Bay,
the Trust, any affiliates or assigns of Greater Bay or the Trust, the Exchange
Agent or any other person shall be under any duty to give any notification of
any irregularities in tenders or incur any liability for failure to give any
such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney, or
any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by Greater Bay
and the Trust, proper evidence satisfactory to Greater Bay and the Trust, in
their sole discretion, of such person's authority to so act must be submitted.
RESALES OF EXCHANGE CAPITAL SECURITIES
The Trust is making the Exchange Offer for the Exchange Capital Securities
in reliance on the position of the Staff of the Commission as set forth in
certain interpretive letters addressed to third parties in other transactions.
However, neither Greater Bay nor the Trust sought its own interpretive letter
and there can be no assurance that the Staff of the Commission would make a
similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
Staff of the Commission, and subject to the two immediately following
sentences, Greater Bay and the Trust believe that Exchange Capital Securities
issued pursuant to this Exchange Offer in exchange for Original Capital
Securities may be offered for resale, resold and otherwise transferred by a
holder thereof (other than a holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such Exchange Capital Securities are acquired in
the ordinary course of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such Exchange Capital Securities. However, any holder of Original Capital
Securities who is an "affiliate" of Greater Bay or the Trust or who intends to
participate in the Exchange Offer for the purpose of distributing Exchange
Capital Securities, or any broker-dealer who purchased Original Capital
Securities from the Trust to resell pursuant to Rule144A or any other
available exemption under the Securities Act, (i) will not be able to rely on
the interpretations of the Staff of the Commission set forth in the above-
mentioned interpretive letters, (ii) will not be permitted or entitled to
tender such Original Capital Securities in the Exchange Offer and (iii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or other transfer of such
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Original Capital Securities unless such sale is made pursuant to an exemption
from such requirements. In addition, as described herein, if any broker-dealer
holds Original Capital Securities acquired for its own account as a result of
market-making or other trading activities and exchanges such Original Capital
Securities for Exchange Capital Securities, then such broker-dealer must
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of such Exchange Capital Securities.
Each holder of Original Capital Securities who wishes to exchange Original
Capital Securities for Exchange Capital Securities in the Exchange Offer will
be required to represent that (i) it is not an "affiliate" of Greater Bay or
the Trust, (ii) any Exchange Capital Securities to be received by it are being
acquired in the ordinary course of its business, (iii) it has no arrangement
or understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such Exchange Capital Securities, and (iv)
if such holder is not a broker-dealer, such holder is not engaged in, and does
not intend to engage in, a distribution (within the meaning of the Securities
Act) of such Exchange Capital Securities. In addition, Greater Bay and the
Trust may require such holder, as a condition to such holder's eligibility to
participate in the Exchange Offer, to furnish to Greater Bay and the Trust (or
an agent thereof) in writing information as to the number of "beneficial
owners" (within the meaning of Rule 13d-3 under the Exchange Act) on behalf of
whom such holder holds the Original Capital Securities to be exchanged in the
Exchange Offer. Each broker-dealer that receives Exchange Capital Securities
for its own account pursuant to the Exchange Offer must acknowledge that it
acquired the Original Capital Securities for its own account as the result of
market-making activities or other trading activities and must agree that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Capital Securities. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. Based on the position taken by the Staff of
the Commission in the interpretive letters referred to above, Greater Bay and
the Trust believe that Participating Broker-Dealers who acquired Original
Capital Securities for their own accounts as a result of market-making
activities or other trading activities may fulfill their prospectus delivery
requirements with respect to the Exchange Capital Securities received upon
exchange of such Original Capital Securities (other than Original Capital
Securities which represent an unsold allotment from the initial sale of the
Original Capital Securities) with a prospectus meeting the requirements of the
Securities Act, which may be the prospectus prepared for an exchange offer so
long as it contains a description of the plan of distribution with respect to
the resale of such Exchange Capital Securities. Accordingly, this Prospectus,
as it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer during the period referred to below in connection
with resales of Exchange Capital Securities received in exchange for Original
Capital Securities where such Original Capital Securities were acquired by
such Participating Broker-Dealer for its own account as a result of market-
making or other trading activities. Subject to certain provisions set forth in
the Registration Rights Agreement, Greater Bay and the Trust have agreed that
this Prospectus, as it may be amended or supplemented from time to time, may
be used by a Participating Broker-Dealer in connection with resales of such
Exchange Capital Securities for a period ending 90 days after the Expiration
Date (subject to extension under certain limited circumstances described
herein) or, if earlier, when all such Exchange Capital Securities have been
disposed of by such Participating Broker-Dealer. See "Plan of Distribution."
However, a Participating Broker-Dealer who intends to use this Prospectus in
connection with the resale of Exchange Capital Securities received in exchange
for Original Capital Securities pursuant to the Exchange Offer must notify
Greater Bay or the Trust, or cause Greater Bay or the Trust to be notified, on
or prior to the Expiration Date, that it is a Participating Broker-Dealer.
Such notice may be given in the space provided for that purpose in the Letter
of Transmittal or may be delivered to the Exchange Agent at its address set
forth herein under "--Exchange Agent." Any Participating Broker-Dealer who is
an "affiliate" of Greater Bay or the Trust may not rely on such interpretive
letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Original
Capital Securities pursuant to the Exchange Offer will be deemed to have
agreed, by execution of the Letter of Transmittal, that upon receipt of notice
from Greater Bay or the Trust of the occurrence of any event or the discovery
of (i) any fact that makes any statement contained or incorporated by
reference in this Prospectus untrue in any material respect or (ii) any
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fact that causes this Prospectus to omit to state a material fact necessary in
order to make the statements contained or incorporated by reference herein, in
light of the circumstances under which they were made, not misleading, or
(iii) of the occurrence of certain other events specified in the Registration
Rights Agreement, such Participating Broker-Dealer will suspend the sale of
Exchange Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable) pursuant to this Prospectus until
Greater Bay or the Trust has amended or supplemented this Prospectus to
correct such misstatement or omission and has furnished copies of the amended
or supplemented Prospectus to such Participating Broker-Dealer, or Greater Bay
or the Trust has given notice that the sale of the Exchange Capital Securities
(or the Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be. If Greater Bay or the Trust
gives such notice to suspend the sale of the Exchange Capital Securities (or
the Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable), it shall extend the 90-day period referred to above during which
Participating Broker-Dealers are entitled to use this Prospectus in connection
with the resale of Exchange Capital Securities by the number of days during
the period from and including the date of the giving of such notice to and
including the date when Participating Broker-Dealers shall have received
copies of the amended or supplemented Prospectus necessary to permit resales
of the Exchange Capital Securities or to and including the date on which
Greater Bay or the Trust has given notice that the sale of Exchange Capital
Securities (or the Exchange Guarantee or the Exchange Junior Subordinated
Debentures, as applicable) may be resumed, as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Original Capital Securities
may be withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective a written, telegraphic or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at its address set forth under "--Exchange Agent" on or
prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Original Capital Securities to be
withdrawn, the aggregate principal amount of Original Capital Securities to be
withdrawn, and (if certificates for such Original Capital Securities have been
tendered) the name of the registered holder of the Original Capital Securities
as set forth on the such certificates if different from that of the person who
tendered such Original Capital Securities. If certificates representing
Original Capital Securities have been delivered or otherwise identified to the
Exchange Agent, then prior to the physical release of such certificates, the
tendering holder must submit the serial numbers shown on the particular
certificates to be withdrawn and the signature on the notice of withdrawal
must be guaranteed by an Eligible Institution, except in the case of Original
Capital Securities tendered for the account of an Eligible Institution. If
Original Capital Securities have been tendered pursuant to the procedures for
book-entry transfer set forth in "--Procedures for Tendering Original Capital
Securities--Book-Entry Transfer," the notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawal of
Original Capital Securities. Withdrawals of tenders of Original Capital
Securities may not be rescinded. Original Capital Securities properly
withdrawn will not be deemed validly tendered for purposes of the Exchange
Offer, but may be retendered at any subsequent time on or prior to the
Expiration Date by following any of the procedures described above under "--
Procedures for Tendering Original Capital Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Trust, in its
sole discretion, whose determination shall be final and binding on all
parties. None of Greater Bay, the Trust, any affiliates or assigns of Greater
Bay or the Trust, the Exchange Agent or any other person shall be under any
duty to give any notification of any irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
Any Original Capital Securities that have been tendered but are withdrawn will
be returned to the holder thereof promptly after withdrawal.
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DISTRIBUTIONS ON THE EXCHANGE CAPITAL SECURITIES
Holders of the Capital Securities will be entitled to receive cumulative
Distributions arising from the payment of interest on the Junior Subordinated
Debentures, accumulating from August 12, 1998, and payable quarterly in
arrears on each Interest Payment Date (as defined herein), commencing on
December 15, 1998. The record dates will be the first day of the month in
which the relevant payment occurs. In the event the Exchange Offer is
consummated prior to the first record date, December 1, 1998, each Exchange
Capital Security will pay cumulative Distributions from and after August 12,
1998. However, in the event the Exchange Offer is consummated after December
1, 1998, Distributions will be paid on the Original Capital Securities
accumulated from and after August 12, 1998 through December 15, 1998, and the
Exchange Capital Securities then will pay Distributions and from and after
December 15, 1998. The amount of each Distribution with respect to Capital
Securities will include amounts accrued to, but excluding the date the
Distribution is due. Because of the foregoing procedures regarding
Distributions, the amount of the Distributions received by holders whose
Original Capital Securities are accepted for exchange will not be affected by
the exchange.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any extension
of the Exchange Offer, Greater Bay and the Trust will not be required to
accept for exchange, or to exchange, any Original Capital Securities for any
Exchange Capital Securities, and, as described herein, may terminate the
Exchange Offer (whether or not any Original Capital Securities have
theretofore been accepted for exchange) or may waive any conditions to or
amend the Exchange Offer, if any of the following conditions have occurred or
exists or have not been satisfied:
(i) there shall occur a change in the current interpretation by the Staff
of the Commission that permits the Exchange Capital Securities issued
pursuant to the Exchange Offer in exchange for Original Capital Securities
to be offered for resale, resold and otherwise transferred by holders
thereof (other than broker-dealers and any such holder that is an
"affiliate" of Greater Bay or the Trust within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Capital Securities are acquired in the ordinary course of such
holders' business and such holders have no arrangement or understanding
with any person to participate in the distribution of such Exchange Capital
Securities; or
(ii) any law, statute, rule or regulation shall have been adopted or
enacted which, in the judgment of Company or the Trust, would reasonably be
expected to impair its ability to proceed with the Exchange Offer; or
(iii) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement, or proceedings shall have been initiated or, to the knowledge of
Greater Bay or the Trust, threatened for that purpose, or any governmental
approval has not been obtained, which approval Greater Bay or the Trust
shall, in its sole discretion, deem necessary for the consummation of the
Exchange Offer as contemplated hereby; or
(iv) Greater Bay determines in good faith that there is a reasonable
likelihood that, or a material uncertainty exists as to whether,
consummation of the Exchange Offer would result in an adverse tax
consequence to the Trust or Greater Bay.
If Greater Bay or the Trust determine in its sole and absolute discretion
that any of the foregoing events or conditions has occurred or exists or has
not been satisfied, it may, subject to applicable law, terminate the Exchange
Offer (whether or not any Original Capital Securities have theretofore been
accepted for exchange) or may waive any such condition or otherwise amend the
terms of the Exchange Offer in any respect. If such waiver or amendment
constitutes a material change to the Exchange Offer, Greater Bay or the Trust
will promptly disclose such waiver or amendment by means of a prospectus
supplement that will be distributed to the registered holders of the Original
Capital Securities and will extend the Exchange Offer to the extent required
by Rule 14e-1 under the Exchange Act.
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EXCHANGE AGENT
Wilmington Trust Company has been appointed as Exchange Agent for the
Exchange Offer. Delivery of the Letters of Transmittal and any other required
documents, questions, requests for assistance, and requests for additional
copies of this Prospectus or of the Letter of Transmittal should be directed
to the Exchange Agent as follows:
BY HAND, OVERNIGHT DELIVERY, REGISTERED OR CERTIFIED MAIL:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Department
Confirm by Telephone: (302) 651-1079
Facsimile Transmissions: (302) 651-1562
(ELIGIBLE INSTITUTIONS ONLY)
Delivery to other than the above address or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
Greater Bay has agreed to pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for its reasonable out-of-pocket
expenses in connection therewith. Greater Bay will also pay brokerage houses
and other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this Prospectus and related
documents to the beneficial owners of Original Capital Securities, and in
handling or tendering for their clients.
Holders who tender their Original Capital Securities for exchange will not
be obligated to pay any transfer taxes in connection therewith. If, however,
Exchange Capital Securities are to be delivered to, or are to be issued in the
name of, any person other than the registered holder of the Original Capital
Securities tendered, or if a transfer tax is imposed for any reason other than
the exchange of Original Capital Securities in connection with the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
Neither Greater Bay nor the Trust will make any payment to brokers, dealers
or others soliciting acceptances of the Exchange Offer.
The Registration Rights Agreement is governed by, and construed in
accordance with, the laws of the State of New York. The summary herein of
certain provisions of the Registration Rights 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 Registration Rights Agreement, a form of which is
available upon request to Greater Bay. See "Information Delivered and
Incorporated by Reference." In addition, the information set forth above
concerning certain interpretations of and positions taken by the Staff of the
Commission is not intended to constitute legal advice, and prospective
investors should consult their own legal advisors with respect to such
matters.
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DESCRIPTION OF EXCHANGE SECURITIES
DESCRIPTION OF EXCHANGE CAPITAL SECURITIES
Pursuant to the terms of the Trust Agreement, the Issuer Trustees on behalf
of the Trust will issue the Exchange Capital Securities. The Exchange Capital
Securities will represent beneficial interests in the Trust and the holders
thereof will be entitled to a preference over the Common Securities in certain
circumstances with respect to Distributions and amounts payable on redemption
of the Trust Securities or liquidation of the Trust. See "--Subordination of
Common Securities." The Trust Agreement has been qualified under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). This summary of
certain provisions of the Exchange Capital Securities, the Common 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.
GENERAL
The Exchange Capital Securities will be limited to $30,000,000 aggregate
Liquidation Amount at any one time outstanding. The Exchange Capital
Securities will rank pari passu, and payments will be made thereon pro rata,
with the Common Securities except as described under "--Subordination of
Common Securities." Legal title to the Exchange Junior Subordinated Debentures
will be held by the Property Trustee on behalf of the Trust in trust for the
benefit of the holders of the Trust Securities. The Exchange Guarantee will
not guarantee payment of Distributions or amounts payable on redemption of the
Exchange Capital Securities or liquidation of the Trust when the Trust does
not have funds legally available for such payments. See "--Description of
Exchange Guarantee."
DISTRIBUTIONS
Holders of the Capital Securities will be entitled to receive cumulative
Distributions arising from the payment of interest on the Junior Subordinated
Debentures, accumulating from August 12, 1998, and payable quarterly in
arrears on March 15, June 15, September 15 and December 15 of each year,
commencing on December 15, 1998. The record dates will be the first day of the
month in which the relevant payment occurs. In the event the Exchange Offer is
consummated prior to the first record date, December 1, 1998, each Exchange
Capital Security will pay cumulative Distributions from and after August 12,
1998. However, in the event the Exchange Offer is consummated after December
1, 1998, Distributions will be paid on the Original Capital Securities
accumulated from and after August 12, 1998 through December 15, 1998, and the
Exchange Capital Securities then will pay Distributions and from and after
December 15, 1998. The amount of each Distribution with respect to Exchange
Capital Securities will include amounts accrued to, but excluding the date the
Distribution is due. Because of the foregoing procedures regarding
Distributions, the amount of the Distributions received by holders whose
Original Capital Securities are accepted for exchange will not be affected by
the exchange. The amount of Distributions payable for any period will be
computed on the basis of the actual number of days elapsed in such period and
a 360-day year. In the event that any date on which Distributions are payable
on the Exchange Capital Securities is not a Business Day (as defined below),
payment of the Distribution 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 to any such delay), except that if such next succeeding
Business Day falls in the next succeeding calendar month, such payment 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 the foregoing, a "Distribution Date"). A "Business
Day" shall mean any day other than a Saturday or a Sunday or a day on which
banking institutions in New York, New York, San Francisco, California, or
Wilmington, Delaware are authorized or required by law or executive order to
remain closed.
The Distribution Rate on the Exchange Capital Securities for each quarter or
other period for which Distributions are payable will be determined on the
Determination Date (as defined below) for such quarter or other period for
which Distributions are payable and will be a per annum rate, reset quarterly,
equal to 3-month LIBOR (determined as set forth below), plus 150 basis points,
and will be effective as of the first day of such quarter or other period for
which Distributions are payable.
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DETERMINATION OF 3-MONTH LIBOR
On each Determination Date, the Calculation Agent will calculate the
Distribution Rate, based on 3-month LIBOR, for the Distribution period
commencing on the second London Banking Day immediately following such
Determination Date. "3-month LIBOR" means, with respect to a Distribution
period relating to a Distribution Date, the London interbank offered rate for
three-month, Eurodollar deposits determined in the following order of
priority:
(a) the rate (expressed as a percentage per annum) for Eurodollar
deposits having a three-month maturity that appears on Telerate Page 3750
as of 11:00 a.m. (London time) on the related Determination Date;
(b) if such rate does not appear on Telerate Page 3750 as of 11:00 a.m.
(London time) on the related Determination Date, 3-month LIBOR will be the
arithmetic mean of the rates (expressed as percentages per annum) for
Eurodollar deposits having a three-month maturity that appear on Reuters
Monitor Money Rates Page LIBO ("Reuters Page LIBO") as of 11:00 a.m.
(London time) on such Determination Date;
(c) if such rate does not appear on Reuters Page LIBO as of 11:00 a.m.
(London time) on the related Determination Date, the Calculation Agent will
request the principal London offices of four leading banks in the London
interbank market to provide such banks' offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for
Eurodollar deposits having a three-month maturity as of 11:00 a.m. (London
time) on such Determination Date. If at least two quotations are provided,
3-month LIBOR will be the arithmetic mean of such quotations;
(d) if fewer than two such quotations are provided as requested in clause
(c) above, the Calculation Agent will request four major New York City
banks to provide such banks' offered quotations (expressed as percentages
per annum) to leading European banks for loans in Eurodollars as of 11:00
a.m. (London time) on such Determination Date. If at least two such
quotations are provided, 3-month LIBOR will be the arithmetic mean of such
quotations; and
(e) if fewer than two such quotations are provided as requested in clause
(d) above, 3-month LIBOR will be 3-month LIBOR determined with respect to
the interest period immediately preceding such current interest period.
If the rate for Eurodollar deposits having a three-month maturity that
initially appears on Telerate Page 3750 or Reuters Page LIBO, as the case may
be, as of 11:00 a.m. (London time) on the related Determination Date is
superseded on Telerate Page 3750 or Reuters Page LIBO, as the case may be, by
a corrected rate before 12:00 noon (London time) on such Determination Date,
the corrected rate as so substituted on the applicable page will be the
applicable 3-month LIBOR for such Determination Date.
As used herein:
"Calculation Agent" means Wilmington Trust Company.
"Determination Date" means the date that is two London Banking Days
preceding the first day of any period for which a Distribution will be
payable.
"London Banking Day" means a day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
"Telerate Page 3750" means the display designated as "Page 3750" on the
Dow Jones Telerate Service (or such other page as may replace Page 3750 on
that service or such other service or services as may be nominated by the
British Bankers' Association as the information vendor for the purpose of
displaying London interbank offered rates for U.S. dollar deposits).
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All percentages resulting from any calculations on the Exchange Capital
Securities will be rounded, if necessary, to the nearest one hundred-
thousandth of a percentage point, with five one-millionths of a percentage
point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655%
(or .0987655)), and all dollar amounts used in or resulting from such
calculation will be rounded to the nearest cent (with one-half cent being
rounded upward).
On the Determination Date, the Calculation Agent shall notify Greater Bay
and the Paying Agent of the applicable Distribution Rate in effect for the
related Distribution period. The Calculation Agent shall, upon the request of
the holder of any Exchange Capital Securities, provide the Distribution Rate
then in effect. All calculations made by the Calculation Agent in the absence
of manifest error shall be conclusive for all purposes and binding on Greater
Bay and the holders of the Exchange Capital Securities.
OPTION TO EXTEND INTEREST PAYMENT DATE
So long as no Debenture Event of Default shall have occurred and be
continuing, Greater Bay will have the right under the Indenture to elect to
defer the payment of interest on the Exchange Junior Subordinated Debentures,
at any time or from time to time, for a period not exceeding 20 consecutive
quarterly periods with respect to each Extension Period, provided that no
Extension Period shall end on a date other than an Interest Payment Date, or
extend beyond the Stated Maturity Date. Upon any such election, quarterly
Distributions on the Exchange Capital Securities will be deferred by the Trust
during such Extension Period. Distributions to which holders of the Exchange
Capital Securities are entitled during any such Extension Period will
accumulate additional Distributions thereon at the applicable periodic
Distribution Rate thereof, compounded quarterly from the relevant Distribution
Date, but not exceeding the interest rate then accruing on the Exchange Junior
Subordinated Debentures. The term "Distributions," as used herein, shall
include any such additional Distributions.
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 quarterly periods, to end
on a date other than an Interest Payment Date or to extend beyond the Stated
Maturity Date. 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 Debenture Trustee notice of its election of any such
Extension Period (or an extension thereof) at least five Business Days prior
to the earlier of: (i) the date the Distributions on the Exchange Capital
Securities would have been payable except for the election to begin such
Extension Period; and (ii) the date the Administrative Trustees are required
to give notice to any securities exchange or automated quotation system or to
holders of such Exchange Capital Securities of the record date or the date
such Distributions are payable, but in any event not less than five Business
Days prior to such record date. There is no limitation on the number of times
that Greater Bay may elect to begin an Extension Period. See "Description of
Exchange Junior Subordinated Debentures--Option to Extend Interest Payment
Date" and "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 (which
includes common and preferred stock); (ii) make any payment of principal of or
premium, if any, on or repay, repurchase or redeem any debt securities of
Greater Bay (including Other Debentures) that rank pari passu with or junior
in right of payment to the Exchange 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 (including Other
Guarantees) if such guarantee ranks pari passu with or junior in right of
payment to the Exchange Junior Subordinated Debentures (other than (a)
dividends or distributions in Greater Bay's capital stock (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 Exchange Guarantee,
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(d) as a result of a reclassification of Greater Bay's capital stock or the
exchange or conversion of one class or series of Greater Bay's capital stock
for another class or series of Greater Bay's capital stock, (e) the purchase
of fractional interests in shares of Greater Bay's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged and (f) 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 or any of Greater Bay's dividend
reinvestment plans). Greater Bay has no current intention to exercise its
right to defer payments of interest on the Exchange Junior Subordinated
Debentures.
The revenue of the Trust available for distribution to holders of the
Exchange Capital Securities will be limited to payments under the Exchange
Junior Subordinated Debentures in which the Trust will invest the proceeds
from the issuance and sale of the Trust Securities. See "Description of
Exchange Junior Subordinated Debentures--General." If Greater Bay does not
make interest payments on the Exchange Junior Subordinated Debentures, the
Property Trustee will not have funds available to pay Distributions on the
Exchange Capital Securities. The payment of Distributions (if and to the
extent the Trust has funds on hand legally available for the payment of such
Distributions) will be guaranteed by Greater Bay on a limited basis as set
forth herein under "Description of Exchange Guarantee."
REDEMPTION
Upon the repayment on the Stated Maturity Date or prepayment in whole or in
part prior to the Stated Maturity Date of the Junior Subordinated Debentures
(other than following the distribution of the Junior Subordinated Debentures
to the holders of the Trust Securities), the proceeds from such repayment or
prepayment shall be applied by the Property Trustee to redeem a Like Amount 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 applicable Redemption
Price, which shall be equal to 100% of the corresponding principal amount of
Exchange Junior Subordinated Debentures so repaid or prepaid, as the case may
be, plus accrued and unpaid interest thereon to the date of redemption. See
"--Description of Exchange Junior Subordinated Debentures--Optional
Prepayment" and "--Special Event Prepayment." If less than all of the Exchange
Junior Subordinated Debentures are to be prepaid on a Redemption Date, then
the proceeds of such prepayment shall be allocated pro rata to the Trust
Securities.
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having a Liquidation Amount equal to the
principal amount of Junior Subordinated Debentures to be paid in accordance
with their terms and (ii) with respect to a distribution of Junior
Subordinated Debentures upon the liquidation of the Trust, Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the holder to whom such Exchange Junior Subordinated
Debentures are distributed.
Greater Bay will have the option to prepay the Junior Subordinated
Debentures, (i) in whole or in part, on or after the Initial Optional
Redemption Date, and (ii) in whole but not in part, at any time prior to the
Initial Optional Redemption Date, upon the occurrence of a Special Event, at
the Prepayment Price, in each case subject to the receipt of any required
regulatory approval. See "--Description of Exchange Junior Subordinated
Debentures--Optional Prepayment" and "--Special Event Prepayment."
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF EXCHANGE JUNIOR SUBORDINATED
DEBENTURES
Greater Bay will have the right at any time to dissolution of the Trust and,
after satisfaction of liabilities to creditors of the Trust as required by
applicable law, to cause Junior Subordinated Debentures to be distributed to
the holders of the Trust Securities in liquidation of the Trust. Such right is
subject to (i) the Administrative Trustees having received an opinion of
counsel to the effect that such distribution will not cause the holders of
Exchange Capital Securities to recognize gain or loss for federal income tax
purposes and (ii) Greater Bay having received any required regulatory
approval.
The Trust shall automatically dissolve upon 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 Exchange Junior Subordinated
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Debentures to the holders of the Trust Securities, if Greater Bay, as Sponsor,
has given written direction to the Property Trustee to terminate the Trust
(which direction is optional and, except as described above, wholly within the
discretion of Greater Bay, as Sponsor); (iii) redemption of all of the Trust
Securities as described under "--Redemption;" (iv) expiration of the term of
the Trust; and (v) the entry of an order for the dissolution of the Trust by a
court of competent jurisdiction.
If a dissolution occurs as described in clause (i), (ii), (iv), or (v)
above, the Trust shall be liquidated by the Issuer Trustees as expeditiously
as the Issuer Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of the Trust as provided by
applicable law, to the holders of the Trust Securities a Like Amount of the
Exchange Junior Subordinated Debentures, unless such distribution is
determined by the Property Trustee not to be practicable, in which event such
holders will be entitled to receive out of the assets of the Trust legally
available for distribution to holders, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, an amount equal to the
aggregate of the Liquidation Amount plus accumulated 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 the Trust has insufficient assets legally available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Trust Securities shall be paid on a pro rata basis, except that
if a Debenture Event of Default has occurred and is continuing, the Exchange
Capital Securities shall have a priority over the Common Securities. See "--
Subordination of Common Securities." If an early dissolution occurs, the
Exchange Junior Subordinated Debentures will be subject to optional
prepayment, in whole or in part, on or after the Initial Optional Redemption
Date, unless such termination relates to the circumstances described in clause
(v) above, in which case the Exchange Junior Subordinated Debentures will be
subject to optional prepayment, in whole but not in part, on or after the
Initial Optional Redemption Date.
After the liquidation date is fixed for any distribution of Exchange Junior
Subordinated Debentures to holders of the Trust Securities, (i) the Trust
Securities will no longer be deemed to be outstanding, (ii) DTC or its
nominee, will receive, in respect of each Global Capital Security held by it,
a registered global certificate representing the Exchange Junior Subordinated
Debentures to be delivered upon such distribution and (iii) any certificates
representing Trust Securities not held by DTC or its nominee will be deemed to
represent Exchange Junior Subordinated Debentures having a principal amount
equal to the Liquidation Amount of such Trust Securities, and bearing accrued
and unpaid interest in an amount equal to the accumulated and unpaid
Distributions on such Trust Securities until such certificates are presented
to the Administrative Trustees or their agent for cancellation, whereupon
Greater Bay will issue to such holder, and the Debenture Trustee will
authenticate, a certificate representing such Exchange Junior Subordinated
Debentures.
There can be no assurance as to the market prices for the Exchange Capital
Securities or the Exchange Junior Subordinated Debentures that may be
distributed in exchange for the Trust Securities if a dissolution and
liquidation of the Trust were to occur. Accordingly, the Exchange Capital
Securities that an investor may purchase, or the Exchange Junior Subordinated
Debentures that the investor may receive on dissolution and liquidation of the
Trust, may trade at a discount to the price that the investor paid to purchase
the Exchange Capital Securities offered hereby.
REDEMPTION PROCEDURES
If applicable, Trust Securities shall be redeemed at the applicable
Redemption Price with the proceeds from the contemporaneous repayment or
prepayment of the Junior Subordinated Debentures. Any redemption of Trust
Securities shall be made and the applicable Redemption Price shall be payable
on the Redemption Date only to the extent that the Trust has funds legally
available for the payment of such applicable Redemption Price. See "--
Subordination of Common Securities."
If the Trust gives a notice of redemption for the Exchange Capital
Securities, then, by 12:00 noon, Eastern time, on the Redemption Date, to the
extent funds are legally available, with respect to the Exchange Capital
Securities held in global form by DTC or its nominees, the Property Trustee
will deposit or cause the Paying
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Agent to deposit irrevocably with DTC funds sufficient to pay the applicable
Redemption Price. See "--Form, Denomination, Book-Entry Procedures and
Transfer." With respect to the Exchange Capital Securities held in
certificated form, the Property Trustee, to the extent funds are legally
available, will irrevocably deposit with the Paying Agent for the Exchange
Capital Securities funds sufficient to pay the applicable Redemption Price and
will give the Paying Agent irrevocable instructions and authority to pay the
applicable Redemption Price to the holders thereof upon surrender of their
certificates evidencing the Exchange Capital Securities. See "--Payment and
Paying Agency." Notwithstanding the foregoing, Distributions payable on or
prior to the Redemption Date shall be payable to the holders of such Exchange
Capital 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
Exchange Capital Securities called for redemption will cease, except the right
of the holders of such Exchange Capital Securities to receive the applicable
Redemption Price, but without interest on such Redemption Price, and such
Exchange Capital Securities will cease to be outstanding. In the event that
any Redemption Date of Exchange Capital Securities is not a Business Day, then
the applicable Redemption Price payable on such date will be paid 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 next succeeding
Business Day falls in the next calendar year, such payment shall be made on
the immediately preceding Business Day. In the event that payment of the
applicable Redemption Price is improperly withheld or refused and not paid
either by the Trust or by Greater Bay pursuant to the Exchange Guarantee as
described under "--Description of Exchange Guarantee," (i) Distributions on
Exchange Capital Securities will continue to accumulate at the then-applicable
rate, from the Redemption Date originally established by the Trust to the date
such applicable Redemption Price is actually paid and (ii) the actual payment
date will be the Redemption Date for purposes of calculating the applicable
Redemption Price.
Notice of any redemption will be mailed at least 30 days but not more than
60 days prior to the Redemption Date to each holder of Trust Securities at its
registered address. Unless Greater Bay defaults in payment of the applicable
Redemption Price on, or in the repayment of, the Exchange Junior Subordinated
Debentures, on and after the Redemption Date, Distributions will cease to
accrue on the Trust Securities called for redemption.
Subject to applicable law (including, without limitation, United States
federal securities law), Greater Bay or its subsidiaries may at any time and
from time to time purchase outstanding Exchange Capital Securities by tender,
in the open market or by private agreement.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Trust
Securities, as applicable, shall be made pro rata based on the Liquidation
Amount of the Trust 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 Capital 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, 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 Capital Securities then due and
payable.
In the case of any Event of Default under the Trust Agreement, Greater Bay
as holder of the Common Securities will be deemed to have waived any right to
act with respect to such Event of Default until the effect of such Event of
Default shall have been cured, waived or otherwise eliminated. Until any such
Event of Default has been so cured, waived or otherwise eliminated, the
Property Trustee shall act solely on behalf of the holders of the Capital
Securities and not on behalf of Greater Bay as holder of the Common
Securities, and only the holders of the Capital Securities will have the right
to direct the Property Trustee to act on their behalf.
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EVENTS OF DEFAULT; NOTICE
The occurrence of a Debenture Event of Default constitutes an "Event of
Default" under the Trust Agreement. See "--Description of Exchange Junior
Subordinated Debentures--Debenture Events of Default."
Within ten (10) 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 Exchange Capital
Securities, the Administrative Trustees and Greater Bay, as Sponsor, unless
such Event of Default shall have been cured or waived. Greater Bay, as
Sponsor, 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 Exchange
Capital Securities shall have a preference over the Common Securities as
described under "--Liquidation of the Trust and Distribution of Exchange
Junior Subordinated Debentures" and "--Subordination of Common Securities."
REMOVAL OF ISSUER TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee 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 Capital
Securities. In no event will the holders of the Exchange Capital 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 an Issuer
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 a Debenture 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's
property may at any time be located, 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's 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 the power to make any such appointment of a co-
trustee.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any Person 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 Person shall be otherwise qualified and
eligible.
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 as an
entirety or substantially as an entirety to any corporation or other Person,
except as described herein or as otherwise described under "--Liquidation of
the Trust and Distribution of Exchange Junior Subordinated Debentures." The
Trust may, at the request of Greater Bay, as Sponsor, with the consent of the
Administrative Trustees but without the consent of the holders of the Exchange
Capital Securities,
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merge with or into, consolidate, amalgamate, or be replaced by or convey,
transfer or lease its properties and assets as an entirety or 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 Trust Securities or (b)
substitutes for the Trust Securities other securities having substantially the
same terms as the Trust Securities (the "Successor Securities") so long as the
Successor Securities rank the same as the Trust 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 with
respect to the Exchange 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 Securities are then listed or quoted, if any,
(iv) if the Exchange Capital Securities (including any Successor Securities)
are rated by any nationally recognized statistical rating organization prior
to such transaction, such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not cause the Exchange Capital Securities
(including any Successor Securities) or, if the Exchange Junior Subordinated
Debentures are so rated, the Exchange Junior Subordinated Debentures, to be
downgraded by any such 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 Trust 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, Greater Bay has
received an opinion from independent counsel to the Trust 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 Securities
(including any Successor Securities) in any material respect (other than any
dilution of such holders' interests in the new entity) 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 Investment Company Act of 1940, as
amended (the "Investment Company Act"), and (viii) Greater Bay or any
permitted successor or assignee 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 Exchange
Guarantee and the Common Guarantee. Notwithstanding the foregoing, the Trust
shall not, except with the consent of holders of 100% in Liquidation Amount of
the Trust Securities, consolidate, amalgamate, merge with or into, or be
replaced by or convey, transfer or lease its properties and assets as an
entirety or 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 not to be classified as a
grantor trust for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided herein and under "--Mergers, Consolidations,
Amalgamations or Replacements of the Trust" and "--Description of Exchange
Guarantee--Amendments and Assignment" and as otherwise required by law and the
Trust Agreement, the holders of the Exchange Capital 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 provision 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 the Trust will be classified for
federal income tax purposes as a grantor trust at all times that any Trust
Securities are outstanding or to ensure that the Trust will not be required to
register as an "investment company" under the Investment Company Act or (iii)
to modify, eliminate or add any provisions of the Trust Agreement to such
extent as shall be necessary to enable the Trust or Greater Bay to conduct an
Exchange Offer in the manner contemplated by the Registration Rights
Agreement; provided, however, that in the case of clauses (i) and (iii), such
action shall
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not adversely affect in any material respect the interests of the holders of
the Trust Securities. Any amendments of the Trust Agreement pursuant to the
foregoing 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 Greater Bay (i) with the consent of holders representing a
majority (based upon Liquidation Amount) of the outstanding Trust Securities
and (ii) upon receipt by the Issuer Trustees of an opinion of counsel
experienced in such matters 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 the Trust's status as a grantor trust for federal income tax
purposes or the Trust'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. The Exchange Capital Securities and any
Original Capital Securities that remain outstanding after consummation of the
Exchange Offer will vote together as a single class for purposes of
determining whether holders of the requisite percentage in outstanding
Liquidation Amount thereof have taken certain actions or exercised certain
rights under the Trust Agreement.
So long as any Exchange 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
Debenture Trustee, or execute any trust or power conferred on the Debenture
Trustee with respect to the Exchange Junior Subordinated Debentures, (ii)
waive certain past defaults under the Indenture, (iii) exercise any right to
rescind or annul a declaration of acceleration of the maturity of the
principal of the Exchange Junior Subordinated Debentures or (iv) consent to
any amendment, modification or termination of the Indenture or the Exchange
Junior Subordinated Debentures, where such consent shall be required, without,
in each case, obtaining the prior approval of the holders of a majority in
Liquidation Amount of all outstanding Capital Securities; provided, however,
that where a consent under the Indenture would require the consent of each
holder of Exchange Junior Subordinated Debentures affected thereby, no such
consent shall be given by the Property Trustee without the prior approval of
each holder of the Exchange Capital Securities. The Issuer Trustees shall not
revoke any action previously authorized or approved by a vote of the holders
of the Exchange Capital Securities except by subsequent vote of such holders.
The Property Trustee shall notify each holder of Exchange Capital Securities
of any notice of default it receives with respect to the Exchange Junior
Subordinated Debentures. In addition to obtaining the foregoing approvals of
such holders of the Exchange Capital 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 the Trust will continue to be
classified as a grantor trust, and not as an association taxable as a
corporation, for federal income tax purposes on account of such action.
Any required approval of holders of Exchange Capital Securities may be given
at a meeting of such holders convened for such purpose or pursuant to written
consent. The Property Trustee will cause a notice of any meeting at which
holders of Exchange Capital 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 Exchange Capital Securities in the manner
set forth in the Trust Agreement.
No vote or consent of the holders of Exchange Capital Securities will be
required for the Trust to redeem and cancel the Exchange Capital Securities in
accordance with the Trust Agreement.
Notwithstanding that holders of the Exchange Capital Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Exchange Capital Securities that are owned by Greater Bay, the Issuer Trustees
or any affiliate of Greater Bay or any Issuer Trustee shall, for purposes of
such vote or consent, be treated as if they were not outstanding.
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FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER
The Exchange Capital Securities initially will be represented by one or more
Exchange Capital Securities in registered, global form (collectively, the
"Global Capital Securities"). The Global Capital Securities will be deposited
upon issuance with the Property Trustee as custodian for DTC, in New York, New
York, and registered in the name of DTC or its nominee, in each case for
credit to an account of a direct or indirect participant in DTC as described
herein.
In the event that Exchange Capital Securities are issued in certificated
form, the Exchange Capital Securities will be in blocks having a Liquidation
Amount of not less than $100,000 (100 Exchange Capital Securities) and may be
transferred or exchanged only in such blocks in the manner described herein.
Except as set forth herein, the Global Capital Securities may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee and only in amounts that would not cause a
holder to own less than 100 Exchange Capital Securities. Beneficial interests
in the Global Capital Securities may not be exchanged for Exchange Capital
Securities in certificated form except in the limited circumstances described
herein. See "--Exchange of Book-Entry Capital Securities for Certificated
Capital Securities."
DEPOSITORY PROCEDURES
DTC has advised the Trust and Greater Bay that DTC is a limited-purpose
trust company organized under the laws of the state of New York, a member of
the Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of its Participants, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and dealers
(including the Initial Purchaser), banks, trust companies, clearing
corporations and certain other organizations. Indirect access to DTC's system
is also available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own
securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership
interest of each actual purchaser of each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Trust and Greater Bay that, pursuant to procedures
established by it, (i) upon deposit of the Global Capital Securities, DTC will
credit the accounts of Participants designated by the Initial Purchaser with
portions of the principal amount of the Global Capital Securities and (ii)
ownership of such interests in the Global Capital Securities will be shown on,
and the transfer of ownership thereof will be effected only through, records
maintained by DTC (with respect to the Participants) or by the Participants
and the Indirect Participants (with respect to other owners of beneficial
interests in the Global Capital Securities).
Investors in the Global Capital Securities may hold their interests therein
directly through DTC if they are Participants, or indirectly through
organizations that are Participants. All interests in a Global Capital
Security will be subject to the procedures and requirements of DTC. The laws
of some states require that certain persons take physical delivery in
certificated form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Capital Security to such persons
will be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants and certain
banks, the ability of a person having beneficial interests in a Global Capital
Security to pledge such interests to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing
such interests. For certain other restrictions on the transferability of the
Exchange Capital Securities, see "--Exchange of Book-Entry Capital Securities
for Certificated Capital Securities."
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EXCEPT AS DESCRIBED HEREIN, OWNERS OF INTERESTS IN THE GLOBAL CAPITAL
SECURITIES WILL NOT HAVE EXCHANGE CAPITAL SECURITIES REGISTERED IN THEIR
NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF EXCHANGE CAPITAL SECURITIES IN
CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS
THEREOF UNDER THE TRUST AGREEMENT FOR ANY PURPOSE.
Payments in respect of the Global Capital Security registered in the name of
DTC or its nominee will be payable by the Property Trustee to DTC in its
capacity as the registered holder under the Trust Agreement. Under the terms
of the Trust Agreement, the Property Trustee will treat the persons in whose
names the Exchange Capital Securities, including the Global Capital
Securities, are registered as the owners thereof for the purpose of receiving
such payments and for any and all other purposes whatsoever. Consequently,
neither the Property Trustee nor any agent thereof has or will have any
responsibility or liability for (i) any aspect of DTC's records or any
Participant's or Indirect Participant's records relating to, or payments made
on account of, beneficial ownership interests in the Global Capital
Securities, or for maintaining, supervising or reviewing any of DTC's records
or any Participant's or Indirect Participant's records relating to the
beneficial ownership interests in the Global Capital Securities or (ii) any
other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants. DTC has advised the Trust and Greater
Bay that its current practice, upon receipt of any payment in respect of
securities such as the Exchange Capital Securities, is to credit the accounts
of the relevant Participants with the payment on the payment date, in amounts
proportionate to their respective holdings in Liquidation Amount of beneficial
interests in the relevant security as shown on the records of DTC unless DTC
has reason to believe it will not receive payment on such payment date.
Payments by the Participants and the Indirect Participants to the beneficial
owners of Exchange Capital Securities will be governed by standing
instructions and customary practices and will be the responsibility of the
Participants or the Indirect Participants and will not be the responsibility
of DTC, the Property Trustee, the Trust or Greater Bay. None of the Trust,
Greater Bay or the Property Trustee will be liable for any delay by DTC or any
of its Participants in identifying the beneficial owners of the Exchange
Capital Securities, and the Trust, Greater Bay and the Property Trustee may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee for all purposes.
Any secondary market trading activity in interests in the Global Capital
Securities will settle in immediately available funds, subject in all cases to
the rules and procedures of DTC and its Participants. Transfers between
Participants in DTC will be effected in accordance with DTC's procedures, and
will settle in same-day funds.
DTC has advised the Trust and Greater Bay that it will take any action
permitted to be taken by a holder of Exchange Capital Securities (including,
without limitation, the presentation of Exchange Capital Securities for
exchange as described herein) only at the direction of one or more
Participants to whose account with DTC interests in the Global Capital
Securities are credited and only in respect of such portion of the aggregate
Liquidation Amount of the Exchange Capital Securities as to which such
Participant or Participants has or have given such direction. However, if
there is an Event of Default under the Trust Agreement, DTC reserves the right
to exchange the Global Capital Securities for legended Exchange Capital
Securities in certificated form and to distribute such Exchange Capital
Securities to its Participants.
So long as DTC or its nominee is the registered owner of the Global Capital
Securities, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Exchange Capital Securities represented by the
Global Capital Security for all purposes under the Trust Agreement.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interest in the Global Capital Securities among Participants in DTC, it is
under no obligation to perform or to continue to perform such procedures, and
such procedures may be discontinued at any time. None of the Trust, Greater
Bay or the Property Trustee will have any responsibility for the performance
by DTC or its Participants or Indirect Participants of their respective
obligations under the rules and procedures governing its operations.
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The information in this section concerning DTC and its book-entry system has
been obtained from sources that the Trust and Greater Bay believe to be
reliable, but neither the Trust nor Greater Bay takes responsibility for the
accuracy thereof.
EXCHANGE OF BOOK-ENTRY CAPITAL SECURITIES FOR CERTIFICATED CAPITAL SECURITIES
A Global Capital Security is exchangeable for Exchange Capital Securities in
registered certificated form if (i) DTC (a) notifies the Trust that it is
unwilling or unable to continue as Depository for the Global Capital Security
or (b) has ceased to be a clearing agency registered under the Exchange Act,
and the Trust thereupon fails to appoint a successor Depository within 90
days, (ii) the Trust in its sole discretion elects to cause the issuance of
the Exchange Capital Securities in certificated form or (iii) there shall have
occurred and be continuing an Event of Default or any event which after notice
or lapse of time or both would be an Event of Default under the Trust
Agreement. In addition, beneficial interests in a Global Capital Security may
be exchanged by or on behalf of DTC for certificated Exchange Capital
Securities upon request by DTC, but only upon at least 20 days' prior written
notice given to the Property Trustee in accordance with DTC's customary
procedures. In all cases, certificated Exchange Capital Securities delivered
in exchange for any Global Capital Security or beneficial interests therein
will be registered in the names, and issued in any approved denominations,
requested by or on behalf of the Depository (in accordance with its customary
procedures).
PAYMENT AND PAYING AGENCY
Payments in respect of the Exchange Capital Securities held in global form
shall be made to the Depository, which shall credit the relevant accounts at
the Depository on the applicable Distribution Dates or in respect of the
Exchange Capital Securities that are not held by the Depository, 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 shall include any co-
paying agent chosen by the Property Trustee that is 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, the Administrative Trustees and Greater Bay. 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.
RESTRICTIONS ON TRANSFER
The Exchange Capital Securities will be issued, and may be transferred, only
in blocks having a Liquidation Amount of not less than $100,000 (100 Exchange
Capital Securities) and multiples of $1,000 in excess thereof. Any attempted
sale, transfer or other disposition of Exchange Capital Securities in a block
having a Liquidation Amount of less than $100,000 shall be deemed to be void
and of no legal effect whatsoever. Any such transferee shall be deemed not to
be the holder of such Exchange Capital Securities for any purpose, including
but not limited to the receipt of Distributions on such Exchange Capital
Securities, and such transferee shall be deemed to have no interest whatsoever
in such Exchange Capital Securities.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as registrar and transfer agent for the
Exchange Capital Securities.
Registration of transfers of the Exchange Capital Securities will be
effected without charge by or on behalf of the Trust, but upon payment of any
tax or other governmental charges that may be imposed in connection with any
transfer or exchange. The Trust will not be required to register or cause to
be registered the transfer of the Exchange Capital Securities after they have
been called for redemption.
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INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of an
Event of Default, undertakes to perform only such duties as are specifically
set forth in the Trust Agreement and, during the existence of an Event of
Default, must exercise the same degree of care and skill as a prudent person
would exercise or use under the circumstances 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 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 Exchange Capital Securities or the Common
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 the Trust in such a way that (i) the Trust will not
be deemed to be an "investment company" required to be registered under the
Investment Company Act, (ii) the Trust will be classified as a grantor trust
for United States federal income tax purposes and (iii) the Exchange 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 or the Trust Agreement, that 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 Securities.
The Trust Agreement provides that (i) holders of the Trust Securities have
no preemptive or similar rights to subscribe for any additional Trust
Securities, and (ii) the issuance of Exchange Capital Securities and the
issuance of Common Securities are not subject to preemptive or similar rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge any
of its assets.
DESCRIPTION OF EXCHANGE JUNIOR SUBORDINATED DEBENTURES
The Original Junior Subordinated Debentures were issued and the Exchange
Junior Subordinated Debentures will be issued under the Indenture. The
Indenture has been qualified under the Trust Indenture Act. This summary of
certain terms and provisions of the Exchange Junior Subordinated Debentures
and the Indenture does not purport to be complete, and where reference is made
to particular provisions of the Indenture, such provisions, including the
definitions of certain terms, some of which are not otherwise defined herein,
are qualified in their entirety by reference to all of the provisions of the
Indenture and those terms made a part of the Indenture by the Trust Indenture
Act.
GENERAL
Concurrently with the issuance of the Original Capital Securities, the Trust
invested the proceeds thereof, together with the consideration paid by Greater
Bay for the Common Securities, in Original Junior Subordinated Debentures
issued by Greater Bay. The Exchange Junior Subordinated Debentures, similarly
to the Original Junior Subordinated Debentures, will bear interest at a rate
per annum, reset quarterly, equal to 3-month LIBOR plus 150 basis points from
the most recent date to which interest has been paid or duly provided for or,
if no interest has been paid or duly provided for, from August 12, 1998, until
the principal thereof becomes due and payable, and at the Interest Rate on any
overdue principal and (to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest,
compounded quarterly, (the "Interest
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Rate"), payable quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year, (each, an "Interest Payment Date"), commencing
December 15, 1998. The record dates will be the first day of the month in
which the relevant payment occurs. It is anticipated that, until the
liquidation, if any, of the Trust, each Exchange Junior Subordinated Debenture
will be held in the name of the Property Trustee in trust for the benefit of
the holders of the Trust Securities. The amount of interest payable for any
period will be computed on the basis of the actual number of days elapsed in
such period and a 360-day year. In the event that any date on which interest
is payable on the Exchange Junior Subordinated Debentures is not a Business
Day, then payment of the interest 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), with the same force and effect as if
made on such date. 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 applicable periodic Interest Rate 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 applicable.
The Interest Rate and amount of interest payable will be calculated or
determined in the same manner as the Distribution Rate and amounts of
Distributions payable, respectively, as described under "Description of
Exchange Capital Securities--Distributions" and "--Determination of 3-month
LIBOR."
The Exchange Junior Subordinated Debentures will be issued in denominations
of $100,000 and multiples of $1,000 in excess thereof. The Exchange Junior
Subordinated Debentures will mature on September15, 2028 (the "Stated Maturity
Date").
The Exchange Junior Subordinated Debentures will be issued in denominations
of $100,000 and multiples of $1,000 in excess thereof, pursuant to the
Indenture.
The Exchange Junior Subordinated Debentures will be unsecured and will rank
pari passu with the Original Junior Subordinated Debentures and all Other
Debentures and subordinate and junior in right of payment to all Senior
Indebtedness to the extent and in the manner set forth in the Indenture. See
"--Subordination."
Greater Bay is a bank holding company regulated by the FRB and almost all of
the operating assets of Greater Bay are owned by its subsidiaries. Greater Bay
is a legal entity separate and distinct from its subsidiaries. Holders of
Junior Subordinated Debentures should look only to Greater Bay for payments on
the Junior Subordinated Debentures. The principal sources of Greater Bay's
income are dividends, interest and fees from the Banks. Greater Bay relies
primarily on dividends from the Banks to meet its obligations for payment of
principal and interest on its outstanding debt obligations and corporate
expenses. 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. Under
the FDIA, insured depositary institutions such as the Banks are prohibited
from making capital distributions, including the payment of dividends, if,
after making such distribution, the institution would become
"undercapitalized" (as such term is used in the statute). Based on each of the
Bank's current financial condition, Greater Bay does not expect that this
provision will have any impact on its ability to obtain dividends from the
Banks. During the first six months of 1998, the Banks paid $1.6 million in
dividends to Greater Bay, which reflected approximately 9.3% of the total
amount of dividends the Banks were permitted to pay as of June 30, 1998 under
existing supervisory practices. 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. The FRB has stated
that, as a matter of prudent banking, a bank or bank holding company should
not maintain its existing rate of cash dividends on common stock unless (i)
the organization's net income available to common shareholders over the past
year has been sufficient to fund fully the dividends; and (ii) the prospective
rate of earnings retention appears consistent with the organization's capital
needs, asset quality, and overall financial condition. No assurance can be
given that the Banks will be able to pay dividends at past levels, or at all,
in the future.
In addition to restrictions on the payment of dividends, the Banks are
subject to certain restrictions imposed by federal law on any extensions of
credit to, and certain other transactions with, Greater Bay and certain other
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affiliates, and on investments in stock or other securities thereof. Such
restrictions prevent Greater Bay and such other affiliates from borrowing from
the Banks, unless the loans are secured by various types of collateral.
Furthermore, such secured loans, other transactions and investments by the
Banks are generally limited in amount as to Greater Bay and as to each of such
other affiliate to 10% of each Bank's capital and surplus and as to Greater
Bay and all of such other affiliates to an aggregate of 20% of the each Bank's
capital and surplus. As of June 30, 1998, approximately $11.5 million of
credit was available to Greater Bay under this limitation.
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 (and thus the ability
of holders of the Exchange Capital Securities to benefit indirectly from such
distribution) is subject to the prior claims of creditors of such subsidiary
(including depositors in the case of the Banks), except to the extent that
Greater Bay may itself be recognized as a creditor of that subsidiary.
Accordingly, the Exchange Junior Subordinated Debentures effectively will be
subordinated to all existing and future liabilities of Greater Bay's
subsidiaries (including deposit liabilities of the Banks) and all liabilities
of future subsidiaries of Greater Bay. As a result, holders of Exchange Junior
Subordinated Debentures should look only to the assets of Greater Bay for
payments on the Exchange Junior Subordinated Debentures. At June 30, 1998,
Greater Bay's subsidiaries had aggregate total liabilities, (including
deposits) of $1.3 billion.
The Indenture does not limit the incurrence or issuance of other secured or
unsecured debt of Greater Bay or any subsidiary, including Senior
Indebtedness. See "--Subordination." Greater Bay expects from time to time
that it will incur additional indebtedness constituting Senior Indebtedness
and that its subsidiaries will incur additional liabilities.
FORM, REGISTRATION AND TRANSFER
If the Exchange Junior Subordinated Debentures are distributed to the
holders of the Trust Securities, the Exchange Junior Subordinated Debentures
may be represented by one or more global certificates registered in the name
of Cede & Co., as the nominee of DTC. The depository arrangements for such
Exchange Junior Subordinated Debentures are expected to be substantially
similar to those in effect for the Exchange Capital Securities. For a
description of DTC and the terms of the depository arrangements relating to
payments, transfers, voting rights, redemptions and other notices and other
matters, see "--Description of Exchange Capital Securities--Form,
Denomination, Book-Entry Procedures and Transfer."
PAYMENT AND PAYING AGENTS
Payment of principal of and interest on the Exchange Junior Subordinated
Debentures will be made at the office of the Debenture Trustee in Wilmington,
Delaware or at the office of such Paying Agent or Paying Agents as Greater Bay
may designate from time to time, except that at the option of Greater Bay
payment of any interest may be made, except in the case of Exchange Junior
Subordinated Debentures in global form, (i) by check mailed to the address of
the Person entitled thereto as such address shall appear in the register for
Exchange Junior Subordinated Debentures or (ii) by transfer to an account
maintained by the Person entitled thereto as specified in such register,
provided that proper transfer instructions have been received by the relevant
record date. Payment of any interest on any Exchange Junior Subordinated
Debenture will be made to the Person in whose name such Exchange Junior
Subordinated Debenture is registered at the close of business on the Record
Date for such interest, except in the case of defaulted interest. Greater Bay
may at any time designate additional Paying Agents or rescind the designation
of any Paying Agent; provided, however, Greater Bay will at all times be
required to maintain a Paying Agent in each place of payment for the Exchange
Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or then
held by Greater Bay in trust, for the payment of the principal of or interest
on any Exchange Junior Subordinated Debenture 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
Exchange Junior Subordinated Debenture shall thereafter look, as a general
unsecured creditor, only to Greater Bay for payment thereof.
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OPTION TO EXTEND INTEREST PAYMENT DATE
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 Exchange Junior Subordinated Debentures at any time and from time to
time for a period not exceeding 20 consecutive quarterly periods with respect
to each Extension Period, provided that no Extension Period shall end on a
date other than an Interest Payment Date or extend beyond the Stated Maturity
Date. At the end of such Extension Period, Greater Bay must pay all interest
then accrued and unpaid (together with interest thereon at the applicable
periodic Interest Rate, compounded quarterly, to the extent permitted by
applicable law). During an Extension Period, interest will continue to accrue
and, if the Exchange Subordinated Debentures have been distributed to holders
of the Trust Securities, holders of Exchange Junior Subordinated Debentures
(or holders of the Trust Securities while Trust Securities are outstanding)
will be required to accrue such deferred interest income for federal income
tax purposes prior to the receipt of cash attributable to such income. 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, (ii)
make any payment of principal of, premium, if any, or interest on or repay,
repurchase or redeem any debt securities of Greater Bay (including Other
Debentures) that rank pari passu with or junior in right of payment to the
Exchange 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 (including Other Guarantees) if such guarantee ranks
pari passu with or junior in right of payment to the Exchange Junior
Subordinated Debentures (other than (a) dividends or distributions in shares
of, or options, warrants or rights to subscribe for or purchase shares of,
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 Exchange Guarantee,
(d) the purchase of fractional shares resulting from a reclassification of
Greater Bay's capital stock, (e) the purchase of fractional interests in
shares of Greater Bay's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged
and (f) purchases of common stock of Greater Bay related to the issuance of
such common stock or rights under any of Greater Bay's benefit plans for its
directors, officers or employees or any of Greater Bay's dividend reinvestment
plans).
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 quarterly periods, end on
a date other than an Interest Payment Date or extend beyond the Stated
Maturity Date. 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 Debenture Trustee notice of its election of any Extension
Period (or an extension thereof) at least five Business Days prior to the
earlier of (i) the date the Distributions on the Trust Securities would have
been payable except for the election to begin or extend such Extension Period
or (ii) the date the Trust is required to give notice to any automated
quotation system or to holders of Exchange Capital Securities of the record
date or the date such Distributions are payable, but in any event not less
than five Business Days prior to such record date. The Debenture Trustee shall
give notice of Greater Bay's election to begin or extend a new Extension
Period to the holders of the Exchange Capital Securities. There is no
limitation on the number of times that Greater Bay may elect to begin an
Extension Period.
OPTIONAL PREPAYMENT
The Exchange Junior Subordinated Debentures will be prepayable, in whole or
in part, at the option of Greater Bay on or after the Initial Optional
Redemption Date, subject to Greater Bay having received any required
regulatory approvals, at a price (the "Prepayment Price") equal to 100% of the
principal amount of Junior Subordinated Debentures so prepaid, plus, accrued
and unpaid interest thereon, if any, to the date of prepayment.
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SPECIAL EVENT PREPAYMENT
Prior to the Initial Optional Repayment Date, if a Special Event shall occur
and be continuing, Greater Bay may, at its option and subject to receipt of
any required regulatory approvals, prepay the Exchange Junior Subordinated
Debentures in whole (but not in part) at any time within 90 days of the
occurrence of such Special Event, at the Prepayment Price. If, following the
occurrence of a Special Event, Greater Bay exercises its option to prepay the
Exchange Junior Subordinated Debentures, then the proceeds of that prepayment
must be applied to redeem a Like Amount of Trust Securities at the Redemption
Price.
A "Special Event" means an Investment Company Event, Regulatory Capital
Event, or a Tax Event, as the case may be.
An "Investment Company Event" means the receipt by Greater Bay and GBB
Capital II of an opinion of independent securities counsel experienced in such
matters to the effect that as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws or any regulation
thereunder of the United States or any rules, guidelines or policies of any
applicable regulatory authority for Greater Bay or (b) any official
administrative 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 original issuance of the Trust
Securities, the Trust is, or within 90 days of the date of such opinion will
be, considered an "investment company" that is required to be registered under
the Investment Company Act.
A "Regulatory Capital Event" means the receipt by Greater Bay of an opinion
of independent bank regulatory counsel experienced in such matters to the
effect that, as a result of (i) any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any rules, guidelines or policies of an applicable
regulatory agency or (ii) 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 original issuance of the Trust Securities,
the Capital Securities do not constitute, or within 90 days of such opinion
will not constitute, Tier 1 Capital (or its then equivalent if Greater Bay
were subject to such capital requirement).
A "Tax Event" means the receipt by Greater Bay and the Trust of an opinion
of independent tax 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 pronouncement or decision is announced on or after the date of
original issuance of the Trust Securities, there is more than an insubstantial
risk that: (i) the Trust 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 on the Junior Subordinated Debentures; (ii) interest
payable by Greater Bay on the Junior Subordinated Debentures is not, or within
90 days of the date of such opinion will not be, deductible by Greater Bay, in
whole or in part, for United States federal income tax purposes; or (iii) the
Trust is, or will be within 90 days of the date of such opinion, subject to
more than a de minimis amount of other taxes, duties or other governmental
charges.
Notice of any prepayment will be mailed at least 30 days but not more than
60 days before the prepayment date to each holder of Exchange Junior
Subordinated Debentures to be prepaid at its registered address. Unless
Greater Bay defaults in payment of the Prepayment Price, on and after the
prepayment date interest ceases to accrue on such Exchange Junior Subordinated
Debentures called for prepayment.
If the Trust 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 Exchange Junior Subordinated Debentures such amounts
as shall be necessary in order that the amount of Distributions then due and
payable by the Trust on the outstanding Trust Securities shall not be reduced
as a result of any additional taxes, duties and other governmental charges to
which the Trust has become subject as a result of a Tax Event ("Additional
Sums").
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CERTAIN COVENANTS OF GREATER BAY
Greater Bay will also covenant that it will 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, (ii)
make any payment of principal of, premium, if any, or interest on or repay,
repurchase or redeem any debt securities of Greater Bay (including Other
Debentures) that rank pari passu with or junior in right of payment to the
Exchange 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 (including Other Guarantees) if such guarantee ranks
pari passu with or junior in right of payment to the Exchange Junior
Subordinated Debentures (other than (a) dividends or distributions in shares
of, or options, warrants or rights to subscribe for or purchase shares of,
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 Exchange Guarantee,
(d) the purchase of fractional shares resulting from a reclassification of
Greater Bay's capital stock, (e) the purchase of fractional interests in
shares of Greater Bay's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged
and (f) purchases of common stock of Greater Bay related to the issuance of
such common stock or rights under any of Greater Bay's benefit plans for its
directors, officers or employees or any of Greater Bay's dividend reinvestment
plans), if at such time (1) there shall have occurred any event of which
Greater Bay has actual knowledge that (A) is, or, 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, (2) if such Exchange Junior Subordinated Debentures are held by the
Trust, Greater Bay shall be in default with respect to its payment obligations
under the Exchange Guarantee or (3) Greater Bay shall have given notice of its
election of its right to commence an Extension Period as provided in the
Indenture and such Extension Period, or any extension thereof, shall have
commenced and be continuing.
So long as the Trust Securities remain outstanding, Greater Bay also will
covenant (i) to maintain 100% direct or indirect ownership of the Common
Securities; provided, however, that any permitted successor of Greater Bay
under the Indenture may succeed to Greater Bay's ownership of such Common
Securities, (ii) to use commercially reasonable efforts to cause the Trust (a)
to remain a business trust, except in connection with the distribution of
Exchange Junior Subordinated Debentures to the holders of Trust Securities in
liquidation of the Trust, the prepayment of all the Trust Securities of the
Trust, or certain mergers, consolidations or amalgamations, each as permitted
by the Trust Agreement, and (b) to otherwise continue to be classified as a
grantor trust for federal income tax purposes, and (iii) to not cause, as
sponsor of the Trust, or to permit, as holder of the Common Securities, the
dissolution, winding-up or termination of the Trust, except as provided in the
Trust Agreement.
MODIFICATION OF INDENTURE
From time to time Greater Bay and the Debenture Trustee may, without the
consent of the holders of Exchange Junior Subordinated Debentures, amend,
waive or supplement the Indenture for specified purposes, including, among
other things, curing ambiguities, defects or inconsistencies, or enabling
Greater Bay and the Trust to conduct an Exchange Offer as contemplated by the
Registration Rights Agreement, provided that any such action does not
materially adversely affect the interest of the holders of Exchange Junior
Subordinated Debentures, and qualifying, or maintaining the qualification of,
the Indenture under the Trust Indenture Act. The Indenture contains provisions
permitting Greater Bay and the Debenture Trustee, with the consent of the
holders of a majority in principal amount of Exchange Junior Subordinated
Debentures, to modify the Indenture in a manner affecting the rights of the
holders of Exchange Junior Subordinated Debentures; provided that no such
modification may, without the consent of the holders of each outstanding
Exchange Junior Subordinated Debenture so affected, (i) change the Stated
Maturity Date, or reduce the principal amount of the Exchange Junior
Subordinated Debentures or reduce the amount payable on redemption thereof or
reduce the rate or extend the time of payment of interest thereon except
pursuant to Greater Bay's right under the Indenture to defer the payment of
interest as provided therein (see "--Option to Extend Interest Payment Date"),
or change any of the
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prepayment provisions or make the principal of, or interest on, the Exchange
Junior Subordinated Debentures payable in any coin or currency other than that
provided in the Exchange Junior Subordinated Debentures, or impair or affect
the right of any holder of Exchange Junior Subordinated Debentures to
institute suit for the payment thereof, or (ii) reduce the percentage of
principal amount of Exchange Junior Subordinated Debentures, the holders of
which are required to consent to any such modification of the Indenture.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Exchange Junior Subordinated Debentures constitutes
a "Debenture Event of Default" (whatever the reason for such Debenture 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) failure for 30 days to pay any interest (including Compounded
Interest and Additional Sums, if any) or Liquidated Damages, if any, on the
Exchange Junior Subordinated Debentures or any Other Debentures, when due
(subject to the deferral of any due date in the case of an Extension Period
in respect of the Junior Subordinated Debentures or Other Debentures, as
the case may be); or
(ii) failure to pay any principal or premium, if any, on the Exchange
Junior Subordinated Debentures or any Other Debentures when due whether at
maturity, upon prepayment, by declaration of acceleration of maturity or
otherwise; or
(iii) failure to observe or perform any other agreement or covenant
contained in the Indenture for 90 days after written notice to Greater Bay
from the Debenture Trustee or the holders of at least 25% in aggregate
outstanding principal amount of Exchange 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
Exchange Junior Subordinated Debentures have, subject to certain exceptions,
the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Debenture Trustee. The Debenture Trustee or
the holders of not less than 25% in aggregate outstanding principal amount of
the Exchange Junior Subordinated Debentures may declare the principal due and
payable immediately upon a Debenture Event of Default. The holders of a
majority in aggregate outstanding principal amount of the Exchange Junior
Subordinated Debentures may annul such declaration and waive the default if
the default (other than the non-payment of the principal of the Exchange
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 Debenture Trustee.
The holders of a majority in aggregate outstanding principal amount of the
Exchange Junior Subordinated Debentures affected thereby may, on behalf of the
holders of all the Exchange Junior Subordinated Debentures, waive any past
default, except a default in the payment of principal thereof (or premium, if
any) or interest thereon (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 Exchange Junior Subordinated Debenture.
The Indenture requires the annual filing by Greater Bay with the Debenture
Trustee of a certificate as to the absence of certain defaults under the
Indenture.
The Indenture provides that the Debenture Trustee may withhold notice of a
Debenture Event of Default from the holders of the Exchange Junior
Subordinated Debentures if the Debenture Trustee considers it in the interest
of such holders to do so.
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ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF EXCHANGE CAPITAL SECURITIES
If a Debenture Event of Default shall have occurred and be continuing and
shall be attributable to the failure of Greater Bay to pay the principal of or
interest (including Compounded Interest and Additional Sums, if any) or
Liquidated Damages, if any, on the Exchange Junior Subordinated Debentures on
the due date, a holder of Exchange Capital Securities may institute a 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 Exchange Capital Securities. Notwithstanding any payments made to a
holder of Exchange Capital Securities by Greater Bay in connection with a
Direct Action, Greater Bay shall remain obligated to pay the principal of and
interest (including Compounded Interest and Additional Sums, if any) and
Liquidated Damages, if any, on the Exchange Junior Subordinated Debentures,
and Greater Bay shall be subrogated to the rights of the holder of such
Exchange Capital Securities with respect to payments on the Exchange Capital
Securities to the extent of any payments made by Greater Bay to such holder in
any Direct Action.
The holders of the Exchange Capital Securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the Exchange Junior Subordinated Debentures unless
there shall have been an Event of Default under the Trust Agreement. See "--
Description of Exchange Capital 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 as an
entirety or 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 as an entirety or 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 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 Exchange Junior
Subordinated Debentures; (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; and (iii) certain other conditions as prescribed in the Indenture
are met.
The general provisions of the Indenture do not afford holders of the
Exchange Junior Subordinated Debentures protection in the event of a highly
leveraged or other transaction involving Greater Bay that may adversely affect
holders of the Exchange Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Exchange Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and
payable at maturity or called for prepayment within one year, and Greater Bay
deposits or causes to be deposited with the Debenture Trustee funds, in trust,
for the purpose and in an amount sufficient to pay and discharge the entire
indebtedness on the Exchange Junior Subordinated Debentures not previously
delivered to the Debenture Trustee for cancellation, for the principal and
interest to the date of the deposit or to the Stated Maturity Date, 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.
SUBORDINATION
In the Indenture, Greater Bay has covenanted and agreed that the payment by
Greater Bay of the principal and interest (including Compounded Interest and
Additional Sums, if any) on all Exchange Junior Subordinated Debentures issued
thereunder will be subordinate and junior in right of payment to all Senior
Indebtedness to the
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extent provided in the Indenture. Upon any payment or distribution of assets
to creditors upon any dissolution, winding-up, liquidation or reorganization,
whether voluntary or involuntary or in bankruptcy, insolvency, receivership or
other proceedings of Greater Bay, the holder of Senior Indebtedness will first
be entitled to receive payment in full of all Allocable Amounts (as defined
below) in respect of such Senior Indebtedness before the holders of Exchange
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 the Exchange Junior
Subordinated Debentures, the holders of all Allocable Amounts due on or in
respect of such Senior Indebtedness outstanding at the time of such
acceleration will first be entitled to receive payment in full of all
Allocable Amounts due on or in respect of such Senior Indebtedness before the
holders of the Exchange Junior Subordinated Debentures will be entitled to
receive or retain any payment in respect of the Exchange Junior Subordinated
Debentures.
No payments on account of principal or interest, if any, in respect of the
Exchange Junior Subordinated Debentures may be made if there shall have
occurred and be continuing a default in any payment with respect to Senior
Indebtedness, or an event of default with respect to any Senior Indebtedness
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 Indebtedness,
means all amounts due or to become due on such Senior Indebtedness less, if
applicable, any amount which would have been paid to, and retained by, the
holders of such Senior Indebtedness (whether as a result of the receipt of
payments by the holders of such Senior Indebtedness 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
Indebtedness 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 Indebtedness or otherwise) but for the fact that such Senior
Indebtedness is subordinate or junior in right of payment to (or subject to a
requirement that amounts received on such Senior Indebtedness be paid over to
obligees on) trade accounts payable or accrued liabilities arising in the
ordinary course of business.
"Indebtedness" shall mean whether recourse is to all or a portion of the
assets of Greater Bay and whether or not contingent (i) every obligation of
Greater Bay for money borrowed; (ii) every obligation of Greater Bay 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 Greater Bay with respect
to letters of credit, banker's acceptances or similar facilities issued for
the account of Greater Bay; (iv) every obligation of Greater Bay 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 Greater Bay; (vi) all
indebtedness of Greater Bay 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, Greater Bay has guaranteed or is responsible or liable for, directly or
indirectly, as obligor or otherwise.
"Indebtedness Ranking on a Parity with the Exchange Junior Subordinated
Debentures" shall mean (i) Indebtedness, whether outstanding on the date of
execution of the Indenture or thereafter created, assumed or incurred, to the
extent such indebtedness specifically by its terms ranks pari passu with and
not prior to the Exchange Junior Subordinated Debentures in the right of
payment upon the happening of the dissolution or winding-up or liquidation or
reorganization of Greater Bay, including without limitation the 1997 Junior
Subordinated Debentures and (ii) all other debt securities, and guarantees in
respect of those debt securities, issued to any other trust, or a trustee of
such trust, partnership or other entity affiliated with Greater Bay that is a
financing vehicle of Greater Bay (a "financing entity") in connection with the
issuance by such financing entity of equity securities or other securities
guaranteed by Greater Bay pursuant to an instrument that ranks pari passu with
or junior in right of payment to the Guarantee. The securing of any
Indebtedness, otherwise constituting
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Indebtedness Ranking on a Parity with the Exchange Junior Subordinated
Debentures, shall not be deemed to prevent such Indebtedness from constituting
Indebtedness Ranking on a Parity with the Exchange Junior Subordinated
Debentures.
"Indebtedness Ranking Junior to the Exchange Junior Subordinated Debentures"
shall mean any Indebtedness, whether outstanding on the date of execution of
the Indenture or thereafter created, assumed or incurred, to the extent such
indebtedness by its terms ranks junior to and not pari passu with or prior to
the Exchange Junior Subordinated Debentures (and any other Indebtedness
Ranking on a Parity with the Exchange Junior Subordinated Debentures) in right
of payment upon the happening of the dissolution or winding-up or liquidation
or reorganization of Greater Bay. The securing of any Indebtedness, otherwise
constituting Indebtedness Ranking Junior to the Exchange Junior Subordinated
Debentures, shall not be deemed to prevent such Indebtedness from constituting
Indebtedness Ranking Junior to the Exchange Junior Subordinated Debentures.
"Senior Indebtedness" shall mean 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 proceedings),
on all Indebtedness, whether outstanding on the date of execution of the
Indenture or thereafter created, assumed or incurred, except Indebtedness
Ranking on a Parity with the Junior Subordinated Debentures or Indebtedness
Ranking Junior to the Junior Subordinated Debentures, and any deferrals,
renewals or extensions of such Senior Indebtedness. Senior Indebtedness shall
include, without limiting the foregoing, the Subordinated Notes of the Company
and shall not include (a) any Indebtedness of Greater Bay 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 Greater Bay, (b) any
Indebtedness of Greater Bay to any of its subsidiaries, (c) any Indebtedness
to any employee of Greater Bay, and (d) any Junior Subordinated Debenture.
At June 30, 1998, Greater Bay had $3.0 million face amount of Senior
Indebtedness outstanding.
Greater Bay is a bank holding company and almost all of the operating assets
of Greater Bay are owned by Greater Bay's subsidiaries. Greater Bay relies
primarily on dividends from the Banks to meet its obligations for payment of
principal and interest on its outstanding debt obligations and corporate
expenses. Greater Bay is a legal entity separate and distinct from its
subsidiaries. Holders of Exchange Junior Subordinated Debentures should look
only to Greater Bay for payments on the Junior Subordinated Debentures. There
are regulatory limitations on the payment of dividends directly or indirectly
to Greater Bay from the Banks. See "--General." In addition, the Banks are
subject to certain restrictions imposed by federal law on any extensions of
credit to, and certain other transactions with, Greater Bay and certain other
affiliates, and on investments in stock or other securities thereof. Such
restrictions prevent Greater Bay and such other affiliates from borrowing from
the Banks unless the loans are secured by various types of collateral.
Further, such secured loans, other transaction and investments by the Banks
are generally limited in amount as to Greater Bay and as to each of such other
affiliates to 10% of each Banks's capital and surplus and as to Greater Bay
and all of such other affiliates to an aggregate of 20% of each Bank's capital
and surplus. Accordingly, the Exchange Junior Subordinated Debentures will be
effectively subordinated to all existing and future liabilities of Greater
Bay's subsidiaries.
Because Greater Bay is a bank 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 Exchange Capital Securities to benefit indirectly from such
distribution), is subject to the prior claims of creditors of that subsidiary
(including depositors, in the case of the Banks), except to the extent Greater
Bay may itself be recognized as a creditor of that subsidiary. At June 30,
1998, the subsidiaries of Greater Bay had aggregate total liabilities,
including deposits, of $1.3 billion. Accordingly, the Exchange Junior
Subordinated Debentures will be effectively subordinated to all existing and
future liabilities of Greater Bay's subsidiaries (including the Banks' deposit
liabilities) and all liabilities of any future subsidiaries of Greater Bay.
The Indenture does not limit the incurrence or issuance of other secured or
unsecured debt of Greater Bay or any subsidiary, including Senior
Indebtedness.
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RESTRICTIONS ON TRANSFER
The Exchange Junior Subordinated Debentures will be issued, and may be
transferred, only in blocks having an aggregate principal amount of not less
than $100,000 (100 Exchange Junior Subordinated Debentures) and multiples of
$1,000 in excess thereof. Any such transfer of Exchange Junior Subordinated
Debentures in a block having an aggregate principal amount of less than
$100,000 shall be deemed to be void and of no legal effect whatsoever. Any
such transferee shall be deemed not to be the holder of such Exchange Junior
Subordinated Debentures for any purpose, including but not limited to the
receipt of payments on such Exchange Junior Subordinated Debentures, and such
transferee shall be deemed to have no interest whatsoever in such Exchange
Junior Subordinated Debentures.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
Following the Exchange Offer and the qualification of the Indenture under
the Trust Indenture Act, the Debenture 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
Debenture Trustee is under no obligation to exercise any of the powers vested
in it by the Indenture at the request of any holder of Exchange Junior
Subordinated Debentures, unless offered reasonable indemnity by such holder
against the costs, expenses and liabilities which might be incurred thereby.
The Debenture 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 Debenture Trustee reasonably believes that repayment or adequate
indemnity is not reasonably assured to it.
GOVERNING LAW
The Indenture and the Exchange Junior Subordinated Debentures will be
governed by and construed in accordance with the laws of the state of New
York.
DESCRIPTION OF EXCHANGE GUARANTEE
The Exchange Guarantee will be executed and delivered by Greater Bay
concurrently with the issuance by the Trust of the Exchange Capital Securities
for the benefit of the holders from time to time of the Exchange Capital
Securities. The terms of the Exchange Guarantee are identical in all material
respects to the terms of the Original Guarantee. Wilmington Trust Company will
act as Guarantee Trustee under the Exchange Guarantee. The Exchange Guarantee
has been qualified under the Trust Indenture Act. This summary of certain
provisions of the Exchange 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 Exchange Guarantee, including the definitions therein of
certain terms, and the Trust Indenture Act. The Guarantee Trustee will hold
the Exchange Guarantee for the benefit of the holders of the Exchange Capital
Securities.
STATUS OF ORIGINAL GUARANTEE
If not all the Original Capital Securities are exchanged for Exchange
Capital Securities in the Exchange Offer, the Original Guarantee will not
terminate, but will continue to guarantee the obligations of Greater Bay for
the benefit of the holders of Original Securities. The Original Guarantee will
terminate upon full payment of the applicable Redemption Price of the Original
Capital Securities, upon full payment of the Liquidation Amount payable upon
liquidation of the Trust or upon distribution of Original Junior Subordinated
Debentures to the holders of the Original Capital Securities. The Original
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of the Original Capital Securities must restore
payment of any sums paid under the Original Capital Securities or the Original
Guarantee.
GENERAL
Greater Bay will irrevocably agree to pay in full on a subordinated basis,
to the extent set forth herein, the Guarantee Payments (as defined herein) to
the holders of the Exchange Capital Securities, as and when due, regardless of
any defense, right of set-off or counterclaim that the Trust may have or
assert other than the defense
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of payment. The following payments with respect to the Exchange Capital
Securities, to the extent not paid by or on behalf of the Trust (the
"Guarantee Payments"), will be subject to the Exchange Guarantee: (i) any
accumulated and unpaid Distributions required to be paid on the Exchange
Capital Securities, to the extent that the Trust has funds legally available
therefor at such time, (ii) the applicable Redemption Price with respect to
the Exchange Capital Securities called for redemption, to the extent that the
Trust has funds legally available therefor at such time, and (iii) upon a
voluntary or involuntary dissolution, winding-up or liquidation of the Trust
(other than in connection with the distribution of the Exchange Junior
Subordinated Debentures to holders of the Exchange Capital Securities or the
redemption of all Exchange Capital Securities), the lesser of (a) the
Liquidation Distribution, to the extent the Trust has funds legally available
therefor at the time, and (b) the amount of assets of the Trust remaining
available for distribution to holders of Exchange Capital Securities after
satisfaction of liabilities to creditors of the Trust as required by
applicable 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 Exchange Capital Securities or by causing the Trust to pay such
amounts to such holders.
Greater Bay will, through the Exchange Guarantee, the Trust Agreement, the
Exchange Junior Subordinated Debentures and the Indenture, taken together,
fully, irrevocably and unconditionally guarantee all of the Trust's
obligations under the Exchange Capital 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 the Trust's obligations under the Exchange Capital
Securities. See "Relationship Among the Exchange Capital Securities, the
Exchange Junior Subordinated Debentures and the Exchange Guarantee."
STATUS OF THE EXCHANGE GUARANTEE
The Exchange Guarantee will constitute an unsecured obligation of Greater
Bay and will rank subordinate and junior in right of payment to all Senior
Indebtedness in the same manner as the Exchange Junior Subordinated
Debentures. See "Description of Exchange Junior Subordinated Debentures--
Subordination." In addition, 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 such subsidiary (including
depositors of the Banks), except to the extent Greater Bay may itself be
recognized as a creditor of such subsidiary. Accordingly, Greater Bay's
obligations under the Exchange Guarantee effectively will be subordinated to
all existing and future liabilities of Greater Bay's present and future
subsidiaries (including deposit liabilities of the Banks). As a result,
claimants should look only to the assets of Greater Bay for payment under the
Exchange Guarantee. See "Description of Exchange Junior Subordinated
Debentures--General." The Exchange Guarantee will rank pari passu with all
Other Guarantees issued by Greater Bay (if any) issued by Other Trusts.
The Exchange Guarantee does not limit the amount of secured or unsecured
debt, including Senior Indebtedness, that may be incurred by Greater Bay or
any of it's subsidiaries. Greater Bay expects from time to time that it will
incur additional indebtedness constituting Senior Indebtedness and that it's
subsidiaries will incur additional liabilities.
The Exchange Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding
directly against Greater Bay to enforce its rights under the Exchange
Guarantee without first instituting a legal proceeding against any other
person or entity). The Exchange Guarantee will be held for the benefit of the
holders of the Exchange Capital Securities. The Exchange Guarantee will not be
discharged except by payment of the Guarantee Payments in full to the extent
not paid by the Trust or upon distribution to the holders of the Exchange
Capital Securities of the Exchange Junior Subordinated Debentures.
EVENTS OF DEFAULT
An event of default under the Exchange Guarantee will occur upon the failure
of Greater Bay to perform any of its payment or other obligations thereunder;
provided, however, that except with respect to a default in payment of any
Guarantee Payment, Greater Bay shall have received notice of default and shall
not have cured such default within 60 days after receipt of such notice.
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The holders of not less than a majority in Liquidation Amount of the
Exchange Capital Securities will 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 Exchange Guarantee or to direct the exercise of any
trust or power conferred upon the Guarantee Trustee under the Exchange
Guarantee. Any holder of the Exchange Capital Securities may institute a legal
proceeding directly against Greater Bay to enforce its rights under the
Exchange Guarantee without first instituting a legal proceeding against the
Trust, the Guarantee Trustee or any other person or entity.
Greater Bay, as guarantor, will be 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
Exchange Guarantee.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of the Exchange Capital Securities (in which case no
consent will be required), the Exchange Guarantee may not be amended without
the prior approval of the holders of a majority of the Liquidation Amount of
such outstanding Exchange Capital Securities. The manner of obtaining any such
approval will be as set forth under "--Description of Exchange Capital
Securities--Voting Rights; Amendment of the Trust Agreement." All guarantees
and agreements contained in the Exchange Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of Greater Bay and shall
inure to the benefit of the holders of the Exchange Capital Securities then
outstanding.
TERMINATION OF THE EXCHANGE GUARANTEE
The Exchange Guarantee will terminate and be of no further force and effect
upon full payment of the applicable Redemption Price of the Exchange Capital
Securities, upon full payment of the Liquidation Amount payable upon
liquidation of the Trust or upon distribution of Exchange Junior Subordinated
Debentures to the holders of the Exchange Capital Securities. The Exchange
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of the Exchange Capital Securities must restore
payment of any sums paid under the Exchange Capital Securities or the Exchange
Guarantee.
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 Exchange Guarantee, will
undertake to perform only such duties as are specifically set forth in the
Exchange Guarantee and, in case a default with respect to the Exchange
Guarantee has occurred, must exercise the same degree of care and skill as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs. Subject to this provision, the Guarantee Trustee will
be under no obligation to exercise any of the powers vested in it by the
Exchange Guarantee at the request of any holder of the Exchange Capital
Securities unless it is offered reasonable indemnity against the costs,
expenses and liabilities that might be incurred thereby.
GOVERNING LAW
The Exchange Guarantee will be governed by and construed in accordance with
the laws of the State of New York.
DESCRIPTION OF ORIGINAL SECURITIES
The terms of the Original Securities are identical in all materials respects
to the Exchange Securities, except that (i) the Original Securities have not
been registered under the Securities Act, are subject to certain restrictions
on transfer and are entitled to certain rights under the applicable
Registration Rights Agreement (which rights will terminate upon consummation
of the Exchange Offer, except under limited circumstances), (ii) the Exchange
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Capital Securities will not provide for any increase in the Distribution Rate
thereon and (iii) the Exchange Junior Subordinated Debentures will not provide
for any liquidated damages thereon. The Original Securities provide that, if a
Registration Statement relating to the Exchange Offer has not been declared
effective by February 8, 1999 then liquidated damages will accrue at the rate
of 0.25% per annum on the principal amount of the Original Junior Subordinated
Debentures and Distributions will accrue at the rate of 0.25% per annum on the
Liquidation Amount of the Original Capital Securities, for the period from the
occurrence of such event until such time as such Registration Statement has
been filed or declared effective, as the case may be. In addition, the
Original Capital Securities provide that, if the Trust has not exchanged
Exchange Capital Securities for all Original Capital Securities validly
tendered by the 45th day after the date on which the Registration Statement is
declared effective, the Distribution Rate borne by the Original Capital
Securities will increase by 0.25% per annum for the period from the occurrence
of such event until such time as the Exchange Offer has been consummated. The
Exchange Securities are not, and upon consummation of the Exchange Offer, the
Original Securities will not be, entitled to any such additional interest or
Distributions. Accordingly, holders of Original Capital Securities should
review the information set forth under "Risk Factors--Consequences of a
Failure to Exchange Original Capital Securities" and "Description of Exchange
Securities."
RELATIONSHIP AMONG THE EXCHANGE CAPITAL SECURITIES, THE
EXCHANGE JUNIOR SUBORDINATED DEBENTURES
AND THE EXCHANGE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Exchange Capital
Securities (to the extent the Trust has funds legally available for the
payment of such Distributions) will be irrevocably guaranteed by Greater Bay
as and to the extent set forth under "Description of Exchange Securities--
Description of Exchange Guarantee." Taken together, Greater Bay's obligations
under the Exchange Junior Subordinated Debentures, the Indenture, the Trust
Agreement and the Exchange Guarantee provide, in the aggregate, a full,
irrevocable and unconditional guarantee of payments of Distributions and other
amounts due on the Exchange Capital 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 the Trust's obligations under the Exchange Capital
Securities. If and to the extent that Greater Bay does not make the required
payments on the Exchange Junior Subordinated Debentures, the Trust will not
have sufficient funds to make the related payments, including Distributions,
on the Exchange Capital Securities. The Exchange Guarantee will not cover any
such payment when the Trust does not have sufficient funds legally available
therefor. In such event, the remedy of a holder of Exchange Capital Securities
is to institute a Direct Action. The obligations of Greater Bay under the
Exchange Guarantee will be subordinate and junior in right of payment to all
Senior Indebtedness.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Exchange Junior Subordinated Debentures, such payments will be sufficient to
cover Distributions and other payments due on the Exchange Capital Securities,
primarily because: (i) the aggregate principal amount or Prepayment Price of
the Exchange Junior Subordinated Debentures will be equal to the sum of the
aggregate Liquidation Amount or Redemption Price, as applicable, of the Trust
Securities; (ii) the interest rate and interest and other payment dates on the
Exchange Junior Subordinated Debentures will match the Distribution Rate and
Distribution and other payment dates for the Trust Securities; (iii) Greater
Bay, as Sponsor, shall pay for all and any costs, expenses and liabilities of
the Trust except the Trust's obligations to holders of Trust Securities under
the Trust Agreement; and (iv) the Trust Agreement further provides that the
Trust is not authorized to engage in any activity that is not consistent with
the limited purposes thereof.
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ENFORCEMENT RIGHTS OF HOLDERS OF EXCHANGE CAPITAL SECURITIES
A holder of any Exchange Capital Security may institute a legal proceeding
directly against Greater Bay to enforce its rights under the Exchange
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the Trust or any other person or entity.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Trust Agreement. However,
in the event of payment defaults under, or acceleration of, Senior
Indebtedness, the subordination provisions of the Indenture provide that no
payments may be made in respect of the Exchange Junior Subordinated Debentures
until all Allocable Amounts due on or in respect of such Senior Indebtedness
has been paid in full or any payment default thereunder has been cured or
waived. Failure to make required payments on Exchange Junior Subordinated
Debentures would constitute an Event of Default under the Trust Agreement.
LIMITED PURPOSE OF THE TRUST
The Capital Securities will represent beneficial interests in the Trust, and
the Trust exists for the sole purpose of issuing and selling the Trust
Securities, using the proceeds from the sale of the Trust Securities to
acquire the Original Junior Subordinated Debentures, exchanging the Original
Capital Securities and the Original Junior Subordinated Debentures in the
Exchange Offer, and engaging in only those other activities necessary,
advisable or incidental thereto.
RIGHTS UPON DISSOLUTION
Unless the Exchange Junior Subordinated Debentures are distributed to
holders of the Exchange Capital Securities, upon any voluntary or involuntary
dissolution, winding-up or liquidation of the Trust, after satisfaction of the
liabilities of creditors of the Trust as required by applicable law, the
holders of the Exchange Capital Securities will be entitled to receive, out of
assets held by the Trust, the Liquidation Distribution in cash. See
"Description of Exchange Securities--Description of Exchange Capital
Securities--Liquidation of the Trust and Distribution of Exchange Junior
Subordinated Debentures." Upon any voluntary or involuntary liquidation or
bankruptcy of Greater Bay, the Property Trustee, as holder of the Exchange
Junior Subordinated Debentures, would be a subordinated creditor of Greater
Bay, subordinated in right of payment to all Senior Indebtedness as set forth
in the Indenture, but entitled to receive payment in full of principal (and
premium, if any) and interest, before any stockholders of Greater Bay receive
payments or distributions.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a summary of certain of the material United States federal
income tax consequences associated with the exchange of Original Capital
Securities for Exchange Capital Securities and with the ownership and
disposition of Capital Securities held as capital assets by a holder who
purchased Original Capital Securities upon initial issuance. It does not
purport to deal with all aspects of federal income taxation that might be
relevant to particular holders in light of their personal investment
circumstances or status, nor does it discuss the federal income tax
consequences to certain types of holders subject to special treatment under
the federal income tax laws, such as banks, thrifts, real estate investment
trusts, regulated investment companies, insurance companies, dealers in
securities or currencies, tax-exempt investors, United States Alien Holders
engaged in a U.S. trade or business or persons that will hold the Capital
Securities as a position in a "straddle," as part of a "synthetic security" or
"hedge," as part of a "conversion transaction" or other integrated investment,
or as other than a capital asset. This summary also does not address the tax
consequences to persons that have a functional currency other than the U.S.
dollar or the tax consequences to shareholders, partners or beneficiaries of a
holder of Capital Securities. Further, it does not include any description of
any alternative minimum tax consequences or the tax laws of any state or local
government or of any foreign government that may be
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applicable to the Capital Securities. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury regulations thereunder
and the administrative and judicial interpretations thereof, as of the date
hereof, all of which are subject to change, possibly on a retroactive basis.
The discussion herein is based upon opinions issued by Manatt, Phelps &
Phillips, LLP ("Tax Counsel"). An opinion of Tax Counsel is not binding on the
Internal Revenue Service ("IRS") or the courts. No rulings have been or are
expected to be sought from the IRS with respect to any of the transactions
described herein and no assurance can be given that the IRS will not take
contrary positions. Moreover, no assurance can be given that the opinions
expressed herein will not be challenged by the IRS or, if challenged, that
such a challenge would not be successful. Tax Counsel has reviewed this
summary and is of the opinion that, to the extent that it constitutes matters
of law or purports to describe certain provisions of the federal income tax
laws, it is a correct summary in all material respects of the matters
discussed herein.
EXCHANGE OF CAPITAL SECURITIES
In the opinion of Tax Counsel, the exchange of Original Capital Securities
for Exchange Capital Securities will not be a taxable event to holders for
federal income tax purposes. The exchange of Original Capital Securities for
Exchange Capital Securities pursuant to the Exchange Offer should not be
treated as an "exchange" for federal income tax purposes because the Exchange
Capital Securities should not be considered to differ materially in kind or
extent from the Original Capital Securities and because the exchange will
occur by operation of the terms of the Original Capital Securities.
Accordingly, the Exchange Capital Securities should have the same issue price
as the Original Capital Securities, and a holder should have the same adjusted
tax basis and holding period in the Exchange Capital Securities immediately
after the exchange as the holder had in the Original Capital Securities
immediately before the exchange.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
Greater Bay intends to take the position that the Junior Subordinated
Debentures will be classified for federal income tax purposes as indebtedness
of Greater Bay. This is consistent with an opinion rendered by Tax Counsel in
connection with the issuance of the Original Capital Securities. Greater Bay,
the Trust and the holders of the Capital Securities (by acceptance of a
beneficial interest in a Capital Security) will agree to treat the Junior
Subordinated Debentures as indebtedness of Greater Bay and the Capital
Securities as evidence of a beneficial ownership interest in the Junior
Subordinated Debentures for all federal income tax purposes. No assurance can
be given, however, that such position will not be challenged by the IRS 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 as indebtedness of Greater Bay for federal income tax purposes.
Enron Corporation has filed a petition in the United States Tax Court
challenging the proposed disallowance by the IRS of the deduction of interest
expense on securities issued by Enron Corporation in 1993 and 1994 that are
similar to, although different in a number of respects from, the Junior
Subordinated Debentures. The opinion of Tax Counsel regarding the tax
classification of the Junior Subordinated Debentures speaks to the state of
the law prior to any Tax Court decision regarding the issues in the Enron
petition. A decision of the Tax Court in the Enron matter upholding the
position of the IRS would not necessarily affect the tax treatment of interest
paid on the Junior Subordinated Debentures because such a decision may be
based on factors that differ from those pertaining to the Junior Subordinated
Debentures, the Trust or Greater Bay. However, it is possible that such
decision would result in the receipt by Greater Bay or the Trust of a
subsequent opinion of counsel that there is more than insubstantial risk that
interest payable on the Junior Subordinated Debentures is not or will not be
deductible. The receipt of such an opinion would constitute a Tax Event, which
would permit Greater Bay to cause a redemption of the Capital Securities.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Original Capital Securities, Tax
Counsel rendered its opinion generally to the effect that, under then-current
law and assuming full compliance with the terms of the Trust Agreement and the
Indenture (and certain other documents), and based on certain facts and
assumptions
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contained in such opinion, the Trust will be classified for federal income tax
purposes as a grantor trust and not as an association taxable as a
corporation. Accordingly, for federal income tax purposes, each holder of
Capital Securities generally will be considered the owner of an undivided
interest in the Junior Subordinated Debentures, and each holder will be
required to include in its gross income any interest (or OID accrued) with
respect to its allocable share of those Junior Subordinated Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations (the "Treasury Regulations")
applicable to debt instruments issued on or after August 13, 1996, a "remote"
contingency that stated interest will not be timely paid will be ignored in
determining whether a debt instrument is issued with OID. Greater Bay believes
that the likelihood of its exercising its option to defer payments of interest
is "remote" since exercising that option would, among other things, prevent
Greater Bay from declaring dividends on any class of its equity securities.
Accordingly, Greater Bay intends to take the position that the Junior
Subordinated Debentures will not be considered to be issued with OID and,
accordingly, stated interest on the Junior Subordinated Debentures generally
will be taxable to a holder as ordinary income at the time it is paid or
accrued in accordance with such holder's method of tax accounting.
Under the Treasury Regulations, if Greater Bay were to exercise its option
to defer payments of interest, the Junior Subordinated Debentures would at
that time be treated as issued with OID, and all stated interest on the Junior
Subordinated Debentures would thereafter be treated as OID as long as the
Junior Subordinated Debentures remain outstanding. In such event, all of a
holder's taxable interest income with respect to the Junior Subordinated
Debentures would thereafter be accounted for on an economic accrual basis
regardless of such holder's method of tax accounting, and actual distributions
of stated interest would not be reported as taxable income. Consequently, a
holder of Capital Securities would be required to include in gross income OID
even though Greater Bay would not make actual cash payments during an
Extension Period. Moreover, under the Treasury Regulations, if the option to
defer the payment of interest was determined not to be "remote," the Junior
Subordinated Debentures would be treated as having been originally issued with
OID. In such event, all of a holder's taxable interest income with respect to
the Junior Subordinated Debentures would be accounted for on an economic
accrual basis regardless of such holder's method of tax accounting, and actual
distributions of stated interest would not be reported as taxable income.
The Treasury Regulations have not yet been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to the interpretation described herein.
Because income on the Capital Securities will constitute interest or OID,
corporate holders of the Capital Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with
respect to the Capital Securities.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE
TRUST
Greater Bay will have the right at any time to liquidate the Trust and cause
the Junior Subordinated Debentures to be distributed to the holders of the
Trust Securities. Under current law, such a distribution, for federal income
tax purposes, would be treated as a nontaxable event to each holder, and each
holder would receive an aggregate tax basis in the Junior Subordinated
Debentures equal to such holder's aggregate tax basis in its Capital
Securities. A holder's holding period in the Junior Subordinated Debentures so
received in liquidation of the Trust would include the period during which the
Capital Securities were held by such holder. If, however, the Trust were
characterized for federal income tax purposes as an association taxable as a
corporation at the time of its dissolution, the distribution of the Junior
Subordinated Debentures may constitute a taxable event to holders of Capital
Securities and a holder's holding period in Junior Subordinated Debentures
would begin on the date such Junior Subordinated Debentures were received.
Under certain circumstances described herein (see "Description of Exchange
Securities--Description of Exchange Capital Securities"), the Junior
Subordinated Debentures may be redeemed for cash and the proceeds of such
redemption distributed to holders in redemption of their Capital Securities.
Under current law, such a
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redemption would, for federal income tax purposes, constitute a taxable
disposition of the redeemed Capital Securities, and a holder could recognize
gain or loss as if it sold such redeemed Capital Securities for cash. See "--
Sales of Capital Securities."
SALES OF CAPITAL SECURITIES
A holder that sells Capital Securities (including a redemption of the
Capital Securities either on the Stated Maturity Date or upon an optional
redemption of the Junior Subordinated Debentures by Greater Bay) will
recognize gain or loss equal to the difference between its adjusted tax basis
in Capital Securities and the amount realized on the sale of such Capital
Securities (other than with respect to accrued and unpaid interest which has
not yet been included in income, which will be treated as ordinary income). A
holder's adjusted tax basis in the Capital Securities generally will be its
initial purchase price increased by OID (if any) previously includible in such
holder's gross income to the date of disposition and decreased by payments (if
any) received on the Capital Securities in respect of OID. Such gain or loss
generally will be a capital gain or loss and generally will be a long-term
capital gain or loss if the Capital Securities have been held for more than
one year. As a result of the IRS Restructuring and Reform Act of 1998, for
individuals the maximum tax on long term capital gains on most assets is 20%
for amounts properly taken into account after January 1, 1998.
The Capital Securities may trade at a price that does not accurately reflect
the value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. A holder who uses the accrual method of accounting
for tax purposes (and a cash method holder, if the Junior Subordinated
Debentures are deemed to have been issued with OID) who disposes of his
Capital Securities between record dates for payments of distributions thereon
will be required to include accrued but unpaid interest on the Junior
Subordinated Debentures through the date of disposition in income as ordinary
income (i.e., interest or, if applicable, OID), and to add such amount to his
adjusted tax basis in his pro rata share of the underlying Junior Subordinated
Debentures deemed disposed of. To the extent the selling price is less than
the holder's adjusted tax basis (which will include all accrued but unpaid
interest) a holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
federal income tax purposes.
PROPOSED TAX LEGISLATION
The Taxpayer Relief Act of 1997, enacted on August 5, 1997, did not contain
certain provisions of President Clinton's Fiscal 1998 Budget Proposal that
would, among other things, have denied an issuer a deduction for United States
federal income tax purposes for the payment of interest on instruments with
characteristics similar to the Junior Subordinated Debentures. There can be no
assurances, however, that the proposed legislation, if enacted, or similar
legislation enacted after the date hereof would not adversely affect the tax
treatment of the Junior Subordinated Debentures, resulting in a Tax Event. The
occurrence of a Tax Event may result in the redemption of the Junior
Subordinated Debentures for cash, in which event the holders of the Capital
Securities would receive cash in redemption of their Capital Securities. See
"Description of Exchange Capital Securities--Redemption" and "Description of
Exchange Junior Subordinated Debentures--Special Event Prepayment."
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is not a U.S.
Holder for federal income tax purposes.
A "U.S. Holder" is a holder of Capital Securities who or which is (i) a
citizen or individual resident (or is treated as a citizen or individual
resident) of the United States for federal income tax purposes, (ii) a
corporation or partnership created or organized in or under the laws of the
United States or any political subdivision thereof, or (iii) a trust or estate
the income of which is includible in its gross income for federal income tax
purposes without regard to its source. Generally, a trust is a U.S. Holder if,
and only if, (a) a court within the United States is able to exercise primary
supervision over the administration of the trust and (b) one or more United
States trustees have the authority to control all substantial decisions of the
trust.
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Under present federal income tax laws: (i) payments by the Trust or any of
its paying agents to any holder of a Capital Security who or which is a United
States Alien Holder will not be subject to federal withholding tax; provided
that, (a) the beneficial owner of the Capital Security does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of Greater Bay entitled to vote, (b) the beneficial owner of
the Capital Security is not a controlled foreign corporation that is related
to Greater Bay through stock ownership, and (c) either (1) the beneficial
owner of the Capital Security certifies to the Trust or its agent, under
penalties of perjury, that it is not a U.S. holder and provides its name and
address or (2) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business (a "Financial Institution"), and holds the Capital Security
in such capacity, certifies to the Trust or its agent, under penalties of
perjury, that such statement has been received from the beneficial owner by it
or by a Financial Institution between it and the beneficial owner and
furnishes the Trust or its agent with a copy thereof; and (ii) a United States
Alien Holder of a Capital Security will not be subject to federal withholding
tax on any gain realized upon the sale or other disposition of a Capital
Security.
Regulations recently issued by the IRS, which will be effective for payments
made after December 31, 1998 (subject to certain transition rules), make
modifications to the certification procedures applicable to United States
Alien Holders. In general, these regulations unify certification procedures
and forms and clarify and modify reliance standards. A United States Alien
Holder should consult with its own advisor regarding the effect of the new
Treasury Regulations.
As discussed above, changes in legislation affecting the federal income tax
treatment of the Junior Subordinated Debentures are possible, and could
adversely affect the ability of Greater Bay to deduct the interest payable on
the Junior Subordinated Debentures. Moreover, any such legislation could
adversely affect United States Alien Holders by characterizing income derived
from the Junior Subordinated Debentures as dividends, generally subject to a
30% income tax (on a withholding basis) when paid to a United States Alien
Holder, rather than as interest which, as discussed above, is generally exempt
from income tax in the hands of a United States Alien Holder.
INFORMATION REPORTING TO HOLDERS
Generally, income on the Capital Securities will be reported to holders on
Form 1099, which forms should be mailed to holders of Capital Securities by
January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Capital Securities may
be subject to a "backup" withholding tax of 31% unless the holder complies
with certain identification requirements. Any withheld amounts will be allowed
as a credit against the holder's federal income tax, provided the required
information is provided to the IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE EXCHANGE OF ORIGINAL CAPITAL
SECURITIES FOR EXCHANGE CAPITAL SECURITIES AND OF THE OWNERSHIP AND
DISPOSITION OF THE CAPITAL 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.
CERTAIN ERISA CONSIDERATIONS
In evaluating the Exchange Capital Securities, a fiduciary of a qualified
profit-sharing, pension or stock bonus plan, including a plan for self-
employed individuals and their employees or any other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), a collective
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investment fund or separate account in which such plans invest and any other
investor using assets that are treated as assets of an employee benefit plan
subject to ERISA (each, a "Plan" and collectively, "Plans") should consider
(a) whether the ownership of Exchange Capital Securities is in accordance with
the documents and instruments governing such Plan; (b) whether the ownership
of Exchange Capital Securities is solely in the interest of Plan participants
and beneficiaries and otherwise consistent with the fiduciary's
responsibilities and in compliance with the requirements of Part 4 of Title I
of ERISA, including, in particular, the diversification, prudence and
liquidity requirements of Section 404 of ERISA and the prohibited transaction
provisions of Section 406 of ERISA and Section 4975 of the Code; (c) whether
the assets of GBB Capital II are treated as assets of the Plan; and (d) the
need to value the assets of the Plan annually. In addition, the fiduciary of
an individual retirement arrangement under 408 of the Code (an "IRA")
considering the purchase of Exchange Capital Securities should consider
whether the ownership of Exchange Capital Securities would result in a non-
exempt prohibited transaction under Section 4975 of the Code.
Governmental plans and certain church plans (each as defined under ERISA)
are not subject to the prohibited transactions rules. Such plans may, however,
be subject to federal, state or local laws or regulations which may affect
their investment in the Exchange Capital Securities. Any fiduciary of such a
governmental or church plan considering an investment in the Exchange Capital
Securities should determine the need for, and the availability, if necessary,
of any exemptive relief under such laws or regulations.
The fiduciary investment considerations summarized below provide a general
discussion that does not include all of the fiduciary investment
considerations relevant to Plans and, where indicated, IRAs. This summary is
based on the current provisions of ERISA and the Code and regulations and
rulings thereunder, and may be changed (perhaps adversely and with retroactive
effect) by future legislative, administrative or judicial actions.
PLANS AND IRAS THAT ARE PROSPECTIVE PURCHASERS OF EXCHANGE CAPITAL
SECURITIES SHOULD CONSULT WITH AND RELY UPON THEIR OWN ADVISORS IN EVALUATING
THESE MATTERS IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.
PLAN ASSET REGULATION
Under Department of Labor regulations governing what constitutes the assets
of a Plan or IRA ("Plan Assets") for purposes of ERISA and the related
prohibited transaction provisions of the Code (the "Plan Asset Regulation", 29
C.F.R. Sec. 2510.3-101), when a Plan or IRA acquires an equity interest in
another entity, and such interest does not represent a "publicly offered
security" nor a security issued by an investment company registered under the
1940 Act, the Plan's assets include both the equity interest and an undivided
interest in each of the underlying assets or the entity, unless it is
established either that the entity is an operating company or that equity
participation in the entity by "benefit plan investors," as defined in the
Plan Asset Regulation, is not "significant." For purposes of the Plan Asset
Regulation GBB Capital II will be neither an investment company nor an
operating company.
Under the Plan Asset Regulation, equity participation by benefit plan
investors will not be considered "significant" on any date only if immediately
after the most recent acquisition of the Exchange Capital Securities, the
aggregate interest in the Exchange Capital Securities held by benefit plan
investors will be less than 25% of the aggregate outstanding principal amount
of the Exchange Capital Securities. Although it is possible that the equity
participation by benefit plan investors on any date will not be "significant"
for purposes of the Plan Asset Regulation, such result cannot be assured.
Consequently, if Plans, IRAs or investors using assets of Plans purchase the
Exchange Capital Securities, GBB Capital II's assets could be deemed to be
"plan assets" of such Plans and/or IRAs for purposes of the fiduciary
responsibility provisions of ERISA and the prohibited transactions rules of
ERISA and the Code. Under ERISA and the Code, any person who exercises any
authority or control respecting the management or disposition of the assets of
a Plan or IRA is considered to be fiduciary of such Plan or IRA. The Property
Trustee could therefore become a fiduciary of the Plans and IRAs that invest
in the Exchange Capital Securities and be subject to the general fiduciary
requirements of ERISA in
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exercising its authority with respect to the management of the assets of GBB
Capital II. However, the Property Trustee will have only limited discretionary
authority with respect to GBB Capital II assets and the remaining functions
and responsibilities performed by the Property Trustee will be for the most
part custodial and ministerial in nature.
PROHIBITED TRANSACTIONS
Each of GBB Capital II Greater Bay (the obligor with respect to the Junior
Subordinated Debentures held by GBB Capital II) and their affiliates or the
Property Trustee may be a party in interest or a disqualified person with
respect to a Plan or IRA investing in the Exchange Capital Securities.
Therefore, such investment by a Plan or IRA may give rise to a prohibited
transaction. Consequently, before investing in the Exchange Capital Securities
or acquiring Junior Subordinated Debentures, any person who is, or who is
acquiring such securities for, or on behalf of, a Plan or IRA should determine
that either a statutory or an administrative exemption from the prohibited
transaction rules discussed below or otherwise available is applicable to such
investment in the Exchange Capital Securities, or that such investment in, or
acquisition of, such securities will not result in a non-exempt prohibited
transaction.
The statutory or administrative exemptions from the prohibited transaction
rules under ERISA and the Code which may be available to a Plan or IRA which
is investing in the Exchange Capital Securities include: Prohibited
Transaction Class Exemption ("PTCE") 90-1, regarding investments by insurance
company pooled separate accounts; PTCE 91-38, regarding investments by bank
collective investment funds; PTCE 84-14, regarding transactions effected by
qualified professional asset managers; PTCE 96-23, regarding transactions
effected by in-house asset managers; and PTCE 95-60, regarding investments by
insurance company general accounts (collectively referred to as the "ERISA
Investor Exemptions").
No person who is, or who in acquiring Exchange Capital Securities is using
the assets of, a Plan or IRA may acquire Exchange Capital Securities unless
one of the ERISA Investor Exemptions or another applicable exemption is
available to the Plan or IRA, or such acquisition or holding of Exchange
Capital Securities will not result in a non-exempt Prohibited Transaction. The
acquisition of the Exchange Capital Securities by any person who is, or who in
acquiring such Exchange Capital Securities is using the assets of, a Plan or
IRA shall be deemed to constitute a representation by such person to GBB
Capital II, Greater Bay and the Initial Purchaser either that (a) it is not a
Plan, IRA, trustee or other person acting on behalf of a Plan or IRA or other
person or entity using the assets of any Plan or IRA to finance such purchase
or (b) such acquisition will not result in a prohibited transaction under
Section 406 of ERISA or Section 4975 of the Code for which there is no
applicable statutory or administrative exemption.
THE DISCUSSION HEREIN OF ERISA IS GENERAL IN NATURE AND IS NOT INTENDED TO
BE ALL INCLUSIVE. ANY FIDUCIARY OF A PLAN, IRA, GOVERNMENTAL PLAN OR CHURCH
PLAN CONSIDERING AN INVESTMENT IN THE EXCHANGE CAPITAL SECURITIES SHOULD
CONSULT WITH ITS LEGAL ADVISORS REGARDING THE CONSEQUENCES OF SUCH INVESTMENT
AND CONSIDER WHETHER THE PLAN OR IRA CAN MAKE THE REPRESENTATIONS NOTED ABOVE.
FURTHER, THE SALE OF INVESTMENTS TO PLANS AND IRAS IS IN NO RESPECT A
REPRESENTATION BY GBB CAPITAL II, GREATER BAY, THE PROPERTY TRUSTEE, THE
INITIAL PURCHASER OR ANY OTHER PERSON ASSOCIATED WITH THE SALE OF THE EXCHANGE
CAPITAL SECURITIES THAT SUCH SECURITIES MEET ALL RELEVANT LEGAL REQUIREMENTS
WITH RESPECT TO INVESTMENTS BY PLANS AND IRAS GENERALLY OR ANY PARTICULAR
PLAN, OR THAT SUCH SECURITIES ARE OTHERWISE APPROPRIATE FOR PLANS AND IRAS
GENERALLY OR ANY PARTICULAR PLAN. ANY PURCHASER PROPOSING TO ACQUIRE CAPITAL
SECURITIES WITH ASSETS OF ANY PLAN OR IRA SHOULD CONSULT WITH ITS COUNSEL.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Capital Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Capital Securities.
This Prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of Exchange Capital
Securities received in exchange for Original Capital Securities where such
Original Capital Securities were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Trust and Greater
Bay have agreed that, starting on the Expiration Date and ending on the close
of business on the 90th day following the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, for a period of 90 days after
the Expiration Date, all dealers effecting transactions in the Exchange
Securities may be required to deliver a prospectus.
The Trust and Greater Bay will not receive any proceeds from any sale of
Exchange Capital Securities by broker-dealers. Exchange Capital Securities
received by broker-dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions, in the over-
the-counter market, in negotiated transactions, through the writing of options
on the Exchange Capital Securities or a combination of such methods of resale,
at market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer and/or the purchasers of any such Exchange Capital Securities. Any
broker-dealer that resells Exchange Capital Securities that were received by
it for its own account pursuant to the Exchange Offer and any broker or dealer
that participates in a distribution of such Exchange Capital Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit of any such resale of Exchange Capital Securities and any commissions
or concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that
by acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
For a period of 90 days after the Expiration Date, the Trust and Greater Bay
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such
documents in the Letter of Transmittal. The Trust and Greater Bay have agreed
to pay all expenses incident to the Exchange Offer (including the expenses of
one counsel for the holders of the Capital Securities) other than commissions
or concessions of any brokers or dealers and will indemnify the holders of the
Exchange Capital Securities (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
VALIDITY OF EXCHANGE SECURITIES
The validity of the Exchange Capital Securities, the Exchange Guarantee and
the Exchange Junior Subordinated Debentures will be passed upon for Greater
Bay by Manatt, Phelps & Phillips, LLP. Certain matters of Delaware law
relating to the validity of the Exchange Capital Securities will be passed
upon on behalf of the Trust by Richards, Layton & Finger, P.A., special
Delaware counsel to the Trust. Certain matters relating to federal income tax
considerations will be passed upon for Greater Bay by Manatt, Phelps &
Phillips, LLP, special tax counsel to Greater Bay.
EXPERTS
The consolidated balance sheets as of December 31, 1997 and 1996 and the
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1997 incorporated by
reference in this Registration Statement, have been incorporated herein in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of that firm as experts in accounting and auditing.
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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 GREATER BAY OR THE TRUST. 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.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information..................................................... 7
Information Delivered and Incorporated by Reference....................... 8
Summary................................................................... 11
Selected Consolidated Financial Data...................................... 20
Recent Developments....................................................... 22
Risk Factors.............................................................. 23
Exchange Offer Procedures................................................. 29
Greater Bay Bancorp....................................................... 31
GBB Capital II............................................................ 33
Use of Proceeds........................................................... 34
Regulatory Capital Ratios................................................. 34
Accounting Treatment...................................................... 35
Capitalization............................................................ 35
The Exchange Offer........................................................ 36
Resales of Exchange Capital Securities.................................... 41
Description of Exchange Securities........................................ 46
Description of Exchange Capital Securities................................ 46
Liquidation of the Trust and Distribution of Exchange Junior Subordinated
Debentures............................................................... 49
Description of Exchange Junior Subordinated Debentures.................... 58
Description of Exchange Guarantee......................................... 68
Description of Original Securities........................................ 70
Relationship among the Exchange Capital Securities, the Exchange Junior
Subordinated Debentures and the Exchange Guarantee....................... 71
Certain Federal Income Tax Consequences................................... 72
Certain ERISA Considerations.............................................. 76
Plan of Distribution...................................................... 79
Validity of Exchange Securities........................................... 79
Experts................................................................... 79
</TABLE>
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GBB CAPITAL II
Offer to Exchange its Floating Rate
Capital Securities, Series B Fully and Unconditionally Guaranteed,
as Described Herein, by
[LOGO]
GREATER BAY BANCORP
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PROSPECTUS
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OCTOBER 23, 1998
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