<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 14, 1999
Greater Bay Bancorp
(Exact name of registrant as specified in its charter)
California 77-0387041
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
Commission file number: 0-25034
2860 West Bayshore Road
Palo Alto, California 94303
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (650) 813-8200
<PAGE>
Item 5. Other Events.
On December 14, 1999, Greater Bay Bancorp (the "Registrant") entered into an
Agreement and Plan of Reorganization with Coast Bancorp ("Coast") providing for
the merger of Coast with and into the Registrant (the "Merger"), subject to the
terms and conditions therein, including the receipt of all required regulatory
approvals and the approval of the shareholders of the Registrant and Coast.
Following consummation of the Merger, Coast Commercial Bank, a wholly owned
subsidiary of Coast, will become a wholly owned subsidiary of the Registrant.
Included as Exhibit 99.4 of this Current Report on Form 8-K is unaudited pro
forma condensed combined financial information. The Unaudited Pro Forma
Condensed Combined Balance Sheet as of September 30, 1999 combines the
historical consolidated balance sheets of the Registrant, Bay Commercial
Services ("BCS") (which merged with the Registrant on October 15, 1999), Mt.
Diablo Bancshares ("MDB") (which signed a definitive agreement on September 15,
1999 to merge with the Registrant) and Coast, as if all of these mergers had
been effective on September 30, 1999, after giving effect to certain
adjustments. These adjustments are based on estimates. The Unaudited Pro Forma
Condensed Combined Statements of Operations for the nine months ended September
30, 1999 and 1998 and for the years ended December 31, 1998, 1997 and 1996
present the combined results of operations of the Registrant, BCS, MDB and Coast
as if the mergers had been effective at the beginning of each period. No
assurance can be given when and if the proposed mergers with MDB and Coast will
be consummated.
The unaudited pro forma condensed combined financial information and
accompanying notes reflect the application of the pooling of interests method of
accounting for the mergers. Under this method of accounting, the recorded
assets, liabilities, shareholders' equity, income and expenses of the
Registrant, BCS, MDB and Coast are combined and reflected at their historical
amounts.
The pro forma combined figures shown in the unaudited pro forma condensed
combined financial information are simply arithmetical combinations of the
Registrant's, BCS', MDB's and Coast's separate financial results; you should not
assume that the Registrant, BCS, MDB and Coast would have achieved the pro forma
combined results if they had actually been combined during the periods
presented.
The combined company expects to achieve merger benefits in the form of
operating cost savings. The pro forma earnings, which do not reflect any direct
costs or potential savings which are expected to result from the consolidation
of the operations of the Registrant, BCS, MDB and Coast, are not indicative of
the results of future operations. No assurances can be given with respect to
the ultimate level of expense savings.
Pro Forma Earnings with Operating Efficiencies
The pro forma condensed combined financial information contained in Exhibit
99.4 indicates that, for the nine months ended September 30, 1999, the
Registrant's net earnings per share (1) would have been $1.62, a decline of
$0.04 from the reported earnings before the mergers with BCS, MDB and Coast.
However, these pro forma earnings per share do not reflect the operating
efficiencies that the Registrant has realized in all of its previous mergers. On
average, the Registrant has realized operating efficiencies from its prior
mergers in excess of 15% of the operating expenses of the acquired institutions.
The following table details the impact of applying the Registrant's historical
percentage of operating efficiencies attained on a pro forma basis to September
30, 1999 earnings:
<TABLE>
<CAPTION>
Operating Net
Expenses Income (1) EPS (1)
--------- ---------- -------
<S> <C> <C> <C>
Pro-Forma Net Income Before
Operating Efficiencies $27,814 $1.62
Operating Expenses:
Bay Commercial Services $ 4,353
Coast $ 9,884
Mt. Diablo $ 4,238
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Total $18,475
=======
Greater Bay Historical Merger & Acquisition
Operating Efficiencies 15%
Estimated Operating Efficiencies, Gross $ 2,771
=======
Estimated Operating Efficiencies, Net of Tax $ 1,718 $ 1,718 $0.10
======= -------- -------
Adjusted Pro-Forma Net Income After
Operating Efficiencies $29,532 $1.72
======== =======
(1) - Before merger and other related nonrecurring costs and extraordinary items.
</TABLE>
No assurance can be given that these operating efficiencies will be
achieved. Information contained under this caption constitutes "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
which involve risks and uncertainties. The Registrant's actual results may
differ significantly from the results discussed in these forward-looking
statements. Factors that might cause such a difference include but are not
limited to difficulties in integrating the business of the newly acquired
institutions, the timing relating to achieving the operating efficiencies,
economic conditions, competition in the geographic and business areas in which
the Registrant conducts its operations and government regulation.
<PAGE>
Item 7. Financial Statements and Exhibits.
Exhibits
- --------
2 Agreement and Plan of Reorganization, dated as of December 14, 1999, by
and between Greater Bay Bancorp and Coast Bancorp
10.1 Stock Option Agreement, dated as of December 14, 1999, by and between
Greater Bay Bancorp and Coast Bancorp
99.1 Press Release dated December 14, 1999 re Coast merger
99.2 Press Release dated December 14, 1999 re dividend declaration
99.3 Press Release dated December 14, 1999 re addition to Nasdaq Financial-100
Index
99.4 Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30,
1999 and Unaudited Pro Forma Condensed Combined Statements of Operations
for the nine months ended September 30, 1999 and 1998 and for the years
ended December 31, 1998, 1997 and 1996
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Greater Bay Bancorp
(Registrant)
Dated: December 15, 1999 By: /s/ Linda M. Iannone
--------------------
Linda M. Iannone
Senior Vice President and General
Counsel
<PAGE>
Exhibit Index
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2 Agreement and Plan of Reorganization, dated as of December 14, 1999, by
and between Greater Bay Bancorp and Coast Bancorp
10.1 Stock Option Agreement, dated as of December 14, 1999, by and between
Greater Bay Bancorp and Coast Bancorp
99.1 Press Release dated December 14, 1999 re Coast merger
99.2 Press Release dated December 14, 1999 re dividend declaration
99.3 Press Release dated December 14, 1999 re addition to Nasdaq Financial-100
Index
99.4 Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30,
1999 and Unaudited Pro Forma Condensed Combined Statements of Operations
for the nine months ended September 30, 1999 and 1998 and for the years
ended December 31, 1998, 1997 and 1996
<PAGE>
EXHIBIT 2
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
GREATER BAY BANCORP
AND
COAST BANCORP
December 14, 1999
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made and entered
into as of the 14th day of December, 1999, by and between GREATER BAY BANCORP, a
California corporation ("GBB"), and COAST BANCORP, a California corporation
("Coast").
WHEREAS, the Boards of Directors of GBB and Coast deem advisable and in the
best interests of their respective shareholders the merger of Coast with and
into GBB (the "Merger") upon the terms and conditions set forth herein and in
accordance with the California General Corporation Law (the "CGCL") (GBB,
following the effectiveness of the Merger, being hereinafter sometimes referred
to as the "Surviving Corporation");
WHEREAS, the Boards of Directors of GBB and Coast have approved the Merger
pursuant to this Agreement and the Agreement of Merger by and between GBB and
Coast (the "Agreement of Merger"), in substantially the form of Exhibit A
---------
attached hereto, pursuant to which Coast will merge with and into GBB and each
outstanding share of Coast common stock, no par value ("Coast Stock"), excluding
any Coast Perfected Dissenting Shares (as defined below), will be converted into
the right to receive a specified amount of GBB common stock, no par value ("GBB
Stock"), upon the terms and subject to the conditions set forth herein;
WHEREAS, as an inducement to GBB to enter into this Agreement, Coast
desires to, and immediately after the execution and delivery hereof will, enter
into a stock option agreement (the "Stock Option Agreement") dated as of the
date hereof with GBB, pursuant to which Coast shall grant to GBB an option to
purchase shares of Coast Stock; and
WHEREAS, the Merger is intended to qualify as a tax-free reorganization
within the meaning of the provisions of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code").
NOW, THEREFORE, on the basis of the foregoing recitals and in consideration
of the mutual covenants, agreements, representations and warranties contained
herein, the parties hereto do covenant and agree as follows:
ARTICLE 1.
DEFINITIONS
-----------
Except as otherwise expressly provided for in this Agreement, or unless the
context otherwise requires, as used throughout this Agreement the following
terms shall have the respective meanings specified below:
"Affiliate" of, or a person "Affiliated" with, a specific person(s) is a
person that directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, the person(s)
specified.
<PAGE>
"Affiliated Group" means, with respect to any entity, a group of entities
required or permitted to file consolidated, combined or unitary Tax Returns (as
defined herein).
"Agreement of Merger" has the meaning set forth in the second recital of
this Agreement.
"Average Closing Price" means the average of the daily closing price of a
share of GBB Stock reported on the Nasdaq National Market System during the 20
consecutive trading days ending at the end of the third trading day immediately
preceding the Effective Time of the Merger (as defined herein).
"BAB" means Bay Area Bank, a California state chartered bank and wholly
owned subsidiary of GBB.
"BBC" means Bay Bank of Commerce, a California state chartered bank and
wholly owned subsidiary of GBB.
"Banks" means BAB, BBC, CNB, GGB, MPB and PBC.
"Benefit Arrangements" has the meaning set forth in Section 4.20(b).
"BHC Act" means the Bank Holding Company Act of 1956, as amended.
"Business Day" means any day other than a Saturday, Sunday or day on which
a bank chartered under the laws of the State of California is closed.
"CCB" means Coast Commercial Bank, a California state chartered bank and
wholly owned subsidiary of Coast.
"Certificates" has the meaning set forth in Section 2.5(b).
"CFC" means California Financial Code.
"CGCL" has the meaning set forth in the second recital of this Agreement.
"Classified Credits" has the meaning set forth in Section 6.7.
"Closing" means the consummation of the Merger provided for in Article 2 of
this Agreement on the Closing Date (as defined herein) at the offices of Greater
Bay Bancorp, 400 Emerson Street, Palo Alto, California, or at such other place
as the parties may agree upon.
"Closing Date" means the date which is the first Friday which follows the
last to occur of (i) the approval of this Agreement and the transactions
contemplated hereby by the shareholders of Coast and GBB, (ii) the receipt of
all permits, authorizations, approvals and consents specified in Section 9.3
hereof, (iii) the expiration of all applicable waiting periods under the law,
(iv) the expiration of the 30 day period following the mailing by Coast to its
shareholders of a notice of
<PAGE>
approval of the Merger by the outstanding shares pursuant to Section 1301 of the
CGCL, or such other date as the parties may agree upon.
"Coast 401(k) Plan" means the Coast Commercial Bank Employee Stock
Ownership Plan with 401(k) Provisions.
"Coast Adjusted Book Value" means the total stockholders' equity of Coast
as reflected on the consolidated financial statements to be provided by Coast to
GBB pursuant to Section 11.14, as adjusted (a) to eliminate all amounts
received by Coast in connection with the exercise of any Coast Stock Options (as
defined herein) since September 30, 1999, (b) to eliminate any amount related to
accumulated other comprehensive income and including instead on such financial
statements the amount of Coast's consolidated accumulated other comprehensive
income as of September 30, 1999, (c) to deduct any dividends to be paid pursuant
to Section 6.1(b) hereof after the date of such financial statements and (d) to
eliminate amounts paid or accrued for Merger-related expenses, including but not
limited to, legal, accounting and financial advisory fees.
"Coast Conflicts and Consents List" has the meaning set forth in Section
4.6.
"Coast Contract List" has the meaning set forth in Section 4.16.
"Coast Derivatives List" has the meaning set forth in Section 4.32.
"Coast Dissenting Shares" means any shares of Coast Stock held by
"dissenting shareholders" within the meaning of Chapter 13 of the CGCL.
"Coast Employee Plan List" has the meaning set forth in Section 4.20.
"Coast Environmental Compliance List" has the meaning set forth in Section
4.12(b).
"Coast Filings" has the meaning set forth in Section 4.5.
"Coast Filings List" has the meaning set forth in Section 4.5.
"Coast Indemnification List" has the meaning set forth in Section 4.30.
"Coast Insurance List" has the meaning set forth in Section 4.7.
"Coast Intellectual Property List" has the set forth in Section 4.35.
"Coast Investment Securities List" has the meaning set forth in Section
4.26.
"Coast List" means any list required to be furnished by Coast to GBB
herewith.
"Coast Litigation List" has the meaning set forth in Section 4.10.
<PAGE>
"Coast Loan List" has the meaning set forth in Section 4.25.
"Coast Offices List" has the meaning set forth in Section 4.23.
"Coast Operating Losses List" has the meaning set forth in Section 4.24.
"Coast Perfected Dissenting Shares" means Coast Dissenting Shares which the
holders thereof have not withdrawn or caused to lose their status as Coast
Dissenting Shares.
"Coast Personal Property List" has the meaning set forth in Section 4.8.
"Coast Property" has the meaning set forth in Section 4.12(b).
"Coast Real Property List" has the meaning set forth in Section 4.9.
"Coast Shareholders' Meeting" means the meeting of Coast's shareholders
referred to in Section 6.6.
"Coast Stock" has the meaning set forth in the second recital of this
Agreement.
"Coast Stock Option" means any option issued pursuant to the Coast Stock
Option Plan.
"Coast Stock Option Plan" means the Coast Bancorp 1995 Amended and Restated
Stock Option Plan.
"Coast Supplied Information" has the meaning set forth in Section 4.34.
"Coast Tax List" has the meaning set forth in Section 4.11.
"Coast Undisclosed Liabilities List" has the meaning set forth in Section
4.19.
"CNB" means Cupertino National Bank, a national banking association and
wholly owned subsidiary of GBB.
"Code" has the meaning set forth in the fourth recital of this Agreement.
"Commissioner" means the Commissioner of the Department of Financial
Institutions of the State of California.
"Competing Transaction" has the meaning set forth in Section 6.1(n).
"Conversion Ratio" has the meaning set forth in Section 2.2(a).
"Covered Person" has the meaning set forth in Section 4.30.
<PAGE>
"Deloitte & Touche" means Deloitte & Touche LLP, Coast's independent
auditors and accountants.
"DFI" means the Department of Financial Institutions of the State of
California.
"Effective Time of the Merger" means the date upon which the Merger is
consummated and the Agreement of Merger is filed with the Secretary of State.
"Employee Plans" has the meaning set forth in Section 4.20(a).
"Encumbrance" shall mean any option, pledge, security interest, lien,
charge, encumbrance or restriction (whether on voting or disposition or
otherwise), whether imposed by agreement, understanding, law or otherwise.
"Environmental Regulations" has the meaning set forth in Section 4.12(b).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliates" has the meaning set forth in Section 4.20(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" means Norwest Bank Minnesota, N.A.
"Exchange Fund" has the meaning set forth in Section 2.5(a) hereof.
"FDIC" means the Federal Deposit Insurance Corporation.
"Financial Statements of GBB" means the audited consolidated financial
statements of GBB consisting of the consolidated balance sheets as of December
31, 1996, 1997 and 1998, the related consolidated statements of operations,
shareholders' equity and cash flows for the years then ended and the related
notes thereto and related opinions thereon for the years then ended and GBB's
unaudited consolidated balance sheets and consolidated statement of operations
and cash flows as of and for the nine month period ended September 30, 1999.
"Financial Statements of Coast" means the consolidated financial statements
of Coast consisting of the consolidated balance sheets as of December 31, 1996,
1997 and 1998, the related statements of income, stockholders' equity and cash
flows for the years then ended and related notes thereto and related opinions
thereon for the years then ended and Coast's unaudited consolidated balance
sheet and consolidated statement of income and cash flows as of and for the nine
month period ended September 30, 1999.
"FRB" means the Board of Governors of the Federal Reserve System.
"GBB 401(k) Plan" means the Greater Bay Bancorp 401(k) Profit Sharing Plan.
<PAGE>
"GBB Acquisition Transaction" has the meaning set forth in Section
2.2(a)(iv).
"GBB Conflicts and Consents List" has the meaning set forth in Section 5.5.
"GBB Dissenting Shares" means any shares of GBB Stock held by "dissenting
shareholders" within the meaning of Chapter 13 of the CGCL.
"GBB Environmental Compliance List" has the meaning set forth in Section
5.9(b).
"GBB Filings" has the meaning set forth in Section 5.4.
"GBB Perfected Dissenting Shares" means any GBB Dissenting Shares which the
holders thereof have not withdrawn or caused to lose their status as GBB
Dissenting Shares.
"GBB Property" has the meaning set forth in Section 5.12(b).
"GBB Shareholders' Meeting" means the meeting of GBB's shareholders
referred to in Section 7.12.
"GBB Stock" has the meaning set forth in the second recital of this
Agreement.
"GBB Stock Option" means any option issued pursuant to the GBB Stock Option
Plan.
"GBB Stock Option Plan" means the Greater Bay Bancorp 1996 Stock Option
Plan, as amended.
"GBB Subsidiaries" means each of the Banks, Pacific Business Funding
Corporation and Peninsula Real Estate Corporation.
"GBB Supplied Information" has the meaning set forth in Section 5.14.
"GBB Undisclosed Liabilities List" has the meaning set forth in Section
5.12.
"GGB" means Golden Gate Bank, a California state chartered bank and wholly
owned subsidiary of GBB.
"Governmental Entity" shall mean any court or tribunal in any jurisdiction
or any United States federal, state, municipal, domestic, foreign or other
administrative authority or instrumentality.
"Hazardous Materials" has the meaning set forth in Section 4.12(b).
"Immediate Family" means a person's spouse, parents, in-laws, children and
siblings.
"Investment Security" means any equity security or debt security as defined
in Statement of Financial Accounting Standards No. 115.
<PAGE>
"IRS" means the Internal Revenue Service.
"Joint Proxy Statement and Prospectus" means the Joint Proxy Statement and
Prospectus that is included as part of the Registration Statement on Form S-4
(as defined herein) and used to solicit proxies for the Coast Shareholders'
Meeting and the GBB Shareholders' Meeting and to offer and sell the shares of
GBB Stock to be issued in connection with the Merger.
"MPB" means Mid-Peninsula Bank, a California state chartered bank and
wholly-owned subsidiary of GBB.
"Operating Loss" has the meaning set forth in Section 4.24.
"PBC" means Peninsula Bank of Commerce, a California state chartered bank
and wholly owned subsidiary of GBB.
"Person" means any individual, corporation, association, partnership,
limited liability company, trust, joint venture, other entity, unincorporated
body, government or governmental department or agency.
"PwC" means PricewaterhouseCoopers LLP, GBB's independent public
accountants.
"Related Group of Persons" means Affiliates, members of an Immediate Family
or Persons the obligations of whom would be attributed to another Person
pursuant to the regulations promulgated by the SEC (as defined herein).
"Registration Statement on Form S-4" means the Registration Statement on
Form S-4, and such amendments thereto, that is filed with the SEC to register
the shares of GBB Stock to be issued in the Merger under the Securities Act and
to clear use of the Joint Proxy Statement and Prospectus in connection with the
Coast Shareholders' Meeting and the GBB Shareholders' Meeting pursuant to the
regulations promulgated under the Exchange Act.
"Sandler O'Neill Agreement" means the letter agreement dated June 1, 1999
between Coast and Sandler O'Neill & Partners, L.P.
"Scheduled Contracts" has the meaning set forth in Section 4.16.
"SEC" means the Securities and Exchange Commission.
"Secretary of State" means the Secretary of State of the State of
California.
"Securities Act" means the Securities Act of 1933, as amended.
"Stock Option Agreement" has the meaning set forth in the third recital of
this Agreement.
<PAGE>
"Surviving Corporation" has the meaning set forth in the first recital of
this Agreement.
"Tanks" has the meaning set forth in Section 4.12(b).
"Tax Returns" means all returns, declarations, reports, estimates,
information returns and statements required to be filed in respect of any Taxes.
"Taxes" means (i) all federal, state, local or foreign taxes, charges,
fees, imposts, levies or other assessments, including, without limitation, all
net income, gross receipts, capital, sales, use, ad valorem, value added,
transfer, franchise, profits, inventory, capital stock, license, withholding,
payroll, employment, social security, unemployment, excise, severance, stamp,
occupation, property, corporation and estimated taxes, custom duties, fees,
assessments and charges of any kind whatsoever; (ii) all interest, penalties,
fines, additions to tax or additional amounts imposed by any taxing authority in
connection with any item described in clause (i); and (iii) any transferred
liability in respect of any items described in clauses (i) and/or (ii).
"Top Up Option" means, in the event that the Average Closing Price is less
than $32.84, the right of GBB to elect to issue that number of shares of GBB
Stock equal to the quotient obtained by dividing $22.17 by the Average Closing
Price.
"Understanding" means any contract, agreement, understanding, commitment or
offer, whether oral or written, which may become a binding obligation if
accepted by another Person.
ARTICLE 2.
TERMS OF MERGER
---------------
2.1. Effect of Merger and Surviving Corporation. At the Effective Time of
------------------------------------------
the Merger, Coast will be merged with and into GBB pursuant to the terms,
conditions and provisions of the Agreement of Merger and in accordance with the
applicable provisions of the CGCL. By virtue of the Merger, all the rights,
privileges, powers and franchises and all property and assets of every kind and
description of Coast and GBB shall be vested in and be held and enjoyed by the
Surviving Corporation, without further act or deed, and all the interests of
every kind of Coast and GBB, including all debts due to either of them on
whatever account, shall be the property of the Surviving Corporation as they
were of Coast and GBB and the title to any interest in real property and any
interest in personal property vested by deed or otherwise in either Coast or GBB
shall not revert or be in any way impaired by reason of the Merger; and all
rights of creditors and liens upon any property of Coast and GBB shall be
preserved unimpaired and all debts, liabilities and duties of Coast and GBB
shall be debts, liabilities and duties of the Surviving Corporation and may be
enforced against it to the same extent as if said debts, liabilities and duties
had been incurred or contracted by it.
2.2. Stock of Coast. Subject to Section 2.4, each share of Coast Stock
--------------
issued and outstanding immediately prior to the Effective Time of the Merger
shall, without any further action on the part of Coast or the holders of such
shares, be treated on the basis set forth herein.
<PAGE>
(a) Conversion of Coast Stock. At the Effective Time of the Merger,
-------------------------
pursuant to the Agreement of Merger, each outstanding share of Coast Stock
excluding any Coast Perfected Dissenting Shares shall, without any further
action on the part of Coast or the holders of any such shares, be automatically
canceled and cease to be an issued and outstanding share of Coast Stock and be
converted into shares of GBB Stock (the "Conversion Ratio") as follows:
(i) If the Average Closing Price is greater than or equal to $32.84
or less than or equal to $38.16, 0.675 shares of GBB Stock;
(ii) If the Average Closing Price is greater than $38.16, a number of
shares of GBB Stock equal to the quotient obtained by dividing (x) $25.76 plus
the product of 0.333 times the difference between the Average Closing Price and
$38.16, by (y) the Average Closing Price; or
(iii) If the Average Closing Price is less than $32.84, GBB may, but
shall not be required to, elect the Top Up Option. GBB shall notify Coast in
writing, within one Business Day of the calculation of the Average Closing
Price, whether GBB will elect the Top Up Option. If GBB does not elect the Top
Up Option, Coast may terminate the Agreement pursuant to Section 13.1(m) within
one Business Day from the date of receipt of written notice from GBB of its
decision not to elect the Top Up Option. If Coast does not give GBB written
notice of its decision to so terminate the Agreement within such one Business
Day period, the Conversion Ratio will be 0.675 shares of GBB Stock. If GBB
elects the Top Up Option, the Conversion Ratio will equal that number of shares
of GBB Stock equal to the quotient obtained by dividing $22.17 by the Average
Closing Price.
(iv) In the event that, prior to the Closing Date, GBB publicly
announces the signing of a definitive agreement with a third party with respect
to a business combination, tender offer or similar transaction which if
consummated would result in the GBB shareholders as of the date of such
announcement owning less than 51% of the outstanding shares of common stock of
the surviving corporation, the price to be paid to GBB shareholders in such
transaction would exceed $38.16 and such transaction is not terminated or
abandoned prior to the Closing Date (a "GBB Acquisition Transaction"), the
Conversion Ratio shall be 0.675 shares of GBB Stock. If such GBB Acquisition
Transaction is terminated or abandoned during the period for determining the
Average Closing Price, GBB can elect to either set the Conversion Ratio at 0.675
shares of GBB Stock or unilaterally delay the Closing Date to a date which is 25
trading days after the date of the public announcement of the termination or
abandonment of such GBB Acquisition Transaction. To preserve the rights of
holders of shares of Coast Stock pursuant to this Section 2.2(a)(iv), GBB and
Coast agree to coordinate the closing of any GBB Acquisition Transaction with
the Closing and to cooperate with such third party in otherwise accomplishing
the purpose hereof. In no event shall GBB close any GBB Acquisition Transaction
that does not result in the purposes of this Section 2.2(a)(iv) being
accomplished, subject to the provisions of Section 14.1(b).
(b) Coast Perfected Dissenting Shares. Coast Perfected Dissenting
---------------------------------
Shares shall not be converted into shares of GBB Stock, but shall, after the
Effective Time of the Merger, be entitled only to such rights as are granted
them by Chapter 13 of the CGCL. Each
<PAGE>
dissenting shareholder who is entitled to payment for his shares of Coast Stock
shall receive such payment in an amount as determined pursuant to Chapter 13 of
the CGCL.
(c) Dividends, Etc. If, prior to the Effective Time of the Merger,
--------------
GBB shall declare a stock dividend or distribution upon or subdivide, split up,
reclassify or combine the GBB Stock, or make a distribution on the GBB Stock in
any security convertible into GBB Stock, with a record date prior to the
Effective Time of the Merger, appropriate adjustment or adjustments will be made
to the Conversion Ratio.
2.3. Effect on GBB Stock. At the Effective Time of the Merger, each
-------------------
outstanding share of GBB Stock shall remain an outstanding share of GBB Stock
and shall not be converted or otherwise affected by the Merger. GBB Perfected
Dissenting Shares shall, after the Effective Time of the Merger, be entitled
only to such rights as are granted them by Chapter 13 of the CGCL. Each
dissenting shareholder who is entitled to payment for his or her shares of GBB
Stock shall receive such payment in an amount as determined pursuant to Chapter
13 of the CGCL.
2.4. Fractional Shares. o fractional shares of GBB Stock shall be
-----------------
issued in the Merger. In lieu thereof, each holder of Coast Stock who would
otherwise be entitled to receive a fractional share shall receive an amount in
cash equal to the product (calculated to the nearest cent) obtained by
multiplying (a) the closing price of GBB Stock reported on the Nasdaq National
Market System on the Business Day immediately preceding the Closing Date times
(b) the fraction of the share of GBB Stock to which such holder would otherwise
be entitled. No such holder shall be entitled to dividends or other rights in
respect of any such fraction.
2.5 Exchange Procedures.
-------------------
(a) As of the Effective Time of the Merger, GBB shall have deposited
with the Exchange Agent for the benefit of the holders of shares of Coast Stock,
for exchange in accordance with this Section 2.5 through the Exchange Agent,
certificates representing the shares of GBB Stock issuable pursuant to Section
2.2 in exchange for shares of Coast Stock outstanding immediately prior to the
Effective Time of the Merger, and funds in an amount not less than the amount of
cash payable in lieu of fractional shares of GBB Stock which would otherwise be
issuable in connection with Section 2.2 hereof but for the operation of Section
2.4 of this Agreement (collectively, the "Exchange Fund").
(b) GBB shall direct the Exchange Agent to mail, promptly after the
Effective Time of the Merger, to each holder of record of a certificate or
certificates which immediately prior to the Effective Time of the Merger
represented outstanding shares of Coast Stock (the "Certificates") whose shares
were converted into the right to receive shares of GBB Stock pursuant to Section
2.2 hereof, (i) a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as GBB and Coast may reasonably specify),
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of GBB Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be
<PAGE>
appointed by GBB, together with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of GBB Stock and cash in
lieu of fractional shares which such holder has the right to receive pursuant to
Sections 2.2 and 2.4 hereof, and the Certificate so surrendered shall forthwith
be canceled. In the event a certificate is surrendered representing Coast Stock,
the transfer of ownership of which is not registered in the transfer records of
Coast, a certificate representing the proper number of shares of GBB Stock may
be issued to a transferee if the Certificate representing such Coast Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.5, each Certificate shall be deemed at any time after the Effective Time of
the Merger to represent only the right to receive upon such surrender the
certificate representing shares of GBB Stock and cash in lieu of any fractional
shares of stock as contemplated by this Section 2.5. Notwithstanding anything to
the contrary set forth herein, if any holder of shares of Coast should be unable
to surrender the Certificates for such shares, because they have been lost or
destroyed, such holder may deliver in lieu thereof a bond in form and substance
and with surety reasonably satisfactory to GBB and shall be entitled to receive
the certificate representing the proper number of shares of GBB Stock and cash
in lieu of fractional shares in accordance with Sections 2.2 and 2.4 hereof.
(c) No dividends or other distributions declared or made with respect
to GBB Stock with a record date after the Effective Time of the Merger shall be
paid to the holder of any unsurrendered Certificate with respect to the shares
of GBB Stock represented thereby and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 2.4 until the holder
of record of such Certificate shall surrender such Certificate. Subject to the
effect of applicable laws, following surrender of any such Certificate, there
shall be paid to the record holder of the certificates representing whole shares
of GBB Common Stock issued in exchange thereof, without interest, (i) at the
time of such surrender, the amount of any cash payable in lieu of a fractional
share of GBB Stock to which such holder is entitled pursuant to Section 2.4 and
the amount of dividends or other distributions with a record date after the
Effective Time of the Merger theretofore paid with respect to such whole shares
of GBB Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time of the Merger
but prior to surrender and a payment date subsequent to surrender payable with
respect to such whole shares of GBB Stock.
(d) All shares of GBB Stock issued upon the surrender for exchange of
Coast Stock in accordance with the terms hereof (including any cash paid
pursuant to Section 2.4) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Coast Stock, and there
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Coast Stock which were outstanding
immediately prior to the Effective Time of the Merger. If, after the Effective
Time of the Merger, Certificates are presented to GBB for any reason, they shall
be canceled and exchanged as provided in this Agreement.
(e) Any portion of the Exchange Fund which remains undistributed to
the shareholders of Coast following the passage of six months after the
Effective Time of the Merger
<PAGE>
shall be delivered to GBB, upon demand, and any shareholders of Coast who have
not theretofore complied with this Section 2.5 shall thereafter look only to GBB
for payment of their claim for GBB Stock, any cash in lieu of fractional shares
of GBB Stock and any dividends or distributions with respect to GBB Stock.
(f) Neither GBB nor Coast shall be liable to any holder of shares of
Coast Stock for such shares (or dividends or distributions with respect thereto)
or cash from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(g) The Exchange Agent shall not be entitled to vote or exercise any
rights of ownership with respect to the shares of GBB Stock held by it from time
to time hereunder, except that it shall receive and hold all dividends or other
distributions paid or distributed with respect to such shares of GBB Stock for
the account of the Persons entitled thereto.
(h) Certificates surrendered for exchange by any Person constituting
an "Affiliate" of Coast for purposes of Rule 145(c) under the Securities Act
shall not be exchanged for certificates representing whole shares of GBB Stock
until GBB has received a written agreement from such person as provided in
Section 6.9.
2.6. Directors of Surviving Corporation and CCB. Commencing with the first
------------------------------------------
meeting of the GBB Board of Directors after the Effective Time of the Merger,
the Board of Directors of the Surviving Corporation shall be comprised of the
persons serving as directors of GBB immediately prior to the Effective Time of
the Merger, and James C. Thompson, or if he is unable or unwilling to serve,
such other member of Coast's Board of Directors designated by Coast and
reasonably acceptable to GBB. Such persons shall serve until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified. Immediately after the Effective Time of the Merger, David
L. Kalkbrenner, or such other person designated by GBB and reasonably acceptable
to Coast, shall be appointed to the Board of Directors of CCB. Commencing with
the first calendar quarter after the Effective Time of the Merger, the CCB Board
of Directors will meet on a quarterly basis and the CCB director fees will be
revised to equal the amount of director fees paid to members of the Boards of
Directors of the Banks.
2.7 Executive Officers of Surviving Corporation. Immediately after the
--------------------------------------------
Effective Time of the Merger, the executive officers of the Surviving
Corporation shall be comprised of the persons serving as executive officers of
GBB immediately prior to the Effective Time of the Merger. Such persons shall
serve until the earlier of their resignation or termination.
ARTICLE 3.
THE CLOSING
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3.1. Closing Date. The Closing shall take place on the Closing Date.
------------
<PAGE>
3.2. Execution of Agreements. As soon as practicable after execution of
-----------------------
this Agreement, the Agreement of Merger together with all other agreements
necessary to consummate the transactions described herein shall be executed by
the parties thereto. On the Closing Date, the Agreement of Merger, together
with all requisite certificates, shall be duly filed with the Secretary of State
as required by applicable law and regulations.
3.3 Further Assurances. At the Closing, the parties hereto shall deliver,
------------------
or cause to be delivered, such documents or certificates as may be necessary in
the reasonable opinion of counsel for any of the parties, to effectuate the
transactions contemplated by this Agreement. From and after the Effective Time
of the Merger, each of the parties hereto covenants and agrees, without the
necessity of any further consideration whatsoever, to execute, acknowledge and
deliver any and all other documents and instruments and take any and all such
other action as may be reasonably necessary or desirable to more effectively
carry out the intent and purpose of this Agreement and the Agreement of Merger.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF COAST
---------------------------------------
Coast represents and warrants to GBB as follows:
4.1. Incorporation, Standing and Power. Coast has been duly organized, is
---------------------------------
validly existing and in good standing as a corporation under the laws of the
State of California and is registered as a bank holding company under the BHC
Act. CCB is a California state chartered bank duly organized, validly existing
and in good standing under the laws of the State of California and is authorized
by the DFI to conduct a general banking business. CCB's deposits are insured by
the FDIC in the manner and to the fullest extent provided by law. Each of Coast
and CCB has all requisite corporate power and authority to own, lease and
operate its properties and assets and to carry on its business as presently
conducted. Neither the scope of the business of Coast or CCB nor the location of
any of their respective properties requires that either Coast or CCB be licensed
to do business in any jurisdiction other than the State of California where the
failure to be so licensed would, individually or in the aggregate, have a
material adverse effect on the business, financial condition, results of
operations or prospects of Coast on a consolidated basis. Coast has delivered to
GBB true and correct copies of its and CCB's Articles of Incorporation and
Bylaws, as amended, and in effect as of the date hereof.
4.2. Capitalization.
--------------
<PAGE>
(a) As of the date of this Agreement, the authorized capital stock of
Coast consists of 40,000,000 shares of Coast Stock, of which 4,818,578 shares
are outstanding, and 10,000,000 shares of preferred stock, none of which are
outstanding. All of the outstanding shares of Coast Stock are duly authorized,
validly issued, fully paid and nonassessable. Except for Coast Stock Options
covering 301,660 shares of Coast Stock granted pursuant to the Coast Stock
Option Plan, there are no outstanding options, warrants or other rights in or
with respect to the unissued shares of Coast Stock nor any securities
convertible into such stock, and Coast is not obligated to issue any additional
shares of its common stock or any additional options, warrants or other rights
in or with respect to the unissued shares of such stock or any other securities
convertible into such stock. Coast has furnished GBB a list (the "Coast Option
List") setting forth the name of each holder of a Coast Option, the number of
shares of Coast Stock covered by each such option, the vesting schedule of such
option, the exercise price per share and the expiration date of each such
option.
(b) As of the date of this Agreement, the authorized capital stock of
CCB consists of 3,000,000 shares of common stock, no par value per share, of
which 2,277,999 shares are outstanding. All of the outstanding shares of such
common stock are duly authorized, validly issued, fully paid and nonassessable
and are owned of record and beneficially by Coast. There are no outstanding
options, warrants or other rights in or with respect to the unissued shares of
such common stock or any other securities convertible into such stock, and CCB
is not obligated to issue any additional shares of its common stock or any
options, warrants or other rights in or with respect to the unissued shares of
its common stock or any other securities convertible into such stock.
4.3. Subsidiaries. Other than CCB, Coast does not own, directly or
------------
indirectly (except as a pledgee pursuant to loans or upon acquisition in
satisfaction of debt previously contracted), the outstanding stock or equity or
other voting interest in any Person.
4.4. Financial Statements. Coast has previously furnished to GBB a copy of
--------------------
the Financial Statements of Coast. The Financial Statements of Coast: (a)
present fairly in all material respects the consolidated financial condition of
Coast as of the respective dates indicated and its consolidated results of
operations and changes in cash flows, for the respective periods then ended,
subject, in the case of the unaudited interim financial statements, to normal
recurring adjustments; (b) have been prepared in accordance with generally
accepted accounting principles consistently applied (except as otherwise
indicated therein); (c) set forth as of the respective dates indicated adequate
reserves for loan losses and other contingencies and (d) are based upon the
books and records of Coast and CCB.
4.5. Reports and Filings. Except as set forth in a list (the "Coast
-------------------
Filings List"), since January 1, 1996, each of Coast and CCB has filed all
reports, returns, registrations and statements (collectively, "Coast Filings"),
together with any amendments required to be made with respect thereto, that were
required to be filed with (a) the FDIC, (b) the DFI, (c) the FRB, (d) the SEC
and (e) any other applicable Governmental Entity, including taxing authorities,
except where the failure to file such reports, returns, registrations or
statements has not had and is not reasonably expected to have a material adverse
effect on the business, financial condition,
<PAGE>
results of operations or prospects of Coast on a consolidated basis. No
administrative actions have been taken or orders issued in connection with such
Coast Filings. As of their respective dates, each of such Coast Filings (y)
complied in all material respects with all laws and regulations enforced or
promulgated by the Governmental Entity with which it was filed (or was amended
so as to be in compliance promptly following discovery of any such
noncompliance); and (z) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Any financial statement contained in any of such Coast
Filings fairly presented the financial position of Coast on a consolidated
basis, Coast alone or CCB alone, as the case may be, and was prepared in
accordance with generally accepted accounting principles or banking regulations
consistently applied, except as stated therein, during the periods involved.
Coast has furnished or made available to GBB true and correct copies of all
Coast Filings filed by Coast since January 1, 1996.
4.6. Authority of Coast. The execution and delivery by Coast of this
------------------
Agreement and the Agreement of Merger and, subject to the requisite approval of
the shareholders of Coast of this Agreement and the transactions contemplated
hereby, the consummation of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action on the
part of Coast. This Agreement is, and the Agreement of Merger will be, upon
due execution and delivery by the respective parties thereto, a valid and
binding obligation of Coast enforceable in accordance with their respective
terms, except as the enforceability thereof may be limited by bankruptcy,
liquidation, receivership, conservatorship, insolvency, moratorium or other
similar laws affecting the rights of creditors generally and by general
equitable principles. Except as set forth in a list furnished by Coast to GBB
(the "Coast Conflicts and Consents List"), neither the execution and delivery by
Coast of this Agreement and the Agreement of Merger, the consummation of the
transactions contemplated herein or therein, nor compliance by Coast with any of
the provisions hereof or thereof, will: (a) conflict with or result in a breach
of any provision of its or CCB's Articles of Incorporation, as amended, or
Bylaws, as amended; (b) constitute a breach of or result in a default (or give
rise to any rights of termination, cancellation or acceleration, or any right to
acquire any securities or assets) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, franchise, license, permit,
agreement or other instrument or obligation to which Coast or CCB is a party, or
by which Coast or CCB or any of their respective properties or assets are bound;
(c) result in the creation or imposition of any Encumbrance on any of the
properties or assets of Coast or CCB; or (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Coast or CCB or
any of their respective properties or assets. Except as set forth in the Coast
Conflicts and Consents List, no consent of, approval of, notice to or filing
with any Governmental Entity having jurisdiction over any aspect of the business
or assets of Coast or CCB, and no consent of, approval of or notice to any other
Person, is required in connection with the execution and delivery by Coast of
this Agreement and the Agreement of Merger or the consummation by Coast of the
Merger or the transactions contemplated hereby or thereby, except (i) the
approval of this Agreement and the Agreement of Merger and the transactions
contemplated hereby and thereby by the shareholders of Coast; (ii) such
approvals as may be required by the FRB and the DFI; (iii) the filing of the
Joint Proxy Statement and Prospectus and Registration Statement on Form S-4 with
the SEC; and (iv) the filing of the Agreement of Merger with the Secretary of
State.
<PAGE>
4.7. Insurance. Each of Coast and CCB has policies of insurance and bonds
---------
with respect to its assets and business against such casualties and
contingencies and in such amounts, types and forms as are customarily
appropriate for its business, operations, properties and assets. All such
insurance policies and bonds are in full force and effect. Except as set forth
in a list furnished by Coast to GBB (the "Coast Insurance List"), no insurer
under any such policy or bond has canceled or indicated an intention to cancel
or not to renew any such policy or bond or generally disclaimed liability
thereunder. Except as set forth in the Coast Insurance List, neither Coast nor
CCB is in default under any such policy or bond and all material claims
thereunder have been filed in a timely fashion. Set forth in the Coast
Insurance List is a list of all policies of insurance carried and owned by
either Coast or CCB showing the name of the insurance company, the nature of the
coverage, the policy limit, the annual premiums and the expiration dates. There
has been delivered to GBB a copy of each such policy of insurance.
4.8. Personal Property. Each of Coast and CCB has good and marketable
-----------------
title to all its material properties and assets, other than real property, owned
or stated to be owned by Coast or CCB, free and clear of all Encumbrances
except: (a) as set forth in the Financial Statements of Coast; (b) for
Encumbrances for current taxes not yet due; (c) for Encumbrances incurred in the
ordinary course of business; (d) for Encumbrances that are not substantial in
character, amount or extent and that do not materially detract from the value,
or interfere with present use, of the property subject thereto or affected
thereby, or otherwise materially impair the conduct of business of Coast or CCB;
or (e) as set forth in a list furnished by Coast to GBB (the "Coast Personal
Property List.")
4.9. Real Estate. Coast has furnished GBB a list of real property,
-----------
including leaseholds and all other interests in real property (other than
security interests), owned by Coast or CCB (the "Coast Real Property List").
Except as set forth on the Coast Real Property List, each of Coast and CCB has
duly recorded or caused to be recorded, in the appropriate county, all
recordable interests in the real property described in the Coast Real Property
List. Either Coast or CCB has good and marketable title to the real property,
and valid leasehold interests in the leaseholds, described in the Coast Real
Property List, free and clear of all Encumbrances, except (a) with respect to
leasehold interests of Coast and CCB, for rights of lessors, co-lessees or
sublessees in such matters that are reflected in the lease or Encumbrances not
created by Coast or CCB; (b) for current taxes not yet due and payable; (c) for
such Encumbrances, if any, as do not materially detract from the value of or
materially interfere with the present use of such property; and (d) as described
in the Coast Real Property List. Coast has furnished GBB with true and correct
copies of all leases included in the Coast Real Property List, all title
insurance policies and all documents evidencing recordation of all recordable
interests in real property included in the Coast Real Property List.
4.10. Litigation. Except as set forth in a list furnished by Coast to GBB
----------
(the "Coast Litigation List"), there is no private or governmental suit, claim,
action or proceeding pending, nor to Coast's knowledge threatened, against Coast
or CCB or against any of their respective directors, officers or employees
relating to the performance of their duties in such capacities or against or
affecting any properties of Coast or CCB which, if adversely determined, would
have, individually or in the aggregate, a material adverse effect upon the
business, financial condition
<PAGE>
or results of operations of Coast on a consolidated basis, or the transactions
contemplated hereby, or which may involve a judgment against Coast or CCB in
excess of $50,000. Also, except as disclosed in the Coast Litigation List, there
are no material judgments, decrees, stipulations or orders against Coast or CCB
or enjoining their respective directors, officers or employees in respect of, or
the effect of which is to prohibit, any business practice or the acquisition of
any property or the conduct of business in any area.
4.11. Taxes.
-----
(a) Except as set forth in a list furnished by Coast to GBB (the
"Coast Tax List"), (i) all Tax Returns required to be filed by or on behalf of
Coast, CCB or the Affiliated Group(s) of which any of them is or was a member,
have been duly and timely filed with the appropriate taxing authorities in all
jurisdictions in which such Tax Returns are required to be filed (after giving
effect to any valid extensions of time in which to make such filings), and all
such Tax Returns were true, complete and correct in all material respects; (ii)
all Taxes due and payable by or on behalf of Coast or CCB, either directly, as
part of an Affiliated Group Tax Return, or otherwise, have been fully and timely
paid, except to the extent adequately reserved therefor in accordance with
generally accepted accounting principles and/or applicable regulatory accounting
principles or banking regulations consistently applied on the Coast balance
sheet, and adequate reserves or accruals for Taxes have been provided in the
Coast balance sheet with respect to any period through the date thereof for
which Tax Returns have not yet been filed or for which Taxes are not yet due and
owing; and (iii) no agreement, waiver or other document or arrangement extending
or having the effect of extending the period for assessment or collection of
Taxes (including, but not limited to, any applicable statute of limitation) has
been executed or filed with any taxing authority by or on behalf of Coast, CCB
or any Affiliated Group(s) of which any of them is or was a member.
(b) Coast and CCB have complied in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes and have duly and timely withheld from employee salaries, wages and
other compensation and have paid over to the appropriate taxing authorities all
amounts required to be so withheld and paid over for all periods under all
applicable laws.
(c) GBB has received complete copies of (i) all income or franchise
Tax Returns of Coast and CCB relating to the taxable periods since January 1,
1995 and (ii) any audit report issued within the last three years relating to
any Taxes due from or with respect to Coast or CCB with respect to their
respective income, assets or operations.
(d) Except as set forth in the Coast Tax List, no written claim has
been made by a taxing authority in a jurisdiction where Coast or CCB do not file
an income or franchise Tax Return such that Coast or CCB are or may be subject
to taxation by that jurisdiction.
(e) Except as set forth in the Coast Tax List: (i) all deficiencies
asserted or assessments made as a result of any examinations by any taxing
authority of the Tax Returns of or covering or including Coast or CCB have been
fully paid, and, to the best of Coast's knowledge, there are no other audits or
investigations by any taxing authority in progress, nor
<PAGE>
have Coast or CCB received any written notice from any taxing authority that it
intends to conduct such an audit or investigation; (ii) no requests for a ruling
or a determination letter are pending with any taxing authority; and (iii) no
issue has been raised in writing by any taxing authority in any current or prior
examination which, by application of the same or similar principles, could
reasonably be expected to result in a proposed deficiency against Coast or CCB
for any subsequent taxable period that could be material.
(f) Except as set forth in the Coast Tax List, neither Coast or CCB
nor any other Person on behalf of Coast or CCB has (i) filed a consent pursuant
to Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by Coast or CCB (ii) agreed to or is
required to make any adjustments pursuant to Section 481(a) of the Code or any
similar provision of state, local or foreign law by reason of a change in
accounting method initiated by Coast or CCB or has any knowledge that the
Internal Revenue Service has proposed in writing any such adjustment or change
in accounting method, or has any application pending with any taxing authority
requesting permission for any changes in accounting methods that relate to the
business or operations of Coast or CCB or (iii) executed or entered into a
closing agreement pursuant to Section 7121 of the Code or any predecessor
provision thereof or any similar provision of state, local or foreign law with
respect to Coast or CCB.
(g) Except as set forth in the Coast Tax List, no property owned by
Coast or CCB is (i) property required to be treated as being owned by another
Person pursuant to provisions of Section 168(f)(8) of the Internal Revenue Code
of 1954, as amended and in effect immediately prior to the enactment of the Tax
Reform Act of 1986, (ii) constitutes "tax exempt use property" within the
meaning of Section 168(h)(1) of the Code or (iii) is "tax-exempt bond financed
property" within the meaning of Section 168(g) of the Code.
(h) Neither Coast (except with CCB) nor CCB (except with Coast) is a
party to any tax sharing agreement or similar agreement or arrangement (whether
written or not written) pursuant to which it will have any obligation to make
any payments after the Closing.
(i) Except as set forth in the Coast Tax List, there is no contract,
agreement, plan or arrangement covering any Person that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible by Coast or CCB or their respective affiliates by reason of Section
280G of the Code, or would constitute compensation in excess of the limitation
set forth in Section 162(m) of the Code.
(j) There are no liens as a result of any due and unpaid Taxes upon
any of the assets of Coast or CCB.
(k) Except as set forth in the Coast Tax List, neither Coast nor CCB
has any elections in effect for federal income tax purposes under Sections 108,
168, 338, 441, 472, 1017, 1033, or 4977 of the Code.
(l) Except as set forth in the Coast Tax list, none of the members of
Coast's Affiliated Group has any net operating loss carryovers.
<PAGE>
(m) Coast agrees, and agrees to cause CCB, to cooperate with tax
counsel in furnishing reasonable and customary written tax representations to
tax counsel for purposes of supporting tax counsel's opinion that the Merger
qualifies as a tax-deferred reorganization within the meaning of Section 368(a)
of the Code as contemplated in Section 9.6 hereof. Coast acknowledges that its,
CCB's inability or unwillingness to provide such reasonable and customary
written representations could preclude tax counsel from rendering such opinion,
with consequences specified elsewhere herein.
4.12. Compliance with Laws and Regulations.
------------------------------------
(a) Neither Coast nor CCB is in default under or in breach or
violation of (i) any provision its Articles of Incorporation, as amended, or
Bylaws, as amended, or (ii) law, ordinance, rule or regulation promulgated by
any Governmental Entity, except, with respect to this clause (ii), for such
violations as would not have, individually or in the aggregate, a material
adverse effect on the business, financial condition, results of operations or
prospects of Coast on a consolidated basis or CCB, as the case may be.
(b) Except as set forth on a list furnished by Coast to GBB (the
"Coast Environmental Compliance List"), to the best of Coast's knowledge without
further investigation, (i) each of Coast and CCB is in compliance with all
Environmental Regulations; (ii) there are no Tanks on or about Coast Property;
(iii) there are no Hazardous Materials on, below or above the surface of, or
migrating to or from Coast Property; (iv) neither Coast nor CCB has loans
outstanding secured by real property that is not in compliance with
Environmental Regulations or which has a leaking Tank or upon which there are
Hazardous Materials on or migrating to or from; and (v) without limiting Section
4.10 or the foregoing representations and warranties contained in clauses (i)
through (iv), as of the date of this Agreement, there is no claim, action, suit,
or proceeding or notice thereof before any Governmental Entity pending against
Coast or CCB or concerning property securing Coast or CCB loans and there is no
outstanding judgment, order, writ, injunction, decree, or award against or
affecting Coast Property or property securing Coast or CCB loans, relating to
the foregoing representations (i) - (iv), in each case the noncompliance with
which, or the presence of which would have a material adverse effect on the
business, financial condition, results of operations or prospects of Coast on a
consolidated basis. For purposes of this Agreement, the term "Environmental
Regulations" shall mean all applicable statutes, regulations, rules, ordinances,
codes, licenses, permits, orders, approvals, plans, authorizations, concessions,
franchises, and similar items, of all Governmental Entities and all applicable
judicial, administrative, and regulatory decrees, judgments, and orders relating
to the protection of human health or the environment, including, without
limitation: all requirements, including, but not limited to those pertaining to
reporting, licensing, permitting, investigation, and remediation of emissions,
discharges, releases, or threatened releases of Hazardous Materials, chemical
substances, pollutants, contaminants, or hazardous or toxic substances,
materials or wastes whether solid, liquid, or gaseous in nature, into the air,
surface water, groundwater, or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
chemical substances, pollutants, contaminants, or hazardous or toxic substances,
materials, or wastes, whether solid, liquid, or gaseous in nature and all
requirements pertaining to the protection of the health and safety of employees
or the
<PAGE>
public. "Coast Property" shall mean real estate currently owned, leased,
or otherwise used by Coast or CCB, or in which Coast or CCB has an investment or
security interest (by mortgage, deed of trust, sale and lease-back or
otherwise), including, without limitation, properties under foreclosure and
properties held by Coast or CCB in its capacity as a trustee or otherwise.
"Tank" shall mean treatment or storage tanks, sumps, or water, gas or oil wells
and associated piping transportation devices. "Hazardous Materials" shall mean
any substance the presence of which requires investigation or remediation under
any federal, state or local statute, regulation, ordinance, order, action,
policy or common law; or which is or becomes defined as a hazardous waste,
hazardous substance, hazardous material, used oil, pollutant or contaminant
under any federal, state or local statute, regulation, rule or ordinance or
amendments thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601,
et seq.); the Resource Conservation and Recovery Act (42 U.S.C. Section 6901, et
seq.); the Clean Air Act, as amended (42 U.S.C. Section 7401, et seq.); the
Federal Water Pollution Control Act, as amended (33 U.S.C. Section 1251, et
seq.); the Toxic Substances Control Act, as amended (15 U.S.C. Section 9601, et
seq.); the Occupational Safety and Health Act, as amended (29 U.S.C. Section
651; the Emergency Planning and Community Right-to-Know Act of 1986 (42 U.S.C.
Section 11001, et seq.); the Mine Safety and Health Act of 1977, as amended (30
U.S.C. Section 801, et seq.); the Safe Drinking Water Act (42 U.S.C. Section
300f, et seq.); and all comparable state and local laws, including without
limitation, the Carpenter-Presley-Tanner Hazardous Substance Account Act (State
Superfund), the Porter-Cologne Water Quality Control Act, Section 25140,
25501(j) and (k), 25501.1,25281 and 25250.1 of the California Health and Safety
Code and/or Article I of Title 22 of the California Code of Regulations,
Division 4, Chapter 30; laws of other jurisdictions or orders and regulations;
or the presence of which causes or threatens to cause a nuisance, trespass or
other common law tort upon real property or adjacent properties or poses or
threatens to pose a hazard to the health or safety of persons or without
limitation, which contains gasoline, diesel fuel or other petroleum
hydrocarbons; polychlorinated biphenyls (PCBs), asbestos or urea formaldehyde
foam insulation.
(c) Coast has provided to GBB phase I environmental assessments with
respect to each interest in real property set forth on the Coast Real Property
List as to which such a phase I environmental investigation has been prepared by
or on behalf of Coast or CCB. The Coast Real Property list shall disclose each
such property as to which such an assessment has not been prepared on behalf of
Coast or CCB.
4.13. Performance of Obligations. Each of Coast and CCB has performed
--------------------------
in all material respects all of the obligations required to be performed by it
to date and is not in default under or in breach of any term or provision of any
covenant, contract, lease, indenture or any other agreement to which it is a
party, is subject or is otherwise bound, and no event has occurred that, with
the giving of notice or the passage of time or both, would constitute such
default or breach, where such default or breach would have, individually or in
the aggregate, a material adverse effect on the business, financial condition,
results of operations or prospects of Coast on a consolidated basis. Except for
loans and leases made by Coast or CCB in the ordinary course of business, to the
best of Coast's knowledge, no party with whom Coast or CCB has an agreement that
is of material importance to the business of Coast or CCB is in default
thereunder.
<PAGE>
4.14. Employees. There are no controversies pending or, to the best of
---------
Coast's knowledge, threatened between either Coast or CCB and any of its
employees that are likely to have a material adverse effect on the business,
financial condition, results of operations or prospects of Coast on a
consolidated basis. Neither Coast nor CCB is a party to any collective
bargaining agreement with respect to any of its employees or any labor
organization to which its employees or any of them belong.
4.15. Brokers and Finders. Except for the obligation to Sandler O'Neill
-------------------
& Partners, L.P set forth in the Sandler O'Neill Agreement, a copy of which has
been delivered to GBB, neither Coast nor CCB is a party to or obligated under
any agreement with any broker or finder relating to the transactions
contemplated hereby, and neither the execution of this Agreement nor the
consummation of the transactions provided for herein will result in any
liability to any broker or finder.
4.16. Material Contracts. Except as set forth in a list furnished by
------------------
Coast to GBB (the "Coast Contract List") hereto (all items listed or required to
be listed in such Coast Contract List being referred to herein as "Scheduled
Contracts"), neither Coast nor CCB is a party or otherwise subject to:
(a) any employment, deferred compensation, bonus or consulting
contract that (i) has a remaining term, as of the date of this Agreement, of
more than one year in length of obligation on the part of Coast or CCB and is
not terminable by Coast or CCB within one year without penalty or (ii) requires
payment by Coast or CCB of $50,000 or more per annum;
(b) any advertising, brokerage, licensing, dealership,
representative or agency relationship or contract requiring payment by Coast or
CCB of $50,000 or more per annum;
(c) any contract or agreement that restricts Coast or CCB (or would
restrict any Affiliate of Coast or CCB or the Surviving Corporation (including
GBB and the GBB Subsidiaries) after the Effective Time of the Merger) from
competing in any line of business with any Person or using or employing the
services of any Person;
(d) any lease of real or personal property providing for annual
lease payments by or to Coast or CCB in excess of $50,000 per annum other than
(A) financing leases entered into in the ordinary course of business in which
Coast or CCB is lessor and (B) leases of real property presently used by CCB as
banking offices;
(e) any mortgage, pledge, conditional sales contract, security
agreement, option, or any other similar agreement with respect to any interest
of Coast or CCB (other than as mortgagor or pledgor in the ordinary course of
its banking business or as mortgagee, secured party or deed of trust beneficiary
in the ordinary course of its business) in personal property having a value of
$50,000 or more;
(f) other than as described in the Coast Filings or as set forth in
the Coast Employee Plan List, any stock purchase, stock option, stock bonus,
stock ownership, profit sharing, group insurance, bonus, deferred compensation,
severance pay, pension, retirement,
<PAGE>
savings or other incentive, welfare or employment plan or material agreement
providing benefits to any present or former employees, officers or directors of
Coast or CCB;
(g) any agreement to acquire equipment or any commitment to make
capital expenditures of $50,000 or more;
(h) other than agreements entered into in the ordinary course of
business, including sales of other real estate owned, any agreement for the sale
of any property or assets in which Coast or CCB has an ownership interest or for
the grant of any preferential right to purchase any such property or asset;
(i) any agreement for the borrowing of any money (other than
liabilities or interbank borrowings made in the ordinary course of its banking
business and reflected in the financial records of Coast or CCB);
(j) any restrictive covenant contained in any deed to or lease of
real property owned or leased by Coast or CCB (as lessee) that materially
restricts the use, transferability or value of such property;
(k) any guarantee or indemnification which involves the sum of
$50,000 or more, other than letters of credit or loan commitments issued in the
normal course of business;
(l) any supply, maintenance or landscape contracts not terminable by
Coast or CCB without penalty on 30 days' or less notice and which provides for
payments in excess of $50,000 per annum;
(m) any material agreement which would be terminable other than by
Coast or CCB as a result of the consummation of the transactions contemplated by
this Agreement;
(n) any contract of participation with any other bank in any loan in
excess of $50,000 or any sales of assets of Coast or CCB with recourse of any
kind to Coast or CCB except the sale of mortgage loans, servicing rights,
repurchase or reverse repurchase agreements, securities or other financial
transactions in the ordinary course of business;
(o) any agreement providing for the sale or servicing of any loan or
other asset which constitutes a "recourse arrangement" under applicable
regulation or policy promulgated by a Governmental Entity (except for agreements
for the sale of guaranteed portions of loans guaranteed in part by the U. S.
Small Business Administration and related servicing agreements);
(p) any contract relating to the provision of data processing
services to Coast or CCB; or
(q) any other agreement of any other kind which involves future
payments or receipts or performances of services or delivery of items requiring
payment of $50,000 or more to or by Coast or CCB other than payments made under
or pursuant to loan agreements,
<PAGE>
participation agreements and other agreements for the extension of credit in the
ordinary course of their business.
True copies of all Scheduled Contracts, including all amendments and
supplements thereto, have been delivered to GBB.
4.17. Certain Material Changes. Except as specifically required, permitted
------------------------
or effected by this Agreement, since December 31, 1998, there has not been,
occurred or arisen any of the following (whether or not in the ordinary course
of business unless otherwise indicated):
(a) any change in any of the assets, liabilities, permits, methods
of accounting or accounting practices, business, or manner of conducting
business, of Coast or CCB or any other event or development that has had or may
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the assets, liabilities, permits, business, financial
condition, results of operations or prospects of Coast on a consolidated basis;
(b) any damage, destruction or other casualty loss (whether or not
covered by insurance) that has had or may reasonably be expected to have a
material adverse effect on the assets, liabilities, business, financial
condition, results of operations or prospects of Coast on a consolidated basis
or that may involve a loss of more than $50,000 in excess of applicable
insurance coverage;
(c) any amendment, modification or termination of any existing, or
entry into any new, material contract or permit that has had or may reasonably
be expected to have a material adverse effect on the assets, liabilities,
business, financial condition, results of operations or prospects of Coast on a
consolidated basis;
(d) any disposition by Coast or CCB of an asset the lack of which
has had or may reasonably be expected to have a material adverse effect on the
assets, liabilities, business, financial condition, results of operations or
prospects of Coast on a consolidated basis; or
(e) any direct or indirect redemption, purchase or other
acquisition by Coast or CCB of any equity securities or any declaration, setting
aside or payment of any dividend or other distribution on or in respect of Coast
Stock whether consisting of money, other personal property, real property or
other things of value (except for the payment of quarterly cash dividends of
$0.08 per share to shareholders of record as of February 5, 1999, May 7, 1999,
August 6, 1999 and November 4, 1999.
4.18. Licenses and Permits. Each of Coast and CCB has all material
--------------------
licenses and permits that are necessary for the conduct of its business, and
such licenses are in full force and effect, except for any failure to be in full
force and effect that would not, individually or in the aggregate, have a
material adverse effect on the business, financial condition, results of
operations or prospects of Coast on a consolidated basis. Except with respect
to properties classified as other real estate owned, the respective properties,
assets, operations and businesses of Coast and CCB are and have been maintained
and conducted, in all material respects, in compliance with all applicable (a)
licenses and permits; and (b) laws and regulations.
<PAGE>
4.19. Undisclosed Liabilities. Neither Coast nor CCB has any
-----------------------
liabilities or obligations, either accrued or contingent, that are material to
Coast and that have not been: (a) reflected or disclosed in the Financial
Statements of Coast; (b) incurred subsequent to December 31, 1998 in the
ordinary course of business consistent with past practices; or (c) disclosed in
a list furnished by Coast to GBB (the "Undisclosed Liabilities List") or on any
other Coast List. Coast does not know of any basis for the assertion against it
or CCB of any liability, obligation or claim (including, without limitation,
that of any regulatory authority) that is likely to result in or cause a
material adverse change in the business, financial condition, results of
operations or prospects of Coast on a consolidated basis that is not fairly
reflected in the Financial Statements of Coast or otherwise disclosed in this
Agreement.
4.20. Employee Benefit Plans.
----------------------
(a) Except as disclosed in a list furnished by Coast to GBB (the
"Coast Employee Plan List"), all Employee Plans were in effect for substantially
all of 1999, and there has been no material amendment thereof (other than
amendments required to comply with applicable law) or increase in the cost
thereof or benefits thereunder on or after January 1, 1999. Except as provided
in the Coast Employee Plan List, Coast has previously made available to GBB
copies of each "employee benefit plan," as defined in Section 3(3) of ERISA, of
which Coast or any member of the same controlled group of corporations, trades
or businesses as Coast within the meaning of Section 4001(a)(14) of ERISA
("ERISA Affiliates") is a sponsor or participating employer or as to which Coast
or any of its ERISA Affiliates makes contributions or is required to make
contributions and which is subject to any provision of ERISA and covers any
employee, whether active or retired, of Coast or any of its ERISA Affiliates,
together with all amendments thereto, all currently effective and related
summary plan descriptions (to the extent one is required by law), the
determination letter from the IRS, the annual reports for the most recent three
years (Form 5500 including, if applicable, Schedule B thereto) and a summary of
material modifications and all material employee communications prepared in
connection with any such plan. Such plans are hereinafter referred to
collectively as the "Employee Plans." Coast does not participate in an employee
benefit pension plan that is a "multiemployer plan" within the meaning of
Section 3(37) of ERISA. Each Employee Plan which is intended to be qualified in
form and operation under Section 401(a) of the Code is so qualified and the
associated trust for each such Employee Plan is exempt from tax under Section
501(a) of the Code. No event has occurred that will subject such Employee Plans
to a material amount of tax under Section 511 of the Code. All amendments
required to bring each Employee Plan into conformity with all of the applicable
provisions of ERISA, the Code and all other applicable laws which are required
to have been made as of the date hereof have been made.
(b) Coast has previously made available to GBB copies or
descriptions of each plan or arrangement maintained or otherwise contributed to
by Coast or any of its ERISA Affiliates which is not an Employee Plan and which
(exclusive of base salary and base wages) provides for any form of current or
deferred compensation, bonus, stock option, stock awards, stock-based
compensation or other forms of incentive compensation or post-termination
insurance, profit sharing, benefit, retirement, group health or insurance,
disability, workers' compensation, welfare or similar plan or arrangement for
the benefit of any employee or class of
<PAGE>
employees, whether active or retired, of Coast or any of its ERISA Affiliates
(such plans and arrangements being collectively referred to herein as "Benefit
Arrangements"). Except as disclosed in the Coast Employee Plan List hereto, all
Benefit Arrangements which are in effect were in effect for substantially all of
1999 and to date. Except as disclosed in the Coast Employee Plan List, there has
been no material amendment thereof or increase in the cost thereof or benefits
payable thereunder since January 1, 1998. Except as set forth in the Coast
Employee Plan List, there has been no material increase in the compensation of
or benefits payable to any senior executive employee of Coast since December 31,
1998, nor any employment, severance or similar contract entered into with any
such employee, nor any amendment to any such contract, since December 31, 1998.
(c) With respect to all Employee Plans and Benefit Arrangements,
Coast and its ERISA Affiliates are in compliance (other than noncompliance the
cost or liability for which is not material) with the requirements prescribed by
any and all statutes, governmental or court orders, or governmental rules or
regulations currently in effect, including but not limited to ERISA and the
Code, applicable to such plans or arrangements. Except as provided in the Coast
Employee Plan List, all government reports and filings required by law have been
properly and timely filed, all information required to be distributed to
participants or beneficiaries has been distributed with respect to each Employee
Plan and Coast and its ERISA Affiliates have performed all of their obligations
under all such Employee Plans and Benefit Arrangements in all material aspects.
There is no pending or, to the best of Coast's knowledge, threatened legal
action, proceeding or investigation against or involving any Employee Plan or
Benefit Arrangement which could result in a material amount of liability to such
Employee Plan, Coast or its ERISA Affiliates. No condition exists that could
constitute grounds for the termination of any Employee Plan under Section 4042
of ERISA. No "prohibited transaction," as defined in Section 406 of ERISA and
Section 4975 of the Code, has occurred with respect to any Employee Plan, or any
other employee benefit plan maintained by Coast or any of its ERISA Affiliates
which is covered by Title I of ERISA, which could subject any person (other than
a person for whom Coast is not directly or indirectly responsible) to a material
amount of liability under Title I of ERISA or to the imposition of a material
amount of tax under Section 4975 of the Code. No Employee Plan subject to Part
III of Subtitle B of Title I of ERISA or Section 412 of the Code, or both, has
incurred any "accumulated funding deficiency," as defined in Section 412 of the
Code, whether or not waived, nor has Coast failed to make any contribution or
pay any amount due and owing as required by the terms of any Employee Plan or
Benefit Arrangement. No "reportable event" as defined in ERISA has occurred with
respect to any of the Employee Plans. Neither Coast nor any of its ERISA
Affiliates has incurred nor expects to incur, directly or indirectly, a material
amount of liability under Title IV of ERISA arising in connection with the
termination of, or a complete or partial withdrawal from, any plan covered or
previously covered by Title IV of ERISA which could constitute a liability of
GBB or of any of its Affiliates (including Coast and CCB) at or after the
Effective Time of the Merger.
(d) Neither Coast nor any of its ERISA Affiliates has provided or is
required to provide security to any Employee Plan pursuant to Section 401(a)(29)
of the Code. Each of the Employee Plans which is intended to be a qualified
plan under Section 401(a) of the Code has received a favorable determination
letter from the Internal Revenue Service and neither Coast nor CCB knows of any
fact which could adversely affect the qualified status of any such
<PAGE>
Employee Plan. All contributions required to be made to each of the Employee
Plans under the terms of the Employee Plan, ERISA, the Code or any other
applicable laws have been timely made. The Financial Statements of Coast
properly reflect all amounts required to be accrued as liabilities to date under
each of the Employee Plans. The fair market value of the assets of each Employee
Plan and Benefit Arrangement that is funded, or required to be funded under the
terms of the Employee Plan or Benefit Arrangement, ERISA, the Code or any other
applicable law, equals or exceeds the liabilities, including the present value
of benefit obligations, of such Employee Plan or Benefit Arrangement.
(e) Except for Scheduled Contracts set forth in the Coast Contract
List or as set forth in the Coast Employee Plan List, as the case may be, each
Employee Plan or Benefit Arrangement and each personal services contract, fringe
benefit, consulting contract or similar arrangement with or for the benefit of
any officer, director, employee or other person can be terminated by Coast
within a period of 30 days following the Effective Time of the Merger, without
payment of any specified amount as a penalty, bonus, premium, severance pay or
other compensation for such termination.
(f) Except as provided in the Coast Employee Plan List, all group
health plans of Coast have been operated in compliance with the group health
plan continuation coverage requirements of Section 4980B of the Code and with
the group health plan portability, access and renewability requirements of
Sections 9801 through 9833 of the Code, and corresponding provisions of ERISA,
in all material respects.
(g) Neither Coast nor CCB has used the services of (i) workers who
have been provided by a third party contract labor supplier for more than six
months or who may otherwise be eligible to participate in any of the Employee
Plans or to an extent that would reasonably be expected to result in the
disqualification of any of the Employee Plans or the imposition of penalties or
excise taxes with respect to the IRS, the Department of Labor, the Pension
Benefit Guaranty Corporation or any other Governmental Entity; (ii) temporary
employees who have worked for more than six months or who may otherwise be
eligible to participate in any of the Employee Plans or to an extent that would
reasonably be expected to result in the disqualification of any of the Employee
Plans or the imposition of penalties or excise taxes with respect to the IRS,
the Department of Labor, the Pension Benefit Guaranty Corporation or any other
Governmental Entity; (iii) individuals who have provided services to Coast or
CCB as independent contractors for more than six months or who may otherwise be
eligible to participate in the Employee Plans or to an extent that would
reasonably be expected to result in the disqualification of any of the Employee
Plans or the imposition of penalties or excise taxes with respect to the IRS,
the Department of Labor, the Pension Benefit Guaranty Corporation or any other
Governmental Entity or (iv) leased employees, as that term is defined in section
414(n) of the Code.
(h) Except as set forth in the Coast Employee Plan List, with respect
to each Employee Plan that is funded wholly or partially through an insurance
policy, there will be no liability of Coast or CCB, as of the Closing Date,
under any such insurance policy or ancillary agreement with respect to such
insurance policy in the nature of a retroactive rate adjustment,
<PAGE>
loss sharing arrangement or other actual or contingent liability arising wholly
or partially out of events occurring prior to the Closing Date.
4.21. Corporate Records. The minute books of each of Coast and CCB
-----------------
accurately reflect all material actions taken to this date by the respective
shareholders, board of directors and committees of each of Coast and CCB.
4.22. Accounting Records. Each of Coast and CCB maintains accounting
------------------
records which fairly and accurately reflect, in all material respects, its
transactions and accounting controls exist sufficient to provide reasonable
assurances that such transactions are, in all material respects, (i) executed in
accordance with its management's general or specific authorization, and (ii)
recorded as necessary to permit the preparation of financial statements in
conformity with generally accepted accounting principles. Such records, to the
extent they contain important information pertaining to Coast or CCB which is
not easily and readily available elsewhere, have been duplicated, and such
duplicates are stored safely and securely.
4.23. Offices and ATMs. Coast has furnished to GBB a list (the "Coast
----------------
Offices List") setting forth the headquarters of each of Coast and CCB
(identified as such) and each of the offices and automated teller machines
("ATMs") maintained and operated by Coast or CCB (including, without limitation,
representative and loan production offices and operations centers) and the
location thereof. Except as set forth on the Coast Offices List, neither Coast
nor CCB maintains any other office or ATM or conducts business at any other
location, and neither Coast nor CCB has applied for or received permission to
open any additional branch or operate at any other location.
4.24. Operating Losses. Coast has furnished to GBB a list (the "Coast
----------------
Operating Losses List") setting forth any Operating Loss (as herein defined)
which has occurred at Coast during the period after December 31, 1998 to the
date of the Agreement. To the best of Coast's knowledge, no action has been
taken or omitted to be taken by any employee of Coast that has resulted in the
incurrence by Coast of an Operating Loss or that might reasonably be expected to
result in the incurrence of any individual Operating Loss which, net of any
insurance proceeds payable in respect thereof, would exceed $50,000 on an
individual basis or in the aggregate. For purposes of this section "Operating
Loss" means any loss resulting from cash shortages, lost or misposted items,
disputed clerical and accounting errors, forged checks, payment of checks over
stop payment orders, counterfeit money, wire transfers made in error, theft,
robberies, defalcations, check kiting, fraudulent use of credit cards or ATMs,
civil money penalties, fines, litigation, claims or other similar acts or
occurrences.
4.25. Loan Portfolio. Coast has furnished to GBB a list (the "Coast
--------------
Loan List") that sets forth (a) as of September 30, 1999, a description of, by
type and classification, if any, each loan, lease, other extension of credit or
commitment to extend credit by Coast or CCB; (b) sets forth as of September 30,
1999, by type and classification, all loans, leases, other extensions and
commitments to extend credit of Coast or CCB that have been classified by its
bank examiners or auditors (external or internal) as "Watch List,"
"Substandard," "Doubtful," "Loss" or any comparable classification; and (c) all
consumer loans due to Coast or CCB as to which any payment of principal,
interest or any other amount is 90 days or more past due.
<PAGE>
4.26. Investment Securities. Coast has furnished to GBB a list (the
---------------------
"Coast Investment Securities List") setting forth a description of each
Investment Security held by Coast or CCB on September 30, 1999. The Coast
Investment Securities List sets forth, with respect to each such Investment
Security: (i) the issuer thereof; (ii) the outstanding balance or number of
shares; (iii) the maturity, if applicable; (iv) the title of issue; and (v) the
classification under SFAS No. 115. Neither Coast nor CCB has any Investment
Security classified as trading.
4.27. Power of Attorney. Neither Coast nor CCB has granted any Person a
-----------------
power of attorney or similar authorization that is presently in effect or
outstanding.
4.28. Facts Affecting Regulatory Approvals. To the best knowledge of
------------------------------------
Coast, there is no fact, event or condition applicable to Coast or CCB which
will, or reasonably could be expected to, adversely affect the likelihood of
securing the requisite approvals or consents of any Governmental Entity to the
Merger and the transactions contemplated by this Agreement.
4.29. Accounting and Tax Matters. To the best of Coast's knowledge,
--------------------------
neither Coast nor CCB has through the date hereof taken or agreed to take any
action that would prevent GBB from accounting for the business combination to be
effected by the Merger as a pooling-of-interests or would prevent the Merger
from qualifying as a tax-free reorganization under the Code.
4.30. Indemnification. Other than pursuant to the provisions of their
---------------
respective Articles of Incorporation or Bylaws, and the Sandler O'Neill
Agreement, neither Coast nor CCB is a party to any indemnification agreement
with any of its present officers, directors, employees, agents or other persons
who serve or served in any other capacity with any other enterprise at the
request of Coast or CCB (a "Covered Person"), and to the best knowledge of
Coast, there are no claims for which any Covered Person would be entitled to
indemnification by Coast or CCB if such provisions were deemed in effect, except
as set forth in a list furnished by Coast to GBB (the "Coast Indemnification
List").
4.31. Community Reinvestment Act. CCB has received a rating of
--------------------------
"outstanding" in its most recent examination or interim review with respect to
the Community Reinvestment Act. CCB has not been advised of any supervisory
concerns regarding its compliance with the Community Reinvestment Act.
4.32. Derivative Transactions. Except as set forth in a list furnished
-----------------------
by Coast to GBB (the "Coast Derivatives List"), neither Coast nor CCB is a party
to or has agreed to enter into an exchange traded or over-the-counter equity,
interest rate, foreign exchange or other swap, forward, future, option, cap,
floor or collar or any other contract that is not included on the balance sheet
and is a derivative contract (including various combinations thereof) or owns
securities that are referred to generically as "structured notes," "high risk
mortgage derivatives," "capped floating rate notes," or "capped floating rate
mortgage derivatives."
4.33. Trust Administration. Neither Coast nor CCB presently maintains
--------------------
trusts or exercises trust powers, including, but not limited to, trust
administration, and neither of them nor
<PAGE>
any predecessor has maintained any trusts or exercised such trust powers for a
period of at least three years prior to the date hereof. The term "trusts" as
used in this Section 4.33 includes (i) any and all common law or other trusts
between an individual, corporation or other entities and Coast or CCB or any of
their predecessors, as trustee or co-trustee, including, without limitation,
pension or other qualified or nonqualified employee benefit plans, compensation,
testamentary, inter vivos, and charitable trust indentures; (ii) any and all
decedents' estates where Coast or CCB or any of their predecessors is serving or
has served as a co-executor or sole executor, personal representative or
administrator, administrator de bonis non, administrator de bonis non with will
annexed, or in any similar fiduciary capacity; (iii) any and all guardianships,
conservatorships or similar positions where Coast or CCB or any of their
predecessors is serving or has served as a co-grantor or a sole grantor or a
conservator or co-conservator of the estate, or any similar fiduciary capacity;
and (iv) any and all agency and/or custodial accounts and/or similar
arrangements, including plan administrator for employee benefit accounts, under
which Coast or CCB or any of their predecessors is serving or has served as an
agent or custodian for the owner or other party establishing the account with or
without investment authority.
4.34. Disclosure Documents and Applications. None of the information
-------------------------------------
supplied or to be supplied by or on behalf of Coast ("Coast Supplied
Information") for inclusion in (a) the Registration Statement on Form S-4 and
the Joint Proxy Statement and Prospectus and (b) any other documents to be filed
with the SEC, the FRB, the DFI or any other Governmental Entity in connection
with the transactions contemplated in this Agreement, will, at the respective
times such documents are filed or become effective, or with respect to the Joint
Proxy Statement and Prospectus when mailed, contain any untrue statement of a
material fact, or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.35. Intellectual Property. Except as set forth in a list furnished by
---------------------
Coast to GBB (the "Coast Intellectual Property List"), Coast and CCB own or
possess valid and binding licenses and other rights to use without payment all
material patents, copyrights, trade secrets, trade names, service marks and
trademarks used in their respective businesses; and neither Coast nor CCB has
received any notice with respect thereto that asserts the rights of others.
Coast and CCB have in all material respects performed all the obligations
required to be performed by them, and are not in default in any material respect
under any license, contract, agreement, arrangement or commitment relating to
any of the foregoing.
4.36. Year 2000. The mission critical computer software operated by Coast
---------
and CCB is currently capable of providing, or is being adapted to provide,
uninterrupted millennium functionality to record, store, process and present
calendar dates falling on or after January 1, 2000 in substantially the same
manner and with the same functionality as such mission critical software
records, stores, processes and presents such calendar dates falling on or before
December 31, 1999. The costs of the adaptations referred to in this clause will
not have a material adverse effect on the business, financial condition, results
of operations or prospects of Coast on a consolidated basis. Neither Coast nor
CCB has received, or reasonably expects to receive, a "Year 2000 Deficiency
Notification Letter" (as such term is employed by the FDIC). Coast has
disclosed to GBB a complete and accurate copy of its plan, including an estimate
of the anticipated associated costs, for addressing the issues set forth in all
Federal Financial
<PAGE>
Institutions Examination Council Interagency Statements as such issues affect
Coast and CCB. Between the date of this Agreement and the Effective Time, Coast
shall use commercially practicable efforts to implement such plan.
4.37. Insider Loans; Other Transactions. Coast has previously provided
---------------------------------
GBB or its agent with a listing, current as of September 30, 1999, of all
extensions of credit made by Coast and CCB to each of its executive officers and
directors and their related interests (all as defined under Federal Reserve
Board Regulation O), all of which have been made in compliance with Regulation
O, and Section 23B under the Federal Reserve Act which listing is true, correct
and complete in all material respects. Neither Coast nor CCB owes any amount
to, or has any contract or lease with or commitment to, any of the present
executive officers or directors of Coast or CCB (other than for compensation for
current services not yet due and payable, reimbursement of expenses arising in
the ordinary course of business, options or awards available under the Coast
Stock Option Plans or any amounts due pursuant to Coast's Employee Plans).
4.38. Registration Obligation. Neither Coast nor CCB is under any
-----------------------
obligation, contingent or otherwise, to register any of their respective
securities under the Securities Act.
4.39. Accuracy and Currentness of Information Furnished. The
-------------------------------------------------
representations and warranties made by Coast hereby or in the Coast Lists or
schedules hereto do not contain any untrue statement of a material fact or omit
to state any material fact which is necessary under the circumstances under
which they were made to prevent the statements contained herein or in such
schedules from being misleading.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF GBB
-------------------------------------
GBB represents and warrants to Coast as follows:
5.1. Incorporation, Standing and Power. GBB has been duly organized, is
---------------------------------
validly existing and in good standing as a corporation under the laws of the
State of California and is registered as a bank holding company under the BHC
Act. GBB has all requisite corporate power and authority to own, lease and
operate its properties and assets and to carry on its business as presently
conducted. GBB is duly qualified and in good standing as a foreign corporation,
and is authorized to do business, in all states or other jurisdictions in which
such qualification or authorization is necessary, except where the failure to be
so qualified or authorized would not, individually or in the aggregate, have a
material adverse effect on the business, financial condition, results of
operations or prospects of GBB on a consolidated basis. True and correct copies
of the Articles of Incorporation and Bylaws of GBB have been delivered to Coast.
Such Articles of Incorporation and Bylaws are in full force and effect as of the
date hereof.
5.2. Capitalization. As of the date of this Agreement, the authorized
--------------
capital stock of GBB consists of 24,000,000 shares of common stock, of which
12,268,381 shares are outstanding as of December 8, 1999, and 4,000,000 shares
of preferred stock, no par value, of
<PAGE>
which no shares are outstanding. All of the outstanding shares of GBB Stock are
duly authorized, validly issued, fully paid and nonassessable. The GBB Stock to
be used in the Merger will be duly authorized, validly issued, fully paid and
nonassessable. As of the date of this Agreement, except for GBB Stock Options
granted pursuant to the GBB Stock Option Plan, rights to acquire shares of GBB
Stock pursuant to GBB's Employee Stock Purchase Plan, GBB 401(k) Plan, GBB
dividend reinvestment plan and the Agreement and Plan of Reorganization, dated
as of September 15, 1999, between GBB and Mt. Diablo Bancshares, and preferred
share purchase rights issued pursuant to the Rights Agreement, dated as of
November 17, 1998, between GBB and Norwest Bank Minnesota, N.A., there are no
outstanding options, warrants or other rights in or with respect to the unissued
shares of GBB Stock nor any securities convertible into such stock, and GBB is
not obligated to issue any additional shares of its common stock or any
additional options, warrants or other rights in or with respect to the unissued
shares of such stock or any other securities convertible into such stock.
5.3. Financial Statements. GBB has previously furnished to Coast a copy
--------------------
of the Financial Statements of GBB. The Financial Statements of GBB: (a)
present fairly in all material respects the consolidated financial condition of
GBB as of the respective dates indicated and its consolidated results of
operations and changes in cash flows, as applicable, for the respective periods
then ended, subject, in the case of the unaudited consolidated interim financial
statements, to normal recurring adjustments; (b) have been prepared in
accordance with generally accepted accounting principles consistently applied
(except as otherwise indicated therein); (c) set forth as of the respective
dates indicated adequate reserves for loan losses and other contingencies; and
(d) are based upon the books and records of GBB and the GBB Subsidiaries.
5.4. Reports and Filings. Since January 1, 1996, GBB and each of the GBB
-------------------
Subsidiaries have filed all reports, returns, registrations and statements
(collectively, "GBB Filings"), together with any amendments required to be made
with respect thereto, that were required to be filed with (a) the SEC, (b) the
FRB, (c) the DFI, and (d) any other applicable Governmental Entity, including
taxing authorities, except where the failure to file such reports, returns,
registrations or statements has not had and is not reasonably expected to have a
material adverse effect on the business, financial condition, results of
operations or prospects of GBB on a consolidated basis. No administrative
actions have been taken or orders issued in connection with such GBB Filings.
As of their respective dates, each of such GBB Filings (y) complied in all
material respects with all laws and regulations enforced or promulgated by the
Governmental Entity with which it was filed (or was amended so as to be in such
compliance promptly following discovery of any such noncompliance); and (z) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. Any
financial statement contained in any of such GBB Filings that was intended to
present the financial position of GBB on a consolidated basis fairly presented
the financial position of GBB on a consolidated basis and was prepared in
accordance with generally accepted accounting principles or banking regulations
consistently applied, except as stated therein, during the periods involved.
5.5. Authority. The execution and delivery by GBB of this Agreement and
---------
the Agreement of Merger, and, subject to the approval of the shareholders of GBB
of this
<PAGE>
Agreement, the increase in the number of shares reserved for issuance under the
GBB Stock Option Plan and the transactions contemplated hereby, the consummation
of the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of GBB. This Agreement
is, and the Agreement of Merger will be, upon due execution and delivery by the
respective parties hereto, valid and binding obligations of GBB enforceable in
accordance with their respective terms, except as the enforceability thereof may
be limited by bankruptcy, liquidation, receivership, conservatorship,
insolvency, moratorium or other similar laws affecting the rights of creditors
generally and by general equitable principles. Except as set forth in a list
furnished by GBB to Coast (the "GBB Conflicts and Consents List"), neither the
execution and delivery by GBB of this Agreement or the Agreement of Merger, the
consummation of the transactions contemplated herein or therein, nor compliance
by GBB with any of the provisions hereof or thereof, will: (a) conflict with or
result in a breach of any provision of its Articles of Incorporation, as
amended, or Bylaws, as amended; (b) constitute a breach of or result in a
default (or give rise to any rights of termination, cancellation or
acceleration, or any right to acquire any securities or assets) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
franchise, license, permit, agreement or other instrument or obligation to which
GBB or any of the GBB Subsidiaries is a party, or by which GBB or any of the GBB
Subsidiaries or any of its properties or assets is bound; (c) result in the
creation or imposition of any Encumbrance on any of the respective properties or
assets of GBB or any of the GBB Subsidiaries; or (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to GBB or any of the
GBB Subsidiaries or any of its respective properties or assets. Except as set
forth in the GBB Conflicts and Consents List, no consent of, approval of, notice
to or filing with any Governmental Entity having jurisdiction over any aspect of
the business or assets of GBB or any of the GBB Subsidiaries, and no consent of,
approval of or notice to any other Person, is required in connection with the
execution and delivery by GBB of this Agreement or the Agreement of Merger, or
the consummation by GBB of the Merger or the transactions contemplated hereby or
thereby, except (i) such approvals as may be required by the FRB and the DFI;
(ii) the filing of the Joint Proxy Statement and Prospectus and Registration
Statement on Form S-4 with the SEC and the issuance by the SEC of an order
declaring the Registration Statement on Form S-4 effective; (iii) the approval
of this Agreement and the transactions contemplated hereby by the shareholders
of GBB (including the increase of the shares of GBB Stock reserved under the GBB
Stock Option Plan); (iv) the filing of the Agreement of Merger with the
Secretary of State; and (v) such approvals as may be required to approve for
inclusion on the Nasdaq National Market System of the GBB Stock to be issued in
the Merger.
5.6. Subsidiaries. As of the date of this Agreement, GBB owns 100% of
------------
the outstanding stock of each of the GBB Subsidiaries. As of the date of this
Agreement, and except for its investments in the GBB Subsidiaries, GBB Capital I
and GBB Capital II, GBB does not own, directly or indirectly (except as a
pledgee pursuant to loans or upon acquisition in satisfaction of debt previously
contracted), the outstanding stock or equity or other voting interest in any
other Person. GBB and Mt. Diablo Bancshares entered into an Agreement and Plan
of Reorganization, dated as of September 15, 1999, pursuant to which Mt. Diablo
Bancshares will merge with and into GBB and Mt. Diablo National Bank, a wholly
owned subsidiary of Mt. Diablo Bancshares, will become a wholly owned subsidiary
of GBB.
<PAGE>
5.7. Insurance. Each of GBB and the GBB Subsidiaries has policies of
---------
insurance and bonds with respect to its assets and business against such
casualties and contingencies and in such amounts, types and forms as are
customarily appropriate for its business, operations, properties and assets.
All such insurance policies and bonds are in full force and effect. No insurer
under any such policy or bond has canceled or indicated an intention to cancel
or not to renew any such policy or bond or generally disclaimed liability
thereunder. Neither GBB nor any GBB Subsidiaries is in default under any such
policy or bond and all material claims thereunder have been filed in a timely
fashion.
5.8. Litigation. There is no private or governmental suit, claim, action
----------
or proceeding pending, nor to GBB's knowledge threatened, against GBB or any of
the GBB Subsidiaries or against any of their respective directors, officers or
employees relating to the performance of their duties in such capacities or
against or affecting any properties of GBB or any of the GBB Subsidiaries which,
if adversely determined, would have, individually or in the aggregate, a
material adverse effect upon the business, financial condition or results of
operations of GBB on a consolidated basis, or the transactions contemplated
hereby.
5.9. Compliance with Laws and Regulations.
------------------------------------
(a) Neither GBB nor any of the GBB Subsidiaries is in default under
or in breach or violation of (i) any provision its Articles of Incorporation, as
amended, or Bylaws, as amended, or (ii) law, ordinance, rule or regulation
promulgated by any Governmental Entity, except, with respect to this clause
(ii), for such violations as would not have, individually or in the aggregate, a
material adverse effect on the business, financial condition, results of
operations or prospects of GBB on a consolidated basis.
(b) Except as set forth on a list furnished by GBB to Coast (the
"GBB Environmental Compliance List"), to the best of GBB's knowledge without
further investigation, (i) each of GBB and the GBB Subsidiaries is in compliance
with all Environmental Regulations; (ii) there are no Tanks on or about GBB
Property; (iii) there are no Hazardous Materials on, below or above the surface
of, or migrating to or from GBB Property; (iv) neither GBB nor any of the GBB
Subsidiaries has loans outstanding secured by real property that is not in
compliance with Environmental Regulations or which has a leaking Tank or upon
which there are Hazardous Materials on or migrating to or from; and (v) without
limiting Section 5.8 or the foregoing representations and warranties contained
in clauses (i) through (iv), as of the date of this Agreement, there is no
claim, action, suit, or proceeding or notice thereof before any Governmental
Entity pending against GBB or any of the GBB Subsidiaries or concerning property
securing GBB's or any of the GBB Subsidiaries' loans and there is no outstanding
judgment, order, writ, injunction, decree, or award against or affecting GBB
Property or property securing GBB's or any of the GBB Subsidiaries' loans,
relating to the foregoing representations (i) - (iv), in each case the
noncompliance with which, or the presence of which would have a material adverse
effect on the business, financial condition, results of operations or prospects
of GBB on a consolidated basis. "GBB Property" shall mean real estate currently
owned, leased, or otherwise used by GBB or any of the GBB Subsidiaries, or in
which GBB or any of the GBB Subsidiaries has an investment or security interest
(by mortgage, deed of trust, sale and lease-
<PAGE>
back or otherwise), including, without limitation, properties under foreclosure
and properties held by GBB or any of the GBB Subsidiaries in its capacity as a
trustee or otherwise.
5.10. Performance of Obligations. Each of GBB and the GBB Subsidiaries
--------------------------
has performed in all material respects all of the obligations required to be
performed by it to date and is not in default under or in breach of any term or
provision of any covenant, contract, lease, indenture or any other agreement to
which it is a party, is subject or is otherwise bound, and no event has occurred
that, with the giving of notice or the passage of time or both, would constitute
such default or breach, where such default or breach would have, individually or
in the aggregate, a material adverse effect on the business, financial
condition, results of operations or prospects of GBB on a consolidated basis.
Except for loans and leases made by GBB or any of the GBB Subsidiaries in the
ordinary course of business, to the best of GBB's knowledge, no party with whom
GBB or any of the GBB Subsidiaries has an agreement that is of material
importance to the business of GBB or any of the GBB Subsidiaries is in default
thereunder.
5.11 Material Contracts. Neither GBB nor any of the GBB Subsidiaries is
------------------
a party or otherwise subject to any material agreement which would be terminable
other than by GBB or one of the GBB Subsidiaries as a result of the consummation
of the transactions contemplated by this Agreement where such termination would
have a material adverse effect on the business, financial condition, results of
operations or prospects of GBB on a consolidated basis.
5.12. Undisclosed Liabilities. As of the date of this Agreement,
-----------------------
neither GBB nor any of the GBB Subsidiaries has any liabilities or obligations,
either accrued or contingent, that are material to GBB and that have not been:
(a) reflected or disclosed in the Financial Statements of GBB; (b) incurred
subsequent to December 31, 1998 in the ordinary course of business consistent
with past practices; or (c) disclosed in a list furnished by GBB to Coast (the
"GBB Undisclosed Liabilities List") or on any other GBB List. GBB does not know
of any basis for the assertion against it or any of the GBB Subsidiaries of any
liability, obligation or claim (including, without limitation, that of any
regulatory authority) that is likely to result in or cause a material adverse
change in the business, financial condition, results of operations or prospects
of GBB on a consolidated basis that is not fairly reflected in the Financial
Statements of GBB or otherwise disclosed in this Agreement.
5.13. Community Reinvestment Act. Each of the Banks has received a
--------------------------
rating of either "outstanding" or "satisfactory" in its most recent examination
or interim review with respect to the Community Reinvestment Act. None of the
Banks has not been advised of any supervisory concerns regarding its compliance
with the Community Reinvestment Act.
5.14. Brokers and Finders. Except for the obligation to First Security
-------------------
Van Kasper, as set forth in a letter agreement dated September 22, 1999, a copy
of which has been delivered to Coast, GBB is not a party to or obligated under
any agreement with any broker or finder relating to the transactions
contemplated hereby, and neither the execution of this Agreement nor the
consummation of the transactions provided for herein will result in any
liability to any broker or finder.
<PAGE>
5.15. Certain Material Changes. Except as specifically required,
------------------------
permitted or effected by this Agreement or as disclosed in any GBB Filings,
since December 31, 1998, there has not been, occurred or arisen any of the
following (whether or not in the ordinary course of business unless otherwise
indicated):
(a) any change in any of the assets, liabilities, permits, methods
of accounting or accounting practices, business, or manner or conducting
business, of GBB or the GBB Subsidiaries or any other event or development that
has had or may reasonably be expected to have a material adverse effect on the
assets, liabilities, permits, business, financial condition, results of
operations or prospects of GBB on a consolidated basis;
(b) any damage, destruction or other casualty loss (whether or not
covered by insurance) that has had or may reasonably be expected to have a
material adverse effect on the assets, liabilities, permits, business, financial
condition, results of operations or prospects of GBB on a consolidated basis;
(c) any amendment, modification or termination of any existing, or
entry into any new, material contract or permit that has had or may reasonably
be expected to have a material adverse effect on the assets, liabilities,
permits, business, financial condition, results of operations or prospects of
GBB on a consolidated basis; or
(d) any disposition by GBB or any of the GBB Subsidiaries of an
asset the lack of which has had or may reasonably be expected to have a material
adverse effect on the assets, liabilities, permits, business, financial
condition, results of operations or prospects of GBB on a consolidated basis.
5.16. Licenses and Permits. GBB and each of the GBB Subsidiaries have
--------------------
all material licenses and permits that are necessary for the conduct of their
respective businesses, and such licenses are in full force and effect, except
for any failure to be in full force and effect that would not, individually or
in the aggregate, have a material adverse effect on the business, financial
condition, results of operations or prospects of GBB on a consolidated basis.
The properties, assets, operations and businesses of GBB and each subsidiary of
GBB are and have been maintained and conducted, in all material respects, in
compliance with all applicable licenses and permits. The properties and
operations of GBB and each subsidiary of GBB are and have been maintained and
conducted, in all material respects, in compliance with all applicable laws and
regulations.
5.17 Corporate Records. The minute books of GBB and each of the GBB
-----------------
Subsidiaries reflect all material actions taken to this date by its
shareholders, boards of directors and committees.
5.18. Accounting Records. GBB and the GBB Subsidiaries maintain
------------------
accounting records which fairly and accurately reflect, in all material
respects, their transactions and accounting controls exist sufficient to provide
reasonable assurances that such transactions are, in all material respects, (i)
executed in accordance with their management's general or specific
authorization, and (ii) recorded as necessary to permit the preparation of
financial statements in
<PAGE>
conformity with generally accepted accounting principles. Such records, to the
extent they contain important information pertaining to GBB and the GBB
Subsidiaries which is not easily and readily available elsewhere, have been
duplicated, and such duplicates are stored safely and securely.
5.19. Facts Affecting Regulatory Approvals. To the best knowledge of
------------------------------------
GBB, there is no fact, event or condition applicable to GBB or any of the GBB
Subsidiaries which will, or reasonably could be expected to, adversely affect
the likelihood of securing the requisite approvals or consents of any
Governmental Entity to the Merger and the transactions contemplated by this
Agreement.
5.20. Accounting and Tax Matters. To the best knowledge of GBB, GBB has
--------------------------
not through the date hereof taken or agreed to take any action that would
prevent it from accounting for the business combination to be effected by the
Merger as a pooling-of-interests or would prevent the Merger from qualifying as
a tax-free reorganization under the Code.
5.21. Disclosure Documents and Applications. None of the information
-------------------------------------
supplied or to be supplied by or on behalf of GBB or any of the GBB Subsidiaries
("GBB Supplied Information") for inclusion in (a) the Registration Statement on
Form S-4 and the Joint Proxy Statement and Prospectus to be mailed to the
shareholders of Coast in connection with obtaining the approval of the
shareholders of Coast of this Agreement, the Merger and the other transactions
contemplated hereby, and (b) any other documents to be filed with the SEC, the
FRB, the DFI or any other Governmental Entity in connection with the
transactions contemplated in this Agreement, will, at the respective times such
documents are filed or become effective, or with respect to the Joint Proxy
Statement and Prospectus when mailed, contain any untrue statement of a material
fact, or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
5.22. Nasdaq Listing. As of the date hereof, GBB Stock is listed on the
--------------
Nasdaq National Market System.
5.23. Year 2000. The mission critical computer software operated by GBB
---------
and the GBB Subsidiaries is currently capable of providing, or is being adapted
to provide, uninterrupted millennium functionality to record, store, process and
present calendar dates falling on or after January 1, 2000 in substantially the
same manner and with the same functionality as such mission critical software
records, stores, processes and presents such calendar dates falling on or before
December 31, 1999. The costs of the adaptations referred to in this clause will
not have a material adverse effect on the business, financial condition, results
of operations or prospects of GBB on a consolidated basis. Neither GBB nor any
of the GBB Subsidiaries has received, or reasonably expects to receive, a "Year
2000 Deficiency Notification Letter" (as such term is employed by the FDIC).
5.24. Derivative Transactions. As of the date of this Agreement,
-----------------------
except as set forth in a list furnished by GBB to Coast (the "GBB Derivatives
List"), neither GBB nor any of the Banks is a party to or has agreed to enter
into an exchange traded or over-the-counter equity,
<PAGE>
interest rate, foreign exchange or other swap, forward, future, option, cap,
floor or collar or any other contract that is not included on the balance sheet
and is a derivative contract (including various combinations thereof) or owns
securities that are referred to generically as "structured notes," "high risk
mortgage derivatives," "capped floating rate notes," or "capped floating rate
mortgage derivatives."
5.25. Investment Securities. GBB has furnished to Coast a list (the
---------------------
"GBB Investment Securities List") setting forth a description of the Investment
Securities held by GBB or any of the Banks on October 29, 1999.
5.26. Accuracy and Currentness of Information Furnished. The
-------------------------------------------------
representations and warranties made by GBB hereby or in the GBB Lists or
Schedules hereto do not contain any untrue statement of material fact or omit to
state any material fact which is necessary under the circumstances under which
they were made to prevent the statements contained herein or in such schedules
from being misleading.
ARTICLE 6.
COVENANTS OF COAST
-------------------
PENDING EFFECTIVE TIME OF THE MERGER
------------------------------------
Coast covenants and agrees with GBB as follows:
6.1. Limitation on Conduct Prior to Effective Time of the Merger.
-----------------------------------------------------------
Between the date hereof and the Effective Time of the Merger, except as
contemplated by this Agreement and subject to requirements of law and
regulation, Coast agrees to conduct its business (and to cause CCB to conduct
its business) in the ordinary course in substantially the manner heretofore
conducted and in accordance with sound banking practices, and Coast and CCB
shall not, without the prior written consent of GBB, which consent GBB shall not
unreasonably withhold or delay:
(a) issue, sell or grant any Coast Stock (except pursuant to the
exercise of Coast Options outstanding as of the date hereof), any other
securities (including long term debt) of Coast or CCB, or any rights, stock
appreciation rights, options or securities to acquire any Coast Stock, or any
other securities (including long term debt) of Coast or CCB;
(b) declare, set aside or pay any dividend or make any other
distribution upon or split, combine or reclassify any shares of capital stock or
other securities of Coast or CCB, provided, however, that subject to Section
6.10, Coast may pay to its shareholders its regular cash dividend in amounts
and in a manner consistent with past practices;
(c) purchase, redeem or otherwise acquire any capital stock or other
securities of Coast or CCB or any rights, options, or securities to acquire any
capital stock or other securities of Coast or CCB;
<PAGE>
(d) except as may be required to effect the transactions contemplated
herein, amend its Articles of Incorporation or Bylaws;
(e) grant any general or uniform increase in the rate of pay of
employees or employee benefits;
(f) grant any increase in salary, incentive compensation or employee
benefits or pay any bonus to any Person or voluntarily accelerate the vesting of
any employee benefits; except that Coast and CCB may grant such increases and
pay bonuses to employees at the vice president level or below in a manner and in
amounts consistent with past practices without obtaining GBB's prior written
consent;
(g) make any capital expenditure or commitments with respect thereto
in excess of $50,000 in the aggregate, except for ordinary repairs, renewals and
replacements;
(h) compromise or otherwise settle or adjust any assertion or claim of
a deficiency in taxes (or interest thereon or penalties in connection
therewith), extend the statute of limitations with any tax authority or file any
pleading in court in any tax litigation or any appeal from an asserted
deficiency, or file or amend any federal, foreign, state or local tax return, or
make any tax election;
(i) grant, renew or commit to grant or renew any extension of credit
if such extension of credit, together with all other credit then outstanding to
the same Person and all Affiliated Persons, would exceed $500,000 on an
unsecured basis, or $1,000,000 if secured by a lien on real estate or cash and
if such real estate secured extension of credit is in compliance with Coast's or
CCB's underwriting guidelines in effect on the date hereof (consent shall be
deemed granted if within two Business Days of written notice, together with a
copy of the applicable loan write-up report and any other relevant documents,
delivered to GBB's Chief Credit Officer, written notice of objection is not
received by Coast);
(j) change its tax or accounting policies and procedures or any method
or period of accounting unless required by generally accepted accounting
principles or a Governmental Entity;
(k) grant or commit to grant any extension of credit or amend the
terms of any such credit outstanding on the date hereof to any executive
officer, director or holder of 10% or more of the outstanding Coast Stock, or
any Affiliate of such Person, if such credit would exceed $50,000;
(l) close any offices at which business is conducted or open any new
offices;
(m) adopt or enter into any new employment agreement or other employee
benefit plan or arrangement or amend or modify any employment agreement or
employee benefit plan or arrangement of any such type except for such amendments
as are required by law;
<PAGE>
(n) initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal which constitutes, or may reasonably be
expected to lead to, any Competing Transaction (as such term is defined below),
or negotiate with any person in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to or endorse any Competing Transaction, or
authorize or permit any of its or CCB's officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or any other
representative retained by it or any of its Affiliates to take any such action,
and Coast shall promptly notify GBB (orally and in writing) of all of the
relevant details relating to all inquiries and proposals which it may receive
relating to any of such matters. For purposes of this Agreement, "Competing
Transaction" shall mean any of the following involving Coast or CCB: any
merger, consolidation, share exchange or other business combination; a sale,
lease, exchange, mortgage, pledge, transfer or other disposition of assets of
Coast or CCB representing 10% or more of the consolidated assets of Coast; a
sale of shares of capital stock (or securities convertible or exchangeable into
or otherwise evidencing, or any agreement or instrument evidencing, the right to
acquire capital stock), representing 10% or more of the voting power of Coast or
CCB; a tender offer or exchange offer for at least 10% of the outstanding shares
of Coast; a solicitation of proxies in opposition to approval of the Merger by
Coast's shareholders; or a public announcement of an unsolicited bona fide
proposal, plan, or intention to do any of the foregoing. Coast and CCB will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties (other than GBB) conducted
heretofore with respect to any of the foregoing. Coast and CCB shall take the
necessary steps to inform promptly the appropriate individuals or entities
referred to above of the obligations undertaken in this Section. Coast and CCB
agree that they shall notify GBB immediately if any such inquiries, proposals or
offers are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with Coast
and CCB. Coast and CCB also agree that they shall promptly request each other
person, other than GBB, that has heretofore executed a confidentiality agreement
in connection with its consideration of acquiring Coast and CCB to return all
confidential information heretofore furnished to such person by or on behalf of
Coast and CCB and enforce any such confidentiality agreements. Notwithstanding
any other provision in this Section 6.1(n), nothing in this Agreement shall
prevent Coast from (i) engaging in any discussions or negotiations with, or
providing any information to, any Person in response to an unsolicited bona fide
written proposal concerning a Competing Transaction by any such Person or (ii)
recommending such an unsolicited bona fide written proposal concerning a
Competing Transaction to the holders of Coast Stock if and only if, prior to
participating in any of the foregoing, (A) the Board of Directors of Coast
concludes in good faith that the Competing Transaction, if consummated, would
result in a transaction more favorable to holders of Coast Stock than the
transaction contemplated by this Agreement (any such more favorable Competing
Transaction being referred to in this Agreement as a "Superior Proposal"); (B)
the Board of Directors of Coast determines in good faith based upon the advice
of outside counsel that participating in any such action is necessary for it to
act in a manner not inconsistent with its fiduciary duties under applicable law;
and (C) at least forty-eight (48) hours prior to providing any information or
data to any person or entering into discussions or negotiations with any Person,
the Board of Directors of Coast notifies GBB of such inquiries, proposals or
offers received by, any such information requested from, or any such discussions
or negotiations sought to be initiated or continued with Coast and CCB;
<PAGE>
(o) change any basic policies and practices with respect to liquidity
management and cash flow planning, marketing, deposit origination, lending,
budgeting, profit and tax planning, personnel practices or any other material
aspect of Coast's or CCB's business or operations, except such changes as may be
required in the opinion of Coast's or CCB's management to respond to economic or
market conditions or as may be required by any Governmental Entity;
(p) grant any Person a power of attorney or similar authority;
(q) make any investment by purchase of stock or securities (including
an Investment Security), contributions to capital, property transfers or
otherwise in any other Person, except for federal funds, obligations of the
United States Treasury or an agency of the United States Government the
obligations of which are entitled to or implied to have the full faith and
credit of the United States government and which have an original maturity not
in excess of one year, bank qualified investment grade municipal bonds, and
mortgage-backed securities that are investment grade, in any case, in the
ordinary course of business consistent with past practices and which are not
designated as trading (consent shall be deemed granted if within two Business
Days of written notice together with all relevant documents delivered to GBB's
Chief Financial Officer or Controller, written notice of objection is not
received by Coast);
(r) amend or modify any Scheduled Contract or enter into any agreement
or contract that would be a Scheduled Contract under Section 4.16;
(s) sell, transfer, mortgage, encumber or otherwise dispose of any
assets or release or waive any claim, except in the ordinary course of business
and consistent with past practices;
(t) take any action which would or is reasonably likely to (i)
adversely affect the ability of GBB or Coast to obtain any necessary approval of
any Governmental Entity required for the transactions contemplated hereby; (ii)
adversely affect Coast's ability to perform its covenants and agreements under
this Agreement; or (iii) result in any of the conditions to the performance of
GBB's or Coast's obligations hereunder, as set forth in Articles 9, 10 or 11
herein not being satisfied;
(u) make any special or extraordinary payments to any Person;
(v) reclassify any Investment Security from held-to-maturity or
available for sale to trading;
(w) sell any security other than in the ordinary course of business,
or engage in gains trading;
<PAGE>
(x) take title to any real property without conducting prior thereto
an environmental investigation, which investigation shall disclose the absence
of any suspected environmental contamination;
(y) take or cause to be taken any action which would disqualify the
Merger as a "reorganization" within the meaning of Section 368 of the Code or
prevent GBB from accounting for the business combination to be effected by the
Merger as a pooling-of-interests;
(z) settle any claim, action or proceeding involving any material
liability for monetary damages or enter into any settlement agreement containing
material obligations;
(aa) make, acquire a participation in, or voluntarily reacquire an
interest in a participation sold of, any loan that is not in compliance with its
normal credit underwriting standards, policies and procedures as in effect on
December 31, 1998; or renew, extend the maturity of, or alter any of the
material terms of any such loan for a period of greater than six months;
(bb) incur any indebtedness for borrowed money or assume, guaranty,
endorse or otherwise as an accommodation become responsible for the obligations
of any other person, except for (i) in connection with banking transactions with
banking customers in the ordinary course of business, or (ii) short-term
borrowings made at prevailing market rates and terms; or
(cc) agree or make any commitment to take any actions prohibited by
this Section 6.1.
6.2 Affirmative Conduct Prior to Effective Time of the Merger. Between
---------------------------------------------------------
the date hereof and the Effective Time of the Merger, Coast shall (and shall
cause CCB to):
(a) use its commercially reasonable efforts consistent with this
Agreement to maintain and preserve intact its present business organization and
to maintain and preserve its relationships and goodwill with account holders,
borrowers, employees and others having business relationships with Coast or CCB;
(b) use its commercially reasonable efforts to keep in full force and
effect all of the existing material permits and licenses of Coast and CCB;
(c) use its commercially reasonable efforts to maintain insurance
coverage at least equal to that now in effect on all properties which it owns or
leases and on its business operations;
(d) perform its material contractual obligations and not become in
material default on any such obligations;
(e) duly observe and conform in all material respects to all lawful
requirements applicable to its business;
<PAGE>
(f) maintain its assets and properties in good condition and repair,
normal wear and tear excepted;
(g) promptly upon learning of such information, advise GBB in writing
of any event or any other transaction within its knowledge whereby any Person or
Related Group of Persons acquires, directly or indirectly, record or beneficial
ownership or control (as defined in Rule 13d-3 promulgated by the SEC under the
Exchange Act) of 5% or more of the outstanding Coast Stock prior to the record
date fixed for the Coast Shareholders' Meeting or any adjourned meeting thereof
to approve this Agreement and the transactions contemplated herein;
(h) promptly notify GBB regarding receipt from any tax authority of
any notification of the commencement of an audit, any request to extend the
statute of limitations, any statutory notice of deficiency, any revenue agent's
report, any notice of proposed assessment, or any other similar notification of
potential adjustments to the tax liabilities of Coast, or any actual or
threatened collection enforcement activity by any tax authority with respect to
tax liabilities of Coast;
(i) make available to GBB monthly unaudited balance sheets and income
statements of Coast within 25 days after the close of each calendar month;
(j) not later than the 30th day of each calendar month, amend or
supplement the Coast Lists prepared and delivered pursuant to Article 4 to
ensure that the information set forth in the Coast Lists accurately reflects the
then-current status of Coast and CCB;
(k) use its commercially reasonable efforts to obtain any third party
consent with respect to any contract, agreement, lease, license, arrangement,
permit or release that is material to the business of Coast or CCB or that is
contemplated in this Agreement as required in connection with the Merger;
(l) maintain an allowance for loan and lease losses consistent with
practices and methodology as in effect on the date of the execution of this
Agreement; and
(m) furnish to Manatt, Phelps & Phillips, LLP promptly upon its
written request written representations and certificates as deemed reasonably
necessary or appropriate for purposes of enabling Manatt, Phelps & Phillips, LLP
to render the tax opinion referred to in Section 9.6 hereof.
6.3 Access to Information.
---------------------
(a) Coast will afford, upon reasonable notice, to GBB and its
representatives, counsel, accountants, agents and employees reasonable access
during normal business hours to all of their business, operations, properties,
books, files and records and will do everything reasonably necessary to enable
GBB and its representatives, counsel, accountants, agents and employees to make
a complete examination of the financial statements, business, assets and
properties of Coast and CCB and the condition thereof and to update such
examination at such intervals as GBB shall deem appropriate. Such examination
shall be conducted in cooperation
<PAGE>
with the officers of Coast and CCB and in such a manner as to minimize any
disruption of, or interference with, the normal business operations of Coast and
CCB. Upon the request of GBB, Coast will request Deloitte & Touche to provide
reasonable access to representatives of PwC working on behalf of GBB to
auditors' work papers with respect to the business and properties of Coast and
CCB, including tax accrual work papers prepared for Coast and CCB during the
preceding 36 months, other than (a) books, records and documents covered by the
attorney-client privilege, or that are attorneys' work product, and (b) books,
records and documents that Coast or CCB is legally obligated to keep
confidential. No examination or review conducted under this section shall
constitute a waiver or relinquishment on the part of GBB of the right to rely
upon the representations and warranties made by Coast herein; provided, that GBB
shall disclose to Coast any fact or circumstance it may discover which GBB
believes renders any representation or warranty made by Coast hereunder
incorrect in any respect. GBB covenants and agrees that it, the GBB
Subsidiaries, and their respective representatives, counsel, accountants, agents
and employees will hold in strict confidence all documents and information
concerning Coast and CCB so obtained from any of them (except to the extent that
such documents or information are a matter of public record or require
disclosure in the Joint Proxy Statement and Prospectus or any of the public
information of any applications required to be filed with any Governmental
Entity to obtain the approvals and consents required to effect the transactions
contemplated hereby), and if the transactions contemplated herein are not
consummated, such confidence shall be maintained and all such documents shall be
returned to Coast.
(b) A representative of GBB, selected by GBB in its sole discretion,
shall be authorized and permitted to review each loan, lease, or other credit
funded or renewed by Coast or CCB after the date hereof, and all information
associated with such loan, lease or other credit, such review to take place, if
possible, on Coast's premises.
(c) A representative of GBB, selected by GBB in its sole discretion,
shall be permitted by Coast and CCB to attend all regular and special Board of
Directors' and committee meetings of Coast and CCB from the date hereof until
the Effective Time of the Merger; provided, however, that the attendance of such
representative shall not be permitted at any meeting, or portion thereof, for
the sole purpose of discussing the transactions contemplated by this Agreement
or the obligations of Coast under this Agreement.
6.4 Filings. Coast agrees that through the Effective Time of the Merger,
-------
each of Coast's or CCB's reports, registrations, statements and other filings
required to be filed with any applicable Governmental Entity will comply in all
material respects with all the applicable statutes, rules and regulations
enforced or promulgated by the Governmental Entity with which it will be filed
and none will contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Any financial statement contained in any such report, registration,
statement or other filing that is intended to present the financial position of
the entity to which it relates will fairly present the financial position of
such entity and will be prepared in accordance with generally accepted
accounting principles or applicable banking regulations consistently applied
during the periods involved.
<PAGE>
6.5 Notices; Reports. Coast will promptly notify GBB of any event of
----------------
which Coast obtains knowledge which has had or may have a materially adverse
effect on the financial condition, operations, business or prospects of Coast on
a consolidated basis, or in the event that Coast determines that it is unable to
fulfill any of the conditions to the performance of GBB's obligations hereunder,
as set forth in Articles 9 or 11 herein, and Coast will furnish GBB (i) as soon
as available, and in any event within one Business Day after it is mailed or
delivered to the Board of Directors of Coast or CCB or committees thereof, any
report by Coast or CCB for submission to the Board of Directors of Coast or CCB
or committees thereof, provided, however, that Coast need not furnish to GBB
communications of Coast's legal counsel regarding Coast's rights and obligations
under this Agreement or the transactions contemplated hereby, or books, records
and documents covered by confidentiality agreements or the attorney-client
privilege, or which are attorneys' work product, (ii) as soon as available, all
proxy statements, information statements, financial statements, reports, letters
and communications sent by Coast to its shareholders or other security holders,
and all reports filed by Coast or CCB with the FRB, the FDIC or the DFI, and
(iii) such other existing reports as GBB may reasonably request relating to
Coast or CCB.
6.6 Coast Shareholders' Meeting. Promptly after the execution of this
---------------------------
Agreement, Coast will take action necessary in accordance with applicable law
and its Articles of Incorporation and Bylaws to convene a meeting of its
shareholders to consider and vote upon this Agreement and the transactions
contemplated hereby so as to permit the consummation of the transactions
contemplated hereby. The Board of Directors of Coast shall, subject to its
fiduciary duties, recommend that its shareholders approve this Agreement and the
transactions contemplated hereby, and the Board of Directors of Coast shall,
subject to its fiduciary duties, use its best efforts to obtain the affirmative
vote of the holders of the largest possible percentage of the outstanding Coast
Stock to approve this Agreement and the transactions contemplated hereby.
6.7 Certain Loans and Other Extensions of Credit. Coast will promptly
--------------------------------------------
inform GBB of the amounts and categories of any loans, leases or other
extensions of credit that have been classified by any bank regulatory authority
or by any unit of Coast or CCB or by any other Person as "Criticized,"
"Specially Mentioned," "Substandard," "Doubtful," "Loss" or any comparable
classification ("Classified Credits"). Coast will furnish GBB, as soon as
practicable, and in any event within 20 days after the end of each calendar
month, schedules including the following: (a) Classified Credits (including
with respect to each credit its classification category and the originating
unit); (b) nonaccrual credits (including the originating unit); (c) accrual
exception credits that are delinquent 90 or more days and have not been placed
on nonaccrual status (including its originating unit); (d) credits delinquent as
to payment of principal or interest (including its originating unit), including
an aging into current-to-29, 30-59, 60-89, and 90+ day categories; (e)
participating loans and leases, stating, with respect to each, whether it is
purchased or sold and the originating unit; (f) loans or leases (including any
commitments) by Coast or CCB to any Coast or CCB director, officer at or above
the senior vice president level, or shareholder holding 10% or more of the
capital stock of Coast, including with respect to each such loan or lease the
identity and, to the knowledge of Coast, the relation of the borrower to Coast
or CCB, and the outstanding and undrawn amounts; (g) letters of credit
(including the originating unit); (h) loans or leases wholly or partially
charged off during the previous month
<PAGE>
(including with respect to each loan or lease, the originating amount, the
write-off amount and its originating unit); and (i) other real estate or assets
acquired in satisfaction of debt.
6.8 Applications. Subject to Section 7.5, Coast will promptly prepare
------------
or cause to be prepared the portions of the Joint Proxy Statement and Prospectus
as it pertains to Coast or CCB and any other applications necessary to
consummate the transactions contemplated hereby, and further agrees to provide
any information requested by GBB for the preparation of any applications
necessary to consummate the transactions contemplated hereby. Coast shall
afford GBB a reasonable opportunity to review the portions of the Joint Proxy
Statement and Prospectus pertaining to Coast or CCB and all such applications
and all amendments and supplements thereto before the filing thereof. Coast
covenants and agrees that, with respect to the information relating to Coast or
CCB, the Joint Proxy Statement and Prospectus will comply in all material
respects with the provisions of applicable law, and will not contain any untrue
statement of material fact or omit to state any material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading. Coast will use
its commercially reasonable efforts to obtain all regulatory approvals or
consents necessary to effect the Merger and the transactions contemplated
herein.
6.9 Affiliate Agreements. Concurrently with the execution of this
--------------------
Agreement, (a) Coast shall deliver to GBB a letter identifying all persons who
are then "affiliates" of Coast for purposes of ASR 130 and 135 and Rule 145
under the Securities Act and (b) Coast shall advise the persons identified in
such letter of the resale restrictions imposed by applicable securities laws and
shall use reasonable efforts to obtain from each person identified in such
letter a written agreement substantially in the form attached hereto as Exhibit
-------
B. Coast shall use reasonable efforts to obtain from any person who becomes an
- -
affiliate of Coast after Coast's delivery of the letter referred to above, and
on or prior to the date of the Coast Shareholders' Meeting to approve this
Agreement, a written agreement substantially in the form attached as Exhibit B
---------
hereto as soon as practicable after obtaining such status.
6.10 Coordination of Dividends. Coast shall coordinate with GBB the
-------------------------
declaration of any dividends that may be allowed pursuant to Section 6.1(b)
hereof, and the record date and the payment dates relating thereto, it being the
intention of the parties that holders of Coast Stock shall not receive two
dividends, or fail to receive one dividend, for any applicable dividend period
with respect to their shares of Coast Stock and any shares of GBB Stock any such
holder will receive in exchange therefor in the Merger.
6.11 D&O Coverage. In the event that GBB is unable to have Coast's and
------------
CCB's directors and officers added to GBB's directors' and officers' liability
insurance policy pursuant to Section 7.2(d) hereof and upon GBB's request, Coast
shall use commercially reasonable efforts to obtain (i) coverage for a period of
at least 36 months following the Effective Time of the Merger for the directors
and officers of Coast and CCB under a directors' and officers' liability
insurance policy which is no less protective in terms of coverage or limitations
than now possessed by GBB covering acts or omissions occurring prior to the
Effective Time of the Merger and actions related to this Agreement, and (ii)
coverage for a period of at least 36 months following the Effective Time of the
Merger under a bankers' blanket bond which is no less
<PAGE>
protective in terms of coverage or limitations than now possessed by Coast and
CCB covering acts or omissions occurring prior to the Effective Time of the
Merger and actions related to this Agreement.
ARTICLE 7.
COVENANTS OF GBB
-----------------
PENDING EFFECTIVE TIME OF THE MERGER
------------------------------------
GBB covenants and agrees with Coast as follows:
7.1. Limitation on Conduct Prior to Effective Time of the Merger.
-----------------------------------------------------------
Between the date hereof and the Effective Time of the Merger, except as
contemplated by this Agreement and subject to requirements of law and regulation
generally applicable to bank holding companies and banks, each of GBB and the
GBB Subsidiaries shall not, without the prior written consent of Coast, which
consent Coast shall not unreasonably withhold or delay:
(a) take any action which would or is reasonably likely to (i)
adversely affect the ability of GBB to obtain any necessary approvals of any
Governmental Entity required for the transactions contemplated hereby; (ii)
adversely affect GBB's ability to perform its covenants and agreements under
this Agreement; or (iii) result in any of the conditions to the performance of
GBB's obligations hereunder, as set forth in Articles 9 or 11 herein not being
satisfied;
(b) take or cause to be taken any action which would disqualify the
Merger as a "reorganization" within the meaning of Section 368 of the Code or
prevent GBB from accounting for the business combination to be effected by the
Merger as a pooling-of-interests;
(c) amend its articles of incorporation in any respect which would
materially and adversely affect the rights and privileges attendant to the GBB
Stock;
(d) enter into a GBB Acquisition Transaction that includes as a
condition precedent to such GBB Acquisition Transaction that GBB terminate this
Agreement; provided, however, notwithstanding the foregoing, nothing in this
Agreement shall prevent GBB from entering into such a GBB Acquisition
Transaction if the Board of Directors of GBB determines in good faith based upon
the advice of counsel that taking such action is necessary for it to act in a
manner not inconsistent with its fiduciary duties under applicable law;
provided, however, that nothing herein shall prohibit Coast from terminating
this Agreement pursuant to Section 13.1(l); or
(e) agree or make any commitment to take any actions prohibited by
this Section 7.1.
7.2. Affirmative Conduct of GBB and Subsidiaries Prior to Effective Time of
----------------------------------------------------------------------
the Merger. Between the date hereof and the Effective Time of the Merger, GBB
- ----------
shall:
<PAGE>
(a) duly observe and conform in all material respects to all lawful
requirements applicable to the business of GBB or any subsidiary of GBB;
(b) use its commercially reasonable efforts to obtain any third party
consent with respect to any contract, agreement, lease, license, arrangement,
permit or release that is material to the business of GBB on a consolidated
basis and that is contemplated in this Agreement as required in connection with
the Merger;
(c) not later than the 30th day of each calendar month, amend or
supplement the GBB Lists prepared and delivered pursuant to Article 5 to ensure
that the information set forth in the GBB Lists accurately reflects the then-
current status of GBB and the GBB Subsidiaries. GBB shall further amend or
supplement the GBB Lists as of the Closing Date if necessary to reflect any
additional information that needs to be included in the GBB Lists; and
(d) use its commercially reasonable efforts to have Coast's and CCB's
directors and officers added to GBB's directors' and officers' liability
insurance policy, providing for coverage for a period of at least 36 months
following the Effective Time of the Merger and covering acts or omissions
occurring prior to the Effective Time of the Merger and actions related to this
Agreement.
7.3. Access to Information. Upon reasonable request by Coast, GBB shall
---------------------
(i) make its Chief Executive Officer, Chief Administrative Officer/Chief
Financial Officer, Chief Credit Officer and Controller available to discuss with
Coast and its representatives GBB's operations; and (ii) shall provide Coast
with written information which is (a) similar to the written information that
Coast reviewed in connection with this Agreement, and (b) related to GBB's
business condition, operations and prospects on a consolidated basis. No
examination or review conducted under this section shall constitute a waiver or
relinquishment on the part of Coast of the right to rely upon the
representations and warranties made by GBB herein; provided, that Coast shall
disclose to GBB any fact or circumstance it may discover which Coast believes
renders any representation or warranty made by GBB hereunder incorrect in any
respect. Coast covenants and agrees that it and its representatives, counsel,
accountants, agents and employees will hold in strict confidence all documents
and information concerning GBB so obtained (except to the extent that such
documents or information are a matter of public record or require disclosure in
the Joint Proxy Statement and Prospectus or any of the public information of any
applications required to be filed with any Governmental Entity to obtain the
approvals and consents required to effect the transactions contemplated hereby),
and if the transactions contemplated herein are not consummated, such confidence
shall be maintained and all such documents shall be returned to GBB.
7.4. Filings. GBB agrees that through the Effective Time of the Merger,
-------
each of its reports, registrations, statements and other filings required to be
filed with any applicable Governmental Entity will comply in all material
respects with all the applicable statutes, rules and regulations enforced or
promulgated by the Governmental Entity with which it will be filed and none will
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Any
financial statement contained in any
<PAGE>
such report, registration, statement or other filing that is intended to present
the financial position of the entities or entity to which it relates will fairly
present the financial position of such entities or entity and will be prepared
in accordance with generally accepted accounting principles or applicable
banking regulations consistently applied during the periods involved.
7.5. Applications. GBB will promptly prepare and file or cause to be
------------
prepared and filed (i) an application for approval of the Merger with the FRB;
(ii) an application for approval of the Merger with the DFI; (iii) in
conjunction with Coast, the Registration Statement on Form S-4 and the Joint
Proxy Statement and Prospectus as it pertains to GBB; and (iv) any other
applications necessary to consummate the transactions contemplated hereby. GBB
shall afford Coast a reasonable opportunity to review the Joint Proxy Statement
and Prospectus and all such applications and all amendments and supplements
thereto before the filing thereof. GBB covenants and agrees that the
Registration Statement on Form S-4 and the Joint Proxy Statement and Prospectus
and all applications to the appropriate regulatory agencies for approval or
consent to the Merger, with respect to information relating to GBB or the GBB
Subsidiaries, will comply in all material respects with the provisions of
applicable law, and will not contain any untrue statement of material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements contained therein, in light of the circumstances under which
they were made, not misleading. GBB will use its commercially reasonable
efforts to obtain all regulatory approvals or consents necessary to effect the
Merger.
7.6. Blue Sky. GBB agrees to use commercially reasonable efforts to have
--------
the shares of GBB Stock to be issued in connection with the Merger qualified or
registered for offer and sale, to the extent required, under the securities laws
of each jurisdiction in which shareholders of Coast reside.
7.7. Notices; Reports. GBB will promptly notify Coast of any event of
----------------
which GBB obtains knowledge which has had or may have a material adverse affect
on the financial condition, operations, business or prospects of GBB on a
consolidated basis or in the event that GBB determines that it is unable to
fulfill any of the conditions to the performance of Coast's obligations
hereunder, as set forth in Articles 9 or 10 herein.
7.8. Removal of Conditions. In the event of the imposition of a
---------------------
condition to any regulatory approvals which GBB deems to materially adversely
affect it or to be materially burdensome, GBB shall use its commercially
reasonable efforts for purposes of obtaining the removal of such condition.
7.9. Stock Options.
-------------
(a) At and as of the Effective Time of the Merger, GBB shall assume
each and every outstanding option to purchase shares of Coast Stock ("Coast
Stock Option") and all obligations of Coast under the Coast Stock Option Plan.
Each and every Coast Stock Option so assumed by GBB under this Agreement shall
continue to have, and be subject to, the same terms and conditions set forth in
the Coast Stock Option Plan and in the other documents governing such Coast
Stock Option immediately prior to the Effective Time of the Merger, except that:
(i) such Coast Stock Option shall be exercisable for that number of whole shares
of GBB Stock
<PAGE>
equal to the product of (A) the number of shares of Coast Stock that were
purchasable under such Coast Stock Option immediately prior to the Effective
Time of the Merger multiplied by (B) the Conversion Ratio, with such product
rounded down to the nearest whole number of shares of GBB Stock; and (ii) the
per share exercise price for the shares of GBB Stock issuable upon exercise of
such Coast Stock Option shall be equal to the quotient determined by dividing
(A) the exercise price per share of Coast Stock at which such Coast Stock Option
was exercisable immediately prior to the Effective Time of the Merger by (B) the
Conversion Ratio. As soon as reasonably practicable after the Effective Time of
the Merger, GBB shall issue to each holder of an outstanding Coast Stock Option
a document evidencing the assumption of such Coast Stock Option by GBB pursuant
to this Section 7.9.
(b) GBB shall use its commercially reasonable efforts to comply with
the terms of the Coast Stock Option Plans and insure, to the extent required by,
and subject to the provisions of, such Plans, that Coast Stock Options which
qualify as incentive stock options prior to the Effective Time of the Merger
qualify as incentive stock options of GBB after the Effective Time of the
Merger.
(c) At or prior to the Effective Time of the Merger, GBB shall take
all corporate action necessary to reserve for issuance a sufficient number of
shares of GBB Stock for delivery upon exercise of GBB Stock Options assumed by
it in accordance with this Section 7.9. At the Effective Time of the Merger, or
as soon as practicable thereafter, GBB shall, if necessary, file a registration
statement on Form S-8 (or any successor or other appropriate form) with respect
to the shares of GBB Stock (as increased in accordance with this Agreement)
subject to such options and shall use all reasonable efforts to maintain the
effectiveness of such registration statement (and maintain the current status of
the prospectus or prospectuses contained therein) for so long as such options
remain outstanding.
7.10 Reservation, Issuance and Registration of GBB Stock. GBB shall
---------------------------------------------------
reserve and make available for issuance in connection with the Merger and in
accordance with the terms and conditions of this Agreement such number of shares
of GBB Stock to be issued to the shareholders of Coast in the Merger pursuant to
Article 2 hereof.
7.11 Nasdaq Listing. GBB shall use its commercially reasonable efforts to
--------------
cause the shares of GBB Stock to be issued in the Merger to be approved for
listing on the Nasdaq National Market System, subject to official notice of
issuance, prior to the Effective Time of the Merger.
<PAGE>
7.12 GBB Shareholders' Meeting. Promptly after the execution of this
-------------------------
Agreement, GBB will take action necessary in accordance with applicable law and
its Articles of Incorporation and Bylaws to convene a meeting of its
shareholders to consider and vote upon this Agreement and the transactions
contemplated hereby and an increase in the number of shares of GBB Stock
reserved for issuance under the GBB Stock Option Plan so as to permit the
consummation of the transactions hereby. The Board of Directors of GBB shall,
subject to its fiduciary duties, recommend that its shareholders approve this
Agreement and the transactions contemplated hereby and the increase in such
shares, and the Board of Directors of GBB shall, subject to its fiduciary
duties, use its best efforts to obtain the affirmative vote of the holders of
the largest possible percentage of the outstanding GBB Stock to approve this
Agreement and the transactions contemplated hereby and the increase in such
shares.
ARTICLE 8.
ADDITIONAL COVENANTS
--------------------
The parties hereto hereby mutually covenant and agree with each other as
follows:
8.1. Commercially Reasonable Efforts. Subject to the terms and
-------------------------------
conditions of this Agreement, each party will use its commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement as
promptly as practical.
8.2. Public Announcements. No press release or other public disclosure
--------------------
of matters related to this Agreement or any of the transactions contemplated
hereby shall be made by GBB or Coast unless the other party shall have provided
its prior consent to the form and substance thereof; provided, however, that
nothing herein shall be deemed to prohibit any party hereto from making any
disclosure which its counsel deems necessary or advisable in order to fulfill
such party's disclosure obligations imposed by law.
8.3. Environmental Assessment and Remediation. GBB may cause to be
----------------------------------------
prepared at GBB's sole cost and expense within 45 days of the date of this
Agreement one or more phase I environmental investigations with respect to the
Real Property set forth on the Coast Real Property List. In the event any such
phase I environmental investigation report, or any such report which Coast or
CCB has already obtained on any of the Real Property set forth on Coast's Real
Property List, discloses facts which, in the sole discretion of GBB, warrant
further investigation, GBB shall provide written notice to Coast, and Coast
shall be required to cause to be completed within 60 days of such written
notice, at the sole cost and expense of GBB, a phase II environmental
investigation and report with respect to such property. The consultant engaged
by Coast to conduct such investigation and provide such report shall be
reasonably acceptable to GBB. GBB shall have 10 days from the receipt of such
investigation report to reasonably object thereto, which objection shall be by
written notice. In the event of any such objection, GBB shall engage an
environmental consultant reasonably satisfactory to Coast who shall provide an
estimate of the cost of taking any remedial action recommended or suggested in
such phase II environmental investigation report, or which is required by law,
or which is determined to be prudent by GBB, in its sole discretion, and, unless
the estimated cost of such Remediation is in
<PAGE>
excess of $500,000 or is not reasonably determinable by such consultant (and
written notice thereof provided by Coast to GBB) Coast shall immediately
commence such Remediation, all at the sole cost and expense of Coast. In the
event such environmental consultant determines that the estimated cost of such
remediation is in excess of $500,000 or is not reasonably determinable, GBB
shall have the right to terminate the Agreement pursuant to Section 13.1(k)
hereof before the expiration of 21 days from the date of such written notice.
GBB agrees to keep confidential and not to disclose any nonpublic
information obtained in the course of such environmental investigation relating
to environmental contamination or suspected contamination of any property on the
Coast Real Property List, except as required by law.
8.4 Appointment of Director. GBB agrees to take all necessary action,
-----------------------
including, if necessary, increasing the authorized number of it directors, to
appoint as contemplated by Section 2.6 hereof one member of Coast's Board of
Directors to the Board of Directors of GBB effective at Effective Time of the
Merger, or as soon thereafter as practicable.
ARTICLE 9.
CONDITIONS PRECEDENT TO THE MERGER
----------------------------------
The obligations of each of the parties hereto to consummate the
transactions contemplated herein are subject to the satisfaction, on or before
the Closing Date, of the following conditions:
9.1. Shareholder Approval. The Agreement and the transactions
--------------------
contemplated hereby, including the increase of shares reserved for issuance
under the GBB Stock Option Plan, shall have received all requisite approvals of
the shareholders of Coast and GBB.
9.2. No Judgments or Orders. No judgment, decree, injunction, order or
----------------------
proceeding shall be outstanding or threatened by any Governmental Entity which
prohibits or restricts the effectuation of, or threatens to invalidate or set
aside, the Merger substantially in the form contemplated by this Agreement,
unless counsel to the party against whom such action or proceeding was
instituted or threatened renders to the other parties hereto a favorable opinion
that such judgment, decree, injunction, order or proceeding is without merit.
9.3. Regulatory Approvals. To the extent required by applicable law or
--------------------
regulation, all approvals or consents of any Governmental Entity, including,
without limitation, those of the FRB and the DFI shall have been obtained or
granted for the Merger and the transactions contemplated hereby and the
applicable waiting period under all laws shall have expired. All other
statutory or regulatory requirements for the valid completion of the
transactions contemplated hereby shall have been satisfied.
9.4. Securities Laws. The Registration Statement on Form S-4 shall have
---------------
been declared effective by the SEC and shall not be the subject of any stop
order or proceedings
<PAGE>
seeking or threatening a stop order. GBB shall have received all state
securities or "Blue Sky" permits and other authorizations necessary to issue the
GBB Stock to consummate the Merger.
9.5. Listing. The GBB Stock issuable in the Merger shall have been
-------
included for listing on the Nasdaq National Market System.
9.6. Tax Opinion. GBB and Coast shall have received from Manatt, Phelps
-----------
& Phillips, LLP an opinion reasonably satisfactory to GBB and Coast to the
effect that the Merger shall not result in the recognition of gain or loss for
federal income tax purposes to GBB or Coast, nor shall the issuance of the GBB
Stock result in the recognition of gain or loss by the holders of Coast Stock
who receive such stock, nor shall the substitution of options under Section 7.9
result in any income or gain to the option holder or disqualify any such options
as incentive stock options in connection with the Merger, dated prior to the
date the Joint Proxy Statement and Prospectus is first mailed to the
shareholders of Coast and GBB and such opinions shall not have been withdrawn or
modified in any material respect.
9.7. Pooling of Interests. Prior to the Effective Time of the Merger,
--------------------
GBB shall have received from PwC a written confirmation that the Merger will
qualify for pooling-of-interests accounting treatment. Additionally, prior to
the Effective Time of the Merger, Deloitte & Touche LLP shall have delivered a
letter to Coast to the effect that, as of the Effective Time of the Merger, no
conditions exist with respect to either Coast or CCB that would preclude
accounting for the Merger as a pooling-of-interests. In making their
determinations that the Merger will qualify for such treatment, PwC and Deloitte
& Touche LLP shall be entitled to assume that cash will be paid with respect to
all shares held of record by any holder of Dissenting Shares.
ARTICLE 10.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF COAST
------------------------------------------------
All of the obligations of Coast to effect the transactions contemplated
hereby shall be subject to the satisfaction, on or before the Closing Date, of
the following conditions, any of which may be waived in writing by Coast:
10.1. Legal Opinion. Coast shall have received the opinion of Linda M.
-------------
Iannone, General Counsel of GBB, dated as of the Closing Date, and in form and
substance satisfactory to the counsel of Coast and CCB, to the effect that: (a)
GBB is a corporation validly existing under the laws of the State of California
with full corporate power and authority to enter into this Agreement and the
Agreement of Merger and to consummate the transactions contemplated hereby and
thereby; (b) all corporate proceedings on the part of GBB necessary to be taken
in connection with the Merger in order to make the same effective have been duly
and validly taken; (c) this Agreement and the Agreement of Merger have been
duly and validly authorized, executed and delivered on behalf of GBB and
constitute (subject to standard exceptions of enforceability arising from the
bankruptcy laws and rules of equity) valid and binding agreements of GBB; and
(d) the shares of GBB Stock to be issued in the Merger will, when issued, be
duly authorized, validly issued, fully paid and nonassessable.
<PAGE>
10.2. Representations and Warranties; Performance of Covenants. All the
--------------------------------------------------------
covenants, terms and conditions of this Agreement to be complied with and
performed by GBB on or before the Closing Date shall have been complied with and
performed in all material respects. Each of the representations and warranties
of GBB contained in Article 5 hereof shall have been true and correct in all
material respects (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement shall be
true and correct in all respects) on and as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date or for changes expressly contemplated by this Agreement) on and as of the
Closing Date, with the same effect as though such representations and warranties
had been made on and as of the Closing Date. It is understood and acknowledged
that the representations being made on and as of the Closing Date shall be made
without giving effect to any update with respect to the GBB Lists in accordance
with Section 7.2(c).
10.3. Authorization of Merger. All actions necessary to authorize the
-----------------------
execution, delivery and performance of this Agreement and the Agreement of
Merger by GBB and the consummation of the transactions contemplated hereby and
thereby shall have been duly and validly taken by the Board of Directors of GBB,
as required by applicable law, and GBB shall have full power and right to merge
pursuant to the Agreement of Merger.
10.4. Absence of Certain Changes. Between the date of this Agreement
--------------------------
and the Effective Time of the Merger, there shall not have occurred any event
that has had or could reasonably be expected to have a material adverse effect
on the business, financial condition, results of operations or prospects of GBB
on a consolidated basis, whether or not such event, change or effect is
reflected in the GBB Lists as amended or supplemented after the date of this
Agreement. Without limiting the generality of the foregoing, any failure of
GBB's or the Banks' mission critical computer systems or software to provide
uninterrupted millennium functionality to record, store, process and present
calendar dates falling on or after January 1, 2000 in substantially the same
manner and with the same functionality as such mission critical systems and
software records, stores, processes and presents such calendar dates falling on
or before December 31, 1999, shall constitute such a material adverse effect.
10.5 Third Party Consents. GBB shall have obtained all consents of other
--------------------
parties to their respective mortgages, notes, leases, franchises, agreements,
licenses and permits as may be necessary to permit the Merger and the
transactions contemplated herein to be consummated without a material default,
acceleration, breach or loss of rights or benefits thereunder.
10.6 Officers' Certificate. There shall have been delivered to Coast on
---------------------
the Closing Date a certificate executed by the Chief Executive Officer and the
Chief Financial Officer of GBB certifying, to the best of their knowledge,
compliance with all of the provisions of Sections 10.2, 10.3, 10.4 and 10.5.
10.7 Fairness Opinion. Coast shall have received a letter from Sandler
----------------
O'Neill & Partners, L.P., dated as of a date within five Business Days of the
mailing of the Joint Proxy Statement and Prospectus to the shareholders of
Coast, to the effect that the transactions
<PAGE>
contemplated by this Agreement are fair from a financial point of view to the
shareholders of Coast.
ARTICLE 11.
CONDITIONS PRECEDENT TO OBLIGATIONS OF GBB
-------------------------------------------
All of the obligations of GBB to effect the transactions contemplated
hereby shall be subject to the satisfaction, on or before the Closing Date, of
the following conditions, any of which may be waived in writing by GBB:
11.1. Legal Opinion. GBB shall have received the opinion of Lillick &
-------------
Charles LLP, attorneys for Coast, and in form and substance satisfactory to the
counsel of GBB, to the effect that: (a) Coast is a corporation validly existing
under the laws of the State of California with full corporate power and
authority to enter into this Agreement and the Agreement of Merger and to
consummate the transactions contemplated hereby and thereby; (b) all corporate
proceedings on the part of Coast necessary to be taken in connection with the
Merger in order to make the same effective have been duly and validly taken; and
(c) this Agreement and the Agreement of Merger have been duly and validly
authorized, executed and delivered on behalf of Coast, and constitute (subject
to standard exceptions of enforceability arising from the bankruptcy laws and
rules of equity) valid and binding agreements of Coast.
11.2. Representations and Warranties; Performance of Covenants. All the
--------------------------------------------------------
covenants, terms and conditions of this Agreement to be complied with and
performed by Coast at or before the Closing Date shall have been complied with
and performed in all material respects. Each of the representations and
warranties of Coast contained in Article 4 hereof shall have been true and
correct in all material respects (except that where any statement in a
representation or warranty expressly includes a standard of materiality, such
statement shall be true and correct in all respects) on and as of the date of
this Agreement and (except to the extent such representations and warranties
speak as of an earlier date or for changes expressly contemplated by this
Agreement) on and as of the Closing Date, with the same effect as though such
representations and warranties had been made on and as of the Closing Date. It
is understood and acknowledged that the representations being made on and as of
the Closing Date shall be made without giving effect to any update with respect
to the Coast Lists in accordance with Section 6.2(j).
11.3. Authorization of Merger. All actions necessary to authorize the
-----------------------
execution, delivery and performance of this Agreement and the Agreement of
Merger by Coast and the consummation of the transactions contemplated hereby and
thereby shall have been duly and validly taken by the Board of Directors and
shareholders of Coast, and Coast shall have full power and right to merge
pursuant to the Agreement of Merger.
11.4. Third Party Consents. Coast shall have obtained all consents of
--------------------
other parties to their respective mortgages, notes, leases, franchises,
agreements, licenses and permits as may be necessary to permit the Merger and
the transactions contemplated herein to be consummated without a material
default, acceleration, breach or loss of rights or benefits thereunder.
<PAGE>
11.5. Absence of Certain Changes. Between the date of this Agreement
--------------------------
and the Effective Time of the Merger, there shall not have occurred any event
that has had or could reasonably be expected to have a material adverse effect
on the business, financial condition, results of operations or prospects of
Coast on a consolidated basis whether or not such event, change or effect is
reflected in the Coast Lists as amended or supplemented after the date of this
Agreement. Without limiting the generality of the foregoing, any failure of
Coast's or CCB's mission critical computer systems or software to provide
uninterrupted millennium functionality to record, store, process and present
calendar dates falling on or after January 1, 2000 in substantially the same
manner and with the same functionality as such mission critical systems and
software records, stores, processes and presents such calendar dates falling on
or before December 31, 1999, shall constitute such a material adverse effect.
11.6. Officers' Certificate. There shall have been delivered to GBB on
---------------------
the Closing Date a certificate executed by the Chief Executive Officer and the
Chief Financial Officer of Coast certifying, to the best of their knowledge,
compliance with all of the provisions of Sections 11.2, 11.3, 11.4 and 11.5.
11.7. Fairness Opinion. GBB shall have received a letter from First
----------------
Security Van Kasper dated as of a date within five Business Days of the mailing
of the Joint Proxy Statement and Prospectus to the shareholders of GBB, to the
effect that the transactions contemplated by this Agreement are fair from a
financial point of view to the shareholders of GBB.
11.8. Shareholder's Agreements. Concurrently with the execution of this
------------------------
Agreement, each director of Coast and CCB shall have executed and delivered to
GBB agreements substantially in the form of Exhibit D hereto.
---------
11.9. Agreements Not to Compete. Concurrently with the execution of
-------------------------
this Agreement, the directors of Coast and CCB shall have executed and delivered
to GBB agreements substantially in the form of Exhibit C hereto.
---------
11.10. Affiliates Agreements. Concurrently with the execution of this
---------------------
Agreement, GBB shall have received from each person named in the letter or
otherwise referred to in Section 6.9 an executed copy of an agreement
substantially in the form on Exhibit B hereto.
---------
11.11. Employee Benefit Plans. GBB shall have received satisfactory
----------------------
evidence that all of Coast's employee benefit plans, programs and arrangements,
including, without limitation, the Coast 401(k) Plan, have been treated as
provided in Article 12 of this Agreement.
11.12. Dissenting Shares. The number of shares of Coast Stock and GBB
-----------------
Stock for which demand is made to be Coast Perfected Dissenting Shares and GBB
Perfected Dissenting Shares shall not exceed an amount which, when combined with
other amounts payable in connection with the Merger, would result in the Merger
being disqualified from pooling of interest accounting treatment.
<PAGE>
11.13. Remediation. All remediation of environmental contamination or
-----------
conditions on any Coast Property shall have been completed to the satisfaction
of GBB.
11.14. Coast Adjusted Book Value. At least five Business Days prior to
-------------------------
the Effective Time of the Merger, Coast shall provide GBB with Coast's
consolidated financial statements as of the close of business on the last day of
the month prior to the Effective Time of the Merger. Such financial statements
shall have been prepared in all material respects in accordance with generally
accepted accounting principles and other applicable legal and accounting
requirements, and reflect all period-end accruals and other adjustments. At the
close of business on the last day of the month preceding the Effective Time of
the Merger, the Coast Adjusted Book Value shall be not less than:
(a) $33,330,000 if the Merger occurs in March 2000;
(b) $34,000,000 if the Merger occurs in April 2000;
(c) $34,417,000 if the Merger occurs in May 2000;
(d) $34,834,000 if the Merger occurs in June 2000; and
(e) $35,251,000 if the Merger occurs in July 2000.
11.15. Termination of Coast Stock Option Plan. GBB shall have received
--------------------------------------
satisfactory evidence that the Coast Stock Option Plan has been terminated prior
to the Effective Time of the Merger.
11.16 Allowance for Loan Losses. Coast's allowance for loan and lease
-------------------------
losses, as reflected on the consolidated financial statements referred to in
Section 11.14, shall equal the greater of:
(a) 1.65% of Coast's total gross loans or $3,467,000 if the Merger
occurs in March 2000;
(b) 1.65% of Coast's total gross loans or $3,500,000 if the Merger
occurs in April 2000;
(c) 1.65% of Coast's total gross loans or $3,533,000 if the Merger
occurs in May 2000;
(d) 1.65% of Coast's total gross loans or $3,567,000 if the Merger
occurs in June 2000; and
(e) 1.65% of Coast's total gross loans or $3,600,000 if the Merger
occurs in July 2000.
11.17 Regulatory Approvals. Any and all approvals or consents of any
--------------------
Governmental Entity which are necessary to consummate the Merger and the
transactions contemplated hereby
<PAGE>
shall have been granted without the imposition of (a) any conditions which
would, in the reasonable opinion of GBB, be unduly burdensome on the business
and operations of GBB as conducted and as anticipated by GBB to be conducted
subsequent to the Effective Time of the Merger, or (b) any condition or
requirement which, in the reasonable opinion of GBB so materially and adversely
affects the anticipated economic and business benefits to GBB of the
transactions contemplated by this Agreement as to render consummation of such
transaction inadvisable (in which case GBB shall promptly notify Coast).
<PAGE>
ARTICLE 12.
EMPLOYEE BENEFITS
-----------------
12.1 Employee Benefits. Prior to the Effective Time of the Merger,
-----------------
Coast shall do any of the following at the direction of GBB: (a) continue to
maintain the Coast 401(k) Plan, (b) discontinue one or more types of
contributions to the Coast 401(k), or (c) divide the Coast 401(k) Plan into
separate employee stock ownership and 401(k) component plans and continue or
discontinue contributions to any or all of such component plans or, with respect
to the 401(k) component, terminate such component plan. If GBB determines in
its sole discretion that the 401(k) component of the Coast 401(k) Plan should be
terminated prior to the Effective Time of the Merger, Coast agrees to use its
best efforts to have that component terminated prior to the Effective Time of
the Merger, provided that any such termination shall be expressly conditioned
upon consummation of the Merger and shall provide, by its terms, that such
termination shall automatically be rescinded without the necessity of any action
by Coast in the event that the Merger is not consummated, and to obtain an IRS
determination that such component continues to be qualified upon termination.
If Coast continues to maintain the Coast 401(k) Plan, or any portion of it,
through the Effective Time of the Merger, GBB may elect, thereafter, to
continue, modify or merge the Coast 401(k), to discontinue contributions to the
Coast 401(k) Plan as GBB determines in its sole discretion or terminate the
401(k) component of the Coast 401(k) Plan, in each case in a manner consistent
with the pooling accounting rules.
As soon as practicable after the Effective Time of the Merger, all other
Employee Plans will be discontinued or merged into GBB plans, in the discretion
of GBB, and employees of Coast and CCB shall become eligible for the employee
benefit plans of GBB on the same terms as such plans and benefits are generally
offered from time to time to employees of GBB and the Banks in comparable
positions with GBB or the Banks. For purposes of determining such employment
eligibility and vesting under the employee benefit plans of GBB, GBB shall
recognize such employees' years of service with Coast or CCB beginning on the
date such employees commenced employment with Coast or CCB through the Effective
Time of the Merger.
ARTICLE 13.
TERMINATION
-----------
13.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time of the Merger upon the occurrence of any of the following:
(a) By mutual agreement of the parties, in writing;
(b) By Coast (unless Coast's Board of Directors shall have withdrawn
or modified in a manner adverse to GBB in any respect its recommendation of the
Merger to the holders of Coast Stock) or GBB (unless GBB's Board of Directors
shall have withdrawn or modified in a manner adverse to Coast in any respect its
recommendation of the Merger to the holders of GBB Stock) upon the failure of
the shareholders of Coast or GBB to give the requisite approval of this
Agreement;
<PAGE>
(c) By Coast promptly following the expiration of 20 days from
delivery of written notice by Coast to GBB of GBB's breach of or failure to
satisfy any covenant or agreement contained herein resulting in a material
impairment of the benefit reasonably expected to be derived by Coast from the
performance or satisfaction of such covenant or agreement (provided that such
breach has not been waived by Coast or cured by GBB prior to expiration of such
20 day period);
(d) By GBB promptly following the expiration of 20 days from delivery
of written notice by GBB to Coast of Coast's breach of or failure to satisfy any
covenant or agreement contained herein resulting in a material impairment of the
benefit reasonably expected to be derived by GBB from the performance or
satisfaction of such covenant or agreement (provided that such breach has not
been waived by GBB or cured by Coast prior to expiration of such 20 day period);
(e) By Coast or GBB upon the expiration of 30 days after any
Governmental Entity denies or refuses to grant any approval, consent or
authorization required to be obtained in order to consummate the transactions
contemplated by this Agreement unless, within said 30 day period after such
denial or refusal, all parties hereto agree to resubmit the application or
appeal the decision to the regulatory authority that has denied, or refused to
grant the approval, consent or qualification requested;
(f) By Coast or GBB if any conditions set forth in Article 9 shall not
have been met by July 31, 2000; provided, however, that this Agreement shall not
be terminated pursuant to this Section 13.1(f) if the relevant condition shall
have failed to occur as a result of any act or omission of the party seeking to
terminate;
(g) By Coast if any of the conditions set forth in Article 10 shall
not have been met by July 31, 2000, or such earlier time as it becomes apparent
that such condition shall not be met, provided, however, that this Agreement
shall not be terminated pursuant to this Section 13.1(g) if the relevant
condition shall have failed to occur as a result of any act or omission of
Coast;
(h) By GBB if any of the conditions set forth in Article 11 shall not
have been met by July 31, 2000, or such earlier time as it becomes apparent that
such condition shall not be met, provided, however, that this Agreement shall
not be terminated pursuant to this Section 13.1(g) if the relevant condition
shall have failed to occur as a result of any act or omission of GBB;
(i) By GBB if Coast or CCB shall have breached any of the obligations
contained in Section 6.1(n);
(j) By GBB if (i) Coast shall have exercised a right specified in the
last sentence of Section 6.1(n) with respect to any Superior Proposal and shall,
directly or through agents or representatives, continue any discussions with any
third party concerning such Superior Proposal for more than ten (10) Business
Days after the date of receipt of such Superior
<PAGE>
Proposal; or (ii) a Superior Proposal that is publicly disclosed shall have been
commenced, publicly proposed or communicated to Coast which contains a proposal
as to price (without regard to the specificity of such price proposal) and Coast
shall not have rejected such proposal within ten (10) Business Days of receipt
of the date its existence first becomes publicly disclosed, if earlier;
(k) By GBB under the circumstances set forth in Section 8.3;
(l) By Coast if GBB shall have entered into a GBB Acquisition
Transaction that includes as a condition precedent to such GBB Acquisition
Transaction that GBB terminate this Agreement; or
(m) By Coast under the circumstances set forth in Section
2.2(a)(iii).
13.2. Effect of Termination. In the event of termination of this
---------------------
Agreement by either Coast or GBB as provided in Section 13.1, neither Coast nor
GBB shall have any further obligation or liability to the other party except (a)
with respect to the last sentences of each of Section 6.3(a), Section 7.3 and
Section 8.3, (b) with respect to Section 14.1; (c) to the extent such
termination results from a party's willful and material breach of the warranties
and representations made by it, or willful and material failure in performance
of any of its covenants, agreements or obligations hereunder; and (d) as
provided in the Stock Option Agreement, the form of which is attached hereto as
Exhibit E and which is governed by its own terms as to termination.
13.3. Force Majeure. Coast and GBB agree that, notwithstanding anything
-------------
to the contrary in this Agreement, in the event this Agreement is terminated as
a result of a failure of a condition, which failure is due to a natural disaster
or other act of God, or an act of war, and provided neither party has materially
failed to observe the obligations of such party under this Agreement, neither
party shall be obligated to pay to the other party to this Agreement any
expenses or otherwise be liable hereunder.
ARTICLE 14.
MISCELLANEOUS
-------------
14.1. Expenses.
--------
(a) GBB hereby agrees that if this Agreement is terminated by Coast
or GBB pursuant to Section 13.1(b) with respect to the failure of GBB
shareholders to approve the Agreement an the transactions contemplated hereby,
or pursuant to Section 13.1(c), GBB shall promptly and in any event within 10
days after such termination pay Coast all Expenses (as defined in Section
14.1(e) below) of Coast, but not to exceed $175,000.
(b) Coast hereby agrees that if the Agreement is terminated by GBB or
Coast pursuant to Section 13.1(b) with respect to the failure of Coast
shareholders to approve the Agreement and the transactions contemplated hereby,
or by GBB pursuant to Section 13.1(d),
<PAGE>
13.1(i) 13.1(j), Coast shall promptly and in any event within 10 days after such
termination pay GBB all Expenses of GBB, but not to exceed $250,000.
(c) As an inducement to Coast to enter into this Agreement, (i) in
the event this Agreement is terminated by Coast pursuant to Section 13.1(l) or
(ii) if GBB consummates a GBB Acquisition Transaction within 12 months following
termination by Coast of this Agreement pursuant to Section 13.1(c), (g) or (m),
GBB shall wire to Coast within three Business Days of the date of termination in
the case of clause (i) and concurrent with the consummation of the GBB
Acquisition Transaction in the case of clause (ii), an amount equal to the
lesser of $2,700,000 or 2% of the assumed value of the Merger on the date the
Agreement is terminated, calculated by multiplying the amount the Conversion
Ratio would have been on that date times the Average Closing Price (for purposes
of this Section 14.1(c), determined based on the 20 consecutive trading days
immediately prior to the date of termination of the Agreement) times the number
of shares of Coast Stock outstanding on the date of this Agreement (plus any
outstanding shares resulting from the exercise of Coast Stock Options between
the date of this Agreement and the termination thereof), which amount the
parties acknowledge as representing (x) Coast's Expenses incurred in negotiating
and undertaking to carry out the transactions contemplated by this Agreement,
including Coast's management time devoted to negotiation and preparation for the
transactions contemplated by this Agreement; (y) Coast's indirect expenses
incurred in connection with the transactions contemplated by this Agreement; and
(z) Coast's loss as a result of the transactions contemplated by this Agreement
not being consummated. Any payment previously made by GBB pursuant to Section
14.1(a) hereof shall be credited against any amount due under this Section
14.1(c). If any payment is made to Coast pursuant to this Section 14.1(c), GBB
shall have no further obligation to make any payment pursuant to Section
14.1(a).
(d) Except as otherwise provided herein, all Expenses incurred by GBB
and Coast in connection with or related to the authorization, preparation and
execution of this Agreement, the solicitation of shareholder approvals and all
other matters related to the closing of the transactions contemplated hereby,
including, without limitation of the generality of the foregoing, all fees and
expenses of agents, representatives, counsel and accountants employed by either
such party or its affiliates, shall be borne solely and entirely by the party
which has incurred the same. Notwithstanding the foregoing, GBB and Coast shall
share equally the cost of printing the Joint Proxy Statement and Prospectus.
(e) "Expenses" as used in this Agreement shall include all reasonable
out-of-pocket expenses (including all fees and expenses of attorneys,
accountants, investment bankers, experts and consultants to the party and its
affiliates) incurred by the party or on its behalf in connection with the
consummation of the transactions contemplated by this Agreement.
14.2 Notices. Any notice, request, instruction or other document to be
-------
given hereunder by any party hereto to another shall be in writing and delivered
personally or by confirmed facsimile transmission or sent by registered or
certified mail, postage prepaid, with return receipt requested, addressed as
follows:
<PAGE>
To GBB: Greater Bay Bancorp
2860 West Bayshore Road
Palo Alto, California 94303
Attention: Steven C. Smith
Facsimile Number: (415) 494-9220
With a copy to: Greater Bay Bancorp
400 Emerson Street, 3rd Floor
Palo Alto, California 94301
Attention: Linda M. Iannone, Esq.
Facsimile Number: (650) 473-9419
To Coast: Coast Bancorp
740 Front Street, Suite 240
Santa Cruz, California 95060
Attention: Harvey J. Nickelson
Facsimile Number: (831) 458-0460
With a copy to: Lillick & Charles LLP
Two Embarcadero Center, Suite 2700
San Francisco, California 94111
Attention: Steven M. Plevin, Esq.
Facsimile Number: (415) 984-8300
Any such notice, request, instruction or other document shall be deemed
received (i) on the date delivered personally or delivered by confirmed
facsimile transmission, (ii) on the next Business Day after it was sent by
overnight courier, postage prepaid; or (iii) on the third Business Day after it
was sent by registered or certified mail, postage prepaid. Any of the persons
shown above may change its address for purposes of this section by giving notice
in accordance herewith.
14.3. Successors and Assigns. All terms and conditions of this
----------------------
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective transferees, successors and assigns; provided,
however, that this Agreement and all rights, privileges, duties and obligations
of the parties hereto may not be assigned or delegated by any party hereto and
any such attempted assignment or delegation shall be null and void.
14.4. Counterparts. This Agreement and any exhibit hereto may be
------------
executed in one or more counterparts, all of which, taken together, shall
constitute one original document and shall become effective when one or more
counterparts have been signed by the appropriate parties and delivered to each
party hereto.
14.5. Effect of Representations and Warranties. The representations and
----------------------------------------
warranties contained in this Agreement or in any List shall terminate
immediately after the Effective Time of the Merger.
<PAGE>
14.6. Third Parties. Each party hereto intends that this Agreement
-------------
shall not benefit or create any right or cause of action to any person other
than parties hereto. As used in this Agreement the term "parties" shall refer
only to GBB and Coast as the context may require.
14.7. Lists; Exhibits; Integration. Each List, exhibit and letter
----------------------------
delivered pursuant to this Agreement shall be in writing and shall constitute a
part of the Agreement, although Lists and letters need not be attached to each
copy of this Agreement. This Agreement, together with such Lists, exhibits and
letters, constitutes the entire agreement between the parties pertaining to the
subject matter hereof and supersedes all prior agreements and understandings of
the parties in connection therewith.
14.8. Knowledge. Except as otherwise provided herein, whenever any
---------
statement herein or in any list, certificate or other document delivered to any
party pursuant to this Agreement is made "to the knowledge" or "to the best
knowledge" of any party or another Person, such party or other Person shall make
such statement only after conducting an investigation reasonable under the
circumstances of the subject matter thereof, and each such statement shall
constitute a representation that such investigation has been conducted.
14.9 Governing Law. This Agreement is made and entered into in the State
-------------
of California, except to the extent that the provisions of federal law are
mandatorily applicable, and the laws of the State of California shall govern the
validity and interpretation hereof and the performance of the parties hereto of
their respective duties and obligations hereunder.
14.10. Captions. The captions contained in this Agreement are for
--------
convenience of reference only and do not form a part of this Agreement and shall
not affect the interpretation hereof.
14.11. Severability. If any portion of this Agreement shall be deemed
------------
by a court of competent jurisdiction to be unenforceable, the remaining portions
shall be valid and enforceable only if, after excluding the portion deemed to be
unenforceable, the remaining terms hereof shall provide for the consummation of
the transactions contemplated herein in substantially the same manner as
originally set forth at the date this Agreement was executed.
14.12. Waiver and Modification; Amendment. No waiver of any term,
----------------------------------
provision or condition of this Agreement, whether by conduct or otherwise, in
any one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such term, provision or condition of this Agreement.
Except as otherwise required by law, this Agreement and the Agreement of Merger,
when executed and delivered, may be modified or amended by action of the Boards
of Directors of GBB and Coast without action by their respective shareholders.
This Agreement may be modified or amended only by an instrument of equal
formality signed by the parties or their duly authorized agents.
14.13 Attorneys' Fees. If any legal action or any arbitration upon
---------------
mutual agreement is brought for the enforcement of this Agreement or because of
an alleged dispute, controversy, breach, or default in connection with this
Agreement, the prevailing party shall be entitled to
<PAGE>
recover reasonable attorneys' fees and other costs and expenses incurred in that
action or proceeding, in addition to any other relief to which it may be
entitled.
<PAGE>
IN WITNESS WHEREOF, the parties to this Agreement have duly executed this
Agreement as of the day and year first above written.
ATTEST: GREATER BAY BANCORP
/s/ Linda M. Iannone By: /s/ David L. Kalkbrenner
- -------------------- ------------------------
Secretary David L. Kalkbrenner
President and Chief Executive Officer
ATTEST: COAST BANCORP
/s/ Bruce H. Kendall By: /s/ Harvey J. Nickelson
- -------------------- -----------------------
Assistant Secretary Harvey J. Nickelson
President and Chief Executive Officer
<PAGE>
EXHIBIT 10.1
THE TRANSFER OF THIS AGREEMENT IS
SUBJECT TO CERTAIN PROVISIONS CONTAINED
HEREIN AND TO RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND
APPLICABLE STATE SECURITIES LAWS
STOCK OPTION AGREEMENT
This Stock Option Agreement, dated as of December 14, 1999 (the
"Agreement"), is made by and between Coast Bancorp, a California corporation
("Issuer"), and Greater Bay Bancorp, a California corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Reorganization dated December 14, 1999 (the "Reorganization Agreement"),
providing for, among other things, the merger of Issuer with and into Grantee
(the "Merger"), with Grantee being the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Reorganization Agreement, Issuer has agreed to grant to Grantee the Option (as
defined below).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Reorganization Agreement, and intending to be legally bound hereby, Issuer
and Grantee agree as follows:
1. Defined Terms. Capitalized terms which are used but not defined
-------------
herein shall have the meanings ascribed to such terms in the Reorganization
Agreement. As used in this Agreement, the following terms shall have the
meanings indicated:
(a) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(b) "Federal Reserve Board" means the Board of Governors of the
Federal Reserve System.
(c) "Holder" means Grantee and, to the extent Grantee has
assigned its rights and obligations under this Agreement as permitted
herein, any subsidiary or direct or indirect transferee of Grantee.
(d) "Person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act and the rules and regulations
thereunder.
(e) "Securities Act" means the Securities Act of 1933, as
amended.
<PAGE>
2. Grant of Option. Subject to the terms and conditions set forth herein,
---------------
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 958,897 shares (the "Option Shares") of common stock, no par value
("Issuer Common Stock"), of Issuer at a purchase price per Option Share of
$21.25 (the "Purchase Price"), but in no event shall the number of Option Shares
exceed 19.9% of the issued and outstanding shares of Issuer Common Stock. The
Purchase Price and the number of Option Shares that may be received upon the
exercise of the Option are subject to adjustment as set forth below.
3. Exercise of Option.
------------------
(a) The Holder may exercise the Option, in whole or in part, at
any time and from time to time but only following the occurrence of
a Purchase Event (as defined below); provided that the Option shall
terminate and be of no further force and effect upon the earliest to
occur of (such earliest date the "Expiration Date"):
(i) the Effective Time of the Merger; or
(ii) 15 months after the first occurrence of a Purchase
Event; or
(iii) 15 months after the termination of the Reorganization
Agreement on or following (x) the occurrence of a Preliminary
Purchase Event (as defined below) or Purchase Event or (y) a
termination by Grantee pursuant to Section 13.1(d), 13.1(i) or
13.1(j) of the Reorganization Agreement; or
(iv) termination of the Reorganization Agreement in
accordance with the terms thereof prior to the occurrence of a
Purchase Event or a Preliminary Purchase Event other than a
termination by Grantee pursuant to Section 13.1(d), 13.1(i) or
13.1(j) of the Reorganization Agreement.
Notwithstanding anything to the contrary contained herein, any purchase of
shares upon exercise of the Option shall be subject to compliance with
applicable law, including, without limitation, the Bank Holding Company Act of
1956, as amended.
(b) As used herein, a "Purchase Event" means any of the
following events:
(i) The Board of Directors of Issuer shall have approved,
or recommended to the Issuer's shareholders that they approve, a
proposal received by Issuer from a person (other than Grantee or any
subsidiary of Grantee) to effect an Acquisition Transaction (as
defined below), Tender Offer (as defined below) or Exchange Offer
(as defined below); or
<PAGE>
(ii) Issuer, without having received Grantee's prior
written consent, shall have entered into an agreement with any
person (other than Grantee or any subsidiary of Grantee) to effect
an Acquisition Transaction; or
(iii) any person (other than Grantee or any subsidiary of
Grantee) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act) of or the
right to acquire beneficial ownership of, or any "group" (as such
term is defined under the Exchange Act and the rules and regulations
promulgated thereunder) shall have been formed which beneficially
owns or has the right to acquire beneficial ownership of twenty
percent (20%) or more of the then outstanding shares of Issuer
Common Stock.
As used herein, the term "Acquisition Transaction" shall mean (A) a merger,
consolidation or similar transaction involving Issuer or any of its subsidiaries
(other than internal mergers, reorganizations, consolidations or dissolutions
involving only Issuer and/or existing subsidiaries and other than a merger,
consolidation or similar transaction in which the common shareholders of Issuer
immediately prior thereto in the aggregate own at least seventy-five percent
(75%) of the common stock of the surviving or successor corporation immediately
after the consummation thereof), (B) the disposition, by sale, lease, exchange
or otherwise, of twenty (20%) or more of the consolidated assets or deposit
liabilities of Issuer and its subsidiaries, or (C) a purchase or other
acquisition (including by way of merger, consolidation, share exchange or any
similar transaction), other than by Issuer or its subsidiaries, of securities
representing twenty percent (20%) or more of the voting power of Issuer or any
of its subsidiaries.
(c) As used herein, a "Preliminary Purchase Event" means any of
the following events:
(i) any person (other than Grantee or any subsidiary of
Grantee) shall have acquired beneficial ownership of, or the right
to acquire beneficial ownership of, or any "group" (as defined under
the Exchange Act and the rules and regulations thereunder) shall
have been formed which beneficially owns or has the right to acquire
beneficial ownership of, ten percent (10%) or more of the then
outstanding shares of Issuer Common Stock; or
(ii) any person (other than Grantee or any subsidiary of
Grantee) shall have commenced (as such term is defined in Rule 14d-2
under the Exchange Act), or shall have filed a registration
statement under the Securities Act with respect to, a tender offer
or exchange offer to purchase any shares of Issuer Common Stock such
that, upon consummation of such offer, such person would own or
control ten percent (10%) or more of the then outstanding shares of
Issuer Common Stock (such an offer being
<PAGE>
referred to herein as a "Tender Offer" or an "Exchange Offer",
respectively); or
(iii) Issuer, without having received Grantee's prior
written consent, shall have entered into an agreement with any
person (other than Grantee or any subsidiary of Grantee) with
respect to, or the Board of Directors of Issuer shall have
recommended that the shareholders of Issuer approve or accept, a
purchase or other acquisition (including by way of merger,
consolidation, share exchange or any similar transaction), other
than by Issuer or its subsidiaries, representing ten percent (10%)
or more of the voting power of Issuer or any of its subsidiaries; or
(iv) any person (other than Grantee or any subsidiary of
Grantee) shall have filed an application or notice with the Federal
Reserve Board or other federal or state regulatory authority, which
application or notice has been accepted for processing, for approval
to engage in an Acquisition Transaction; or
(v) the holders of Issuer Common Stock shall not have
approved the Reorganization Agreement at the meeting of such
shareholders held for the purpose of voting on the Reorganization
Agreement, such meeting shall not have been held or shall have been
canceled prior to termination of the Reorganization Agreement, or
Issuer's Board of Directors shall have withdrawn or modified in a
manner adverse to Grantee the recommendation of Issuer's Board of
Directors with respect to the Reorganization Agreement, in each case
after it shall have been publicly announced that any person (other
than Grantee or any subsidiary of Grantee) shall have (A) made or
disclosed an intention to make a proposal to engage in an
Acquisition Transaction or (B) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect to an
Exchange Offer.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Purchase Event or Preliminary Purchase Event;
provided, however, such notice shall not be a condition to the right
of the Holder to exercise the Option.
(e) In the event Holder wishes to exercise the Option, it shall
send to Issuer a written notice (dated the date on which it is sent to
Issuer, which date is referred to as the "Notice Date") specifying (i)
the total number of Option Shares it intends to purchase pursuant to
such exercise and (ii) a date not earlier than three (3) business days
nor later than fifteen (15) business
<PAGE>
days from the Notice Date for the closing (the "Closing") of such
purchase (the "Closing Date"). The Closing shall be held at the
Issuer's principal office or at such other place as Issuer and Holder
may agree. If prior notification to or approval of the Federal Reserve
Board or any other regulatory authority is required as a condition
precedent to such purchase, then (A) Holder shall promptly file and
process the required notice or application for approval; (B) Issuer
shall cooperate with Holder in the filing of the required notice or
application for approval and the obtaining of any such approval; and
(C) the Closing Date shall be subject to extension for such period of
time, not to exceed six (6) months, as may be necessary to permit the
Holder to submit such filing to, and, if necessary, to obtain such
approval from, the Federal Reserve Board or other applicable
regulatory authority; provided, however, that the notice of Option
exercise and such governmental filing must be made, and the Notice
Date must be, no later than the date on which the Option would
otherwise terminate. Any exercise of the Option shall be deemed to
have occurred on the Notice Date.
4. Payment and Delivery of Certificates.
------------------------------------
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account
designated by Issuer, an amount equal to the Purchase Price multiplied
by the number of Option Shares to be purchased on such Closing Date
and (ii) present and surrender this Agreement to the Issuer at the
address of the Issuer specified in Section 12(g) hereof.
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as
provided in Section 4(a), (i) Issuer shall deliver to Holder (A) a
certificate or certificates representing the Option Shares to be
purchased at such Closing, which Option Shares shall be free and clear
of all liens, claims, charges and encumbrances of any kind whatsoever,
and (B) if the Option is exercised in part only, an executed new
agreement with the same terms as this Agreement evidencing the right
to purchase the balance of the shares of Issuer Common Stock
purchasable hereunder; and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise
dispose of such Option Shares in violation of the provisions of this
Agreement or applicable state and federal securities laws.
(c) Certificates for the Option Shares delivered at each Closing
shall be endorsed with a restrictive legend which shall read
substantially as follows:
THE SECURITIES EVIDENCED BY THIS CERT1FICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR QUALIFIED OR
REGISTERED UNDER THE SECURITIES LAWS OF ANY STATE. THEY MAY
<PAGE>
NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND UNTIL THEY HAVE BEEN QUALIFIED OR REGISTERED
UNDER APPLICABLE STATE SECURITIES LAWS, UNLESS THE ISSUER RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES, REASONABLY
SATISFACTORY TO THE ISSUER, STATING THAT SUCH SALE OR TRANSFER IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS. THE TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS ALSO SUBJECT TO RESALE RESTRICTIONS
ARISING UNDER THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF DECEMBER 14,
1999, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE OFFICE OF THE
SECRETARY OF THE ISSUER.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Holder shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel
in form and substance reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act or
applicable state securities laws.
5. Representations and Warranties and Covenants of Issuer. Issuer hereby
------------------------------------------------------
represents and warrants to Grantee as follows:
(a) Due Authorization. Issuer has all requisite corporate power
-----------------
and authority to enter into this Agreement and, subject to any
approvals referred to herein, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of
Issuer. This Agreement has been duly executed and delivered by Issuer
and constitutes a binding agreement of Issuer enforceable against
Issuer in accordance with its terms, except as the enforceability
hereof may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting the rights of creditors generally or by
equitable principles, whether such enforcement is sought in law or
equity.
(b) Authorized Stock. Issuer has taken all necessary corporate
----------------
action to authorize and reserve and to permit it to issue, and, at all
times from the date hereof until the obligation to deliver Issuer
Common Stock upon the exercise of the Option terminates, will have
reserved for issuance, upon exercise of the Option, shares of Issuer
Common Stock necessary for Holder to exercise the Option, and Issuer
will take all necessary corporate action to authorize and reserve for
issuance all additional shares of Issuer Common Stock or other
securities which may be issued pursuant to Section 7 upon exercise of
the Option. The shares of Issuer Common Stock to be issued upon due
exercise of the Option, including all additional shares of Issuer
Common
<PAGE>
Stock or other securities which may be issuable pursuant to Section 7,
upon issuance pursuant hereto, shall be duly and validly issued, fully
paid and nonassessable, and shall be delivered free and clear of all
liens, claims, charges and encumbrances of any kind or nature
whatsoever, including any preemptive rights of any stockholder of
Issuer.
(c) No Conflict The execution and delivery by Issuer of this
-----------
Agreement and the consummation of the transactions contemplated hereby do not
and will not violate or conflict with Issuer's Articles of Incorporation or
Bylaws, or any statute, regulation, judgment, order, writ, decree or injunction
applicable to Issuer (other than as may be effected by Grantee's ownership of
Issuer Common Stock exceeding certain limits set forth by statute or regulation)
or its properties or assets and do not and will not violate, conflict with,
result in a breach of, constitute a default (or an event which with due notice
and/or lapse of time would constitute a default) under, result in a termination
of, accelerate the performance required by, or result in the creation of any
lien, pledge, security interest, charge or other encumbrance upon any of the
properties or assets of Issuer under the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, or loan agreement or other
agreement, instrument or obligation to which Issuer is a party, or by which
Issuer or any of its properties or assets may be bound or affected.
(d) Observance of Covenants. Issuer agrees that it will not, by
-----------------------
amendment of its Articles of Incorporation or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid, or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer.
(e) Compliance. Issuer shall promptly take all action as may from
----------
time to time be required (including, complying with all premerger notification,
reporting and waiting period requirements of any federal or state regulatory
authority, as necessary, before the Option may be exercised, and cooperating
fully with Holder in preparing such applications or notices and providing such
information to the Federal Reserve Board, the Federal Deposit Insurance
Corporation, the Department of Financial Institutions or any other regulatory
authority as they may require) in order to permit Grantee to exercise the Option
and Issuer duly and effectively to issue shares of Common Stock pursuant hereto,
and to protect the rights of Grantee against dilution.
6. Representations and Warranties of Grantee. Grantee hereby represents
-----------------------------------------
and warrants to Issuer that this Option is not being, and any Option Shares or
other securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the Securities Act and applicable state
securities laws.
7. Adjustment Upon Changes in Capitalization, etc.
-----------------------------------------------
(a) In the event of any change in Issuer Common Stock by reason
of a stock dividend, stock split, split-up, recapitalization,
combination, exchange of shares or similar transaction, the type and
number of shares or
<PAGE>
securities subject to the Option, and the Purchase Price therefor,
shall be adjusted appropriately, and proper provision shall be made
in the documentation pertaining to such transaction so that Holder
shall receive, upon exercise of the Option, the number and class of
shares or other securities or property that Holder would have
received in respect of Issuer Common Stock if the Option had been
exercised immediately prior to such event, or the record date
therefor, as applicable. If any additional shares of Issuer Common
Stock are issued after the date of this Agreement (whether upon
exercise of stock options or otherwise but excluding any issuance
pursuant to an event described in the first sentence of this Section
7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted so that, after such issuance, such number
of shares, together with any shares of Issuer Common Stock
previously issued pursuant hereto, equals 19.9% of the number of
shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the
Option (with any fractional share being rounded up to the next full
share). Issuer agrees that in no event shall the number of shares of
Issuer Common Stock issued after the date of this Agreement pursuant
to the preceding sentence, together with the number of shares of
Issuer Common Stock subject to the Option, adjusted as aforesaid,
exceed the number of available authorized but unissued and
unreserved shares of Issuer Common Stock. Nothing contained in this
Section 7(a) or elsewhere in this Agreement shall be deemed to
authorize Issuer to issue shares in breach of any provision of the
Reorganization Agreement.
(b) In the event that Issuer shall, prior to the occurrence of
an event set forth in Section 3(a) terminating the Holder's right to
exercise the Option, enter into an agreement (i) to consolidate with
or merge into any person, other than Grantee or one of its
subsidiaries, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its subsidiaries, to merge into
Issuer and Issuer shall be the continuing or surviving corporation,
but, in connection with such merger, the then outstanding shares of
Issuer Common Stock shall be changed into or exchanged for stock or
other securities of Issuer or any other person or cash or any other
property or the outstanding shares of Issuer Common Stock
immediately prior to such merger shall after such merger represent
less than 50% of the outstanding shares and share equivalents of the
merged company, or (iii) to sell or otherwise transfer all or
substantially all of its consolidated assets or deposit liabilities
to any person other than Grantee or one of its subsidiaries, then,
and in each such case, the agreement governing such transaction
shall make proper provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an
option (the "Substitute Option"), at the, election of Grantee, of
either (A) the Acquiring Corporation (as defined below), (B) any
person that controls the Acquiring Corporation, (such person being
referred to as the "Substitute Option Issuer"), or (C) in the case
of a merger described in clause (ii), Issuer.
<PAGE>
(c) The Substitute Option shall have the same terms as the
Option, provided that if the terms of the Substitute Option cannot,
for legal reasons, be the same as the Option, such terms shall be as
similar as possible and in no event less advantageous to Grantee.
The Substitute Option Issuer shall also enter into an agreement with
the then holder or holders of the Substitute Option in substantially
the same form as this Agreement (after giving effect for such
purposes to the provisions of this Agreement), which shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number
of shares of the Substitute Common Stock (as is hereinafter defined)
as is equal to the Assigned Value (as is hereinafter defined)
multiplied by the number of shares of the Issuer Common Stock for
which the Option was theretofore exercisable, divided by the Average
Price (as is hereinafter defined). The exercise price of the
Substitute Option per share of the Substitute Common Stock (the
"Substitute Purchase Price") shall then be equal to the Purchase
Price multiplied by a fraction in which the numerator is the number
of shares of the Issuer Common Stock for which the Option was
theretofore exercisable and the denominator is the number of shares
of the Substitute Common Stock for which the Substitute Option is
exercisable.
(e) As used herein, the following terms have the meanings
indicated:
(i) "Acquiring Corporation" shall mean (A) the continuing
or surviving corporation of a consolidation or merger with Issuer
(if other than Issuer), (B) Issuer in a merger in which Issuer is
the continuing or surviving person, and (C) the transferee of all or
any substantial part of the Issuer's assets (or the assets of its
subsidiaries).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the Substitute Option Issuer upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the highest of (A) the
price per share of the Issuer Common Stock at which a Tender Offer
or Exchange Offer therefor has been made by any person (other than
Grantee or a subsidiary of Grantee), (B) the price per share of the
Issuer Common Stock to be paid by any person (other than Grantee or
a subsidiary of Grantee) pursuant to an agreement with Issuer, and
(C) the highest closing price per share of Issuer Common Stock as
quoted on The Nasdaq Stock Market (or if Common Stock is not quoted
on The Nasdaq Stock Market, the highest bid price per share on any
day as quoted on the principal trading market or securities exchange
on which such shares are traded as reported by a recognized source
chosen by
<PAGE>
Grantee and reasonably acceptable to Issuer) within the six-month
period immediately preceding the agreement governing the transaction
described in Section 7(b) which gave rise to the Substitute Option;
provided, however, that in the event of a sale of less than all of
Issuer's consolidated assets or deposit liabilities, the Assigned
Value shall be the sum of the price paid in such sale for such
assets or deposit liabilities and the current market value of the
remaining consolidated net assets of Issuer as determined by a
nationally recognized investment banking firm selected by the Holder
(or by a majority in interest of the Holders if there shall be more
than one Holder (a "Holder Majority")) and reasonably acceptable to
Issuer, divided by the number of shares of the Issuer Common Stock
outstanding at the time of such sale. In the event that an exchange
offer is made for the Issuer Common Stock or an agreement is entered
into for a merger or consolidation involving consideration other
than cash, the value of the securities or other property issuable or
deliverable in exchange for the Issuer Common Stock shall be
determined by a nationally recognized investment banking firm
selected by Holder (or a Holder Majority) and reasonably acceptable
to Issuer.
(iv) "Average Price" shall mean the average closing price
of the Substitute Common Stock for the one year immediately
preceding the effective date of the consolidation, merger or sale in
question, but in no event higher than the closing price of the
shares of the Substitute Common Stock on the day preceding such
consolidation, merger or sale; provided that if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with
respect to a share of common stock issued by Issuer, the person
merging into Issuer or by any company which controls or is
controlled by such merging person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% of the
aggregate of the shares of the Substitute Common Stock outstanding
prior to exercise of the Substitute Option (with any fractional share
being rounded up to the next full share). In the event that the
Substitute Option would be exercisable for more than 19.9% of the
aggregate of the shares of the Substitute Common Stock but for this
clause (f), the Substitute Option Issuer shall make a cash payment to
Grantee equal to the excess of (i) the value of the Substitute Option
without giving effect to the limitation in this clause (f) over (ii)
the value of the Substitute Option after giving effect to the
limitation in this clause (f). The difference in value shall be
determined by a nationally recognized investment banking firm selected
by Grantee and reasonably acceptable to the Substitute Option Issuer,
whose determination shall be conclusive and binding on the parties.
<PAGE>
(g) Issuer shall not enter into any transaction described in
subsection (b) of this Section 7 unless the Acquiring Corporation and
any person that controls the Acquiring Corporation assume in writing
all the obligations of Issuer hereunder and take all other actions
that may be necessary so that the provisions of this Section 7 are
given full force and effect (including, without limitation, any action
that may be necessary so that the shares of Substitute Common Stock
are in no way distinguishable from or have lesser economic value than
other shares of common stock issued by the Substitute Option Issuer).
(h) At the written request of Holder delivered to the Substitute
Option Issuer prior to the occurrence of an event set forth in Section
3(a) above terminating the Substitute Option, the Substitute Option
Issuer shall repurchase from Holder (i) the Substitute Option and/or
(ii) all Substitute Common Stock theretofore purchased by Holder
pursuant hereto with respect to which Holder then has beneficial
ownership. The date on which Holder exercises its rights under this
Section 7(h) is referred to as the "Substitute Option Request Date."
Such repurchase shall be at an aggregate price (the "Substitute Option
Repurchase Consideration") equal to the sum of (A) the excess, if any,
of (1) the Highest Closing Price (as defined below) for each share of
Substitute Common Stock over (2) the Substitute Purchase Price per
share of Substitute Common Stock, multiplied by the number of shares
of Substitute Common Stock for which the Substitute Option may then be
exercised and as to which Holder has exercised its repurchase right
hereunder, plus (B) the Highest Closing Price for each share of
Substitute Common Stock, multiplied by the number of shares of
Substitute Common Stock previously acquired by Holder upon exercise of
the Option or Substitute Option and as to which Holder has exercised
its repurchase right hereunder. The term "Highest Closing Price" shall
mean the highest closing price per share of Substitute Common Stock on
the Nasdaq National Market (or, if Substitute Common Stock is not
quoted on The Nasdaq Stock Market, the highest bid price per share on
any day as quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a recognized
source chosen by Grantee and reasonably acceptable to Issuer) or, if
such shares are not traded in a trading market or listed on an
exchange, as quoted by the brokerage firms acting as market makers for
the Substitute Common Stock prior to the trading or listing of the
Substitute Common Stock on any national securities exchange and
thereafter as reported by the principal trading market or securities
exchange on which such shares are traded, during the 60 business days
preceding the Substitute Option Request Date.
(i) The provisions of Sections 8(b), 8(c), 11 and 12 shall
apply, with appropriate adjustments, to any securities for which the
Option becomes exercisable pursuant to this Section 7 and as
applicable, references in such sections to "Issuer", "Option",
"Purchase Price", "Issuer Common Stock", "Repurchase Consideration",
and "Request Date" shall be deemed to be references to "Substitute
Option Issuer", "Substitute Option", "Substitute
<PAGE>
Purchase Price", "Substitute Common Stock", "Substitute Option
Repurchase Consideration", and "Substitute Option Request Date",
respectively.
8. Repurchase at the Option of Grantee.
-----------------------------------
(a) At any time after the first occurrence of a Repurchase Event
(as defined in Section 8(e) below), at the written request of Holder
delivered to Issuer prior to the occurrence of an event set forth in
Section 3(a) above terminating the Option, Issuer shall repurchase
from Holder (i) the Option and (ii) all Option Shares theretofore
purchased by Holder pursuant hereto with respect to which Holder then
has beneficial ownership. The date on which Holder exercises its
rights under this Section 8 is referred to as the "Request Date." Such
repurchase shall be at an aggregate price (the "Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any
Option Shares acquired pursuant to the Option with respect to which
Holder then has beneficial ownership;
(ii) the excess, if any, of (A) the Applicable Price (as
defined below) for each Option Share over (B) the Purchase Price per
Option Share (subject to adjustment pursuant to Section 7(a)),
multiplied by the number of Option Shares with respect to which the
Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7(a)) paid
(or, in the case of Option Shares with respect to which the Option
has been exercised but the Closing Date has not occurred, payable)
by Holder for each Option Share with respect to which the Option has
been exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer
shall, within ten (10) business days after the Request Date, pay the
Repurchase Consideration to Holder in immediately available funds, and
Holder shall surrender to Issuer the Option and the certificates
evidencing the Option Shares purchased thereunder with respect to
which Holder then has beneficial ownership and has designated to be
repurchased, and Holder shall warrant that it has sole record and
beneficial ownership of such shares and that the same are then free
and clear of all liens, claims, charges and encumbrances of any kind
whatsoever.
(c) Notwithstanding the provisions hereof to the contrary, to
the extent that Issuer is prohibited under applicable law, regulation
or
<PAGE>
administrative policy from repurchasing all or any portion of the
Option or Option Shares, then (i) Issuer shall promptly give notice of
such fact to Holder; (ii) Issuer shall, from time to time subject to
the last sentence of this Section 8(c), deliver to Holder that portion
of the Repurchase Consideration that it is not then so prohibited from
paying; (iii) at Holder's request, Issuer shall promptly file any
required notice or application for approval and expeditiously process
the same. After Holder's receipt of such notice from Issuer, Issuer
shall not be in breach of its repurchase obligation hereunder to the
extent it is or remains, despite reasonable efforts to obtain any
required approvals, legally prohibited from repurchasing the Option or
Option Shares. Holder shall have the right (A) to revoke its request
for repurchase with respect to the portion of the Option or Option
Shares that Issuer is prohibited from repurchasing, (B) to require
Issuer to deliver to Holder the Option and/or Option Shares Issuer is
prohibited from repurchasing, and (C) to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the
Request Date less the number of such Option Shares in respect of which
the Repurchase Consideration has been lawfully paid. Notwithstanding
anything herein to the contrary, Issuer shall not be obligated to
repurchase all or any part of the Option or Option Shares pursuant to
more than one written request from Holder, except that Issuer shall be
obligated to repurchase, pursuant to more than one written request,
any Option or Option Shares in the event that Holder (1) has revoked
its request for repurchase in accordance with the provisions of this
Section 8 prior to the occurrence of an event set forth in Section
3(a) terminating the Holder's right to exercise the Option and (2) has
delivered, prior to such event, a new written notice requesting a
repurchase. If an event set forth in Section 3(a) terminating the
Holder's right to exercise the Option occurs prior to, or is scheduled
to occur within, 60 days after the date of the notice by Issuer
described in clause 8(c)(i) above, then, notwithstanding the
occurrence of such terminating event, Holder shall have the right to
receive the Repurchase Consideration to the extent Issuer is or
becomes, within a 60 day period from the date of such notice by
Issuer, legally permitted to repurchase. Except as set forth in the
preceding sentence, Holder's repurchase rights under this Agreement
shall terminate concurrently with the termination of Holder's right to
exercise the Option, pursuant to Section 3(a).
(d) For purposes of this Agreement, the "Applicable Price" means
the highest of (i) the highest price per share of Issuer Common Stock
paid for any such share by the person or groups described in Section
8(e)(i), (ii) the price per share of Issuer Common Stock received by
holders of Issuer Common Stock in connection with any merger or other
business combination transaction described in Section 7(b)(i),
7(b)(ii) or 7(b)(iii), or (iii) the highest bid price per share of
Issuer Common Stock on The Nasdaq Stock Market or other principal
trading market or securities exchange on which such shares are traded
as reported by a recognized source selected by Holder during the 60
business days preceding the Request Date; provided, however, that in
the event of a sale of less than all of Issuer's assets, the
Applicable Price shall be
<PAGE>
the sum of the price paid in such sale for such assets or deposit
liabilities and the current market value of the remaining consolidated
net assets of Issuer as determined by a nationally recognized
investment banking firm selected by Holder (or the Holder Majority)
and reasonably acceptable to Issuer, divided by the number of shares
of the Issuer Common Stock outstanding at the time of such sale. If
the consideration to be offered, paid or received pursuant to either
of the foregoing clauses (i) or (ii) shall be other than in cash, the
value of such consideration shall be determined in good faith by an
independent nationally recognized investment banking firm selected by
Holder (or the Holder Majority) and reasonably acceptable to Issuer,
which determination shall be conclusive for all purposes of this
Agreement.
(e) As used herein, a "Repurchase Event" shall occur if (i) any
person (other than Grantee or any subsidiary of Grantee) shall have
acquired beneficial ownership of (as such term is defined in Rule 13d-
3 promulgated under the Exchange Act) or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under
the Exchange Act and the rules and regulations promulgated thereunder)
shall have been formed which beneficially owns, or has the right to
acquire beneficial ownership of, fifty percent (50%) or more of the
then outstanding shares of Issuer Common Stock or (ii) any of the
transactions described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) shall
be consummated.
9. Registration Rights.
--------------------
(a) Demand Registration Rights. Issuer shall, subject to the
--------------------------
conditions of Section 9(c) below, if requested by any Holder, including Grantee
and any permitted transferee ("Selling Shareholder"), after exercise of the
Option and prior to an Expiration Date, expeditiously prepare and file, a
registration statement under the Securities Act if such registration is
necessary in order to permit the sale or other disposition of any or all shares
of Issuer Common Stock or other securities that have been acquired by or are
issuable to the Selling Shareholder upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by the Selling
Shareholder in such request, including without limitation a "shelf" registration
statement under Rule 415 under the Securities Act or any successor provision,
and Issuer shall use its best efforts to qualify such shares or other securities
for sale under any applicable state securities laws. Issuer shall not be
obligated to effect more than one (1) registration pursuant to this Section
9(a).
(b) Additional Registration Rights. If Issuer at any time after
------------------------------
the exercise of the Option proposes to register any shares of Issuer Common
Stock under the Securities Act in connection with an underwritten public
offering of such Issuer Common Stock, Issuer will promptly give written notice
to the Holders of its intention to do so and, upon the written request of any
Holder given within 30 days after receipt of any such notice (which request
shall specify the number of shares of Issuer Common Stock intended to be
included in such underwritten public offering by the Holder), Issuer will cause
all such shares for which a Holder requests participation in such registration,
to be so registered and included in such underwritten public offering; provided,
however, that Issuer may elect to not cause all of such
<PAGE>
shares to be so registered (i) if the managing underwriter imposes a limitation
on the number of shares of Issuer Common Stock that may be included in the
registration because, in such underwriter's judgment, such limitation would be
necessary to effect an orderly public distribution, then Issuer will be
obligated to include only such limited portion, if any, of the Issuer Common
Stock with respect to which the Holders have requested inclusion hereunder, or
(ii) in the case of a registration solely to implement an employee benefit plan
or a registration filed on Form S-4 of the Securities Act or any successor form,
in which case Issuer shall not be required to include any of Holder's shares in
the registration; provided, further, however, that an election pursuant to (i)
may be only made one time. If some but not all the shares of Issuer Common
Stock, with respect to which Issuer shall have received requests for
registration pursuant to this Section 9(b), shall be excluded from such
registration, Issuer shall make appropriate allocation of shares to be
registered among the Holders desiring to register their shares pro rata in the
proportion that the number of shares requested to be registered by each such
Holder bears to the total number of shares requested to be registered by all
such Holders then desiring to have Issuer Common Stock registered for sale.
Issuer shall not be obligated to effect more than one (1) registration pursuant
to this Section 9(b).
(c) Conditions to Required Registration. Issuer shall use all
reasonable efforts to cause each registration statement referred to in Section
9(a) above to become effective and to obtain all consents or waivers of other
parties which are required therefor and to keep such registration statement
effective; provided, however, that Issuer may delay any registration of Option
Shares required pursuant to Section 9(a) above for a period not exceeding 90
days if Issuer determines, in the good faith exercise of its reasonable business
judgment, that such registration and offering could adversely effect or
interfere with bona fide financing plans of Issuer or would require disclosure
of information, the premature disclosure of which could adversely affect Issuer
or any transaction under active consideration by Issuer. Notwithstanding
anything to the contrary stated herein, Issuer shall not be required to register
Option Shares under the Securities Act pursuant to Section 9(a) above:
(i) on more than one occasion during any calendar year;
(ii) within 90 days after the effective date of a
registration referred to in Section 9(b) above pursuant to which the Holders
concerned were afforded the opportunity to register or qualify such shares under
the Securities Act and such shares were registered or qualified as requested,
and
(iii) unless a request therefor is made to Issuer by
Holders that hold at least 25% or more of the aggregate number of Option Shares
(including shares of Issuer Common Stock issuable upon exercise of the Option)
then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain the
effectiveness of any registration statement after the expiration of nine months
from the effective date of such registration statement. Issuer shall use all
reasonable efforts to make any filings, and take all steps, under all applicable
state securities laws to the extent necessary to permit the sale or other
disposition of the Option Shares so registered in accordance with the intended
method of distribution for such shares; provided, however, that Issuer shall not
be required to consent to the
<PAGE>
general jurisdiction or qualify to do business in any state where it is not
otherwise required to so consent to such jurisdiction or to so qualify to do
business.
(d) Expenses. Except where applicable state law prohibits such
--------
payments, Issuer will pay the costs of such registration or qualification
expenses, including without limitation registration fees, qualification fees,
blue sky fees and expenses, Issuer's legal expenses, costs of special audits or
"cold comfort" letters, expenses of underwriters, excluding discounts and
commissions, and the reasonable fees and expenses of any necessary special
experts in connection with each registration pursuant to Section 9(a) or (b)
above (including the related offerings and sales by holders of Option Shares)
and all other qualifications, notifications, or exemptions pursuant to Section
9(a) or 9(b) above.
(e) Indemnification. In connection with any registration under
---------------
Section 9(a) or 9(b) above, Issuer hereby indemnifies the Selling Shareholders,
and each underwriter thereof, including each person, if any, who controls such
holder or underwriter within the meaning of Section 15 of the Securities Act,
against all expenses, losses, claims, damages and liabilities caused by any
untrue, or alleged untrue, statement of a material fact contained in any
registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission, or alleged omission, to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such expenses, losses, claims, damages or
liabilities of such indemnified party are caused by any untrue statement or
alleged untrue statement that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon, and in conformity with,
information furnished in writing to Issuer by such indemnified party or any
underwriter expressly for use therein, and Issuer and each officer, director and
controlling person of Issuer shall be indemnified by such Selling Shareholders,
or by such underwriter, as the case may be, for all such expenses, losses,
claims, damages and liabilities caused by any untrue, or alleged untrue,
statement, that was included by Issuer in any such registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) in reliance upon, and in conformity with, information
furnished in writing to Issuer by such holder or such underwriter, as the case
may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 9(e) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and satisfactory to such
indemnified party. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel (other than reasonable costs of investigation)
shall be paid by the indemnified party unless (i) the
<PAGE>
indemnifying party either agrees to pay the same, (ii) the indemnifying party
fails to assume the defense of such action with counsel reasonably satisfactory
to the indemnified party, or (iii) the indemnified party has been advised by
counsel that one or more legal defenses may be available to the indemnified
party that may be contrary to the interest of the indemnifying party. No
indemnifying party shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 9(e) is unavailable to
a party otherwise entitled to be indemnified in respect of any expenses, losses,
claims, damages or liabilities referred to herein, then the indemnifying party,
in lieu of indemnifying such party otherwise entitled to be indemnified, shall
contribute to the amount paid or payable by such party to be indemnified as a
result of such expenses, losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative benefits received by
Issuer, the Selling Shareholders and the underwriters from the offering of the
securities and also the relative fault of Issuer, the Selling Shareholders and
the underwriters in connection with the statements or omissions which resulted
in such expenses, losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable by a party as a
result of the expenses, losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim, provided, however, that in no case shall any Selling Shareholder be
responsible, in the aggregate, for any amount in excess of the net offering
proceeds attributable to its Option Shares included in the offering. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. Any obligation by any holder to
indemnify shall be several and not joint with other holders.
In connection with any registration pursuant to Section 9(a) or 9(b) above,
Issuer and each Selling Shareholder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this Section 9(e).
(f) Miscellaneous Reporting. Issuer shall comply with all
-----------------------
reporting requirements and will do all such other things as may be necessary to
permit the expeditious sale at any time of any Option Shares by the Selling
Shareholders thereof in accordance with and to the extent permitted by any rule
or regulation promulgated by the SEC from time to time. Issuer shall at its
expense provide the Selling Shareholders with any information necessary in
connection with the completion and filing of any reports or forms required to be
filed by them under the Securities Act or the Exchange Act, or required pursuant
to any state securities laws or the rules of any stock exchange.
10. Listing. If Issuer Common Stock or any other securities to be
-------
acquired upon exercise of the Option are not then authorized for quotation on
The Nasdaq Stock Market or any securities exchange, Issuer, upon the request of
Holder, will promptly file an application to authorize for quotation the shares
of Issuer Common Stock or other securities to be acquired upon exercise of the
Option on The Nasdaq Stock Market and will use its commercially reasonable
efforts to obtain approval of such listing as soon as practicable.
<PAGE>
11. Division of Option. This Agreement (and the Option granted hereby)
------------------
are exchangeable, without expense, at the option of Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer for other
agreements providing for other options of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of Issuer
Common Stock purchasable hereunder. The terms "other agreements" and "other
options" as used in the preceding sentence mean any other agreements and related
options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
12. Limitation on Total Profit and Notional Total Profit.
-----------------------------------------------------
(a) Notwithstanding anything to the contrary contained herein, in
no event shall Grantee's Total Profit (as defined below in Section 12(c) hereof)
exceed $5,500,000 and, if it otherwise would exceed such amount, Grantee, at its
sole election, shall either (i) reduce the number of shares of Issuer common
stock subject to the Option, (ii) pay cash to Issuer, or (iii) any combination
thereof, so that Grantee's actually realized Total Profit shall not exceed
$5,500,000 after taking into account the foregoing actions.
(b) Notwithstanding anything to the contrary contained herein,
the Option may not be exercised for a number of shares as would, as of the date
of exercise, result in a Notional Total Profit (as defined below in Section
12(d) hereof) of more than $5,500,000; provided, that nothing in this sentence
shall restrict any exercise of the Option permitted hereby on any subsequent
date on which the Notional Total Profit would be less than $5,500,000.
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount received by
Grantee pursuant to Issuer's repurchase of the Option (or any portion thereof)
pursuant to Section 8 hereof, (ii) (x) the amount received by Grantee or any
affiliate of Grantee pursuant to Issuer's repurchase of Option Shares pursuant
to Section 8 hereof, less (y) Grantee's or any affiliate of Grantee's purchase
price for such Option Shares, (iii) (x) the net cash amounts received by Grantee
or any affiliate of Grantee pursuant to the sale of Option Shares (or any other
securities into which such Option Shares shall be converted or exchanged) to any
unaffiliated party, less (y) Grantee's or any affiliate of Grantee's purchase
price of such Option Shares, and (iv) any equivalent amounts with respect to the
Substitute Option.
(d) As used herein, the term "Notional Total Profit" with respect
to any number of shares as to which Grantee or any affiliate of Grantee may
propose to exercise the Option shall be the Total Profit determined as of the
date of such proposed exercise assuming that the Option were exercised on such
date for such number of shares and assuming that such shares, together with all
other Option Shares held by Grantee or any affiliate of Grantee as of
<PAGE>
such date, were sold for cash at the closing market price for the Issuer Common
Stock as of the close of business on the preceding trading day (less customary
brokerage commissions).
(e) Grantee agrees, promptly following any exercise of all or any
portion of the Option, and subject to its rights under Section 8 hereof, to use
and cause any wholly owned Subsidiary of Grantee to use commercially reasonable
efforts promptly to maximize the value of Option Shares purchased taking into
account market conditions, the number of Option Shares, the potential negative
impact of substantial sales on the market price for Issuer Common stock, and the
availability of an effective registration statement to permit public sale of
Option Shares.
13. Miscellaneous.
-------------
(a) Expenses. Except as otherwise provided in Section 9,
--------
each of the parties hereto and any Holder shall bear and pay all
costs and expenses incurred by it or on its behalf in connection
with the transactions contemplated hereunder, including, without
limitation, fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement
--------------------
may be waived at any time by the party that is entitled to the
benefits of such provision. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary. This
--------------------------------------------
Agreement, together with the Reorganization Agreement and the other
documents and instruments referred to herein and therein (i)
constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, between the parties with
respect to the subject matter hereof and (ii) is not intended to
confer upon any person other than the parties hereto, and their
respective successors and assigns, any rights or remedies hereunder,
except as expressly provided in this Agreement.
(d) Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court or a federal or
state regulatory authority of competent jurisdiction to be invalid,
void or unenforceable, such invalid, void or unenforceable term,
provision, covenant or restriction shall, if it is so susceptible,
be deemed modified to the minimum extent necessary to render the
same valid and enforceable and, in all events, the remainder of the
terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. Without limiting the foregoing,
if for any reason such court or regulatory authority determines that
Holder may not legally acquire, or Issuer may not legally
repurchase, the full number of shares of Issuer Common Stock as
provided in Sections 3 and 8 (as adjusted pursuant to Section 7), it
is the express intention of Issuer to allow Holder to acquire or to
require Issuer to
<PAGE>
repurchase the maximum number of shares as may be legally
permissible without any amendment or modification hereof.
(e) Governing Law. This Agreement shall be governed and
-------------
construed in accordance with the laws of the State of California
without regard to any applicable conflicts of law rules.
(f) Descriptive Headings. The descriptive headings
--------------------
contained herein are for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
(g) Notices. All notices, requests, claims, demands and
-------
other communications under this Agreement shall be in writing and
shall be given (and shall be deemed to have been duly received if so
given) by personal delivery, by telecopy (provided that copy is
concurrently sent by first class U.S. mail, postage prepaid), or by
mail (registered or certified mail, postage prepaid, return receipt
requested) to the parties as follows:
To Grantee: Greater Bay Bancorp
2860 West Bayshore Road
Palo Alto, California 94303
Attention: Steven C. Smith
Facsimile Number: (415) 494-9220
With a copy to: Greater Bay Bancorp
400 Emerson Street, 3rd Floor
Palo Alto, California 94301
Attention: Linda M. Iannone, Esq.
Facsimile Number: (650) 473-9419
To Issuer: Coast Bancorp
740 Front Street, Suite 240
Santa Cruz, California 95060
Attention: Harvey J. Nickelson
Facsimile Number: (831) 458-0460
With a copy to: Lillick & Charles LLP
Two Embarcadero Center, Suite 2700
San Francisco, California 94111
Attention: Steven M. Plevin, Esq.
Facsimile Number: (415) 984-8300
or to such other address as a party may have furnished to the others in writing
in accordance with this paragraph, except that notices of change of address
shall only be effective upon receipt. Any notice, demand or other communication
given pursuant to the provisions of this Section 11(g) shall be deemed to have
been given on the date actually delivered or on the third day following the date
mailed, whichever first occurs.
<PAGE>
(h) Counterparts. This Agreement and any amendments hereto
------------
may be executed in two counterparts, each of which shall be
considered one and the same agreement and shall become effective
when both counterparts have been signed, it being understood that
both parties need not sign the same counterpart.
(i) Assignment. Neither this Agreement nor any of the
----------
rights, interests or obligations hereunder or under the Option shall
be assigned by any of the parties hereto without the prior written
consent of the other party, except that Grantee may assign this
Agreement to a wholly-owned subsidiary of Grantee and at any time
after a Purchase Event occurs, Holder may assign or transfer its
rights and obligations hereunder, in whole or in part, to any Person
or Persons, subject to compliance with applicable laws. In order to
effectuate the foregoing, Grantee shall be entitled to surrender
this Agreement to Issuer in exchange for two or more Agreements
entitling the holders thereof to purchase in the aggregate the same
number of shares of Common Stock as may be purchasable hereunder.
Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the parties and
their respective successors and permitted assigns.
(j) Further Assurances. In the event of any exercise of
------------------
the Option by Holder, Issuer and Holder shall execute and deliver
all other documents and instruments and take all other action that
may be reasonably necessary in order to consummate the transactions
provided for by such exercise.
(k) Specific Performance. The parties hereto agree that
--------------------
this Agreement may be enforced by either party through specific
performance, injunctive relief and other equitable relief. Both
parties further agree to waive any requirement for the securing or
posting of any bond in connection with the obtaining of any such
equitable relief and that this provision is without prejudice to any
other rights that the parties hereto may have for any failure to
perform this Agreement.
<PAGE>
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
GREATER BAY BANCORP COAST BANCORP
By: /s/ David L. Kalkbrenner By: /s/ Harvey J. Nickelson
------------------------ -----------------------
David L. Kalkbrenner Harvey J. Nickelson
President and Chief President and Chief
Executive Officer Executive Officer
<PAGE>
Exhibit 99.1
Press Release dated December 14, 1999 re Coast merger
For Information Contact
At Greater Bay Bancorp: At Financial Relations Board:
David L. Kalkbrenner, President & CEO Christina Carrabino (general information)
(650) 614-5767 Stephanie Mishra (analyst contact)
Steven C. Smith, EVP, CAO & CFO (415) 986-1591
(650) 813-8222
At Coast Bancorp:
Harvey Nickelson, President & CEO
(831) 458-4501
FOR IMMEDIATE RELEASE
---------------------
GREATER BAY BANCORP AND
COAST BANCORP ANNOUNCE AGREEMENT TO MERGE
-----------------------------------------
PALO ALTO, CA; December 14, 1999 -- Greater Bay Bancorp (Nasdaq:GBBK), Palo
Alto, California, and Coast Bancorp (Nasdaq:CTBP), Santa Cruz, California,
announced today the signing of a definitive agreement for a merger of the two
companies. Following the transaction, Coast Commercial Bank, a wholly owned
subsidiary of Coast Bancorp, will operate as a wholly owned subsidiary of
Greater Bay Bancorp.
In the merger, Greater Bay Bancorp will issue shares of its stock in a tax free
exchange for the shares of stock of Coast Bancorp for an estimated value of
approximately $125 million, depending on the market price of Greater Bay
Bancorp's stock at the time of the merger closing. The merger, which will be
accounted for as a pooling of interests, is expected to be completed late in the
first quarter of 2000 or early in the second quarter of 2000.
Greater Bay Bancorp anticipates the transaction, including cost savings, to be
approximately 1.5% accretive to 2000 earnings per share. Greater Bay Bancorp
has not included any anticipated revenue enhancements that may be realized from
the merger, even though Greater Bay Bancorp's prior acquisitions have resulted
in substantial revenue growth at the newly acquired subsidiary banks.
Greater Bay Bancorp has previously announced the closing of its merger with Bay
Commercial Services, parent of Bay Bank of Commerce, and the execution of a
definitive agreement for a merger with Mt. Diablo Bancshares, parent of Mt.
Diablo National Bank. With the merger of Bay Commercial Services, and the
completion of the mergers with Mt. Diablo Bancshares and Coast Bancorp, Greater
Bay Bancorp would have on a pro forma basis as of September 30, 1999 total
assets of approximately $2.9 billion and total shareholders' equity of
approximately $164 million.
Coast Bancorp, founded in 1982, has banking offices in Aptos, Capitola, Santa
Cruz, Scotts Valley and Watsonville, California serving the small to mid-sized
business community. As of September 30, 1999, Coast Bancorp had total assets of
$350.1 million and total deposits of $282.8 million. For the nine months ended
September 30, 1999, net income was $5.0 million.
<PAGE>
David Kalkbrenner, President and Chief Executive Officer of Greater Bay Bancorp,
stated, "We are excited to have Coast Bancorp join the Greater Bay super
community banking family. Coast Bancorp is among the top rated California banks
for safety, strength and performance. It is a quality organization with a
strong management team that has demonstrated success year after year. This
merger represents a unique opportunity for us to continue our expansion in the
Northern California markets. We will also be pleased to welcome James
Thompson, chairman of Coast Bancorp, to our Board when the merger closes."
Harvey Nickelson, President and Chief Executive Officer of Coast Bancorp,
commented, "We are proud to join Greater Bay Bancorp, a company that has
demonstrated a superior performance record with strong earnings and solid asset
growth. We believe a merger with Greater Bay Bancorp will enhance our ability
to serve our customers and increase our client base with even larger business
organizations through expanded product offerings and increased lending
capabilities. Our shareholders will benefit by receiving enhanced value for
their Coast Bancorp stock and additional liquidity through a combined market
capitalization of Greater Bay Bancorp of over $650 million. Greater Bay
Bancorp's super community banking strategy is completely compatible with Coast
Commercial Bank's philosophy of a strong, enthusiastic commitment to our local
community."
Terms of the Merger
The terms of the agreement provide for the shareholders of Coast Bancorp to
receive shares of Greater Bay Bancorp stock. Coast Bancorp currently has
approximately 4,819,000 shares of common stock outstanding. If the average
closing price of Greater Bay Bancorp common stock is between $32.84 and $38.16,
Greater Bay Bancorp will issue 0.675 shares for each outstanding share of common
stock of Coast Bancorp. If the average closing price of Greater Bay Bancorp
common stock is greater than $38.16, the conversion ratio will equal the
quotient obtained by dividing (a) $25.76 plus the product of 0.333 times the
difference between the average closing price of Greater Bay Bancorp stock and
$38.16, by (b) the average closing price of Greater Bay Bancorp stock.
If the average closing price of Greater Bay Bancorp common stock is less than
$32.84, Greater Bay Bancorp may elect to exercise a top up option. In that
case, the conversion ratio will equal the quotient obtained by dividing $22.17
by the average closing price of Greater Bay Bancorp stock. If Greater Bay
Bancorp does not elect the top up option, Coast Bancorp may terminate the
agreement. If Coast Bancorp does not terminate the agreement, the conversion
ratio will be 0.675.
The merger is subject to certain conditions, including the approval of the
shareholders of Greater Bay Bancorp and Coast Bancorp and regulatory approval.
Upon consummation of the merger, former Coast Bancorp shareholders will own
approximately 18% of Greater Bay Bancorp's outstanding shares, assuming
completion of the Mt. Diablo Bancshares merger.
Greater Bay Bancorp and its financial services subsidiaries, Bay Area Bank, Bay
Bank of Commerce, Cupertino National Bank, Golden Gate Bank, Mid-Peninsula Bank
and Peninsula Bank of Commerce, along with its operating divisions, Greater Bay
Corporate Finance Group, Greater Bay Bank Contra Costa Region, Greater Bay Bank
Fremont Region, Greater Bay Bank Santa Clara Commercial Banking Group, Greater
Bay International Banking Division, Greater
<PAGE>
Bay Trust Company, Pacific Business Funding and Venture Banking Group, serve
clients throughout Silicon Valley, the San Francisco Peninsula and the Contra
Costa Tri Valley Region, with offices located in Cupertino, Fremont, Hayward,
Millbrae, Palo Alto, Redwood City, San Francisco, San Jose, San Leandro, San
Mateo, San Ramon, Santa Clara, and Walnut Creek.
Safe Harbor
Certain matters discussed in this press release constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These forward looking statements relate to future financial performance
and condition and pending mergers. These forward looking statements are subject
to certain risks and uncertainties that could cause the actual results,
performance or achievements to differ materially from those expressed, suggested
or implied by the forward looking statements due to a number of factors,
including, but not limited to, when and if the proposed mergers are consummated,
the success of Greater Bay Bancorp in integrating the new banks into its
organization and other risks detailed in the Greater Bay Bancorp and Coast
Bancorp reports filed with the Securities and Exchange Commission, including
their Annual Reports on Form 10-K for the year ended December 31, 1998.
For investor information on Greater Bay Bancorp at no charge, call our automated
shareholder information line at 1-800-PRO-INFO (1-800-776-4636) and enter code
GBBK. For international access, dial 1-201-432-6555.
# # #
<PAGE>
EXHIBIT 99.2
Press Release dated December 14, 1999 re dividend declaration
For Information Contact
- -----------------------
at Greater Bay Bancorp: At Financial Relations Board:
David L Kalkbrenner, President & CEO Christina Carrabino (general information)
(650) 614-5767 Stephanie Mishra (analyst contact)
Steven C. Smith, EVP, CAO & CFO (415) 986-1591
(650) 813-8222
FOR IMMEDIATE RELEASE
- ---------------------
GREATER BAY BANCORP DECLARES
FOURTH QUARTER CASH DIVIDEND
PALO ALTO, CA, December 14, 1999 -- Greater Bay Bancorp (Nasdaq: GBBK), a $2.3
billion in assets financial services holding company, has declared a twelve cent
($0.12) per share cash dividend for the fourth quarter of 1999.
The cash dividend will be payable on January 14, 2000, to shareholders of record
as of December 31, 1999.
"We are pleased that our shareholders are once again rewarded for Greater Bay
Bancorp's continued financial success," said David L. Kalkbrenner, president and
chief executive officer of Greater Bay Bancorp. "This is our 30th consecutive
quarterly cash dividend and we are happy that our shareholders continue to
benefit from Greater Bay Bancorp's strong earnings performance."
Greater Bay Bancorp and its financial services subsidiaries, Bay Area Bank, Bay
Bank of Commerce, Cupertino National Bank, Golden Gate Bank, Mid-Peninsula Bank,
and Peninsula Bank of Commerce along with its operating divisions, Greater Bay
Bank Contra Costa Region, Greater Bay Bank Fremont Region, Greater Bay Bank
Santa Clara Commercial Banking Group, Greater Bay Corporate Finance Group,
Greater Bay International Banking Division, Greater Bay Trust Company, Pacific
Business Funding and Venture Banking Group, serve clients throughout Silicon
Valley, the San Francisco Peninsula and the Contra Costa Tri-Valley Region, with
offices located in Cupertino, Fremont, Hayward, Millbrae, Palo Alto, Redwood
City, San Francisco, San Jose, San Leandro, San Mateo, San Ramon, Santa Clara
and Walnut Creek.
Safe Harbor
This document may contain forward-looking statements that are subject to risks
and uncertainties that could cause actual results to differ materially from
those projected. For a discussion of factors that could cause actual results to
differ, please see the publicly available Securities and Exchange Commission
filings of Greater Bay Bancorp, including the Annual Report on Form 10-K for the
year ended December 31, 1998, and particularly the discussion of risk factors
with such documents.
<PAGE>
For investor information on Greater Bay Bancorp at no charge, call our automated
shareholder information line at 1-800-PRO-INFO (1-800-776-4636) and enter code
GBBK. For international access, dial 1-201-432-6555.
###
<PAGE>
EXHIBIT 99.3
Press Release dated December 14, 1999 re addition to Nasdaq Financial-100 Index
For Information Contact
- -----------------------
At Greater Bay Bancorp: At Financial Relations Board:
David L. Kalkbrenner Christina Carrabino (general information)
President and CEO Stephanie Mishra (analyst contact)
(650) 614-5767 (415) 986-1591
Steven C. Smith
EVP, CAO and CFO
(650) 813-8222
FOR IMMEDIATE RELEASE
---------------------
GREATER BAY BANCORP JOINS NASDAQ FINANCIAL-100 INDEX
PALO ALTO, CA, December 14, 1999 -- Greater Bay Bancorp (Nasdaq: GBBK), a $2.3
billion in assets financial services holding company, announced today that is
has become a component of the Nasdaq Financial-100 Index, beginning December 7,
1999. Greater Bay Bancorp replaced Charter One Financial because that company
is now listed on the New York Stock Exchange. The Nasdaq-100 Index, launched in
January 1985, consists of 100 of the largest financial companies listed on the
Nasdaq National Market System.
"We are pleased with becoming a component of the Nasdaq Financial-100 Index,"
said David L. Kalkbrenner, president and chief executive officer. "This
addition is an endorsement of Greater Bay Bancorp's strong financial performance
and it will increase our visibility and exposure to the investment community."
Greater Bay Bancorp and its financial services subsidiaries, Bay Area Bank, Bay
Bank of Commerce, Cupertino National Bank, Golden Gate Bank, Mid-Peninsula Bank
and Peninsula Bank of Commerce, along with its operating divisions, Greater Bay
Bank Contra Costa Region, Greater Bay Bank Fremont Region, Greater Bay Bank
Santa Clara Commercial Banking Group, Greater Bay Corporate Finance Group,
Greater Bay International Banking Division, Greater Bay Trust Company, Pacific
Business Funding and Venture Banking Group, serve clients throughout Silicon
Valley, the San Francisco Peninsula and the Contra Costa Tri Valley Region, with
offices located in Cupertino, Fremont, Hayward, Millbrae, Palo Alto, Redwood
City, San Francisco, San Jose, San Leandro, San Mateo, San Ramon, Santa Clara,
and Walnut Creek.
Safe Harbor
This document may contain forward-looking statements that are subject to risks
and uncertainties that could cause actual results to differ materially from
those projected. For a discussion of factors that could cause actual results to
differ, please see the publicly available Securities and Exchange Commission
filings of Greater Bay Bancorp, including the Annual Report on Form 10-K for the
year ended December 31, 1998, and particularly the discussion of risk factors
with such documents.
<PAGE>
For investor information on Greater Bay Bancorp at no charge, call our automated
shareholder information line at 1-800-PRO-INFO (1-800-776-4636) and enter code
GBBK. For international access, dial 1-201-432-6555.
###
<PAGE>
EXHIBIT 99.4
Unaudited Pro Forma Condensed Combined Balance Sheet
As of September 30, 1999
<TABLE>
<CAPTION>
Bay Greater Bay
Greater Commercial & Bay Commercial
Bay Services Services Combined Coast Adjustments(1)
---- -------- ----------------- ----- -------------
<S> <C> <C> <C> <C> <C>
Assets
Cash an due from banks $ 98,863 $ 9,452 $ 108,315 $ 18,746 $ --
Federal funds sold 183,800 4,500 188,300 6,800 --
Other short-term securities 38,936 -- 38,936 -- --
Securities available-for-sale 277,187 21,432 298,619 116,729 --
Securities held-to-maturity and
other 127,460 7,296 134,756 -- --
Total loans, net 1,454,339 105,742 1,560,081 189,318 --
Property, premises and
equipment 15,724 1,958 17,682 2,124 --
Interest receivable and other
assets 87,578 1,376 88,954 16,371 --
-------------------------------------------------------------------------
Total assets $2,283,887 $151,756 $2,435,643 $350,088 $ --
=========================================================================
Liabilities
Total Deposits $2,032,737 $136,523 $2,169,260 $282,799 $ --
Other borrowings 52,000 678 52,678 31,500 --
Subordinated debt -- -- -- -- --
Other liabilities 29,112 1,106 30,218 3,856 2,500
Trust Preferred Securities 50,000 -- 50,000 -- --
-------------------------------------------------------------------------
Total liabilities 2,163,849 138,307 2,302,156 318,155 2,500
-------------------------------------------------------------------------
Shareholders' equity 120,038 13,449 133,487 31,933 (2,500)
-------------------------------------------------------------------------
Total liabilities and shareholders' equity $2,283,887 $151,756 $2,435,643 $350,088 $ --
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
Greater Bay, Bay Greater Bay, Bay
Commercial Services Commercial Services,
& Coast Coast & Mt. Diablo
Combined Mt. Diablo Adjustments (1) Combined (2)
-------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Assets
Cash an due from banks $ 127,061 $ 13,427 $ -- $ 140,488
Federal funds sold 195,100 8,800 -- 203,900
Other short-term securities 38,936 -- -- 38,936
Securities available-for-sale 415,348 24,476 -- 439,824
Securities held-to-maturity and
other 134,756 378 -- 135,134
Total loans, net 1,749,399 150,422 -- 1,899,821
Property, premises and
equipment 19,806 2,660 -- 22,466
Interest receivable and other
assets 105,325 5,544 -- 110,869
--------------------------------------------------------------
Total assets $2,785,731 $205,707 $ -- $2,991,438
==============================================================
Liabilities
Total Deposits 2,452,059 $190,223 $ -- 2,642,282
Other borrowings 84,178 -- -- 84,178
Subordinated debt -- -- --
Other liabilities 36,574 3,364 1,800 41,738
Trust Preferred Securities 50,000 -- -- 50,000
--------------------------------------------------------------
Total liabilities 2,622,811 193,587 1,800 2,818,198
--------------------------------------------------------------
Shareholders' equity 162,920 12,120 (1,800) 173,240
--------------------------------------------------------------
Total liabilities and shareholders' equity $2,785,731 $205,707 $ -- $2,991,438
==============================================================
</TABLE>
(1) The table above reflects all nonrecurring Mt. Diablo and Coast estimated
merger-related costs as of September 30, 1999, but does not reflect the
merger-related costs related to the Greater Bay/Bay Commercial Services
merger. The nonrecurring Mt. Diablo and Coast estimated merger-related costs
are not included on the unaudited pro forma condensed combined statement of
operations but are included on the unaudited pro forma condensed combined
balance sheet as a reduction to shareholders' equity, net of a $950,000 and
$1.4 million tax benefit, respectively. These costs will be charged to expense
immediately following
(2) For pro forma financial information related to the merger of Greater Bay and
Mt. Diablo, see Greater Bay's Registration Statement on Form S-4, filed with
the SEC on November 1, 1999, as amended on November 9, 1999 (Reg. No. 333-
90025).
<PAGE>
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Nine Months Ended September 30, 1999
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Bay Greater Bay
Greater Commercial & Bay Commercial
Bay Services Services Combined Coast
--- -------- ----------------- -----
<S> <C> <C> <C> <C>
Interest on loans $ 90,946 $ 6,996 $ 97,942 $ 13,603
Interest on investment securities 17,905 1,264 19,169 5,086
Other interest income 7,361 110 7,471 691
----------------------------------------------------------
Total interest income 116,212 8,370 124,582 19,380
Interest on deposits 41,315 2,725 44,040 4,476
Other interest expense 6,399 25 6,424 668
----------------------------------------------------------
Net interest income 68,498 5,620 74,118 14,236
Provision for loans losses 6,075 161 6,236 -
----------------------------------------------------------
Net interest income after provision for loan losses 62,423 5,459 67,882 14,236
Other income 9,643 716 10,359 3,853
Operating expenses 40,402 4,353 44,755 9,884
----------------------------------------------------------
Income before provision for income taxes and
merger and other related nonrecurring costs and extraordinary
items 31,664 1,822 33,486 8,205
Provision for income taxes 12,052 669 12,721 3,202
----------------------------------------------------------
Net income before merger and other related nonrecurring costs 19,612 1,153 20,765 5,003
Merger and other related nonrecurring costs, net tax 2,491 - 2,491 -
----------------------------------------------------------
Income before extraordinary items 17,121 1,153 18,274 5,003
Extraordinary items (88) - (88) -
----------------------------------------------------------
Net income $ 17,033 $ 1,153 $ 18,186 $ 5,003
==========================================================
Net income per share - basic (1) $ 1.75 $ 0.91 $ 1.72 $ 1.05
==========================================================
Average common shares outstanding (2) 11,189,000 1,269,000 12,056,108 4,784,000
==========================================================
Net income per share - diluted (1) $ 1.66 $ 0.87 $ 1.63 $ 1.02
==========================================================
Average common and common equivalent shares
outstanding (2) 11,810,000 1,325,156 12,715,479 4,900,000
==========================================================
</TABLE>
<TABLE>
<CAPTION>
Commercial Services
& Coast
Adjustments Combined Mt. Diablo Adjustments
------------ -------- ----------- -----------
<S> <C> <C> <C> <C>
Interest on loans $ - $ 111,545 $ 9,295 $ -
Interest on investment securities - 24,255 1,044 -
Other interest income - 8,162 300 -
---------------------------------------------------------
Total interest income - 143,962 10,639 -
Interest on deposits - 48,516 3,578 -
Other interest expense - 7,092 - -
---------------------------------------------------------
Net interest income - 88,354 7,061 -
Provision for loans losses - 6,236 596 -
---------------------------------------------------------
Net interest income after provision for loan losses - 82,118 6,465 -
Other income - 14,212 1,233 -
Operating expenses - 54,639 4,238 -
---------------------------------------------------------
Income before provision for income taxes and -
merger and other related nonrecurring costs and extraordinary
items - 41,691 3,460 -
Provision for income taxes - 15,923 1,414 -
---------------------------------------------------------
Net income before merger and other related nonrecurring costs - 25,768 2,046 -
Merger and other related nonrecurring costs, net tax - 2,491 - -
---------------------------------------------------------
Income before extraordinary items - 23,277 2,046 -
Extraordinary items - (88) - -
----------------------------------------------------------
Net income $ - $ 23,189 $ 2,046 $ -
=========================================================
Net income per share - basic (1) $ - $ 1.70 $ 1.68 $ -
=========================================================
Average common shares outstanding (2) (1,703,104) 15,137,004 1,215,000 (104,612)
=========================================================
Net income per share - diluted (1) $ - $ 1.62 $ 1.43 $ -
=========================================================
Average common and common equivalent shares
outstanding (2) (1,744,400) 15,871,079 1,431,000 (123,209)
=========================================================
</TABLE>
<TABLE>
<CAPTION>
Greater Bay, Bay
Commercial Services,
Coast & Mt. Diablo
Combined (3)
--------
<S> <C>
Interest on loans $ 120,840
Interest on investment securities 25,299
Other interest income 8,462
------------
Total interest income 154,601
Interest on deposits 52,094
Other interest expense 7,092
------------
Net interest income 95,415
Provision for loans losses 6,832
------------
Net interest income after provision for loan losses 88,583
Other income 15,445
Operating expenses 58,877
------------
Income before provision for income taxes and -
merger and other related nonrecurring costs and extraordinary
items 45,151
Provision for income taxes 17,337
------------
Net income before merger and other related nonrecurring costs 27,814
Merger and other related nonrecurring costs, net tax 2,491
------------
Income before extraordinary items 25,323
Extraordinary items (88)
------------
Net income $ 25,235
============
Net income per share - basic (1) $ 1.71
============
Average common shares outstanding (2) 16,247,392
============
Net income per share - diluted (1) $ 1.62
============
Average common and common equivalent shares
outstanding (2) 17,178,870
============
</TABLE>
(1) Before merger and other related nonrecurring costs and extraordinary items
(2) Calculated as the historical Greater Bay weighted average shares plus the
historical Mt. Diablo and Coast weighted average shares adjusted for the
assumed conversion ratio of 0.9139 and 0.644, respectively.
(3) For pro forma financial information related to the merger of Greater Bay and
Mt. Diablo, see Greater Bay's Registration Statement on Form S-4, filed with
the SEC on November 1, 1999, as amended on November 9, 1999 (Reg. No. 333-
90025).
<PAGE>
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Nine Months Ended September 30, 1998
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Bay Greater Bay
Greater Commercial & Bay Commercial
Bay Services Services Combined Coast
--- -------- ----------------- -------
<S> <C> <C> <C> <C>
Interest on loans $ 68,973 $ 6,085 $ 75,058 $ 12,496
Interest on investment securities 14,288 1,102 15,390 4,280
Other interest income 8,385 317 8,702 949
--------------------------------------------------------
Total interest income 91,646 7,504 99,150 17,725
Interest on deposits 31,883 2,524 34,407 3,975
Other interest expense 5,822 49 5,871 1,033
--------------------------------------------------------
Net interest income 53,941 4,931 58,872 12,717
Provision for loans losses 4,294 99 4,393 225
--------------------------------------------------------
Net interest income after provision for loan losses 49,647 4,832 54,479 12,492
Other income 6,619 723 7,342 4,554
Operating expenses 34,210 4,193 38,403 9,038
--------------------------------------------------------
Income before provision for income taxes and
merger and other related nonrecurring costs and extraordinary items 22,056 1,362 23,418 8,008
Provision for income taxes 7,427 478 7,905 3,327
--------------------------------------------------------
Net income before merger and other related nonrecurring costs 14,629 884 15,513 4,681
Merger and other related nonrecurring costs, net tax 1,314 - 1,314 -
--------------------------------------------------------
Income before extraordinary items 13,315 884 14,199 4,681
Extraordinary items - - - -
--------------------------------------------------------
Net income $ 13,315 $ 884 $ 14,199 $ 4,681
========================================================
Net income per share - basic (1) $ 1.35 $ 0.82 $ 1.34 $ 0.97
========================================================
Average common shares outstanding (2) 10,848,000 $1,080,000 11,585,964 4,816,000
========================================================
Net income per share - diluted (1) $ 1.26 $ 0.69 $ 1.24 $ 0.94
========================================================
Average common and common equivalent shares
outstanding (2) 11,649,000 1,280,000 12,523,624 4,957,000
========================================================
</TABLE>
<TABLE>
<CAPTION>
Greater Bay, Bay
Commercial Services
& Coast
Adjustments Combined Mt. Diablo
----------- -------- ----------
<S> <C> <C> <C>
Interest on loans $ - $ 87,554 $ 6,523
Interest on investment securities - 19,670 679
Other interest income - 9,651 500
-------------------------------------------
Total interest income - 116,875 7,702
Interest on deposits - 38,382 3,018
Other interest expense - 6,904 -
-------------------------------------------
Net interest income - 71,589 4,684
Provision for loans losses - 4,618 650
-------------------------------------------
Net interest income after provision for loan losses - 66,971 4,034
Other income - 11,896 486
Operating expenses - 47,441 3,178
-------------------------------------------
Income before provision for income taxes and -
merger and other related nonrecurring costs and extraordinary items - 31,426 1,342
Provision for income taxes - 11,232 546
-------------------------------------------
Net income before merger and other related nonrecurring costs - 20,194 796
Merger and other related nonrecurring costs, net tax - 1,314 -
-------------------------------------------
Income before extraordinary items - 18,880 796
Extraordinary items - - -
-------------------------------------------
Net income $ - $ 18,880 $ 796
===========================================
Net income per share - basic (1) $ - $ 1.37 $ 0.66
===========================================
Average common shares outstanding (2) (1,714,496) 14,687,468 1,215,000
===========================================
Net income per share - diluted (1) $ - $ 1.28 $ 0.59
===========================================
Average common and common equivalent shares
outstanding (2) (1,764,692) 15,715,932 1,352,000
===========================================
</TABLE>
<TABLE>
<CAPTION>
Greater Bay, Bay
Commercial Services
Coast & Mt. Diablo
Adjustments Combined (3)
----------- --------
<S> <C> <C>
Interest on loans $ - $ 94,077
Interest on investment securities - 20,349
Other interest income - 10,151
---------------------------
Total interest income - 124,577
Interest on deposits - 41,400
Other interest expense - 6,904
---------------------------
Net interest income - 76,273
Provision for loans losses - 5,268
---------------------------
Net interest income after provision for loan losses - 71,005
Other income - 12,382
Operating expenses - 50,619
---------------------------
Income before provision for income taxes and -
merger and other related nonrecurring costs and extraordinary items - 32,768
Provision for income taxes - 11,778
---------------------------
Net income before merger and other related nonrecurring costs - 20,990
Merger and other related nonrecurring costs, net tax - 1,314
---------------------------
Income before extraordinary items - 19,676
Extraordinary items - -
---------------------------
Net income $ - $ 19,676
===========================
Net income per share - basic (1) $ - $ 1.33
===========================
Average common shares outstanding (2) (104,612) 15,797,856
===========================
Net income per share - diluted (1) $ - $ 1.24
===========================
Average common and common equivalent shares
outstanding (2) (116,407) 16,951,525
===========================
</TABLE>
(1) Before merger and other related nonrecurring costs and extraordinary items
(2) Calculated as the historical Greater Bay weighted average shares plus the
historical Mt. Diablo and Coast weighted average shares adjusted for the
assumed conversion ratio of 0.9139 and 0.644, respectively.
(3) For pro forma financial information related to the merger of Greater Bay and
Mt. Diablo, see Greater Bay's Registration Statement on Form S-4, filed with
the SEC on November 1, 1999, as amended on November 9, 1999 (Reg. No. 333-
90025).
<PAGE>
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 1998
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Bay Greater Bay
Greater Commercial & Bay Commercial
Bay Services Services Combined Coast
--- -------- ----------------- -----
<S> <C> <C> <C> <C>
Interest on loans $ 93,915 $ 8,177 $ 102,092 $16,891
Interest on investment securities 20,075 2,023 22,098 5,848
Other interest income 10,808 - 10,808 1,388
-------------------------------------------------------
Total interest income 124,798 10,200 134,998 24,127
Interest on deposits 43,004 3,406 46,410 5,589
Other interest expense 8,176 73 8,249 1,174
-------------------------------------------------------
Net interest income 73,618 6,721 80,339 17,364
Provision for loans losses 6,235 134 6,369 300
-------------------------------------------------------
Net interest income after provision for loan losses 67,383 6,587 73,970 17,064
Other income 9,720 941 10,661 5,860
Operating expenses 46,436 5,656 52,092 12,355
-------------------------------------------------------
Income before provision for income taxes and
merger and other related nonrecurring costs and extraordinary items 30,667 1,872 32,539 10,569
Provision for income taxes 10,050 657 10,707 4,408
-------------------------------------------------------
Net income before merger and other related nonrecurring costs, net of tax 20,617 1,215 21,832 6,161
Merger and other related nonrecurring costs, net of tax 1,674 - 1,674 -
Net income $ 18,943 $ 1,215 $ 20,158 $ 6,161
=======================================================
Net income per share - basic (1) $ 1.90 $ 1.13 $ 1.88 $ 1.28
=======================================================
Average common shares outstanding (2) 10,858,000 1,080,000 11,595,964 4,803,000
=======================================================
Net income per share - diluted (1) $ 1.77 $ 0.95 $ 1.75 $ 1.25
=======================================================
Average common and common equivalent shares
outstanding (2) 11,637,000 1,277,000 12,509,574 4,936,000
=======================================================
</TABLE>
<TABLE>
<CAPTION>
Greater Bay, Bay
Commercial Services
& Coast
Adjustments Combined Mt. Diablo
----------- -------- ----------
<S> <C> <C> <C>
Interest on loans $ - $ 118,983 $ 9,269
Interest on investment securities - 27,946 997
Other interest income - 12,196 642
-------------------------------------------
Total interest income - 159,125 10,908
Interest on deposits - 51,999 4,153
Other interest expense - 9,423 6
-------------------------------------------
Net interest income - 97,703 6,749
Provision for loans losses - 6,669 790
-------------------------------------------
Net interest income after provision for loan losses - 91,034 5,959
Other income - 16,521 709
Operating expenses - 64,447 4,312
-------------------------------------------
Income before provision for income taxes and -
merger and other related nonrecurring costs and extraordinary items - 43,108 2,356
Provision for income taxes - 15,115 960
-------------------------------------------
Net income before merger and other related nonrecurring costs, net of tax - 27,993 1,396
Merger and other related nonrecurring costs, net of tax - 1,674 -
-------------------------------------------
Net income $ - $ 26,319 $ 1,396
===========================================
Net income per share - basic (1) $ - $ 1.91 $ 1.15
===========================================
Average common shares outstanding (2) (1,709,868) 14,689,096 1,215,000
===========================================
Net income per share - diluted (1) $ - $ 1.78 0.98
===========================================
Average common and common equivalent shares
outstanding (2) (1,757,216) 15,688,358 1,423,000
===========================================
</TABLE>
<TABLE>
<CAPTION>
Greater Bay, Bay
Commercial Services,
Coast & Mt. Diablo
Adjustments Combined (3)
----------- --------
<S> <C> <C>
Interest on loans $ - $ 128,252
Interest on investment securities - 28,943
Other interest income - 12,838
-------------------------------------
Total interest income - 170,033
Interest on deposits - 56,152
Other interest expense - 9,429
-------------------------------------
Net interest income - 104,452
Provision for loans losses - 7,459
-------------------------------------
Net interest income after provision for loan losses - 96,993
Other income - 17,230
Operating expenses - 68,759
-------------------------------------
Income before provision for income taxes and
merger and other related nonrecurring costs and extraordinary items - 45,464
Provision for income taxes - 16,075
-------------------------------------
Net income before merger and other related nonrecurring costs, net of tax - 29,389
Merger and other related nonrecurring costs, net of tax - 1,674
-------------------------------------
Net income $ - 27,715
=====================================
Net income per share - basic (1) $ - $ 1.86
=====================================
Average common shares outstanding (2) (104,612) 15,799,484
=====================================
Net income per share - diluted (1) $ - $ 1.73
=====================================
Average common and common equivalent shares
outstanding (2) (122,520) 16,988,838
=====================================
</TABLE>
(1) Before merger and other related nonrecurring costs and extraordinary items
(2) Calculated as the historical Greater Bay weighted average shares plus the
historical Mt. Diablo and Coast weighted average shares adjusted for the
assumed conversion ratio of 0.9139 and 0.644, respectively.
(3) For pro forma financial information related to the merger of Greater Bay and
Mt. Diablo, see Greater Bay's Registration Statement on Form S-4, filed with
the SEC on November 1, 1999, as amended on November 9, 1999 (Reg. No. 333-
90025).
<PAGE>
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 1997
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Great Bay &
Bay Bay Commercial
Greater Commercial Services
Bay Services Combined Coast
-------- --------- ------------- ------
<S> <C> <C> <C> <C>
Interest on loans ....................................................... $ 78,278 $ 7,137 $ 85,415 $ 14,383
Interest on investment securities ....................................... 10,323 1,622 11,945 5,052
Other interest income ................................................... 9,660 -- 9,660 1,244
------------------------------------------------------
Total interest income ................................................ 98,261 8,759 107,020 20,679
Interest on deposits .................................................... 33,565 2,860 36,425 4,172
Other interest expense .................................................. 3,447 96 3,543 1,455
------------------------------------------------------
Net interest income ..................................................... 61,249 5,803 67,052 15,052
Provision for loans losses .............................................. 7,026 52 7,078 450
------------------------------------------------------
Net interest income after provision for loan losses ..................... 54,223 5,751 59,974 14,602
Other income ............................................................ 9,058 971 10,029 5,060
Operating expenses ...................................................... 38,791 5,072 43,863 11,006
------------------------------------------------------
Income before provision for income taxes and
merger and other related nonrecurring costs and extraordinary items ... 24,490 1,650 26,140 8,656
Provision for income taxes .............................................. 8,784 588 9,372 3,501
------------------------------------------------------
Net income before merger and other related nonrecurring costs, net of
tax...................................................................... 15,706 1,062 16,768 5,155
Merger and other related nonrecurring costs, net of tax ................. 2,282 -- 2,282 --
------------------------------------------------------
Net income ........................................................... $ 13,424 $ 1,062 $ 14,486 $ 5,155
======================================================
Net income per share - basic (1) ........................................ $ 1.51 $ 0.99 $ 1.50 $ 1.06
======================================================
Average common shares outstanding (2) ................................... 10,421,000 1,077,000 11,156,914 4,853,000
======================================================
Net income per share - diluted (1) ...................................... $ 1.40 $ 0.84 $ 1.38 $ 1.05
======================================================
Average common and common equivalent shares
outstanding (2) ...................................................... 11,254,000 1,258,000 12,113,591 4,931,000
======================================================
<CAPTION>
Greater Greater
Bay, Bay Bay, Bay
Commercial Commerical
Services Services,
& Coast Mt. Coast & Mt. Diablo
Ajustments Combined Diablo Adjustments Combined(3)
---------- -------- ----- ---------- ------------
<S> <C> <C> <C> <C> <C>
Interest on loans ........................................$ -- $ 99,798 $ 5,723 $ -- $ 105,521
Interest on investment securities ........................ -- 16,997 372 -- 17,369
Other interest income .................................... -- 10,904 344 -- 11,248
----------------------------------------------------------------------
Total interest income ................................. -- 127,699 6,439 -- 134,138
Interest on deposits ..................................... -- 40,597 2,553 -- 43,150
Other interest expense ................................... -- 4,998 3 -- 5,001
----------------------------------------------------------------------
Net interest income ...................................... -- 82,104 3,883 -- 85,987
Provision for loans losses ............................... -- 7,528 463 -- 7,991
----------------------------------------------------------------------
Net interest income after provision for loan losses ...... -- 74,576 3,420 -- 77,996
Other income ............................................. -- 15,089 348 -- 15,437
Operating expenses ....................................... -- 54,869 2,627 -- 57,496
----------------------------------------------------------------------
Income before provision for income taxes and
merger and other related nonrecurring costs and
extraordinary items ..................................... -- 34,796 1,141 -- 35,937
Provision for income taxes ............................... -- 12,873 427 -- 13,300
----------------------------------------------------------------------
Net income before merger and other related
nonrecurring costs, net of tax............................. -- 21,923 714 -- 22,637
Merger and other related nonrecurring costs, net of tax .... -- 2,282 -- -- 2,282
----------------------------------------------------------------------
Net income ............................................ $ -- $ 19,641 $ 714 $ -- $ 20,355
======================================================================
Net income per share - basic (1) ......................... $ -- $ 1.53 $ 0.68 $ -- $ 1.48
======================================================================
Average common shares outstanding (2) ................... (1,727,668) 14,282,246 1,053,000 (90,663) 15,244,583
======================================================================
Net income per share - diluted (1) ..................... $ -- $ 1.43 $ 0.63 $ -- $ 1.39
======================================================================
Average common and common equivalent shares
outstanding (2) ..................................... (1,755,436) 15,289,155 1,136,000 (97,810) 16,327,345
======================================================================
</TABLE>
(1) Before merger and other related nonrecurring costs and extraordinary items
(2) Calculated as the historical Greater Bay weighted average shares plus the
historical Mt. Diablo and Coast weighted average shares adjusted for the
assumed conversion ratio of 0.9139 and 0.644, respectively.
(3) For pro forma financial information related to the merger of Greater Bay and
Mt. Diablo, see Greater Bay's Registration Statement on Form S-4, filed with
the SEC on November 1, 1999, as amended on November 9, 1999 (Reg. No. 333-
90025).
<PAGE>
<TABLE>
<CAPTION>
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 1996
(in thousands, except per share amounts)
Bay Greater Bay
Greater Commercial & Bay Commercial
Bay Services Services Combined Coast
--- -------- ----------------- -----
<S> <C> <C> <C> <C>
Interest on loans .................................................... $ 57,379 $ 6,463 $ 63,842 $ 12,845
Interest on investment securities .................................... 9,222 1,363 10,585 4,571
Other interest income ................................................ 4,683 -- 4,683 832
-----------------------------------------------------
Total interest income ............................................. 71,284 7,826 79,110 18,248
Interest on deposits ................................................. 23,744 2,351 26,095 3,435
Other interest expense ............................................... 1,174 106 1,280 1,378
-----------------------------------------------------
Net interest income .................................................. 46,366 5,369 51,735 13,435
Provision for loans losses ........................................... 3,029 -- 3,029 900
-----------------------------------------------------
Net interest income after provision for loan losses .................. 43,337 5,369 48,706 12,535
Other income ......................................................... 7,444 1,080 8,524 4,898
Operating expenses ................................................... 35,292 4,686 39,978 10,539
-----------------------------------------------------
Income before provision for income taxes and ......................... -- -- -- --
merger and other related nonrecurring costs and extraordinary
items .............................................................. 15,489 1,763 17,252 6,894
Provision for income taxes ........................................... 5,735 680 6,415 2,766
-----------------------------------------------------
Net income before merger and other related nonrecurring costs,
net of tax ......................................................... 9,754 1,083 10,837 4,128
Merger and other related nonrecurring costs, net of tax .............. 1,991 -- 1,991 --
-----------------------------------------------------
Net income ........................................................ $ 7,763 $ 1,083 $ 8,846 $ 4,128
=====================================================
Net income per share - basic (1) ..................................... $ 0.97 $ 1.01 $ 1.01 $ 0.85
=====================================================
Average common shares outstanding (2) ................................ 10,014,000 1,077,000 10,749,914 4,881,000
=====================================================
Net income per share - diluted (1) ................................... $ 0.91 $ 0.89 $ 0.94 $ 0.84
=====================================================
Average common and common equivalent shares
outstanding (2) ................................................... 10,747,000 1,217,000 11,578,576 4,919,000
=====================================================
<CAPTION>
Greater Bay, Bay Greater Bay, Bay
Commercial Services Commercial Services
& Coast Coast & Mt. Diablo
Adjustments Combined Mt. Diablo Adjustments Combined(3)
----------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Interest on loans .............................................. $ -- $ 76,687 $ 3,545 $ -- $ 80,232
Interest on investment securities .............................. -- 15,156 248 -- 15,404
Other interest income .......................................... -- 5,515 276 -- 5,791
---------------------------------------------------------------
Total interest income ....................................... -- 97,358 4,069 -- 101,427
Interest on deposits ........................................... -- 29,530 1,672 -- 31,202
Other interest expense ......................................... -- 2,658 -- -- 2,658
---------------------------------------------------------------
Net interest income ............................................ -- 65,170 2,397 -- 67,567
Provision for loans losses ..................................... -- 3,929 181 -- 4,110
---------------------------------------------------------------
Net interest income after provision for loan losses ............ -- 61,241 2,216 -- 63,457
Other income ................................................... -- 13,422 145 -- 13,567
Operating expenses ............................................. -- 50,517 1,995 -- 52,512
---------------------------------------------------------------
Income before provision for income taxes and
merger and other related nonrecurring costs and
extraordinary items .......................................... -- 24,146 366 -- 24,512
Provision for income taxes ..................................... -- 9,181 (137) -- 9,044
---------------------------------------------------------------
Net income before merger and other related nonrecurring
costs, net of tax ............................................ -- 14,965 503 -- 15,468
Merger and other related nonrecurring costs, net of tax ........ -- 1,991 -- -- 1,991
---------------------------------------------------------------
Net income .................................................. $ -- $ 12,974 $ 503 $ -- $ 13,477
===============================================================
Net income per share - basic (1) ............................... $ -- $ 1.08 $ 0.56 $ -- $ 1.05
===============================================================
Average common shares outstanding (2) .......................... (1,737,636) 13,893,278 900,000 (77,490) 14,715,788
===============================================================
Net income per share - diluted (1) ............................. $ -- $ 1.01 $ 0.56 $ -- $ 0.99
===============================================================
Average common and common equivalent shares
outstanding (2) ............................................. (1,751,164) 14,746,412 900,000 (77,490) 15,568,922
===============================================================
</TABLE>
(1) Before merger and other related nonrecurring costs and extraordinary items
(2) Calculated as the historical Greater Bay weighted average shares plus the
historical Mt. Diablo and Coast weighted average shares adjusted for the
assumed conversion ratio of 0.9139 and 0.644, respectively.
(3) For pro forma financial information related to the merger of Greater Bay and
Mt. Diablo, see Greater Bay's Registration Statement on Form S-4, filed with
the SEC on November 1, 1999, as amended on November 9, 1999 (Reg. No. 333-
90025).
