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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): September 15, 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
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Item 5. Other Events.
On September 15, 1999, Greater Bay Bancorp (the "Registrant") entered into
an Agreement and Plan of Reorganization with Mt. Diablo Bancshares ("MDB")
providing for the merger of MDB 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 MDB.
Following consummation of the Merger, Mt. Diablo National Bank, a wholly owned
subsidiary of MDB, will become a wholly owned subsidiary of the Registrant.
Item 7. Financial Statements and Exhibits.
Exhibits
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2 Agreement and Plan of Reorganization, dated as of September 15, 1999, by
and between Greater Bay Bancorp and Mt. Diablo Bancshares
99.1 Press Release dated September 15, 1999
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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: September 17, 1999 By: /s/ Linda M. Iannone
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Linda M. Iannone
Senior Vice President and General
Counsel
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Exhibit Index
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2 Agreement and Plan of Reorganization, dated as of September 15, 1999, by
and between Greater Bay Bancorp and Mt. Diablo Bancshares
99.1 Press Release dated September 15, 1999
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EXHIBIT 2
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
GREATER BAY BANCORP
AND
MT. DIABLO BANCSHARES
September 15, 1999
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AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made and entered into
as of the 15th day of September, 1999, by and between GREATER BAY BANCORP, a
California corporation ("GBB"), and MT. DIABLO BANCSHARES, a California
corporation ("MDB").
WHEREAS, the Boards of Directors of GBB and MDB deem advisable and in the best
interests of their respective shareholders the merger of MDB 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 MDB have approved the Merger
pursuant to this Agreement and the Agreement of Merger by and between GBB and
MDB (the "Agreement of Merger"), in substantially the form of Exhibit A attached
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hereto, pursuant to which MDB will merge with and into GBB and each outstanding
share of MDB common stock, no par value ("MDB Stock"), excluding any MDB
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; 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 I
DEFINITIONS
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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.
"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).
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"BAB" means Bay Area Bank, a California state chartered bank and wholly owned
subsidiary of GBB.
"Banks" means CNB, GGB, BAB, 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 required or
permitted to be closed.
"CGCL" has the meaning set forth in the second recital of this Agreement.
"Certificates" has the meaning set forth in Section 2.5(b).
"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, subject to the second sentence of Section 2.2(a)(iv), 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 MDB, (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 MDB to its shareholders of a notice of 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; provided, however in no event
shall the Closing Date be prior to November 30, 1999.
"CNB" means Cupertino National Bank, a national banking association and wholly
owned subsidiary of GBB.
"Code" shall have the meaning set forth in the third recital of this Agreement.
"Competing Transaction" has the meaning set forth in Section 6.1(n).
"Consultant's Agreement" means the letter agreement dated March 18, 1999 between
Joseph Colmery and MDB.
"Conversion Ratio" has the meaning set forth in Section 2.2(a).
"Covered Person" has the meaning set forth in Section 4.30.
"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 of
the State of California.
"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.
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"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 six month period ended June 30, 1999.
"Financial Statements of MDB" means the audited consolidated financial
statements of MDB consisting of the consolidated statements of condition 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
MDB's unaudited consolidated balance sheet and consolidated statement of income
and cash flows as of and for the six month period ended June 30, 1999.
"FRB" means the Board of Governors of the Federal Reserve System.
"GBB Acquisition Transaction" has the meaning set forth in Section 2.2(a)(iv).
"GBB 401(k) Plan" means the Greater Bay Bancorp 401(k) Profit Sharing Plan.
"GBB Conflicts and Consents List" has the meaning set forth in Section 5.5.
"GBB Filings" has the meaning set forth in Section 5.4.
"GBB Stock" has the meaning set forth in the second recital of this Agreement.
"GBB Stock Option Plan" means the Greater Bay Bancorp 1996 Stock Option Plan, as
amended.
"GBB Supplied Information" has the meaning set forth in Section 5.14.
"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.
"IRS" means the Internal Revenue Service.
"MDB 401(k) Plan" means the Mt. Diablo Bancshares 401(k) Plan.
"MDB Conflicts and Consents List" has the meaning set forth in Section 4.6.
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"MDB Contract List" has the meaning set forth in Section 4.16.
"MDB Derivatives List" has the meaning set forth in Section 4.32.
"MDB Dissenting Shares" means any shares of MDB Stock held by "dissenting
shareholders" within the meaning of Chapter 13 of the CGCL.
"MDB Employee Plan List" has the meaning set forth in Section 4.20.
"MDB Environmental Compliance List" has the meaning set forth in Section
4.12(b).
"MDB Filings" has the meaning set forth in Section 4.5.
"MDB Filings List" has the meaning set forth in Section 4.5.
"MDB Adjusted Book Value" means the total shareholders' equity of MDB as
reflected on the consolidated financial statements to be provided by MDB to GBB
pursuant to Section 11.14 as adjusted (a) to eliminate all amounts paid in
connection with the exercise of MDB Stock Options (as defined herein) since June
30, 1999; (b) to eliminate any amount related to accumulated other comprehensive
income and including instead on such financial statements the amount of MDB's
consolidated accumulated other comprehensive income as of June 30, 1999, and (c)
to deduct any dividends to be paid pursuant to Section 6.1(b) hereof after the
date of such consolidated financial statements.
"MDB Indemnification List" has the meaning set forth in Section 4.30.
"MDB Insurance List" has the meaning set forth in Section 4.7.
"MDB Intellectual Property List" has the meaning set forth in Section 4.35.
"MDB Investment Securities List" has the meaning set forth in Section 4.26.
"MDB List" means any list required to be furnished by MDB to GBB under this
Agreement
"MDB Litigation List" has the meaning set forth in Section 4.10.
"MDB Loan List" has the meaning set forth in Section 4.25.
"MDB Offices List" has the meaning set forth in Section 4.23.
"MDB Operating Losses List" has the meaning set forth in Section 4.24.
"MDB Perfected Dissenting Shares" means MDB Dissenting Shares which the holders
thereof have not withdrawn or caused to lose their status as MDB Dissenting
Shares.
"MDB Personal Property List" has the meaning set forth in Section 4.8.
"MDB Real Property List" has the meaning set forth in Section 4.9.
"MDB Regulatory Issue List" has the meaning set forth in Section 4.28.
"MDB Shareholders' Meeting" means the meeting of MDB's shareholders referred to
in Section 6.5.
"MDB Stock" has the meaning set forth in the second recital of this Agreement.
"MDB Stock Option" means any option issued pursuant to the MDB Stock Option
Plan.
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"MDB Stock Option Plan" means the Mt. Diablo Bancshares 1992 Stock Option Plan,
as amended.
"MDB Supplied Information" has the meaning set forth in Section 4.34.
"MDB Tax List" has the meaning set forth in Section 4.11.
"MDB Undisclosed Liabilities List" has the meaning set forth in Section 4.19.
"MDNB" means Mt. Diablo National Bank, a national banking association and wholly
owned subsidiary of MDB.
"MPB" means Mid-Peninsula Bank, a California state chartered bank and wholly-
owned subsidiary of GBB.
"OCC" means the Office of the Comptroller of the Currency.
"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.
"Proxy Statement and Prospectus" means the 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 MDB Shareholders' Meeting and to
offer and sell the shares of GBB Stock to be issued in connection with the
Merger.
"PwC" means PricewaterhouseCoopers LLP, GBB's and MDB's independent public
accountants.
"Related Group of Persons" means Affiliates, members of an Immediate Family or
Persons whose obligations 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 Proxy Statement and Prospectus in connection with the MDB
Shareholders' Meeting pursuant to the regulations promulgated under the Exchange
Act.
"Scheduled Contracts" has the meaning set forth in Section 4.16.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"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.
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"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
$33.00, the right of GBB to elect to issue that number of shares of GBB Stock
equal to the quotient obtained by dividing $32.175 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 II
TERMS OF MERGER
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2.1 Effect of Merger and Surviving Corporation. At the Effective Time
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of the Merger, MDB 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 MDB 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 MDB 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 MDB
and GBB and the title to any interest in real property and any interest in
personal property vested by deed or otherwise in either MDB 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 MDB and GBB shall be preserved
unimpaired and all debts, liabilities and duties of MDB 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 MDB. Subject to Section 2.4, each share of MDB Stock
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issued and outstanding immediately prior to the Effective Time of the Merger
shall, without any further action on the part of MDB or the holders of such
shares, be treated on the basis set forth herein.
(a) Conversion of MDB Stock. At the Effective Time of the Merger,
-----------------------
pursuant to the Agreement of Merger, each outstanding share of MDB Stock
excluding any MDB Perfected Dissenting Shares shall, without any further action
on the part of MDB or the holders of any such shares, be automatically canceled
and cease to be an issued and outstanding share of MDB Stock and be converted
into shares of GBB Stock (the "Conversion Ratio") as follows:
(i) If the Average Closing Price is greater than $38.00, a
number of shares of GBB Stock equal to the quotient obtained by dividing (A)
$37.05 plus the product of
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0.333 times the difference between the Average Closing Price and $38.00, by (B)
the Average Closing Price.
(ii) If the Average Closing Price is from $33.00 to $38.00,
0.9750 shares of GBB Stock.
(iii) If the Average Closing Price is less than $33.00, GBB may,
but shall not be required to, elect the Top Up Option. GBB shall notify MDB in
writing, within one Business Day from the date of calculation of the Average
Closing Price, whether GBB will elect the Top Up Option. If GBB does not elect
the Top Up Option, MDB may terminate this Agreement pursuant to Section 13.1(l)
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 MDB 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 0.9750 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 $32.175 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 the surviving
corporation, and the price to be paid to GBB shareholders in such transaction
would exceed $38.00 per share, and such transaction is not terminated or
abandoned prior to the Closing Date (a "GBB Acquisition Transaction"), the
Conversion Ratio shall be 0.9750 shares of GBB Stock. If such GBB Acquisition
Transaction is terminated and abandoned during the period for determining the
Average Closing Price, GBB can elect to either set the Conversion Ratio at
0.9750 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 MDB Stock pursuant to this Section 2.2(a)(iv),
GBB and MDB 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.
(b) MDB Perfected Dissenting Shares. MDB 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 dissenting shareholder who is entitled to payment
for his shares of MDB Perfected Dissenting Shares 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,
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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.
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2.3 Effect on GBB Stock. On the Effective Time of the Merger, each
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outstanding share of GBB Stock shall remain an outstanding share of GBB Stock
and shall not be converted or otherwise affected by the Merger.
2.4 Fractional Shares. No fractional shares of GBB Stock shall be
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issued in the Merger. In lieu thereof, each holder of MDB 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 sale 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.
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(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 MDB 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 MDB 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 MDB 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 MDB 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 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 MDB Stock, the transfer of ownership which is not
registered in the transfer records of MDB, a certificate representing the proper
number of shares of GBB Stock may be issued to a transferee if the Certificate
representing such MDB 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
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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 MDB should be unable to surrender the Certificates for such shares,
because they have been lost or destroyed, such holder may deliver in lieu
thereof such 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
MDB 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 MDB Stock, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of MDB 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 MDB following the passage of six months after the Effective
Time of the Merger shall be delivered to GBB, upon demand, and any shareholders
of MDB 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 MDB shall be liable to any holder of shares of
MDB 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,
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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 who is an
Affiliate of MDB 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 MDNB. Immediately after
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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 John J. Hounslow, or
if he is unable or unwilling to serve, such other member of MDB's Board of
Directors designated by MDB 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 MDB, shall be appointed to the
Board of Directors of MDNB.
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 III
THE CLOSING
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3.1 Closing Date. The Closing shall take place on the Closing Date.
------------
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 of
the State of California 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.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MDB
-------------------------------------
MDB represents and warrants to GBB as follows:
4.1 Incorporation, Standing and Power. MDB 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. MDNB is a national banking association duly organized, validly existing and
in good standing under the laws of the United States of America and is
authorized by the OCC to conduct a general banking business. MDNB's deposits are
insured by the FDIC in the manner and to the fullest extent provided by law.
Each of MDB and MDNB 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 MDB or MDNB nor the
location of any of their respective properties requires that either MDB or MDNB
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 MDB on a consolidated basis. MDB has
delivered to GBB true and correct copies of its and MDNB's Articles of
Incorporation and Bylaws, as amended, and in effect as of the date hereof.
4.2 Capitalization.
--------------
(a) As of the date of this Agreement, the authorized capital stock of
MDB consists of 10,000,000 shares of MDB Stock, of which 1,214,653 shares are
outstanding, and 5,000,000 shares of preferred stock, none of which are
outstanding. All of the outstanding shares of MDB Stock are duly authorized,
validly issued, fully paid and nonassessable. Except for MDB Options covering
322,958 shares of MDB Stock granted pursuant to the MDB Stock Option Plan, there
are no outstanding options, warrants or other rights in or with respect to the
unissued shares of MDB Stock nor any securities convertible into such stock, and
MDB 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. MDB
has furnished GBB a list (the "MDB Option List") setting forth the name of each
holder of an MDB Option, the number of shares of MDB 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
MDNB consists of 2,000,000 shares of common stock, $5.00 par value per share, of
which 809,775 shares are outstanding. All of the outstanding shares of such
common stock are duly authorized, validly issued, fully paid and nonassessable
(except to the extent and in the manner provided by the National Bank Act), and
are owned of record and beneficially by MDB. 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 MDNB is
not obligated to issue any additional shares of its common stock or any options,
warrants or other rights in or with
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respect to the unissued shares of its common stock or any other securities
convertible into such stock.
4.3 Subsidiaries. Other than MDNB, MDB 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. MDB has previously furnished to GBB a
--------------------
copy of the Financial Statements of MDB. The Financial Statements of MDB: (a)
present fairly the consolidated financial condition of MDB 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 MDB and MDNB.
4.5 Reports and Filings. Except as set forth in a list (the "MDB
-------------------
Filings List"), since January 1, 1996, each of MDB and MDNB has filed all
reports, returns, registrations and statements (collectively, "MDB Filings"),
together with any amendments required to be made with respect thereto, that were
required to be filed with (a) the OCC, (b) the FRB, (c) the SEC 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 MDB on a
consolidated basis. No administrative actions have been taken or orders issued
in connection with such MDB Filings. As of their respective dates, each of such
MDB 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 MDB
Filings fairly presented the financial position of MDB on a consolidated basis,
MDB alone and MDNB 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. MDB
has furnished or made available to GBB true and correct copies of all MDB
Filings filed since January 1, 1996.
4.6 Authority of MDB. The execution and delivery by MDB of this
----------------
Agreement and the Agreement of Merger and, subject to the requisite approval of
the shareholders of MDB 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 MDB and MDNB. 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 MDB enforceable in accordance with their respective terms,
except as the enforceability thereof may be limited by bankruptcy, liquidation,
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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 MDB to GBB (the "MDB Conflicts and
Consents List"), neither the execution and delivery by MDB of this Agreement and
the Agreement of Merger, the consummation of the transactions contemplated
herein or therein, nor compliance by MDB with any of the provisions hereof or
thereof, will: (a) conflict with or result in a breach of any provision of its
or MDNB'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 MDB or MDNB is a party, or by which MDB or
MDNB 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 MDB or MDNB; or (d) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to MDB or MDNB or any of their respective
properties or assets. Except as set forth in the MDB 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 MDB or
MDNB, and no consent of, approval of or notice to any other Person, is required
in connection with the execution and delivery by MDB of this Agreement and the
Agreement of Merger or the consummation by MDB 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 MDB; (ii) such approvals as may be required by the FRB and
the OCC; (iii) the filing of the 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.
4.7 Insurance. Each of MDB and MDNB 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 MDB to GBB (the "MDB 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 MDB Insurance List, neither MDB nor MDNB 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 MDB Insurance List is a list of
all policies of insurance carried and owned by either MDB or MDNB 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 MDB and MDNB has good and marketable
-----------------
title to all its material properties and assets, other than real property, owned
or stated to be owned by MDB or MDNB, free and clear of all Encumbrances except:
(a) as set forth in the Financial Statements of MDB; (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
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conduct of business of MDB or MDNB; or (e) as set forth in a list furnished by
MDB to GBB (the "MDB Personal Property List.")
4.9 Real Estate. MDB has furnished GBB a list of real property,
-----------
including leaseholds and all other interests in real property (other than
security interests), owned by MDB or MDNB (the "MDB Real Property List"). Each
of MDB and MDNB has duly recorded or caused to be recorded, in the appropriate
county, all recordable interests in the real property described in the MDB Real
Property List. Either MDB or MDNB has good and marketable title to the real
property, and valid leasehold interests in the leaseholds, described in the MDB
Real Property List, free and clear of all Encumbrances, except (a) for rights of
lessors, co-lessees or sublessees in such matters that are reflected in the
lease; (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 MDB Real
Property List. MDB has furnished GBB with true and correct copies of all leases
included in the MDB Real Property List, all title insurance policies and all
documents evidencing recordation of all recordable interests in real property
included in the MDB Real Property List.
4.10 Litigation. Except as set forth in a list furnished by MDB to
----------
GBB (the "MDB Litigation List"), there is no private or governmental suit,
claim, action or proceeding pending, nor to MDB's knowledge threatened, against
MDB or MDNB 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 MDB or MDNB 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 MDB on a consolidated
basis, or the transactions contemplated hereby, or which may involve a judgment
against MDB or MDNB in excess of $25,000. Also, except as disclosed in the MDB
Litigation List, there are no material judgments, decrees, stipulations or
orders against MDB or MDNB 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 MDB to GBB (the "MDB
Tax List"), (A) all material Tax Returns required to be filed by or on behalf of
MDB, MDNB or any of their subsidiaries 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; (B) all Taxes due and payable by or on behalf of MDB,
MDNB or any of their subsidiaries, 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 MDB balance sheet, and adequate
reserves or accruals for Taxes have been provided in the MDB 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 (C) no
agreement, waiver or other document or arrangement extending or
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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 MDB, MDNB or any
of their subsidiaries, or any Affiliated Group(s) of which any of them is or was
a member.
(b) MDB, MDNB and any of their subsidiaries 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 material income or
franchise Tax Returns of MDB, MDNB and any of their subsidiaries relating to the
taxable periods since January 1, 1995 and (ii) any audit report issued within
the last three years relating to any material Taxes due from or with respect to
MDB, MDNB or any of their subsidiaries with respect to their respective income,
assets or operations.
(d) Except as set forth in the MDB Tax List, no claim has been made
by a taxing authority in a jurisdiction where MDB, MDNB or any of their
subsidiaries do not file an income or franchise Tax Return such that MDB, MDNB
or any of their subsidiaries are or may be subject to taxation by that
jurisdiction.
(e) Except as set forth in the MDB 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 MDB, MDNB or any of
their subsidiaries have been fully paid, and there are no other audits or
investigations by any taxing authority in progress, nor have MDB, MDNB or any of
their subsidiaries received any 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 MDB, MDNB or
any of their subsidiaries for any subsequent taxable period that could be
material.
(f) Except as set forth in the MDB Tax List, neither MDB, MDNB or any
of their subsidiaries nor any other Person on behalf of MDB, MDNB or any of
their subsidiaries 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 MDB, MDNB or any of their subsidiaries, (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 MDB, MDNB or any of their subsidiaries or has any
knowledge that the Internal Revenue Service has proposed 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 MDB, MDNB or any of their subsidiaries
or (iii) executed or entered into a closing agreement pursuant to Section 7121
of the Code or any predecessor
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provision thereof or any similar provision of state, local or foreign law with
respect to MDB, MDNB or any of their subsidiaries.
(g) Except as set forth in the MDB Tax List, no property owned by
MDB, MDNB or any of their subsidiaries 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 MDB (except with MDNB) nor MDNB (except with MDB) 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 MDB 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 MDB, MDNB or any of their subsidiaries 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 unpaid Taxes upon any of
the assets of MDB, MDNB or any of their subsidiaries.
(k) Except as set forth in the MDB Tax List, MDB, MDNB or any of
their subsidiaries have no 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 MDB Tax list, none of the members of
MDB's Affiliated Group has any net operating loss carryovers.
(m) MDB agrees, and agrees to cause MDNB or any of their
subsidiaries, 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. MDB acknowledges that its, MDNB's or any of their subsidiaries'
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 MDB nor MDNB 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 MDB on a consolidated basis or MDNB, as the case may be.
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(b) Except as set forth on a list furnished by MDB to GBB (the "MDB
Environmental Compliance List"), to the best of MDB's knowledge (i) each of MDB
and MDNB is in compliance with all Environmental Regulations; (ii) there are no
Tanks on or about MDB Property; (iii) there are no Hazardous Materials on, below
or above the surface of, or migrating to or from MDB Property; (iv) neither MDB
nor MDNB 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 MDB or MDNB or concerning property securing MDB or MDNB
loans and there is no outstanding judgment, order, writ, injunction, decree, or
award against or affecting MDB Property or property securing MDB or MDNB 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 MDB on a consolidated basis. For purposes of this Section 4.12(b), 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 public. "MDB Property" shall mean real
estate currently owned, leased, or otherwise used by MDB or MDNB, or in which
MDB or MDNB 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 MDB or MDNB 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
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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) MDB has provided to GBB phase I environmental assessments with
respect to each interest in real property set forth on the MDB Real Property
List as to which such a phase I environmental investigation has been prepared by
or on behalf of MDB or MDNB. The MDB Real Property list shall disclose each such
property as to which such an assessment has not been prepared on behalf of MDB
or MDNB.
4.13 Performance of Obligations. Each of MDB and MDNB 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 covenant 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 MDB on a consolidated basis. Except for
loans and leases made by MDB or MDNB in the ordinary course of business, to
MDB's knowledge, no party with whom MDB or MDNB has an agreement that is of
material importance to the business of MDB or MDNB is in default thereunder.
4.14 Employees. There are no controversies pending or threatened
---------
between either MDB or MDNB 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 MDB on a consolidated basis. Neither MDB nor MDNB 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 obligations set forth in the
-------------------
Consultant's Agreement, a copy of which has been delivered to GBB, neither MDB
nor MDNB 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
------------------
MDB to GBB (the "MDB Contract List") hereto (all items listed or required to be
listed in such MDB Contract List being referred to herein as "Scheduled
Contracts"), neither MDB nor MDNB is a party or otherwise subject to:
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(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 MDB or MDNB and is not
terminable by MDB or MDNB within one year without penalty or (ii) requires
payment by MDB or MDNB of $25,000 or more per annum;
(b) any advertising, brokerage, licensing, dealership, representative
or agency relationship or contract requiring payment by MDB or MDNB of $25,000
or more per annum;
(c) any contract or agreement that restricts MDB or MDNB (or would
restrict any Affiliate of MDB or MDNB or the Surviving Corporation (including
GBB and its 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 MDB or MDNB in excess of $25,000 per annum other than (A)
financing leases entered into in the ordinary course of business in which MDB or
MDNB is lessor and (B) leases of real property presently used by MDNB as banking
offices;
(e) any mortgage, pledge, conditional sales contract, security
agreement, option, or any other similar agreement with respect to any interest
of MDB or MDNB (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
$25,000 or more;
(f) other than as described in the MDB Filings or as set forth in the
MDB Employee Plan List, any stock purchase, stock option, stock bonus, stock
ownership, profit sharing, group insurance, bonus, deferred compensation,
severance pay, pension, retirement, savings or other incentive, welfare or
employment plan or material agreement providing benefits to any present or
former employees, officers or directors of MDB or MDNB;
(g) any agreement to acquire equipment or any commitment to make
capital expenditures of $25,000 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 MDB or MDNB 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 MDB or MDNB);
(j) any restrictive covenant contained in any deed to or lease of
real property owned or leased by MDB or MDNB (as lessee) that materially
restricts the use, transferability or value of such property;
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(k) any guarantee or indemnification which involves the sum of
$25,000 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
MDB or MDNB without penalty on 30 days' or less notice and which provides for
payments in excess of $25,000 per annum;
(m) any material agreement which would be terminable other than by
MDB or MDNB 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 $25,000 or any sales of assets of MDB or MDNB with recourse of any
kind to MDB or MDNB 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 MDB or MDNB; 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 $25,000 or more to or by MDB or MDNB other than payments made under
or pursuant to loan agreements, 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 MDB or MDNB 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 MDB 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 MDB on a consolidated basis or
that may involve a loss of more than $25,000 in excess of applicable insurance
coverage;
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(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 MDB on a
consolidated basis;
(d) any disposition by MDB or MDNB 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 MDB on a consolidated basis; or
(e) any direct or indirect redemption, purchase or other acquisition
by MDB or MDNB of any equity securities or any declaration, setting aside or
payment of any dividend or other distribution on or in respect of MDB Stock
whether consisting of money, other personal property, real property or other
things of value.
4.18 Licenses and Permits. Each of MDB and MDNB 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 MDB on a consolidated basis. The respective
properties, assets, operations and businesses of MDB and MDNB are and have been
maintained and conducted, in all material respects, in compliance with all
applicable licenses and permits. The respective properties and operations of MDB
and MDNB are and have been maintained and conducted, in all material respects,
in compliance with all applicable laws and regulations.
4.19 Undisclosed Liabilities. Neither MDB nor MDNB has any
-----------------------
liabilities or obligations, either accrued or contingent, that are material to
MDB and that have not been: (a) reflected or disclosed in the Financial
Statements of MDB; (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 MDB to GBB (the "Undisclosed Liabilities List") or on any other MDB
List. MDB does not know of any basis for the assertion against it or MDNB 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 MDB on a consolidated basis that is not fairly reflected in the Financial
Statements of MDB or otherwise disclosed in this Agreement.
4.20 Employee Benefit Plans.
----------------------
(a) MDB has previously made available to GBB copies of each "employee
benefit plan," as defined in Section 3(3) of ERISA, of which MDB or any member
of the same controlled group of corporations, trades or businesses as MDB within
the meaning of Section 4001(a)(14) of ERISA ("ERISA Affiliates") is a sponsor or
participating employer or as to which MDB 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 MDB or
any of its ERISA Affiliates, together with all amendments thereto, all currently
effective and related summary plan descriptions, the determination letter from
the IRS, the
21
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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." MDB 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 any Employee Plan to 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 have been made. Except as
disclosed in a list furnished by MDB to GBB (the "MDB Employee Plan List"),
all Employee Plans were in effect for substantially all of 1998 and 1999 to
date, 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, 1998.
(b) MDB has previously made available to GBB copies or
descriptions of each plan or arrangement maintained or otherwise
contributed to by MDB 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 award, 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 employees, whether active or retired, of MDB or any of its ERISA
Affiliates (such plans and arrangements being collectively referred to
herein as "Benefit Arrangements"). Except as disclosed in the MDB Employee
Plan List hereto, all Benefit Arrangements which are in effect were in
effect for substantially all of 1998 and 1999 to date. 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 MDB
Employee Plan List, there has been no material increase in the compensation
of or benefits payable to any senior executive employee of MDB 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,
MDB and its ERISA Affiliates are in material 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. All government reports and filings required by law have been
properly and timely filed and all information required to be distributed to
participants or beneficiaries has been distributed with respect to each
Employee Plan. MDB 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 knowledge of MDB,
threatened legal action, proceeding or investigation against or involving
any Employee Plan or Benefit Arrangement. 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 or Section 4975 of the Code, has occurred with respect to any
Employee Plan, or any other employee benefit plan maintained by MDB or any
of
22
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its ERISA Affiliates which is covered by Title I of ERISA, which could
subject any person (other than a person for whom MDB is not directly or
indirectly responsible) to liability under Title I of ERISA or to the
imposition of a 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 MDB
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 MDB nor any of its ERISA Affiliates has incurred nor expects
to incur, directly or indirectly, any liability under Title IV or 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 MDB and MDNB) at or after the Effective Time of the Merger.
(d) Neither MDB 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 MDB nor
MDNB knows of any fact which could adversely affect the qualified status of
any such 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 MDB 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 MDB Contract
List or as set forth in the MDB 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 MDB within a period of 30 days following the Effective
Time of the Merger, without payment of any amount as a penalty, bonus,
premium, severance pay or other compensation for such termination.
(f) All group health plans of MDB 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 MDB nor MDNB 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
23
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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 MDB or MDNB 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 MDB 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 MDB or MDNB, 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, 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 MDB and
-----------------
MDNB accurately reflect all material actions taken to this date by the
respective shareholders, board of directors and committees of each of MDB
and MDNB .
4.22 Accounting Records. Each of MDB and MDNB 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 MDB or MDNB which is not easily and readily
available elsewhere, have been duplicated, and such duplicates are stored
safely and securely.
4.23 Offices and ATMs. MDB has furnished to GBB a list (the
----------------
"MDB Offices List") setting forth the headquarters of each of MDB and MDNB
(identified as such) and each of the offices and automated teller machines
("ATMs") maintained and operated by MDB or MDNB (including, without
limitation, representative and loan production offices and operations
centers) and the location thereof. Except as set forth on the MDB Offices
List, neither MDB nor MDNB maintains any other office or ATM or conducts
business at any other location, and neither MDB nor MDNB has applied for or
received permission to open any additional branch or operate at any other
location.
4.24 Operating Losses. MDB has furnished to GBB a list (the
----------------
"MDB Operating Losses List") setting forth any Operating Loss (as herein
defined) which has occurred at MDB during the period after December 31,
1998 to the date of the Agreement. No action has been taken or omitted to
be taken by any employee of MDB that has resulted in the incurrence by
24
<PAGE>
MDB 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 $25,000 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. MDB has furnished to GBB a list (the "MDB
--------------
Loan List") that sets forth (a) as of August 31, 1999, a description of, by
type and classification, if any, each loan, lease, other extension of
credit or commitment to extend credit by MDB or MDNB; (b) sets forth as of
December 31, 1998, by type and classification, all loans, leases, other
extensions and commitments to extend credit of MDB or MDNB 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 MDB or MDNB as to which
any payment of principal, interest or any other amount is 90 days or more
past due.
4.26 Investment Securities. MDB has furnished to GBB a list
---------------------
(the "MDB Investment Securities List") setting forth a description of each
Investment Security held by MDB or MDNB on August 31, 1999. The MDB
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 MDB nor MDNB has any
Investment Security classified as trading.
4.27 Power of Attorney. Neither MDB nor MDNB 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 MDB, there is no fact, event or condition applicable to MDB or
MDNB 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, except as set forth on a list furnished by MDB to GBB (the "MDB
Regulatory Issue List").
4.29 Accounting and Tax Matters. Neither MDB nor MDNB 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 Consultant's
Agreement, neither MDB nor MDNB 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 MDB or MDNB (a "Covered Person"), and to the best
knowledge of MDB, there are no claims for which any Covered Person would be
entitled to indemnification by MDB or
25
<PAGE>
MDNB if such provisions were deemed in effect, except as set forth in a
list furnished by MDB to GBB (the "MDB Indemnification List").
4.31 Community Reinvestment Act. MDNB has received rating of
--------------------------
"satisfactory" in its most recent examination or interim review with
respect to the Community Reinvestment Act. MDNB has not been advised of any
supervisory concerns regarding MDB's compliance with the Community
Reinvestment Act.
4.32 Derivative Transactions. Except as set forth in a list
-----------------------
furnished by MDB to GBB (the "MDB Derivatives List"), neither MDB nor MDNB
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. Except for acting as a trustee under
--------------------
individual retirement accounts, neither MDB nor MDNB presently maintains
trusts or exercises trust powers, including, but not limited to, trust
administration, and neither of them nor any of their predecessors 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 MDB and MDNB 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 MDB and MDNB 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 MDB and MDNB 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 MDB
and MDNB 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 MDB ("MDB
Supplied Information") for inclusion in (a) the Registration Statement on
Form S-4 and the Proxy Statement and Prospectus and (b) any other documents
to be filed with the SEC, the FRB, the OCC 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 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.
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4.35 Intellectual Property. Except as set forth in a list
---------------------
furnished by MDB to GBB (the "MDB Intellectual Property List"), MDB and
MDNB 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 MDB nor MDNB has received any notice with respect thereto that
asserts the rights of others. MDB and MDNB has 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 MDB and MDNB 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 MDB on a consolidated basis. Neither MDB nor MDNB has
received, or reasonably expects to receive, a "Year 2000 Deficiency
Notification Letter" (as such term is employed by the FDIC). MDB 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 Institutions Examination Council Interagency
Statements as such issues affect MDB and MDNB. Between the date of this
Agreement and the Effective Time, MDB shall use commercially practicable
efforts to implement such plan.
4.37 Insider Loans; Other Transactions. MDB has previously
---------------------------------
provided GBB with a listing, current as of August 31, 1999, of all
extensions of credit made by MDB and MDNB 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 MDB nor
MDNB owes any amount to, or has any contract or lease with or commitment
to, any of the present executive officers or directors of MDB or MDNB
(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 MDB Stock Option Plan or any amounts
due pursuant to MDB's Employee Plans).
4.38 Registration Obligation. Neither MDB nor MDNB 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 MDB hereby or in the MDB 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.
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<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF GBB
-------------------------------------
GBB represents and warrants to MDB 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 MDB. 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 11,299,887 shares were outstanding on August 31, 1999 and
4,000,000 shares of preferred stock, no par value, of 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.
5.3 Financial Statements. GBB has previously furnished to MDB a
--------------------
copy of the Financial Statements of GBB. The Financial Statements of GBB:
(a) present fairly 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 its
subsidiaries.
5.4 Reports and Filings. Since January 1, 1996, GBB has 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, and
(c) 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
28
<PAGE>
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 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 MDB (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 subsidiary of GBB is a party, or by which GBB or any subsidiary of
GBB or any of its properties or assets is bound; (c) result in the creation
or imposition of any Encumbrance on any of the properties or assets of GBB
or any subsidiary; or (d) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to GBB or any subsidiary of GBB or
any of its 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, 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; (ii) the filing of the Proxy
Statement and Prospectus and Registration Statement on Forms S-4 with the
SEC and the issuance by the SEC of an order declaring the Registration
Statement on Form S-4 effective; (iii) filing of the Agreement of Merger
with the Secretary of State of the State of California; and (iv) 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,
------------
directly or indirectly, 100% of the outstanding stock of each of the Banks,
Pacific Business Funding Corporation and Peninsula Real Estate Corporation.
As of the date of this Agreement, and except for its investments in the
Banks, Pacific Business Funding Corporation, Peninsula Real Estate
Corporation, GBB Capital I and GBB Capital II, GBB does not own, directly
or indirectly
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(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.
5.7 Brokers and Finders. Except for the obligation to First
-------------------
Security Van Kasper, as set forth in a letter agreement dated May 19, 1999,
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.
5.8 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 its 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 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.
5.9 Licenses and Permits. GBB and each subsidiary of GBB 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.
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5.10 Corporate Records. The minute books of GBB reflect all
-----------------
material actions taken to this date by its shareholders, boards of
directors and committees.
5.11 Accounting Records. GBB and its 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 conformity with generally accepted
accounting principles. Such records, to the extent they contain important
information pertaining to GBB and its subsidiaries which is not easily and
readily available elsewhere, have been duplicated, and such duplicates are
stored safely and securely.
5.12 Facts Affecting Regulatory Approvals. To the best
------------------------------------
knowledge of GBB, there is no fact, event or condition applicable to GBB or
any of its 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.
5.13 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.
5.14 Disclosure Documents and Applications. None of the
-------------------------------------
information supplied or to be supplied by or on behalf of GBB or any of its
subsidiaries ("GBB Supplied Information") for inclusion in (a) the
Registration Statement on Form S-4 and the Proxy Statement and Prospectus
to be mailed to the shareholders of MDB in connection with obtaining the
approval of the shareholders of MDB 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 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.
5.15 Nasdaq Listing. As of the date hereof, GBB Stock is listed
--------------
on the Nasdaq National Market System.
5.16 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.
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5.17 Year 2000. The mission critical computer software operated
---------
by GBB 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. GBB has not received, and reasonably expects that it
will not receive, a "Year 2000 Deficiency Notification Letter" (as such
term is employed by the FDIC).
ARTICLE VI
COVENANTS OF MDB PENDING EFFECTIVE TIME OF THE MERGER
-----------------------------------------------------
MDB 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, MDB agrees to conduct its business (and to cause MDNB to
conduct its business) in the ordinary course in substantially the manner
heretofore conducted and in accordance with sound banking practices, and
MDB and MDNB shall not, without the prior written consent of GBB, which GBB
shall not unreasonably withhold or delay:
(a) issue, sell or grant any MDB Stock (except pursuant to the
exercise of MDB Options outstanding as of the date hereof), any other
securities (including long term debt) of MDB or MDNB, or any rights, stock
appreciation rights, options or securities to acquire any MDB Stock, or any
other securities (including long term debt) of MDB or MDNB;
(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 MDB or MDNB, provided, however, that subject
to Section 6.10, MDB 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 MDB or MDNB or any rights, options, or securities to
acquire any capital stock or other securities of MDB or MDNB;
(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;
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(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 $200,000 on an
unsecured basis, or $500,000 if secured by a lien on real estate or cash
(consent shall be deemed granted if within one Business Day of written notice
together with all relevant documents delivered to GBB's Chief Credit Officer,
written notice of objection is not received by MDB);
(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 MDB Stock, or any
Affiliate of such Person, if such credit would exceed $25,000;
(l) close any offices at which business is conducted or open any new
offices, except to close its temporary Pleasanton office and to open its
Blackhawk office and a proposed permanent Pleasanton office;
(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;
(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 MDNB'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 MDB 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 MDB or MDNB: any merger,
consolidation, share exchange or other business combination; a sale, lease,
exchange, mortgage, pledge, transfer or other disposition of assets of MDB or
MDNB representing 10% or more of the consolidated assets of MDB; a sale of
33
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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 MDB or
MDNB; a tender offer or exchange offer for at least 10% of the outstanding
shares; a solicitation of proxies in opposition to approval of the Merger by
MDB's shareholders; or a public announcement of an unsolicited bona fide
proposal, plan, or intention to do any of the foregoing. MDB and MDNB 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. MDB and MDNB shall take the
necessary steps to inform promptly the appropriate individuals or entities
referred to above of the obligations undertaken in this Section. MDB and MDNB
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 MDB and
MDNB. MDB and MDNB 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 MDB and MDNB to return all
confidential information heretofore furnished to such person by or on behalf of
MDB and MDNB and enforce any such confidentiality agreements. Notwithstanding
any other provision in this Section 6.1(n), nothing in this Agreement shall
prevent MDB 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 MDB Stock if and only if, prior to
participating in any of the foregoing, (A) the Board of Directors of MDB
concludes in good faith that the Competing Transaction, if consummated, would
result in a transaction more favorable to holders of MDB 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 MDB 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 MDB 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 MDB and MDNB;
(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 MDB's or MDNB's business or operations, except such changes as may be
required in the opinion of MDB's or MDNB'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 or obligations of the
United States Treasury or an agency of the United
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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, or bank qualified investment grade
municipal bonds, 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 one Business Day 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 MDB);
(r) amend or modify any Scheduled Contract or enter into any
agreement or contract that would be a Scheduled Contract under Section 4.15;
(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) knowingly take any action which would or is reasonably likely to
(i) adversely affect the ability of GBB, the Banks, MDB or MDNB to obtain any
necessary approval of any Governmental Entity required for the transactions
contemplated hereby; (ii) adversely affect MDB's or MDNB'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, MDB's or MDNB'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;
(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) knowingly 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 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;
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(bb) incur any indebtedness for borrowed money or assume, guarantee,
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, MDB shall (and
shall cause MDNB 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 MDB or MDNB;
(b) use its commercially reasonable efforts to keep in full force and
effect all of the existing material permits and licenses of MDB and MDNB;
(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;
(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 MDB Stock prior to the record
date fixed for the MDB 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 MDB, or any actual or threatened
collection enforcement activity by any tax authority with respect to tax
liabilities of MDB;
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(i) make available to GBB monthly unaudited balance sheets and income
statements of MDB within 25 days after the close of each calendar month;
(j) not later than the 30th day of each calendar month and as of the
Closing Date, amend or supplement the MDB Lists prepared and delivered pursuant
to Article 4 to ensure that the information set forth in the MDB Lists
accurately reflects the then-current status of MDB and MDNB.
(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 MDB or MDNB 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 cause Steve Shindel to complete as of a date within 45 days of the
anticipated Closing Date a review of the MDNB's assets in a manner consistent
with his prior reviews; and
(m) use its commercially reasonable efforts to 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) MDB 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 MDB and MDNB and the condition thereof and to update such
examination at such intervals as GBB shall deem appropriate. Such examination
shall be conducted in cooperation with the officers of MDB and MDNB and in such
a manner as to minimize any disruption of, or interference with, the normal
business operations of MDB and MDNB. Upon the request of GBB, MDB will request
PwC 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 MDB
and MDNB, including tax accrual work papers prepared for MDB and MDNB during the
preceding 60 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 MDB or MDNB 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 MDB herein; provided, that GBB
shall disclose to MDB any fact or circumstance it may discover which GBB
believes renders any representation or warranty made by MDB hereunder incorrect
in any respect. GBB covenants and agrees that it, its subsidiaries, and their
respective representatives, counsel, accountants, agents and employees will hold
in strict confidence all documents and information concerning MDB and MDNB so
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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 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 MDB.
(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 MDB or MDNB after the date hereof, and all information
associated with such loan, lease or other credit, such review to take place, if
possible, on MDB's premises.
(c) A representative of GBB, selected by GBB in its sole discretion,
shall be permitted by MDB and MDNB to attend all regular and special Board of
Directors' and committee meetings of MDB and MDNB 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 MDB under this Agreement.
6.4 Filings. MDB agrees that through the Effective Time of the
-------
Merger, each of MDB's or MDNB'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.
6.5 Notices; Reports. MDB will promptly notify GBB of any event of
----------------
which MDB obtains knowledge which has had or may have a materially adverse
effect on the financial condition, operations, business or prospects of MDB on a
consolidated basis, or in the event that MDB 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 MDB 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 MDB or MDNB or committees thereof, any
report by MDB or MDNB for submission to the Board of Directors of MDB or MDNB or
committees thereof, provided, however, that MDB need not furnish to GBB
communications of MDB's legal counsel regarding MDB'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 MDB to its shareholders or other security holders,
and all reports filed by MDB or MDNB with the
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FRB or the OCC, and (iii) such other existing reports as GBB may reasonably
request relating to MDB or MDNB.
6.6 MDB Shareholders' Meeting. Promptly after the execution of this
-------------------------
Agreement, MDB 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 MDB shall, subject to its
fiduciary duties, recommend that its shareholders approve this Agreement and the
transactions contemplated hereby, and the Board of Directors of MDB 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 MDB
Stock to approve this Agreement and the transactions contemplated hereby.
6.7 Certain Loans and Other Extensions of Credit. MDB 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 MDB or MDNB or by any other Person as "Criticized," "Specially
Mentioned," "Substandard," "Doubtful," "Loss" or any comparable classification
("Classified Credits"). MDB 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 MDB or MDNB
to any MDB or MDNB director, officer at or above the senior vice president
level, or shareholder holding 10% or more of the capital stock of MDB, including
with respect to each such loan or lease the identity and, to the knowledge of
MDB, the relation of the borrower to MDB or MDNB, 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
(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, MDB will promptly
------------
prepare or cause to be prepared the portions of the Proxy Statement and
Prospectus as it pertains to MDB or MDNB 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. MDB shall afford
GBB a reasonable opportunity to review the portions of the Proxy Statement and
Prospectus pertaining to MDB or MDNB and all such applications and all
amendments and supplements thereto before the filing thereof. MDB covenants and
agrees that, with respect to the information relating to MDB or MDNB, the 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
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necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. MDB 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) MDB shall deliver to GBB a letter identifying all persons who are
then "affiliates" of MDB for purposes of Rule 145 under the Securities Act and
(b) MDB 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. MDB shall use
---------
reasonable efforts to obtain from any person who becomes an affiliate of MDB
after MDB's delivery of the letter referred to above, and on or prior to the
date of the MDB 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. MDB 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 MDB Stock shall not receive two
dividends, or fail to receive one dividend, for any applicable dividend period
with respect to their shares of MDB 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 MDB's and
------------
MDNB'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, MDB
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 MDB and MDNB under a directors' and officers' liability
insurance policy which is no less protective in terms of coverage or limitations
than now possessed by MDB 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 protective in terms of
coverage or limitations than now possessed by MDB covering acts or omissions
occurring prior to the Effective Time of the Merger and actions related to this
Agreement.
ARTICLE VII
COVENANTS OF GBB PENDING EFFECTIVE TIME OF THE MERGER
-----------------------------------------------------
GBB covenants and agrees with MDB 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 its
subsidiaries shall not, without the prior written consent of MDB:
40
<PAGE>
(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; 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:
(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 20th 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 its 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 MDB's and MDNB'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.
41
<PAGE>
7.3 Access to Information. Upon reasonable request by MDB, GBB
---------------------
shall (i) make its Chief Executive Officer, Chief Administrative Officer/Chief
Financial Officer, Controller and Chief Credit Officer available to discuss with
MDB and its representatives GBB's operations; and (ii) shall provide MDB with
written information which is (a) similar to the written information that MDB
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 MDB of the right to rely upon the representations and warranties
made by GBB herein; provided, that MDB shall disclose to GBB any fact or
circumstance it may discover which MDB believes renders any representation or
warranty made by GBB hereunder incorrect in any respect. MDB 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 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 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) in conjunction with MDB, the Registration Statement on Form S-4 and
the Proxy Statement and Prospectus as it pertains to GBB; and (iii) any other
applications necessary to consummate the transactions contemplated hereby. GBB
shall afford MDB a reasonable opportunity to review the 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 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 its 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.
42
<PAGE>
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 MDB reside.
7.7 Notices; Reports. GBB will promptly notify MDB 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 MDB'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 MDB Stock ("MDB Stock
Option") and all obligations of MDB under the MDB Stock Option Plan. Each and
every MDB 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 MDB
Stock Option Plan and in the other documents governing such MDB Stock Option
immediately prior to the Effective Time of the Merger, except that: (i) such MDB
Stock Option shall be exercisable for that number of whole shares of GBB Stock
equal to the product of (A) the number of shares of MDB Stock that were
purchasable under such MDB 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 MDB
Stock Option shall be equal to the quotient determined by dividing (A) the
exercise price per share of MDB Stock at which such MDB Stock Option was
exercisable immediately prior to the Effective Time of the Merger by (B) the
Conversion Ratio. At the Effective Time of the Merger, or as soon as practicable
thereafter, GBB shall issue to each holder of an outstanding MDB Stock Option a
document evidencing the assumption of such MDB 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 MDB Stock Option Plan and insure, to the extent required by,
and subject to the provisions of, such plan, that MDB 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,
43
<PAGE>
file a registration statement on Form S-8 (or any successor or other appropriate
form) with respect to the shares of GBB Stock 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 MDB 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.
ARTICLE VIII
ADDITIONAL COVENANTS
--------------------
The parties hereto hereby mutually covenant and agree with each other as
follows:
8.1 Commercial Reasonable Efforts. Subject to the terms and
-----------------------------
conditions of this Agreement, each party will use all 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 MDB 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 MDB Real Property List. In the event any such
phase I environmental investigation report, or any such report which MDB or MDNB
has already obtained on any of the Real Property set forth on MDB's Real
Property List, discloses facts which, in the sole discretion of GBB, warrant
further investigation, GBB shall provide written notice to MDB, and MDB 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 MDB to conduct such
investigation and provide such report shall be acceptable to GBB. GBB shall have
10 days from the receipt of such investigation report to object thereto, which
objection shall be by written notice. In the event of any such objection, GBB
shall engage an environmental consultant satisfactory to MDB who shall provide
an
44
<PAGE>
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 excess of $100,000 or is not
reasonably determinable by such consultant (and written notice thereof provided
by MDB to GBB) MDB shall immediately commence such Remediation, all at the sole
cost and expense of MDB. In the event such environmental consultant determines
that the estimated cost of such remediation is in excess of $100,000 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
MDB Real Property List, except as required by law notice.
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 MDB's Board of
Directors to the Board of Directors of GBB effective at Effective Time of the
Merger.
ARTICLE IX
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 shall have received all requisite approvals of the
shareholders of MDB.
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, that of the FRB 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
---------------
declared effective by the SEC and shall not be the subject of any stop order or
proceedings
45
<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 MDB shall have received from Manatt, Phelps
-----------
& Phillips, LLP an opinion reasonably satisfactory to GBB and MDB to the effect
that the Merger shall not result in the recognition of gain or loss for federal
income tax purposes to GBB or MDB, nor shall the issuance of the GBB Stock
result in the recognition of gain or loss by the holders of MDB 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 Proxy Statement and Prospectus is first mailed to the shareholders of
MDB 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. In making its
determination that the Merger will qualify for such treatment, PwC shall be
entitled to assume that cash will be paid with respect to all shares held of
record by any holder of MDB Dissenting Shares.
ARTICLE X
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF MDB
----------------------------------------------
All of the obligations of MDB 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 MDB:
10.1 Legal Opinion. MDB 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 MDB and MDNB, to the effect that:
(i) 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; (ii) 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; (iv) 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 (v) the shares of GBB Stock to be issued in the Merger will, when
issued, be duly authorized, validly issued, fully paid and nonassessable.
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
46
<PAGE>
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.
10.5 Officers' Certificate. There shall have been delivered to MDB
---------------------
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 and 10.4.
10.6 Fairness Opinion. MDB shall have received a letter from Hoefer
----------------
& Arnett Incorporated dated as of a date within five Business Days of the
mailing of the Proxy Statement and Prospectus to the shareholders of MDB, to the
effect that the transactions contemplated by this Agreement are fair from a
financial point of view to the shareholders of MDB.
ARTICLE XI
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 McCutchen,
-------------
McCutchen, Doyle, Brown & Enersen, LLP, attorneys for MDB, and in form and
substance satisfactory to the counsel of GBB, to the effect that: (i) MDB 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; (ii)
all corporate proceedings on the part of MDB necessary to be taken in connection
with the
47
<PAGE>
Merger in order to make the same effective have been duly and validly taken; and
(iii) this Agreement and the Agreement of Merger have been duly and validly
authorized, executed and delivered on behalf of MDB, and constitute (subject to
standard exceptions of enforceability arising from the bankruptcy laws and rules
of equity valid and binding agreements of MDB.
11.2 Representations and Warranties; Performance of Covenants. All
--------------------------------------------------------
the covenants, terms and conditions of this Agreement to be complied with and
performed by MDB at or before the Closing Date shall have been complied with and
performed in all material respects. Each of the representations and warranties
of MDB 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 MDB 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 MDB 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 MDB, and MDB shall have full power and right to merge pursuant
to the Agreement of Merger.
11.4 Third Party Consents. MDB and MDNB 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.
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 MDB
on a consolidated basis whether or not such event, change or effect is reflected
in the MDB Lists as amended or supplemented after the date of this Agreement.
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 MDB 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 Proxy Statement
48
<PAGE>
and Prospectus to the shareholders of MDB, 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 MDB and MDNB 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 MDB and MDNB 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 MDB's employee benefit plans, programs and arrangements,
including, without limitation, the MDB 401(k) Plan, have been treated as
provided in Article 12 of this Agreement.
11.12 Dissenting Shares. MDB Perfected Dissenting Shares shall
-----------------
constitute less than 8% of the outstanding shares of MDB Stock.
11.13 Remediation. All remediation of environmental contamination or
-----------
conditions on any MDB Property shall have been completed to the satisfaction of
GBB.
11.14 MDB Adjusted Book Value. At least five Business Days prior to
-----------------------
the Effective Time of the Merger, MDB shall provide GBB with MDB'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 MDB Adjusted Book Value, as determined in accordance with such
financial statements, shall be:
(a) not less than $12,200,000 if the Effective Time of the Merger
occurs in December 1999;
(b) not less than $12,400,000 if the Effective Time of the Merger
occurs in January 2000;
(c) not less than $12,600,000 if the Effective Time of the Merger
occurs in February 2000; and
(d) not less than $12,800,000 if the Effective Time of the Merger
occurs in March 1999.
49
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11.15 Allowance for Loan Losses. MDB'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 $2,150,000, 1.42% of MDB's total
consolidated loan portfolio as reflected on such financial statements, or the
mid-point of the range of values determined by Steven Shindel during his asset
review conducted pursuant to Section 6.2(1) hereof.
11.16 Regulatory Approval. Any and all approvals or consents of any
-------------------
Governmental Entity which are necessary to consummate the Merger and the
transactions contemplated hereby shall have been granted without the imposition
of any conditions which GBB deems, in its sole and absolute opinion, to
materially adversely affect it or be materially burdensome.
ARTICLE XII
EMPLOYEE BENEFITS
-----------------
12.1 Employee Benefits. GBB, in its sole discretion, may elect to
-----------------
terminate the MDB 401(k) or to discontinue contributions to the MDB 401(k) Plan
following the Effective Time of the Merger, to cause MDB to terminate the MDB
401(k) Plan or to discontinue contributions to the MDB 401(k) Plan prior to the
Effective Time of the Merger, or to merge the MDB 401(k) Plan with and into the
GBB 401(k) Plan after the Effective Time of the Merger. In no event shall the
MDB 401(k) Plan be merged with and into the GBB 401(k) Plan, however, unless GBB
determines, in its sole discretion, that: (i) the MDB 401(k) Plan is a qualified
plan under Section 401(a) of the Code, both as to the form of the MDB 401(k)
Plan and as to its operation; and (ii) there are no facts in existence that
would be reasonably likely to adversely affect the qualified status of the MDB
401(k) Plan. If GBB determines in its sole discretion not to merge the MDB
401(k) Plan into the GBB 401(k) Plan and that the MDB 401(k) Plan should be
terminated prior to the Effective Time of the Merger, MDB agrees to use its best
efforts to have the MDB 401(k) Plan terminated prior to the Effective Time of
the Merger and to obtain an IRS determination that the MDB 401(k) Plan continues
to be qualified upon termination.
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 MDB and MDNB 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 its subsidiaries in comparable
positions with GBB or its subsidiaries. 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 MDB or MDNB beginning on
the date such employees commenced employment with MDB or MDNB through the
Effective Time of the Merger.
ARTICLE XIII
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:
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(a) By mutual agreement of the parties, in writing;
(b) By MDB (unless MDB'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 MDB Stock) or GBB upon the failure of the shareholders
of MDB to give the requisite approval of this Agreement;
(c) By MDB promptly following the expiration of 20 days from
delivery of written notice by MDB 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 MDB from the
performance or satisfaction of such covenant or agreement (provided that such
breach has not been waived by MDB 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 MDB of MDB'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 MDB prior to expiration of such 20
day period);
(e) By MDB 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 MDB or GBB if any conditions set forth in Article 9 shall
not have been met by March 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 MDB if any of the conditions set forth in Article 10 shall
not have been met by March 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 MDB;
(h) By GBB if any of the conditions set forth in Article 11 shall
not have been met by March 31, 2000, or such earlier time as it becomes apparent
that such condition shall not be met; provided that this Agreement shall not be
terminated pursuant to this Section 13.1(h) if the relevant condition shall have
failed to occur as a result of any act or omission of GBB;
(i) By GBB if MDB and MDNB shall have breached any of the
obligations contained in Section 6.1(n);
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(j) By GBB if (i) MDB 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 Proposal; or (ii) a Superior
Proposal that is publicly disclosed shall have been commenced, publicly proposed
or communicated to MDB which contains a proposal as to price (without regard to
the specificity of such price proposal) and MDB 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 MDB under the circumstances set forth in Section
2.2(a)(iii), or
(m) By MDB 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.
13.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either MDB or GBB as provided in Section 13.1, neither MDB 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 Sections 14.1, 14.2, and 14.3 and (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.
13.3 Force Majeure. MDB 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 XIV
MISCELLANEOUS
-------------
14.1 Expenses.
--------
(a) GBB hereby agrees that if this Agreement is terminated by MDB
pursuant to Section 13.1(c), GBB shall promptly and in any event within 10 days
after such termination pay MDB all Expenses (as defined in Section 14.1(d)
below) of MDB, but not to exceed $150,000.
(b) MDB hereby agrees that if the Agreement is terminated by GBB or
MDB pursuant to Section 13.1(b) with respect to the failure of MDB shareholders
to approve the Agreement and the transactions contemplated hereby, or by GBB
pursuant to Sections 13.1(d),
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13.1(i), or 13.1(j), MDB 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) Except as otherwise provided herein, all Expenses incurred by
GBB and MDB 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 MDB shall
share equally the cost of printing the Proxy Statement and Prospectus.
(d) "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 Competing Transaction Fee. As an inducement to GBB to enter
-------------------------
into this Agreement, (a) in the event this Agreement is terminated by GBB
pursuant to Sections 13.1(i) or 13.1(j), or (b) if MDB or MDNB otherwise
consummates a Competing Transaction during the 12-month period following
termination of this Agreement pursuant to Sections 13.1(a) (if GBB shall at the
time have been entitled to terminate the Agreement pursuant to Section 13.1(d));
13.1(b), 13.1(d); 13.1(f) (if the relevant condition shall have failed to occur
as a result of any act or omission by MDB or its shareholders); or 13.1(h)
(other than a termination related to the satisfaction of the conditions set
forth in the second sentence of Section 11.2 and in Sections 11.5, 11.7, 11.12,
11.13, 11.14 and 11.16), MDB shall wire to GBB within three Business Days of the
date of termination in the case of clause (a) and concurrent with the
consummation of the Competing Transaction in the case of clause (b), the sum of
$1,750,000, which sum the parties acknowledge as representing (i) GBB's direct
costs and expenses (including, but not limited to, fees and expenses of
financial or other consultants, printing costs, accountants, and counsel)
incurred in negotiating and undertaking to carry out the transactions
contemplated by this Agreement, including GBB's management time devoted to
negotiation and preparation for the transactions contemplated by this Agreement;
(ii) GBB's indirect costs and expenses incurred in connection with the
transactions contemplated by this Agreement; and (iii) GBB's loss as a result of
the transactions contemplated by this Agreement not being consummated. Any
payment previously made by MDB pursuant to Section 14.1(b) hereof shall be
credited against any amount due under this Section.
14.3 GBB Acquisition Transaction Fee. As an inducement to MDB to
-------------------------------
enter into this Agreement, (a) in the event this Agreement is terminated by MDB
pursuant to Section 13.1(m) or (b) if GBB consummates a GBB Acquisition
Transaction within 12 months following termination by GBB of this Agreement
other than pursuant to Section 13.1, GBB shall wire to MDB within three Business
Days of the date of termination in the case of clause (a) and concurrent with
the consummation of the GBB Acquisition Transaction in the case of clause (b),
the sum of $1,500,000, which sum the parties acknowledge as representing (i)
MDB's direct costs and expenses (including, but not limited to, fees and
expenses of financial or other
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consultants, printing costs, accountants, and counsel) incurred in negotiating
and undertaking to carry out the transactions contemplated by this Agreement,
including MDB's management time devoted to negotiation and preparation for the
transactions contemplated by this Agreement; (ii) MDB's indirect costs and
expenses incurred in connection with the transactions contemplated by this
Agreement; and (iii) MDB'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. If any payment is made to MDB pursuant to this Section, GBB
shall have not further obligation to make any payment pursuant to Section
14.1(a).
14.4 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:
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, 3/rd/ Floor
Palo Alto, California 94301
Attention: Linda M. Iannone, Esq.
Facsimile Number: (650) 473-9419
To MDB: Mt. Diablo Bancshares
156 Diablo Road
Danville, California 94526
Attention: John J. Hounslow
Facsimile Number: (925) 552-4701
With a copy to: McCutchen, Doyle, Brown & Enersen, LLP
Three Embarcadero Center
San Francisco, California 94111
Attention: Thomas G. Reddy, Esq.
Facsimile Number: (415) 393-2286
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.
14.5 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
54
<PAGE>
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.
14.6 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.
14.7 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.
14.8 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 MDB as the context may require.
14.9 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.
14.10 Knowledge. 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.
14.11 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.
14.12 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.
14.13 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.
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14.14 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 MDB 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.
14.15 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 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.
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: MT. DIABLO BANCSHARES
/s/ J. Gordon Bingham By: /s/ John J. Hounslow
- --------------------- --------------------
Secretary John J. Hounslow
Chairman of the Board
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EXHIBIT LIST
------------
A AGREEMENT OF MERGER
B FORM OF AFFILIATE'S AGREEMENT
C FORM OF NONCOMPETITION AGREEMENT
D FORM OF SHAREHOLDER'S AGREEMENT
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EXHIBIT 99.1
Press Release dated September 15, 1999
For Information Contact
At Greater Bay Bancorp: At Financial Relations Board:
David L. Kalkbrenner, President & CEO Christina Carrabino (general
(650) 614-5767 information)
Steven C. Smith, EVP, CAO & CFO Kristi Larson (analyst contact)
(650) 813-8222 (415) 986-1591
John J. Hounslow, Chairman & CEO
Mt. Diablo Bancshares
(925) 552-4709
FOR IMMEDIATE RELEASE
---------------------
GREATER BAY BANCORP AND
MT. DIABLO BANCSHARES ANNOUNCE AGREEMENT TO MERGE
PALO ALTO, CA; September 15, 1999 -- Greater Bay Bancorp (Nasdaq: GBBK), Palo
Alto, California, and Mt. Diablo Bancshares (OTC Bulletin Board: DBLB),
Danville, California, announced today the signing of a definitive agreement for
a merger of the two companies. Following the transaction, Mt. Diablo National
Bank, a wholly owned subsidiary of Mt. Diablo Bancshares, will operate as a
wholly owned subsidiary of Greater Bay Bancorp. The merger is expected to be
completed late in the fourth quarter of 1999 or early in the first quarter of
2000.
Greater Bay Bancorp anticipates the transaction, including cost savings, to be
neutral on 1999 earnings per share and approximately 2% 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 revenue growth at the newly
acquired subsidiary banks.
Mt. Diablo National Bank, established in April 1992, has banking offices in
Danville, Pleasanton and Lafayette, California serving the small- to mid-sized
business community. As of June 30, 1999, Mt. Diablo Bancshares had total assets
of $200 million, and deposits of $189 million. For the six months ended June 30,
1999, net income was $1.1 million.
David Kalkbrenner, president and chief executive officer of Greater Bay Bancorp,
stated, "We are excited to have Mt. Diablo Bancshares join us as we believe the
company's market areas have substantial growth opportunities. We will also be
pleased to welcome John J. Hounslow, Chairman and Chief Executive Officer of Mt.
Diablo Bancshares, to our Board when the merger closes. The completion of the
mergers with Mt. Diablo Bancshares and Bay Commercial Services will result in
substantial Greater Bay representation in the East Bay region of the San
Francisco Bay Area with offices in Walnut Creek, Lafayette, Danville, Sam Ramon,
Pleasanton, Hayward, San Leandro and Fremont."
Mr. Hounslow commented, "We are pleased to be joining the Greater Bay Bancorp
super community banking family. Mt. Diablo National Bank has been one of the
fastest growing
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community banks in Northern California during the past three years. Our goal is
to ensure that our clients benefit from Greater Bay Bancorp's extended product
offerings and increased lending capabilities and that our shareholders receive
enhanced value for their Mt. Diablo Bancshares stock."
Greater Bay Bancorp previously announced the execution of a definitive agreement
to acquire Bay Commercial Services and its wholly owned subsidiary, Bay Bank of
Commerce. When the acquisitions of Bay Commercial Services and Mt. Diablo
Bancshares are both completed, Greater Bay Bancorp would have on a pro forma
basis as of June 30, 1999 total assets of approximately $2.5 billion and total
shareholders' equity of approximately $139 million. Shareholders of Bay
Commercial Services recently approved the merger with Greater Bay Bancorp, which
is expected to close next month, subject to receipt of all regulatory approvals.
Terms of the Merger
The terms of the agreement provide for the shareholders of Mt. Diablo Bancshares
to receive shares of Greater Bay Bancorp stock in a tax-free merger. Mt. Diablo
Bancshares currently has approximately 1,215,000 shares of common stock
outstanding. If the average closing price of Greater Bay Bancorp common stock is
between $33.00 and $38.00, Greater Bay Bancorp will issue 0.975 shares for each
outstanding share of common stock of Mt. Diablo Bancshares, for an estimated
aggregate value of between approximately $46.5 million and $53.5 million. If the
average closing price of Greater Bay Bancorp common stock is greater than
$38.00, the conversion ratio will adjust downward according to a formula.
If the average closing price of Greater Bay Bancorp common stock is less than
$33.00, Greater Bay Bancorp has the alternative of either allowing the
conversion ratio to remain at 0.975 shares or electing to revise the conversion
ratio according to a formula. If Greater Bay Bancorp does not elect to revise
the conversion ratio, Mt. Diablo Bancshares can elect to terminate the
transaction.
The sale of Mt. Diablo Bancshares' corporate headquarters building is currently
in escrow and is scheduled to close by the end of the third quarter. The sale
will result in an economic gain of approximately $1.4 million. Based on the last
twelve months earnings, the acquisition price equates to a multiple of 22.79
times, while the acquisition price to 1999 earnings is estimated to be
approximately 19.00 times. The acquisition price to book value will be
approximately 3.36 times when adjusted for the economic gain on the sale of the
corporate headquarters building and adjusted for estimated earnings through
December 31, 1999.
The merger is subject to certain conditions, including the approval of the
shareholders of Mt. Diablo Bancshares and regulatory approval, and will be
accounted for as a pooling of interests.
Greater Bay Bancorp and its financial services subsidiaries, Bay Area Bank,
Cupertino National Bank, Mid-Peninsula Bank, Peninsula Bank of Commerce and
Golden Gate Bank, 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 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 San Jose,
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Cupertino, Santa Clara, Palo Alto, Redwood City, San Mateo, Millbrae, San
Francisco 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 acquisitions. 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 acquisitions 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
reports filed with the Securities and Exchange Commission, including its Annual
Report 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.
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