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EXHIBIT 2
STOCK PURCHASE AGREEMENT
BY AND AMONG
GREATER BAY BANCORP,
THE MATSCO COMPANIES INC.
AND
THE SHAREHOLDERS OF THE MATSCO COMPANIES INC.
AUGUST 8, 2000
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STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into as
of the 8th day of August, 2000, by and among GREATER BAY BANCORP, a California
corporation ("GBB"), THE MATSCO COMPANIES INC., a Delaware corporation
("Matsco"), and each of the shareholders of Matsco (the "Matsco Shareholders")
as identified in Exhibit A attached hereto.
WHEREAS, the Matsco Shareholders are the record and beneficial owners
all of the issued and outstanding shares of Matsco Stock;
WHEREAS, the Matsco Shareholders desire to sell to GBB, and
GBB desires to purchase from the Matsco Shareholders, all of the shares of
Matsco Stock on the terms and conditions set forth in this Agreement;
WHEREAS, the Boards of Directors of GBB and Matsco have approved the
sale and purchase of all of the shares of Matsco Stock on the terms and
conditions set forth in this Agreement; and
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated by this Agreement.
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
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.
"Benefit Arrangements" has the meaning set forth in Section 4.19(b).
"BHC Act" means the Bank Holding Company Act of 1956, as amended.
"Business Day" means any day other than a Saturday, Sunday or day on which a
bank chartered under the laws of the State of California is closed.
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"Change in Control of GBB" means the first to occur of any of the following
events:
(a) Any "person" (as that term is used in Section 13 and 14(d)(2) of
the Securities and Exchange Act of 1934 ("Exchange Act")) becomes the beneficial
owner (as that term is used in Section 13(d) of the Exchange Act), directly or
indirectly, of 50% or more of GBB's capital stock entitled to vote in the
election of directors;
(b) During any period of not more than two consecutive years,
individuals who, at the beginning of such period constitute the Board of
Directors of GBB, and any new director (other than a director designated by a
person who has entered into an agreement with GBB to effect a transaction
described in clause (a), (c) (d) and (e)) whose appointment to the Board of
Directors or nomination for election to the Board of Directors was approved by a
vote of at least three-fourths (3/4ths) of the directors then still in office,
either were directors at the beginning of the period or whose appointment or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority thereof;
(c) The shareholders of GBB approve any consolidation or merger of GBB,
other than a consolidation or merger of GBB in which the holders of the common
stock of GBB immediately prior to the consolidation or merger hold more than 50%
of the common stock of the surviving corporation immediately after the
consolidation or merger;
(d) The shareholders of GBB approve any plan or proposal for the
liquidation or dissolution of GBB; or
(e) The shareholders of GBB approve the sale or transfer of
substantially all of GBB's assets to parties that are not within a "controlled
group of corporations" (as defined in Code Section 1563) in which GBB is a
member.
"Closing" means the consummation of the sale and purchase of all of the issued
and outstanding shares of Matsco Stock as provided for in Article 2 of this
Agreement on the Closing Date, at the offices of Greater Bay Bancorp, 400
Emerson Street, Palo Alto, California, or at such other place upon which the
parties may agree.
"Closing Date" has the meaning set forth in Section 3.1.
"CNB" means Cupertino National Bank.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commissioner" means the Commissioner of Corporations of the State of
California.
"Competing Transaction" has the meaning set forth in Section 7.1(n).
"Converted Shares" means the number of shares of Matsco Common Stock or, in the
case of Matsco Preferred Stock, the number of shares of Matsco Common Stock into
which such Matsco Preferred Stock converts held by a Matsco Shareholder as set
forth on Exhibit A hereto.
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"Conversion Share Equivalent and Earn Out Percentage" means the percentage
interest of Participating Shareholders, as set forth on Exhibit A hereto (which
percentage calculation shall be adjusted proportionately if the applicable
employment requirement in Section 2.3 is not satisfied by any Participating
Shareholders).
"Covered Party" has the meaning set forth in Section 4.29.
"Earnings" means the consolidated revenues of the Matsco Operating Unit from
Matsco Business less interest expenses, sales, general and administrative
expenses, and provision for doubtful accounts but excluding (a) all
extraordinary and other nonrecurring items of income or expense and (b) any
management or other fees and overhead expenses payable by the Matsco Operating
Unit to GBB or its Affiliates, with all such being calculated in accordance with
GAAP.
"Earn-Out Targets" has the meaning set forth in Section 2.3.
"Earn-Out Payment" and "Earn-Out Payments" have the respective meanings set
forth in Section 2.3(a).
"EBT" means, for any Fiscal Year, the Earnings for such period before expenses
for taxes, whether paid, accrued or deferred, allocable against Earnings.
"EBT Bonus" has the meaning set forth in Section 8.9.
"EBT Bonus Percentage" means the percentage interest of Participating
Shareholders other than The Timothy Shieman Trust as set forth on Exhibit A
hereto (which percentage calculation shall be adjusted proportionately if the
applicable employment requirement in Section 8.9 is not satisfied by any
Participating Shareholders).
"EBT Bonus Targets" has the meaning set forth in Section 8.9.
"Employee Plans" has the meaning set forth in Section 4.19(a).
"Employment Agreements" means the Employment Agreements in the form of
Employment Agreement attached hereto as Exhibit C.
"Encumbrance" means 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" means 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
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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.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Expenses" has the meaning set forth in Section 14.3(e).
"Financial Statements of GBB" means the audited consolidated financial
statements of GBB consisting of the statements of condition as of December 31,
1996, 1997, 1998 and 1999, the related 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.
"Fiscal Year" means the period from January 1 through the succeeding December 31
for each of 2000 through 2005.
"FRB" means the Board of Governors of the Federal Reserve System.
"GAAP" means generally accepted accounting principles as used in the United
States as in effect at the time any applicable financial statements were
prepared.
"GBB Common Stock" has the meaning set forth in Section 2.3.
"GBB Conflicts and Consents List" has the meaning set forth in Section 6.3.
"GBB Filings" has the meaning set forth in Section 6.4.
"GBB Financial Assistance and Support List" has the meaning set forth in Section
7.2(d).
"Governmental Entity" means any court or tribunal in any jurisdiction or any
United States federal, state, municipal, domestic, foreign or other similar
administrative authority or instrumentality.
"Grant Thornton" means Grant Thornton LLP, Matsco's independent accountants.
"Hazardous Materials" means 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
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Safety and Health Act, as amended (29 U.S.C. Section 651) the Emergency Planning
and Community Right-to-Know Act of 1986 (42 U.S.C. Section 11001, et seq.); the
Mine Safety and Health Act of 1977, as amended (30 U.S.C. Section 801, et seq.);
the Safe Drinking Water Act (42 U.S.C. Section 300f, et seq.); and all
comparable state and local laws, including without limitation, the Carpenter-
Presley-Tanner Hazardous Substance Account Act (State Superfund), the Porter-
Cologne Water Quality Control Act, Section 25140, 25501(j) and (k), 25501.1,
25281 and 25250.1 of the California Health and Safety Code and/or Article I of
Title 22 of the California Code of Regulations, Division 4, Chapter 30; laws of
other jurisdictions or orders and regulations; or the presence of which causes
or threatens to cause a nuisance, trespass or other common law tort upon real
property or adjacent properties or poses or threatens to pose a hazard to the
health or safety of persons or without limitation, which contains gasoline,
diesel fuel or other petroleum hydrocarbons; polychlorinated biphenyls (PCBs),
asbestos or urea formaldehyde foam insulation.
"Holdback Funds" shall mean the balance of the sum of the Initial Holdback
Amount and accrued interest thereon and any additional amounts required for the
resolution of any Material Contingencies as provided in Section 2.3.
"Initial Holdback Amount" means $900,000 of the Initial Payment that shall be
withheld by GBB as Holdback Funds in accordance with Sections 2.2 and 2.4.
"Indemnifying Shareholders" shall mean all Matsco Shareholders other than
Marshall.
"Initial Payment" means $6,500,000.
"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.
"Lists" means any lists required to be furnished by one party to another party
under this Agreement.
"Loss" has the meaning set forth in Section 15.2(a).
"Marshall" means Marshall Financial Partners, L.P., a Delaware limited
partnership.
"Marshall Agreements" means the Shareholders' Agreement, dated as of September
22, 1998, by and among the Matsco Shareholders, the Management Agreement, dated
as of September 22, 1998, by and between Matsco and Marshall Ventures, LLC and
the Securities Purchase Agreement, dated as of September 22, 1998, by and among
Matsco, Matthew D. Shieman, The Matthew D. Shieman Family Trust, Timothy E.
Shieman, The Timothy Shieman Trust and Marshall.
"Marshall Guaranties" has the meaning set forth in Section 11.7.
"Marshall Guaranties List" has the meaning set forth in Section 11.7.
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"Material Adverse Effect" means when used in connection with GBB or Matsco, as
the case may be, any condition, change or effect that, individually or when
taken together with all other such conditions, changes or effects that existed
or occurred prior to the date of determination of the existence or occurrence of
the Material Adverse Effect, is or is reasonably likely to be materially adverse
to the business, operations, assets (including intangible assets), financial
condition or results of operations of GBB and its subsidiaries or Matsco and its
subsidiaries, taken as a whole, as applicable.
"Material Changes List" has the meaning set forth in Section 4.17.
"Material Contingency" or "Material Contingencies" have the meaning set forth in
Section 4.10.
"Matsco" has the meaning set forth in the introductory paragraph of this
Agreement.
"Matsco Business" means all business related to the commercial financing of
health care professionals engaged in by the Matsco Operating Unit after the
Closing and any other commercial lending and financing business engaged in by
the Matsco Operating Unit with the consent of GBB, which consent shall not be
unreasonably withheld.
"Matsco Common Stock" means the common stock, $0.001 par value per share, of
Matsco.
"Matsco Conflicts and Consents List" has the meaning set forth in Section 4.6.
"Matsco Contract List" has the meaning set forth in Section 4.16.
"Matsco Employee Plan List" has the meaning set forth in Section 4.19.
"Matsco Environmental Compliance List" has the meaning set forth in Section
4.12(b).
"Matsco Financial Statements" means the audited consolidated financial
statements of Matsco consisting of the consolidated statements of condition as
of December 31, 1996, 1997, 1998 and 1999, the related consolidated statements
of income, 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
unaudited financial statements of Matsco and the Matsco Subsidiaries as of March
31, 2000 and June 30, 2000.
"Matsco Filings" has the meaning set forth in Section 4.5.
"Matsco Filings List" has the meaning set forth in Section 4.5.
"Matsco Guaranties List" has the meaning set forth in Section 8.7.
"Matsco Indemnification List" has the meaning set forth in Section 4.30.
"Matsco Insurance List" has the meaning set forth in Section 4.7.
"Matsco Investment Securities List" has the meaning set forth in Section 4.27.
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"Matsco Liabilities List" has the meaning set forth in Section 4.10.
"Matsco List" means any list required to be furnished by Matsco to GBB herewith.
"Matsco Loan List" has the meaning set forth in Section 4.24.
"Matsco Offices List" has the meaning set forth in Section 4.22.
"Matsco Operating Losses List" has the meaning set forth in Section 4.23.
"Matsco Operating Unit" means Matsco and the Matsco Subsidiaries after the
Closing Date, as such entities may be merged, consolidated, or otherwise
combined with or into each other or an Affiliate of GBB.
"Matsco Personal Property List" has the meaning set forth in Section 4.8.
"Matsco Preferred Stock" means the Series A, Series B and Series C preferred
stock, $0.001 par value per share, of Matsco.
"Matsco Property" means real property currently owned, leased or otherwise used
by Matsco or any Matsco Subsidiary, or in which Matsco or any Matsco Subsidiary
has an investment or security interest (by mortgage, deed of trust, sale and
lease-back or otherwise), including, without limitation, real properties under
foreclosure and rent properties held by Matsco or any Matsco Subsidiary in its
capacity as a trustee or otherwise.
"Matsco Real Property List" has the meaning set forth in Section 4.9.
"Matsco Shareholders" has the meaning set forth in the introductory paragraph of
this Agreement.
"Matsco Stock" means the Matsco Common Stock and the Matsco Preferred Stock.
"Matsco Subsidiary or Subsidiaries" means Matsco Financial Corporation, Matsco
Professional Finance Corporation, Matsco Lease Finance, Inc., Matsco Lease
Finance, Inc. II, Matsco Lease Finance, Inc. III, and CDRP, Inc.
"Matsco Tax List" has the meaning set forth in Section 4.11.
"Non-Compete Agreements" means the Non-Compete Agreements in the form of
Non-Compete Agreement attached hereto as Exhibit D.
"OCC" means Office of the Comptroller of the Currency.
"Operating Loss" has the meaning set forth in Section 4.23.
"Participating Majority" means the Participating Shareholders that shall have
held at least a majority of the Common Share Equivalents immediately prior to
the Closing Date and for
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whom Matthew D. Shieman or his designee shall be the sole spokesperson with
power of attorney.
"Participating Shareholders" means the Matsco Shareholders designated as such on
Exhibit A hereto.
"Person" means any individual, corporation, association, partnership, trust,
joint venture, other entity or unincorporated body.
"Power of Attorney List" has the meaning set forth in Section 4.28.
"Pre-Closing Transactions" shall have the meaning set forth in Section 7.2.(m).
"Purchase Price" means the Initial Payment plus the Earn-Out Payments.
"PwC" means PricewaterhouseCoopers LLP, GBB's independent accountants.
"Receivables Sales and Servicing List" has the meaning set forth in Section
4.25.
"Scheduled Contracts" has the meaning set forth in Section 4.16.
"SEC" means the Securities and Exchange Commission.
"Series A Preferred" means the Series A Preferred Stock of Matsco, $0.001 par
value.
"Series B Preferred" means the Series B Preferred Stock of Matsco, $0.001 par
value.
"Series C Preferred" means the Series C 7.5% Cumulative Convertible Preferred
Stock of Matsco, $0.001 par value.
"Shieman Employment Agreement" means the Employment Agreement dated as of
September 22, 1998 by and between Matthew D. Shieman and Matsco.
"Spencer Agreement" shall have the meaning set forth in Section 2.5.
"Spousal Consent" has the meaning set forth in Section 5.5.
"Tanks" means treatment or storage tanks, sumps, or water, gas or oil wells and
associated piping transportation devices.
Article II
SALE AND PURCHASE OF THE MATSCO STOCK
2.1 Purchase and Sale of the Matsco Stock. At the Closing, the Matsco
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Shareholders shall sell, assign, transfer and convey to GBB all of their right,
title and interest in and to the issued and outstanding shares of Matsco Stock
held by the Matsco Shareholders. At the Closing, GBB shall purchase and acquire
such Matsco Stock and in exchange therefor
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the Matsco Shareholders shall be entitled to receive the Purchase Price, which
shall be paid in accordance with this Article 2.
2.2 The Initial Payment. The Initial Payment shall be paid on the
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Closing Date and allocated as follows:
(a) $4,000,000 to Marshall as consideration and in exchange
for the Series C Preferred held by Marshall;
(b) $101,000 to Marshall as consideration and in exchange for
the Series A Preferred held by Marshall;
(c) $899,000 to Marshall as consideration and in exchange for
the Series B Preferred held by Marshall;
(d) $900,000, the Initial Holdback Amount to be withheld by
GBB and to be paid in accordance with Section 2.4 hereof; and
(e) the remainder of the Initial Payment to the Participating
Shareholders in proportion to the respective Conversion Share Equivalent and
Earn Out Percentage held by such Participating Shareholders, as set forth on
Exhibit A hereto.
2.3 Earn-Out Payments.
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(a) GBB covenants and agrees to pay to The Timothy Shieman Trust,
to those other Participating Shareholders employed by the Matsco Operating Unit
throughout the prior Fiscal Year and such other Participating Shareholders whose
non-employment is due to death, disability or involuntary termination other than
for "cause," as "cause" is defined in the Employment Agreements, and The Timothy
Shieman Trust and such Participating Shareholders shall have a right to receive
from GBB, with respect to each Fiscal Year in which the Matsco Operating Unit
shall have an EBT equal to or greater than the Earn-Out Targets (or a portion
thereof) as set forth on Exhibit B hereto, payments in amounts and in proportion
to the respective Conversion Share Equivalent and Earn Out Percentage as set
forth on Exhibit A or such portion of the Earn-Out Payment as is set forth on
Exhibit B if the Matsco Operating Unit shall have an EBT equal to or greater
than a portion of the Earn-Out Target for a given Fiscal Year (each such payment
is referred to herein as an "Earn-Out Payment" and all such payments are
collectively referred to herein as the "Earn-Out Payments"). Each Earn-Out
Payment shall, subject to Section 2.7, be made fifty percent (50%) in cash (less
any cash to be paid first to Marshall as provided below) and the remainder (or
as close an amount as possible) in the number of whole (non-fractional) shares
of GBB Common Stock equivalent to the amount of the Earn-Out Payment to be paid
in GBB Common Stock divided by the average closing price for GBB Common Stock as
reported on The Nasdaq Stock Market for the Fiscal Year for which such Earn-Out
Payment is calculated, but only after Marshall shall first be paid in cash only
by GBB up to sixty percent (60%) of any Earn-Out Payment and up to sixty percent
(60%) of any release of any of the Holdback Funds, as provided in Section 2.4
below, until Marshall shall have received the aggregate
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amount of $600,000 in addition to the amounts provided in Section 2.2 in lieu of
accrued and unpaid dividends on the Series C Preferred owned by Marshall. The
payment of a portion of the Initial Payment, as set forth in Section 2.2, and
the granting of the right to receive payments in accordance with this Section
2.3, shall constitute full consideration delivered to Marshall, The Timothy
Shieman Trust and the Participating Shareholders in exchange for the Matsco
Stock held by such Matsco Shareholders. The Earn-Out Payments shall be made in
accordance with the terms of this Section 2.3; provided if any additional
amounts are determined by GBB in good faith and in its commercially reasonable
discretion to be required for the resolution of any Material Contingencies in
excess of the amounts available pursuant to Section 2.4 and Article 15, Earn-Out
Payments need not be made in full, but instead such additional amounts as may be
required from time to time may be added by GBB to the Holdback Funds as provided
in Section 2.4 and any balance of the Earn-Out Payments shall then be paid as
provided herein.
(b) The EBT for each Fiscal Year shall be calculated, at GBB's
expense, by a nationally recognized accounting firm engaged by GBB in accordance
with GAAP applied in a manner, to the extent permitted by GAAP, consistent with
the accounting practices of Matsco prior to the Closing Date. GBB shall deliver
to each of the Participating Shareholders who may receive Earn-Out Payments or
EBT Bonuses, as defined below, a calculation of the EBT for a Fiscal Year and
the Earn-Out Payment corresponding to the EBT for that Fiscal Year on or before
March 31 of the following Fiscal Year. The Participating Majority of said
Participating Shareholders shall, for a period of ten (10) days after receipt of
GBB's calculation of EBT, have the right to request an opportunity to review
such calculation. If the Participating Majority does not make such a request
within ten (10) days, then GBB shall within five (5) days after such 10-day
period pay to such Participating Shareholders the Earn-Out Payments in
proportion to the Conversion Share Equivalent and Earn-Out Percentage
respectively held by such Participating Shareholders as set forth on Exhibit A
hereto. If the Participating Majority shall have requested the right to review
such calculation, the Participating Majority shall have the right to retain, at
the expense of the Participating Majority, a nationally recognized accounting
firm to review the calculation of the EBT prepared by GBB. For a period of not
more than thirty (30) days following the date of the Participating Majority's
request to review such calculation, GBB shall, upon reasonable notice and at
reasonable times without significant disruption to the business of the Matsco
Operating Unit, give the Participating Majority and the accounting firm retained
by the Participating Majority reasonable access to the work papers of the
accounting firm retained by GBB, to all offices and other facilities of the
Matsco Operating Unit and to all books and records necessary to review the
calculation of the EBT and will cause the officers of the Matsco Operating Unit
to furnish to the Participating Majority such financial and other operational
data and other information as the Participating Majority may reasonably request
in connection with such review. If, after conducting such review, the
Participating Majority advises GBB in writing no later than five (5) days after
the end of the thirty day period that it disputes the calculation of EBT
prepared by GBB, then the dispute shall be resolved as follows:
(i) First, the accounting firms retained by GBB and the
Participating Majority shall attempt to resolve the discrepancies in their
respective
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calculations of EBT for a period of not more than ten (10) days after the date
on which the Participating Majority notifies GBB of its dispute of GBB
calculation of the EBT;
(ii) Second, if the accounting firms can not resolve the
discrepancies in their calculations, then GBB and the Participating Majority
shall submit the dispute to binding arbitration in accordance with Section
2.3(c).
(c) If GBB and the Participating Majority cannot resolve a dispute
regarding the calculation of EBT, then such dispute shall be resolved by
submission to binding arbitration in San Francisco, California before a retired
judge or justice. If GBB and the Participating Majority are unable to agree on a
retired judge or justice, each party will name one retired judge or justice and
the two persons so named will select a neutral judge or justice who will act as
the sole arbitrator. The parties shall be entitled to take discovery in
accordance with the provisions of the California Code of Civil Procedure, but
either party may request that the arbitrator limit the amount or scope of
discovery and, in determining whether to do so, the arbitrator shall balance the
need for the discovery against the parties' mutual desire to resolve disputes
expeditiously and inexpensively. The prevailing party shall be entitled to
recover all reasonable attorneys' fees, expert fees, expenses, and costs
(whether or not such fees, expenses, and costs are recoverable pursuant to the
California Code of Civil Procedure).
(d) Until Marshall has received the entire $600,000 payment
referenced in Section 2.3(a), Marshall shall be entitled to the rights of a
Participating Shareholder under Sections 2.3(b) and (c).
2.4 Holdback Funds. The Holdback Funds shall be withheld by GBB and
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shall earn interest at the fixed rate of 7.50% per annum and, to the extent the
Holdback Funds are not used and are determined by GBB in good faith and in its
commercially reasonable discretion to no longer be required for the resolution
of any Material Contingency, shall be released by GBB and delivered to the
Participating Shareholders together with accrued interest on the Holdback Funds
in proportion to the Conversion Share Equivalents and Earn Out Percentage
respectively held by the Participating Shareholders as set forth on Exhibit A
hereto as follows:
. one-third (1/3) of the remaining Holdback Funds plus accrued
interest on the entire balance of the Holdback Funds on the
first anniversary of the Closing Date;
. one-half (1/2) of the remaining Holdback Funds plus accrued
interest on the remaining balance of the Holdback Funds on the
second anniversary of the Closing Date; and
. the balance of the Holdback Funds plus accrued interest on the
remaining balance of the Holdback Funds on the third
anniversary of the Closing Date;
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provided that any payments to Marshall required by Section 2.3 shall first be
subtracted and paid to Marshall on the dates specified in this Section 2.4.
Nothing in this Section 2.4 shall limit the right of GBB to seek
indemnification from the Participating Shareholders to the extent permitted in
Article 15 of this Agreement; provided that indemnity may only be sought by GBB
for a Material Contingency to the extent the Loss (as defined in Section 15.2)
incurred by GBB on all Material Contingencies in the aggregate shall exceed the
lesser of $900,000 or the remaining amount of Holdback Funds. The balance of any
Holdback Funds determined by GBB as provided herein as required for the
resolution of the Material Contingencies shall be released, together with
accrued interest, promptly when no longer required to resolve any Material
Contingency.
2.5 Spencer Consideration. Payment of the First Retention Payment (as that
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term is defined in the Spencer Agreement) as full consideration for the shares
of Matsco Stock held by Harold Spencer shall be made as provided in a letter
agreement (the "Spencer Agreement") in the form of Exhibit "F" hereto. Nothing
in this Section 2.5 or in the Spencer Agreement shall limit the right of GBB to
seek indemnification from Harold Spencer to the extent permitted in Article 15
of this Agreement after the First Retention Payment has been made to Harold
Spencer, it being agreed that the Second Retention Payment (as that term is
defined in the Spencer Agreement) shall not be deemed to be consideration
received by Harold Spencer as consideration for shares of Matsco Stock held by
Harold Spencer and, therefore, shall not be subject to payment by Harold Spencer
to GBB in connection with any indemnification obligation, if any, of the Matsco
Shareholders pursuant to the terms of this Agreement.
2.6 Vesting. Notwithstanding the requirements in Section 2.3 regarding the
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required employment of a Participating Shareholder (other than The Timothy
Shieman Trust) by the Matsco Operating Unit during a Fiscal Year or whether the
Matsco Operating Unit EBT is equal to or greater than the Earn-Out Targets or a
portion thereof set forth in Exhibit B, if (i) a Participating Shareholder is no
longer employed by the Matsco Operating Unit throughout the entire prior Fiscal
Year as a result of death, disability or involuntary termination other than for
"cause" or (ii) a Change in Control of GBB occurs, then that Participating
Shareholder (in the case of death, disability or involuntary termination) or all
Participating Shareholders (in the case of a Change in Control of GBB) shall be
entitled to receive its Conversion Share Equivalent and Earn Out Percentage of
the entire Earn-Out Payment for each and all of the remaining Fiscal Years that
the Earn-Out Payment is payable pursuant to Section 2.3 as if the Matsco
Operating Unit shall have achieved an EBT equal to or greater than the Earn-Out
Targets as set forth on Exhibit B hereto for each such Fiscal Year, and said
amounts shall be paid by GBB or its successor on or before March 31 in each
Fiscal Year as otherwise provided in Section 2.3. In such event and subject to
Section 2.7, the amount of GBB Common Stock to be issued for 50% of the future
Earn-Out Payments will instead be calculated using the average price of GBB
stock for the most recent Fiscal Year and such GBB Common Stock shall then be
issued and held by GBB or its successors in escrow until the March 31 payment
date in each Fiscal Year whereupon the determined amount of GBB Common Stock for
that Fiscal Year shall be delivered by GBB.
2.7 GBB Common Stock.
----------------
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(a) Notwithstanding the provisions of Section 2.3 for the
payment of fifty percent (50%) of Earn-Out Payments in GBB Common
Stock, GBB shall not be deemed to have offered or agreed to issue any
GBB Common Stock as provided in Section 2.3 to any Matsco Shareholder
and 100% of each Earn-Out Payment shall be paid entirely in cash
unless:
(i) A permit (the "Permit") has been issued by the
Commissioner of Corporations of the State of California
pursuant to Section 25142 of the California Corporate
Securities Laws of 1968, as amended;
(ii) GBB determines at its option after receiving the
Permit and at the time Earn-Out Payments are payable as
provided in Section 2.3 to offer GBB Common Stock in lieu of
cash for up to 50% of such Earn-Out Payments, subject to the
provisions of Section 2.3, to the Matsco Shareholders eligible
to receive an Earn-Out Payment;
(iii) A Matsco Shareholder eligible to receive an
Earn-Out Payment elects to accept GBB's offer; and
(iv) All documentation required by GBB in connection
with the issuance of the GBB Common Stock shall have been
completed, executed and delivered, including any investment
representations or affiliate's agreements as may be required.
(b) GBB agrees to use its best efforts to obtain the Permit.
ARTICLE III
THE CLOSING
3.1 Closing Date. The Closing shall take place as of the close of
------------
business within five (5) business days after the date on which all of the
conditions set forth in this Agreement have been satisfied, or as the parties
may otherwise agree, but in no event later than October 31, 2000 (the "Closing
Date").
3.2 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
Closing Date, 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 reasonably be deemed necessary by the other party, more
effectively to carry out the intent and purpose of this Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MATSCO
AND THE INDEMNIFYING SHAREHOLDERS
Matsco and each of the Indemnifying Shareholders, jointly and
severally, represent and warrant to GBB as follows:
4.1 Incorporation, Standing and Power. Each of Matsco and the Matsco
---------------------------------
Subsidiaries has been duly organized, is validly existing and in good standing
as a corporation under the laws of its state of incorporation and is duly
licensed, if and as required, as a "Lender," as defined under the California
Finance Lenders Law (Sections 22000 et seq. of the California Financial Code).
Each of Matsco and the Matsco Subsidiaries have all requisite corporate power
and authority to own, lease and operate its properties and assets and to carry
on its business as presently conducted. Each of Matsco and the Matsco
Subsidiaries are qualified or licensed to do business in all jurisdictions in
which the scope of its business or the location of any of its properties in such
jurisdictions requires such licensing or qualification, except where the failure
to so qualify or to be so licensed would not have a Material Adverse Effect.
Matsco has furnished to GBB true and correct copies of its and each of the
Matsco Subsidiaries' articles of incorporation, bylaws, licenses and
qualifications in effect as of the date hereof.
4.2 Capitalization.
--------------
As of the date of this Agreement, the authorized capital stock of
Matsco consists of 200,000 shares of Matsco Common Stock, $0.001 par value, of
which, on the date hereof, there are 5,200 shares issued and outstanding, and
10,000 shares of Matsco Preferred Stock, $0.001 par value, of which, on the date
hereof, (i) 375 shares have been designated as Series A Preferred Stock (the
"Series A Preferred Stock"), of which, on the date hereof, there are 375 shares
issued and outstanding, (ii) 1,125 shares have been designated as Series B
Preferred Stock (the "Series B Preferred Stock"), of which, on the date hereof,
there are 1,125 shares issued and outstanding and (iii) 400 shares have been
designated as Series C 7.5% Cumulative Convertible Preferred Stock (the "Series
C Preferred Stock"), of which, on the date hereof, there are 400 shares issued
and outstanding. All of the outstanding shares are duly authorized, validly
issued, fully paid and nonassessable and are owned of record, and in the
respective amounts, by the Matsco Shareholders as identified in Exhibit A
attached hereto. There are no outstanding options, warrants or other rights in
or with respect to the unissued shares of Matsco Stock, nor any securities
(other than the Matsco Preferred Stock) convertible into such stock, and Matsco
is not obligated to issue any additional shares of its common stock (other than
upon conversion of outstanding shares of the Matsco Preferred Stock), preferred
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.
4.3 Subsidiaries. Except for the Matsco Subsidiaries and as set forth
------------
on the Matsco Investment Securities List, Matsco does not own, directly or
indirectly (except for shares and warrants of Carbide Tools for Industry
acquired as pledgee pursuant to loans or
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upon acquisition in satisfaction of debt previously contracted), the outstanding
stock or equity or other voting interest in any corporation, partnership, joint
venture or other entity.
4.4 Financial Statements. Matsco has previously furnished to GBB a copy
--------------------
of the Financial Statements of Matsco. The Financial Statements of Matsco: (a)
present fairly the financial condition of Matsco as of the respective dates
indicated and its 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; and (b) have been
prepared in accordance with GAAP consistently applied (except as otherwise
indicated therein and that the unaudited Matsco Financial Statements do not
contain footnotes as required by GAAP).
4.5 Reports and Filings. Except as set forth on a list furnished by
-------------------
Matsco to GBB (the "Matsco Filings List") and since December 31, 1996, Matsco
and each of the Matsco Subsidiaries have filed all reports, returns,
registrations and statements (such reports and filings referred to as "Matsco
Filings"), together with any amendments required to be made with respect
thereto, that were required to be filed with the Commissioner, the Delaware
Secretary of State and 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. Except as disclosed in the Matsco Filings List, no
adverse administrative actions have been taken or orders issued in connection
with such Matsco Filings. As of their respective dates, each of such Matsco
Filings (a) 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 (b) 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 Matsco
Filings that was intended to present the financial position, results of
operations or cash flows of Matsco on a consolidated basis fairly presented the
financial position, results of operations or cash flows of Matsco on a
consolidated basis and was prepared in accordance with GAAP consistently
applied, except as stated therein, during the periods involved. Matsco has
furnished GBB with true and correct copies of all Matsco Filings filed by Matsco
since December 31, 1996.
4.6 Authority of Matsco. The execution and delivery by Matsco of this
-------------------
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of
Matsco, including the execution by all Matsco Shareholders of written consents
approving the transactions contemplated herein, and, assuming the accuracy of
the representations contained in Section 6.3 hereof, this Agreement is, upon due
execution and delivery by the respective parties hereto, a valid and binding
obligation of Matsco enforceable in accordance with its 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 Matsco to GBB (the "Matsco Conflicts and Consents
List"), neither the execution and delivery by
16
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Matsco of this Agreement, the consummation of the transactions contemplated
herein, nor compliance by Matsco with any of the provisions hereof, will: (a)
conflict with or result in a breach of any provision of its certificate 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 material note, bond, mortgage, indenture,
franchise, license, permit, agreement or other instrument or obligation to which
Matsco or any of the Matsco Subsidiaries is a party, or by which Matsco or any
of the Matsco Subsidiaries or any of their properties or assets are bound; (c)
result in the creation or imposition of any Encumbrance on any of the properties
or assets of Matsco or any of the Matsco Subsidiaries; or (d) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Matsco or
any of their properties or assets. Except as set forth in the Matsco 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 Matsco or any of the Matsco Subsidiaries, and no consent of, approval
of or notice to any other Person, is required in connection with the execution
and delivery by Matsco of this Agreement or the consummation by Matsco of the
transactions contemplated hereby.
4.7 Insurance. Matsco has the policies of insurance with respect to its
---------
and the Matsco Subsidiaries' assets and business against such casualties and
contingencies and in such amounts, types and forms as are set forth in a list
furnished by Matsco to GBB (the "Matsco Insurance List"). All such insurance
policies are in full force and effect. Except as set forth in the Matsco
Insurance List, no insurer under any such policy has canceled or indicated an
intention to cancel or not to renew any such policy or generally disclaimed
liability thereunder. Except as set forth in the Matsco Insurance List, Matsco
is not in default under any such policy and all material claims thereunder have
been filed in a timely fashion. Set forth in the Matsco Insurance List is a list
of all policies of insurance carried and owned by Matsco or any of the Matsco
Subsidiaries 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 furnished to GBB a copy of each such policy of insurance.
4.8 Personal Property. Matsco and each of the Matsco Subsidiaries have
-----------------
good and marketable title to all its material properties and assets (other than
real property) owned or stated to be owned by Matsco or any Matsco Subsidiary as
reflected on the Matsco Financial Statements as of December 31, 1999 and March
31, 2000 or acquired after that date free and clear of all Encumbrances except
(a) as disposed of in the ordinary course of business; (b) as set forth in the
Financial Statements of Matsco; (c) for Encumbrances for current taxes and
assessments not yet due and payable; (d) for Encumbrances incurred in the
ordinary course of business; (e) for Encumbrances that are not substantial in
character, amount or extent and that do not materially detract from the value,
or interfere with present use, of the property subject thereto or affected
thereby, or otherwise materially impair the conduct of business of Matsco; or
(f) as set forth in a list furnished by Matsco to GBB (the "Matsco Personal
Property List").
4.9 Real Estate. Neither Matsco nor any Matsco Subsidiary owns any real
-----------
property. Matsco has furnished GBB a list of all leaseholds and all other
interests in real property (other than security interests or liens in favor of
Matsco) owned by Matsco or any of
17
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the Matsco Subsidiaries (the "Matsco Real Property List") as of March 31, 2000
or acquired after that date. Matsco or any of the Matsco Subsidiaries has valid
leasehold interests in the leaseholds, described in the Matsco Real Property
List, free and clear of all Encumbrances, except (a) for rights of lessors, co-
lessees or sublessee in such matters that are reflected in the lease; (b) for
current taxes not yet due and payable; (c) for Encumbrances of public record;
(d) 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 (e) as
described in the Matsco Real Property List. Matsco has furnished GBB with true
and correct copies of all leases included in the Matsco Real Property List, all
title insurance policies and all documents evidencing recordation of all
recordable interests in real property included in the Matsco Real Property List.
4.10 Contingent Liabilities. Neither Matsco nor any Matsco Subsidiary
----------------------
has any liabilities or obligations, either accrued or contingent, and including
any obligation for known but unasserted claims, that are material to Matsco or
any Matsco Subsidiary on a consolidated basis and there is no private or
governmental suit, claim, action or proceeding pending, nor, to Matsco's
knowledge threatened or known but unasserted against Matsco, or any of the
Matsco Subsidiaries, or directors, officers or employees of Matsco or any of the
Matsco Subsidiaries relating to the performance of their duties in such
capacities or against or affecting any properties of Matsco or any of the Matsco
Subsidiaries which, if adversely determined, would have a Material Adverse
Effect, except for liabilities and obligations: (a) reflected, reserved for or
disclosed in the Financial Statements of Matsco; (b) incurred subsequent to
September 30, 1999 in the ordinary course of business; or (c) disclosed in a
list furnished by Matsco to GBB (the "Matsco Liabilities List") or on any other
Matsco List. To the knowledge of Matsco, there are no facts that would form the
valid basis for the assertion against it or any Matsco Subsidiary 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
Effect and is not fairly reflected in the Financial Statements of Matsco or
otherwise disclosed in this Agreement. The Material Liabilities list contains a
list of those certain contingent liabilities (the "Material Contingencies")
which the Indemnifying Shareholders and GBB agree may be resolved, if necessary,
by the use of the Holdback Funds and which shall be subject to the procedures
set forth in Section 15.3. Except as disclosed in the Matsco Liabilities List,
there are no judgments, decrees, stipulations or orders against Matsco or any of
the Matsco Subsidiaries or enjoining its 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. Except as set forth on the Matsco Tax List, Matsco and the
-----
Matsco Subsidiaries have filed all federal and foreign income tax returns, all
state and local franchise and income tax, real and personal property tax, sales
and use tax, premium tax, excise tax and other tax returns required to be filed
and has paid all taxes, together with any interest and penalties owing in
connection therewith, shown on such returns to be due in respect of the periods
covered by such returns, other than taxes which are being contested in good
faith and for which adequate reserves have been established. Matsco has not
filed a consent pursuant to Section 341(f) of the Code. The tax and audit
positions taken by Matsco and the Matsco Subsidiaries in connection with the tax
returns described in the first sentence of this paragraph
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were asserted in good faith. Matsco and the Matsco Subsidiaries have filed all
required payroll tax returns, have fulfilled all tax withholding obligations and
have paid over to the appropriate governmental authorities the proper amounts
with respect to the foregoing. Adequate provision has been made in the books and
records of Matsco and, to the extent required by GAAP, reflected in the
Financial Statements of Matsco, for all tax liabilities, including interest or
penalties, whether or not due and payable and whether or not disputed, with
respect to any and all federal, foreign, state and local taxes for the periods
covered by such financial statements and for all prior periods. Matsco has
furnished GBB a list (the "Matsco Tax List") of the federal tax returns of
Matsco and the Matsco Subsidiaries which have been duly filed with the IRS on or
after December 31, 1996. The Matsco Tax List also contains a complete list of
each year for which any federal, state, local or foreign tax authority has
obtained or has requested an extension of the statute of limitations from Matsco
and lists each tax case of Matsco currently pending in audit, at the
administrative appeals level or in litigation. The Matsco Tax List further lists
the date and issuing authority of each statutory notice of deficiency, notice of
proposed assessment and revenue agent's report issued to Matsco within the last
twelve (12) months. Except as set forth in the Matsco Tax List, neither the IRS
nor any foreign, state or local taxing authority has, during the past three (3)
years, examined or has informed Matsco that it is in the process of examining
any federal, foreign, state or local tax returns of Matsco. Neither the IRS nor
any foreign, state or local taxing authority is now asserting or, to the
knowledge of Matsco, threatening to assert any deficiency or claim for
additional taxes (or interest thereon or penalties in connection therewith)
except as set forth on the Matsco Tax List.
4.12 Compliance with Laws and Regulations.
------------------------------------
(a) Except as expressly set forth or limited in other
representations and warranties set forth herein, neither Matsco nor any of the
Matsco Subsidiaries is in default under or in breach of any provision of its
certificate or articles of incorporation, as amended, or bylaws, as amended, or
law, ordinance, rule or regulation promulgated by any Governmental Entity,
except for such defaults or breaches that would not have a Material Adverse
Effect.
(b) The representations and warranties in this Section 4.12(b)
apply only to matters which would have a Material Adverse Effect. Without
limiting Section 4.12(a), and except as set forth on a list furnished by Matsco
to GBB (the "Matsco Environmental Compliance List"), to the actual knowledge of
Matsco and any Matsco Subsidiary: (i) Matsco and each of the Matsco Subsidiaries
are in compliance with all Environmental Regulations; (ii) there are no Tanks on
or about Matsco Property; (iii) there are no Hazardous Materials on, below or
above the surface of, or migrating to or from Matsco Property; (iv) neither
Matsco nor any of the Matsco Subsidiaries has any 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; (v) neither Matsco nor any of its Affiliates has been an "operator"
of any Matsco Property for purposes of establishing liability under the
Environmental Regulations; and (vi) without limiting Section 4.10 or the
foregoing representations and warranties contained in clauses (i) through (v),
as of the date of this Agreement, there is no claim, action, suit or proceeding,
or notice thereof, before any
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Governmental Entity pending against Matsco or any of the Matsco Subsidiaries or
concerning property securing Matsco loans and there is no outstanding judgment,
order, writ, injunction, decree, or award against or affecting Matsco Property
or property securing Matsco loans, relating to the foregoing representations (i)
through (v), in each case the noncompliance with which, or the presence of which
would have a Material Adverse Effect. Anything herein to the contrary
notwithstanding, neither Matsco nor any Matsco Subsidiary shall be deemed to
have conducted, or be required to conduct, any investigations of any Matsco
Property covered by this Section 4.12(b).
(c) No Phase I environmental assessments have been prepared by or
on behalf of Matsco or any of the Matsco Subsidiaries.
4.13 Performance of Obligations. Except contracts or agreements
--------------------------
identified on the Matsco Conflicts and Consents List pursuant to which Matsco or
any Matsco Subsidiary is required to obtain the consent of the other party or
parties thereto in order to consummate the transaction contemplated hereby,
Matsco and each of the Matsco Subsidiaries have performed in all material
respects all of the obligations required to be performed by them to date and are
not in default under or in breach of any term or provision of any covenant,
contract, lease, indenture or any other covenant to which any of them 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 a Material Adverse
Effect.
4.14 Employees. To the knowledge of Matsco or any Matsco Subsidiary,
---------
there are no controversies pending or threatened between Matsco or any of the
Matsco Subsidiaries and any of their employees. Neither Matsco nor any of the
Matsco Subsidiaries 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 its 1999 agreement with Piper
-------------------
Jaffray, neither Matsco nor any Matsco Subsidiary 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 (including any additional obligation to Piper
Jaffray pursuant to a 1998 agreement).
4.16 Material Contracts. Except as set forth in a list delivered by
------------------
Matsco and any Matsco Subsidiaries to GBB (the "Matsco Contract List") (all
items listed or required to be listed in such Matsco Contract List being
referred to herein as "Scheduled Contracts"), neither Matsco nor any of the
Matsco Subsidiaries is a party or otherwise subject to:
(a) any employment, deferred compensation, bonus or consulting
contract that (i) has a remaining term, as of the date of this Agreement, of
more than one year in length of obligation on the part of Matsco or any Matsco
Subsidiary and is not terminable by Matsco or any Matsco Subsidiary within one
year without penalty or (ii) requires payment by Matsco or any Matsco Subsidiary
of $50,000 or more per annum;
20
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(b) any advertising, brokerage, licensing, dealership,
representative or agency relationship or contract requiring payment by Matsco or
any Matsco Subsidiary of $50,000 or more per annum;
(c) any contract or agreement that restricts Matsco or any Matsco
Subsidiary (or would restrict any Affiliate of Matsco (including GBB and its
subsidiaries) after the Closing Date) 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 Matsco or any Matsco Subsidiary in excess of $50,000 per
annum other than (A) financing leases entered into in the ordinary course of
business in which Matsco or any Matsco Subsidiary is lessor and (B) leases of
real property presently used by Matsco or any Matsco Subsidiary as its offices;
(e) any mortgage, pledge, conditional sales contract, security
agreement, option, or any other similar agreement with respect to any interest
of Matsco or any Matsco Subsidiary (other than as mortgagor or pledgor in the
ordinary course of its leasing and finance business or as mortgagee, secured
party or deed of trust beneficiary in the ordinary course of its business) in
personal property having a value of $50,000 or more (other than in the ordinary
course of its leasing and finance business);
(f) 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 Matsco or any Matsco Subsidiary;
(g) other than agreements entered into in the ordinary course of
business, any agreement to acquire equipment or any commitment to make capital
expenditures of $50,000 or more;
(h) other than agreements entered into in the ordinary course of
business, including sales of other real estate owned, any agreement for the sale
of any property or assets in which Matsco or any Matsco Subsidiary 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 by Matsco or any Matsco
Subsidiary of any money (other than borrowings made in the ordinary course of
its business and reflected in the financial records of Matsco);
(j) any restrictive covenant contained in any deed to or lease of
real property owned or leased by Matsco or any Matsco Subsidiary (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
$50,000 or more, other than loan or credit agreements, letters of credit or loan
commitments issued or entered into in the normal course of business;
(l) any supply, maintenance or landscape contracts not terminable
by Matsco or any Matsco Subsidiary without penalty on thirty (30) days' or less
notice and which provides for payments in excess of $50,000 per annum;
(m) other than as disclosed with reference to subparagraph (k) of
this Section 4.16 or in the Matsco Conflicts and Consents List, any material
agreement which would be terminable other than by Matsco or any Matsco
Subsidiary as a result of the consummation of the transactions contemplated by
this Agreement;
(n) any contract of participation with any other bank in any loan
in excess of $50,000 or any sales of assets of Matsco or any Matsco Subsidiary
with recourse of any kind to Matsco or any Matsco Subsidiary except the sale of
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;
(p) any contract relating to the provision of data processing
services to Matsco or any Matsco Subsidiary requiring payment by Matsco or any
Matsco Subsidiary in excess of $100,000 per annum;
(q) any other agreement of any other kind which involves future
payments or receipts or performances of services or delivery of items requiring
payment of $50,000 or more to or by Matsco or any Matsco Subsidiary other than
payments made under or pursuant to loan agreements, equipment financing
agreements, equipment leases, participation agreements and other agreements for
the extension of credit in the ordinary course of business; or
(r) any agreement that, alone or in conjunction with any other
agreements, would result in a deduction disallowance under Section 280G of the
Code or imposition of an excise tax under Section 4999 of the Code.
True copies of all Scheduled Contracts, including all amendments and supplements
thereto, have been furnished to GBB.
4.17 Certain Material Changes. Except as specifically required,
------------------------
permitted or effected by this Agreement or as disclosed in a list furnished by
Matsco to GBB (the "Material Changes List"), since December 31, 1999 there has
not been, occurred or arisen any of the following (whether or not in the
ordinary course of business unless otherwise indicated) with respect to Matsco
or any Matsco Subsidiary:
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(a) Any change in any of the assets, liabilities, permits, methods
of accounting or accounting practices, business or manner of conducting
business, of Matsco or any Matsco Subsidiary or any other event or development
that has had or could reasonably be expected to have a Material Adverse Effect;
(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 or that may involve a loss of more than $50,000 in
excess of applicable insurance coverage;
(c) Any amendment, modification or termination of any existing, or
entry into any new contract or permit otherwise than in the ordinary course of
business;
(d) Any disposition by Matsco or by any Matsco Subsidiary of any
asset otherwise than in the ordinary course of business; or
(e) Any direct or indirect redemption, purchase or other
acquisition by Matsco or any Matsco Subsidiary of any equity securities or any
declaration, setting aside or payment of any dividend (except, in the case of
the declaration, setting aside or payment of a cash dividend, as disclosed in
the Financial Statements of Matsco) or other distribution on or in respect of
Matsco Stock whether consisting of money, other personal property, real property
or other things of value.
4.18 Licenses and Permits. Matsco and each of the Matsco Subsidiaries
--------------------
have all material licenses and permits that are necessary for the conduct of its
business, and such licenses and permits are in full force and effect except for
licenses and permits of which the failure to hold, or failure to be in full
force and effect, does not have a Material Adverse Effect. The properties,
assets, operations and businesses of Matsco are and have been maintained and
conducted in all material respects in compliance with all applicable licenses
and permits. The properties and operations of Matsco and the Matsco Subsidiaries
are and have been maintained and conducted, in all material respects, in
compliance with all applicable laws and regulations.
4.19 Employee Benefit Plans.
----------------------
(a) Matsco has previously furnished to GBB copies of each of its
and any Matsco Subsidiary's "employee benefit plan," as defined in Section 3(3)
of ERISA, which is subject to any provision of ERISA and covers any employee,
whether active or retired, of Matsco, together with all amendments thereto, all
related summary plan descriptions (to the extent one is required by law), the
most recent determination or opinion letter issued by the IRS for each such plan
that is intended to be qualified under Section 401(a) of the Code, and the
annual reports for the most recent three (3) years (Form 5500 including, if
applicable, Schedule B thereto) prepared in connection with each such plan. Such
plans are hereinafter referred to collectively as the "Employee Plans." Matsco
does not participate in an employee benefit pension plan that is a
"multiemployer plan" within the meaning of Section 3(37) of ERISA that would
subject Matsco to a material amount of liability with respect to any such plan.
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
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Plan is exempt from tax under Section 501(a) of the Code. To the knowledge of
Matsco, no event has occurred that will subject such Employee Plans to tax under
Section 511 of the Code. All amendments required to be made on or before the
date hereof 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 Matsco to GBB (the "Matsco
Employee Plan List"), all Employee Plans were in effect for substantially all of
1998 and 1999, and there has been no amendment thereof (other than amendments
required to comply with applicable law or to maintain an Employee Plan's tax-
qualified status under Section 401(a) of the Code) or increase in the cost
thereof or benefits thereunder on or after January 1, 1998.
(b) Matsco has previously made available to GBB copies or
descriptions of each plan or arrangement maintained or otherwise contributed to
by Matsco 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, profit sharing, benefit, retirement, incentive, group health or
insurance, welfare or similar plan or arrangement for the benefit of any
employee or class of employees, whether active or retired, of Matsco (such plans
and arrangements being collectively referred to herein as "Benefit
Arrangements"). Except as disclosed in the Matsco Employee Plan List hereto, all
Benefit Arrangements which are in effect were in effect for substantially all of
1998 and 1999. There has been no amendment thereof or increase in the cost
thereof or benefits payable thereunder since January 1, 1998. Except as set
forth in the Matsco Employee Plan List, there has been no material increase in
the compensation of or benefits payable to any senior executive employee of
Matsco since January 1, 1999, nor any employment, severance or similar contract
entered into with any such employee, nor any amendment to any such contract,
since January 1, 1999. There is no contract, agreement or benefit arrangement
covering any employee of Matsco which individually or collectively could give
rise to the payment of any amount which would constitute an "excess parachute
payment," as such term is defined in Section 280(G) of the Code.
(c) To the knowledge of Matsco, with respect to all Employee Plans
and Benefit Arrangements, Matsco is in compliance 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. Matsco has performed all of its
obligations under all such Employee Plans and Benefit Arrangements in all
material respects. There is no pending or, to the knowledge of Matsco,
threatened legal action, proceeding or investigation against or involving any
Employee Plan or Benefit Arrangement which could result in liability to such
Employee Plan. To Matsco's knowledge, no condition exists that could constitute
grounds for the termination of any Employee Plan under Section 4042 of ERISA; no
"prohibited transaction," as defined in Section 406 of ERISA and Section 4975 of
the Code and for which there is no applicable exception or exemption, has
occurred with respect to any Employee Plan, or any other employee benefit plan
maintained by Matsco which is covered by Title I of ERISA, which could subject
any person (other than a person for
24
<PAGE>
whom Matsco 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; nor has
any Employee Plan subject to Part III of Subtitle B of Title I of ERISA or
Section 412 of the Code, or both, incurred any "accumulated funding deficiency,"
as defined in Section 412 of the Code, whether or not waived; nor has Matsco
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 Title IV of ERISA has occurred with respect to any of the Employee
Plans. To the knowledge of Matsco, Matsco has not incurred nor expects to incur,
directly or indirectly, any liability under Title IV of ERISA arising in
connection with the termination of, or a complete or partial withdrawal from,
any plan covered or previously covered by Title IV of ERISA which could
constitute a liability of GBB or of any of its affiliates (including Matsco) at
or after the Closing Date.
(d) Except for Scheduled Contracts set forth in the Matsco
Contract List or as set forth in the Matsco 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 Matsco within a period of thirty (30) days following the Closing Date,
without payment of any amount as a penalty, bonus, premium, severance pay or
other compensation for such termination.
(e) All group health plans of Matsco have been operated in
compliance with the applicable group health plan continuation coverage
requirements of Section 4980B of the Code.
4.20 Corporate Records. The minute books of Matsco and each of the
-----------------
Matsco Subsidiaries accurately reflect all material actions taken to this date
by the shareholders, board of directors and committees of Matsco and each of the
Matsco Subsidiaries and contain true and complete copies of Matsco's and the
Matsco Subsidiaries' articles or certificates of incorporation, bylaws and other
charter documents, and all amendments thereto.
4.21 Accounting Records. Matsco maintains accounting records which
------------------
fairly and validly reflect its and the Matsco Subsidiaries' transactions, in all
material respects, and accounting controls exist sufficient to provide
reasonable assurances that such transactions are recorded as necessary to permit
the preparation of financial statements in conformity with GAAP.
4.22 Offices. Matsco has furnished to GBB a list (the "Matsco Offices
-------
List") setting forth the headquarters of Matsco (identified as such) and each of
the offices maintained and operated by Matsco and the Matsco Subsidiaries and
the location thereof. Except as set forth on the Matsco Offices List, Matsco
does not maintain any other office and is not operating its business at any
other location, and Matsco has not applied for or received permission from the
Commissioner or any other Governmental Entity to open any additional facility or
operate at any other location.
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4.23 Operating Losses. Matsco has furnished to GBB a list (the "Matsco
----------------
Operating Losses List") setting forth any Operating Loss (as herein defined)
which has occurred at Matsco or any Matsco Subsidiary during the period after
December 31, 1999 to the date of the Agreement. To the knowledge of Matsco or
any Matsco Subsidiary, no action has been taken or omitted to be taken by any
employee of Matsco that has resulted in the incurrence by Matsco 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 $50,000 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 or other similar acts or
occurrences.
4.24 Loan Portfolio. Matsco has furnished to GBB a summary aging (the
--------------
"Matsco Loan List") that sets forth, as of June 30, 2000, an aging of each loan,
lease, other extension of credit or commitment to extend credit by Matsco or any
Matsco Subsidiary that identifies and explains any repayment or collection
problems relating to any of such loans, leases or other extensions of credit
that could have a Material Adverse Effect.
4.25 Receivables Sales and Servicing.
-------------------------------
(a) For the purposes of this Section 4.25, the following terms
shall have the meanings ascribed to them below:
(i) "Equipment" means the equipment leased to customers of
Matsco pursuant to the Lease Documents or pledged by customers to Matsco
pursuant to the Loan Documents, together with any replacement parts, additions
and repairs thereto, and any accessories incorporated therein and/or affixed
thereto.
(ii) "Investor" means any unrelated person or entity that has
purchased, financed or otherwise acquired an interest in a Receivable from
Matsco or any Matsco Subsidiary.
(iii) "Investor Documents" means any indenture, trust
agreement, loan agreement, purchase agreement or similar document, and any
related agreements entered into by Matsco or a Matsco Subsidiary in connection
with any sale or financing of any Receivable.
(iv) "Investor Requirements" means any outstanding
contractual, legal and regulatory obligations of Matsco or any Matsco Subsidiary
to any Investor, including but not limited to, the representations, warranties
and covenants made by Matsco or any Matsco Subsidiary to any Investor in any
Investor Documents.
(v) "Lease Documents" means the lease contracts evidencing a
lease of Equipment and all rights with respect thereto, including all guaranties
and other
26
<PAGE>
guaranties or arrangements supporting or securing payment of any lease of
Equipment and all rights with respect to any agreements or arrangements with
vendors, dealers or manufacturers of any Equipment or other collateral for such
lease to the extent that it is specifically related to any such lease contract.
(vi) "Loan Documents" means the loan contracts evidencing
either a (A) sale of the related Equipment to a customer and retention by the
lessor of a security interest in such Equipment or (B) Practice Acquisition Loan
Contract and the related promissory notes, if any, and, in each case, all rights
with respect thereto, including all guaranties and other guaranties or
arrangements supporting or securing payment of any such loan contracts and all
rights with respect to any agreements or arrangements with vendors, dealers or
manufacturers of any Equipment or other collateral for such loan to the extent
that it is specifically related to any such loan contract.
(vii) "Practice Acquisition Loan" means a loan contract
relating to any loan by Matsco to a professional who is engaged in the operation
and acquisition of a licensed professional practice, which loan is secured by
Equipment, inventory, accounts and other general intangibles.
(viii) "Receivable" means all amounts due from the obligor
under any Loan Document or Lease Document that was originated or is serviced by
Matsco or any Matsco Subsidiary to the extent that Matsco or any Matsco
Subsidiary could have any liability, obligation or duties with respect thereto.
(ix) "Receivable Documents" means any Lease Documents or any
Loan Documents.
(x) "Receivables Held for Sale" means all Receivables
currently held and hereinafter acquired or originated by Matsco or any Matsco
Subsidiary for which beneficial ownership has not been transferred to an
Investor.
(xi) "Serviced Receivable" means all Receivables to the extent
serviced by Matsco or a Matsco Subsidiary, whether for its own account or for
Investors.
(xii) "Servicing Requirements" means prudent practice in line
with industry standards together with any contractual, legal or regulatory
obligation(s) of Matsco or any Matsco Subsidiary relating to the Serviced
Receivables or any Receivable previously serviced by Matsco or any Matsco
Subsidiary for which Investor Documents are still in effect.
(b) To Matsco's knowledge, except to the extent covered by
indemnification from third parties not party to the Receivables Documents, the
Receivable Documents evidencing each Receivable that is currently outstanding:
(A) constitute the legal, valid and binding obligation of the parties to such
Receivable Documents and (B) are enforceable against such parties in accordance
with their terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization, receivership,
conservatorship or other similar laws affecting the rights of lending
institutions or creditors generally and by general equitable principles or
doctrines. To Matsco's knowledge, except to
27
<PAGE>
the extent covered by indemnification from third parties not party to the
Receivables Documents, no Receivable is subject to any legally enforceable right
of rescission, set-off, counterclaim or defense, including the defense of usury
or, to the knowledge of Matsco, lack of legal capacity of any borrower, lessor
or guarantor, nor will the operation of any of the terms of any Receivable, or
the exercise of any legally enforceable right thereunder, render any Receivable
or any of the Receivable Documents unenforceable, in whole or in part, or
subject to any right of rescission, set-off, counterclaim or defense, including
the defense of usury, or, to the knowledge of Matsco, lack of legal capacity of
any borrower, lessor or guarantor, and no such right of rescission, set-off,
counterclaim or defense has been asserted with respect to any Receivable Held
for Sale or any Receivable for which there is any recourse against, or
responsibility or exposure of, Matsco or any Matsco Subsidiary under any
Investor Documents.
(c) To Matsco's knowledge or the knowledge of any Matsco
Subsidiary, Matsco has at all times maintained the Receivable Documents in all
material respects in accordance with Investor Requirements, Servicing
Requirements and other legal and regulatory requirements and contractual
obligations applicable thereto.
(d) All outstanding Receivables sold or financed by Matsco or any
Matsco Subsidiary complied in all material respects with Investor Requirements
on the respective date of sale or finance of such Receivables.
(e) Matsco and the Matsco Subsidiaries have at all times been and
are now in compliance in all material respects with the Servicing Requirements
relating to the Serviced Receivables and Receivables previously serviced by them
for which Investor Documents are still in effect.
(f) Except as set forth on a list which has been furnished to GBB
(the "Receivables Sales and Servicing List"), neither Matsco nor any Matsco
Subsidiary has any advances outstanding with respect to any Receivable(s),
except for advances made under the Servicing Requirements that are expected to
be reimbursed within ninety (90) days from the date that such advance was made.
(g) Neither Matsco nor any Matsco Subsidiary is in material
default with respect to any of its respective obligations under any Lease
Document or Loan Document.
(h) No Receivable relates to an obligor that became a party to the
relevant Receivable Documents in a consumer (rather than commercial) capacity.
(i) All Receivables securitized in a pool, at the time of
inclusion in such pool, and at the time of any bring down of eligibility
representations with respect to such pool, met all applicable eligibility
criteria for such pool. The implicit principal balance outstanding and owing on
the Serviced Receivables in each pool equals or exceeds the amount owing to the
corresponding Investors in such pool.
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<PAGE>
(j) To the knowledge of Matsco or any Matsco Subsidiary, all
guarantees and indebtedness owed to Matsco or any Matsco Subsidiary, including
but not limited to those of the Small Business Administration and other state
and federal agencies, are valid and enforceable, except to the extent limited by
bankruptcy, insolvency, moratorium, reorganization, receivership,
conservatorship or other similar laws affecting the rights of lending
institutions or creditors generally and by general equitable principles.
(k) As of the date hereof, neither Matsco nor any Matsco
Subsidiary is a party to any interest rate swaps, caps, floors or option
agreements with respect to the Receivables
(l) The terms of each Receivable have not been impaired, waived,
altered or modified in any material respect from the date of its origination,
except by a written instrument, which written instrument has been recorded if
recordation is necessary to protect the interests of the owner thereof. The
substance of any such waiver, alteration or modification has been communicated
to and approved in writing by the relevant Investor, to the extent required by
the relevant Investor Requirements, and its terms are reflected in the files for
the Receivable Documents. Except as authorized by the applicable Investor, where
such Investor's authorization is required, neither Matsco nor any Matsco
Subsidiary has: (i) subordinated the security interest for any Receivable to any
other secured party or lien or given any other secured party or lien equal
priority with the lien for a Receivable except for those instances where a loan
or lease to an obligor is cross-defaulted or cross-collateralized with another
loan or lease from Matsco to that obligor and that may have been assigned to
different Investors consistent with past practices or (ii) executed any
instrument of release, cancellation or satisfaction with respect to any
Receivable, in whole or in part, other than in connection with a pay-off or in
the course of a pending work-out that has already been disclosed.
(m) Except as set forth in the Investor Documents, neither Matsco
nor any Matsco Subsidiary is subject to any repurchase obligation with respect
to any Receivable.
(n) Neither Matsco nor any Matsco Subsidiary has received a
written notice of a servicing default for any Serviced Receivable that has not
been cured or waived. All amounts payable in respect of a Receivable, or the
Equipment covered by a Receivable which Matsco or any Matsco Subsidiary is
responsible for paying, directly or indirectly under any Investor Document have,
in all material respects, been paid prior to becoming delinquent.
(o) To the knowledge of Matsco, no fact regarding Matsco, any
Matsco Subsidiary or any Receivables currently exists with respect to existing
securitizations heretofore undertaken by Matsco or any Matsco Subsidiary, nor
does Matsco have actual knowledge of any fact, that could reasonably be expected
to materially and adversely affect the ability of Matsco or any Matsco
Subsidiary to continue to perform securitizations in the future in accordance
with existing practices.
(p) Neither Matsco nor any Matsco Subsidiary has any existing or
contingent recourse obligations or commitments, as defined in the risk-weighted
capital
29
<PAGE>
adequacy regulations applicable to GBB or CNB, on any of their securitizations
that would require any increase or allocation of capital by GBB or CNB.
4.26 Risk-Weighted Capital. Matsco has furnished GBB all information
---------------------
regarding Matsco's securitization transactions requested by GBB to enable GBB to
determine how the transactions will impact risk-weighted capital calculations
for GBB.
4.27 Investment Securities. Matsco has furnished to GBB a list (the
---------------------
"Matsco Investment Securities List") setting forth a description of each
Investment Security held by Matsco or any Matsco Subsidiary on June 30, 2000.
The Matsco 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. Except as set forth on the Matsco
Investment Securities List, Matsco has no Investment Securities classified as
trading.
4.28 Power of Attorney. Except as set forth in a list furnished by
-----------------
Matsco to GBB (the "Power of Attorney List"), neither Matsco nor any Matsco
Subsidiary has granted any Person a power of attorney or similar authorization
that is presently in effect or outstanding.
4.29 Facts Affecting Regulatory Approvals. To the knowledge of Matsco
------------------------------------
or any Matsco Subsidiary, there is no fact, event or condition applicable to
Matsco or any Matsco Subsidiary which will, or could reasonably be expected to
prevent securing all requisite approvals or consents (if any) of any
Governmental Entity to the transactions contemplated by this Agreement.
4.30 Indemnification. Other than pursuant to the provisions of their
---------------
respective articles or certificates of incorporation or bylaws, neither Matsco
nor any Matsco Subsidiary 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
Matsco or any Matsco Subsidiary (a "Covered Party"), and, to the knowledge of
Matsco or any Matsco Subsidiary, there are no claims for which any Covered Party
would be entitled to indemnification by Matsco or any Matsco Subsidiary if such
provisions were deemed in effect, except as set forth in a list furnished by
Matsco to GBB (the "Matsco Indemnification List").
4.31 Derivative Transactions. Neither Matsco nor any Matsco Subsidiary
-----------------------
is a party to a transaction in or involving forwards, futures, options on
futures, swaps or other derivative instruments, other than in the ordinary
course of business consistent with past practices.
4.32 Intellectual Property. Except as set forth in a list furnished by
---------------------
Matsco to GBB (the "Matsco Intellectual Property List"), Matsco and each of the
Matsco Subsidiaries 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 Matsco nor any of the Matsco Subsidiaries has received any notice with
respect thereto that asserts the rights of others. Matsco and each of the Matsco
Subsidiaries has in all material respects performed
30
<PAGE>
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.
4.33 Year 2000. The mission critical computer software operated by
---------
Matsco and the Matsco Subsidiaries is currently capable of providing
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 any adaptations referred to in this clause made
or yet required have been provided to GBB.
4.34 Insider Loans; Other Transactions. Matsco has previously provided
---------------------------------
GBB with a listing, current as of March 31, 2000, of all extensions of credit
made by Matsco or any of the Matsco Subsidiaries to each of its executive
officers and directors and their Affiliates. Except as set forth on a list
furnished by Matsco to GBB (the "Matsco Related Party Transaction List"),
neither Matsco nor any of the Matsco Subsidiaries owes any amount to, or has any
contract or lease with or commitment to, any of the present executive officers
or directors of Matsco or any of the Matsco Subsidiaries (other than for
compensation for current services not yet due and payable, reimbursement of
expenses arising in the ordinary course of business or any amounts due pursuant
to Matsco's Employee Plans).
4.35 Registration Obligation. Except as required under the Marshall
-----------------------
Agreements, Matsco is not under any obligation, contingent or otherwise, to
register any of its securities under the Securities Act of 1933, as amended.
4.36 Accuracy and Currentness of Information Furnished. The
-------------------------------------------------
representations and warranties made by Matsco hereby or in the Matsco Lists 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 the Matsco Lists from
being misleading.
ARTICLE V
ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF THE MATSCO SHAREHOLDERS
The Matsco Shareholders jointly, but not severally, represent and
warrant to GBB as follows:
5.1 Authorization. The Matsco Shareholders have the full power and
-------------
authority to execute, deliver and perform this Agreement. Assuming the accuracy
of the representations in Section 6.3 hereof, this Agreement when executed and
delivered by the Matsco Shareholders will constitute a valid and legally binding
obligation of the Matsco Shareholders, enforceable in accordance with its terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and other laws of general applications affecting
enforcement of creditors' rights generally, rules of law governing specific
performance, injunctive relief and other equitable remedies, and limitations of
public policy.
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5.2 Reliance. The Matsco Shareholders acknowledge that GBB has
--------
responded to their requests for written information regarding GBB, and that the
Matsco Shareholders have had the opportunity to ask questions of, and receive
answers from, GBB or any Person acting on GBB's behalf, concerning the business,
operations, assets (including intangible assets), financial condition, results
of operations and prospects of GBB.
5.3 Tax Advisors. The Matsco Shareholders have reviewed with their own
------------
tax advisors the federal, state and local tax consequences of this investment,
where applicable, and the transactions contemplated by this Agreement. The
Matsco Shareholders are relying solely on such advisors with respect to tax
advice, and shall be responsible for the Matsco Shareholders' own tax liability
that may arise as a result of this investment or the transactions contemplated
by this Agreement.
5.4 Investor Counsel. The Matsco Shareholders acknowledge that they
----------------
have had the opportunity to review this Agreement (including the exhibits and
the schedules attached thereto) and the transactions contemplated by this
Agreement with their own legal counsel. The Matsco Shareholders are not relying
on GBB or its counsel for legal advice with respect to this investment and the
transactions contemplated by this Agreement, except for their reliance on the
opinion to be delivered pursuant to Section 11.6.
5.5 Spousal Consents. As applicable, the spouses of each of the Matsco
----------------
Shareholders have executed and delivered to GBB a Spousal Consent substantially
in the form of Exhibit E attached hereto.
5.6 Beneficial Ownership. Each of the Matsco Shareholders has
--------------------
beneficial ownership of the outstanding shares of Matsco Stock set forth
opposite such Matsco Shareholders name on Exhibit A attached hereto.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF GBB
GBB represents and warrants to Matsco and each of the Matsco
Shareholders as follows:
6.1 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.
6.2 Financial Statements. GBB has previously furnished to Matsco 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
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periods then ended, subject, in the case of the unaudited consolidated interim
financial statements, to normal recurring adjustments; and (b) have been
prepared in accordance with GAAP consistently applied (except as otherwise
indicated therein).
6.3 Authority. The execution and delivery by GBB of this Agreement and
---------
the consummation of the transactions contemplated hereby, have been duly and
validly authorized by all necessary corporate action on the part of GBB, and,
assuming the accuracy of the representations contained in Sections 4.6 and 5.1
and upon the due execution and delivery by the respective parties hereto, this
Agreement is a valid and binding obligation of GBB enforceable in accordance
with its 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 Matsco
(the "GBB Conflicts and Consents List"), neither the execution and delivery by
GBB of this Agreement, the consummation of the transactions contemplated herein,
nor compliance by GBB with any of the provisions hereof, 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 is a party, or by which 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 of its subsidiaries; or (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to 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
consummation by GBB of the transactions contemplated hereby, except such
approvals as may be required by the SEC, the FRB, the OCC, and the Commissioner.
6.4 Reports and Filings. Since December 31, 1996, GBB has filed all
-------------------
reports, returns, registrations and statements (such reports and filings
referred to as "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. No adverse administrative actions have been taken or orders issued
in connection with such GBB Filings. As of their respective dates, each of such
GBB Filings (y) complied in all material respects with all laws and regulations
enforced or promulgated by the Governmental Entity with which it was filed (or
was amended so as to be in such compliance promptly following discovery of any
such noncompliance); and (z) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Any financial statement contained in any of such GBB
Filings that was intended to present the financial position, results of
operations or cash flows of GBB on a consolidated basis fairly presented the
financial position, results of operations or cash flows of GBB on a consolidated
basis and was prepared in accordance with
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GAAP or banking regulations consistently applied, except as stated therein,
during the periods involved.
6.5 Facts Affecting Regulatory Approvals. 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 all
requisite approvals or consents (if any) of any Governmental Entity to the
transactions contemplated by this Agreement.
6.6 Consideration. GBB has access to sufficient liquid funds to
-------------
consummate the transactions contemplated in this Agreement.
ARTICLE VII
COVENANTS OF MATSCO AND THE MATSCO SHAREHOLDERS
Matsco and each of the Matsco Shareholders hereby jointly but not
severally covenant and agree with GBB as follows:
7.1 Limitation on Matsco's Conduct Prior to the Closing Date. Between
--------------------------------------------------------
the date hereof and the Closing Date, except as provided in Section 7.2 or as
otherwise contemplated by this Agreement, and subject to requirements of law and
regulation, Matsco agrees to conduct its business and that of the Matsco
Subsidiaries, and the Matsco Shareholders agree to cause Matsco to conduct its
business and that of the Matsco Subsidiaries, in the ordinary course in
substantially the manner heretofore conducted, including applying consistent
with past practices and not changing its existing credit guidelines. Consistent
therewith, Matsco shall not, and Matsco shall cause the Matsco Subsidiaries not
to and the Matsco Shareholders shall cause Matsco not to, without the prior
written consent of GBB, which consent shall not be unreasonably withheld or
delayed and which consent, except as provided further below, shall be deemed
granted if GBB has not communicated its response in writing, electronically or
telephonically within five (5) business days:
(a) issue, sell or grant any Matsco Stock, any other securities
(including long term debt) of Matsco or any Matsco Subsidiary or any rights,
options or securities to acquire any Matsco Stock or any other securities
(including long term debt) of Matsco or any Matsco Subsidiary;
(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 Matsco;
(c) purchase, redeem or otherwise acquire any capital stock or
other securities of Matsco or any rights, options or securities to acquire any
capital stock or other securities of Matsco;
(d) except as may be required to effect the transactions
contemplated herein, amend its articles of incorporation or bylaws;
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(e) grant any general or uniform increase in the rate of pay of
employees or employee benefits, except for certain proposed increases which are
consistent with normal past practices and have been furnished to GBB;
(f) except as agreed by GBB with respect to Harold Spencer, grant
any increase in salary, incentive compensation or employee benefits or pay any
bonus to any Person or voluntarily accelerate the vesting of any employee
benefits, except for certain proposed increases which are consistent with normal
past practices and have been furnished to GBB;
(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 and capital expenditures and commitments previously
incurred in connection with Matsco's relocation to 2000 Powell Street;
(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 in excess of $750,000 without GBB's review and consent, which shall be
deemed granted if GBB has not communicated its response within 48 hours of
Matsco submitting such request for review and consent together with such
information as GBB may require in order to review such credit (which information
shall also be contained in credit write-ups or approvals to be submitted or made
available to GBB weekly for credits between $250,000 and $750,000);
(j) change its tax or accounting policies and procedures or any
method or period of accounting unless required by GAAP 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 ten percent (10%) or more of the outstanding
Matsco 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;
(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 or solicit (including by way of furnishing information
or assistance), or take any other action to facilitate, any inquiries or the
making of any proposal
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which constitutes, or may reasonably be expected to lead to, any Competing
Transaction, 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 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 Matsco 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 Matsco: any merger,
consolidation, share exchange or other business combination; a sale, lease,
exchange, mortgage, pledge, transfer or other disposition of assets of Matsco
other than in the ordinary course of business; a sale of shares of capital stock
(or securities convertible or exchangeable into or otherwise evidencing, or any
agreement or instrument evidencing, the right to acquire capital stock), a
tender offer or exchange offer for outstanding shares; or a public announcement
of an unsolicited bona fide proposal, plan, or intention to do any of the
foregoing;
(o) change any of its basic policies and practices with respect to
liquidity management and cash flow planning, marketing, lending, budgeting,
profit and tax planning, personnel practices or any other material aspect of its
business or operations, except such changes as may be required in the opinion of
Matsco'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
(other than in the ordinary course of business consistent with past practice);
(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 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, in any case, in the ordinary course of business
consistent with past practices and which are not designated as trading;
(r) amend or modify any Scheduled Contract or enter into any
agreement or contract that would be a Scheduled Contract under Section 4.16
other than in the ordinary course of business;
(s) sell, transfer, mortgage, encumber or otherwise dispose of any
assets or release or waive any claim, except in the ordinary course of business
and consistent with past practices;
(t) take any action which, to the knowledge of Matsco or any Matsco
Subsidiary, would or is reasonably likely to (i) adversely affect the ability of
GBB or Matsco to obtain any necessary approval of any Governmental Entity
required for the transactions contemplated hereby; (ii) adversely affect
Matsco's ability to perform its covenants and
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<PAGE>
agreements under this Agreement; or (iii) result in any of the conditions to
the performance of GBB's or Matsco's obligations in Articles 10 and 11 hereunder
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) settle any claim, action or proceeding involving any liability
for monetary damages or enter into any settlement agreement containing material
obligations;
(z) 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 January 1, 2000;
or renew, extend the maturity of, or alter any of the material terms of any such
loan for a period of greater than three (3) months;
(aa) incur any indebtedness for borrowed money or assume, guaranty,
endorse or otherwise as an accommodation become responsible for the obligations
of any other person, except for short-term borrowings made at prevailing market
rates and terms and in the ordinary course of business; or
(bb) agree or make any commitment to take any actions prohibited by
this Section 7.1.
7.2 Affirmative Conduct of Matsco Prior to the Closing Date. Between
the date hereof and the Closing Date, Matsco shall, and Matsco shall cause each
Matsco Subsidiary and the Matsco Shareholders shall cause Matsco, 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 Matsco;
(b) use its commercially reasonable efforts to keep in full force
and effect all of the existing material permits and licenses of Matsco;
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<PAGE>
(c) use its commercially reasonable efforts to maintain insurance
coverage at least equal to that now in effect on all properties for which it is
responsible and on its business operations;
(d) perform its material contractual obligations and not become in
material default on any such obligations, provided GBB and its Affiliates
continue certain financial assistance and support as set forth in the GBB
Financial Assistance and Support List delivered by GBB to Matsco;
(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 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 its tax liabilities, or any actual or threatened
collection enforcement activity by any tax authority with respect to its tax
liabilities;
(h) promptly provide GBB monthly unaudited balance sheets and
income statements of Matsco and the Matsco Subsidiaries within twenty-five (25)
days after the close of each calendar month;
(i) not later than the 20th day of each calendar month, amend or
supplement the Matsco Lists prepared and delivered pursuant to Article 4 to
ensure that the information set forth in the Matsco Lists accurately reflects
the then-current status of Matsco. Matsco shall further amend or supplement the
Matsco Lists as of the Closing Date if necessary to reflect any additional
information that needs to be included in the Matsco Lists;
(j) 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 Matsco or any
of the Matsco Subsidiaries or that is required to consummate the transactions
contemplated by this Agreement;
(k) furnish to GBB, as soon as practicable, and in any event within
fifteen (15) days after it is prepared, a copy of any report submitted to the
Matsco Board of Directors or any committee thereof, provided, however, that
Matsco need not furnish to GBB communications of Matsco's legal counsel
regarding Matsco's rights and obligations under this Agreement or the
transactions contemplated hereby, or books, records and documents covered by
confidentiality agreements or filed with any Governmental Entity on a
confidential basis (other than confidentially filed portions of any notice or
application filed in connection with the transactions contemplated by this
Agreement, which shall be furnished to GBB) or covered by the attorney-client
privilege, or which are attorneys' work product; and
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<PAGE>
(l) use its commercially reasonable efforts to protect and preserve
its rights to the use of the name "The Matsco Companies Inc." and to take any
actions reasonably requested by GBB to ensure that such rights will inure to the
benefit of GBB upon the Closing.
(m) complete the sale or transfer of (i) the airplane owned by
Matsco or a Matsco Subsidiary and (ii) Matsco's ownership interest in National
Dental Network (together the "Pre-Closing Transactions"), provided that
contingent revenue interests acceptable to GBB shall be retained by Matsco in
connection with such sale or transfer of National Dental Network.
7.3 Access to Information. Matsco will afford, and the Matsco
---------------------
Shareholders shall cause Matsco to afford, upon reasonable notice, to GBB and
its representatives, counsel, accountants, agents and employees reasonable
access during normal business hours to all of its and the Matsco Subsidiaries'
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 Matsco and the
condition thereof and to update such examination at such intervals as GBB shall
reasonably deem appropriate. Such examination shall be conducted in cooperation
with the officers of Matsco and in such a manner as to minimize any disruption
of, or interference with, the normal business operations of Matsco. Upon the
request of GBB, Matsco will request (and the Matsco Shareholders shall cause
Matsco to request) Grant Thornton 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 Matsco, including tax accrual work
papers prepared for Matsco during the preceding thirty-six (36) months, other
than (a) books, records and documents covered by the attorney-client privilege,
or that are attorneys' work product, and (b) books, records and documents that
Matsco 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
Matsco herein; provided, that GBB shall disclose to Matsco any fact or
circumstance it may discover which GBB believes renders any representation or
warranty made by Matsco 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 Matsco so obtained from any of them (except to the
extent that such documents or information are a matter of public record 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 Matsco.
7.4 Filings. Matsco and the Matsco Shareholders agree that through the
-------
Closing Date, each of Matsco's and Matsco's Subsidiaries' 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
39
<PAGE>
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 GAAP or applicable banking regulations
consistently applied during the periods involved.
7.5 Notices; Reports. Matsco and the Matsco Shareholders each will
-------
promptly notify GBB of any event of which Matsco or the Matsco Shareholders
obtains knowledge which has had or could reasonably be expected to have a
Material Adverse Effect, or in the event that Matsco or the Matsco Shareholders
determine that they are unable to fulfill any of the conditions to the
performance of GBB's obligations under this Agreement, Matsco and the Matsco
Shareholders each will furnish GBB (i) as soon as available, and in any event
within ten (10) days after it is prepared, any report by Matsco for submission
to the Board of Directors of Matsco or committees thereof, (ii) as soon as
available, all proxy statements, information statements, financial statements,
reports, letters and communications sent by Matsco to the Matsco Shareholders,
and all reports to be filed by Matsco with the Commissioner, the Delaware
Secretary of State or any other Governmental Entity after the date hereof, and
(iii) the public portions (subject to Section 7.7) of such other existing
reports as GBB may reasonably request relating to Matsco.
7.6 Loan Portfolio. Matsco will promptly inform GBB of any loan, lease,
--------------
other extension of credit or commitment to extend credit by Matsco or any Matsco
Subsidiary that involves any repayment or collection problem that would have a
Material Adverse Effect.
7.7 Applications. Matsco and the Matsco Shareholders each will promptly
------------
prepare any applications necessary on their part to consummate the transactions
contemplated hereby, and each further agrees to provide any information
reasonably requested by GBB for the preparation of any applications by GBB
necessary to consummate the transactions contemplated hereby. Matsco and the
Matsco Shareholders shall afford GBB a reasonable opportunity to review all such
applications (including confidential or nonpublic portions thereof) and all
amendments and supplements thereto before the filing thereof. Matsco will use
its commercially reasonable efforts to obtain all regulatory approvals or
consents that are required to be obtained by Matsco and are necessary to effect
the transactions contemplated herein.
7.8 No Sale or Encumbrance. Except for existing encumbrances listed on
----------------------
the Matsco Encumbrance List, each of the Matsco Shareholders agrees not to sell,
transfer or encumber their Matsco Stock prior to the earlier of the Closing or
the termination of this Agreement.
7.9 Employment Agreements and Non-Compete Agreements. Certain of the
------------------------------------------------
Matsco Shareholders identified on Exhibit A agree to execute and deliver to GBB
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Employment Agreements in the form of Exhibit C hereto and the Non-Compete
Agreements in the form of Exhibit D hereto.
7.10 Matsco Stock Collateral. Marshall agrees to release any claim or
-----------------------
security interest in any Matsco Stock held as collateral for any Marshall
Guaranties as provided in Section 11.7.
ARTICLE VIII
COVENANTS OF GBB
GBB covenants and agrees with Matsco and the Matsco Shareholders as
follows:
8.1 Limitation on GBB's Conduct Prior to the Closing Date. Between the
-----------------------------------------------------
date hereof and the Closing Date, except as contemplated by this Agreement and
subject to requirements of law and regulation generally applicable to bank
holding companies and banks, GBB shall not, without the prior written consent of
Matsco, which consent shall not be unreasonably withheld or delayed:
(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 not being satisfied; or
(b) agree or make any commitment to take any actions prohibited by
this Section 8.1.
8.2 Affirmative Conduct of GBB Prior to the Closing Date. Between the
----------------------------------------------------
date hereof and the Closing Date, GBB shall:
(a) use its commercially reasonable efforts consistent with this
Agreement to maintain and preserve intact their respective present business
organizations and to maintain and preserve the relationships and goodwill with
account holders, borrowers, employees and others having business relationships
with GBB;
(b) duly observe and conform in all material respects to all lawful
requirements applicable to the business of GBB;
(c) 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 that is
required to consummate the transactions contemplated by this Agreement;
(d) not later than the 20th day of each calendar month, amend or
supplement the GBB Lists prepared and delivered pursuant to Article 6 to ensure
that the
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information set forth in the GBB Lists accurately reflects the then-current
status of GBB. 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
(e) use commercially reasonable efforts to have Matsco's directors
and officers added to GBB's directors' and officers' liability insurance policy
providing for coverage for a period of at least thirty-six (36) months following
the Closing Date and covering acts and omissions occurring prior to the Closing
Date and acts and omissions related to this Agreement, provided that the cost of
such additional coverage does not increase GBB's current annual premium by more
than five percent (5%).
8.3 Access to Information. Upon reasonable request by Matsco, GBB shall
---------------------
(i) make its Chief Executive Officer, Chief Administrative Officer/Chief
Financial Officer and Controller available to discuss with Matsco and its
representatives GBB's operations and (ii) shall provide Matsco with written
information which is (a) similar to the written information that Matsco reviewed
in connection with this Agreement, and (b) related to GBB's business condition,
operations and prospects. No examination or review conducted under this section
shall constitute a waiver or relinquishment on the part of Matsco of the right
to rely upon the representations and warranties made by GBB herein; provided,
that Matsco shall disclose to GBB any fact or circumstance it may discover which
Matsco believes renders any representation or warranty made by GBB hereunder
incorrect in any material respect. Matsco 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
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 or except as required by law), and if the
transactions contemplated herein are not consummated, such confidence shall be
maintained and all such documents shall be returned to GBB.
8.4 Applications. GBB will promptly prepare and file or cause to be
------------
prepared and filed such regulatory applications, notices or filings as deemed
necessary to consummate the transactions contemplated hereby, including those
required for compliance with the federal BHC Act and Hart Scott Rodino Act. GBB
shall afford Matsco a reasonable opportunity to review all such applications and
notices (including confidential or nonpublic portions thereof) and all
amendments and supplements thereto before the filing thereof. GBB will use its
commercially reasonable efforts to obtain all such regulatory approvals or
consents or to satisfy the requirements for any exemption necessary to effect
the transactions contemplated herein.
8.5 Notices; Reports. GBB will promptly notify Matsco of any event of
----------------
which GBB obtains knowledge which has had or may have a Material Adverse Effect
on the financial condition, operations, business or prospects of GBB or in the
event that GBB determines that it is unable to fulfill any of the conditions to
the performance of Matsco's obligations hereunder.
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8.6 Employment Agreements and Non-Compete Agreements. GBB agrees to
------------------------------------------------
execute and deliver the Employment Agreements and Non-Compete Agreements to the
Matsco Shareholders identified on Exhibit A.
8.7 Release of Guaranties. GBB shall use its best efforts to obtain the
---------------------
termination and release promptly after the Closing Date of the personal
guaranties of the Matsco Shareholders listed on the Matsco Guaranties List, all
of which relate to indebtedness or obligations of Matsco or the Matsco
Subsidiaries. The applicable Matsco Shareholder may notify the obligees under
such guaranties that such Matsco Shareholder shall have terminated its
obligations under such guaranties. After the Closing Date, GBB shall defend,
indemnify and hold harmless any Matsco Shareholders from and against any and all
cost, claims, damage, loss, liability and expense (including, without
limitation, reasonable expenses of investigation and reasonable attorneys' fees
and expenses in connection with any action, suit or proceeding) incurred or
suffered by such Matsco Shareholder arising out of any actions suits,
proceedings or other claims by third parties to enforce or collect indebtedness
owed by Matsco or the Matsco Subsidiaries which is personally guaranteed by such
Matsco Shareholders, including the Marshall Guaranties.
8.8 Operation of the Matsco Operating Unit. After the Closing Date and
--------------------------------------
at all times prior to the termination of GBB's obligation to make any Earn-Out
Payments, it is intended that the Matsco Operating Unit will operate as a
division or as a subsidiary of CNB or another bank or other Affiliate of GBB or
as a subsidiary of GBB and, in any event, it is agreed that the Matsco Operating
Unit shall engage in Matsco Business except as otherwise prohibited by
applicable banking laws or regulations.
8.9 Excess EBT. If, in any Fiscal Year, the Matsco Operating Unit shall
----------
have an EBT in excess of the bonus targets (the "EBT Bonus Targets") set forth
on Exhibit B for that Fiscal Year, which EBT shall have been finalized as
provided in Section 2.3, GBB hereby grants, and covenants and agrees to grant,
all right, power and authority to the Participating Shareholders employed by the
Matsco Operating Unit throughout the prior Fiscal Year to determine, in their
sole discretion, the distribution to be made by GBB of twenty percent (20%) of
such excess (the "EBT Bonus") among the employees of the Matsco Operating Unit
(including employees who are Participating Shareholders and those Participating
Shareholders whose non-employment is due to death, disability or involuntary
termination other than for cause, as cause is defined in the Employment
Agreements), provided that (i) such Participating Shareholders shall share such
EBT Bonuses pursuant to the EBT Bonus Percentages set forth in Exhibit A; (ii)
not more than fifty percent (50%) of the EBT Bonus shall be distributed, in the
aggregate, to such Participating Shareholders unless GBB shall have agreed in
writing that a higher percentage may be paid to such Participating Shareholders
for a given Fiscal Year; and (iii) if a Participating Shareholder is not
employed by the Matsco Operating Unit throughout the entire prior Fiscal Year as
a result of death, disability or involuntary termination other than for "cause,"
then that Participating Shareholder shall be entitled to receive its portion of
the EBT Bonus for that Fiscal Year but shall not be entitled to receive any EBT
Bonus for any subsequent Fiscal Years.
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ARTICLE IX
MUTUAL COVENANTS
The parties hereto hereby mutually covenant and agree with
each other as follows:
9.1 Best Efforts. Subject to the terms and conditions of this
------------
Agreement, each party will use its best 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.
9.2 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, Matsco or the Matsco Shareholders 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 advises is required in order
to fulfill such party's disclosure obligations imposed by law.
9.3 Matsco Lists. It is agreed that information furnished by Matsco to
------------
GBB as required on any Matsco List shall be deemed to be furnished as to another
relevant Matsco List if it is commercially reasonable to consider such
information to have been furnished by Matsco to GBB in satisfaction of any other
requirement hereunder notwithstanding the inadvertent failure of Matsco to
furnish the information required on another Matsco List.
9.4 Payment of Loans. Immediately after the Closing, GBB shall pay
----------------
Matsco's outstanding loan obligations to The Matthew D. Shieman Family Trust
pursuant to the Subordinated Term Promissory Note dated March 31, 2000 in the
original principal amount of $4,000,000 and The Matthew D. Shieman Family Trust
hereby directs that the proceeds of such payment shall be delivered by GBB to
CNB in payment of the outstanding loan obligations of The Matthew D. Shieman
Family Trust to CNB pursuant to the Promissory Note dated March 31, 2000 in the
original principal amount of $4,000,000, whereupon such obligations of Matsco
and The Matthew D. Shieman Family Trust shall be deemed paid in full, terminated
and cancelled.
ARTICLE X
CONDITIONS PRECEDENT TO THE CLOSING
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 or as expressly provided below, of the following conditions:
10.1 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 transactions contemplated by this Agreement, unless counsel to the
party against whom such action or proceeding was instituted
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or threatened renders to the other parties hereto a favorable opinion that such
judgment, decree, injunction, order or proceeding is without merit.
10.2 Regulatory Approvals. To the extent required by applicable law or
--------------------
regulation, all approvals or consents of any Governmental Entity shall have been
obtained or granted for the transactions contemplated herein and the applicable
waiting periods 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. In addition, all regulatory
approvals and consents of any Governmental Entity for the transactions
contemplated herein shall have been obtained without the imposition of any
conditions that are or would become applicable to GBB, Matsco or the Matsco
Shareholders that in good faith and in the reasonable opinion of the Board of
Directors of GBB or Matsco, as applicable, would so materially and adversely
affect the anticipated economic and business benefits to GBB, Matsco or the
Matsco Shareholders of the transactions contemplated by this Agreement as to
render consummation of such transactions inadvisable.
10.3 Employment Agreements and Non-Compete Agreements. The Non-Compete
------------------------------------------------
Agreements shall have been executed as of the date of this Agreement by the
Matsco Shareholders identified in Exhibit A and delivered to GBB and the
Employment Agreements shall have been executed and delivered by GBB and certain
Matsco Shareholders identified in Exhibit A on or prior to the Closing Date.
10.4 Spencer Agreement. The Spencer Agreement shall have been executed
-----------------
as of the date of this Agreement and delivered by GBB and Harold Spencer.
ARTICLE XI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF MATSCO
AND THE MATSCO SHAREHOLDERS
All of the obligations of Matsco and the Matsco Shareholders 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 Matsco and the Matsco Shareholders:
11.1 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 6 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.
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11.2 Authorization. All actions necessary to authorize the execution,
-------------
delivery and performance of this Agreement by GBB and the consummation of the
transactions contemplated hereby shall have been duly and validly taken by the
Board of Directors of GBB, as required by applicable law.
11.3 Third Party Consents. GBB shall have obtained all consents of
--------------------
other parties to its respective material mortgages, notes, leases, franchises,
agreements, licenses and permits as may be necessary to permit the transactions
contemplated hereby to be consummated without a material default, acceleration,
breach or loss of rights or benefits thereunder.
11.4 Absence of Certain Changes. Between the date of this Agreement and
--------------------------
the Closing Date, there shall not have occurred any event that has had or could
reasonably be expected to have a Material Adverse Effect on GBB, whether or not
such event, change or effect is reflected in the GBB Lists as amended or
supplemented after the date of this Agreement.
11.5 Officers' Certificate. There shall have been delivered to Matsco
---------------------
on the Closing Date a certificate executed by the Chief Executive Officer and
Chief Financial Officer of GBB certifying compliance with all the provisions of
Sections 11.1, 11.2, 11.3 and 11.4.
11.6 Legal Opinions. The Matsco Shareholders 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 Matsco, 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 to consummate the transactions contemplated hereby; (ii) all
corporate proceedings on the part of GBB necessary to be taken in connection
with the transactions contemplated hereby in order to make the same effective
have been duly and validly taken; and (iii) this Agreement has been duly and
validly authorized, executed and delivered on behalf of GBB and constitutes
(subject to standard exceptions of enforceability arising from the bankruptcy
laws and rules of equity) the valid and binding agreement of GBB.
11.7 Release of Marshall Guaranties and Collateral. The guaranties of
---------------------------------------------
Marshall (the "Marshall Guaranties") listed on the Marshall Guaranties List, all
of which relate to indebtedness or obligations of Matsco or the Matsco
Subsidiaries, shall have been cancelled, terminated and released, Marshall shall
have released all claims and security interests in all Matsco Stock held by
Marshall as collateral for the Marshall Guaranties and all such Matsco Stock
shall have been reassigned and delivered to The Matthew D. Shieman Family Trust
and Marshall shall have cancelled, terminated and released any and all
guaranties delivered by Matthew D. Shieman in favor of Marshall.
11.8 Payment of Marshall Management Fee. Matsco shall have paid to
----------------------------------
Marshall the pro rata amount of the management fee due to Marshall from Matsco
for the year 2000.
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ARTICLE XII
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:
12.1 Representations and Warranties; Performance of Covenants. All the
------------------------------
covenants, terms and conditions of this Agreement to be complied with and
performed by Matsco and the Matsco Shareholders at or before the Closing Date
shall have been complied with and performed in all material respects. Each of
the representations and warranties of Matsco and the Matsco Shareholders
contained in Articles 4 and 5 hereof shall have been true and correct in all
material respects (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement shall be
true and correct in all respects) on and as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date or for changes expressly contemplated by this Agreement) on and as of the
Closing Date, with the same effect as though such representations and warranties
had been made on and as of the Closing Date.
12.2 Authorization. All actions necessary to authorize the execution,
-------------
delivery and performance of this Agreement by Matsco and the Matsco Shareholders
and the consummation of the transactions contemplated hereby shall have been
duly and validly taken by the Matsco Board of Directors and Matsco Shareholders.
12.3 Third Party Consents. Matsco and the Matsco Shareholders each
--------------------
shall have obtained all consents of other parties to its respective material
mortgages, notes, leases, franchises, agreements, licenses and permits as may be
necessary to permit the transactions contemplated herein to be consummated
without a material default, acceleration, breach or loss of rights or benefits
thereunder.
12.4 Absence of Certain Changes. Between the date of this Agreement and
--------------------------
the Closing Date, there shall not have occurred any event that has had or could
reasonably be expected to have a Material Adverse Effect on Matsco, whether or
not such event, change or effect is reflected in the Matsco Lists as amended or
supplemented after the date of this Agreement.
12.5 Legal Opinion. GBB shall have received the opinion of Shartsis,
-------------
Friese & Ginsburg LLP, attorneys for Matsco, and in form and substance
satisfactory to the counsel of GBB, to the effect that: (i) Matsco and each of
the Matsco Subsidiaries are corporations validly existing under the laws of
their respective states of incorporation; (ii) Matsco has full corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby; (iii) all corporate proceedings on the part of Matsco
necessary to be taken in connection with the transactions contemplated herein in
order to make the same effective have been duly and validly taken; and (iv) this
Agreement has been duly and validly authorized, executed and delivered on behalf
of Matsco, and constitutes
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(subject to standard exceptions of enforceability arising from the bankruptcy
laws and rules of equity) the valid and binding agreement of Matsco; provided
that no opinion shall be required as to Article 15, the Employment Agreements or
the Non-Compete Agreements.
12.6 Marshall Agreements. The Marshall Agreements shall have been
-------------------
terminated.
12.7 Shieman Employment Agreement. The Shieman Employment Agreement
----------------------------
shall have been terminated without any payments which may be otherwise required
thereunder.
12.8 Status of Litigation. The status of any litigation which is a
--------------------
Material Contingency shall be acceptable to GBB in its commercially reasonable
discretion.
12.9 Employee Benefit Plans. GBB shall have received satisfactory
----------------------
evidence that all of Matsco's employee benefit plans, programs and arrangements
have been treated as provided in Article 13 of this Agreement.
12.10 Officers' Certificate. There shall have been delivered to GBB on
---------------------
the Closing Date a certificate executed by the Chief Executive Officer and Chief
Financial Officer of Matsco certifying compliance with all the provisions of
Sections 12.1, 12.2, 12.3 and 12.4.
12.11 Pre-Closing Transactions. Matsco shall have completed the
------------------------
Pre-Closing Transactions.
ARTICLE XIII
EMPLOYEE BENEFITS
13.1 Employee Benefits. Subject to ERISA, the Code and other applicable
-----------------
law, GBB, in its sole discretion, may elect (i) to terminate the Matsco 401(k)
Plan or to discontinue contributions to the Matsco 401(k) Plan following the
Closing Date, (ii) to cause Matsco to terminate the Matsco 401(k) Plan or to
discontinue contributions to the Matsco 401(k) Plan prior to the Closing Date,
or (iii) to merge the Matsco 401(k) Plan with and into the GBB 401(k) Plan after
the Closing Date. In no event shall the Matsco 401(k) Plan be merged with and
into the GBB 401(k) Plan, however, unless GBB reasonably determines that: (i)
the Matsco 401(k) Plan is a qualified plan under Section 401(a) of the Code,
both as to the form of the Matsco 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 Matsco 401(k) Plan. If GBB determines that
the Matsco 401(k) Plan is to be terminated prior to the Closing Date, whereupon
Matsco agrees to use its best efforts to (i) terminate the Matsco 401(k) Plan
prior to the Closing Date, (ii) amend the Matsco 401(k) Plan prior to the
Closing Date to the extent necessary to maintain its tax-qualified status under
Section 401(a) of the Code on termination, and (iii) apply as soon as possible
for an IRS determination that the Matsco 401(k) Plan continues to be qualified
upon termination. Upon the issuance of such an IRS determination, GBB shall
cause the GBB 401(k) Plan to accept transfer of the accounts of the Matsco
401(k) Plan which cannot, without adversely affecting the tax-qualified status
of the Matsco 401(k)
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<PAGE>
Plan, be distributed to participants because of the "successor plan" rule of
Section 401(k)(10)(A)(i) of the Code.
As soon as practicable after the Closing Date, all other Employee Plans
will be discontinued or merged into GBB plans, in the discretion of GBB, and
employees of Matsco 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 Matsco beginning on the date such employees
commenced employment with Matsco through the Closing Date.
ARTICLE XIV
TERMINATION
14.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing Date upon the occurrence of any of the following:
(a) By mutual agreement of the parties, in writing;
(b) By Matsco immediately upon expiration of ten (10) days from
delivery of written notice by Matsco 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 Matsco from the
performance or satisfaction of such covenant or agreement (provided that such
breach has not been waived by Matsco or cured by GBB, as the case may be, prior
to expiration of such ten (10) day period);
(c) By GBB immediately upon expiration of ten (10) days from
delivery of written
notice by GBB to Matsco of Matsco's or the Matsco Shareholders' 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 Matsco, as the case may be,
prior to expiration of such ten-day period;
(d) By Matsco or GBB upon the expiration of thirty (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;
(e) By Matsco or GBB immediately if any conditions set forth in
Article 10 shall not have been met by October 31, 2000;
(f) By Matsco immediately if any of the conditions set forth in
Article 11 shall not have been met, or by GBB if any of the conditions set forth
in Article 12 shall not have been met, by October 31, 2000; or
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<PAGE>
(g) By GBB immediately if Matsco has taken or failed to take action
in breach of Section 7.1(n).
14.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either Matsco or GBB as provided in Section 14.1, neither GBB, nor
Matsco nor the Matsco Shareholders shall have any further obligation or
liability to the other parties hereunder except (i) with respect to the last
sentence of each of Section 7.3 and 8.3 and (ii) with respect to Section 14.3,
to the extent that such termination results from such party's material breach of
the representations and warranties made by it, or material breach in the
performance of any of its covenants, agreements or obligations hereunder.
14.3 Expenses.
--------
(a) GBB hereby agrees that if this Agreement is terminated by
Matsco pursuant to Section 14.1(b), GBB shall promptly, and in any event within
ten (10) days after such termination, pay Matsco all Expenses (as defined in
Section 14.3(e) below) of Matsco, but not to exceed $200,000.
(b) Matsco hereby agrees that if the Agreement is terminated by GBB
pursuant to Section 14.1(c) or (g), Matsco shall promptly, and in any event
within ten (10) days after such termination, pay GBB all Expenses of GBB, but
not to exceed $500,000.
(c) Except as otherwise provided herein, all Expenses incurred by
GBB, Matsco or the Matsco Shareholders in connection with or related to the
authorization, preparation and execution of this Agreement, the other
transaction documents and all other matters related to the closing of the
transactions contemplated hereby, including, without limiting the generality of
the foregoing, all fees and expenses of agents, representatives, counsel,
investment bankers and accountants employed by either such party or its
affiliates, shall be borne solely and entirely by the party which has incurred
the same.
(d) GBB, Matsco and the Matsco Shareholders agree that,
notwithstanding anything to the contrary in this Agreement, in the event this
Agreement is terminated solely 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.
(e) "Expenses" as used in this Agreement shall include all
reasonable out-of-pocket expenses (including all reasonable 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.
ARTICLE XV
SURVIVAL; INDEMNIFICATION; RELEASE
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15.1 Survival.
--------
(a) Each representation, warranty, covenant and agreement of Matsco
and the Matsco Shareholders contained in this Agreement shall survive the
execution and delivery of this Agreement and the Closing and shall thereafter
terminate and expire on the eighteenth (18th) month anniversary of the Closing
Date, provided that the representations in Section 4.11 shall terminate and
expire on the Thirty-sixth (36th) month anniversary of the Closing Date.
Notwithstanding anything else contained in this Section 15.1(a), the
representations and warranties that are referenced in this Section 15.1(a) shall
not terminate and expire if, on or before the termination and expiration date
provided for therein, GBB or any of its Affiliates has delivered to the Matsco
Shareholders a written notice of a claim with respect to such representations
and warranties. The Material Contingencies identified in the Matsco Liabilities
List are subject to indemnification as provided in this Article notwithstanding
any disclosure of any Material Contingency on any Matsco List.
(b) Each representation, warranty, covenant and agreement of GBB
contained in this Agreement shall survive the execution and delivery of this
Agreement and the Closing and shall thereafter terminate and expire on the
eighteenth (18th) month anniversary of the Closing Date except that the
covenants of GBB in Article 2 and Sections 8.7, 8.8 and 8.9 shall survive the
execution and delivery of this Agreement and the Closing and shall not terminate
or expire. Notwithstanding anything else contained in this Section 15.1(b), the
representations and warranties referenced in this Section 15.1(b) shall not
terminate and expire if, on or before the termination and expiration date
provided for herein, the Matsco Shareholders or any of their Affiliates has
delivered to GBB a written notice of a claim with respect to such
representations and warranties.
15.2 Indemnification.
---------------
(a) Each of the Indemnifying Shareholders shall indemnify GBB and
its Affiliates against, and shall hold each of them harmless from, any and all
cost, claims, damage, loss, liability and expense (including, without
limitation, reasonable expenses of investigation and reasonable attorneys' fees
and expenses in connection with any action, suit or proceeding) (collectively,
and after subtracting the amount of any insurance proceeds recoverable with
respect thereto "Loss") incurred or suffered by GBB or any of its Affiliates
arising out of any misrepresentation or breach of any representation, warranty,
covenant or agreement made or to be performed by Matsco or the Matsco
Shareholders pursuant to this Agreement (other than with respect to any
misrepresentation or breach of any representation or warranty by Marshall in
Article 5 with respect to Marshall or any breach of covenant or agreement by
Marshall) or incurred or suffered by GBB in the resolution of any Material
Contingency, and Marshall shall indemnify GBB and its Affiliates against, and
shall hold each of them harmless from, any and all Losses incurred or suffered
by GBB or any of its Affiliates arising out of any misrepresentation or breach
of any representation or warranty by Marshall in Article 5 with respect to
Marshall or any breach of covenant or agreement by Marshall; provided, however,
that the Matsco Shareholders shall only be required to indemnify GBB and its
Affiliates if, on a cumulative and aggregate basis, the amount of Loss incurred
by GBB and its Affiliates exceeds the amount of Seventy-Five Thousand Dollars
($75,000). However,
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<PAGE>
if the cumulative and aggregate amount of such Loss exceeds Seventy-Five
Thousand Dollars ($75,000), all of the Loss shall be subject to indemnification
hereunder by the Matsco Shareholders. Notwithstanding the foregoing, the
aggregate liability of the Matsco Shareholders under this Section 15.2(a) shall
not exceed $1.25 million. Notwithstanding the foregoing, the obligations of the
Indemnifying Shareholders to indemnify GBB for a Loss resulting from a breach of
their representations and warranties (other than with respect to the breach of
the representation and warranty of Marshall in Section 5.6 with respect to
shares of Matsco Stock held by Marshall) contained in Sections 4.2 and 5.6 and
Marshall's obligation to indemnify GBB for a Loss resulting from a breach of the
representation and warranty of Marshall in Section 5.6 with respect to shares of
Matsco Stock held by Marshall, shall not be subject to the foregoing limitation
on liability but may not exceed the aggregate consideration actually received by
the Matsco Shareholders in connection with the transactions contemplated herein.
Anything herein to the contrary notwithstanding, the maximum amount GBB may
recover from a Matsco Shareholder as a result of a Loss hereunder shall not in
the aggregate exceed that Matsco Shareholder's pro rata portion of such Loss. A
Matsco Shareholder's "pro rata portion" of a Loss shall be determined by
multiplying (i) the amount of the Loss times (ii) a fraction the numerator of
which is aggregate amount of the consideration actually received by that Matsco
Shareholder in connection with the transactions contemplated hereby and the
denominator of which is the aggregate amount of the consideration actually
received by all Matsco Shareholders in connection with the transactions
contemplated hereby; provided, that (a) Marshall shall not be obligated to pay
for any Loss resulting from a breach of any representation, warranty, covenant
or agreement of the Indemnifying Shareholders, and (b) the Indemnifying
Shareholders shall not be obligated to pay for any Loss resulting from a breach
of the representation and warranty of Marshall in Article 5 with respect to
Marshall, or the breach of any covenant or agreement of Marshall.
(b) GBB shall indemnify each of the Matsco Shareholders against,
and shall hold each of them harmless from, any and all Loss incurred or suffered
by any of them arising out of any misrepresentation or breach, or any allegation
thereof, of any representation, warranty, covenant or agreement made or to be
performed by GBB or any of its Affiliates pursuant to this Agreement; provided,
however, that GBB shall only be required to indemnify the Matsco Shareholders
if, on a cumulative and aggregate basis, the amount of Loss incurred by the
Matsco Shareholders exceeds Seventy-Five Thousand Dollars ($75,000). However, if
the cumulative and aggregate amount of such Loss exceeds Seventy-Five Thousand
Dollars ($75,000), all of the Loss shall be subject to indemnification hereunder
by GBB. Notwithstanding the foregoing, GBB's obligation to indemnify the Matsco
Shareholders for a Loss resulting from a breach of its representations and
warranties contained in Article 2 and Sections 8.7 and 8.9 shall not be subject
to the foregoing limitation on liability.
15.3 Procedures. The party seeking indemnification under Section 15.2
----------
(the "Indemnified Party") agrees to give prompt notice to the party against whom
indemnity is sought (the "Indemnifying Party") of the assertion of any claim, or
the commencement of any suit, action or proceeding in respect of which indemnity
may be sought under Section 15.2; provided that the failure to give such notice
shall not limit the Indemnified Party's right to indemnification hereunder
except to the extent that the Indemnifying Party is materially prejudiced
thereby. The Indemnifying Party shall assume control of the defense of any such
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<PAGE>
suit, action or proceeding and the Indemnified Party may participate in the
defense of any such suit, action or proceeding at its own expense. The
Indemnifying Party shall not be liable under Section 15.2 for any settlement
effected without its consent of any claim, litigation or proceeding in respect
of which indemnity may be sought hereunder; provided, however, that consent to
settlement shall not be unreasonably withheld or delayed. In any such
suit, action or proceeding, the Indemnified Party shall have the right to retain
its own counsel, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party unless (i) the Indemnifying Party has agreed
to pay such fees and expenses, (ii) the Indemnifying Party has failed to assume
the defense of such suit, action or proceeding or to employ counsel reasonably
satisfactory to the Indemnified Party, or (iii) in the reasonable judgment of
such Indemnified Party representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them, in
any which case, if the Indemnified Party notifies the Indemnifying Party in
writing that the Indemnified Party elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of such suit, action or proceeding on behalf of the
Indemnified Party. The Indemnifying Party shall not be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) at any time for all the Indemnified Parties.
15.4 Release.
-------
(a) In consideration of the payment of the Purchase Price to the
Matsco Shareholders at the Closing, effective as of the Closing Date, the Matsco
Shareholders shall release and discharge GBB, Matsco and their Affiliates, and
each of their respective shareholders, officers, directors, employees, agents
and attorneys, from any and all claims, contentions, demands, causes of action
at law or in equity, debts, liens, agreements, notes, obligations or liabilities
of any nature, character or description whatsoever, whether known or unknown,
which the Matsco Shareholders may now or hereafter have against Matsco by reason
of any matter, event, thing or state of facts occurring, arising, done, omitted
or suffered to be done prior to the Closing Date; provided, that nothing in this
section shall release or discharge GBB, Matsco or their Affiliates, or any of
their respective shareholders, officers, directors, employees, agents or
attorneys, (i) from any claims arising from or in connection with this Agreement
or any agreement entered into in connection herewith, including any claims
arising from a breach of any representations, warranties or covenants contained
herein or therein, (ii) from any obligations or indebtedness owed by Matsco to
any Matsco Shareholder, including any indebtedness in connection with any loans
made by such Matsco Shareholder to Matsco, (iii) to the extent any such claim
by, actions by or rights of the Matsco Shareholder are covered by insurance
which was in effect at the time the event giving rise to such claim, action or
right occurred; (iv) from any obligation relating to compensation (including
accrued vacation) due and payable to such Matsco Shareholder in such Matsco
Shareholder's capacity as an employee of Matsco; or (v) from any claims arising
from or in connection with the guaranties described in Section 8.7 of this
Agreement.
(b) In consideration of the Matsco Shareholders entering into the
transactions contemplated hereby, effective as of the Closing Date, GBB (on
behalf of itself and its Affiliates) and Matsco (on behalf of itself and its
Affiliates) shall release and discharge
53
<PAGE>
the Matsco Shareholders and their Affiliates, and each of their respective
shareholders, officers, directors, employees, agents and attorneys, from any and
all claims, contentions, demands, causes of action at law or in equity, debts,
liens, agreements, notes, obligations or liabilities of any nature, character or
description whatsoever, whether known or unknown, which GBB, any of GBB's
Affiliates, Matsco or any of Matsco's Affiliates may now or hereafter have
against any of the Matsco Shareholders by reason of any matter, event, thing or
state of facts occurring, arising, done, omitted or suffered to be done prior to
the Closing Date; provided, that nothing in this section shall release or
discharge the Matsco Shareholders or their Affiliates, or any of their
respective shareholders, officers, directors, employees, agents or attorneys,
(i) from any claims arising from or in connection with this Agreement or any
agreement entered into in connection herewith, including any claims arising from
a breach of any representations, warranties or covenants contained herein or
therein, or (ii) from any indebtedness for money borrowed or owed by any Matsco
Shareholder to Matsco.
(c) The Matsco Shareholders, GBB (on behalf of itself and its
Affiliates) and Matsco (on behalf of itself and its Affiliates) hereby
acknowledge and represent that they have been advised by their respective
attorneys of record, and are familiar with, Section 1542 of the Civil Code of
the State of California, which presently provides as follows:
"A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor."
The Matsco Shareholders, GBB (on behalf of itself and its
Affiliates) and Matsco (on behalf of itself and its Affiliates) hereby waive and
relinquish any and all rights and benefits under Section 1542 of the Civil Code
as now worded and as it may from time to time hereafter be amended, in
connection with the releases in this Section 15.4.
ARTICLE XVI
MISCELLANEOUS
16.1 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
Telephone Number: (650) 813-8222
Facsimile Number: (650) 494-9220
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With a copy to: Greater Bay Bancorp
400 Emerson Street, 3rd Floor
Palo Alto, California 94301
Attention: Linda M. Iannone, Esq.
Telephone Number: (650) 614-5734
Facsimile Number: (650) 473-9419
To Matsco: The Matsco Companies Inc.
2000 Powell Street, Fourth Floor
Emeryville, California 94608
Attention: Matthew D. Shieman
Telephone Number: (510) 450-3158
Facsimile Number: (510) 450-3033
With a copy to: Shartsis, Friese & Ginsburg LLP
One Maritime Plaza, 18th Floor
San Francisco, California 94111
Attention: Douglas L. Hammer, Esq.
Telephone Number: (415) 421-6500
Facsimile Number: (415) 421-2922
To the Matsco
Shareholders: At the addresses set forth on Exhibit A.
With a copy to: Shartsis, Friese & Ginsburg LLP
One Maritime Plaza, 18th Floor
San Francisco, California 94111
Attention: Douglas L. Hammer, Esq.
Telephone Number: (415) 421-6500
Facsimile Number: (415) 421-2922
Any such notice, request, instruction or other document shall be deemed received
on the date delivered personally or delivered by confirmed facsimile
transmission, or 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.
16.2 Successors and Assigns. All terms and conditions of this Agreement
----------------------
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective transferees, successors and assigns; provided, however, that
this Agreement and all rights, privileges, duties and obligations of the parties
hereto may not be assigned or delegated by any party hereto and any such
attempted assignment or delegation shall be null and void.
16.3 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
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shall become effective when one or more counterparts have been signed by the
appropriate parties and delivered to each party hereto.
16.4 Third Parties. Each party hereto intends that this Agreement shall
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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, Matsco or the Matsco Shareholders as the context may require.
16.5 Lists; Exhibits; Integration. Each List, Exhibit and other
----------------------------
document delivered pursuant to this Agreement shall be in writing and shall
constitute a part of the Agreement, although Lists and such other documents need
not be attached to each copy of this Agreement. This Agreement, the
Confidentiality Agreement between the parties hereto, dated as of April 23,
1999, and all other agreements executed pursuant to the terms of this Agreement,
together with such Lists, exhibits and such other documents, 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.
16.6 Knowledge. Except as specifically otherwise indicated or qualified
---------
elsewhere in this Agreement (including, but not limited to, by the use of the
word "actual"), 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" of any party or Person, such party or Person shall be deemed to have
made such statement only after conducting an investigation, if commercially
reasonable to do so under the circumstances, of the subject matter thereof
(including in the case of Matsco, such investigation as to the knowledge of any
Matsco Subsidiary, which knowledge shall be deemed attributed to Matsco), and
each such statement shall constitute a representation that such investigation
has been conducted if so required.
16.7 Governing Law. This Agreement is made and entered into in the
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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; provided that the corporate
affairs of Matsco are governed by the Delaware General Corporation Law.
16.8 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.
16.9 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.
16.10 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,
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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, when executed and delivered, may be modified or amended by
action of the Boards of Directors of GBB or Matsco without action by their
respective shareholders (except as to amendments relating to the Matsco
Shareholders themselves). This Agreement may be modified or amended only by an
instrument of equal formality signed by the parties or their duly authorized
agents.
16.11 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.
16.12 Schedules. All statements appearing in all Lists, schedules,
---------
exhibits, appendices and documents referred to in or attached to this Agreement
shall be deemed disclosed for all purposes and not only in connection with the
specific representation or warranty to which they are explicitly referenced.
[The remainder of this page has been intentionally left blank]
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IN WITNESS WHEREOF, the parties to this Agreement have duly
executed this Agreement as of the day and year first above written.
GREATER BAY BANCORP
By: /s/ David L. Kalkbrenner
-------------------------
Name: David L. Kalkbrenner
Title: President and Chief Executive Officer
THE MATSCO COMPANIES INC.
By: /s/ Matthew D. Shieman
-----------------------
Name: Matthew D. Shieman
Title: President
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THE MATSCO SHAREHOLDERS
THE MATTHEW D. SHIEMAN FAMILY TRUST
By: /s/ Matthew D. Shieman
------------------------
Its: Co-Trustee
By:_____________________
Its: Co-Trustee
THE TIMOTHY SHIEMAN TRUST
By: /s/ Timothy E. Shieman
-------------------------
Its: Trustee
MARSHALL FINANCIAL PARTNERS, L.P.
By: Marshall Ventures, LLC,
Its:General Partner
By: /s/ Kenneth J. Severinson
-------------------------
Its: COO
/s/ Harold C. Spencer
---------------------
Harold C. Spencer
/s/ Patricia N. Montmorency
---------------------------
Patricia N. Montmorency
/s/ Allison Farey
-----------------
Allison Farey
59
