EXHIBIT 2
STOCK PURCHASE AGREEMENT
BY AND AMONG
GREATER BAY BANCORP,
CAPCO FINANCIAL COMPANY, INC.
AND
THE SHAREHOLDERS OF CAPCO FINANCIAL COMPANY, INC.
MARCH 14, 2001
EXHIBIT 2
STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into
as of the 14th day of March, 2001, by and among GREATER BAY BANCORP, a
California corporation ("GBB"), CAPCO FINANCIAL COMPANY, INC., a Washington
corporation ("CAPCO"), and each of the shareholders and optionholders of CAPCO
(collectively, the "CAPCO Shareholders") as identified in Exhibit A attached
hereto.
WHEREAS, the CAPCO Shareholders are the record and beneficial owners
all of the issued and outstanding shares of CAPCO Stock and options outstanding
to acquire CAPCO Stock;
WHEREAS, the CAPCO Shareholders desire to sell to GBB, and GBB desires
to purchase from the CAPCO Shareholders, all of the shares of CAPCO Stock and
options outstanding to acquire CAPCO Stock on the terms and conditions set forth
in this Agreement;
WHEREAS, the Boards of Directors of GBB and CAPCO have approved 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 1
DEFINITIONS
Except as otherwise expressly provided for in this Agreement, or
unless the context otherwise requires, as used throughout this Agreement the
following terms shall have the respective meanings specified below:
"Affiliate" of, or a person "Affiliated" with, a specific person(s) is a person
that directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person(s) specified.
"Aggregate Transaction Amount" means an amount equal to the sum of (a)
$8,500,000 plus (b) the aggregate amount, if any, paid in cash upon exercise of
any of the outstanding options listed on Exhibit A hereto between the date
hereof and the Closing Date plus (c) the product obtained by multiplying $3.25
and the number of shares of CAPCO Stock subject to outstanding options
immediately prior to the time of the Closing.
"Average Closing Price" means the average of the daily closing price of a share
of GBB Stock reported on the Nasdaq National Market System during the 20
consecutive trading days ending at the end of the third trading day immediately
preceding the Closing Date (as defined herein).
"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.
"CAPCO" has the meaning set forth in the introductory paragraph of this
Agreement.
"CAPCO Conflicts and Consents List" has the meaning set forth in Section 4.6.
"CAPCO Contract List" has the meaning set forth in Section 4.16.
"CAPCO Employee Plan List" has the meaning set forth in Section 4.19.
"CAPCO Environmental Compliance List" has the meaning set forth in Section
4.12(b).
"CAPCO Financial Statements" means the audited consolidated financial statements
of CAPCO consisting of the consolidated statements of condition as of December
31, 1998, 1999 and 2000, 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.
"CAPCO Filings" has the meaning set forth in Section 4.5.
"CAPCO Filings List" has the meaning set forth in Section 4.5.
"CAPCO Indemnification List" has the meaning set forth in Section 4.28.
"CAPCO Insurance List" has the meaning set forth in Section 4.7.
"CAPCO Intellectual Property List" has the meaning set forth in Section 4.30.
"CAPCO Investment Securities List" has the meaning set forth in Section 4.25.
"CAPCO Liabilities List" has the meaning set forth in Section 4.10.
"CAPCO List" means any list required to be furnished by CAPCO to GBB herewith.
"CAPCO Loan List" has the meaning set forth in Section 4.24.
"CAPCO Offices List" has the meaning set forth in Section 4.22.
"CAPCO Operating Losses List" has the meaning set forth in Section 4.23.
"CAPCO Personal Property List" has the meaning set forth in Section 4.8.
"CAPCO Property" means real property currently owned, leased or otherwise used
by CAPCO, or in which CAPCO has an investment or security interest (by mortgage,
deed of trust, sale and
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lease-back or otherwise), including, without limitation, real properties under
foreclosure and rent properties held by CAPCO in its capacity as a trustee or
otherwise.
"CAPCO Real Property List" has the meaning set forth in Section 4.9.
"CAPCO Related Party Transaction List" has the meaning set forth in Section
4.31.
"CAPCO Shareholders" has the meaning set forth in the introductory paragraph of
this Agreement, in addition to any holders of options to purchase CAPCO Stock
who exercise their options prior to the Closing Date.
"CAPCO Stock" means the common stock of CAPCO, including both the Voting Common
Shares and the Non-Voting Common Shares.
"CAPCO Tax List" has the meaning set forth in Section 4.11.
"Closing" means the consummation of the sale and purchase of all of the issued
and outstanding shares of CAPCO Stock as provided for in Article 2 of this
Agreement on the Closing Date, at the offices of Greater Bay Bancorp, 000
Xxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx, or at such other place upon which the
parties may agree.
"Closing Date" has the meaning set forth in Section 3.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Competing Transaction" has the meaning set forth in Section 7.1(n).
"Covered Party" has the meaning set forth in Section 4.29.
"Employee Plans" has the meaning set forth in Section 4.19(a).
"Employment Agreements" means the Employment Agreements substantially in the
form attached hereto as Exhibit B.
"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 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,
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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,
1998, 1999 and 2000, 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.
"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 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 Stock" means the common stock, no par value, of GBB.
"Governmental Entity" means any state or federal regulatory, supervisory or
licensing authority, any court or tribunal in any jurisdiction, or any United
States federal, state, municipal, domestic, foreign or other similar
administrative authority or instrumentality.
"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 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 Xxxxxxxxx-Xxxxxxx-Xxxxxx Hazardous
Substance Account Act (State Superfund), the Xxxxxx-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
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persons or without limitation, which contains gasoline, diesel fuel or other
petroleum hydrocarbons; polychlorinated biphenyls (PCBs), asbestos or urea
formaldehyde foam insulation.
"Holdback Contingency" has the meaning set forth in Section 2.5.
"Holdback Funds" means $200,000 that shall be withheld by GBB, in accordance
with Section 2.5, from the cash payments to be received by the Shareholders and
the Principal Shareholders in accordance with Section 2.1(a) and (b).
"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.
"Knight Vale & Xxxxxxx" means Knight Vale & Xxxxxxx LLC, CAPCO's independent
accountants.
"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).
"Material Adverse Effect" means when used in connection with GBB or CAPCO, 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 CAPCO and its
subsidiaries, taken as a whole, as applicable.
"Material Changes List" has the meaning set forth in Section 4.17.
"Non-Compete Agreements" means the Non-Compete Agreements substantially in the
form attached hereto as Exhibit C.
"Operating Loss" has the meaning set forth in Section 4.23.
"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 4.26.
"Price Per Share" means the quotient obtained by dividing (a) the Aggregate
Transaction Amount by (b) the sum of the number of shares of CAPCO Stock
outstanding and the number of shares of CAPCO Stock subject to options
outstanding immediately prior to the time of the Closing.
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"Principal Shareholders" means Xxxxxx Xxxxxx and Xxxxxx Xxxxxxxxxxx.
"PwC" means PricewaterhouseCoopers LLP, GBB's independent accountants.
"Scheduled Contracts" has the meaning set forth in Section 4.16.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Spousal Consent" means the Spousal Consent substantially in the form attached
hereto as Exhibit D.
"Subchapter S Distribution" means a distribution from CAPCO's accumulated
adjustment account (within the meaning of Section 1371(e) of the Code) to be
made by CAPCO pursuant to the Tax Indemnification Agreement attached hereto as
Exhibit E, but in an amount not to exceed 100% of CAPCO's net income since
December 31, 2000; provided, however, that CAPCO's total equity on the Closing
Date shall be a minimum of $2,517,931, plus the proceeds from the exercise of
any options to acquire CAPCO Stock occurring prior to the Closing Date.
"Tanks" means treatment or storage tanks, sumps, or water, gas or oil xxxxx and
associated piping transportation devices.
ARTICLE 2
SALE AND PURCHASE OF THE CAPCO STOCK
2.1 Purchase and Sale of the CAPCO Stock. At the Closing, the CAPCO
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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 CAPCO Stock
held by the CAPCO Shareholders. At the Closing, GBB shall purchase and acquire
such CAPCO Stock and in exchange therefor the CAPCO Shareholders shall be
entitled to receive the following consideration, subject to Section 2.5 below:
(a) Each CAPCO Shareholder, other than the Principal Shareholders, shall
receive a cash payment in an amount equal to the product of (i) the Price Per
Share and (ii) the number of shares of CAPCO Stock owned by such shareholder at
the time of the Closing.
(b) Each Principal Shareholder shall receive:
(i) a cash payment in an amount equal to the product of (x) 0.333
times (y) the Price Per Share times (z) the number of shares of CAPCO Stock
owned by such Principal Shareholder at the time of the Closing; and
(ii) a number of shares of GBB Stock equal to the quotient obtained
by dividing (x) the product of (1) 0.667 times (2) the Price Per Share times (3)
the number of shares of CAPCO Stock owned by such Principal Shareholder at the
time of the Closing by (y) the Average Closing Price.
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2.2 Payment for and Cancellation of Options. At the Closing, each
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outstanding option to purchase CAPCO Stock shall be canceled and each CAPCO
optionholder shall receive a cash payment in an amount equal to the product of
(a) the number of shares of CAPCO Stock subject to the outstanding option at the
time of the Closing Date and (b) the difference between the Price Per Share and
$3.25.
2.3 Fractional Shares. No fractional shares of GBB Stock shall be
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issued under this Agreement. In lieu thereof, the Principal Shareholders shall
receive an amount in cash equal to the product (calculated to the nearest
hundredth) obtained by multiplying (a) the closing price of GBB Stock reported
on the Nasdaq National Market System on the Business Day immediately preceding
the Closing Date times (b) the fraction of the share of GBB Stock to which such
shareholder would otherwise be entitled. No such shareholder shall be entitled
to dividends or other rights in respect of any such fraction.
2.4 Exchange Procedures.
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(a) As of the Closing Date, GBB shall have deposited with the Exchange
Agent for the benefit of the Principal Shareholders, for exchange in accordance
with this Section 2.4 through the Exchange Agent, certificates representing the
shares of GBB Stock issuable pursuant to Section 2.1(b) in exchange for their
shares of CAPCO Stock outstanding immediately prior to the Closing Date, and
funds in an amount not less than the amount of cash payable in lieu of
fractional shares of GBB Stock which would otherwise be issuable in connection
with Section 2.1(b) hereof but for the operation of Section 2.3 of this
Agreement.
(b) Upon surrender for cancellation by the Principal Shareholders to
the Exchange Agent of one or more certificates for shares of CAPCO Stock ("Old
Certificates"), accompanied by stock powers duly endorsed in blank, the Exchange
Agent shall, promptly after the Closing Date, deliver to the Principal
Shareholders, in exchange for such surrendered Old Certificates, new
certificates representing the appropriate number of shares of GBB Stock to which
each Principal Shareholder is entitled pursuant to this Agreement ("New
Certificates"), together with a check for payment of cash in lieu of fractional
interests. Until surrendered as contemplated by this Section 2.4, each Old
Certificate shall be deemed at any time after the Closing Date to represent only
the right to receive upon such surrender the New Certificate representing shares
of GBB Stock and cash in lieu of any fractional interests as contemplated by
Section 2.3. Notwithstanding anything to the contrary set forth herein, if any
Principal Shareholder should be unable to surrender Old Certificates for,
because they have been lost or destroyed, such holder shall deliver in lieu
thereof a bond in form and substance and with surety reasonably satisfactory to
GBB and shall be entitled to receive the certificate representing the proper
number of shares of GBB Stock and cash in lieu of fractional shares in
accordance with Sections 2.1(b) and 2.3.
(c) No dividends or other distributions declared or made with respect
to GBB Stock with a record date after the Closing Date shall be paid to any
Principal Shareholder until the Old Certificates have been surrendered in
exchange for New Certificates in the manner herein provided, but upon such
surrender, such dividends or distributions, from and after the Closing Date,
will be paid to such Principal Shareholder in accordance with the terms of such
GBB Stock, but without interest thereon.
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(d) All shares of GBB Stock issued upon the surrender for exchange of
CAPCO Stock in accordance with the terms hereof (including any cash paid
pursuant to Section 2.3) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of CAPCO Stock, and there
shall be no further registration of transfers on the stock transfer books of
CAPCO of the shares of CAPCO Stock which were outstanding immediately prior to
the Closing Date. If, after the Closing Date, Old Certificates are presented to
GBB for any reason, they shall be canceled and exchanged as provided in this
Agreement.
(e) No transfer taxes shall be payable by the Principal Shareholders
in respect of the issuance of New Certificates, except that if any New
Certificate is to be issued in a name other than that in which the Old
Certificate surrendered shall have been registered, it shall be a condition of
such issuance that the Person requesting such issuance shall properly endorse
the certificate or certificates and shall pay to GBB any transfer taxes payable
by reason thereof, or of any prior transfer of such surrendered certificate, or
establish to the satisfaction of GBB that such taxes have been paid or are not
payable.
(f) Any GBB Stock or cash delivered to the Exchange Agent (together
with any interest or profits earned thereon) and not issued pursuant to this
Article 2 at the end of three months from the Closing Date shall be returned to
GBB.
(g) The Exchange Agent shall not be entitled to vote or exercise any
rights of ownership with respect to the shares of GBB Stock held by it from time
to time hereunder, except that it shall receive and hold all dividends or other
distributions paid or distributed with respect to such shares of GBB Stock for
the account of the Persons entitled thereto.
2.5 Holdback Funds. The Holdback Funds shall be withheld by GBB and
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shall earn interest at the 3-month U.S. Treasury Xxxx Rate as published in the
Wall Street Journal from time to time. Upon the earlier of (a) the final
resolution of the Holdback Contingency or (b) a determination by GBB in good
faith and in its commercially reasonable discretion that the Holdback Funds are
no longer required for the resolution of the Holdback Contingency identified on
the CAPCO Liabilities List, the remaining Holdback Funds (if any), plus accrued
interest thereon, shall be released by GBB and delivered to the CAPCO
Shareholders in proportion to their ownership interests as set forth on Exhibit
A. Nothing in this Section 2.5 shall limit the right of GBB to seek
indemnification from the Shareholders to the extent permitted in Article 15 of
this Agreement.
ARTICLE 3
THE CLOSING
3.1 Closing Date. The Closing shall take place as of the close of
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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 June 30, 2001 (the "Closing
Date").
3.2 Further Assurances. At the Closing, the parties hereto shall deliver,
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or cause to be delivered, such documents or certificates as may be necessary, in
the reasonable opinion of
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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.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF CAPCO
AND THE CAPCO SHAREHOLDERS
CAPCO and each of the CAPCO Shareholders, jointly and severally,
represent and warrant to GBB as follows:
4.1 Incorporation, Standing and Power. CAPCO has been duly organized, is
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validly existing and in good standing as a corporation under the laws of its
state of incorporation and is duly licensed under all applicable state laws.
CAPCO 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.
CAPCO is 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.
CAPCO has furnished to GBB true and correct copies of its 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
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capital stock of CAPCO consists of 6,000,000 shares of CAPCO Stock, of which, on
the date hereof, there are 462,556 shares of Voting Common Shares issued and
outstanding and 758,008 shares of Non-Voting Common shares issued and
outstanding. All of the issued and outstanding shares are duly authorized,
validly issued, fully paid and nonassessable and are owned of record, and in the
respective amounts, by the CAPCO Shareholders as identified in Exhibit A
attached hereto. Except as set forth on Exhibit A, there are no outstanding
options, warrants or other rights in or with respect to the unissued shares of
CAPCO Stock, nor any securities convertible into such stock, and CAPCO is not
obligated to issue any additional shares of its common 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 as set forth on the CAPCO Investment Securities
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List, CAPCO does not own, directly or indirectly, the outstanding stock or
equity or other voting interest in any corporation, partnership, joint venture
or other entity.
4.4 Financial Statements. CAPCO has previously furnished to GBB a copy
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of the Financial Statements of CAPCO. The Financial Statements of CAPCO: (a)
present fairly the financial condition of CAPCO 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
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and that the unaudited CAPCO Financial Statements do not contain footnotes as
required by GAAP).
4.5 Reports and Filings. Except as set forth on a list furnished by CAPCO
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to GBB (the "CAPCO Filings List") and since December 31, 1997, CAPCO has filed
all reports, returns, registrations and statements (such reports and filings
referred to as "CAPCO Filings"), together with any amendments required to be
made with respect thereto, that were required to be filed with the Washington
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 CAPCO Filings List, no
adverse administrative actions have been taken or orders issued in connection
with such CAPCO Filings. As of their respective dates, each of such CAPCO
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 CAPCO
Filings that was intended to present the financial position, results of
operations or cash flows of CAPCO fairly presented the financial position,
results of operations or cash flows of CAPCO and was prepared in accordance with
GAAP consistently applied, except as stated therein, during the periods
involved. CAPCO has furnished GBB with true and correct copies of all CAPCO
Filings filed by CAPCO since December 31, 1997.
4.6 Authority of CAPCO. The execution and delivery by CAPCO of this
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Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of
CAPCO, including the execution by all CAPCO 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 CAPCO 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 CAPCO to GBB (the "CAPCO Conflicts and Consents
List"), neither the execution and delivery by CAPCO of this Agreement, the
consummation of the transactions contemplated herein, nor compliance by CAPCO
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
material note, bond, mortgage, indenture, franchise, license, permit, agreement
or other instrument or obligation to which CAPCO is a party, or by which CAPCO
or any of its properties or assets are bound; (c) result in the creation or
imposition of any Encumbrance on any of the properties or assets of CAPCO; or
(d) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to CAPCO or any of its properties or assets. Except as set forth in
the CAPCO 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
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CAPCO, and no consent of, approval of or notice to any other Person, is required
in connection with the execution and delivery by CAPCO of this Agreement or the
consummation by CAPCO of the transactions contemplated hereby, except for such
approvals as may be required by the Washington Secretary of State.
4.7 Insurance. CAPCO has the policies of insurance with respect to its
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assets and business against such casualties and contingencies and in such
amounts, types and forms as are set forth in a list furnished by CAPCO to GBB
(the "CAPCO Insurance List"). All such insurance policies are in full force and
effect. Except as set forth in the CAPCO 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 CAPCO Insurance List, CAPCO is not in default under any such policy and all
material claims thereunder have been filed in a timely fashion. Set forth in the
CAPCO Insurance List is a list of all policies of insurance carried and owned by
CAPCO 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. CAPCO has good and marketable title to all its
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material properties and assets (other than real property) owned or stated to be
owned by CAPCO as reflected on the CAPCO Financial Statements as of December 31,
1999 and September 30, 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 CAPCO; (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
CAPCO; or (f) as set forth in a list furnished by CAPCO to GBB (the "CAPCO
Personal Property List").
4.9 Real Estate. CAPCO does not own any real property. CAPCO has
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furnished GBB a list of all leaseholds and all other interests in real property
(other than security interests or liens in favor of CAPCO) owned by CAPCO (the
"CAPCO Real Property List") as of September 30, 2000 or acquired after that
date. CAPCO has valid leasehold interests in the leaseholds, described in the
CAPCO 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 CAPCO Real Property List. CAPCO has
furnished GBB with true and correct copies of all leases included in the CAPCO
Real Property List, all title insurance policies and all documents evidencing
recordation of all recordable interests in real property included in the CAPCO
Real Property List.
4.10 Contingent Liabilities. CAPCO has no liabilities or obligations,
----------------------
either accrued or contingent, and including any obligation for known but
unasserted claims, that are material to CAPCO and there is no private or
governmental suit, claim, action or proceeding pending, nor, to CAPCO's
knowledge threatened or known but unasserted against CAPCO, or directors,
officers or employees of CAPCO relating to the performance of their duties in
such capacities or
11
against or affecting any properties of CAPCO 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 CAPCO;
(b) incurred subsequent to September 30, 2000 in the ordinary course of
business; or (c) disclosed in a list furnished by CAPCO to GBB (the "CAPCO
Liabilities List") or on any other CAPCO List. To the knowledge of CAPCO, there
are no facts that would form the valid basis for the assertion against it 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 CAPCO or
otherwise disclosed in this Agreement. Except as disclosed in the CAPCO
Liabilities List, there are no judgments, decrees, stipulations or orders
against CAPCO 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 CAPCO Tax List, CAPCO has 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. CAPCO's assertion on its tax returns that CAPCO was a
Subchapter S corporation was accurate in all cases. CAPCO has not filed a
consent pursuant to Section 341(f) of the Code. The tax and audit positions
taken by CAPCO in connection with the tax returns described in the first
sentence of this paragraph were asserted in good faith. CAPCO has filed all
required payroll tax returns, has fulfilled all tax withholding obligations and
has 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 CAPCO and, to the extent required by GAAP, reflected in the Financial
Statements of CAPCO, 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. CAPCO has furnished GBB a list
(the "CAPCO Tax List") of the federal tax returns of CAPCO which have been duly
filed with the IRS on or after December 31, 1996. The CAPCO 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 CAPCO and lists each tax case of CAPCO currently pending in
audit, at the administrative appeals level or in litigation. The CAPCO 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
CAPCO within the last twelve (12) months. Except as set forth in the CAPCO Tax
List, neither the IRS nor any foreign, state or local taxing authority has,
during the past three (3) years, examined or has informed CAPCO that it is in
the process of examining any federal, foreign, state or local tax returns of
CAPCO. Neither the IRS nor any foreign, state or local taxing authority is now
asserting or, to the knowledge of CAPCO, threatening to assert any deficiency or
claim for additional taxes (or interest thereon or penalties in connection
therewith) except as set forth on the CAPCO Tax List.
4.12 Compliance with Laws and Regulations.
------------------------------------
12
(a) Except as expressly set forth or limited in other
representations and warranties set forth herein, CAPCO is not in default under
or in breach of any provision of its 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) Without limiting Section 4.12(a), and except as set forth on a
list furnished by CAPCO to GBB (the "CAPCO Environmental Compliance List"), to
the best knowledge of CAPCO: (i) CAPCO is in compliance with all Environmental
Regulations; (ii) there are no Tanks on or about CAPCO Property; (iii) there are
no Hazardous Materials on, below or above the surface of, or migrating to or
from CAPCO Property; (iv) CAPCO has no 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 CAPCO nor any of its Affiliates has been an "operator" of any
CAPCO 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 Governmental Entity pending against CAPCO or concerning
property securing CAPCO loans and there is no outstanding judgment, order, writ,
injunction, decree, or award against or affecting CAPCO Property or property
securing CAPCO 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, CAPCO
shall not be deemed to have conducted, or be required to conduct, any
investigations of any CAPCO Property covered by this Section 4.12(b).
4.13 Performance of Obligations. Except contracts or agreements identified
--------------------------
on the CAPCO Conflicts and Consents List pursuant to which CAPCO is required to
obtain the consent of the other party or parties thereto in order to consummate
the transaction contemplated hereby, CAPCO has 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. There are no controversies pending or, to the knowledge of
---------
CAPCO, threatened between CAPCO and any of its employees. CAPCO is not 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. CAPCO is not a party to or obligated under any
-------------------
agreement with any broker or finder relating to the transactions contemplated
hereby, and neither the execution of this Agreement nor the consummation of the
transactions provided for herein will result in any liability to any broker or
finder.
4.16 Material Contracts. Except as set forth in a list delivered by CAPCO
------------------
to GBB (the "CAPCO Contract List") (all items listed or required to be listed in
such CAPCO Contract List
13
being referred to herein as "Scheduled Contracts"), CAPCO is not 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 one
year or more in length of obligation on the part of CAPCO and is not terminable
by CAPCO within one year without penalty or (ii) requires payment by CAPCO of
$50,000 or more per annum;
(b) any advertising, brokerage, licensing, dealership,
representative or agency relationship or contract requiring payment by CAPCO of
$50,000 or more per annum;
(c) any contract or agreement that restricts CAPCO (or would
restrict any Affiliate of CAPCO (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 CAPCO in excess of $50,000 per annum other than (A)
financing leases entered into in the ordinary course of business in which CAPCO
is lessor and (B) leases of real property presently used by CAPCO as its
offices;
(e) any mortgage, pledge, conditional sales contract, security
agreement, option, or any other similar agreement with respect to any interest
of CAPCO (other than as mortgagor or pledgor in the ordinary course of its
financing business) in personal or real property having a value of $50,000 or
more;
(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 CAPCO;
(g) any agreement to acquire equipment or any commitment to make
capital expenditures of $50,000 or more;
(h) other than agreements entered into in the ordinary course of
business, including sales of other real estate owned, any agreement for the sale
of any property or assets in which CAPCO 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 CAPCO of any money (other
than borrowings made in the ordinary course of its business and reflected in the
financial records of CAPCO);
(j) any restrictive covenant contained in any deed to or lease of
real property owned or leased by CAPCO (as lessee) that materially restricts the
use, transferability or value of such property;
14
(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
CAPCO 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 CAPCO Conflicts and Consents List, any material
agreement which would be terminable other than by CAPCO 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 CAPCO with recourse of any kind to
CAPCO 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 CAPCO;
(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 CAPCO 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 CAPCO 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) with respect to CAPCO:
(a) Any change in any of the assets, liabilities, permits, methods
of accounting or accounting practices, business or manner of conducting
business, of CAPCO or any other event or development that has had or could
reasonably be expected to have a Material Adverse Effect;
15
(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 CAPCO of any asset otherwise than in the
ordinary course of business; or
(e) Any direct or indirect redemption, purchase or other acquisition
by CAPCO 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 or distribution, as disclosed in the Financial
Statements of CAPCO) or other distribution on or in respect of CAPCO Stock
whether consisting of money, other personal property, real property or other
things of value.
4.18 Licenses and Permits. CAPCO has all 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 CAPCO are
and have been maintained and conducted in all material respects in compliance
with all applicable licenses and permits. The properties and operations of
CAPCO 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) CAPCO has previously furnished to GBB copies of each of its
"employee benefit plans," 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
CAPCO, 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." CAPCO 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 CAPCO 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 Plan is
exempt from tax under Section 501(a) of the Code. 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 CAPCO to GBB (the "CAPCO Employee Plan List"), all Employee
Plans were in effect for substantially all of 1999 and 2000, and there has been
no amendment thereof (other than amendments required to comply with
16
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, 2000.
(b) CAPCO has previously made available to GBB copies or
descriptions of each plan or arrangement maintained or otherwise contributed to
by CAPCO 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 CAPCO (such plans
and arrangements being collectively referred to herein as "Benefit
Arrangements"). Except as disclosed in the CAPCO Employee Plan List hereto, all
Benefit Arrangements which are in effect were in effect for substantially all of
1999 and 2000. There has been no amendment thereof or increase in the cost
thereof or benefits payable thereunder since January 1, 2000. Except as set
forth in the CAPCO Employee Plan List, there has been no material increase in
the compensation of or benefits payable to any senior executive employee of
CAPCO since January 1, 2000, nor any employment, severance or similar contract
entered into with any such employee, nor any amendment to any such contract,
since January 1, 2000. There is no contract, agreement or benefit arrangement
covering any employee of CAPCO 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) With respect to all Employee Plans and Benefit Arrangements,
CAPCO 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. CAPCO 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 CAPCO, threatened legal action, proceeding or investigation
against or involving any Employee Plan or Benefit Arrangement which could result
in liability to such Employee Plan. 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 CAPCO which is covered by Title I of ERISA, which could subject
any person (other than a person for whom CAPCO 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 CAPCO 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. CAPCO 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 CAPCO) at
or after the Closing Date.
17
(d) Except for Scheduled Contracts set forth in the CAPCO Contract
List or as set forth in the CAPCO 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 CAPCO
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 CAPCO 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 CAPCO accurately reflect all
-----------------
material actions taken to this date by the shareholders, board of directors and
committees of CAPCO and contain true and complete copies of CAPCO's articles or
certificates of incorporation, bylaws and other charter documents, and all
amendments thereto.
4.21 Accounting Records. CAPCO maintains accounting records which fairly
------------------
and validly reflect its 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. CAPCO has furnished to GBB a list (the "CAPCO Offices List")
-------
setting forth the headquarters of CAPCO (identified as such) and each of the
offices maintained and operated by CAPCO and the location thereof. Except as set
forth on the CAPCO Offices List, CAPCO does not maintain any other office and is
not operating its business at any other location, and CAPCO has not applied for
or received permission from the Washington Secretary of State or any other
Governmental Entity to open any additional facility or operate at any other
location.
4.23 Operating Losses. CAPCO has furnished to GBB a list (the "CAPCO
----------------
Operating Losses List") setting forth any Operating Loss (as herein defined)
which has occurred at CAPCO during the period after December 31, 1999 to the
date of the Agreement. To the knowledge of CAPCO, no action has been taken or
omitted to be taken by any employee of CAPCO that has resulted in the incurrence
by CAPCO 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. CAPCO has furnished to GBB a summary aging (the
--------------
"CAPCO Loan List") that sets forth, as of December 31, 2000, an aging of each
loan, lease, purchased receivable or asset, or other extension of credit or
commitment to extend credit by CAPCO that identifies and explains any repayment
or collection problems relating to any of such loan, lease, purchased
receivables or assets or other extensions of credit that could have a Material
Adverse Effect.
18
4.25 Investment Securities. CAPCO has furnished to GBB a list (the
---------------------
"CAPCO Investment Securities List") setting forth a description of each
Investment Security held by CAPCO on December 31, 2000. The CAPCO 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 CAPCO Investment Securities List,
CAPCO has no Investment Securities classified as trading.
4.26 Power of Attorney. Except as set forth in a list furnished by CAPCO
-----------------
to GBB (the "Power of Attorney List"), CAPCO has not granted any Person a power
of attorney or similar authorization that is presently in effect or outstanding.
4.27 Facts Affecting Regulatory Approvals. To the knowledge of CAPCO,
------------------------------------
there is no fact, event or condition applicable to CAPCO 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.
4.28 Indemnification. Other than pursuant to the provisions of their
---------------
respective articles of incorporation or bylaws, CAPCO is not 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 CAPCO (a "Covered Party"), and, to
the knowledge of CAPCO, there are no claims for which any Covered Party would be
entitled to indemnification by CAPCO if such provisions were deemed in effect,
except as set forth in a list furnished by CAPCO to GBB (the "CAPCO
Indemnification List").
4.29 Derivative Transactions. CAPCO is not 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.
4.30 Intellectual Property. Except as set forth in a list furnished by
---------------------
CAPCO to GBB (the "CAPCO Intellectual Property List"), CAPCO owns or possesses
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 CAPCO has not received any notice with
respect thereto that asserts the rights of others. CAPCO has in all material
respects performed all the obligations required to be performed by it, and is
not in default in any material respect under any license, contract, agreement,
arrangement or commitment relating to any of the foregoing.
4.31 Insider Loans; Other Transactions. CAPCO has previously provided
---------------------------------
GBB with a listing, current as of December 31, 2000, of all extensions of credit
made by CAPCO to each of its executive officers and directors and their
Affiliates. Except as set forth on a list furnished by CAPCO to GBB (the "CAPCO
Related Party Transaction List"), CAPCO does not owe any amount to, or has any
contract or lease with or commitment to, any of the present executive officers
or directors of CAPCO (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 CAPCO's Employee Plans).
19
4.32 Registration Obligation. CAPCO is not under any obligation,
-----------------------
contingent or otherwise, to register any of its securities under the Securities
Act of 1933, as amended.
4.33 Accuracy and Currentness of Information Furnished. The
-------------------------------------------------
representations and warranties made by CAPCO hereby or in the CAPCO 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 CAPCO Lists from being
misleading.
ARTICLE 5
ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF THE CAPCO SHAREHOLDERS AND THE PRINCIPAL SHAREHOLDERS
5.1 Representations and Warranties of the CAPCO Shareholders. The CAPCO
--------------------------------------------------------
Shareholders jointly, but not severally, represent and warrant to GBB as
follows:
(a) The CAPCO 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 CAPCO
Shareholders will constitute a valid and legally binding obligation of the CAPCO
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.
(b) The CAPCO Shareholders acknowledge that GBB has responded to their
requests for written information regarding GBB, and that the CAPCO 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.
(c) The CAPCO 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 CAPCO Shareholders are
relying solely on such advisors with respect to tax advice, and shall be
responsible for the CAPCO Shareholders' own tax liability that may arise as a
result of this investment or the transactions contemplated by this Agreement.
(d) The CAPCO 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 CAPCO 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.
(e) As applicable, the spouses of each of the CAPCO Shareholders have
executed and delivered to GBB a Spousal Consent substantially in the form of
Exhibit D attached hereto.
20
(f) Each of the CAPCO Shareholders has beneficial ownership of the
outstanding shares of CAPCO Stock and/or outstanding options to purchase CAPCO
Stock set forth opposite such CAPCO Shareholder's name on Exhibit A attached
hereto.
5.2 Representations and Warranties of the Principal Shareholders. The
------------------------------------------------------------
Principal Shareholders jointly, but not severally, represent and warrant to GBB
as follows:
(a) The Principal Shareholders understand that the GBB Stock being
issued under this Agreement has not been registered under the Securities Act and
is being offered and sold pursuant to an exemption from registration contained
in the Securities Act based in part upon the representations contained herein.
(b) The Principal Shareholders are acquiring the GBB Stock to be issued
under this Agreement for their own account for investment and not as a nominee
and not with a view to the distribution thereof.
(c) The Principal Shareholders acknowledge that GBB shall make a
notation in its stock books regarding the restrictions on transfer set forth in
this Section and shall transfer such shares on the books of GBB only to the
extent not inconsistent therewith.
(d) The Principal Shareholders acknowledge that they are aware of Rule
144 promulgated under the Securities Act, which permits limited public resales
of securities acquired in a nonpublic offering, subject to the satisfaction of
certain conditions.
(e) The Principal Shareholders have been furnished with such written
information regarding GBB, and the Principal 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, as the Principal Shareholders have deemed necessary or appropriate for
purposes of their investment decision.
(f) The Principal Shareholders understand and acknowledge that the
certificates evidencing their shares of GBB Stock to be issued under this
Agreement will be imprinted with a legend stating in substance the following:
THE COMMON STOCK REPRSENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR REGISTERED OR
QUALIFIED UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED,
HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS SO
REGISTERED OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF IS
AVAILABLE.
The Principal Shareholders and GBB acknowledge and agree that this
legend and the notation in GBB's stock books referred to above will be removed
upon any registration of the shares of GBB Stock issued under this Agreement,
the expiration of the applicable holding period or otherwise in accordance with
the Securities Act and the regulations of the SEC thereunder.
21
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF GBB
GBB represents and warrants to CAPCO and each of the CAPCO
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 CAPCO a copy
--------------------
of the Financial Statements of GBB. The Financial Statements of GBB: (a) present
fairly the consolidated financial condition of GBB as of the respective dates
indicated and its consolidated results of operations and changes in cash flows,
as applicable, for the respective periods then ended, subject, in the case of
the unaudited consolidated interim financial statements, to normal recurring
adjustments; 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 CAPCO
(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
22
GBB of the transactions contemplated hereby, except such approvals as may be
required by the SEC, the FRB, the OCC, and the Washington Secretary of State.
6.4 Reports and Filings. Since December 31, 1997, 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 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.
6.7 Contingent Liabilities. GBB has no liabilities or obligations,
----------------------
either accrued or contingent, and including any obligation for known but
unasserted claims, that are material to GBB and there is no private or
governmental suit, claim, action or proceeding pending, nor, to GBB' s knowledge
threatened or known but unasserted against GBB, or directors, officers or
employees of GBB relating to the performance of their duties in such capacities
or against or affecting any properties of GBB 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 GBB; or
(b) incurred subsequent to December 31, 2000 in the ordinary course of business.
6.8 Accuracy and Currentness of Information Furnished. The
-------------------------------------------------
representations and warranties made by GBB hereby 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 from being misleading.
ARTICLE 7
COVENANTS OF CAPCO AND THE CAPCO SHAREHOLDERS
23
CAPCO and each of the CAPCO Shareholders hereby covenant and agree
with GBB as follows:
7.1 Limitation on CAPCO'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, CAPCO agrees to conduct its business, and the CAPCO Shareholders
agree to cause CAPCO to conduct its business, 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, CAPCO shall not, and the CAPCO Shareholders shall cause CAPCO not to,
without the prior written consent of GBB, which consent shall not be
unreasonably withheld or delayed:
(a) issue, sell or grant any CAPCO Stock, any other securities
(including long term debt) of CAPCO or any rights, options or securities to
acquire any CAPCO Stock or any other securities (including long term debt) of
CAPCO;
(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 CAPCO (except for the Subchapter S Distribution);
(c) purchase, redeem or otherwise acquire any capital stock or other
securities of CAPCO or any rights, options or securities to acquire any capital
stock or other securities of CAPCO;
(d) except as may be required to effect the transactions
contemplated herein, amend its articles of incorporation or bylaws;
(e) grant a ny 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) 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;
(g) make any capital expenditure or commitments with respect thereto
in excess of $50,000 in the aggregate;
(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;
24
(i) grant, renew or commit to grant or renew any extension of
credit, or purchase any receivables, in excess of $1 million without GBB's
review and consent, which shall be deemed granted if GBB has not communicated
its response within 48 hours of CAPCO 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 up to $1
million);
(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
CAPCO 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 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 CAPCO 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 CAPCO: any
merger, consolidation, share exchange or other business combination; a sale,
lease, exchange, mortgage, pledge, transfer or other disposition of assets of
CAPCO 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
CAPCO'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);
25
(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 CAPCO, would or is
reasonably likely to (i) adversely affect the ability of GBB or CAPCO to obtain
any necessary approval of any Governmental Entity required for the transactions
contemplated hereby; (ii) adversely affect CAPCO's ability to perform its
covenants and agreements under this Agreement; or (iii) result in any of the
conditions to the performance of GBB's or CAPCO'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;
(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
26
(bb) agree or make any commitment to take any actions prohibited by
this Section 7.1.
7.2 Affirmative Conduct of CAPCO Prior to the Closing Date. Between the
------------------------------------------------------
date hereof and the Closing Date, CAPCO shall, and the CAPCO Shareholders shall
cause CAPCO, 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 CAPCO;
(b) use its commercially reasonable efforts to keep in full force
and effect all of the existing material permits and licenses of CAPCO;
(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;
(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 CAPCO 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 CAPCO Lists prepared and delivered pursuant to Article 4 to
ensure that the information set forth in the CAPCO Lists accurately reflects the
then-current status of CAPCO. CAPCO shall further amend or supplement the CAPCO
Lists as of the Closing Date if necessary to reflect any additional information
that needs to be included in the CAPCO 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 CAPCO or that
is required to consummate the transactions contemplated by this Agreement;
27
(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
CAPCO Board of Directors or any committee thereof, provided, however, that CAPCO
need not furnish to GBB communications of CAPCO's legal counsel regarding
CAPCO'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;
(l) use its commercially reasonable efforts to protect and preserve
its rights to the use of the name "CAPCO Financial Company, 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; and
(m) declare as a dividend and pay the Subchapter S Distribution on
or before the Closing Date.
7.3 Access to Information. CAPCO will afford, and the CAPCO Shareholders
---------------------
shall cause CAPCO 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 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 CAPCO 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 CAPCO and in such a manner as
to minimize any disruption of, or interference with, the normal business
operations of CAPCO. Upon the request of GBB, CAPCO will request (and the CAPCO
Shareholders shall cause CAPCO to request) Knight Vale & Xxxxxxx 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 CAPCO,
including tax accrual work papers prepared for CAPCO 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 CAPCO 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 CAPCO herein; provided, that GBB
shall disclose to CAPCO any fact or circumstance it may discover which GBB
believes renders any representation or warranty made by CAPCO 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 CAPCO 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 CAPCO.
28
7.4 Filings. CAPCO and the CAPCO Shareholders agree that through the
-------
Closing Date, CAPCO's reports, registrations, statements and other filings
required to be filed with any applicable Governmental Entity will comply in all
material respects with all the applicable statutes, rules and regulations
enforced or promulgated by the Governmental Entity with which it will be filed
and none will contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Any financial statement contained in any such report, registration,
statement or other filing that is intended to present the financial position of
the entity to which it relates will fairly present the financial position of
such entity and will be prepared in accordance with GAAP or applicable banking
regulations consistently applied during the periods involved.
7.5 Notices; Reports. CAPCO and the CAPCO Shareholders each will
----------------
promptly notify GBB of any event of which CAPCO or the CAPCO Shareholders
obtains knowledge which has had or could reasonably be expected to have a
Material Adverse Effect, or in the event that CAPCO or the CAPCO Shareholders
determine that they are unable to fulfill any of the conditions to the
performance of GBB's obligations under this Agreement, CAPCO and the CAPCO
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 CAPCO for submission to
the Board of Directors of CAPCO or committees thereof, (ii) as soon as
available, all proxy statements, information statements, financial statements,
reports, letters and communications sent by CAPCO to the CAPCO Shareholders, and
all reports to be filed by CAPCO with the Commissioner, the Washington 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 CAPCO.
7.6 Loan Portfolio. CAPCO will promptly inform GBB of any loan, lease,
--------------
other extension of credit or commitment to extend credit by CAPCO that involves
any repayment or collection problem that would have a Material Adverse Effect.
7.7 Applications. CAPCO and the CAPCO Shareholders each will promptly
------------
prepare any applications or notices 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. CAPCO and
the CAPCO 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. CAPCO will use
its commercially reasonable efforts to obtain all regulatory approvals or
consents that are required to be obtained by CAPCO and are necessary to effect
the transactions contemplated herein.
7.8 No Sale or Encumbrance. Except for existing encumbrances listed on
----------------------
the CAPCO Encumbrance List, each of the CAPCO Shareholders agrees not to sell,
transfer or encumber their CAPCO Stock prior to the earlier of the Closing or
the termination of this Agreement.
7.9 Employment Agreements and Non-Compete Agreements. The Principal
------------------------------------------------
Shareholders agree to execute and deliver to GBB Employment Agreements in the
form of
29
Exhibit B hereto. Each of the CAPCO Shareholders agrees to execute and deliver
to GBB the Non-Compete Agreements in the form of Exhibit C hereto.
7.10 Restrictions on GBB Stock. In order to induce GBB to enter into
-------------------------
this Agreement, each of the Principal Shareholders shall not, for a period of 12
months following the Closing Date, sell, transfer, assign , hypothecate, pledge
or otherwise dispose of any beneficial interest in (either pursuant to Rule 144
of the regulations promulgated under the Securities Act or otherwise) any shares
of the GBB Stock registered in their names or beneficially owned by them. Each
of the Principal Shareholders hereby consents to (a) the placing of appropriate
legends on certificates evidencing the shares of GBB Stock issued to them and
(b) the submission of stop transfer orders with the transfer agent of GBB Stock,
in order to enable GBB to enforce all of the foregoing covenants.
7.11 Tax Indemnification Agreement. CAPCO and each of the CAPCO
-----------------------------
Shareholders agrees to execute and deliver to GBB a Tax Indemnification
Agreement substantially in the form of Exhibit E attached hereto.
ARTICLE 8
COVENANTS OF GBB
GBB covenants and agrees with CAPCO and the CAPCO 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
CAPCO, 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;
(b) amend its articles of incorporation in any respect which would
materially and adversely affect the rights and privileges attendant to the GBB
Stock; or
(c) 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
30
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 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 CAPCO'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 CAPCO, GBB shall
---------------------
(i) make its Chief Executive Officer, Chief Administrative Officer/Chief
Financial Officer and Controller available to discuss with CAPCO and its
representatives GBB's operations and (ii) shall provide CAPCO with written
information which is (a) similar to the written information that CAPCO 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 CAPCO of the right to
rely upon the representations and warranties made by GBB herein; provided, that
CAPCO shall disclose to GBB any fact or circumstance it may discover which CAPCO
believes renders any representation or warranty made by GBB hereunder incorrect
in any material respect. CAPCO 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 BHC Act and Xxxx Xxxxx Xxxxxx Act. GBB shall
afford CAPCO a reasonable opportunity to review all such applications and
notices (including confidential or nonpublic portions thereof) and all
31
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 CAPCO 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 CAPCO's obligations hereunder.
8.6 Employment Agreements and Non-Compete Agreements. GBB agrees to
------------------------------------------------
execute and deliver the Employment Agreements to the Principal Shareholders and
Non-Compete Agreements to the CAPCO Shareholders.
8.7 Blue Sky. GBB shall take any action required to be taken under any
--------
applicable state securities laws in connection with the issuance of the GBB
Stock Consideration, and CAPCO and the CAPCO Shareholders agree to furnish all
information deemed necessary or appropriate in connection with any such action.
8.8 Reservation, Issuance and Registration of GBB Stock. GBB shall
---------------------------------------------------
reserve and make available for issuance as the GBB Stock Consideration and in
accordance with the terms and conditions of this Agreement such number of shares
of GBB Stock to be issued to the Principal Shareholders pursuant to Article 2
hereof.
8.9 Nasdaq Listing. GBB shall use its best efforts to cause the shares
--------------
of GBB Stock to be issued under this Agreement to be approved for listing on The
Nasdaq Stock Market, subject to official notice of issuance, and shall submit an
application therefor within 30 days following the Closing Date.
8.10 Tax Indemnification Agreement. GBB agrees to execute and
-----------------------------
deliver the Tax Indemnification Agreement to the CAPCO Shareholders.
ARTICLE 9
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, CAPCO or the CAPCO 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.
32
9.3 CAPCO Lists. It is agreed that information furnished by CAPCO to GBB
-----------
as required on any CAPCO List shall be deemed to be furnished as to another
relevant CAPCO List if it is commercially reasonable to consider such
information to have been furnished by CAPCO to GBB in satisfaction of any other
requirement hereunder notwithstanding the inadvertent failure of CAPCO to
furnish the information required on another CAPCO List.
ARTICLE 10
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 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, CAPCO or the CAPCO
Shareholders that in good faith and in the reasonable opinion of the Board of
Directors of GBB or CAPCO, as applicable, would so materially and adversely
affect the anticipated economic and business benefits to GBB, CAPCO or the CAPCO
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
CAPCO Shareholders and delivered to GBB and the Employment Agreements shall have
been executed and delivered by GBB and the Principal Shareholders on or prior to
the Closing Date.
10.4 Tax Indemnification Agreement. The Tax Indemnification Agreement
-----------------------------
shall have been executed and delivered by CAPCO, the CAPCO Shareholders and GBB.
33
ARTICLE 11
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF CAPCO
AND THE CAPCO SHAREHOLDERS
All of the obligations of CAPCO and the CAPCO 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 CAPCO and the CAPCO 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.
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 CAPCO 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 CAPCO Shareholders shall have received the
--------------
opinion of Xxxxx X. Xxxxxxx, General Counsel of GBB, dated as of the Closing
Date, and in form and substance satisfactory to the counsel of CAPCO, to the
effect that: (a) GBB is a corporation validly existing under the laws of the
State of California with full corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby; (b) 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
34
taken; (c) 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; and (d) the shares of GBB Stock to be issued under
this Agreement will, when issued, be duly authorized, validly issued, fully paid
and nonassessable.
ARTICLE 12
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 CAPCO and the CAPCO 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 CAPCO and the CAPCO 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 CAPCO and the CAPCO Shareholders
and the consummation of the transactions contemplated hereby shall have been
duly and validly taken by the CAPCO Board of Directors and CAPCO Shareholders.
12.3 Third Party Consents. CAPCO and the CAPCO 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 CAPCO, whether or
not such event, change or effect is reflected in the CAPCO Lists as amended or
supplemented after the date of this Agreement.
12.5 Legal Opinion. GBB shall have received the opinion of Cable,
-------------
Xxxxxxxxxx, Xxxxxx & Xxxxx, LLP, attorneys for CAPCO, and in form and substance
satisfactory to the counsel of GBB, to the effect that: (a) CAPCO is a
corporation validly existing under the laws
35
of its state of incorporation; (b) CAPCO has full corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby; (c) all corporate proceedings on the part of CAPCO 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 (d) this Agreement has been
duly and validly authorized, executed and delivered on behalf of CAPCO, and
constitutes (subject to standard exceptions of enforceability arising from the
bankruptcy laws and rules of equity) the valid and binding agreement of CAPCO.
12.6 Employee Benefit Plans. GBB shall have received satisfactory
----------------------
evidence that all of CAPCO's employee benefit plans, programs and arrangements
have been treated as provided in Article 13 of this Agreement.
12.7 Stock Option Plan. The CAPCO 1992/1993 Stock Option Plan shall be
-----------------
terminated.
12.8 Shareholders Agreement. GBB shall have received satisfactory
----------------------
evidence that the Shareholders Agreement, dated as of January 4, 1993, by and
among CAPCO and the Shareholders has been terminated.
12.9 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 CAPCO certifying compliance with all the provisions of
Sections 12.1, 12.2, 12.3 and 12.4.
ARTICLE 13
EMPLOYEE BENEFITS
13.1 Termination of Employee Benefit Plans. As soon as practicable on or
-------------------------------------
after the Closing Date, or such other time as GBB in its sole and exclusive
discretion may determine, all Employee Plans will be discontinued or merged into
GBB plans, in the discretion of GBB.
13.2 Eligibility under GBB Employee Benefit Plans. All persons who are
---------------------------------------------
employed by CAPCO immediately before the Closing Date who are employed by GBB
(or a subsidiary thereof) at or after the Closing Date 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 CAPCO
beginning on the date such employees commenced employment with CAPCO through the
Closing Date.
13.3 Bonus Plan. After the Closing Date, CAPCO may continue to provide
----------
annual incentive compensation in accordance with its current bonus plan,
provided, however, that annual bonuses shall not exceed 50% of any employee's
base salary.
36
ARTICLE 14
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 CAPCO immediately upon expiration of ten (10) days from
delivery of written notice by CAPCO 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 CAPCO from the
performance or satisfaction of such covenant or agreement (provided that such
breach has not been waived by CAPCO 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 CAPCO of CAPCO's or the CAPCO 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 CAPCO, as the case may
be, prior to expiration of such ten-day period);
(d) By CAPCO 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 CAPCO or GBB immediately if any conditions set forth in
Article 10 shall not have been met by June 30, 2001;
(f) By CAPCO 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 June 30, 2001; or
(g) By GBB immediately if CAPCO 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 CAPCO or GBB as provided in Section 14.1, neither GBB, nor CAPCO nor
the CAPCO 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.
37
14.3 Expenses.
--------
(a) GBB hereby agrees that if this Agreement is terminated by CAPCO
pursuant to Section 14.1(b), GBB shall promptly, and in any event within ten
(10) days after such termination, pay CAPCO all Expenses (as defined in Section
14.3(e) below) of CAPCO, but not to exceed $100,000.
(b) CAPCO hereby agrees that if the Agreement is terminated by GBB
pursuant to Section 14.1(c) or (g), CAPCO shall promptly, and in any event
within ten (10) days after such termination, pay GBB all Expenses of GBB, but
not to exceed $300,000.
(c) Except as otherwise provided herein, all Expenses incurred by
GBB, CAPCO or the CAPCO 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, CAPCO and the CAPCO 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 15
SURVIVAL; INDEMNIFICATION; RELEASE
15.1 Survival.
--------
(a) Each representation, warranty, covenant and agreement of CAPCO
and the CAPCO 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 CAPCO
Shareholders a written notice of a claim with respect to such representations
and warranties.
38
(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 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 CAPCO
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 CAPCO 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 CAPCO or the CAPCO Shareholders pursuant to
this Agreement; provided, however, that the CAPCO 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 $75,000. However, if the cumulative and aggregate amount of such Loss
exceeds $75,000, all of the Loss shall be subject to indemnification hereunder
by the CAPCO Shareholders. Notwithstanding the foregoing, the aggregate
liability of the CAPCO Shareholders under this Section 15.2(a) shall not exceed
$1 million. Notwithstanding the foregoing, the obligations of the CAPCO
Shareholders to indemnify GBB for a Loss resulting from a breach of their
representations and warranties contained in Section 4.2, shall not be subject to
the foregoing limitation on liability but may not exceed the aggregate
consideration actually received by the CAPCO Shareholders in connection with the
transactions contemplated herein. Anything herein to the contrary
notwithstanding, the maximum amount GBB may recover from a CAPCO Shareholder as
a result of a Loss hereunder shall not in the aggregate exceed the CAPCO
Shareholder's pro rata portion of such Loss. A CAPCO 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 CAPCO Shareholder in connection with the
transactions contemplated hereby and the denominator of which is the aggregate
amount of the consideration actually received by all CAPCO Shareholders in
connection with the transactions contemplated hereby.
(b) GBB shall indemnify each of the CAPCO 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 CAPCO Shareholders if,
on a cumulative and aggregate basis, the amount of Loss incurred by the CAPCO
Shareholders exceeds $75,000. However, if the cumulative and aggregate amount of
39
such Loss exceeds $75,000, all of the Loss shall be subject to indemnification
hereunder by GBB.
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
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 Aggregate Transaction
Amount to the CAPCO Shareholders at the Closing, effective as of the Closing
Date, the CAPCO Shareholders shall release and discharge GBB, CAPCO 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 CAPCO Shareholders may now or hereafter have
against CAPCO 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, CAPCO 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 CAPCO to any CAPCO Shareholder, including any
indebtedness in connection with any loans made by such CAPCO Shareholder to
CAPCO, (iii) to the extent any such claim by, actions by or rights of the CAPCO
Shareholder are covered by insurance which was in effect at the time the event
giving rise to such claim, action
40
or right occurred; or (iv) from any obligation relating to compensation
(including accrued vacation) due and payable to such CAPCO Shareholder in such
CAPCO Shareholder's capacity as an employee of CAPCO.
(b) In consideration of the CAPCO Shareholders entering into the
transactions contemplated hereby, effective as of the Closing Date, GBB (on
behalf of itself and its Affiliates) and CAPCO (on behalf of itself and its
Affiliates) shall release and discharge the CAPCO 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, CAPCO or any of
CAPCO's Affiliates may now or hereafter have against any of the CAPCO
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 CAPCO
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 CAPCO Shareholder to
CAPCO.
(c) The CAPCO Shareholders, GBB (on behalf of itself and its
Affiliates) and CAPCO (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 CAPCO Shareholders, GBB (on behalf of itself and its Affiliates) and CAPCO
(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 16
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:
41
To GBB: Greater Bay Bancorp
0000 Xxxx Xxxxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
With a copy to: Greater Bay Bancorp
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
To CAPCO: CAPCO Financial Company, Inc.
00000 XX Xxxxx Xxxxxx., Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxx
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
With a copy to: Cable, Xxxxxxxxxx, Xxxxxx & Xxxxx, LLP
0000 Xxxxxx Xxx.
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxx Cable, Esq.
Telephone Number: (000)000-0000
Facsimile Number: (000)000-0000
To the CAPCO
Shareholders: At the addresses set forth on Exhibit A.
With a copy to: Cable, Xxxxxxxxxx, Xxxxxx & Xxxxx, LLP
0000 Xxxxxx Xxx.
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxx Cable, Esq.
Telephone Number: (000)000-0000
Facsimile Number: (000)000-0000
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.
42
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 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
-------------
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, CAPCO or the CAPCO 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 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, 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 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 CAPCO are governed by the Washington 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
43
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, 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 CAPCO without action by their respective shareholders (except as to
amendments relating to the CAPCO 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]
44
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/ Xxxxx X. Xxxxxxxxxxx
------------------------
Name: Xxxxx X. Xxxxxxxxxxx
Title: President and Chief
Executive Officer
CAPCO FINANCIAL COMPANY, INC.
By: /s/ Xxxxxx Xxxxxx
-----------------
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
45
THE CAPCO SHAREHOLDERS:
/s/ Xxxxxx Xxxxxx /s/ Xxxxxx Xxxx
-------------------------- --------------------------
Xxxxxx Xxxxxx Xxxxxx Xxxx
/s/ Xxxxxx Xxxxxxxxxxx /s/ Xxxxxx Xxxxxx
-------------------------- --------------------------
Xxxxxx Xxxxxxxxxxx Xxxxxx Xxxxxx
/s/ Xxxxx Xxxxxx /s/ Xxxxxxxx Xxxx
-------------------------- --------------------------
Xxxxx Xxxxxx Family Trust, Xxxxxxxx Xxxx
Xxxxx Xxxxxx Trustee
/s/ Xxxxxx Xxxxxxxx /s/ Xxxxxx Xxxx
-------------------------- --------------------------
Xxxxxx Xxxxxxxx Xxxx Family Trust,
Xxxxxx Xxxx Trustee
/s/ Xxxx Xxxxxxx /s/ Xxxxxxxxx Xxxxxxxx
-------------------------- --------------------------
Xxxx Xxxxxxx Xxxxxxxxx Xxxxxxxx
/s/ Xxxx Xxxxxxxx /s/ Xxxxxx Xxxxxxx
-------------------------- --------------------------
Xxxxxxxx Family Trust, Xxxxxx Xxxxxxx
Xxxx Xxxxxxxx Trustee
/s/ Xxxxxxx Xxxxxxxxxx /s/ Xxxxxx Xxxxxxx
-------------------------- --------------------------
Xxxxxxx Xxxxxxxxxx Xxxxxx Xxxxxxx
/s/ Xxxxxxx Xxxxxxx /s/ Xxxxxx Xxxxxxx Rose
-------------------------- --------------------------
Xxxxxxx Xxxxxxx Xxxxxx Xxxxxxx Rose
/s/ Xxxxxx Xxxxxxx /s/ Xxxxxxx Xxxxxx
-------------------------- --------------------------
Xxxxxx Xxxxxxx Xxxxxxx Xxxxxx
46
/s/ Xxxx Xxxxx
--------------------------
Xxxx Xxxxx
/s/ Xxxxxxxx Daily
--------------------------
Xxxxxxxx Daily
/s/ Xx Xxxxxxx
--------------------------
Xx Xxxxxxx
47
