SHAREHOLDER AGREEMENT
This
SHAREHOLDER AGREEMENT (this “Shareholder
Agreement”)
is
made and entered into as of May 29, 2007 by and between Heritage Oaks Bancorp,
a
California corporation (“Acquiror”
or
“Bancorp”),
and
the signatories hereto (collectively, the “Shareholders”
or
individually, “Shareholder”).
WHEREAS,
Bancorp, Business First National Bank, a national banking association located
in
Santa Barbara, California (the “Seller”),
and
Bancorp have entered into that certain Agreement and Plan of Merger, dated
as of
the date hereof (the “Merger
Agreement”).
WHEREAS,
as a condition to entering into the Merger Agreement, the parties thereto have
required that the Shareholders, solely in the Shareholders’ capacity as a holder
of Seller Common Stock, enter into, and the Shareholders have agreed to enter
into, this Shareholder Agreement.
NOW,
THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the
parties hereby agree as follows:
1. Representations
and Warranties of the Shareholder.
The
Shareholders hereby individually represent and warrant to Bancorp as
follows:
(a) Authority;
Binding Obligation.
The
Shareholder has all necessary power and authority to enter into this Shareholder
Agreement and perform all of the Shareholder’s obligations hereunder. This
Shareholder Agreement has been duly and validly executed and delivered by the
Shareholder and constitutes a valid and legally binding obligation of the
Shareholder, enforceable against the Shareholder in accordance with its
terms.
(b) Ownership
of Shares.
The
Shareholder is the beneficial owner or record holder of the number of shares
of
Seller Common Stock listed under the Shareholder’s name on the signature page
hereto (the “Existing
Shares”
and,
together with any shares of Seller Common Stock the record or beneficial
ownership of which is acquired by the Shareholder after the date hereof, the
“Shares”)
and,
as of the date hereof, the Existing Shares constitute all the shares of Seller
Common Stock owned of record or beneficially by the Shareholder. With respect
to
the Existing Shares, the Shareholder has sole voting power and sole power to
issue instructions with respect to or otherwise engage in the actions set forth
in Section 2 hereof, sole power of disposition and sole power to demand
appraisal rights, with no restrictions on the voting rights, rights of
disposition or otherwise, subject to applicable laws and the terms of this
Shareholder Agreement.
(c) No
Conflicts.
Neither
the execution, delivery and performance of this Shareholder Agreement nor the
consummation of the transactions contemplated hereby will conflict with or
constitute a violation of or a default under (with or without notice, lapse
of
time, or both) any contract, agreement, voting agreement, shareholders’
agreement, trust agreement, voting trust, proxy, power of attorney, pooling
arrangement, note, mortgage, indenture, instrument, arrangement or other
obligation or restriction of any kind to which the Shareholder is a party or
which the Shareholder or the Shareholder’s Shares are subject to or bound.
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2. Voting
Agreement and Agreement Not to Transfer.
(a) Unless
this Agreement is terminated pursuant to Section 4, each Shareholder hereby
agrees to vote or caused to be voted all of that Shareholder’s Shares
(i) in favor of the approval of the principal terms of the Merger Agreement
as well as any other matters required to be approved by the shareholders of
the
Seller for consummation of the Merger; (ii) against any action or agreement
that would reasonably be expected to result in a breach in any material respect
of any covenant, representation or warranty or any other obligation or agreement
of the Seller under the Merger Agreement; and (iii) except with the prior
written consent of Bancorp, against the following actions (other than the Merger
or the consummation of any actions contemplated by the Merger Agreement):
(A) any extraordinary corporate transactions, such as a merger,
consolidation or other business combination involving the Seller; (B) any
sale, lease, transfer or disposition of a material amount of the assets of
the
Seller; (C) any change in the majority of the board of directors of the
Seller; (D) any material change in the present capitalization of the
Seller; (E) any amendment of the Seller’s articles of incorporation or
bylaws; (F) any other change in the corporate structure, business, assets
or ownership of the Seller; or (G) any other action which is intended, or
could reasonably be expected to, impede, interfere with, delay, postpone,
discourage or adversely affect the contemplated economic benefits to Bancorp
of
the Merger and the transactions contemplated by the Merger Agreement.
Notwithstanding the foregoing, Shareholders shall not be obligated to vote
or
cause to be voted all of the Shareholder’s Shares in accordance with the
provisions of Section 2(a)(i)-(iii) hereof, if there has been a material
modification or amendment of the terms of the Merger Agreement or a waiver
of
any material condition to the Merger Agreement.
(b) Unless
this Agreement is terminated pursuant to Section 4, each Shareholder hereby
agrees not to (i) sell, transfer, convey, assign or otherwise dispose of
any of his or her Shares without the prior written consent of Bancorp which
shall not be unreasonably withheld, other than Shares sold or surrendered to
pay
the exercise price of any Seller Options or to satisfy the Seller’s withholding
obligations with respect to any taxes resulting from such exercise, or
(ii) pledge, mortgage or otherwise encumber such Shares. Any permitted
transferee of a Shareholder’s Shares must become a party to this Shareholder
Agreement and any purported transfer of a Shareholder’s Shares to a Person that
does not become a party hereto shall be null and void ab
initio.
3. Shareholder
Capacity.
Each
Shareholder is entering this Shareholder Agreement in his or her capacity as
the
record or beneficial owner of the Shares, and not in his or her capacity as
a
director or officer of the Seller. Nothing in this Shareholder Agreement shall
be deemed in any manner to limit the discretion of any Shareholder to take
any
action, or fail to take any action, in his or her capacity as a director or
officer of the Seller that may be either (a) required of the Shareholder
under applicable law or (b) is otherwise permitted by the Merger
Agreement.
4. Termination.
Except
for the covenants contained in Section 6, the obligations of the Shareholder
hereunder shall terminate upon the consummation of the Merger. If the Merger
is
not consummated, the obligations of the Shareholder hereunder including the
covenants of Section 6 shall terminate upon the termination of the Merger
Agreement in accordance with its terms, provided
however,
Shareholders shall have the additional right to terminate the Shareholder
Agreement if the Shareholders unanimously determine in good faith, taking
into consideration the written advice of their counsel,
that
complying with the terms of the Shareholder Agreement would not be consistent
with such Shareholders’ fiduciary duties to
the
other shareholders of Seller under
applicable law. To exercise their right to terminate this Shareholder Agreement
pursuant to this Section 4, the Shareholders shall deliver written notice to
Bancorp of their election to terminate, which election shall be effective upon
Bancorp’s actual receipt of (i) such notice and (ii) the payment provided for in
the following sentence. In the event that the Shareholders exercise their right
to terminate this Shareholder Agreement as provided in this Section 4,
Shareholders shall pay to Bancorp the sum of $550,000 in immediately available
funds, which shall be delivered to Bancorp concurrently with the notice of
termination. In addition, if within twelve (12) months of the termination of
this Shareholder Agreement, Seller enters into a definitive agreement for a
Competing Transaction or consummates a Competing Transaction, Shareholders
shall
pay to Bancorp the sum of $200,000 in immediately available funds. Shareholders
shall be jointly and severally liable for the foregoing payment(s). Bancorp
acknowledges and agrees that if Bancorp is entitled to a fee under this Section
4 and Section 11.1(c) of the Merger Agreement, the aggregate amount it is
entitled to under both agreements shall be $750,000, paid by Shareholders,
Seller, or a combination thereof.
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5. Specific
Performance.
Each
Shareholder acknowledges that it would be impossible to determine the amount
of
damages that would result from any breach of any of its obligations under the
obligations of Section 2 and 6 of this Shareholder Agreement and that the remedy
at law for any breach, or threatened breach, would likely be inadequate and,
accordingly, agrees that Bancorp shall, in addition to any other rights or
remedies which it may have at law or in equity, be entitled to seek such
equitable and injunctive relief as may be available from any court of competent
jurisdiction to restrain the Shareholder from violating any of its obligations
under Section 2 or 6 of this Shareholder Agreement. In connection with any
action or proceeding for such equitable or injunctive relief, each Shareholder
hereby waives any claim or defense that a remedy at law alone is adequate and
agrees, to the maximum extent permitted by law, to have the obligations of
the
Shareholder under this Shareholder Agreement specifically enforced against
him,
without the necessity of posting bond or other security, and consents to the
entry of equitable or injunctive relief against the Shareholder enjoining or
restraining any breach or threatened breach of Section 2 or 6 of this
Shareholder Agreement.
6. Two-Year
Standstill Covenant Following Effective Time of the Merger.
Each
Shareholder agrees that if the Merger is consummated, for a period of two years
following the Effective Time, Shareholder will not without the prior written
consent of Bancorp’s Board of Directors:
(a) provide
Bancorp or any other person with any proposal relating to any transaction
between Bancorp and/or its security holders, other than a proposal to the board
of directors of Bancorp in response to an invitation from the board of directors
of Bancorp to submit a proposal;
(b) assist,
advise or encourage any other person in acquiring, directly or indirectly,
by
purchase, tender offer or otherwise, more than five percent (5%) of the issued
and outstanding voting securities or direct or indirect rights to acquire more
than five percent (5%) of the issued and outstanding voting securities of
Bancorp of any affiliate thereof or join or participate in such activities
with
any “group” within the meaning of Section 13(d)(3) of the Exchange
Act;
3
(c) make,
or
in any way participate, directly or indirectly, in any (i) nomination to the
Bancorp’s board of directors or (ii) “solicitation” of “proxies” to vote (as
such terms are defined under the Exchange Act), or seek to advise or influence
any person or entity with respect to the voting of, any voting securities of
Bancorp or become a “participant” in any “election contest” (as those terms are
defined in the regulations and rules promulgated under the Exchange
Act);
(d) make
any
public announcement with respect to, or submit a proposal for, or offer of,
any
extraordinary transaction involving Bancorp or any of its securities or
assets;
(e) seek,
directly or indirectly, to control the management, Board of Directors or
policies of Bancorp or any affiliate thereof; or
(f) form,
join or in any way participate in a “group” (as defined in the Exchange Act) or
otherwise participate in any effort, directly or indirectly, for purposes of
doing any of the foregoing.
Notwithstanding
the covenants contained in Sections 6(a)-6(f) hereof, if at any time during
such
two-year standstill period Xx. Xxxxxxxx X. Xxxx no longer serves as Chief
Executive Officer of Bancorp for any reason other than death, disability, or
a
removal for cause, then all such covenants set forth in Section 6(a)-6(f) shall
terminate contemporaneously with Xx. Xxxx’x change in status.
7. Miscellaneous.
(a) Definitional
Matters.
(i) For
purposes of this Agreement, beneficial ownership shall be determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended.
(ii) All
capitalized terms used but not defined in this Shareholder Agreement shall
have
the respective meanings that the Merger Agreement ascribes to such
terms.
(iii) The
section and paragraph captions herein are for convenience of reference only,
do
not constitute part of this Shareholder Agreement and shall not be deemed to
limit or otherwise affect any of the provisions hereof.
(b) Entire
Agreement.
This
Shareholder Agreement constitutes the entire agreement of the parties hereto
with reference to the transactions contemplated hereby and supersedes all other
prior agreements, understandings, representations and warranties, both written
and oral, between the parties or their respective representatives, agents or
attorneys, with respect to the subject matter hereof.
(c) Parties
in Interest.
This
Shareholder Agreement shall be binding upon and inure solely to the benefit
of
each party hereto and the other parties to the Merger Agreement and their
respective successors, assigns, estate, heirs, executors, administrators and
other legal representatives, as the case may be. Nothing in this Shareholder
Agreement, express or implied, is intended to confer upon any other Person,
other than parties hereto or their respective successors, assigns, estate,
heirs, executors, administrators and other legal representatives, as the case
may be, any rights, remedies, obligations or liabilities under or by reason
of
this Shareholder Agreement, except for the last sentence of Section 4, which
is
intended to benefit Seller in addition to Shareholders.
4
(d) Assignment.
This
Shareholder Agreement shall not be assignable by law or otherwise without the
prior written consent of the other party hereto; provided, however, that Bancorp
may assign any of its rights and obligations hereunder to any of its affiliates
or to any other entity which may acquire all or substantially all of the assets,
shares or business of Bancorp or any of its subsidiaries or any entity with
or
into which Bancorp or any of its subsidiaries may be consolidated or
merged.
(e) Modifications;
Waivers.
This
Shareholder Agreement shall not be amended, altered or modified in any manner
whatsoever, except by a written instrument executed by the parties hereto.
No
waiver of any breach or default hereunder shall be considered valid unless
in
writing and signed by the party giving such waiver, and no such waiver shall
be
deemed a waiver of any subsequent breach of the same or similar
nature.
(f) Severability.
Any
term or provision of this Shareholder Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity and unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Shareholder
Agreement in any other jurisdiction. If any provision of this Shareholder
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
(g) Governing
Law.
This
Shareholder Agreement shall be deemed to be made in and in all respects shall
be
interpreted, construed and governed by and in accordance with the laws of the
State of California, without regard to the conflict of law principles
thereof.
(h) Jurisdiction
and Venue.
Any
legal action or proceeding with respect to this Shareholder Agreement may be
brought in the courts of the State of California in the County of San Xxxx
Obispo or of the United States of America for the Central District of California
and, by execution and delivery of this Agreement, each of the Shareholders
and
Bancorp hereby accepts for itself and in respect of its property, generally
and
unconditionally, the jurisdiction of and venue in the aforesaid courts,
notwithstanding any objections it may otherwise have. Each of the Shareholders
and Bancorp irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the delivery of notice
as provided in Section 7(k) below, such service to become effective thirty
(30)
days after such delivery.
(i) Attorney’s
Fees.
The
prevailing party in any litigation, arbitration, mediation, bankruptcy,
insolvency or other proceeding (“Proceeding”)
relating to the enforcement or interpretation of this Shareholder Agreement
may
recover from the unsuccessful party all fees and disbursements of counsel
(including expert witness and other consultants’ fees and costs) relating to or
arising out of (a) the Proceeding (whether or not the Proceeding results in
a judgment) and (b) any post-judgment or post-award Proceeding including,
without limitation, one to enforce or collect any judgment or award resulting
from any Proceeding. All such judgments and awards shall contain a specific
provision for the recovery of all such subsequently incurred costs, expenses,
fees and disbursements of counsel.
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(j) Counterparts.
This
Shareholder Agreement may be executed in one or more counterparts (including
by
facsimile), each of which shall be deemed to be an original, but all of which
shall constitute one and the same instrument.
(k) Notices.
All
notices, requests, instructions and other communications to be given hereunder
by any party to the other shall be in writing and shall be deemed given if
personally delivered, telecopied (with confirmation) or mailed by registered
or
certified mail, postage prepaid (return receipt requested), to such party at
its
address set forth below or such other address as such party may specify to
the
other party by notice provided in accordance with this Section
7(k).
If
to
Bancorp, to:
000
Xxxxxxx Xxxxxx
Xxxx
Xxxxxx, XX 00000
Telephone:
(000)
000-0000
Facsimile:
(000) 000-0000
Attention:
President and CEO
and
Xxxxxxx
X. Xxxxx, Esq.
Xxxxxxx
Xxxxxx & Xxxxx
0000
Xxxxx Xxxxxx
Xxx
Xxxx
Xxxxxx, XX 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
and
|
Xxxxxxx
Xxxxxxx, M.D.
|
|
Chairman
of the Board
|
|
Business
First National Bank
|
|
0000
Xxxxx Xxxxxx
|
|
Xxxxx
Xxxxxxx, XX 00000
|
|
Telephone:
|
|
Facsimile:
|
If
to a
Shareholder, to the address noted on the signature page hereto.
6
(l) Advice
of Counsel.
EACH
SHAREHOLDER ACKNOWLEDGES THAT, IN EXECUTING THIS SHAREHOLDER AGREEMENT,
SHAREHOLDER HAS HAD THE OPPOERTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL
COUNSEL, AND HAS READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS
AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON
OF
THE DRAFTING OR PREPARATION HEREOF.
[This
space intentionally blank.]
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IN
WITNESS WHEREOF, the parties hereto have executed this Shareholder Agreement
as
of the date first above written.
|
By:_____________________________
|
|
|
Name:
Xxxxxxxx X. Xxxx
|
|
|
Title:
President & CEO
|
SHAREHOLDER:
Marquette
Financial Companies
__________________________________________
By:
_______________________________________
Its:
_______________________________________
Number
of
Shares:
Number
of
Seller Options: 60,000 (Common Stock)
Address
for Notices:
0000
Xxxx
Xxxxxxxx Xxxxx
00
Xxxxx
0xx Xx.
Xxxxxxxxxxx,
XX 00000
SHAREHOLDER:
Revocable
Trust of Xxxx X. Xxxxxx
Created
U/A dated June 28, 1991
_________________________________________
By:
Xxxx
X. Xxxxxx
Its:
Trustee
Number
of
Shares: 175 (Common Stock)
Address
for notices:
00
Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx,
XX 00000
SHAREHOLDER:
Revocable
Trust of Xxxx X. Xxxxxx
Created
U/A dated May 28, 1993
_________________________________________
By:
Xxxx
X. Xxxxxx
Its:
Trustee
Number
of
Shares: 337,666 (Common Stock)
8
Address
for notices:
00
Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx,
XX 00000
SHAREHOLDER:
Xxxxx
X.
Xxxxxx share of the X X Xxxxxx
Irrevocable
Trst #1 dtd 01/17/00
_________________________________________
By:
Xxxxx
X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxx X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxxx X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxx X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxxx X. Xxxx Xx.
Its:
Trustee
Number
of
Shares: 83,353 (Common Stock)
Address
for notices:
00
Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx,
XX 00000
SHAREHOLDER:
Xxxxxx
X
Xxxxxx share of the X X Xxxxxx
Irrevocable
Trst #1 dtd 01/17/00
_________________________________________
By:
Xxxxx
X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxx X. Xxxxxx
Its:
Trustee
9
_________________________________________
By:
Xxxxxxx X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxx X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxxx X. Xxxx Xx.
Its:
Trustee
______________________________________
Its:
Trustee
Number
of
Shares: 83,353 (Common Stock)
Address
for notices:
00
Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx,
XX 00000
SHAREHOLDER:
Xxxxxxx
X
Xxxxxx share of the X X Xxxxxx
IrrevocableTrst
#1 dtd 01/17/00
_________________________________________
By:
Xxxxx
X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxx X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxxx X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxx X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxxx X. Xxxx Xx.
Its:
Trustee
Number
of
Shares: 83,353 (Common Stock)
Address
for notices:
00
Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx,
XX 00000
10
SHAREHOLDER:
Xxxxx
X.
Xxxxxx
_________________________________________
By:
Xxxxx
X. Xxxxxx
Number
of
Shares: 75,143 (Common Stock)
Address
for notices:
00
Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx,
XX 00000
SHAREHOLDER:
Xxxxx
X
Xxxxxx share of the X X Xxxxxx
Irrevocable
Trst #1 dtd 12/20/99
_________________________________________
By:
Xxxxx
X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxx X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxxx X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxx X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxxx X. Xxxx Xx.
Its:
Trustee
Number
of
Shares: 26,625 (Common Stock)
Address
for notices:
00
Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx,
XX 00000
SHAREHOLDER:
Xxxxxx
X
Xxxxxx share of the X X Xxxxxx
Irrevocable
Trst #1 dtd 12/20/99
_________________________________________
By:
Xxxxx
X. Xxxxxx
Its:
Trustee
11
_________________________________________
By:
Xxxxxx X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxxx X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxx X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxxx X. Xxxx Xx.
Its:
Trustee
Number
of
Shares: 26,624 (Common Stock)
Address
for notices:
00
Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx,
XX 00000
SHAREHOLDER:
Xxxxxxx
X
Xxxxxx share of the X X Xxxxxx
Irrevocable
Trst #1 dtd 12/20/99
_________________________________________
By:
Xxxxx
X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxx X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxxx X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxx X. Xxxxxx
Its:
Trustee
_________________________________________
By:
Xxxxxxx X. Xxxx Xx.
Its:
Trustee
Number
of
Shares: 26,624 (Common Stock)
12
Address
for notices:
00
Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx,
XX 00000
SHAREHOLDER:
Xxxxxx
X.
Xxxxxx
_________________________________________
By:
Xxxxxx X. Xxxxxx
Number
of
Shares: 75,509 (Common Stock)
Address
for notices:
00
Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx,
XX 00000
SHAREHOLDER:
Xxxxxxx
X. Xxxxxx
_________________________________________
By:
Xxxxxxx X. Xxxxxx
Number
of
Shares: 75,548 (Common Stock)
Address
for notices:
00
Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx,
XX 00000
13
