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EXHIBIT
2.2
AGREEMENT
AND PLAN OF REORGANIZATION
by and among
Umpqua Holdings Corporation,
Umpqua Bank,
North Bay Bancorp
and
The Vintage Bank
January 17,
2007
TABLE OF
CONTENTS
1.
Definitions.
1
2.
Mergers.
6
2.1
Transactions Pursuant to the Holding Company Plan of Merger
6
2.2
Transactions Pursuant to the Bank Plan of Merger
8
2.3
Exchange Procedures.
8
2.4
Dissenters’ Shares
9
2.5
Anti-Dilution Provision
9
3.
Reserved.
10
4.
Representations and Warranties of NBB and TVB.
10
4.1
Organization, Existence, and Authority
10
4.2
Authorized and Outstanding Stock, Options, and Other Rights
10
4.3
Public Reports; Sarbanes-Oxley Compliance
10
4.4
Articles of Incorporation, Bylaws, Minutes
12
4.5
No Holding Company, Joint Venture, or Other Subsidiaries
12
4.6
Shareholder Reports
12
4.7
Books and Records
13
4.8
Legal Proceedings
13
4.9
Compliance with Laws and Regulations
13
4.10
Commitments
14
4.11
Environmental Matters
14
4.12
Contingent and Other Liabilities
15
4.13
No Material Adverse Effects
15
4.14
Regulatory Approvals Required
15
4.15
Corporate and Shareholder Approval of Agreement, Binding
Obligations
16
4.16
No Defaults from Transaction
16
4.17
Taxes and Tax Returns
16
4.18
Real Property, Leased Personal Property
17
4.19
Insurance
18
4.20
Intellectual Property
18
4.21
Contracts and Agreements
18
4.22
Employee Benefits.
19
4.23
Labor and Employment
21
4.24
Allowance for Loan Losses
21
4.25
Repurchase Agreement
21
4.26
Shareholder List.
21
4.27
Interests of Directors and Others
21
4.28
NBB Disclosure Schedule to this Agreement
21
4.29
Brokers and Finders
22
4.30
Bank Secrecy Act; Patriot Act; Transactions with Affiliates.
22
4.31
Risk Management Instruments.
22
5.
Representations and Warranties of Umpqua and Umpqua Bank
22
5.1
Organization, Existence, and Authority
22
5.2
Authorized and Outstanding Stock, Options, and Other Rights
23
5.3
Public Reports; Sarbanes-Oxley Compliance
23
- i -
5.4
Articles of Incorporation, Bylaws, Minutes
24
5.5
Shareholder Reports
25
5.6
Books and Records
25
5.7
Legal Proceedings
25
5.8
Compliance with Laws and Regulations
25
5.9
Environmental Matters
26
5.10
Contingent and Other Liabilities
27
5.11
No Material Adverse Effects
27
5.12
Regulatory Approvals Required
27
5.13
Corporate and Shareholder Approval of Agreement, Binding
Obligations
28
5.14
No Defaults from Transaction
28
5.15
Taxes and Tax Returns
28
5.16
Insurance
29
5.17
Contracts and Agreements
29
5.18
Reserve for Loan Losses
29
5.19
Repurchase Agreement
29
5.20
Interests of Directors and Others
29
5.21
Umpqua Disclosure Schedule to this Agreement
29
5.22
Brokers and Finders.
30
5.23
Bank Secrecy Act; Patriot Act; Transactions with Affiliates.
30
5.24
Risk Management Instruments.
30
6.
Covenants of NBB.
30
6.1
Certain Actions
30
6.2
No Solicitation
33
6.3
Filing Reports and Returns, Payment of Taxes
33
6.4
Preservation of Business
33
6.5
Commercially Reasonable Efforts
33
6.6
Updating the NBB Disclosure Schedule
34
6.7
Rights of Access
34
6.8
Proxy Statement
34
6.9
Availability of Reports; Communications
35
6.10
Shareholder Meeting
35
6.11
Title Reports
35
6.12
Allowance for Loan Losses
35
6.13
Agreements and Plans
35
6.14
Other Actions
36
6.15
Section 16 Matters.
36
7.
Covenants of Umpqua.
36
7.1
Certain Actions
36
7.2
Filing Reports and Returns, Payment of Taxes
37
7.3
Preservation of Business
37
7.4
Commercially Reasonable Efforts
37
7.5
Updating the Umpqua Disclosure Schedule
38
7.6
S-4 Registration Statement
38
7.7
Listing of Securities
39
7.8
Other Actions
39
7.9
Employee Matters
39
7.10
Indemnification of Directors and Officers; D&O Insurance
40
7.11
Section 16 Matters.
41
-ii-
8.
Conditions to Obligations of Umpqua.
42
8.1
NBB Shareholder Approval; Dissenting Shareholders
42
8.2
No Litigation
42
8.3
No Banking Moratorium
42
8.4
Regulatory Approvals
42
8.5
Compliance with Securities Laws
42
8.6
Other Consents
42
8.7
Corporate Documents
43
8.8
Continuing Accuracy of Representations and Warranties
43
8.9
Compliance with Covenants and Conditions
43
8.10
No Material Adverse Effects
43
8.11
Certificate
43
8.12
Tax Opinion
43
8.13
Employee Agreements
44
8.14
Director Agreements.
44
9.
Conditions to Obligations of NBB.
44
9.1
Shareholder Approval
44
9.2
No Litigation
44
9.3
No Banking Moratorium
44
9.4
Regulatory Approvals
44
9.5
Compliance with Securities Laws
44
9.6
Other Consents
45
9.7
Corporate Documents
45
9.8
Continuing Accuracy of Representations and Warranties
45
9.9
Compliance with Covenants and Conditions
45
9.10
No Material Adverse Effects
45
9.11
Tax Opinion
45
9.12
Certificate
46
10.
Closing.
46
11.
Termination; Price Protection.
46
11.1
Procedure for Termination
46
11.2
Effect of Termination.
47
11.3
Price Protection
48
11.4
Participation in Subsequent Transaction
48
11.5
Documents from NBB
48
11.6
Documents from Umpqua
48
12.
Miscellaneous Provisions.
49
12.1
Amendment or Modification
49
12.2
Public Statements
49
12.3
Confidentiality
49
12.4
Waivers and Extensions
49
12.5
Expenses
49
12.6
Financial Advisors
49
12.7
Binding Effect, No Assignment
49
-iii-
12.8
Representations and Warranties
49
12.9
Remedies
50
12.10
No Benefit to Third Parties
50
12.11
Notices
50
12.12
Governing Law
51
12.13
Entire Agreement
51
12.14
Headings
51
12.15
Counterparts
51
12.16
Restrictions On Transfer
51
12.17
Material Change
51
12.18
Survival
52
Exhibit A – Holding Company Plan of Merger
Exhibit B – Bank Plan of Merger
Exhibit C – Forms of Director Voting, Non-Competition and
Non-Solicitation Agreements and Director Voting and
Non-Solicitation Agreement
Exhibit D – Rule 145 Affiliate Letter
-iv-
AGREEMENT
AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization is entered into
effective this 17 th day of January, 2007 (this
"Agreement"), by and among Umpqua Holdings Corporation ("Umpqua"),
Umpqua Bank ("Umpqua Bank"), North Bay Bancorp ("NBB") and The
Vintage Bank ("TVB").
RECITALS:
A.
Umpqua is an Oregon corporation, and registered financial
holding company, with its executive offices at Umpqua Bank Plaza,
Suite 1200, One SW Columbia Street, Portland, Oregon.
B.
Umpqua Bank is an Oregon state-chartered bank, and a wholly
owned subsidiary of Umpqua, with its principal office at
445 SE Main Street, Roseburg, Oregon.
C.
NBB is a California corporation, and registered bank holding
company, with its executive offices at 1190 Airport Road, Napa,
California.
D.
TVB is a California state-chartered bank, and a wholly owned
subsidiary of NBB, with its principal office at 1500 Soscol Avenue,
Napa, California.
E.
The parties desire to enter into a strategic business
combination pursuant to the terms of this Agreement.
F.
The respective boards of directors of each of Umpqua, Umpqua
Bank, NBB and TVB have determined that it is in the best interests
of their respective corporations and shareholders to consummate the
applicable Mergers and the other transactions contemplated by this
Agreement.
G.
The parties intend that the transactions contemplated hereby
shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended.
H.
Section 8.13(a) of the NBB Disclosure Schedule lists those
individuals who have entered into amended and restated employment,
consulting or other agreements in connection with the transactions
contemplated hereby.
I.
Each director of NBB and TVB has, simultaneously with the
execution and delivery hereof, executed and delivered to Umpqua a
Voting, Non-Competition and Non-Solicitation Agreement or Voting
and Non-Solicitation Agreement, as the case may be, substantially
in the appropriate form of such agreement attached hereto as
Exhibit C and each director and executive officer of NBB
has, simultaneously with the execution and delivery hereof,
executed and delivered a Rule 145 Affiliate Letter substantially in
the form of Exhibit D attached hereto.
AGREEMENT
In consideration of the mutual premises, and of the
representations and warranties, covenants and agreements herein
contained, the parties hereby enter into this Agreement and agree
as follows:
1.
Definitions. For purposes of this Agreement, the following
terms shall have the definitions given:
(a)
"Agreement" has the meaning set forth in the Preamble.
1
(b)
"Alternative Acquisition Transaction" means any event or series
of events pursuant to which a party or its board of directors
enters into an agreement or recommends to its shareholders any
agreement (other than this Agreement) pursuant to which any Person
would (i) merge or consolidate with such party, with the
result that the shareholders of such party hold less than 50% of
the stock or voting power of the surviving entity, (ii) acquire 50%
or more of the assets or liabilities of such party or any of its
subsidiaries, or (iii) purchase or otherwise acquire (including by
merger, consolidation, share exchange or any similar transaction)
stock or other securities representing or convertible into 50% or
more of the stock or voting power of such party or any one or more
of its subsidiaries.
(c)
"Bank Merger" means the merger of TVB with and into Umpqua Bank
in accordance with the Bank Plan of Merger.
(d)
"Bank Plan of Merger" means the Plan of Merger to be executed by
Umpqua Bank and TVB and delivered to the Oregon Director and
California Secretary of State for filing substantially in the form
attached hereto as Exhibit B .
(e)
"Benefits Integration" has the meaning set forth in Section
7.9.
(f)
"California Commissioner" means the Commissioner of the
California Department of Financial Institutions.
(g)
"Call Reports" means the final quarterly reports of condition
and income filed by such bank with the FFIEC pursuant to the
Federal Deposit Insurance Act.
(h)
"Cash Consideration" has the meaning set forth in Section
11.1(e).
(i)
"Cash Fill Option" has the meaning set forth in Section
11.1(e).
(j)
"CGCL" means the California General Corporation Law.
(k)
"COBRA" has the meaning set forth in Section 4.22(f).
(l)
"Code" means the Internal Revenue Code of 1986, as amended.
(m)
"Confidentiality Agreement" means the letter agreement, dated as
of December 6, 2006, by and between Umpqua and NBB.
(n)
"Contract" means any agreement, contract, undertaking,
obligation, instrument, note, power of attorney, evidence of
indebtedness, purchase order, quotation, license or other
commitment to which any Party or to which any of the assets of such
Party is subject, whether oral or written, express or implied,
except that the term "Contracts" shall not include Loans made in
the ordinary course of business consistent with past practices and
the notes or other instruments or agreements that evidence such
loans or provide security therefore.
(o)
"Converted Option" has the meaning set forth in Section
2.1.6.
(p)
"Core Deposits" means all deposits other than (i) brokered
deposits, (ii) time deposits greater than $100,000, and (iii) any
deposits that were subject to off balance sheet deposit sweep
programs in November 2006 or have been subject to such sweep
programs since November 30, 2006.
(q)
"Costs" has the meaning set forth in Section 7.10(a).
2
(r)
"Decline Adjustment" has the meaning set forth in Section
11.1(e).
(s)
"Dissenters’ Shares" has the meaning set forth in Section
2.1.4.
(t)
"Dissenting Shareholder" means any holder of Dissenters’
Shares.
(u)
"Effective Date" is the date on which the Articles of Merger for
the Holding Company Merger are filed with the Oregon Secretary of
State.
(v)
"Effective Time" is the time set forth in the Holding Company
Plan of Merger at which the Holding Company Merger is
effective.
(w)
"Employee Benefit Plans" means all benefit and compensation
plans, Contracts, policies or arrangements covering current or
former employees of NBB, TVB or Solano Bank and current or former
directors of NBB, TVB or Solano Bank including, but not limited to,
"employee benefit plans" as defined by Section 3(3) of ERISA, and
deferred compensation, severance, stock option, stock purchase,
stock appreciation rights, stock based, restricted stock,
incentive, salary continuation, supplemental executive retirement
and bonus plans.
(x)
"Environmental Law" has the meaning set forth in Section
4.11.
(y)
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(z)
"ERISA Affiliate" has the meaning set forth in Section 4.22.
(aa)
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and, to the extent the context requires, the rules
promulgated thereunder.
(bb)
"Exchange Agent" has the meaning set forth in Section 2.3.1.
(cc)
"Exchange Ratio" means 1.217, subject to adjustment in
accordance with Section 2.5, Section 11.1(e) and Section 11.3.
(dd)
"FDIC" means the Federal Deposit Insurance Corporation.
(ee)
"FFIEC" means the Federal Financial Institutions Examination
Council.
(ff)
"FHA" means the Federal Housing Administration.
(gg)
"FHLMC" means the Federal Home Loan Mortgage Corporation.
(hh)
"FNMA" means the Federal National Mortgage Association.
(ii)
"FRB" means the Board of Governors of the Federal Reserve
System.
(jj)
"GAAP" has the meaning set forth in Section 4.3.
(kk)
"GNMA" means the Government National Mortgage Association.
(ll)
"Hazardous Material" has the meaning set forth in Section
4.11.
3
(mm)
"Holding Company Merger" means the merger of NBB with and into
Umpqua at the Effective Time in accordance with the Holding Company
Plan of Merger.
(nn)
"Holding Company Plan of Merger" means the Plan of Merger to be
executed by Umpqua and NBB and delivered together with Articles of
Merger to the Oregon Secretary of State and California Secretary of
State for filing on the Effective Date substantially in the form
attached hereto as Exhibit A .
(oo)
"Intellectual Property" means trademarks, service marks, brand
names, certification marks, trade dress and other indications of
origin, the goodwill associated with the foregoing and
registrations and applications to register the foregoing;
inventions, discoveries and ideas; patents and applications for
patents; nonpublic information, trade secrets and confidential
information and rights to limit the use or disclosure thereof by
any person; writings and other works, whether copyrightable or not;
and registrations or applications for registration of copyrights;
and any similar intellectual property or proprietary rights.
(pp)
"Knowledge" means, as to a party, the actual knowledge of an
Officer of such party, and does not include information of which
the Officers of such party may be deemed to have constructive
knowledge.
(qq)
"Loan" means a written or oral agreement, note or borrowing
arrangement (including leases, credit enhancements, commitments,
guarantees and interest-bearing assets) payable to NBB or TVB or to
Umpqua or Umpqua Bank, as the case may be.
(rr)
"Local Barriers Acts" has the meaning set forth in Section
4.18.
(ss)
"Material Adverse Effect" has the meaning set forth in Section
12.17.
(tt)
"Material Contracts" has the meaning set forth in Section
4.21.
(uu)
"Mergers" means the Holding Company Merger and the Bank
Merger.
(vv)
"NASD" means the National Association of Securities Dealers,
Inc.
(ww)
"NBB" has the meaning set forth in the Preamble.
(xx)
"NBB Common Stock" means the shares of common stock, without par
value, of NBB.
(yy)
"NBB Disclosure Schedule" has the meaning set forth in Section
4.
(zz)
"NBB Option" has the meaning set forth in Section 2.1.6.
(aaa)
"NBB Property" has the meaning set forth in Section 4.11.
(bbb)
"NBB Public Reports" means the reports and other information
required to be filed by NBB with the SEC pursuant to the Exchange
Act, together with the reports to shareholders required to be
delivered by NBB to its shareholders pursuant to Exchange Act Rule
14a-3, in each case from and after January 1, 2005.
(ccc)
"NBB Real Property" has the meaning set forth in Section
4.18.
(ddd)
"NBB Stock Award" has the meaning set forth in Section
2.1.6.
4
(eee)
"NBB Stock Plans" means the North Bay Bancorp Stock Option Plan
and the North Bay Bancorp Amended and Restated 2002 Incentive
Compensation Plan (formerly the North Bay Bancorp 2002 Stock Option
Plan).
(fff)
"NBB Subsidiary" means, with respect to NBB, any entity in which
NBB owns, directly or indirectly, more than 50% of the voting
securities or ownership interests having by their terms ordinary
voting power to elect a majority of the board of directors or other
persons performing similar functions, other than in such
party’s capacity as a fiduciary or a secured party.
(ggg)
"New Certificate" has the meaning set forth in Section
2.3.2.
(hhh)
"Officer" means the individuals listed on Section 8.13(b) of the
NBB Disclosure Schedule with respect to NBB and the individuals
listed on Section 8.13(b) of the Umpqua Disclosure Schedule who are
officers of such Party.
(iii)
"Old Certificate" has the meaning set forth in Section
2.3.2.
(jjj)
"Order" has the meaning set forth in Section 8.2.
(kkk)
"Oregon Bank Act" means Chapters 706 through 716 of the Oregon
Revised Statutes.
(lll)
"Oregon Director" means the Director of the Oregon Department of
Consumer and Business Services acting by and through the
Administration of the Division of Finance and Corporate
Securities.
(mmm)
"OSHA" has the meaning set forth in Section 4.18.
(nnn)
"PBGC" means the Pension Benefit Guaranty Corporation.
(ooo)
"Pension Benefit Plan" has the meaning set forth in Section
4.22(d).
(ppp)
"Permitted Liens" has the meaning set forth in Section 4.18.
(qqq)
"Person" means any natural person or any other entity, person,
or group. For purposes of this definition, the meaning of the term
"group" shall be determined in accordance with Section 13(d)(3) of
the Exchange Act.
(rrr)
"Plans of Merger" means the Bank Plan of Merger and the Holding
Company Plan of Merger.
(sss)
"Proxy Statement" has the meaning set forth in Section 6.8.
(ttt)
"Rule 145 Affiliate Letter" means the letter agreement to be
executed by each "affiliate" (as defined in Rule 144
promulgated by the SEC pursuant to the Securities Act) of NBB
substantially in the form attached hereto as Exhibit D.
(uuu)
"SAWY" means Strand, Atkinson, William & York, Inc., an
Oregon corporation.
(vvv)
"SAWY Broker Dealer Reports" means such reports filed by Strand,
Atkinson, Williams & York, Inc. with the SEC or with the
NASD.
5
(www)
"SBA" means the Small Business Administration of the Department
of Commerce.
(xxx)
"SEC" means the Securities and Exchange Commission.
(yyy)
"Securities Act" means the Securities Act of 1933, as amended,
and to the extent the context requires, the rules promulgated
thereunder.
(zzz)
"Solano Bank" means the California state-chartered bank and
wholly owned subsidiary of NBB the assets of which were acquired by
and liabilities of which were assumed by TVB on or about January
15, 2005.
(aaaa)
"S-4 Registration Statement" has the meaning set forth in
Section 6.8.
(bbbb)
"Tax" or "Taxes" has the meaning set forth in Section 4.17.
(cccc)
"TVB" has the meaning set forth in the Preamble.
(dddd)
"Umpqua" has the meaning set forth in the Preamble.
(eeee)
"Umpqua Bank" has the meaning set forth in the Preamble.
(ffff)
"Umpqua Common Stock" means shares of common stock, no par
value, of Umpqua.
(gggg)
"Umpqua Disclosure Schedule" has the meaning set forth in
Section 5.
(hhhh)
"Umpqua Measuring Period" has the meaning set forth in Section
11.1(e).
(iiii)
"Umpqua Measuring Price" has the meaning set forth in Section
11.1(e).
(jjjj)
"Umpqua Property" has the meaning set forth in Section 5.9.
(kkkk)
"Umpqua Public Reports" means the reports and other information
required to be filed by Umpqua with the SEC pursuant to the
Exchange Act, together with the reports to shareholders required to
be delivered by Umpqua to its shareholders pursuant to Exchange Act
Rule 14a-3, in each case from and after January 1, 2005.
(llll)
"Umpqua Subsidiary" means, with respect to Umpqua and Umpqua
Bank, any entity in which Umpqua or Umpqua Bank owns, directly or
indirectly, more than 50% of the voting securities or ownership
interests having by their terms ordinary voting power to elect a
majority of the board of directors or other persons performing
similar functions, other than in such party’s capacity as a
fiduciary or a secured party.
(mmmm)
"VA" means the Veterans Administration.
(nnnn)
"VCT" means Vintage Capital Trust, a Maryland real estate
investment trust.
(oooo)
"Welfare Benefit Plan" has the meaning set forth in Section
4.22(b).
6
2.
Mergers.
2.1
Transactions Pursuant to the Holding Company Plan of
Merger. Subject to the terms and conditions set forth in
this Agreement, on the Effective Date:
2.1.1
NBB shall be merged with and into Umpqua under Oregon law on the
terms and conditions set forth in the Holding Company Plan of
Merger. The Holding Company Plan of Merger and the Holding Company
Articles of Merger shall be filed with the Secretary of State of
the State of Oregon to effect the Holding Company Merger and the
Secretary of State of the State of California as required under
California law.
2.1.2
Umpqua shall be the surviving corporation in the Holding Company
Merger. Umpqua’s Articles of Incorporation and Bylaws
shall be the articles of incorporation and bylaws of the surviving
corporation.
2.1.3
As of the Effective Time, each share of Umpqua capital stock
outstanding immediately prior to the Holding Company Merger shall
remain outstanding and shall be deemed to be one share of the
capital stock of the surviving corporation.
2.1.4
All shares of NBB Common Stock that are "dissenting shares"
within the meaning of CGCL § 1300 ("Dissenters’ Shares")
shall not be converted into or represent a right to receive Umpqua
Common Stock or Umpqua Common Stock and Cash Consideration unless
and until such shares have lost their status as dissenting shares
under CGCL § 1300, at which time such shares shall be
converted into Umpqua Common Stock or Umpqua Common Stock and Cash
Consideration pursuant to Section 2.1.5.
2.1.5
As of the Effective Time, each outstanding share of NBB Common
Stock (other than Dissenters’ Shares) shall be converted into
the right to receive: (i) the number of shares of Umpqua Common
Stock equal to the Exchange Ratio, (ii) cash in lieu of any
resulting fractional shares, (iii) any dividend or distribution
pursuant to Section 2.3.3, and (iv) in the event Umpqua elects the
Cash Fill Option, an amount in cash equal to the Cash
Consideration. Notwithstanding any other provision of this
Agreement, no fractional shares of Umpqua Common Stock will be
issued and any holder of shares of NBB Common Stock entitled to
receive a fractional share of Umpqua Common Stock but for this
sentence shall be entitled to receive a cash payment in lieu
thereof, which payment shall be calculated by the Exchange Agent
and shall represent such holder’s proportionate interest in a
share of Umpqua Common Stock based on the Umpqua Measuring
Price.
2.1.6
(a)
As of the Effective Time, by virtue of the Holding Company
Merger and without any action on the part of any holder of any such
option, each outstanding option to acquire NBB Common Stock (each
an "NBB Option") shall be automatically converted into an option to
purchase Umpqua Common Stock (each a "Converted Option") as
follows: (i) the number of shares of
Umpqua Common Stock issuable upon exercise of the Converted Option
shall be equal to the product of: (A) the number of shares of NBB
Common Stock issuable upon exercise of the NBB Option and (B) the
Exchange Ratio; and (ii) the exercise price per share of Umpqua
Common Stock shall be equal to the quotient of: (A) the exercise
price of the NBB Option divided by (B) the Exchange Ratio.
Provided, further, if Umpqua elects the Cash Fill Option, the
exercise price per share of the NBB options as calculated pursuant
to this Section 2.1.6(a) will be reduced by the amount of the Cash
Consideration. All terms and conditions of the
Converted Options other than the number of shares and exercise
price as adjusted pursuant to the Section 2.1.6(a) shall remain the
same as the terms and conditions of the NBB Options. With
respect to each NBB Option, the foregoing adjustments shall be
effected in a manner consistent with Section 424(a) of the Code and
related treasury regulations.
7
(b)
Umpqua shall, as of the Effective Time, assume the obligations
and rights of NBB under the NBB Stock Plans pursuant to which NBB
Options and NBB Stock Awards are outstanding as of the Effective
Time and shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Umpqua Common Stock for
delivery upon exercise of the Converted Options. Umpqua shall
cause the registration of the shares of Umpqua Common Stock subject
to the Converted Options to become effective as part of a
registration statement on Form S-8, or any successor or other
appropriate forms, with respect to the shares of Umpqua Common
Stock subject to the Converted Options promptly after the Effective
Time; and, thereafter, Umpqua shall deliver to holders of Converted
Options any applicable prospectus and shall maintain the
effectiveness of such registration statement or registration
statements, including the current status of any related prospectus,
for so long as the Converted Options remain outstanding.
(c)
As of the Effective Time, each outstanding Restricted Stock
Award to receive shares of NBB Common Stock (each a "NBB Stock
Award") shall terminate and become fully vested and free of all
forfeiture provisions and shall be automatically converted shares
of Umpqua Common Stock in accordance with Section 2.1.5 of this
Agreement.
2.2
Transactions Pursuant to the Bank Plan of Merger.
Subject to the terms and conditions set forth in this
Agreement, promptly following the Effective Time:
2.2.1
TVB will be merged with and into Umpqua Bank in accordance with
the provisions of the Oregon Bank Act. The Bank Plan of
Merger shall be filed with the Oregon Director for purposes of
obtaining a Certificate of Merger.
2.2.2
As of the date set forth in the Certificate of Merger, TVB will
merge with Umpqua Bank, with Umpqua Bank being the resulting bank
and having its head office in Roseburg, Oregon.
2.2.3
Umpqua Bank’s Articles of Incorporation, Bylaws and
banking charter in effect immediately before the date set forth on
the Certificate of Merger shall be the articles of incorporation,
bylaws and banking charter of the resulting bank.
2.2.4
Upon effectiveness of the Bank Merger, each outstanding share of
Umpqua Bank common stock shall remain outstanding as shares of the
resulting bank, the holders of such shares shall retain their
rights with respect to such shares as in effect prior to the Bank
Merger, and each outstanding share of TVB held by NBB will be
cancelled.
2.3
Exchange Procedures.
2.3.1
Prior to the Effective Date, Umpqua shall appoint an exchange
agent reasonably acceptable to NBB for the purpose of exchanging
certificates representing shares of NBB Common Stock (other than
Dissenters’ Shares) for Umpqua Common Stock and, as
applicable, Cash Consideration as required by Section 2.1 (the
"Exchange Agent"). On or about the Effective Date, Umpqua
will issue and deliver to the Exchange Agent certificates
representing a sufficient number of shares of Umpqua Common Stock
issuable in the Holding Company Merger and an estimate of the cash
required to make cash payable in lieu of fractional shares and,
after the Effective Time, if applicable, any Cash Consideration and
any cash and dividends or other distributions of Umpqua Common
Stock to be issued or paid pursuant to Section 2.3.3.
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2.3.2
Promptly after the Effective Time, Umpqua shall cause the
Exchange Agent to mail to each holder of record of shares (other
than holders of Dissenters’ Shares) a notice advising such
holders of the effectiveness of the Holding Company Merger,
including appropriate transmittal materials specifying that
delivery shall be effected, and risk of loss and title to
certificates for shares of NBB Common Stock ("Old Certificates")
shall pass, only upon delivery of the Old Certificates (or
affidavits of loss in lieu thereof, as provided in Section 2.3.5)
and instructions for surrendering the Old Certificates (or
affidavits of loss in lieu thereof) to the Exchange Agent.
Upon surrender for cancellation to the Exchange Agent of one
or more Old Certificates, accompanied by a duly executed letter of
transmittal in proper form, the Exchange Agent shall deliver to
each holder of such surrendered Old Certificates new certificates
representing the appropriate number of shares of Umpqua Common
Stock ("New Certificates"), together with checks for payment of
cash in lieu of fractional shares to be issued in respect of the
Old Certificates plus any Cash Consideration and any dividends
(including the $0.14 cash dividend permitted pursuant to Section
6.1(b) if the Effective Time is on or before March 31, 2007 and
such dividend is declared but unpaid at such time) or other
distributions that such holder has the right to receive pursuant to
the provisions of this Section 2, less any taxes required to be
withheld with respect thereto.
2.3.3
Until Old Certificates have been surrendered and exchanged for
New Certificates as herein provided, each outstanding Old
Certificate shall be deemed, for all corporate purposes of Umpqua,
to represent the number of shares of Umpqua Common Stock into which
the shares of NBB Common Stock were exchanged pursuant to Section
2.1.5. All shares of Umpqua Common Stock to be issued pursuant to
the Holding Company Merger shall be deemed issued and outstanding
as of the Effective Time and whenever a dividend or other
distribution is declared by Umpqua in respect of the Umpqua Common
Stock, the record date for which is at or after the Effective Time,
that declaration shall include dividends or other distributions in
respect of all shares issuable pursuant to this Agreement. No
dividends or other distributions that are declared on Umpqua Common
Stock into which shares of NBB Common Stock have been converted
after the Effective Date will be paid to persons otherwise entitled
to receive the same until the Old Certificates have been
surrendered in exchange for New Certificates in the manner herein
provided. In no event shall the persons entitled to receive such dividends or other
distributions be entitled to receive interest on such dividends or
other distributions. In the event of a transfer of ownership
of shares of NBB Common Stock that is not registered in the
transfer records of NBB, a New Certificate, together with a check
for any cash to be paid upon due surrender of the Old Certificate
and any other dividends or distributions in respect thereof, may be
issued and/or paid to such a transferee if the Old Certificate
formerly representing such shares is presented to the Exchange
Agent, accompanied by all documents required by Umpqua and the
Exchange Agent to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid or are not
applicable.
2.3.4
Any Umpqua Common Stock or cash delivered to the Exchange Agent
(together with any interest or dividends thereon) and not issued
pursuant to this Section 2.3 at the end of twelve months from the
Effective Date shall be returned to Umpqua, in which event the
persons entitled thereto shall look only to Umpqua for payment
thereof.
2.3.5
Notwithstanding anything to the contrary set forth in this
Agreement, if any holder of NBB Common Stock shall be unable to
surrender his or her Old Certificates because such certificates
have been lost or destroyed, such holder may deliver in lieu
thereof a lost stock certificate affidavit and, unless waived, at
the sole option of Umpqua or the Exchange Agent, an indemnity bond
in customary amount together with a surety, each in a form and
substance reasonably satisfactory to Umpqua or the Exchange
Agent.
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2.3.6
The Exchange Agent shall not be entitled to vote or exercise any
rights of ownership with respect to the shares of Umpqua Common
Stock or NBB Common 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
Umpqua Common Stock for the account of the persons entitled
thereto.
2.4
Dissenters’ Shares. Any Dissenting
Shareholder who shall be entitled to be paid the fair market value
of such shareholder’s shares of NBB Common Stock, as provided
in Section 1300 of the CGCL, shall not be entitled to shares of
Umpqua Common Stock at the Exchange Ratio or, as applicable, shares
of Umpqua Common Stock and Cash Consideration in respect thereof
unless and until such Dissenting Shareholder shall have failed to
perfect or shall have effectively withdrawn or lost such Dissenting
Shareholder’s right to dissent from the Holding Company
Merger under the CGCL, and shall be entitled to receive only the
payment provided for by Section 1300 of the CGCL with respect to
such Dissenters’ Shares.
2.5
Anti-Dilution Provision. If Umpqua changes or
proposes to change the number of shares of Umpqua Common Stock
issued and outstanding prior to the Effective Date as a result of a
stock split, stock dividend or similar transaction with respect to
the outstanding Umpqua Common Stock, or exchanges Umpqua Common
Stock for a different number or kind of shares or securities or is
involved in any transaction resulting in any of the foregoing, and
the record date therefor shall be prior to the Effective Date, the
Exchange Ratio shall be proportionately adjusted.
3.
Reserved.
4.
Representations and Warranties of NBB and TVB.
Except as disclosed in one or more schedules to this Agreement
delivered to Umpqua prior to execution of this Agreement (the "NBB
Disclosure Schedule"), NBB and TVB represent and warrant to Umpqua
as follows:
4.1
Organization, Existence, and Authority. NBB is a
corporation duly organized and validly existing under the laws of
the State of California and has all requisite corporate power and
authority to own, lease, and operate its properties and assets and
to carry on its business in the manner now being conducted. TVB is
a state-chartered bank, duly organized, validly existing, and in
good standing under the laws of the State of California and has all
requisite corporate power and authority to own, lease, and operate
its properties and assets and carry on its business in the manner
now being conducted. Each of NBB and TVB is qualified to do
business and is in good standing in every jurisdiction in which
such qualification is required except where the failure to so
qualify or be in good standing would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect
with respect to NBB. North Bay Bancorp Statutory Trust I is a
statutory trust organized and validly existing under Connecticut
law and the trust’s activities do not require it to be
qualified to do business in any jurisdiction other than
Connecticut. VCT was a subsidiary of TVB and a statutory real
estate investment trust organized under Maryland law and qualified
to do business in California. VCT has been dissolved, all
preferred shares of beneficial interest have been liquidated and
all remaining assets of VCT have been distributed to TVB as the
sole holder of common shares of beneficial interest.
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4.2
Authorized and Outstanding Stock, Options, and Other
Rights. The authorized capital stock of NBB consists of
(i) 500,000 shares of preferred stock, without par value, of which
no preferred shares are issued or outstanding, and (ii) 15,000,000
shares of common stock, without par value, of which 4,169,845
shares are outstanding as of the close of business on January 17,
2007, all of which are validly issued, fully paid and
nonassessable. All outstanding shares of capital stock of TVB
are validly issued, fully paid and nonassessable and held by NBB.
No bonds, debentures, notes or other indebtedness having the
right to vote on any matters on which NBB shareholders may vote are
issued or outstanding. Other than 474,125.73 shares of NBB
Common Stock issuable upon exercise of NBB Options under NBB Stock
Plans as of the close of business on January 17, 2007, and 23,650
shares of NBB Common Stock issued pursuant to NBB Stock Awards as
of the close of business on January 17, 2007, and as disclosed in
the NBB Public Reports and in Section 4.2 of the NBB Disclosure
Schedule, no subscriptions, options, warrants, convertible
securities or other rights or commitments which would enable the
holder to acquire any shares of capital stock or other investment
securities of NBB or TVB, or which enable or require NBB or TVB to
acquire shares of its capital stock or of investments issued by NBB
or TVB from any holder, are authorized, issued or outstanding.
All grants of NBB Options were properly approved by
NBB’s Board of Directors or a committee duly authorized by
the Board of Directors and validly issued in accordance with the
applicable NBB Stock Plan and applicable law. No grant of an
NBB Option involved any "backdating."
4.3
Public Reports; Sarbanes-Oxley Compliance
(a)
Since January 1, 2004, NBB has timely filed with the SEC all NBB
Public Reports required to be so filed, and TVB has timely filed
with the FRB, FDIC and the California Commissioner all reports
including without limitation Call Reports required to be so
filed.
(b)
The financial statements included in the NBB Public Reports have
been and will be prepared in accordance with generally accepted
accounting principles in the United States ("GAAP"), consistently
applied, and fairly present the financial position and results of
operation of NBB and TVB on the dates and for the periods covered
thereby.
(c)
Except as disclosed in Section 4.3(c) of the NBB Disclosure
Schedule, as of their respective dates, all NBB Public Reports and
all TVB Call Reports complied in all material respects with all
requirements applicable to such filing. As of their
respective dates, none of the NBB Public Reports or TVB Call
Reports contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading.
(d)
Section 4.3 of the NBB Disclosure Schedule lists, and NBB has
delivered to Umpqua true and correct copies of the documentation
creating or governing, all securitization transactions and
"off-balance sheet arrangements" (as defined in Item 303(a) of
Regulation S-K of the SEC) effected by NBB or any NBB Subsidiary
from January 1, 2004 through the date hereof.
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(e)
Perry-Smith LLP is, and has been throughout the periods covered
by the NBB Public Reports filed since June 9, 2006, (a) a
registered public accounting firm (as defined in Section 2(a)(12)
of the Sarbanes-Oxley Act of 2002), (b) "independent" with respect
to NBB within the meaning of SEC Regulation S-X, and (c) in
compliance with subsections ( g ) through ( l ) of
Section 10A of the Exchange Act and the related rules of the SEC
and the Public Company Accounting Oversight Board. Throughout
the periods covered by NBB Public Reports filed between January 1,
2004 and May 30, 2006, KPMG LLP was (a) a registered public
accounting firm (as defined in Section 2(a)(12) of the
Sarbanes-Oxley Act of 2002), (b) "independent" with respect to NBB
within the meaning of SEC Regulation S-X, and (c) in compliance
with subsections ( g ) through ( l ) of Section 10A
of the Exchange Act and the related rules of the SEC and the Public
Company Accounting Oversight Board. The definitive proxy
statements of NBB electronically filed with the SEC and Section 4.3
of the NBB Disclosure Schedule list all non-audit services
performed by Perry-Smith LLP and KPMG LLP for NBB and the NBB
Subsidiaries from January 1, 2005 through the date hereof.
(f)
NBB and the NBB Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance
that: (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain asset
accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate actions are taken with respect to any differences. NBB
has disclosed, based on its most recent evaluation prior to the
date hereof, to its auditors and the audit committee of its Board
of Directors (1) any significant deficiencies in the design or
operation of internal controls which could adversely affect in any
material respect its ability to record, process, summarize and
report financial data and has identified for its auditors any
material weaknesses in internal controls and (2) any fraud, whether
or not material, that involves management or other employees who
have a significant role in its internal controls. NBB has
implemented "disclosure controls and procedures" (as defined in
Rules 13a-15(e) and 15d-15(e) of the Exchange Act) reasonably
designed to ensure that all information required to be disclosed by
NBB in the NBB Public Reports is recorded, processed, summarized
and reported within the time periods specified in the rules and
regulations of the SEC, and that such information is accumulated
and communicated to NBB’s management as appropriate to allow
timely decisions regarding required disclosure.
(g)
Each NBB Public Report that was required to be accompanied by
the certifications contemplated by Item 601 of Regulation S-K was
so accompanied, and at the time of filing or submission of each
such certification, such certification complied with such item and
was accurate in all material respects as of the date of such
certificate.
(h)
The audit committee of the NBB Board of Directors has
established procedures for the receipt, retention and treatment of
complaints regarding the accounting, internal accounting controls
and auditing matters and the confidential, anonymous submission by
employees of NBB of concerns regarding questionable accounting or
auditing practices. No attorney representing NBB or any NBB
Subsidiary, whether or not employed by NBB or any NBB Subsidiary,
has reported "evidence of a material violation" (within the meaning
of Part 205 of the Standards of Professional Conduct for Attorneys
Appearing and Practicing Before the Commission in the
Representation of an Issuer) by NBB or any of its officers,
directors, employees or agents to the NBB Board of Directors or any
committee thereof, to NBB’s chief executive officer.
Section 4.3 of the NBB Disclosure Schedule lists all
investigations conducted prior to the date hereof regarding any
reported "evidence of a material violation" by NBB or any of its
officers, directors, employees or agents and all NBB audit
committee investigations conducted prior to the date hereof of
complaints by NBB employees regarding accounting, internal
accounting controls, or auditing matters.
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(i)
NBB is in compliance in all material respects with all current
listing and corporate governance requirements of the NASDAQ Global
Market, and is in compliance in all material respects with the
Sarbanes-Oxley Act of 2002 and the rules and regulations of the
SEC.
4.4
Articles of Incorporation, Bylaws, Minutes. The
copies of NBB’s Articles of Incorporation, NBB’s
Bylaws, TVB’s Articles of Incorporation and TVB’s
Bylaws delivered to Umpqua are true and correct copies of such
documents, each as amended and restated as of the date hereof.
NBB is not in violation of any provision of its Articles of
Incorporation or Bylaws. TVB is not in violation of any
provision of its Articles of Incorporation or Bylaws. The
minute books of NBB and TVB contain minutes of all meetings and all
consents evidencing actions taken without a meeting by its Board of
Directors (and any committees thereof) and by its shareholders and
such minutes and consents are accurate in all material respects.
NBB has delivered to Umpqua true, correct and complete copies
of the minute books of NBB and TVB from January 1, 2005 through the
date hereof. Notwithstanding the foregoing, minutes of
executive sessions conducted by the boards and committees of NBB
and TVB will not be provided to Umpqua, and minutes provided will
be redacted to eliminate confidential strategic discussions.
4.5
No Holding Company, Joint Venture, or Other Subsidiaries.
Other than as to NBB with respect to TVB, no corporation or
other entity is registered or, to the Knowledge of NBB or TVB, is
required to be registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended, because of ownership or
control of NBB or TVB. Except for NBB with respect to TVB and
North Bay Bancorp Statutory Trust I, neither NBB nor TVB, directly
or indirectly, beneficially owns (within the meaning of Section 13
of the Exchange Act and the rules and regulations of the SEC
thereunder) any shares of capital stock of any other corporation or
entity, other than shares held in a fiduciary or custodial capacity
in the ordinary course of business, and shares representing less
than five percent of the outstanding shares of such corporation
acquired in partial or full satisfaction of debts previously
contracted. None of NBB or TVB is a part of or has any
ownership interest in any joint venture, limited liability company,
trust, general or limited partnership, or a member of any
unincorporated association.
4.6
Shareholder Reports. NBB has delivered to Umpqua
true and correct copies of all of NBB’s reports and other
written communications to shareholders since January 1, 2004,
including all proxy statements and notices of shareholder meetings,
to the extent such reports and communications have not been
electronically filed with the SEC.
4.7
Books and Records. The books and records of NBB and
TVB accurately reflect in all material respects the transactions
and obligations to which it is a party or by which it or its
properties are bound or subject. Such books and records
comply in all material respects with applicable legal, regulatory
and accounting requirements.
4.8
Legal Proceedings. Section 4.8 of the NBB
Disclosure Schedule lists, as of the date hereof, all actions,
suits, proceedings, claims or governmental investigations pending
or, to the Knowledge of NBB, threatened against or affecting NBB or
any NBB Subsidiary before any court, administrative officer or
agency, other governmental body, or arbitrator. Except for
regulatory examinations conducted in the normal course of
regulation of NBB and TVB, there are no actions, suits,
proceedings, claims or governmental investigations pending or, to
the Knowledge of NBB, threatened against or affecting NBB or any
NBB Subsidiary before any court, administrative officer or agency,
other governmental body, or arbitrator that, if determined
adversely to NBB or any NBB Subsidiary, would reasonably be
expected to result, individually or in the aggregate, in a Material
Adverse Effect with respect to NBB or to materially hinder or delay
the consummation of the transactions contemplated by this
Agreement.
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4.9
Compliance with Laws and Regulations. Except as
would not reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect with respect to NBB:
(a)
The conduct by each of NBB and TVB of its respective business
and, except for matters covered by Section 4.18, the operation of
the properties or other assets owned or leased by it does not
violate or infringe any domestic laws, statutes, ordinances, rules
or regulations or, to the Knowledge of NBB, any foreign laws,
statutes, ordinances, rules or regulations including, but without
limitation, every local, state or federal law or ordinance, and any
regulation or order issued thereunder, now in effect and applicable
to it governing or pertaining to fair housing, anti-redlining,
equal credit opportunity, truth-in-lending, real estate settlement
procedures, fair credit reporting and every other prohibition
against unlawful discrimination in residential lending, or
governing consumer credit, including, but not limited to, the
Community Reinvestment Act, the Consumer Credit Protection Act,
Fair Credit Reporting Act, Home Mortgage Disclosure Act,
Truth-in-Lending Act, Regulation Z promulgated by the FRB, and the
Real Estate Settlement Procedures Act of 1974.
(b)
Except as disclosed in Section 4.9(b) of the NBB Disclosure
Schedule, all loans, leases, contracts and accounts receivable
(billed and unbilled), security agreements, guarantees and recourse
agreements, of NBB or TVB, as held in their respective portfolios
or as sold with recourse into the secondary market since January 1,
2004, represent and are valid and binding obligations of their
respective parties and debtors, enforceable in accordance with
their respective terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’
rights and to general equity principles. Each of them has
been executed and delivered in compliance, in form and substance,
with any and all federal, state or local laws applicable to NBB or
TVB, or to the other party or parties to the contract(s) or
commitment(s), including without limitation the Truth-in-Lending
Act, Regulations Z and U of the FRB, laws and regulations providing
for nondiscriminatory practices in the granting of loans or credit,
applicable usury laws, and laws imposing lending limits; and all
such contracts or commitments have been administered in compliance
with all applicable federal, state or local laws or regulations.
(c)
All Uniform Commercial Code filings, or filings of trust deeds
or mortgages, or of liens or other security interest documentation
that are required by any applicable federal, state or local
governmental laws and regulations to perfect the security interests
referred to in any and all of such documents or other security
agreements have been made, and all security interests under such
deeds, documents or security agreements have been perfected, and
all contracts related to such filings and documents have been
entered into or assumed in full compliance with all applicable
material legal or regulatory requirements.
(d)
Except as disclosed in Section 4.9(d) of the NBB Disclosure
Schedule, all Loan files of TVB are complete and accurate in all
material respects and have been maintained in accordance with good
banking practice.
(e)
All notices of default, foreclosure proceedings or repossession
proceedings against any real or personal property collateral have
been issued, initiated and conducted by TVB in material formal and
substantive compliance with all applicable federal, state or local
laws and regulations, and no loss or impairment of any material
security interest, or exposure to meritorious lawsuits or other
proceedings against NBB or TVB with respect to any such material
security interest, has been or will be suffered or incurred by NBB
or TVB.
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(f)
Neither NBB nor TVB is in material violation of any applicable
services or any other requirements of the FHA, VA, FNMA, GNMA,
FHLMC, SBA or any private mortgage insurer which insured or
guaranteed any loans owned by NBB or TVB or as to which either has
sold to other investors, and with respect to such loans neither NBB
or TVB has done or failed to do, or caused to be done or omitted to
be done, any act the effect of which act or omission impairs or
invalidates (i) any FHA insurance or commitments of the FHA to
insure, (ii) any VA guarantee or commitment of the VA to guarantee,
(iii) any SBA guarantees or commitments of the SBA to guarantee,
(iv) any private mortgage insurance or commitment of any private
mortgage insurer to insure, (v) any title insurance policy, (vi)
any hazard insurance policy, or (vii) any flood insurance policy
required by the National Flood Insurance Act of 1968, as
amended.
(g)
Neither NBB nor TVB has knowingly engaged principally, or as one
of its important activities, in the business of extending credit
for the purpose of purchasing or carrying any margin stock.
(h)
The deposit accounts of TVB are insured by the FDIC through the
Deposit Insurance Fund to the fullest extent permitted by law, and
all premiums and assessments required to be paid in connection
therewith have been paid when due.
(i)
TVB has at least a "satisfactory" rating under the U.S.
Community Reinvestment Act.
(j)
TVB is, and there has not been any event or occurrence since
January 1, 2004, that could reasonably be expected to result in a
determination that TVB is not, "well capitalized" as a matter of
United States federal banking law.
4.10
Commitments. Section 4.10 of the NBB Disclosure
Schedule sets forth a list of each outstanding commitment,
including outstanding letters of credit, repurchase agreements and
unfunded agreements to lend of TVB, as of January 17, 2007, in an
amount of $250,000.00 or more.
4.11
Environmental Matters. To the Knowledge of NBB, and
except as would not reasonably be expected to result, indivually or
in the aggregate, in a Material Adverse Effect with respect to NBB,
neither NBB nor TVB, nor any other person having an interest in any
property which NBB or TVB owns or leases, or has owned or leased,
or in which either holds any security interest, mortgage, or other
liens or interest including but not limited to as beneficiary of a
deed of trust ("NBB Property"), has engaged in the generation, use,
manufacture, treatment, transportation, storage (in tanks or
otherwise), or disposal of Hazardous Material on or from such NBB
Property except as allowable by and in accordance with
Environmental Laws. To the Knowledge of NBB, and except as
would not reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect with respect to NBB, there
has been no: (i) presence, use, generation, handling, treatment,
storage, release, threatened release, migration or disposal of
Hazardous Material on an NBB Property; (ii) condition that could
result in any use, ownership or transfer restriction; or (iii)
condition of nuisance on or from such NBB Property. During
the past six years, neither NBB nor TVB has received any written
notice of a condition that could reasonably be expected to give
rise to any private or governmental suit, claim, action, proceeding
or investigation against NBB, TVB, any such other person or such
NBB Property as a result of any of the foregoing events or has
Knowledge of any condition that could reasonably be expected to
give rise to any such material private or governmental suit, claim,
action, proceeding or investigation. "Hazardous Material"
means any substance that is (A) listed, classified or regulated
pursuant to any Environmental Law; (B) any petroleum product or
by-product, asbestos-containing material, lead-containing paint or
plumbing, polychlorinated biphenyls, radioactive material or radon;
and (C) any other substance which may be the subject of regulatory
action by any government entity in connection with any
Environmental Law. "Environmental Law" means any federal,
state, local or foreign statute, law, regulation, order, decree,
permit, authorization, opinion, common law or agency requirement
relating to: (A) the protection, investigation or restoration
of the environment, health, safety, or natural resources, (B) the
handling, use, presence, disposal, release or threatened release of
any Hazardous Material or (C) noise, odor, indoor air,
15
employee exposure, wetlands,
pollution, contamination or any injury or threat of injury to
persons or property relating to any Hazardous Material.
4.12
Contingent and Other Liabilities. Section 4.12 of
the NBB Disclosure Schedule is a list, to the Knowledge of NBB and
as of the date hereof, of each contingent and other liability,
which individually or, when aggregated with a group of related
contingent or other liabilities, could reasonably expected to be in
excess of $50,000 which are not set forth or reflected in other
sections of the NBB Disclosure Schedule, in the NBB Public Reports
or in TVB’s Call Reports. Except as set forth in any
financial statements (including the notes thereto) included in any
NBB Public Reports, neither NBB nor TVB has any obligations or
liabilities of any nature (whether accrued, absolute, contingent or
otherwise) which would reasonably be expected to result,
individually or in the aggregate, in a Material Adverse Effect with
respect to NBB.
4.13
No Material Adverse Effects. Since September 30,
2006 through the date hereof, (a) there has been no event or
occurrence that would reasonably be expected to result,
individually or in the aggregate, in a Material Adverse Effect with
respect to NBB; (b) no cash, stock or other dividends, or other
distributions with respect to capital stock, have been declared or
paid by NBB or TVB, nor has NBB or TVB purchased or redeemed any of
its shares or shares of a Subsidiary or other affiliate; and (c)
there has not been any damage, destruction or loss (whether or not
covered by insurance) materially and adversely affecting any asset
material to NBB or TVB. Since September 30, 2006 through the
date hereof, neither NBB nor TVB have sold any investment
securities at a gain except as necessary to provide liquidity,
consistent with past practices.
4.14
Regulatory Approvals Required. The nature of the
business and operations of NBB and TVB does not require any
approval, authorization, consent, license, clearance or order of,
any declaration or notification to, or any filing or registration
with, any governmental or regulatory authority in order to permit
any of them to perform their obligations under this Agreement, or
to prevent the termination of any material right, privilege,
license or agreement of NBB or TVB, or any material loss or
disadvantage to their business, as a result of consummation of the
Holding Company Merger or Bank Merger, except for:
(a)
approval from, or waiver of jurisdiction by, the Oregon
Director, FDIC, FRB and California Commissioner of the Bank
Merger;
(b)
approval from, or waiver of jurisdiction by, the FRB of the
Holding Company Merger;
(c)
filing of the Holding Company Plan of Merger and Articles of
Merger with the Oregon Secretary of State and California Secretary
of State; and
(d)
filing and effectiveness of the S-4 Registration Statement, of
which the Proxy Statement is a part, under the Securities Act.
As of the date hereof, NBB has no Knowledge of any reason why
the approvals set forth in this Section 4.14 and in Section 8.4
will not be received without the imposition of a condition,
restriction or requirement of the type described in Section
8.4.
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4.15
Corporate and Shareholder Approval of Agreement, Binding
Obligations. NBB and TVB each has all requisite corporate
power to execute, deliver and perform its obligations under this
Agreement. The execution, delivery and performance of this
Agreement, and the transactions contemplated hereby, have been duly
authorized and unanimously approved by the Board of Directors of
each of NBB and TVB. No other corporate action on the part of
NBB or TVB other than shareholder approval is required to authorize
this Agreement or the Holding Company Plan of Merger or Bank Plan
of Merger or the consummation of the transactions contemplated
thereby. This Agreement has been duly executed and delivered
by NBB and TVB, and assuming the accuracy of Umpqua’s
representations and warranties, constitutes the legal, valid and
binding obligation of each of them enforceable against each of them
in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’
rights and to general equity principles.
4.16
No Defaults from Transaction. Subject to compliance
with the matters referred to in Section 4.14 and Section 4.21 of
the NBB Disclosure Schedule, neither the execution, delivery and
performance of this Agreement and the Holding Company Plan of
Merger or Bank Plan of Merger by NBB and TVB, as the case may be,
nor the consummation of the transactions contemplated thereby will
conflict with, result in any material breach or violation of, or
result in any default or any acceleration of performance under, or
will result in the declaration or imposition of any lien, charge or
encumbrance upon any of the assets of NBB or TVB under, any of the
terms, conditions or provisions of (a) NBB’s or TVB’s
Articles of Incorporation or Bylaws, (b) any statute, regulation or
existing order, writ, injunction or decree of any court or
governmental agency, or (c) any contract, agreement or instrument
to which any of NBB or TVB is a party or by which any of NBB or TVB
is bound, except in the case of clauses (b) and (c) as would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect with respect to NBB or to materially hinder
or delay the consummation of the transactions contemplated by this
Agreement.
4.17
Taxes and Tax Returns. Except as disclosed in
Section 4.17 of the NBB Disclosure Schedule, NBB and each NBB
Subsidiary have filed all material federal, state and other income,
franchise or other tax returns, required to be filed by them; each
such return is complete and accurate in all material respects; and
all Taxes and related interest and liabilities to be paid in
connection therewith have been paid or adequate reserve has been
established for the timely payment thereof. There have been
no audits or examinations of any income tax returns of NBB or TVB.
NBB and TVB have timely and accurately filed all material
required information returns and reports, including without
limitation Forms 1099, and to NBB’s Knowledge, NBB and TVB
have timely and accurately filed all material currency transaction
reports required by the Bank Secrecy Act, as amended. NBB has not
received notice of any federal, state or other income, franchise or
other tax assessment or notice of a deficiency to date which has
not been paid or for which adequate reserve has not been provided,
and to NBB’s Knowledge there are no pending or threatened (in
writing) audit or investigation of NBB or TVB with respect to any
Tax liabilities. There are currently no agreements in effect with
respect to NBB or TVB to extend the period of limitations for
assessment or collection of any Tax, and, except as required by law
among NBB and the NBB Subsidiaries, neither NBB or TVB is a party
to any tax sharing, allocation or indemnification agreement or
arrangement or is liable for any Tax imposed on any other Person
other than NBB or TVB. Except as disclosed in Section 4.17 of
the NBB Disclosure Schedule, all Taxes that NBB or TVB is required
to withhold from amounts owing to any employee or director, former
employee or director, creditor or third party have been properly
withheld and, to the extent payable, timely paid. NBB has delivered
to Umpqua true and correct copies of NBB’s and TVB’s
unconsolidated or uncombined federal and state income or franchise
tax returns for the years 2003, 2004 and 2005. "Tax" or
"Taxes" means (i) any and all federal, state, local, and foreign
income, excise, gross receipts, gross income, ad valorem, profits,
gains, property, capital, sales, transfer, use, payroll,
employment, severance, withholding, duties, intangibles, franchise,
backup withholding, and other taxes, charges, levies or like
assessments together with all penalties and additions to tax and
interest thereon and (ii) any liability for any items described in
clause (i), as successor
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or transferee, by contract or
otherwise. NBB, TVB or VCT paid Tax on all income received by
VCT as though VCT was not qualified as a "real estate investment
trust" under Code Section 856.
4.18
Real Property, Leased Personal Property. Section
4.18 of the NBB Disclosure Schedule includes a list of all the real
property owned or leased by NBB or TVB and all real property held
by NBB or TVB as of the date hereof as other real estate owned (the
"NBB Real Property"). Except for disposition of other real
estate owned in the ordinary course of business and except as
disclosed in Section 4.18 of the NBB Disclosure Schedule, NBB or
TVB will own or have a valid leasehold interest in all of the NBB
Real Property on the Effective Date. All NBB Real Property
reflected in the NBB Public Reports or TVB’s Call Reports as
of September 30, 2006 is included in Section 4.18 of the NBB
Disclosure Schedule. The leases pursuant to which NBB or TVB
leases real property and material personal property, true and
correct copies of which have been delivered to Umpqua, are the
legal, valid and binding obligation of NBB or TVB, enforceable
against such entity in accordance with its terms, and, to the
Knowledge of NBB, are the legal, valid and binding obligation of
the other party thereto, enforceable against such entity in
accordance with its terms, in each case subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting
creditors’ rights and to general equity principles valid, and
neither NBB nor TVB nor, to the Knowledge of NBB, the other party
thereto is in material default, and no event has occurred that
would, with the giving of notice, lapse of time or both, constitute
a material default under such leases. No material waiver or
indulgence has been granted by any landlord under any such leases.
All owned NBB Real Property and material personal property
owned by NBB or TVB is free of any adverse claims, except for (1)
statutory liens not yet delinquent which are being contested in
good faith by appropriate proceedings, and liens for taxes not yet
due, for which NBB maintains reserves
as required by GAAP consistently applied
with the NBB Public Reports, (2) pledges of assets in the ordinary
course of business to secure public deposits, (3) defects and
irregularities of title and encumbrances that do not materially
impair the use thereof for the purposes for which they are held,
(4) mechanics’, materialmen’s, workmen’s,
repairmen’s, warehousemen’s, carriers’ and other
similar liens, for sums not yet delinquent or which are being
contested in good faith by appropriate proceedings, arising in the
ordinary course of business for which NBB maintains reserves as
required by GAAP consistently applied with the NBB Public Reports
and (5) adverse claims with respect to properties and assets the
loss of which would not reasonably be expected to have,
individually or in the aggregate, have a Material Adverse Effect
with respect to NBB ("Permitted Liens"). All buildings and
structures on the NBB Real Property, the equipment located thereon,
and the real and personal property leased by NBB or TVB, are in
good operating condition and in a good state of repair (ordinary
wear and tear excepted). The NBB Real Property is in material
compliance with all applicable zoning laws and building codes.
There are no pending or, to the Knowledge of NBB, threatened
condemnation proceedings against the NBB Real Property. To
NBB’s Knowledge, since January 1, 2005, neither NBB nor TVB
have received any written notices alleging violations of the
Americans with Disabilities Act of 1990 ("ADA"), Title 24 of the
California Code of Regulations, California Building Standard Code
and all similarly motivated state and local laws ("Local Barriers
Acts") or the Occupational Health and Safety Act of 1970 ("OSHA"),
any notices of claims made or threatened in writing regarding
noncompliance with ADA, or Local Barriers Acts or any written
notices of any governmental or regulatory actions or investigations
instituted or threatened regarding noncompliance with ADA or Local
Barriers Acts. NBB and TVB have good and marketable title to
all of their owned NBB Real Property and personal property, subject
to no mortgages, pledges, encumbrances, liens or charges of any
kind, except for Permitted Liens.
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4.19
Insurance. For each of the past three years and
continuing through the date hereof, NBB and TVB have insured their
business and real and personal property against all risks of a
character usually insured against, including but not limited to
financial institution bond, directors and officers liability,
property and casualty and commercial liability insurance, with
customary amounts of coverage, deductibles and exclusions by
reputable insurers authorized to transact insurance in the State of
California and such other jurisdictions where they do business or
own property. NBB and TVB are in material compliance with all
existing insurance policies and have not failed to give timely
notice of, or present properly, any material claim thereunder of
which NBB has Knowledge. Section 4.19 of the NBB Disclosure
Schedule includes a list of all insurance policies in force as of
the date hereof with respect to NBB’s and TVB’s
business and real and personal property. No insurer has
advised NBB or any NBB Subsidiary that it intends to materially
reduce coverage or materially increase any premium under any such
policy or that coverage is not available (or that it will contest
coverage) for any material claim made against NBB or any NBB
Subsidiary.
4.20
Intellectual Property. NBB and TVB own or have
valid licenses to use all Intellectual Property which they consider
to be material to their business taken as a whole, and have not
received written notice of infringement or violation of any
Intellectual Property which would reasonably be likely to have,
individually or in the aggregate, a Material Adverse Effect with
respect to NBB.
4.21
Contracts and Agreements. Section 4.21 of the NBB
Disclosure Schedule is a list of each Contract (i) that is a
"material contract" (as such term is defined in Item 601(b)(10) of
SEC Regulation S-K); (ii) to which NBB or TVB is a party or to
which any of their properties are subject that individually or
together with all related Contracts involve a payment after the
date of this Agreement by NBB or TVB in excess of $50,000; (iii)
would prohibit or materially delay the consummation of the Holding
Company Merger or the Bank Merger or any of the transactions
contemplated by this Agreement; (iv) would entitle any present or
former director, officer employee or agent of NBB or any NBB
Subsidiary to indemnification from NBB or any NBB Subsidiary; (v)
limits the ability of the NBB or any NBB Subsidiary from competing
in any line of business, in any geographic area or with any person,
or which requires referrals of business or requires NBB or any NBB
Subsidiary to offer products or services of any other person on a
priority or exclusive basis; (vi) gives rise to any benefits to any
other person as a result of the consummation of the Holding Company
Merger or the Bank Merger; or (vii) is with current officers and
directors and any persons who have been an officer or director of
NBB or TVB within the past three years, other than Contracts
relating to deposits or Loans that are fully performing in
accordance with their terms, and the terms of which are no more
favorable than those available to unaffiliated parties made at or
about the same time (collectively, "Material Contracts").
Each Material Contract is
valid and binding on NBB or the NBB Subsidiary (as the case may be)
that is a party thereto, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’
rights and to general equity principles. and neither NBB nor
TVB is in material default or breach, and there has not occurred
any event which with notice or lapse of time would constitute a
material breach or default by any such entity, under any Material
Contract, and to the Knowledge of NBB, except with respect to loan
agreements or notices with TVB customers reflected in TVB’s
delinquent loan reports, no other party thereto is in material
default thereof. Except as disclosed in Section 4.21 of the
NBB Disclosure Schedule, no consent or approval by the other
parties to any Material Contract is required by reason of this
Agreement to maintain such oral or written contracts, agreements or
leases in effect.
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4.22
Employee Benefits.
(a)
Each Employee Benefit Plan sponsored or maintained by NBB, or
any entity which is considered one employer with NBB as determined
under Section 414(b), (c), (m) or (o) of the Code ("ERISA
Affiliate"), is disclosed in Section 4.22(a) of the NBB Disclosure
Schedule. Neither NBB nor any ERISA Affiliate maintains nor
sponsors any other pension, profit sharing, thrift, savings, bonus,
retirement, vacation, life insurance, health insurance, severance,
salary continuation, sickness, disability, medical or death benefit
plans, whether or not subject to ERISA. There are no other
compensation, employment, stock options, stock purchase agreements,
life, health, accident or other insurance, bonus, deferred or
incentive compensation, change-in-control, severance or separation,
salary continuation, profit sharing, retirement, or employee fringe
benefit policies or arrangements of any kind that could result in
the payment to any current or former employees, directors,
consultants or any of their beneficiaries of NBB or TVB of any
money or other property.
(b)
The only "employee welfare benefit plans" (as defined in Section
3(1) of ERISA) sponsored or maintained by NBB or any ERISA
Affiliate, or to which NBB or any ERISA Affiliate contributes
("Welfare Benefit Plan") or are required to contribute, are as set
forth Section 4.22(b) of the NBB Disclosure Schedule.
(c)
Except as disclosed in Section 4.22(c) of the NBB Disclosure
Schedule, there are no Contracts, agreements, arrangements,
undertakings or commitments maintained or agreed to by either of
NBB or TVB or provision of any Employee Benefit Plan that provide
for or could result in the payment to any NBB or TVB employee or
director or former employee or director of any money or other
property rights or that would accelerate the vesting or payment of
such amounts or rights to any such person as a result of the
consummation of transactions contemplated by this Agreement.
Except as set forth in Section 4.22(c) of the NBB Disclosure
Schedule, no such payment or acceleration set forth in Section
4.22(c) of the NBB Disclosure Schedule could be characterized as an
"excess parachute payment" within the meaning of Code Section
280G.
(d)
Except as set forth in Section 4.22(d) of the NBB Disclosure
Schedule, neither NBB nor any ERISA Affiliate has maintained a
single-employer pension benefit plan that is subject to title 1,
subtitle B, part 3 of ERISA within six years of the date hereof
(each, a "Pension Benefit Plan"). With respect to any such
Pension Benefit Plan, the amount of liability for any contribution
paid or owing with respect to such Pension Benefit Plan for the
last or current plan year and the plan year in which the Effective
Date occurs is set forth on Section 4.22(d) of the NBB Disclosure
Schedule. Except as set forth in Section 4.22(d) of the NBB
Disclosure Schedule, under each Pension Benefit Plan, as of the
last day of the most recent plan year ended prior to the date
hereof, the actuarially determined present value of all "benefit
liabilities", within the meaning of Section 4001(a)(16) of ERISA
(as determined on the basis of the actuarial assumptions contained
in such Pension Benefit Plan's most recent actuarial valuation),
did not exceed the then current value of the assets of such Pension
Benefit Plan, and there has been no material change in the
financial condition, whether or not as a result of a change in the
funding method, of such Pension Benefit Plan since the last day of
the most recent plan year.
(e)
NBB and, to the Knowledge of NBB, all persons having fiduciary
or other responsibilities or duties with respect to any Employee
Benefit Plan, are, and have since inception been, in substantial
compliance in all material respects with, and each such Employee
Benefit Plan is and has been operated substantially in accordance
with its provisions and in compliance with the applicable laws,
rules and regulations governing such Employee Benefit Plan,
including, without limitation, the rules and regulations
promulgated by the Department of Labor, the Pension Benefit
Guaranty Corporation and the Internal Revenue Service under ERISA
or the Code. Each Pension Benefit Plan and any related trust
agreements or annuity contracts (or any other funding instruments)
substantially comply both as to form and operation, with the
provisions of ERISA and the Code (including Section 410(b) of the
Code relating to coverage), where required in order to be
tax-qualified under Section 401(a) or 403(a) or other applicable
provisions of the Code, and all other applicable laws, rules and
regulations; all material governmental approvals for the Employee
Benefit Plans have been obtained; and a favorable
20
determination or opinion as to
the qualification under the Code of each Pension Benefit Plan
described in Section 4.22(d) of the NBB Disclosure Schedule has
been made or given by the Internal Revenue Service covering all tax
law changes prior to the Economic Growth and Tax Relief
Reconciliation Act of 2001 or such letter or opinion has been
applied for within the applicable remedial amendment period under
Section 401(b) of the Code. No Employee Benefit Plan or
Pension Benefit Plan is a "multi-employer pension plan," as such
term is defined in Section 3(37) of ERISA. To the
Knowledge of NBB, all contributions or other amounts payable by NBB
or TVB as of the date hereof with respect to each Employee Benefit
Plan in respect of current or prior plan years have been paid or
accrued in accordance with generally accepted accounting principles
and, to the extent applicable, Section 412 of the Code, and
there are no pending or, to the Knowledge of NBB, threatened or
anticipated claims (other than routine claims for benefits) by, on
behalf of or against any Employee Benefit Plan, or any trusts
related thereto which would, individually or in the aggregate, have
or be reasonably expected to have a Material Adverse Effect with
respect to NBB.
(f)
Each Welfare Benefit Plan and each Pension Benefit Plan has been
administered to date in material compliance with the requirements
of the claims procedure of the Code and ERISA. All reports
required by any government agency and disclosures to participants
with respect to each Welfare Benefit Plan and each Pension Benefit
Plan have been timely made or filed. Each Employee Benefit
Plan is in material compliance with the governing instruments and
applicable federal or state law. In particular, but without
limitation, each Welfare Benefit Plan is in material compliance
with federal law, including without limitation the health care
continuation requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"). Except as set
forth in Section 4.22(f) of the NBB Disclosure Schedule, no
Employee Benefit Plan provides benefits, including without
limitation death or medical benefits (whether or not insured), with
respect to current or former employees or directors of NBB or any
ERISA Affiliate beyond their retirement or other termination of
service, other than (i) coverage mandated by applicable law,
(ii) death benefits or retirement benefits under any "employee
pension plan," as that term is defined in Section 3(2) of
ERISA, (iii) any deferred compensation benefits fully accrued
as liabilities on the books of NBB or any ERISA Affiliate or
(iv) benefits the full cost of which is borne by the current
or former employee or director (or beneficiary thereof).
(g)
Neither NBB nor, to the Knowledge of NBB, any plan fiduciary of
any Welfare Benefit Plan or Pension Benefit Plan, has engaged in
any transaction in violation of Section 406(a) or (b) of ERISA (for
which no exemption exists under Section 408 of ERISA or for which
no exemption has been granted by the Department of Labor or the
Internal Revenue Service) or any "prohibited transaction" (as
defined in Section 4975(c)(1) of the Code) for which no exemption
exists under Section 4975(c)(2) or (d) of the Code or for which no
exemption has been granted by the Department of Labor or the
Internal Revenue Service, in each case which would, individually,
or in the aggregate, have or be reasonably expected to have a
Material Adverse Effect with respect to NBB. To the Knowledge
of NBB, neither NBB nor any ERISA Affiliate has engaged in a
transaction in connection with which NBB or any ERISA Affiliate
could be subject to either a material civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a material tax
imposed pursuant to Section 4975 or 4976 of the Code.
(h)
Complete and correct copies of the following documents have been
furnished to Umpqua:
(1)
Each current Employee Benefit Plan and any related trust
agreements;
(2)
The most recent summary plan description of each current
Employee Benefit Plan for which a summary plan description is
required under ERISA;
21
(3)
The most recent determination or opinion letters of the Internal
Revenue Service with respect to the qualified status of the current
Pension Benefit Plan;
(4)
Annual Reports (on Form 5500 series) required to be filed by NBB
or TVB with any governmental agency for the last two years;
(5)
Financial information which identifies to the Knowledge of NBB
(x) all material claims arising under any Employee Benefit Plan,
(y) all claims presently outstanding against any Employee Benefit
Plan (other than normal claims for benefits), and (z) a description
of any material future compliance action required with respect to
any Employee Benefit Plan under ERISA, or federal or state law;
and
(6)
Any actuarial reports and PBGC Forms 1 for the last two
years.
(i)
Except as set forth in Section 4.22(i) of the NBB Disclosure
Schedule, to NBB’s Knowledge neither NBB nor TVB has (i)
granted to any person an interest in a "nonqualified deferred
compensation plan" (as defined in Section 409A(d)(1) of the Code)
which interest has been or, upon the lapse of a substantial risk of
forfeiture with respect to such interest, will be subject to tax
imposed by Section 409A(a)(1)(B) or (b)(4)(A) of the Code or (ii)
modified the terms of any "nonqualified deferred compensation plan"
in a manner that could cause an interest previously granted under
such plan to become subject to the tax imposed by Section
409A(a)(1)(B) or (b)(4)(A) of the Code.
4.23
Labor and Employment. There is no labor strike,
material dispute, slowdown or stoppage pending or, to the Knowledge
of NBB, threatened against NBB or TVB, and to the Knowledge of NBB
there is no attempt to organize any employees of NBB or TVB into a
collective bargaining unit.
4.24
Allowance for Loan Losses. NBB’s allowance
for loan losses, as established from time to time, equals or
exceeds the amount required of NBB and TVB as determined (i) by
internal policies and procedures of NBB and TVB for determining the
allowance for loan losses; (ii) by applicable SEC rules and
guidance; (iii) by applicable bank regulatory agencies; and (iv)
pursuant to GAAP. Since September 30, 2006, NBB has not
reversed any provision taken for loan losses. NBB and TVB
have properly accounted for all impaired loans in accordance with
internal policies of NBB and TVB and in accordance with SFAS
114.
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