<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 18, 1997
REGISTRATION NO. 333-
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TEHAMA BANCORP
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
CALIFORNIA 6711 91-1775524
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code No.) Identification
incorporation or organization) No.)
</TABLE>
239 SOUTH MAIN STREET, RED BLUFF, CALIFORNIA 96080
(Address of principal executive offices, including Zip Code)
(916) 528-3000
(Registrant's telephone number, including area code)
------------------------
COPY TO:
WILLIAM P. ELLISON JOHN W. CARR, ESQ.
Chief Executive Officer Bronson, Bronson & McKinnon LLP
Tehama Bancorp 505 Montgomery Street
239 South Main Street San Francisco, California 94111-2514
Red Bluff, California 96080 (415) 986-4200
(916) 528-3000
(Name, address and telephone number of agent for service of process)
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC:
THE DATE OF MAILING THE ENCLOSED PROXY STATEMENT/PROSPECTUS TO THE
SHAREHOLDERS OF TEHAMA BANK.
------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. /X/
------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) SHARE PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock......................... 1,708,489 shares $9.39 $16,042,711.71 $4,861.43
</TABLE>
(1) Represents the maximum number of shares of the Registrant's Common Stock to
be issued in connection with the Merger described herein.
(2) Estimated pursuant to Rule 457(f)(2) solely for the purpose of calculating
the registration fee based on the book value of the securities to be
received by the Registrant as determined on December 31, 1996.
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<PAGE>
TEHAMA BANCORP
CROSS-REFERENCE SHEET PURSUANT TO ITEM 501 OF REGULATION S-K
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PART I--INFORMATION REQUIRED IN THE PROSPECTUS
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ITEM OF FORM S-4 CAPTION IN PROSPECTUS/PROXY STATEMENT
- - ---------------------------------------------------------------- -----------------------------------------------------
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus........................... Facing page of Registration Statement; Cross-
Reference Sheet; Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside Front Cover Page of Prospectus
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information.................................. Summary; General Information; Selected Financial
Information; The Merger
4. Terms of the Transaction............................. Summary; The Merger; Capital Stock of Bancorp and the
Bank; Legal Matters
5. Pro Forma Financial Information...................... Not Applicable
6. Material Contracts with the Company Being Acquired... Not Applicable
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters...... Not Applicable
8. Interest of Named Experts and Counsel................ Not Applicable
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................... Indemnification
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants.......... Not Applicable
11. Incorporation of Certain Information by Reference.... Not Applicable
12. Information with Respect to S-2 or S-3 Registrants... Not Applicable
13. Incorporation of Certain Information by Reference.... Not Applicable
14. Information with Respect to Registrants Other Than
S-3 or S-2 Registrants............................. Tehama Bancorp; Market Information Regarding the
Bank's and Bancorp's Common Stock
</TABLE>
<PAGE>
<TABLE>
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ITEM OF FORM S-4 CAPTION IN PROSPECTUS/PROXY STATEMENT
- - ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies............ Not Applicable
16. Information with Respect to S-2 or S-3 Companies..... Not Applicable
17. Information with Respect to Companies Other than S-3
or S-2 Companies................................... Tehama Bank; Market Information Regarding the Bank's
and Bancorp's Common Stock; Selected Financial
Information
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations
are to be Solicited................................ Summary; General Information; The Merger; Proposal
One: Election of Directors; Tehama Bancorp; Tehama
Bank
19. Information if Proxies, Consents or Authorizations
are not to be Solicited or in an Exchange Offer.... Not Applicable
</TABLE>
<PAGE>
TEHAMA BANK
239 SOUTH MAIN STREET
RED BLUFF, CALIFORNIA 96080
Dear Shareholder: April 8, 1997
The Annual Meeting of Shareholders of Tehama Bank (the "Bank") will be held
at the Red Bluff Community & Senior Center, 1500 S. Jackson Street, Red Bluff,
California on Tuesday, May 6, 1997, at 7:30 P.M.
The enclosed Proxy Statement/Prospectus explains the items of business
scheduled for consideration by the shareholders. You are cordially invited to
attend this year's Annual Meeting in person; however, a form of proxy and
pre-addressed envelope are enclosed for your convenience in voting by proxy.
You will be asked at the Annual Meeting to approve a Plan of Reorganization
and Merger Agreement, dated as of February 12, 1997 (the "Reorganization
Agreement"), by and among the Bank, Tehama Bancorp, a newly-formed bank holding
company ("Bancorp") and Tehama Merger Corporation, a wholly-owned subsidiary of
Bancorp (the "Subsidiary"), and all transactions contemplated thereby, including
the merger (the "Merger") of the Subsidiary with and into the Bank, pursuant to
which the Bank will become the wholly-owned subsidiary of Bancorp. If the
Reorganization Agreement and Merger are approved, your Bank stock will be
converted into stock of Bancorp on a share-for-share basis. Your current stock
certificates will represent shares in Bancorp, and it will not be necessary for
you to exchange stock certificates, although you may do so if you so desire. A
detailed explanation of the Merger is contained in the accompanying Notice of
Annual Meeting and Proxy Statement/Prospectus.
Management believes that the formation of a holding company will enhance the
ability of the Bank to compete with major banks in our marketing area, many of
which have been similarly reorganized, and will provide a broader range of
business alternatives with respect to growth and access to additional capital.
Your Board of Directors has determined that the Reorganization Agreement and the
Merger are in the best interests of the Bank and its shareholders. YOUR BOARD OF
DIRECTORS UNANIMOUSLY APPROVED THE REORGANIZATION AGREEMENT AND MERGER AND
RECOMMENDS THAT YOU VOTE FOR ADOPTION OF THE REORGANIZATION AGREEMENT AND MERGER
AT THE ANNUAL MEETING.
At the Annual Meeting, you will also be asked to elect directors and to
consider and act upon any other matters which may properly be brought before the
Annual Meeting. We suggest you read carefully the accompanying Notice of Annual
Meeting and Proxy Statement/Prospectus which describes such matters in detail.
We urge you to express your views by completing and returning your proxy
whether or not you plan to attend the Annual Meeting. This will ensure the
voting of your shares if you are unable to attend. If you do attend the Annual
Meeting, you may, if you choose, withdraw your proxy and vote in person.
Your continuing interest in the business of the Bank is appreciated.
Sincerely yours,
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<S> <C>
William P. Ellison John W. Koeberer
PRESIDENT AND CHIEF EXECUTIVE CHAIRMAN OF THE BOARD
OFFICER
</TABLE>
<PAGE>
TEHAMA BANK
239 SOUTH MAIN STREET
RED BLUFF, CALIFORNIA 96080
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, MAY 6, 1997
7:30 P.M.
TO THE SHAREHOLDERS OF TEHAMA BANK:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Tehama
Bank (the "Bank") will be held at the Red Bluff Community & Senior Center, 1500
S. Jackson Street, Red Bluff, California on Tuesday, May 6, 1997, at 7:30 P.M.
for the following purposes:
1. To elect fourteen (14) directors to serve until the next Annual Meeting
of Shareholders and until their successors are elected and qualified. See
"PROPOSAL ONE: ELECTION OF DIRECTORS."
The directors of Tehama Bancorp, a newly formed bank holding company
("Bancorp") are the same as the directors of the Bank. All of such directors
have held office since shortly after the incorporation of Bancorp. They will
hold office until the next Annual Meeting of shareholders of Bancorp or until
their successors are duly elected and qualified. See "TEHAMA BANCORP--Management
of Bancorp."
2. To approve a Plan of Reorganization and Merger Agreement, dated as of
February 12, 1997 (the "Reorganization Agreement"), by and among the Bank,
Bancorp and Tehama Merger Corporation, a wholly-owned subsidiary of Bancorp (the
"Subsidiary"), and all transactions contemplated thereby, including the merger
(the "Merger") of the Subsidiary with and into the Bank, pursuant to which the
Bank will become the wholly-owned subsidiary of Bancorp. See "PROPOSAL TWO:
APPROVAL OF PLAN OF REORGANIZATION AND MERGER AGREEMENT."
3. To transact such other business as may properly come before the Annual
Meeting and any adjournment or adjournments thereof.
Section 16 of the Bylaws of the Bank provides for the nomination of
directors in the following manner:
Nomination for election of members of the Board of Directors may be made by
the Board of Directors or by any stockholder of any outstanding class of capital
stock of the corporation entitled to vote for the election of directors. Notice
of intention to make any nominations shall be made in writing and shall be
delivered or mailed to the President of the corporation not less than 21 days
nor more than 60 days prior to any meeting of stockholders called for the
election of directors; provided however, that if less than 21 days notice of the
meeting is given to the shareholders, such notice of intention to nominate shall
be mailed or delivered to the President of the corporation not later than the
close of business on the tenth day following the day on which the notice of
meeting was mailed; provided further, that if notice of such meeting is sent by
third-class mail as permitted by Section 6 of these By-Laws, no notice of
intention to make nominations shall be required. Such notification shall contain
the following information to the extent known to the notifying shareholder:
(a) the name and address of each proposed nominee;
(b) the principal occupation of each proposed nominee;
(c) the number of shares of capital stock of the corporation owned by each
proposed nominee;
(d) the name and residence address of the notifying shareholder; and
(e) the number of shares of capital stock of the corporation owned by the
notifying shareholder.
Nominations not made in accordance herewith may, in the discretion of the
Chairman of the meeting, be disregarded and upon the Chairman's instructions,
the inspectors of election can disregard all votes cast for each such nominee.
<PAGE>
Only those shareholders of record at the close of business on March 17,
1997, will be entitled to notice of and to vote at the Annual Meeting.
You are cordially invited to attend the Annual Meeting.
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DATED: Red Bluff, California By Order of the Board of Directors
April 8, 1997
Raymond C. Lieberenz
SECRETARY
</TABLE>
A COPY OF THE BANK'S ANNUAL REPORT TO THE BOARD OF GOVERNORS OF THE FEDERAL
RESERVE SYSTEM ON FORM 10-K MAY BE OBTAINED BY ANY SHAREHOLDER OF THE BANK,
WITHOUT CHARGE, BY WRITING TO THE SECRETARY, TEHAMA BANK, P.O. BOX 890, RED
BLUFF, CALIFORNIA 96080.
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POST-PAID ENVELOPE.
2
<PAGE>
Mailed to shareholders
on or about April 8, 1997
TEHAMA BANK
PROXY STATEMENT
TEHAMA BANCORP
PROSPECTUS
239 SOUTH MAIN STREET
RED BLUFF, CALIFORNIA 96080
TELEPHONE (916) 528-3000
INFORMATION CONCERNING THE SOLICITATION
This Proxy Statement/Prospectus is being furnished to the shareholders of
Tehama Bank, a California banking corporation (the "Bank"), in connection with
the solicitation of proxies by the Board of Directors for use at the Annual
Meeting of Shareholders to be held at Red Bluff Community & Senior Center, 1500
S. Jackson Street, Red Bluff, California, at 7:30 P.M. on Tuesday, May 6, 1997.
Only shareholders of record on March 17, 1997 (the "Record Date"), will be
entitled to notice of and to vote at the meeting. At the close of business on
that date, the Bank had outstanding and entitled to be voted 1,610,940 shares of
its no par value Common Stock (the "Common Stock").
The matters to be considered and voted upon at the Annual Meeting will be:
1. ELECTION OF DIRECTORS. Election of fourteen (14) directors to serve
until the next Annual Meeting of Shareholders and until their successors are
elected and qualified. See "PROPOSAL ONE: ELECTION OF DIRECTORS."
The directors of Tehama Bancorp, a newly-formed bank holding company
("Bancorp"), are the same as the directors of the Bank. All of such directors
have held office since shortly after the incorporation of Bancorp. They will
hold office until the next annual meeting of shareholders of Bancorp or until
their successors are duly elected and qualified. See "TEHAMA BANCORP--
Management of Bancorp."
2. APPROVAL OF PLAN OF REORGANIZATION AND MERGER AGREEMENT. A proposal to
approve a Plan of Reorganization and Merger Agreement, dated as of February 12,
1997 (the "Reorganization Agreement"), by and among the Bank, Bancorp and Tehama
Merger Corporation, a wholly-owned subsidiary of Bancorp (the "Subsidiary"), and
all transactions contemplated thereby, including the merger (the "Merger") of
the Subsidiary with and into the Bank, pursuant to which the Bank will become
the wholly-owned subsidiary of Bancorp. See "PROPOSAL TWO: APPROVAL OF PLAN OF
REORGANIZATION AND MERGER AGREEMENT."
3. OTHER MATTERS. Such other matters as may properly come before the
Annual Meeting and at any and all postponements or adjournments thereof.
This Proxy Statement also constitutes a prospectus of Bancorp with respect
to up to 1,708,489 shares of Common Stock of Bancorp which may be issuable in
connection with the Merger (which number includes 1,610,940 shares issuable to
holders of the 1,610,940 shares of Bank Common Stock presently issued and
outstanding and 97,549 shares issuable to the holders of outstanding options
under the Bank's 1994 Stock Option Plan which are presently exercisable). Upon
consummation of the Merger, each outstanding share of Bank Common Stock
(including shares acquired by the exercise of stock options prior to the
Effective Date of the Merger) will be converted into the right to receive one
share of Bancorp Common Stock. See "THE MERGER."
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS APRIL 8, 1997
<PAGE>
THE SHARES OF BANCORP COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND OR
ANY OTHER GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE FEDERAL RESERVE BOARD OR BY ANY STATE REGULATOR OF
SECURITIES, NOR HAS THE COMMISSION OR THE FEDERAL RESERVE BOARD OR ANY SUCH
STATE REGULATOR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THE PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES MADE
HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE BANK, BANCORP OR THE SUBSIDIARY.
THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY,
IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THE
PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE BANK, BANCORP OR THE SUBSIDIARY SINCE THE DATE
HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
SUCH DATE.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
AVAILABLE INFORMATION...................................................................................... 1
SUMMARY.................................................................................................... 2
The Parties.............................................................................................. 2
Meeting Information...................................................................................... 2
The Merger............................................................................................... 3
SELECTED FINANCIAL INFORMATION............................................................................. 5
MARKET INFORMATION CONCERNING THE BANK'S AND BANCORP'S COMMON STOCK........................................ 5
GENERAL INFORMATION........................................................................................ 6
Report to Shareholders................................................................................... 6
Revocability of Proxies.................................................................................. 6
Solicitation of Proxies.................................................................................. 6
Voting Securities........................................................................................ 6
PRINCIPAL SHAREHOLDERS..................................................................................... 7
PROPOSAL ONE: ELECTION OF DIRECTORS OF THE BANK............................................................ 7
Nominations.............................................................................................. 7
Nominees................................................................................................. 7
Committees of the Board of Directors..................................................................... 9
COMPENSATION AND CERTAIN TRANSACTIONS...................................................................... 11
Summary Compensation Table............................................................................... 11
Stock Option Plan........................................................................................ 11
Option Grants, Exercises and Year-End Values for 1996.................................................... 12
Salary Continuation Agreements........................................................................... 13
Director Compensation.................................................................................... 13
Indebtedness of Management............................................................................... 14
Transactions With Management............................................................................. 14
PROPOSAL TWO: APPROVAL OF PLAN OF REORGANIZATION........................................................... 15
THE MERGER................................................................................................. 15
General.................................................................................................. 15
Conversion of Options.................................................................................... 15
Recommendation and Reasons............................................................................... 15
Conversion of Shares and Exchange of Certificates........................................................ 16
Required Approvals....................................................................................... 17
Conditions and Effective Date; Amendment; Termination.................................................... 17
Accounting Treatment..................................................................................... 18
Federal Income Tax Consequences.......................................................................... 18
No Dissenters' Rights.................................................................................... 19
Interest of Certain Persons in the Proposed Transaction.................................................. 19
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Restrictions on Sale of Bank Common Stock Prior to the Merger by Certain Persons and on Resale of Bancorp
Common Stock Received by Certain Persons............................................................... 19
DIVIDENDS.................................................................................................. 20
The Bank................................................................................................. 20
Bancorp.................................................................................................. 20
CAPITALIZATION............................................................................................. 21
BOOK VALUE OF BANK'S COMMON STOCK.......................................................................... 21
FINANCIAL STATEMENTS AND RELATED MATTERS................................................................... 22
TEHAMA BANK................................................................................................ 22
General.................................................................................................. 22
Markets and Competition.................................................................................. 23
Patents, Trademarks, Etc................................................................................. 23
Research Activities...................................................................................... 23
Employees................................................................................................ 24
Properties............................................................................................... 24
Legal Proceedings........................................................................................ 24
Management............................................................................................... 24
TEHAMA BANCORP............................................................................................. 24
General.................................................................................................. 24
Management of Bancorp.................................................................................... 25
SUPERVISION AND REGULATION................................................................................. 25
General.................................................................................................. 25
Capital Standards........................................................................................ 27
Prompt Corrective Action................................................................................. 28
Deposit Insurance Assessments............................................................................ 28
Limitations on Dividends................................................................................. 28
Impact of Monetary Policies.............................................................................. 29
CAPITAL STOCK OF BANCORP AND THE BANK...................................................................... 29
INDEMNIFICATION............................................................................................ 32
California Legislation................................................................................... 32
Directors' and Officers' Liability Insurance............................................................. 33
Commission Position on Indemnification................................................................... 33
INDEPENDENT PUBLIC ACCOUNTANTS............................................................................. 33
ANNUAL REPORT.............................................................................................. 33
SHAREHOLDERS' PROPOSALS.................................................................................... 33
OTHER MATTERS.............................................................................................. 34
APPENDIX A: PLAN OF REORGANIZATION AND MERGER AGREEMENT.................................................... 35
</TABLE>
ii
<PAGE>
AVAILABLE INFORMATION
Bancorp has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a Registration Statement on Form S-4 under the
Securities Act of 1933, as amended, with respect to the securities being offered
hereby. This Proxy Statement/Prospectus does not contain all of the information
set forth in the Registration Statement, certain portions of which have been
omitted as permitted by the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement and to the exhibits
filed therewith. The Registration Statement may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549. Copies of the Registration Statement
may be obtained by mail from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 upon payment of fees
at prescribed rates.
The Bank is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and, in accordance therewith, files
reports and other information with the Federal Reserve Board ("FRB"), 20th
Street and Constitution Avenue, N.W., Washington, D.C. 20551, including without
limitation proxy statements, annual reports and quarterly reports. The Bank has
designated its annual report on Form 10-K filed with the FRB as the Bank's
Annual Disclosure Statement, copies of which are available upon request as
provided in the Notice of Meeting. Copies of reports and information filed by
the Bank with the FRB may be obtained from the FRB by written request addressed
as above.
1
<PAGE>
SUMMARY
The following Summary does not purport to be complete and is qualified in
its entirety by reference to the full text of this Proxy Statement/Prospectus
and Appendix thereto.
THE PARTIES
Tehama Bancorp ("Bancorp") was recently incorporated as a for-profit
corporation under the California General Corporation Law (the "CGCL") for the
principal purpose of engaging in activities permitted for a bank holding
company. Bancorp has not yet commenced active operations. After consummation of
the Merger, Bancorp will act as a holding company for Tehama Bank (the "Bank")
and will be a legal entity separate and distinct from the Bank. The operations
of Bancorp will be conducted at the same location and in the same facilities as
the operations of the Bank. Bancorp does not expect to engage in activities
other than the operation of the Bank in the reasonably foreseeable future.
Bancorp expects to receive all of its income initially from dividends made to it
by the Bank. See "SUPERVISION AND REGULATION--Limitations on Dividends." It may
also receive management fees if it provides management services to the Bank. See
"TEHAMA BANCORP."
Tehama Merger Corporation (the "Subsidiary") was recently incorporated as a
for-profit corporation under the CGCL for the principal purpose of facilitating
the reorganization described in the Proxy Statement/Prospectus. Pursuant to the
terms of the Reorganization Agreement, the Subsidiary will merge with and into
the Bank, whereupon it will cease to exist as a separate entity.
The Bank is a California banking corporation which has served individuals,
merchants, small and medium-sized businesses, professionals and agribusiness
enterprises located in and adjacent to Red Bluff, California since commencing
business in 1984. The Bank operates through its headquarters branch office
located in Red Bluff, California. The Bank at present has additional branch
operations in Chico, Los Molinos, Orland and Willows, California, and a Loan
Production Office in Redding, California.
The Bank conducts a commercial banking business including accepting demand,
savings and time deposits, issuing letters of credit, and making commercial,
real estate, and consumer loans. It also offers installment note collection,
issues cashier's checks, sells traveler's checks, acts as a licensed merchant
bankcard sales clearer, and provides the following: 24-hour automated teller
service, bank-by-mail and night depository services, safe deposit boxes, and
other customary banking services. Most of the Bank's customers are individuals
and small businesses. The Bank is a member bank of the Federal Reserve System,
and the accounts of its depositors are insured by the Federal Deposit Insurance
Corporation ("FDIC"). The Bank does not offer trust services or international
banking services and does not plan to do so in the near future. See "TEHAMA
BANK."
MEETING INFORMATION
DATE, TIME AND PLACE. May 6, 1997 at 7:30 p.m. at the Red Bluff Community &
Senior Center, 1500 S. Jackson Street, Red Bluff, California .
PURPOSES. The matters to be considered and voted upon at the Annual Meeting
will be:
1. ELECTION OF DIRECTORS. Election of fourteen directors to serve until
the next Annual Meeting of Shareholders and until their successors are elected
and qualified.
2. APPROVAL OF PLAN OF REORGANIZATION AND MERGER AGREEMENT. A proposal to
approve a Plan of Reorganization and Merger Agreement, dated as of February 12,
1997, by and among the Bank, Bancorp and the Subsidiary, and all transactions
contemplated thereby, including the merger (the "Merger") of the Subsidiary with
and into the Bank, pursuant to which the Bank will become the wholly-owned
subsidiary of Bancorp.
2
<PAGE>
3. OTHER MATTERS. Such other matters as may properly come before the
Annual Meeting and at any and all postponements or adjournments thereof.
RECORD DATE. Only shareholders of record at the close of business on March
17, 1997, will be entitled to vote at the Annual Meeting.
VOTE REQUIRED/SECURITY OWNERSHIP. The affirmative vote at the Annual
Meeting of the holders of at least a majority of the total outstanding shares of
Bank Common Stock is required to approve the Merger. In connection with the
election of directors of the Bank, shareholders are entitled to cumulate their
votes. See "GENERAL INFORMATION--Voting Securities" herein. As of the date of
this Proxy Statement/ Prospectus, directors and executive officers of the Bank
and their affiliates may be deemed to be the beneficial owners of approximately
25% of the outstanding shares of Bank Common Stock, including Common Stock which
could be acquired as the result of exercise of stock options exercisable within
60 days of the Record Date.
THE MERGER
THE MERGER. Pursuant to the terms of the Reorganization Agreement, the
Subsidiary will be merged with and into the Bank, with the result that the Bank
will become a wholly-owned subsidiary of Bancorp. At the effective date (the
"Effective Date") of the Merger, each outstanding share of Bank Common Stock
will be converted into, and may be exchanged for, one share of Bancorp Common
Stock. The currently outstanding and exercisable options to purchase up to an
aggregate of 97,549 shares of the Bank's authorized but unissued Common Stock
will be converted into Bancorp options to purchase the same number of shares of
Bancorp Common Stock on the same terms and conditions as currently are in
effect. See "THE MERGER--Conversion of Options." The Merger is planned to be
consummated as soon as possible after all necessary conditions, including
shareholder and regulatory approvals, have been obtained.
A copy of the Reorganization Agreement is attached as Appendix A to this
Proxy Statement/ Prospectus and is incorporated herein by reference. No change
in the management of the Bank will result from the Merger and the directors and
executive officers of the Bank also will serve as the directors and executive
officers of Bancorp. See "TEHAMA BANCORP--Management of Bancorp."
RECOMMENDATIONS AND REASONS. The Bank' Board of Directors has unanimously
approved the Reorganization Agreement and recommends its approval by the
shareholders of the Bank. A bank holding company structure offers certain
advantages in comparison to the Bank's present corporate structure. These
advantages include additional flexibility in expansion of the Bank's business
through the acquisition of other financial institutions, in the raising of
additional capital through borrowing (if needed), in the ability to repurchase
its securities (subject to applicable regulatory requirements), and flexibility
in acquiring or establishing other businesses related to banking. The Board of
Directors does not believe that there are any significant disadvantages to
implementing a holding company structure for the Bank, and believes that the
incremental additional costs, if any, of operating under such a structure will
not be material. See "THE MERGER--Recommendation and Reasons."
REQUIRED REGULATORY APPROVALS. The Merger is subject to approval by the
California Superintendent of Banks (the "Superintendent"), the Federal Deposit
Insurance Corporation (the "FDIC") and the Board of Governors of the Federal
Reserve System (the "FRB"). Applications for such required approvals either have
been filed and are pending or will soon be filed. Although no assurances are or
can be given, Bancorp and the Bank believe that all such approvals will be
obtained. See "THE MERGER--Required Approvals."
CONDITIONS AND EFFECTIVE DATE. In addition to required regulatory approvals
and approval by the Bank's shareholders, consummation of the Merger is
conditioned upon the fulfillment of certain other conditions set forth in the
Reorganization Agreement. It is expected that some or all such regulatory
3
<PAGE>
approvals will require that the Merger become effective within three months
after regulatory approval is granted. See "THE MERGER--Conditions and Effective
Date; Amendment; Termination" and Appendix A.
EXPENSES. The expenses of the Merger are estimated to be approximately
$70,000. Such expenses will be borne initially by the Bank, but if the Merger is
consummated the Bank will be reimbursed by Bancorp for those expenses which may
not properly be borne by the Bank. Some or all of the funds used by Bancorp to
reimburse the Bank will be paid from dividends received by Bancorp from the Bank
in the future.
FEDERAL INCOME TAX CONSEQUENCES. Based on certain representations made by
the Bank and Bancorp, and assuming among other matters that shares of Bank
Common Stock surrendered pursuant to the Merger will not be subject to any
liability at the time surrendered and that no liabilities of any shareholder of
the Bank will be assumed by the Bank in connection with the Merger, it is
intended that the Merger and the conversion of the outstanding shares of Bank
Common Stock into shares of Bancorp Common Stock qualify as a tax-free
reorganization for federal income tax purposes, with no gain or loss being
recognized by the Bank's shareholders whose shares of Bank Common Stock are
converted into and exchanged for shares of Bancorp Common Stock. The Bank
expects to receive an opinion from its independent public accountants
substantially to that effect. See "THE MERGER--Federal Income Tax Consequences."
ACCOUNTING TREATMENT. Management of the Bank and Bancorp have been advised
that the Merger, if completed as proposed, will be treated similar to a "pooling
of interests" for accounting purposes. See "THE MERGER--Accounting Treatment."
NO DISSENTERS' RIGHTS. Under the CGCL, no shareholder of the Bank will have
any appraisal rights in connection with the Merger. See "THE MERGER--No
Dissenters' Rights."
REGULATION AND SUPERVISION. Upon consummation of the Merger, Bancorp will
be regulated as a bank holding company by the FRB and will be subject to its
rules and regulations. See "SUPERVISION AND REGULATION." The Bank will continue
to exist as a California banking corporation subject to regulation by the
Superintendent (if the Effective Date occurs before July 1, 1997) and/or the
Commissioner of Financial Institutions (the "Commissioner"), and the FRB; the
Bank's deposits will continue to be insured by the FDIC to the maximum amount
permitted by law; and the Bank will continue to engage in substantially the same
business and activities in which it is presently engaged. See "TEHAMA BANK--
General."
CERTAIN CHANGES IN SHAREHOLDERS' RIGHTS. Shareholders of the Bank will,
upon consummation of the Merger, become shareholders of Bancorp. There are
certain differences under California law between the rights of shareholders of
Bancorp as opposed to the Bank. Shareholders should consider carefully the
differences in Bancorp Common Stock and Bank Common Stock under California law.
See "CAPITAL STOCK OF BANCORP AND THE BANK."
4
<PAGE>
SELECTED FINANCIAL INFORMATION
The following table sets forth selected financial data of the Bank as of
December 31, 1996, 1995, 1994, 1993, and 1992, respectively:
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------------- -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Interest Income.................. $ 10,273,963 $ 9,423,881 $ 6,946,120 $ 5,813,216 $ 5,252,857
Interest expense................. 4,356,668 3,878,670 2,519,458 2,292,594 2,323,730
Provision for loan losses........ 570,000 330,000 180,000 182,500 125,000
Other income..................... 1,859,822 1,775,136 1,654,902 1,382,333 1,005,731
Other expense.................... 4,308,656 4,102,668 3,335,126 2,491,868 2,120,256
Net income....................... 1,939,461 1,848,679 1,675,738 1,520,587 1,131,802
Earnings per share............... $ 1.18 $ 1.12 $ 1.08 $ 1.00 $ 0.76
Total assets..................... $ 138,122,246 $ 127,826,459 $ 106,390,229 $ 88,690,899 $ 72,961,526
Total deposits................... 121,602,706 113,586,727 94,645,804 78,925,683 65,333,842
Total equity..................... 15,113,176 13,085,863 10,758,016 8,862,173 6,927,580
</TABLE>
MARKET INFORMATION CONCERNING
THE BANK'S AND BANCORP'S COMMON STOCK
There is limited trading in shares of the Common Stock of the Bank, which is
not listed on any exchange or quoted on any automated quotations system. There
were approximately 771 shareholders of record as of March 17, 1997.
The following table summarizes those trades of which the Bank has knowledge,
setting forth the approximate high and low bid prices for the period indicated.
The Bank has not paid a cash dividend but paid a 10% stock dividend on May 2,
1994, a 2 for 1 stock split on September 30, 1994, a 10% stock dividend on May
1, 1995, and a 10% stock dividend on May 1, 1996.
<TABLE>
<CAPTION>
PRICE OF
COMMON STOCK(1)
-------------------- ESTIMATED DIVIDENDS PAID DIVIDENDS
CALENDAR QUARTER ENDING LOW HIGH TRADING VOLUME IN COMMON STOCK PAID IN CASH(2)
- - ------------------------------------------ --------- --------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
March 31, 1995............................ $ 12.00 $ 13.00 12,006 -0- -0-
June 30, 1995............................. $ 12.63 $ 13.00 8,184 130,833 $ 2,961
September 30, 1995........................ $ 13.00 $ 14.75 12,245 -0- -0-
December 31, 1995......................... $ 13.50 $ 14.25 23,962 -0- -0-
March 31, 1996............................ $ 13.00 $ 13.75 23,265 -0- -0-
June 30, 1996............................. $ 10.25 $ 11.88 137,200 144,851 $ 2,851
September 30, 1996........................ $ 10.75 $ 11.50 28,800 -0- -0-
December 31, 1996......................... $ 10.63 $ 12.25 56,500 -0- -0-
</TABLE>
- - ------------------------
(1) As estimated by the Bank based upon trades of which it was aware, and not
including purchases of stock pursuant to the exercise of stock options. The
Bank is not aware of the prices of some of the trades included in the
Estimated Trading Volume column, above. Information regarding trades during
1995 and 1996 was derived from Hoefer & Arnett, Incorporated and there may
have been trades of which the Bank is unaware.
(2) Represents cash paid in lieu of issuance of fractional shares in connection
with payment of stock dividends.
5
<PAGE>
Bancorp was formed by the Bank for the sole purpose of becoming the Bank's
parent bank holding company. Consequently, there is no established market for
Bancorp Common Stock that will be issued in connection with the Merger. It is
contemplated, however, that upon consummation of the Merger, Bancorp Common
Stock will be traded in the same way that Bank Common Stock is now traded. Also,
upon consummation of the Merger, the only shares of Bank Common Stock
outstanding will be those owned by Bancorp. Consequently, trading in the Bank's
Common Stock will cease.
GENERAL INFORMATION
REPORT TO SHAREHOLDERS
The Annual Report of the Bank for the year ended December 31, 1996,
containing the financial statements for the Bank as of and for the year ended
December 31, 1996, audited by Perry-Smith&Co. accompanies this Proxy
Statement/Prospectus. Additional copies of the Annual Report may be obtained
upon oral or written request from Frank S. Onions, Chief Financial Officer,
Tehama Bank, P.O. Box 890, Red Bluff, California 96080. See "FINANCIAL
STATEMENTS AND RELATED MATTERS."
REVOCABILITY OF PROXIES
Any person giving a proxy in the form accompanying this Proxy
Statement/Prospectus has the power to revoke that proxy prior to its exercise.
The proxy may be revoked prior to the Annual Meeting by delivering to the
Secretary of the Bank either a written instrument revoking the proxy or a duly
executed proxy bearing a later date. The proxy may also be revoked by the
shareholder by attending and voting at the Annual Meeting. The proxy will be
voted as directed by the shareholder giving the proxy and if no directions are
given on the proxy, the proxy will be voted "FOR" the nominees of the Board of
Directors as described in this Proxy Statement/Prospectus, "FOR" approval of the
Plan of Reorganization and Merger Agreement, and, at the proxy holders'
discretion, on such other matters, if any, which may come before the meeting
(including any proposal to adjourn the Annual Meeting).
SOLICITATION OF PROXIES
The Bank will bear the entire cost of preparing, assembling, printing and
mailing proxy materials furnished by the Board of Directors to shareholders.
Copies of proxy materials will be furnished to brokerage houses, fiduciaries and
custodians to be forwarded to the beneficial owners of the Common Stock. In
addition to the solicitation of proxies by use of the mail, some of the
officers, directors and regular employees of the Bank may (without additional
compensation) solicit proxies by telephone or personal interview, the costs of
which will be borne by the Bank.
VOTING SECURITIES
The Bank is authorized to issue 4,000,000 shares of Common Stock, no par
value, of which 1,610,940 shares are issued and outstanding. All common shares
are voting shares but only those shareholders of record as of March 17, 1997
(the "Record Date"), will be entitled to notice of and to vote at the Annual
Meeting and at any and all postponements or adjournments thereof. The presence
in person or by proxy of the holders of a majority of the outstanding shares
entitled to vote at the Annual Meeting will constitute a quorum for the purpose
of transacting business at the Annual Meeting.
Each common share is entitled to one vote at the Annual Meeting, except with
respect to the election of directors. In elections for directors, California law
provides that a shareholder of a California corporation, or the shareholder's
proxy, may cumulate votes. Cumulation of votes means that each shareholder has a
number of votes equal to the number of shares owned by the shareholder,
multiplied by the number of directors to be elected, and a shareholder may
cumulate such votes for a single candidate or distribute such votes among as
many candidates as the shareholder deems appropriate. However, a shareholder may
cumulate votes only for a candidate or candidates whose names have been placed
in
6
<PAGE>
nomination prior to the voting, and only if the shareholder has given notice at
the Annual Meeting, prior to the voting, of the shareholder's intention to
cumulate votes. If any one shareholder has given such notice, all shareholders
may cumulate their votes for the candidates in nomination. Prior to voting, an
opportunity will be given for shareholders or their proxies at the Annual
Meeting to announce their intention to cumulate their votes. The proxy holders
are given discretionary authority to cumulate votes represented by shares for
which they are named in the proxy.
In an election of directors, California law provides that the nominees
receiving the highest number of affirmative votes of the shares entitled to vote
for them up to the number of directors to be elected by such shares are elected;
votes against the director and votes withheld shall have no effect.
PRINCIPAL SHAREHOLDERS
As of March 17, 1997, no person known to the Bank owned beneficially or of
record more than five percent (5%) of the outstanding shares of its Common
Stock.
PROPOSAL ONE:
ELECTION OF DIRECTORS OF THE BANK
NOMINATIONS
The Bylaws of the Bank provide a procedure for nomination for election of
members of the Board of Directors, which procedure is printed in full in the
Notice of Annual Meeting of Shareholders accompanying this Proxy
Statement/Prospectus. Nominations not made in accordance therewith may be
disregarded by the Chairman of the Meeting, and upon his instructions the
inspectors of election shall disregard all votes cast for such nominee(s).
Shareholders of Common Stock are entitled to one vote for each share held,
except that for the election of directors each shareholder has cumulative voting
rights and is entitled to as many votes as shall equal the number of shares held
by such shareholder multiplied by the number of directors to be elected. Each
shareholder may cast all of his or her votes for a single candidate or
distribute such votes among any or all of the candidates as he or she chooses.
However, no shareholder shall be entitled to cumulate votes (in other words,
cast for any candidate a number of votes greater than the number of shares of
stock held by such shareholder) unless such candidate's name has been placed in
nomination prior to the voting and the shareholder has given notice at the
meeting prior to the voting of the shareholder's intention to cumulate votes. If
any shareholder has given such notice, all shareholders may cumulate their votes
for candidates in nomination. Prior to voting, an opportunity will be given for
shareholders or their proxies at the meeting to announce their intention to
cumulate their votes. The proxy holders are given, under the terms of the proxy,
discretionary authority to cumulate votes on shares for which they hold a proxy.
NOMINEES
The authorized number of directors fixed in accordance with Section 16 of
the Bylaws of the Bank and to be elected at the Annual Meeting is fourteen (14).
Each director will hold office until the next Annual Meeting of Shareholders and
until his or her successor is elected and qualified.
All proxies will be voted for the election of the following fourteen (14)
nominees (all of whom are incumbent directors), recommended by the Board of
Directors, unless authority to vote for the election of any directors is
withheld by the shareholder on the proxy. If any nominee should unexpectedly
decline or be unable to act as a director, the proxies may be voted for a
substitute nominee to be designated by the Board of Directors. The Board of
Directors has no reason to believe that any nominee will become unavailable and
has no present intention to nominate persons in addition to or in lieu of those
named below.
7
<PAGE>
The following table sets forth information with respect to beneficial
ownership of the Common Stock of the Bank by those persons nominated by the
Board of Directors for election as directors, as well as all directors and
principal officers as a group. There is no family relationship between any of
the directors and/or principal officers. The Bank has only one class of shares
outstanding, Common Stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
AS OF
MARCH 17, 1997(1)
--------------------------
POSITIONS HELD DIRECTOR % OF
NOMINEE AGE WITH THE BANK SINCE SOLE(2) SHARED(3) CLASS
- - ---------------------------------------- --- ---------------------------------------- -------- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Henry Clay Arnest III................... 55 Director 1984 6,534 13,836 1.26
Louis J. Bosetti........................ 65 Director 1984 7,262 15,482 1.46
Daniel B. Cargile....................... 56 Director 1985 34,712 -- 2.15
Harry Dudley............................ 66 Director 1989 -- 38,013 2.36
William P. Ellison...................... 48 President, Executive Officer and 1995 12,741 -- 0.79
Director
Garry D. Fish........................... 52 Director 1984 20,126 -- 1.24
Max Muller Froome....................... 46 Director 1984 5,340 2,446 0.48
Orville K. Jacobs....................... 66 Director 1984 49,491 1,100 3.13
Gary C. Katz............................ 47 Director 1984 30,815 11,310 2.60
John W. Koeberer........................ 52 Chairman of the Board of Directors and 1984 19,927 21,423 2.56
Director
Raymond C. Lieberenz.................... 53 Secretary and Director 1984 6,534 12,184 1.16
Gary L. Napier.......................... 56 Vice Chairman of the Board of Directors 1984 25,771 -- 1.59
and Director
Eugene F. Penne......................... 69 Director 1984 6,534 15,902 1.39
Terrance A. Rust........................ 56 Director 1984 16,678 40,404 3.53
All directors and principal officers (17
persons) as a group...................
259,002 172,644 25.38
</TABLE>
- - ------------------------
(1) The calculations below are based on the total number of shares outstanding,
including 13,326 shares (9,023 of which became vested during 1996) held for
the benefit of the principal officers pursuant to the Bank's Employee Stock
Ownership Plan and related trust agreement, and includes certain stock
options as indicated in footnote (2).
(2) The named persons exercise sole voting and investment power with respect to
shares listed in this column. Includes 89,575 shares as to which options
granted to directors and principal officers pursuant to the Bank's 1994
Stock Option Plan (see "Stock Option Plan" herein) are vested within 60 days
of the Record Date.
(3) The named persons share voting and investment power with respect to shares
listed in this column.
The following is a brief account of the business experience of each nominee.
HENRY CLAY ARNEST III is sales manager for Northwestern Carbon Company, and
was previously a group home proprietor and owner of Arnest & Sons Country Store
in Red Bluff.
LOUIS J. BOSETTI was the Superintendent of Schools for Tehama County from
1971 until retirement in 1991, and is currently self-employed as an educational
consultant.
8
<PAGE>
DANIEL B. CARGILE serves the Bank in a part-time capacity as Business
Development Officer, and retired as President and Chief Executive Officer of the
Bank December 31, 1995, after serving in that position since 1985. Prior to
joining Tehama Bank, Mr. Cargile was employed by Crocker National Bank for 20
years.
HARRY DUDLEY is president of Dudley's Underground Construction Company and
Countryside Cable TV.
WILLIAM P. ELLISON became President and Chief Executive Officer of the Bank
January 1, 1996, and from 1991 until that time served the Bank as Vice President
and later Senior Vice President (Operations). Prior to joining the staff of
Tehama Bank, Mr. Ellison was employed by Bank of America for 21 years.
DR. GARRY D. FISH has been engaged in the practice of optometry in Red Bluff
since 1972.
MAX MULLER FROOME was self-employed as a landscape contractor from 1978
through 1992, and is currently self-employed as a broker of antiques and jewelry
salesman.
ORVILLE K. JACOBS is retired and was a developer of real estate in Tehama
County for 14 years, during which time he was involved with commercial real
estate ventures in Red Bluff and surrounding communities. He is presently a
partner in Camper's Corral, which is located in Red Bluff.
GARY C. KATZ is the president and majority owner of Phoenix Broadcasting,
Inc., which owns and operates the North State Radio Network, operator of radio
stations in northern California.
JOHN W. KOEBERER, Chairman of the Board, has been involved in resort and
park management in Tehama County since 1969. He is President and owner of The
California Parks Company, which operates park concessions in Lassen Volcanic
National Park, Shasta--Trinity National Recreation Area and numerous facilities
in the San Francisco Bay area. He is a member of the California Tourism
Commission and a member of the Fibreboard Corporation and California Chamber of
Commerce boards of directors. He is also Chairman of the California Parks
Hospitality Association and Lassen National Park Foundation.
RAYMOND C. LIEBERENZ, Secretary of the Board, was associate real estate
appraiser for the Tehama County Assessor from 1977 to 1987, and currently is a
licensed real estate broker and co-owner of Mountain Valley Real Estate.
GARY L. NAPIER, Vice Chairman of the Board, has been a principal of Buffum
and Napier Insurance Brokers since 1965, and the sole owner for the last 15
years. He is also the developer of several properties in Red Bluff and
surrounding areas, and president of Torja Corporation, a private investment
company.
EUGENE F. PENNE is the proprietor of bowling recreation centers in Red Bluff
(Lariat Bowl) and Chico (Orchard Lanes).
TERRANCE A. RUST is a dentist engaged in the specialty practice of oral and
maxillofacial surgery, and has maintained offices in Redding and Red Bluff since
1970.
COMMITTEES OF THE BOARD OF DIRECTORS
The Bank has an Audit/Investment Committee and an Executive/Compensation
Committee. The members of the Audit/Investment Committee are as follows: Louis
J. Bosetti (Chairperson), Henry Clay Arnest III, Gary C. Katz, John W. Koeberer,
and Eugene F. Penne. The members of the Executive/ Compensation Committee are as
follows: Louis J. Bosetti, William P. Ellison, Garry D. Fish, Gary C. Katz, John
W. Koeberer and Gary L. Napier.
The Bank does not have a nominating committee, but the
Executive/Compensation Committee functions as the Bank's nominating committee.
Shareholders may nominate directors in accordance with the procedures set forth
in Section 16 of the Bank's Bylaws, which is printed in full in the Notice of
Annual Meeting of Shareholders which accompanies this Proxy Statement.
9
<PAGE>
The Audit/Investment Committee examines and reviews both internal audit
controls and regulatory audit reports, meets with the Bank's auditors concerning
audit procedures and controls, and monitors the Bank's investments. The
Executive/Compensation Committee oversees the routine operations of the Bank by
delegation from the Board of Directors, advises and reports to the full Board
regarding such matters, investigates and advises the Board of Directors as to
employee benefit arrangements, conducts searches when the Bank proposes to hire
executive personnel, and reports to the Board of Directors with regard to
executive compensation, including bonus compensation.
The Board of Directors met a total of twelve (12) times during 1996. During
this same period, the Audit/Investment Committee met seven (7) times and the
Executive/Compensation Committee met five (5) times. All incumbent directors of
the Bank attended at least seventy-five percent (75%) of the meetings of the
Board of Directors and the Committees of which they were members.
10
<PAGE>
COMPENSATION AND CERTAIN TRANSACTIONS
SUMMARY COMPENSATION TABLE
The following table provides information concerning compensation of all
executive officers of the Bank who received, during any of the periods
indicated, annual salary and bonus exceeding $100,000.
<TABLE>
<CAPTION>
ALL OTHER
COMPENSATION(3)
----------------
ANNUAL COMPENSATION
- - ----------------------------------------------------------------------------------------------------
OTHER ANNUAL
NAME YEAR SALARY BONUS(1) COMPENSATION(2)
- - ----------------------------------------------- --------- ---------- --------- -----------------
<S> <C> <C> <C> <C> <C>
William P. Ellison............................. 1996 $ 109,500 $ 44,000 $ 4,272 $ 24,315
1995 77,454 29,000 967 20,642
1994 58,312 25,500 756 17,982
Frank S. Onions................................ 1996 $ 74,635 $ 35,289 $ 1,921 $ 47,799
1995 70,674 35,300 1,177 42,908
1994 67,744 32,021 1,171 39,900
W. Steven Gilman............................... 1996 $ 74,583 $ 19,000 $ 641 --
1995 44,209 -- 314 --
1994 -- -- -- --
David L. Roberts............................... 1996 $ 74,080 $ 12,000 $ 1,345 $ 24,315
1995 73,453 36,400 1,120 20,642
1994 70,555 33,020 1,118 17,982
</TABLE>
- - ------------------------
(1) Bonuses are indicated for the years upon which they are based, and are
payable March of the succeeding year.
(2) Includes Bank payment of insurance premiums, matching contributions to the
Bank's Employee Stock Ownership Plan and, in the case of Mr. Ellison and Mr.
Onions, use of a Bank automobile.
(3) Includes amounts accrued pursuant to Salary Continuation Agreement. See
"Salary Continuation Agreements" below.
STOCK OPTION PLAN
The Tehama Bank 1994 Stock Option Plan (the "1994 Plan") was approved by the
shareholders of the Bank at the 1994 Annual Meeting of Shareholders. The Board
adopted the 1994 Plan in order to attract and retain the best available
personnel for positions of substantial responsibility and to provide additional
incentive to present and future affiliates of the Bank, including officers,
employees and directors. Options granted under the 1994 Plan may only be granted
to key, full-time salaried employees, key, full-time salaried officers, and
directors of the Bank or any subsidiary. As of the date of this Proxy Statement
there are approximately 57 officers or employees of the Bank eligible to receive
option grants. The aggregate number of shares available for issuance pursuant to
the exercise of options granted under the Plan may not exceed 389,000 shares of
the Bank's common stock. However, such number of shares as well as the number of
shares and the exercise price of outstanding options are required to be
proportionately adjusted for any increase or decrease in the number of
outstanding shares of common stock resulting from any recapitalization, merger
in which the Bank is not the surviving entity, stock dividend, or the like. The
1994 Plan and outstanding options may be terminated in the event of a sale or
dissolution or change in control of the Bank, provided that (unless replacement
options are offered) all outstanding options may be exercised prior to the
effectiveness of such transactions without regard to individual vesting
provisions. Acceleration of vesting is also required in the event of tender
offers. The Plan is administered by a Stock Option Committee currently composed
of all members of the Board of Directors except Chief Executive Officer William
P. Ellison.
11
<PAGE>
The terms of options granted to officers and employees of the Bank are
within the discretion of the Committee, subject to the limitations that no
option may have a term exceeding ten years, all options must be granted at not
less than the fair market value of the common stock as of the date of grant, and
the number of shares subject to options granted under the Plan or any other plan
of the Bank held by any single optionee may not exceed 10% of the total
outstanding shares of the Bank's common stock. The 1994 Plan also provides that
each current and future director of the Bank shall receive a one-time grant of
an option to acquire 10,890 shares (as adjusted for the two-for-one stock split
declared in 1994 and 10% stock dividends declared in 1995 and 1996) of common
stock at a price equal to 100 % of the fair market value of the common stock as
of the date of the grant. No director may receive more than one such grant under
the 1994 Plan. Each such director option expires five years from the date of
grant, vests immediately as to 20% of the total number of shares subject to the
grant, and vests to the extent of an additional 20% of such number of shares on
each of the first through the fourth anniversaries of the date of grant.
The exercise price of options under the 1994 Plan may be paid in cash or in
shares of common stock valued at fair market value on the exercise date. Options
may also be exercised (1) through a same-day sale program, pursuant to which a
designated brokerage firm is to effect an immediate sale of the shares purchased
under the option and pay over to the Bank, out of the sales proceeds available
on the settlement date, sufficient funds to cover the exercise price for the
purchased shares plus applicable withholding taxes, (2) by delivering to the
Bank a sufficient number of previously acquired shares of common stock to pay
the exercise price and any required withholding, and (3) with the consent of the
Stock Option Committee, by having the Bank withhold from the number of shares
exercised a sufficient number of shares to satisfy such exercise price and tax
withholding.
Options under the 1994 Plan are not assignable or transferable other than by
will or by the laws of inheritance, and during the optionee's lifetime the
option may be exercised only by the optionee. If an optionee officer or director
ceases to be employed by the Bank or any of its subsidiaries for any reason
other than cause (as defined), disability or death, the optionee may, within
three months after the date of termination of employment, exercise the option to
the extent the optionee was entitled to exercise it at the date of such
termination; provided that the date of exercise is in no event after the
expiration of the term of the option. If an employee's employment is terminated
for cause, the option terminates on the date of termination. In the event an
optionee's employment is terminated due to the optionee's disability or death,
the optionee or the optionee's estate, as applicable, within twelve months
following the date of termination of employment, may exercise the option to the
extent the option was exercisable at the date of such termination of employment,
provided that the date of exercise is in no event after the expiration of the
term of the option.
OPTION GRANTS, EXERCISES AND YEAR-END VALUES FOR 1996
The following table sets forth, with respect to the executive officers named
in the Summary Compensation Table, information concerning options granted or
exercised during 1996 and the estimated 1996 year-end value of unexercised
options held by such executive officers. Numbers and prices have been adjusted
for the 1994 stock split and 1995 and 1996 stock dividends.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END OPTIONS AT FY-END(2)
OPTIONS ACQUIRED VALUE REALIZED (EXERCISABLE/ (EXERCISABLE/
NAME GRANTED ON EXERCISE (1) UNEXERCISABLE) UNEXERCISABLE)
- - ------------------------------ ----------- --------------- ------------------- --------------------- --------------------
<S> <C> <C> <C> <C> <C>
William P. Ellison............ 9,000 -- -- 7,989/13,527 $ 21,866/$21,783
W. Steven Gilman.............. 5,000 -- -- 1,100/4,400 250/1,000
Frank S. Onions............... -- -- -- 6,504/4,386 23,180/15,632
David L. Roberts.............. -- -- -- 3,115/5,597 11,102/19,948
</TABLE>
- - ------------------------
(1) Market value of underlying securities on the date(s) of exercise, minus the
exercise or base price.
(2) Market value of underlying securities at year-end 1996, minus the exercise
or base price.
12
<PAGE>
SALARY CONTINUATION AGREEMENTS
In order to provide long-term incentive to selected senior executive
officers, the Bank on June 17, 1993 entered into Executive Salary Continuation
Agreements (each an "SCA") with four senior executive officers of the Bank,
including former Chief Executive Officer Daniel B. Cargile, Chief Executive
Officer (and former Senior Vice President) William P. Ellison, and Senior Vice
Presidents David L. Roberts and Frank S. Onions. Benefits payable under the SCAs
are intended by the Bank to be funded by single-premium life insurance policies
which the Bank purchased in connection with entering into the SCAs and of which
the Bank is the owner and beneficiary. The total amount of such premiums, paid
by the Bank during 1993 and 1994, was $1,285,000. Notwithstanding the existence
of such policies of insurance, however, the SCAs create no rights or interests
in the property or assets of the Bank, the sole obligation of the Bank under the
SCAs is an unfunded and unsecured promise to pay money in the future, and the
status of any person who may assert a claim pursuant to an SCA is that of an
unsecured general creditor of the Bank.
Generally, each SCA provides the named executive officer with a specified
annual money benefit (the "Annual Benefit") payable to the executive or to his
named beneficiary or surviving spouse or estate, in that order, for a period of
fifteen years following the executive's retirement upon or after a specified
retirement age. If the executive should die or become disabled prior to such
specified retirement age, a percentage of the Annual Benefit (on a sliding
upward scale depending upon the number of years which elapse between execution
of the SCA and the executive's early death or disability) would be payable.
No Annual Benefit is payable if the executive's employment is terminated for
cause or the executive voluntarily terminates his employment with the Bank prior
to his specified retirement age, but the full Annual Benefit is payable if the
executive's employment with the Bank is terminated by the Bank without cause or
in connection with a change in control of the Bank. The amount of the Annual
Benefit also is subject to reduction if in any year it exceeds the compensation
expense which (with respect to the payment of such Annual Benefit) the Bank may
deduct under the Internal Revenue Code of 1986, as amended (the "Code"), or if
any portion of the Annual Benefit not waived by the executive constitutes an
"excess parachute" payment under the Code.
Subject to such contingencies, the following table sets forth information
regarding benefits payable under the four SCAs which have been entered into by
the Bank:
<TABLE>
<CAPTION>
YEARS REQUIRED YEAR ANNUAL
FOR FULL BENEFIT
NAME ANNUAL BENEFIT BENEFIT COMMENCES RETIREMENT AGE
- - ---------------------------------------------------- -------------- ------------------- ------------- -------------------
<S> <C> <C> <C> <C>
Daniel B. Cargile................................... $ 25,000 5 1998 57
David L. Roberts.................................... $ 50,000 10 2011 62
Frank S. Onions..................................... $ 25,000 5 1998 65
William P. Ellison.................................. $ 50,000 10 2011 62
</TABLE>
DIRECTOR COMPENSATION
Directors of the Bank were paid $750 per meeting of the Board of Directors
attended during 1996. In addition, members of each committee were paid $50 for
each committee meeting attended, Mr. Koeberer, as Chairman, was paid an
additional $450 per month, and committee chairman were paid an additional $50
per meeting. The total amount of such fees paid to all directors for all
meetings attended during fiscal year 1996 was $151,350.
During 1996, director options for 8,934 shares (as adjusted for the 1994
stock split and 1995 and 1996 stock dividends) having a net value (market price
less exercise price on the date of exercise) of $31,314 were exercised.
13
<PAGE>
INDEBTEDNESS OF MANAGEMENT
The Bank has had and expects to have in the future, banking transactions in
the ordinary course of its business with directors, principal officers, their
respective associates and members of their immediate families. All loans and
commitments to lend to such persons during 1996 were made in accordance with
Bank policy on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons and, in the opinion of the Bank, did not involve more than the
normal risk of collectibility or present other unfavorable features.
TRANSACTIONS WITH MANAGEMENT
During 1996, the Bank placed radio advertising in the amount of $16,760 with
agencies employed by stations owned and operated by director Gary Katz, and paid
brokerage commissions in the total amount of $10,493 to director Gary Napier for
insurance purchased through his agency. No other business transactions of any
kind existed or were entered into between the Bank and its directors and their
affiliates.
14
<PAGE>
PROPOSAL TWO: APPROVAL OF PLAN OF REORGANIZATION
AND MERGER AGREEMENT
THE MERGER
GENERAL
Shareholders of the Bank are being asked to consider and vote upon a
proposal to approve a Plan of Reorganization and Merger Agreement, dated as of
February 12, 1997 (the "Reorganization Agreement"), pursuant to which the
business of the Bank will be conducted as a wholly-owned subsidiary of Tehama
Bancorp ("Bancorp"). Bancorp is a California corporation formed by the Bank and
at the direction of the Bank's Board of Directors for the specific purpose of
becoming the bank holding company for the Bank. See "TEHAMA BANCORP." The Bank
also formed Tehama Merger Corporation (the "Subsidiary") as a California
corporation. Bancorp owns all of the issued and outstanding shares of capital
stock of the Subsidiary. Assuming all requisite approvals are obtained and
certain other conditions are satisfied or waived, upon consummation of the
Merger, the Subsidiary will be merged with and into the Bank, all outstanding
shares of Bank Common Stock held by the Bank's shareholders will be converted
into and exchanged for shares of Bancorp Common Stock on a share-for-share
basis, the Bank's shareholders will become the shareholders of Bancorp, and
Bancorp will become the sole shareholder and parent holding company of the Bank.
Following the Merger, the Bank: (i) will continue to exist as a California
banking corporation and to be regulated by the Superintendent and/or
Commissioner, and the FRB, and the Bank's deposits will continue to be insured
by the FDIC to the maximum amount permitted by law; (ii) will continue to be
managed by its current Board of Directors and management; and (iii) will
continue to engage in substantially the same business and activities in which it
is presently engaged at all of its presently established branch offices. See
"Tehama Bank--General."
The Board of Directors of the Bank has unanimously approved the proposed
Merger and recommends that the shareholders vote "For" the proposal.
The terms of the Merger are set forth in the Reorganization Agreement
attached to this Proxy Statement/Prospectus as Appendix A, and incorporated
herein by reference. The summary of the Reorganization Agreement set forth in
this Proxy Statement/Prospectus is qualified in its entirety by reference to the
Reorganization Agreement.
CONVERSION OF OPTIONS
There currently are outstanding under the Bank's 1994 Plan options to
purchase an aggregate of 195,826 shares of the Bank's authorized but unissued
Common Stock at prices ranging between $8.68 and $12.27 per share which expire
between the years 1999 and 2001. In accordance with the terms of the
Reorganization Agreement, upon consummation of the Merger, the 1994 Plan will be
administered in an appropriate manner to reflect the Merger and any outstanding
options to purchase shares of Common Stock of the Bank will be converted into
options to purchase the same numbers of shares of Bancorp Common Stock on the
same terms and conditions as currently are in effect.
RECOMMENDATION AND REASONS
In the opinion of the Bank's Board of Directors, a bank holding company
structure will provide the Bank with certain advantages in comparison to the
Bank's present corporate structure. These advantages include additional
flexibility in expansion of the Bank's business through the acquisition of other
financial institutions, in the raising of additional capital through borrowing
(if needed), subject to applicable regulatory requirements, the ability to
repurchase its securities, and flexibility in acquiring or establishing other
businesses related to banking.
15
<PAGE>
Recent legislation, economic conditions and actions by financial institution
regulators have combined to result in a period of consolidation in the bank and
thrift industry, and the Board of Directors believes the Bank may have
opportunities to expand its business and geographic markets through the
acquisition of other financial institutions or of branch offices of other
institutions. A bank holding company form of organization will provide the Bank
with the greatest amount of flexibility in responding quickly to expansion
opportunities. For instance, the Bank is not permitted to own a separate bank or
thrift institution. In a holding company structure, on the other hand, a
financial institution could be acquired and operated as a separate entity if it
was desirable to do so. While the Bank and Bancorp might in the future consider
making acquisitions, neither the Bank nor Bancorp is presently conducting
discussions with any potential candidate for acquisition.
A bank holding company structure may provide more alternatives in the
raising of funds required by the Bank, or other subsidiaries of the holding
company, particularly under changing conditions in financial and monetary
markets. Indeed, if a subsidiary of the holding company required additional
capital, the holding company might raise that capital by relying on its own
borrowing capacity reflecting all of its subsidiaries, thereby eliminating the
need to sell additional equity capital. While there currently are no plans for
Bancorp to borrow funds for the use of or to contribute to the capital of the
Bank (nor is the Bank presently in need of additional capital funds to meet the
capital adequacy requirements of federal and state regulatory authorities),
management believes that the added borrowing flexibility provided by a holding
company structure is desirable. There can be no assurance, however, as to the
method or type of financing arrangements that will be available to Bancorp if
the Reorganization Agreement is approved.
The Bank may not repurchase shares of its own capital stock except after
application and receipt of specific approval by the Superintendent and the FRB.
Consequently, if situations arose where the Board of
Directors considered a repurchase of shares to be in the Bank's best interests,
the Bank's ability to respond would be subject to such conditions. Assuming that
the Bank continues to be well-capitalized, however (see "SUPERVISION AND
REGULATION--Capital Standards" below), Bancorp under current regulations of the
FRB would probably qualify to repurchase its shares without FRB or other
regulatory approval, provided that Bancorp's capital exceeds the standards for a
"well-capitalized" bank both before and after any such repurchases, its FRB
examination results in a rating of "1" or "2," and there are no unresolved
supervisory issues with respect to Bancorp.
A holding company structure also will provide flexibility in engaging in
other financial services activities through newly formed subsidiaries or through
the acquisition of existing companies. Bancorp does not expect to engage in any
activities other than the operation of the Bank in the reasonably foreseeable
future. Under a holding company structure, however, Bancorp will be positioned
to do so (subject to required regulatory approvals) in the event that, in the
future, such a course of action would be considered to be in Bancorp's best
interests. See "SUPERVISION AND REGULATION."
CONVERSION OF SHARES AND EXCHANGE OF CERTIFICATES
Upon consummation of the Merger, the shares of Common Stock of the
respective corporate parties to the Reorganization Agreement shall be converted
as follows:
(i) Each share of Bank Common Stock held of record by the Bank's
shareholders automatically will be converted into one share of Bancorp Common
Stock (such Bancorp Common Stock having the equivalent number of votes per share
as the shares of Bank Common Stock being surrendered). Thereafter, the Bank's
shareholders will be entitled to receive, upon the surrender by them to Bancorp
of all certificates representing shares of Bank Common Stock held by them on the
Effective Date ("Old Certificates"), a certificate or certificates representing
the number of shares of Bancorp Common Stock to which they are entitled; and,
until so surrendered, each Old Certificate will be deemed for all corporate
purposes to evidence the ownership of the same number of shares of Bancorp
Common Stock. Shareholders whose Old Certificates have been lost or are missing
may be required to make certain special arrangements in order to receive their
certificates representing Bancorp Common Stock, including the
16
<PAGE>
furnishing to Bancorp or its stock transfer agent of certain affidavits and/or a
bond or other form of indemnification.
(ii) The Subsidiary will disappear, the shares of the Subsidiary's Common
Stock outstanding immediately prior to the Effective Date of the Merger will be
converted into shares of the Bank, and all the outstanding shares of Bank Common
Stock will then be owned by Bancorp.
(iii) The shares of Bancorp Common Stock outstanding immediately prior to
the Effective Date of the Merger will be repurchased by Bancorp for the amount
paid for such shares. Such shares upon repurchase will be canceled.
REQUIRED APPROVALS
The affirmative vote at the Annual Meeting of the holders of at least a
majority of the total outstanding shares of Bank Common Stock is required to
approve the Merger. All proxies will be voted for the proposal to approve the
Merger, unless a vote against the Merger or an abstention is noted. Abstentions
will be counted for purposes of determining the number of shares entitled to
vote on the proposal and will have the effect of a vote against the proposal.
Broker non-votes (shares held by brokers or nominees which are present in person
or represented by proxy at the meeting but as to which voting instructions have
not been received from the beneficial owners or persons entitled to vote such
shares and the broker or nominee does not have discretionary voting power under
applicable New York Stock Exchange rules or other rules applicable to brokers)
with respect to Proposal Two will be counted to determine the presence or
absence of a quorum, and will also have the effect of a vote against the
proposal.
In addition, the Merger is subject to the approval of the Superintendent,
the FDIC and the FRB. Applications for all such required regulatory approvals
either have been filed and currently are pending or will soon be filed. Although
no assurances are or can be given, Bancorp and the Bank have no reason to
believe that such regulatory approvals will not be obtained.
After final regulatory approvals are received, a thirty day waiting period
is required prior to consummation of the Merger to allow the United States
Department of Justice to review the transaction for antitrust considerations.
Receipt and continued effectiveness of all necessary regulatory approvals are
conditions of the Merger.
CONDITIONS AND EFFECTIVE DATE; AMENDMENT; TERMINATION
As mentioned above, consummation of the Merger is subject to various
conditions described in the Reorganization Agreement, including, without
limitation: (i) approval of the Reorganization Agreement and the Merger by the
shareholders of the Bank; (ii) receipt of required regulatory approvals, some of
which may be conditioned upon the Merger being consummated within three months
after the granting of approval; and (iii) receipt (unless waived by the Bank,
Bancorp and the Subsidiary) of the favorable opinion of the Bank's independent
certified public accountants or legal counsel with respect to Federal income tax
consequences of the Merger. Subject to the fulfillment of all conditions
described in the Reorganization Agreement, the Merger will become effective on
the date on which the Reorganization Agreement is filed with the Secretary of
State of the State of California.
The Reorganization Agreement may be amended, modified or supplemented by the
Bank and Bancorp at any time prior to consummation of the Merger, and whether
before or after approval by the Bank's shareholders. Following approval of the
Reorganization Agreement by the Bank's shareholders, however, no such amendment
may change the ratio of conversion of Bank Common Stock into Bancorp Common
Stock without shareholder approval of such change.
The Reorganization Agreement may be terminated, whether before or after
shareholder approval, upon the mutual consent of the Bank and Bancorp, or by
either the Bank or Bancorp if, among other things: (i) any suit or proceeding is
instituted or threatened in which it is sought to restrain or prohibit the
Merger; (ii) the Merger is not approved by the Bank's shareholders at the Annual
Meeting; or (iii) either
17
<PAGE>
party determines that consummation of the Merger is not in the best interests of
the Bank or its shareholders.
The expenses of the Merger are estimated to be approximately $70,000. Such
expenses will be borne initially by the Bank, but if the Merger is consummated
the Bank will be reimbursed by Bancorp for those expenses which may not properly
be borne by the Bank. Some or all of the funds used by Bancorp to reimburse the
Bank will be paid from dividends received by Bancorp from the Bank in the
future.
ACCOUNTING TREATMENT
Management of the Bank and Bancorp have been advised that the Merger, if
completed as proposed, will be treated similar to a "pooling of interests" for
accounting purposes. Accordingly, under generally accepted accounting
principles, the assets and liabilities of the Bank will be reported in the
financial statements of Bancorp at their respective book values as of the
Effective Date, and the consolidated financial statements of Bancorp will
reflect the historical operations of the Bank prior to the Merger.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain of the federal income tax
consequences of the Merger pursuant to the Code, as set forth in a tax opinion
that Bancorp and the Bank expect to obtain from their independent public
accountants, and is included for general information only.
The following discussion assumes among other matters that shares of Bank
Common Stock exchanged for shares of Bancorp Common Stock pursuant to the Merger
will not be subject to any liability at the time they are so exchanged and that
no liabilities of any shareholder of the Bank will be assumed by the Bank in
connection with the Merger. The discussion does not cover the consequences of
the Merger under state, local or other tax laws, or special tax consequences to
particular shareholders having special situations. In addition, the Internal
Revenue Service is not being asked to provide a Tax Ruling as to the federal
income tax consequences of the Merger, and is not obligated to accept the
position set forth herein in the event that the matter were placed at issue.
Accordingly, shareholders are urged to consult with their own tax advisors
regarding the effect of the Merger on them personally. ALSO, THIS DISCUSSION
DOES NOT COVER THE TAX CONSEQUENCES OF THE CONVERSION OF THE OUTSTANDING OPTIONS
TO PURCHASE SHARES OF BANK COMMON STOCK INTO BANCORP OPTIONS. HOLDERS OF THE
BANK'S OUTSTANDING OPTIONS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS REGARDING
THE EFFECT OF THE MERGER AND CONVERSION.
Subject to the foregoing assumptions and based on certain representations
made by the Bank and Bancorp, Bancorp and the Bank are informed that, for
federal income tax purposes:
(a) The merger of the Subsidiary into the Bank and the issuance of Bancorp
Common Stock in connection therewith as described herein will constitute a
tax-free reorganization under Sections 368(a)(1)(A) and 368(a)(2)(E) of the
Code;
(b) No gain or loss will be recognized by the holders of Bank Common Stock
upon the exchange of such stock for shares of Bancorp Common Stock in connection
with the Merger;
(c) The tax basis of Bancorp Common Stock received by the shareholders of
the Bank pursuant to the Merger will be the same as the tax basis of the shares
of Bank Common Stock exchanged therefor; and
(d) The holding period of the shares of Bancorp Common Stock received by the
shareholders of the Bank will include the holding period of the shares of Bank
Common Stock exchanged therefor, provided that Bank Common Stock is held by the
shareholder as a capital asset on the date of consummation of the Merger.
Shareholders are advised to consult their own tax advisers in order to make
a personal evaluation of the federal income tax consequences, and any state or
local tax consequences, of the Merger.
18
<PAGE>
NO DISSENTERS' RIGHTS
Under the CGCL, no shareholder of the Bank will have any dissenter's rights
in connection with the Merger. The dissenter's rights of shareholders of the
Bank and Bancorp are identical under California law.
INTEREST OF CERTAIN PERSONS IN THE PROPOSED TRANSACTION
No consideration, monetary or otherwise, has been given or offered to any
shareholder, officer, or director, or any member of the immediate family
thereof, of the Bank, the Subsidiary or Bancorp in connection with the
consummation of the Merger. The directors and executive officers of the Bank are
also the directors and executive officers of Bancorp.
RESTRICTIONS ON SALE OF BANK COMMON STOCK PRIOR TO THE MERGER BY CERTAIN PERSONS
AND ON RESALE OF BANCORP COMMON STOCK RECEIVED BY CERTAIN PERSONS
The shares of Bancorp Common Stock proposed to be issued to the Bank's
shareholders in the Merger have been registered under the Securities Act of
1933, as amended (the "1933 Act"). However, certain restrictions will apply to
the resale of shares issued to certain persons. Under Federal securities laws,
any person who is an "affiliate" of the Bank at the time the Merger is submitted
to a vote of the Bank's shareholders may not resell or transfer shares of
Bancorp Common Stock received by him or her during a period of three years
following the date of consummation of the Merger unless: (i) such person's offer
and sale of those shares has been registered under the 1933 Act; (ii) such
person's offer and resale is made in compliance with Rule 145 promulgated under
the 1933 Act (which permits limited sales under certain circumstances); or (iii)
another exemption from registration is available.
Persons who are considered "affiliates" of Bancorp following the Merger also
will be subject to certain restrictions on sales by them of any shares of
Bancorp Common Stock. Any such sale by a Bancorp affiliate will require: (i) the
registration under the 1933 Act of the shares to be sold; (ii) compliance with
Rule 144 promulgated under the 1933 Act (which permits limited sales under
certain circumstances); or (iii) the availability of another exemption from
registration.
An "affiliate" of the Bank or Bancorp, as defined by the rules promulgated
pursuant to the 1933 Act, is a person who directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control with
the Bank or Bancorp. The above restrictions are expected to apply to the
directors and executive officers of the Bank and Bancorp (and to any relative or
spouse of any such person or any relative of any such spouse, any of whom live
in the same home as such person, and any trusts, estates, corporations or other
entities in which such persons have a 10% or greater beneficial or equity
interest), and may apply to any current shareholder of the Bank (or, following
the Merger, any shareholder of Bancorp) that owns an amount of stock sufficient
to be considered to "control" the Bank or Bancorp or that otherwise is an
"affiliate" of the Bank or Bancorp. Stock transfer instructions will be given by
Bancorp to its stock transfer agent with respect to Bancorp Common Stock to be
received by persons deemed by Bancorp to be subject to these restrictions, and
the certificates for such stock may be appropriately legended. However,
individual shareholders should consult with their own counsel regarding the
application of the above restrictions to their Bancorp Common Stock.
This Proxy Statement/Prospectus does not apply to any resales of Bancorp
Common Stock received by any person in connection with the Merger, and no person
is authorized to make use of this Proxy Statement/Prospectus in connection with
any such resale.
19
<PAGE>
DIVIDENDS
THE BANK
Holders of Bank Common Stock are entitled to such dividends as may be
declared from time to time by the Board of Directors out of funds legally
available therefor. See "SUPERVISION AND REGULATION--Limitations on Dividends."
No cash dividends have been paid by the Bank, but the Bank paid 10% stock
dividends in 1994, 1995 and 1996, and declared a 2-for-1 stock split in 1994.
Whether or not dividends will be paid in the future will be determined by the
Board of Directors after consideration of various factors. The Bank's
profitability and regulatory capital ratios in addition to other financial
conditions will be key factors considered by the Board of Directors in making
such determinations regarding the payment of dividends by the Bank. In any
event, upon consummation of the Merger, any dividends paid by the Bank will be
paid to Bancorp.
BANCORP
Holders of Bancorp Common Stock will be entitled to receive such dividends
as may be declared by the Board of Directors of Bancorp out of funds legally
available therefor. See "SUPERVISION AND REGULATION--Limitations on Dividends."
While Bancorp will not be subject to certain restrictions on dividends and stock
redemptions and repurchases applicable to the Bank, the ability of Bancorp to
pay dividends to the holders of its stock will depend to a large extent upon the
amount of dividends paid by the Bank to Bancorp. The ability of the Bank to pay
dividends in the future will depend upon the earnings and financial condition of
the Bank. As a newly organized corporation, Bancorp has no dividend policy.
20
<PAGE>
CAPITALIZATION
Set forth below is the capitalization of the Bank at December 31, 1996, the
capitalization of Bancorp and the Subsidiary immediately prior to the Merger and
the pro forma capitalization of Bancorp after giving effect to the Merger,
assuming that no stock options are exercised prior to the Merger. The
presentation of this information is unaudited.
<TABLE>
<CAPTION>
PRO FORMA
BANK SUBSIDIARY(1) BANCORP(2) (BANCORP)(3)
----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Common Stock................................................ $12,225,722 $ 1,000 $ 1,000 $ 12,226,722
Retained Earnings........................................... 2,905,644 -- -- 2,905,644
Total....................................................... 15,131,366 1,000 1,000 15,132,366
Common Stock:
Authorized.................................................. 4,000,000 4,000,000 4,000,000 4,000,000
Outstanding................................................. 1,610,940 100 100 1,610,940
</TABLE>
- - ------------------------
(1) Funds to capitalize the Subsidiary were obtained by issuing 100 shares of
its Common Stock to Bancorp for a total of $1,000. At the Effective Date of
the Merger, the shares of the Subsidiary will be converted into shares of
the Bank.
(2) In order to organize Bancorp, 100 shares of its Common Stock were issued to
William P. Ellison, President and Chief Executive Officer of the Bank, for a
total of $1,000. On the Effective Date of the Merger, such shares will be
repurchased and canceled by Bancorp at a cash price equal to that paid by
Mr. Ellison.
(3) Estimated total expenses of the Merger, including legal and accounting fees,
of $70,000 are not reflected in the table.
BOOK VALUE OF BANK'S COMMON STOCK
The table below shows the per share book value of the Bank's Common Stock
for the two years ended December 31, 1995 and 1996.
BOOK VALUE
<TABLE>
<S> <C>
December 31, 1995 $8.99
December 31, 1996 $9.39
</TABLE>
21
<PAGE>
FINANCIAL STATEMENTS AND RELATED MATTERS
The Bank's audited balance sheets as of December 31, 1996 and 1995 and
related audited statements of income, shareholders' equity and cash flows for
each of the three years ended December 31, 1996, prepared in conformity with
generally accepted accounting principles, report of independent public
accountants, management's discussion and analysis of financial condition and
results of operations, and five-year selected financial data are set forth in
the Bank's 1996 Annual Report to Shareholders and are incorporated into this
Proxy Statement/Prospectus by reference. A copy of the 1996 Annual Report to
Shareholders is being provided to shareholders along with this Proxy
Statement/Prospectus.
No historical financial information is available for Bancorp since it is a
newly formed California corporation.
TEHAMA BANK
GENERAL
The Bank was incorporated as a California banking corporation under the name
Tehama County Bank on March 15, 1984, and received its Certificate of Authority
to commence banking operations on August 30, 1984. Effective February 11, 1997,
the Bank changed its name to Tehama Bank. The Bank's headquarters is located at
239 South Main Street and its main office is located at 237 South Main Street,
Red Bluff, Tehama County, California. Branch offices are located at 7843 Highway
99E, in the unincorporated community of Los Molinos, Tehama County; at 2025
Pillsbury Road, Chico, Butte County; at 301 Walker Street, Orland, Glenn County;
and 160 North Butte Street, Willows, Glenn County. The Bank also maintains a
Loan Production Office at 448 Redcliff Drive, Redding, Shasta County. The
branches located in Orland and Willows were acquired by the Bank from Wells
Fargo Bank, N.A., in a transaction which was effective February 22, 1997.
The Bank conducts a commercial banking business including accepting demand,
savings and time deposits, issuing letters of credit, and making commercial,
real estate, and consumer loans. It also offers installment note collection,
issues cashier's checks, sells traveler's checks, acts as a licensed merchant
bankcard sales clearer, and provides the following: 24-hour automated teller
service, bank-by-mail and night depository services, safe deposit boxes, and
other customary banking services. Most of the Bank's customers are individuals
and small businesses. The Bank is a member bank of the Federal Reserve System,
and the accounts of its depositors are insured by the Federal Deposit Insurance
Corporation ("FDIC"). The Bank does not offer trust services or international
banking services and does not plan to do so in the near future.
The Bank's operating policy since its inception has emphasized retail
banking. Most of the Bank's customers are retail customers, farmers and small to
medium-sized businesses. The Bank takes real estate, listed and unlisted
securities, savings and time deposits, automobiles, machinery and equipment as
collateral for loans.
Most of the Bank's deposits are attracted by local promotional activities
and advertising in the local media. A material portion of the Bank's deposits
have not been obtained from a single person or a few persons, the loss of any
one or more of which would have a materially adverse effect on the business of
the Bank. As of December 31, 1996, $37,280,547 of the Bank's $93,692,752 in
loans consisted of interim construction and real estate loans, primarily for
single family residences or for commercial development.
During 1996, the Bank entered into a joint venture with Humboldt Bank,
Eureka, California ("Humboldt"), to organize and share equally in a subsidiary
leasing company. Bancorp Financial Services ("BFS") was organized as a
California corporation on November 25, 1996, and the Bank and Humboldt each
contributed $2 million towards its capitalization as of January 2, 1997. It is
anticipated that both Humboldt and the Bank also will extend credit to BFS in
order to provide further funding for its operations. BFS' offices are located at
83 Scripps Drive, Suite 310, in Sacramento, California; the company
22
<PAGE>
engages in equipment leasing in the so-called "small ticket" segment of the
industry, which includes leases of $100,000 or less. BFS' business plan is to
acquire such leases from independent lessors or brokers through brokerage or
discount, to service them and, at predetermined intervals, package and resell
them to investors which may include Humboldt and the Bank. Income to the company
is expected to be generated through spreads on its lease portfolio, gains on
sales, and ongoing fees and charges. The company's board of directors includes
BFS Chief Executive Officer Kevin D. Cochrane, three members from the Humboldt
Board of Directors and three members from the Bank's Board of Directors. Since
the Bank's investment in BFS did not occur until 1997, no income was realized
from the Bank's investment in BFS during 1996.
MARKETS AND COMPETITION
The Bank's primary service areas include Tehama, Butte and Glenn counties
and contain a total of 52 competitive banking offices, of which 38 are offices
of major chain banking systems and 14 are offices of other independent banks. On
June 30, 1996, amounts reported by state and federal agencies indicated that
these banking offices held approximately $1,681 million in total deposits,
averaging approximately $32.3 million per office. The service areas also contain
the offices of six savings and loan associations, with approximately $414.2
million in total deposits as of June 30, 1996.
The banking business in California generally, and in the Bank's primary
service areas specifically, is highly competitive with respect to both loans and
deposits and is dominated by a relatively small number of major banks with many
offices operating over a wide geographic area. Among the advantages such major
banks have over the Bank are their ability to finance wide ranging advertising
campaigns and to allocate their investment assets to regions of highest yield
and demand. Such banks offer certain services such as trust services and
international banking which are not offered directly by the Bank (but are
offered indirectly through correspondent institutions) and, by virtue of their
greater total capitalization (legal lending limits to an individual customer are
limited to a percentage of a bank's total capital accounts), such banks have
substantially higher lending limits than does the Bank. Other entities, both
governmental and in private industry, seeking to raise capital through the
issuance and sale of debt or equity securities, also provide competition for the
Bank in the acquisition of deposits.
Commercial banks also compete with other types of financial institutions
(savings associations and credit unions) and with other markets for funds. For
instance, yields on corporate and government debt securities and other
commercial paper affect the ability of commercial banks to attract and hold
deposits. Commercial banks also compete for available funds with money market
instruments. In periods of high interest rates, such money market funds have
provided substantial competition to banks for deposits, and it is anticipated
they may continue to do so in the future.
In order to compete with other financial institutions in its primary service
areas, the Bank relies principally upon (a) direct personal contact by officers,
directors, employees and shareholders, (b) extended lobby hours, and (c)
specialized promotions. The Bank focuses its promotional activities on the
advantages of dealing with an independent bank.
PATENTS, TRADEMARKS, ETC.
The Bank holds no patents, registered trademarks, licenses (other than
licenses required to be obtained from appropriate banking regulatory agencies),
franchises or concessions.
RESEARCH ACTIVITIES
Officers and employees of the Bank have engaged continually in marketing
activities, including the evaluation of development of new services, to enable
the Bank to retain and improve its competitive position in its service area. The
cost to the Bank for these marketing activities cannot be calculated with any
degree of certainty, although it is not considered to be material to the Bank's
operations.
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EMPLOYEES
At March 1, 1997, the Bank employed 90 persons (16 of whom were part-time
employees), including four principal officers and a total of 23 other officers.
None of the Bank's employees is presently represented by a union or covered
under a collective bargaining agreement. Management of the Bank believes that
its employee relations are excellent.
PROPERTIES
The Bank leases its Orland branch office and Redding loan production office,
and owns the land and buildings in which its Chico, Los Molinos and Willows
branch offices are located. The Bank owns the building in which its Red Bluff
branch office and administrative headquarters are located, subject to the ground
lease described below. The Bank's total rentals for premises and equipment for
fiscal year 1996 were approximately $63,000 and its minimum future commitments
under operating leases, as of December 31, 1996, totaled $436,760.
The head office, a two-story commercial building with approximately 7,700
square feet of space, was formerly owned and used as a branch office by the Bank
of America. At the time the Bank acquired the property in 1988, the building was
approximately eight years old and had been vacant for approximately seven years.
The Bank acquired the right to purchase the structure by way of an
assignment dated February 25, 1988 ("Assignment"), from two of the Bank's
directors, Orville Jacobs and John Koeberer. The building was acquired on or
about February 29, 1988 for a price of $25,000. The Assignment contains a right
of first refusal in favor of Messrs. Jacobs and Koeberer whereby they have the
right to repurchase the building from the Bank in the event that the Bank elects
to sell, vacate or sublet the building to a party other than a financial
institution. This right of first refusal has a term concurrent with the terms of
the underlying ground lease.
The ground lease, which is dated July 31, 1980, and was amended on February
6, 1981, is between Allied Farms, Inc., as ground lessor, and the Bank of
America, as ground lessee. The ground lease provides for an initial term of
eight (8) years which terminated on December 31, 1988. It further provides for
four (4) additional options to extend the term of the ground lease for a period
of eight (8) years each, or a total of 32 years. The base rent is to be adjusted
during each extension term in accordance with the fair market rental value of
the land as of the commencement of the applicable extension term. The current
lease term, at a monthly rental of $2,310, expires December 31, 2004.
LEGAL PROCEEDINGS
At times, the Bank is a defendant in lawsuits in the ordinary course of its
business. It is the opinion of management of the Bank that the resolution of
these lawsuits will not have a material adverse effect on the financial
condition or results of operations of the Bank.
MANAGEMENT
For information regarding the Bank's management, including share ownership
of management and executive compensation, see "PROPOSAL ONE: ELECTION OF
DIRECTORS."
TEHAMA BANCORP
GENERAL
Bancorp was recently incorporated as a for-profit corporation under the
California General Corporation Law for the principal purpose of engaging in
activities permitted for a bank holding company. Bancorp has not yet commenced
active operations. After consummation of the Merger, Bancorp will act as
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a holding company for the Bank and will be a legal entity separate and distinct
from the Bank. The operations of Bancorp will be conducted at the same location
and in the same facilities as the operations of the Bank. Bancorp does not
expect to engage in activities other than the operation of the Bank in the
reasonably foreseeable future. At the present time, it is not intended that, for
the reasonably foreseeable future, the Bank will be compensated by Bancorp for
the use of its facilities or that employees, officers or directors of Bancorp
will be separately compensated by Bancorp for their services except with respect
to the issuance of Bancorp stock options in replacement of outstanding Bank
stock options. Bancorp expects to receive all of its income initially from
dividends paid to it by the Bank, and may also receive management fees if it
provides management services to the Bank.
Upon consummation of the Merger, the activities of Bancorp will be subject
to the supervision of the FRB. Bancorp may engage, directly or through
subsidiary corporations, in those activities closely related to banking which
are specifically permitted under the Bank Holding Company Act of 1956, as
amended (the "BHCA"). See "SUPERVISION AND REGULATION."
MANAGEMENT OF BANCORP
The directors of Bancorp are the same as the directors of the Bank, namely:
Henry Clay Arnest III, Louis J. Bossetti, Daniel B. Cargile, Harry Dudley,
William P. Ellison, Garry D. Fish, Max Muller Froome, Orville K. Jacobs, Gary C.
Katz, John W. Koeberer, Raymond C. Lieberenz, Gary L. Napier, Eugene F. Penne
and Terrance A. Rust.
The executive officers of Bancorp are also the same as the executive
officers of the Bank, namely: William P. Ellison, President and Chief Executive
Officer; W. Steven Gilman, Senior Vice President and Chief Operating Officer;
Frank S. Onions, Senior Vice President and Chief Financial Officer; David L.
Roberts, Senior Vice President and Chief Credit Officer.
All of the above-named directors and executive officers have held their
respective offices since shortly after the incorporation of Bancorp. They will
hold office until the next annual meeting of shareholders of Bancorp or until
their successors are duly elected and qualified. No arrangements or
understandings exist between any of the directors or any other persons pursuant
to which any of the above persons have been selected as directors.
SUPERVISION AND REGULATION
The Bank is chartered under the banking laws of the State of California and
is subject to the supervision of, and is regularly examined by, the California
Superintendent of Banks (after July 1, 1997, the California Commissioner of
Financial Institutions) and the FRB. Upon consummation of the Merger, the Bank
will remain subject to regulation by such government agencies.
Upon consummation of the Merger, Bancorp will be a bank holding company
within the meaning of the BHCA, and will be registered as such with and will be
subject to the supervision of the FRB.
Certain legislation and regulations affecting the business of Bancorp and
the Bank are discussed below.
GENERAL
BANCORP. As a bank holding company, Bancorp will be registered with, report
to, and be subject to supervision and periodic examination by the FRB. A bank
holding company may engage in activities which the FRB has determined to be
closely related to banking or managing or controlling banks. The FRB has
determined by regulation that certain activities are closely related to banking
within the meaning of the BHCA. Such activities include, among others, making or
servicing loans; engaging in industrial banking activities; performing trust
company functions; providing investment or financial advice; leasing personal or
real property; engaging in community development activities; performing certain
data processing
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operations; acting as an insurance agent for certain types of credit-related
insurance; operating a savings association; providing courier services;
providing management consulting services to depository institutions; issuing and
selling money orders and traveler's checks and selling savings bonds; appraising
real estate and personal property; arranging commercial real estate equity
financing; providing certain stock brokerage services; underwriting and dealing
in government obligations and money market instruments; providing foreign
exchange advisory and transactional services; acting as a futures commission
merchant; providing investment advice on financial futures and options on
futures; providing consumer financial counseling services; tax planning and
preparation; providing check guaranty services; operating a collection agency
and operating a credit bureau.
Under FRB policy, a bank holding company is required to serve as a source of
financial strength to its subsidiary depository institutions and to commit
resources to support such institutions in circumstances where it might not do
so, absent such policy. Under the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), a bank holding company is required to
guarantee that any "undercapitalized" (as such term is defined therein) insured
depository institution subsidiary will comply with the terms of any capital
restoration plan filed by such subsidiary with its appropriate federal banking
agency to the lesser of: (i) an amount equal to 5% of the institution's total
assets at the time the institution became undercapitalized; or (ii) the amount
which is necessary (or would have been necessary) to bring the institution into
compliance with all capital standards as of the time the institution failed to
comply with such capital restoration plan.
Generally, a bank holding company must obtain FRB approval before it may
acquire assets or shares of any bank. See "THE MERGER--Required Approvals." FRB
approval is also required for the merger or consolidation of bank holding
companies, and for the assumption by any insured bank subsidiary of a bank
holding company of deposit liabilities of an insured savings association, or
vice versa.
THE BANK. The Bank, as a California state-chartered nonmember bank, is
subject to the supervision and regulation of the Superintendent (after July 1,
1997, the Commissioner of Financial Institutions) and the FRB. The Bank's
deposits are insured up to the maximum legal limits by the FDIC. Various
requirements and restrictions of these agencies affect the operations of the
Bank. Federal regulations include requirements to maintain reserves against
deposits and limitations on the nature and amount of loans which may be made and
borrowings.
Under federal law, no person, acting directly or indirectly or through or in
concert with one or more persons, may acquire control of any insured depository
institution such as the Bank, unless the FDIC has been given 60 days' prior
written notice of the proposed acquisition and within that time period the FDIC
has not issued a notice disapproving the proposed acquisition, or extended the
period of time during which a disapproval may be issued. See "THE
MERGER--Required Approvals." For purposes of these provisions, "control" is
defined as the power, directly or indirectly, to direct the management or
policies of an insured depository institution or to vote 25% or more of any
class of voting securities of an insured depository institution. The purchase,
assignment, transfer, pledge or other disposition of voting stock through which
any person will acquire ownership, control or the power to vote 10% or more of a
class of voting securities of the Bank would be presumed to be an acquisition of
control. An acquiring person may request an opportunity to contest any such
presumption of control. No assurance can be given that the FDIC would not
disapprove a notice of proposed acquisition as described above. California law
has a similar provision requiring the approval of the Superintendent prior to
the acquisition of control of a state-chartered bank, such as the Bank. See "THE
MERGER--Required Approvals."
With certain limitations, depository institution subsidiaries of bank
holding companies may extend credit to, invest in the securities of, purchase
assets from, or issue a guarantee, acceptance, or letter of credit on behalf of,
an affiliate, provided that the aggregate of such transactions with any
affiliate may not exceed 10% of the capital stock and surplus of the
institution, and the aggregate of such transactions with all affiliates may not
exceed 20% of the capital stock and surplus of the institution. A bank generally
may
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not purchase a low-quality asset from an affiliate, and loans to affiliates must
be secured by marketable collateral. Further, bank holding companies and their
subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit, sale or lease of property, or
furnishing of services.
CAPITAL STANDARDS
Federal regulation imposes upon all FDIC-insured financial institutions
including the Bank and (assuming that the Merger is approved and becomes
effective) Bancorp a variable system of risk-based capital guidelines designed
to make capital requirements sensitive to differences in risk profiles among
banking organizations, to take into account off-balance sheet exposures and to
aid in making the definition of bank capital uniform internationally. Under the
FRB's risk-based capital guidelines, the Bank is required (and Bancorp will be
required) to maintain capital equal to at least 8 percent of its assets,
weighted by risk. Assets and off-balance sheet items are categorized by the
guidelines according to risk, and certain assets considered to present less risk
than others permit maintenance of capital at less than the 8 percent ratio. The
guidelines establish two categories of qualifying capital: Tier 1 capital
comprising core capital elements, and Tier 2 comprising supplementary capital
requirements. At least one-half of the required capital must be maintained in
the form of Tier 1 capital. For the Bank (and for Bancorp after the Merger),
Tier l capital includes only common stockholders' equity and retained earnings,
but qualifying perpetual preferred stock would also be included without limit if
the Bank or Bancorp were to issue such stock. Tier 2 capital includes, among
other items, limited life (and in the case of banks, cumulative) preferred
stock, mandatory convertible securities, subordinated debt and a limited amount
of the allowance for loan and lease losses.
The guidelines also require all insured institutions to maintain a minimum
leverage ratio of 3 percent Tier 1 capital to total assets (the "leverage
ratio"). The FRB emphasizes that the leverage ratio constitutes a minimum
requirement for the most well-run banking organizations. All other banking
organizations are required to maintain a minimum leverage ratio ranging
generally from 4 to 5 percent. The Bank's required minimum leverage ratio is 5
percent.
The federal banking agencies during 1996 issued a joint agency policy
statement regarding the management of interest-rate risk exposure (interest rate
risk is the risk that changes in market interest rates might adversely affect a
bank's financial condition) with the goal of ensuring that institutions with
high levels of interest-rate risk have sufficient capital to cover their
exposures. This policy statement reflected the agencies' decision at that time
not to promulgate a standardized measure and explicit capital charge for
interest rate risk, in the expectation that industry techniques for measurement
of such risk will evolve.
However, the Federal Financial Institution Examination Counsel ("FFIEC") on
December 13, 1996, approved an updated Uniform Financial Institutions Rating
System ("UFIRS"). In addition to the five components traditionally included in
the so-called "CAMEL" rating system which has been used by bank examiners for a
number of years to classify and evaluate the soundness of financial institutions
(including capital adequacy, asset quality, management, earnings and liquidity),
UFIRS includes for all bank regulatory examinations conducted on or after
January 1, 1997, a new rating for a sixth category identified as sensitivity to
market risk. Ratings in this category are intended to reflect the degree to
which changes in interest rates, foreign exchange rates, commodity prices or
equity prices may adversely affect an institution's earnings and capital. The
rating system henceforth will be identified as the "CAMELS" system.
As of December 31, 1996, the Bank's total risk-based capital ratio was
approximately 18 percent and its leverage ratio was approximately 12 percent.
The Bank does not presently expect that compliance with the risk-based capital
guidelines or minimum leverage requirements will have a materially adverse
effect on its business in the reasonably foreseeable future. Nor does the Bank
expect that its sensitivity to market
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risk will adversely affect its overall CAMELS rating as compared with its
previous CAMEL ratings by bank examiners.
PROMPT CORRECTIVE ACTION
Prompt Corrective Action Regulations (the "PCA Regulations") of the federal
bank regulatory agencies establish five capital categories in descending order
(well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized), assignment of banks to which
depends upon the institution's total risk-based capital ratio, Tier 1 risk-based
capital ratio, and leverage ratio. Institutions classified in one of the three
undercapitalized categories are subject to certain mandatory and discretionary
supervisory actions, which include increased monitoring and review,
implementation of capital restoration plans, asset growth restrictions,
limitations upon expansion and new business activities, requirements to augment
capital, restrictions upon deposit gathering and interest rates, replacement of
senior executive officers and directors, and requiring divestiture or sale of
the institution. The Bank has been classified as a well-capitalized bank since
adoption of the PCA Regulations. Bancorp will not be subject to the PCA
Regulations, but the Bank will continue to be subject to the PCA Regulations
after the Merger.
DEPOSIT INSURANCE ASSESSMENTS.
In 1995 the FDIC, pursuant to Congressional mandate, reduced bank deposit
insurance assessment rates to a range from $0 to $0.27 per $100 of deposits,
dependent upon a bank's risk. The FDIC has continued these reduced assessment
rates through the first semiannual assessment period of 1997. Based upon the
above risk-based assessment rate schedule, the Bank's current capital ratios,
the Bank's current level of deposits, and assuming no further change in the
assessment rate applicable to the Bank during 1997, the Bank estimates that its
annual noninterest expense attributed to assessments will increase during 1997
by approximately $15,000, due principally to the Bank's acquisition of an
additional $19 million in deposits in connection with its February 1997
acquisition of two branches from Wells Fargo Bank.
LIMITATIONS ON DIVIDENDS
BANCORP. Under California law, shareholders of Bancorp may receive
dividends when and as declared by its Board of Directors out of funds legally
available therefor. With certain exceptions, a California corporation may not
pay a dividend to its shareholders unless its retained earnings equal at least
the amount of the proposed dividend. California law further provides that, in
the event that sufficient retained earnings are not available for the proposed
distribution, a corporation may nevertheless make a distribution to its
shareholders if it meets the following two generally stated conditions: (i) the
corporation's assets equal at least 1 1/4 times its liabilities; and (ii) the
corporation's current assets equal at least its current liabilities or, if the
average of the corporation's earnings before taxes on income and before interest
expense for the two preceding fiscal years was less than the average of the
corporation's interest expense for such fiscal years, then the corporation's
current assets must equal at least 1 1/4 times its current liabilities.
FRB policy prohibits a bank holding company from declaring or paying a cash
dividend which would impose undue pressure on the capital of subsidiary banks or
would be funded only through borrowings or other arrangements that might
adversely affect the holding company's financial position. The policy further
declares that a bank holding company should not continue its existing rate of
cash dividends on its common stock unless its net income is sufficient to fully
fund each dividend and its prospective rate of earnings retention appears
consistent with its capital needs, asset quality and overall financial
condition. Other FRB policies forbid the payment by the bank subsidiaries to
their parent companies of management fees which are unreasonable in amount or
exceed the fair market value of the services rendered (or, if no market exists,
actual cost plus a reasonable profit).
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THE BANK. The power of the board of directors of a state chartered
nonmember bank whose deposits are insured by the FDIC to declare a cash dividend
is subject to statutory and regulatory restrictions which limit the amount
available for cash dividends depending upon the earnings, financial condition
and cash needs of the bank, as well as general business conditions. In
particular, the California Financial Code provides that a bank may not make a
cash distribution to its shareholders in excess of the lesser of the following:
(i) the bank's retained earnings, or (ii) the bank's net income for its last
three fiscal years, less the amount of any distributions made by the bank to its
shareholders during such period. A bank, however, with the prior approval of the
Superintendent (or, after July 1, 1997, the Commissioner of Financial
Institutions), may make a distribution to its shareholders of an amount not to
exceed the greater of (i) a bank's retained earnings; (ii) its net income for
its last fiscal year; or (iii) its net income for the current fiscal year. In
the event that the Superintendent or the Commissioner determines that the
stockholders' equity of a bank is inadequate or that the making of a
distribution by a bank would be unsafe or unsound, the Superintendent or
Commissioner may order a bank to refrain from making such a proposed
distribution. Similar restrictions under FRB regulations also govern the Bank's
ability to pay dividends.
The ability of the Bank to pay dividends is further restricted under FDICIA.
FDICIA prohibits a bank from paying dividends, subject to limited exceptions, if
the bank would be deemed to be undercapitalized under applicable regulations of
the FDIC. In addition, in policy statements, the FDIC has advised insured
institutions, like the bank, that the payment of cash dividends in excess of
current earnings from operations is inappropriate and may be cause for
supervisory action. As a result of this policy, the Bank may find it difficult
to pay dividends out of retained earnings from historical periods prior to the
most recent fiscal year or to take advantage of earnings generated by
extraordinary items. Under the Financial Institutions Supervisory act and the
Federal Financial Institutions Reform, Recovery and Enforcement Act of 1989,
federal regulators also have authority to prohibit financial institutions from
engaging in business practices which are considered to be unsafe or unsound. It
is possible, depending upon the financial condition of the Bank and other
factors, that such regulators could assert that the payment of dividends in some
circumstances by the Bank might constitute unsafe or unsound practices and
prohibit the payment of dividends even though technically permissible.
IMPACT OF MONETARY POLICIES
Banking is a business which depends on interest rate differentials. In
general, the difference between the interest paid by the Bank on its deposits
and other borrowings, and the interest rate earned by the Bank on loans,
securities and other interest-earning assets comprises the major source of the
Bank's earnings. The Bank's business is also affected by general economic
conditions and by the monetary and fiscal policies of the United States. These
policies influence, for example, the FRB's open market operations in U.S.
government securities, the reserve requirements imposed upon commercial banks,
the discount rates applicable to borrowings from the Federal Reserve System by
member banks, and other similar matters which impact the growth of the Bank's
loans, investments and deposits and the interest rates which the Bank charges
and pays. The nature and timing of any future changes in such policies and their
impact on the Bank cannot be predicted. In addition, adverse economic conditions
could make a higher provision for loan losses a prudent course and could cause
higher loan loss charge-offs, thus adversely affecting the Bank's net earnings.
CAPITAL STOCK OF BANCORP AND THE BANK
Upon consummation of the Merger, the holders of Bank Common Stock will
become shareholders of Bancorp and receive one share of Bancorp Common Stock for
each of their shares of Bank Common Stock. Immediately following the Merger, the
Bank's shareholders will hold all of the outstanding shares of Bancorp Common
Stock and be the only shareholders of Bancorp. While the classes of authorized,
and the number of outstanding, shares of stock are the same for Bank and
Bancorp, there are certain differences under California law between the rights
of shareholders of Bancorp as opposed to the Bank. Shareholders
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should consider carefully the differences in Bancorp Common Stock and Bank
Common Stock under California law.
AUTHORIZED CAPITAL. The Bank currently has an authorized capitalization of
4,000,000 shares of no par value Common Stock and 2,000,000 shares of Preferred
Stock. As of March 17, 1997, 1,610,940 shares of Bank Common Stock were issued
and outstanding, 195,826 shares of Common Stock were reserved for issuance upon
exercise of options pursuant to the Bank's 1994 Plan, and no shares of Preferred
Stock were outstanding.
Bancorp currently has an authorized capitalization of 4,000,000 shares of no
par value Common Stock and 2,000,000 shares of Preferred Stock. Of such
authorized shares, 100 shares of Bancorp Common Stock are currently issued and
outstanding (and will be repurchased by Bancorp upon consummation of the
Merger).
Pursuant to the terms of the Reorganization Agreement, Bancorp will issue
1,610,940 shares of its Common Stock in exchange for all of the outstanding
shares of Bank Common Stock. An additional 340,412 shares of Bancorp Common
Stock will be reserved for issuance pursuant to the 1994 Plan to be assumed by
Bancorp. See "THE MERGER--Conversion of Options." The balance of Bancorp's
authorized capital stock will be available to be issued when and as the Board of
Directors of Bancorp determines it advisable to do so. Such shares of capital
stock could be issued for the purpose of raising additional capital, in
connection with acquisitions of other businesses, or for other appropriate
purposes. The Board of Directors of Bancorp has the authority to issue shares of
Common Stock to the extent of the number of authorized unissued shares without
obtaining the approval of existing holders of Common Stock. The issuance of
additional shares of Bancorp Common Stock could adversely affect the voting
power of holders of Common Stock.
VOTING RIGHTS. Holders of Bank Common Stock are entitled to, and holders of
Bancorp Common Stock will be entitled to, one vote for each share held, except
that in the election of directors each shareholder has cumulative voting rights.
See "GENERAL INFORMATION--Voting Securities."
ASSESSMENT OF SHARES. The outstanding shares of Bank Common Stock are fully
paid and nonassessable, except as provided in Section 662 of the California
Financial Code. Section 662 provides that whenever the contributed capital of a
bank is impaired, the Superintendent must order the bank to correct such
impairment to its capital within 60 days. Unless the impairment of contributed
capital is otherwise corrected, the directors of a bank must levy and collect an
assessment upon its outstanding shares of stock pursuant to the California
Financial Code. If the assessment is not paid, the shares may be sold or
forfeited to satisfy the assessment. Section 662 imposes no personal liability
on the part of the shareholders of the Bank.
The Common Stock of Bancorp is not subject to assessment, as its Articles of
Incorporation do not confer upon its Board of Directors the authority to order
such assessment.
The Bank may not repurchase shares of its own capital stock except after
application and receipt of specific approval by the Superintendent and the FRB.
Consequently, if situations arose where the Board of Directors considered a
repurchase of shares to be in the Bank's best interests, the Bank's ability to
respond would be subject to such conditions. Assuming that the Bank continues to
be well-capitalized, however (see "SUPERVISION AND REGULATION--Capital
Standards" below), Bancorp under current regulations of the FRB would probably
qualify to repurchase its shares without FRB or other regulatory approval,
provided that Bancorp's capital exceeds the standards for a "well-capitalized"
bank both before and after any such repurchases, its FRB examination results in
a rating of "1" or "2," and there are no unresolved supervisory issues with
respect to Bancorp.
BYLAWS. The Bylaws of the Bank and of Bancorp are identical in all material
respects (including with respect to the number of authorized directors), except
with respect to provisions in the Bank's Bylaws
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required by the California Financial Code and applicable only to banks. The most
significant difference is that the Superintendent (or the Commissioner as his
successor) may order the call of a meeting of the Board of Directors of the
Bank, but neither the Superintendent nor any other regulatory authority has such
authority with respect to Bancorp.
ARTICLES OF INCORPORATION. The Articles of Incorporation of the Bank and
Bancorp are substantially identical, except that the Bank's Articles of
Incorporation authorize it to engage in the commercial banking business and
Bancorp's Articles of Incorporation forbid it to engage in the banking or trust
company business or the practice of a profession permitted to be incorporated
under the California Corporations Code. Under California law, amendments to the
Bank's Articles of Incorporation require the Superintendent's (after July 1,
1997, the Commissioner's) approval in addition to any shareholder approvals
which may be required, and must be filed with the California Secretary of State
before they may take effect. Amendments to Bancorp's Articles of Incorporation
do not require the approval of the Superintendent, the Commissioner or any other
regulatory authority, although shareholder approval is required for certain
amendments and all such amendments also must be filed with the California
Secretary of State before they may take effect.
Copies of the Articles of Incorporation of the Bank and Bancorp are
available at the Bank's main office at 239 South Main Street, Red Bluff, to be
inspected and copied during regular business hours by any interested
shareholder.
APPLICABILITY OF SECURITIES LAWS. The securities of the Bank, unlike those
of Bancorp, are exempt from the registration requirements of the 1933 Act and
the California Corporate Securities Law of 1968, as amended (the "CSL"). The
effect on the Bank of such exemptions is to allow the Bank to sell its
securities without registration under such laws, although the Bank must obtain a
permit from the Superintendent to offer and sell its securities otherwise than
pursuant to employee stock option plans. In contrast to the Bank, the public
sale by Bancorp of its securities must be registered under the 1933 Act and the
CSL, unless an exemption from registration is available. The requirement that
Bancorp register its securities for sale could increase the cost of the sale of
such securities.
DIVIDENDS. The shareholders of the Bank are entitled to dividends when and
as declared by the Bank's Board of Directors out of funds legally available
therefor, subject to the restrictions set forth in the California Financial
Code. See "SUPERVISION AND REGULATION--Limitations on Dividends." The
shareholders of Bancorp will be entitled to receive dividends when and as
declared by its Board of Directors, out of funds legally available therefor,
subject to the restrictions set forth in the California General Corporation Law.
See "SUPERVISION AND REGULATION--Limitations on Dividends."
Subject to the restrictions on payment of cash dividends as described above,
Bancorp may pay cash dividends depending upon the earnings of Bancorp,
management's assessment of the future capital needs of the Bank, and other
factors; however, no assurance can be given as to whether or when Bancorp may
begin paying cash or stock dividends. Dividends from the Bank are the only
source of funds available from which Bancorp in turn can pay dividends, except
to the extent that Bancorp receives management fees for any management services
it may provide to the Bank. The ability of the Bank to pay dividends to Bancorp
is restricted by statute as described above. See "SUPERVISION AND
REGULATION--Limitations on Dividends."
PREEMPTIVE RIGHTS. Holders of Bank Common Stock do not, and holders of
Bancorp Common Stock will not, have preemptive rights. Bank Common Stock and
Bancorp Common Stock do not have any conversion rights, redemption rights or
sinking fund provisions applicable thereto.
LIQUIDATION RIGHTS. Upon liquidation of the Bank, the shareholders of Bank
Common Stock have the right to receive their pro rata portion of the assets of
the Bank distributable to shareholders. The holders of Bancorp Common Stock will
also be entitled to receive their pro rata share of the assets of Bancorp
distributable to shareholders upon liquidation.
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<PAGE>
DEREGISTRATION OF BANK COMMON STOCK. The Bank is subject to the periodic
reporting requirements of the 1934 Act, and in accordance therewith files
reports and proxy statements with the FRB. Upon consummation of the Merger, the
only shares of Bank Common Stock outstanding will be owned by Bancorp.
Accordingly, upon consummation of the Merger, the Bank will be entitled to, and
in fact will, deregister its Common Stock and thereby terminate its obligations
to file such reports and proxy statements with the FRB. Additionally, upon
consummation of the Merger, there will no longer be any trading in Bank Common
Stock. Bancorp Common Stock, however, upon consummation of the Merger, will be
traded in the over-the-counter market, and Bancorp will be subject to the
periodic reporting requirements of the Securities Exchange Act of 1934 and will
file such reports with the Securities and Exchange Commission. See "MARKET
INFORMATION REGARDING THE BANK'S AND BANCORP'S COMMON STOCK."
INDEMNIFICATION
CALIFORNIA LEGISLATION
The Bank and Bancorp are subject to the California General Corporation Law
(the "CGCL"), which provides a detailed statutory framework covering limitation
of liability of directors in certain instances and indemnification of any
officer, director or other agent of a corporation who is made or threatened to
be made a party to any legal proceeding by reason of his or her service on
behalf of such corporation.
With respect to limitation of liability, the CGCL permits a California
corporation to adopt a provision in its articles of incorporation reducing or
eliminating the liability of a director to the corporation or its shareholders
for monetary damages for breach of the fiduciary duty of care, provided that
such liability does not arise from certain proscribed conduct (including
intentional misconduct and breach of the duty of loyalty). The CGCL in this
regard relates only to actions brought by shareholders on behalf of the
corporation (i.e., "derivative actions") and does not apply to claims brought by
outside parties.
With respect to indemnification, the CGCL provides that to the extent any
officer, director or other agent of a corporation is successful "on the merits"
in defense of any legal proceeding to which such person is a party or is
threatened to be made a party by reason of his or her service on behalf of such
corporation or in defense of any claim, issue, or matter therein, such agent
shall be indemnified against expenses actually and reasonably incurred by the
agent in connection therewith, but does not require indemnification in any other
circumstance. The CGCL also provides that a corporation may indemnify any agent
of the corporation, including officers and directors, against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in a third party proceeding against such person by reason of his or her services
on behalf of the corporation, provided the person acted in good faith and in a
manner he or she reasonably believed to be in the best interests of such
corporation. The CGCL further provides that in derivative suits a corporation
may indemnify such a person against expenses incurred in such a proceeding,
provided such person acted in good faith and in a manner he or she reasonably
believed to be in the best interests of the corporation and its shareholders.
Indemnification is not available in derivative actions (i) for amounts paid or
expenses incurred in connection with a matter that is settled or otherwise
disposed of without court approval or (ii) with respect to matters for which the
agent shall have been adjudged to be liable to the corporation unless the court
shall determine that such person is entitled to indemnification.
The CGCL permits the advancing of expenses incurred in defending any
proceeding against a corporate agent by reason of his or her service on behalf
of the corporation upon the giving of a promise to repay any such sums in the
event it is later determined that such person is not entitled to be indemnified.
Finally, the CGCL provides that the indemnification provided by the statute is
not exclusive of other rights to which those seeking indemnification may be
entitled, by bylaw, agreement or otherwise, to the extent additional rights are
authorized in a corporation's articles of incorporation. The law further permits
a corporation to procure insurance on behalf of its directors, officers and
agents against any liability incurred
32
<PAGE>
by any such individual, even if a corporation would not otherwise have the power
under applicable law to indemnify the director, officer or agent for such
expenses.
The Articles of Incorporation and Bylaws of the Bank and Bancorp implement
the applicable statutory framework by limiting the personal liability of
directors for monetary damages for a breach of a directors' fiduciary duty of
care and allowing the Bank and Bancorp to expand the scope of their
indemnification of directors, officers and other agents to the fullest extent
permitted by California law. The Articles of the Bank and Bancorp, pursuant to
the applicable provisions of the CGCL, also include a provision allowing the
Bank and Bancorp to include in their bylaws, and in agreements between the Bank
and Bancorp and their directors, officers and other agents, provisions expanding
the scope of indemnification beyond that specifically provided under California
law. The Bank has no such agreements in force, and no such agreements are
planned for the directors, officers or other agents of Bancorp.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE.
The Bank presently maintains a policy of directors' and officers' liability
insurance. There is no assurance, however, that such coverage will continue to
be available with such breadth of coverage as the Bank deems advisable and at
reasonable expense. It is intended that the coverage provided by the insurance
be made available to the officers and directors of Bancorp upon consummation of
the Merger.
COMMISSION POSITION ON INDEMNIFICATION
Insofar as indemnification for liabilities arising under the 1933 Act may be
permitted to directors, officers or persons controlling Bancorp pursuant to the
foregoing provisions, Bancorp has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the 1933 Act and is therefore unenforceable.
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Perry-Smith&Co. ("Perry-Smith"), certified public
accountants, serves the Bank as its auditors at the direction of the board of
directors and Audit Committee of the Bank. It is anticipated that a
representative of Perry-Smith will be present at the Annual Meeting with the
opportunity to make a statement if he or she desires to do so and will be
available to answer appropriate questions.
During 1996, the Bank paid Perry-Smith $23,560 in fees for non-audit
services, including tax advice and preparation. This amount represented
approximately 31% of the total fees paid to Perry-Smith during the period.
Before each professional service provided by Perry-Smith was rendered to the
Bank, such service was approved by, and its effect upon Perry-Smith's
independence was considered by, the Audit Committee.
ANNUAL REPORT
The Annual Report to Shareholders of the Bank containing audited financial
statements for the fiscal year ended December 31, 1996, accompanies this Proxy
Statement/Prospectus.
SHAREHOLDERS' PROPOSALS
Next year's Annual Meeting of Shareholders of the Bank (and, if the Merger
takes place, Bancorp) will be held on April 27, 1998. The deadline for
shareholders to submit proposals for inclusion in the Proxy Statement and form
of Proxy for the 1998 Annual Meeting of Shareholders is December 29, 1997.
Assuming that the Merger takes place, all proposals should be submitted by
Certified Mail, Return Receipt Requested, to the Secretary, Tehama Bancorp, P.O.
Box 890, Red Bluff, California 96080.
33
<PAGE>
OTHER MATTERS
The Board of Directors knows of no other matters which will be brought
before the Annual Meeting, but if such matters are properly presented to the
Annual Meeting, proxies solicited hereby will be voted in accordance with the
judgment of the persons holding such proxies. All shares represented by duly
executed proxies will be voted at the Annual Meeting in accordance with the
terms of such proxies.
TEHAMA BANK
SENIOR VICE PRESIDENT AND CASHIER
Red Bluff, California
April 8, 1997
34
<PAGE>
APPENDIX A
PLAN OF REORGANIZATION
AND
MERGER AGREEMENT
AMONG
TEHAMA BANK,
TEHAMA BANCORP
AND
TEHAMA MERGER CORPORATION
FEBRUARY, 1997
35
<PAGE>
PLAN OF REORGANIZATION AND MERGER AGREEMENT
This Plan of Reorganization and Merger Agreement (the "Merger Agreement") is
entered into as of February 12, 1997 by and among Tehama Bank (the "Bank"),
Tehama Merger Corporation (the "Subsidiary"), and Tehama Bancorp (the "Holding
Company").
RECITALS AND UNDERTAKINGS
A. The Bank is a California state-chartered bank with its principal office
in the City of Red Bluff, County of Tehama, State of California. The Subsidiary
and the Holding Company are corporations duly organized and existing under the
laws of the State of California with their principal offices in the City of Red
Bluff, County of Tehama, State of California.
B. As of the date hereof, the Bank has 4,000,000 shares of common stock and
2,000,000 shares of preferred stock authorized and 1,604,406 shares of common
stock issued and outstanding.
C. As of the date hereof, the Subsidiary has 4,000,000 shares of common
stock and 2,000,000 shares of preferred stock authorized. Immediately prior to
the Effective Date (as such term is defined below), 100 shares of such common
stock will be issued and outstanding, all of which shares will be owned by the
Holding Company.
D. As of the date hereof, the Holding Company has 4,000,000 shares of common
stock and 2,000,000 shares of preferred stock authorized. Immediately prior to
the Effective Date, 100 shares of the Holding Company's common stock will be
issued and outstanding.
E. The Boards of Directors of the Bank, the Holding Company and the
Subsidiary, respectively, have approved this Merger Agreement and authorized its
execution.
AGREEMENT
Section 1. GENERAL
1.1 THE MERGER. On the Effective Date, the Subsidiary shall be merged with
and into the Bank, with the Bank being the surviving corporation. The Bank shall
thereafter be a subsidiary of the Holding Company, and its name shall be "Tehama
Bank."
1.2 EFFECTIVE DATE. The merger described herein shall become effective at
the close of business on the day (the "Effective Date") upon which an executed
counterpart of this Merger Agreement shall have been filed with the Secretary of
State of the State of California in accordance with Section 1103 of the
California General Corporation Law.
1.3 ARTICLES OF INCORPORATION AND BYLAWS. On the Effective Date, the
Articles of Incorporation of the Bank, as in effect immediately prior to the
Effective Date, shall remain the Articles of Incorporation of the Bank until
amended; the Bylaws of the Bank, as in effect immediately prior to the Effective
Date, shall remain the Bylaws of the Bank until amended; the certificate of
authority of the Bank issued by the Superintendent of Banks of the State of
California shall remain the certificate of authority of the Bank; and the Bank's
deposit insurance coverage by the Federal Deposit Insurance Corporation shall
remain the deposit insurance of the Bank.
1.4 DIRECTORS AND OFFICERS. On the Effective Date, the directors and
officers of the Bank immediately prior to the Effective Date shall remain the
directors and officers of the Bank. The directors of the Bank shall serve until
the next annual meeting of shareholders of the Bank or until such time as their
successors are elected and have been qualified.
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<PAGE>
1.5 EFFECT OF THE MERGER.
(a) ASSETS AND RIGHTS. On the Effective Date and thereafter, all
rights, privileges, franchises and property of the Subsidiary and all debts
and liabilities due or to become due to the Subsidiary including choses in
action and every interest or asset of conceivable value or benefit, shall be
deemed fully and finally and without any right of reversion vested in the
Bank without further act or deed; and the Bank shall have and hold the same
in its own right as fully as the same was possessed and held by the
Subsidiary.
(b) LIABILITIES. On the Effective Date and thereafter, all debts,
liabilities and obligations due or to become due of, and all claims and
demands for any cause existing against, the Subsidiary shall be and become
the debts, liabilities or obligations of, or the claims or demands against,
the Bank in the same manner as if the Bank had itself incurred or become
liable for them.
(c) CREDITORS' RIGHTS AND LIENS. On the Effective Date and thereafter,
all rights of creditors of the Subsidiary and all liens upon the property of
the Subsidiary shall be preserved unimpaired, and shall be limited to the
property affected by such liens immediately prior to the Effective Date.
(d) PENDING ACTIONS. On the Effective Date and thereafter, any action
or proceeding pending by or against the Subsidiary shall not be deemed to
have abated or been discontinued, but may be pursued to judgment with full
right to appeal or review. Any such action or proceeding may be pursued as
if the merger described herein had not occurred, or with the Bank
substituted in place of the Subsidiary as the case may be.
1.6 FURTHER ASSURANCES. The Subsidiary agrees that at any time, or from
time to time, as and when requested by the Bank, or by its successors or
assigns, it will execute and deliver, or cause to be executed and delivered, in
its name by its last acting officers, or by the corresponding officers of the
Bank, all such conveyances, assignments, transfers, deeds and other instruments,
and will take or cause to be taken such further or other action as the Bank, or
its successors or assigns, may deem necessary or desirable in order to carry out
the vesting, perfecting, confirming, assignment, devolution or other transfer of
the interests, property, privileges, powers, immunities, franchises and other
rights transferred to the Bank in this Section 1, or otherwise to carry out the
intent and purposes of this Merger Agreement.
Section 2. STOCK
2.1 STOCK OF THE SUBSIDIARY. On the Effective Date, each share of common
stock of the Subsidiary issued and outstanding immediately prior to the
Effective Date shall, by virtue of the merger described herein, be deemed to be
exchanged for and converted into one share of fully paid and (except as provided
by California Financial Code Section 662) nonassessable common stock of the
Bank.
2.2 STOCK OF THE HOLDING COMPANY. On the Effective Date, each share of
common stock of the Holding Company issued and outstanding immediately prior to
the Effective Date shall be repurchased by the Holding Company for the amount
paid for such shares upon their original issuance.
2.3 STOCK OF THE BANK. On the Effective Date, each share of common stock
of the Bank issued and outstanding immediately prior to the Effective Date
shall, by virtue of the merger described herein, be deemed to be exchanged for
and converted into one share of fully paid and nonassessable common stock of the
Holding Company, in accordance with the provisions of Paragraph 2.4 hereof.
2.4 EXCHANGE OF STOCK BY SHAREHOLDERS OF THE BANK. On the Effective Date
or as soon as practicable thereafter, the following actions shall be taken to
effectuate the exchange and conversion specified in Paragraph 2.3 hereof:
(a) The shareholders of the Bank of record immediately prior to the
Effective Date shall be allocated and entitled to receive for each share of
stock of the Bank then held by them respectively one share of common stock
of the Holding Company.
37
<PAGE>
(b) Subject to the provisions of Paragraph 2.4(c) hereof, the Holding
Company shall issue to the shareholders of the Bank the shares of common
stock of the Holding Company which said shareholders are entitled to
receive.
(c) Thereafter, outstanding certificates representing shares of common
stock of the Bank shall represent shares of the common stock of the Holding
Company, and such certificates may, but need not, be exchanged by the
holders thereof for new certificates for the appropriate number of shares of
the Holding Company.
2.5 OTHER RIGHTS TO STOCK.
(a) On the Effective Date and thereafter, the Bank's 1994 Stock Option
Plan shall be administered in an appropriate manner to reflect the merger
described herein; any outstanding options to purchase shares of common stock
of the Bank shall be deemed to be options granted by the Holding Company
upon the same terms and conditions, except that appropriate adjustments
shall be deemed to be made to such terms and conditions to reflect the
merger described herein; and any options thereafter granted pursuant to the
1994 Stock Option Plan, shall be deemed to be options granted by the Holding
Company.
(b) From time to time as and when required by the provisions of any
agreement to which the Bank or the Holding Company shall become a party
after the date hereof that provides for the issuance of shares of common
stock or other securities, either debt or equity, of the Bank or the Holding
Company in connection with a merger into the Bank of any other banking
institution or the acquisition by the Bank of the assets or stock of any
other banking institution or other corporation, the Holding Company shall
issue in accordance with the terms of any such agreement shares of its
common stock or other debt or equity securities as required by such
agreement or in substitution for the shares of common stock or other debt or
equity securities of the Bank required to be issued by such agreement, as
the case may be, which the shareholders of any other such banking
institution or other corporation shall be entitled to receive by virtue of
any such agreement.
Section 3. APPROVALS
3.1 SHAREHOLDER APPROVAL. This Merger Agreement shall be submitted to the
shareholder(s) of the Holding Company, the Subsidiary and the Bank for
ratification and confirmation to the extent required by, and in accordance with,
applicable provisions of law.
3.2 REGULATORY APPROVALS. Each of the parties hereto shall proceed
expeditiously and cooperate fully in procuring all other consents and approvals,
and in satisfying all other requirements, prescribed by law or otherwise,
necessary or desirable for the merger described herein to be consummated,
including without limitation the consents and approvals referred to in
Paragraphs 4.1(b), 4.1(c) and 4.1(d) hereof.
Section 4. CONDITIONS PRECEDENT, TERMINATION AND PAYMENT OF EXPENSES
4.1 CONDITIONS PRECEDENT TO THE MERGER. Consummation of the merger
described herein is conditioned upon the following:
(a) Ratification and confirmation of this Merger Agreement by the
shareholders of the Holding Company, the Subsidiary and the Bank in
accordance with applicable provisions of law;
(b) Procuring all other consents and approvals and satisfying all other
requirements, prescribed by law or otherwise, which are necessary for the
merger described herein to be consummated, including without limitation: (i)
approval from the Federal Deposit Insurance Corporation, the Superintendent
of Banks of the State of California, and the Board of Governors of the
Federal Reserve System; (ii) approval of the California Commissioner of
Corporations under the California Corporate Securities Law of 1968, and
securities administrators of other applicable jurisdictions, with respect to
the securities of the Holding Company issuable upon consummation of the
merger, and
38
<PAGE>
(iii) the declaration by the Securities and Exchange Commission of the
effectiveness of a registration statement under the Securities Act of 1933
with respect to the securities of the Holding Company issuable upon
consummation of the merger or the automatic effectiveness of such
registration statement;
(c) Receipt (unless waived by each of the parties hereto) of an opinion
of counsel and/or accountants with respect to the tax consequences to the
parties and their shareholders of the merger described herein;
(d) Procuring all consents or approvals, governmental or otherwise,
which in the opinion of counsel for the Bank are or may be necessary to
permit or to enable the Bank to conduct, upon and after the merger described
herein, all or any part of the businesses and other activities that the Bank
engages in immediately prior to such merger, in the same manner and to the
same extent that the Bank engaged in such businesses and other activities
immediately prior to such merger; and
(e) Performance by each of the parties hereto of all obligations under
this Merger Agreement which are to be performed prior to the consummation of
the merger described herein.
4.2 TERMINATION OF THE MERGER. In the event that any condition specified
in Paragraph 4.1 hereof cannot be fulfilled, or prior to the Effective Date the
Board of Directors of any of the parties hereto reaches any of the following
determinations:
(a) The number of shares of common stock of the Bank voting against the
merger described herein makes consummation of such merger inadvisable; or
(b) Any action, suit, proceeding or claim relating to the merger
described herein, whether initiated or threatened, makes consummation of
such merger inadvisable; or
(c) Consummation of the merger described herein is inadvisable for any
other reason;
then this Merger Agreement shall terminate. Upon termination, this Merger
Agreement shall be void and of no further effect, and there shall be no
liability by reason of this Merger Agreement or the termination hereof on the
part of any the parties hereto or their respective directors, officers,
employees, agents or shareholders.
4.3 EXPENSES OF THE MERGER. All of the expenses of the merger described
herein, including without limitation filing fees, printing costs, mailing costs,
accountant's fees and legal fees, shall be borne initially by the Bank but shall
after the Effective Date be apportioned and adjusted between the Bank and the
Holding Company as shall be required by applicable regulation or rules of
accounting, provided that, nothing herein shall forbid the Bank from paying any
dividend to the Holding Company which the Holding Company may use for the
payment (including reimbursement of the Bank) of any such expenses.
39
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Merger Agreement to
be executed by their duly authorized officers as of the day and year first above
written.
TEHAMA BANK
By:
--------------------------------------
William P. Ellison,
PRESIDENT
By:
--------------------------------------
Raymond C. Lieberenz
SECRETARY
TEHAMA MERGER CORPORATION
By:
--------------------------------------
William P. Ellison,
PRESIDENT
By:
--------------------------------------
Raymond C. Lieberenz
SECRETARY
TEHAMA BANCORP
By:
--------------------------------------
William P. Ellison,
PRESIDENT
By:
--------------------------------------
Raymond C. Lieberenz
SECRETARY
40
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
CALIFORNIA LEGISLATION
The Bank and Bancorp are subject to the California General Corporation Law
(the "CGCL"), which provides a detailed statutory framework covering limitation
of liability of directors in certain instances and indemnification of any
officer, director or other agent of a corporation who is made or threatened to
be made a party to any legal proceeding by reason of his or her service on
behalf of such corporation.
With respect to limitation of liability, the CGCL permits a California
corporation to adopt a provision in its articles of incorporation reducing or
eliminating the liability of a director to the corporation or its shareholders
for monetary damages for breach of the fiduciary duty of care, provided that
such liability does not arise from certain proscribed conduct (including
intentional misconduct and breach of the duty of loyalty). The CGCL in this
regard relates only to actions brought by shareholders on behalf of the
corporation (i.e., "derivative actions") and does not apply to claims brought by
outside parties.
With respect to indemnification, the CGCL provides that to the extent any
officer, director or other agent of a corporation is successful "on the merits"
in defense of any legal proceeding to which such person is a party or is
threatened to be made a party by reason of his or her service on behalf of such
corporation or in defense of any claim, issue, or matter therein, such agent
shall be indemnified against expenses actually and reasonably incurred by the
agent in connection therewith, but does not require indemnification in any other
circumstance. The CGCL also provides that a corporation may indemnify any agent
of the corporation, including officers and directors, against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in a third party proceeding against such person by reason of his or her services
on behalf of the corporation, provided the person acted in good faith and in a
manner he or she reasonably believed to be in the best interests of such
corporation. The CGCL further provides that in derivative suits a corporation
may indemnify such a person against expenses incurred in such a proceeding,
provided such person acted in good faith and in a manner he or she reasonably
believed to be in the best interests of the corporation and its shareholders.
Indemnification is not available in derivative actions (1) for amounts paid or
expenses incurred in connection with a matter that is settled or otherwise
disposed of without court approval or (ii) with respect to matters for which the
agent shall have been adjudged to be liable to the corporation unless the court
shall determine that such person is entitled to indemnification.
The CGCL permits the advancing of expenses incurred in defending any
proceeding against a corporate agent by reason of his or her service on behalf
of the corporation upon the giving of a promise to repay any such sums in the
event it is later determined that such person is not entitled to be indemnified.
Finally, the CGCL provides that the indemnification provided by the statute is
not exclusive of other rights to which those seeking indemnification may be
entitled, by bylaw, agreement or otherwise, to the extent additional rights are
authorized in a corporation's articles of incorporation. The law further permits
a corporation to procure insurance on behalf of its directors, officers and
agents against any liability incurred by any such individual, even if a
corporation would not otherwise have the power under applicable law to indemnify
the director, officer or agent for such expenses.
The Articles of Incorporation and Bylaws of the Bank and Bancorp implement
the applicable statutory framework by limiting the personal liability of
directors for monetary damages for a breach of a directors' fiduciary duty of
care and allowing the Bank and Bancorp to expand the scope of their
indemnification of directors, officers and other agents to the fullest extent
permitted by California law. The Articles of the Bank and Bancorp, pursuant to
the applicable provisions of the CGCL, also include a provision allowing the
Bank and Bancorp to include in their bylaws, and in agreements between the Bank
II-1
<PAGE>
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS (CONTINUED)
and Bancorp and their directors, officers and other agents, provisions expanding
the scope of indemnification beyond that specifically provided under California
law.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
The Bank presently maintains a policy of directors' and officers' liability
insurance. There is no assurance, however, that such coverage will continue to
be available with such breadth of coverage as the Bank deems advisable and at
reasonable expense. It is intended that the coverage provided by the insurance
be made available to the officers and directors of Bancorp upon consummation of
the Merger.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following exhibits are filed as part of this Registration Statement:
<TABLE>
<S> <C>
2 Plan of Reorganization and Merger Agreement
3.1 Articles of Incorporation
3.2 Bylaws
4.1 Specimen form of certificate for Bancorp Common Stock
5 Opinion and consent of Bronson, Bronson & McKinnon LLP as to the validity of the
securities to be registered
8 Opinion and consent of Perry-Smith&Co. with respect to tax matters
10.1 (A) Lease Assignment Agreement dated February 22, 1988
(B) Ground lease dated July 31, 1980
(C) Addendum to Lease dated February 6, 1981
10.2 Assignment and Assumption of Agreement and Right of First Refusal, dated February 25,
1988
10.3 Purchase and Assumption Agreement dated October 15, 1996, between the Bank and Wells
Fargo Bank, N.A.
10.4 (A) Tehama County Bank 1994 Stock Option Plan
(B) Form of Incentive Stock Option Agreement
(C) Form of Nonstatutory Stock Option Agreement
(D) Form of Director's Nonstatutory Stock Option Agreement
10.5 (A) Merchant Services Agreement with Cardservice International, Inc., effective July
1, 1994
(B) Lead Principal Member Agreement dated April 17, 1991
10.6 Service Agreement with First Data Resources, Inc., dated June 3, 1991, as amended June
29, 1992, February 8, 1993, March 15, 1994, March 15, 1994 and March 1, 1994
10.7 (A-D) Executive Salary Continuation Agreements dated June 17, 1993 with
(a) Daniel B. Cargile, (b) David L. Roberts, (c) Frank S. Onions and (d) William P.
Ellison
13 The portions of the Tehama County Bank 1996 Annual Report to Shareholders which have
been incorporated by reference herein are filed with the Commission. The portions
which have not been incorporated herein are provided for information purposes only
23.1 Consent of Bronson, Bronson & McKinnon LLP (contained in its opinion included as
Exhibit 5 hereto)
23.2 Consent of Perry-Smith&Co. (contained in its opinion included as Exhibit 8 hereto)
24 Power of Attorney
99 Form of Proxy to be utilized in connection with the Annual Meeting of Shareholders of
the Bank
</TABLE>
II-2
<PAGE>
ITEM 22. UNDERTAKINGS
(1) The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through the use of
a Prospectus which is a part of this Registration Statement by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the Registrant undertakes that such reoffering Prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters in addition to the
information called for by other Items of the applicable form.
(2) The Registrant undertakes that every Prospectus (i) that is filed pursuant
to Paragraph (1) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for each such post-effective amendment
shall be deemed to be a new Registration Statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) The Registrant hereby undertakes to respond to requests for information that
is incorporated by reference into the Prospectus pursuant to Items 4, 10(b),
11 or 13 of this Form, within one business day of receipt of such request,
and to send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(4) The Registrant hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
Registration Statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
duly caused this Registration Statement on Form S-4 to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Red Bluff, State
of California, on March 18, 1997.
TEHAMA BANCORP
(Registrant)
By: /s/ WILLIAM P. ELLISON
-----------------------------------
William P. Ellison
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Date: March 18, 1997 /s/ WILLIAM P. ELLISON
-------------------------------------------------------
William P. Ellison, President and Chief Executive Officer
<S> <C>
Date: March 18, 1997 /s/ FRANK S. ONIONS
-------------------------------------------------------
Frank S. Onions, Senior Vice President and Cashier
(Principal Financial Officer and Principal Accounting Officer)
Date: March 18, 1997 /s/ HENRY CLAY ARNEST III
-------------------------------------------------------
Henry Clay Arnest III, Director
Date: March 18, 1997 /s/ LOUIS J. BOSETTI
-------------------------------------------------------
Louis J. Bosetti, Director
Date: March 18, 1997 /s/ DANIEL B. CARGILE
-------------------------------------------------------
Daniel B. Cargile, Director
Date: March 18, 1997 /s/ HARRY DUDLEY
-------------------------------------------------------
Harry Dudley, Director
Date: March 18, 1997 /s/ WILLIAM P. ELLISON
-------------------------------------------------------
William P. Ellison, Director
Date: March 18, 1997 /s/ GARRY D. FISH
-------------------------------------------------------
Garry D. Fish, Director
Date: March 18, 1997 /s/ MAX M. FROOME
-------------------------------------------------------
Max M. Froome, Director
Date: March 18, 1997 /s/ ORVILLE K. JACOBS
-------------------------------------------------------
Orville K. Jacobs, Director
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C>
Date: March 18, 1997 /s/ GARY C. KATZ
-------------------------------------------------------
Gary C. Katz, Director
Date: March 18, 1997 /s/ JOHN W. KOEBERER
-------------------------------------------------------
John W. Koeberer, Director and Chairman of the Board
Date: March 18, 1997 /s/ RAYMOND C. LIEBERENZ
-------------------------------------------------------
Raymond C. Lieberenz, Director and Secretary of the Board
Date: March 18, 1997 /s/ GARY L. NAPIER
-------------------------------------------------------
Gary L. Napier, Director and Vice Chairman of the Board
Date: March 18, 1997 /s/ GENE PENNE
-------------------------------------------------------
Gene Penne, Director
Date: March 18, 1997 /s/ TERRANCE A. RUST
-------------------------------------------------------
Terrance A. Rust, Director
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. EXHIBIT NAME PAGE NO.
- - ----------- --------------------------------------------------------------------------------------------- ---------------
<C> <S> <C>
2 Plan of Reorganization and Merger Agreement
3.1 Articles of Incorporation
3.2 By-Laws.
4 Specimen form of certificate for Bancorp Common Stock
5 Opinion and consent of Bronson, Bronson & McKinnon LLP as to the validity of the securities
to be registered
8 Opinion and consent of Perry-Smith&Co. with respect to tax matters
10.1 (A) Lease Assignment Agreement dated February 22, 1988
(B) Ground Lease dated July 31, 1980
(C) Addendum to Lease dated February 6, 1981
10.2 Assignment and Assumption of Agreement and Right of First Refusal, dated February 25, 1988.
10.3 Purchase and Assumption Agreement dated October 15, 1996, between the Bank and Wells Fargo
Bank, N.A.
10.4 (A) Tehama County Bank 1994 Stock Option Plan
(B) Form of Incentive Stock Option Agreement
(C) Form of Nonstatutory Stock Option Agreement
(D) Form of Director's Nonstatutory Stock Option Agreement
10.5 (A) Merchant Services Agreement with Cardservice International, Inc., effective July 1, 1994
(B) Lead Principal Member Agreement dated April 17, 1991
10.6 Service Agreement with First Data Resources, Inc., dated June 3, 1991, as amended June 29,
1992, February 8, 1993, March 15, 1994, March 15, 1994 and March 1, 1994
10.7 (A-D) Executive Salary Continuation Agreements dated June 17, 1993 with (a) Daniel B.
Cargile, (b) David L. Roberts, (c) Frank S. Onions and (d) William P. Ellison
13 The portions of the Tehama County Bank 1996 Annual Report to Shareholders which have been
incorporated by reference herein are filed with the Commission. The portions which have not
been incorporated herein are provided for information purposes only.
23.1 Consent of Bronson, Bronson & McKinnon LLP (contained in its opinion included as Exhibit 5
hereto)
23.2 Consent of Perry-Smith&Co. (contained in its opinion included as Exhibit 8 hereto)
24 Power of Attorney
99 Form of Proxy to be utilized in connection with the Annual Meeting of Shareholders of the
Bank
</TABLE>
<PAGE>
(EXHIBIT 2)
PLAN OF REORGANIZATION
AND
MERGER AGREEMENT
AMONG
TEHAMA BANK,
TEHAMA BANCORP
AND
TEHAMA MERGER CORPORATION
FEBRUARY, 1997
<PAGE>
PLAN OF REORGANIZATION AND MERGER AGREEMENT
This Plan of Reorganization and Merger Agreement (the "Merger Agreement")
is entered into as of February 12, 1997 by and among Tehama Bank (the "Bank"),
Tehama Merger Corporation (the "Subsidiary"), and Tehama Bancorp (the "Holding
Company").
RECITALS AND UNDERTAKINGS
A. The Bank is a California state-chartered bank with its principal
office in the City of Red Bluff, County of Tehama, State of California. The
Subsidiary and the Holding Company are corporations duly organized and existing
under the laws of the State of California with their principal offices in the
City of Red Bluff, County of Tehama, State of California.
B. As of the date hereof, the Bank has 4,000,000 shares of common stock
and 2,000,000 shares of preferred stock authorized and 1,604,406 shares of
common stock issued and outstanding.
C. As of the date hereof, the Subsidiary has 4,000,000 shares of common
stock and 2,000,000 shares of preferred stock authorized. Immediately prior to
the Effective Date (as such term is defined below), 100 shares of such common
stock will be issued and outstanding, all of which shares will be owned by the
Holding Company.
D. As of the date hereof, the Holding Company has 4,000,000 shares of
common stock and 2,000,000 shares of preferred stock authorized. Immediately
prior to the Effective Date, 100 shares of the Holding Company's common stock
will be issued and outstanding.
E. The Boards of Directors of the Bank, the Holding Company and the
Subsidiary, respectively, have approved this Merger Agreement and authorized its
execution.
AGREEMENT
Section 1. GENERAL
1.1 THE MERGER. On the Effective Date, the Subsidiary shall be merged
with and into the Bank, with the Bank being the surviving corporation. The Bank
shall thereafter be a subsidiary of the Holding Company, and its name shall be
"Tehama Bank."
1.2 EFFECTIVE DATE. The merger described herein shall become effective at
the close of business on the day (the "Effective Date") upon which an executed
counterpart of this
2
<PAGE>
Merger Agreement shall have been filed with the Secretary of
State of the State of California in accordance with Section 1103 of the
California General Corporation Law.
1.3 ARTICLES OF INCORPORATION AND BYLAWS. On the Effective Date, the
Articles of Incorporation of the Bank, as in effect immediately prior to the
Effective Date, shall remain the Articles of Incorporation of the Bank until
amended; the Bylaws of the Bank, as in effect immediately prior to the Effective
Date, shall remain the Bylaws of the Bank until amended; the certificate of
authority of the Bank issued by the Superintendent of Banks of the State of
California shall remain the certificate of authority of the Bank; and the Bank's
deposit insurance coverage by the Federal Deposit Insurance Corporation shall
remain the deposit insurance of the Bank.
1.4 DIRECTORS AND OFFICERS. On the Effective Date, the directors and
officers of the Bank immediately prior to the Effective Date shall remain the
directors and officers of the Bank. The directors of the Bank shall serve until
the next annual meeting of shareholders of the Bank or until such time as their
successors are elected and have been qualified.
1.5 EFFECT OF THE MERGER.
(a) ASSETS AND RIGHTS. On the Effective Date and thereafter, all
rights, privileges, franchises and property of the Subsidiary and all debts
and liabilities due or to become due to the Subsidiary including choses in
action and every interest or asset of conceivable value or benefit, shall
be deemed fully and finally and without any right of reversion vested in
the Bank without further act or deed; and the Bank shall have and hold the
same in its own right as fully as the same was possessed and held by the
Subsidiary.
(b) LIABILITIES. On the Effective Date and thereafter, all debts,
liabilities and obligations due or to become due of, and all claims and
demands for any cause existing against, the Subsidiary shall be and become
the debts, liabilities or obligations of, or the claims or demands against,
the Bank in the same manner as if the Bank had itself incurred or become
liable for them.
(c) CREDITORS' RIGHTS AND LIENS. On the Effective Date and
thereafter, all rights of creditors of the Subsidiary and all liens upon
the property of the Subsidiary shall be preserved unimpaired, and shall be
limited to the property affected by such liens immediately prior to the
Effective Date.
(d) PENDING ACTIONS. On the Effective Date and thereafter, any
action or proceeding pending by or against the Subsidiary shall not be
deemed to have abated or been discontinued, but may be pursued to judgment
with full right to appeal or review.
3
<PAGE>
Any such action or proceeding may be pursued as if the merger described
herein had not occurred, or with the Bank substituted in place of the
Subsidiary as the case may be.
1.6 FURTHER ASSURANCES. The Subsidiary agrees that at any time, or from time
to time, as and when requested by the Bank, or by its successors or assigns, it
will execute and deliver, or cause to be executed and delivered, in its name by
its last acting officers, or by the corresponding officers of the Bank, all such
conveyances, assignments, transfers, deeds and other instruments, and will take
or cause to be taken such further or other action as the Bank, or its successors
or assigns, may deem necessary or desirable in order to carry out the vesting,
perfecting, confirming, assignment, devolution or other transfer of the
interests, property, privileges, powers, immunities, franchises and other rights
transferred to the Bank in this Section 1, or otherwise to carry out the intent
and purposes of this Merger Agreement.
Section 2. STOCK
2.1 STOCK OF THE SUBSIDIARY. On the Effective Date, each share of common
stock of the Subsidiary issued and outstanding immediately prior to the
Effective Date shall, by virtue of the merger described herein, be deemed to be
exchanged for and converted into one share of fully paid and (except as provided
by California Financial Code Section 662) nonassessable common stock of the
Bank.
2.2 STOCK OF THE HOLDING COMPANY. On the Effective Date, each share of
common stock of the Holding Company issued and outstanding immediately prior to
the Effective Date shall be repurchased by the Holding Company for the amount
paid for such shares upon their original issuance.
2.3 STOCK OF THE BANK. On the Effective Date, each share of common stock
of the Bank issued and outstanding immediately prior to the Effective Date
shall, by virtue of the merger described herein, be deemed to be exchanged for
and converted into one share of fully paid and nonassessable common stock of the
Holding Company, in accordance with the provisions of Paragraph 2.4 hereof.
2.4 EXCHANGE OF STOCK BY SHAREHOLDERS OF THE BANK. On the Effective Date
or as soon as practicable thereafter, the following actions shall be taken to
effectuate the exchange and conversion specified in Paragraph 2.3 hereof:
(a) The shareholders of the Bank of record immediately prior to the
Effective Date shall be allocated and entitled to receive for each share of
common stock of the Bank then held by them respectively one share of common
stock of the Holding Company.
4
<PAGE>
(b) Subject to the provisions of Paragraph 2.4(c) hereof, the Holding
Company shall issue to the shareholders of the Bank the shares of common
stock of the Holding Company which said shareholders are entitled to
receive.
(c) Thereafter, outstanding certificates representing shares of
common stock of the Bank shall represent shares of the common stock of the
Holding Company, and such certificates may, but need not, be exchanged by
the holders thereof for new certificates for the appropriate number of
shares of the Holding Company.
2.5 OTHER RIGHTS TO STOCK.
(a) On the Effective Date and thereafter, the Bank's 1994 Stock
Option Plan shall be administered in an appropriate manner to reflect the
merger described herein; any outstanding options to purchase shares of
common stock of the Bank shall be deemed to be options granted by the
Holding Company upon the same terms and conditions, except that appropriate
adjustments shall be deemed to be made to such terms and conditions to
reflect the merger described herein; and any options thereafter granted
pursuant to the 1994 Stock Option Plan, shall be deemed to be options
granted by the Holding Company.
(b) From time to time as and when required by the provisions of any
agreement to which the Bank or the Holding Company shall become a party
after the date hereof that provides for the issuance of shares of common
stock or other securities, either debt or equity, of the Bank or the
Holding Company in connection with a merger into the Bank of any other
banking institution or the acquisition by the Bank of the assets or stock
of any other banking institution or other corporation, the Holding Company
shall issue in accordance with the terms of any such agreement shares of
its common stock or other debt or equity securities as required by such
agreement or in substitution for the shares of common stock or other debt
or equity securities of the Bank required to be issued by such agreement,
as the case may be, which the shareholders of any other such banking
institution or other corporation shall be entitled to receive by virtue of
any such agreement.
Section 3. APPROVALS
3.1 SHAREHOLDER APPROVAL. This Merger Agreement shall be submitted to the
shareholder(s) of the Holding Company, the Subsidiary and the Bank for
ratification and confirmation to the extent required by, and in accordance with,
applicable provisions of law.
3.2 REGULATORY APPROVALS. Each of the parties hereto shall proceed
expeditiously and cooperate fully in procuring all other consents and approvals,
and in satisfying all other requirements, prescribed by law or otherwise,
necessary or desirable for the merger described
5
<PAGE>
herein to be consummated, including without limitation the consents and
approvals referred to in Paragraphs 4.1(b), 4.1(c) and 4.1(d) hereof.
Section 4. CONDITIONS PRECEDENT, TERMINATION AND PAYMENT
OF EXPENSES
4.1 CONDITIONS PRECEDENT TO THE MERGER. Consummation of the merger
described herein is conditioned upon the following:
(a) Ratification and confirmation of this Merger Agreement by the
shareholders of the Holding Company, the Subsidiary and the Bank in
accordance with applicable provisions of law;
(b) Procuring all other consents and approvals and satisfying all
other requirements, prescribed by law or otherwise, which are necessary for
the merger described herein to be consummated, including without
limitation: (i) approval from the Federal Deposit Insurance Corporation,
the Superintendent of Banks of the State of California, and the Board of
Governors of the Federal Reserve System; (ii) approval of the California
Commissioner of Corporations under the California Corporate Securities Law
of 1968, and securities administrators of other applicable jurisdictions,
with respect to the securities of the Holding Company issuable upon
consummation of the merger, and (iii) the declaration by the Securities and
Exchange Commission of the effectiveness of a registration statement under
the Securities Act of 1933 with respect to the securities of the Holding
Company issuable upon consummation of the merger or the automatic
effectiveness of such registration statement;
(c) Receipt (unless waived by each of the parties hereto) of an
opinion of counsel and/or accountants with respect to the tax consequences
to the parties and their shareholders of the merger described herein;
(d) Procuring all consents or approvals, governmental or otherwise,
which in the opinion of counsel for the Bank are or may be necessary to
permit or to enable the Bank to conduct, upon and after the merger
described herein, all or any part of the businesses and other activities
that the Bank engages in immediately prior to such merger, in the same
manner and to the same extent that the Bank engaged in such businesses and
other activities immediately prior to such merger; and
(e) Performance by each of the parties hereto of all obligations
under this Merger Agreement which are to be performed prior to the
consummation of the merger described herein.
6
<PAGE>
4.2 TERMINATION OF THE MERGER. In the event that any condition specified
in Paragraph 4.1 hereof cannot be fulfilled, or prior to the Effective Date the
Board of Directors of any of the parties hereto reaches any of the following
determinations:
(a) The number of shares of common stock of the Bank voting against
the merger described herein makes consummation of such merger inadvisable;
or
(b) Any action, suit, proceeding or claim relating to the merger
described herein, whether initiated or threatened, makes consummation of
such merger inadvisable; or
(c) Consummation of the merger described herein is inadvisable for
any other reason;
then this Merger Agreement shall terminate. Upon termination, this Merger
Agreement shall be void and of no further effect, and there shall be no
liability by reason of this Merger Agreement or the termination hereof on the
part of any of the parties hereto or their respective directors, officers,
employees, agents or shareholders.
4.3 EXPENSES OF THE MERGER. All of the expenses of the merger described
herein, including without limitation filing fees, printing costs, mailing costs,
accountant's fees and legal fees, shall be borne initially by the Bank but shall
after the Effective Date be apportioned and adjusted between the Bank and the
Holding Company as shall be required by applicable regulation or rules of
accounting, provided that, nothing herein shall forbid the Bank from paying any
dividend to the Holding Company which the Holding Company may use for the
payment (including reimbursement of the Bank) of any such expenses.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Merger Agreement to
be executed by their duly authorized officers as of the day and year first above
written.
TEHAMA BANK
By: /s/ William P. Ellison
----------------------------
William P. Ellison, President
By: /s/ Raymond C. Lieberenz
----------------------------
Raymond C. Lieberenz
Secretary
TEHAMA MERGER CORPORATION
By: /s/ William P. Ellison
------------------------------
William P. Ellison, President
By: /s/ Raymond C. Lieberenz
------------------------------
Raymond C. Lieberenz
Secretary
TEHAMA BANCORP
By: /s/ William P. Ellison
------------------------------
William P. Ellison, President
By: /s/ Raymond C. Lieberenz
----------------------------
Raymond C. Lieberenz
Secretary
8
<PAGE>
(EXHIBIT 3.1)
ARTICLES OF INCORPORATION
OF
TEHAMA BANCORP
The undersigned incorporator, for the purpose of forming a corporation
under the General Corporation Law of the State of California, hereby certifies:
I
The name of the corporation is Tehama Bancorp.
II
The purpose of the corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III
The name and complete business address in the State of California of the
corporation's Initial Agent for Service of Process is: John W. Carr, Bronson,
Bronson & McKinnon LLP, 505 Montgomery Street, San Francisco, California 94111.
IV
The corporation is authorized to issue two classes of shares designated
"Common Stock" and "Preferred Stock," respectively. The number of shares of
Common Stock authorized to be issued is Four Million (4,000,000) and the
number of shares of Preferred Stock authorized to be issued is Two Million
(2,000,000). The Preferred Stock may be divided into such number of series as
the Board of Directors may determine. The Board of Directors is authorized
to determine and alter the rights, preferences, privileges and restrictions
granted to and imposed upon the Preferred Stock or any series thereof with
respect to any wholly unissued class or series of Preferred Stock, and to fix
the number of shares of any series of Preferred Stock, and the designation of
any such series of Preferred Stock. The Board of Directors, within the
limits and restrictions stated in any resolution or resolutions of the Board
of Directors originally fixing the number of shares constituting any series,
may increase or decrease (but not below the number of shares of such series
then outstanding) the number of shares of any series subsequent to the issue
of shares of that series.
V
(a) The liability of the directors of the corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
(b) The corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) for breach of duty
to the corporation and its shareholders through bylaw provisions or through
agreements with agents, or otherwise, in excess of the indemnification otherwise
permitted by Section 317 of the California Corporations Code, subject to the
limits on such excess indemnification set forth in Sections 204 and 317 of the
California Corporations Code.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation.
/s/ John W. Carr
-----------------------------------
John W. Carr, Incorporator
<PAGE>
(EXHIBIT 3.2)
BYLAWS
OF
TEHAMA BANCORP.
A CALIFORNIA CORPORATION
(AS ADOPTED FEBRUARY 20, 1997]
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal executive office in the
State of California for the transaction of the business of the corporation
(called the principal office) shall be 239 South Main Street, Red Bluff,
California, in the County of Tehama. The Board of Directors shall have the
authority from time to time to change the principal office from one location
to another within the State by amending this Section 1 of the Bylaws.
SECTION 2. OTHER OFFICES. Other subordinate offices may at any time be
fixed and located by the Board of Directors at such place or places within
the State of California as it deems appropriate.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 3. PLACE OF MEETINGS. Meetings of the share-holders shall
be held at any place within the State of California that may be designated
either by the Board of Directors in accordance with these Bylaws, or by the
written consent of all persons entitled to vote at the meeting, given either
before or after the meeting and filed with the Secretary of the corporation. If
no such designation is made, the meetings shall be held at the principal office
of the corporation.
SECTION 4. ANNUAL MEETINGS. The annual meeting of the shareholders
shall be held on the fourth Tuesday of April in each year, if not a legal
holiday, and if a legal holiday, then on the next succeeding business day, at
the hour of 7:30 P.M., at which time the shareholders shall elect a Board of
Directors, consider reports of the affairs of the corporation, and transact
such other business as may properly be brought before the meeting.
If the annual meeting of shareholders shall not be held on the date
above specified, the Board of Directors shall cause such a meeting to be held
as soon thereafter as convenient and any
<PAGE>
business transacted or election held at such meeting shall be as valid as if
transacted or held at an annual meeting on the date above specified.
SECTION 5. SPECIAL MEETINGS. Special meetings of the shareholders, for
any purpose or purposes whatsoever, may be called at any time by the Board of
Directors, Chairman of the Board of Directors, the President, or by holders
of shares entitled to cast not less than 10 percent (10%) of the votes at the
meeting.
SECTION 6. NOTICE OF SHAREHOLDERS' MEETINGS. Whenever shareholders are
required or permitted to take any action at a meeting, a written notice of
the meeting shall be given not less than 10 (or, if sent by third class mail,
30) nor more than 60 days before the date of the meeting to each shareholder
entitled to vote thereat. Such notice shall state the place, date and hour
of the meeting and (1) in the case of a special meeting, the general nature
of the business to be transacted, and no other business may be transacted, or
(2) in the case of the annual meeting, those matters which the Board of
Directors, at the time of the mailing of the notice, intends to present for
action by the shareholders, but subject to the provisions of Section 601(f)
of the California Corporations Code, any proper matter may be presented at
the meeting for such action. The notice of any meeting at which directors
are to be elected shall include the names of nominees intended at the time of
the notice to be presented by management for election.
Notice of a shareholders' meeting shall be given either personally or by
first-class mail (or, if the corporation has outstanding shares held of
record by 500 or more persons (determined as provided in Section 605 of the
California Corporations Code) on the record date for the shareholders'
meeting, notice may be sent third-class mail as provided in Sections 601(a)
and 601(b) of the California Corporations Code) or other means of written
communication, addressed to the shareholder at the address of such
shareholder appearing on the books of the corporation or given by the
shareholder to the corporation for the purpose of notice; or if no such
address appears or is given, at the place where the principal office of the
corporation is located. The notice shall be deemed to have been given at the
time when delivered personally or deposited in the mail or sent by other
means of written communication.
If any notice addressed to the shareholder at the address of such
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the
shareholder at such address, all future notices shall be deemed to have been
duly given without further mailing if the same shall be available for the
shareholder upon written demand of the shareholder at the principal office of
the corporation for a period of one year from the date of the giving of the
notice to all other shareholders.
Upon request in writing to the Chairman of the Board of Directors,
President, Vice President or Secretary by any person entitled to call a
special meeting of shareholders, the officer forthwith shall cause notice to
be given to the shareholders entitled to vote that a meeting will be held at
a time requested by the person or persons calling the meeting, not less than
nor more than 60 days after the receipt of the request.
2
<PAGE>
SECTION 7. QUORUM. The presence at any meeting, in person or by
proxy, of the persons entitled to vote a majority of the voting shares of the
corporation shall constitute a quorum for the transaction of business.
Shareholders present at a valid meeting at which a quorum is initially
present may continue to do business until adjournment notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by persons voting more than 25
percent of the voting shares.
SECTION 8. ADIOURNED MEETING. Any annual or special shareholders'
meeting may be adjourned from time to time, ever though a quorum is not
present, by vote of the holders of a majority of the voting shares present at
the meeting either in person or by proxy, provided that in the absence of a
quorum, no other business may be transacted at the meeting except as provided
in Section 7 of these Bylaws.
Notice need not be given of the adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, any business may be transacted which might have been
transacted at the original meeting. If the adjournment is for more than 45
days or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each shareholder
of record entitled to vote at the meeting.
SECTION 9. WAIVER OR CONSENT BY SHAREHOLDERS. The transactions of any
meeting of shareholders, however called and noticed, and wherever held, are
as valid as though had at a meeting duly held after regular call and notice,
if a quorum is present either in person or by proxy, and if, either before or
after the meeting, each of the persons entitled to vote, not present in
person or by proxy, signs a written waiver of notice or a consent to the
holding of the meeting or an approval of the minutes thereof. All such
waivers, consents and approvals shall be filed with the corporate records or
made a part of the minutes of the meeting. Attendance of a person at a
meeting shall constitute a waiver of notice of and presence at such meeting,
except when the person objects, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened and except that attendance at a meeting is not a waiver of any right
to object to the consideration of matters required by Section 6 of these
Bylaws or Section 601(f) of the California Corporations Code to be included
in the notice but not so included, if such objection is expressly made at the
meeting. Neither the business to be transacted at nor the purpose of any
regular or special meeting of shareholders need be specified in any written
waiver of notice, consent to the holding of the meeting or approval of the
minutes thereof, except as provided in Section 601(f) of the California
Corporations Code.
SECTION 10. ACTION WITHOUT MEETING. Any action which may be taken at
any annual or special meeting of shareholders may be taken without a meeting
and without prior notice, if a consent in writing, setting forth the action
so taken, shall be signed by the holders of outstanding shares having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon
were present and voted, except that unanimous written consent shall be
required for election of directors to non-vacant positions.
3
<PAGE>
Unless the consents of all shareholders entitled to vote have been
solicited or received in writing, notice shall be given to non-consenting
shareholders to the extent required by Section 603 (b) of the California
Corporations Code.
Any shareholder giving written consent, or the shareholder's
proxyholders, or a transferee of the shares or a personal representative of
the shareholder or their respective proxyholders, may revoke the consent by a
writing received by the corporation prior to the time that written consents
of the number of shares required to authorize the proposed action have been
filed with the Secretary of the corporation, but may not do so thereafter.
Such revocation is effective upon its receipt by the Secretary of the
corporation.
SECTION 11. VOTING RIGHTS; CUMULATIVE VOTING. Only persons in whose
names shares entitled to vote stand on the stock records of the corporation
at the close of business on the record date fixed by the Board of Directors
as provided in Section 42 of these Bylaws for the determination of
shareholders of record shall be entitled to notice of and to vote at such
meeting of shareholders. If no record date is fixed, the record date for
determining shareholders entitled to notice of or to vote at the meeting of
shareholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which notice
is given or, if notice is waived, at the close of business on the business
day next preceding the day on which the meeting is held; the record date for
determining shareholders entitled to give consent to corporate action in
writing without a meeting, when no prior action by the Board has been taken,
shall be the day on which the first written consent is given; and the record
date for determining shareholders for any other purpose shall be at the close
of business or the day on which the Board adopts the resolution relating
thereto, or the 60th day prior to the date of such other action, whichever is
later.
Except as provided in the next following sentence and except as may be
otherwise provided in the Articles of Incorporation, each shareholder
entitled to vote shall be entitled to one vote for each share held on each
matter submitted to a vote of shareholders. In the election of directors,
each such shareholder complying with the following paragraph may cumulate
such shareholder's votes and give one candidate a number of votes equal to
the number of directors to be elected multiplied by the number of votes to
which the shareholder's shares are normally entitled, or distribute the
shareholder's votes on the same principle among as many candidates as the
shareholder thinks fit.
No shareholder shall be entitled to cumulate votes in favor of any
candidate or candidates unless such candidate's or candidates' names have
been placed in nomination prior to the voting and the shareholder has given
notice at the meeting prior to the voting of the shareholder's intention to
cumulate the shareholder's votes. If any one shareholder has given such
notice, such fact shall be announced to all shareholders and proxies present,
who may then cumulate their votes for candidates in nomination.
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In any election of directors, the candidates receiving the highest
number of votes of the shares entitled to be voted for them, up to the number
of directors to be elected by such shares, are elected.
Voting may be by voice or ballot, provided that any election of
directors must be by ballot upon the demand of any shareholder made at the
meeting and before the voting begins.
SECTION 12. PROXIES. Every person entitled to vote shares may
authorize another person or persons to act by proxy with respect to such
shares. All proxies must be in writing and must be signed by the shareholder
confirming the proxy or his attorney-in-fact. No proxy shall be valid after
the expiration of 11 months from the date thereof unless otherwise provided
in the proxy. Every proxy continues in full force and effect until revoked by
the person executing it prior to the vote pursuant thereto, except as
otherwise provided in Section 705 of the California Corporations Code. Such
revocation may be effected by a writing delivered to the corporation stating
that the proxy is revoked or by a subsequent proxy executed by the person
executing the prior proxy and presented to the meeting, or as to any meeting,
by attendance at such meeting and voting in person by the person executing
the proxy. The dates contained on the forms of proxy presumptively determine
the order of execution, regardless of the postmark dates on the envelopes in
which they are mailed.
SECTION 13. VOTING BY JOINT HOLDERS OR PROXIES. Shares or proxies
standing in the names of two or more persons shall be voted or represented in
accordance with the vote or consent of the majority of such persons. If only
one of such persons is present in person or by proxy, that person shall have
the right to vote all such shares, and all of the shares standing in the
names of such persons shall be deemed to be represented for the purpose of
determining a quorum. This section shall apply to the voting of shares by
two or more administrators, executors, trustees or other fiduciaries, or
joint proxyholders, unless the instrument or order of court appointing them
shall otherwise direct.
SECTION 14. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders the Board may appoint inspectors of election to act at the
meeting and any adjournment thereof. If inspectors of election are not so
appointed, or if any persons so appointed fail to appear or refuse to act,
the chairman of any meeting of shareholders may, and on the request of any
shareholder or a shareholder's proxy shall, appoint inspectors of election
(or persons to replace those who so fail or refuse) at the meeting. The
number of inspectors shall be either one of three. If appointed at a meeting
on the request of one or more shareholders or proxies, the majority of shares
represented in person or by proxy shall determine whether one or three
inspectors are to be appointed. If there are three inspectors of election,
the decision, act or certificate of a majority is effective in all respects
as the decision, act or certificate of all.
The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum and the authenticity, validity and effect
of proxies; receive votes, ballots or consents; hear and determine all
challenges and questions in any way arising in connection with the right to
vote; count and
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tabulate all votes or consents; determine when the polls shall close;
determine the result and do such acts as may be proper to conduct the
election or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS; MANAGEMENT
SECTION 15. POWERS. Subject to any provisions of the Articles of
Incorporation, of the Bylaws and of law limiting the powers of the Board of
Directors or reserving powers to the shareholders, the Board of Directors
shall, directly or by delegation, manage the business and affairs of the
corporation and exercise all corporate powers permitted by law.
SECTION 16. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized
number of directors shall be not less than nine (9) nor more than seventeen
(17), unless and until changed by ar amendment of this Section 16 adopted by
the shareholders pursuant to Section 50 of these Bylaws. The exact number of
directors within said range shall be fixed by an amendment of this Section 16
of these Bylaws adopted by the Board of Directors; and unless and until so
amended, the exact number of directors is hereby fixed at fourteen (14). A
reduction in the authorized number of directors shall not remove any director
prior to the expiration of such director's term of office. Directors need
not be shareholders of the corporation.
Nomination for election of members of the Board of Directors may be made
by the Board of Directors or by any stockholder of any outstanding class of
capital stock of the corporation entitled to vote for the election of
directors. Notice of intention to make any nominations shall be made in
writing and shall be delivered or mailed to the President of the corporation
not less than 21 days nor more than 60 days prior to any meeting of
stockholders called for the election of directors; provided however, that if
less than 21 days notice of the meeting is given to shareholders, such notice
of intention to nominate shall be mailed or delivered to the President of the
corporation not later than the close of business on the tenth day following
the day on which the notice of meeting was mailed; provided further, that if
notice of such meeting is sent by third-class mail as permitted by Section 6
of these Bylaws, no notice of intention to make nominations shall be
required. Such notification shall contain the following information to the
extent known to the notifying shareholder: (a) the name and address of each
proposed nominee; (b) the principal occupation of each proposed nominee; (c)
the number of shares of capital stock of the corporation owned by each
proposed nominee; (d) the name and residence address of the notifying
shareholder; and (e) the number of shares of capital stock of the corporation
owned by the notifying shareholder. Nominations not made in accordance
herewith may, in the discretion of the Chairman of the meeting, be
disregarded and upon the Chairman's instructions, the inspectors of election
can disregard all votes cast for each such nominee. A copy of this paragraph
shall be set forth in a notice to shareholders of any meeting at which
Directors are to be elected.
SECTION 17. ELECTION AND TERM OF OFFICE. The directors shall be
elected annually by the shareholders at the annual meeting of the
shareholders; provided, that if for any reason, said-annual meeting or an
adjournment thereof is not held or the directors are not elected thereat,
then the directors may be elected at any special meeting of the shareholders
called and held for that
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purpose. The term of office of the directors shall, except as provided in
Section 18 of these Bylaws, begin immediately after their election and shall
continue until their respective successors are elected and qualified.
SECTION 18. REMOVAL OF DIRECTORS. A director may be removed from
office by the Board of Directors if he is declared of unsound mind by the
order of court or convicted of a felony. Any or all of the directors may be
removed from office without cause by a vote of shareholders holding a
majority of the outstanding shares entitled to vote at an election of
directors; however, unless the entire Board of Directors is removed, an
individual director shall not be removed if the votes cast against removal,
or not consenting in writing to such removal, would be sufficient to elect
such director if voted cumulatively at an election at which the same total
number of votes were cast, or, if such action is taken by written consent,
all shares entitled to vote were voted, and the entire number of directors
authorized at the time of the director's most recent election were then being
elected. A director may also be removed from office by the Superior Court of
the county in which the principal office of the corporation is located, at
the suit of shareholders holding at least ten percent (10%) of the number of
outstanding shares of any class, in case of fraudulent or dishonest acts or
gross abuse of authority or discretion with reference to the corporation, in
the manner provided by law.
No reduction of the authorized number of directors shall have the effect
of removing any director before his term of office expires.
SECTION 19. VACANCIES. A vacancy or vacancies on the Board of
Directors shall exist on the death, resignation, or removal of any director,
or if the authorized number of directors is increased or the shareholders
fail to elect the full authorized number of directors.
Except for a vacancy created by the removal of a director, vacancies on
the Board of Directors may be filled by a majority of the remaining directors
although less than a quorum, or by a sole remaining director, and each
director elected in this manner shall hold office until his successor is
elected at an annual or special shareholders' meeting.
The shareholders may elect a director at any time to fill any vacancy
not filled by the directors. Any such election by written consent other than
to fill a vacancy created by removal requires the consent of a majority of
the outstanding shares entitled to vote.
Any director may resign effective upon giving written notice to the
Chairman of the Board of Directors, the President, the Secretary or the Board
of Directors of the corporation, unless the notice specifies a later time for
the effectiveness of such resignation. If the resignation is effective at a
future time, a successor may be elected to take office when the resignation
becomes effective.
SECTION 20. PLACE OF MEETINGS. Regular and special meetings of the
Board of Directors shall be held at any place within the State of California
that is designated by resolution of the Board or, either before or after the
meeting, consented to in writing by all the Board members. If the place of a
regular or special meeting is not fixed by resolution or written consents of
the Board, it shall be held at the corporation's principal office.
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SECTION 21. ORGANIZATIONAL MEETINGS. Immediately following each
annual shareholders' meeting, the Board of Directors shall hold an
organizational meeting at a date and time adopted by the Board of Directors
by resolution to organize, elect officers, and transact other business.
Notice of this meeting shall not be required.
SECTION 22. OTHER REGULAR MEETINGs. Other regular meetings of the
Board of Directors shall be held at such time and place as the Board of
Directors by resolution shall determine, but not less than once each calendar
quarter. Notice of these regular meetings shall not be required.
SECTION 23. SPECIAL MEETINGS. Special meetings of the Board of
Directors for any purpose may be called at any time by the Chairman of the
Board of Directors, or the President, or any Vice President, or the
Secretary, or any two directors.
Special meetings of the Board shall be held upon four days' notice by
mail or 48 hours notice delivered personally or by telephone or telegraph.
If notice is by telephone, it shall be complete when the person calling the
meeting believes in good faith that the notified person has heard and
acknowledged the notice. If the notice is by mail or telegraph, it shall be
complete when deposited in the United States mail or delivered to the
telegraph office at the place where the corporation's principal office is
located, charges prepaid and addressed to the notified person at such
person's address appearing on the corporate records or, if it is not on these
records or is not readily ascertainable, at the place where the regular Board
meeting is held.
SECTION 24. QUORUM. A majority of the authorized number of directors,
but in no event less than three (unless the authorized number of directors is
one), shall constitute a quorum for the transaction of business, except to
adjourn a meeting under Section 26 of these Bylaws. Every act done or
decision made by a majority of the directors present at a meeting at which a
quorum is present shall be regarded as the act of the Board of Directors,
unless the vote of a greater number is required by law, the Articles of
Incorporation, or these Bylaws. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
directors, if any action taken is approved by a majority of the required
quorum for such meeting.
SECTION 25. CONTENTS OF NOTICE AND WAIVER OF NOTICE. Neither the
business to be transacted at, nor the purpose of, any regular or special
Board meeting need be specified in the notice or waiver of notice of the
meeting. Notice of a meeting need not be given to any director who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, either before or after the meeting, or who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to said director. All such waivers, consents, and approvals shall be
filed with the corporate records or made a part of the minutes of the meeting.
SECTION 26. ADJOURNMENT. A majority of the directors present, whether
or not a quorum is present, may adjourn any meeting to another time and place.
SECTION 27. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given to absent directors if the
time and place are fixed at the
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meeting being adjourned, except that if the meeting is adjourned for more
than 24 hours such notice shall be given prior to the adjourned meeting to
the directors who were not present at the time of the adjournment.
SECTION 28. TELEPHONE PARTICIPATION. Members of the Board may
participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in such
meetings can hear one another. Such participation constitutes presence in
person at such meeting.
SECTION 29. ACTION WITHOUT MEETING. The Board of Directors may take
any action without a meeting that may be required or permitted to be taken by
the Board at a meeting, if all members of the Board individually or
collectively consent in writing to the action. The written consent or
consents shall be filed in the minutes of the proceedings of the Board of
Directors. Such action by written consent shall have the same effect as an
unanimous vote of directors.
SECTION 30. FEES AND COMPENSATION. Directors and members of
committees shall receive neither compensation for their services nor
reimbursement for their expenses unless these payments are fixed by
resolution of the Board.
ARTICLE IV
OFFICERS
SECTION 31. OFFICERS. The officers of the corporation shall be a
President, a Secretary, and a Chief Financial Officer. The corporation may
also have, at the discretion of the Board of Directors, a Chairman and Vice
Chairman of the Board (who shall be chosen from the Board of Directors), one
or more Vice Presidents, one or more Assistant Secretaries, one or more
Assistant Chief Financial Officers, and any other officers who may be
appointed under Section 33 of these Bylaws. Any two or more officers, except
those of President and Secretary, may be held by the same person.
Any officer of the corporation may be excluded by resolution of the
Board of Directors or by a provision of these Bylaws from participation,
other than in the capacity of a director, in major policymaking functions of
the corporation.
Each officer and employee of the corporation shall give bond of suitable
amount with security to be approved by the Board of Directors, conditioned on
the honest and faithful discharge of his duties as such officer or employee.
At the discretion of the Board, such bonds may be schedule or blanket form
and the premiums shall be paid by the corporation. The amount of such bonds,
the form of coverage, and the name of the company providing the surety
therefor shall be reviewed annually by the Board of Directors. Action shall
be taken by the Board at that time approving the amount of the bond to be
provided by each officer and employee of the corporation for the ensuing year.
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SECTION 32. ELECTION. The officers of the corporation, except those
appointed under Section 33 of these Bylaws, shall be chosen annually by the
Board of Directors, and each shall hold his office until he resigns or is
removed or otherwise disqualified to serve, or his successor is elected and
qualified.
SECTION 33. SUBORDINATE OFFICERS. The Board of Dlrectors may appoint,
and may authorize the President to appoint, any other officers that the
business of the corporation may require, each of whom shall hold office for
the period, have the authority, and perform the duties specified in the
Bylaws or by the Board of Directors.
SECTION 34. REMOVAL AND RESIGNATION. Any officer may be removed with
or without cause either by the Board of Directors at any regular or special
directors' meeting or, except for an officer chosen by the Board, by any
officer on whom the power of removal may be conferred by the Board.
Any officer may resign at any time by giving written notice to the Board
of Directors, the President or the Secretary of the corporation. An
officer's resignation shall take effect when it is received or at any later
time specified in the resignation. Unless the resignation specifies
otherwise, its acceptance by the corporation shall not be necessary to make
it effective.
SECTION 35. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in the Bylaws for regular appointments to the office.
SECTION 36. CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The Board of
Directors may in its discretion elect a Chairman of the Board, who shall
preside at all meetings of the Board of Directors at which the Chairman is
present and shall exercise and perform any other powers and duties assigned
to the Chairman by the Board or prescribed by the Bylaws. In the absence of
the Chairman, the Vice Chairman appointed by the Board shall preside at all
shareholders' meetings and meetings of the Board of Directors.
The positions of Chairman and Vice Chairman of the Board shall be deemed
not to be executive officers of the corporation and the Chairman and Vice
Chairman shall be excluded from participation, other than in the capacity of
a director, in major policymaking functions of the corporation.
SECTION 37. PRESIDENT. Subject to any supervisory powers that may be
given by the Board of Directors or the Bylaws to the Chairman of the Board,
the President shall be the corporation's chief executive officer and shall,
subject to the control of the Board of Directors, have general supervision,
direction, and control over the corporation's business and officers. The
President shall be ex officio a member of all the standing committees except
the Audit Committee, shall have the general powers and duties of management
usually vested in a corporation's president; shall have any other powers and
duties that are prescribed by the Board of Directors or these Bylaws; and
shall be primarily responsible for carrying out all orders and resolutions of
the Board of Directors.
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SECTION 38. VICE PRESIDENTS. If the President is absent or is unable
or refuses to act, the Vice Presidents in order of their rank as fixed by the
Board of Directors or, if not ranked, the Vice President designated by the
Board of Directors, shall perform all the duties of the President, and when
so acting shall have all the powers of, and be subject to all the
restrictions on, the President. Each Vice President shall have any other
duties that are prescribed for said Vice President by the Board of Directors
or the Bylaws.
SECTION 39. SECRETARY. The Secretary shall keep or cause to be kept,
and be available at the principal office and any other place that the Board
of Directors specifies, a book of minutes of all directors' and shareholders'
meetings. The minutes of each meeting shall state the time and place that it
was held; whether it was regular or special; if a special meeting, how it was
authorized; the notice given; the names of those present or represented at
shareholders' meetings; and the proceedings of the meetings. A similar
minute book shall be kept for each committee of the Board.
The Secretary shall keep, or cause to be kept, at the principal office
or at the office of the corporation's transfer agent, a share register, or
duplicate share register, showing the shareholders' names and addresses, the
number and classes of shares held by each, the number and date of each
certificate issued for these shares, and the number and date of cancellation
of each certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all directors'
and shareholders' meetings required to be given under these Bylaws or by law,
shall keep the corporate seal in safe-custody, and shall have any other
powers and perform any other duties that are prescribed by the Board of
Directors or these Bylaws.
The Secretary shall be deemed not to be an executive officer of the
corporation and the Secretary shall be excluded from participation, other
than in the capacity of director if the Secretary is also a director, in
major policymaking functions of the corporation.
SECTION 40. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall be the corporation's chief financial officer and shall keep and
maintain, or cause to be kept and maintained, adequate and correct accounts
of the corporation's properties and business transactions, including accounts
of its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The Chief Financial Officer shall deposit all money and other valuables
in the name and to the credit of the corporation with the depositories
designated by the Board of Directors. The Chief Financial Officer shall
disburse the corporation's funds as ordered by the Board of Directors; shall
render to the President and directors, whenever they request it, an account
of all his transactions as Chief Financial Officer and of the corporation's
financial condition; and shall have any other powers and perform any other
duties that are prescribed by the Board of Directors or Bylaws.
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If required by the Board of Directors, the Chief Financial Officer shall
give the corporation a bond in the amount and with the surety or sureties
specified by the Board for faithful performance of the duties of that
person's office and for restoration to the corporation of all its books,
papers, vouchers, money, and other property of every kind in that person's
possession or under that person's control on that person's death,
resignation, retirement, or removal from office.
ARTICLE V
GENERAL CORPORATE MATTERS
SECTION 41. RECORD DATE AND CLOSING OF STOCKBOOKS. The Board of
Directors may fix a time in the future as a record date for determining
shareholders entitled to notice of and to vote at any shareholders' meeting;
to receive any dividend, distribution, or allotment of rights; or to exercise
rights in respect of any other lawful action, including change, conversion,
or exchange of shares. The record date shall not, however, be more than 60
nor less than 10 days prior to the date of such meeting nor more than 60 days
prior to any other action. If a record date is fixed for a particular
meeting or event, only shareholders of record on that date are entitled to
notice and tc vote and to receive the dividend, distribution, or allotment of
rights or to exercise the rights, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the record date.
A determination of shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the
meeting unless the Board fixes a new record date for the adjourned meeting,
but the Board shall fix a new record date if the meeting is adjourned for
more than 45 days.
SECTION 42. CORPORATE RECORDS AND INSPECTION BY SHAREHOLDERS AND
DIRECTORS. Books and records of account and minutes of the proceedings of
the shareholders, Board, and committees of the Board shall be kept available
for inspection at the principal office of the corporation. A record of the
shareholders, giving the names and addresses of all shareholders and the
number and class of shares held by each, shall be kept available for
inspection at the principal office or at the office of the corporation's
transfer agent or registrar.
A shareholder or shareholders holding at least five percent (5%) in the
aggregate of the outstanding voting shares of the corporation shall have an
absolute right to do either or both of the following: (1) inspect and copy
the record of shareholders' names and addresses and shareholdings during
usual business hours upon five business days' prior written demand upon the
corporation, or (2) obtain from the transfer agent for the corporation, upon
five business days prior written demand and upon the tender of its usual
charges for such a list (the amount of which charges shall be stated to the
shareholder by the transfer agent upon request), a list of the shareholders'
names and addresses, who are entitled to vote for the election of directors,
and their shareholdings, as of the most recent record date for which it has
been compiled or as of a date specified by the shareholder subsequent to the
date of demand. The record of shareholders shall also be open to inspection
and copying by any shareholder or holder of a voting trust certificate at any
time during usual business hours upon written demand on the corporation, for
a purpose
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reasonably related to such holder's interests as a shareholder or holder of a
voting trust certificate. Inspection and copying may be made in person or by
agent or attorney.
Every director shall have the absolute right at any reasonable time to
inspect and copy all books, records and documents of every kind and to
inspect the physical properties of the corporation and its subsidiary
corporations, domestic or foreign. Such inspection by a director may be made
in person or by agent or attornev and includes the right to copy and make
extracts.
SECTION 43. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks,
drafts, or other orders for payment of money, notes, and all mortgages, or
other evidences of indebtedness, issued in the name of or payable to the
corporation, and all assignments and endorsements of the foregoing, shall be
signed or endorsed by the person or persons and in the manner specified by the
Board of Directors.
SECTION 44. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. Except
as otherwise provided in the Bylaws, officers, agents, or employees must be
authorized by the Board of Directors to enter into any contract or execute
any instrument in the corporation's name and on its behalf. This authority
may be general or confined to specific instances.
Section 45. STOCK CERTIFICATES. One or more certificates for shares
of the corporation's capital stock shall be issued to each shareholder for
any of such shareholder's shares that are fully paid. The corporate seal or
its facsimile may be fixed on certificates. All certificates shall be signed
by the Chairman of the Board, President, or a Vice President and the
Secretary, Treasurer, or an Assistant Secretary. Any or all of the
signatures on the certificate may be facsimile signatures.
SECTION 46. LOST CERTIFICATES. No new share certificate that replaces
an old one shall be issued unless the old one is surrendered and cancelled at
the same time; provided, however, that if any share certificate is lost,
stolen, mutilated, or destroyed, the Board of Directors may authorize
issuance of a new certificate replacing the old one on any terms and
conditions, including a reasonable arrangement for indemnification of the
corporation, that the Board may specify.
SECTION 47. REPORTS TO SHAREHOLDERS. The requirement for the annual
report to shareholders referred to in Section 1501(a) of the California
Corporations Code is hereby expressly waived so long as there are less than 100
holders of record of the corporation's shares. The Board of Directors shall
cause to be sent to the shareholders such annual or other periodic reports as
they consider appropriate or as otherwise required by law. In the event the
corporation has 100 or more holders of its shares, an annual report complying
with Section 1501(a) and, when applicable, Section 1501(b) of the California
Corporations Code, shall be sent to the shareholders not later than 120 days
after the close of the fiscal year and at least 15 days prior to the annual
meeting of shareholders to be held during the next fiscal year.
If no annual report for the last fiscal year has been sent to shareholders,
the corporation shall, upon the written request of any shareholder made more
than 120 days after the close of
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such fiscal year, deliver or mail to the person making the request within 30
days thereafter the financial statements referred to in Section 1501(a) for
such year.
A shareholder or shareholders holding at least five percent (5%) of the
outstanding shares of any class of a corporation may make a written request to
the corporation for an income statement of the corporation for the three-month,
six-month, or nine-month period of the current fiscal year ended more than 30
days prior to the date of the request and a balance sheet of the corporation as
of the end of such period and, in addition, if no annual report for the last
fiscal year has been sent to shareholders, the statements referred to in Section
1501(a) of the California Corporations Code for the last fiscal year. The
statement shall be delivered or mailed to the person making the request within
30 days thereafter. A copy of the statements shall be kept on file in the
principal office of the corporation for 12 months and they shall be exhibited at
all reasonable times to any shareholder demanding an examination of them or a
copy shall be mailed to such shareholder. The income statements and balance
sheets referred to shall be accompanied by the report thereon, if any, of any
independent accountants engaged by the corporation or the certificate of an
authorized officer of the corporation that such financial statements were
prepared without audit from the books and records of the corporation.
SECTION 48. INDEMNITY OF OFFICERS, DIRECTORS, ETC.
A. ACTION, ETC. OTHER THAN BY RIGHT OF THE CORPORATION. The
corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any proceeding (other than an action by or
in the right of the corporation to procure a judgment in its favor) by
reason of the fact that such person is or was an Agent of the corporation,
against expenses, judgments, fines, settlements and other amounts actually
and reasonably incurred in connection with such proceeding if such person
acted in good faith and in a manner such person reasonably believed to be
in the best interests of the corporation and, in the case of a criminal
proceeding, had no reasonable cause to believe the conduct of such person
was unlawful. The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that the person did not act in
good faith and in a manner which the person reasonably believed to be in
the best interests of the corporation or that the person had reasonable
cause to believe that the person's conduct was unlawful.
B. ACTION, ETC., BY OR IN THE RIGHT OF THE CORPORATION. The
corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that such person is or was an Agent of the
corporation, against expenses actually and reasonably incurred by such
person in connection with the defense or settlement of such action if such
person acted in good faith, in a manner such person believed to be in the
best interests of the corporation and its shareholders; except that no
indemnification shall be made under this subsection 48(B) for any of the
following:
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(1) In respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation in the
performance of such person's duty to the corporation and its
shareholders, unless and only to the extent that the court in which
such proceeding is or was pending shall determine upon application
that, in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for the expenses which
such court shall determine:
(2) Of amounts paid in settling or otherwise disposing of a
pending action without court approval; or
(3) Of expenses incurred in defending a pending action which is
settled or otherwise disposed of without court approval.
C. DETERMINATION OF RIGHT OF INDEMNIFICATION. Any indemnification
under subsections 48(A) and 48(B) shall be made by the corporation only if
authorized in the specific case, upon a determination that indemnification
of the Agent is proper in the circumstances because that Agent has met the
applicable standard of conduct set forth above in subsections 48(A)
and 48(B) by any of the following:
(1) A majority vote of a quorum consisting of directors who are
not parties to such proceeding;
(2) If such a quorum of directors is not obtainable, by
independent legal counsel in a written opinion;
(3) Approval of the shareholders by the affirmative vote of a
majority of the shares entitled to vote represented at a duly held
meeting at which a quorum is present or by the written consent of
shareholders as provided in Section 10, with the shares owned by the
person to be indemnified not being entitled to vote thereon; or
(4) The court in which such proceeding is or was pending upon
application made by the corporation or its Agent or attorney or other
person rendering services in connection with the defense, whether or
not such application by the Agent, attorney or other person is opposed
by the corporation.
D. ADVANCES OF EXPENSES. Expenses (including attorneys' fees),
costs, and charges incurred in defending any proceeding shall be advanced
by the corporation prior to the final disposition of such proceeding upon
receipt of an undertaking by or on behalf of the Agent to repay such amount
unless it shall be determined ultimately that the Agent is entitled to be
indemnified as authorized in this Section 48.
E. INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding the other provisions of this Section 48, to the extent that
an Agent has been successful on the merits in a defense of any proceeding,
claim, issue or matter referred to in subsections
15
<PAGE>
48(A) and 48(B), such Agent shall be indemnified against all expenses
actually and reasonably incurred by the Agent in connection therewith.
F. RIGHT OF AGENT TO INDEMNIFICATION UPON APPLICATION; PROCEDURE
UPON APPLICATION. Any indemnification provided for in subsections 48(A),
48(B), or 48(E) shall be made no later than ninety (90) days after the
corporation is given notice of request by Agent, provided that such request
is made after final adjudication, dismissal, or settlement unless an appeal
is filed, in which case the request is made after the appeal is resolved
(hereafter referred to as "Final Disposition"). Upon such notice, if a
quorum of directors who were not parties to the action, suit or proceeding
giving rise to indemnification is obtainable, the corporation shall within
two (2) weeks call a Board of Directors' meeting to be held within four (4)
weeks of such notice, to make a determination as to whether the Agent has
met the applicable standard of conduct. Otherwise, if a quorum consisting
of directors who were not parties in the relevant action, suit, or
proceeding is not obtainable, the corporation shall retain (at the
corporation's expense) independent legal counsel chosen either jointly by
the corporation and Agent or else by corporation counsel within two (2)
weeks to make such determination. If (1) at such Board of Directors'
meeting, such a quorum is not obtained or, if obtained, refuses to make
such determination, or (2) such legal counsel is not so retained or, if
retained, does not make such determination within four (4) weeks, then the
Board of Directors shall cause a shareholders meeting to be held within
four (4) weeks to make such a determination.
If notice of a request for payment of a claim under these Bylaws, under any
statute, under any provision of any agreement with the corporation, or under the
corporation's articles of incorporation providing for indemnification or advance
or expenses has been given to the corporation by Agent, and such claim is not
paid in full by the corporation within ninety (90) days of the later occurring
of the giving of such notice and Final Disposition in the case of
indemnification and twenty (20) days of the giving of such notice in the case of
advance of expenses, then Agent may, but need not, at any time thereafter bring
an action against the corporation to receive the unpaid amount of the claim or
the expense advance and, if successful, Agent shall also be paid for the
expenses (including attorneys' fees) of bringing such action. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in connection with any action, suit, or proceeding in advance
of its Final Disposition) that Agent has not met the standards of conduct which
make it permissible under applicable law for the corporation to indemnify Agent
for the amount claimed, and Agent shall be entitled to receive interim payment
of expenses pursuant to subsection 48(D) unless and until such defense may be
finally adjudicated by court order or judgment from which no further right of
appeal exists. Neither the failure of the corporation (including its Board of
Directors, independent legal counsel, or its shareholders) to have made a
determination that indemnification of Agent is proper in the circumstances
because Agent has met the applicable standard of conduct required by applicable
law, nor an actual determination by the corporation (including its Board of
Directors, independent legal counsel, or its shareholders) that Agent has not
met such applicable standard of conduct, shall create a presumption that the
Agent has or has not met the applicable standard of conduct.
16
<PAGE>
G. OTHER RIGHTS AND REMEDIES. The indemnification provided by this
Section 48 shall not be deemed exclusive of, and shall not affect, any
other rights to which an Agent seeking indemnification may be entitled
under any law, other provision of these Bylaws, the corporation's articles
of incorporation, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in his or her official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be an Agent and shall inure to
the benefit of the heirs, executors, and administrators of such a person.
H. INSURANCE. The corporation may purchase and maintain insurance
on behalf of any person who is or was an Agent against any liability
asserted against such person and incurred by him or her in any such
capacity, or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify such person against such
liability under the provisions of this Section 48.
I. OPTIONAL MEANS OF ASSURING PAYMENT. Upon request by an Agent
certifying that the Agent has reasonable grounds to believe the Agent may
be made a party to a proceeding for which the Agent may be entitled to be
indemnified under this Section 48, the corporation may but is not required
to create a trust fund, grant a security interest or use other means
(including, without limitation, a letter of credit) to ensure the payment
of such sums as may become necessary to effect indemnification as provided
herein.
J. SAVINGS CLAUSE. If this Section 48 or any portion thereof shall
be invalidated on any ground by any court of competent jurisdiction, then
the corporation shall nevertheless indemnify each Agent as to expenses
(including attorneys' fees), judgments, fines, and amounts paid in
settlement with respect to any action, suit, proceeding, or investigation,
whether civil, criminal or administrative, and whether internal or
external, including a grand jury proceeding and an action or suit brought
by or in the right of the corporation, to the full extent permitted by any
applicable portion of this Section 48 that shall not have been invalidated,
or by any other applicable law.
K. DEFINITION OF AGENT. For the purposes of this Section 48,
"Agent" means any person who is or was a director, officer, employee or
other agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other
enterprise, or was a director, officer, employee or agent of a foreign or
domestic corporation which was a predecessor corporation of the corporation
or of another enterprise at the request of such predecessor corporation;
"proceeding" means any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative; and
"expenses" includes without limitation attorneys' fees and any expenses of
establishing a right to indemnification.
L. INDEMNIFICATION UNDER SECTION 204(A)(11) OF THE CALIFORNIA
CORPORATIONS CODE. Subject to the provisions of California Corporations
Code Section 204(a)(11) and
17
<PAGE>
any other applicable law, notwithstanding any other provisions of these
Bylaws, the following shall apply to the indemnification of Agents under
these Bylaws:
(1) The corporation shall indemnify a person pursuant to this
subsection 48(L) if the corporation would be required to indemnify
such person pursuant to subsections 48(A) or 48(B) if in subsections
48(A) and 48(B) the phrase "in a manner such persor reasonably
believed to be in the best interests of the corporation" is replaced
with the phrase "in a manner such person did not believe to be
contrary to the best interests of the corporation." If pursuant to
subsections 48(C) and 48(F) the person making the subsection 48(A)
and/or 48(B) conduct standard determination determines that such
standard has not been satisfied, such person shall also determine
whether this subsection 48(L)(l) conduct standard has been satisfied;
(2) There shall be a presumption that the Agent met the
applicable standard of conduct required to be met in subsection 48(C)
for indemnification of the Agent, rebuttable by clear and convincing
evidence the the contrary;
(3) The corporation shall have the burden of proving that the
Agent did not meet the applicable standard of conduct in
subsection 48(C);
(4) In addition to the methods provided for in subsection 48(C),
a determination that indemnification is proper in the circumstances
because that Agent met the applicable standard of conduct may also be
made by the arbitrator in any arbitration proceeding in which such
matter is or was pending;
(5) Unless otherwise agreed to in writing between an Agent and
the corporation in any specific case, indemnification may be made
under subsection 48(B) for amounts paid in settling or otherwise
disposing of a pending action without court approval.
ARTICLE VI
AMENDMENTS
SECTION 49. AMENDMENTS BY SHAREHOLDERS. New Bylaws may be adopted or
these Bylaws may be amended or repealed by the affirmative vote or written
consent of a majority of the outstanding shares entitled to vote.
SECTION 49. AMENDMENT BY DIRECTORS. Subject to the right of
shareholders under the preceding Section 49 of these Bylaws, Bylaws other
than a Bylaw fixing or changing the authorized number of directors may be
adopted, amended, or repealed by the Board of Directors. However, if the
Articles of Incorporation, or a Bylaw adopted by the shareholders, provide
for an indefinite number of directors within specified limits, the directors
may adopt or amend a by-law fixing the exact number of directors within those
limits.
18
<PAGE>
ARTICLE VII
COMMITTEES OF THE BOARD OF DIRECTORS
Section 51. COMMITTEES OF THE BOARD OF DIRECTORS. The Board of
Directors shall, by resolution adopted by a majority of the authorized number of
directors, designate the following standing committees:
A. A Loan and Discount Committee, which shall have the power to
examine and approve loans and discounts, and to exercise authority
regarding loans and discounts held by the corporation or its subsidiaries;
B. An Investment Committee, which shall have the power to discount
and purchase bills, notes and other evidences of debt, and to buy and sell
bills of exchange; and
C. An Audit Committee which shall consist of at least three members
of the Board of Directors, none of whom shall be active officers of the
corporation. The duties of this committee shall be to make suitable
examinations every 12 months of the affairs of the corporation. The result
of such examination shall be reported, in writing, to the Board of
Directors stating whether the corporation is in a sound and solvent
condition, whether adequate internal audit controls and procedures are
being maintained, and recommending to the Board such changes in the manner
of doing business, etc. as shall be deemed advisable. The Audit Committee,
upon its own recommendation and with the approval of the Board of
Directors, may employ a qualified firm of Certified Public Accountants to
make a suitable examination and audit of the corporation. If such a
procedure is followed, the one annual examination and audit of such firm of
accountants and the presentation of its report to the Board of Directors
will be deemed sufficient to comply with the requirements of this section
of these Bylaws.
The Board of Directors may, by resolution adopted by a majority of the
authorized number of directors, also designate one or more additional standing
committees including, but not limited to, an Executive Committee consisting of
two or more Directors who shall be appointed by, and hold office at, the
pleasure of the Board of Directors. The Board of Directors may, except as
hereinafter limited, delegate to the Executive Committee any of the powers and
authorities of the Board of Directors.
The appointment of members or alternate members of a committee requires the
vote of a majority of the authorized number of directors.
The Board of Directors shall designate one or more directors as alternate
members of any committee, who may replace any absent member at any meeting of
the committee. Any such committee, to the extent provided in the resolution of
the Board of Directors shall have all the authority of the Board, except with
respect to:
A. The approval of any action for which shareholder approval is also
required.
19
<PAGE>
B. The filling of vacancies on the Board or in any committee.
C. The fixing of compensation of the directors for serving on the
Board or on any committee.
D. The amendment or repeal of Bylaws or the adoption of new Bylaws.
E. The amendment or repeal of any resolution of the Board which by
its express terms is not so amendable or repealable.
F. A distribution to the shareholders of the corporation as defined
in Section 166 of the California Corporations Code, except at a rate or in
a periodic amount or within a price range determined by the Board.
G. The appointment of other committees of the Board or the members
thereof.
The Board of Directors shall designate a chairman for each committee who
shall have the sole power to call any committee meeting other than a meeting set
by the Board. Except as otherwise established by the Board of Directors,
Article III of these Bylaws shall apply to committees of the Board and action by
such committees, MUTATIS MUTANDIS.
20
<PAGE>
(EXHIBIT 4)
NUMBER TEHAMA BANCORP SHARES
INCORPORATED UNDER THE LAWS OF THE STATE OF CALIFORNIA
SEE REVERSE SIDE FOR A STATEMENT AS
TO THE RIGHTS, PREFERENCES, PRIVILEGES
AND RESTRICTIONS OF EACH CLASS OF SHARES.
THIS CERTIFIES THAT CUSIP
SPECIMEN
IS THE RECORD OWNER OF
FULLY PAID SHARES OF THE NO PAR COMMON STOCK OF
TEHAMA BANCORP
Transferable on the books of the Corporation in person or by duly
authorized attorney upon surrender of this Certificate properly endorsed.
This Certificate is not valid until countersigned by the transfer agent and
registered by the registrar.
Witness the facsimile seal of the Corporation and the signature of its
duly authorized officers.
Dated
(Signature) (Signature)
Secretary President
(SEAL)
TEHAMA BANCORP
INCORPORATED
JANUARY 15, 1997
CALIFORNIA
<PAGE>
TEHAMA BANCORP
Any shareholder may obtain, upon request and without charge, a copy of the
rights, preferences, privileges and restrictions granted to or imposed upon each
class of shares of stock and upon the holders thereof by the Articles of
Incorporation and the By-Laws of Tehama Bancorp; and a statement of the number
of shares constituting each class of shares and the designation thereof. Such
requests may be directed to the Secretary of the Corporation.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT - as tenants by the entireties
JT TEN -- as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN. ACT ______________ Custodian_____________
(Cust) (Minor)
Under Uniform Gifts to Minors
Act _________________________________________
(State)
UNIF TRF MIN ACT ________ Custodian (until age ________)
Cust)
_____________________ under Uniform Transfers
(Minor)
to Minors Act _______________________________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ______________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- - -------------------------------------
- - -------------------------------------
- - --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OR ASSIGNEE)
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Shares
- - --------------------------------------------------------------------------
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
- - ------------------------------------------------------------------------
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
------------------------------
X
---------------------------------------
X
---------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRESPOND
WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE
CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
Signature(s) Guaranteed
By
--------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM) PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE>
(EXHIBIT 5)
March 17, 1997
Board of Directors
Tehama Bancorp
239 South MainStreet
Red Bluff, California 96080
Gentlemen:
We are acting as counsel to Tehama Bancorp, a California corporation (the
"Company"), in connection with the registration under the Securities Act of
1933, as amended (the "Act") of 1,708,489 shares of Common Stock, no par value
(the "Shares"), of the Company. A registration statement on Form S-4 (the
"Registration Statement") is proposed to be filed under the Act with respect to
the offering of the Shares, and this opinion is proposed to be filed as an
exhibit thereto.
In connection with the offering of the Shares, we have examined the
Registration Statement and the Plan of Reorganization and Merger Agreement
referenced in the Registration Statement and such other documents as we have
deemed necessary to form the opinions hereinafter expressed. As to various
questions of fact material to such opinions, where relevant facts were not
independently established, we have relied upon statements of officers of the
Company.
Based upon and subject to the foregoing, after having given due regard to
such issues of law as we deemed relevant and assuming that (i) the Registration
Statement becomes and remains effective, and the Prospectus and your delivery
procedures with respect thereto fulfill all of the requirements of the Act
through all periods relevant to this opinion, (ii) all issuances of the Shares
shall be in a manner complying with the terms of the Registration Statement and
in compliance with Blue Sky Laws of any states having jurisdiction thereof; we
are of the opinion that the Shares, when issued, will be validly issued, fully
paid and nonassessable.
Consent is hereby given to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" as having passed upon the validity of the Shares. In giving
this consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
<PAGE>
Board of Directors
Tehama Bancorp
March 17, 1997
Page 2
This opinion is furnished solely in connection with the Registration
Statement and is not to be used for any other purpose without our prior written
consent.
Sincerely,
/s/ Bronson Bronson & McKinnon LLP
<PAGE>
EXHIBIT 8
March 17, 1997
Mr. William P. Ellison
President
Tehama Bank
239 South Main Street
Red Bluff, California 96080
Dear Mr. Ellison:
As you requested, this letter sets forth our opinion as to certain
federal income tax consequences of a proposed reorganization and merger,
which is intended to qualify as a tax-free reorganization under Section
368(a)(1)(A) of the Internal Revenue Code of 1986 (the Code).
The specific issues addressed in this opinion letter are limited to the
federal income tax consequences of the proposed reorganization of Tehama Bank
(Tehama) and certain federal income tax consequences to the parties to the
reorganization. Only the federal income tax consequences specifically
addressed have been evaluated and consequently no opinion is expressed as to
any other federal income tax consequences, including alternative minimum tax.
We express no opinion as to the consequences to holders of any stock options
of Tehama with respect to the impact of the merger on those stock options.
Our conclusions are based on the assumption that all exchanges are value for
value and that the proposed transaction legally qualifies under the relevant
state or federal law. No opinion is expressed on any state, local or foreign
tax issues with respect to the transaction.
We have reviewed the signed Plan of Reorganization and Merger Agreement
Among Tehama Bank, Tehama Bancorp and Tehama Merger Corporation (Agreement)
dated February, 1997 and the Registration Statement on Form S-4 to be filed
with the Securities and Exchange Commission. The Agreement provides for the
merger of Tehama Merger Corporation, a subsidiary of Tehama Bancorp, a
holding company, with and into Tehama, with Tehama surviving. The
shareholders of Tehama will receive the stock of Tehama Bancorp in exchange
for their Tehama shares.
Our opinion as to the federal income tax consequences of the
transaction is based upon our understanding of the facts and management's
representations as described within, and a review of the relevant authorities
as defined herein. Our opinion applies only to the transaction described in
this letter and may not be appropriate if facts and circumstances are
different or if the tax law in the area changes.
<PAGE>
Mr. William P. Ellison
Tehama Bank March 17, 1997
-2-
FACTS AND REPRESENTATIONS
We have relied on certain representations and facts set forth in the
Agreement and the Registration Statement. If any representation or fact set
forth in the Agreement or Registration Statement is not true and accurate,
both on the date of this letter and at the effective date of the
reorganization, then we express no opinion. Further, our opinion assumes that
the reorganization will occur fully in accordance with the terms and
provisions of the Agreement. If it does not, then we express no opinion. In
stating this opinion, we have assumed the authenticity of all documents
submitted to us as originals and the conformity to authentic original
documents of all documents submitted to us as certified, conformed,
photostatic or facsimile copies.
The following representations are made by management of the company
with respect to the proposed transaction:
(a) The fair market value of Tehama Bancorp (Bancorp) stock and other
consideration received by each Tehama shareholder will be
approximately equal to the fair market value of the Tehama stock
surrendered in the exchange.
(b) To the best of the knowledge of management, there is no plan or
intention by the shareholders of Tehama to sell, exchange, or
otherwise dispose of a number of shares of Bancorp stock received
in the transaction that would reduce the Tehama shareholders'
ownership of Bancorp stock to a number of shares having a value,
as of the date of the transaction, of less than fifty percent
(50%) of the value of all of the formerly outstanding stock of
Tehama as of the same date. For purposes of this representation,
shares of Tehama stock, if any, which are exchanged for cash or
other property, surrendered by dissenters or exchanged for cash
in lieu of fractional interests will be treated as outstanding
shares of Tehama stock on the date of the transaction. Moreover,
shares of Tehama stock and shares of Bancorp stock held by Tehama
shareholders and otherwise sold, redeemed, or disposed of prior
or subsequent to the transaction will be considered in making
this representation.
(c) Tehama has no plan or intention to issue additional shares of its
stock that would result in Bancorp losing control of Tehama
within the meaning of Section 368(c) of the Code.
(d) There is no plan or intention to liquidate Tehama; to merge
Tehama into another corporation; to cause Tehama to sell or
otherwise dispose of any of its assets, except for dispositions
made in the ordinary course of business; or to sell or otherwise
dispose of any of the Tehama stock acquired in the transaction.
<PAGE>
Mr. William P. Ellison
Tehama Bank -3- March 17, 1997
(e) Bancorp, Tehama and the shareholders of Tehama will pay their
respective expenses, if any, incurred in connection with the
transaction.
(f) No liabilities of Tehama or the Tehama shareholders will be assumed
by Bancorp. nor will any Tehama stock be subject to any liabilities.
(g) Bancorp does not own, directly or indirectly, nor has it owned
during the past five years, directly or indirectly, any stock of
Tehama.
(h) Following this transaction, Tehama will continue its historic
business or use a significant portion of its historic business
assets in a business.
(i) No two parties to the transaction are investment companies as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(j) On the date of the transaction, the fair market value of the assets
of Tehama will exceed the sum of its liabilities plus the
liabilities, if any, to which the assets are subject.
(k) The management and board of directors of Tehama believe that the
formation of a holding company will enhance the ability of Tehama to
compete with major banks in their marketing area and will provide a
broader range of business alternatives with respect to growth and
access to additional capital.
DISCUSSION OF AUTHORITIES
Generally, a statutory merger qualifies as a tax-free reorganization under
Section 368(a)(1)(A) of the Code. Section 368(a)(2)(E) provides that a
transaction otherwise qualifying under paragraph (a)(1)(A) shall not be
disqualified by reason of the fact that stock of a corporation, which before
the merger was in control of the merged corporation, is used in the
transaction, if after the transaction, the corporation surviving the merger
holds substantially all of its properties and the properties of the merged
corporation (other than stock of the controlling corporation distributed in
the transaction); and in the transaction, former shareholders of the
surviving corporation exchanged, for an amount of voting stock of the
controlling corporation, an amount of stock in the surviving corporation
which constitutes control of such corporation. Control is defined in Section
368(c) as the ownership of stock possessing at least eighty percent (80%) of
the total combined voting power of all classes of stock of the corporation.
<PAGE>
Mr. William P. Ellison
Tehama Bank -4- March 17, 1997
In addition to the statutory requirements for a tax-free reorganization,
there are also certain judicial requirements. The requirements of continuity
of proprietary interest, continuity of business enterprise and business
purpose are embodied in Section 1.368-1(b) of the regulations and have been
developed through application by the courts.
The continuity of interest test will be met in the proposed transaction.
There will be a continuing interest through stock ownership in Bancorp on the
part of the former shareholders of Tehama since there is no plan or intention
on the part of these shareholders to dispose of the Bancorp stock received in
the exchange.
Section 1.368-1(b) of the Regulations provides that the continuity of
business enterprise (as described in Section 1.368-1(d) of the regulations)
requires that the acquiring corporation either continue the acquired
corporation's historic business or use a significant portion of the acquired
corporation's assets in a business. The proposed transaction meets the
continuity of business enterprise test of section 1.368-1(b) of the
Regulations because Tehama will continue to be engaged in banking activities
after the transaction.
The proposed transaction will also meet the business purpose test of
Section 1.368-2(g) of the Regulations as it will give Bancorp and Tehama
greater operating flexibility, enhance market receptivity to its common stock
and provide the opportunity for further diversification and the facilitation
of the expansion of operations into other markets.
CONCLUSION
Based solely on the facts and representations as set forth above, and the
relevant authority, including the Internal Revenue Code, Treasury
regulations, Internal Revenue Service rulings, and the case law, it is our
opinion that:
(1) The merger of Tehama Merger Corp. into Tehama Bank and the issuance
of Tehama Bancorp common stock in connection therewith as described
in the Agreement will constitute a tax-free reorganization within
the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E).
(2) Pursuant to Section 354(a)(1) of the Code, no gain or loss will be
recognized by the holders of Tehama Bank common stock upon the
exchange of such stock for shares of Bancorp common stock in
connection with the merger.
(3) Pursuant to Section 358(a)(1) of the Code, the basis of the common
stock of Bancorp received by the shareholders of Tehama will be the
same as the basis of Tehama common stock surrendered in exchange
therefor.
<PAGE>
Mr. William P. Ellison
Tehama Bank March 17, 1997
-5-
(4) Pursuant to section 1223(1) of the Code, the holding period of
the common stock of Bancorp received by the shareholders of
Tehama Bank will include the period during which the stock of
Tehama exchanged therefor was held, provided that the stock of
Tehama is held as a capital asset in the hands of the
shareholders of Tehama on the date of the exchange.
The foregoing opinions are based on the federal income tax laws of the
United States, including the Code, Treasury regulations and judicial and
administrative interpretations thereof as they exist on the date of this
letter. Please be aware that tax laws, regulations and administrative
policies change constantly and that this opinion applies only to the proposed
transaction at the date of this letter. Perry-Smith & Co. has no obligation
to update this opinion should any such changes occur.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to reference to us under the heading
"Merger--Certain Federal Income Tax Consequences" in the Prospectus/Proxy
Statement, which is part of the Registration Statement. In so consenting, we
do not thereby admit that we are within the category of persons whose consent
is required under Section 7 of the Securities Act.
Very truly yours,
Perry-Smith&Co.
<PAGE>
(EXHIBIT 10.1(A))
LEASE ASSIGNMENT AGREEMENT
This Lease Assignment Agreement ("Agreement") executed in duplicate, and
made as of this 2nd day of February 1988, by and between BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association,
hereinafter called Assignor, and TEHAMA COUNTY BANK, hereinafter called
Assignee.
1. RECITALS: This Agreement is made with reference to the following
facts and objectives:
Landlord and Assignor, as Tenant, entered into a written Lease dated July
31, 1980 and as amended on February 6, 1981 (the "Lease"), a copy attached as
Exhibit "A", in which Landlord leased to Assignor and Assignor leased from
Landlord premises located in the City of Red Bluff, County of Tehama, State of
California, commonly known as 237 South Main Street, Red Bluff, California, for
a term of eight (8) years ending on December 31, 1988, with four options to
extend the lease term for a period of eight (8) years each from and after the
expiration of the term. The options are to be exercised by at least six (6)
months' written notice.
Whereas Assignor now desires to assign the lease to Assignee, and Assignee
desires to accept the assignment thereof.
2. ASSIGNMENT: Assignor hereby assigns and transfers to Assignee,
effective February 24, 1988, all of its rights, title and interest in the Lease,
and Assignee accepts the assignment and assumes and agrees to perform, from the
date the assignment is effective, as a direct obligation to Landlord, all of the
provisions of the Lease.
3. SALE OF IMPROVEMENTS: Assignor agrees to sell and Assignee agrees to
purchase the existing improvements and leasehold interest for a price of
Twenty-Five Thousand and No/100 Dollars ($25,000.00). On or before the
effective date of this Agreement, Assignee shall deposit into escrow the entire
purchase price. The sale of the improvements shall be evidenced by a Quitclaim
Deed. The sale of the improvements and the leasehold interest shall be subject
to the rights of Landlord as set forth in the Lease.
4. ACCEPTANCE OF PREMISES: Assignee accepts the premises, as well as the
improvements thereon and the facilities appurtenant thereto, in their present
condition and stipulates that said premises as well as the improvements thereon
and the facilities appurtenant thereto are in good, clean, safe, and tenantable
condition as of the date of this Agreement. Assignee further agrees with and
represents to Assignor that said premises have been inspected by Assignee and
that Assignee has been assured by means independent of Assignor or any agent of
Assignor of all facts Assignee deems pertinent to this Agreement and that said
premises are being accepted by Assignee as a result of Assignee's inspection and
not as a result of any representations made by Assignor or any agent of
Assignor. Assignee is accepting the premises in "AS IS" condition and is solely
responsible for any and all conditions of the premises and/or
<PAGE>
improvements, including, but not by way of limitation, any defects or problems
with the premises whether known or unknown to either party, and irrespective of
whether such defects are hidden, latent, or readily discernible. Assignee is
accepting the premises without representation or warranty of any kind, expressed
or implied, by Assignor as to their condition or state of repair or as to their
suitability for the uses contemplated by Assignee.
5. PERMITTED USES: Assignee agrees that the permitted uses for the
premises, in accordance with Article 9 of the Lease, are for a commercial branch
banking office, or any other financial or office use. Assignee shall not use
the premises for any other purpose without obtaining the prior written approval
from the Landlord.
6. DEFAULT: During the term of the Lease, or any extension or renewal
thereof ("Lease Term"), Assignee shall provide Assignor with copies of any and
all notices of default received from Landlord. Assignee hereby indemnifies and
agrees to defend and hold Assignor free and harmless from and against any
claims, liabilities, demands, costs, losses, expenses and damages (including
reasonable attorney's fees and costs) suffered by Assignor as a result of
Assignee's default under the Lease or breach of this Agreement. If Assignee
defaults under the Lease, then, in addition to the rights provided below in this
Paragraph 6, Assignor shall have all rights against Assignee that are available
at law in equity. During the Lease Term, Assignor shall have the right, but as
between Assignor and Assignee, not the obligation, to cure any default by
Assignee under the Lease. If Assignor exercises its right to cure such default,
Assignee shall, within ten (10) days after request therefor from Assignor,
reimburse Assignor for Assignor's reasonable costs and expenses incurred in
curing such default, including, without limitation, reasonable attorney's fees
and costs allocated to in-house counsel, but only to the extent such expenses
are incurred while Assignee is not diligently pursing all reasonably means of
remedying such default. In addition, if Assignee abandons the premises or
receives a notice of eviction from Landlord, Assignor shall have, in addition to
any other remedies it may have at law or in equity, the right to have the Lease
assigned to a third party, subject to the provisions of the Lease, effective as
of the date of such abandonment or notice of eviction, or at any time thereafter
as Assignor shall elect in its sole discretion, and to cause Landlord to evict
Assignee from the premises subject to the Lease; provided, however, that
Assignor shall not exercise such right during pendency of a good faith contest
by Assignee with respect to the notice of eviction so long as there is not a
material risk that the Lease would be terminated prior to the resolution of such
contest. For purposes of effectuating the assignment referred to in the
immediately preceding sentence, and for no other purpose, Assignee hereby
appoints Assignor as its attorney-in-fact, which power of attorney is coupled
with an interest and is irrevocable.
7. AMENDMENT OF LEASE: Landlord and Assignee shall not enter into any
agreement that amends the Lease without Assignor's consent, and Assignor's
consent shall not be unreasonably withheld. Any amendment of the Lease in
violation of this provision shall have no force or effect on Assignor.
8. ATTORNEY'S FEE: If any party commences any action against the other
party arising out of or in connection with this Agreement, the prevailing party
shall be entitled to recover from the losing party a reasonable attorney's fee
and costs of suit, including, without limitation, costs allocable to in-house
counsel.
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9. NOTICE: Any notice, demand, request, consent, approval or
communication that any party desires or is required to give to the other party
shall be in writing and either served personally or sent prepaid, by first-class
mail or certified or registered, or by overnight delivery. Any notice, demand,
request, consent, approval, or communication that any party desires or is
required to give any other party shall be addressed to the other party at their
respective addresses set forth below. Any party may provide or change its
address by notifying the other party in writing of the change. Notice shall be
deemed communicated pursuant to this paragraph forty-eight (48) hours from the
time of mailing if mailed as provided herein.
10. SUCCESSORS: This Agreement shall be binding on and inure to the
benefit of all parties hereto and their respective assigns and successors in
interest.
11. LANDLORD'S CONSENT: This Agreement is subject to Landlord's consent
as set forth in the Lease and shall not be construed to amend or modify the
terms of the Lease.
Executed as of the day and year first above written.
ASSIGNOR: ASSIGNEE:
BANK OF AMERICA NATIONAL TRUST TEHAMA COUNTY BANK
AND SAVINGS ASSOCIATION P.O. Box 890
Corporate Real Estate - Real Estate Red Bluff, California 96080
Asset Management #3786
560 Davis Street
San Francisco, California 94111
By: /s/L.N. Hill by: /s/ Daniel B. Cargile
------------------------------ ------------------------------
Name: L.N. Hill Name: Daniel B. Cargile
------------------------------ ------------------------------
Title: Vice President Title: President
------------------------------ ------------------------------
Date: February 26, 1988 Date: 2-25-88
------------------------------ ------------------------------
By: /s/ K. MacAdam By: /s/ Raymond C. Lieberenz
------------------------------ ------------------------------
Name: K. MacAdam Name: Raymond C. Lieberenz
------------------------------ ------------------------------
Title: Vice President Title: Secretary
------------------------------ ------------------------------
Date: February 26, 1988 Date: 2-25-88
------------------------------ ------------------------------
3
<PAGE>
(EXHIBIT 10.1(B))
GROUND LEASE
SOUTH RED BLUFF BRANCH
This Agreement, made and entered into this 31st day of July, 1980, by and
between Bank of America National Trust and Savings Association, a national
banking association, hereinafter called Tenant, and Allied Farms, Inc.,
hereinafter called Landlord.
ARTICLE 1
PREMISES AND TERM
Landlord hereby leases to Tenant and Tenant hereby hires from Landlord
those certain premises situated in the Kelton Plaza Shopping Center (hereinafter
called the Center) in the City of Red Bluff, County of Tehama, State of
California, being approximately 8,400 square feet of land area, hereinafter
called the premises, as generally shown on attached Exhibit A, together with the
right to use in-common with others, the common areas of the Center. The
premises measure approximately 60 feet in front width by a depth of 140 feet,
adjacent to the existing K-Mart store facility. The exact location and
dimensions of the premises shall be established by a topographic and boundary
survey, subject to the mutual approval by Landlord and Tenant prior to Tenant's
construction. The initial term of this lease shall be for eight (8) years
commencing on the day Tenant receives a building permit for the construction of
its improvements, but not later than 150 days after the execution of this lease,
and shall terminate on the last day of the ninety-sixth (96th) full calendar
month, subject to the option to extend provisions contained in Article 13
hereof. Upon commencement of the lease term, Tenant and Landlord shall execute
an addendum to this lease establishing the exact dates of the term.
ARTICLE 2
RENT
Rent during the initial term of the lease shall be One-Thousand Six-Hundred
Sixty-six Dollars and Sixty-seven Cents ($1,666.67) per month due and payable on
the first of every month, in advance. Rent for partial months shall be
prorated.
<PAGE>
ARTICLE 3
TAXES AND ASSESSMENTS
Tenant agrees to pay before delinquency all real property taxes and
assessments which are levied or assessed against the demised premises and/or the
improvements thereon during the term of this lease or any renewal thereof.
Tenant will pay before delinquency all taxes and assessments levied or
assessed against any trade fixture, equipment, or personal property placed or
kept by Tenant upon the demised premises during the term of this lease or any
renewal thereof.
Landlord will use its best efforts to have the demised premises separately
assessed, if possible, and have billings sent directly to Tenant from taxing
authority. If separate tax bills are not available, then the portion of the
taxes to be paid by Tenant shall be computed by (a) apportioning the taxes on
the buildings, in the bill, in the same ratio as the ground floor area in
Tenant's building bears to the entire ground floor area contained in the
buildings included in the bill; and (b) apportioning the taxes on the land,
outside of the common areas, in the bill, as the ground floor area in Tenant's
building bears to the entire ground floor area contained on land either built or
shown on Exhibit "A" as reserved for future building included in the tax bill.
The taxes on the common areas shall be apportioned as provided for in
Article 33. It is agreed that Tenant may take advantage of the provisions of
any statute or ordinance permitting such taxes and assessments to be paid over a
period of time and Tenant shall be obligated to pay only the installments of
such taxes and assessments which are attributable to the term of this lease.
All real property taxes and assessments for the partial years in which this
lease commences and terminates shall be apportioned between Landlord and Tenant
on a daily basis.
If it shall so desire, Tenant may at any time contest the validity of any
assessment, tax, or levy. In this event, Landlord will offer no objection and
at the request of Tenant, but without expense to Landlord, will cooperate with
Tenant in such contest. Tenant hereby agrees to indemnify and save Landlord
harmless against any and all loss, cost, expense of any kind in connection
therewith.
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<PAGE>
Nothing herein contained shall be construed to require Tenant to pay any
franchise, estate, inheritance, succession, capital levy, or transfer tax of the
Landlord growing out of or connected with this lease of the Landlord's rights in
the demised premises or any income, excess profits or revenue tax.
ARTICLE 4
PUBLIC LIABILITY INSURANCE
Tenant agrees that it will at all times at its own expense during the term
of this lease maintain in force a policy or policies of comprehensive liability
insurance, including property damage, written by one or more responsible
insurance carriers which will insure Landlord and Tenant against liability for
injury to persons and/or property and death of any person or persons occurring
in or about the premises. Liability under such insurance shall not be less than
five hundred thousand dollars ($500,000) combined single limit. The insurance
provided for in this paragraph may be a general policy or policies covering all
of Tenant's properties. Additionally, if Tenant so desires it may self-insure
against the risks referred to in this paragraph. Tenant shall furnish Landlord
proof of the existence of the insurance policy or policies referred to in this
Article, if Landlord requests proof in written form to Tenant.
ARTICLE 5
FIRE INSURANCE
Tenant at its sole cost shall self-insure or maintain a normal fire
insurance policy with an extended coverage endorsement attached on the
improvements placed on the demised premises, in an amount of not less than
eighty percent (80%) of its full insurable value excluding foundations and
excavations. As long as his insurers so permit, Tenant hereby waives its rights
of recovery against Landlord for any loss insured by fire, extended coverage and
other property insurance policies. Tenant shall apply to its insurers to obtain
said waivers. Tenant shall obtain any special endorsements, if required by its
insurer to evidence compliance with the aforementioned waiver.
3
<PAGE>
ARTICLE 6
TENANT'S UTILITIES
Tenant agrees that it will arrange for and pay for all the fuel, gas, oil,
heat, electricity, water, power, and sewerage which may be furnished to or used
on the demised premises during the term of this lease, and dispose of its own
garbage and refuse from the premises.
ARTICLE 7
RIGHT OF INSPECTION
Landlord and the appropriate agents and employees of Landlord shall have
the right to enter upon said premises during business hours, to inspect the same
to see that no damage has been or is done to the premises, and to protect any or
all rights of Landlord and to post such reasonable notices as Landlord may
desire to protect the rights of Landlord.
ARTICLE 8
TENANT'S MAINTENANCE
Tenant shall keep and maintain, or cause to be kept and maintained, all
buildings, improvements, Tenant installed landscaping, appurtenances, and
adjacent sidewalks, which may at any time during the lease term be located upon
or adjacent to the demised premises in good condition and repair and in a clean,
attractive and sanitary condition, reasonable wear and use and damage from
casualties excepted.
ARTICLE 9
USE
Tenant agrees that it will not use the premises for, or carry on, or permit
upon said premises any offensive, noisy or dangerous trade, business,
manufacture or occupation or any nuisance or anything against public policy, and
that the premises shall not be used in whole or in part during the term of this
lease for any purpose or use in violation of any of the laws, ordinances,
regulations or rules of any public authority at any time applicable thereto.
The demised premises shall be used for a commercial branch banking office, or
any other financial or
4
<PAGE>
office use. Any other use shall require the prior written consent and approval
from Landlord, which consent shall not be unreasonably withheld.
ARTICLE 10
HOLDING OVER
Should Tenant hold over the term hereby granted with the consent of
Landlord, the term of this lease shall be deemed to be and shall be extended at
the monthly rent then in effect, and otherwise upon the covenants and conditions
in this lease contained, until either party serves upon the other thirty (30)
days written notice reciting therein the effective date of cancellation and upon
said date this lease as so extended shall terminate.
ARTICLE 11
ASSIGNMENT AND SUBLETTING
ASSIGNMENT. It is hereby covenanted and agreed by and between the parties
hereto that, provided Tenant shall remain liable for all terms and conditions of
this lease, Tenant may, subject to the conditions hereinafter set forth, assign
its interest in and to this lease in the manner hereafter provided, upon
condition that at the date of assignment Tenant shall not then be in default of
any of the covenants and conditions herein contained to be kept, observed and
performed by Tenant, and provided also that such assignment by Tenant shall be
evidenced by an instrument in writing, duly executed and acknowledged by both
Tenant and the assignee before a notary public or other officer authorized by
law to take acknowledgments and duly recorded in the Recorder's Office of the
County of Tehama, wherein and whereby such assignee shall expressly accept and
assume all of the terms, covenants and conditions in this lease contained to be
kept, observed and performed by Tenant, and shall become bound to comply
therewith, and an executed original of such instrument of assignment shall be
delivered to Landlord wherein shall also appear the specific place of business
or residence of the said assignee. The Tenant further covenants and agrees that
it will not make any assignment of this lease, except in the manner and upon the
conditions set forth herein, and it is agreed by and between the parties hereto
that any assignment by Tenant of its interest in and to this lease without
complying with the covenants and conditions aforesaid shall be null and void.
5
<PAGE>
SUBLETTING. It is further mutually agreed between the parties hereto that,
provided Tenant shall remain liable for all terms and conditions of this lease,
Tenant may sublet all or any part of any building and/or improvements upon the
land hereunder demised for any period or periods within the term hereby demised,
provided that the lease or leases under which subleasing shall be made are
subject to all of the covenants, agreements and conditions of this lease, and
provided further, that upon the termination of this lease such subleases shall
IPSO FACTO be terminated, provided also, that the receipt by Landlord from any
subtenant or subtenants of Tenant of any rent due to Tenant be received and
applied by Landlord toward the payment of the rent hereby reserved shall not be
taken and construed as a release of Tenant from any of its liabilities
undertaking the covenants and agreements hereunder, except to the extent of the
monies so received by said Landlord.
Any sublease by Tenant shall be evidenced by an instrument in writing, a
short form of which, suitable for recording, shall be duly executed and
acknowledged by both Tenant and the sublessee before a notary public or other
officer authorized by law to take acknowledgments and duly recorded in the
Recorder's Office of the County of Tehama. Any such sublease shall provide that
such sublessee shall expressly agree to take said sublease subject to all of the
terms, covenants and conditions in this lease contained to be kept, observed and
performed by said sublessee. A conformed copy of such instrument of sublease
and the short form thereof shall be delivered to Landlord, in which sublease
shall also appear the specific place of business or residence of said sublessee.
LANDLORD'S CONSENT. Landlord's consent shall not be required for an
assignment or sublease by Tenant, provided the demised premises are used in
accordance with those permitted uses stated in Article 9 herein. For any other
use of all or any portion of the demised premises shall require the prior
written consent and approval from Landlord, which consent shall not be
unreasonably withheld.
6
<PAGE>
ARTICLE 12
REMOVAL OF TRADE FIXTURES
Trade fixtures and furniture, including, but not limited to, the vault
door, any walk-up windows, and any automatic teller machines installed in the
demised premises at the cost of Tenant prior to or during the term of this lease
or any extensions thereof, shall be the property of Tenant, and Tenant shall
have the right to remove these from the demised premises at the end of the term
of this lease. If Tenant so elects, these trade fixtures and furniture may be
abandoned. In the event Tenant removes any such trade fixtures or furniture,
Tenant shall repair any damage to the demised premises caused by the removal
thereof.
ARTICLE 13
OPTIONS TO EXTEND
Provided Tenant is not in default under any of the terms, covenants and
conditions hereof at the time of the exercise of its option, Tenant shall have
four (4) consecutive options to extend the term of this lease for a period of
eight (8) years each.
Each such option shall be exercised by Tenant giving Landlord a written
notice that it is exercising the same at least six (6) months prior to the date
upon which this lease would otherwise terminate if such option were not
exercised. In computing this six (6) month period the provisions of Article 10
shall be disregarded. Any extended term hereof, pursuant to the exercise of
said option or options, shall be subject to all of the terms, covenants and
conditions of this lease, save and except that the rental for the applicable
extended term or terms shall be the fair market rental value of the demised
premises as of the time of the commencement of the applicable extended term. If
the parties hereto shall be unable to agree as to the fair market rental value
for the extended term or terms, then it shall be determined by arbitration in
accordance with the rules of the American Arbitration Association then in effect
and judgment upon the award may be entered in any court having jurisdiction
thereof. Any improvements constructed on the demised premises by Tenant at its
expense shall not be taken into consideration by determining the fair market
value. In the event the monthly rental for the first extended term hereof is
not determined prior to the commencement of such extended term, Tenant shall pay
Landlord monthly rental at
7
<PAGE>
the rate payable during the immediately preceding extension until such monthly
rental is determined. In the event the monthly rental as finally determined
exceeds the monthly rental therefore paid by Tenant to Landlord for any such
extension, rental shall be due following the determination of such monthly
rental in addition to the monthly rental due for said month, an amount equal to
the sum total of the difference between monthly rental therefore paid to
Landlord by Tenant during such extended term and the actual monthly rental so
determined to be due hereunder for such portion of the extended term. In the
event the monthly rental as actually determined for the extended term is less
than that theretofore paid to Landlord by Tenant, Landlord shall remit to
Tenant, following the determination of such monthly rental, an amount equal to
the sum total of the difference between monthly rental theretofore paid to
Landlord by Tenant during such extended term and the actual monthly rental so
determined to be due hereunder for such portion of the extended term. However,
in no event shall the monthly rental during any extended period be less than One
Thousand Six-Hundred and Sixty-six Dollars and Sixty-seven Cents ($1,666.67).
ARTICLE 14
CONDEMNATION
ENTIRE OR SUBSTANTIAL TAKING. If title to all of the premises or so much
thereof be taken for any public or quasi-public use under any statute by right
of eminent domain, or by private purchase in lieu thereof, so as to prevent a
reasonable amount of improvement and reasonably suitable for Tenant's continued
occupancy for the uses and purposes for which the premises are leased, this
lease shall terminate as of the date that possession of said premises, or any
part thereof, be taken and rent and other charges shall be adjusted as of such
date.
PARTIAL TAKING. If any part of the premises shall be so taken, including
any portion of any building or improvements thereon, and the remaining part
thereof (after reconstruction of the then existing building in which the
premises are located) is reasonably suitable for Tenant's continued occupancy
for the purpose and uses for which the premises are leased, this lease shall, as
to the part so taken, terminate as of the date that possession of such part of
said premises be so taken and the rent shall be reduced in the same proportion
that the land area taken bears to the original
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<PAGE>
land area demised, and Tenant shall, at its own cost and expense, make all
necessary repairs or alterations to the building and improvements situated
thereon so as to constitute the portion of the building and improvements not
taken as a complete architectural unit.
DISPOSITION OF PROCEEDS. There shall be a joint award or settlement made
to and with Landlord and Tenant for such part of the premises so taken, and any
sums legally recoverable are to be paid therefore, including damage to the
leasehold interest, if any, the fee and the remainder. The proceeds of such
joint award, settlements or compensation (or any separate awards, settlements or
compensation made in lieu thereof), which sums so legally recoverable are paid,
shall be distributed as follows: (i) the amount required for the restoration or
rehabilitation of any building or improvements (in the event of taking) shall be
paid to Tenant to be used solely for that purpose, (ii) such portion of said
proceeds as shall represent Tenant's depreciated cost of improvements or
building made or erected on the premises by Tenant shall be paid to Tenant. The
team "depreciated cost" within the meaning of this section means the amount
which is then Tenant's adjusted cost basis of said building and improvements
should Tenant depreciate said building and improvements over the then-remaining
term of this lease including the option periods; (iii) the residue of said
proceeds shall belong to and be paid over to Landlord on his proper share of
said award, settlement or compensation. Notwithstanding the foregoing, said
residue shall be in any event an amount not greater than the value of the land
leased hereunder if taken in its entirety by right of eminent domain, or in the
event that part of said leased land is taken, then the value of such part plus
the damages, if any, caused to the remaining portion shall be the amount
included in said residue; it is being understood that said value and said
damages shall be determined and ascertained as of the date of said taking by
right of eminent domain and shall be determined and fixed in said eminent domain
proceedings and shall in no event include the value of any improvements on said
land leased.
FURTHER ASSURANCE. Each party agrees to execute and deliver to the other
all instructions that may be required to effectuate the provisions hereof.
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<PAGE>
ARTICLE 15
QUIET ENJOYMENT
Landlord agrees that so long as Tenant is not in default hereunder, Tenant
shall have the quiet enjoyment of the demised premises without let or hindrance
on the part of Landlord, and Landlord will warrant and defend Tenant in the
peaceful and quiet enjoyment of the demised premises against the lawful claims
of all persons claiming by, through or under Landlord, its successors, heirs, or
assigns, including any buyer of all or part of Landlord's interest.
ARTICLE 16
DEFAULT
This lease is made upon the condition that:
(a) If default be made in payment of the rent and such default shall
continue for more than thirty (30) days after receipt of written demand by
Landlord to Tenant therefor, or
(b) If Tenant fails or neglects to perform any of Tenant's other
obligations hereunder for a period of thirty (30) days after receipt of
written demand by Landlord to Tenant for such performance, provided,
however, that Tenant's obligation in this respect shall be fully satisfied
where the default cannot be cured within said thirty (30) days, if Tenant
starts to cure same within said period, and thereafter diligently proceeds
to complete the curing of the said default, or
(c) If the estate hereby created shall be levied upon by a writ of
execution or similar writ and such writ shall not be canceled, satisfied or
otherwise removed within ninety (90) days after notice to Landlord, or in
any event prior to execution thereof, or
(d) If Tenant shall be adjudicated a bankrupt or insolvent according to
law, or if any assignment of its property shall be made for the benefit of
creditors, then and in any of said events, Landlord or the legal
representative of Landlord shall have the remedies herein provided.
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<PAGE>
In the event of any such default or breach by Tenant, Landlord may at any
time thereafter, upon written notice to Tenant, or Tenant's representative,
terminate this lease and Tenant's right to possession of the premises. In
addition, in any of said events, Landlord shall have the immediate right of re-
entry and right to remove all persons and property from the leased premises and
store such property in a public warehouse or elsewhere at the cost of and for
the account of Tenant, without service of notice or resort to legal process, and
Landlord shall not thereby be deemed guilty of trespass or become liable for any
loss or damaged occasioned thereby. A re-entry by Landlord without written
notice terminating this lease shall not constitute a termination of this lease
or of Tenant's possession of the premises.
Whether or not the lease is terminated, Landlord shall be entitled to
recover from the Tenant costs and expenses, including but not limited to, for
cleaning, removal of property, repairs and alterations, commissions required in
reletting the premises, and Landlord's reasonable attorney's fees and court
costs. All unpaid rent or other sums shall bear interest from the date due at
the rate of ten percent (10%) per annum.
Landlord may terminate this lease and Tenant's right to possession of the
premises only by first sending a written notice to that effect to Tenant or
Tenant's representative. Even though Tenant has defaulted or breached this
lease and abandoned the property, the lease shall continue in effect for so long
as Landlord does not so terminate Tenant's right to possession and Landlord may
enforce all of his rights and remedies under the lease including the right to
recover rent as it becomes due.
Upon a termination of this lease, in addition to all other damages that
Landlord is entitled to recover from Tenant, Landlord shall also be entitled to
recover from Tenant the worth of the amount by which the unpaid rent for the
balance of the term of the lease exceeds the amount of such rental loss that
Tenant can prove could be reasonably avoided by Landlord.
The rights and remedies of Landlord are cumulative, and the use of one
remedy shall not be taken to exclude or waive the right to the use of another.
If Landlord is compelled to commence or sustain an action at law or in equity to
collect the stipulated rent or any additional rent or any costs or expenses
provided for in this lease or to dispossess Tenant or to recover
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<PAGE>
possession of or to relet the premises or to enforce or defend any of Landlord's
rights, Tenant shall pay all costs in connection therewith including a
reasonable fee for the attorney of Landlord.
Landlord shall not be in default unless Landlord fails to perform
obligations required of Landlord within a reasonable time, but in no event later
than thirty (30) days after written notice by Tenant to Landlord and to the
holder of any first mortgage or deed of trust covering the premises whose name
and address shall have theretofore been furnished to Tenant in writing,
specifying wherein Landlord has failed to perform such obligation; provided,
however, that if the nature of Landlord's obligation is such that more than
thirty (30) days are required for performance then Landlord shall not be default
if Landlord commences performance within such thirty (30) day period and
thereafter diligently prosecutes the same to completion.
ARTICLE 17
INDEMNIFICATION
Tenant covenants to indemnify and save Landlord harmless from and against
any and all claims, arising from any action, omission or negligence of Tenant,
or of the agents, contractors, servants, employees or licensees of Tenant or any
subtenant, or arising from any accident, injury or damage whatsoever caused to
any person or to the property of any person, firm or corporation occurring
during the lease term in and about the premises (except, however, those
resulting from the acts, omission or negligence of Landlord or its agents,
contractors, servants or employees), and from and against all costs, expenses
and liabilities incurred in or in connection with any such claim or any action
or proceeding brought thereon; provided, however, Landlord shall not admit
liability therefor or pay or enter into any agreement for the payment or
compromise of any such claim or claims without Tenant's prior consent. Tenant,
upon payment to Landlord of Tenant's full liability to Landlord hereunder with
respect to any such occurrence, shall thereby be subrogated to any rights of
Landlord against any other parties whomsoever (other than Landlord's insurers,
if any) in connection therewith to the extent of the payment so made by Tenant;
and Landlord shall cooperate with Tenant in pursuit by Tenant of any of its
rights under this section.
12
<PAGE>
Landlord covenants to indemnify and save Tenant harmless from and against
any and all claims, arising from any action, omission or negligence of Landlord,
or its agents, contractors, servants, employees or licensees, or arising from
any injury or damage whatsoever caused to any person or to the property of any
person, firm or corporation occurring during the lease term in or about the
shopping center, except only the portion thereof covered by Tenant's covenant
above (except, however, those resulting from the acts, omission or negligence of
Tenant, or subtenant), and from and against all costs, expenses and liabilities
incurred in or in connection with any such claim or any action or proceeding
brought thereon. Landlord, upon payment to tenant of Landlord's full liability
to Tenant hereunder with respect to any such occurrence, shall thereby be
subrogated to any rights of Tenant against any other parties whomsoever (other
than Tenant's insurers, if any) in connection therewith, to the extent of the
payment so made by Landlord.
ARTICLE 18
SUBORDINATION
Upon written request by Landlord, Tenant shall execute and deliver an
agreement subordinating this lease to any first mortgage or deed of trust upon
the demised premises; provided, however, such subordination shall be upon the
express condition that the validity of this lease shall be recognized by the
mortgagee, and that, notwithstanding any default by the mortgagor with respect
to said mortgage or any foreclosure thereof, Tenant's possession and right of
use under this lease in and to the demised premises shall not be disturbed by
such mortgagee unless and until Tenant shall breach any of the provisions hereof
and this lease or Tenant's right to possession hereunder shall have been
terminated in accordance with the provisions of this lease.
ARTICLE 19
TENANT IMPROVEMENTS
Landlord hereby grants to tenant the right to build certain improvements in
accordance with all applicable local and state laws and regulations, and
according to the development plans of Tenant, consisting of a single story
mezzanine building of approximately 6,000 square feet of ground floor area with
two walk-up windows. Tenant shall install, at its own costs, in a first class
13
<PAGE>
workmanlike manner, all building improvements for its own use, to be harmonious
with the K-Mart store facility in the Center. Prior to construction of its
improvements, Tenant shall submit to Landlord a set of plans, showing Tenant's
floor plan and exterior elevations, for Landlord's approval, which approval
shall not be unreasonably withheld. Landlord shall have fifteen (15) working
days to review said plans and unless Landlord objects in writing to Tenant
during said fifteen (15) day period, Landlord's approval shall be deemed given.
It is further understood that Tenant shall have the right during the term of
this lease to expand its building an additional 2,400 square feet of ground
floor area at the rear portion of the building.
ARTICLE 20
NOTICES
All notices, including statements, demands, requests, consents, approvals,
authorizations, offers, agreements, appointments, designations, or refusals, but
not limited to these, by either party to the other shall be in writing and shall
either be served upon the party or sent by United States registered mail, return
receipt requested, postage prepaid. If sent by mail, the same shall be
addressed to Landlord and Tenant, as the case may be, at the following
addresses, or to such address as the parties hereto shall designate from time to
time. The addresses are:
Landlord: Allied Farms, Inc.
c/o Richard Kelton
9250 Wilshire Boulevard
Suite 404
Beverly Hills, CA 90212
Tenant: Bank of America, N.T. & S.A.
Premises and Real Properties Department
560 Davis Street
San Francisco, CA 94111
The date of said notice shall be the date on which such notice is deposited
in a post office of the United States Postal Service.
14
<PAGE>
ARTICLE 21
AGREEMENTS IN WRITING
There are no oral agreements or understandings between the parties hereto
affecting this lease, and this lease supersedes and cancels any and all previous
negotiations, arrangements, agreements, agreements and understandings, if any,
between the parties hereto with respect to the subject matters thereof, and none
thereof shall be used to interpret or construe this lease.
ARTICLE 22
NO ORAL CHANGES
This lease may not be changed orally but only by an agreement in writing
signed by the party against whom enforcement of any waiver, change, modification
or discharge is sought.
ARTICLE 23
ASSIGNEES BOUND
Subject to the provisions of this lease with respect to assignment by
Tenant, the covenants, conditions and provisions contained herein shall be
binding upon and inure to the benefit of Landlord, its successors and assigns,
and Tenant, its successors and assigns.
ARTICLE 24
LIENS
Tenant at all times shall keep the premises and property in which the
premises are situated free from any liens arising out of any work performed,
material furnished, or obligations incurred by Tenant. Tenant shall save,
indemnify and hold Landlord harmless from any and all claims, actions, demands
or damages arising from any such liens (including without limitation any and all
cost).
15
<PAGE>
ARTICLE 25
DESTRUCTION
If any buildings or improvements on the premises are partially or totally
destroyed or damaged by a risk covered by the insurance referred to in
Article 5, except to the extent herein provided, Tenant shall restore, or cause
to be restored, such damage or destruction; provided, however, Tenant may, at is
sole option, remove such damaged or destroyed building or improvements as it, in
its sole option, may elect, and replace it with a new building or improvements,
provided said new building or improvements are comparable in value to those
being replace. Any insurance proceeds available, whether from Tenant's self-
insurance or otherwise, shall be the property of Tenant, and Landlord shall have
no interest therein.
In the event the building and/or improvements on the premises are damaged
or destroyed (a) within the last four (4) years of the then-existing term of
this lease, or any extended term thereof, and (b) to such an extent that
restoration in the original form or construction of new improvements is not
economically feasible in the sole opinion of Tenant, this lease may be
terminated at Tenant's option by notice to Landlord within ninety (90) days
following any such damage or destruction, and if such damage or destruction is
covered by the insurance referred to in Article 5 hereof, Tenant shall pay to
Landlord the proceeds of such insurance.
ARTICLE 26
ARBITRATION
Any question, dispute, controversy or misunderstanding arising under any
provision of this lease shall be settled by arbitration. The party asking for
arbitration shall request arbitration through the American Arbitration
Association and the rules and decision of that association then in effect shall
be binding unto the parties hereto. The expense of the arbitration shall be
borne as the American Arbitration Association directs.
16
<PAGE>
ARTICLE 27
SIGNING
Tenant shall have the right to install, paint and affix signs upon the
demised premises, subject to the required approval of all appropriate
governmental authorities, and complying with all applicable laws, and all
restrictions of record.
It is further understood that Tenant shall have the right to place a pylon
type sign at any entrance to the shopping center or if Landlord installs a sign
advertising the shopping center on South Main Street, then on such sign. Exact
size and location of said pylon signs shall be subject to Landlord's approval,
which approval shall not be unreasonably withheld, and shall be subject to the
required approval of all appropriate governmental authorities, and complying
with all applicable laws and restrictions of record. Tenant shall be solely
responsible for all costs and taxes in connection with the installation,
maintenance and operation of said pylon and other signs.
ARTICLE 28
OWNERSHIP OF IMPROVEMENTS
All improvements made by the Tenant on the demised premises shall remain
the property of the Tenant for the term of this lease, or extension or renewal
thereof. Except for the right of removal provided for in Article 12, said
improvements shall become the property of the Landlord upon the termination of
the lease and vacation by tenant.
ARTICLE 29
GOVERNMENTAL PERMITS AND APPROVALS
The obligations of Tenant hereunder are expressly conditioned upon Tenant
obtaining from the appropriate governmental authorities an unlimited use permit,
if required, and a building permit for the installation and use of building on
the demised premises in accordance with plans of development as shown on
Exhibit "A" attached hereto.
Tenant will order, at its expense, immediately following execution of this
lease, a soils engineering report and a topographic and boundary survey on the
demised premises. Tenant shall
17
<PAGE>
have the right to terminate this lease in the event said investigations reveal
conditions that will result in a substantial increase in costs to construct
Tenant's improvements or impair Tenant's rights and use thereon. Tenant's right
to terminate this lease either for failure of its obtaining permits from
governmental authorities or due to soil conditions shall expire unless exercised
by written notice given to Landlord within 150 days from the execution of this
lease.
ARTICLE 30
SHORT FORM LEASE
The parties hereto agree to execute this lease, or at Tenant's election, a
short form thereof, in a manner so that it may be recorded in the Office of the
County Recorder, Tehama County.
ARTICLE 31
TIME
Time is of the essence of this lease.
ARTICLE 32
TITLE INSURANCE
After full execution of this lease, but prior to Tenant's obligation to
perform hereunder, Landlord will provide, a standard leasehold policy of Title
Insurance in the amount Five Hundred Ninety-two Thousand Dollars ($592,000)
issued by Western Title Insurance Company, naming Tenant as the insured, free
and clear, except for those exceptions expressly approved in writing by Tenant.
The cost of this policy will be paid 200/592 by Landlord and the balance by
Tenant.
ARTICLE 33
COMMON AREA MANAGEMENT
Landlord hereby agrees that it shall, at all times during the term of this
lease, including extensions, property construct, operate, furnish and maintain
all common areas in good condition and repair. Tenant agrees to reimburse
Landlord for a proportionate share of the costs of
18
<PAGE>
maintenance, utilities, real estate taxes and insurance for the parking and
common areas. The maintenance costs shall include a management fee of five
percent (5%) of the foregoing items, except that the five percent (5%) shall not
be calculated on the real property taxes. Tenant's pro rata share of common
area expenses shall be determined by applying the following ratio to the total
common area costs:
Numerator: 8,400 square feet
Denominator: 131,900 square feet
When buildings have been constructed on all of the frontage allowable for
buildings (except the K-Mart expansion area), then the Numerator and Denominator
above specified shall be modified to the actual square footage of the
constructed buildings on Tenant's premises and on the entire shopping center in
accordance with the actually constructed buildings as they exist from time to
time. Tenant shall be billed for its pro rata share of common area expenses at
reasonable intervals not more frequently than monthly, and the statement shall
show in reasonable detail the actual common area costs and expenses. Tenant
shall pay the bill promptly on receipt thereof. Tenant at al times shall have
access to the books and records of Landlord with respect to the total costs of
utilities and maintenance of parking areas and common areas so as to ascertain
that Tenant is paying its proper share thereof.
ARTICLE 34
ACCESS AND PARKING
At all times during the term of this lease, customers, employees, invitees
and agents of Tenant shall have access to and from the demised premises
(including access to Public streets) as outlined on Exhibit A, attached hereto.
The customers, agents, employees and invitees of Landlord and Tenant shall have
mutual and non-exclusive reciprocal rights to use the entire parking area of the
shopping center throughout the term of this lease and no improvements shall be
erected which would interfere with or diminish the extent of the parking areas.
It is further agreed that throughout the term of this lease, Landlord shall at
all times provide at least 475 parking spaces with respect to the shopping
center premises, provided, however, that if
19
<PAGE>
Landlord, due to governmental action (e.g., condemnation), is unable to provide
the minimum number of spaces specified, Tenant shall be released from its
obligation hereunder.
Adequate parking for the entire shopping center has been provided
sufficient for future expansion of Tenant's business premises. In the event
that actions of Landlord (e.g. construction of additional improvements) reduces
the parking ratio required by governmental authorities so that Tenant is unable
to expand its premises as outlined, Tenant shall have the right to terminate
this lease upon ninety (90) days' written notice, unless Landlord is able to
provide within said time the additional parking spaces required for expansion of
Tenant's premises. The Landlord shall provide 475 parking spaces in accordance
with the development plan for the Center.
ARTICLE 35
TERMINATION OF LESSORS' RESPONSIBILITY
In the event Landlord shall convey its fee interest, or any part thereof,
in all or a portion of the Shopping Center, Landlord shall be automatically
freed and relieved, from the date of such transfer or conveyance, of all
liability for the performance of any obligation on the part of Landlord
contained in this lease thereafter to be performed with respect to the property
conveyed. The obligations contained in this lease on the part of Landlord shall
be binding on Landlord only during and in respect to its period of ownership.
Landlord shall remain liable for any default incurred prior to the date of
conveyance. The transferee of such interest in the premises shall be deemed,
without any further agreement between the parties or their successor in
interest, to have
20
<PAGE>
assumed and agreed to carry out any and all of the covenants and obligations of
the Landlord under this lease.
IN WITNESS WHEREOF, the parties hereto have executed this lease on the day
and year first above written.
ALLIED FARMS, INC. BANK OF AMERICAN NATIONAL TRUST
"Landlord" AND SAVINGS ASSOCIATION
"Tenant"
By: [text illegible], President /s/ Charles E. [text illegible],
--------------------------- --------------------------------
Vice President
By: /s/ Richard Kelton, Secretary /s/ Michael F. Schmidt, AVP
----------------------------- ----------------------------------
21
<PAGE>
(EXHIBIT 10.1(C))
ADDENDUM TO LEASE
The undersigned, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as
Tenant, and ALLIED FARMS, INC., as Landlord, under that certain Lease dated
July 31, 1980 hereby certify as follows:
1. That the undersigned Tenant has entered into occupancy of the premises
described in said Lease;
2. That said Lease is in full force and effect and has not been assigned,
modified, supplemented or amended in any way;
3. That the same represents the entire agreement between the parties as to
said Leasing;
4. That the commencement date of said Lease is December 28, 1980;
5. That the termination date of said Lease is December 31, 1988.
6. That all conditions of said Lease to be performed by Landlord, and
necessary to the enforceability of said Lease have been satisfied;
7. That there are no defaults by either Landlord or Tenant thereunder;
8. That no rents have been prepaid, other than as provided in said Lease;
and
9. That on this date there are no existing defenses or offsets which the
undersigned Tenant has against the enforcement of said Lease by Landlord.
EXECUTED this 6th day of February, 1981.
LANDLORD: TENANT:
ALLIED FARMS, INC. BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Richard Kelton By: /s/ [Text illegible]
-------------------- -------------------------
<PAGE>
(EXHIBIT 10.2
ASSIGNMENT AND ASSUMTION OF AGREEMENT
AND RIGHT OF FIRST REFUSAL
This Assignment and Assumption of Agreement and Right of First Refusal (the
"Assignment") is made and entered into as of February 25, 1988, by and between
ORVILLE JACOBS and JOHN KOEBERER ("Assignors") and TEHAMA COUNTY BANK, a
California banking corporation ("Assignee") as follows.
RECITALS
A. Assignors, as buyer, have entered into a certain Real Estate Purchase
contract and Receipt for Deposit (the "Purchase Agreement") with Bank of America
National Trust and Savings Association, a national banking association
("Seller"), dated January 5, 1988, a copy of which is attached hereto as
EXHIBIT A and made a part hereof, with respect to the acquisition of certain
real property situated at 237 South Main Street, Red Bluff, in the County of
Tehama, California (the "Property"), more fully described in the Purchase
Agreement.
B. Assignors desire to assign to Asignee all of their right, title and
interest in, and delegate to Assignee all of their obligations and duties under,
the Purchase Agreement; and Assignee desires to accept assignment of all of
Assignors' right, title and interest in, and assume all of Assignors'
obligations and duties under, the Purchase Agreement.
C. Assignee desires to grant Assignor or Assignors, as the case may be, a
Right of First Refusal to purchase the Property as more fully described herein
below.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
Assignor and Assignee hereby agree as follows:
1. ASSIGNMENT AND DELEGATION. For good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Assignors hereby
assigns to Assignee and its successors and assigns all of Assignor's right,
title and interest in and to the Purchase Agreement, and delegate to Assignee
and its successor and assigns all of Assignors' obligations and duties of
performance under the Purchase Agreement.
2. ACCEPTANCE AND ASSUMPTION. Assignee, for itself and its successors
and assigns, hereby accepts the foregoing assignment, and assumes all of
Assignors' obligations and duties of performance under the Purchase Agreement to
the same extent as if Assignee had been the original buyer named therein.
3. RIGHT OF FIRST REFUSAL. Upon closing of the purchase of the Property
pursuant to the Purchase Agreement, should Assignee elect to sell, vacate or
subject to anyone other than a financial institution all of any portion of the
Property, Assignee shall personally deliver or mail by first class mail, postage
prepaid, to each of the Assignors, a written Notice of Assignee's intention to
sell the Property ("Notice"). If notice is sent by
<PAGE>
first class mail it shall be deemed to be delivered 72 hours after being posted
in the U.S. Mail. Assignors, collectively or individually as they shall
determine, shall have a right of first refusal to purchase the Property
("Refusal Right") on the following terms and conditions:
a. The Refusal Right shall exist for a period running concurrently
with the term of the Ground Lease (as it may be extended as provided therein), a
copy of which is attached hereto as EXHIBIT B and made a part hereof.
b. The purchase price for the Property shall be the sum $25,000,
payable in cash.
c. The Refusal Right shall be exercised by (i) within 30 days of
delivery of the Notice, Assignors' delivery to Assignee of a written notice of
intention to exercise the Refusal Right, subject only to assignee's delivery of
good and marketable title and Assignor's assumption of the Ground Lease and the
ground lessor's unqualified consent thereto; ad (ii) Assignors' deposit of
$25,000 into escrow with a title company of Assignors' choice, with jointly
executed escrow instruction to close in 60 days from the date of delivery of the
Notice.
4. LEASE OR SALE. Should Assignor or Assignors exercise their Refusal
Right and acquire said Property specified in paragraph 3 above, Assignors agree
not to lease or sell the Property to a financial institution other than Assignee
for a period of six (6) months, commencing with the last day Assignee's business
at the Property is open to the public. In consideration for such agreement,
Assignee agrees to pay to Assignor ground rent under the Ground Lease referenced
in the Purchase Agreement until the termination of said six-month period or
until the building is leased or sold by Assignor, whichever first occurs.
5. CONDITION TO ASSIGNMENT AND DELEGATION. The Assignment is conditioned
upon Assignee obtaining any approvals required by law or required by any
regulatory body governing the conduct of Assignee's banking business at
237 South Main Street, Red Bluff, California.
6. INDEMNIFICATION. Assignee, for itself and its successors and assigns,
agrees to indemnify and hold harmless Assignor for any liability for performance
or non-performance of the obligations and duties assumed herein, arising on and
after the date hereof. Assignor agrees to indemnify and hold harmless Assignee
and its successors and assigns for any liability for performance or
non-performance of the obligations and duties delegated herein, arising prior to
the date hereof.
7. SUCCESSORS. Subject to any restrictions in this Assignment, all of
the terms, covenants and conditions of this Assignment shall be binding upon,
and shall inure to the benefit of, the heirs, executors, administrators,
successors and permitted assigns of the parties hereto.
<PAGE>
8. GOVERNING LAW. This Assignment shall be governed by, construed in
accordance with, and interpreted under, the internal law of the State of
California.
9. ATTORNEYS' FEES. If there is any litigation between the parties
hereto to enforce any of the provisions of this Assignment or any right of any
party hereto, the unsuccessful party in such litigation shall pay to he
successful party all attorneys' fees and court costs (whether incurred at the
trial, appellate or administrative levels) incurred by the successful party in
connection with such litigation, in such amount as the court or administrative
body shall judge reasonable, all of which may be included in and as part of any
judgment rendered in connection with such litigation.
IN WITNESS WHEROF, the parties hereto have executed this Assignment as of
the date first above written.
ASSIGNORS:
/s/ Orville Jacobs
-----------------------------------------------------
Orville Jacobs
Address:
623 Main Street
-----------------------------------------------------
Red Bluff, Calif.
-----------------------------------------------------
/s/ John Koeberer by Orville Jacobs, Attorney in Fact
-----------------------------------------------------
John Koeberer
Address:
2150 Main Street
-----------------------------------------------------
Red Bluff, Calif.
-----------------------------------------------------
ASSIGNEE:
TEHAMA COUNTY BANK
By: /s/ Daniel B. Cargile
--------------------------------------------------
Its: President
-------------------------------------------------
<PAGE>
- - -------------------------------------------------------------------------------
(EXHIBIT 10.3)
PURCHASE AND ASSUMPTION AGREEMENT
dated as of
October 15, 1996
between
WELLS FARGO BANK, N.A.
and
TEHAMA COUNTY BANK
- - -------------------------------------------------------------------------------
<PAGE>
LIST OF SCHEDULES
Schedule 1.1(a) Assumed Severance Obligations
Schedule 1.1(b) Branches/Real Properties
Schedule 3.6(a) Form of California Grant Deed
Schedule 3.6(b) Form of Bill of Sale
Schedule 3.6(c) Form of Assignment and Assumption Agreement
Schedule 3.6(d) Form of Assignment of Lease and Assumption
Schedule 3.6(e) Form of Landlord Consent
Schedule 3.6(g) Form of Certificate of Officer, Wells Fargo Bank, National
Association
Schedule 3.7(d) Form of Certificate of Officer [Purchaser]
Schedule 5.4 Tenant Leases
Schedule 5.6 Litigation and Undisclosed Liabilities
Schedule 5.16 Environmental Matters
Schedule 8.1 Outstanding Tax Liabilities
<PAGE>
This PURCHASE AND ASSUMPTION AGREEMENT, dated as of this 15th day of
October, 1996 (this "AGREEMENT"), is by and between Wells Fargo Bank, N.A.
("SELLER") and Tehama County Bank ("PURCHASER").
RECITALS
A. SELLER. As of the date hereof, Seller is a national banking
association, organized under the laws of the United States, with its principal
office located in San Francisco, California.
B. PURCHASER. Purchaser is a state chartered bank, organized under the
laws of State of California, with its principal office located in Red Bluff,
California.
C. Purchaser desires to acquire from Seller, and Seller desires to
transfer to Purchaser, certain banking premises and certain deposits and deposit
related loans associated therewith, located in the State of California, all in
accordance with and subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and obligations set forth herein, the parties agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1 CERTAIN DEFINITIONS. The terms set forth below are used in this
Agreement with the following meanings:
"ACCRUED INTEREST" means, as of any date, (a) with respect to a Deposit,
interest which is accrued on such Deposit to but excluding such date and not yet
posted to the relevant deposit account and (b) with respect to a Deposit Related
Loan, interest which is accrued on such Deposit Related Loan to but excluding
such date and not yet paid.
"ACH DIRECT DEPOSIT CUT-OFF DATE" has the meaning set forth in Section 4.3.
"ADJUSTED PAYMENT AMOUNT" has the meaning set forth in Section 3.3
"ADJUSTMENT DATE" has the meaning set forth in Section 3.3.
"AFFILIATE" means, with respect to any person, any other person directly or
indirectly controlling, controlled by or under common control with such person.
"AGREEMENT" means this Purchase and Assumption Agreement, including all
schedules, exhibits and addenda, each as amended from time to time in accordance
with the terms hereof.
"ALLOCATION STATEMENT" has the meaning set forth in Section 3.4(a).
<PAGE>
"ASBESTOS HAZARD" means the presence of asbestos in a parcel of Owned Real
Property or the improvements thereon as of the date hereof which, under
applicable laws, must be immediately remediated in order to allow continuation
of the current operation of the Branch within such Owned Real Property using the
current improvements thereon and the cost of such remediation, as reasonably
determined by the Environmental Consultant, shall be more than One Hundred
Thousand Dollars ($100,000).
"ASSETS" has the meaning set forth in Section 2.1(a).
"ASSIGNMENT AND ASSUMPTION AGREEMENT" has the meaning set forth in Section
3.6(c).
"ASSUMED SEVERANCE OBLIGATIONS" means those duties, responsibilities,
obligations and liabilities of Seller or of its Affiliates under the severance
and similar plans described in Schedule 1.1(a) to pay severance and provide
benefits to any Branch Employee or Transferred Employee.
"BRANCH EMPLOYEES" means, the employees of the Seller working at the
Branches on the Closing Date (including, without limitation, those employees who
on the Closing Date are on family and medical leave, military leave or personal
or pregnancy leave and who are eligible to return to work under Seller's
policies), subject to any transfers permitted pursuant to Section 7.1 and
replacement in the ordinary course of business of employees who may leave
Seller's employ between the date hereof and the Closing Date.
"BRANCH LEASES" means the leases under which Seller leases land and/or
buildings used as Branches, including without limitation ground leases.
"BRANCHES" means each of the branch banking offices of Seller at the
locations identified on Schedule 1.1(b) hereto.
"BURDENSOME CONDITION" has the meaning set forth in Section 9.1(a).
"BUSINESS DAY" means a day on which banks are generally open for business
in California and which is not a Saturday or Sunday.
"CASH ON HAND" means, as of any date, all petty cash, vault cash, teller
cash, ATM cash, prepaid postage and cash equivalents held at a Branch.
"CLOSING" and "CLOSING DATE" refer to the closing of the P&A Transaction,
which is to be held at such time and date as provided in Article 3 hereof.
"CODE" means the Internal Revenue Code of 1986, as amended.
"DEPOSIT RELATED LOANS" means the following loans and only the following:
(i) any consumer loan secured directly by a Deposit being sold (but not
including any credit card line of credit); and (ii) any overdraft loan linked
directly to a Deposit being sold (but not including any credit card protection
relationship). No other loans are being sold.
-2-
<PAGE>
"DEPOSIT(S)" means deposit liabilities with respect to deposit accounts
booked by Seller at the Branches, as of the close of business of the day prior
to the Closing Date, which constitute "deposits" for purposes of the Federal
Deposit Insurance Act. 12 U.S.C. Section 1813, including collected and
uncollected deposits and Accrued Interest, BUT EXCLUDING: (a) all Excluded
Deposits; (b) deposit liabilities with respect to accounts registered in the
name of a trust for which Seller serves as trustee (other than IRA and Keogh
Account deposit liabilities); (c) deposit liabilities with respect to accounts
booked by Seller at any Branch for which Seller serves as guardian or custodian
(other than IRA and Keogh Account deposit liabilities); and (d) Excluded
IRA/Keogh Account Deposits.
"DRAFT CLOSING STATEMENT" means a draft closing statement, prepared by
Seller, as of the close of business of the third (3rd) business day preceding
the Closing Date setting forth an estimated calculation of both the Purchase
Price and the Estimated Payment Amount.
"ENCUMBRANCES" means all mortgages, claims, charges, liens, encumbrances,
easements, limitations, restrictions, commitments and security interests, except
for statutory liens securing tax and/or other payments not yet due, liens
incurred in the ordinary course of business, including without limitation liens
in favor of mechanics or materialmen, and such other liens, charges, security
interests or encumbrances as do not materially detract from the value or
materially and adversely affect the use of the properties or assets subject
thereto or affected thereby or which otherwise do not materially impair the
value of or business operations at such properties and except for obligations
pursuant to the California escheat and unclaimed property laws relating to the
Escheat Deposits.
ENVIRONMENTAL CONSULTANT has the meaning specified in Section 10.1(b).
"ENVIRONMENTAL HAZARD" means the presence of any Hazardous Substance in
violation of, and reasonably likely to require material remediation costs under,
applicable Environmental Laws; PROVIDED, HOWEVER, that the definition of
Environmental Hazard shall not include asbestos and asbestos-containing
materials, unless, with respect to any single parcel of Owned Real Property, the
cost of remediation, as reasonably determined by the Environmental Consultant,
shall be more than One Hundred Thousand Dollars ($100,000). Any such
determination shall be based upon a "risk-based approach" of what would be
necessary to obtain the equivalent of a "no further action letter" from the
applicable regulatory agency or agencies with no deed restrictions which would
adversely affect the commercial use of the parcel of Owned Real Property.
"ENVIRONMENTAL LAW" means any Federal or state law, statute, rule,
regulation, code, order, judgment, decree, injunction or agreement with any
Federal or state governmental authority, (x) relating to the protection,
preservation or restoration of the environment (including, without limitation,
air, water vapor, surface water, groundwater, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource) or
to human health or safety or (y) the exposure to, or the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of hazardous substances, in each case
as amended and now in effect. Environmental Laws include, without limitation,
the Clean Air Act (42 USC Section 7401 ET SEQ.); the Comprehensive Environmental
Response Compensation and Liability Act (42 USC Sections 9601 ET SEQ.); the
Resource Conservation and Recovery Act (42 USC
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Section 96901 ET SEQ.); the Federal Water Pollution Control Act (33 USC
Sections 1251 ET SEQ.); the Occupational Safety and Health Act (29 USC
Section 651 ET SEQ.); the California Porter-Cologne Act (Cal. Water Code
Section 13000 ET SEQ.) and the California Carpenter-Presley-Tanner Hazardous
Substance Account Act (Cal. Health & Safety Code Sections 25300 ET SEQ.);
PROVIDED, HOWEVER, that the definition of "Environmental Law" shall not
include any Federal or state law, statute, rule, regulation, code, order,
judgment, decree, injunction or agreement with any governmental authority
relating to asbestos or asbestos-containing materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCHEAT DEPOSITS" means, as of any date, Deposits and safe deposit box
contents, in each case held on such date at the Branches which become subject to
escheat, in the calendar year in which the Closing occurs, to the State of
California pursuant to applicable escheat and unclaimed property laws.
"ESTIMATED PAYMENT AMOUNT" has the meaning set forth in Section 3.2(a).
"ESTIMATED PURCHASE PRICE" means the Purchase Price as set forth on the
Draft Closing Statement.
"EXCLUDED IRA/KEOGH ACCOUNT DEPOSITS" has the meaning set forth in
Section 2.4(c).
"EXCLUDED DEPOSITS" means: (i) all wholesale commercial deposits (i.e.,
with account analysis or cash management services); and (ii) certain business
related deposit liabilities excluded by Seller. All Excluded Deposits have been
previously removed from deposit lists provided to Purchaser.
"FDIA" means the Federal Deposit Insurance Act, as amended.
"FDIC" means the Federal Deposit Insurance Corporation.
"FEDERAL FUNDS RATE" on any day means the per annum rate of interest
(rounded upward to the nearest 1/100 of 1%) which is the weighted average of the
rates on overnight federal funds transactions arranged on such day or, if such
day is not a Business Day, the previous Business Day, by federal funds brokers
computed and released by the Federal Reserve Bank of New York (or any successor)
in substantially the same manner as such Federal Reserve Bank currently computes
and releases the weighted average it refers to as the "Federal Funds Effective
Rate" at the date of this Agreement.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System.
"FEDWIRE DIRECT DEPOSIT CUT-OFF DATE" has the meaning set forth in
Section 4.3.
"FINAL CLOSING STATEMENT" means a final closing statement, prepared by
Seller, as of the ninetieth (90th) day following the Closing Date setting forth
both the Purchase Price and the Adjusted Payment Amount.
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"GRANT DEEDS" has the meaning set forth in Section 3.6(a).
"HAZARDOUS SUBSTANCE" means any substance, whether liquid, solid or gas (a)
listed, identified or designated as hazardous or toxic to a level which requires
remediation under any Environmental Law; (b) which, applying criteria specified
in any Environmental Law, is hazardous or toxic; or (c) the use or disposal of
which is regulated under Environmental Law.
"IRA" means an "individual retirement account" or similar account created
by a trust for the exclusive benefit of an individual or his beneficiaries in
accordance with the provisions of Section 408 of the Code.
"IRS" means the Internal Revenue Service.
"KEOGH ACCOUNT" means an account created by a trust for the benefit of
employees (some or all of whom are owner-employees) and that complies with the
provisions of Section 401 of the Code.
"LANDLORD CONSENTS" has the meaning set forth in Section 3.6(e).
"LEASE AGREEMENT" means a lease entered into pursuant to Section 10.1(c)
upon such specific terms and conditions as contemplated by such Section and such
other commercially reasonable terms and conditions as are customary in a "triple
net" lease of a bank branch facility in the State of California.
"LEASE ASSIGNMENT" has the meaning set forth in Section 3.6(d).
"LIABILITIES" has the meaning set forth in Section 2.2.
"LOANS" means Deposit Related Loans only. No other loans are being sold.
"LOAN DOCUMENTS" means all documents included in Seller's files with
respect to a Deposit Related Loan, including, without limitation, notes security
agreements, loan agreements, guaranties, and all modifications, waivers and
consents relating to any of the foregoing.
"LOAN VALUE" means with respect to a Deposit Related Loan and as of a date,
the unpaid principal balance of any such Loan plus Accrued Interest thereon.
"LOSS" means the amount of losses, liabilities, damages (including
forgiveness or cancellation of obligations) and expenses (including reasonable
expenses of investigation and reasonable attorneys' fees and expenses in
connection with any action, suit or proceeding) incurred or suffered by the
indemnified party or its Affiliates in connection with the matters described in
Section 12.1, less the amount of the economic benefit (if any) to the
indemnified party or its Affiliates occurring or reasonably anticipated to occur
in connection with any such damage, loss, liability or expense (including Tax
benefits obtainable under applicable law, amounts
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recovered under insurance policies net of deductibles, recovery by setoffs or
counterclaims, and other economic benefits).
"MATERIAL ADVERSE EFFECT" means (a) with respect to Seller, a material
adverse effect on the business or direct economic results of operations of the
Branches, taken as a whole, or on the ability of Seller timely to consummate the
P&A Transaction as contemplated by this Agreement, and (b) with respect to
Purchaser, a material adverse effect on the ability of Purchaser to perform any
of its financial or other obligations under this Agreement, including the
ability of Purchaser timely to consummate the P&A Transaction contemplated by
this Agreement. In determining whether there has occurred a Material Adverse
Effect there shall be excluded the effect of any change in Federal or state
banking laws or regulations, any change in GAAP or regulatory accounting
principles, any adverse change in general economic conditions, including without
limitation the interest rate environment, or in the California depository
institution industry generally.
"OCC" means the Office of the Comptroller of the Currency.
"ORDER" has the meaning set forth in Section 9.1(b).
"OWNED REAL PROPERTY" means Real Property where Seller owns both the real
property and improvements thereon that are used for Branches.
"P&A TRANSACTION" means the purchase and sale of Assets and the assumption
of Liabilities described in Sections 2.1 and 2.2.
"PERSONAL PROPERTY" means all of the personal property of Seller, located
in the Branches, which is defined on the personal property and fixed assets list
previously provided to Purchaser; PROVIDED, no teller terminals or Wells Fargo
signs are being sold. If, prior to the Closing Date, an item of Personal
Property is stolen, destroyed or otherwise lost, such item shall be excluded
form the P&A Transaction, and the term "Personal Property" as used herein shall
exclude such item. If, prior to the Closing Date, an item of Personal Property
is damaged by fire or other casualty, such item, if reasonably repairable, shall
be sold to Purchaser (in accordance with the provisions hereof) and the
insurance proceeds relating to such item shall be assigned to Purchaser, it
being understood that if such item is not reasonably repairable or is
underinsured or uninsured, it shall be excluded from the P&A Transaction.
Personal Property, for purposes of what is being sold hereunder, does not
include any personal property of Seller located in the Real Property which is
not in the branch banking office and is not necessary to the operation of the
branch banking office (e.g., personal property associated with non-branch
banking offices of Seller which may be located in the Real Property).
"PERSONAL PROPERTY LEASES" means the leases under which Seller leases
certain Personal Property in the Branch. Seller shall cancel all such Personal
Property Leases as of the Closing.
"PURCHASE PRICE" has the meaning set forth in Section 2.3.
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"REAL PROPERTY" means the parcels of real property on which the Branches
listed on Schedule 1.1(b) are located, including any improvements and tenant
improvements and trade fixtures thereon, which Schedule indicates whether or not
such real property is Owned Real Property.
"RECORDS" means all paper records and original documents, or where
reasonable and appropriate copies thereof, in Seller's possession that pertain
to and are utilized by Seller to administer, reflect, monitor, evidence or
record information respecting the business or conduct of the Branches (including
transaction tickets through the Closing Date and all records for closed accounts
located in Branches and excluding any other transaction tickets and records for
closed accounts) and all such records and original documents, or where
reasonable and appropriate copies thereof, regarding the Assets, or the
Deposits, or to comply with applicable laws and governmental regulations to
which the Deposits are subject, including but not limited to the California
unclaimed property and escheat laws. Notwithstanding the above, Seller may
provide copies of all Records, except notes and other Loan Documents. Seller is
not required to deliver any data processing or electronic/image type records
commingled with other records of Seller unrelated to the Branches and Seller is
not required to deliver any account history which is prior to forty-five (45)
days prior to Closing. In addition, Seller is not required to deliver any
risk-management information regarding customers, including without limitation
credit-scoring formulas, daylight over draft limits, stop payment or overdraft
history more than forty-five (45) days prior to Closing.
"REGULATORY APPROVALS" means all approvals, authorizations, waivers or
consents of or notices to any governmental agencies or authorities required for
or in connection with consummation of the P&A Transaction.
"SAFE DEPOSIT AGREEMENTS" means the agreements relating to safe deposit
boxes located in the Branches.
"SELLER'S KNOWLEDGE" or other similar phrases means information that is
actually known to any officer of Seller who holds the title of Senior Vice
President or above and has responsibility with respect to management of
operations conducted at the Branches.
"TAX RETURNS" means any return or other report required to be filed with
respect to any Tax, including declaration of estimated tax and information
returns.
"TAXES" means any federal, state, local, or foreign taxes, including but
not limited to taxes on or measured by income, estimated income, franchise,
capital stock, employee's withholding, non-resident alien withholding, backup
withholding, social security, occupation, unemployment, disability, value added
taxes, taxes on services, real property, personal property, sales, use, excise,
transfer, gross receipts, inventory and merchandise, business privilege, and
other taxes or governmental fees or charges or amounts required to be withheld
and paid over to any government in respect of any tax or governmental fee or
charge, including any interest, penalties, or additions to tax on the foregoing
whether or not disputed.
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"TENANT LEASES" means leases or subleases between Seller and tenants, if
any, listed on Schedule 5.4.
"TITLE COMPANY" has the meaning set forth in Section 3.10(a).
"TITLE POLICY" has the meaning set forth in Section 3.10(b).
"TITLE REPORTS" has the meaning set forth in Section 3.10(a).
"TRANSACTION ACCOUNT" means any account at a Branch in respect of which
deposits therein are withdrawable in practice upon demand or upon which third
party drafts may be drawn by the depositor, including checking account,
negotiable order of withdrawal accounts and money market deposit accounts.
"TRANSFERRED EMPLOYEES" means Branch Employees employed by Purchaser on and
after the Closing Date.
1.2 ACCOUNTING TERMS. All accounting terms not otherwise defined herein
shall have the respective meanings assigned to them in accordance with
consistently applied generally accepted accounting principles as in effect from
time to time in the United States of America ("GAAP").
1.3 INTERPRETATION. The captions or headings in this Agreement are for
convenience of reference only and in no way define, limit or describe the scope
or intent of any provisions or Sections of this Agreement. All references in
this Agreement to particular Articles or Sections are references to the Articles
or Sections of this Agreement, unless some other reference is clearly indicated.
In this Agreement, unless the context otherwise requires, (i) words describing
the singular number shall include the plural and vice versa, (ii) words denoting
any gender shall include all genders and (iii) the word "including" shall mean
"including without limitation." The rule of construction against the draftsman
shall not be applied in interpreting and construing this Agreement.
ARTICLE 2
THE P&A TRANSACTION
2.1 PURCHASE AND SALE OF ASSETS. (a) Subject to the terms and conditions
set forth in this Agreement, at the Closing, Seller shall grant, sell, convey,
assign, transfer and deliver to Purchaser, and Purchaser shall purchase and
accept from Seller, all of Seller's right, title and interest, as of the Closing
Date, in and to the following (collectively, the "ASSETS"):
(i) Cash on Hand;
(ii) the Owned Real Property;
(iii) the Personal Property; PROVIDED, HOWEVER, no Personal Property
Leases are being sold.
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(iv) the Deposit Related Loans, and the servicing rights related
thereto pursuant to Section 2.5.
(v) the Branch Leases and Tenant Leases;
(vi) the Safe Deposit Agreements; and
(vii) the Records
(b) Purchaser understands and agrees that it is purchasing only the Assets
(and assuming only the Liabilities) specified in this Agreement and, except as
may be expressly provided for in this Agreement, Purchaser has no interest in or
right to any other business relationship which Seller may have with any customer
of the Branches, including without limitation: (i) any deposit account or other
service of Seller at any other office of Seller which may be linked to the
Deposits; (ii) any money market account which sweeps from the Branch to a third
party; (iii) any merchant card banking relationship; and/or (iv) any cash
management service (e.g., sweep accounts, cash concentrator accounts, controlled
disbursement accounts) which Seller may provide to any customer of the Branches.
No credit card relationships are being sold. No right to the use of any trade
name, trademark or service mark, if any, of Seller, Wells Fargo & Company
(parent of Seller) or any of their respective Affiliates is being sold.
2.2 ASSUMPTION OF LIABILITIES. (a) Subject to the terms and conditions
set forth in this Agreement, at the Closing, Purchaser shall assume, pay,
perform and discharge all duties, responsibilities, obligations or liabilities
of Seller (whether accrued, contingent or otherwise) to be discharged,
performed, satisfied or paid on or after the Closing Date, with respect to the
following (collectively, the "LIABILITIES"):
(i) the Deposits, including the IRA and Keogh Accounts to the extent
contemplated by Section 2.4;
(ii) the Branch Leases, Tenant Leases and Personal Property Leases;
(iii) the Safe Deposit Agreements; and
(iv) the Assumed Severance Obligations.
(b) Notwithstanding anything to the contrary in this Agreement, Purchaser
shall not assume or be bound by any duties, responsibilities, obligations or
liabilities of Seller, or of any of Seller's Affiliates, of any kind or nature,
known, unknown, contingent or otherwise, other than the Liabilities.
2.3 PURCHASE PRICE. The purchase price ("PURCHASE PRICE") for the Assets
shall be the sum of:
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(a) An amount equal to 3.420% of the average daily balance (including
Accrued Interest) of the Deposits for the period commencing thirty (30) days
prior to and inclusive of the day prior to the Closing Date and ending on the
day prior to the Closing Date;
(b) The aggregate amount of Cash on Hand as of the Closing Date;
(c) The aggregate net book value of all the Assets, other than Cash on
Hand and Deposit Related Loans, as reflected on the books of Seller as of the
close of business of the month-end day most recently preceding the Closing Date.
(d) The aggregate Loan Value of the Deposit Related Loans as of the close
of business of the day prior to the Closing Date.
Purchaser has, concurrently with Seller's execution of this Agreement, made a
good faith deposit to Seller, as consideration for entering into this Agreement,
in the amount of Seventy-Five Thousand Dollars ($75,000) per branch for each
Branch which is the subject of this Agreement. Such good faith deposit shall be
applied against the Purchase Price upon Closing. Such good faith deposit shall
be returned to Purchaser if this Agreement is terminated for a reason other than
the default of Purchaser. If the Closing does not timely occur due to the
default of Purchaser, Seller shall retain such deposit. Such good faith deposit
is consideration for entering into this Agreement, is not intended as liquidated
damages and shall not in any way limit Seller's remedies for a default by
Purchaser hereunder. No interest shall be paid on such good-faith deposit.
2.4 ASSUMPTION OF IRA AND KEOGH ACCOUNT DEPOSITS. (a) With respect to
Deposits in IRAs, Seller will use reasonable efforts and will cooperate with
Purchaser in taking any action reasonably necessary to accomplish either the
appointment of Purchaser as successor custodian or the delegation to Purchaser
(or an Affiliate of Purchaser) of Seller's authority and responsibility as
custodian of all such IRA deposits except self-directed IRA deposits, including,
but not limited to, sending to the depositors thereof appropriate notices,
cooperating with Purchaser (or such Affiliate) in soliciting consents from such
depositors, and filing any appropriate applications with applicable regulatory
authorities. If any such delegation is made to Purchaser (or such Affiliates),
Purchaser (or such Affiliate) will perform all of the duties so delegated and
comply with the terms of Seller's agreement with the depositor of the IRA
deposits affected thereby.
(b) With respect to Deposits in Keogh Accounts, Seller shall cooperate
with Purchaser to invite depositors thereof to direct a transfer of each such
depositor's Keogh Account and the related Deposits to Purchaser (or an Affiliate
of Purchaser), as trustee thereof, and to adopt Purchaser's (or such
Affiliate's) form of Keogh Master Plan as a successor to that of Seller.
Purchaser (or such Affiliate) will assume no Keogh Accounts unless Purchaser (or
such Affiliate) has received the documents necessary for such assumption at or
before the Closing. With respect to any owner of a Keogh Account who does not
adopt Purchaser's (or such Affiliate's) form of Keogh Master Plan, Seller will
use reasonable efforts in order to enable Purchaser (or such Affiliate) to
retain such Keogh Accounts at the Branches.
(c) If, notwithstanding the foregoing, as of the Closing Date, Purchaser
shall be unable to retain deposit liabilities in respect of an IRA or Keogh
Account, such deposit liabilities shall be
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excluded from Deposits for purposes of this Agreement and shall constitute
"EXCLUDED IRA/KEOGH ACCOUNT DEPOSITS."
2.5 SALE AND TRANSFER OF SERVICING AND ESCROWS. The Deposit Related Loans
shall be sold on a servicing released basis. As of the Closing Date, all
rights, obligations, liabilities and responsibilities with respect to the
servicing of such Loans on and after the Closing Date will be assumed by
Purchaser. Seller shall be discharged and indemnified by Purchaser from all
liability with respect to servicing of the Deposit Related Loans on and after
the Closing Date and Purchaser shall be discharged and indemnified by Seller
from all liability with respect to servicing of the Deposit Related Loans prior
to the Closing Date.
ARTICLE 3
CLOSING PROCEDURE; ADJUSTMENTS
3.1 CLOSING. (a) The Closing will be held at the offices of Seller at
420 Montgomery Street, San Francisco or such place as may be agreed to by the
parties.
(b) The Closing Date shall be at a date and time as soon as practicable,
which shall be no later than thirty (30) Business Days after receipt of all
Regulatory Approvals unless otherwise agreed to by the parties; PROVIDED,
HOWEVER, in no event shall the closing be later than March 31, 1997.
3.2 PAYMENT AT CLOSING. (a) At Closing, Seller shall pay to Purchaser
the amount by which the aggregate balance (including Accrued Interest) of the
Deposits exceeds the Estimated Purchase Price (the "ESTIMATED PAYMENT AMOUNT")
or, Purchaser shall pay to Seller the amount by which the Estimated Purchase
Price exceeds the aggregate balance (including Accrued Interest) of the
Deposits, each as set forth on the Draft Closing Statement as agreed upon
between Seller and Purchaser.
(b) All payments to be made hereunder by one party to the other shall be
made by wire transfer of immediately available funds (in all cases to an account
specified in writing by Seller or Purchaser, as the case may be, to the other
not later than the third (3rd) Business Day prior to the Closing Date) on or
before 11:00 A.M. local time on the date of payment. If any payment to be made
hereunder on the Closing Date (or any other date) shall not be made on or before
11:00 A.M. local time on such date, and the amount thereof shall have been
agreed to in writing by the parties at the Closing Date (or such other payment
date), the party responsible therefor may make such payment on or before 11:00
A.M. local time on the next Business Day together with interest thereon at the
Federal Funds Rate applicable from the Closing Date (or such other payment date)
to the date such payment is actually made, which in no event shall be later than
the fifth (5th) business day after such payment was due.
(c) If any instrument of transfer contemplated herein shall be recorded in
any public record before the Closing and thereafter the Closing is not
completed, then at the request of such transferring party the other party will
deliver (or execute and deliver) such instruments and take
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such other action as such transferring party shall reasonably request to revoke
such purported transfer.
3.3 ADJUSTMENT OF PURCHASE PRICE. (a) On or before 12:00 noon on the
sixtieth (60th) day following the Closing Date (the "ADJUSTMENT DATE"), Seller
shall deliver to Purchaser the Final Closing Statement and shall make available
such work papers, schedules and other supporting data as may be reasonably
requested by Purchaser to enable it to verify the amounts set forth in the Final
Closing Statement. The Final Closing Statement shall also set forth the amount
(the "ADJUSTED PAYMENT AMOUNT") by which the aggregate amount of Deposits
(including Accrued Interest) shown on the Final Closing Statement differs from
the Estimated Purchase Price.
(b) The determination of the Adjusted Payment Amount shall be final and
binding on the parties hereto unless within thirty (30) days after receipt by
Purchaser of the Final Closing Statement, Purchaser shall notify the Seller in
writing of its disagreement with any amount included therein or omitted
therefrom, in which case, if the parties are unable to resolve the disputed
items within ten (10) Business Days of the receipt by Seller of notice of such
disagreement, such items shall be determined by an independent accounting firm
selected by mutual agreement between Seller and Purchaser; PROVIDED, HOWEVER,
that in the event the fees of such firm as estimated by such firm would exceed
fifty percent (50%) of the net amount in dispute, the parties agree that such
firm will not be engaged by either party and that such net amount in dispute
will be equally apportioned between Seller and Purchaser. Such accounting firm
shall be instructed to resolve the disputed items within ten (10) Business Days
of engagement, to the extent reasonably practicable. The determination of such
accounting firm shall be final and binding on the parties hereto. The fees of
any such accounting firm shall be divided equally between Seller and Purchaser.
(c) On or before 12:00 Noon on the tenth (10th) Business Day after the
Adjustment Date or, in the case of a dispute, the date of the resolution of the
dispute pursuant to subsection 3.3(b) above, Seller shall pay to Purchaser an
amount equal to the amount by which the Adjusted Payment Amount exceeds the
Estimated Payment Amount, plus interest on such excess amount from the Closing
Date to but excluding the payment date, at the Federal Funds Rate or, if the
Estimated Payment Amount exceeds the Adjusted Payment Amount, Purchaser shall
pay to Seller an amount equal to such excess, plus interest from the Closing
Date to but excluding the payment date, at the Federal Funds Rate. Any payments
required by Section 3.5 shall be made contemporaneously with the foregoing
payment.
3.4 ALLOCATION OF PURCHASE PRICE. (a) Purchaser and Seller agree that
upon final determination of the Purchase Price, the Purchase Price shall be
allocated in a manner as determined by Purchaser subject to Seller's consent
(which consent shall not be unreasonably withheld or delayed), after taking into
account any applicable Treasury Regulations and the fair market value of such
items and to be set forth in a statement, dated the Adjustment Date (the
"ALLOCATION STATEMENT") prepared by Purchaser.
(b) Purchaser and Seller shall report the transaction contemplated by this
Agreement (including income tax reporting requirements imposed pursuant to
Section 1060 of the Code) in
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accordance with the allocation specified in the Allocation Statement. In the
event any party hereto receives notice of an audit in respect of the allocation
of the Purchase Price specified herein, such party shall immediately notify the
other party in writing as to the date and subject of such audit.
(c) If any Tax Return filed by Purchaser or Seller relating to the
transactions contemplated hereby is challenged by the taxing authority with
which such Tax Return was filed on the basis of the allocation set forth in the
Allocation Statement, as finally adjusted, the filing party shall assert and
maintain in good faith the validity and correctness of such allocation during
the audit thereof until the issuance by the taxing authority of a "30 Day
Letter", or a determination of liability equivalent thereto, to such party;
PROVIDED, HOWEVER, that at any time such party shall, in its sole discretion,
have the right to pay, compromise, settle, dispute or otherwise deal with its
alleged tax liability. If such a Tax Return is challenged as herein described,
the party filing such Tax Return shall keep the other party apprised of its
decisions and the current status and progress of all administrative and judicial
proceedings, if any, that are undertaken at the election of such party.
3.5 PRORATION; OTHER CLOSING DATE ADJUSTMENTS. (a) Except as otherwise
specifically provided in this Agreement, it is the intention of the parties that
Seller will operate the Branches for its own account until 11:59 P.M.,
California time, the day prior to the Closing Date, and that Purchaser shall
operate the Branches, hold the Assets and assume the Liabilities for its own
account on and after the Closing Date. Thus, except as otherwise specifically
provided in this Agreement, items of income and expense, as defined herein,
shall be prorated as of 11:59 P.M., California time, the day prior to the
Closing Date, and settled between Seller and Purchaser on the Closing Date,
whether or not such adjustment would normally be made as of such time. Items of
proration will be handled at Closing as an adjustment to the Purchase Price
unless otherwise agreed by the parties hereto.
(b) For purposes of this Agreement, items of proration and other
adjustments shall include, without limitation: (i) rental payments and security
deposits under the Branch Leases and the Tenant Leases; (ii) sales and use
taxes and personal and real property taxes and assessments; (iii) FDIC deposit
insurance assessments; (iv) wages, salaries and employee benefits and expenses;
(v) trustee or custodian fees on IRA and Keogh Accounts; (vi) adjustments
reflecting exclusions from the Personal Property as provided for in the
definition thereof; and (vii) other prepaid expenses and items and accrued but
unpaid liabilities, as of the close of business on the day prior to the Closing
Date. Safe deposit rental payments previously received by Seller shall not be
prorated.
3.6 SELLER DELIVERIES. At the Closing, Seller shall deliver to Purchaser:
(a) Grant deeds, in substantially the form of Schedule 3.6(a), pursuant to
which the Owned Real Property shall be transferred to Purchaser "AS IS", "WHERE
IS" and with all faults (the "GRANT DEEDS");
(b) A bill of sale, in substantially the form of Schedule 3.6(b), pursuant
to which the Personal Property shall be transferred to Purchaser "AS IS", "WHERE
IS" and with all faults;
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(c) An assignment and assumption agreement, in substantially the form of
Schedule 3.6(c), with respect to the Liabilities (the "ASSIGNMENT AND ASSUMPTION
AGREEMENT");
(d) Lease assignment and assumption agreements in substantially the form
of Schedule 3.6(d), with respect to each of the Branch Leases (the "LEASE
ASSIGNMENTS");
(e) Subject to the provisions of Section 7.4, such consents of landlords
under the Branch Leases, as shall be required pursuant to the terms of such
Branch Leases, to the assignment of the Branch Leases to Purchaser in
substantially the form of Schedule 3.6(e) (the "LANDLORD CONSENTS");
(f) Subject to the provisions of Section 7.4, such consents as shall be
required pursuant to the terms of the Tenant Leases and the Personal Property
Leases in connection with the assignments thereof to Purchaser;
(g) An Officer's Certificate in substantially the form of Schedule 3.6(g);
(h) An opinion of Seller's counsel, dated the Closing Date, in form and
substance reasonably satisfactory to Purchaser substantially to the effect that:
(i) Seller is a national banking association, duly organized and
validly existing under the laws of the United States, with all requisite
corporate power and authority to execute, deliver and perform this
Agreement;
(ii) all Regulatory Approvals required to have been obtained by Seller
or its Affiliates have been obtained and are in full force and effect; and
(iii) this Agreement has been duly authorized, executed and delivered
by Seller and (assuming due authorization, execution and delivery by
Purchaser) is a valid and legally binding obligation of Seller enforceable
in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfers, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles;
(i) The Draft Closing Statement;
(j) Seller's resignation as trustee or custodian, as applicable, with
respect to each IRA or Keogh Account included in the Deposits and designation of
Purchaser as successor trustee or custodian with respect thereto as contemplated
by Section 2.4;
(k) All documentation required to exempt Seller from the withholding
requirement of Section 1445 of the Code, consisting of an affidavit from Seller
to Purchaser under penalty of perjury that Seller is not a foreign person and
providing Seller's U.S. taxpayer identification number; and
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(l) Such other documents as the parties determine are reasonably necessary
to consummate the P&A Transaction as contemplated hereby.
3.7 PURCHASER DELIVERIES. At the Closing, Purchaser shall deliver to
Seller:
(a) The Assignment and Assumption Agreement;
(b) Purchaser's acceptance of its appointment as successor trustee or
custodian, as applicable, of the IRA and Keogh Accounts included in the Deposits
and assumption of the fiduciary obligations of the trustee or custodian with
respect thereto, as contemplated by Section 2.4;
(c) The Lease Assignments and, as contemplated by Section 7.4, such other
instruments and documents as any landlord under a Branch Lease may reasonably
require as necessary or desirable for providing for the assumption by Purchaser
of a Branch Lease, each such instrument and document in the form and substance
reasonably satisfactory to the parties and dated as of the Closing Date;
(d) An Officer's Certificate in the form of Schedule 3.7(d) attached
hereto;
(e) An opinion of Purchaser's counsel, dated the Closing Date, in form and
substance reasonably satisfactory to Seller, substantially to the effect that:
(i) Purchaser is a state chartered bank, duly organized and validly
existing under the laws of the State of California, with all requisite
corporate power and authority to execute, deliver and perform this
Agreement;
(ii) all Regulatory Approvals required to have been obtained by
Purchaser or its Affiliates have been obtained and are in full force and
effect; and
(iii) this Agreement has been duly authorized, executed and delivered
by Purchaser and (assuming due authorization, execution and delivery by
Seller) is a valid and legally binding obligation of Purchaser enforceable
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; and
(f) Such other documents as the parties determine are reasonably necessary
to consummate the P&A Transaction as contemplated hereby.
3.8 DELIVERY OF THE LOAN DOCUMENTS. (a) In connection with the sale
hereunder, as soon as is reasonably practicable after the Closing Date, Seller
shall deliver to Purchaser or its designee the Loan Documents actually in the
possession of Seller. Seller makes no representation or warranty to Purchaser
regarding the condition of the Loan Documents or any single document included
therein, or Seller's interest in any collateral securing any Deposit Related
Loan, except as specifically set forth herein. Seller shall have no
responsibility or liability for the Loan Documents
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from and after the time such files are delivered by Seller to an independent
third party for shipment to Purchaser, the cost of which shall be the sole
responsibility of Purchaser.
(b) Promptly upon the execution of this Agreement, Purchaser shall provide
Seller the exact name to which the Deposit Related Loans are to be endorsed, or
whether any Deposit Related Loans should be endorsed in blank. Seller will use
its best efforts to complete such endorsements and deliver the Loan Documents
within ninety (90) days after Closing; PROVIDED, HOWEVER, with respect to
specific Loan Documents, Seller may require additional time to effectively
transfer title thereto and Purchaser shall not hold Seller liable for any
reasonable delays in the delivery of such Loan Documents. Purchaser further
acknowledges and agrees that Seller may execute or endorse any Loan Document by
way of facsimile signature.
3.9 OWNED REAL PROPERTY FILINGS. On or prior to the Closing Date, Seller
shall file or record, or cause to be filed or recorded, any and all documents
(including, without limitation, deeds) necessary in order that the legal and
equitable title to Owned Real Property shall be duly vested in Purchaser as of
the Closing Date. Any expenses or documentary transfer taxes with respect to
such filings shall be borne by Seller or Purchaser in accordance with the escrow
agent's determination of the local custom in the county in which the filing is
being made; PROVIDED, HOWEVER, that if it is determined that (i) the custom is
to split such expenses or documentary transfer taxes or (ii) there is no
discernible custom, any such expenses or documentary transfer taxes shall be
split evenly between Seller and Purchaser.
3.10 TITLE POLICIES. (a) Purchaser has previously been provided by Seller,
at its own expense, a preliminary title report (the "TITLE REPORTS") for all the
Owned Real Property issued by Chicago Title Company (the "TITLE COMPANY"),
Purchaser has had an opportunity to review such Title Reports and Purchaser
hereby approves the condition of title with respect to all the Owned Real
Property being purchased hereunder.
(b) Purchaser shall, at its own expense, obtain as of the Closing Date a
CLTA title insurance policy from the Title Company (a "TITLE POLICY") with
respect to all the Owned Real Property. Seller will cooperate with Purchaser in
assisting Purchaser to obtain (at Purchaser's expense) such Title Policies,
including without limitation only such endorsements as may be reasonably
necessary to insure that such Owned Real Property is free and clear of any
Encumbrance not shown on the Title Reports which would materially and adversely
affect the value or marketability of title thereto.
ARTICLE 4
TRANSITIONAL MATTERS
4.1 TRANSITIONAL ARRANGEMENTS. Seller and Purchaser agree to cooperate
and to proceed as follows to effect the transfer of account record
responsibility for the Branches:
(a) Not later than thirty (30) days after the signing of this Agreement,
Seller will meet with Purchaser to investigate, confirm and agree upon mutually
acceptable transaction settlement
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procedures and specifications, files, procedures and schedules, for the transfer
of account record responsibility; PROVIDED, HOWEVER it being understood and
agreed that Seller is not obligated under this Agreement to provide Purchaser
any system conversion files regarding the Assets and Liabilities other than a
standard format conversion tape (i.e., not one which is specifically formatted
for Purchaser's systems specifications); and PROVIDED, FURTHER, that Seller is
not obligated to provide Purchaser with any information regarding Seller's
relationship with the customers outside of the Branch (e.g., other customer
products, house-holding information).
(b) Not later than sixty (60) days after the date of this Agreement,
Seller shall provide Purchaser with a hard copy listing of all applicable
Check/Savings/Signatures that Seller has for the Deposits and related special
instructions.
4.2 CUSTOMERS. (a) Not later than thirty (30) days prior to the Closing
Date (unless earlier required by law),
(i) Seller will notify the holders of Deposits to be transferred on
the Closing Date that, subject to the terms and conditions of this
Agreement, Purchaser will be assuming liability for such Deposits;
(ii) each of Seller and Purchaser shall provide, or join in providing
where appropriate, all notices to customers of the Branches and other
persons that Seller or Purchaser, as the case may be, is required to give
under applicable law or the terms of any other agreement between Seller and
any customer in connection with the transactions contemplated hereby; and
(iii) following or concurrently with the notice referred to in clause
(i) above, Purchaser may communicate with and deliver information,
brochures, bulletins and other communications to depositors and other
customers of the Branches concerning the P&A Transaction and the business
of Purchaser. A party proposing to send or publish any notice or
communication pursuant to any paragraph of this Section 4.2 shall furnish
to the other party a copy of the proposed form of such notice or
communication at least five (5) days in advance of the proposed date of the
first mailing, posting, or other dissemination thereof to customers, and
shall not unreasonably refuse to amend such notice to incorporate any
changes that the other such party proposes as necessary to comply with
applicable law. All costs and expenses of any notice or communication sent
or published by Purchaser or Seller shall be the responsibility of the
party sending such notice or communication and all costs and expenses of
any joint notice or communication shall be shared equally by Seller and
Purchaser. As soon as reasonably practicable and in any event within
fourteen (14) days of the date hereof, Seller shall provide to Purchaser a
report of the names and addresses of the owners of the Deposits and the
lessees of the safe deposit boxes in connection with the mailing of such
materials, which report shall be current as of the date hereof.
(b) Following the giving of any notice described in paragraph (a) above,
Purchaser and Seller shall deliver to each new customer at any of the Branches
such notice or notices as may be reasonably necessary to notify such new
customers of Purchaser's pending assumption of liability
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for the Deposits and to comply with applicable law. The cost of such notices
shall be paid by Purchaser. At any time after the receipt of all Regulatory
Approvals (except for the expiration of statutory waiting periods), within five
(5) Business Days following any request by Purchaser, Seller will provide
Purchaser with account information, including complete mailing addresses for
each of the depositors of the Deposits as of a recent date, and upon reasonable
request shall provide an updated version of such records; PROVIDED, HOWEVER,
that Seller shall not be obligated to provide such updated records more than
twice.
(c) Notwithstanding the provisions of Section 7.6, neither Purchaser nor
Seller shall object to the use, by depositors of the Deposits, of payment orders
issued to or ordered by such depositors on or prior to the Closing Date, which
payment orders bear the name, or any logo, trademark, service mark, trade name
or the proprietary mark of Wells Fargo Bank or any of its Affiliates.
4.3 DIRECT DEPOSITS. Seller will use all reasonable efforts to transfer
to Purchaser on the Closing Date all of those automated clearing house and
FedWire direct deposit arrangements related (by agreement or other standing
arrangement) to Deposits. As soon as practicable after the receipt of all
Regulatory Approvals (except for the expiration of statutory waiting periods),
Seller will deliver to Purchaser a listing in a format mutually agreed upon by
the parties of all such direct deposit records which Seller, in the exercise of
all reasonable efforts, is able to identify. On each Business Day for a period
of four (4) months following the Closing, in the case of automated clearing
house direct deposits to accounts containing Deposits (the final Business Day of
such period being the "ACH DIRECT DEPOSIT CUT-OFF DATE"), Seller shall, as soon
as practicable, but in any event no less than twice daily and no later than 4:00
A.M., California time, of each Business Day for same day settlement, and no
later than 6:00 P.M., California time, of each Business Day for settlement on
the following Business Day, remit and transfer to Purchaser all ACH direct
deposits intended for accounts constituting Deposits. On each Business Day, for
a period of thirty (30) days following the Closing Date, in the case of feeder
direct deposits to accounts constituting Deposits (the final Business Day of
such period being the "FEDWIRE DIRECT DEPOSIT CUT-OFF DATE"), Seller shall, as
soon practicable, but in any event, no later then 12:00 noon, California time,
of each Business Day following the date of receipt thereof, remit and transfer
to Purchaser all FedWire direct deposits intended for accounts constituting
Deposits. Compensation for ACH direct deposits or FedWire direct deposits not
forwarded to Purchaser on the same Business Day as that on which Seller has
received such deposits will be handled in accordance with the rules established
by the United States Council on International Banking. After the applicable
Direct Deposit Cut-Off Date, Seller may discontinue accepting and forwarding
automated clearing house and FedWire entries and funds and return such direct
deposits to the originators marked "Account Closed." Seller shall not be liable
for any overdrafts that may thereby be created. Purchaser and Seller shall
agree on a reasonable period of time prior to the Closing during which Seller
will no longer be obligated to accept new direct deposit arrangements related to
the Branches. At the time of each Direct Deposit Cut-off Date, Purchaser will
provide automated clearing housing originators with account numbers relating to
Deposits.
4.4 DIRECT DEBIT. As soon as practicable after the receipt of all
Regulatory Approvals (except for the expiration of statutory waiting periods),
and after the notice provided in Section 4.2(a), Purchaser will send appropriate
notice to all customers having accounts constituting
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Deposits the terms of which provide for direct debit of such accounts by third
parties, instructing such customers concerning transfer of customer direct
debit authorizations from Seller to Purchaser. Seller shall cooperate in
soliciting the transfer of such authorizations. Such notice shall be in a
form agreed to by the parties. For a period of four (4) months following
the Closing Date, Seller shall as soon as practicable, but in any event, no
less than twice daily and no later than 4:00 A.M., California time, of each
Business Day for same day settlement, and no later than 6:00 P.M.,
California time, of each Business Day for settlement on the following
Business Day, forward to Purchaser all direct debits on accounts
constituting Deposits. Thereafter, Seller may discontinue forwarding such
entries and return them to the originators marked "Account Closed."
Purchaser and Seller shall agree on a reasonable period of time prior to the
Closing during which Seller will not longer be obligated to accept new
direct debit arrangements related to the Branches. On the Closing Date,
Purchaser will provide automated clearing house originators of such direct
debits with account numbers.
4.5 ESCHEAT DEPOSITS. As soon as practicable after the Closing Date,
Seller will deliver to Purchaser a data processing record identifying all
Escheat Deposits that have been transferred to Purchaser. Thereafter, Purchaser
shall be solely responsible for the proper reporting and transmission to the
State of California of such Escheat Deposits.
4.6 MAINTENANCE OF RECORDS. Through the Closing Date, Seller will
maintain the Records relating to the Assets and Liabilities in the same manner
and with the same care that the Records have been maintained prior to the
execution of this Agreement. Purchaser may, at its own expense, make such
copies of and excerpts from the Records as it may deem desirable. All Records,
whether held by Purchaser or Seller, shall be maintained for such periods as are
required by law, unless the parties shall, applicable law permitting, agree in
writing to a different period. From and after the Closing Date, each of the
parties shall permit the other reasonable access to any applicable Records in
its possession relating to matters arising on or before the Closing Date and
reasonably necessary in connection with any claim, action, litigation or other
proceeding involving the party requesting access to such Records or in
connection with any legal obligation owed by such party to any present or former
depositor or other customer.
4.7 INTEREST REPORTING AND WITHHOLDING. (a) Unless otherwise agreed to
by the parties, Seller will report to applicable taxing authorities and holders
of Deposits, with respect to the period from January 1 of the year in which the
Closing occurs through the Closing Date, all interest (including for purposes
hereof dividends and other distributions with respect to money market accounts)
credited to, withheld from and any early withdrawal penalties imposed upon the
Deposits. Purchaser will report to the applicable taxing authorities and
holders of Deposits, with respect to all periods from the day after the Closing
Date, all such interest credited to, withheld from and early withdrawal
penalties imposed upon such Deposits. Any amounts required by any governmental
agencies to be withheld from any of the Deposits through the Closing Date will
be withheld by Seller in accordance with applicable law or appropriate notice
from any governmental agency and will be remitted by Seller to the appropriate
agency on or prior to the applicable due date. Any such withholding required to
be made subsequent to the Closing Date shall be withheld by Purchaser in
accordance with applicable law or the appropriate notice from any governmental
agency and will be remitted by Purchaser to the appropriate agency on or prior
to the applicable due date. Promptly after the Closing Date, but in no event
later than the date Purchaser is
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obligated to remit such amounts to the applicable governmental agency, Seller
will pay to Purchaser that portion of any sums theretofore withheld by Seller
from any Deposits which are required to be remitted by Purchaser pursuant to
the foregoing and shall directly remit to the applicable governmental agency
that portion of any such sums which are required to be remitted by Seller.
(b) Unless otherwise agreed by the parties, Seller shall be responsible
for delivering to payees all IRS notices with respect to information reporting
and tax identification numbers required to be delivered through the Closing Date
with respect to the Deposits, and Purchaser shall be responsible for delivering
to payees all such notices required to be delivered following the Closing Date
with respect to the Deposits. Purchaser and Seller shall, prior to the Closing
Date, consult and Seller shall take reasonable actions as are necessary to
permit Purchaser timely to deliver such IRS notices required to be delivered
following the Closing Date.
(c) Unless otherwise agreed by the parties, Seller will make all required
reports to applicable Tax authorities and to obligors on the Deposit Related
Loans purchased on the Closing Date, with respect to the period from January 1
of the year in which the Closing occurs through the Closing Date, concerning all
interest and points received by the Seller. Purchaser will make all required
reports to applicable Tax authorities and to obligors on the Deposit Related
Loans purchased on the Closing Date, with respect to all periods from the day
after the Closing Date, concerning all such interest and points received.
4.8 NEGOTIABLE INSTRUMENTS. Seller will remove any supply of Seller's
money orders, official checks, gift checks, travelers' checks or any other
negotiable instruments located at each of the Branches on the Closing Date.
4.9 ATM/DEBIT CARDS. Seller will provide Purchaser with a list of ATM
access/debit cards issued by Seller to depositors of any Deposits, and a record
thereof in a format reasonably agreed to by the parties containing all addresses
therefor, as soon as practicable after the receipt of all Regulatory Approvals
(except for the expiration of any statutory waiting periods). At or promptly
after the Closing, Seller will provide Purchaser with a revised record through
the Closing. In instances where a depositor of a Deposit made an assertion of
error regarding an account constituting Deposits pursuant to the Electronic
Funds Transfer Act and Federal Reserve Board Regulation E, and Seller, prior to
the Closing, recredited the disputed amount to the relevant account during the
conduct of the error investigation, Purchaser agrees to comply with a written
request from Seller to debit such account in a stated amount and remit such
amount to Seller, to the extent of the balance of funds available in the
accounts. Seller agrees to indemnify Purchaser for any claims or losses that
Purchaser may incur as a result of complying with such request from Seller.
Seller will not be required to disclose to Purchaser customers' PINs or
algorithms or logic used to generate PINs. Purchaser shall reissue ATM
access/debit cards to depositors of any Deposits prior to the Closing Date,
which cards shall be effective as of the Closing Date. Seller agrees to settle
any and all ATM transactions effected on or before the Closing Date, but
processed after the Closing Date, as soon as practicable. Purchaser and Seller
agree to remit the total net balance of such transactions to Seller or
Purchaser, as the case may be, on the same date the transactions are settled.
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4.10 LEASING OF PERSONAL PROPERTY. Seller shall cancel or terminate any
Personal Property Leases as of the Closing Date.
4.11 HANDLING OF CERTAIN ITEMS. (a) As soon as practicable after the
Closing Date, Purchaser shall mail to each depositor in respect of a Transaction
Account (i) a letter approved by Seller requesting that such depositor promptly
cease writing Seller's drafts against such Transaction Account and (ii) new
drafts which such depositor may draw upon Purchaser for the purpose of effecting
transactions with respect to such Transaction Accounts. The parties hereto
shall use their best efforts to develop procedures which cause Seller's drafts
against Transaction Accounts which are received after the Closing Date to be
cleared through Purchaser's then-current clearing procedures. During the ninety
(90) day period after the Closing Date, if it is not possible to clear
Transaction Account drafts through Purchaser's then-current clearing procedures,
Seller shall forward to Purchaser as soon as practicable but in no event more
than three (3) Business Days after receipt all Transaction Account drafts drawn
against Transaction Accounts. Seller shall have no obligation to pay such
forwarded Transaction Account drafts. Upon the expiration of such ninety (90)
day period, Seller shall cease forwarding drafts against Transaction Accounts.
Purchaser and Seller will agree upon a reasonable market rate compensation to be
paid to Seller for its processing of the drafts during the ninety (90) day
period following the Closing Date.
(b) Any items that were credited for deposit to or cashed against a
Deposit prior to the Closing and are returned unpaid on or within sixty (60)
days after the Closing Date ("RETURNED ITEMS") will be handled as set forth
herein. If Seller's bank account is charged for the Returned Item, Seller shall
forward such Returned Item to Purchaser. If upon Purchaser's receipt of such
Returned Item there are sufficient funds in the Deposit to which such Returned
Item was credited or any other Deposit transferred at the Closing standing in
the name of the party liable for such Returned Item, Purchaser will debit any or
all of such Deposits an amount equal in the aggregate to the Returned Item, and
shall repay that amount to Seller. If there are not sufficient funds in the
Deposit because of Purchaser's failure to honor holds placed on such Deposit,
Purchaser shall repay the amount of the Returned Item to Seller. Any items that
were credited for deposit to or cashed against an account at the Branches to be
transferred at the Closing prior to the Closing and are returned unpaid more
than sixty (60) days after the Closing will be the responsibility of Purchaser,
except that for a period of eighteen (18) months after the Closing checks drawn
on the United States Treasury, checks issued by state governments and
municipalities and checks returned for endorsement irregularities will be the
responsibility of Seller.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
5.1 CORPORATE ORGANIZATION AND AUTHORITY. As of the date hereof, Seller
is a national banking association, duly organized and validly existing in good
standing under the laws of the United States of America and has the requisite
power and authority to conduct the business now being conducted at the Branches.
Seller has the requisite corporate power and authority and has
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taken all corporate action necessary in order to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. This
Agreement is a valid and binding agreement of Seller enforceable in accordance
with its terms subject, as to enforcement, to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
5.2 NO CONFLICTS. The execution, delivery and performance of this
Agreement by Seller does not, and will not, (i) violate any provision of its
charter or by-laws or (ii) violate or constitute a breach of, or default under,
any law, rule, regulation, judgment, decree, ruling or order of any court,
government or governmental agency to which Seller is subject or under any
agreement or instrument of Seller, or to which Seller is subject or by which
Seller is otherwise bound, which violation, breach, contravention or default
referred to in this clause (ii), individually or in the aggregate, would have a
Material Adverse Effect (assuming the receipt of any required consents of
lessors under the Branch Leases and Personal Property Leases). Seller has all
material licenses, franchises, permits, certificates of public convenience,
orders and other authorizations of all federal, state and local governments and
governmental authorities necessary for the lawful conduct of its business at
each of the Branches as now conducted and all such licenses, franchises,
permits, certificates of public convenience, orders and other authorizations,
are valid and in good standing and, to Sellers' knowledge, are not subject to
any suspension, modification or revocation or proceedings related thereto.
5.3 APPROVALS AND CONSENTS. Other than the Regulatory Approvals or as
otherwise disclosed in writing to Purchaser by Seller prior to the date hereof,
no notices, reports or other filings are required to be made by Seller with, nor
are any consents, registrations, approvals, permits or authorizations required
to be obtained by Seller from, any governmental or regulatory authorities of the
United States or the several States in connection with the execution and
delivery of this Agreement by Seller and the consummation of the transactions
contemplated hereby by Seller, the failure to make or obtain any or all of
which, individually or in the aggregate, would have a Material Adverse Effect.
5.4 TENANTS. Except for the tenants listed on Schedule 5.4 attached
hereto, there are no tenants or other occupants of the Real Property.
5.5 LEASES. Each Branch Lease and each Personal Property Lease is the
valid and binding obligation of Seller and, to Seller's knowledge, of each other
party thereto; and there does not exist with respect to Seller's obligations
thereunder, or, to Seller's knowledge, with respect to the obligations of the
lessor thereof, any material default, or event or condition which constitutes
or, after notice or passage of time or both, would constitute a material default
on the part of Seller or the lessor under any such Branch Lease or Personal
Property Lease. As used in the immediately preceding sentence, the term
"lessor" includes any sub-lessor of the property to Seller. Each Branch Lease
and each material Personal Property Lease is current and all rents, expenses and
charges payable by Seller thereunder have been paid or accrued pursuant to the
terms thereof (except for any payments not yet delinquent or as to which the
obligation to make such payment is being contested in good faith). Accurate
copies of each Branch Lease and each material Personal Property Lease have
heretofore been made available to Purchaser.
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5.6 LITIGATION AND UNDISCLOSED LIABILITIES. Except as set forth in
Schedule 5.6, there are no actions, suits or proceedings that have a reasonable
likelihood of an adverse determination pending or, to Seller's knowledge,
threatened against Seller or any of the Branches, or obligations or liabilities
(whether or not accrued, contingent or otherwise) or to Seller's knowledge,
facts or circumstances that could reasonably be expected to result in any claims
against or obligations or liabilities of Seller that, individually or in the
aggregate, would have a Material Adverse Effect.
5.7 REGULATORY MATTERS. (a) Except as previously disclosed in writing to
Purchaser, there are no pending, or to Seller's knowledge threatened, disputes
or controversies between Seller and any federal, state or local governmental
agency or authority that, individually or in the aggregate, would have a
Material Adverse Effect.
(b) Seller is not a party to any written order, decree, agreement or
memorandum or understanding with, or commitment letter or similar submission to,
any federal or state governmental agency or authority charged with the
supervision or regulation of depository institutions, nor has Seller been
advised by any such agency or authority that it is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting) any
such order, decree, agreement, memorandum of understanding, commitment letter of
submission, in each case which, individually or in the aggregate, would have a
Material Adverse Effect.
5.9 COMPLIANCE WITH LAWS. The banking business of the Branches has been
conducted in compliance with all federal, state and local laws, regulations and
ordinances applicable thereto, except for any failures to comply that would not,
individually or in the aggregate, result in a Material Adverse Effect.
5.10 LOANS. (a) An accurate list of the Deposit Related Loans has
previously been delivered to Purchaser. Such list will be updated to include an
accurate list of such Loans as of the Closing Date. With respect to each such
Deposit Related Loan:
(i) Such Loan was solicited and originated in material compliance
with all applicable requirements of federal, state, and local laws and
regulations in effect at the time of such solicitation and origination; and
there was no fraud on the part of the Seller with respect to the
origination of any Loan;
(ii) Each note evidencing a Loan and any related security instrument
constitutes a valid and legally binding obligation of the obligor
thereunder enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfers, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles;
(iii) To Seller's knowledge, no claims or defenses to the enforcement
of such Loan have been asserted and Seller is aware of no acts or omissions
that would give rise to any claim or right of rescission, setoff,
counterclaim or defense by a borrower, obligor, guarantor or any other
person obligated to perform under any related Loan Documents;
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(iv) The security interest in any Deposit account securing any Loan is
a legal, valid and binding obligation enforceable against the obligor
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.
(v) All information provided hereunder pertaining to such Loan is a
true and correct reflection of Seller's records regarding such Loan in all
material respects;
(vi) Each Loan was made in compliance with all applicable usury laws;
and
(vii) The terms of the notes have not been altered, modified or waived
in any material respect, except by a written instrument contained in the
Loan Documents.
5.11 FINANCIAL AND DEPOSIT DATA. To Seller's knowledge, all written
financial and Deposit information regarding the Assets and Liabilities provided
to Purchaser by Seller was accurate in all material respects as of the date
thereof.
5.12 RECORDS. The Records respecting the operations of the Branches and
the Assets and Liabilities accurately reflect in all material respects the net
book value of the Assets and Liabilities being transferred to Purchaser
hereunder. The Records include all information reasonably necessary to service
the Deposits and the Deposit Related Loans on an ongoing basis.
5.13 TITLE TO ASSETS. Subject to the terms and conditions of this
Agreement, on the Closing Date Purchaser will acquire, good and marketable title
to all of the material Assets, free and clear of any Encumbrances; PROVIDED,
HOWEVER, that this representation does not cover Owned Real Property (with
respect to which Seller has provided a Title Report and Purchaser is to obtain
its own Title Policy pursuant to Section 3.10), Branch Leases or Tenant Leases.
5.14 BRANCH LEASES. The Branch Leases give Seller the right to occupy the
building and land comprising the related Branch. Accurate copies of all Branch
Leases and all attachments, amendments and addenda thereto have heretofore been
made available to Purchaser. To Seller's knowledge, the Branch Leases
constitute valid and legally binding leasehold interests of Seller. Except as
described on Schedule 5.4, there are no leases, subleases, occupancies,
tenancies or rights of first refusal relating to any Branch created or suffered
to exist by Seller or, to Seller's knowledge, created or suffered to exist by
any other person.
5.15 DEPOSITS. All of the Deposit accounts have been administered and, to
Seller's knowledge, originated, in compliance with the documents governing the
relevant type of Deposit account and all applicable laws. The Deposit accounts
are insured by the Bank Insurance Fund of the FDIC up to the current applicable
maximum limits, and no action is pending or, to Seller's knowledge, threatened
by the FDIC with respect to the termination of such insurance.
5.16 ENVIRONMENTAL LAWS; HAZARDOUS SUBSTANCES. To Seller's knowledge,
except as disclosed on Schedule 5.16, or as would not, individually or in the
aggregate, have a Material Adverse Effect, each parcel of Real Property:
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(a) has been operated by Seller in compliance with all applicable
Environmental Laws;
(b) is not the subject of any pending written notice from any governmental
authority alleging the violation of any applicable Environmental Laws;
(c) is not currently subject to any court order, administrative order or
decree arising under any Environmental Law;
(d) has not been used during the period of Seller's ownership or occupancy
of such Real Property for the disposal of Hazardous Substances and is not
contaminated with any Hazardous Substances requiring remediation under any
applicable Environmental Law; and
(e) has not, during the period of Seller's ownership or occupancy of such
Real Property, had any release of Hazardous Substances except as permitted under
applicable Environmental Laws.
For purposes of this Section 5.16, with respect to the parcels which are
subject to Branch Leases and Tenant Leases, "Seller's knowledge" shall mean that
an officer of Seller who holds the title of Senior Vice President or above and
has responsibility with respect to management of operations conducted at the
Branches on such parcels has received actual written notice from the landlord
that any one of the representations in (a) through (e) above is not correct.
5.17 BROKER'S FEES. Except for Montgomery Securities, no broker has been
employed by or on behalf of Seller in connection with the transactions
contemplated by this Agreement. Seller will pay the fees of Montgomery
Securities.
5.18 LIMITATIONS ON REPRESENTATIONS AND WARRANTIES. Notwithstanding
anything to the contrary contained herein Seller makes no representations or
warranties to Purchaser in this Agreement or in any agreement, instrument or
other document executed in connection with any of the transactions contemplated
hereby or provided or prepared pursuant hereto or in connection with any of the
transactions contemplated hereby:
(a) As to title to Owned Real Property or as to the physical condition
(including, without limitation, ability to withstand seismic events) of the
Branches or Personal Property, all of which are being sold "AS IS", "WHERE IS"
and with all faults at the Closing Date; or
(b) As to whether, or the length of time during which, any accounts will
be maintained by the depositors at the Branches after the Closing Date.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
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6.1 CORPORATE ORGANIZATION AND AUTHORITY. Purchaser is a state chartered
bank duly organized and validly existing under the laws of State of California
and has the requisite power and authority to conduct the business conducted at
the Branches substantially as currently conducted by Seller. Purchaser has the
requisite corporate power and authority and has taken all corporate action
necessary in order to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement is a valid and binding
agreement of Purchaser enforceable in accordance with its terms subject, as to
enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
6.2 NO CONFLICTS. The execution, delivery and performance of this
Agreement by Purchaser does not, and will not, (i) violate any provision of its
charter or by-laws or (ii) violate or constitute a breach of, or default under,
any law, rule, regulation, judgment, decree, ruling or order of any court,
government or governmental agency to which Purchaser is subject or under any
agreement or instrument of Purchaser, or to which Purchaser is subject or by
which Purchaser is otherwise bound, which violation, breach, contravention or
default referred to in this clause (ii), individually or in the aggregate, would
have a Material Adverse Effect.
6.3 APPROVALS AND CONSENTS. Other than the Regulatory Approvals or as
otherwise disclosed in writing to Seller by Purchaser prior to the date hereof,
no notices, reports or other filings are required to be made by Purchaser with,
nor are any consents, registrations, approvals, permits or authorizations
required to be obtained by Purchaser from any governmental or regulatory
authorities of the United States, the several States or any foreign
jurisdictions in connection with the execution and delivery of this Agreement by
Purchaser and the consummation of the transactions contemplated hereby by
Purchaser, the failure to make or obtain any or all of which, individually or in
the aggregate, would have a Material Adverse Effect.
6.4 REGULATORY MATTERS. (a) Except as previously disclosed in writing to
Seller, there are no pending, or to Purchaser's knowledge threatened, disputes
or controversies between Purchaser and any federal, state or local governmental
agency or authority that, individually or in the aggregate, would have a
Material Adverse Effect.
(b) Purchaser is not a party to any written order, decree, agreement or
memorandum of understanding with, or commitment letter or similar submission to,
any federal or state governmental agency or authority charged with the
supervision or regulation of depository institutions, nor has Purchaser been
advised by any such agency or authority that it is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting) any
such order, decree, agreement, memorandum of understanding, commitment letter or
submission, in each case which, individually or in the aggregate, would have a
Material Adverse Effect.
(c) Purchaser is, and on a PRO FORMA basis giving effect to the P&A
Transaction will be, (i) at least "adequately capitalized", as defined for
purposes of the FDIA, and (ii) in compliance with all capital requirements,
standards and ratios required by each state or federal bank regulator with
jurisdiction over Purchaser, including, without limitation, any such higher
requirements, standard or ratio as shall apply to institutions engaging in the
acquisition of insured
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institution deposits, assets or branches, and no such regulator is likely to,
or has indicated that it will, condition any of the Regulatory Approvals upon
an increase in Purchaser's capital or compliance with any capital requirements,
standard or ratio.
(d) Purchaser has no knowledge that it will be required to divest deposit
liabilities, branches, loans or any business or line of business as a condition
to the receipt of any of the Regulatory Approvals.
(e) Each of the subsidiaries or Affiliates of Purchaser that is an insured
depository institution was rated "Satisfactory" or "Outstanding" following its
most recent Community Reinvestment Act examination by the regulatory agency
responsible for its supervision. Purchaser has received no notice of and has no
knowledge of any planned or threatened objection by any community group to the
transactions contemplated hereby.
6.5 LITIGATION AND UNDISCLOSED LIABILITIES. There are no actions, suits
or proceedings that have a reasonable likelihood of an adverse determination
pending or, to Purchaser's knowledge, threatened against Purchaser, or
obligations or liabilities (whether or not accrued, contingent or otherwise) or,
to Purchaser's knowledge, facts or circumstances that could reasonably be
expected to result in any claims against or obligations or liabilities of
Purchaser that, individually or in the aggregate, would have a Material Adverse
Effect.
6.6 FINANCING AVAILABLE. Not later than the Closing Date, Purchaser will
have available sufficient cash or other liquid assets or financing pursuant to
binding agreements or commitments which may be used to fund the P&A Transaction;
and Purchaser's ability to consummate the transactions contemplated by this
Agreement is not contingent on raising any equity capital, obtaining specific
financing thereof, consent of any lender or any other matter.
6.7 BROKER'S FEES. Purchaser has not employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finder's fees in
connection with the transactions contemplated by this Agreement.
ARTICLE 7
COVENANTS OF THE PARTIES
7.1 ACTIVITY IN THE ORDINARY COURSE. Until the Closing Date, (a) Seller
shall conduct the business of the Branches (including, without limitation,
filling open positions at the Branches and job-posting in the Branches for open
positions at other offices of Seller) in the ordinary and usual course of
business consistent with past practice and giving effect to the fact that Seller
is engaged in certain systems conversions and office closings arising out of its
recent merger with First Interstate Bank, and (b) Seller shall not, without the
prior written consent of Purchaser:
(i) Increase or agree to increase the salary, remuneration or compensation
of any Branch Employee (or make any material increase or decrease in the number
of such persons, or transfer such persons to or from any Branch) other than in
accordance with Seller's existing customary policies generally applicable to
employees having similar rank or duties, or pay or
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agree to pay any uncommitted bonus to any Branch Employee other than regular
bonuses granted in the ordinary course of Seller's business (which bonuses,
in any event, shall be the responsibility of Seller); or, except at the
request of such Branch Employee, transfer any Branch Employee to another
branch or office, of Seller or any of its Affiliates;
(ii) Offer interest rates or terms on any category of deposits at a Branch
except as determined in a manner consistent with Seller's practice with respect
to its branches which are not being sold;
(iii) Transfer to or from any Branch to or from any of Seller's other
operations or branches any material Assets or any Deposits, except (A) in the
ordinary course of business or as contemplated in this Agreement, or (B) upon
the unsolicited request of a depositor or customer;
(iv) Sell, transfer, assign, encumber or otherwise dispose of or enter into
any contract, agreement or understanding to sell, transfer, assign, encumber or
dispose of any of the Assets existing on the date hereof, except in the ordinary
course of business and in an immaterial aggregate amount; PROVIDED, HOWEVER,
that in any event, Seller shall not knowingly take any action that would create
any Encumbrance on any of the Real Property or the Branch Leases;
(v) Make or agree to make any material improvements to the Owned Real
Property, except with respect to commitments for such made on or before the date
of this Agreement (and heretofore disclosed in writing to Purchaser) and normal
maintenance, repair or refurbishing purchased or made in the ordinary course of
business;
(vi) File any application or give any notice to relocate or close any
Branch or relocate or close any Branch;
(vii) Amend, terminate or extend in any material respect any Branch Lease,
Tenant Lease or Personal Property Lease; PROVIDED, HOWEVER, Seller may extend
any Branch Lease, Tenant Lease or Personal Property Lease, in its reasonable
business judgment (including without limitation pursuant to the terms and
conditions of any contractual option to extend in any Branch Lease, Tenant Lease
or Personal Property Lease) if Seller determines such extension is necessary to
deliver the Branch on the Closing Date as a fully operative branch banking
operation.
7.2 ACCESS AND CONFIDENTIALITY. (a) Until the Closing Date, Seller shall
afford to Purchaser and its officers and authorized agents and representatives
reasonable access to the properties, books, records, contracts, documents, files
and other information of or relating to the Assets and Liabilities. Purchaser
and Seller each will identify to the other, within ten (10) days after the date
hereof, a selected group of their respective salaried personnel that shall
constitute a "transition group" who will be available to Seller and Purchaser,
respectively, at reasonable times (limited to normal operating hours) to provide
information and assistance in connection with Purchaser's investigation of
matters relating to the Assets and Liabilities. Seller shall cause other
personnel to be reasonably available during normal business hours, to an extent
not disruptive of ongoing operations, for the same purposes. Any investigation
pursuant to this Section 7.2 shall be conducted in such manner as not to
interfere unreasonably with the conduct of the Seller's business.
Notwithstanding the foregoing, Seller shall not be required to provide access to
or
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disclose information where such access or disclosure would impose an
unreasonable burden on Seller, or any employee of Seller or would violate or
prejudice the rights of customers, jeopardize any attorney-client privilege or
contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or
binding agreement entered into prior to the date of this Agreement. The parties
hereto shall make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply.
(b) EACH PARTY TO THIS AGREEMENT SHALL HOLD, AND SHALL CAUSE ITS
RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, CONSULTANTS AND ADVISORS TO
HOLD, IN STRICT CONFIDENCE, UNLESS DISCLOSURE TO A BANK REGULATORY AUTHORITY IS
NECESSARY OR DESIRABLE IN CONNECTION WITH ANY REGULATORY APPROVAL OR UNLESS
COMPELLED TO DISCLOSE BY JUDICIAL OR ADMINISTRATIVE PROCESS OR, IN THE WRITTEN
OPINION OF ITS COUNSEL, BY OTHER REQUIREMENTS OF LAW OR THE APPLICABLE
REQUIREMENTS OF ANY REGULATORY AGENCY OR RELEVANT STOCK EXCHANGE, ALL NON-PUBLIC
RECORDS, BOOKS, CONTRACTS, INSTRUMENTS, COMPUTER DATA AND OTHER DATA AND
INFORMATION (COLLECTIVELY, "INFORMATION") CONCERNING THE OTHER PARTY (OR, IF
REQUIRED UNDER A CONTRACT WITH A THIRD PARTY, SUCH THIRD PARTY) FURNISHED IT BY
SUCH OTHER PARTY OR ITS REPRESENTATIVES PURSUANT TO THIS AGREEMENT (EXCEPT TO
THE EXTENT THAT SUCH INFORMATION CAN BE SHOWN TO HAVE BEEN (i) PREVIOUSLY KNOWN
BY SUCH PARTY ON A NON-CONFIDENTIAL BASIS, (ii) IN THE PUBLIC DOMAIN THROUGH NO
FAULT OF SUCH PARTY OR (iii) LATER LAWFULLY ACQUIRED FROM OTHER SOURCES BY THE
PARTY TO WHICH IT WAS FURNISHED), AND NEITHER PARTY SHALL RELEASE OR DISCLOSE
SUCH INFORMATION TO ANY OTHER PERSON, EXCEPT ITS AUDITORS, ATTORNEYS, FINANCIAL
ADVISORS, BANKERS, OTHER CONSULTANTS AND ADVISORS AND, TO THE EXTENT PERMITTED
ABOVE, TO BANK REGULATORY AUTHORITIES.
7.3 REGULATORY APPROVALS. As soon as practicable after the date of this
Agreement, Purchaser shall prepare and file any applications, notices and
filings required in order to obtain the Regulatory Approvals. Purchaser shall
use all reasonable efforts to obtain each such approval as promptly as
reasonably practicable and, to the extent possible, in order to permit the
Closing to occur not later than March 31, 1997. Seller will cooperate in
connection therewith (including the furnishing of any information and any
reasonable undertaking or commitments which may be required to obtain the
Regulatory Approvals). Each party will provide the other with copies of any
applications and all correspondence relating thereto prior to filing, other than
material filed in connection therewith under a claim of confidentiality.
7.4 CONSENTS. Seller agrees to use reasonable commercial efforts (such
efforts not to include making payments to third parties) to obtain from lessors
and any other parties to any Branch Leases or Personal Property Leases any
required consents to the assignment of the Branch Leases and Personal Property
Leases to Purchaser on the Closing Date; PROVIDED, HOWEVER, the Seller shall not
be obligated to incur any monetary obligations or expenditures to the parties
whose consent is required in connection with the utilization of its reasonable
efforts to obtain any such required consents. If any such required consent
cannot be obtained, notwithstanding any
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other provision hereof, the Assets and Liabilities associated with the
subject Branch, other than any such Branch Lease or any Personal Property
Lease or as to which consent cannot be obtained, shall nevertheless be
transferred to Purchaser at the Closing and the parties shall negotiate in
good faith and Seller and Purchaser shall use reasonable efforts (such
efforts not to include making payments to third parties) to make alternative
arrangements reasonably satisfactory to Seller and Purchaser. In the event
Seller does not obtain consent from the lessors and any other parties to any
Branch Lease or Personal Property Lease, Seller shall not be obligated to
deliver physical possession of the subject Branch or the personal property
subject to such Personal Property Lease to Purchaser at the Closing.
7.5 EFFORTS TO CONSUMMATE; FURTHER ASSURANCES. (a) Purchaser and Seller
agree to use all reasonable efforts to satisfy or cause to be satisfied as soon
as practicable their respective obligations hereunder and the conditions
precedent to the Closing.
(b) Seller will duly execute and deliver such assignments, bills of sale,
deeds, acknowledgments and other instruments of conveyance and transfer as shall
at any time be necessary or appropriate to vest in Purchaser the full legal and
equitable title to the Assets.
(c) On and after the Closing Date, each party will promptly deliver to the
other all mail and other communications properly addressable or deliverable to
the other as a consequence of the P&A Transaction; and without limitation of the
foregoing, on and after the Closing Date, Seller shall promptly forward any
mail, communications or other material relating to the Deposits or the Assets
transferred on the Closing Date, including, but not limited to, that portion of
any IRS "B" tapes that relates to such Deposits, to such employees of Purchaser
at such addresses as may from time to time be specified by Purchaser in writing.
(d) The costs incurred by a party in performing its obligations to the
other (x) under Sections 7.5(a) and (c) shall be borne by the initial recipient
and (y) otherwise under this Section 7.5 shall be borne by Purchaser. Seller
will cooperate with Purchaser to minimize the costs referred to in clause (y).
7.6 SOLICITATION. (a) Until the Closing Date and for an additional six
(6) months following the Closing Date, Seller agrees that it will not solicit
deposits (but may solicit loans or other business) from or to persons or
entities who were depositors at the Branches on the date hereof by personal
contact, by telephone, by facsimile, by mail or other similar solicitation, or
in any other way except for general solicitations and solicitations that are not
directed primarily to persons or entities who were depositors of the Branches on
the date hereof; PROVIDED, HOWEVER, that Seller may solicit depositors who as of
the date of this Agreement have existing accounts originating at branches or
other offices of Seller or its Affiliates other than the Branches pursuant to
solicitations which arise from their status as a customer at such other branches
or offices; and PROVIDED, FURTHER, that Seller may solicit major or statewide
depositors (such as, for example, a company with more than one location or the
state government or any agency or instrumentality thereof) without restriction
hereunder.
(b) Prior to the Closing Date, Purchaser agrees that it will not attempt
to solicit Branch customers through advertising nor transact its business in a
way which would induce such
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Branch customers to close any account and open accounts directly with
Purchaser or would otherwise result in a transfer of all or a portion of an
existing account from Seller to Purchaser or to any other financial
institution. Notwithstanding the foregoing sentence, Purchaser and its
Affiliates shall be permitted to: (i) engage in advertising, solicitations
or marketing campaigns not primarily directed to or targeted at such Branch
customers; (ii) engage in lending, deposit, safe deposit, trust or other
financial services relationships existing as of the date hereof which such
Branch customers through other branch offices of Purchaser; (iii) respond to
unsolicited inquiries by such Branch customers with respect to banking or
other financial services; and (iv) provide notices or communications relating
to the transactions contemplated hereby in accordance with the provisions
hereof.
7.7 INSURANCE. Seller will maintain in effect until the Closing Date all
casualty and public liabilities policies relating to the Branches and maintained
by Seller on the date hereof or procure comparable replacement policies and
maintain such replacement policies in effect until the Closing Date.
7.8 NO SERVICING AND MAINTENANCE CONTRACTS. Except for the Personal
Property Leases, no existing contracts of Seller with respect to the service,
maintenance and physical operation of the Branches will be assumed at the
Closing by Purchaser. All such service and maintenance shall be provided by
Purchaser, subsequent to the Closing, pursuant to its own contracts.
ARTICLE 8
TAXES AND EMPLOYEE BENEFITS
8.1 TAX REPRESENTATIONS. Seller represents and warrants to Purchaser as
follows:
(a) Except as set forth in Schedule 8.1, all Tax Returns with respect to
the Assets or income therefrom, the Liabilities or payments in respect thereof
or the operation of the Branches, that are required to be filed (taking into
account any extension of time within which to file) before the Closing Date,
have been or will be duly filed, and all Taxes shown to be due on such Tax
Returns have been or will be paid in full.
(b) With respect to the Deposits, Seller is in compliance with the Code
and regulations thereunder relative to obtaining form depositors of the Deposits
executed IRS Forms W-8 and W-9. With respect to the Deposits opened after
December 31, 1983, Seller has either obtained a properly completed Form W-8 or
W-9 (or a substitute form meeting applicable requirements) or is back-up
withholding on such account.
8.2 PRORATION OF TAXES. Except as otherwise agreed to by the parties,
whenever it is necessary to determine the liability for Taxes for a portion of a
taxable year or period that begins before and ends on or after the Closing Date,
the determination of the Taxes for the portion of the year or period ending on,
and the portion of the year or period beginning on or after, the Closing Date
shall be determined by assuming that the taxable year or period ended at 11:59
P.M. California time on the day prior to the Closing Date.
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8.3 SALES AND TRANSFER TAXES. Except as set forth in Section 3.9, all
excise, sales, use and transfer taxes that are payable or that arise as a result
of the consummation of the purchase and sale contemplated by this Agreement
shall be paid by Purchaser and Purchaser shall indemnify and hold Seller
harmless from and against any such taxes.
8.4 INFORMATION RETURNS. At the Closing or as soon thereafter as is
practicable, Seller shall provide Purchaser with a list of all Deposits for
which Seller has not received a properly completed Form W-8 and W-9 (or a
substitute form meeting applicable requirements) or on which Seller is back-up
withholding as of the Closing Date. Seller agrees to indemnify Purchaser in an
amount equal to any penalty and interest imposed upon Purchaser by the IRS which
Purchaser is thereafter required to, and does, pay to the IRS where such penalty
and interest arises out of actions taken or omitted to be taken by Purchaser in
reasonable reliance upon information provided under this Section 8.4 and such
penalty and interest does not result from an act or omission of Purchaser not
made in reasonable reliance upon such information. The term "interest" for
purposes of this Section 8.4 means interest accrued prior to the receipt by
Purchaser of a notice of Penalty from the IRS regarding Forms W-8 or W-9 for the
Deposits. Purchaser shall timely notify Seller of such penalty notice prior to
Purchaser's payment of any penalty or interest. Seller has the right, at its
own expense, to protest such penalty and interest. Purchaser shall cooperate
fully with respect to Seller's protest, including furnishing all relevant
information, records, and documents.
8.5 PAYMENT OF AMOUNT DUE UNDER ARTICLE 8. Any payment by Seller to
Purchaser, or to Seller from Purchaser, under this Article 8 (other than
payments required by Section 8.3) to the extent due at the Closing may be offset
against any payment due the other party at the Closing. All subsequent payments
under this Article 8 shall be made as soon as determinable and shall be made and
bear interest from the date due to the date of payment as provided in Section
3.2(b).
8.6 ASSISTANCE AND COOPERATION. After the Closing Date, each of Seller
and Purchaser shall:
(a) Make available to the other and to any taxing authority as reasonably
requested all relevant information, records, and documents relating to Taxes
with respect to the Assets or income therefrom, the Liabilities or payments in
respect thereof, or the operation of the Branches;
(b) Provide timely notice to the other in writing of any pending or
proposed Tax audits (with copies of all relevant correspondence received from
any Taxing authority in connection with any Tax audit or information request) or
Tax assessments with respect to the Assets or the income therefrom, the
Liabilities or payments in respect thereof, or the operation of the Branches for
taxable periods for which the other may have a liability under this Article 8;
and
(c) The party requesting assistance or cooperation shall bear the other
party's out-of-pocket expenses in complying with such request to the extent that
those expenses are attributable to fees and other costs of unaffiliated third
party service providers.
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8.7 EMPLOYEES. (a) As soon as reasonably practicable and in any event
within thirty (30) days of the date hereof, Seller shall deliver to Purchaser a
true and complete list of all Branch Employees by name, date of hire and
position, as of the date hereof, together with their most recent performance
evaluations, current salaries and other compensation arrangements; PROVIDED,
HOWEVER, that Seller shall not release a performance evaluation without having
first obtained the written consent of the respective Branch Employee. Purchaser
may, at its discretion, interview any and all Branch Employees. Purchaser shall
make employment available to all Branch Employees on the Closing Date upon the
terms and conditions described below. Seller shall promptly inform Purchaser of
any Branch Employee who resigns prior to the Closing Date. On and after the
Closing Date, Branch Employees employed by Purchaser shall be defined as
Transferred Employees for all purposes hereof. Subject to the provisions of
this Section 8.7, Transferred Employees shall be subject to the employment
terms, conditions and rules applicable to other employees of Purchaser. Nothing
contained in this Agreement shall be construed as an employment contract between
Purchaser and any Branch Employee or Transferred Employee.
(b) Purchaser may interview Branch Employees during normal working hours.
Purchaser shall be solely responsible for any activity in connection with
interviewing Branch Employees. Purchaser indemnifies and holds Seller harmless
from and against any claim, liability, losses, costs or expenses, including
reasonable attorneys' fees, resulting or arising from Purchaser's acts or
omissions in connection with said interviews.
(c) Purchaser shall be responsible for the Assumed Severance Obligations
with respect to all Branch Employees.
(d) Each Transferred Employee shall be provided employment subject to the
following terms and conditions:
(i) Base salary rate shall be at least equivalent to the rate of base
salary paid by Seller to such Transferred Employee as of the close of
business on the day prior to the Closing Date.
(ii) Except as specifically provided herein, Transferred Employees
shall be provided employee benefits that are no less favorable in the
aggregate than those provided to similarly situated employees of Purchaser.
Purchaser shall provide such Transferred Employee with credit for the
Transferred Employee's period of service with Seller (including any service
credited from First Interstate Bank as a predecessor entity to Seller)
towards the calculation of eligibility for such purposes as vacation,
severance and other benefits and participation and vesting in Purchaser's
qualified pension or profit sharing plan, as such plans may exist (but,
except as set forth in (v) below and for vacation, not for purpose of
benefit accruals, including without limitation, funding of accrued pension
or profit sharing plans for such Transferred Employee with respect to any
period prior to the Closing Date).
(iii) Each Transferred Employee shall be eligible to participate in the
medical, dental or other welfare plans of Purchaser, as such plans may
exist, effective as of the Closing Date and any pre-existing conditions
provisions of such plans shall be waived with
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respect to such Transferred Employee; PROVIDED, HOWEVER, that if
Purchaser's relevant health or disability insurance policy or plan has a
pre-existing condition limitation and a Transferred Employee's condition
is being excluded (as a pre-existing condition) under Seller's plan as of
the Closing Date, Purchaser may treat such condition as a pre-existing
condition for the period such condition would have been treated as a
pre-existing condition under Seller's plan under which such Transferred
Employee would have been covered.
(iv) With respect to any Transferred Employee on a short-term
disability or temporary leave of absence, upon conclusion of his or her
short-term disability or temporary leave of absence, subject to the terms
and conditions of the Purchaser's plans and policies and applicable law,
each Transferred Employee on such leave shall receive the salary and
vacation benefits in effect when he or she went on leave, shall otherwise
be treated as a Transferred Employee and, to the extent practicable, shall
be offered by Purchaser the same or a substantially equivalent position to
his or her position with Seller prior to having gone on leave.
(v) Until April 1, 1998, each Transferred Employee shall be eligible
for benefits under the severance and similar plans referred to in Schedule
1.1(a) (the "Assumed Severance Obligations"). After April 1, 1998, each
Transferred Employee, who is continuously employed by Purchaser as of the
Closing Date, shall be eligible for benefits under any severance or similar
plans maintained by Purchaser with credit for the period of years of
credited service with Seller towards the calculation of benefits.
(e) Except as provided herein, Seller shall pay, discharge and be
responsible for (i) all salary and wages, arising out of or relating to the
employment of the Branch Employees before the Closing Date and (ii) any
employee benefits (including, but not limited to, accrued vacation) arising
under Seller's employee benefit plans and employee programs prior to the
Closing Date (but not including any future retiree medical benefits),
including benefits with respect to claims incurred prior to the Closing Date
but reported after the Closing Date. From and after the Closing Date,
Purchaser shall pay, discharge and be responsible for all salary, wages and
benefits arising out of or relating to the employment of the Transferred
Employees by Purchaser on and after the Closing Date, including, without
limitation, all claims for welfare benefit plans incurred on or after the
Closing Date. Claims are incurred as of the date services are provided or
disability payments are accrued, notwithstanding when the injury or illness
may have occurred.
(f) To the extent permitted under Purchaser's 401(k) plan, Seller and
Purchaser shall cooperate in arranging for the transfer to Purchaser's 401(k)
plan, as soon as practicable after the Closing Date and in a manner that
satisfies sections 414(l) and 411(d)(6) of the Code, of those accounts held
under Seller's 401(k) plan on behalf of Transferred Employees.
(g) For a period of twelve (12) months following the Closing Date,
Seller shall not solicit any Transferred Employee hired by Purchaser as of
the Closing Date to again become an employee of Seller or any of its
Affiliates; PROVIDED, HOWEVER, that Seller shall not be prohibited from
hiring a Transferred Employee if such Transferred Employee contacts Seller to
seek such hiring or retention, whether in response to general advertising or
otherwise.
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For purposes of this Section 8.7, the term "Seller" shall include Wells Fargo
& Company, a Delaware corporation and their Affiliates.
8.8 BRANCH EMPLOYEE REPRESENTATIONS. (a) Seller represents and warrants
to Purchaser, to Seller's knowledge, as follows:
(i) none of the Branch Employees is a member of any labor union;
(ii) Seller is not a party to any individual contract, written or
oral, express or implied, for the employment of any Branch Employee, and
Seller is not subject to any collective bargaining arrangement with respect
to any Branch Employee;
(iii) Seller's 401(k) Plan is in compliance in all material respects
with applicable law;
(iv) no liabilities exist or are reasonably expected to exist under
any employee benefit plan of Seller that, individually or in the aggregate,
would have a Material Adverse Effect; and
(v) Seller has not entered into any individual agreement or
otherwise made any individual commitment to any Branch Employee with
respect to continued employment by Purchaser.
(b) Seller shall indemnify and hold Purchaser harmless from and against
any claims, losses, damages or expenses (including attorney's fee) suffered as a
result of any failure to give any notice to its Branch Employees required by the
Worker Adjustment and Retraining Notification Act (the "WARN Act"), provided
such notice is required as a result of action by Seller prior to the Closing
Date.
ARTICLE 9
CONDITIONS TO CLOSING
9.1 CONDITIONS TO OBLIGATIONS OF PURCHASER. Unless waived in writing by
Purchaser, the obligation of Purchaser to consummate the P&A Transaction is
conditioned upon satisfaction of each of the following conditions:
(a) REGULATORY APPROVALS. All consents, approvals and authorizations
required to be obtained prior to the Closing from governmental and regulatory
authorities in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby to be
consummated at the Closing, including the Regulatory Approvals, shall have
been made or obtained, and shall remain in full force and effect, and all
waiting periods applicable to the consummation of the P&A Transaction shall
have expired or been terminated; PROVIDED, HOWEVER, that no Regulatory
Approval shall have imposed any condition or requirement (a "BURDENSOME
CONDITION") that would (i) result in any Material Adverse Effect or (ii)
require
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Purchaser to effect any divestiture that would constitute a substantial
portion of the business or properties of the Branches, taken as a whole.
(b) ORDERS. No court or governmental authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) (any of the foregoing, an
"ORDER") which is in effect and prohibits or makes illegal the consummation
of the P&A Transaction or would otherwise result in a Material Adverse Effect.
(c) REPRESENTATIONS AND WARRANTIES; COVENANTS. Each of the
representations and warranties of Seller contained in this Agreement shall be
true in all material respects when made and as of the Closing Date, with the
same effect as though such representations and warranties had been made on
and as of the Closing Date (except that representations and warranties
relating to Assets and Liabilities transferred at the Closing Date shall only
be made, and need only be true in all material respects, on and as of the
Closing Date). Purchaser shall have received at Closing a certificate to that
effect dated as of such Closing Date and executed by the President or any
Executive Vice President of Seller. Each of the covenants and agreements of
Seller to be performed on or prior to the Closing Date shall have been duly
performed in all material respects. Purchaser shall have received at Closing
a certificate to that effect dated as of such Closing Date and executed by
the President or any Executive Vice President of Seller.
Notwithstanding any other provision of this Agreement, if there shall be
a failure of any condition specified in this Section 9.1 to the obligations
of Purchaser in respect of the acquisition of any specific Branch or Branches
the aggregate Deposits of which as of the date hereof shall constitute less
than 25% of the Deposits in all of the Branches subject to this Agreement as
of the date hereof, Purchaser nevertheless shall be obligated to consummate
the P&A Transaction but may, upon written notice to Seller, exclude from the
transaction the Branch or Branches in respect of which the failure of
condition shall exist, in which case, appropriate adjustment shall be made in
the schedules hereto and the other documents to be delivered pursuant hereto
so as to duly reflect the deletion of such Branch or Branches from the
transactions contemplated hereby (and, consequently, to the calculation of
the Estimated Purchase Price, Estimated Payment Amount, Purchase Price and
Adjusted Payment Amount). If any Branch is excluded from this Agreement or
if Purchaser nevertheless elects to purchase any Branch which would otherwise
be so excluded and such Branch is transferred to Purchaser at the Closing
(subject to Purchaser's rights under Section 12.1(a)), any event that would
otherwise constitute a breach of warranty or failure of condition in respect
of such Branch arising solely from or relating to the operation of this
paragraph shall not constitute a breach of warranty or failure of condition.
9.2 CONDITIONS TO OBLIGATIONS OF SELLER. Unless waived in writing by
Seller, the obligation of Seller to consummate the P&A Transaction is
conditioned upon satisfaction of each of the following conditions:
(a) REGULATORY APPROVALS. All consents, approvals and authorizations
required to be obtained prior to the Closing from governmental and regulatory
authorities in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby to be
consummated at the Closing, including the Regulatory Approvals, shall have
been
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made or obtained, and shall remain in full force and effect, and all
statutory waiting periods applicable to the consummation of the P&A
Transaction shall have expired or been terminated.
(b) ORDERS. No Order shall be in effect that prohibits or makes illegal
the consummation of the P&A Transaction.
(c) REPRESENTATIONS AND WARRANTIES; COVENANTS. Each of the
representations and warranties of Purchaser contained in this Agreement shall
be true in all material respects when made and as of the Closing Date, with
the same effect as though such representations and warranties had been made
on and as of the Closing Date (except that representations and warranties
that are made as of a specific date need be true in all material respects
only as of such date). Seller shall have received at Closing a certificate
to that effect dated as of such Closing Date and executed by the President or
any Executive Vice President of Purchaser. Each of the covenants and
agreements of Purchaser to be performed on or prior to the Closing Date shall
have been duly performed in all material respects. Seller shall have
received at Closing a certificate to that effect dated as of such Closing
Date and executed by the President or any Executive Vice President of
Purchaser.
ARTICLE 10
ENVIRONMENTAL MATTERS
10.1 ENVIRONMENTAL MATTERS. (a) Seller has provided to Purchaser and
Purchaser hereby acknowledges receipt of copies of Phase I environmental site
assessments for all Owned Real Property and asbestos reports with respect to
all the Real Property, except for Real Property where the improvements have
been completed after December 31, 1978. Such Phase I environmental site
assessments for all Owned Real Property have been dated (or supplemented) on
or after January 1, 1996.
(b) If such Phase I site assessments and asbestos reports reasonably
indicate the necessity or desirability of further investigation to determine
whether or not an Environmental Hazard or an Asbestos Hazard exists at such
Real Property, Purchaser may elect, not later than thirty (30) days after the
signing of this Agreement, to have Clayton Environmental, Building Analytics,
or another similarly qualified environmental engineer or consultant mutually
acceptable to Purchaser and Seller (the "ENVIRONMENTAL CONSULTANT"), to the
extent reasonable and appropriate, conduct Phase II environmental site
assessments and additional asbestos investigations, the cost of which shall
be shared equally by the parties. Any such further investigation or testing
shall be conducted in such a manner so as not to interfere with the normal
operation of the Branch(s) involved. All such Phase II environmental site
assessments and additional asbestos reports shall be treated as information
subject to Section 7.2(b) and shall be completed not less than ninety (90)
days after the signing of this Agreement.
(c) In the event that the Environmental Consultant has discovered an
Environmental Hazard, and/or Asbestos Hazard, during any such Phase II
environmental site assessment at any single parcel of Owned Real Property,
the remediation of which, in the reasonable judgment of the Environmental
Consultant, is or would be the responsibility of Seller, or Purchaser should
it
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acquire such Owned Real Property, and will cost $100,000 or more for such
single parcel of Owned Real Property, Purchaser shall lease from Seller such
single parcel of Owned Real Property pursuant to a Lease Agreement that shall
provide as follows:
(i) Such Lease Agreement shall be for a term of two (2) years, with
no obligation or right to renew (it being the intention of Seller that
Purchaser locate an alternative branch site during such two years), at a
rental equal to a fair market rental value;
(ii) Seller may sell such Owned Real Property to any person, subject
to such Lease Agreement, for any price;
(iii) During the term of such Lease Agreement, in the event that Seller
shall deliver to Purchaser a report of a qualified environmental engineer
or consultant certifying that the Environmental Hazard, and/or Asbestos
Hazard, at or on any such leased parcel of Owned Real Property has been
remediated to the extent required under applicable Environmental Laws,
Purchaser shall be required to purchase such parcel of Owned Real Property
at the net book value as of the close of business of the month-end day most
recently preceding the Closing Date; and
(iv) Other terms and conditions of the Lease Agreement shall be
typical to such branch leases in the market as negotiated between Seller
and Purchaser.
If the remediation cost is less than $100,000 for any single parcel of
Owned Real Property, Purchaser shall acquire such parcel and such cost shall
be borne by Purchaser without indemnity under this Agreement.
(d) Purchaser agrees that it and its Environmental Consultant shall
conduct any Phase II environmental site assessments or other investigations
pursuant to this Section with reasonable care and subject to customary
practices among environmental consultants and engineers, including, without
limitation, following completion thereof, the restoration of any site to the
extent practicable to its condition prior to such site assessment or
investigation and the removal of all monitoring wells.
(e) Any lease of a parcel of Owned Real Property under Section 10.1(c)
shall in no way affect the transfer of any Assets or Liabilities, other than
such parcel of Owned Real Property, to the Purchaser at the Closing.
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ARTICLE 11
TERMINATION
11.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date:
(a) By the mutual written agreement of Purchaser and Seller;
(b) By Seller or Purchaser, in the event of a material breach by the
other of any representation, warranty or agreement contained herein which is
not cured or cannot be cured within thirty (30) days after written notice of
such termination has been delivered to the breaching party; PROVIDED,
HOWEVER, that termination pursuant to this Section 11.1(b) shall not relieve
the breaching party of liability arising out of or related to such breach;
(c) By Seller or Purchaser, in the event that the Closing has not
occurred by March 31, 1997 unless the failure to so consummate by such time
is due to a breach of this Agreement by the party seeking to terminate;
(d) By Seller or Purchaser at any time after the denial or revocation
of any Regulatory Approval or by Purchaser if any such approval has been
obtained which contains a Burdensome Condition; or
(e) By Seller if, at any time prior to the Closing Date, an appropriate
official of any governmental agency or authority whose consent, approval or
authorization is required in order for Purchaser to consummate the
transactions contemplated hereby shall have advised that such authority will
not grant such consent, approval or authorization or will grant the same only
subject to a Burdensome Condition (unless Purchaser shall have waived the
condition provided for in the proviso to Section 9.1(a)), or where there
shall be in effect any Order, or if there shall exist any proceeding which,
in Seller's reasonable judgment, would result in an Order; PROVIDED, HOWEVER,
that Purchaser shall have fifteen (15) days following receipt of notice from
Seller to remedy any such situation or to provide assurances reasonably
acceptable to Seller that such situation will be remedied by the Closing Date.
11.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement and abandonment of the transactions contemplated hereby pursuant to
Section 11.1, no party hereto (or any of its directors, officers, employees,
agents or Affiliates) shall have any liability or further obligation to any
other party, except as provided in Section 7.2(b) and except that nothing
herein will relieve any party from liability for any breach of this Agreement.
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ARTICLE 12
INDEMNIFICATION AND OTHER REMEDIES
----------------------------------
12.1 INDEMNIFICATION. (a) Subject to Section 13.1, Seller shall
indemnify and hold harmless Purchaser and any person directly or indirectly
controlling Purchaser from and against any and all Losses which Purchaser may
suffer, incur or sustain arising out of or attributable to (i) any breach of
any representation or warranty made by Seller in this Agreement, (ii) any
material breach of any covenant or agreement to be performed by Seller
pursuant to this Agreement, (iii) any claim, penalty asserted, legal action
or administrative proceeding based upon any action taken or omitted to be
taken by Seller or conditions existing prior to the Closing Date, relating in
any such case to the operation of the Branches, the Assets or the
Liabilities; or (iv) any liability, obligation or duty of Seller that is not
a Liability.
(b) Subject to Section 13.1, Purchaser shall indemnify and hold
harmless Seller and any person directly or indirectly controlling Seller from
and against any and all Losses which Seller may suffer, incur or sustain
arising out of (i) any breach of any representation or warranty made by
Purchaser in this Agreement, (ii) any material breach of any covenant or
agreement to be performed by Purchaser pursuant to this Agreement, including,
without limitation, the covenants contained in Section 10.2 above, or (iii)
any claim, penalty asserted, legal action or administrative proceeding based
upon any action taken or omitted to be taken by Purchaser on or after the
Closing Date, relating in any such case to the operation of the Branches or
the Assets, or (iv) the Liabilities.
(c) To exercise its indemnification rights under this Section 12.1 as a
result of the assertion against it of any claim or potential liability for
which indemnification is provided, the indemnified party shall promptly
notify the indemnifying party of the assertion of such claim, discovery of
any such potential liability or the commencement of any action or proceeding
in respect of which indemnity may be sought hereunder; PROVIDED, HOWEVER, in
no event shall notice of original claim for indemnification under this
Agreement be given later than the expiration of one (1) year from the Closing
Date (excluding only claims related to the covenants in Section 10.2 above).
The indemnified party shall advise the indemnifying party of all facts
relating to such assertion within the knowledge of the indemnified party, and
shall afford the indemnifying party the opportunity, at the indemnifying
party's sole cost and expense, to defend against such claims for liability.
In any such action or proceeding, the indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be
at its own expense unless (i) the indemnifying party and the indemnified
party mutually agree to the retention of such counsel or (ii) the named
parties to any such suit, action, or proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party, and
in the reasonable judgment of the indemnified party, representation of the
indemnifying party and the indemnified party by the same counsel would be
inadvisable due to actual or potential differing defenses or conflicts of
interests between them.
(d) The indemnified party shall have the right to settle or compromise any
claim or liability subject to indemnification under this Section, and to be
indemnified from and against all Losses resulting therefrom, unless the
indemnifying party, within sixty (60) calendar days after receiving written
notice of the claim or liability in accordance with Section 12.1(c) above,
notifies
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the indemnified party that it intends to defend against such claim or
liability and undertakes such defense, or, if required in a shorter time than
sixty (60) calendar days, the indemnifying party makes the requisite response
to such claim or liability asserted.
(e) Notwithstanding anything to the contrary contained in this
Agreement, an indemnifying party shall not be liable under this Section 12.1
for any Losses sustained by the indemnified party unless and until the
aggregate amount of all indemnifiable Losses sustained by the indemnified
party shall exceed Twenty-Five Thousand Dollars ($25,000) times the number of
Branches being purchased hereunder, in which event the indemnifying party
shall provide indemnification hereunder in respect of all such indemnifiable
Losses in excess of Twenty-Five Thousand Dollars ($25,000) times the number
of Branches being purchased hereunder, PROVIDED, HOWEVER, that the aggregate
amount of indemnification payments payable pursuant to this Section 12.1,
shall in no event exceed the amount of the Purchase Price. An indemnifying
party shall not be liable under this Section 12.1 for any settlement
effected, without its consent, of any claim or liability or proceeding for
which indemnity may be sought hereunder except in the case of a settlement in
an amount which does not exceed Twenty-Five Thousand Dollars ($25,000) times
the number of Branches being purchased hereunder; PROVIDED, HOWEVER, the
provisions of this Section 12.1(e) shall not apply to Purchaser's obligation
to indemnify Seller for a breach of Purchaser's covenants contained in
Section 10.2 above. In no event shall either party hereto be entitled to
consequential or punitive damages or damages for lost profits in any action
relating to the subject matter of this Agreement.
12.2 PURCHASE PRICE ADJUSTMENT. Any amount paid by Seller or Purchaser
under this Article 12 will be treated as an adjustment to the Purchase Price
unless and to the extent that a "determination" (as defined in Section
1313(a) of the Code) causes any such amount not to constitute an adjustment
to the Purchase Price for federal Tax purposes.
12.3 EXCLUSIVITY. After the Closing, Article 12 will provide the
exclusive remedy for any misrepresentation, breach of warranty, covenant or
other agreement or other claim arising out of this Agreement or the
transactions contemplated hereby.
12.4 AS-IS SALE; WAIVER OF WARRANTIES. Except as otherwise expressly
set forth in this Agreement, Purchaser acknowledges that the Assets and
Liabilities are being sold and accepted on an "AS-IS-WHERE-IS" basis, and are
being accepted without any representation or warranty. As part of
Purchaser's agreement to purchase and accept the Assets and Liabilities
AS-IS-WHERE-IS, and not as a limitation on such agreement, TO THE FULLEST
EXTENT PERMITTED BY LAW, SELLER HEREBY DISCLAIMS AND PURCHASER HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES AND RELEASES ANY AND ALL ACTUAL OR
POTENTIAL RIGHTS PURCHASER MIGHT HAVE AGAINST SELLER OR ANY PERSON DIRECTLY
OR INDIRECTLY CONTROLLING SELLER REGARDING ANY FORM OF WARRANTY, EXPRESS OR
IMPLIED, OF ANY KIND OR TYPE, RELATING TO THE ASSETS AND LIABILITIES
INCLUDING, BUT NOT LIMITED TO, THE LOANS AND/OR THE COLLATERAL THEREFOR
EXCEPT THOSE SET FORTH IN ARTICLE 5 AND SECTIONS 8.1 AND 8.8. SUCH WAIVER
AND RELEASE IS, TO THE FULLEST EXTENT PERMITTED BY LAW, ABSOLUTE, COMPLETE,
TOTAL AND UNLIMITED IN EVERY WAY. SUCH WAIVER AND RELEASE INCLUDES TO THE
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FULLEST EXTENT PERMITTED BY LAW, BUT IS NOT LIMITED TO, A WAIVER AND RELEASE
OF EXPRESS WARRANTIES (EXCEPT THOSE SET FORTH IN ARTICLE 5 AND SECTIONS 8.1
AND 8.8), IMPLIED WARRANTIES, WARRANTIES OF FITNESS FOR A PARTICULAR USE,
WARRANTIES OF MERCHANTABILITY, WARRANTIES OF HABITABILITY, STRICT LIABILITY
RIGHTS AND CLAIMS OF EVERY KIND AND TYPE, INCLUDING BUT NOT LIMITED TO CLAIMS
REGARDING DEFECTS WHICH WERE NOT OR ARE NOT DISCOVERABLE, ALL OTHER EXTANT OR
LATER CREATED OR CONCEIVED OF STRICT LIABILITY OR STRICT LIABILITY TYPE
CLAIMS AND RIGHTS.
ARTICLE 13
MISCELLANEOUS
-------------
13.1 SURVIVAL. (a) The parties' respective representations and
warranties contained in this Agreement shall survive until the first
anniversary of the Closing Date, and thereafter neither party may claim any
Loss in relation to a breach thereof. The agreements and covenants contained
in this Agreement shall not survive the Closing except to the extent
expressly set forth herein.
(b) No claim based on any breach of any representation or warranty
shall be valid or made unless written notice with respect thereto is given to
Seller in accordance with this Agreement on or before the date specified in
Section 12.1(c); PROVIDED, HOWEVER, that the provisions of this Section shall
not apply to claims based on Purchaser's breach of Section 10.2 above.
13.2 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations of either party may be assigned by either of the
parties hereto without the prior written consent of the other party, and any
purported assignment in contravention of this Section 13.2 shall be void.
13.3 BINDING EFFECT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
13.4 PUBLIC NOTICE. Prior to the Closing Date, neither Purchaser nor
Seller shall directly or indirectly make or cause to be made any press
release for general circulation, public announcement or disclosure or issue
any notice or general communication to employees with respect to any of the
transactions contemplated hereby without the prior written consent of the
other party (which consent shall not be unreasonably withheld or delayed).
Purchaser agrees that, without Seller's prior written consent, it shall not
release or disclose any of the terms or conditions of the transactions
contemplated herein to any other person. Notwithstanding the foregoing, each
party may make such public disclosure as, in the opinion of its counsel, may
be required by law or as necessary to obtain the Regulatory Approvals.
13.5 NOTICES. All notices, requests, demands, consents and other
communications given or required to be given under this Agreement and under
the related documents shall be in writing and delivered to the applicable
party at the address indicated below:
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IF TO SELLER, TO: Wells Fargo Bank, National Association
420 Montgomery Street
San Francisco, CA 94104
Attention: Guy Rounsaville, Jr., Esq.
Executive Vice President,
Chief Counsel & Secretary
Fax: (415) 975-7151
IF TO PURCHASER, TO: Tehama County Bank
239 South Main Street
Red Bluff, CA 96080
Attention: Steve Gilman, SVP/COO
Fax: (916) 528-3020
or, as to each party at such other address as shall be designated by such
party in a written notice to the other party complying as to delivery with
the terms of this Section. Any notices shall be in writing, including
telegraphic or facsimile communication, and may be sent by registered or
certified mail, return receipt requested, postage prepaid, or by fax, or by
overnight delivery service. Notice shall be effective upon actual receipt
thereof.
13.6 EXPENSES. Except as expressly provided otherwise in this
Agreement, each party shall bear any and all costs and expenses which it
incurs, or which may be incurred on its behalf, in connection with the
preparation of this Agreement and consummation of the transactions described
herein, and the expenses, fees, and costs necessary for any approvals of the
appropriate regulatory authorities.
13.7 GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of California applicable to
contracts made and to be performed entirely within such State.
13.8 ENTIRE AGREEMENT; AMENDMENTS. (a) This Agreement contains the
entire understanding of and all agreements between the parties hereto with
respect to the subject matter hereof and supersedes any prior or
contemporaneous agreement or understanding, oral or written, pertaining to
any such matters which agreements or understandings shall be of no force or
effect for any purpose; PROVIDED, HOWEVER, that the terms of any
confidentiality agreement between the parties hereto previously entered into,
to the extent not inconsistent with any provisions of this Agreement, shall
continue to apply.
(b) This Agreement may not be amended or supplemented in any manner
except by mutual agreement of the parties and as set forth in a writing
signed by the parties hereto or their respective successors in interest. The
waiver of any breach of any provision under this Agreement by any party shall
not be deemed to be a waiver of any preceding or subsequent breach under this
Agreement. No such waiver shall be effective unless in writing.
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13.9 THIRD PARTY BENEFICIARIES. This Agreement shall not benefit or
create any right or cause of action in or on behalf of any person other than
Seller and Purchaser.
13.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.11 HEADINGS. The headings used in this Agreement are inserted for
purposes of convenience of reference only and shall not limit or define the
meaning of any provisions of this Agreement.
13.12 CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. (a) EACH PARTY
HERETO HEREBY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF
CALIFORNIA AND THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
CALIFORNIA, AS WELL AS TO THE JURISDICTION OF ALL COURTS FROM WHICH AN APPEAL
MAY BE TAKEN OR OTHER REVIEW SOUGHT FROM THE AFORESAID COURTS, FOR THE
PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF SUCH PARTY'S
OBLIGATIONS UNDER OR WITH RESPECT TO THIS AGREEMENT OR ANY OF THE AGREEMENTS,
INSTRUMENTS OR DOCUMENTS CONTEMPLATED HEREBY, AND, TO THE EXTENT IT LAWFULLY
MAY DO SO, EXPRESSLY WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE AS TO VENUE IN
ANY OF SUCH COURTS.
(b) EACH PARTY HERETO HEREBY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY CONCERNED
WITH THIS AGREEMENT OR ANY OF THE AGREEMENTS, INSTRUMENTS OR DOCUMENTS
CONTEMPLATED HEREBY. NO PARTY HERETO, NOR ANY ASSIGNEE OR SUCCESSOR OF A
PARTY HERETO, SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING,
COUNTERCLAIM OR ANY OTHER LITIGATION PROCEDURE BASED UPON, OR ARISING OUT OF,
THIS AGREEMENT OR ANY OF THE AGREEMENTS, INSTRUMENTS OR DOCUMENTS
CONTEMPLATED HEREBY. NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION IN
WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY
TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OR THIS SECTION HAVE
BEEN FULLY CONSIDERED BY THE PARTIES HERETO, AND THE PROVISIONS SHALL BE
SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED
TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS SECTION WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
13.13 SEVERABILITY. If any provision of this Agreement, as applied to
any party or circumstance, shall be judged by a court of competent
jurisdiction to be void, invalid or unenforceable, the same shall in no way
effect any other provision of this Agreement, the application of any such
provision and any other circumstances or the validity or enforceability of
the other provisions of this Agreement.
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13.14 LEGAL ACTION. If either Seller or Purchaser shall institute any
legal action to enforce this Agreement or any provision hereof, it is agreed
that the prevailing party shall be entitled to collect reasonable attorneys
fees and costs incurred in connection therewith.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date and year first
above written.
WELLS FARGO BANK,
NATIONAL ASSOCIATION
By:____________________________________
Name:____________________________
Title:___________________________
By:____________________________________
Name:____________________________
Title:___________________________
PURCHASER
By:____________________________________
Name:____________________________
Title:___________________________
By:____________________________________
Name:____________________________
Title:___________________________
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SCHEDULE 1.1(a)
Assumed Severance Obligations
1. First Interstate Bancorp Broad-Based Change in Control Severance Pay
Plan.
2. First Interstate Bancorp Middle Management Change in Control Severance
Pay Plan.
3. Wells Fargo & Company Separation Pay Plan.
<PAGE>
SCHEDULE 1.1(b)
Branches/Real Properties
BRANCH NAME BRANCH ADDRESS CITY LEASE/OWN
- - ----------- -------------- ---- ---------
Orland 301 Walker Street Orland Lease
Willows 160 N. Butte Street Willows Owned
<PAGE>
SCHEDULE 1.1(c)
(DELETED)
<PAGE>
SCHEDULE 1.1(d)
(DELETED)
<PAGE>
SCHEDULE 3.6(a)
FORM OF CALIFORNIA GRANT DEED
-----------------------------
Recording Requested by:
When Recorded Mail to:
DOCUMENTARY TRANSFER TAX $ ________________
( ) COMPUTED ON FULL VALUE OF PROPERTY CONVEYED, OR ( ) COMPUTED ON FULL
VALUE LESS LIENS AND ENCUMBRANCES REMAINING THEREON AT TIME OF SALE.
Signature of declarant or agent determining tax - Firm Name
( ) Unincorporated Area ( ) City of ________________
Assessor's parcel No. ________________
WELLS FARGO BANK, NATIONAL ASSOCIATION with its principal office
located in San Francisco, California, the undersigned grantor, for a valuable
consideration, receipt of which is hereby acknowledged, does hereby remise,
release and forever grant to [NAME OF GRANTEE(S)] a _________________, with
its principal office located in __________________, all of the real property
in the City of ____________________, County of ____________________, State of
California, described in Attachment A hereto.
Date: ___________________ WELLS FARGO BANK, NATIONAL
ASSOCIATION
By:____________________________
Name:
Title:
MAIL TAX STATEMENTS TO GRANTEE
AT ADDRESS ABOVE
<PAGE>
Attachment A
PROPERTY
--------
2
<PAGE>
SCHEDULE 3.6(b)
FORM OF BILL OF SALE
--------------------
BILL OF SALE, dated as of _________________, 1996 by WELLS FARGO BANK,
NATIONAL ASSOCIATION, with its principal office located in San Francisco,
California ("SELLER"), to _______________________________________________,
with its principal office located in _____________________________________,
California ("PURCHASER"). Capitalized terms not otherwise defined herein
shall have the same meanings as set forth in the Purchase and Assumption
Agreement, dated as of __________________, 1996 (the "P&A AGREEMENT"),
between Seller and Purchaser, unless the context herein otherwise requires.
W I T N E S S E T H:
-------------------
WHEREAS, subject to the terms and conditions set forth in the P&A
Agreement, Seller has agreed to transfer to Purchaser the Assets;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller does hereby convey,
grant, bargain, sell, transfer, set over, assign, alienate, remise, release,
deliver and confirm unto Purchaser, its successors and assigns, forever, all
of Seller's right, title, interest and claim in and to the Personal Property
(including without limitation, the items described in Attachment A hereto),
as of 11:59 P.M., California time, the day prior to the date hereof.
TO HAVE AND TO HOLD all and singular of the foregoing (the "TRANSFERRED
PROPERTIES") unto Purchaser, its successors and assigns, to its and their own
use and enjoyment forever.
SELLER FURTHER COVENANTS AND AGREES AS FOLLOWS:
1. This instrument shall not constitute an assignment of any covenant,
obligation, liability, contract, agreement, license, lease or commitment
pertaining to the Transferred Properties if an attempted assignment thereof
without the consent of any other party thereto or with an interest therein
would constitute a breach thereof or would materially and adversely affect
the rights of Seller thereunder. If any such consent is not obtained with
respect to any such covenant, obligation, liability, contract, agreement,
license, lease or commitment, or if an attempted assignment with respect
thereto would be ineffective or would impair the rights of Seller thereunder
so that Purchaser would not in fact receive the benefit of all such rights,
then Seller, its successors and assigns, shall act as Purchaser's agent in
order to obtain for Purchaser, its successors and assigns, the benefits
thereunder, and Seller will cooperate with Purchaser in any other reasonable
arrangement designed to provide such benefits for Purchaser.
2. The Transferred Properties are being delivered "AS IS", "WHERE IS"
and with all faults.
<PAGE>
3. From time to time, Seller, its successor and assigns, shall execute
and deliver all such further bills of sale, assignments or other instruments
of conveyance and transfer as Purchaser, its successors or assigns, may
reasonably request more effectively to transfer to and vest in Purchaser all
of Seller's interest in the Transferred Properties.
4. This Bill of Sale is made pursuant to the provisions of the P&A
Agreement, and, except as herein otherwise provided, the transfer of property
hereunder is made subject to the terms and provisions of the P&A Agreement.
5. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of California applicable to contracts made and to
be performed entirely within such State.
IN WITNESS WHEREOF, Seller has duly executed and delivered this Bill of
Sale as of the day and year first above written.
WELLS FARGO BANK, NATIONAL ASSOCIATION
By:___________________________________
Name:
Title:
PURCHASER:
By:___________________________________
Name:
Title:
2
<PAGE>
Attachment A
PERSONAL PROPERTY
-----------------
[To be provided]
<PAGE>
SCHEDULE 3.6(c)
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
-------------------------------------------
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of __________, 1996 (this
"AGREEMENT"), between WELLS FARGO BANK, NATIONAL ASSOCIATION, organized under
the laws of the United States, with its principal office located in San
Francisco, California ("SELLER"), and _____________________________, with its
principal office located in ________________________________ ("PURCHASER").
Capitalized terms not otherwise defined herein shall have the meanings set
forth in the Purchase and Assumption Agreement, dated as of
_____________________, (the "P&A AGREEMENT"), between Seller and Purchaser,
unless the context herein otherwise requires.
W I T N E S S E T H:
-------------------
WHEREAS, subject to the terms and conditions set forth in the P&A
Agreement, Seller has agreed to assign, and Purchaser has agreed to assume,
the Liabilities;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Seller hereby sells, assigns, conveys, transfers and delivers, and
Purchaser assumes, without warranty or representation, express or implied, or
recourse to, Seller, except as expressly provided in the P&A Agreement, the
Liabilities, other than the Branch Leases, as set forth in the P&A Agreement.
2. Seller hereby (a) resigns as the trustee or custodian of each
Deposit in an IRA or Keogh Account of which it is the trustee or custodian,
and (b) the extent permitted by the documentation governing such IRA or Keogh
Account, appoints Purchaser as successor trustee or custodian of each such
IRA or Keogh Account, and Purchaser hereby accepts each such trusteeship or
custodianship and assumes all fiduciary obligations with respect thereto.
3. This Agreement shall not constitute an assignment or assumption of
any covenant, fiduciary or other obligation, liability, contract, agreement,
license, lease or commitment pertaining to any Liability if an attempted
assignment or assumption thereof without the consent of any other party
thereto or with an interest therein would constitute a breach thereof or
would materially and adversely affect the rights of Seller thereunder. If
any such consent is not obtained with respect to any such covenant, fiduciary
or other obligation, liability, contract, agreement, license, lease or
commitment, or if an attempted assignment or assumption of any covenant,
fiduciary or other obligation, liability, contract, agreement, license, lease
or commitment pertaining to any Liability would be ineffective or would
impair the rights of Seller thereunder so that Purchaser would not in fact
receive the benefit of all such rights, then Seller, its successors and
assigns shall act as Purchaser's agent in order to obtain for Purchaser, its
successors and assigns, the benefits thereunder, and Seller will cooperate
with Purchaser in any other reasonable arrangement designed to provide such
benefits for Purchaser.
<PAGE>
4. This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties hereto and their respective
permitted successors and permitted assigns; provided, that neither this
Agreement nor any of the rights, interests or obligations of either party may
be assigned by either party hereto without the prior written consent of the
other party, and any purported assignment in contradiction of this Section 4
shall be void.
5. This Agreement is made pursuant to the provisions of the P&A
Agreement and, except as herein otherwise provided, the assignment and
assumption of any other Liabilities hereunder are made subject to the terms
and provisions of the P&A Agreement.
6. Except as otherwise provided herein, all of the transactions
provided for herein shall be effective as of 11:59 p.m., California time, the
day prior to the date hereof.
7. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of California applicable to contracts made and to
be performed entirely within such State.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
WELLS FARGO BANK, NATIONAL ASSOCIATION
By:___________________________________
Name:
Title:
[PURCHASER]:
By:___________________________________
Name:
Title:
2
<PAGE>
SCHEDULE 3.6(d)
FORM OF ASSIGNMENT OF LEASE AND ASSUMPTION
------------------------------------------
KNOW THAT WELLS FARGO BANK, NATIONAL ASSOCIATION, a national bank,
organized under the laws of the United States, having its principal office in
San Francisco, California ("ASSIGNOR"), in consideration of One Dollar ($1.00)
and other good and valuable consideration paid by ____________________, with
its principal office located in _________________, California ("ASSIGNEE"),
hereby assigns unto the Assignee all of Assignor's right, title and interest
as tenant under a certain lease more particularly described on Attachment A
hereto, covering premises described on such attachment and in such Lease
(the "LEASE").
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns
from and after 11:59 P.M., California time, the day prior to the date hereof
(the "EFFECTIVE TIME"), subject to the terms, covenants, conditions and
provisions set forth in the Lease.
ASSIGNEE hereby assumes, effective as of the Effective Time, the
performance of all terms, covenants and obligations of the Lease on the part
of Assignor to be performed under the Lease.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Agreement
as of the ____ day of ______________, 1996.
WELLS FARGO BANK, NATIONAL ASSOCIATION
By:___________________________________
Name:
Title:
[ASSIGNEE]:
By:___________________________________
Name:
Title:
<PAGE>
Attachment A
LEASE
-----
2
<PAGE>
SCHEDULE 3.6(e)
FORM OF LANDLORD CONSENT
------------------------
CONSENT, dated as of ________________, 1996, of __________________, with
its principal office located in _______________________ ("LANDLORD"), in
favor of WELLS FARGO BANK, NATIONAL ASSOCIATION organized under the laws of
the United States, with its principal office located in San Francisco,
California ("SELLER").
W I T N E S S E T H:
-------------------
WHEREAS, Landlord is the owner of certain premises and a party to a
certain lease, each described on Attachment A hereto (the "LEASE"); and
WHEREAS, Seller desires to assign its entire interest (including,
without limitation, renewal rights, if any) in the Lease to
_____________________________, with its principal office located in
__________________, California ("PURCHASER"); and
WHEREAS, Seller has requested Landlord's consent to said assignment and
to Purchaser's use of said premises as a banking office and for all other
purposes authorized under the Lease for the balance of the term of the Lease
and Landlord desires to consent to the same for all purposes required under
the Lease.
NOW, THEREFORE,
1. Subject to the limitations set forth below, Landlord hereby
consents to the assignment of the Lease by Seller to Purchaser and to
Purchaser's use of said premises as a banking office and for all other
purposes authorized under the Lease for the balance of the term of the Lease;
provided that Purchaser shall agree to assume all of the obligations of
Seller arising under the Lease from and after the effective date of the
assignment.
2. Except for the aforementioned assignment by Seller to Purchaser,
nothing contained herein shall constitute a waiver of the obligation, if any,
of the holder of the leasehold interest created under the Lease to obtain
Landlord's consent to future assignments of the Lease or a sublease of the
premises demised thereunder.
3. Nothing contained herein shall be construed to obligate Seller to
assign the Lease to Purchaser, it being understood and acknowledged by
Landlord that the execution and delivery of this Consent is in anticipation
of said assignment, which may or may not be effected. If said assignment
shall be effected, Seller or Purchaser shall promptly provide to Landlord a
fully executed counterpart of said assignment and notify Landlord of the
effective date thereof.
4. Landlord acknowledges and certifies that, except for the conditions
contained herein, all conditions set forth in the Lease, if any, to the
effectiveness of the aforementioned
<PAGE>
assignment or to the consent of Landlord contained herein have been either
waived by Landlord or satisfied.
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this
instrument as of the day and year first above written.
[LANDLORD]
By:___________________________________
Name:
Title:
<PAGE>
Attachment A
LEASE
-----
3
<PAGE>
SCHEDULE 3.6(g)
FORM OF CERTIFICATE OF OFFICER
WELLS FARGO BANK, NATIONAL ASSOCIATION
--------------------------------------
The undersigned, the [title of officer] of WELLS FARGO BANK, NATIONAL
ASSOCIATION, a bank, organized under the laws of the United States of
America, with its principal office located in San Francisco, California
("SELLER"), hereby certifies, to the best of [his] [her] knowledge after
reasonable inquiry, as follows:
1. Each of the representations and warranties made by Seller in the
Purchase and Assumption Agreement, dated as of _____________, 1996, (the "P&A
AGREEMENT"), between Seller and _________________________________, with its
principal office located in __________________, California, are true in all
material respects, as of the date hereof.
2. Each of the covenants and agreements of Seller to be performed on
or prior to the date hereof have been duly performed in all material respects.
3. Attached hereto are true and correct copies of the resolutions of
the Seller's Board of Directors, dated as of _____________, 1996, authorizing
the execution, delivery and performance of the transactions contemplated by
the P&A Agreement, which resolutions were duly adopted and, as of the date
hereof, remain in full force and effect without amendment or modification.
IN WITNESS WHEREOF, I have hereunto subscribed my name this ____ day of
________________, 1996.
WELLS FARGO BANK, NATIONAL ASSOCIATION
By:___________________________________
Name:
Title:
<PAGE>
SCHEDULE 3.7(d)
FORM OF CERTIFICATE OF OFFICER
The undersigned, the [title of officer] of
_________________________________, with its principal office located in
____________________, California ("PURCHASER"), hereby certifies, to the best of
[his] [her] knowledge after reasonable inquiry, as follows:
1. Each of the representations and warranties made by Purchaser in the
Purchase and Assumption Agreement, dated as of ____________, 1996 (the "P&A
AGREEMENT"), between Purchaser and Wells Fargo Bank, National Association,
organized under the laws of the United States, with its principal office
located in Los Angeles, California, are true in all material respects, as of
the date hereof (except for representations and warranties that are made as
of a specific date).
2. Each of the covenants and agreements of Purchaser to be performed
on or prior to the date hereof have been duly performed in all material
respects.
3. Attached hereto are true and correct copies of the resolutions of
the Purchaser's Board of Directors, dated as of _________________, 1996,
authorizing the execution, delivery and performance of the transactions
contemplated by the P&A Agreement, which resolutions were duly adopted and,
as of the date hereof, remain in full force and effect without amendment or
modification.
IN WITNESS WHEREOF, I have hereunto subscribed my name this ____ day of
________________, 1996.
[PURCHASER]:
By:___________________________________
Name:
Title:
<PAGE>
SCHEDULE 5.4
Tenant Leases
PROP.# PROPERTY NAME SUB-TENANT NAME SQ. LEASE
- - ---- ------------- --------------- FT. EXPIRES
--- -------
None.
<PAGE>
SCHEDULE 5.6
Litigation and Undisclosed Liabilities
None.
<PAGE>
SCHEDULE 5.10(a)(ix)
(DELETED)
<PAGE>
SCHEDULE 5.10(f)(i)
(DELETED)
<PAGE>
SCHEDULE 5.16
Environmental Matters
See asbestos reports and Phase I Reports (as updated) previously provided to
Purchaser.
<PAGE>
SCHEDULE 8.1
Outstanding Tax Liabilities
None.
<PAGE>
(EXHIBIT 10.4(A))
TEHAMA COUNTY BANK
1994 STOCK OPTION PLAN
<PAGE>
(AS AMENDED THROUGH MAY 4, 1994)
TEHAMA COUNTY BANK
1994 STOCK OPTION PLAN
INDEX
ARTICLE COMMENCING
NO. DESCRIPTION ON PAGE
- - --------------------------------------------------------------------------------
1. PURPOSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) BOARD OF DIRECTORS AND COMMITTEE . . . . . . . . . . . . . . . . . 1
(b) POWERS OF COMMITTEE. . . . . . . . . . . . . . . . . . . . . . . . 2
(c) DELIVERY OF OPTION AGREEMENT . . . . . . . . . . . . . . . . . . . 2
3. PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. THE SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
5. GRANT, TERMS AND CONDITIONS OF OPTIONS . . . . . . . . . . . . . . . . . 3
(a) GRANTS TO OFFICERS AND EMPLOYEES . . . . . . . . . . . . . . . . . 3
(b) OPTION PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) DURATION AND VESTING OF OPTIONS. . . . . . . . . . . . . . . . . . 3
(d) EXERCISE OF OPTIONS; PAYMENT . . . . . . . . . . . . . . . . . . . 4
(e) TAX WITHHOLDING. . . . . . . . . . . . . . . . . . . . . . . . . . 4
(f) TERMINATION OF EMPLOYEE OR OFFICER STATUS. . . . . . . . . . . . . 5
(i) DEATH OR DISABILITY. . . . . . . . . . . . . . . . . . . . . 5
2
<PAGE>
(ii) CAUSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(iii) OTHER REASONS. . . . . . . . . . . . . . . . . . . . . . . . 5
(g) TRANSFERABILITY OF OPTIONS . . . . . . . . . . . . . . . . . . . . 5
(h) OTHER TERMS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . 6
(i) USE OF PROCEEDS FROM EXERCISE OF OPTIONS . . . . . . . . . . . . . 6
(j) RIGHTS AS A SHAREHOLDER. . . . . . . . . . . . . . . . . . . . . . 6
(k) DIRECTORS' OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . 6
(l) TERMINATION OF DIRECTOR STATUS . . . . . . . . . . . . . . . . . . 6
6. ADJUSTMENT OF AND CHANGES IN THE SHARES . . . . . . . . . . . . . . . . 7
(a) CHANGES IN CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . 7
(b) CHANGE OF CONTROL OF THE BANK. . . . . . . . . . . . . . . . . . . 7
(c) TENDER OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(d) NO FRACTIONAL SHARES . . . . . . . . . . . . . . . . . . . . . . . 8
(e) OTHER EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7. LISTING OR QUALIFICATION OF SHARES. . . . . . . . . . . . . . . . . . . 8
8. AMENDMENT AND TERMINATION OF THE PLAN . . . . . . . . . . . . . . . . . 8
(a) AUTHORITY OF BOARD OF DIRECTORS; PERMITS AND SHAREHOLDER APPROVAL. 8
(b) EFFECT OF AMENDMENT OR TERMINATION . . . . . . . . . . . . . . . . 9
9. EFFECTIVENESS OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . 9
10. PRIVILEGES OF STOCK OWNERSHIP; SECURITIES LAW COMPLIANCE;
NOTICE OF SALE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
11. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ii
<PAGE>
TEHAMA COUNTY BANK
1994 STOCK OPTION PLAN
1. PURPOSE.
The purpose of this 1994 Stock Option Plan (the "Plan") of Tehama County
Bank and its present or future affiliates (hereinafter collectively referred to
as the "Bank") is to secure for the Bank and its stockholders the benefits of
the incentive inherent in the ownership of common stock ("Common Stock") of the
Bank by those key full-time employees, officers and directors of the Bank who
will share responsibility with management of the Bank for its future growth and
success. An "affiliate" of the Bank means any bank or corporation in an
unbroken chain of banks or corporations beginning or ending with the Bank, if at
the time of the granting of an option, each such bank or corporation other than
the last in that chain owns stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other banks or
corporations in the chain.
2. ADMINISTRATION.
(a) BOARD OF DIRECTORS AND COMMITTEE. The Plan shall be
administered by a committee of the Board of Directors appointed for such
purposes by the Board of Directors (the "Committee") and composed of not less
than two (2) disinterested directors. Once appointed, the Committee shall
administer the Plan on behalf of the Board of Directors, subject to such terms
and conditions as the Board of Directors may prescribe and shall continue to
serve until otherwise directed by the Board of Directors. The Committee may
include the entire Board of Directors if all of its members are disinterested.
A "disinterested" director is a director who has not been granted or awarded,
during the period of one year prior to the time such director becomes a member
of the Committee, options pursuant to this Plan or any other similar plan of the
Bank except pursuant to subarticle 5(k) of the Plan or similar provisions of
such other plan providing for formula grants to directors in compliance with
Rule 16b-3(c)(ii) of the Securities and Exchange Commission, or any applicable
successor rule, and applicable related rulings and interpretations.
The Board of Directors may from time to time remove members from or add
members to the Committee. Vacancies on the Committee, howsoever caused, shall
be filled by the Board of Directors. The Board of Directors shall designate a
Chairman and Vice-Chairman of the Committee from among the Committee members.
Acts of the Committee (i) at a meeting, held at a time and place and in
accordance with rules adopted by the Committee, at which a quorum of the
Committee is present and acting, or (ii) reduced to and approved in writing by a
majority of the members of the Committee, shall be the valid acts of the
Committee.
1
<PAGE>
(b) POWERS OF COMMITTEE. The Bank shall effect the grant of
options under the Plan by execution of instruments in writing in a form approved
by the Committee. Subject to the express terms and conditions of the Plan and
the terms of any option outstanding under the Plan, the Committee shall have
full power (i) to construe the Plan and the terms of any option granted under
the Plan, (ii) to prescribe, amend and rescind rules and regulations relating to
the Plan or such options, and (iii) to make all other determinations necessary
or advisable for the Plan's administration, including, without limitation, the
power to (A) determine which persons meet the requirements of Section 3 hereof
for selection as participants in the Plan; (B) determine to whom of the eligible
persons, if any, options shall be granted under the Plan; (C) establish the
terms and conditions required or permitted to be included in every option
agreement or any amendments thereto, including whether options to be granted
thereunder shall be incentive stock options ("Incentive Stock Options"), as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or stock options not entitled under the Code to treatment as Incentive
Stock Options ("Nonstatutory Stock Options"); (D) specify the number of shares
to be covered by each option; (E) in the event a particular option is to be an
Incentive Stock Option, determine and incorporate such terms and provisions, as
well as amendments thereto, as shall be required in the judgment of the
Committee, so as to provide for or conform such option to any change in any law,
regulation, ruling or interpretation applicable thereto; (F) determine the fair
market value of Common Stock used by an optionee to pay for the exercise of
options or the withholding of any tax hereunder; (G) accelerate or defer (with
the consent of the optionee) the exercise date of any option, consistent with
the provisions of subarticle 5(b); (H) with the permission of the California
Superintendent of Banks (the "Superintendent"), cancel options outstanding under
the Plan with the consent of the affected optionee and issue replacement options
therefor; and (I) make all other determinations deemed necessary or advisable
for administering the Plan. The Committee's determination on all matters
subject to its regulation or determination under the Plan shall be final,
binding and conclusive.
(c) DELIVERY OF OPTION AGREEMENT. At the time of the grant of an
option, the Committee shall cause to be delivered to the participant a copy of
the participant's stock option agreement and either a copy of the Plan or a
disclosure statement that summarizes the provisions of the Plan and the stock
option agreement.
3. PARTICIPANTS.
Participants in the Plan (hereinafter the "Participants") shall be those
key, full-time salaried employees and key, full-time salaried officers of the
Bank, to whom options may be granted from time to time by the Committee.
Directors shall be Participants in the Plan subject to the specific limitations
provided in subarticle 5(k).
4. THE SHARES.
The shares of stock subject to options authorized to be granted under the
Plan (hereinafter the "Shares") shall consist of 153,331 shares of the Bank's
Common Stock, or the number and kind of shares of stock or other securities
which shall be substituted for such Shares or to which such Shares
2
<PAGE>
shall be adjusted as provided in Article 6 of the Plan. The Shares subject to
the Plan shall be set aside initially out of the authorized but unissued shares
of Common Stock of the Bank not reserved for any other purpose. Shares of
Common Stock subject to an option which, for any reason, terminates in whole or
part unexercised as to the Shares, shall remain in the Plan, and thereto shall
be added shares of Common Stock (i) delivered by an optionee in payment of any
portion of the exercise price of the option or taxes due in connection with such
exercise, or (ii) withheld from the Shares otherwise deliverable upon exercise
of the option in payment of the exercise price or taxes due in connection with
such exercise.
5. GRANT, TERMS AND CONDITIONS OF OPTIONS.
(a) GRANTS TO OFFICERS AND EMPLOYEES. Options may be granted at
any time prior to the termination of the Plan to key, full-time, salaried
officers and other key, full-time salaried employees of the Bank who, in the
judgment of the Committee, contribute to the successful conduct of the Bank's
operation through their judgment, interest, ability and special efforts;
provided, however, that: (i) an eligible officer or employee shall not
participate in the granting of his or her own option; (ii) the aggregate fair
market value (determined as of the date the option is granted) of the stock with
respect to which Incentive Stock Options are exercisable for the first time by
any optionee during any calendar year (under all stock option plans of the Bank)
shall not exceed $100,000; (iii) except in the case of termination by death or
disability, as set forth in subarticle (c) below, the granted option must be
exercised by the optionee no later than three (3) months after any termination
of employment with the Bank and said employment must have been continuous since
the granting of the option; and (iv) the total number of shares subject to
options granted to any one optionee, at any one time, shall not exceed ten
percent (10%) of the then issued and outstanding shares of Common Stock of the
Bank.
(b) OPTION PRICE. The purchase price of each option shall be
not less than one hundred percent (100%) of the fair market value of the Shares
subject thereto on the date the option is granted, as such value is determined
by the Committee. The fair market value of such stock shall be determined in
accordance with any reasonable method of valuation, including the valuation
methods described in Treasury Regulation Section 20.2031-2. If, however, an
employee owns stock of the Bank possessing more than 10 percent (10%) of the
total combined voting power of all classes of stock of the Bank, the option
price of any Incentive Stock Option granted to such optionee shall be not less
than 110 percent (110%) of such fair market value at the time such option is
granted.
(c) DURATION AND VESTING OF OPTIONS. Each option shall vest in
such manner and at such time up to but not exceeding ten (10) years from the
date the option is granted as the Committee shall determine in its sole
discretion; provided also, however, that the Committee may, in its sole
discretion, accelerate the time of exercise of any option; provided further,
that if an Incentive Stock Option is granted to any employee owning stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Bank, such option by its terms is not exercisable after
the expiration of five (5) years from the date such option is granted. The
termination of the Plan shall not alter the maximum duration, the vesting
provisions, or any other term or condition of any option granted prior to the
termination of the Plan.
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(d) EXERCISE OF OPTIONS; PAYMENT. To the extent the right to
purchase Shares has vested under a Participant's stock option agreement, options
thereunder may be exercised from time to time by delivering to the Secretary of
the Bank an irrevocable written notice of exercise which shall identify the
option agreement and specify the number of Shares as to which the agreement is
being exercised, together with (i) payment therefor in cash, certified check,
official bank check, or the equivalent thereof acceptable to the Bank, (ii)
delivery of other shares of Common Stock owned by the optionee and having a fair
market value on the date of surrender equal to the aggregate exercise price of
the Shares as to which the option shall be exercised, (iii) delivery of an
election to the Bank to withhold a sufficient number of Shares from the Shares
otherwise due upon exercise of the option having an aggregate fair market value
on the date of exercise equal to the exercise price, (iv) any combination of
payment or delivery in accordance with (i) through (iii), or (v) any other
consideration or method of payment for the issuance of Shares permitted under
applicable law.
In addition, full payment for the purchased Shares may be effected through
a broker-dealer sale and remittance procedure pursuant to which the optionee (i)
shall provide irrevocable written instructions to a designated brokerage firm to
effect the immediate sale of all or a sufficient portion of the purchased Shares
to enable said brokerage firm to remit to the Bank, out of the sale proceeds
available on the settlement date for such sale, sufficient funds to cover the
aggregate exercise price payable for the purchased Shares plus all applicable
federal, state and local income and employment taxes required to be withheld by
the Bank by reason of such purchase, and (ii) shall provide a written directive
to the Bank to deliver (or to have its transfer agent deliver) the certificates
for the purchased Shares directly to such brokerage firm in order to complete
the sale transaction. Exercise of an option by the delivery of shares already
owned or by the withholding of Shares from the Shares otherwise due upon
exercise of the option shall be effected in such a manner so as not to result in
the cancellation of outstanding shares of Common Stock and so as to result in a
certificate being issued to the optionee for the net number of Shares being
acquired by the exercise. An optionee's election to deliver shares owned by the
optionee or to have the Bank withhold Shares from the Shares otherwise due upon
exercise of the option to satisfy the payment of the exercise price of the
option shall be subject to approval by the Committee and must be made in
accordance with rules and procedures established by the Committee, including the
time within which such an election must be made.
(e) TAX WITHHOLDING. Where the Bank deems that it is
appropriate to withhold taxes relating to the exercise of any option, the
Committee may in its discretion require that such taxes be paid in a manner
satisfactory to the Bank. The Bank may require the payment of such taxes before
Shares of the Bank's Common Stock deliverable pursuant to such exercise are
transferred to the optionee. An Optionee may elect to pay such tax by having
the Bank withhold a sufficient number of Shares otherwise deliverable pursuant
to the exercise of such Option or by delivering to the Bank a sufficient number
of shares of Common Stock owned by the optionee. The value of shares of Common
Stock withheld or delivered shall be the fair market value of such shares, as
determined by the Committee, on the date the exercise becomes taxable. All
elections shall be affected in such a manner so as not to result in the
cancellation of outstanding shares and are subject to the approval of the
Committee and must be made in compliance with rules and procedures established
by the Committee.
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(f) TERMINATION OF EMPLOYEE OR OFFICER STATUS. Upon the
termination of an optionee's status as an employee or officer of the Bank, his
or her rights to exercise an option then held shall be only as follows:
(i) DEATH OR DISABILITY. If an optionee's employment or
status as an officer is terminated by death or disability, such optionee or such
optionee's qualified representative (in the event of the optionee's mental
disability) or the optionee's estate (in the event of optionee's death) shall
have the right for a period of twelve (12) months following the date of such
death or disability to exercise the option to the extent the optionee was
entitled to exercise such option on the date of the optionee's death or
disability, provided the actual date of exercise is in no event after the
expiration of the term of the option. An optionee's "estate" shall mean the
optionee's legal representative or any person who acquires the right to exercise
an option by reason of the optionee's death.
(ii) CAUSE. If an employee or officer is determined by the
Board of Directors to have committed an act of embezzlement, fraud, dishonesty,
breach of fiduciary duty to the Bank, or to have deliberately disregarded the
rules of the Bank which resulted in loss, damage or injury to the Bank, or if an
optionee makes any unauthorized disclosure of any of the secrets or confidential
information of the Bank, induces any client or customer of the Bank to break any
contract with the Bank or induces any principal for whom the Bank acts as agent
to terminate such agency relations, or engages in any conduct which constitutes
unfair competition with the Bank, or if an optionee is removed from any office
of the Bank by the Federal Deposit Insurance Corporation or any other bank
regulatory agency, or if an optionee is removed from the Board of Directors
pursuant to Section 302 or Section 304 of the California Corporations Code,
neither the optionee nor the optionee's estate shall be entitled to exercise any
option with respect to any Shares whatsoever after termination of employment or
officer status, whether or not after termination of employment or officer status
the optionee may receive payment from the Bank for vacation pay, for services
rendered prior to termination, for services for the day on which termination
occurred, for salary in lieu of notice, or for other benefits. In making such
determination, the Board of Directors shall act fairly and shall give the
optionee an opportunity to appear and be heard at a hearing before the full
Board of Directors and present evidence on the optionee's behalf. For the
purpose of this paragraph, termination of employment or officer status shall be
deemed to occur when the Bank dispatches notice or advice to the optionee that
the optionee's employment or status as an officer is terminated, and not at the
time of optionee's receipt thereof.
(iii) OTHER REASONS. If an optionee's employment or status
as an officer is terminated for any reason other than those mentioned in
subsections (i) and (ii) above, the optionee may, within three (3) months
following such termination, exercise the option to the extent such option was
exercisable by the optionee on the date of termination of the optionee's
employment or status as an officer, provided the date of exercise in no event
occurs after the expiration of the term of the option.
(g) TRANSFERABILITY OF OPTIONS. Each option shall be
transferrable only by will or the laws of descent and distribution and shall be
exercisable during the optionee's lifetime only by the optionee or, in case of
the optionee's mental disability, the optionee's qualified representative.
5
<PAGE>
(h) OTHER TERMS AND CONDITIONS. Options may also contain such
other provisions, which shall not be inconsistent with any of the foregoing
terms, as the Committee shall deem appropriate. No option, however, nor
anything contained in the Plan, shall confer upon any optionee any right to
continue in the employ or in the status as an officer or director of the Bank,
nor limit in any way the right of the Bank to terminate an optionee's employment
or status as an officer at any time.
(i) USE OF PROCEEDS FROM EXERCISE OF OPTIONS. Proceeds from the
sale of Shares pursuant to the exercise of options granted under the Plan shall
constitute general funds of the Bank.
(j) RIGHTS AS A SHAREHOLDER. The optionee shall have no rights
as a shareholder with respect to any Shares until the date of issuance of a
stock certificate for such Shares. No adjustment shall be made for dividends or
other rights for which the record date is prior to the date of such issuance,
except as provided in Article 6 hereof.
(k) DIRECTORS' OPTIONS. Notwithstanding anything to the
contrary in other provisions of the Plan, each director of the Bank who is not a
full-time salaried employee or full-time salaried officer of the Bank shall be
eligible to participate in the Plan in accordance with this subarticle. Options
granted to such directors are subject to the following additional terms and
conditions: (i) all grants to directors shall be Nonstatutory Stock Options;
(ii) options granted to directors shall be exercisable immediately as to 20% of
the Shares subject to the option and as to the remainder of the Shares in four
additional installments of 20% of the Shares on each of the first four
anniversary dates after the date of grant; (iii) options granted to directors
under the Plan shall expire five (5) years from the date of grant; (iv) each
member of the Board of Directors as of the effective date of the Plan shall be
granted, as of such date, an option to purchase 4,500 shares at a price equal to
100% of the fair market value of the Shares at the time of grant, or such number
or kind of shares of stock or other securities which shall be substituted for
such number of Shares or to which such number of Shares shall be adjusted as
provided in Article 6 of the Plan; (v) each person first becoming a member of
the Board of Directors after the effective date of the Plan shall be granted, as
of the date such person becomes a member of the Board of Directors, an option
identical to the option described in subsection (iv) immediately above; and (vi)
no director shall be entitled to receive more than one grant of options pursuant
to this subarticle.
(l) TERMINATION OF DIRECTOR STATUS. An option held by a non-
employee director shall terminate in connection with the termination of the
optionee's status as a director as follows: (i) if such optionee's status as a
director is terminated as a result of death or disability or any reason other
than cause as specified in subarticle (ii) immediately below, the option shall
terminate in accordance with subarticles (f)(i) and (iii) above; (ii) such
option shall terminate immediately (A) if the optionee is removed as a director
of the Bank pursuant to Section 302 or Section 304 of the California
Corporations Code or by the Federal Deposit Insurance Corporation or any other
bank regulatory agency, or (B) if such optionee's status as a director is
terminated on account of any act of embezzlement, fraud, dishonesty, breach of
fiduciary duty to the Bank, deliberate disregard of the rules of the Bank
resulting in loss, damage or injury to the Bank, unauthorized disclosure of any
of the secrets or confidential information of the Bank, inducement of any client
or customer of the Bank to break any contract with the Bank or of any principal
for whom the Bank acts as agent to terminate such agency relations, or engaging
in any conduct which constitutes unfair competition with the Bank.
6
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6. ADJUSTMENT OF AND CHANGES IN THE SHARES.
(a) CHANGES IN CAPITALIZATION. In the event the shares of
Common Stock of the Bank, as presently constituted, shall be changed into or
exchanged for a different number or kind of shares of stock or other securities
of the Bank or of another corporation (whether by reason of reorganization,
merger, consolidation, recapitalization, reclassification, stock split,
split-up, combination of shares, or otherwise), or if the number of shares of
Common Stock of the Bank shall be increased through the payment of a stock
dividend, the Committee shall substitute for or add to each share of Common
Stock of the Bank theretofore appropriated or thereafter subject or which may
become subject to an option under the Plan, the number and kind of shares of
stock or other securities into which each outstanding share of Common Stock of
the Bank shall be so changed, or for which each share shall be exchanged, or to
which each such share shall be entitled, as the case may be. In addition, the
Committee shall make appropriate adjustment in the number and kind of shares as
to which outstanding options, or portions thereof then unexercised, shall be
exercisable, so that any optionee's proportionate interest in the Bank by reason
of his or her rights under unexercised portions of such options shall be
maintained as before the occurrence of such event. Such adjustment in
outstanding options shall be made without change in the total price to the
unexercised portion of the option and with a corresponding adjustment in the
option price per share.
(b) CHANGE OF CONTROL OF THE BANK. In the event of (i) a sale,
dissolution or liquidation of the Bank, (ii) a merger or consolidation in which
the Bank is not the surviving or resulting corporation, or (iii) the acquisition
by any company, person or group (whether by a single acquisition or a series of
acquisitions) of twenty percent (20%) or more of the outstanding shares of
Common Stock of the Bank (or shares of stock or other securities which shall be
substituted for such shares or to which such shares shall be adjusted as
provided in subarticle (a) above)(a "Change of Control"), the Committee shall
have the power to cause the termination of every option outstanding hereunder,
except that the surviving or resulting corporation may, in its absolute and
uncontrolled discretion, tender an option or options to purchase its shares on
its terms and conditions, both as to the number of shares and otherwise;
provided, however, that in all events the optionee shall have the right, during
a reasonable period of time as determined by the Committee and prior to such
sale, dissolution, liquidation, merger or consolidation or Change of Control, to
notification thereof and to exercise the optionee's option and purchase Shares
subject thereto to the extent of any unexercised portion of the option,
regardless of the vesting provisions of the option. This right of exercise
shall be conditioned in each case upon, respectively, (i) the execution of a
final plan of dissolution or liquidation, or (ii) the execution of a definitive
agreement of merger or consolidation, or (iii) the filing of a notice of change
of control of the Bank involving a Change of Control as defined hereinabove,
pursuant to the Change in Bank Control Act of 1978 (or any similar successor
statute), and, if required by law in case (i) or (ii) above, the approval of
such plan or agreement by the shareholders of the Bank.
(c) TENDER OFFER. In the event of an offer by any person or
entity to all shareholders of the Bank to purchase any or all shares of Common
Stock of the Bank (or shares of stock or other securities which shall be
substituted for such shares or to which such shares shall be adjusted as
provided in subarticle (a) above) any optionee under this Plan shall have the
right upon the commencement of such offer to exercise the option and purchase
shares subject thereto to the extent of any unexercised or unvested portion of
such option.
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<PAGE>
(d) NO FRACTIONAL SHARES. No right to purchase fractional
shares shall result from any adjustment in options pursuant to this Article 6.
In case of any such adjustment, the Shares subject to the option shall be
rounded down to the nearest whole Share. Notice of any adjustment shall be
given by the Bank to each holder of an option which is so adjusted and such
adjustment (whether or not such notice is given) shall be effective and binding
for all purposes of the Plan.
(e) OTHER EVENTS. Except as expressly provided in this Article
6, an optionee shall have no rights by reason of any of the following events:
(i) the subdivision or consolidation of shares of stock of any class; (ii) the
payment of any stock dividend; (iii) any other increase or decrease in the
number of shares of stock of any class; (iv) any dissolution, liquidation,
merger, consolidation, spin-off or acquisition of assets or stock of another
corporation; (v) any issue by the Bank of shares of stock of any class, or
securities convertible into shares of any class. The grant of an option
pursuant to the Plan shall not affect in any way the right or power of the Bank
to make adjustments, reclassifications, reorganizations or changes of its
capital or business structure or to merge or to consolidate or to dissolve,
liquidate or sell, or transfer all or any part of its business or assets.
7. LISTING OR QUALIFICATION OF SHARES.
All options granted under the Plan are subject to the requirement that, if
at any time the Committee shall determine in its discretion that the listing or
qualification of the Shares subject thereto on any securities exchange or under
any applicable law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of or in connection with the
issuance of the Shares under the option, the option may not be exercised in
whole or in part unless such listing, qualification, consent or approval shall
have been effected or obtained, free of any condition not acceptable to the
Board of Directors or the Committee.
8. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AUTHORITY OF BOARD OF DIRECTORS; PERMITS AND SHAREHOLDER
APPROVAL. The Board of Directors shall have complete power and authority to
terminate or amend the Plan; provided, however, that the provisions of
subarticle 5(k) of the Plan shall not be amended more than once every six
months, other than to comport with changes in the Code or the Employee
Retirement Income Security Act or rules promulgated under either of them. The
Board of Directors shall, to the extent required, and in the manner required, by
Rule 16b-3(b) of the Securities and Exchange Commission, as amended from time to
time, or by any successor rule or other applicable law or regulation, obtain
shareholder approval of any amendment to the Plan. The Board of Directors shall
not, without the approval of the shareholders of the Bank and the approval of
the Superintendent, (i) increase the maximum number of shares for which options
may be granted under the Plan; (ii) change the computation as to minimum option
prices set
8
<PAGE>
forth in subarticle 5(b); (iii) extend the period during which options may be
granted or exercised; or (iv) amend the requirements as to the class of
employees, officers or directors eligible to receive options.
(b) EFFECT OF AMENDMENT OR TERMINATION. Except as provided in
Section 6, no termination or amendment of the Plan may, without the consent of
any employee, officer or director to whom an option shall theretofore have been
granted, adversely effect the rights of such optionee under such option. Unless
the Plan shall have been terminated by action of the Board of Directors prior
thereto, it shall terminate ten (10) years after the earlier of its adoption by
the Board of Directors or approval by the shareholders of the Bank.
9. EFFECTIVENESS OF THE PLAN.
The Plan shall become effective upon the last to occur of (i) approval of
the Plan by the Board of Directors, and (ii) receipt of an appropriate permit
from the Superintendent, and (iii) May 3, 1994. No option may be granted prior
to the receipt of such permit or exercised in whole or part prior to the
approval of the Plan by the shareholders of the Bank. If such shareholder
approval is not obtained within 12 months before or after the date the Plan is
adopted, the Plan shall be null and void.
10. PRIVILEGES OF STOCK OWNERSHIP; SECURITIES LAW COMPLIANCE; NOTICE OF
SALE.
No optionee shall be entitled to the privileges of stock ownership as to
any Shares not actually issued and delivered to the optionee. No Shares shall
be purchased upon the exercise of any option unless and until any applicable
requirements of any regulatory agencies having jurisdiction and of any exchanges
upon which the Common Stock of the Bank may be listed shall have been fully
complied with. The Bank shall diligently endeavor to comply with all applicable
securities laws before any options are granted under the Plan and before any
Shares are issued pursuant to the exercise of such options. The optionee shall
give the Bank notice of any sale or other disposition of any such Shares not
more than five (5) days after such sale or disposition.
11. SEVERABILITY.
If any provision of this Plan shall be determined to be invalid or
prohibited by applicable law, it shall be construed, interpreted and limited to
effectuate its purpose to the maximum extent legally permissible. If any such
provision cannot be so construed and interpreted, such provision shall be
ineffective to the extent of such invalidity or prohibition without invalidating
the remainder of such provision or the remaining provisions of the Plan, and the
Plan shall be construed to the maximum extent possible to carry out its terms
without such invalid or unenforceable provision or portion thereof.
9
<PAGE>
(EXHIBIT 10.4(B))
THE OPTION REPRESENTED BY THIS AGREEMENT MAY BE EXERCISED ONLY IF
THE 1994 STOCK OPTION PLAN HAS BEEN APPROVED BY THE SHAREHOLDERS
HOLDING A MAJORITY OF THE VOTING POWER OF THE ISSUED AND
OUTSTANDING SHARES OF THE BANK.
TEHAMA COUNTY BANK 1994 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
Grant Date:
To:
Tehama County Bank (the "Bank") this day hereby grants to the
undersigned (the "Optionee") an incentive option (the "Option") to purchase all
or any part of ________ shares of the Common Stock of the Bank (the "Shares") at
the Option Price of ___________ per share under the Bank's 1994 Stock Option
Plan (the "Plan").
THE OPTION MAY BE EXERCISED ONLY IN ACCORDANCE WITH THE TERMS OF THE
PLAN, ONLY CERTAIN PROVISIONS OF WHICH ARE SUMMARIZED HEREIN. THE COPY OF THE
PLAN ATTACHED TO THIS AGREEMENT SHOULD BE CONSULTED FOR FURTHER UNDERSTANDING OF
THE TERMS AND CONDITIONS OF THE OPTION.
1. OPTION SUBJECT TO TERMS OF THE PLAN.
The Option shall be subject in all respects to the terms and
conditions of the Plan. This agreement (the "Agreement") is not intended to be
or to provide a summary description of the Plan. Optionee's signature herein
represents Optionee's acknowledgement of receipt of a copy of the Plan. Any
dispute or disagreement which shall arise under or as a result of or pursuant to
this Agreement shall be finally and conclusively determined in the sole
discretion of the committee appointed by the Board of Directors of the Bank to
administer the Plan (the "Committee"), and such determination by the Committee
shall be binding upon all parties.
2. APPROVAL OF PLAN BY SHAREHOLDERS.
Exercise of the Option is conditioned upon approval of the Plan
by the shareholders of the Bank in accordance with the requirements of the
Superintendent of Banks of the State of California.
3. SIGNATURE ON OPTION AGREEMENT.
The Option cannot be exercised unless the Optionee executes this
Agreement by signature in the place provided below and returns it to the
Secretary of the Bank before the close
<PAGE>
of business on the 90th day after the grant date of this Option. If the
Optionee fails to do so, the Option will terminate and be of no effect.
However, Optionee's execution and delivery of this Agreement will not bind the
Optionee to purchase any of the Shares subject to the Option. Optionee's
obligation to purchase the Shares can arise only when the Option is exercised in
the manner set forth in Section 4 below.
4. EXERCISE OF OPTION.
Subject to the provisions of Section 5 below and this Section 4,
this Option can be exercised by Optionee at any time during a period of ________
(_____) months from the grant date as follows:
(a) The Option may be exercised immediately to the extent of not
more than ________ percent (____%) of the Shares;
(b) After the expiration of __________ (____) months from the
grant date, the Option may be exercised to the extent of not more than _________
percent (____%) of the Shares;
(c) After the expiration of __________ (____) months from the
grant date, the Option may be exercised to the extent of not more than _________
percent (____%) of the Shares;
(d) After the expiration of __________ (____) months from the
grant date, the Option may be exercised to the extent of not more than _________
percent (____%) of the Shares;
(e) After the expiration of __________ (____) months from the
grant date, the Option may be exercised to the extent of not more than _________
percent (____%) of the Shares;
(f) After the expiration of __________ (____) months from the
grant date, the Option may be exercised to the extent of not more than _________
percent (____%) of the Shares.
Any portion of the Option unexercised in whole or part shall
accumulate following its vesting in accordance with the above schedule and may
be exercised by Optionee at any time prior to the expiration of __________
(____) months from the grant date.
The Option may be exercised by delivering to the Secretary of the
Bank an irrevocable written notice of exercise which shall identify this
Agreement and specify the number of Shares as to which the Agreement is being
exercised, together with (i) payment therefor (including the amount of any tax
due upon exercise) in cash, certified check, official bank check, or the
equivalent thereof acceptable to the Bank, (ii) delivery of other shares of
Common Stock owned by the Optionee and having a fair market value on the date of
surrender not less than the sum of the aggregate exercise price of the Shares as
to which the Option shall be exercised and the amount of any tax required to be
withheld, (iii) delivery of an election to the Bank to withhold a sufficient
number of Shares from the Shares otherwise due upon exercise of the Option
having an aggregate fair market value on the date of exercise not less than the
sum of the exercise price and the amount of any tax required to be withheld,
(iv) any combination of payment or delivery in accordance with (i) through
(iii), or (v) any other consideration or method of payment for the issuance of
Shares
2
<PAGE>
permitted under applicable law.
The Option may also be exercised by means of broker-dealer sale
and remittance procedures which are set forth in subarticle 5(d) of the Plan.
5. TERMINATION OF OFFICE OR EMPLOYMENT.
(a) If Optionee's status as an employee or officer of the Bank is
terminated for any reason other than death or permanent and total disability or
cause, the Option may be exercised within three (3) months from the date of such
termination to the extent Optionee shall be entitled to exercise the Option on
the date of termination, but in no event may the Option be exercised after the
expiration of its term specified in Section 4 hereof.
(b) If Optionee is removed from office or Optionee's employment
with the Bank is terminated for "cause" as defined in the Plan, the Option shall
expire at the time notice or advice of such removal or termination is dispatched
by the Bank or an order of removal or termination is issued by a court or
regulatory authority having jurisdiction thereof, and notwithstanding anything
else herein to the contrary, neither Optionee nor Optionee's estate shall be
entitled to exercise the Option after such removal or termination.
(c) If Optionee dies or becomes permanently and totally disabled
while an officer or employee of the Bank, the Option may be exercised in whole
or in part within twelve (12) months from the date of death or permanent and
total disability to the extent that Optionee shall have the right to exercise
the Option on the date of death or permanent and total disability, by Optionee
or Optionee's qualified representative (in the event of mental disability) or by
the duly authorized executor of Optionee's will or by the duly authorized
administrator or special administrator of Optionee's estate (in the event of
death). In no event may the Option be exercised after the expiration of its
term specified in Section 4.
Permanent and total disability shall be deemed to exist only if
the Optionee is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months. Optionee shall not be considered
to be permanently and totally disabled unless Optionee furnishes proof of the
existence thereof in such form and manner, and at such times, as required by the
Committee pursuant to applicable regulation of the Secretary of the Treasury.
6. NONTRANSFERABILITY OF OPTION.
The Option shall not be transferable except by will or the laws
of descent and distribution, and may be exercised during Optionee's lifetime
only by Optionee or (if Optionee shall be mentally disabled) by Optionee's
qualified representative. Any purported transfer or assignment of the Option
shall be void and of no effect, and shall give the Bank the right to terminate
the Option as of the date of such purported transfer or assignment.
7. ADJUSTMENT OF AND CHANGES IN THE SHARES.
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<PAGE>
(a) In the event the shares of Common Stock of the Bank, as
presently constituted, shall be changed into or exchanged for a different number
or kind of shares of stock or other securities of the Bank or of another
corporation (whether by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split, split-up, combination of
shares, or otherwise), or if the number of shares of Common Stock of the Bank
shall be increased through the payment of a stock dividend, the Committee (to
the extent that the Option is unexercised as of the date of such change or
exchange) shall substitute for or add to each share of Common Stock of the Bank
subject to the Option the number and kind of shares of stock or other securities
into which each outstanding share of Common Stock of the Bank shall be so
changed, or for which each share shall be exchanged, or to which each such share
shall be entitled, as the case may be. Such adjustment shall be made without
change in the total price to the unexercised portion of the Option and with a
corresponding adjustment in the Option Price per share.
(b) In the event of (i) a sale, dissolution or liquidation of the
Bank, (ii) a merger or consolidation in which the Bank is not the surviving or
resulting corporation, or (iii) the acquisition by any company, person or group
(whether by a single acquisition or a series of acquisitions) of twenty percent
(20%) or more of the outstanding shares of Common Stock of the Bank (or shares
of stock or other securities which shall be substituted for such shares or to
which such shares shall be adjusted as provided in subarticle (a) above)(a
"Change of Control"), the Committee shall have the power to cause the
termination of every option outstanding hereunder, except that the surviving or
resulting corporation may, in its absolute and uncontrolled discretion, tender
an option or options to purchase its shares on its terms and conditions, both as
to the number of shares and otherwise; provided, however, that in all events the
optionee shall have the right, during a reasonable period of time as determined
by the Committee and prior to such sale, dissolution, liquidation, merger or
consolidation or Change of Control, to notification thereof and to exercise the
optionee's option and purchase Shares subject thereto to the extent of any
unexercised portion of the option, regardless of the vesting provisions of the
option. This right of exercise shall be conditioned in each case upon,
respectively, (i) the execution of a final plan of dissolution or liquidation,
or (ii) the execution of a definitive agreement of merger or consolidation, or
(iii) the filing of a notice of change of control of the Bank involving a Change
of Control as defined hereinabove, pursuant to the Change in Bank Control Act of
1978 (or any similar successor statute), and, if required by law in case (i) or
(ii) above, the approval of such plan or agreement by the shareholders of the
Bank.
(c) In the event of an offer by any person or entity to all
shareholders of the Bank to purchase any or all shares of Common Stock of the
Bank, or shares of stock or other securities which shall be substituted for such
shares or to which such shares shall be adjusted as provided in subsection (a)
above, Optionee shall have the right upon the commencement of such offer to
exercise the Option and purchase shares subject thereto regardless of the
vesting provisions of the Option pursuant to section 4 hereof.
(d) No right to purchase fractional shares shall result from any
adjustment of the Option pursuant to this section. In case of any such
adjustment, the Shares subject to the Option shall be rounded down to the
nearest whole Share. Notice of any adjustment shall be given by the Bank to
Optionee and such adjustment (whether or not such notice is given) shall be
4
<PAGE>
effective and binding upon Optionee.
8. RIGHTS AS A SHAREHOLDER.
Optionee shall have no rights as a shareholder of the Bank with
respect to any Shares until the date of the issuance of a stock certificate for
such Shares.
9. TAX WITHHOLDING.
The Option is intended to be an incentive stock option within the
meaning of section 422 of the Internal Revenue Code of 1986, as amended.
Exercise of the Option shall not be subject to tax withholding by the Bank,
provided that all applicable conditions of section 422 have been satisfied (or
no applicable condition of section 422 has been violated) as of the date of
exercise, and provided further that Optionee shall notify the Bank promptly
after making any disposition of Shares acquired by exercise of the Option which
may have the effect of disqualifying the Option as an incentive stock option
under section 422. The Bank undertakes no obligation and makes no other
representation to Optionee regarding the effect on Optionee of the tax laws of
any jurisdiction with respect to the grant or exercise of the Option. It shall
be the obligation of Optionee to obtain tax advice appropriate to Optionee's
circumstances.
10. NOTIFICATION OF SALE OR DISPOSITION.
Optionee, or any person acquiring Shares upon exercise of the
Option on behalf of Optionee, shall notify the Bank not more than five (5) days
after any sale or other disposition of such Shares.
TEHAMA COUNTY BANK
By:_______________
Agreed to this __ day of _______ 19__
_____________________________________
Signature of Optionee
5
<PAGE>
(EXHIBIT 10.4(C))
THE OPTION REPRESENTED BY THIS AGREEMENT MAY BE EXERCISED ONLY IF
THE 1994 STOCK OPTION PLAN HAS BEEN APPROVED BY THE SHAREHOLDERS
HOLDING A MAJORITY OF THE VOTING POWER OF THE ISSUED AND
OUTSTANDING SHARES OF THE BANK.
TEHAMA COUNTY BANK 1994 STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
Grant Date:
To:
Tehama County Bank (the "Bank") this day hereby grants to the
undersigned (the "Optionee") a nonstatutory option (the "Option") to purchase
all or any part of ____________ shares of the Common Stock of the Bank (the
"Shares") at the Option Price of ___________ per share under the Bank's 1994
Stock Option Plan (the "Plan").
THE OPTION MAY BE EXERCISED ONLY IN ACCORDANCE WITH THE TERMS OF THE
PLAN, ONLY CERTAIN PROVISIONS OF WHICH ARE SUMMARIZED HEREIN. THE COPY OF THE
PLAN ATTACHED TO THIS AGREEMENT SHOULD BE CONSULTED FOR FURTHER UNDERSTANDING OF
THE TERMS AND CONDITIONS OF THE OPTION.
1. OPTION SUBJECT TO TERMS OF THE PLAN.
The Option shall be subject in all respects to the terms and
conditions of the Plan. This agreement (the "Agreement") is not intended to be
or to provide a summary description of the Plan. Optionee's signature herein
represents Optionee's acknowledgement of receipt of a copy of the Plan. Any
dispute or disagreement which shall arise under or as a result of or pursuant to
this Agreement shall be finally and conclusively determined in the sole
discretion of the committee appointed by the Board of Directors of the Bank to
administer the Plan (the "Committee"), and such determination by the Committee
shall be binding upon all parties.
2. APPROVAL OF PLAN BY SHAREHOLDERS.
Exercise of the Option is conditioned upon approval of the Plan
by the shareholders of the Bank in accordance with the requirements of the
Superintendent of Banks of the State of California.
3. SIGNATURE ON OPTION AGREEMENT.
The Option cannot be exercised unless the Optionee executes this
Agreement by signature in the place provided below and returns it to the
Secretary of the Bank before the close
<PAGE>
of business on the 90th day after the grant date of this Option. If the
Optionee fails to do so, the Option will terminate and be of no effect.
However, Optionee's execution and delivery of this Agreement will not bind the
Optionee to purchase any of the Shares subject to the Option. Optionee's
obligation to purchase the Shares can arise only when the Option is exercised in
the manner set forth in Section 4 below.
4. EXERCISE OF OPTION.
Subject to the provisions of Section 5 below and this Section 4,
this Option can be exercised by Optionee at any time during a period of _______
(____) months from the grant date as follows:
(a) The Option may be exercised immediately to the extent of not
more than __________ percent (_____%) of the Shares;
(b) After the expiration of __________ (_____) months from the
grant date, the Option may be exercised to the extent of not more than _________
percent (_____%) of the Shares;
(c) After the expiration of __________ (_____) months from the
grant date, the Option may be exercised to the extent of not more than _________
percent (_____%) of the Shares;
(d) After the expiration of __________ (_____) months from the
grant date, the Option may be exercised to the extent of not more than _________
percent (_____%) of the Shares;
(e) After the expiration of __________ (_____) months from the
grant date, the Option may be exercised to the extent of not more than _________
percent (_____%) of the Shares;
(f) After the expiration of __________ (_____) months from the
grant date, the Option may be exercised to the extent of not more than _________
percent (_____%) of the Shares.
The Option may be exercised by delivering to the Secretary of the
Bank an irrevocable written notice of exercise which shall identify this
Agreement and specify the number of Shares as to which the Agreement is being
exercised, together with (i) payment therefor (including the amount of any tax
due upon exercise) in cash, certified check, official bank check, or the
equivalent thereof acceptable to the Bank, (ii) delivery of other shares of
Common Stock owned by the Optionee and having a fair market value on the date of
surrender not less than the sum of the aggregate exercise price of the Shares as
to which the Option shall be exercised and the amount of any tax required to be
withheld, (iii) delivery of an election to the Bank to withhold a sufficient
number of Shares from the Shares otherwise due upon exercise of the Option
having an aggregate fair market value on the date of exercise not less than the
sum of the exercise price and the amount of any tax required to be withheld,
(iv) any combination of payment or delivery in accordance with (i) through
(iii), or (v) any other consideration or method of payment for the issuance of
Shares permitted under applicable law.
The Option may also be exercised by means of broker-dealer sale
and remittance procedures which are set forth in subarticle 5(d) of the Plan.
2
<PAGE>
5. TERMINATION OF OFFICE OR EMPLOYMENT.
(a) If Optionee's status as an employee or officer of the Bank is
terminated for any reason other than death or permanent and total disability or
cause, the Option may be exercised within three (3) months from the date of such
termination to the extent Optionee shall be entitled to exercise the Option on
the date of termination, but in no event may the Option be exercised after the
expiration of its term specified in Section 4 hereof.
(b) If Optionee is removed from office or Optionee's employment
with the Bank is terminated for "cause" as defined in the Plan, the Option shall
expire at the time notice or advice of such removal or termination is dispatched
by the Bank, and notwithstanding anything else herein to the contrary, neither
Optionee nor Optionee's estate shall be entitled to exercise the Option after
such removal or termination.
(c) If Optionee dies or becomes permanently and totally disabled
while an officer or employee of the Bank, the Option may be exercised in whole
or in part within twelve (12) months from the date of death or permanent and
total disability to the extent that Optionee shall have the right to exercise
the Option on the date of death or permanent and total disability, by Optionee
or Optionee's qualified representative (in the event of mental disability) or by
the duly authorized executor of Optionee's will or by the duly authorized
administrator or special administrator of Optionee's estate (in the event of
death). In no event may the Option be exercised after the expiration of its
term specified in Section 4.
Permanent and total disability shall be deemed to exist only if
the Optionee is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months. Optionee shall not be considered
to be permanently and totally disabled unless Optionee furnishes proof of the
existence thereof in such form and manner, and at such times, as required by the
Committee pursuant to applicable regulation of the Secretary of the Treasury.
6. NONTRANSFERABILITY OF OPTION.
The Option shall not be transferable except by will or the laws
of descent and distribution, and may be exercised during Optionee's lifetime
only by Optionee or (if Optionee shall be mentally disabled) by Optionee's
qualified representative. Any purported transfer or assignment of the Option
shall be void and of no effect, and shall give the Bank the right to terminate
the Option as of the date of such purported transfer or assignment.
7. ADJUSTMENT OF AND CHANGES IN THE SHARES.
(a) In the event the shares of Common Stock of the Bank, as
presently constituted, shall be changed into or exchanged for a different number
or kind of shares of stock or other securities of the Bank or of another
corporation (whether by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split, split-up, combination of
shares,
3
<PAGE>
or otherwise), or if the number of shares of Common Stock of the Bank shall be
increased through the payment of a stock dividend, the Committee (to the extent
that the Option is unexercised as of the date of such change or exchange) shall
substitute for or add to each share of Common Stock of the Bank subject to the
Option the number and kind of shares of stock or other securities into which
each outstanding share of Common Stock of the Bank shall be so changed, or for
which each share shall be exchanged, or to which each such share shall be
entitled, as the case may be. Such adjustment shall be made without change in
the total price to the unexercised portion of the Option and with a
corresponding adjustment in the Option Price per share.
(b) In the event of (i) a sale, dissolution or liquidation of the
Bank, (ii) a merger or consolidation in which the Bank is not the surviving or
resulting corporation, or (iii) the acquisition by any company, person or group
(whether by a single acquisition or a series of acquisitions) of twenty percent
(20%) or more of the outstanding shares of Common Stock of the Bank (or shares
of stock or other securities which shall be substituted for such shares or to
which such shares shall be adjusted as provided in subarticle (a) above)(a
"Change of Control"), the Committee shall have the power to cause the
termination of every option outstanding hereunder, except that the surviving or
resulting corporation may, in its absolute and uncontrolled discretion, tender
an option or options to purchase its shares on its terms and conditions, both as
to the number of shares and otherwise; provided, however, that in all events the
optionee shall have the right, during a reasonable period of time as determined
by the Committee and prior to such sale, dissolution, liquidation, merger or
consolidation or Change of Control, to notification thereof and to exercise the
optionee's option and purchase Shares subject thereto to the extent of any
unexercised portion of the option, regardless of the vesting provisions of the
option. This right of exercise shall be conditioned in each case upon,
respectively, (i) the execution of a final plan of dissolution or liquidation,
or (ii) the execution of a definitive agreement of merger or consolidation, or
(iii) the filing of a notice of change of control of the Bank involving a Change
of Control as defined hereinabove, pursuant to the Change in Bank Control Act of
1978 (or any similar successor statute), and, if required by law in case (i) or
(ii) above, the approval of such plan or agreement by the shareholders of the
Bank.
(c) In the event of an offer by any person or entity to all
shareholders of the Bank to purchase any or all shares of Common Stock of the
Bank, or shares of stock or other securities which shall be substituted for such
shares or to which such shares shall be adjusted as provided in subsection (a)
above, Optionee shall have the right upon the commencement of such offer to
exercise the Option and purchase shares subject thereto regardless of the
vesting provisions of the Option pursuant to section 4 hereof.
(d) No right to purchase fractional shares shall result from any
adjustment of the Option pursuant to this section. In case of any such
adjustment, the Shares subject to the Option shall be rounded down to the
nearest whole Share. Notice of any adjustment shall be given by the Bank to
Optionee and such adjustment (whether or not such notice is given) shall be
effective and binding upon Optionee.
4
<PAGE>
8. RIGHTS AS A SHAREHOLDER.
Optionee shall have no rights as a shareholder of the Bank with
respect to any Shares until the date of the issuance of a stock certificate for
such Shares.
9. TAX WITHHOLDING.
Exercise of the Option shall be subject to tax withholding
pursuant to subarticle 5(e) of the Plan. The Bank otherwise undertakes no
obligation and makes no representation to Optionee regarding the effect on
Optionee of the tax laws of any jurisdiction with respect to the grant or
exercise of the Option. It shall be the obligation of Optionee to obtain tax
advice appropriate to Optionee's circumstances.
10. NOTIFICATION OF SALE.
Optionee, or any person acquiring Shares upon exercise of the
Option on behalf of Optionee, shall notify the Bank not more than five (5) days
after any sale or disposition of such Shares.
TEHAMA COUNTY BANK
By:__________________________________
Agreed to this ___ day of ____________ 19__
_________________________________________
Signature of Optionee
5
<PAGE>
(EXHIBIT 10.4(D))
THE OPTION REPRESENTED BY THIS AGREEMENT MAY BE EXERCISED ONLY IF
THE 1994 STOCK OPTION PLAN HAS BEEN APPROVED BY THE SHAREHOLDERS
HOLDING A MAJORITY OF THE VOTING POWER OF THE ISSUED AND
OUTSTANDING SHARES OF THE BANK.
TEHAMA COUNTY BANK 1994 STOCK OPTION PLAN
DIRECTOR NONSTATUTORY STOCK OPTION AGREEMENT
Grant Date:
To:
Tehama County Bank (the "Bank") this day hereby grants to the
undersigned director of the Bank (the "Optionee") a nonstatutory option (the
"Option") to purchase all or any part of ____________ shares of the Common Stock
of the Bank (the "Shares") at the Option Price of ___________ per share under
the Bank's 1994 Stock Option Plan (the "Plan").
THE OPTION MAY BE EXERCISED ONLY IN ACCORDANCE WITH THE TERMS OF THE
PLAN, ONLY CERTAIN PROVISIONS OF WHICH ARE SUMMARIZED HEREIN. THE COPY OF THE
PLAN ATTACHED TO THIS AGREEMENT SHOULD BE CONSULTED FOR FURTHER UNDERSTANDING OF
THE TERMS AND CONDITIONS OF THE OPTION.
1. OPTION SUBJECT TO TERMS OF THE PLAN.
The Option shall be subject in all respects to the terms and
conditions of the Plan. This agreement (the "Agreement") is not intended to be
or to provide a summary description of the Plan. Optionee's signature herein
represents Optionee's acknowledgement of receipt of a copy of the Plan. Any
dispute or disagreement which shall arise under or as a result of or pursuant to
this Agreement shall be finally and conclusively determined in the sole
discretion of the committee appointed by the Board of Directors of the Bank to
administer the Plan (the "Committee"), and such determination by the Committee
shall be binding upon all parties.
2. APPROVAL OF PLAN BY SHAREHOLDERS.
Exercise of the Option is conditioned upon approval of the Plan
by the shareholders of the Bank in accordance with the requirements of the
Superintendent of Banks of the State of California.
3. SIGNATURE ON OPTION AGREEMENT.
The Option cannot be exercised unless the Optionee executes this
Agreement by signature in the place provided below and returns it to the
Secretary of the Bank before the close
<PAGE>
of business on the 90th day after the grant date of this Option. If the
Optionee fails to do so, the Option will terminate and be of no effect.
However, Optionee's execution and delivery of this Agreement will not bind the
Optionee to purchase any of the Shares subject to the Option. Optionee's
obligation to purchase the Shares can arise only when the Option is exercised in
the manner set forth in Section 4 below.
4. EXERCISE OF OPTION.
Subject to the provisions of Section 5 below and this Section 4,
this Option can be exercised by Optionee at any time during a period of sixty
(60) months from the grant date as follows:
(a) The Option may be exercised immediately to the extent of not
more than twenty percent (20%) of the Shares;
(b) After the expiration of twelve (12) months from the grant
date, the Option may be exercised to the extent of not more than forty percent
(40%) of the Shares;
(c) After the expiration of twenty-four (24) months from the
grant date, the Option may be exercised to the extent of not more than sixty
percent (60%) of the Shares;
(d) After the expiration of thirty-six (36) months from the
grant date, the Option may be exercised to the extent of not more than eighty
percent (80%) of the Shares;
(e) After the expiration of forty-eight (48) months from the
grant date, the Option may be exercised to the extent of not more than one
hundred percent (100%) of the Shares.
Any portion of the Option unexercised in whole or part shall
accumulate following its vesting in accordance with the above schedule and may
be exercised by Optionee at any time prior to the expiration of sixty (60)
months from the grant date.
The Option may be exercised by delivering to the Secretary of the
Bank an irrevocable written notice of exercise which shall identify this
Agreement and specify the number of Shares as to which the Agreement is being
exercised, together with (i) payment therefor (including the amount of any tax
due upon exercise) in cash, certified check, official bank check, or the
equivalent thereof acceptable to the Bank, (ii) delivery of other shares of
Common Stock owned by the Optionee and having a fair market value on the date of
surrender not less than the sum of the aggregate exercise price of the Shares as
to which the Option shall be exercised and the amount of any tax required to be
withheld, (iii) delivery of an election to the Bank to withhold a sufficient
number of Shares from the Shares otherwise due upon exercise of the Option
having an aggregate fair market value on the date of exercise not less than the
sum of the exercise price and the amount of any tax required to be withheld,
(iv) any combination of payment or delivery in accordance with (i) through
(iii), or (v) any other consideration or method of payment for the issuance of
Shares permitted under applicable law.
2
<PAGE>
The Option may also be exercised by means of broker-dealer sale
and remittance procedures which are set forth in subarticle 5(d) of the Plan.
5. TERMINATION OF OFFICE OR EMPLOYMENT.
(a) If Optionee's status as a director of the Bank is terminated
for any reason other than death or permanent and total disability or cause, the
Option may be exercised within three (3) months from the date of such
termination to the extent Optionee shall be entitled to exercise the Option on
the date of termination, but in no event may the Option be exercised after the
expiration of its term specified in Section 4 hereof.
(b) If Optionee is removed as a director of the Bank for "cause"
as defined in the Plan, the Option shall expire at the time notice or advice of
such removal or termination is dispatched by the Bank or an order of removal or
termination is issued by a court or regulatory authority having jurisdiction
thereof, and notwithstanding anything else herein to the contrary, neither
Optionee nor Optionee's estate shall be entitled to exercise the Option after
such removal or termination.
(c) If Optionee dies or becomes permanently and totally disabled
while acting as a director of the Bank, the Option may be exercised in whole or
in part within twelve (12) months from the date of death or permanent and total
disability to the extent that Optionee shall have the right to exercise the
Option on the date of death or permanent and total disability, by Optionee or
Optionee's qualified representative (in the event of mental disability) or by
the duly authorized executor of Optionee's will or by the duly authorized
administrator or special administrator of Optionee's estate (in the event of
death). In no event may the Option be exercised after the expiration of its
term specified in Section 4.
Permanent and total disability shall be deemed to exist only if
the Optionee is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months. Optionee shall not be considered
to be permanently and totally disabled unless Optionee furnishes proof of the
existence thereof in such form and manner, and at such times, as required by the
Committee pursuant to applicable regulation of the Secretary of the Treasury.
6. NONTRANSFERABILITY OF OPTION.
The Option shall not be transferable except by will or the laws
of descent and distribution, and may be exercised during Optionee's lifetime
only by Optionee or (if Optionee shall be mentally disabled) by Optionee's
qualified representative. Any purported transfer or assignment of the Option
shall be void and of no effect, and shall give the Bank the right to terminate
the Option as of the date of such purported transfer or assignment.
7. ADJUSTMENT OF AND CHANGES IN THE SHARES.
(a) In the event the shares of Common Stock of the Bank, as
presently
3
<PAGE>
constituted, shall be changed into or exchanged for a different number or kind
of shares of stock or other securities of the Bank or of another corporation
(whether by reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split, split-up, combination of shares, or otherwise),
or if the number of shares of Common Stock of the Bank shall be increased
through the payment of a stock dividend, the Committee (to the extent that the
Option is unexercised as of the date of such change or exchange) shall
substitute for or add to each share of Common Stock of the Bank subject to the
Option the number and kind of shares of stock or other securities into which
each outstanding share of Common Stock of the Bank shall be so changed, or for
which each share shall be exchanged, or to which each such share shall be
entitled, as the case may be. Such adjustment shall be made without change in
the total price to the unexercised portion of the Option and with a
corresponding adjustment in the Option Price per share.
(b) In the event of (i) a sale, dissolution or liquidation of the
Bank, (ii) a merger or consolidation in which the Bank is not the surviving or
resulting corporation, or (iii) the acquisition by any company, person or group
(whether by a single acquisition or a series of acquisitions) of twenty percent
(20%) or more of the outstanding shares of Common Stock of the Bank (or shares
of stock or other securities which shall be substituted for such shares or to
which such shares shall be adjusted as provided in subarticle (a) above)(a
"Change of Control"), the Committee shall have the power to cause the
termination of every option outstanding hereunder, except that the surviving or
resulting corporation may, in its absolute and uncontrolled discretion, tender
an option or options to purchase its shares on its terms and conditions, both as
to the number of shares and otherwise; provided, however, that in all events the
optionee shall have the right, during a reasonable period of time as determined
by the Committee and prior to such sale, dissolution, liquidation, merger or
consolidation or Change of Control, to notification thereof and to exercise the
optionee's option and purchase Shares subject thereto to the extent of any
unexercised portion of the option, regardless of the vesting provisions of the
option. This right of exercise shall be conditioned in each case upon,
respectively, (i) the execution of a final plan of dissolution or liquidation,
or (ii) the execution of a definitive agreement of merger or consolidation, or
(iii) the filing of a notice of change of control of the Bank involving a Change
of Control as defined hereinabove, pursuant to the Change in Bank Control Act of
1978 (or any similar successor statute), and, if required by law in case (i) or
(ii) above, the approval of such plan or agreement by the shareholders of the
Bank.
(c) In the event of an offer by any person or entity to all
shareholders of the Bank to purchase any or all shares of Common Stock of the
Bank, or shares of stock or other securities which shall be substituted for such
shares or to which such shares shall be adjusted as provided in subsection (a)
above, Optionee shall have the right upon the commencement of such offer to
exercise the Option and purchase shares subject thereto regardless of the
vesting provisions of the Option pursuant to section 4 hereof.
(d) No right to purchase fractional shares shall result from any
adjustment of the Option pursuant to this section. In case of any such
adjustment, the Shares subject to the Option shall be rounded down to the
nearest whole Share. Notice of any adjustment shall be given by the Bank to
Optionee and such adjustment (whether or not such notice is given) shall be
effective and binding upon Optionee.
4
<PAGE>
8. RIGHTS AS A SHAREHOLDER.
Optionee shall have no rights as a shareholder of the Bank with
respect to any Shares until the date of the issuance of a stock certificate for
such Shares.
9. TAX WITHHOLDING.
Exercise of the Option shall be subject to tax withholding
pursuant to subarticle 5(e) of the Plan. The Bank otherwise undertakes no
obligation and makes no representation to Optionee regarding the effect on
Optionee of the tax laws of any jurisdiction with respect to the grant or
exercise of the Option. It shall be the obligation of Optionee to obtain tax
advice appropriate to Optionee's circumstances.
10. NOTIFICATION OF SALE.
Optionee, or any person acquiring Shares upon exercise of the
Option on behalf of Optionee, shall notify the Bank not more than five (5) days
after any sale or disposition of such Shares.
TEHAMA COUNTY BANK
By:_______________________________
Agreed to this ____ day of _____________ 19__
__________________________________________________
Signature of Optionee
<PAGE>
(EXHIBIT 10.5(A))
CARDSERVICE INTERNATIONAL INC
MERCHANT SERVICES AGREEMENT
This Agreement (the "Agreement") by and between CARDSERVICE INTERNATIONAL,
INC., a California Corporation (herein "CARDSERVICE"), with its principal
business at 26775 Malibu Hills Road, Agoura Hills, CA 91301 and TEHAMA COUNTY
BANK, a California, (hereinafter "BANK") with its principal business address at
237 South Main Street, Red Bluff, CA 96080, is intended by the Parties to amend
and supersede that agreement between them effective April 17, 1991, as amended
on November 19, 1992, and October 12, 1993, and shall be effective as of July 1,
1994. All provisions of the aforesaid prior agreement between the Parties are
intended to continue to be effective as to any matter occurring before July I,
1994.
RECITALS
WHEREAS, CARDSERVICE is in the business of providing consulting and
business development services to financial institutions which may be delivered
through its own facilities or subcontracted with external vendors.
WHEREAS, CARDSERVICE will function as marketing, business development, and
merchant servicing service for credit card services point of sale equipment, and
other related merchant transactions (those merchants for which CARDSERVICE
provides services, from time to time, under this Agreement shall be referred to
herein as "COVERED MERCHANTS");
WHEREAS, BANK will serve as an acquirer by maintaining and/or obtaining
necessary membership and licensing in VISA U.S.A. INCORPORATED ("VISA") and
MASTERCARD INTERNATIONAL ("MCI") for merchant bankcard clearing; and
WHEREAS, CARDSERVICE will provide BANK with certain services to facilitate
credit card and financial transactions.
NOW, THEREFORE, in consideration of the covenants and conditions herein
contained, the parties agree as follows:
1.0 DEPOSIT ACCOUNTS AND PAYROLL EXPENSE.
CARDSERVICE has established and funded a reserve account (the "Reserve
Account"), in an interest bearing money market deposit account held by BANK.
CARDSERVICE shall have no control over, or access to funds deposited in, said
the Reserve Account.
<PAGE>
1.1 CARDSERVICE shall maintain the Reserve Account at 75 basis points of
the net monthly processing volume for COVERED MERCHANTS; provided that in no
event shall the Reserve Account balance be less than 75 basis points of the
average net monthly processing volume for COVERED MERCHANTS for previous
six-month period. BANK shall release to CARDSERVICE reserve amounts in excess
of the required amount.
1.2 CARDSERVICE agrees to maintain the reserve account, at the balance
level set forth above, throughout the term of this Agreement (including any
renewal term(s)) and for a period of six months following termination of this
agreement, at the end of which six month period BANK shall return to
CARDSERVICE all funds remaining in the Reserve Account, including any accrued
interest.
1.3 BANK has established, from CARDSERVICE'S operating proceeds, a
non-interest bearing demand deposit account (the "Operating Account") in an
initial amount of $10,000. CARDSERVICE shall have no control over, or access to
funds deposited in, the Operating Account.
1.4 BANK shall from time to time reasonably determine the minimum
operating balance required in the Operating Account for the term of this
Agreement (including any renewal terms).
1.5 CARDSERVICE hereby grants BANK a security interest in the Reserve
Account, in all funds in the Reserve Account, all writings evidencing the
account, and all the proceeds of the Reserve Account, to secure CARDSERVICE'S
existing and future obligations to BANK under this agreement CARDSERVICE agrees
to take such actions as may be required, from time to time, to establish and
maintain such security interest as a first lien security interest. For the
purpose of this provision, any failure by CARDSERVICE to indemnify BANK promptly
for losses incurred in connection with credit card transactions generated by
COVERED MERCHANTS or to reimburse BANK for other amounts owed by CARDSERVICE
under this Agreement shall constitute a default by CARDSERVICE. Upon any such
default BANK, shall have all rights and remedies provided by law, including the
right to enforce its security interest by applying all funds in the Reserve
Account to any and all of CARDSERVICE'S indebtedness to BANK.
2.0 SERVICES AND INCOME.
BANK's relationship with CARDSERVICE, through the executed duties and
responsibilities listed herein will provide BANK with:
(a) An expanded geographic marketing area;
(b) Reduced risk in VISA/MasterCard processing; and
(c) Generation of fee income.
CARDSERVICE shall provide the following services for the BANK:
2
<PAGE>
(a) Solicitation of new merchants.
(b) Complete documentation, processing, evaluation and
recommendation of new merchants.
(c) All input necessary to set-up new merchants and then maintain
them on the processing vendors computer system.
(d) Daily loss prevention monitoring of the serviced accounts.
(e) Maintenance of a well trained, readily available, Merchant
Service Department to provide processing, equipment and fraud prevention
assistance to the COVERED MERCHANTS.
The fees collected by Bank from COVERED MERCHANTS pursuant to BANK's
agreement with such Merchants ("Merchant Fees") shall be allocated, used, and
distributed as follows:
2.1 BANK shall retain for itself that portion of the Merchant Fees which
equals 15.0 basis point (.15%) of the net bankcard sales and five cents
($0.05) per Debit transaction for COVERED MERCHANTS. Except for those amounts
identified in sections 1.3, 1.4 and 2.3 of the Agreement. CARDSERVICE shall be
entitled to all remaining funds.
Note: For merchants who have a monthly volume (totaling multiple locations)
in excess of $50,000 and fall below CARDSERVICE's Average Profitability for
BANK; BANK shall refund to CARDSERVICE 5.0 basis points (.05%) of the net
bankcard sales of those merchants after receipt and verification of a written
request submitted by CARDSERVICE.
2.2 Upon request, the funds not needed to maintain the OPERATING ACCOUNT
at the required level will be wired to an account designated by CARDSERVICE.
2.3 BANK shall charge the Operating Account from time to time, amounts
necessary to cover any/all of the following charges attributable to COVERED
MERCHANTS:
(a) All VISA interchange charges, transaction charges, frequency
charges, application fees, dues;
(b) All MCI interchange charges, transaction charges, frequency
charges, application fees, dues;
(c) All third party vendor processing charges, i.e.: FOR, Envoy,
MDI, etc.
(d) Automated Clearing House ("ACH") fees incurred in connection
with the transmittal by BANK of funds to COVERED MERCHANTS;
(e) BANK's payroll expenses of up to $4,000 per month;
(f) All initial and annual third party service provider
registration fees charged
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to BANK by VISA and MCI;
(g) All fines paid by BANK to VISA or MCI resulting from
CARDSERVICE's violation of the bylaws, rules, regulations, and other directives
of VISA or MCI (the "Card Association Rules"): and
(h) Any other "out of pocket" expense directly attributable to the
administration of the BANK's Merchant Servicing Program for COVERED MERCHANTS.
2.4 CARDSERVICE shall hold BANK harmless from and indemnify BANK against
all claims, losses, damages, and liabilities, including attorneys' fees and
other costs of defense, that relate to or result from either the processing of
credit card transactions for COVERED MERCHANTS or any alleged violations by
CARDSERVICE of the Card Association Rules. BANK may reimburse itself for any
such claims, losses, damages, or liabilities by immediately charging the Reserve
Account and/or the Operating Account in the amount of the loss incurred.
3.0 BANK'S OBLIGATIONS.
BANK agrees to the following considerations:
3.1 BANK agrees to perform all requirements as acquirer for COVERED
MERCHANTS.
3.2 BANK agrees that for the term of this agreement, or any extension
thereof, CARDSERVICE shall be the BANK's exclusive outside provider of merchant
credit card marketing and business development services for retail face to face
merchants, and that if at the conclusion of this agreement, it is not renewed
BANK shall allow CARDSERVICE to transfer the COVERED MERCHANTS, to another
institution without any additional consideration, subject to applicable Card
Association Rules; provided, however, that nothing herein shall prohibit BANK
from contracting directly with merchants other than the COVERED MERCHANTS
without the assistance of any third party service provider.
3.3 BANK agrees to maintain and/or obtain appropriate membership in
VISA, MCI and in all other entities required to allow BANK to serve as an
acquirer and to provide CARDSERVICE the authority to participate as a third
party merchant service provider. CARDSERVICE shall reimburse BANK for all costs
incurred by BANK in obtaining and maintaining the necessary memberships in VISA,
MCI, and any similar entity; provided, however, that all such costs, if any,
that are attributable directly and solely to BANK's role as an issuer shall be
borne by BANK. BANK may collect any amounts for which CARDSERVICE is
responsible under this paragraph by charging the Operating Account in the amount
owed by CARDSERVICE.
3.4 BANK shall cooperate with CARDSERVICE to establish a computer to
computer interface through which BANK and the processing vendor, may transmit
information necessary to provide accurate merchant account setup, on-line
merchant information, and daily security reporting. Expenses associated with
setting up this data link will be the responsibility of CARDSERVICE.
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3.5 BANK agrees to provide the settlement services required for COVERED
MERCHANTS using Debit services.
4.0 VISA, MCI RULES AND REGULATIONS.
CARDSERVICE acknowledges that it has received and understands all
applicable Card Association Rules, and agrees to comply fully with such rules,
as they are amended from time to time, including but not limited to the rules
governing third party service providers and the use of card association
trademarks. In the event of any inconsistency between any provisions of the
Agreement and any of the Card Association Rules, the Card Association Rules
shall take precedence and shall apply. CARDSERVICE shall not be liable for the
failure of any merchant of BANK to comply with any Card Association Rules
applicable to that merchant.
4.1 BANK shall control approval and review of all COVERED MERCHANTS,
BANK shall control the establishment of Merchant Fees with respect to VISA and
MCI transactions.
4.2 BANK, VISA, MCI and/or their designees may conduct financial and
procedural audits and/or reviews of CARDSERVICE at any time.
4.3 CARDSERVICE shall make available, within seven business days of any
request by BANK, VISA, MCI, or any other regulatory agency, all records and
documents within CARDSERVICE's control that relate to the merchant services
CARDSERVICE provides to BANK.
4.4 CARDSERVICE has disclosed and will continue to disclose to BANK the
identity and location of all of CARDSERVICE's sales or other business locations.
BANK, VISA, and MCI each shall have the right to inspect any business location
of CARDSERVICE to ensure full compliance with provisions of Agreement and all
applicable Card Association Rules. CARDSERVICE shall reimburse BANK for amounts
BANK pays to VISA or MCI to cover the costs of any such inspection.
4.5 CARDSERVICE acknowledges and agrees that VISA and MCI each is the
owner of its respective trademarks and service marks, and that CARDSERVICE will
not contest the ownership of such marks nor do anything inconsistent with such
ownership. CARDSERVICE agrees that all use of these trademarks and/or service
marks shall conform to standards established and maintained by the Card
Association Rules, and further agrees upon request to supply VISA and/or MCI, as
the case may me, with specimens of all materials bearing these marks produced by
Cardservice pursuant to this Agreement.
4.6 CARDSERVICE understands and agrees that VISA and MCI each has the
right to immediately and without advance notice prohibit CARDSERVICE from
performing any further service or activity relating to any VISA or MCI program,
as applicable should CARDSERVICE be deemed by VISA or MCI to have violated any
of its rules or regulations.
4.7 CARDSERVICE shall not use any of the VISA or MCI trademarks or
service marks on any of the following materials:
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(a) MARKETING MATERIAL. On any marketing material relating to the
merchant program covered by this Agreement including, but not limited to,
business cards and stationery, nor shall CARDSERVICE permit any of its agents to
use any of the VISA or MCI trademarks or service marks.
(b) OTHER MATERIAL. On any other material relating to the merchant
program covered by this Agreement unless BANK is prominently identified by name
and city adjacent to those marks. Such material may not identify CARDSERVICE
unless CARDSERVICE is prominently identified as an agent or representative of
BANK.
(c) USE BY CARDSERVICE AGENTS. CARDSERVICE shall not permit any of
its agents or representatives to use any of the VISA or MCI trademarks or
service marks.
5.0 DAILY RECORDKEEPING BY BANK.
BANK agrees to provide CARDSERVICE with the following records within three
business days after such request is made by CARDSERVICE.
5.1 Gross merchant charges per day per merchant; (VISA/MCI)
5.2 Net VISA/MCI sales per day per merchant on;
(a) All VISA interchange charges.
(b) All MCI interchange charges.
(c) All Chargebacks.
(d) All rejects.
(e) All daily FDR (or other processor) charges.
5.3 Settlement statement to reconcile the funds received from vendor
processor, including computation of BANK fees, and addition to CARDSERVICE's
Reserve Account; and any other pertinent information upon request.
6.0 ADVERTISING.
BANK agrees that CARDSERVICE may use its name in CARDSERVICE's
promotional/advertising material, but only with the advance consent of BANK as
further explained in paragraph 6.l.
6.1 BANK must review and approve in advance all marketing and
solicitation material prepared by CARDSERVICE.
7.0 SUPPLIES AND EQUIPMENT.
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CARDSERVICE agrees to provide its COVERED MERCHANTS with
supplies/equipment.
8.0 LAW AND REGULATIONS.
BANK agrees to comply with all applicable laws and regulations regulating
credit and credit cards.
9.0 ELECTRONIC TICKET CAPTURE AND MERCHANT ACCOUNT APPROVAL.
Through the use of a point of sale terminal, COVERED MERCHANT
VISA/MasterCard sales will be deposited into COVERED MERCHANT bank accounts by
the process of electronic ticket capture.
9.1 BANK agrees to facilitate this deposit by opening the necessary
COVERED MERCHANT account, or by providing deposit service to the COVERED
MERCHANT through use of the Automatic Clearing House (ACH).
9.2 BANK will have the final right to refuse any merchant recommended by
CARDSERVICE.
9.3 Any new client of BANK submitted by CARDSERVICE will complete, to
the satisfaction of BANK all necessary forms and agreements required by BANK,
VISA, and MCI on forms provided by CARDSERVICE for distribution to COVERED
MERCHANTS.
9.4 BANK agrees to release CARDSERVICE, its respective officers,
directors and representatives from all claims, demands, liabilities and damages
resulting from relationships with COVERED MERCHANTS for normal banking services
such as maintaining checking accounts.
10.0 TERM.
This agreement shall be effective as of the execution date hereof by
CARDSERVICE and shall continue in full force for a period equal to the contract
term BANK enters into either with FDR or any other agreed upon processing
vendor. This Agreement will automatically renew for additional periods that
coincide with renewals of the aforementioned processing vendor contract unless
written notice of cancellation is delivered 30 days prior to the expiration of
any renewal periods by either party, provided CARDSERVICE must notify BANK of
the date the current period ends, via certified mail, 90 days prior to the end
of that period.
10.1 Notwithstanding the provisions of Section 10.0 above, BANK may
terminate this Agreement, during the initial term or any renewal term, if
CARDSERVICE fails to comply fully with any applicable Card Association Rules.
In addition, this Agreement will terminate automatically if (a) either VISA,
MCI, or a lawfully recognized regulator prohibits CARDSERVICE from continuing to
provide services; or (b) either VISA or MCI terminates BANK's membership in or
licensing by that card association.
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11.0 NON PERFORMANCE CLAUSE.
CARDSERVICE agrees to perform all of its responsibilities listed herein.
BANK may terminate this Agreement by prevailing in a claim brought against
CARDSERVICE for NON PERFORMANCE in accordance with the ARBITRATION provision set
forth in Section 24 of this Agreement.
12.0 WARRANTY STATEMENT.
CARDSERVICE warrants that in carrying out its obligations hereunder, the
information originated and transmitted to BANK by CARDSERVICE or its
sub-contractors shall be accurate and the services shall be performed with due
care.
13.0 CONFIDENTIALITY.
It is understood that, in the performance of services under this Agreement,
CARDSERVICE may have access to private or confidential information of BANK.
CARDSERVICE shall use its best efforts to keep, and to have its employees and
agents keep, any and all such information confidential and to use such
information only for the purpose of fulfilling the service to be performed under
this Agreement or as otherwise agreed by BANK. CARDSERVICE shall not be
entitled to provide information concerning BANK accounts to third parties
pursuant to an administrative or judicial subpoena, summons, search warrant or
other governmental order, or through informal request of governmental agencies
without first notifying BANK of such order or informal request and providing
BANK adequate time to satisfy any requirements that BANK may have under
applicable laws. BANK agrees to hold confidential and to use only in
conjunction with the services provided under this Agreement, all proprietary
information CARDSERVICE furnishes to BANK which is identified as proprietary.
14.0 REGULATION.
It is understood and agreed to by the parties hereto that the performance
of the services hereunder are or may be subject to regulation of the Federal and
State regulatory agencies, and CARDSERVICE and BANK are each authorized to
submit or furnish to any such agency such reports, information, assurances or
other data as may be required by them under related and applicable laws and
regulations.
15.0 NOTICES.
Any written notice required or permitted to be given by BANK to CARDSERVICE
hereunder shall he addressed to:
CARDSERVICE INTERNATIONAL, INC.
26775 MALIBU HILLS RD.
AGOURA HILLS, CA 91301
and any written notice required or permitted to be given by CARDSERVICE to BANK
under this Agreement shall be addressed to:
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TEHAMA COUNTY BANK
237 SOUTH MAIN STREET
RED BLUFF, CA 96080
16.0 INDEPENDENT CONTRACTOR.
Nothing herein contained shall be construed as constituting a form of any
type of a partnership, joint venture or agency between the parties hereto. The
relationship is intended by the parties as one of independent contractor.
17.0 ASSIGNMENT.
This Agreement shall not be assignable in whole or in part by any of the
parties hereto without the prior written consent of the other parties hereto and
any assignment without such written consent shall be void. However, any of the
parties hereto may assign this Agreement to the successor of its business
through merger, sale of assets or other reorganization.
18.0 AUTHORITY.
Each party of this Agreement hereby represents and warrants to the others
that is has the full right, power and authority to enter into and perform this
Agreement in accordance with all of the terms, provisions, covenants and
conditions hereof, and that the execution and delivery of this Agreement has
been duly authorized by proper corporate action.
19.0 SPECIAL EVENTS.
In the event any of the parties to this Agreement shall cease conducting
business in the ordinary course, become insolvent, make a general assignment for
the benefit of creditors, suffer or permit appointment of a receiver for its
business or assets, or shall avail itself of, or become subject to, any
proceeding under the Federal Bankruptcy Laws or any statute of any state
relating to insolvency or the protection of the rights of creditors, then (at
the option of the other parties hereto), this Agreement shall terminate and be
of no further force and effect, and any property or rights of such other
parties, tangible or intangible, shall forthwith be returned to them.
20.0 FORCE MAJEURE.
Each party hereto will be excused from performance hereunder when and to
the extent that it is prevented from performance by, but not limited to, the
following: computer, utility, or communications breakdown, inability to operate
or obtain services for its equipment, fire and Act of God, or any act of a third
party beyond its control, provided that it takes all steps reasonably practical
and necessary to effect prompt resumption of its respective responsibilities set
forth hereunder in full or in part.
21.0 WAIVER.
Any delay, waiver or omission by any party to this Agreement to exercise
any right or power arising from any breach or default of any other party of any
of the terms, provisions or
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covenants of this Agreement shall not be construed to be a waiver by that party
of any subsequent breach or default of the same or other terms, provisions or
covenants on the part of any other party hereto.
22.0 BENEFIT.
This Agreement shall be binding upon all parties, their officers,
directors, representatives successors and assigns as provided herein.
23.0 ATTORNEY'S FEES.
Should either party hereto be required to seek the services of an attorney
to enforce its rights hereunder, the prevailing party in such action shall be
awarded attorney's fees and other collection fees and legal costs incurred by
that party in connection herewith.
24.0 ARBITRATION.
Any controversy or claim arising out of or relating to this or any related
agreements or default thereunder shall be settled by arbitration with the
Commercial Arbitration Rules of the American Arbitration Association and
judgment upon the award rendered by the Arbitrator(s) may be entered in any
court having jurisdiction thereof.
25.0 LAW.
This Agreement shall be governed in all respects by and construed in
accordance with the laws of the State of California.
26.0 SEVERABILITY.
Should any of the provisions of this Agreement be invalid, such invalidity
shall not affect the validity of the remaining provisions.
27.0 ENTIRE AGREEMENT.
This Agreement constitutes the only agreement between the parties hereto
relating to the subject matter hereof, and all prior negotiations, agreements,
and understandings, whether oral or written, are therefore superseded hereby.
No modification or amendment of this Agreement shall be effective unless and
until set forth in writing and signed by all parties hereto.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by a duly authorized representative on the day and
written below.
TEHAMA COUNTY BANK
NAME: /s/ W.P. Ellison
------------------------------
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TITLE: Vice President
----------------------------
DATE. 7/20/94
----------------------------
CARDSERVICE INTERNATIONAL, INC.
NAME: /s/ David [text illegible]
----------------------------
TITLE: CFO
----------------------------
DATE. 7/19/94
----------------------------
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(EXHIBIT 10.5(B))
CARDSERVICE INTERNATIONAL, INC
LEAD PRINCIPAL MEMBER AGREEMENT
This Agreement (the "Agreement") is effective as of 04/17/91 by and
between CARDSERVICE INTERNATIONAL, INC., a California Corporation (hereinafter
Cardservice) with its principal business at 21122 Erwin St., Woodland Hills, CA
91367 and Tehama County Bank, a California Corporation, with its principal
business address at 237 South Main Street, Red Bluff, CA 96080.
WHEREAS, Cardservice is in the business of providing consulting and
business development services to financial institutions which may be delivered
through its own facilities or subcontracted with external vendors;
WHEREAS, Cardservice will function as marketing, business development, and
merchant servicing service for credit card services point of sale equipment, and
other related merchant transactions;
WHEREAS, Tehama County Bank will serve as a lead principal member
maintaining and/or obtaining VISA/Mastercard licensing for merchant bankcard
clearing; and
WHEREAS, Tehama County Bank will provide Cardservice with certain services
to facilitate credit card and financial transactions.
0.0 Cardservice agrees to establish a reserve account in an
interest-bearing account at Tehama County Bank in an amount equal to 50 basis
points of the initial merchant processing net monthly processing volume or
$25,000; whichever is greater.
0.1 Cardservice agrees to increase the reserve account at a rate of 05
basis points per month until the reserve balance is equal to 100 basis points of
the net monthly processing volume.
0.2 Cardservice agrees to maintain the reserve account for the term of
this agreement; and further agrees to continue the reserve account set forth
above for a period of six months following the expiration of this agreement.
0.3 Cardservice agrees to establish a general account in an
interest-bearing account at Tehama County Bank in an amount of $10,000.
0.4 Cardservice agrees to maintain an operating balance in the general
account for the term of this Agreement.
0.5 Cardservice agrees to reimburse Tehama County Bank on a monthly
basis for payroll expense in an amount set by Tehama County Bank but not to
exceed $2000.
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1.0 Tehama County Bank's relationship with Cardservice through the
executed duties and responsibilities listed herein, will provide Tehama County
Bank with:
(a) An expanded geographic marketing area;
(b) Reduced risk in VISA/Mastercard processing; and
(c) Generation of fee income.
Distribution of the earned fee income is as follows:
1.1 Cardservice authorizes Tehama County Bank to withhold as a
processing fee, income equal to 15 basis points of the net sales for all
deposits processed by Tehama County Bank in its capacity as a lead principal
member.
1.2 Cardservice authorizes Tehama County Bank to deposit the remaining
revenues earned into the general account.
1.3 Cardservice further authorizes Tehama County Bank to charge the
general account for payment of any/all of the following:
(a) All VISA interchange charges, transaction charges, frequency
charges;
(b) All MCI interchange charges, transaction charges, frequency
charges;
(c) All Cardservice vendor processing charges i.e.: FDR, Envoy,
MDI, etc.
1.4 If Tehama County Bank incurs any losses in any one or more bankcard
transactions contemplated by this AGREEMENT, Tehama County Bank SHALL HAVE THE
RIGHT TO IMMEDIATELY REIMBURSE ITSELF FROM THE RESERVE ACCOUNT.
2.0 Tehama County Bank agrees to the following considerations.
2.1 Tehama County Bank agrees to perform all requirements as lead
principal member for Cardservice.
2.2 Tehama County Bank agrees to retain Cardservice to perform marketing
and business development services.
2.3 Tehama County Bank agrees to maintain and/or obtain appropriate
membership in VISA U.S.A., Incorporated (VISA), MCI International (MCI), and in
all other entities required to allow Cardservice the authority to participate as
a card issuing member and/or as a merchant member. All costs, expenses, fees,
and other expenditures incurred by Tehama County Bank in connection with
acquiring and maintaining such membership(s) in good standing shall be
underwritten by Tehama County Bank (this does not apply to vendor processing
fees). This paragraph is applicable only if Tehama County Bank were to
participate as a card issuing member.
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2.4 Tehama County Bank agrees to cooperate with Cardservice to establish
a computer to computer interface through which Tehama County Bank and the
processing vendor, may transmit information necessary to provide accurate
merchant account set up, on-line merchant information, and daily security
reporting.
3.0 VISA, MCI RULES AND REGULATIONS. Tehama County Bank agrees to abide
by and comply with all of the BY-LAWS, Rules, Regulations, and Directives as
they are from time to time published and amended by MCI, VISA, or any other
entity in which Tehama County Bank has membership pursuant to paragraph 2.3
hereinabove. Tehama County Bank shall be fully responsible for any consequences
resulting from a failure of any merchants contracting with Tehama County Bank to
comply with such By-Laws, Rules, Regulations and Directives.
4.0 DAILY RECORD KEEPING BY BANK. Tehama County Bank agrees to provide
Cardservice with the following records within thirty-six (36) hours after such
request is made by Cardservice.
4.1 Gross merchant charges per day per merchant; (VISA/MCI).
4.2 Net VISA/MCI sales per day per merchant on all:
(a) All VISA interchange charges.
(b) All MCI interchange charges.
(c) All vendor processing charges.
(d) All chargebacks.
(e) All rejects.
4.3 Settlement statement to reconcile the funds received from vendor
processor, including computation of Tehama County Bank fees, and addition to
Cardservice's reserve account; and other information upon request.
5.0 ADVERTISING. Tehama County Bank agrees that Cardservice may use its
name in Cardservice's promotional/advertising material with the advance consent
of Tehama County Bank.
6.0 SUPPLIES AND EQUIPMENT. Cardservice agrees to provide its merchants
with supplies/equipment.
7.0 LAWS AND REGULATIONS. Tehama County Bank agrees to comply with all
applicable laws and regulations regulating credit and credit cards.
8.0 ELECTRONIC TICKET CAPTURE. Through the use of a point of sale
terminal, merchant VISA/Mastercard sales will be deposited into merchant bank
accounts by the process of electronic ticket capture.
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8.1 Tehama County Bank agrees to facilitate this deposit by opening the
necessary merchant account, or by providing deposit service to the merchant
through use of the Automatic Clearing House (ACH).
8.2 Tehama County Bank will have the final right to refuse any merchant
recommended by Cardservice.
8.3 Any new client of Tehama County Bank caused by Cardservice will
complete to the satisfaction of Tehama County Bank all necessary forms and
agreements required by Tehama County Bank, VISA, and MCI on forms provided by
Cardservice for distribution to merchants.
8.4 Tehama County Bank agrees to release Cardservice, its respective
officers, directors and representatives from all claims, demands, liabilities
and damages resulting from relationships with merchants for normal banking
services such as maintaining checking accounts.
9.0 TERM. This Agreement shall be effective as of the execution date
hereof by Cardservice and shall continue in full force for a period of five
years. This Agreement will automatically renew for additional five year periods
unless written notice of cancellation is delivered 30 days prior to the
expiration date of any of the renewal periods by either party, provided
Cardservice notifies Tehama County Bank via certified mail 90 days prior to the
expiration of this Agreement of the expiration date.
9.1 NON PERFORMANCE CLAUSE. Cardservice agrees to perform to the best
of its ability all of its responsibilities listed herein. Tehama County Bank
may invoke revocation of this Agreement by prevailing in a claim brought against
Cardservice for NON PERFORMANCE in accordance with the ARBITRATION provision set
forth in Section 22 of this Agreement.
10.0 WARRANTY STATEMENT. Cardservice warrants that in carrying out its
obligations hereunder, the information originated and transmitted to Tehama
County Bank by Cardservice or its sub-contractors shall be accurate and the
services shall be performed with due care.
11.0 CONFIDENTIALITY. It is understood that, in the performance of
services under this Agreement, Cardservice may have access to private or
confidential information of Tehama County Bank. Cardservice shall use its best
efforts to keep, and to have its employees and agents keep, any and all such
information confidential and to use such information only for the purpose of
fulfilling the services to be performed under this Agreement or as otherwise
agreed by merchant. Cardservice shall not be entitled to provide information
concerning Tehama County Bank accounts to third parties pursuant to an
administrative or judicial subpoena, summons, search warrant or other
governmental order, or through informal request of governmental agencies without
first notifying Tehama County Bank of such order of informal request and
providing to Tehama County Bank adequate time to satisfy any requirements that
Tehama County Bank may have under applicable laws. Tehama County Bank agrees to
hold confidential and to use only in connection with the services provided under
this Agreement, all proprietary information Cardservice furnishes to Tehama
County Bank which is identified as proprietary.
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12.0 REGULATION. It is understood and agreed to by the parties hereto
that the performance of said services are or may be subject to regulation of the
Federal and State Regulatory Agencies, and Cardservice and Tehama County Bank
are each authorized to submit or furnish to any such agency such reports,
information, assurances or other data as may be required by them under related
and applicable laws and regulations.
13.0 NOTICES. Any written notice required or permitted to be given by
Tehama County Bank to Cardservice hereunder shall be addressed to:
CARDSERVICE INTERNATIONAL, INC
21122 ERWIN ST.
WOODLAND HILLS, CA 91367
and any written notice required or permitted to be given by CARDSERVICE to
Tehama County Bank under this Agreement shall be addressed to:
Tehama County Bank
237 South Main Street
Red Bluff, CA 96080
14.0 INDEPENDENT CONTRACTOR. Nothing herein contained shall be construed
as constituting a form of any type of a partnership, joint venture or agency
between the parties hereto. The relationship is intended by the parties as one
of independent contractor.
15.0 ASSIGNMENT. This Agreement shall not be assignable in whole or in
part by any of the parties hereto without the prior written consent of the other
parties hereto and any assignment without such written consent shall be void.
However, any of the parties hereto may assign this Agreement to the successor of
its business through merger, sale of assets or other reorganization.
16.0 AUTHORITY. Each party of this Agreement hereby represents and
warrants to the others that it has the full right, power, and authority to enter
into and perform this Agreement in accordance with all of the terms, provisions,
covenants and conditions hereof, and that the execution and delivery of this
Agreement has been duly authorized by proper corporate action.
17.0 SPECIAL EVENTS. In the event any of the parties to this Agreement
shall cease conducting business in the ordinary course, becomes insolvent, makes
a general assignment for the benefit of creditors, suffers or permits the
appointment of a receiver for its business or assets, or shall avail itself of,
or become subject to, any proceeding under the Federal Bankruptcy Laws or any
statute of any state relating to insolvency or the protection of the rights of
creditors, then (at the option of the other parties hereto), this Agreement
shall terminate and be of no further force and effect, and any property or
rights of such other parties, tangible or intangible, shall forthwith be
returned to them.
18.0 FORCE MAJEURE. Each party hereto will be excused from performance
hereunder when and to the extent that it is prevented from performance by, but
not limited to, the following: computer, utility or communications breakdown,
inability to operate or obtain services
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for its equipment, fire, and Act of God, or any act of a third party beyond its
control provided that it takes all steps reasonably practical and necessary to
effect prompt resumption of its respective responsibilities set forth hereunder
in full or in part.
19.0 WAIVER. Any delay, waiver or omission by any party to this
Agreement to exercise any right or power arising from any breach or default of
any other party in any of the terms, provisions or covenants of this Agreement
shall not be construed to be a waiver by that party of any subsequent breach or
default of the same or other terms, provisions of covenants on the part of any
other party hereto.
20.0 BENEFIT. This Agreement shall be binding upon and shall
representatives and successors and assign as provided herein.
21.0 ATTORNEY'S FEES. Should either party hereto be required to seek the
services of an attorney to enforce its rights hereunder, the prevailing party in
such action shall be awarded attorney's fees and other collection fees and legal
costs incurred by that party in connection herewith.
22.0 ARBITRATION. Any controversy or claim arising out of or relating to
this or any related agreements or default thereunder shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association and judgment upon the award rendered by the
Arbitrator(s) may be entered in any court having jurisdiction thereof.
23.0 LAW. This Agreement shall be governed in all respects by and
construed in accordance with the laws of the State of California.
24.0 SEVERABILITY. Should any of the provisions of this Agreement be
invalid, such invalidity shall not affect the validity of the remaining
provisions.
25.0 ENTIRE AGREEMENT. This Agreement constitutes the only agreement
between the parties hereto relating to the subject matter hereof, and all prior
negotiations, agreements, and understanding, whether oral or written, are
therefore superseded hereby. No modification or amendment of this Agreement
shall be effective unless and until set forth in writing and signed by all
parties hereto.
26.0 Tehama County Bank will control approval and review of Merchants.
Tehama County Bank will control the establishment of Merchant Fees with respect
to VISA Transactions.
27.0 This contract shall be terminated in the event that VISA USA
prohibits Cardservice from providing services related to VISA Products in
accordance with Section 9.17G of the VISA Regulation.
28.0 Tehama County Bank, VISA USA and/or their designees may conduct
financial and procedural audits and/or reviews at any time.
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29.0 Records containing Cardholder and Merchant records as requested by
Tehama County Bank, VISA USA, their designees or any, regulatory agency must be
made available as soon as possible but no later than seven business days from
Cardservice's receipt of a request.
30.0 Tehama County Bank shall maintain a file on Cardservice which
includes all applicable documentation. This file shall be retained for a
minimum of two years following discontinuance of the Tehama County
Bank/Cardservice relationship and shall include the reason for discontinuance.
31.0 Tehama County Bank warrants that it and Cardservice will comply with
all the requirements in Section 10.6 and other applicable sections of the VISA
Operating Regulations.
32.0 VISA USA reserves the right to permanently prohibit Cardservice
and/or its principal(s) from providing service with respect to VISA products for
good cause, such as (i) fraudulent activity, (ii) activity which causes Tehama
County Bank to repeatedly violate the VISA USA Operating Regulations,
(iii) operating in an unsound, unsafe manner and/or (iv) any other activities
which may result in undue economic hardship and/or damage to the goodwill of the
VISA system, if Cardservice fails to take corrective action.
33.0 Tehama County Bank shall be responsible for and indemnify and hold
VISA, USA and Mastercard International harmless against any and all claims,
losses, damages or liabilities arising out of Tehama County Bank's use of
Cardservice for Merchant solicitation, sales and service, Merchant Transaction
processing solicitation or Merchant Transaction processing or the Member's use
of the Agent Reference File.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by a duly authorized representative on the day and
written below.
Tehama County Bank
NAME: /s/ D.B. Cargile
TITLE: President
DATE: April 19, 1991
CARDSERVICE INTERNATIONAL, INC.
NAME: /s/ [text illegible]
TITLE: President
DATE: April 17, 1991
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SERVICE AGREEMENT
Agreement dated as of June 3, 1991, between Tehama County Bank, 237 South
Main Street, Red Bluff, California 96080 ("Buyer") and First Data Resources
Inc., 7301 Pacific Street, Omaha, Nebraska 68114 ("FDRI").
W I T N E S S E T H:
WHEREAS, Buyer and FDRI heretofore entered into a Service Agreement dated
as of June 1, 1991 as amended by Amendments to Service Agreement dated June 29,
1992, February 8, 1993, March 15, 1994 and March 15, 1994 (the "Service
Agreement"); and
WHEREAS, Buyer has entered into a Merchant Services Agreement dated as of
March 1, 1994 (the "Sponsor Bank Agreement") with Cardservice International,
Inc., 26775 Malibu Hills Road, Agoura Hills, California 91301 ("CSI") pursuant
to which, INTER ALIA: (i) CSI provides marketing, business development and
merchant servicing for credit card services, point of sale equipment and other
related support services for Buyer, (ii) Buyer serves as an Acquirer as provided
for in the bylaws and operating regulations of MasterCard and VISA, and
(iii) CSI and Buyer have written agreements with Merchants ("Sponsored
Merchants"); and
WHEREAS, Buyer desires to continue to obtain data processing and other
related services in connection with the Sponsored Merchants and those Merchants
with which Buyer has written agreements (the "Nonsponsored Merchants"); and
WHEREAS, FDRI is willing to continue to perform data processing and other
related services in connection with the Sponsored Merchants and the Nonsponsored
Merchants of Buyer in accordance with the terms and conditions of the Service
Agreement, as amended hereinafter; and
NOW, THEREFORE, Buyer and FDRI hereby agree as follows:
ARTICLE 1
SPECIAL TERMS
1.1 DEFINITIONS. The following definitions apply to the terms set forth
below when used in this Agreement:
(a) "Affiliate" means, with respect to Buyer, any Entity which,
directly or indirectly, controls, is controlled by, or is under common
control with Buyer. As used herein, "control" means the power to direct
the management or affairs of an Entity.
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(b) "Buyer's Accounts" means the Cardholder Accounts and Merchant
Accounts issued or established by Buyer or Buyer's Transaction Card
Affiliates.
(c) "Buyer's Issuer Affiliate" means an Affiliate of Buyer that
establishes Cardholder Accounts at any time during the Term of this
Agreement.
(d) "Buyer's Merchant Affiliate" means an Affiliate of Buyer that
establishes Merchant Accounts at any time during the Term of this
Agreement.
(e) "Buyer's Transaction Card Affiliates" means Buyer's Issuer
Affiliates and Buyer's Merchant Affiliates. Buyer shall cause each of
Buyer's Transaction Card Affiliates to execute a document in the form of
Exhibit D indicating such Affiliate's promise to be bound by the terms of
this Agreement.
(f) "Cardholder" means a person or an Entity that has established a
Cardholder Account with an Issuer.
(g) "Cardholder Account" means an agreement between a person or an
Entity and an Issuer which provides for such person or Entity to use one or
more Transaction Cards supplied by such Issuer.
(h) "Deconversion" means the removal of information concerning
Buyer's Accounts from the FDRI System.
(i) "Entity" means a corporation, partnership, sole proprietorship,
joint venture, or other form of organization formed for the conduct of a
business, whether active or passive.
(j) "FDRI System" means the computer equipment, computer software,
supplies and related documentation used at any time by FDRI to provide the
services contemplated by this Agreement.
(k) "Issuer" means a financial institution that supplies a
Transaction Card to a Cardholder.
(l) "Merchant" means a person or an Entity that acquires Transaction
Card Tickets from Cardholders as payment for goods, services or otherwise.
(m) "Merchant Account" means a relationship between a financial
institution and a Merchant which permits a Merchant to deposit Transaction
Card Tickets (whether electronic or paper) which have been acquired by a
Merchant for presentation to and payment by an Issuer.
(n) "Processing Fees" means all fees and charges set forth in
Exhibit "B" with the exception of data circuit charges, postage, courier
and other similar charges described in Exhibit "B," Section I.
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(o) "Processing Year" means the twelve (12) month period commencing
on the first day of Processing Year 1 and on each anniversary of such date
during the Term of this Agreement.
(p) "Term" means the Original Term together with any Renewal Period
or any other extension of this Agreement.
(q) "Transaction Card" means a payment card issued pursuant to a
license from MasterCard International, Inc. ('MasterCard'), VISA U.S.A.
Inc. or VISA International Services Association ('VISA') and other credit
cards, debit cards and private label cards.
(r) "Transaction Card Ticket" means a record created by a Merchant
which evidences the presentation of a Transaction Card to a Merchant as
payment for goods, services or otherwise.
1.2 START-UP. Buyer agrees to assign adequate personnel and resources to
fully support Buyer's responsibilities with respect to the start-up activities,
as set forth in this Agreement. Subject to Buyer's provision of assistance,
FDRI agrees to complete such start-up activities and to begin performing the
services called for in this Agreement in connection with Buyer's Accounts within
three (3) months after the execution of this Agreement, or such later date as
may be mutually agreed upon by FDRI and Buyer.
1.3 ICA/BIN PROCUREMENT. Anything in this Agreement to the contrary
notwithstanding, in the event that Buyer is unable to obtain an ICA and a BIN
Number from MasterCard and VISA on or before October 1, 1991 (the "Start Date"),
then effective upon the Start Date, this Agreement shall be terminated without
further obligation from either party; provided, however, that Buyer agrees to
reimburse FDRI for the full amount of any costs incurred by FDRI in connection
with the start-up services performed by FDRI pursuant to Exhibit "B,"
Section I-e.
ARTICLE 2
SERVICES
2.1 BASIC SERVICES. FDRI shall make available to and perform for Buyer
computer programming, data processing, authorizations, security, embossing and
other services which are applicable to its Sponsored Merchants, Nonsponsored
Merchants and its other merchant related MasterCard International, Inc.
("MasterCard"), VISA U.S.A. Inc. ("VISA") and other credit card, debit card and
private label card ("transaction card") operations which are supported by FDRI.
Such services shall be provided in accordance with the description of services
which is set forth in Exhibit A which is annexed hereto and made a part of this
Agreement.
2.2 COMMUNICATIONS. FDRI shall provide a communication data circuit from
its computer center to Buyer's location(s) for the purpose of establishing a
communications
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connection between FDRI's computer and a video display terminal(s) or Buyer's
computer at Buyer's location(s). The method of transmission and the media
employed will be determined by FDRI and FDRI will take into consideration such
factors as traffic type, inbound and outbound message sizes, traffic loading
distribution, and any other devices Buyer may want to include on the
communications circuit.
In addition to the foregoing, at the request of Buyer, FDRI shall provide a
communications data line from its computer in Omaha, Nebraska to the location of
CardService International ("CI") for the purpose of connection between FDRI's
computer and video display terminal(s) or a computer at CI's location. Buyer
understands that if Buyer requests that FDRI establish and maintain a
communications data line from its computer in Omaha, Nebraska to CI's location,
then CI and its personnel will be able to access, inquire into, change, modify,
delete and add to the Merchant data base (and, if applicable, the Cardholder
database) of Buyer which FDRI maintains and Buyer hereby authorizes all such
access, inquiry, change, modification, deletion and adding to its Merchant data
base (and, if applicable, its Cardholder database) by CI and its personnel.
FDRI shall be entitled to rely on all on-line functions and instructions
performed by CI with respect to Buyer and Buyer's Transaction Card Affiliates
pursuant to this Agreement; provided, however, that FDRI shall follow whatever
limitations are imposed by Buyer and Buyer's Transaction Card Affiliates on CI
by the use of the functions and features available in the FDRI System. FDRI
shall have no responsibility or liability to Buyer or any of Buyer's Transaction
Card Affiliates for any actions of CI. Buyer shall pay all fees and charges
incurred with respect to services rendered by FDRI under this Agreement on
behalf of Buyer and Buyer's Transaction Card Affiliates at the request of CI;
provided, however, that FDRI will not allow CI to add additional services
pursuant to this Agreement without Buyer's written consent.
2.3 NOAH. In order for Buyer and Buyer's Transaction Card Affiliates to
obtain Noah Services as described in Exhibit "A," Buyer shall execute a license
in the form of Exhibit C for the necessary software (the "Noah Software"). The
licenses shall govern the use of the Noah Software by Buyer and Buyer's
Transaction Card Affiliates, including but not limited to any warranties
available to Buyer or Buyer's Transaction Card Affiliates with respect to the
software. Buyer and Buyer's Transaction Card Affiliates shall be responsible,
at their expense, for all computer equipment at Buyer's or Buyer's Transaction
Card Affiliates' location necessary to run the Noah Software and all
communication charges associated with accessing the FDRI computers used to
provide Noah Services. If Buyer's right to license the Noah Software is
terminated because such software infringes upon the copyright, patent, or other
proprietary rights of any party, FDRI shall have the right to terminate the
provision of NOAH Services upon thirty (30) days' notice to Buyer and FDRI shall
have no further liability to Buyer or Buyer's Transaction Card Affiliates with
respect to such terminated services. Within thirty (30) days after the
termination of this Agreement, or the earlier termination of Buyer's license to
use the Noah Software, Buyer and Buyer's Transaction Card Affiliates shall
deliver to FDRI all copies of the relevant software and associated
documentation, together with all separate informational materials provided with
respect to the services, in their possession, custody or control or shall
destroy the same, as directed by FDRI. In addition, an officer of Buyer shall
certify in writing to FDRI that use of the relevant software has been
discontinued.
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2.4 EQUASION APS SERVICES. FDRI shall make available to and perform for
Buyer and Buyer's Transaction Card Affiliates Application Processing Services
and On-Line Credit Bureau Report Request Services using the Equasion-Registered
Trademark- Automated Credit Application Processing System/Bureau Link-Registered
Trademark- ("Equasion APS") in accordance with the description of services set
forth in Section I of Exhibit "A" which is annexed hereto and made a part of
this Agreement. Buyer shall pay FDRI the amounts shown in Exhibit "B" for
Application Processing Services and On-Line Credit Bureau Report Request
Services. Buyer shall indemnify and hold harmless FDRI and its employees from
and against all claims, damages, losses and expenses arising out of FDRI's
performance of Application Processing Services and On-Line Credit Bureau Report
Request Services under this Agreement, to the extent that such claim, damage,
loss or expense is caused by any error, omission or negligence of Buyer,
employees of Buyer or of any other persons or entities who are directly or
indirectly associated with Buyer or who directly or indirectly participate with
Buyer in connection with its operations of a transaction card program as
affiliates, agents or otherwise. Buyer shall have no obligation to indemnify
FDRI against any liability, loss or damage FDRI might suffer arising solely out
of FDRI's negligent performance of Application Processing Services and On-Line
Credit Bureau Report Request Services called for by this Agreement. FDRI will
use due diligence in processing the application materials received from Buyer,
and the performance by FDRI of the Application Processing Services and the
On-Line Credit Bureau Report Request Services called for in this Agreement shall
be consistent with industry standards. Buyer acknowledges that the supplier of
Equasion APS to FDRI is a third party beneficiary to this Agreement. Equasion
is a registered trademark of First Data Resources Inc. Bureau Link is a
registered trademark of American Management Systems, Incorporated.
2.5 AMEXCO SERVICES. FDRI agrees to make available for Buyer and Buyer's
Transaction Card Affiliates Amexco Services in accordance with the terms and
conditions of this Agreement and the Agreement entered into between FDRI and
American Express Travel Related Services Company, Inc., World Financial Center,
American Express Tower, New York, New York 10285 ("Amex") dated July 7, 1987, as
amended (the "Amex Agreement"). The prices for Amexco Services shall be the
same as those set forth herein for Buyer's other Transaction Card operations.
Buyer agrees that, prior to so receiving Amexco Services from FDRI hereunder,
Buyer shall have read the Amex Agreement, and Buyer hereby agrees to comply with
(and to cause all its Transaction Card Affiliates to comply with) all of the
terms and conditions of the Amex Agreement relating to System Users.
Notwithstanding anything in this Agreement to the contrary, Buyer agrees that
FDRI's obligation to provide Amexco Services shall automatically terminate
(without penalty or financial obligation of any type or kind to FDRI) on the
earlier to occur of: (i) the termination of the Amex Agreement or (ii) the
occurrence of any event causing FDRI to terminate Buyer's access to the Amexco
Services. The terms Amexco Services and System Users shall be defined as having
the same meaning as set forth in the Amex Agreement.
2.6 SOLE AND EXCLUSIVE PROVIDER. During the Term of this Agreement, FDRI
shall be the sole and exclusive provider to Buyer and each of Buyer's
Transaction Card Affiliates of all services provided under this Agreement in
connection with Buyer's and each of Buyer's Transaction Card Affiliates,
Sponsored Merchants, Nonsponsored Merchants and its other merchant related
MasterCard and VISA credit and debit card operations ("Buyer's Merchant
Activities"). Neither Buyer, any of Buyer's Transaction Card Affiliates, nor
any third party other
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than FDRI shall perform or provide any services in connection with Buyer's
Merchant Activities for Buyer or any of Buyer's Transaction Card Affiliates.
Notwithstanding the foregoing, Buyer and Buyer's Transaction Card Affiliates
may: (i) utilize the services of a third party for not more than 10% of the
total aggregate volume of Batch Authorization and POS Authorization Inquiries
generated by Merchants of Buyer and Buyer's Transaction Card Affiliates, and
(ii) continue to obtain services from a third party in connection with those
agent bank relationships which Buyer established prior to June 1, 1991.
2.7 ACQUIRING DEBIT SERVICES.
(a) In addition to the above services, FDRI agrees to provide Buyer
and Buyer's Transaction Card Affiliates with Dial-Up Point-of-Sale ("POS")
authorization services and Electronic Ticket Capture ("ETC") services
(collectively, the "Acquiring Debit Services") in connection with the
proprietary debit card networks listed below, which list may be added to or
deleted from in FDRI's sole discretion: Money Access Service, Inc.; New
York Cash Exchange; Yankee 24 (a/k/a New England Network, Inc.); Explore
(a/k/a Star System, Inc.); Maestro; and Interlink (collectively, the
"Network"). In the event that additional debit card networks are added,
the terms and conditions contained herein shall apply automatically without
further amendment hereto. FDRI currently provides the Acquiring Debit
Services in part through a Gateway Access Agreement with Electronic Data
Systems, Inc. ("EDS") and reserves the right to utilize other access
networks or to access directly the Network for purposes of providing the
Acquiring Debit Services. EDS and any alternative network provider shall
be referred to collectively herein as the "Provider."
(b) All Acquiring Debit Services shall be provided in accordance with
the description of services set forth in Section I of Exhibit "A" of this
Agreement. Prices for the Acquiring Debit Services shall be the same as
those charged to Buyer in connection with Buyer's credit card operations,
except as set forth in Section II-a of Exhibit "B." In no event shall FDRI
be responsible for, and Buyer shall indemnify and hold harmless FDRI from
and against, any claims, damages, losses, or expenses resulting from any
failure, negligence, or intentional act or omission on the part of the
Provider, the Network, or any part thereof in connection with the Acquiring
Debit Services, including but not limited to any system downtime or
improper authorization of a transaction. In no event shall FDRI be
responsible for money damages hereunder arising from or related to the
Acquiring Debit Services which exceed: (a) the amount of cash,
merchandise, and/or services erroneously dispensed by Buyer, FDRI, or a
merchant subscribing to merchant processing services with Buyer
("Merchant") through a point of sale device; and/or (ii) the loss of funds
resulting from amounts erroneously transferred to or from an account of
FDRI, Buyer, or Merchant, in each case directly caused by FDRI's failure to
properly service, maintain, program, or operate the Acquiring Debit
Services or any misconduct or negligence on the part of FDRI's officers,
employees, or agents in performing the Acquiring Debit Services. IN NO
EVENT SHALL FDRI BE RESPONSIBLE FOR SPECIAL, INDIRECT, INCIDENTIAL, OR
CONSEQUENTIAL DAMAGES WHICH BUYER OR MERCHANT MAY INCUR OR EXPERIENCE ON
ACCOUNT OF
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ENTERING INTO OR RELYING UPON THIS AGREEMENT, EVEN IF FDRI HAS BEEN ADVISED
OF THE POSSIBLITY OF SUCH DAMAGES.
(c) Notwithstanding anything in this Agreement to the contrary,
FDRI's obligation to provide Acquiring Debit Services shall terminate
automatically without penalty or obligation of any type to FDRI upon the
earlier of: (i) the termination of the Gateway Access Agreement with EDS;
(ii) the termination of FDRI's access to the Network or any part thereof;
or (iii) the termination of Buyer's membership in the Network or any part
thereof. Buyer agrees to comply with all rules, regulations, procedures,
and obligations of each of the entities comprising the Network.
2.8 FDRI shall, with respect to those telephone area codes where such
service is available, perform electronic point-of-sale ("POS") authorization
services on behalf of Buyer and Buyer's Transaction Card Affiliates through
existing POS terminals at Buyer's Merchants' locations by the utilization of a
"950" telephone number which will be provided to Buyer's Merchants (hereinafter
referred to as "950 Access Services"). 950 Access Services shall be performed
in accordance with the description of Dial-Up Point-of-Sale (POS) Inquiries set
forth in Exhibit "A," and per inquiry prices for 950 Access Services shall be
set forth in Exhibit "B." Notwithstanding anything in this Agreement to the
contrary, Buyer agrees that FDRI's obligation to provide 950 Access Services
shall automatically terminate without penalty or financial obligation of any
type or kind to FDRI upon the effective date of the termination of the
relationship, for whatever reason, between FDRI and the third-party vendor
selected by FDRI to provide FDRI and its customers with 950 Access Services. In
the event of such termination, Buyer shall, upon the effective date of such
termination, commence to receive Local Line or WATS Line (whichever is
appropriate) Dial-Up Point-of-Sale Terminal Inquiry services at the then-current
rates in this Agreement for such services.
2.9 AXESS SERVICES. FDRI shall provide Buyer and Buyer's Nonsponsored
Merchants with a Point-of-Sale ("POS") terminal management service software
package (the "Axess Services Package") in connection with Buyer's Merchant
Transaction Card operations. Included in such package, FDRI shall provide Buyer
and its Nonsponsored Merchants with a license to use certain software and the
included documentation (the "Axess Software"). Buyer acknowledges that the
Axess Software will be provided to Buyer and Buyer's Nonsponsored Merchants
under separate license agreements with Buyer and/or its Nonsponsored Merchants
which shall govern Buyer's and its Nonsponsored Merchants' use of the Axess
Software, including but not limited to any warranties available to Buyer and its
Nonsponsored Merchants with respect to the Axess Software. Buyer and its
Nonsponsored Merchants shall be responsible, at their expense, for all computer
equipment at Buyer's and the Nonsponsored Merchants' locations necessary to run
the Axess Software (as specified by FDRI) and all communication charges
associated with using the Axess Services Package. In the event that FDRI's
right to license the Axess Software to Buyer and its Nonsponsored Merchants is
terminated because the Axess Software infringes upon the copyright, patent or
other proprietary rights of any party, FDRI shall have the right to terminate
Buyer's and its Nonsponsored Merchants' use of the Axess Services Package under
this Agreement upon one hundred eighty (180) days' notice to Buyer. Buyer
warrants and represents to FDRI that it will permit the Axess Services Package
to be utilized or accessed by Buyer and its
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Nonsponsored Merchants in its and their internal businesses only by Buyer's and
the Nonsponsored Merchants' own personnel. Within thirty (30) days after the
termination of this Agreement, Buyer shall deliver to FDRI all copies of the
Axess Software (including the associated documentation), together with all
separate informational materials provided to Buyer's Nonsponsored Merchants with
respect to the Axess Services Package, in its Nonsponsored Merchants'
possession, custody or control or shall have the same destroyed, as directed by
FDRI. In addition, an officer of Buyer shall certify in writing to FDRI that
use of the Axess Software by its Nonsponsored Merchants has been discontinued.
2.10 FDR LINKUP SERVICES. In order for Buyer to obtain FDRI LinkUp
Services as described in Exhibit "A," FDRI shall distribute to Buyer cc:Mail
Software and related documentation (collectively, the "cc:Mail Software").
(a) Buyer represents and warrants to FDRI that each will permit the
FDR LinkUp Services to be utilized or accessed in its internal business
only by its own personnel. Each copy of the cc:Mail Software provided to
Buyer may be used by Buyer on a single computer only, and in no event may
Buyer install any cc:Mail product given to Buyer by FDRI on a network
server. Buyer shall not copy the cc:Mail Software except that Buyer may
make archival copies of the cc:Mail Software for the sole purpose of having
a backup copy. Buyer agrees that it will not reverse assemble or reverse
compile the cc:Mail Software Program, nor transfer, sublicense, rent, lease
or assign the cc:Mail Software. The cc:Mail Software is owned by cc:Mail,
Inc., a division of Lotus Development Corporation ("Lotus") and is
protected by United States copyright laws and international treaty
provisions.
(b) Buyer shall be responsible, at its expense, for all computer
equipment at Buyer's locations necessary to use the cc:Mail Software. All
communication charges associated with accessing the FDRI computers and
equipment used to provide FDR LinkUp Services shall be paid by Buyer.
(c) If FDRI's right to distribute the cc:Mail Software is terminated
because the software infringes upon the copyright, patent, or other
proprietary rights of any party or for any other reason, FDRI shall have
the right to terminate the provision of FDR LinkUp Services upon thirty
(30) days' notice to Buyer, or such shorter period of notice as coincides
with the termination of FDRI's right to distribute the software, and FDRI
shall have no further liability to Buyer with respect to the terminated
services.
(d) Within thirty (30) days after the termination of this Agreement,
or the earlier termination of Buyer's right to use the cc:Mail Software,
Buyer shall deliver to FDRI all copies of the relevant software and
associated documentation, together with all separate informational
materials provided with respect to the services or the software, in their
possession, custody or control or shall destroy the same, as directed by
FDRI. In addition, an officer of Buyer shall certify in writing to FDRI
that use of the relevant software has been discontinued and all items have
been returned or destroyed as required in this Section.
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(e) Buyer agrees to indemnify and hold harmless Lotus, its
subsidiaries, affiliates, officers, directors, employees and agents from
and against any and all claims, demands, liability, loss, cost, damage or
expense, including attorneys' fees and costs of settlement, resulting from
or arising out of (i) the failure of Buyer to observe any covenant or
condition set forth in this Section, (ii) the violation by Buyer of any
applicable statute, law or regulation, or (iii) Buyer's use of the FDR
LinkUp Services.
(f) Buyer acknowledges that the cc:Mail Software product is subject
to restrictions and controls imposed under the U.S. Export Administration
Act. Buyer certifies that neither the cc:Mail Software nor any direct
product thereof is being or will be acquired, shipped, transferred or
reexported, directly or indirectly, into any country prohibited under the
Act. RESTRICTED RIGHTS LEGEND. Use, duplication or disclosure by the U.S.
Government is subject to restrictions as set forth in
subparagraph (c)(1)(ii) of the Rights in Technical Data and Computer
Software clause at DFARS 52.227-7013. cc:Mail, Inc., 2141 Landings Drive,
Mountain View, CA 94043.
(g) NEITHER FDRI NOR LOTUS MAKES ANY WARRANTIES, WHETHER ORAL OR
WRITTEN, EXPRESS OR IMPLIED, WITH RESPECT TO THE PRODUCTS OR SERVICES TO BE
PROVIDED HEREUNDER, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. LOTUS DOES NOT
WARRANT THAT THE FUNCTIONS CONTAINED IN THE CC:MAIL SOFTWARE WILL MEET
BUYER'S REQUIREMENTS OR THAT THE OPERATION OF THE SOFTWARE WILL BE
ERROR-FREE, OR THAT DEFECTS IN THE SOFTWARE WILL BE CORRECTED. IN NO EVENT
WILL BUYER HAVE ANY CAUSE OF ACTION AGAINST LOTUS, NOR WILL LOTUS BE LIABLE
TO BUYER FOR ANY LOSSES, DAMAGES, OR ANY ECONOMIC CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS OR SAVINGS), INCIDENTIAL DAMAGES OR PUNITIVE
DAMAGES INCURRED OR SUFFERED BY BUYER EVEN IF LOTUS IS INFORMED OF THEIR
POSSIBLITY.
ARTICLE 3
PAYMENT FOR SERVICES
3.1 FEES AND CHARGES. The Processing Fees for the services to be provided
hereunder are set forth in Exhibit "B." Exhibit "B" also contains current
prices to be charged by FDRI for start-up costs, data circuit charges, postage,
courier and other similar charges as defined in such Exhibit.
3.2 During each Processing Year of the Original Term after Processing Year
4, FDRI shall be allowed to increase any or all of the Processing Fees set forth
in Exhibit "B" by an amount not to exceed the percentage change in the Consumer
Price Index ("CPI") during a period described below; provided, however, that in
no event shall such increase exceed 5% nor be less than 0%. For purposes of
this Section 3.2, the CPI shall be the index compiled by the United
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State Department of Labor's Bureau of Labor Statistics, Consumer Price Index for
All Urban Consumers (CPI-U) having a base of 100 in 1982-84, using that portion
of the index which appears under the caption "Other Goods and Services." The
percentage change in the CPI shall be calculated, and notification given to
Buyer ninety (90) days in advance of the effective date of said increase, by
comparing the CPI using a twelve (12) month period ending three (3) months prior
to notification to Buyer and expressing the increase in said CPI through the
twelve (12) month period as a percentage. If at any time while this Agreement
is in effect, the tariff line rates, WATS lines rates, data circuit charges or
other rates charged to FDRI by the communications common carrier, or postage,
courier and other similar charges are increased, or FDRI obtains communication
or other services by another method, resulting in an increase in the charges to
FDRI for such items, FDRI shall increase proportionately the price Buyer is then
paying FDRI for such charges under this Agreement. Such price change by FDRI
shall be effective on the effective date of the increase to FDRI.
3.3 METHOD OF PAYMENT. To facilitate the payment of Processing Fees and
other fees and charges to FDRI, Buyer will provide FDRI with access to an
account of Buyer's funds, not requiring signature, which FDRI may draw upon to
pay for services provided and charges incurred under the terms of this
Agreement. The detailed records of the transaction types, prices, volumes and
charges represented by the amount drafted on the account of Buyer will be
provided by FDRI to Buyer on a daily or monthly basis according to the nature of
the transaction or charge. FDRI shall be under no obligation to begin
Conversion until such account has been established as provided herein.
ARTICLE 4
MEDIATION
4.1 In the event any dispute, controversy or claim shall arise between the
parties to this Agreement, the parties agree to participate in at least four (4)
hours of mediation in accordance with the Mediation Procedures of United States
Arbitration and Mediation. The parties agree to equally split the costs of
mediation. Mediation shall not be binding upon the parties unless the parties
agree in writing to any settlement arising from such mediation. FDRI shall
continue to provide data processing services under this Agreement during any
mediation and Buyer shall continue to make payments to FDRI in accordance with
this Agreement. The fact that mediation has or may be commenced shall not
impair the exercise of any termination rights in accordance with the provisions
of this Agreement.
ARTICLE 5
INDEMNIFICATION
5.1 BUYER'S INDEMNIFICATION. Buyer and Buyer's Transaction Card
Affiliates, jointly and severally, shall indemnify and hold harmless FDRI and
its employees, agents and affiliates from and against any and all claims,
liabilities, losses and damages (including reasonable attorney fees, expert
witness fees, expenses and costs of settlement) arising out of or with respect
to this
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Agreement, to the extent that such claim, liability, loss or damage is caused
by, relates to or arises out of (a) the negligence of Buyer or Buyer's
Transaction Card Affiliates or (b) the breach by Buyer or Buyer's Transaction
Card Affiliates of any promises or covenants of Buyer or Buyer's Transaction
Card Affiliates set forth in Article 10 of this Agreement, including but not
limited to any amount which FDRI may be called upon to pay under the applicable
rules of VISA or MasterCard organizations with respect to the interchange
obligations of Buyer or Buyer's Transaction Card Affiliates following the
failure of FDRI to receive any Wire Transfer Amount (as defined in Section 10.3)
from Buyer required by Article 10. Buyer and Buyer's Transaction Card
Affiliates shall not have any obligation to indemnify FDRI against any claim,
liability, loss or damage FDRI or its employees, agents or affiliates might
suffer arising solely out of FDRI's negligent performance of any of the services
called for by this Agreement.
5.2 FDRI'S INDEMNIFICATION. FDRI shall indemnify Buyer and Buyer's
Transaction Card Affiliates, and their respective employees and agents against
any and all claims, liabilities, losses or damages (including reasonable
attorney fees, expert witness fees, expenses and costs of settlement arising out
of or with respect to FDRI's performance of any of the services called for in
this Agreement, to the extent that such claim, liability, loss or damage is
caused by the negligent performance of FDRI; provided, that FDRI's obligation to
indemnify Buyer and Buyer's Transaction Card Affiliates and their respective
employees and agents as aforesaid, shall be limited to:
(a) The actual cost of reprocessing to correct any such negligent
performance; and
(b) The additional out of pocket expenses incurred by Buyer and
Buyer's Transaction Card Affiliates as a direct result of such negligent
performance.
5.3 LIMIT ON LIABILITY. FDRI's cumulative liability arising under or with
respect to this Agreement (whether under Section 5.2 of this Agreement or for
breach of any other provisions of this Agreement or otherwise) during any one
Processing Year after Processing Year 3 shall not under any circumstances exceed
the amount of the Processing Fees paid to FDRI pursuant to this Agreement for
services performed in the immediately preceding Processing Year.
5.4 NOTIFICATION. In the event a claim or suit is made or filed against a
party or its employees for which indemnification may be available under this
Agreement, the party against which the claim or suit is made, shall promptly
notify the other party in writing of such claim or suit. The indemnifying party
may then, at its election, decide to defend, compromise, or settle such claim or
suit at its expense. The party claiming indemnification shall provide to the
other party all information, assistance and authority reasonably requested in
order to evaluate such claim or suit and effect such defense, compromise or
settlement. Any claim for indemnification under this Agreement must be made
prior to the earlier of (a) one year after the party claiming indemnification
becomes aware of the event for which indemnification is claimed or (b) one year
after the earlier of the termination of this Agreement or the expiration of the
Term of this Agreement.
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5.5 DISCLAIMER. FDRI SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, EACH OF WHICH IS HEREBY
EXCLUDED BY AGREEMENT OF THE PARTIES.
ARTICLE 6
TERM OF AGREEMENT
6.1 TERM. The Original Term of this Agreement shall continue in effect
for a period of seven (7) Processing Years (Years 4, 5, 6, 7, 8, 9 and 10),
commencing on March 1, 1994 and ending on February 28, 2001. For purposes of
this Agreement, Processing Year 4 shall mean the twelve (12) month period
commencing on March 1, 1994 and ending on February 28, 1995. Each subsequent
Processing Year shall mean a twelve (12) month period commencing on the first
day of March and ending on the last day of February.
6.2 RENEWAL. This Agreement shall automatically be renewed and FDRI shall
provide all services set forth in this Agreement for an additional period of two
(2) Processing Years (the "Renewal Period") and Buyer agrees to pay Processing
Fees which may be increased by up to 7% per Processing Year during such Renewal
Period unless either party gives the other party written notice at least nine
(9) months prior to the termination date of the Original Term of its intention
to not allow this Agreement to be so renewed.
6.3 DECONVERSION. Upon the expiration of the Term of this Agreement or
the earlier termination of this Agreement, Buyer shall pay FDRI, at FDRI's then
current rates, for each activity completed by FDRI in order to accomplish the
Deconversion.
ARTICLE 7
TERMINATION
7.1 TERMINATION BY FDRI. Despite anything to the contrary herein
contained, FDRI, at its option, may terminate this Agreement under the following
circumstances:
(a) If Buyer fails to establish the account required by Section 3.3
within 10 days after receipt of written notice to Buyer of its failure to
establish such account or Buyer thereafter fails to maintain such account
during the Term of this Agreement;
(b) If FDRI is unable to receive payment from Buyer because
sufficient funds are not available in the account established pursuant to
Section 3.3 and Buyer, within twenty-four hours after written notice to
Buyer of such fact, fails to provide sufficient funds in the account to
permit a draft to be honored to pay FDRI;
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(c) Immediately, without further notice, upon the termination of
Buyer's membership in VISA or MasterCard or their successors in interest;
(d) After one hundred twenty (120) days written notice to Buyer after
the expiration or termination of the CSI Agreement (as defined in Section
12.15); provided, however, that FDRI shall not be permitted to exercise its
right pursuant to this paragraph (d) if Buyer maintains at least twenty
thousand (20,000) Nonsponsored Merchants at all times after the expiration
or termination of the CSI Agreement.
ARTICLE 8
CONFIDENTIAL NATURE OF DATA
8.1 BUYER'S PROPRIETARY INFORMATION. FDRI agrees to return to Buyer upon
the expiration or termination of this Agreement and upon written request from
Buyer, all or any requested portion of Buyer's data listed below ("Buyer's
Proprietary Information")"
Cardholder Master Files
Merchant Master Files
Agent Bank Master Files
Computer-Produced Reports (reflecting activity during the period of ninety
(90) days immediately prior to contract termination)
Cardholder Revolving Transaction Files
CIS Memo Files
Buyer agrees to reimburse FDRI for all costs, including postage, of returning
such data.
8.2 FDRI'S PROPRIETARY INFORMATION. Neither Buyer nor Buyer's Transaction
Card Affiliates shall obtain any proprietary rights in the FDRI System and
related materials used in the performance of services under this Agreement,
including but not limited to all applicable copyrights, trade secrets and
patents ("FDRI's Proprietary Information") whether those materials are developed
or purchased specifically for performance of this Agreement or otherwise.
8.3 CONFIDENTIALITY OF AGREEMENT. The terms and conditions of this
Agreement are and shall remain and be kept completely confidential by Buyer and
Buyer's Transaction Card Affiliates, and their employees and agents and shall
not be disclosed to any third party without the prior written consent of FDRI,
provided that Buyer and Buyer's Transaction Card Affiliates may disclose the
terms and conditions of this Agreement to supervisory or regulatory authorities
of Buyer or Buyer's Transaction Card Affiliates upon the written request of such
entity.
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8.4 CONFIDENTIALITY. FDRI, Buyer and Buyer's Transaction Card Affiliates
agree to maintain Buyer's Proprietary Information and FDRI's Proprietary
Information, respectively, in strict confidence. Without limiting the
generality of the foregoing, FDRI, Buyer and Buyer's Transaction Card Affiliates
each agree:
(a) Not to disclose or permit any other person or Entity access to
Buyer's Proprietary Information or FDRI's Proprietary Information, as
appropriate, except that such disclosure or access shall be permitted to an
employee, agent, representative or independent contractor of such party
requiring access to the same in the course of his or her employment or
service;
(b) To ensure that its employees, agents, representatives,
independent contractors and guests are advised of the confidential nature
of Buyer's Proprietary Information and FDRI's Proprietary Information, as
appropriate, and are precluded from taking any action prohibited under this
Article;
(c) Not to alter or remove any identification, copyright or
proprietary rights notice which indicates the ownership of any part of
Buyer's Proprietary Information or FDRI's Proprietary Information, as
appropriate; and
(d) To notify the other promptly and in writing of the circumstances
surrounding any possession, use or knowledge of Buyer's Proprietary
Information or FDRI's Proprietary Information, as appropriate, at any
location or by any person or Entity other than those authorized by this
Agreement.
8.5 RELEASE OF INFORMATION. Despite the foregoing Buyer agrees that
Buyer's Proprietary Information may be made available to VISA, MasterCard or
supervisory or regulatory authorities of Buyer or Buyer's Transaction Card
Affiliates upon the written request of such Entity, provided that FDRI delivers
to Buyer a copy of all such data or information.
8.6 EXCLUSIONS. Nothing in this Article 8 shall restrict either party
with respect to information or data identical or similar to that contained in
Buyer's Proprietary Information or FDRI's Proprietary Information, as
appropriate, but which (a) that party rightfully possessed before it received
such information from the other as evidenced by written documentation;
(b) subsequently becomes publicly available through no fault of that party;
(c) is subsequently furnished rightfully to that party by a third party without
restrictions on use or disclosure; or (d) is required to be disclosed by law,
provided that the disclosing party will exercise reasonable efforts to notify
the other party prior to disclosure.
8.7 REMEDY. Buyer, Buyer's Transaction Card Affiliates and FDRI agree
that if any of them, their officers, employees or anyone obtaining access to the
proprietary information of the other party by, through or under them, breaches
any provision of this Article 8, the non-breaching party shall be entitled to an
accounting and repayment of all profits, compensation, commissions,
remunerations and benefits which the breaching party, its officers or employees
directly or indirectly realize and/or may realize as a result of, growing out
of, or in connection with any such
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breach. In addition to, and not in limitation of the foregoing, in the event of
any breach of this Article 8, the parties agree that the non-breaching party
would suffer irreparable harm and the total amount of monetary damages for any
injury to the non-breaching party from any violation of this Article 8 would be
impossible to calculate and would therefore be an inadequate remedy.
Accordingly, the parties agree that the non-breaching party shall be entitled to
temporary and permanent injunctive relief against the breaching party, its
officers or employees and such other rights and remedies to which the
non-breaching party may be entitled to at law, in equity and under this
Agreement for any violation of this Article 8. The provisions of this Article 8
shall survive the expiration or termination of this Agreement.
ARTICLE 9
REPRESENTATIONS
9.1 FDRI'S REPRESENTATIONS. FDRI represents and warrants that (a) it is a
corporation validly organized and existing under the laws of the State of
Delaware; (b) it has full power and authority under its organizational documents
and the laws of the State of Delaware to execute and deliver this Agreement and
to perform its obligations hereunder; (c) it has by proper action duly
authorized the execution and delivery of this Agreement and when validly
executed and delivered this Agreement shall constitute a legal, valid and
binding Agreement of FDRI enforceable in accordance with its terms; and (d) the
execution and delivery of this Agreement and the consummation of the transaction
herein contemplated does not conflict in any material respect with or constitute
a material breach or material default under its organizational documents or
under the terms and conditions of any documents, agreements or other writings to
which it is a party.
9.2 BUYER'S REPRESENTATIONS. Buyer represents and warrants that (a) it is
a corporation validly organized and existing under the laws of the State of
California; (b) it has full power and authority under its organizational
documents and the laws of the State of California to execute and deliver this
Agreement and to perform its obligations hereunder; (c) it has by proper action
duly authorized the execution and delivery of this Agreement and when validly
executed and delivered this Agreement shall constitute a legal, valid and
binding agreement of Buyer enforceable in accordance with its terms; and (d) the
execution and delivery of this Agreement and the consummation of the transaction
herein contemplated does not conflict in any material respect with or constitute
a material breach or material default under its organizational documents or
under the terms and conditions of any documents, agreements or other writings to
which it is a party.
ARTICLE 10
TRANSACTION SETTLEMENT
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10.1 NET SETTLEMENT. In order for FDRI to provide its services to Buyer
and Buyer's Transaction Card Affiliates pursuant to this Agreement, it is
necessary for FDRI to handle and settle MasterCard and VISA interchange
transactions for Buyer and Buyer's Transaction Card Affiliates through the
international interchange networks of MasterCard and VISA. Buyer and Buyer's
Transaction Card Affiliates understand that FDRI handles the interchange
transactions with MasterCard and VISA for all of its clients including Buyer and
Buyer's Transaction Card Affiliates on a net settlement basis (the "Net
Settlement System"). To facilitate the Net Settlement System, FDRI has
established, will establish or will direct Buyer to establish one or more
interchange settlement Central Clearing Trust Accounts (collectively the
"Account") at one or more banks. At FDRI's option, the Account will be set up
to permit FDRI to draw upon the Account, without requirement of a signature, in
order to receive payment. FDRI reserves the right, in its sole discretion, to
designate and change the bank or banks at which the account is located.
10.2 DEFINITIONS. The following definitions shall apply to this Article
10:
(a) "Net Settlement Amount" shall mean with respect to Buyer and
Buyer's Transaction Card Affiliates for each business day the net dollar
amount of all (i) transactions processed for Buyer and Buyer's Transaction
Card Affiliates for such day determined in accordance with the applicable
rules of MasterCard, VISA and the Net Settlement System, (ii) interchange
fees and expenses relating to Buyer and Buyer's Transaction Card Affiliates
and (iii) Account expenses such as but not limited to overdraft charges,
activity charges, wire transfer fees and other such charges relating to
Buyer and Buyer's Transaction Card Affiliates.
(b) "Net Settlement System Procedures" shall mean the training
materials, documents, settlement manual, policies and procedures adopted by
FDRI to provide for the fair and efficient settlement of interchange
transactions with MasterCard and VISA and of transactions between and among
FDRI customers.
10.3 TRANSFER OF FUNDS. FDRI shall calculate and inform Buyer on each
business day of the amount of funds to be transferred (the "Wire Transfer
Amount") as the result of (a) current transaction processing and (b) funding
required for incoming transactions. If the Wire Transfer Amount is negative,
Buyer must, prior to the close of business of the Federal Reserve System in New
York on such business day, transfer to the Account immediately available funds
in an amount equal to the Wire Transfer Amount or at FDRI's option permit FDRI
to draft on the Account, without signature. If the Wire Transfer Amount is
positive, FDRI will transfer to Buyer, or will cause MasterCard or VISA to
transfer to Buyer, immediately available funds equal to the Wire Transfer Amount
prior to the close of business of the Federal Reserve System in New York on such
date.
10.4 WIRE TRANSFER AMOUNT. The Wire Transfer Amount shall equal (a) the
Net Settlement Amount for Buyer and Buyer's Transaction Card Affiliates plus
(b) the amount necessary to fund incoming interchange transactions not yet
processed, determined in accordance with the Net Settlement System Procedures,
minus (c) the amount previously advanced by Buyer
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with respect to prior incoming interchange transactions for which processing is
complete. Special procedures shall be used to determine the Wire Transfer
Amount on days immediately preceding and following days on which the Buyer or
the Federal Reserve System is closed. On the day preceding a closing of Buyer
the amount necessary to fund incoming interchange transactions is increased in
accordance with Net Settlement System Procedures so that incoming transactions
can be paid for while Buyer is closed and FDRI and the Federal Reserve System
are open. When Buyer reopens for business an additional Net Settlement Amount
will be reflected for the day on which Buyer was closed and the Wire Transfer
Amount will be appropriately adjusted in accordance with the Net Settlement
System Procedures. On the day following a day on which the Federal Reserve
System is closed but FDRI and the MasterCard and VISA interchange networks are
open, an additional Net Settlement Amount will be reflected for Buyer but no
increase in funding for incoming interchange transactions will be required from
Buyer.
10.5 FAILURE TO TRANSFER. In the event that Buyer fails on any business
day when required by the terms of this Agreement, to transfer a Wire Transfer
Amount to the Account, or make available funds equal to the Wire Transfer Amount
for FDRI to draw upon, as applicable, FDRI may refuse to discharge any
additional VISA or MasterCard interchange obligations of Buyer and Buyer's
Transaction Card Affiliates and shall have the right to immediately notify
MasterCard and VISA that it will no longer cause the MasterCard or VISA
interchange obligations of Buyer and Buyer's Transaction Card Affiliates to be
discharged. In addition to the foregoing, FDRI may take such actions with
respect to Buyer's obligations under the Net Settlement System as FDRI deems
reasonable to protect FDRI or its customers from any loss arising from Buyer's
non-payment of the Wire Transfer Amount.
10.6 LATE PAYMENT FEE. In addition to any other provisions herein, in the
event of Buyer's failure to pay the Wire Transfer Amount for any business day,
Buyer shall pay to FDRI a late payment fee (the "Late Payment Fee") which shall
be equal to the amount Buyer and Buyer's Transaction Card Affiliates would have
been required to pay as a late payment fee under MasterCard and VISA rules.
Such amount shall be calculated in accordance with such rules and shall continue
to accrue until FDRI shall have received the Wire Transfer Amount from Buyer.
Late Payment Fees shall be paid to FDRI based upon such rules even though FDRI
may have elected to make settlement with MasterCard or VISA in a timely manner
on behalf of Buyer and Buyer's Transaction Card Affiliates.
10.7 NO INDEPENDENT OBLIGATION. The obligation of FDRI to discharge any
VISA or MasterCard interchange obligations of Buyer and Buyer's Transaction Card
Affiliates shall be solely as an agent of Buyer and Buyer's Transaction Card
Affiliates in accordance with the terms and provisions of this Agreement and
FDRI shall have no independent obligation with respect to the discharge of such
interchange obligations.
10.8 VIOLATION OF RULES. In the event that MasterCard or VISA shall notify
FDRI of any violation, relating to Buyer or Buyer's Transaction Card Affiliates
or transactions processed for Buyer or Buyer's Transaction Card Affiliates, of
the rules and regulations of MasterCard or VISA, FDRI shall have the right to
terminate settlement of transactions for Buyer and Buyer's
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Transaction Card Affiliates under this Agreement until such time as FDRI shall
have been notified by MasterCard or VISA that such violation has been corrected.
ARTICLE 11
TAXES
11.1 PAYMENT OF TAXES. Buyer shall, in addition to the other amounts
payable under this Agreement, pay all taxes, federal, state or otherwise, or
duties, imposts, fees or charges, however designated, which are levied or
imposed by any governmental authority by reason of the sale or license of any
services, communication equipment, software or other goods and products covered
by this Agreement. Without limiting the foregoing, Buyer shall promptly pay to
FDRI an amount equal to any such items actually paid or required to be collected
or paid by FDRI.
11.2 CALCULATION OF TAXES. Buyer hereby authorizes FDRI to calculate the
total amount of sales taxes due by Buyer from the monies due FDRI and remit said
amount of sales taxes to the appropriate taxing authority on Buyer's behalf.
FDRI's remittance of the sales taxes referred to in this paragraph on Buyer's
behalf shall be computed by FDRI on the best information available. In the
event of error, Buyer shall be responsible for any additional monies deemed to
be due and for collecting any refunds Buyer deems it is due from the appropriate
taxing authority.
11.3 TAX INFORMATION. Prior to FDRI making the sales tax remittance on
Buyer's behalf as provided herein, Buyer agrees to supply FDRI with any and all
current information necessary for FDRI to compute and remit such taxes,
including but not limited to, tax exempt certificate, tax exempt claim letter,
or evidence satisfactory to FDRI authenticating said exemption. At the time of
the execution of this Agreement, Buyer's Tax Identification Number is 68-0008340
and if Buyer has a sales tax exemption, Buyer's Sales Tax Exemption Number is
_______________.
ARTICLE 12
GENERAL
12.1 ASSIGNMENT. Except as otherwise provided herein, the rights and
obligations of Buyer and Buyer's Transaction Card Affiliates under this
Agreement are personal and not assignable, either voluntarily or by operation of
law, without the prior written consent of FDRI. The transfer of control of
Buyer or of a majority of the outstanding capital stock of Buyer, the sale of
substantially all of the assets of Buyer or the merger of Buyer with another
corporation shall each constitute an assignment for purposes of this Section.
Subject to the foregoing, all provisions contained in this Agreement shall
extend to and be binding upon the parties hereto or their respective successors
and permitted assigns.
12.2 RELATIONSHIP OF PARTIES. Nothing contained in this Agreement shall be
deemed or construed by the parties hereto, or by any third party, to create the
relationship of partnership or joint venture between the parties hereto, it
being understood and agreed that neither the method of computing compensation
nor any other provision contained herein shall be deemed to create any
relationship between the parties hereto other than the relationship of
independent parties
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contracting for services and for purposes of interchange settlement only, the
relationship of principal and agent as set forth in Section 10.7. Neither party
to this Agreement has, and shall not hold itself out as having, any authority to
enter into any contract or create any obligation or liability on behalf of, in
the name of, or binding upon the other party to this Agreement.
12.3 SETOFF. FDRI reserves the right to withhold or setoff any amount due
and owing to FDRI under this Agreement from or against any sums which are owed
to Buyer or Buyer's Transaction Card Affiliates or held by FDRI on behalf of
Buyer or Buyer's Transaction Card Affiliates.
12.4 THIRD PARTY BENEFICIARIES. This Agreement is entered into solely for
the benefit of FDRI, Buyer and Buyer's Transaction Card Affiliates, and shall
not confer any rights upon any person or Entity not a party to this Agreement,
including but not limited to any customers or agents of Buyer, MasterCard or
VISA.
12.5 STATE LAW. This Agreement shall be governed by the laws of the State
of Nebraska as to all matters, including, but not limited to matters of
validity, construction, effect, performance and remedies without giving effect
to the principles of choice of law thereof. With respect to any claim arising
out of this Agreement, (a) each party irrevocably submits to the exclusive
jurisdiction of the courts of the State of Nebraska and the United States
District Court located in the City of Omaha, Nebraska, and (b) each party
irrevocably waives any objection which it may have at any time to the venue of
any suit, action or proceeding arising out of or relating to this Agreement
brought in any such court and irrevocably waives any claim such suit, action or
proceeding is brought in an inconvenient forum and further irrevocably waives
the right to object, with respect to such claim, suit, action or proceeding
brought in any such court, that such court does not have jurisdiction over such
party. For purposes of any such action or proceeding each party agrees that any
process to be served in connection therewith shall, if delivered, sent or mailed
in accordance with Section 12.6, constitute, good proper and sufficient service
thereof.
12.6 NOTICE. All notices which either party may be required or desire to
give to the other party shall be in writing and shall be given by personal
service, telecopy, registered mail or certified mail (or its equivalent) to the
other party at its respective address or telecopy telephone number set forth
below. Mailed notices shall be deemed to be given upon actual receipt by the
party to be notified. Notices delivered by telecopy shall be confirmed in
writing by overnight courier and shall be deemed to be given upon actual receipt
by the party to be notified.
If to FDRI:
First Data Resources Inc.
10825 Farnam Drive
Omaha, Nebraska 68154
Attn: President, Transaction Services Division
Telecopy Number: (402) 399-7025
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With a copy to:
First Data Resources Inc.
10825 Farnam Drive
Omaha, Nebraska 68154
Attn: General Corporate Counsel
Telecopy Number: (402) 399-7700
If to Buyer:
Tehama County Bank
P.O. Box 890
Red Bluff, CA 96080
Attn: Bill Ellison
Telecopy Number: (916) 529-0908
A party may change its address or addresses set forth above by giving the other
party notice of such change in accordance with the provisions of this section.
In the event FDRI provides notice hereunder to Buyer of any default by Buyer in
the performance of the provisions of this Agreement, which default could result
in the termination of this Agreement, FDRI may, at its option, deliver a copy of
such notice to any of Buyer's Transaction Card Affiliates receiving services
under this Agreement.
12.7 HEADINGS. The section headings in this Agreement are solely for
convenience and shall not be considered in its interpretation. The recitals set
forth on the first page of this Agreement are incorporated into the body of the
Agreement. The Exhibits referred to throughout this Agreement are attached to
this Agreement and are incorporated into this Agreement. Unless the context
clearly indicates, words used in the singular include the plural and words in
the plural include the singular.
12.8 WAIVER. The failure of either party at any time to require
performance by the other party of any provision of this Agreement shall not
affect in any way the full right to require such performance at any subsequent
time; nor shall the waiver by either party of a breach of any provision of this
Agreement be taken or held to be a waiver of the provision itself.
12.9 FORCE MAJEURE. If performance by FDRI of any service or obligation
under this Agreement, including Conversion, is prevented, restricted, delayed or
interfered with by reason of labor disputes, strikes, acts of God, floods,
lightning, severe weather, shortages of materials, rationing, utility or
communication failures, earthquakes, war, revolution, civil commotion, acts of
public enemies, blockade, embargo, or any law, order, proclamation, regulation,
ordinance, demand or requirement having legal effect of any government or any
judicial authority or representative of any such government, or any other act
whatsoever, whether similar or dissimilar to those referred to in this clause,
which are beyond the reasonable control of FDRI, then FDRI shall be excused from
such performance to the extent of such prevention, restriction, delay or
interference.
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12.10 SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable for any reason, such invalidity shall not affect the validity of
the remaining provisions of this Agreement, and the parties shall substitute for
the invalid provisions a valid provision which most closely approximates the
intent and economic effect of the invalid provision.
12.11 DISASTER RECOVERY. FDRI has created a disaster recovery plan (the
"Disaster Recovery Plan"). FDRI shall provide Buyer with a written copy of an
executive summary of such Disaster Recovery Plan if Buyer requests such plan in
writing. Despite the foregoing, FDRI reserves the right to change such Disaster
Recovery Plan from time to time during the Term of this Agreement with or
without notice to Buyer. Any such change shall not degrade the quality of the
Disaster Recovery Plan in a manner which has a material, adverse impact on the
services provided hereunder.
12.12 AUDIT. From time to time during the Term of this Agreement, FDRI
will allow a third party to perform an audit of the electronic data processing
environment maintained by FDRI to provide the services contemplated under this
Agreement. FDRI shall provide Buyer with a copy of the results of such audit if
Buyer requests a copy in writing.
12.13 ISO/THIRD PARTY AGENT COMPLIANCE. Buyer hereby agrees that if,
during the term of this Agreement, Buyer establishes any relationship with an
independent sales organization (ISO) or third party agent which performs any
merchant solicitation, sales or service or any similar services, then Buyer
shall notify FDRI, in writing, of the existence of such relationships. Buyer
agrees that it will comply with all VISA and MasterCard rules and regulations
relating to such ISOs and third party agents and will cause its ISOs and third
party agents to register and comply with all VISA and MasterCard rules and
regulations. If Buyer terminates its relationship with any such ISO or third
party agent, then Buyer shall immediately notify FDRI in writing of the
termination of such relationship.
12.14 ENTIRE AGREEMENT. This Agreement, including Exhibits, sets forth
all of the promises, agreements, conditions and understandings between the
parties respecting the subject matter hereof and supersedes all negotiations,
conversations, discussions, correspondence, memorandums and agreements between
the parties concerning such subject matter. This Agreement may not be modified
except by a writing signed by authorized representatives of both parties to this
Agreement.
12.15 OBLIGATIONS OF BUYER. Buyer and Buyer's Transaction Card Affiliates
hereby agree that if CSI fails to make any payments which are owed by CSI to
FDRI pursuant to the Service Agreement between CSI and FDRI dated as of March 1,
1994 (the "CSI Agreement") which are associated with the basic services set
forth in Section 1.1 performed by FDRI in connection with Buyer's or Buyer's
Transaction Card Affiliates' Sponsored Merchants, then Buyer or Buyer's
Transaction Card Affiliates shall make such payments to FDRI. In addition, if
any such payments are owed to FDRI by CSI, then FDRI, at its option, may reduce
the Wire Transfer Amount paid by FDRI to Buyer by the payments which are owed to
FDRI by CSI pursuant to Section 10.3 which are associated with the services
performed by FDRI in connection with the CSI Agreement.
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12.16 PURPOSE OF THIS AGREEMENT. Buyer and Buyer's Transaction Card
Affiliates hereby agree that the services to be performed by FDRI pursuant to
this Agreement are to be associated with (a) Sponsored Merchants and/or
(b) Nonsponsored Merchants in connection with Buyer's and Buyer's Transaction
Card Affiliates' Transaction Card businesses and that nothing in this Agreement
shall require FDRI to perform any services for Buyer or Buyer's Transaction Card
Affiliates pursuant to any other oral or written agreement Buyer or Buyer's
Transaction Card Affiliates may have with any Entities which provide services
that are similar to those which CSI is providing to Buyer and Buyer's
Transaction Card Affiliates pursuant to the Sponsor Bank Agreement.
IN WITNESS WHEREOF, the parties to this Agreement have caused it to be
executed by their duty authorized officers as of the day and year first written
above. This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
FIRST DATA RESOURCES INC.
By: /s/ Timothy L. Placzik
------------------------------------
ATTEST: /s/ Rosemary T. Gallagher Title: SVP
---------------------------- ---------------------------------
TEHAMA COUNTY BANK
By: /s/ D.B. Cargile
------------------------------------
ATTEST: Title: Daniel B. Cargile, President/CEO
---------------------------- ---------------------------------
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(EXHIBIT 10.7(A))
EXECUTIVE SALARY CONTINUATION AGREEMENT
This Agreement is made and entered into this 17 day of June, 1993, by and
between Tehama County Bank, a corporation organized under the laws of the State
of California (the "Employer"), and Daniel B. Cargile, an individual residing in
the State of California (hereinafter referred to as the "Executive").
R E C I T A L S
WHEREAS, the Executive is an employee of the Employer and is serving
as its President and Chief Executive Officer;
WHEREAS, the Executive's experience and knowledge of the affairs of
the Employer and the banking industry are extensive and valuable;
WHEREAS, it is deemed to be in the best interests of the Employer to
provide the Executive with certain salary continuation benefits, on the terms
and conditions set forth herein, in order to reasonably induce the Executive to
remain in the Employer's employment; and
WHEREAS, the Executive and the Employer wish to specify in writing the
terms and conditions upon which this additional compensatory incentive will be
provided to the Executive, or to the Executive's spouse or the Executive's
designated beneficiaries, as the case may be;
NOW, THEREFORE, in consideration of the services to be performed in
the future, as well as the mutual promises and covenants contained herein, the
Executive and the Employer agree as follows:
A G R E E M E N T
1. TERMS AND DEFINITIONS.
1.1. ADMINISTRATOR. The Employer shall be the "Administrator"
and, solely for the purposes of ERISA, the "fiduciary" of this Agreement where a
fiduciary is required by ERISA.
1.2. ANNUAL BENEFIT. The term "Annual Benefit" shall mean an
annual sum of Twenty-Five Thousand Dollars ($25,000) multiplied by the
Applicable Percentage (defined below) and then reduced to the extent: (i)
required under the other provisions of this Agreement, including, but not
limited to, Paragraphs 5, 6 and 7 hereof; (ii) required by reason of
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the lawful order of any regulatory agency or body having jurisdiction over the
Employer; and (iii) required in order for the Employer to properly comply with
any and all applicable state and federal laws, including, but not limited to,
income, employment and disability income tax laws (e.g., FICA, FUTA, SDI).
1.3. APPLICABLE PERCENTAGE. The term "Applicable Percentage"
shall mean that percentage listed on Schedule "A" attached hereto which is
adjacent to the number of complete years (with a "year" being the performance of
personal services for or on behalf of the Employer for a period of 365 days)
which have elapsed starting from the Effective Date of this Agreement and ending
on the earlier of: (a) the date Executive dies (except as provided below in
this Paragraph); (b) the date Executive Retires (as defined below); (c) the date
Executive ceases to be employed by Employer (other than by reason of Disability,
as defined below); or (d) in the case of Executive's Disability (as defined
below), the date Executive becomes Disabled (as defined below). Notwithstanding
the foregoing or the percentages set forth on Schedule "A," but subject to all
other terms and conditions set forth herein, the "Applicable Percentage" shall
be: (i) one hundred percent (100%) in the event the Executive dies prior to
Retirement but while employed full time by the employer; and (ii) zero percent
(0%) in the event the Executive takes any action which prevents the Employer
from collecting the proceeds of any life insurance policy which the Employer may
happen to own at the time of the Executive's death and of which the Employer is
the designated beneficiary.
1.4. BENEFICIARY. The term "beneficiary" or "designated
beneficiary" shall mean the person or persons whom the Executive shall designate
in a valid Beneficiary Designation, a copy of which is attached hereto as
Exhibit "B," to receive the benefits provided hereunder. A Beneficiary
Designation shall be valid only if it is in the form attached hereto and made a
part hereof and is received by the Administrator prior to the Executive's death.
1.5. CHANGE IN CONTROL. The term "Change in Control" shall mean,
with respect to the Employer: (i) a change in control of the Employer of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or in response to any other form or
report to the regulatory agencies or governmental authorities having
jurisdiction over the Employer or any stock exchange on which the Employer's
shares are listed which requires the reporting of a change in control; (ii) any
merger, consolidation or reorganization of the Employer in which the Employer
does not survive; (iii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) of any assets
of the Employer having an aggregate fair market value of fifty percent (50%) of
the total value of the assets of the Employer, reflected in the most recent
balance sheet of the Employer; (iv) a transaction whereby any "person" (as such
term is used in the Exchange Act or any individual, corporation, partnership,
trust or any other entity) becomes the beneficial owner, directly or indirectly,
of securities of the Employer representing twenty-five percent (25%) or more of
the
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combined voting power of the Employer's then outstanding securities; or (v) a
situation where, in any one-year period, individuals who at the beginning of
such period constitute the Board of Directors of the Employer cease for any
reason to constitute at least a majority thereof, unless the election, or the
nomination for election by the Employer's shareholders, of each new director is
approved by a vote of at least three-quarters (3/4) of the directors then still
in office who were directors at the beginning of the period.
1.6. THE CODE. The "Code" shall mean the Internal Revenue Code
of 1986, as amended (the "Code").
1.7. DISABILITY/DISABLED. The term "Disability" or "Disabled"
shall have the same meaning given such term in the principal disability
insurance policy covering the Executive, which is incorporated herein by
reference to the limited extent thereof. In the event the Executive is not
covered by a disability policy containing a definition of "Disability" or
"Disabled," these terms shall mean an illness or incapacity which, having
continued for a period of one hundred and eighty (180) consecutive days,
prevents the Executive from adequately performing the Executive's regular
employment duties, as determined by an independent physician selected by mutual
agreement of the parties. For purposes of determining the Applicable
Percentage, the Executive shall be deemed to be Disabled as of the first day on
which the Executive is treated as being Disabled under the Executive's principal
disability insurance policy or, if no such policy exists, the one hundred and
eightieth (180th) consecutive day of the Executive's illness or incapacity, as
determined above.
1.8. EFFECTIVE DATE. The term "Effective Date" shall mean the
date upon which this Agreement was entered into by the parties, as first written
above.
1.9. ERISA. The term "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended.
1.10. PLAN YEAR. The term "Plan Year" shall mean the
Employer's fiscal year.
1.11. RETIREMENT. The term "Retirement" or "Retires" shall
refer to the date which the Executive acknowledges in writing to Employer,
after attaining fifty-seven (57) years of age, to be the last day he will
provide any significant personal services, whether as an employee or
independent consultant or contractor, to Employer and to, for, or on behalf
of, any other business entity conducting, performing or making available to
any person or entity banking or other financial services of any kind. For
purposes of this Agreement, the phrase "significant personal services" shall
mean more than ten (10) hours of personal services rendered to one or more
individuals or entities in any thirty (30) day period.
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1.12. SURVIVING SPOUSE. The term "Surviving Spouse" shall mean
the person, if any, who shall be legally married to the Executive on the date of
the Executive's death.
1.13. TERMINATION FOR CAUSE. The term "Termination for Cause"
shall mean termination of the employment of the Executive by reason of any of
the following:
(a) A termination "for cause" as this term may be defined in any
written employment agreement entered into by and between the Employer and the
Executive;
(b) The willful breach of duty by the Executive in the course of
his employment;
(c) The habitual neglect by the Executive of his employment
responsibilities and duties;
(d) The Executive's deliberate violation of any state or federal
banking or securities laws, or of the Bylaws, rules, policies or resolutions of
the Employer, or of the rules or regulations of: (i) the Office of the
California Superintendent of Banks; (ii) the Board of Governors of the Federal
Reserve System; (iii) the Federal Deposit Insurance Corporation; or (iv) any
other state or federal regulatory agency or governmental authority having
jurisdiction over the Employer;
(e) The determination by a state or federal banking agency or
other governmental authority having jurisdiction over the Employer that the
Executive is not suitable to act in the capacity for which he is employed by the
Employer;
(f) The Executive is convicted of any felony or a crime
involving moral turpitude or a fraudulent or dishonest act; or
(g) The Executive discloses without authority any secret or
confidential information not otherwise publicly available concerning the
Employer or takes any action which the Employer's Board of Directors determines,
in its sole discretion and subject to good faith, fair dealing and
reasonableness, constitutes unfair competition with or induces any customer to
breach any contract with the Employer.
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2. SCOPE, PURPOSE AND EFFECT.
2.1. CONTRACT OF EMPLOYMENT. Although this Agreement is intended
to provide the Executive with an additional incentive to remain in the employ of
the Employer, this Agreement shall not be deemed to constitute a contract of
employment between the Executive and the Employer nor shall any provision of
this Agreement restrict or expand the right of the Employer to terminate the
Executive's employment. This Agreement shall have no impact or effect upon any
separate written Employment Agreement which the Executive may have with the
Employer, it being the parties' intention and agreement that unless this
Agreement is specifically referenced in said Employment Agreement (or any
modification thereto), this Agreement (and the Employer's obligations hereunder)
shall stand separate and apart and shall have no effect upon, nor be affected
by, the terms and provisions of said Employment Agreement.
2.2. FRINGE BENEFIT. The benefits provided by this Agreement are
granted by the Employer as a fringe benefit to the Executive and are not a part
of any salary reduction plan or any arrangement deferring a bonus or a salary
increase. The Executive has no option to take any current payments or bonus in
lieu of the benefits provided by this Agreement.
3. PAYMENTS UPON OR AFTER RETIREMENT.
3.1. PAYMENTS UPON RETIREMENT. If the Executive shall remain in
the continuous employment of the Employer until attaining fifty-seven (57) years
of age, the Executive shall be entitled to be paid the Annual Benefit, as
defined above, in equal monthly installments, for a period of fifteen (15) years
(One Hundred Eighty (180) months), with each installment to be paid on the first
day of each month, beginning with the month following the month in which the
Executive Retires or upon such later date as may be mutually agreed upon by the
Executive and the Employer in advance of said Retirement date. At the
Employer's sole and absolute discretion, the Employer may increase the Annual
Benefit as and when the Employer determines the same to be appropriate in order
to reflect a substantial change in the cost of living. Notwithstanding anything
contained herein to the contrary, the Employer shall have no obligation
hereunder to make any such cost-of-living adjustment.
3.2. PAYMENTS IN THE EVENT OF DEATH AFTER RETIREMENT. The
Employer agrees that if the Executive Retires, but shall die before receiving
all of the One Hundred Eighty (180) monthly payments to which he is entitled
hereunder, the Employer will continue to make such monthly payments to the
Executive's designated beneficiary for the remaining period. If a valid
Beneficiary Designation is not in effect, then the remaining amounts due to the
Executive under the term of this Agreement shall be paid to the Executive's
Surviving Spouse. If the Executive leaves no Surviving Spouse, the remaining
amounts due to the
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Executive under the terms of this Agreement shall be paid to the duly qualified
personal representative, executor or administrator of the Executive's estate.
4. PAYMENTS IN THE EVENT DEATH OR DISABILITY OCCURS PRIOR TO RETIREMENT.
4.1. PAYMENTS IN THE EVENT OF DEATH PRIOR TO RETIREMENT. In the
event the Executive should die while actively employed by the Employer at any
time after the Effective Date of this Agreement, but prior to attaining fifty-
seven (57) years of age or if the Executive chooses to work after attaining
fifty-seven (57) years of age, but dies before Retirement, the Employer agrees
to pay the Annual Benefit to the Executive's designated beneficiary, in equal
monthly installments, for a period of fifteen (15) years (One Hundred Eighty
(180) months). If a valid Beneficiary Designation is not in effect, then the
remaining amounts due to the Executive under the term of this Agreement shall be
paid to the Executive's Surviving Spouse. If the Executive leaves no Surviving
Spouse, the remaining amounts due to the Executive under the terms of this
Agreement shall be paid to the duly qualified personal representative, executor
or administrator of the Executive's estate. Each installment shall be paid on
the first day of each month, beginning with the month following the month in
which the Executive's death occurs.
4.2. PAYMENTS IN THE EVENT OF DISABILITY PRIOR TO RETIREMENT. In
the event the Executive becomes Disabled while actively employed by the Employer
at any time after the date of this Agreement but prior to Retirement, the
Executive shall be entitled to be paid the Annual Benefit, as defined above, in
equal monthly installments, for a period of fifteen (15) years (One Hundred
Eighty (180) months), with each installment to be paid on the first day of each
month, beginning with the month following the earlier of (1) the month in which
the Executive attains fifty-seven (57) years of age; or (2) the date upon which
the Executive is no longer entitled to receive Disability benefits under the
Executive's principal Disability insurance policy and is, at such time, unable
to return to and thereafter fulfil the responsibilities associated with the
employment position held with the Employer prior to becoming Disabled by reason
of such Disability continuing. Notwithstanding the foregoing, if the Executive
chooses to elect the Retirement payout option set forth in Paragraph 3 hereof,
the Executive may waive the payout provisions set forth in this subparagraph 4.2
and in lieu thereof receive the Annual Benefit which the Executive would be
entitled to receive under the terms of Paragraph 3.
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5. PAYMENTS IN THE EVENT EMPLOYMENT IS TERMINATED PRIOR TO RETIREMENT.
As indicated in Paragraph 2 above, the Employer reserves the right to terminate
the Executive's employment, with or without cause but subject to any written
employment agreement which may then exist, at any time prior to the Executive's
Retirement. In the event that the employment of the Executive shall be
terminated, other than by reason of Disability or death, prior to the
Executive's attaining fifty-seven (57) years of age, then this Agreement shall
terminate upon the date of such termination of employment; provided, however,
that the Executive shall be entitled to the following benefits as may be
applicable depending upon the circumstances surrounding the Executive's
termination:
5.1. TERMINATION WITHOUT CAUSE. If the Executive's employment is
terminated by the Employer without cause, the Executive shall be entitled to be
paid the Annual Benefit, as defined above, in equal monthly installments for a
period of fifteen (15) years (One Hundred Eighty (180) months), with each
installment to be paid on the first day of each month, beginning with the month
following the month in which Executive is terminated without cause or upon such
later date as may be mutually agreed upon by the Executive and the Employer in
advance of the effective date of the Executive's termination.
5.2. VOLUNTARY TERMINATION BY THE EXECUTIVE. It is acknowledged
and agreed by the Executive that the purpose of this Agreement is to assure the
Executive's continued employment with the Employer and that if the Executive
voluntarily terminates his employment with the Employer (other than by reason of
death, Disability or Retirement), then the Executive shall have willingly
forfeited any and all rights and benefits he may have under the terms of this
Agreement and that, furthermore, no amounts shall be due or paid to the
Executive by the Employer pursuant to the terms of this Agreement.
5.3. TERMINATION FOR CAUSE. The Executive agrees that if his
employment with the Employer is terminated "for cause," as defined in
subparagraph 1.13 of this Agreement, he shall forfeit any and all rights and
benefits he may have under the terms of this Agreement and shall have no right
to be paid any of the amounts which would otherwise be due or paid to the
Executive by the Employer pursuant to the terms of this Agreement.
5.4. TERMINATION BY THE EMPLOYER ON ACCOUNT OF OR AFTER A CHANGE
IN CONTROL. In the event: (i) the Executive's employment with the Employer is
terminated by the Employer in conjunction with, or by reason of, a "change in
control" (as defined in subparagraph 1.5 above); or (ii) by reason of the
Employer's actions any adverse and material change occurs in the scope of the
Executive's position, responsibilities, duties, salary, benefits, or location of
employment after a "change in control" (as defined in subparagraph 1.5) occurs;
or (iii) the Employer causes an event to occur which reasonably constitutes or
results in a demotion, a significant diminution of responsibilities or
authority, or a constructive termination (by forcing a
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resignation or otherwise) of the Executive's employment after a "change in
control" (as defined in subparagraph 1.5) occurs, then the Executive shall be
entitled to be paid the Annual Benefit, as defined above, in equal monthly
installments for a period of fifteen (15) years (One Hundred Eighty (180)
months), with each installment to be paid on the first day of each month,
beginning with the month following the month in which the Executive is
terminated or the action referred to above occurs, whichever is earlier.
6. ADDITIONAL LIMITATIONS ON THE AMOUNT OF THE ANNUAL BENEFIT. The
Executive acknowledges and agrees that the parties have entered into this
Agreement based upon the certain financial and tax accounting assumptions.
Accordingly, with full knowledge of the potential consequences the Executive
agrees that, notwithstanding anything contained herein to the contrary: (i) the
amount of the Annual Benefit shall be limited to that amount of the Annual
Benefit (determined without regard to this Paragraph 6) which will be deductible
by the Employer under the Code in the year in which payment is to be made to the
Executive; (ii) the Annual Benefit amount shall be deemed to be the last payment
made to the Executive and the first for which an income tax deduction, if any,
has been disallowed; and (iii) any compensatory amounts for which a deduction is
denied to the Employer shall, at the Employer's election, serve to first reduce
the Employer's obligation to make the monthly Annual Benefit payments otherwise
due and payable to the Executive under the terms of this Agreement. The
Executive recognizes that, in this regard, limitations on deductibility may be
imposed under, but not limited to, Code Section 280G. Consistent with the
foregoing, and in the event that any payment or benefit received or to be
received by the Executive, whether payable pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Employer
(together with the Annual Benefit, the "Total Payments"), will not be deductible
(in whole or in part) as a result of Code Section 280G, the Annual Benefit shall
be reduced until no portion of the Total Payments is nondeductible as a result
of Section 280G of the Code (or the Annual Benefit is reduced to zero (0)). For
purposes of this limitation:
(a) No portion of the Total Payments, the receipt or enjoyment
of which the Executive shall have effectively waived in writing prior to the
date of payment of any future Annual Benefit payments, shall be taken into
account;
(b) No portion of the Total Payments shall be taken into
account, which in the opinion of the tax counsel selected by the Employer and
acceptable to the Executive, does not constitute a "parachute payment" within
the meaning of Section 280G of the Code;
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(c) Future Annual Benefit payments shall be reduced only to the
extent necessary so that the Total Payments (other than those referred to in
clauses (a) or (b) above in their entirety) constitute reasonable compensation
for services actually rendered within the meaning of Section 280G of the Code,
in the opinion of tax counsel referred to in clause (b) above; and
(d) The value of any non-cash benefit or any deferred payment or
benefit included in the Total Payments shall be determined by the Employer's
independent auditors in accordance with the principles of Section 280G of the
Code.
7. RIGHT TO DETERMINE FUNDING METHODS. The Employer reserves the right
to determine, in its sole and absolute discretion, whether, to what extent and
by what method, if any, to provide for the payment of the amounts which may be
payable to the Executive, the Executive's spouse or the Executive's
beneficiaries under the terms of this Agreement. In the event that the Employer
elects to fund this Agreement, in whole or in part, through the use of life
insurance or annuities, or both, the Employer shall determine the ownership and
beneficial interests of any such policy of life insurance or annuity. The
Employer further reserves the right, in its sole and absolute discretion, to
terminate any such policy, and any other device used to fund its obligations
under this Agreement, at any time, in whole or in part. Consistent with
Paragraph 9 below, neither the Executive, the Executive's spouse nor the
Executive's beneficiaries shall have any right, title or interest in or to any
funding source or amount utilized by the Employer pursuant to this Agreement,
and any such funding source or amount shall not constitute security for the
performance of the Employer's obligations pursuant to this Agreement. In
connection with the foregoing, the Executive agrees to execute such documents
and undergo such medical examinations or tests which the Employer may request
and which may be reasonably necessary to facilitate any funding for this
Agreement including, without limitation, the Employer's acquisition of any
policy of insurance or annuity. Furthermore, a refusal by the Executive to
consent to, participate in and undergo any such medical examinations or tests
shall result in the immediate termination of this Agreement and the immediate
forfeiture by the Executive, the Executive's spouse and the Executive's
beneficiaries of any and all rights to payment hereunder.
8. CLAIMS PROCEDURE. The Employer shall, but only to the extent
necessary to comply with ERISA, be designated as the named fiduciary under this
Agreement and shall have authority to control and manage the operation and
administration of this Agreement. Consistent therewith, the Employer shall make
all determinations as to the rights to benefits under this Agreement. Any
decision by the Employer denying a claim by the Executive, the Executive's
spouse, or the Executive's beneficiary for benefits under this Agreement shall
be stated in writing and delivered or mailed, via registered or certified mail,
to the Executive, the Executive's spouse or the Executive's beneficiary, as the
case may be. Such decision shall set forth the specific reasons for the denial
of a claim. In addition, the Employer shall provide the Executive, the
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Executive's spouse or the Executive's beneficiary with a reasonable opportunity
for a full and fair review of the decision denying such claim.
9. STATUS AS AN UNSECURED GENERAL CREDITOR. Notwithstanding anything
contained herein to the contrary: (i) neither the Executive, the Executive's
spouse or the Executive's beneficiary shall have any legal or equitable rights,
interests or claims in or to any specific property or assets of the Employer;
(ii) none of the Employer's assets shall be held in or under any trust for the
benefit of the Executive, the Executive's spouse or the Executive's
beneficiaries or held in any way as security for the fulfillment of the
obligations of the Employer under this Agreement; (iii) all of the Employer's
assets shall be and remain the general unpledged and unrestricted assets of the
Employer; (iv) the Employer's obligation under this Agreement shall be that of
an unfunded and unsecured promise by the Employer to pay money in the future;
and (v) the Executive, the Executive's spouse and the Executive's beneficiaries
shall be unsecured general creditors with respect to any benefits which may be
payable under the terms of this Agreement.
10. MISCELLANEOUS.
10.1. OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL. The
Executive acknowledges that he has been afforded the opportunity to consult with
independent counsel of his choosing regarding both the benefits granted to him
under the terms of this Agreement and the terms and conditions which may affect
the Executive's right to these benefits. The Executive further acknowledges
that he has read, understands and consents to all of the terms and conditions of
this Agreement, and that he enters into this Agreement with a full understanding
of its terms and conditions.
10.2. ARBITRATION OF DISPUTES. All claims, disputes and other
matters in question arising out of or relating to this Agreement or the breach
or interpretation thereof, other than those matters which are to be determined
by the Employer in its sole and absolute discretion, shall be resolved by
binding arbitration before a representative member, selected by the mutual
agreement of the parties, of the Judicial Arbitration and Mediation Services,
Inc. ("JAMS"), presently located at 111 Pine Street, Suite 710, in San
Francisco, California. In the event JAMS is unable or unwilling to conduct the
arbitration provided for under the terms of this Paragraph, or has discontinued
its business, the parties agree that a representative member, selected by the
mutual agreement of the parties, of the American Arbitration Association
("AAA"), presently located at 417 Montgomery Street, in San Francisco,
California, shall conduct the binding arbitration referred to in this Paragraph.
Notice of the demand for arbitration shall be filed in writing with the other
party to this Agreement and with JAMS (or AAA, if necessary). In no event shall
the demand for arbitration be made after the date when institution of legal or
equitable proceedings based on such claim, dispute or other matter in question
would be barred by the applicable statute of limitations. The arbitration shall
be subject to such rules of procedure used or established by JAMS, or if there
are none, the rules of procedure used or established by AAA.
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Any award rendered by JAMS or AAA shall be final and binding upon the parties,
and as applicable, their respective heirs, beneficiaries, legal representatives,
agents, successors and assigns, and may be entered in any court having
jurisdiction thereof. The obligation of the parties to arbitrate pursuant to
this clause shall be specifically enforceable in accordance with, and shall be
conducted consistently with, the provisions of Title 9 of Part 3 of the
California Code of Civil Procedure. Any arbitration hereunder shall be
conducted in Red Bluff, California, unless otherwise agreed to by the parties.
10.3. ATTORNEYS' FEES. In the event of any arbitration or
litigation concerning any controversy, claim or dispute between the parties
hereto, arising out of or relating to this Agreement or the breach hereof, or
the interpretation hereof, the prevailing party shall be entitled to recover
from the losing party reasonable expenses, attorneys' fees and costs incurred in
connection therewith or in the enforcement or collection of any judgment or
award rendered therein. The "prevailing party" means the party determined by
the arbitrator(s) or court, as the case may be, to have most nearly prevailed,
even if such party did not prevail in all matters, not necessarily the one in
whose favor a judgment is rendered.
10.4. NOTICE. Any notice required or permitted of either the
Executive or the Employer under this Agreement shall be deemed to have been duly
given, if by personal delivery, upon the date received by the party or its
authorized representative; if by facsimile, upon transmission to a telephone
number previously provided by the party to whom the facsimile is transmitted as
reflected in the records of the party transmitting the facsimile and upon
reasonable confirmation of such transmission; and if by mail, on the third day
after mailing via U.S. first class mail, registered or certified, postage
prepaid and return receipt requested, and addressed to the party at the address
given below for the receipt of notices, or such changed address as may be
requested in writing by a party.
If to the Employer: Tehama County Bank
237 Main Street
Red Bluff, California 96080-0890
Attn: CHAIRMAN OF THE BOARD
----------------------------
If to the Executive: Daniel B. Cargile
13755 Crestview Drive
Red Bluff, California 96080
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10.5. ASSIGNMENT. Neither the Executive, the Executive's spouse,
nor any other beneficiary under this Agreement shall have any power or right to
transfer, assign, anticipate, hypothecate, modify or otherwise encumber any part
or all of the amounts payable hereunder, nor, prior to payment in accordance
with the terms of this Agreement, shall any portion of such amounts be: (i)
subject to seizure by any creditor of any such beneficiary, by a proceeding at
law or in equity, for the payment of any debts, judgments, alimony or separate
maintenance obligations which may be owed by the Executive, the Executive's
spouse, or any designated beneficiary; or (ii) transferable by operation of law
in the event of bankruptcy, insolvency or otherwise. Any such attempted
assignment or transfer shall be void and shall terminate this Agreement, and the
Employer shall thereupon have no further liability hereunder.
10.6. BINDING EFFECT/MERGER OR REORGANIZATION. This Agreement
shall be binding upon and inure to the benefit of the Executive and the Employer
and, as applicable, their respective heirs, beneficiaries, legal
representatives, agents, successors and assigns. Accordingly, the Employer
shall not merge or consolidate into or with another corporation, or reorganize
or sell substantially all of its assets to another corporation, firm or person,
unless and until such succeeding or continuing corporation, firm or person
agrees to assume and discharge the obligations of the Employer under this
Agreement. Upon the occurrence of such event, the term "Employer" as used in
this Agreement shall be deemed to refer to such surviving or successor firm,
person, entity or corporation.
10.7. NONWAIVER. The failure of either party to enforce at any
time or for any period of time any one or more of the terms or conditions of
this Agreement shall not be a waiver of such term(s) or condition(s) or of that
party's right thereafter to enforce each and every term and condition of this
Agreement.
10.8. PARTIAL INVALIDITY. If any term, provision, covenant, or
condition of this Agreement is determined by an arbitrator or a court, as the
case may be, to be invalid, void, or unenforceable, such determination shall not
render any other term, provision, covenant or condition invalid, void or
unenforceable, and the Agreement shall remain in full force and effect
notwithstanding such partial invalidity.
10.9. ENTIRE AGREEMENT. This Agreement supersedes any and all
other agreements, either oral or in writing, between the parties with respect to
the subject matter of this Agreement and contains all of the covenants and
agreements between the parties with respect thereto. Each party to this
Agreement acknowledges that no other representations, inducements, promises, or
agreements, oral or otherwise, have been made by any party, or anyone acting on
behalf of any party, which are not set forth herein, and that no other
agreement, statement, or promise not contained in this Agreement shall be valid
or binding on either party.
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10.10. MODIFICATIONS. Any modification of this Agreement shall be
effective only if it is in writing and signed by each party or such party's
authorized representative.
10.11. PARAGRAPH HEADINGS. The paragraph headings used in this
Agreement are included solely for the convenience of the parties and shall not
affect or be used in connection with the interpretation of this Agreement.
10.12. NO STRICT CONSTRUCTION. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
person.
10.13. GOVERNING LAW. The laws of the State of California, other
than those laws denominated choice of law rules, and, where applicable, the
rules and regulations of (i) the Office of the California Superintendent of
Banks; (ii) the Board of Governors of the Federal Reserve System;
(iii) the Federal Deposit Insurance Corporation; or (iv) any other regulatory
agency or governmental authority having jurisdiction over the Employer, shall
govern the validity, interpretation, construction and effect of this Agreement.
IN WITNESS WHEREOF, the Employer and the Executive have executed this
Agreement on the date first above-written in the City of Red Bluff, Tehama
County, California.
THE EMPLOYER: THE EXECUTIVE:
TEHAMA COUNTY BANK,
a California corporation
By: /s/ John W. Koeberer /s/ Daniel B. Cargile
--------------------------- --------------------------
JOHN W. KOEBERER, Chairman DANIEL B. CARGILE
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SCHEDULE A
NUMBER OF COMPLETE
YEARS WHICH HAVE ELAPSED APPLICABLE PERCENTAGE
------------------------ ---------------------
1. . . . . . . . . . . . . 22.88%
2. . . . . . . . . . . . . 44.23%
3. . . . . . . . . . . . . 64.13%
4. . . . . . . . . . . . . 82.69%
5. . . . . . . . . . . . . 100.00%
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SCHEDULE B
BENEFICIARY DESIGNATION
To the Administrator of the Tehama County Bank Executive Salary
Continuation Agreement:
Pursuant to the Provisions of my Executive Salary Continuation
Agreement with Tehama County Bank, permitting the designation of a beneficiary
or beneficiaries by a participant, I hereby designate the following persons and
entities as primary and secondary beneficiaries of any benefit under said
Agreement payable by reason of my death:
PRIMARY BENEFICIARY:
Donna Darlene Cargile 13755 Crestview Drive Red Bluff, CA Spouse
- - ---------------------- -------------------------------------- --------------
Name Address Relationship
SECONDARY (CONTINGENT) BENEFICIARY:
Donna Diane Giannecchinni Same as above Daughter
Dennis David Cargile " Son
______________________ ____________________________ _______________
Name Address Relationship
THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION IS HEREBY RESERVED.
ALL PRIOR DESIGNATIONS, IF ANY, OF PRIMARY BENEFICIARIES AND SECONDARY
BENEFICIARIES ARE HEREBY REVOKED.
The Administrator shall pay all sums payable under the Agreement by reason of my
death to the Primary Beneficiary, if he or she survives me, and if no Primary
Beneficiary shall survive me, then to the Secondary Beneficiary, and if no named
beneficiary survives me, then the Administrator shall pay all amounts in
accordance with the terms of my Executive Salary Continuation Agreement. In the
event that a named beneficiary survives me and dies prior to receiving the
entire benefit payable under said Agreement, then and in that event, the
remaining unpaid benefit
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payable according to the terms of my Executive Salary Continuation Agreement
shall be payable to the personal representatives of the estate of said
beneficiary who survived me but died prior to receiving the total benefit
provided by my Executive Salary Continuation Agreement.
THE EXECUTIVE:
Dated: June 17, 1993 /s/ Daniel B. Cargile
-------- -- -------------------------
DANIEL B. CARGILE
CONSENT OF THE EXECUTIVE'S SPOUSE
TO THE ABOVE BENEFICIARY DESIGNATION:
I, ____________________________, being the spouse of Daniel B. Cargile, after
being afforded the opportunity to consult with independent counsel of my
choosing, do hereby acknowledge that I have read, agree and consent to the
foregoing Beneficiary Designation which relates to the Executive Salary
Continuation Agreement entered into by my spouse on ______________, 1993. I
understand that the above Beneficiary Designation may affect certain rights
which I may have in the benefits provided for under the terms of the Executive
Salary Continuation Agreement and in which I may have a marital property
interest.
Dated: _______________________, 199___.
____________________________________________
_____________
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CERTIFICATE OF ACKNOWLEDGMENT
OF NOTARY PUBLIC
State of California )
) ss.
County of Tehama )
On ____________, 1993, before me, _______________, Notary Public, State
of California, personally appeared ________________
/ / personally known to me - OR
/ / proved to me on the basis of satisfactory evidence
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
----------------------------------
Notary Public,
State of California
(Seal)
CAPACITY CLAIMED BY SIGNER:
/ / Individual(s) Signing for Oneself/Themselves
/ / Corporate Officer(s) ________________________ ____________________________
Title Company
________________________ ____________________________
Title Company
/ / Partner(s) ________________________________________________________________
Partnership
/ / Trustees(s) _______________________________________________________________
Trust
/ / Attorney-in-Fact ____________________________ ___________________________
Principal Principal
Other __________________________________________ ___________________________
Entity(ies) Represented Entity(ies) Represented
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Title or Type of Document:____________________________Date of Document: ________
Number of Pages:______ Signer(s) Other Than Named Above:________________________
<PAGE>
(EXHIBIT 10.7(B))
EXECUTIVE SALARY CONTINUATION AGREEMENT
This Agreement is made and entered into this 17 day of JUNE , 1993,
by and between Tehama County Bank, a corporation organized under the laws of the
State of California (the "Employer"), and David L. Roberts, an individual
residing in the State of California (hereinafter referred to as the
"Executive").
R E C I T A L S
WHEREAS, the Executive is an employee of the Employer and is serving
as its Senior Vice President and Senior Loan Officer;
WHEREAS, the Executive's experience and knowledge of the affairs of
the Employer and the banking industry are extensive and valuable;
WHEREAS, it is deemed to be in the best interests of the Employer to
provide the Executive with certain salary continuation benefits, on the terms
and conditions set forth herein, in order to reasonably induce the Executive to
remain in the Employer's employment; and
WHEREAS, the Executive and the Employer wish to specify in writing the
terms and conditions upon which this additional compensatory incentive will be
provided to the Executive, or to the Executive's spouse or the Executive's
designated beneficiaries, as the case may be;
NOW, THEREFORE, in consideration of the services to be performed in
the future, as well as the mutual promises and covenants contained herein, the
Executive and the Employer agree as follows:
A G R E E M E N T
1. TERMS AND DEFINITIONS.
1.1. ADMINISTRATOR. The Employer shall be the "Administrator"
and, solely for the purposes of ERISA, the "fiduciary" of this Agreement where a
fiduciary is required by ERISA.
1.2. ANNUAL BENEFIT. The term "Annual Benefit" shall mean an
annual sum of Fifty Thousand Dollars ($50,000) multiplied by the Applicable
Percentage (defined below) and then reduced to the extent: (i) required under
the other provisions of this Agreement, including, but not limited to,
Paragraphs 5, 6 and 7 hereof; (ii) required by reason of the lawful
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order of any regulatory agency or body having jurisdiction over the Employer;
and (iii) required in order for the Employer to properly comply with any and all
applicable state and federal laws, including, but not limited to, income,
employment and disability income tax laws (e.g., FICA, FUTA, SDI).
1.3. APPLICABLE PERCENTAGE. The term "Applicable Percentage"
shall mean that percentage listed on Schedule "A" attached hereto which is
adjacent to the number of complete years (with a "year" being the performance of
personal services for or on behalf of the Employer for a period of 365 days)
which have elapsed starting from the Effective Date of this Agreement and ending
on the earlier of: (a) the date Executive dies (except as provided below in
this Paragraph); (b) the date Executive Retires (as defined below); (c) the date
Executive ceases to be employed by Employer (other than by reason of Disability,
as defined below); or (d) in the case of Executive's Disability (as defined
below), the date Executive becomes Disabled (as defined below). Notwithstanding
the foregoing or the percentages set forth on Schedule "A," but subject to all
other terms and conditions set forth herein, the "Applicable Percentage" shall
be: (i) one hundred percent (100%) in the event the Executive dies prior to
Retirement but while employed full time by the employer; and (ii) zero percent
(0%) in the event the Executive takes any action which prevents the Employer
from collecting the proceeds of any life insurance policy which the Employer may
happen to own at the time of the Executive's death and of which the Employer is
the designated beneficiary.
1.4. BENEFICIARY. The term "beneficiary" or "designated
beneficiary" shall mean the person or persons whom the Executive shall designate
in a valid Beneficiary Designation, a copy of which is attached hereto as
Exhibit "B," to receive the benefits provided hereunder. A Beneficiary
Designation shall be valid only if it is in the form attached hereto and made a
part hereof and is received by the Administrator prior to the Executive's death.
1.5. CHANGE IN CONTROL. The term "Change in Control" shall mean,
with respect to the Employer: (i) a change in control of the Employer of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or in response to any other form or
report to the regulatory agencies or governmental authorities having
jurisdiction over the Employer or any stock exchange on which the Employer's
shares are listed which requires the reporting of a change in control; (ii) any
merger, consolidation or reorganization of the Employer in which the Employer
does not survive; (iii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) of any assets
of the Employer having an aggregate fair market value of fifty percent (50%) of
the total value of the assets of the Employer, reflected in the most recent
balance sheet of the Employer; (iv) a transaction whereby any "person" (as such
term is used in the Exchange Act or any individual, corporation, partnership,
trust or any other entity) becomes the beneficial owner, directly or indirectly,
of securities of the Employer representing twenty-five percent (25%) or more of
the
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combined voting power of the Employer's then outstanding securities; or (v) a
situation where, in any one-year period, individuals who at the beginning of
such period constitute the Board of Directors of the Employer cease for any
reason to constitute at least a majority thereof, unless the election, or the
nomination for election by the Employer's shareholders, of each new director is
approved by a vote of at least three-quarters (3/4) of the directors then still
in office who were directors at the beginning of the period.
1.6. THE CODE. The "Code" shall mean the Internal Revenue Code
of 1986, as amended (the "Code").
1.7. DISABILITY/DISABLED. The term "Disability" or "Disabled"
shall have the same meaning given such term in the principal disability
insurance policy covering the Executive, which is incorporated herein by
reference to the limited extent thereof. In the event the Executive is not
covered by a disability policy containing a definition of "Disability" or
"Disabled," these terms shall mean an illness or incapacity which, having
continued for a period of one hundred and eighty (180) consecutive days,
prevents the Executive from adequately performing the Executive's regular
employment duties, as determined by an independent physician selected by mutual
agreement of the parties. For purposes of determining the Applicable
Percentage, the Executive shall be deemed to be Disabled as of the first day on
which the Executive is treated as being Disabled under the Executive's principal
disability insurance policy or, if no such policy exists, the one hundred and
eightieth (180th) consecutive day of the Executive's illness or incapacity, as
determined above.
1.8. EFFECTIVE DATE. The term "Effective Date" shall mean the
date upon which this Agreement was entered into by the parties, as first written
above.
1.9. ERISA. The term "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended.
1.10. PLAN YEAR. The term "Plan Year" shall mean the Employer's
fiscal year.
1.11. RETIREMENT. The term "Retirement" or "Retires" shall refer
to the date which the Executive acknowledges in writing to Employer, after
attaining sixty-two (62) years of age, to be the last day he will provide any
significant personal services, whether as an employee or independent consultant
or contractor, to Employer and to, for, or on behalf of, any other business
entity conducting, performing or making available to any person or entity
banking or other financial services of any kind. For purposes of this
Agreement, the phrase "significant personal services" shall mean more than ten
(10) hours of personal services rendered to one or more individuals or entities
in any thirty (30) day period.
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1.12. SURVIVING SPOUSE. The term "Surviving Spouse" shall mean
the person, if any, who shall be legally married to the Executive on the date of
the Executive's death.
1.13. TERMINATION FOR CAUSE. The term "Termination for Cause"
shall mean termination of the employment of the Executive by reason of any of
the following:
(a) A termination "for cause" as this term may be defined in any
written employment agreement entered into by and between the Employer and the
Executive;
(b) The willful breach of duty by the Executive in the course of
his employment;
(c) The habitual neglect by the Executive of his employment
responsibilities and duties;
(d) The Executive's deliberate violation of any state or federal
banking or securities laws, or of the Bylaws, rules, policies or resolutions of
the Employer, or of the rules or regulations of: (i) the Office of the
California Superintendent of Banks; (ii) the Board of Governors of the Federal
Reserve System; (iii) the Federal Deposit Insurance Corporation; or (iv) any
other state or federal regulatory agency or governmental authority having
jurisdiction over the Employer;
(e) The determination by a state or federal banking agency or
other governmental authority having jurisdiction over the Employer that the
Executive is not suitable to act in the capacity for which he is employed by the
Employer;
(f) The Executive is convicted of any felony or a crime
involving moral turpitude or a fraudulent or dishonest act; or
(g) The Executive discloses without authority any secret or
confidential information not otherwise publicly available concerning the
Employer or takes any action which the Employer's Board of Directors determines,
in its sole discretion and subject to good faith, fair dealing and
reasonableness, constitutes unfair competition with or induces any customer to
breach any contract with the Employer.
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2. SCOPE, PURPOSE AND EFFECT.
2.1. CONTRACT OF EMPLOYMENT. Although this Agreement is intended
to provide the Executive with an additional incentive to remain in the employ of
the Employer, this Agreement shall not be deemed to constitute a contract of
employment between the Executive and the Employer nor shall any provision of
this Agreement restrict or expand the right of the Employer to terminate the
Executive's employment. This Agreement shall have no impact or effect upon any
separate written Employment Agreement which the Executive may have with the
Employer, it being the parties' intention and agreement that unless this
Agreement is specifically referenced in said Employment Agreement (or any
modification thereto), this Agreement (and the Employer's obligations hereunder)
shall stand separate and apart and shall have no effect upon, nor be affected
by, the terms and provisions of said Employment Agreement.
2.2. FRINGE BENEFIT. The benefits provided by this Agreement are
granted by the Employer as a fringe benefit to the Executive and are not a part
of any salary reduction plan or any arrangement deferring a bonus or a salary
increase. The Executive has no option to take any current payments or bonus in
lieu of the benefits provided by this Agreement.
3. PAYMENTS UPON OR AFTER RETIREMENT.
3.1. PAYMENTS UPON RETIREMENT. If the Executive shall remain in
the continuous employment of the Employer until attaining sixty-two (62) years
of age, the Executive shall be entitled to be paid the Annual Benefit, as
defined above, in equal monthly installments, for a period of fifteen (15) years
(One Hundred Eighty (180) months), with each installment to be paid on the first
day of each month, beginning with the month following the month in which the
Executive Retires or upon such later date as may be mutually agreed upon by the
Executive and the Employer in advance of said Retirement date. At the
Employer's sole and absolute discretion, the Employer may increase the Annual
Benefit as and when the Employer determines the same to be appropriate in order
to reflect a substantial change in the cost of living. Notwithstanding anything
contained herein to the contrary, the Employer shall have no obligation
hereunder to make any such cost-of-living adjustment.
3.2. PAYMENTS IN THE EVENT OF DEATH AFTER RETIREMENT. The
Employer agrees that if the Executive Retires, but shall die before receiving
all of the One Hundred Eighty (180) monthly payments to which he is entitled
hereunder, the Employer will continue to make such monthly payments to the
Executive's designated beneficiary for the remaining period. If a valid
Beneficiary Designation is not in effect, then the remaining amounts due to the
Executive under the term of this Agreement shall be paid to the Executive's
Surviving Spouse. If the Executive leaves no Surviving Spouse, the remaining
amounts due to the
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Executive under the terms of this Agreement shall be paid to the duly qualified
personal representative, executor or administrator of the Executive's estate.
4. PAYMENTS IN THE EVENT DEATH OR DISABILITY OCCURS PRIOR TO RETIREMENT.
4.1. PAYMENTS IN THE EVENT OF DEATH PRIOR TO RETIREMENT. In the
event the Executive should die while actively employed by the Employer at any
time after the Effective Date of this Agreement, but prior to attaining
sixty-two (62) years of age or if the Executive chooses to work after attaining
sixty-two (62) years of age, but dies before Retirement, the Employer agrees to
pay the Annual Benefit to the Executive's designated beneficiary, in equal
monthly installments, for a period of fifteen (15) years (One Hundred Eighty
(180) months). If a valid Beneficiary Designation is not in effect, then the
remaining amounts due to the Executive under the term of this Agreement shall be
paid to the Executive's Surviving Spouse. If the Executive leaves no Surviving
Spouse, the remaining amounts due to the Executive under the terms of this
Agreement shall be paid to the duly qualified personal representative, executor
or administrator of the Executive's estate. Each installment shall be paid on
the first day of each month, beginning with the month following the month in
which the Executive's death occurs.
4.2. PAYMENTS IN THE EVENT OF DISABILITY PRIOR TO RETIREMENT. In
the event the Executive becomes Disabled while actively employed by the Employer
at any time after the date of this Agreement but prior to Retirement, the
Executive shall be entitled to be paid the Annual Benefit, as defined above, in
equal monthly installments, for a period of fifteen (15) years (One Hundred
Eighty (180) months), with each installment to be paid on the first day of each
month, beginning with the month following the earlier of (1) the month in which
the Executive attains sixty-two (62) years of age; or (2) the date upon which
the Executive is no longer entitled to receive Disability benefits under the
Executive's principal Disability insurance policy and is, at such time, unable
to return to and thereafter fulfil the responsibilities associated with the
employment position held with the Employer prior to becoming Disabled by reason
of such Disability continuing. Notwithstanding the foregoing, if the Executive
chooses to elect the Retirement payout option set forth in Paragraph 3 hereof,
the Executive may waive the payout provisions set forth in this subparagraph 4.2
and in lieu thereof receive the Annual Benefit which the Executive would be
entitled to receive under the terms of Paragraph 3.
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5. PAYMENTS IN THE EVENT EMPLOYMENT IS TERMINATED PRIOR TO RETIREMENT.
As indicated in Paragraph 2 above, the Employer reserves the right to terminate
the Executive's employment, with or without cause but subject to any written
employment agreement which may then exist, at any time prior to the Executive's
Retirement. In the event that the employment of the Executive shall be
terminated, other than by reason of Disability or death, prior to the
Executive's attaining sixty-two (62) years of age, then this Agreement shall
terminate upon the date of such termination of employment; provided, however,
that the Executive shall be entitled to the following benefits as may be
applicable depending upon the circumstances surrounding the Executive's
termination:
5.1. TERMINATION WITHOUT CAUSE. If the Executive's employment is
terminated by the Employer without cause, the Executive shall be entitled to be
paid the Annual Benefit, as defined above, in equal monthly installments, for a
period of fifteen (15) years (One Hundred Eighty (180) months), with each
installment to be paid on the first day of each month, beginning with the month
following the month in which Executive is terminated without cause or upon such
later date as may be mutually agreed upon by the Executive and the Employer in
advance of the effective date of the Executive's termination.
5.2. VOLUNTARY TERMINATION BY THE EXECUTIVE. It is acknowledged
and agreed by the Executive that the purpose of this Agreement is to assure the
Executive's continued employment with the Employer and that if the Executive
voluntarily terminates his employment with the Employer (other than by reason of
death, Disability or Retirement), then the Executive shall have willingly
forfeited any and all rights and benefits he may have under the terms of this
Agreement and that, furthermore, no amounts shall be due or paid to the
Executive by the Employer pursuant to the terms of this Agreement.
5.3. TERMINATION FOR CAUSE. The Executive agrees that if his
employment with the Employer is terminated "for cause," as defined in
subparagraph 1.13 of this Agreement, he shall forfeit any and all rights and
benefits he may have under the terms of this Agreement and shall have no right
to be paid any of the amounts which would otherwise be due or paid to the
Executive by the Employer pursuant to the terms of this Agreement.
5.4. TERMINATION BY THE EMPLOYER ON ACCOUNT OF OR AFTER A CHANGE
IN CONTROL. In the event: (i) the Executive's employment with the Employer is
terminated by the Employer in conjunction with, or by reason of, a "change in
control" (as defined in subparagraph 1.5 above); or (ii) by reason of the
Employer's actions any adverse and material change occurs in the scope of the
Executive's position, responsibilities, duties, salary, benefits, or location of
employment after a "change in control" (as defined in subparagraph 1.5) occurs;
or (iii) the Employer causes an event to occur which reasonably constitutes or
results in a demotion, a significant diminution of responsibilities or
authority, or a constructive termination (by forcing a
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resignation or otherwise) of the Executive's employment after a "change in
control" (as defined in subparagraph 1.5) occurs, then the Executive shall be
entitled to be paid the Annual Benefit, as defined above, in equal monthly
installments, for a period of fifteen (15) years (One Hundred Eighty (180)
months), with each installment to be paid on the first day of each month,
beginning with the month following the month in which the Executive is
terminated or the action referred to above occurs, whichever is earlier.
6. ADDITIONAL LIMITATIONS ON THE AMOUNT OF THE ANNUAL BENEFIT. The
Executive acknowledges and agrees that the parties have entered into this
Agreement based upon the certain financial and tax accounting assumptions.
Accordingly, with full knowledge of the potential consequences the Executive
agrees that, notwithstanding anything contained herein to the contrary: (i) the
amount of the Annual Benefit shall be limited to that amount of the Annual
Benefit (determined without regard to this Paragraph 6) which will be deductible
by the Employer under the Code in the year in which payment is to be made to the
Executive; (ii) the Annual Benefit amount shall be deemed to be the last payment
made to the Executive and the first for which an income tax deduction, if any,
has been disallowed; and (iii) any compensatory amounts for which an income tax
deduction is denied to the Employer shall, at the Employer's election, serve to
first reduce the Employer's obligation to make the monthly Annual Benefit
payments otherwise due and payable to the Executive under the terms of this
Agreement. The Executive recognizes that, in this regard, limitations on
deductibility may be imposed under, but not limited to, Code Section 280G.
Consistent with the foregoing, and in the event that any payment or benefit
received or to be received by the Executive, whether payable pursuant to the
terms of this Agreement or any other plan, arrangement or agreement with the
Employer (together with the Annual Benefit, the "Total Payments"), will not be
deductible (in whole or in part) as a result of Code Section 280G, the Annual
Benefit shall be reduced until no portion of the Total Payments is nondeductible
as a result of Section 280G of the Code (or the Annual Benefit is reduced to
zero (0)). For purposes of this limitation:
(a) No portion of the Total Payments, the receipt or enjoyment
of which the Executive shall have effectively waived in writing prior to the
date of payment of any future Annual Benefit payments, shall be taken into
account;
(b) No portion of the Total Payments shall be taken into
account, which in the opinion of the tax counsel selected by the Employer and
acceptable to the Executive, does not constitute a "parachute payment" within
the meaning of Section 280G of the Code;
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(c) Future Annual Benefit payments shall be reduced only to the
extent necessary so that the Total Payments (other than those referred to in
clauses (a) or (b) above in their entirety) constitute reasonable compensation
for services actually rendered within the meaning of Section 280G of the Code,
in the opinion of tax counsel referred to in clause (b) above; and
(d) The value of any non-cash benefit or any deferred payment or
benefit included in the Total Payments shall be determined by the Employer's
independent auditors in accordance with the principles of Section 280G of the
Code.
7. RIGHT TO DETERMINE FUNDING METHODS. The Employer reserves the right
to determine, in its sole and absolute discretion, whether, to what extent and
by what method, if any, to provide for the payment of the amounts which may be
payable to the Executive, the Executive's spouse or the Executive's
beneficiaries under the terms of this Agreement. In the event that the Employer
elects to fund this Agreement, in whole or in part, through the use of life
insurance or annuities, or both, the Employer shall determine the ownership and
beneficial interests of any such policy of life insurance or annuity. The
Employer further reserves the right, in its sole and absolute discretion, to
terminate any such policy, and any other device used to fund its obligations
under this Agreement, at any time, in whole or in part. Consistent with
Paragraph 9 below, neither the Executive, the Executive's spouse nor the
Executive's beneficiaries shall have any right, title or interest in or to any
funding source or amount utilized by the Employer pursuant to this Agreement,
and any such funding source or amount shall not constitute security for the
performance of the Employer's obligations pursuant to this Agreement. In
connection with the foregoing, the Executive agrees to execute such documents
and undergo such medical examinations or tests which the Employer may request
and which may be reasonably necessary to facilitate any funding for this
Agreement including, without limitation, the Employer's acquisition of any
policy of insurance or annuity. Furthermore, a refusal by the Executive to
consent to, participate in and undergo any such medical examinations or tests
shall result in the immediate termination of this Agreement and the immediate
forfeiture by the Executive, the Executive's spouse and the Executive's
beneficiaries of any and all rights to payment hereunder.
8. CLAIMS PROCEDURE. The Employer shall, but only to the extent
necessary to comply with ERISA, be designated as the named fiduciary under this
Agreement and shall have authority to control and manage the operation and
administration of this Agreement. Consistent therewith, the Employer shall make
all determinations as to the rights to benefits under this Agreement. Any
decision by the Employer denying a claim by the Executive, the Executive's
spouse, or the Executive's beneficiary for benefits under this Agreement shall
be stated in writing and delivered or mailed, via registered or certified mail,
to the Executive, the Executive's spouse or the Executive's beneficiary, as the
case may be. Such decision shall set forth the specific reasons for the denial
of a claim. In addition, the Employer shall provide the Executive, the
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Executive's spouse or the Executive's beneficiary with a reasonable opportunity
for a full and fair review of the decision denying such claim.
9. STATUS AS AN UNSECURED GENERAL CREDITOR. Notwithstanding anything
contained herein to the contrary: (i) neither the Executive, the Executive's
spouse or the Executive's beneficiary shall have any legal or equitable rights,
interests or claims in or to any specific property or assets of the Employer;
(ii) none of the Employer's assets shall be held in or under any trust for the
benefit of the Executive, the Executive's spouse or the Executive's
beneficiaries or held in any way as security for the fulfillment of the
obligations of the Employer under this Agreement; (iii) all of the Employer's
assets shall be and remain the general unpledged and unrestricted assets of the
Employer; (iv) the Employer's obligation under this Agreement shall be that of
an unfunded and unsecured promise by the Employer to pay money in the future;
and (v) the Executive, the Executive's spouse and the Executive's beneficiaries
shall be unsecured general creditors with respect to any benefits which may be
payable under the terms of this Agreement.
10. MISCELLANEOUS.
10.1. OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL. The
Executive acknowledges that he has been afforded the opportunity to consult with
independent counsel of his choosing regarding both the benefits granted to him
under the terms of this Agreement and the terms and conditions which may affect
the Executive's right to these benefits. The Executive further acknowledges
that he has read, understands and consents to all of the terms and conditions of
this Agreement, and that he enters into this Agreement with a full understanding
of its terms and conditions.
10.2. ARBITRATION OF DISPUTES. All claims, disputes and other
matters in question arising out of or relating to this Agreement or the breach
or interpretation thereof, other than those matters which are to be determined
by the Employer in its sole and absolute discretion, shall be resolved by
binding arbitration before a representative member, selected by the mutual
agreement of the parties, of the Judicial Arbitration and Mediation Services,
Inc. ("JAMS"), presently located at 111 Pine Street, Suite 710, in San
Francisco, California. In the event JAMS is unable or unwilling to conduct the
arbitration provided for under the terms of this Paragraph, or has discontinued
its business, the parties agree that a representative member, selected by the
mutual agreement of the parties, of the American Arbitration Association
("AAA"), presently located at 417 Montgomery Street, in San Francisco,
California, shall conduct the binding arbitration referred to in this Paragraph.
Notice of the demand for arbitration shall be filed in writing with the other
party to this Agreement and with JAMS (or AAA, if necessary). In no event shall
the demand for arbitration be made after the date when institution of legal or
equitable proceedings based on such claim, dispute or other matter in question
would be barred by the applicable statute of limitations. The arbitration shall
be subject to such rules of procedure used or established by JAMS, or if there
are none, the rules of procedure used or established by AAA.
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Any award rendered by JAMS or AAA shall be final and binding upon the parties,
and as applicable, their respective heirs, beneficiaries, legal representatives,
agents, successors and assigns, and may be entered in any court having
jurisdiction thereof. The obligation of the parties to arbitrate pursuant to
this clause shall be specifically enforceable in accordance with, and shall be
conducted consistently with, the provisions of Title 9 of Part 3 of the
California Code of Civil Procedure. Any arbitration hereunder shall be
conducted in Red Bluff, California, unless otherwise agreed to by the parties.
10.3. ATTORNEYS' FEES. In the event of any arbitration or
litigation concerning any controversy, claim or dispute between the parties
hereto, arising out of or relating to this Agreement or the breach hereof, or
the interpretation hereof, the prevailing party shall be entitled to recover
from the losing party reasonable expenses, attorneys' fees and costs incurred in
connection therewith or in the enforcement or collection of any judgment or
award rendered therein. The "prevailing party" means the party determined by
the arbitrator(s) or court, as the case may be, to have most nearly prevailed,
even if such party did not prevail in all matters, not necessarily the one in
whose favor a judgment is rendered.
10.4. NOTICE. Any notice required or permitted of either the
Executive or the Employer under this Agreement shall be deemed to have been duly
given, if by personal delivery, upon the date received by the party or its
authorized representative; if by facsimile, upon transmission to a telephone
number previously provided by the party to whom the facsimile is transmitted as
reflected in the records of the party transmitting the facsimile and upon
reasonable confirmation of such transmission; and if by mail, on the third day
after mailing via U.S. first class mail, registered or certified, postage
prepaid and return receipt requested, and addressed to the party at the address
given below for the receipt of notices, or such changed address as may be
requested in writing by a party.
If to the Employer: Tehama County Bank
237 Main Street
Red Bluff, California 96080-0890
Attn: Chairman of the Board
----------------------
If to the Executive: David L. Roberts
6655 Terra Linda Way
---------------------------------
Reading, California 96003
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10.5. ASSIGNMENT. Neither the Executive, the Executive's spouse,
nor any other beneficiary under this Agreement shall have any power or right to
transfer, assign, anticipate, hypothecate, modify or otherwise encumber any part
or all of the amounts payable hereunder, nor, prior to payment in accordance
with the terms of this Agreement, shall any portion of such amounts be: (i)
subject to seizure by any creditor of any such beneficiary, by a proceeding at
law or in equity, for the payment of any debts, judgments, alimony or separate
maintenance obligations which may be owed by the Executive, the Executive's
spouse, or any designated beneficiary; or (ii) transferable by operation of law
in the event of bankruptcy, insolvency or otherwise. Any such attempted
assignment or transfer shall be void and shall terminate this Agreement, and the
Employer shall thereupon have no further liability hereunder.
10.6. BINDING EFFECT/MERGER OR REORGANIZATION. This Agreement
shall be binding upon and inure to the benefit of the Executive and the Employer
and, as applicable, their respective heirs, beneficiaries, legal
representatives, agents, successors and assigns. Accordingly, the Employer
shall not merge or consolidate into or with another corporation, or reorganize
or sell substantially all of its assets to another corporation, firm or person,
unless and until such succeeding or continuing corporation, firm or person
agrees to assume and discharge the obligations of the Employer under this
Agreement. Upon the occurrence of such event, the term "Employer" as used in
this Agreement shall be deemed to refer to such surviving or successor firm,
person, entity or corporation.
10.7. NONWAIVER. The failure of either party to enforce at any
time or for any period of time any one or more of the terms or conditions of
this Agreement shall not be a waiver of such term(s) or condition(s) or of that
party's right thereafter to enforce each and every term and condition of this
Agreement.
10.8. PARTIAL INVALIDITY. If any term, provision, covenant, or
condition of this Agreement is determined by an arbitrator or a court, as the
case may be, to be invalid, void, or unenforceable, such determination shall not
render any other term, provision, covenant or condition invalid, void or
unenforceable, and the Agreement shall remain in full force and effect
notwithstanding such partial invalidity.
10.9. ENTIRE AGREEMENT. This Agreement supersedes any and all
other agreements, either oral or in writing, between the parties with respect to
the subject matter of this Agreement and contains all of the covenants and
agreements between the parties with respect thereto. Each party to this
Agreement acknowledges that no other representations, inducements, promises, or
agreements, oral or otherwise, have been made by any party, or anyone acting on
behalf of any party, which are not set forth herein, and that no other
agreement, statement, or promise not contained in this Agreement shall be valid
or binding on either party.
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10.10. MODIFICATIONS. Any modification of this Agreement shall be
effective only if it is in writing and signed by each party or such party's
authorized representative.
10.11. PARAGRAPH HEADINGS. The paragraph headings used in this
Agreement are included solely for the convenience of the parties and shall not
affect or be used in connection with the interpretation of this Agreement.
10.12. NO STRICT CONSTRUCTION. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
person.
10.13. GOVERNING LAW. The laws of the State of California, other
than those laws denominated choice of law rules, and, where applicable, the
rules and regulations of (i) the Office of the California Superintendent of
Banks; (ii) the Board of Governors of the Federal Reserve System;
(iii) the Federal Deposit Insurance Corporation; or (iv) any other regulatory
agency or governmental authority having jurisdiction over the Employer, shall
govern the validity, interpretation, construction and effect of this Agreement.
IN WITNESS WHEREOF, the Employer and the Executive have executed this
Agreement on the date first above-written in the City of Red Bluff, Tehama
County, California.
THE EMPLOYER: THE EXECUTIVE:
TEHAMA COUNTY BANK,
a California corporation
By: /s/ John W. Koeberer /s/ David L. Roberts
-------------------------------- -------------------------------
JOHN W. KOEBERER, Chairman DAVID L. ROBERTS
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SCHEDULE A
NUMBER OF COMPLETE
YEARS WHICH HAVE ELAPSED APPLICABLE PERCENTAGE
------------------------ ---------------------
1.................................. 10.00%
2.................................. 20.00%
3.................................. 30.00%
4.................................. 40.00%
5.................................. 50.00%
6.................................. 60.00%
7.................................. 70.00%
8.................................. 80.00%
9.................................. 90.00%
10................................. 100.00%
14
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SCHEDULE B
BENEFICIARY DESIGNATION
To the Administrator of the Tehama County Bank Executive Salary
Continuation Agreement:
Pursuant to the Provisions of my Executive Salary Continuation Agreement
with Tehama County Bank, permitting the designation of a beneficiary or
beneficiaries by a participant, I hereby designate the following persons and
entities as primary and secondary beneficiaries of any benefit under said
Agreement payable by reason of my death:
PRIMARY BENEFICIARY:
Elaine J. Roberts 6655 Terra Linda Way Spouse
Redding, CA 96003
______________________ _____________________ _______________
Name Address Relationship
SECONDARY (CONTINGENT) BENEFICIARY:
Gary J. Roberts 6655 Terra Linda Way Son
Kevin M. Roberts Redding, CA 96003 Son
______________________ _____________________ _______________
Name Address Relationship
THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION IS HEREBY RESERVED.
ALL PRIOR DESIGNATIONS, IF ANY, OF PRIMARY BENEFICIARIES AND SECONDARY
BENEFICIARIES ARE HEREBY REVOKED.
The Administrator shall pay all sums payable under the Agreement by reason of my
death to the Primary Beneficiary, if he or she survives me, and if no Primary
Beneficiary shall survive me, then to the Secondary Beneficiary, and if no named
beneficiary survives me, then the Administrator shall pay all amounts in
accordance with the terms of my Executive Salary Continuation Agreement. In the
event that a named beneficiary survives me and dies prior to receiving the
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entire benefit payable under said Agreement, then and in that event, the
remaining unpaid benefit payable according to the terms of my Executive Salary
Continuation Agreement shall be payable to the personal representatives of the
estate of said beneficiary who survived me but died prior to receiving the total
benefit provided by my Executive Salary Continuation Agreement.
THE EXECUTIVE:
Dated: June 17 , 199 3 /s/ David L. Roberts
------------------------- ----------------------------------------
DAVID L. ROBERTS
CONSENT OF THE EXECUTIVE'S SPOUSE
TO THE ABOVE BENEFICIARY DESIGNATION:
------------------------------------
I, ____________________________, being the spouse of David L. Roberts,
after being afforded the opportunity to consult with independent counsel of my
choosing, do hereby acknowledge that I have read, agree and consent to the
foregoing Beneficiary Designation which relates to the Executive Salary
Continuation Agreement entered into by my spouse on ______________, 1993. I
understand that the above Beneficiary Designation may affect certain rights
which I may have in the benefits provided for under the terms of the Executive
Salary Continuation Agreement and in which I may have a marital property
interest.
Dated: _______________________, 199___.
__________________________________________
_______________
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<PAGE>
CERTIFICATE OF ACKNOWLEDGMENT
OF NOTARY PUBLIC
State of California )
) ss.
County of Tehama )
On ____________, 1993, before me, _______________, Notary Public, State of
California, personally appeared ________________
/ / personally known to me - OR
/ / proved to me on the basis of satisfactory evidence
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
________________________________________
Notary Public,
State of California
(Seal)
Capacity Claimed by Signer:
- - --------------------------
/ / Individual(s) Signing for Oneself/Themselves
/ / Corporate Officer(s) _________________ _____________________
Title Company
_________________ _____________________
Title Company
/ / Partner(s) ___________________________________________________
Partnership
/ / Trustees(s) __________________________________________________
Trust
/ / Attorney-in-Fact ______________________ _____________________
Principal Principal
/ / Other ______________________________ ________________________
Entity(ies) Represented Entity(ies) Represented
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Title or Type of Document:________________________________________
Date of Document:_______________ Number of Pages: ________________
Signer(s) Other Than Named Above: ________________________________
<PAGE>
(EXHIBIT 10.7(C))
EXECUTIVE SALARY CONTINUATION AGREEMENT
This Agreement is made and entered into this 17 day of June, 1993, by and
between Tehama County Bank, a corporation organized under the laws of the State
of California (the "Employer"), and Frank S. Onions, an individual residing in
the State of California (hereinafter referred to as the "Executive").
R E C I T A L S
WHEREAS, the Executive is an employee of the Employer and is serving
as its Chief Financial Officer;
WHEREAS, the Executive's experience and knowledge of the affairs of
the Employer and the banking industry are extensive and valuable;
WHEREAS, it is deemed to be in the best interests of the Employer to
provide the Executive with certain salary continuation benefits, on the terms
and conditions set forth herein, in order to reasonably induce the Executive to
remain in the Employer's employment; and
WHEREAS, the Executive and the Employer wish to specify in writing the
terms and conditions upon which this additional compensatory incentive will be
provided to the Executive, or to the Executive's spouse or the Executive's
designated beneficiaries, as the case may be;
NOW, THEREFORE, in consideration of the services to be performed in
the future, as well as the mutual promises and covenants contained herein, the
Executive and the Employer agree as follows:
A G R E E M E N T
1. TERMS AND DEFINITIONS.
1.1. ADMINISTRATOR. The Employer shall be the "Administrator"
and, solely for the purposes of ERISA, the "fiduciary" of this Agreement where a
fiduciary is required by ERISA.
1.2. ANNUAL BENEFIT. The term "Annual Benefit" shall mean an
annual sum of Twenty-Five Thousand Dollars ($25,000) multiplied by the
Applicable Percentage (defined below) and then reduced to the extent: (i)
required under the other
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provisions of this Agreement, including, but not limited to, Paragraphs 5, 6 and
7 hereof; (ii) required by reason of the lawful order of any regulatory agency
or body having jurisdiction over the Employer; and (iii) required in order for
the Employer to properly comply with any and all applicable state and federal
laws, including, but not limited to, income, employment and disability income
tax laws (e.g., FICA, FUTA, SDI).
1.3. APPLICABLE PERCENTAGE. The term "Applicable Percentage"
shall mean that percentage listed on Schedule "A" attached hereto which is
adjacent to the number of complete years (with a "year" being the performance of
personal services for or on behalf of the Employer for a period of 365 days)
which have elapsed starting from the Effective Date of this Agreement and ending
on the earlier of: (a) the date Executive dies (except as provided below in
this Paragraph); (b) the date Executive Retires (as defined below); (c) the date
Executive ceases to be employed by Employer (other than by reason of Disability,
as defined below); or (d) in the case of Executive's Disability (as defined
below), the date Executive becomes Disabled (as defined below). Notwithstanding
the foregoing or the percentages set forth on Schedule "A," but subject to all
other terms and conditions set forth herein, the "Applicable Percentage" shall
be zero percent (0%) in the event the Executive takes any action which prevents
the Employer from collecting the proceeds of any life insurance policy which the
Employer may happen to own at the time of the Executive's death and of which the
Employer is the designated beneficiary.
1.4. CHANGE IN CONTROL. The term "Change in Control" shall mean,
with respect to the Employer: (i) a change in control of the Employer of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or in response to any other form or
report to the regulatory agencies or governmental authorities having
jurisdiction over the Employer or any stock exchange on which the Employer's
shares are listed which requires the reporting of a change in control; (ii) any
merger, consolidation or reorganization of the Employer in which the Employer
does not survive; (iii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) of any assets
of the Employer having an aggregate fair market value of fifty percent (50%) of
the total value of the assets of the Employer, reflected in the most recent
balance sheet of the Employer; (iv) a transaction whereby any "person" (as such
term is used in the Exchange Act or any individual, corporation, partnership,
trust or any other entity) becomes the beneficial owner, directly or indirectly,
of securities of the Employer representing twenty-five percent (25%) or more of
the combined voting power of the Employer's then outstanding securities; or (v)
a situation where, in any one-year period, individuals who at the beginning of
such period constitute the Board of Directors of the Employer cease for any
reason to constitute at least a majority thereof, unless the election, or the
nomination for election by the Employer's shareholders, of each new director is
approved by a vote of at least three-quarters (3/4) of the directors then still
in office who were directors
2
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at the beginning of the period.
1.5. THE CODE. The "Code" shall mean the Internal Revenue Code
of 1986, as amended (the "Code").
1.6. DISABILITY/DISABLED. The term "Disability" or "Disabled"
shall have the same meaning given such term in the principal disability
insurance policy covering the Executive, which is incorporated herein by
reference to the limited extent thereof. In the event the Executive is not
covered by a disability policy containing a definition of "Disability" or
"Disabled," these terms shall mean an illness or incapacity which, having
continued for a period of one hundred and eighty (180) consecutive days,
prevents the Executive from adequately performing the Executive's regular
employment duties, as determined by an independent physician selected by mutual
agreement of the parties. For purposes of determining the Applicable
Percentage, the Executive shall be deemed to be Disabled as of the first day on
which the Executive is treated as being Disabled under the Executive's principal
disability insurance policy or, if no such policy exists, the one hundred and
eightieth (180th) consecutive day of the Executive's illness or incapacity, as
determined above.
1.7. EFFECTIVE DATE. The term "Effective Date" shall mean the
date upon which this Agreement was entered into by the parties, as first written
above.
1.8. ERISA. The term "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended.
1.9. PLAN YEAR. The term "Plan Year" shall mean the Employer's
fiscal year.
1.10. RETIREMENT. The term "Retirement" or "Retires" shall refer
to the date which the Executive acknowledges in writing to Employer, after
attaining sixty-five (65) years of age, to be the last day he will provide any
significant personal services, whether as an employee or independent consultant
or contractor, to Employer and to, for, or on behalf of, any other business
entity conducting, performing or making available to any person or entity
banking or other financial services of any kind. For purposes of this
Agreement, the phrase "significant personal services" shall mean more than ten
(10) hours of personal services rendered to one or more individuals or entities
in any thirty (30) day period.
1.11. SURVIVING SPOUSE. The term "Surviving Spouse" shall mean
the person, if any, who shall be legally married to the Executive on the date of
the Executive's death.
1.12. TERMINATION FOR CAUSE. The term "Termination for Cause"
3
<PAGE>
shall mean termination of the employment of the Executive by reason of any of
the following:
(a) A termination "for cause" as this term may be defined in any
written employment agreement entered into by and between the Employer and the
Executive;
(b) The willful breach of duty by the Executive in the course of
his employment;
(c) The habitual neglect by the Executive of his employment
responsibilities and duties;
(d) The Executive's deliberate violation of any state or federal
banking or securities laws, or of the Bylaws, rules, policies or resolutions of
the Employer, or of the rules or regulations of: (i) the Office of the
California Superintendent of Banks; (ii) the Board of Governors of the Federal
Reserve System; (iii) the Federal Deposit Insurance Corporation; or (iv) any
other state or federal regulatory agency or governmental authority having
jurisdiction over the Employer;
(e) The determination by a state or federal banking agency or
other governmental authority having jurisdiction over the Employer that the
Executive is not suitable to act in the capacity for which he is employed by the
Employer;
(f) The Executive is convicted of any felony or a crime
involving moral turpitude or a fraudulent or dishonest act; or
(g) The Executive discloses without authority any secret or
confidential information not otherwise publicly available concerning the
Employer or takes any action which the Employer's Board of Directors determines,
in its sole discretion and subject to good faith, fair dealing and
reasonableness, constitutes unfair competition with or induces any customer to
breach any contract with the Employer.
2. SCOPE, PURPOSE AND EFFECT.
2.1. CONTRACT OF EMPLOYMENT. Although this Agreement is intended
to provide the Executive with an additional incentive to remain in the employ of
the Employer, this Agreement shall not be deemed to constitute a contract of
employment between the Executive and the Employer nor shall any provision of
this Agreement restrict or expand the right of the Employer to terminate the
Executive's employment. This Agreement shall have no impact or effect upon any
separate written Employment Agreement which the Executive may have with the
Employer, it being the parties' intention and agreement that unless this
Agreement is specifically referenced in said Employment Agreement (or any
modification
4
<PAGE>
thereto), this Agreement (and the Employer's obligations hereunder) shall stand
separate and apart and shall have no effect upon, nor be affected by, the terms
and provisions of said Employment Agreement.
2.2. FRINGE BENEFIT. The benefits provided by this Agreement are
granted by the Employer as a fringe benefit to the Executive and are not a part
of any salary reduction plan or any arrangement deferring a bonus or a salary
increase. The Executive has no option to take any current payments or bonus in
lieu of the benefits provided by this Agreement.
3. PAYMENTS UPON OR AFTER RETIREMENT.
3.1. PAYMENTS UPON RETIREMENT. If the Executive shall remain in
the continuous employment of the Employer until attaining sixty-five (65) years
of age, the Executive (or the Executive's Surviving Spouse, as the case may be)
shall be entitled to be paid the Annual Benefit, as defined above, in equal
monthly installments, until: (a) both the Executive and the Executive's
Surviving Spouse, if any, have died; or (b) the Annual Benefit has been paid to
Executive and/or Executive's Surviving Spouse, as the case may be, for a period
of fifteen (15) years (One Hundred Eighty (180) months), whichever occurs first.
Each monthly installment shall be paid on the first day of each month, beginning
with the month following the month in which the Executive Retires or upon such
later date as may be mutually agreed upon by the Executive and the Employer in
advance of said Retirement date. At the Employer's sole and absolute
discretion, the Employer may increase the Annual Benefit as and when the
Employer determines the same to be appropriate in order to reflect a substantial
change in the cost of living. Notwithstanding anything contained herein to the
contrary, the Employer shall have no obligation hereunder to make any such
cost-of-living adjustment.
3.2. PAYMENTS IN THE EVENT OF DEATH AFTER RETIREMENT. The
Employer agrees that if the Executive Retires, but shall die before receiving
all of the One Hundred Eighty (180) monthly payments to which he is entitled
hereunder, the Employer will continue to make such monthly payments to the
Executive's Surviving Spouse for the remainder of her lifetime or the remainder
of the One Hundred Eighty (180) month period, whichever is shorter.
5
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4. PAYMENTS IN THE EVENT DEATH OR DISABILITY OCCURS PRIOR TO RETIREMENT.
4.1. PAYMENTS IN THE EVENT OF DEATH PRIOR TO RETIREMENT. In the
event the Executive should die while actively employed by the Employer at any
time after the Effective Date of this Agreement, but prior to attaining
sixty-five (65) years of age or if the Executive chooses to work after attaining
sixty-five (65) years of age, but dies before Retirement, the Employer agrees to
pay the Annual Benefit to the Executive's Surviving Spouse, in equal monthly
installments, for the remainder of her lifetime or fifteen (15) years (One
Hundred Eighty (180) months), whichever is shorter. Each installment shall be
paid on the first day of each month, beginning with the month following the
month in which the Executive's death occurs.
4.2. PAYMENTS IN THE EVENT OF DISABILITY PRIOR TO RETIREMENT. In
the event the Executive becomes Disabled while actively employed by the Employer
at any time after the date of this Agreement but prior to Retirement, the
Executive (or the Executive's Surviving Spouse) shall be entitled to be paid the
Annual Benefit, as defined above, in equal monthly installments, until:
(a) both the Executive and the Executive's Surviving Spouse, if any, have died;
or (b) the Annual Benefit has been paid to Executive and/or Executive's
Surviving spouse, as the case may be, for a period of fifteen (15) years (One
Hundred Eighty (180) months), whichever occurs first. Each installment shall be
paid on the first day of each month, beginning with the month following the
earlier of (1) the month in which the Executive attains sixty-five (65) years of
age; or (2) the date upon which the Executive is no longer entitled to receive
Disability benefits under the Executive's principal Disability insurance policy
and is, at such time, unable to return to and thereafter fulfil the
responsibilities associated with the employment position held with the Employer
prior to becoming Disabled by reason of such Disability continuing.
Notwithstanding the foregoing, if the Executive chooses to elect the Retirement
payout option set forth in Paragraph 3 hereof, the Executive may waive the
payout provisions set forth in this subparagraph 4.2 and in lieu thereof receive
the Annual Benefit which the Executive would be entitled to receive under the
terms of Paragraph 3 hereof.
5. PAYMENTS IN THE EVENT EMPLOYMENT IS TERMINATED PRIOR TO RETIREMENT.
As indicated in Paragraph 2 above, the Employer reserves the right to terminate
the Executive's employment, with or without cause but subject to any written
employment agreement which may then exist, at any time prior to the Executive's
Retirement. In the event that the employment of the Executive shall be
terminated, other than by reason of Disability or death, prior to the
Executive's attaining sixty-five (65) years of age, then this Agreement shall
terminate upon the date of such termination of employment; provided, however,
that the Executive shall be entitled to the following benefits as may be
applicable depending upon the circumstances surrounding the Executive's
termination:
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5.1. TERMINATION WITHOUT CAUSE. If the Executive's employment is
terminated by the Employer without cause, the Executive (or the Executive's
Surviving Spouse, as the case may be) shall be entitled to be paid the Annual
Benefit, as defined above, in equal monthly installments, until: (a) both the
Executive and the Executive's Surviving Spouse, if any, have died; or (b) the
Annual Benefit has been paid to Executive and/or Executive's Surviving spouse,
as the case may be, for a period of fifteen (15) years (One Hundred Eighty (180)
months), whichever occurs first. Each monthly installment shall be paid on the
first day of each month, beginning with the month following the month in which
Executive is terminated without cause or upon such later date as may be mutually
agreed upon by the Executive and the Employer in advance of the effective date
of the Executive's termination.
5.2. VOLUNTARY TERMINATION BY THE EXECUTIVE. It is acknowledged
and agreed by the Executive that the purpose of this Agreement is to assure the
Executive's continued employment with the Employer and that if the Executive
voluntarily terminates his employment with the Employer (other than by reason of
death, Disability or Retirement), then the Executive shall have willingly
forfeited any and all rights and benefits he may have under the terms of this
Agreement and that, furthermore, no amounts shall be due or paid to the
Executive by the Employer pursuant to the terms of this Agreement.
5.3. TERMINATION FOR CAUSE. The Executive agrees that if his
employment with the Employer is terminated "for cause," as defined in
subparagraph 1.12 of this Agreement, he shall forfeit any and all rights and
benefits he may have under the terms of this Agreement and shall have no right
to be paid any of the amounts which would otherwise be due or paid to the
Executive by the Employer pursuant to the terms of this Agreement.
5.4. TERMINATION BY THE EMPLOYER ON ACCOUNT OF OR AFTER A CHANGE
IN CONTROL. In the event: (i) the Executive's employment with the Employer is
terminated by the Employer in conjunction with, or by reason of, a "change in
control" (as defined in subparagraph 1.4 above); or (ii) by reason of the
Employer's actions any adverse and material change occurs in the scope of the
Executive's position, responsibilities, duties, salary, benefits, or location of
employment after a "change in control" (as defined in subparagraph 1.4) occurs;
or (iii) the Employer causes an event to occur which reasonably constitutes or
results in a demotion, a significant diminution of responsibilities or
authority, or a constructive termination (by forcing a resignation or otherwise)
of the Executive's employment after a "change in control" (as defined in
subparagraph 1.4) occurs, then the Executive (or the Executive's Surviving
Spouse, as the case may be) shall be entitled to be paid the Annual Benefit, as
defined above, in equal monthly installments, until: (a) both the Executive and
the Executive's Surviving Spouse, if any, have died; or (b) the Annual Benefit
has been paid to Executive and/or Executive's Surviving spouse, as the case may
be, for a
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period of fifteen (15) years (One Hundred Eighty (180) months), whichever occurs
first. Each installment shall be paid on the first day of each month, beginning
with the month following the month in which the Executive is terminated or the
action referred to above occurs.
6. ADDITIONAL LIMITATIONS ON THE AMOUNT OF THE ANNUAL BENEFIT. The
Executive acknowledges and agrees that the parties have entered into this
Agreement based upon the certain financial and tax accounting assumptions.
Accordingly, with full knowledge of the potential consequences the Executive
agrees that, notwithstanding anything contained herein to the contrary: (i) the
amount of the Annual Benefit shall be limited to that amount of the Annual
Benefit (determined without regard to this Paragraph 6) which will be deductible
by the Employer under the Code in the year in which payment is to be made to the
Executive; (ii) the Annual Benefit amount shall be deemed to be the last payment
made to the Executive and the first for which an income tax deduction, if any,
has been disallowed; and (iii) any compensatory amounts for which a deduction is
denied to the Employer shall, at the Employer's election, serve to first reduce
the Employer's obligation to make the monthly Annual Benefit payments otherwise
due and payable to the Executive under the terms of this Agreement. The
Executive recognizes that, in this regard, limitations on deductibility may be
imposed under, but not limited to, Code Section 280G. Consistent with the
foregoing, and in the event that any payment or benefit received or to be
received by the Executive, whether payable pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Employer
(together with the Annual Benefit, the "Total Payments"), will not be deductible
(in whole or in part) as a result of Code Section 280G, the Annual Benefit shall
be reduced until no portion of the Total Payments is nondeductible as a result
of Section 280G of the Code (or the Annual Benefit is reduced to zero (0)). For
purposes of this limitation:
(a) No portion of the Total Payments, the receipt or enjoyment
of which the Executive shall have effectively waived in writing prior to the
date of payment of any future Annual Benefit payments, shall be taken into
account;
(b) No portion of the Total Payments shall be taken into
account, which in the opinion of the tax counsel selected by the Employer and
acceptable to the Executive, does not constitute a "parachute payment" within
the meaning of Section 280G of the Code;
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(c) Future Annual Benefit payments shall be reduced only to the
extent necessary so that the Total Payments (other than those referred to in
clauses (a) or (b) above in their entirety) constitute reasonable compensation
for services actually rendered within the meaning of Section 280G of the Code,
in the opinion of tax counsel referred to in clause (b) above; and
(d) The value of any non-cash benefit or any deferred payment or
benefit included in the Total Payments shall be determined by the Employer's
independent auditors in accordance with the principles of Section 280G of the
Code.
7. RIGHT TO DETERMINE FUNDING METHODS. The Employer reserves the right
to determine, in its sole and absolute discretion, whether, to what extent and
by what method, if any, to provide for the payment of the amounts which may be
payable to the Executive, the Executive's spouse or the Executive's
beneficiaries under the terms of this Agreement. In the event that the Employer
elects to fund this Agreement, in whole or in part, through the use of life
insurance or annuities, or both, the Employer shall determine the ownership and
beneficial interests of any such policy of life insurance or annuity. The
Employer further reserves the right, in its sole and absolute discretion, to
terminate any such policy, and any other device used to fund its obligations
under this Agreement, at any time, in whole or in part. Consistent with
Paragraph 10 below, neither the Executive, the Executive's spouse nor the
Executive's beneficiaries shall have any right, title or interest in or to any
funding source or amount utilized by the Employer pursuant to this Agreement,
and any such funding source or amount shall not constitute security for the
performance of the Employer's obligations pursuant to this Agreement. In
connection with the foregoing, the Executive agrees to execute such documents
and undergo such medical examinations or tests which the Employer may request
and which may be reasonably necessary to facilitate any funding for this
Agreement including, without limitation, the Employer's acquisition of any
policy of insurance or annuity. Furthermore, a refusal by the Executive to
consent to, participate in and undergo any such medical examinations or tests
shall result in the immediate termination of this Agreement and the immediate
forfeiture by the Executive, the Executive's spouse and the Executive's
beneficiaries of any and all rights to payment hereunder.
8. CLAIMS PROCEDURE. The Employer shall, but only to the extent
necessary to comply with ERISA, be designated as the named fiduciary under this
Agreement and shall have authority to control and manage the operation and
administration of this Agreement. Consistent therewith, the Employer shall make
all determinations as to the rights to benefits under this Agreement. Any
decision by the Employer denying a claim by the Executive or the Executive's
spouse for benefits under this Agreement shall be stated in writing and
delivered or mailed, via registered or certified mail, to the Executive or the
Executive's spouse, as the case may be. Such decision shall set forth the
specific reasons for the denial of a claim. In
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addition, the Employer shall provide the Executive or the Executive's spouse
with a reasonable opportunity for a full and fair review of the decision denying
such claim.
9. STATUS AS AN UNSECURED GENERAL CREDITOR. Notwithstanding anything
contained herein to the contrary: (i) neither the Executive nor the Executive's
spouse shall have any legal or equitable rights, interests or claims in or to
any specific property or assets of the Employer; (ii) none of the Employer's
assets shall be held in or under any trust for the benefit of the Executive, the
Executive's spouse or the Executive's beneficiaries or held in any way as
security for the fulfillment of the obligations of the Employer under this
Agreement; (iii) all of the Employer's assets shall be and remain the general
unpledged and unrestricted assets of the Employer; (iv) the Employer's
obligation under this Agreement shall be that of an unfunded and unsecured
promise by the Employer to pay money in the future; and (v) the Executive, the
Executive's spouse and the Executive's beneficiaries shall be unsecured general
creditors with respect to any benefits which may be payable under the terms of
this Agreement.
10. MISCELLANEOUS.
10.1. OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL. The
Executive acknowledges that he has been afforded the opportunity to consult with
independent counsel of his choosing regarding both the benefits granted to him
under the terms of this Agreement and the terms and conditions which may affect
the Executive's right to these benefits. The Executive further acknowledges
that he has read, understands and consents to all of the terms and conditions of
this Agreement, and that he enters into this Agreement with a full understanding
of its terms and conditions.
10.2. ARBITRATION OF DISPUTES. All claims, disputes and other
matters in question arising out of or relating to this Agreement or the breach
or interpretation thereof, other than those matters which are to be determined
by the Employer in its sole and absolute discretion, shall be resolved by
binding arbitration before a representative member, selected by the mutual
agreement of the parties, of the Judicial Arbitration and Mediation Services,
Inc. ("JAMS"), presently located at 111 Pine Street, Suite 710, in San
Francisco, California. In the event JAMS is unable or unwilling to conduct the
arbitration provided for under the terms of this Paragraph, or has discontinued
its business, the parties agree that a representative member, selected by the
mutual agreement of the parties, of the American Arbitration Association
("AAA"), presently located at 417 Montgomery Street, in San Francisco,
California, shall conduct the binding arbitration referred to in this Paragraph.
Notice of the demand for arbitration shall be filed in writing with the other
party to this Agreement and with JAMS (or AAA, if necessary). In no event shall
the demand for arbitration be made after the date when institution of legal or
equitable proceedings based on such claim, dispute or other matter in question
would be barred by the applicable statute of limitations. The arbitration
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shall be subject to such rules of procedure used or established by JAMS, or if
there are none, the rules of procedure used or established by AAA. Any award
rendered by JAMS or AAA shall be final and binding upon the parties, and as
applicable, their respective heirs, beneficiaries, legal representatives,
agents, successors and assigns, and may be entered in any court having
jurisdiction thereof. The obligation of the parties to arbitrate pursuant to
this clause shall be specifically enforceable in accordance with, and shall be
conducted consistently with, the provisions of Title 9 of Part 3 of the
California Code of Civil Procedure. Any arbitration hereunder shall be
conducted in Red Bluff, California, unless otherwise agreed to by the parties.
10.3. ATTORNEYS' FEES. In the event of any arbitration or
litigation concerning any controversy, claim or dispute between the parties
hereto, arising out of or relating to this Agreement or the breach hereof, or
the interpretation hereof, the prevailing party shall be entitled to recover
from the losing party reasonable expenses, attorneys' fees and costs incurred in
connection therewith or in the enforcement or collection of any judgment or
award rendered therein. The "prevailing party" means the party determined by
the arbitrator(s) or court, as the case may be, to have most nearly prevailed,
even if such party did not prevail in all matters, not necessarily the one in
whose favor a judgment is rendered.
10.4. NOTICE. Any notice required or permitted of either the
Executive or the Employer under this Agreement shall be deemed to have been duly
given, if by personal delivery, upon the date received by the party or its
authorized representative; if by facsimile, upon transmission to a telephone
number previously provided by the party to whom the facsimile is transmitted as
reflected in the records of the party transmitting the facsimile and upon
reasonable confirmation of such transmission; and if by mail, on the third day
after mailing via U.S. first class mail, registered or certified, postage
prepaid and return receipt requested, and addressed to the party at the address
given below for the receipt of notices, or such changed address as may be
requested in writing by a party.
If to the Employer: Tehama County Bank
237 Main Street
Red Bluff, California 96080-0890
Attn: Chairman of the Board
-----------------------
If to the Executive: Frank S. Onions
P.O. BOX 433
------------------------------
Red Bluff, California 96080
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10.5. ASSIGNMENT. Neither the Executive nor the Executive's
spouse shall have any power or right to transfer, assign, anticipate,
hypothecate, modify or otherwise encumber any part or all of the amounts payable
hereunder, nor, prior to payment in accordance with the terms of this Agreement,
shall any portion of such amounts be: (i) subject to seizure by any creditor of
the Executive or the Executive's Surviving Spouse by a proceeding at law or in
equity, for the payment of any debts, judgments, alimony or separate maintenance
obligations which may be owed by the Executive or the Executive's spouse; or
(ii) transferable by operation of law in the event of bankruptcy, insolvency or
otherwise. Any such attempted assignment or transfer shall be void and shall
terminate this Agreement, and the Employer shall thereupon have no further
liability hereunder.
10.6. BINDING EFFECT/MERGER OR REORGANIZATION. This Agreement
shall be binding upon and inure to the benefit of the Executive and the Employer
and, as applicable, their respective heirs, beneficiaries, legal
representatives, agents, successors and assigns. Accordingly, the Employer
shall not merge or consolidate into or with another corporation, or reorganize
or sell substantially all of its assets to another corporation, firm or person,
unless and until such succeeding or continuing corporation, firm or person
agrees to assume and discharge the obligations of the Employer under this
Agreement. Upon the occurrence of such event, the term "Employer" as used in
this Agreement shall be deemed to refer to such surviving or successor firm,
person, entity or corporation.
10.7. NONWAIVER. The failure of either party to enforce at any time
or for any period of time any one or more of the terms or conditions of this
Agreement shall not be a waiver of such term(s) or condition(s) or of that
party's right thereafter to enforce each and every term and condition of this
Agreement.
10.8. PARTIAL INVALIDITY. If any term, provision, covenant, or
condition of this Agreement is determined by an arbitrator or a court, as the
case may be, to be invalid, void, or unenforceable, such determination shall not
render any other term, provision, covenant or condition invalid, void or
unenforceable, and the Agreement shall remain in full force and effect
notwithstanding such partial invalidity.
10.9. ENTIRE AGREEMENT. This Agreement supersedes any and all
other agreements, either oral or in writing, between the parties with respect to
the subject matter of this Agreement and contains all of the covenants and
agreements between the parties with respect thereto. Each party to this
Agreement acknowledges that no other representations, inducements, promises, or
agreements, oral or otherwise, have been made by any party, or anyone acting on
behalf of any party, which are not set forth herein, and that no other
agreement, statement, or promise not contained in this Agreement shall be valid
or binding on either party.
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10.10. MODIFICATIONS. Any modification of this Agreement shall
be effective only if it is in writing and signed by each party or such
party's authorized representative.
10.11. PARAGRAPH HEADINGS. The paragraph headings used in this
Agreement are included solely for the convenience of the parties and shall not
affect or be used in connection with the interpretation of this Agreement.
10.12. NO STRICT CONSTRUCTION. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
person.
10.13. GOVERNING LAW. The laws of the State of California, other
than those laws denominated choice of law rules, and, where applicable, the
rules and regulations of (i) the Office of the California Superintendent of
Banks; (ii) the Board of Governors of the Federal Reserve System;
(iii) the Federal Deposit Insurance Corporation; or (iv) any other regulatory
agency or governmental authority having jurisdiction over the Employer, shall
govern the validity, interpretation, construction and effect of this Agreement.
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IN WITNESS WHEREOF, the Employer and the Executive have executed this
Agreement on the date first above-written in the City of Red Bluff, Tehama
County, California.
THE EMPLOYER: THE EXECUTIVE:
TEHAMA COUNTY BANK,
a California corporation
By: /s/ John W. Koeberer /s/ Frank S. Onions
-------------------------------- -----------------------------
JOHN W. KOEBERER, Chairman FRANK S. ONIONS
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SCHEDULE A
NUMBER OF COMPLETE
YEARS WHICH HAVE ELAPSED APPLICABLE PERCENTAGE
------------------------ ---------------------
1.................................. 22.88%
2.................................. 44.23%
3.................................. 64.13%
4.................................. 82.69%
5.................................. 100.00%
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CERTIFICATE OF ACKNOWLEDGMENT
OF NOTARY PUBLIC
State of California )
) ss.
County of Tehama )
On ____________, 1993, before me, _______________, Notary Public, State of
California, personally appeared ________________
/ / personally known to me - OR
/ / proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
-----------------------------------
Notary Public,
State of California
[Seal]
CAPACITY CLAIMED BY SIGNER:
/ / Individual(s) Signing for Oneself/Themselves
/ / Corporate Officer(s)
--------------------- -------------------------
Title Company
--------------------- -------------------------
Title Company
/ / Partner(s)
-----------------------------------------------------------
Partnership
/ / Trustees(s)
----------------------------------------------------------
Trust
/ / Attorney-in-Fact
---------------------------- ----------------------
Principal Principal
/ / Other
-------------------------------- -----------------------------
Entity(ies) Represented Entity(ies) Represented
Title or Type of Document: Date of Document:
----------------------- ------------
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Number of Pages: Signer(s) Other Than Named Above:
---------------- -----------
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(EXHIBIT 10.7(D))
EXECUTIVE SALARY CONTINUATION AGREEMENT
This Agreement is made and entered into this 17 day of June, 1993, by and
between Tehama County Bank, a corporation organized under the laws of the State
of California (the "Employer"), and William P. Ellison, an individual residing
in the State of California (hereinafter referred to as the "Executive").
R E C I T A L S
WHEREAS, the Executive is an employee of the Employer and is serving
as its Vice President - Operations;
WHEREAS, the Executive's experience and knowledge of the affairs of
the Employer and the banking industry are extensive and valuable;
WHEREAS, it is deemed to be in the best interests of the Employer to
provide the Executive with certain salary continuation benefits, on the terms
and conditions set forth herein, in order to reasonably induce the Executive to
remain in the Employer's employment; and
WHEREAS, the Executive and the Employer wish to specify in writing the
terms and conditions upon which this additional compensatory incentive will be
provided to the Executive, or to the Executive's spouse or the Executive's
designated beneficiaries, as the case may be;
NOW, THEREFORE, in consideration of the services to be performed in
the future, as well as the mutual promises and covenants contained herein, the
Executive and the Employer agree as follows:
A G R E E M E N T
1. TERMS AND DEFINITIONS.
1.1. ADMINISTRATOR. The Employer shall be the
"Administrator" and, solely for the purposes of ERISA, the "fiduciary" of this
Agreement where a fiduciary is required by ERISA.
1.2. ANNUAL BENEFIT. The term "Annual Benefit" shall mean
an annual sum of Fifty Thousand Dollars ($50,000) multiplied by the Applicable
Percentage (defined below) and then reduced to the extent: (i) required under
the other provisions of this Agreement, including, but not limited to,
Paragraphs 5, 6 and 7 hereof; (ii) required by
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reason of the lawful order of any regulatory agency or body having jurisdiction
over the Employer; and (iii) required in order for the Employer to properly
comply with any and all applicable state and federal laws, including, but not
limited to, income, employment and disability income tax laws (e.g., FICA, FUTA,
SDI).
1.3. APPLICABLE PERCENTAGE. The term "Applicable
Percentage" shall mean that percentage listed on Schedule "A" attached hereto
which is adjacent to the number of complete years (with a "year" being the
performance of personal services for or on behalf of the Employer for a period
of 365 days) which have elapsed starting from the Effective Date of this
Agreement and ending on the earlier of: (a) the date Executive dies (except as
provided below in this Paragraph); (b) the date Executive Retires (as defined
below); (c) the date Executive ceases to be employed by Employer (other than by
reason of Disability, as defined below); or (d) in the case of Executive's
Disability (as defined below), the date Executive becomes Disabled (as defined
below). Notwithstanding the foregoing or the percentages set forth on Schedule
"A," but subject to all other terms and conditions set forth herein, the
"Applicable Percentage" shall be: (i) one hundred percent (100%) in the event
the Executive dies prior to Retirement but while employed full time by the
employer; and (ii) zero percent (0%) in the event the Executive takes any action
which prevents the Employer from collecting the proceeds of any life insurance
policy which the Employer may happen to own at the time of the Executive's death
and of which the Employer is the designated beneficiary.
1.4. BENEFICIARY. The term "beneficiary" or "designated
beneficiary" shall mean the person or persons whom the Executive shall designate
in a valid Beneficiary Designation, a copy of which is attached hereto as
Exhibit "B," to receive the benefits provided hereunder. A Beneficiary
Designation shall be valid only if it is in the form attached hereto and made a
part hereof and is received by the Administrator prior to the Executive's death.
1.5. CHANGE IN CONTROL. The term "Change in Control" shall
mean, with respect to the Employer: (i) a change in control of the Employer of
a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or in response to any other form or
report to the regulatory agencies or governmental authorities having
jurisdiction over the Employer or any stock exchange on which the Employer's
shares are listed which requires the reporting of a change in control; (ii) any
merger, consolidation or reorganization of the Employer in which the Employer
does not survive; (iii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) of any assets
of the Employer having an aggregate fair market value of fifty percent (50%) of
the total value of the assets of the Employer, reflected in the most recent
balance sheet of the Employer; (iv) a transaction whereby any "person" (as such
term is used in the Exchange Act or any individual, corporation, partnership,
trust or any other entity)
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becomes the beneficial owner, directly or indirectly, of securities of the
Employer representing twenty-five percent (25%) or more of the combined voting
power of the Employer's then outstanding securities; or (v) a situation where,
in any one-year period, individuals who at the beginning of such period
constitute the Board of Directors of the Employer cease for any reason to
constitute at least a majority thereof, unless the election, or the nomination
for election by the Employer's shareholders, of each new director is approved by
a vote of at least three-quarters (3/4) of the directors then still in office
who were directors at the beginning of the period.
1.6. THE CODE. The "Code" shall mean the Internal Revenue
Code of 1986, as amended (the "Code").
1.7. DISABILITY/DISABLED. The term "Disability" or
"Disabled" shall have the same meaning given such term in the principal
disability insurance policy covering the Executive, which is incorporated herein
by reference to the limited extent thereof. In the event the Executive is not
covered by a disability policy containing a definition of "Disability" or
"Disabled," these terms shall mean an illness or incapacity which, having
continued for a period of one hundred and eighty (180) consecutive days,
prevents the Executive from adequately performing the Executive's regular
employment duties, as determined by an independent physician selected by mutual
agreement of the parties. For purposes of determining the Applicable
Percentage, the Executive shall be deemed to be Disabled as of the first day on
which the Executive is treated as being Disabled under the Executive's principal
disability insurance policy or, if no such policy exists, the one hundred and
eightieth (180th) consecutive day of the Executive's illness or incapacity, as
determined above.
1.8. EFFECTIVE DATE. The term "Effective Date" shall mean
the date upon which this Agreement was entered into by the parties, as first
written above.
1.9. ERISA. The term "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended.
1.10. PLAN YEAR. The term "Plan Year" shall mean the
Employer's fiscal year.
1.11. RETIREMENT. The term "Retirement" or "Retires" shall
refer to the date which the Executive acknowledges in writing to Employer, after
attaining sixty-two (62) years of age, to be the last day he will provide any
significant personal services, whether as an employee or independent consultant
or contractor, to Employer and to, for, or on behalf of, any other business
entity conducting, performing or making available to any person or entity
banking or other financial services of any kind. For purposes of this
Agreement, the phrase "significant personal services" shall mean more than ten
(10) hours of personal services
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rendered to one or more individuals or entities in any thirty (30) day period.
1.12. SURVIVING SPOUSE. The term "Surviving Spouse" shall
mean the person, if any, who shall be legally married to the Executive on the
date of the Executive's death.
1.13. TERMINATION FOR CAUSE. The term "Termination for
Cause" shall mean termination of the employment of the Executive by reason of
any of the following:
(A) A termination "for cause" as this term may be defined
in any written employment agreement entered into by and between the Employer and
the Executive;
(B) The willful breach of duty by the Executive in the
course of his employment;
(C) The habitual neglect by the Executive of his employment
responsibilities and duties;
(D) The Executive's deliberate violation of any state or
federal banking or securities laws, or of the Bylaws, rules, policies or
resolutions of the Employer, or of the rules or regulations of: (i) the Office
of the California Superintendent of Banks; (ii) the Board of Governors of the
Federal Reserve System; (iii) the Federal Deposit Insurance Corporation; or (iv)
any other state or federal regulatory agency or governmental authority having
jurisdiction over the Employer;
(E) The determination by a state or federal banking agency
or other governmental authority having jurisdiction over the Employer that the
Executive is not suitable to act in the capacity for which he is employed by the
Employer;
(F) The Executive is convicted of any felony or a crime
involving moral turpitude or a fraudulent or dishonest act; or
(G) The Executive discloses without authority any secret or
confidential information not otherwise publicly available concerning the
Employer or takes any action which the Employer's Board of Directors determines,
in its sole discretion and subject to good faith, fair dealing and
reasonableness, constitutes unfair competition with or induces any customer to
breach any contract with the Employer.
2. SCOPE, PURPOSE AND EFFECT.
2.1. CONTRACT OF EMPLOYMENT. Although this Agreement is
intended
4
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to provide the Executive with an additional incentive to remain in the employ of
the Employer, this Agreement shall not be deemed to constitute a contract of
employment between the Executive and the Employer nor shall any provision of
this Agreement restrict or expand the right of the Employer to terminate the
Executive's employment. This Agreement shall have no impact or effect upon any
separate written Employment Agreement which the Executive may have with the
Employer, it being the parties' intention and agreement that unless this
Agreement is specifically referenced in said Employment Agreement (or any
modification thereto), this Agreement (and the Employer's obligations hereunder)
shall stand separate and apart and shall have no effect upon, nor be affected
by, the terms and provisions of said Employment Agreement.
2.2. FRINGE BENEFIT. The benefits provided by this
Agreement are granted by the Employer as a fringe benefit to the Executive and
are not a part of any salary reduction plan or any arrangement deferring a bonus
or a salary increase. The Executive has no option to take any current payments
or bonus in lieu of the benefits provided by this Agreement.
3. PAYMENTS UPON OR AFTER RETIREMENT.
3.1. PAYMENTS UPON RETIREMENT. If the Executive shall
remain in the continuous employment of the Employer until attaining sixty-two
(62) years of age, the Executive shall be entitled to be paid the Annual
Benefit, as defined above, in equal monthly installments, for a period of
fifteen (15) years (One Hundred Eighty (180) months), with each installment to
be paid on the first day of each month, beginning with the month following the
month in which the Executive Retires or upon such later date as may be mutually
agreed upon by the Executive and the Employer in advance of said Retirement
date. At the Employer's sole and absolute discretion, the Employer may increase
the Annual Benefit as and when the Employer determines the same to be
appropriate in order to reflect a substantial change in the cost of living.
Notwithstanding anything contained herein to the contrary, the Employer shall
have no obligation hereunder to make any such cost-of-living adjustment.
3.2. PAYMENTS IN THE EVENT OF DEATH AFTER RETIREMENT. The
Employer agrees that if the Executive Retires, but shall die before receiving
all of the One Hundred Eighty (180) monthly payments to which he is entitled
hereunder, the Employer will continue to make such monthly payments to the
Executive's designated beneficiary for the remaining period. If a valid
Beneficiary Designation is not in effect, then the remaining amounts due to the
Executive under the term of this Agreement shall be paid to the Executive's
Surviving Spouse. If the Executive leaves no Surviving Spouse, the remaining
amounts due to the Executive under the terms of this Agreement shall be paid to
the duly qualified personal representative, executor or administrator of the
Executive's estate.
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4. PAYMENTS IN THE EVENT DEATH OR DISABILITY OCCURS PRIOR TO RETIREMENT.
4.1. PAYMENTS IN THE EVENT OF DEATH PRIOR TO RETIREMENT. In
the event the Executive should die while actively employed by the Employer at
any time after the Effective Date of this Agreement, but prior to attaining
sixty-two (62) years of age or if the Executive chooses to work after attaining
sixty-two (62) years of age, but dies before Retirement, the Employer agrees to
pay the Annual Benefit to the Executive's designated beneficiary, in equal
monthly installments, for a period of fifteen (15) years (One Hundred Eighty
(180) months). If a valid Beneficiary Designation is not in effect, then the
remaining amounts due to the Executive under the term of this Agreement shall be
paid to the Executive's Surviving Spouse. If the Executive leaves no Surviving
Spouse, the remaining amounts due to the Executive under the terms of this
Agreement shall be paid to the duly qualified personal representative, executor
or administrator of the Executive's estate. Each installment shall be paid on
the first day of each month, beginning with the month following the month in
which the Executive's death occurs.
4.2. PAYMENTS IN THE EVENT OF DISABILITY PRIOR TO
RETIREMENT. In the event the Executive becomes Disabled while actively employed
by the Employer at any time after the date of this Agreement but prior to
Retirement, the Executive shall be entitled to be paid the Annual Benefit, as
defined above, in equal monthly installments, for a period of fifteen (15) years
(One Hundred Eighty (180) months), with each installment to be paid on the first
day of each month, beginning with the month following the earlier of (1) the
month in which the Executive attains sixty-two (62) years of age; or (2) the
date upon which the Executive is no longer entitled to receive Disability
benefits under the Executive's principal Disability insurance policy and is, at
such time, unable to return to and thereafter fulfil the responsibilities
associated with the employment position held with the Employer prior to becoming
Disabled by reason of such Disability continuing. Notwithstanding the
foregoing, if the Executive chooses to elect the Retirement payout option set
forth in Paragraph 3 hereof, the Executive may waive the payout provisions set
forth in this subparagraph 4.2 and in lieu thereof receive the Annual Benefit
which the Executive would be entitled to receive under the terms of Paragraph 3.
6
<PAGE>
5. PAYMENTS IN THE EVENT EMPLOYMENT IS TERMINATED PRIOR TO RETIREMENT.
As indicated in Paragraph 2 above, the Employer reserves the right to terminate
the Executive's employment, with or without cause but subject to any written
employment agreement which may then exist, at any time prior to the Executive's
Retirement. In the event that the employment of the Executive shall be
terminated, other than by reason of Disability or death, prior to the
Executive's attaining sixty-two (62) years of age, then this Agreement shall
terminate upon the date of such termination of employment; provided, however,
that the Executive shall be entitled to the following benefits as may be
applicable depending upon the circumstances surrounding the Executive's
termination:
5.1. TERMINATION WITHOUT CAUSE. If the Executive's
employment is terminated by the Employer without cause, the Executive shall be
entitled to be paid the Annual Benefit, as defined above, in equal monthly
installments for a period of fifteen (15) years (One Hundred Eighty (180)
months), with each installment to be paid on the first day of each month,
beginning with the month following the month in which Executive is terminated
without cause or upon such later date as may be mutually agreed upon by the
Executive and the Employer in advance of the effective date of the Executive's
termination.
5.2. VOLUNTARY TERMINATION BY THE EXECUTIVE. It is
acknowledged and agreed by the Executive that the purpose of this Agreement is
to assure the Executive's continued employment with the Employer and that if the
Executive voluntarily terminates his employment with the Employer (other than by
reason of death, Disability or Retirement), then the Executive shall have
willingly forfeited any and all rights and benefits he may have under the terms
of this Agreement and that, furthermore, no amounts shall be due or paid to the
Executive by the Employer pursuant to the terms of this Agreement.
5.3. TERMINATION FOR CAUSE. The Executive agrees that if
his employment with the Employer is terminated "for cause," as defined in
subparagraph 1.13 of this Agreement, he shall forfeit any and all rights and
benefits he may have under the terms of this Agreement and shall have no right
to be paid any of the amounts which would otherwise be due or paid to the
Executive by the Employer pursuant to the terms of this Agreement.
5.4. TERMINATION BY THE EMPLOYER ON ACCOUNT OF OR AFTER A
CHANGE IN CONTROL. In the event: (i) the Executive's employment with the
Employer is terminated by the Employer in conjunction with, or by reason of, a
"change in control" (as defined in subparagraph 1.5 above); or (ii) by reason of
the Employer's actions any adverse and material change occurs in the scope of
the Executive's position, responsibilities, duties, salary, benefits, or
location of employment after a "change in control" (as defined in subparagraph
1.5) occurs; or (iii) the Employer causes an event to occur which reasonably
constitutes or results in a demotion, a significant diminution of
responsibilities or authority, or
7
<PAGE>
a constructive termination (by forcing a resignation or otherwise) of the
Executive's employment after a "change in control" (as defined in subparagraph
1.5) occurs, then the Executive shall be entitled to be paid the Annual Benefit,
as defined above, in equal monthly installments for a period of fifteen (15)
years (One Hundred Eighty (180) months), with each installment to be paid on the
first day of each month, beginning with the month following the month in which
the Executive is terminated or the action referred to above occurs, whichever is
earlier.
6. ADDITIONAL LIMITATIONS ON THE AMOUNT OF THE ANNUAL BENEFIT. The
Executive acknowledges and agrees that the parties have entered into this
Agreement based upon the certain financial and tax accounting assumptions.
Accordingly, with full knowledge of the potential consequences the Executive
agrees that, notwithstanding anything contained herein to the contrary: (i) the
amount of the Annual Benefit shall be limited to that amount of the Annual
Benefit (determined without regard to this Paragraph 6) which will be deductible
by the Employer under the Code in the year in which payment is to be made to the
Executive; (ii) the Annual Benefit amount shall be deemed to be the last payment
made to the Executive and the first for which an income tax deduction, if any,
has been disallowed; and (iii) any compensatory amounts for which a deduction is
denied to the Employer shall, at the Employer's election, serve to first reduce
the Employer's obligation to make the monthly Annual Benefit payments otherwise
due and payable to the Executive under the terms of this Agreement. The
Executive recognizes that, in this regard, limitations on deductibility may be
imposed under, but not limited to, Code Section 280G. Consistent with the
foregoing, and in the event that any payment or benefit received or to be
received by the Executive, whether payable pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Employer
(together with the Annual Benefit, the "Total Payments"), will not be deductible
(in whole or in part) as a result of Code Section 280G, the Annual Benefit shall
be reduced until no portion of the Total Payments is nondeductible as a result
of Section 280G of the Code (or the Annual Benefit is reduced to zero (0)). For
purposes of this limitation:
(a) No portion of the Total Payments, the receipt or
enjoyment of which the Executive shall have effectively waived in writing prior
to the date of payment of any future Annual Benefit payments, shall be taken
into account;
(b) No portion of the Total Payments shall be taken into
account, which in the opinion of the tax counsel selected by the Employer and
acceptable to the Executive, does not constitute a "parachute payment" within
the meaning of Section 280G of the Code;
8
<PAGE>
(c) Future Annual Benefit payments shall be reduced only to
the extent necessary so that the Total Payments (other than those referred to in
clauses (a) or (b) above in their entirety) constitute reasonable compensation
for services actually rendered within the meaning of Section 280G of the Code,
in the opinion of tax counsel referred to in clause (b) above; and
(d) The value of any non-cash benefit or any deferred
payment or benefit included in the Total Payments shall be determined by the
Employer's independent auditors in accordance with the principles of Section
280G of the Code.
7. RIGHT TO DETERMINE FUNDING METHODS. The Employer reserves the right
to determine, in its sole and absolute discretion, whether, to what extent and
by what method, if any, to provide for the payment of the amounts which may be
payable to the Executive, the Executive's spouse or the Executive's
beneficiaries under the terms of this Agreement. In the event that the Employer
elects to fund this Agreement, in whole or in part, through the use of life
insurance or annuities, or both, the Employer shall determine the ownership and
beneficial interests of any such policy of life insurance or annuity. The
Employer further reserves the right, in its sole and absolute discretion, to
terminate any such policy, and any other device used to fund its obligations
under this Agreement, at any time, in whole or in part. Consistent with
Paragraph 9 below, neither the Executive, the Executive's spouse nor the
Executive's beneficiaries shall have any right, title or interest in or to any
funding source or amount utilized by the Employer pursuant to this Agreement,
and any such funding source or amount shall not constitute security for the
performance of the Employer's obligations pursuant to this Agreement. In
connection with the foregoing, the Executive agrees to execute such documents
and undergo such medical examinations or tests which the Employer may request
and which may be reasonably necessary to facilitate any funding for this
Agreement including, without limitation, the Employer's acquisition of any
policy of insurance or annuity. Furthermore, a refusal by the Executive to
consent to, participate in and undergo any such medical examinations or tests
shall result in the immediate termination of this Agreement and the immediate
forfeiture by the Executive, the Executive's spouse and the Executive's
beneficiaries of any and all rights to payment hereunder.
8. CLAIMS PROCEDURE. The Employer shall, but only to the extent
necessary to comply with ERISA, be designated as the named fiduciary under this
Agreement and shall have authority to control and manage the operation and
administration of this Agreement. Consistent therewith, the Employer shall make
all determinations as to the rights to benefits under this Agreement. Any
decision by the Employer denying a claim by the Executive, the Executive's
spouse, or the Executive's beneficiary for benefits under this Agreement shall
be stated in writing and delivered or mailed, via registered or certified mail,
to the Executive, the Executive's spouse or the Executive's beneficiary, as the
case may be. Such decision shall set
9
<PAGE>
forth the specific reasons for the denial of a claim. In addition, the Employer
shall provide the Executive, the Executive's spouse or the Executive's
beneficiary with a reasonable opportunity for a full and fair review of the
decision denying such claim.
9. STATUS AS AN UNSECURED GENERAL CREDITOR. Notwithstanding anything
contained herein to the contrary: (i) neither the Executive, the Executive's
spouse or the Executive's beneficiary shall have any legal or equitable rights,
interests or claims in or to any specific property or assets of the Employer;
(ii) none of the Employer's assets shall be held in or under any trust for the
benefit of the Executive, the Executive's spouse or the Executive's
beneficiaries or held in any way as security for the fulfillment of the
obligations of the Employer under this Agreement; (iii) all of the Employer's
assets shall be and remain the general unpledged and unrestricted assets of the
Employer; (iv) the Employer's obligation under this Agreement shall be that of
an unfunded and unsecured promise by the Employer to pay money in the future;
and (v) the Executive, the Executive's spouse and the Executive's beneficiaries
shall be unsecured general creditors with respect to any benefits which may be
payable under the terms of this Agreement.
10. MISCELLANEOUS.
10.1. OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL. The
Executive acknowledges that he has been afforded the opportunity to consult with
independent counsel of his choosing regarding both the benefits granted to him
under the terms of this Agreement and the terms and conditions which may affect
the Executive's right to these benefits. The Executive further acknowledges
that he has read, understands and consents to all of the terms and conditions of
this Agreement, and that he enters into this Agreement with a full understanding
of its terms and conditions.
10.2. ARBITRATION OF DISPUTES. All claims, disputes and
other matters in question arising out of or relating to this Agreement or the
breach or interpretation thereof, other than those matters which are to be
determined by the Employer in its sole and absolute discretion, shall be
resolved by binding arbitration before a representative member, selected by the
mutual agreement of the parties, of the Judicial Arbitration and Mediation
Services, Inc. ("JAMS"), presently located at 111 Pine Street, Suite 710, in San
Francisco, California. In the event JAMS is unable or unwilling to conduct the
arbitration provided for under the terms of this Paragraph, or has discontinued
its business, the parties agree that a representative member, selected by the
mutual agreement of the parties, of the American Arbitration Association
("AAA"), presently located at 417 Montgomery Street, in San Francisco,
California, shall conduct the binding arbitration referred to in this Paragraph.
Notice of the demand for arbitration shall be filed in writing with the other
party to this Agreement and with JAMS (or AAA, if necessary). In no event shall
the demand for arbitration be made after the date when institution of legal or
equitable proceedings based on such claim, dispute or other
10
<PAGE>
matter in question would be barred by the applicable statute of limitations.
The arbitration shall be subject to such rules of procedure used or established
by JAMS, or if there are none, the rules of procedure used or established by
AAA. Any award rendered by JAMS or AAA shall be final and binding upon the
parties, and as applicable, their respective heirs, beneficiaries, legal
representatives, agents, successors and assigns, and may be entered in any court
having jurisdiction thereof. The obligation of the parties to arbitrate
pursuant to this clause shall be specifically enforceable in accordance with,
and shall be conducted consistently with, the provisions of Title 9 of Part 3 of
the California Code of Civil Procedure. Any arbitration hereunder shall be
conducted in Red Bluff, California, unless otherwise agreed to by the parties.
10.3. ATTORNEYS' FEES. In the event of any arbitration or
litigation concerning any controversy, claim or dispute between the parties
hereto, arising out of or relating to this Agreement or the breach hereof, or
the interpretation hereof, the prevailing party shall be entitled to recover
from the losing party reasonable expenses, attorneys' fees and costs incurred in
connection therewith or in the enforcement or collection of any judgment or
award rendered therein. The "prevailing party" means the party determined by
the arbitrator(s) or court, as the case may be, to have most nearly prevailed,
even if such party did not prevail in all matters, not necessarily the one in
whose favor a judgment is rendered.
10.4. NOTICE. Any notice required or permitted of either the
Executive or the Employer under this Agreement shall be deemed to have been duly
given, if by personal delivery, upon the date received by the party or its
authorized representative; if by facsimile, upon transmission to a telephone
number previously provided by the party to whom the facsimile is transmitted as
reflected in the records of the party transmitting the facsimile and upon
reasonable confirmation of such transmission; and if by mail, on the third day
after mailing via U.S. first class mail, registered or certified, postage
prepaid and return receipt requested, and addressed to the party at the address
given below for the receipt of notices, or such changed address as may be
requested in writing by a party.
If to the Employer: Tehama County Bank
237 Main Street
Red Bluff, California 96080-0890
Attn: Chairman of the Board
-----------------------
If to the Executive: William P. Ellison
3435 Scenic Drive
----------------------------
Redding, California 96001
11
<PAGE>
10.5. ASSIGNMENT. Neither the Executive, the Executive's
spouse, nor any other beneficiary under this Agreement shall have any power or
right to transfer, assign, anticipate, hypothecate, modify or otherwise encumber
any part or all of the amounts payable hereunder, nor, prior to payment in
accordance with the terms of this Agreement, shall any portion of such amounts
be: (i) subject to seizure by any creditor of any such beneficiary, by a
proceeding at law or in equity, for the payment of any debts, judgments, alimony
or separate maintenance obligations which may be owed by the Executive, the
Executive's spouse, or any designated beneficiary; or (ii) transferable by
operation of law in the event of bankruptcy, insolvency or otherwise. Any such
attempted assignment or transfer shall be void and shall terminate this
Agreement, and the Employer shall thereupon have no further liability hereunder.
10.6. BINDING EFFECT/MERGER OR REORGANIZATION. This
Agreement shall be binding upon and inure to the benefit of the Executive and
the Employer and, as applicable, their respective heirs, beneficiaries, legal
representatives, agents, successors and assigns. Accordingly, the Employer
shall not merge or consolidate into or with another corporation, or reorganize
or sell substantially all of its assets to another corporation, firm or person,
unless and until such succeeding or continuing corporation, firm or person
agrees to assume and discharge the obligations of the Employer under this
Agreement. Upon the occurrence of such event, the term "Employer" as used in
this Agreement shall be deemed to refer to such surviving or successor firm,
person, entity or corporation.
10.7. NONWAIVER. The failure of either party to enforce at
any time or for any period of time any one or more of the terms or conditions
of this Agreement shall not be a waiver of such term(s) or condition(s) or of
that party's right thereafter to enforce each and every term and condition of
this Agreement.
12
<PAGE>
10.8. PARTIAL INVALIDITY. If any term, provision, covenant,
or condition of this Agreement is determined by an arbitrator or a court, as the
case may be, to be invalid, void, or unenforceable, such determination shall not
render any other term, provision, covenant or condition invalid, void or
unenforceable, and the Agreement shall remain in full force and effect
notwithstanding such partial invalidity.
10.9. ENTIRE AGREEMENT. This Agreement supersedes any and
all other agreements, either oral or in writing, between the parties with
respect to the subject matter of this Agreement and contains all of the
covenants and agreements between the parties with respect thereto. Each party
to this Agreement acknowledges that no other representations, inducements,
promises, or agreements, oral or otherwise, have been made by any party, or
anyone acting on behalf of any party, which are not set forth herein, and that
no other agreement, statement, or promise not contained in this Agreement shall
be valid or binding on either party.
10.10. MODIFICATIONS. Any modification of this Agreement
shall be effective only if it is in writing and signed by each party or such
party's authorized representative.
10.11. PARAGRAPH HEADINGS. The paragraph headings used in
this Agreement are included solely for the convenience of the parties and shall
not affect or be used in connection with the interpretation of this Agreement.
10.12. NO STRICT CONSTRUCTION. The language used in this
Agreement shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction will be applied
against any person.
10.13. GOVERNING LAW. The laws of the State of California,
other than those laws denominated choice of law rules, and, where applicable,
the rules and regulations of (i) the Office of the California Superintendent
of Banks; (ii) the Board of Governors of the Federal Reserve System; (iii)
the Federal Deposit Insurance Corporation; or (iv) any other regulatory
agency or governmental authority having jurisdiction over the Employer, shall
govern the validity, interpretation, construction and effect of this
Agreement.
13
<PAGE>
IN WITNESS WHEREOF, the Employer and the Executive have executed this
Agreement on the date first above-written in the City of Red Bluff, Tehama
County, California.
THE EMPLOYER: THE EXECUTIVE:
TEHAMA COUNTY BANK,
a California corporation
By: /s/ John W. Koeberer /s/ William P. Ellison
----------------------------- -----------------------------
JOHN W. KOEBERER, Chairman WILLIAM P. ELLISON
14
<PAGE>
SCHEDULE A
NUMBER OF COMPLETE
YEARS WHICH HAVE ELAPSED APPLICABLE PERCENTAGE
1.................................. 10.00%
2.................................. 20.00%
3.................................. 30.00%
4.................................. 40.00%
5.................................. 50.00%
6.................................. 60.00%
7.................................. 70.00%
8.................................. 80.00%
9.................................. 90.00%
10................................. 100.00%
15
<PAGE>
SCHEDULE B
BENEFICIARY DESIGNATION
To the Administrator of the Tehama County Bank Executive Salary
Continuation Agreement:
Pursuant to the Provisions of my Executive Salary Continuation Agreement
with Tehama County Bank, permitting the designation of a beneficiary or
beneficiaries by a participant, I hereby designate the following persons and
entities as primary and secondary beneficiaries of any benefit under said
Agreement payable by reason of my death:
PRIMARY BENEFICIARY:
Deborah A. Ellison 3435 Scenic Drive Spouse
Redding, CA 96001
- - ---------------------- ---------------------- --------------------
Name Address Relationship
SECONDARY (CONTINGENT) BENEFICIARY:
50% William Philip Ellison 3435 Scenic Drive Son
50% Samuel Robert Ellison Redding, CA 96001 Son
- - ---------------------- --------------------- --------------------
Name Address Relationship
THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION IS HEREBY RESERVED.
ALL PRIOR DESIGNATIONS, IF ANY, OF PRIMARY BENEFICIARIES AND SECONDARY
BENEFICIARIES ARE HEREBY REVOKED.
The Administrator shall pay all sums payable under the Agreement by reason of my
death to the Primary Beneficiary, if he or she survives me, and if no Primary
Beneficiary shall survive me, then to the Secondary Beneficiary, and if no named
beneficiary survives me, then the Administrator shall pay all amounts in
accordance with the terms of my Executive Salary
16
<PAGE>
Continuation Agreement. In the event that a named beneficiary survives me and
dies prior to receiving the entire benefit payable under said Agreement, then
and in that event, the remaining unpaid benefit payable according to the terms
of my Executive Salary Continuation Agreement shall be payable to the personal
representatives of the estate of said beneficiary who survived me but died prior
to receiving the total benefit provided by my Executive Salary Continuation
Agreement.
THE EXECUTIVE:
Dated: 17 June, 1993 /s/ William P. Ellison
---------------------------------------------
WILLIAM P. ELLISON
CONSENT OF THE EXECUTIVE'S SPOUSE
TO THE ABOVE BENEFICIARY DESIGNATION:
I, ____________________________, being the spouse of William P. Ellison,
after being afforded the opportunity to consult with independent counsel of my
choosing, do hereby acknowledge that I have read, agree and consent to the
foregoing Beneficiary Designation which relates to the Executive Salary
Continuation Agreement entered into by my spouse on ______________, 1993. I
understand that the above Beneficiary Designation may affect certain rights
which I may have in the benefits provided for under the terms of the Executive
Salary Continuation Agreement and in which I may have a marital property
interest.
Dated: , 199 .
------------------------ ---
--------------------------------------------
-------------------
17
<PAGE>
CERTIFICATE OF ACKNOWLEDGMENT
OF NOTARY PUBLIC
State of California )
) ss.
County of Tehama )
On ____________, 1993, before me, _______________, Notary Public, State of
California, personally appeared ________________
/ / personally known to me - OR
/ / proved to me on the basis of satisfactory evidence
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
-------------------------------------
Notary Public,
State of California
[Seal]
CAPACITY CLAIMED BY SIGNER:
/ / Individual(s) Signing for Oneself/Themselves
/ / Corporate Officer(s)
--------------------- ----------------------
Title Company
--------------------- ----------------------
Title Company
/ / Partner(s)
--------------------------------------------------------
Partnership
/ / Trustees(s)
-------------------------------------------------------
Trust
/ / Attorney-in-Fact
------------------------- ----------------------
Principal Principal
/ / Other
----------------------------- -----------------------------
Entity(ies) Represented Entity(ies) Represented
- - --------------------------------------------------------------------------------
Title or Type of Document: Date of Document:
---------------- -----------------
Number of Pages: Signer(s) Other Than Named Above:
------- ---------------------
<PAGE>
(Exhibit 13)
MESSAGE TO SHAREHOLDERS, CUSTOMERS AND FRIENDS:
By all meaningful measures, 1996 was another successful year for TEHAMA
BANK. Record earnings, continued growth, expansion into new markets, and a name
change all contributed to the year's achievements and set the stage for even
further opportunity ahead. Total assets surpassed the $140,000,000 threshold
during December 1996 and ended the year just below at $138,122,246. Net income
exceeded $1,939,000, up 4.9% from the previous year. Total equity return as a
percentage of average total assets (ROA) was 1.54%, and the total equity return
as a percentage of beginning equity capital (ROE) was 14.63%.
We are very pleased to once again see our results place us in the uppermost
quartile of California banks, and earn us the continued distinction of being a
"Super-Premier Performing Bank," as measured by performance ratios established
by the Findley Group, a well-known and highly respected industry consultant.
At year-end, several exciting events were taking place that will provide
many new challenges and opportunities in 1997 and beyond. Acquisition of two
new branches in Glenn County, Orland and Willows, significantly increases the
potential for new lending opportunities and customer relationships. Partnership
in a newly formed leasing company that focuses on providing funding sources to
companies that generate leases on industrial equipment should provide
significant non-interest income to the Bank. Additionally, TEHAMA BANK has
formulated plans to aggressively pursue opportunities available in the SBA
Lending market.
The many changes occurring in our industry provide both challenges and
opportunities for TEHAMA BANK. Developing new products to meet the changing
needs of our customers, controlling costs, maintaining our commitment to
"POSITIVELY OUTSTANDING SERVICE" and providing value to our shareholders have
been and will continue to be our primary goals. We believe your bank is well
positioned to meet these objectives.
The Board of Directors and management thank our customers and shareholders
who have been critical to the success of TEHAMA BANK.
BILL ELLISON JOHN KOEBERER
President, Chief Executive Officer Chairman of the Board
<PAGE>
TEHAMA BANK
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1996, 1995 AND 1994
and
INDEPENDENT AUDITOR'S REPORT
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
and Stockholders
Tehama Bank
We have audited the accompanying balance sheet of Tehama Bank (formerly
Tehama County Bank) as of December 31, 1996 and 1995, and the related statements
of income, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1996. These financial statements are the
responsibility of the Bank's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Tehama Bank as of December
31, 1996 and 1995, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
Perry-Smith&Co.
Certified Public Accountants
Sacramento, California
January 30, 1997
<PAGE>
TEHAMA BANK
BALANCE SHEET
DECEMBER 31, 1996 AND 1995
1996 1995
------------- ------------
ASSETS
Cash and due from banks $ 4,388,685 $ 6,241,908
Federal funds sold 5,000,000 13,800,000
Investment securities (market value of
$31,760,800 in 1996 and $22,639,650 in 1995)
(Note 2) 31,590,388 22,366,603
Loans, less allowance for loan losses of $896,733
in 1996 and $809,608 in 1995 (Note 3) 91,687,370 80,582,168
Bank premises and equipment, net (Note 4) 1,200,464 1,137,915
Other real estate 470,000 506,000
Accrued interest receivable and other assets 3,785,339 3,191,865
-------------- ------------
$ 138,122,246 $127,826,459
-------------- ------------
-------------- ------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 22,938,555 $ 20,920,696
Interest bearing (Note 5) 98,664,151 92,666,031
-------------- ------------
Total deposits 121,602,706 113,586,727
Accrued interest payable and other liabilities 1,406,364 1,153,869
-------------- ------------
Total liabilities 123,009,070 114,740,596
-------------- ------------
Commitments (Note 8)
Stockholders' equity (Note 9):
Preferred stock - no par value; 2,000,000
shares authorized; none issued
Common stock - no par value; 4,000,000
shares authorized; 1,610,940 and 1,450,621
shares issued and outstanding in 1996 and
1995, respectively 12,225,722 10,117,632
Retained earnings 2,905,644 2,924,523
Unrealized (loss) gain on available-for-sale
investment securities, net of taxes (Note 2) (18,190) 43,708
-------------- ------------
Total stockholders' equity 15,113,176 13,085,863
-------------- ------------
$ 138,122,246 $127,826,459
-------------- ------------
-------------- ------------
The accompanying notes are an integral
part of these financial statements.
2
<PAGE>
TEHAMA BANK
STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
----------- ----------- -----------
Interest income:
Interest and fees on loans $ 8,144,669 $ 7,775,753 $ 5,709,136
Interest on Federal funds sold 716,204 724,748 249,897
Interest on investment securities:
Taxable 876,606 386,425 426,640
Exempt from Federal income
taxes 536,484 536,955 560,447
----------- ----------- -----------
Total interest income 10,273,963 9,423,881 6,946,120
Interest expense on deposits (Note 5) 4,356,668 3,878,670 2,519,458
----------- ----------- -----------
Net interest income 5,917,295 5,545,211 4,426,662
Provision for loan losses (Note 3) 570,000 330,000 180,000
----------- ----------- -----------
Net interest income after
provision for loan losses 5,347,295 5,215,211 4,246,662
----------- ----------- -----------
Non-interest income:
Service charges 372,800 319,304 260,715
Merchant processing fees 1,229,003 1,185,210 1,147,454
Loan servicing fees 72,511 82,100 75,170
Gain on sale of loans 23,001 37,479 49,589
Other income 162,507 151,043 121,974
----------- ----------- -----------
Total non-interest income 1,859,822 1,775,136 1,654,902
----------- ----------- -----------
Other expenses:
Salaries and employee benefits
(Notes 3 and 11) 2,108,086 2,011,842 1,604,955
Occupancy 498,637 432,628 350,169
Other (Note 10) 1,701,933 1,658,198 1,380,002
----------- ----------- -----------
Total other expenses 4,308,656 4,102,668 3,335,126
----------- ----------- -----------
Income before income taxes 2,898,461 2,887,679 2,566,438
Income taxes (Note 6) 959,000 1,039,000 890,700
----------- ----------- -----------
Net income $ 1,939,461 $ 1,848,679 $ 1,675,738
----------- ----------- -----------
----------- ----------- -----------
Earnings per share $ 1.18 $ 1.12 $ 1.08
----------- ----------- -----------
----------- ----------- -----------
Weighted average number of
shares outstanding 1,643,968 1,652,584 1,553,455
----------- ----------- -----------
----------- ----------- -----------
The accompanying notes are an integral
part of these financial statements.
3
<PAGE>
TEHAMA BANK
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
UNREALIZED
(LOSS) GAIN
ON AVAILABLE-
COMMON STOCK FOR-SALE
---------------------- RETAINED INVESTMENT
SHARES AMOUNT EARNINGS SECURITIES TOTAL
------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1994 560,136 $ 6,631,323 $ 2,230,850 $ 8,862,173
Stock options exercised and
related tax benefit 40,639 353,441 353,441
10% stock dividend 56,060 1,121,200 (1,126,954) (5,754)
Two-for-one stock split 626,561
Net income 1,675,738 1,675,738
Unrealized loss on available-
for-sale investment securities,
net of taxes $ (127,582) (127,582)
--------- ------------ ----------- ------------ ------------
Balance, December 31, 1994 1,283,396 8,105,964 2,779,634 (127,582) 10,758,016
Stock options exercised and
related tax benefit 36,392 310,839 310,839
10% stock dividend 130,833 1,700,829 (1,703,790) (2,961)
Net income 1,848,679 1,848,679
Net change in unrealized (loss)
gain on available-for-sale
investment securities, net of
taxes (Note 2) 171,290 171,290
--------- ------------ ------------ ------------ ------------
Balance, December 31, 1995 1,450,621 10,117,632 2,924,523 43,708 13,085,863
Stock options exercised and
related tax benefit 15,468 152,601 152,601
10% stock dividend 144,851 1,955,489 (1,958,340) (2,851)
Net income 1,939,461 1,939,461
Net change in unrealized gain
(loss) on available-for-sale
investment securities, net of
taxes (Note 2) (61,898) (61,898)
--------- ------------ ----------- ------------ ------------
Balance, December 31, 1996 1,610,940 $ 12,225,722 $ 2,905,644 $ (18,190) $ 15,113,176
--------- ------------ ----------- ------------ ------------
--------- ------------ ----------- ------------ ------------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
4
<PAGE>
TEHAMA BANK
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,939,461 $ 1,848,679 $ 1,675,738
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan losses 570,000 330,000 180,000
Depreciation and amortization 160,486 141,194 91,234
Net change in premium and discount on
investments, net 786 (53,175) 24,477
(Decrease) increase in net deferred loan
origination fees and costs (35,569) (62,132) 101,359
(Gain) loss on sale of available-for-sale
investment securities (1,847) 200
Gain from called held-to-maturity investment
securities (4,111)
Loss on sale of other real estate 18,876 443
Net decrease in loans held for sale 262,750 936,140
Loss (gain) on sale of equipment 1,441 (1,713) 4,298
Increase in accrued interest receivable and
other assets (475,817) (114,669) (230,059)
Increase in accrued interest payable and
other liabilities 252,495 167,460 83,366
Deferred taxes (73,000) (94,000) (77,000)
------------- ------------- -------------
Net cash provided by operating activities 2,359,159 2,422,990 2,785,642
------------- ------------- -------------
Cash flows from investing activities:
Proceeds from sales of available-for-sale invest-
ment securities 271,739 500,000 1,000,000
Proceeds from called available-for-sale investment
securities 2,500,000
Proceeds from called held-to-maturity investment
securities 405,000 103,000
Proceeds from matured available-for-sale invest-
ment securities 3,435,000 2,340,000 2,580,000
Purchases of available-for-sale investment
securities (13,203,912) (7,067,800) (2,750,233)
Purchases of held-to-maturity investment
securities (2,792,045) (1,195,000) (138,565)
Principal payments received from available-
for-sale investment securities 53,092 44,174 88,823
Net increase in loans (11,848,173) (7,618,227) (15,753,780)
Purchases of premises and equipment (228,726) (107,088) (867,933)
Proceeds from sale of other real estate 225,664 15,792
Purchase of life insurance policies (420,000)
Proceeds from sale of equipment 4,250 12,550 19,592
------------- ------------- -------------
Net cash used in investing activities (21,178,111) (13,075,599) (16,139,096)
------------- ------------- -------------
</TABLE>
(Continued)
5
<PAGE>
TEHAMA BANK
STATEMENT OF CASH FLOWS
(Continued)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in demand deposits,
interest-bearing and savings accounts $ 13,747 $ 4,823,413 $ (3,014,664)
Net increase in time deposits 8,002,232 14,117,510 18,734,785
Payments for fractional shares (2,851) (2,961) (5,754)
Proceeds from exercise of stock options 152,601 310,839 353,441
------------- ------------- -------------
Net cash provided by financing activities 8,165,729 19,248,801 16,067,808
------------- ------------- -------------
(Decrease) increase in cash and cash
equivalents (10,653,223) 8,596,192 2,714,354
Cash and cash equivalents at beginning of year 20,041,908 11,445,716 8,731,362
------------- ------------- -------------
Cash and cash equivalents at end of year $ 9,388,685 $ 20,041,908 $ 11,445,716
------------- ------------- -------------
------------- ------------- -------------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest expense $ 4,320,615 $ 3,745,841 $ 2,418,401
Income taxes $ 1,145,181 $ 869,000 $ 900,996
Non-cash investing activities:
Real estate acquired through foreclosure $ 226,000 $ 107,235 $ 444,794
Other assets acquired through foreclosure of
consumer loans $ 453,409 $ 267,210
Net change in unrealized loss (gain) on
available-for-sale investment securities $ 106,555 $ 291,323 $ (216,241)
</TABLE>
The accompanying notes are an integral
part of these financial statements.
6
<PAGE>
TEHAMA BANK
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Tehama County Bank changed its name to Tehama Bank to reflect the expansion
of the Bank's service area to include Tehama, Butte, Shasta and Glenn
Counties.
The accounting and reporting policies of Tehama Bank conform with generally
accepted accounting principles and prevailing practices within the banking
industry.
INVESTMENT SECURITIES
Investments are classified into one of the following categories:
- Available-for-sale securities reported at fair value, with
unrealized gains and losses excluded from earnings and reported,
net of taxes, as a separate component of stockholders' equity.
- Held-to-maturity securities, which management has the positive
intent and ability to hold, reported at amortized cost, adjusted
for the accretion of discounts and amortization of premiums.
Management determines the appropriate classification of its investments at
the time of purchase and may only change the classification in certain
limited circumstances. All transfers between categories are accounted for
at fair value.
Gains or losses on the sale of investment securities are computed on the
specific identification method. Interest earned on investment securities
is reported in interest income, net of applicable adjustments for accretion
of discounts and amortization of premiums. In addition, unrealized losses
that are other than temporary are recognized in earnings for all
investments.
LOANS HELD FOR SALE
Loans held for sale consist of mortgage loans and are carried at the lower
of cost or market value. Market value is determined using the specific
identification method as of the balance sheet date. Unrealized losses and
realized gains or losses are determined on the specific identification
method and are reflected in non-interest income or expense. Loans held for
sale are included in accrued interest receivable and other assets.
7
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
LOANS
Loans are stated at principal balances outstanding, except for loans
transferred from loans held for sale which are carried at the lower of
principal balance or market value at the date of transfer, adjusted for
accretion of discounts. Interest is accrued daily based upon outstanding
loan balances. However, when, in the opinion of management, loans are
considered to be impaired and the future collectibility of interest and
principal is in serious doubt, loans are placed on nonaccrual status and
the accrual of interest income is suspended. Any interest accrued but
unpaid is charged against income. Payments received are applied to reduce
principal to the extent necessary to ensure collection. Subsequent
payments on these loans, or payments received on nonaccrual loans for which
the ultimate collectibility of principal is not in doubt, are applied first
to earned but unpaid interest and then to principal.
An impaired loan is measured based on the present value of expected future
cash flows discounted at the loan's effective interest rate or, as a
practical matter, at the loan's observable market price or the fair value
of collateral if the loan is collateral dependent. A loan is considered
impaired when, based on current information and events, it is probable that
the Bank will be unable to collect all amounts due (including both
principal and interest) in accordance with the contractual terms of the
loan agreement.
Loan origination fees, commitment fees, direct loan origination costs and
purchase premiums and discounts on loans are deferred and recognized as an
adjustment of yield, to be amortized to interest income over the
contractual term of the loan. The unamortized balance of deferred fees and
costs is reported as a component of net loans.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained to provide for losses related
to impaired loans and other losses that can be expected to occur in the
normal course of business. The determination of the allowance is based on
estimates made by management, to include consideration of the character of
the loan portfolio, specifically identified problem loans, potential losses
inherent in the portfolio taken as a whole and economic conditions in the
Bank's service area. These estimates are particularly susceptible to
changes in the economic environment and market conditions. The allowance
is established through a provision for loan losses which is charged to
expense.
OTHER REAL ESTATE
Other real estate includes real estate acquired in full or partial
settlement of loan obligations. When property is acquired, any excess of
the Bank's recorded investment in the loan balance and accrued interest
income over the estimated fair market value of the property, net of
estimated selling costs, is charged against the allowance for loan losses.
A valuation allowance for losses on other real estate is maintained to
provide for temporary declines in value. Subsequent gains or losses on
sales or writedowns resulting from permanent impairment are recorded in
other income or expense as incurred.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
8
<PAGE>
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are carried at cost. Depreciation is
determined using the straight-line method over the estimated useful lives
of the related assets. The useful lives of furniture, fixtures and
equipment are estimated to be three to ten years. Leasehold improvements
are amortized over the life of related leases, or the life of the asset,
whichever is shorter. When assets are sold or otherwise disposed of, the
cost and related accumulated depreciation are removed from the accounts,
and any resulting gain or loss is recognized in income for the period. The
cost of maintenance and repairs is charged to expense as incurred.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the tax consequences
of temporary differences between the financial statement and tax basis of
existing assets and liabilities. On the balance sheet, net deferred tax
assets are included in accrued interest receivable and other assets.
CASH AND CASH EQUIVALENTS
For the purpose of the statement of cash flows, cash and due from banks and
Federal funds sold are considered to be cash equivalents. Generally,
Federal funds are sold for one day periods.
EARNINGS PER SHARE
Earnings per share are calculated using the weighted-average number of
shares of common stock and common stock equivalents outstanding during the
year and are retroactively adjusted for stock dividends and stock splits
for all periods presented. The dilutive effect of stock options
outstanding from the application of the treasury stock method has been
considered in the computation of common stock equivalents.
MERCHANT BANK CARD PROCESSING
The Bank serves as a merchant processor, under contract with a third party,
for processing credit card transactions of selected merchants. Processing
fees are recorded as non-interest income and are based upon a contractual
percentage of valid credit card transactions processed each month. A
portion of direct costs of the Bank's merchant card processing personnel is
reimbursed by the program's marketing agent. The credit card processing
equipment and related software are the assets of the third party and are
not reflected on the Bank's financial statements.
LOANS SERVICED FOR OTHERS
Loans with unpaid balances of approximately $29,156,000 and $28,795,000
were being serviced for others at December 31, 1996 and 1995, respectively.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
USE OF ESTIMATES
9
<PAGE>
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These estimates and assumptions affect the reported amounts
of assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
NEW FINANCIAL ACCOUNTING STANDARDS
In June, 1996, the Financial Accounting Standards Board issued SFAS 125,
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES. Under the provisions of SFAS 125, an
entity recognizes the financial and servicing assets it controls and the
liabilities it has incurred, derecognizes financial assets when control has
been surrendered, and derecognizes liabilities when extinguished. In
addition, this Statement provides consistent standards for distinguishing
transfers of financial assets that are sales from transfers that are
secured borrowings. This Statement is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring
after December 31, 1996 and is to be applied prospectively. However, the
implementation of certain aspects of this Statement was subsequently
delayed for one year with the issuance of SFAS 127 in December, 1996.
Management does not believe that the adoption of SFAS 125 will have a
significant impact on its financial position and results of operations.
In October, 1995, the Financial Accounting Standards Board issued SFAS 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION which is effective for transactions
entered into after December 15, 1995. This Statement establishes a fair
value based method of accounting for stock-based compensation and
encourages, but does not require, companies to record compensation cost.
However, if compensation cost is material to the financial statements and
not recorded, pro-forma net income and earnings per share must be disclosed
as if the fair value method had been applied. The Bank has chosen to
continue to account for stock-based compensation under the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, ACCOUNTING
FOR STOCK ISSUED TO EMPLOYEES. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the quoted market price of
the Bank's stock at the date of grant over the exercise price.
Compensation cost related to options granted during 1996 and 1995 was
determined by management to be immaterial for disclosure purposes.
10
<PAGE>
2. INVESTMENT SECURITIES
The amortized cost and estimated market value of investment securities at
December 31, 1996 and 1995 consisted of the following:
AVAILABLE-FOR-SALE:
<TABLE>
<CAPTION>
1996
-------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-------------- ----------------- --------------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury se-
curities and obli-
gations of U.S.
Government cor-
porations and
agencies $ 19,662,402 $ 30,331 $ (69,733) $ 19,623,000
Obligations of
states and polit-
ical subdivisions 1,428,071 9,456 (1,527) 1,436,000
Other securities 366,800 366,800
-------------- ------------- ------------- -------------
$ 21,457,273 $ 39,787 $ (71,260) $ 21,425,800
-------------- ------------- ------------- -------------
-------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
1995
---------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
U.S. Treasury se-
curities and obli-
gations of U.S.
Government cor-
porations and
agencies $ 12,168,820 $ 73,937 $ (17,757) $ 12,225,000
Obligations of
states and polit-
ical subdivisions 2,034,098 19,192 (290) 2,053,000
Other securities 302,650 302,650
-------------- ------------- ------------- -------------
$ 14,505,5 $ 93,129 $ (18,047) $ 14,580,650
-------------- ------------- ------------- -------------
-------------- ------------- ------------- -------------
</TABLE>
11
<PAGE>
2. INVESTMENT SECURITIES (Continued)
AVAILABLE-FOR-SALE: (Continued)
Net unrealized (losses) gains on available-for-sale investment securities
totaling ($31,473) and $75,082 were recorded net of $13,283 and ($31,374)
in tax benefits (liabilities) as a separate component of stockholders'
equity at December 31 1996 and 1995, respectively. Proceeds of $2,771,739
from called available-for-sale investment securities resulted in no gains
or losses for the year ended December 31, 1996. Proceeds of $500,000 from
the sale of an available-for-sale investment security resulted in a gross
realized gain of $1,847 for the year ended December 31, 1995. Proceeds of
$1,000,000 from the sale of available-for-sale investment securities
resulted in gross realized losses of $200 for the year ended December 31,
1994.
HELD-TO-MATURITY:
<TABLE>
<CAPTION>
1996
------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Obligations of states
and political sub-
divisions $ 10,164,588 $ 215,408 $ (44,996) $ 10,335,000
-------------- ------------- ------------- -------------
-------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
1995
---------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Obligations of states
and political sub-
divisions $ 7,785,953 $ 282,572 $ (9,525) $ 8,059,000
-------------- ------------- ------------- -------------
-------------- ------------- ------------- -------------
</TABLE>
There were no sales or transfers of held-to-maturity investment
securities during the years ended December 31, 1996, 1995 or 1994.
12
<PAGE>
2. INVESTMENT SECURITIES (Continued)
The amortized cost and estimated market value of investment securities
at December 31, 1996 by contractual maturity are shown below. Expected
maturities will differ from contractual maturities because issuers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
Available-for-Sale Held-to-Maturity
--------------------------- --------------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Within one year $ 1,096,385 $ 1,100,000 $ 81,643 $ 82,000
After one year
through five years 19,936,168 19,897,000 1,999,177 2,046,000
After five years
through ten years 6,551,005 6,674,000
After ten years 59,920 64,000 1,532,763 1,533,000
------------- ------------- ------------- ------------
Subtotal 21,092,473 21,061,000 10,164,588 10,335,000
Federal Reserve
Bank stock 364,800 364,800
------------- ------------- ------------- ------------
$ 21,457,273 $ 21,425,800 $ 10,164,588 $ 10,335,000
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------
</TABLE>
Investment securities with amortized costs of approximately $2,201,000
and $976,000 and estimated market values of $2,199,000 and $1,000,000 were
pledged to secure deposits at December 31, 1996 and 1995, respectively.
13
<PAGE>
3. LOANS
Outstanding loans are summarized as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1996 1995
------------------ -----------------
<S> <C> <C>
Commercial $ 10,534,854 $ 10,594,510
Commercial real estate 8,959,255 10,034,620
Real estate construction 5,824,170 5,601,805
Real estate mortgage 31,456,377 26,623,732
Installment 36,916,096 29,162,986
------------------ -----------------
93,690,752 82,017,653
Unearned discount - installment (1,110,267) (593,926)
Deferred loan costs and fees, net 3,618 (31,951)
Allowance for loan losses (896,733) (809,608)
------------------ -----------------
$ 91,687,370 $ 80,582,168
------------------ -----------------
------------------ -----------------
</TABLE>
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Balance, beginning of year $ 809,608 $ 720,557 $ 671,037
Provision charged to operations 570,000 330,000 180,000
Losses charged to allowance (537,585) (250,067) (137,284)
Recoveries 54,710 9,118 6,804
------------ ------------ ------------
Balance, end of year $ 896,733 $ 809,608 $ 720,557
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
At December 31, 1996 and 1995, nonaccrual loans totaled $123,000 and
$136,000, respectively. Interest foregone on nonaccrual loans totaled
approximately $4,200, $3,600 and $4,000 for the years ended December 31,
1996, 1995 and 1994, respectively. The Bank had no impaired loans during
the years ended December 31, 1996 and 1995.
Salaries and employee benefits totaling $165,000, $71,000 and $185,000,
have been deferred as loan origination costs for the years ended December
31, 1996, 1995 and 1994, respectively.
14
<PAGE>
4. BANK PREMISES AND EQUIPMENT
Bank premises and equipment consisted of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1996 1995
------------------ -------------------
<S> <C> <C>
Bank premises $ 661,126 $ 647,490
Furniture, fixtures and equipment 1,049,774 862,775
Leasehold improvements 127,335 124,300
------------------ -------------------
1,838,235 1,634,565
Less accumulated depreciation
and amortization (637,771) (496,650)
------------------ -------------------
$ 1,200,464 $ 1,137,915
------------------ -------------------
------------------ -------------------
</TABLE>
Depreciation and amortization included in occupancy expense totaled
$160,486, $141,194 and $91,234 for the years ended December 31, 1996, 1995
and 1994, respectively.
5. INTEREST-BEARING DEPOSITS
Interest-bearing deposits consisted of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1996 1995
------------------ -------------------
<S> <C> <C>
Savings $ 10,046,368 $ 9,589,150
Money market 24,575,331 25,953,409
NOW accounts 7,855,017 8,938,269
Time, $100,000 or more 10,498,752 10,205,435
Other time 45,688,683 37,979,768
------------------ -------------------
$ 98,664,151 $ 92,666,031
------------------ -------------------
------------------ -------------------
</TABLE>
15
<PAGE>
5. INTEREST-BEARING DEPOSITS (Continued)
Interest expense recognized on interest-bearing deposits consisted of
the following:
Year Ended December 31,
---------------------------------
1996 1995 1994
---------- ---------- ----------
Savings $ 299,085 $ 302,566 $ 291,824
Money market 1,047,823 958,019 1,170,839
NOW accounts 149,802 143,162 139,099
Time, $100,000 or more 562,084 468,839 194,261
Other time 2,297,874 2,006,084 723,435
---------- ---------- ----------
$4,356,668 $3,878,670 $2,519,458
---------- ---------- ----------
---------- ---------- ----------
6. INCOME TAXES
The provision for income taxes for the years ended December 31, 1996,
1995 and 1994 consisted of the following:
Federal State Total
------- ----- -----
1996
----
Current $ 708,000 $ 324,000 $1,032,000
Deferred (63,000) (10,000) (73,000)
---------- ---------- ----------
Income tax expense $ 645,000 $ 314,000 $ 959,000
---------- ---------- ----------
---------- ---------- ----------
1995
----
Current $ 799,000 $ 334,000 $1,133,000
Deferred (71,000) (23,000) (94,000)
---------- ---------- ----------
Income tax expense $ 728,000 $ 311,000 $1,039,000
---------- ---------- ----------
---------- ---------- ----------
1994
----
Current $ 642,500 $ 325,200 $ 967,700
Deferred (52,000) (25,000) (77,000)
---------- ---------- ----------
Income tax expense $ 590,500 $ 300,200 $ 890,700
---------- ---------- ----------
---------- ---------- ----------
16
<PAGE>
6. INCOME TAXES (Continued)
Deferred tax assets (liabilities) are comprised of the following at
December 31, 1996 and 1995:
1996 1995
---------- ----------
Deferred tax assets:
Allowance for loan losses $ 322,000 $ 302,000
Salary continuation expense 203,000 140,000
Future benefit of state tax deduction 111,000 108,000
Unrealized loss on available-for-sale
investment securities 13,000
Other 20,000 26,000
---------- ----------
Total deferred tax assets 669,000 576,000
---------- ----------
Deferred tax liabilities:
Bank premises and equipment (52,000) (48,000)
Future liability of state deferred tax asset (39,000) (36,000)
Unrealized gain on available-for-sale
investment securities (31,000)
---------- ----------
Total deferred tax liabilities (91,000) (115,000)
---------- ----------
Net deferred tax assets $ 578,000 $ 461,000
---------- ----------
---------- ----------
The provision for income taxes differs from amounts computed by applying
the statutory Federal income tax rates to operating income before income
taxes. The tax effects for these differences are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------- ------------------ ----------------
Amount Rate% Amount Rate% Amount Rate%
------------ ----- ---------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Federal income tax
expense, at
statutory rate $ 985,477 34.0 $ 981,811 34.0 $872,588 34.0
State franchise tax,
net of Federal tax
effect 204,056 7.0 196,173 6.8 195,049 7.6
Interest on obligations
of states and political
subdivisions (188,585) (6.5) (180,714) (6.3) (201,995) (7.9)
Other (41,948) (1.4) 41,730 1.5 25,058 1.0
------------ ----- ----------- ----- -------- -----
Total income
tax expense $ 959,000 33.1 $ 1,039,000 36.0 $890,700 34.7
------------ ----- ----------- ----- -------- -----
------------ ----- ----------- ----- -------- -----
</TABLE>
7. SHORT-TERM BORROWING ARRANGEMENTS
The Bank has a $1,500,000 unsecured borrowing arrangement with one of
its correspondent
17
<PAGE>
banks and a Federal funds line of credit available up to an aggregate of
the fair market value of pledged securities. Securities pledged had
amortized costs totaling $989,295 and estimated market values totaling
approximately $999,000 at December 31, 1996. There were no borrowings
outstanding under these arrangements at December 31, 1996 and 1995.
8. COMMITMENTS
LEASES
The Bank's minimum commitments under operating leases for premises and
equipment as of December 31, 1996 are as follows:
Year Ending
December 31,
---------------
1997 $ 57,720
1998 57,720
1999 57,720
2000 57,720
2001 57,720
Thereafter 148,160
----------
$ 436,760
----------
----------
Rent expense for premises and equipment included in occupancy expense
totaled approximately $63,000, $58,000 and $60,100 for the years ended
December 31, 1996, 1995 and 1994, respectively.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Bank is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers and to reduce its own exposure to fluctuations in interest
rates. These financial instruments include commitments to extend credit
and letters of credit. These instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount
recognized on the balance sheet.
The Bank's exposure to credit loss in the event of nonperformance by the
other party for commitments to extend credit is represented by the
contractual amount of those instruments. Management uses the same
credit policies in making commitments as it does for loans included on
the balance sheet.
18
<PAGE>
8. COMMITMENTS (Continued)
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (Continued)
The following financial instruments represent off-balance-sheet credit
risk:
December 31,
------------------------
1996 1995
----------- ----------
Commitments to extend credit $ 9,763,000 $8,522,000
Letters of credit $ 109,000 $ 466,000
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since some of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash
requirements. Management evaluates each customer's credit-worthiness on
a case-by-case basis. The amount of collateral obtained, if deemed
necessary upon extension of credit, is based on management's credit
evaluation of the borrower. Collateral held varies, but may include
real estate, accounts receivable and personal property.
Letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. The credit
risk involved in issuing letters of credit is essentially the same as
that involved in extending loans to customers.
At December 31, 1996, commercial loan commitments represent
approximately 51% of total commitments and are generally unsecured. Real
estate loan commitments represent 42% of total commitments and are
generally secured by property with a loan-to-value ratio not to exceed
80%. Unsecured credit cards and consumer lines of credit represent the
remaining 7% of total commitments.
The Bank is a party to additional financial instruments entered into in
the normal course of business. These financial instruments include
commitments to sell loans. Commitments to sell loans are agreements to
sell to another party loans originated by the Bank. The Bank only sells
loans to third parties without recourse. The Bank is not exposed to
credit loss if the borrower fails to perform according to the promissory
note as long as the Bank has fulfilled its obligations as stated in the
sales commitment. The Bank retains servicing of these loans.
19
<PAGE>
8. COMMITMENTS (Continued)
SIGNIFICANT CONCENTRATION OF CREDIT RISK
The Bank grants real estate mortgage, real estate construction,
commercial and consumer loans to customers throughout Tehama, Butte and
Shasta counties.
Although the Bank has a diversified loan portfolio, a substantial
portion of its portfolio is secured by commercial and residential real
estate. Additionally, automobiles, trucks and recreational vehicles
secure a substantial portion of the Bank's installment loans. However,
personal and business income represent the primary source of repayment
for a majority of these loans.
MERCHANT BANK CARD PROCESSING
The Bank has a merchant transaction servicing agreement for the
processing of credit card transactions with First Data Resources, Inc.
("FDRI"). The Bank is contingently liable for undetected fraud on
third-party credit card transactions processed under its agreement with
FDRI. However, the Bank is reimbursed on a monthly basis by the
marketing agent of the program, CardService International, Inc. ("CSI"),
for losses incurred. The Bank has not incurred any losses to date for
transactions processed under this program.
DATA PROCESSING
The Bank has also entered into a data processing service agreement with
Bank Processing, Inc. Under this agreement, the Bank's minimum payments
are as follows:
Year Ending
December 31,
---------------
1997 $ 152,904
1998 152,904
1999 152,904
2000 89,194
----------
$ 547,906
----------
----------
9. STOCKHOLDERS' EQUITY
DIVIDENDS
Upon declaration by the Board of Directors, all stockholders of record
will be entitled to receive dividends. The California Financial Code
restricts the total cash dividend payment of any bank at any time to the
lessor of (1) the bank's retained earnings or (2) the bank's net income
for its last three fiscal years, less distributions made to stockholders
during the same three-year period. At December 31, 1996, retained
earnings of $674,794 were free of such restrictions.
9. STOCKHOLDERS' EQUITY (Continued)
20
<PAGE>
STOCK OPTIONS
In 1994, the Bank established a Stock Option Plan for which 439,544
shares of no par value common stock are reserved for issuance to
employees and directors under incentive and non-statutory agreements.
The plan requires that the option price may not be less than the fair
market value of the stock at the date the option is granted, and that
the stock must be paid in full at the time the option is exercised.
Options granted vest at 20 percent each year. The options under this
plan expire on dates determined by the Board of Directors, but not later
than ten years from the date of grant. The Bank's 1984 Stock Option
Plan expired during 1995. As of December 31, 1995, all options related
to the 1984 plan had been exercised or expired. The activity within
these plans are combined and summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------- ------------------ -----------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
-------- ---------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year 172,100 $ 8.75 196,012 $ 8.90 34,004 $ 3.68
Options granted 25,500 $ 11.97 86,500 $ 10.60
Options resulting from
two-for-one stock split 113,143 $ 8.97
Options resulting from
10% stock dividend 19,150 $ 9.13 16,480 $ 9.63 3,094 $ 3.68
Options exercised (15,468) $ 8.68 (36,392) $ 5.68 (40,729) $ 3.68
Options cancelled (5,456) $ 8.91 (4,000) $ 9.83
-------- -------- -------
Options outstanding,
end of year 195,826 $ 9.211 72,100 $ 9.63 196,012 $ 9.79
-------- -------- -------
-------- -------- -------
Options exercisable,
end of year 97,549 $ 8.94 68,840 $ 9.63 57,612 $ 7.83
-------- -------- -------
-------- -------- -------
</TABLE>
<TABLE>
<CAPTION>
Outstanding Options
------------------------------------------------
Number of Weighted Number of
Options Average Options
Outstanding Remaining Exercisable
December 31, Contractual December 31,
Range of Exercise Prices 1996 Life 1996
------------------------ ------------ ----------- ------------
<S> <C> <C> <C>
$ 8.68 115,278 2 years 63,313
$ 8.94 52,998 3 years 28,726
$ 10.75 5,000 5 years 1,000
$ 12.27 22,550 4 years 4,510
------------ ------------
195,826 97,549
------------ ------------
------------ ------------
</TABLE>
21
<PAGE>
9. STOCKHOLDERS' EQUITY (Continued)
REGULATORY CAPITAL
The Bank is subject to certain regulatory capital requirements
administered by the Federal Reserve Board and the Federal Deposit
Insurance Corporation (FDIC). Failure to meet these minimum capital
requirements can initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could have a
direct material effect on the Bank's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that
involve quantitative measures of the Bank's assets, liabilities and
certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are
also subject to qualitative judgments by the regulators about
components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios of
total and Tier 1 capital to risk-weighted assets and of Tier 1 capital
to average assets. Each of these components is defined in the
regulations. Management believes that the Bank meets all its capital
adequacy requirements as of December 31, 1996.
In addition, the most recent notification from the FDIC as of December
31, 1996 categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier 1
risk-based and Tier 1 leverage ratios as set forth below. There are no
conditions or events since that notification that management believes
have changed the Bank's category.
<TABLE>
<CAPTION>
1996 1995 1994
--------------------- --------------------- ----------------------
Amount Ratio Amount Ratio Amount Ratio
------------ ------- ------------ ------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Leverage Ratio
--------------
Tehama Bank $ 15,131,400 11.5% $ 13,042,200 10.2% $ 10,885,600 10.2%
Minimum requirement for "Well-
Capitalized" institution $ 6,582,600 5.0% $ 6,391,400 5.0% $ 5,322,000 5.0%
Minimum regulatory requirement $ 5,266,100 4.0% $ 5,113,100 4.0% $ 4,257,600 4.0%
TIER I RISK-BASED CAPITAL RATIO
-------------------------------
Tehama Bank $ 15,131,400 16.8% $ 13,042,200 15.5% $ 10,885,600 15.3%
Minimum requirement for "Well-
Capitalized" institution $ 5,420,400 6.0% $ 5,054,100 6.0% $ 4,280,900 6.0%
Minimum regulatory requirement $ 3,613,600 4.0% $ 3,369,400 4.0% $ 2,853,900 4.0%
TOTAL RISK-BASED CAPITAL RATIO
------------------------------
Tehama Bank $ 16,028,100 17.7% $ 13,851,800 16.4% $ 11,606,200 16.3%
Minimum requirement for "Well-
Capitalized" institution $ 9,034,000 10.0% $ 8,423,500 10.0% $ 7,134,800 10.0%
Minimum regulatory requirement $ 7,227,200 8.0% $ 6,738,800 8.0% $ 5,707,900 8.0%
</TABLE>
10. OTHER EXPENSES
Other expenses consisted of the following:
22
<PAGE>
Year Ended December 31,
---------------------------------
1996 1995 1994
----------- ---------- ----------
Data processing fees $ 173,665 $ 155,555 $ 130,613
Professional services 237,491 159,809 116,392
Regulatory assessments 19,494 122,176 195,468
Directors fees 151,350 151,983 107,150
Stationery and supplies 123,073 119,802 114,796
Advertising 151,705 111,743 107,576
Officer salary continuation
expense (Note 11) 144,227 127,098 115,764
Other 700,928 710,032 492,243
----------- ---------- ----------
$ 1,701,933 $1,658,198 $1,380,002
----------- ---------- ----------
----------- ---------- ----------
11. EMPLOYEE BENEFIT PLANS
EMPLOYEE STOCK OWNERSHIP PLAN
In 1987, the Bank adopted an employee stock ownership plan. This plan
is designed to invest primarily in securities of the Bank, purchased on
the open market. The Bank's contributions to the plan are at the sole
discretion of the Board of Directors. Contributions are limited on a
participant-by-participant basis to the lesser of $30,000 or 25% of the
participant's compensation for the plan year. Employee contributions
are not permitted. The Bank made contributions of $38,789, $41,328 and
$37,437 for the years ended December 31, 1996, 1995 and 1994,
respectively.
PROFIT SHARING PLAN
Effective September 1, 1992, the Bank adopted the Tehama Bank 401(k)
Profit Sharing Plan. The plan is available to all employees of the
Bank. The Bank's contribution to the plan is discretionary and is
allocated at 25 percent of each participant's annual contribution.
Aggregate contributions to the profit sharing plan totaled $24,324,
$15,517 and $11,783 for the years ended December 31, 1996, 1995 and
1994, respectively.
23
<PAGE>
11. EMPLOYEE BENEFIT PLANS (Continued)
SALARY CONTINUATION PLANS
The Bank has salary continuation plans for key executives. Under these
plans, the Bank is obligated to provide the executives, or their
designated beneficiaries, with annual benefits for fifteen years after
retirement or death. These benefits are substantially equivalent to
those available under insurance policies purchased by the Bank on the
lives of the executives. In addition, the estimated present value of
these future benefits are accrued over the period from the effective
date of the plans until each of the executive's expected retirement
dates. The expense recognized under these plans for the years ended
December 31, 1996, 1995 and 1994 totaled $144,227, $127,098 and
$115,764, respectively.
Under these plans, the Bank invested in single premium life insurance
policies with cash surrender values totaling $1,413,986 and $1,372,326
at December 31, 1996 and 1995, respectively. In the financial
statements, the cash surrender value of life insurance policies is
included in accrued interest receivable and other assets.
12. RELATED PARTY TRANSACTIONS
During the normal course of business, the Bank enters into transactions
with related parties, including directors and affiliates. These
transactions are on substantially the same terms and conditions as those
prevailing for comparable transactions with unrelated parties and
include borrowings from the Bank and the purchase of casualty insurance
and advertising through Directors.
The following is a summary of the aggregate lending activity involving
related party borrowers for the year ended December 31, 1996:
Balance, beginning of year $ 3,000,000
Disbursements 1,700,000
Amounts repaid (1,500,000)
--------------
Balance, end of year $ 3,200,000
--------------
--------------
Undisbursed commitments to related parties,
December 31, 1996 $ 450,000
--------------
--------------
24
<PAGE>
13. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Disclosures include estimated fair values for financial instruments for
which it is practicable to estimate fair value. These estimates are
made at a specific point in time based on relevant market data and
information about the financial instruments. These estimates do not
reflect any premium or discount that could result from offering the
Bank's entire holdings of a particular financial instrument for sale at
one time, nor do they attempt to estimate the value of anticipated
future business related to the instruments. In addition, the tax
ramifications related to the realization of unrealized gains and losses
can have a significant effect on fair value estimates and have not been
considered in any of these estimates.
Because no market exists for a significant portion of the Bank's
financial instruments, fair value estimates are based on judgments
regarding current economic conditions, risk characteristics of various
financial instruments and other factors. These estimates are subjective
in nature and involve uncertainties and matters of significant judgment
and therefore cannot be determined with precision. Changes in
assumptions could significantly affect the fair values presented.
The following methods and assumptions were used by management to
estimate the fair value of its financial instruments at December 31,
1996 and 1995:
CASH AND CASH EQUIVALENTS: For cash and cash equivalents, the carrying
amount is estimated to be fair value.
INVESTMENT SECURITIES: For investment securities, fair values are based
on quoted market prices, where available. If quoted market prices are
not available, fair values are estimated using quoted market prices for
similar securities and indications of value provided by brokers.
LOANS: For variable-rate loans that reprice frequently with no
significant change in credit risk, fair values are based on carrying
values. Fair values of loans held for sale are estimated using quoted
market prices for similar loans. Fair values for other loans are
estimated using discounted cash flow analyses, using interest rates
being offered at each reporting date for loans with similar terms to
borrowers of comparable creditworthiness. The carrying amount of
accrued interest receivable approximates its fair value.
LIFE INSURANCE POLICIES: The fair values of life insurance policies are
based on current cash surrender values at each reporting date as
provided by the insurers.
DEPOSITS: The fair values for demand deposits are, by definition, equal
to the amount payable on demand at each reporting date represented by
their carrying amount. Fair values for fixed-rate certificates of
deposit are estimated using a discounted cash flow analyses using
interest rates being offered at each reporting date by the Bank for
certificates with similar remaining maturities. The carrying amount of
accrued interest payable approximates its fair value.
25
<PAGE>
13. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
TREASURY TAX AND LOAN AGREEMENT: For the Treasury Tax and Loan
Agreement, the carrying amount is estimate to be fair value.
COMMITMENTS TO EXTEND CREDIT: Commitments to extend credit are
primarily for adjustable rate loans. For these commitments, there are
no differences between the committed amounts and fair values.
Commitments to fund fixed rate loans are at rates which approximate fair
value at each reporting date. The fair values of letters of credit are
estimated using the fees currently charged to enter into similar
agreements. These fees approximate fair value.
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
--------------------------- ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks $ 4,388,685 $ 4,388,685 $ 6,241,908 $ 6,241,908
Federal funds sold 5,000,000 5,000,000 13,800,000 13,800,000
Investment securities 31,590,388 31,760,800 22,366,603 22,639,650
Loans 91,687,370 92,823,000 80,582,168 81,996,000
Accrued interest receivable 955,833 955,833 1,052,677 1,052,677
Cash surrender value of life
insurance policies 1,413,986 1,413,986 1,372,326 1,372,326
------------- ------------- ------------- -------------
$ 135,036,262 $ 136,342,304 $ 125,415,682 $ 127,102,561
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Financial liabilities:
Deposits $ 121,602,706 $ 121,735,000 $ 113,586,727 $ 113,788,524
Accrued interest payable 354,585 354,585 318,532 318,532
Treasury tax and loan
agreement 383,443 383,443 40,000 40,000
------------- ------------- ------------- -------------
$ 122,340,734 $ 122,473,028 $ 113,945,259 $ 114,147,056
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Off-balance-sheet financial
instruments:
Commitments to extend credit $ 9,763,000 $ 9,763,000 $ 8,522,000 $ 8,522,000
Standby letters of credit 109,000 109,000 466,000 466,000
------------- ------------- ------------- -------------
$ 9,872,000 $ 9,872,000 $ 8,988,000 $ 8,988,000
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
26
<PAGE>
14. SUBSEQUENT EVENTS
The Bank has entered into an agreement to acquire selected assets and
liabilities of two Glenn County branches of a national bank effective
February, 1997. At December 31, 1996, a good-faith deposit of $150,000
related to the acquisition is included in accrued interest receivable
and other assets.
On January 2, 1997, the Bank invested $2,000,000 in a Joint Venture to
participate in the formation of Bancorp Financial Services, an equipment
leasing company. The leasing company is expected to begin operations in
February, 1997.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The purpose of this discussion is to focus on information about Tehama
Bank's financial condition and results of operations which is not otherwise
apparent from the financial statements in this annual report. Reference should
be made to those statements and accompanying notes and the selected financial
data presented elsewhere in this report for an understanding of the following
discussion and analysis.
BUSINESS ORGANIZATION
In 1996 Tehama County Bank undertook several expansion projects; opening a
Loan Production Office in Redding (Shasta County), successfully bidding to
purchase two new branches in Orland and Willows (Glenn County), and establishing
a partnership with Humboldt Bank to create a new leasing company called Bancorp
Financial Services, Inc. Acquisition of the two new branches was approved by
the Bank's shareholders and by the California Superintendent of Banks and the
entire transaction was completed on February 22, 1997. Expansion of the Bank's
business into these neighboring counties also led management to submit to
shareholders a proposal, also approved, to change the Bank's name to Tehama
Bank. This new name of Tehama Bank keeps the Bank's identity firmly planted in
the community that shared in the Bank's initial vision of banking, while
recognizing that the Bank now serves regional, as well as local needs.
The Bank engages in basic consumer and commercial banking, offering a
diverse range of traditional banking products and services to individuals,
businesses and the professional community. The Bank's main office and
administrative staff are located in Red Bluff. The Bank also has branch offices
in Los Molinos, Chico and as of February 22, 1997 in Orland and Willows.
Additionally, the Bank has a Dealer Loan Center that focuses on financing autos,
trucks, recreational vehicles, mobile homes and other related equipment sold by
Automobile and Recreational Vehicle Dealers, and a Loan Production Office in
Redding that focuses primarily on single family residence construction and
permanent financing, as well as commercial real estate loans. The Bank's market
area consists primarily of the counties in which the offices noted above are
located, their neighboring counties and occasionally beyond for some dealer,
agricultural and real estate loans.
OVERVIEW
For the fiscal year ended December 31, 1996 the Bank produced net income of
$1,939,461 representing an increase of $90,782 or 4.9% from 1995 net income of
$1,848,679. Total assets were $138,122,246 and total deposits equaled
$121,602,706 at December 31, 1996. Common shareholders' equity increased by
$2,108,090 to end the year at $12,225,722. In 1995 and 1994 common
shareholders' equity increased $2,011,668 and $1,474,641 respectively. During
1996 the Bank paid a 10% stock dividend, continuing a trend of stock dividend
payments that began in 1987. On a weighted-average common and common equivalent
share basis, earnings per share increased to $1.18 in 1996, up from $1.12 in
1995 and $1.08 in 1994.
28
<PAGE>
BALANCE SHEET AND NET INCOME ANALYSIS
Total assets of $138,122,246 at December 31, 1996, represent an increase of
$10,295,787 or 8.1% from the 1995 year-end figure of $127,826,459. Growth in
total assets was most significant in real estate mortgage loans--increasing $4.8
million from the previous year--and installment loans--increasing $7.8 million
from the previous year. Total deposits were $121,602,706 at December 31, 1996,
representing an increase of $8,015,979 or 7.1% from $113,586,727 at December 31,
1995. Growth in total deposits was most significant in time deposits less than
$100,000--increasing $7.7 million from the previous year--and non-interest
bearing demand deposits--increasing $2 million from the previous year.
The primary source of income for the Bank is net interest income, the
difference between the interest and fees earned on loans and investments and the
interest paid on deposits taken by the Bank to fund these activities. A primary
factor affecting the level of net interest income is the Bank's interest rate
margin, the difference between the yield earned on interest-earning assets and
the rate paid on interest-bearing liabilities, as well as the difference between
the relative amounts of average interest-earning assets and interest-bearing
liabilities.
The following table presents, for the periods indicated, the Bank's total
dollar amount of interest income from average interest-earning assets and the
resultant yields, as well as the interest expense on average interest-bearing
liabilities and the resultant cost, expressed both in dollars and rates. The
table also sets forth the net interest income and the net yield on interest-
earning assets for the periods indicated.
29
<PAGE>
AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND INTEREST YIELDS/RATES
<TABLE>
<CAPTION>
1996 1995 1994
- - --------------------------------- ----------------------------- ------------------------------- -----------------------------
Average Income / Yield / Average Income / Yield / Average Income / Yield /
(In thousands) Balance Expense Rate Balance Expense Rate Balance Expense Rate
- - --------------------------------- ----------------------------- ------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
INTEREST-EARNING ASSETS:
Commercial Loans (1) $ 10,589 $ 1,205 11.38% $ 12,282 $ 1,361 11.08% $ 9,931 $ 968 9.75%
Real Estate Loans (1) 44,012 3,873 8.80% 40,987 3,699 9.02% 38,493 2,925 7.60%
Installment Loans (1) 32,667 3,067 9.39% 28,201 2,716 9.63% 18,640 1,816 9.74%
Federal Funds Sold 13,636 716 5.25% 12,761 725 5.68% 6,281 250 3.98%
Total Investments (2) 24,110 1,413 5.86% 15,929 923 5.79% 17,849 987 5.53%
- - --------------------------------- ----------------------------- ------------------------------- -----------------------------
Total Interest-earning Assets 125,014 10,274 8.22% 110,160 9,424 8.55% 91,194 6,946 7.62%
- - --------------------------------- ----------------------------- ------------------------------- -----------------------------
NON-EARNING ASSETS:
Allowance for loan losses (933) (784) (713)
Unearned discount-installment (827) (692) (556)
Cash due from banks 3,786 3,435 2,976
Other real estate owned 485 538 228
Premises and equipment, net 1,304 1,207 840
Cash surrender value of
life insurance 1,389 1,350 910
Accrued interest receivable
and other assets 1,580 1,509 1,322
- - --------------------------------- --------- --------- --------
Total Assets $ 131,798 $ 116,723 $ 96,201
- - --------------------------------- --------- --------- --------
- - --------------------------------- --------- --------- --------
LIABILITIES AND
STOCKHOLDERS' EQUITY:
INTEREST-BEARING LIABILITIES:
Transaction accounts $ 33,279 $ 1,198 3.60% $ 31,366 $ 1,101 3.51% $ 39,634 $ 1,310 3.31%
Savings accounts 9,939 299 3.01% 9,580 303 3.16% 9,007 292 3.24%
Time deposits 52,205 2,846 5.45% 42,956 2,462 5.73% 19,987 908 4.54%
Federal funds purchased &
other short-term borrowings 285 14 4.91% 255 13 5.10% 255 9 3.53%
- - --------------------------------- ----------------------------- ------------------------------- -----------------------------
Total Interest-bearing
Liabilities 95,708 4,357 4.55% 84,157 3,879 4.61% 68,883 2,519 3.66%
- - --------------------------------- ----------------------------- ------------------------------- -----------------------------
NON-INTEREST BEARING LIABILITIES:
Demand deposits 21,274 19,683 17,012
Other liabilities 896 904 593
- - --------------------------------- --------- --------- --------
Total Liabilities 117,878 104,744 86,488
- - --------------------------------- --------- --------- --------
STOCKHOLDERS' EQUITY:
Common stock 11,477 9,448 7,470
Retained earnings 2,563 2,628 2,276
Unrealized loss on
investment securities (120) (97) (33)
- - --------------------------------- --------- --------- --------
Total Stockholders' Equity 13,920 11,979 9,713
- - --------------------------------- --------- --------- --------
Total Liabilities and
Stockholders' Equity $ 131,798 $ 116,723 $ 96,201
- - --------------------------------- --------- --------- --------
- - --------------------------------- --------- --------- --------
- - --------------------------------- ----------------------------- ------------------------------- -----------------------------
Net interest income $ 5,917 $ 5,545 $ 4,427
- - --------------------------------- -------- --------- --------
- - --------------------------------- -------- --------- --------
Interest income as a
percentage of average
interest-earning assets 8.22% 8.55% 7.62%
Interest expense as a
percentage of average
interest-earning assets 3.49% 3.52% 2.76%
- - --------------------------------- ----------------------------- ------------------------------- -----------------------------
Net yield on average
interest-earning assets 4.73% 5.03% 4.85%
- - --------------------------------- ----------------------------- ------------------------------- -----------------------------
</TABLE>
(1) Loan amounts include nonaccrual loans, but the related interest income has
been included only for the period prior to the loan being placed on a nonaccrual
basis. Loan interest income includes loan fees of approximately $297,000,
$336,000 and $247,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
(2) Applicable nontaxable yields have not been calculated on a taxable-
equivalent basis.
30
<PAGE>
Changes in net interest income can be attributed to changes in the yield on
interest-earning assets and to changes in the rate paid on interest-bearing
liabilities. It can also be attributed to changes in the volume of interest-
earning assets and interest-bearing liabilities. The following table presents,
for the periods indicated, a summary of the changes in interest income and
interest expense for each major component of interest-earning assets and
interest-bearing liabilities. It also shows the portion attributable to changes
in average rates versus the portion attributable to changes in average volumes
for the periods indicated. Changes in interest income and expense resulting
from combined rate and volume changes have been allocated based on the magnitude
of the individual volume and rate changes.
<TABLE>
<CAPTION>
(In thousands) 1996-1995 1995-1994
-------------------------- -----------------------------
Volume Rate Total Volume Rate Total
-------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN INTEREST INCOME:
Loans $ 544 $ (175) $ 369 $ 1,321 $ 746 $ 2,067
Investment Securities 479 11 490 (109) 46 (63)
Federal funds sold 48 (57) (9) 336 139 475
------------------------- ----------------------------
Total 1,071 (221) 850 1,548 931 2,479
------------------------- ----------------------------
INCREASE (DECREASE) IN INTEREST EXPENSE:
Transaction accounts 68 29 97 (286) 77 (209)
Savings accounts 11 (16) (5) 19 (7) 12
Time deposits 510 (126) 384 1,264 290 1,554
Other short term borrowings 2 - 2 - 4 4
------------------------- ----------------------------
Total 591 (113) 478 997 364 1,361
- - ------------------------------------------ ------------------------- ----------------------------
INCREASE (DECREASE) IN NET INTEREST INCOME $ 480 $ (108) $ 372 $ 551 $ 567 $ 1,118
------------------------- ----------------------------
------------------------- ----------------------------
</TABLE>
As disclosed in the foregoing table the Bank's net interest income in 1996
and 1995 increased over the preceding years by $372,000 (6.7%) and $1,118,000
(25.2%), respectively. During these same periods, average interest-earning
assets increased, by $14,854,000 (13.5%) and $18,966,000 (20.8%), respectively.
The increase in interest income from 1995 to 1996 is attributed to growth
in volume of average interest-earning assets, while declining rates limited the
amount of the total increase. Average total loans increased $5,798,000 in 1996
and, calculated at flat rates from the prior year, contributed $544,000 towards
an increase in interest income from the prior year. However, lower overall
rates in 1996 resulted in less income from the existing loan portfolio than
during the prior year, and a contribution of $175,000 less in interest income
over the prior year. During 1996, the loan portfolio therefore, contributed a
net $369,000 towards the total increase in interest income.
An analysis of the investment portfolio shows that increases in average
total investments and increases in overall rates on investments, both
contributed to the increase in interest income from 1995 to 1996. The volume
component of investment income contributed $479,000, while the rate component
contributed $11,000 for a total increase attributed to investments of $490,000.
31
<PAGE>
Average federal funds sold increased $875,000 in 1996, while average
interest rates decreased 0.43% in the same period. The growth in average
balances, again calculated at flat rates from the prior year, produced a
contribution to interest income of $48,000. However, decreases in rates had a
greater effect, and contributed a decrease of $57,000. The net change in total
interest income from 1995 to 1996 attributed to federal funds sold is a decrease
of $9,000.
The increase in interest expense from 1995 to 1996 is attributable
primarily to increases in volume of interest-bearing liabilities in contrast to
decreases in overall rates. Transaction accounts were the one exception where
rates increased slightly overall and both volume and rate contributed to the
increase in total interest expense. The volume component of transaction
accounts contributed $68,000 to increased interest expense and the rate
component contributed $29,000 to the total increase in expense, for a combined
$97,000 change from the prior year.
Savings accounts and time deposits both increased in volume in 1996,
contributing to increases in total interest expense. Both categories also
reflect decreased overall rates during the period, thereby contributing less
interest expense on existing levels of deposits than in the prior period. The
rate component of savings accounts was more significant than the volume growth,
resulting in a net decrease of $5,000 towards the change in total interest
expense. The volume growth in time deposits and its contribution towards
increasing interest expense outweighed the decreases associated with the lower
rates, resulting in a net increase of $384,000 towards the change in total
interest expense from 1995 to 1996.
Net interest income increased $372,000 in 1996 over 1995. Increases in
volume of interest-earning assets combined with increases in volume of interest-
bearing liabilities produced a net increase of $506,000, while combined changes
in rates earned on assets and paid on deposits produced a net decrease of
$134,000.
INVESTMENT SECURITIES
Investment securities of $31,590,388 at December 31, 1996 represent an
increase of $9,223,785 or 41% from the balance of $22,366,603 at December 31,
1995. Significant growth in investment securities took place in the fourth
quarter as management shifted dollars out of overnight federal funds sold and
into longer term securities in preparation for the acquisition of the two new
branches and approximately $18,000,000 in deposit liabilities during February
1997. As allowed under the Bank's investment policy, approximately seventy-five
percent of the increase occurred in investments classified as available-for-
sale. The remaining portion of new investments occurred in investments
classified as held-to-maturity.
The provisions of Statement of Financial Accounting Standards (SFAS) 115
require, among other things, that certain investments in debt and equity
securities be classified under three categories: securities available-for-sale;
securities held-to-maturity; and trading securities. Securities classified as
available-for-sale are to be reported at fair value with unrealized gains and
losses excluded from earnings and reported as a separate component of
shareholders' equity, net of tax; securities classified as held-to-maturity are
to be reported at amortized cost; and securities classified as trading
securities are to be reported at fair value with unrealized gains and losses
included in operations. The Bank does not have any securities classified as
trading securities.
32
<PAGE>
The following table sets forth the estimated market value of securities
available-for-sale as of December 31, 1996 and weighted-average yields of such
securities:
<TABLE>
<CAPTION>
AFTER ONE AFTER FIVE
SECURITIES AVAILABLE-FOR-SALE (1) WITHIN BUT WITHIN BUT WITHIN AFTER
ONE YEAR FIVE YEARS TEN YEARS TEN YEARS TOTAL
- - -------------------------------- -------------- ------------------ -------------- --------------- ------------------
(In thousands) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
- - -------------------------------- -------------- ------------------ -------------- --------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasuries $ 500 5.80% $ 500 5.80%
U.S. Government agencies $ 19,061 6.37% $ 64 10.23% 19,125 6.38%
Obligations of states and
political subdivisions 600 4.45% 836 4.18% 1,436 4.29%
Other securities (2) 365 6.00% 365 6.00%
- - -------------------------------- -------------- ------------------ -------------- -------------- ------------------
Total $1,465 5.30% $ 19,897 6.28% $ - 0.00% $ 64 10.23% $ 21,426 6.22%
- - -------------------------------- -------------- ------------------ -------------- -------------- ------------------
-------------- ------------------ -------------- -------------- ------------------
</TABLE>
(1) Yields calculated on nontaxable securities have not been adjusted to
reflect tax equivalent effects.
(2) Federal Reserve Bank stock that is required to be held and does not have a
stated maturity.
The following table sets forth the amortized cost of securities
held-to-maturity as of December 31, 1996 and weighted-average yields of such
securities:
<TABLE>
<CAPTION>
AFTER ONE AFTER FIVE
SECURITIES HELD-TO-MATURITY (1) WITHIN BUT WITHIN BUT WITHIN AFTER
ONE YEAR FIVE YEARS TEN YEARS TEN YEARS TOTAL
- - -------------------------------- -------------- ------------------ -------------- --------------- -------------------
(In thousands) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
- - -------------------------------- -------------- ------------------ -------------- --------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
Obligations of states and
political subdivisions $82 6.52% $1,999 4.99% $6,551 5.31% $1,533 5.35% $10,165 5.26%
- - -------------------------------- -------------- ------------------ -------------- --------------- ------------------
Total $82 6.52% $1,999 4.99% $6,551 5.31% $1,533 5.35% $10,165 5.26%
- - -------------------------------- -------------- ------------------ -------------- --------------- ------------------
-------------- ------------------ -------------- --------------- ------------------
</TABLE>
The following table is a comparison of the amortized cost and approximate
fair value of the investment securities portfolio as of December 31, 1996, 1995,
and 1994, respectively.
<TABLE>
<CAPTION>
1996 1995 1994
- - --------------------------------- --------------------- ----------------------- ----------------------
(In thousands) Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
- - --------------------------------- ---------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities and
obligations of U.S. Government
corporations and agencies $ 19,662 $ 19,623 $ 12,169 $ 12,225 $ 6,711 $ 6,503
Obligations of states and
political subdivisions 11,593 11,771 9,820 10,112 9,907 9,738
- - --------------------------------- ---------------------- ---------------------- ----------------------
Other securities 367 367 303 303 240 240
- - --------------------------------- ---------------------- ---------------------- ----------------------
Total Investment Securities $ 31,622 $ 31,761 $ 22,292 $ 22,640 $ 16,858 $ 16,481
- - --------------------------------- ---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
</TABLE>
33
<PAGE>
LOANS
The Bank uses its funds primarily to support its lending activities within
its defined market area. Direct loans are originated at each of the Bank's
branch offices and by real estate and agricultural specialists who may cover the
Bank's entire service area. The following table represents a breakdown of the
Bank's loan portfolio in both dollars outstanding as well as a percentage of
total loans for the years ended December 31, 1996, 1995, 1994, 1993, and 1992,
respectively.
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994 1993 1992
- - ------------------------------ ------------------- ------------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial $ 10,535 11.2% $ 10,594 12.9% $ 11,067 14.8% $ 9,101 15.3% $ 9,779 22.8%
Commercial real estate 8,959 9.6% 10,035 12.2% 7,842 10.5% 8,106 13.6% 7,986 18.6%
Real estate construction 5,824 6.2% 5,602 6.8% 5,619 7.5% 6,254 10.5% 2,005 4.7%
Real estate mortgage 31,456 33.6% 26,624 32.5% 25,867 34.6% 20,975 35.3% 11,840 27.6%
Installment 36,916 39.4% 29,163 35.6% 24,408 32.6% 15,075 25.3% 11,332 26.3%
- - ------------------------------ ------------------- ------------------- ----------------- --------------- ---------------
Subtotal 93,690 100.0% 82,018 100.0% 74,803 100.0% 59,511 100.0% 42,942 100.0%
- - ------------------------------ ------------------- ------------------- ----------------- --------------- ---------------
Less:
Unearned discount-installment (1,110) (594) (565) (354)
Net deferred loan fees & costs 4 (32) (94) (165) (93)
Allowance for loan losses (897) (810) (721) (671) (514)
- - ------------------------------ ------------------- ------------------- ----------------- --------------- ---------------
Total loans, net $ 91,687 $ 80,582 $ 73,423 $58,321 $42,335
- - ------------------------------ ------------------- ------------------- ----------------- --------------- ---------------
</TABLE>
Real estate and installment loans commonly fall into planned pricing and
maturity models for routine types of credits. Commercial loans tend to be more
unique and generally have pricing and/or maturity set on an individual loan
basis. The following table sets forth the maturity distribution of the loan
portfolio as of December 31, 1996.
AFTER ONE
(In thousands) WITHIN BUT WITHIN AFTER
ONE YEAR FIVE YEARS FIVE YEARS TOTAL
- - -------------- -------- ---------- ---------- ----------
Loans:
Commercial $ 5,786 $ 3,784 $ 965 $ 10,535
Real estate 8,294 14,310 23,635 46,239
Installment 6,215 22,143 8,558 36,916
- - -------------- -------- ---------- ---------- ----------
Total $ 20,295 $ 40,237 $ 33,158 $ 93,690
- - -------------- -------- ---------- ---------- ----------
-------- ---------- ---------- ----------
Commercial and commercial real estate loans comprised approximately 20% of
the Bank's loan portfolio at December 31, 1996, compared to 25% at December 31,
1995. These loans are generally made to small and mid-size businesses and
professionals. Commercial loans are diversified as to industries and types of
business, with no material industry or specific borrower concentrations. Most
of these loans have floating rates with the majority tied to the national Prime
Rate. The primary source of repayment on most commercial loans is cash flow
from primary business operations. Collateral in the form of real estate, cash,
accounts receivable, inventory, equipment or other financial instruments is
often obtained as a secondary source of repayment.
Real estate construction and real estate mortgage loans comprised
approximately 40% of the Bank's loan portfolio at December 31, 1996, compared to
just over 39% at December 31, 1995. Real estate construction loans are
primarily made for the construction of single family residential housing. These
loans are secured by deeds of trust on the primary property. Real estate
mortgage loans include single family and multi-family residential loans, farm
and ranch properties, as well as some non-residential properties. Real estate
mortgage loans are secured by first deeds of trust and may either have fixed or
adjustable interest rates.
34
<PAGE>
Installment loans comprised approximately 40% of the Bank's loan portfolio
at December 31, 1996, compared to approximately 36% at December 31, 1995. This
category includes traditional consumer loans (vehicles, credit cards, lines of
credit) and may be secured by title to various types of collateral or be
unsecured. Loans made by the Bank's Dealer Center are included in this
category.
CREDIT RISK ELEMENTS
The Bank assesses and manages credit risk on an ongoing basis through
formal lending policies, stringent approval and credit review processes, and
extensive internal monitoring. Additionally, the Bank contracts with an outside
loan review consultant to periodically review the existing loan portfolio.
Management believes its ability to identify and assess risk and return
characteristics of the Bank's loan portfolio is critical for profitability and
growth. Management strives to continue the historically low level of credit
losses by continuing its emphasis on credit quality in the loan approval
process, active credit administration and regular monitoring. With this in
mind, management has designed and implemented a comprehensive loan review and
grading system that functions to continually assess the credit risk inherent in
the loan portfolio. Additionally, management believes its ability to manage
portfolio credit risk is enhanced by the knowledge of the Bank's service area
possessed by its lending personnel and Board of Directors.
The Bank's policy is to cease accruing interest when a loan becomes 90 days
past due as to principal or interest, when the full, timely collection of
interest and principal becomes uncertain; or when a portion of the principal
balance has been charged off, unless the loan is well secured and in the process
of collection. When a loan is placed on nonaccrual status, the accrued and
uncollected interest receivable is reversed and the loan is accounted for on the
cash method thereafter, until qualifying for return to accrual status.
Generally, a loan may be returned to accrual status when all delinquent interest
and principal become current in accordance with the terms of the loan agreement
or when the loan is both well secured and in process of collection. At December
31, 1996 the Bank did not have any loans past due 90 days or more that were not
transferred to a nonaccrual status. The following table summarizes the
nonaccrual loans as of December 31, 1996, 1995, 1994, and 1993, respectively:
1996 1995 1994 1993
---------- ---------- ---------- ----------
Nonaccrual loans $ 123,000 $ 136,000 $ 258,000 $ 822,000
- - ----------------- ---------- ---------- ---------- ----------
Interest foregone $ 4,200 $ 3,600 $ 4,000 $ 26,000
- - ----------------- ---------- ---------- ---------- ----------
Loans delinquent over thirty days averaged 2.0% in 1996, 1.6% in 1995, 2.2%
in 1994, 1.9% in 1993, and 1.1% in 1992. Increased focus on collections during
the last two months of the year helped achieve a delinquency percentage of 1.2%
as of December 31, 1996. The Bank's level of delinquent loans has consistently
been below industry averages. Statewide, loan delinquencies have ranged between
3% and 5.5% during these same periods.
Management is not aware of any potential problem loans, which were accruing
interest and current at December 31, 1996, where serious doubt exists as to the
ability of the borrower to comply with present repayment terms. Aside from
local and statewide economic conditions that affect all of the Bank's borrowers,
management does not believe there is any concentration of loans exceeding 10% of
total loans to borrowers engaged in similar activities which could be similarly
impacted by changes in the economy.
35
<PAGE>
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses reflects management's judgment as to the
level which is considered adequate to absorb potential losses inherent in the
loan portfolio. This allowance is increased by provisions charged to expense
and reduced by loan charge-offs, net of recoveries. Management determines an
appropriate provision based on information currently available to analyze credit
loss potential, including: (1) composition of the loan portfolio and its growth
in the period, (2) a comprehensive grading and review of new and existing loans
outstanding, (3) past charge-off experience, and (4) current economic
conditions, as well as recent changes and trends.
The allowance for loan losses totaled $896,733, or .96% of gross loans as
of December 31, 1996, compared to $809,608, or .99% as of December 31, 1995.
The provision for loan losses was $570,000 for the year ended December 31, 1996,
compared to $330,000 and $180,000 in the previous two years. Based on
information currently available to analyze loan loss potential, management
believes the existing allowance for loan losses is adequate. The following
table presents the activity within the allowance for loan losses for the years
ended December 31, 1996, 1995, 1994, 1993, and 1992, respectively.
(In thousands) 1996 1995 1994 1993 1992
- - ---------------------------- ------ ------ ------ ------ -------
Balance, beginning of year $ 810 $ 721 $ 671 $ 515 $ 508
Provision charged to expense 570 330 180 183 125
- - ---------------------------- ------ ------ ------ ------ ------
CHARGE-OFFS:
Commercial (131) (87) (1) (65)
Real estate (75)
Installment (407) (163) (62) (27) (53)
------ ------ ------ ------ ------
Total Charge-offs (538) (250) (137) (28) (118)
- - ---------------------------- ------ ------ ------ ------ ------
RECOVERIES:
Commercial 16 1
Installment 39 9 7
------ ------ ------ ------ ------
Total Recoveries 55 9 7 1
- - ---------------------------- ------ ------ ------ ------ ------
Net Charge-offs (483) (241) (130) (27) (118)
- - ---------------------------- ------ ------ ------ ------ ------
Balance, end of year $ 897 $ 810 $ 721 $ 671 $ 515
- - ---------------------------- ------ ------ ------ ------ ------
------ ------ ------ ------ ------
The following table represents the allocation of the allowance for loan
losses for the years ended December 31, 1996, 1995, 1994, 1993, and 1992,
respectively.
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994 1993 1992
- - -------------------- ------------------ ------------------- ------------------ ------------------ ------------------
Percent Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total
- - -------------------- ------------------ ------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial $ 119 13.3% $ 170 21.0% $ 183 25.4% $ 289 43.1% $ 67 13.0%
Real Estate 147 16.4% 189 23.3% 226 31.3% 216 32.2% 263 51.1%
Installment 631 70.3% 451 55.7% 312 43.3% 166 24.7% 185 35.9%
- - -------------------- ------------------ ------------------- ------------------ ----------------- ------------------
Total Allowance $ 897 100.0% $ 810 100.0% $ 721 100.0% $ 671 100.0% $ 515 100.0%
- - -------------------- ------------------ ------------------- ------------------ ----------------- ------------------
------------------ ------------------- ------------------ ----------------- ------------------
</TABLE>
36
<PAGE>
DEPOSITS
Deposits represent the Bank's primary source of funds to support its
various lending and investment activities. Virtually all of the Bank's deposits
are from individuals and businesses within the Bank's service area. The Bank's
deposit mix has traditionally seen approximately 80% held in interest-bearing
accounts and 20% in non-interest bearing accounts. Total deposits equaled
$121,602,706 at year-end, representing an increase of $8,015,979 or 7.1% from
the 1995 year-end figure of $113,586,727. Growth in total deposits was most
significant in time deposits less than $100,000--up $7.7 million from the
previous year--and non-interest bearing demand deposits--up $2 million from the
previous year. The following table represents the composition of the deposit
mix at December 31, 1996, 1995, 1994, 1993, and 1992, respectively.
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994 1993 1992
- - ---------------------- ------------------- ------------------ ------------------ ------------------ ------------------
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
- - ---------------------- ------------------- ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NONINTEREST-BEARING:
Demand $ 22,939 18.9% $ 20,921 18.4% $ 18,801 19.9% $ 15,182 19.2% $ 9,697 14.8%
INTEREST-BEARING:
Savings 10,046 8.3% 9,589 8.4% 9,158 9.7% 8,676 11.0% 8,359 12.8%
Money market 24,575 20.2% 25,953 22.9% 25,939 27.3% 33,024 41.9% 21,995 33.7%
NOW accounts 7,855 6.5% 8,938 7.9% 6,680 7.1% 6,711 8.5% 7,616 11.7%
Time, $100,000 or more 10,499 8.6% 10,206 9.0% 6,398 6.8% 3,485 4.4% 3,785 5.8%
Other time 45,689 37.5% 37,980 33.4% 27,670 29.2% 11,848 15.0% 13,882 21.2%
- - ---------------------- ------------------- ------------------ ------------------ ------------------ -----------------
Total interest-bearing
deposits 98,664 81.1% 92,666 81.6% 75,845 80.1% 63,744 80.8% 55,637 85.1%
- - ---------------------- ------------------- ------------------ ------------------ ------------------ -----------------
Total deposits $ 121,603 100.0% $ 113,587 100.0% $ 94,646 100.0% $ 78,926 100.0% $ 65,334 100.0%
- - ---------------------- ------------------- ------------------ ------------------ ------------------ -----------------
------------------- ------------------ ------------------ ------------------ -----------------
</TABLE>
Jumbo time deposits include all time deposits of $100,000 or more. Due to
the size of these individual and aggregate deposits, relatively small changes in
volume can have a more significant affect on the size of the entire deposit
portfolio than other categories. The following table represents the maturities
of time deposits of $100,000 or more at December 31, 1996.
THREE OVER THREE OVER
MONTHS THROUGH TWELVE
(In thousands) OR LESS TWELVE MONTHS MONTHS TOTAL
- - --------------------------- -------- ------------- ------ ---------
Maturities of time deposits
of $100,000 or more $ 3,968 $ 5,906 $ 625 $ 10,499
- - --------------------------- -------- ------------- ------ ---------
-------- ------------- ------ ---------
NON-INTEREST INCOME
Non-interest income consists of service charges on deposit accounts, other
fees and charges collected by the Bank for both deposit accounts and loans, gain
on sale of loans and fee income generated by the Bank's Merchant Bankcard
department. Non-interest income increased by 4.8% in 1996, by 7.3% in 1995 and
by 19.7% during 1994. Non-interest income generated by the Merchant Bankcard
department contributed 66% of total non-interest income during 1996.
37
<PAGE>
In 1991, the Bank contracted with CardService International, Inc. (CSI) for
the solicitation on behalf of the Bank of merchants who accept credit cards as
payment for goods and services. As a result, the Bank has obtained electronic
credit card draft processing relationships with approximately 25,000 merchants
on a nationwide basis. The bank also entered into an agreement with First Data
Resources, Inc. (FDRI) for the processing of merchant credit card transactions.
Fee income to the Bank after payment of obligations to CSI and FDRI totaled,
$1,229,003 in 1996, $1,185,210 in 1995 and $1,147,454 in 1994.
Deposit account service charges, loan servicing fees, gain on sale of loans
and other income contributed 34% of non-interest income. Service charges and
other income increased 16.8% and 7.6%, respectively, in 1996 compared to 1995,
and increased 22.5% and 23.8%, respectively, in 1995 compared to 1994.
Decreases in the growth rate of this income are attributed to decreases in the
growth rate of total deposits in these periods.
The combined gain on sale of loans and servicing fees on loans sold
decreased by 20.1% in 1996, 4.2% in 1995 and 41.6% in 1994 The decreases are
due primarily to reductions in the volume of loan sales and related servicing
income on loans sold.
NON-INTEREST EXPENSE
Non-interest expense consists of salaries and related benefits, occupancy
and equipment expense and other expenses. These expenses increased by 5.0% in
1996, 23.0% in 1995 and 33.8% in 1994. Increases in salary expense during the
past three years are attributable to the hiring of additional administrative and
branch personnel due to the significant growth recorded by the Bank during those
periods. Salary expense increased 4.8%, 25.3% and 46.4% in 1996, 1995 and 1994,
respectively. SFAS 91 requires the Bank to defer loan origination costs (salary
related benefits) associated with the origination of loans, resulting in
recording salary expense at an amount less than that actually paid by the Bank.
The difference amounted to $165,000, $71,000 and $185,000 in 1996, 1995 and
1994, respectively.
The combined occupancy and other expenses increased by 5.2% in 1996, 20.8%
in 1995 and 23.9% in 1994. Of significant note in the other expense category,
deposit insurance assessments decreased 84% during 1996. In 1995, the FDIC
exceeded the required reserve requirements for the deposit insurance fund and
lowered assessments based on a bank's capitalization. The Bank continues to be
classified as a "well capitalized bank" which qualifies it for the lowest
possible assessment. During 1996 the Bank paid FDIC deposit insurance
assessments in the amount of $2,000; for 1995 the assessment was $105,489 and
for 1994 it was $178,998. Expenses attributed to the bid to acquire the two new
branches, change the Bank's name and enter into the leasing company partnership
contributed to an increase in professional fees of $77,682, or 48.6%, over the
previous year.
38
<PAGE>
LIQUIDITY
Liquidity management refers to the Bank's ability to provide funds on an
ongoing basis to meet fluctuations in deposit levels as well as the credit needs
and requirements of its customers. Both assets and liabilities contribute to
the Bank's liquidity position. Sources of funds adding to a bank's liquidity
include: increases in deposits, loan repayments, sale or maturity of
investments, increases in income, and any other areas that result in additional
cash assets. Uses of funds that decrease liquidity include: increases in loans
and draws against lines of credit, withdrawals from deposit accounts or
decreases in total deposits, purchases (including investments and fixed assets),
expenses (including interest and operating expenses), and any other areas that
result in using up cash assets.
One of the most common measurements of liquidity for banks is the ratio of
net loans to deposits. A ratio of 85% or lower is generally considered to be an
indication of sufficient liquidity. This ratio for the Bank was 76.1% as of
December 31, 1996, compared to 71.7% at December 31, 1995, and 78.3% at December
31, 1994. Management monitors the likelihood of projected funding requirements
by reviewing historical funding patterns, current and forecasted economic
conditions, pending new loan fundings and individual customer needs. The Bank's
liquidity is further managed by structuring the investment securities portfolio
with individual maturities designed to meet anticipated future liquidity needs.
Additionally, the Bank's borrowing arrangement with a correspondent bank and the
availability of a Federal Funds line of credit adds to the Bank's ability to
increase its liquidity. Finally, residential real estate loans are documented
in such a manner that the Bank will be able to sell them in the secondary market
if needed to provide an additional source of liquidity.
CAPITAL
Tehama Bank maintains a strong capital position to take advantage of
business opportunities while ensuring that it has the resources necessary to
absorb the risks inherent in the industry. The Bank has historically been able
to sustain its growth in capital through retention of earnings.
The Federal Reserve Board, jointly with other Federal Regulatory Agencies,
has issued capital adequacy requirements applicable to the Bank based upon asset
risk and minimum leverage. A minimum ratio of 8% of qualifying total capital to
total risk-adjusted assets is required for banking organizations in the United
States. On December 31, 1996 the Bank's risk-based capital was 17.7% and on
December 31, 1995 this ratio was 16.4%. Both figures are well above the minimum
regulatory requirements.
Additionally, on December 19, 1992 minimum capital requirements for "well-
capitalized" banks were defined under the Federal Deposit Insurance Corporation
Improvement Act. The Act defined a bank as well capitalized if the leverage
ratio (ratio of tier 1 capital to total assets), Tier 1 risk-based capital ratio
and total risk-based capital ratio exceed 5.0%, 6.0% and 10.0% respectively. At
December 31, 1996 the Bank meets the definition of a well-capitalized
institution with a leverage ratio of 11.5%, a Tier 1 risk-based capital ratio of
16.8% and a total risk-based capital ratio of 17.7%.
39
<PAGE>
MARKET FOR THE BANK'S COMMON STOCK
There is limited trading in shares of the Common Stock of the Bank, which
is not listed on any exchange or quoted on any automated quotations system.
There were approximately 984 shareholders of record as of March 1, 1997.
The following table summarizes those trades of which the Bank has
knowledge, setting forth the approximate high and low bid prices for the period
indicated. The Bank has not paid a cash dividend but paid a 10% stock dividend
on May 2, 1994, a 2 for 1 stock split on September 30, 1994, a 10% stock
dividend on May 1, 1995, and a 10% stock dividend on May 1, 1996.
Price of
Common Stock (1) Estimated
Calendar ---------------- Trading Dividends Paid Dividends
Quarter Ending Low High Volumein Common Stock Paid in Cash (2)
March 31,1995 $12.00 $13.00 12,006 -0- -0-
June 30, 1995 $12.63 $13.00 8,184 130,833 $ 2,961
September 30, 1995 $13.00 $14.75 12,245 -0- -0-
December 31, 1995 $13.50 $14.25 23,962 -0- -0-
March 31,1996 $13.00 $13.75 23,265 -0- -0-
June 30, 1996 $10.25 $11.88 137,200 144,851 $ 2,851
September 30, 1996 $10.75 $11.50 28,800 -0- -0-
December 31, 1996 $10.63 $12.25 56,500 -0- -0-
(1) As estimated by the Bank based upon trades of which it was aware, and
not including purchases of stock pursuant to the exercise of stock
options. The Bank is not aware of the prices of some of the trades
included in the Estimated Trading Volume column, above. Information
regarding trades during 1995 and 1996 was derived from Hoefer &
Arnett, Incorporated and there may have been trades of which the Bank
is unaware.
(2) Represents cash paid in lieu of issuance of fractional shares in
connection with payment of stock dividends.
40
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected financial data as of December 31,
1996, 1995, 1994, 1993, and 1992, respectively:
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Interest Income $ 10,273,963 $ 9,423,881 $ 6,946,120 $ 5,813,216 $ 5,252,857
Interest expense 4,356,668 3,878,670 2,519,458 2,292,594 2,323,730
Provision for loan losses 570,000 330,000 180,000 182,500 125,000
Other income 1,859,822 1,775,136 1,654,902 1,382,333 1,005,731
Other expense 4,308,656 4,102,668 3,335,126 2,491,868 2,120,256
Net income 1,939,461 1,848,679 1,675,738 1,520,587 1,131,802
Earnings per share $ 1.18 $ 1.12 $ 1.08 $ 1.00 $ 0.76
Total assets $ 138,122,246 $ 127,826,459 $ 106,390,229 $ 88,690,899 $ 72,961,526
Total deposits 121,602,706 113,586,727 94,645,804 78,925,683 65,333,842
Total equity 15,113,176 13,085,863 10,758,016 8,862,173 6,927,580
</TABLE>
The following table discloses the return on assets, the return on equity,
and the percentage of equity to assets for the last three calendar years:
1996 1995 1994
---- ---- ----
Return on assets 1.54% 1.66% 1.79%
Return on Equity 14.63% 16.70% 18.10%
Equity to assets 10.56% 10.26% 10.10%
(1) Calculations include the allowance for loan losses
41
<PAGE>
TEHAMA BANK OFFICERS
ADMINISTRATION
William P. Ellison, President and Chief Executive Officer
W. Steven Gilman, Senior Vice President and Chief Operating Officer
Frank S. Onions, Senior Vice President and Chief Financial Officer
David L. Roberts, Senior Vice President and Chief Credit Officer
Helen M. McIntosh, Vice President / Operations
William M. Jenkins, Vice President / Assistant Cashier
Garry R. Prosperi, Assistant Vice President / Compliance Officer
Juanita M. Rajanen, Assistant Vice President / Project Manager
RED BLUFF BRANCH
Richard E. Mehling, Vice President / Manager
Linda J. Vaughan, Vice President / Assistant Manager
Emery F. LeBaudour, Vice President / Loan Officer
Daryl L. Kumler, Loan Officer
Marie L. Morrison, Operations Officer
LOS MOLINOS BRANCH
Claudia Martin, Assistant Vice President / Manager
CHICO BRANCH
Jolene D. Dietle, Vice President / Manager
Roger A. Hart, Assistant Vice President / Loan Officer
K. Linda Puckett, Operations Officer
ORLAND BRANCH
Sylvia C. Lopez, Assistant Vice President / Manager
WILLOWS BRANCH
Geraldine M. Rainbolt, Assistant Vice President / Manager
REDDING LOAN PRODUCTION OFFICE
Stan R. Patterson, Real Estate Loans
Daryl F. Sutterfield, Vice President / SBA Loans
DEALER CENTER
William M. Odle, Vice President / Manager
MERCHANT BANKCARD
K. Kay Webb, Assistant Vice President / Manager
OPERATIONS CENTER
Kristy M. Weir, Operations Supervisor
LOAN CENTER
Michael P. Zepponi, Vice President / Agri-Business
Pat Y. Serna, Loan Officer
Lisa A. Frech, Loan Review Officer
T. Nadene Finn, Mortgage Loan Underwriter
Robin R. Williams, Note Department Supervisor
42
<PAGE>
TEHAMA BANK
DIRECTORS
HENRY C. ARNEST, III ORVILLE K. JACOBS
Vice President Real Estate Developer
Northwest Carbon
LOUIS J. BOSETTI GARY C. KATZ
Educational Consultant Radio Station Operator
DANIEL B. CARGILE JOHN W. KOEBERER
Business Development Chairman of the Board
Resort/Park Concessionaire
HARRY DUDLEY RAYMOND C. LIEBERENZ
Construction Secretary to the Board
Real Estate Broker
WILLIAM P. ELLISON GARY L. NAPIER
President & CEO Vice Chairman
Tehama Bank Insurance Broker
GARRY D. FISH GENE PENNE
Optometrist Owner, Bowling Recreation Centers
MAX FROOME TERRANCE A. RUST
Real Estate/Investments Oral Surgeon
43
<PAGE>
SHAREHOLDER INFORMATION:
STOCK TRANSFER AGENT:
U.S. Stock Transfer Corporation
1745 Gardena Avenue
Glendale, CA. 91204-2991
(800) 835-8778
SALES & PURCHASES OF STOCK:
Hoefer & Arnett, Inc.
Marc Arnett
353 Sacramento Street, 10th Floor
San Francisco, CA 94111
(800) 346-5544
Paine Webber Dean Witter Reynolds, Inc.
James E. Hennis James L. Horton
1051 Mangrove Avenue 2150 Main Street
Chico, CA 95926 Red Bluff, CA 96080
(800) 472-3867 (916) 527-1484
Sutro & Co. Van Kasper & Company
Troy Norlander L. Jack Block
P.O. Box 1688 600 California Street, Suite 1700
Big Bear Lake, CA 92315 San Francisco, CA 94108
(800) 288-2811 (800) 652-1747
44
<PAGE>
(EXHIBIT 24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints William P. Ellison and Frank S. Onions, and each
or any one of them, his true and lawful attorney-in-fact and agent, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitutes or substitute, may lawfully do or cause to be done by virtue hereof.
Date: February 20, 1997 /s/ Henry Clay Arnest, III
----------------------------------------
Henry Clay Arnest III, Director
Date: February 20, 1997 /s/ Louis J. Bosetti
----------------------------------------
Louis J. Bosetti, Director
Date: February 20, 1997 /s/ Daniel B. Cargile
----------------------------------------
Daniel B. Cargile, Director
Date: February 20, 1997 /s/ Harry B. Dudley
----------------------------------------
Harry Dudley, Director
Date: February 20, 1997 /s/ William P. Ellison
----------------------------------------
William P. Ellison, Director
Date: February 20, 1997 /s/ Garry D. Fish
----------------------------------------
Garry D. Fish, Director
Date: February 20, 1997 /s/ Max M. Froome
----------------------------------------
Max M. Froome, Director
Date: February 20, 1997 /s/ Orville K. Jacobs
----------------------------------------
Orville K. Jacobs, Director
Date: February 20, 1997 /s/ Gary C. Katz
----------------------------------------
Gary C. Katz, Director
Date: February 20, 1997 /s/ John W. Koeberer
----------------------------------------
John W. Koeberer,
Director and Chairman of the Board
Date: February 20, 1997 /s/ Raymond C. Lieberenz
----------------------------------------
Raymond C. Lieberenz,
Director and Secretary of the Board
Date: February 20, 1997 /s/ Gary L. Napier
----------------------------------------
Gary L. Napier,
Director and Vice Chairman of the Board
Date: February 20, 1997 /s/ Gene Penne
----------------------------------------
Gene Penne, Director
Date: February 20, 1997 /s/ Terrance A. Rust
----------------------------------------
Terrance A. Rust, Director
<PAGE>
(EXHIBIT 99)
PROXY
TEHAMA BANK
Solicited by the Board of Directors
for the Annual Meeting of Shareholders,
May 6, 1997
The undersigned holder of Common Stock acknowledges receipt of a copy of
the Notice of Annual Meeting of Shareholders of Tehama Bank and the accompanying
Proxy Statement/Prospectus dated April 8, 1997, and revoking any Proxy
heretofore given, hereby constitutes and appoints Louis J. Bosetti and Harry
Dudley and each of them, with full power of substitution, as attorneys and
proxies to appear and vote all of the shares of Common Stock of Tehama Bank, a
California banking corporation, standing in the name of the undersigned which
the undersigned could vote if personally present and acting at the Annual
Meeting of Shareholders of Tehama Bank, to be held at the Red Bluff Community &
Senior Center, 1500 S. Jackson Street, Red Bluff, California on Tuesday,
May 6, 1997, at 7:30 p.m. or at any adjournments thereof, upon the following
items as set forth in the Notice of Meeting and Proxy Statement/ Prospectus and
to vote according to their discretion on all matters which may be properly
presented for action at the meeting or any adjournments thereof. The above-named
proxy holders are hereby granted discretionary authority to cumulate votes
represented by the shares covered by this Proxy in the election of directors.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE FOLLOWING
ITEMS:
To elect as Directors the nominees set forth below.
/ / FOR all nominees listed below (except as marked to the contrary
below).
/ / WITHHOLD AUTHORITY to vote for all nominees listed below.
INSTRUCTION: To withhold authority to vote for any individual nominee, strike
a line through the nominee's name in the list below:
Henry Clay Arnest III Orville K. Jacobs
Louis J. Bosetti Gary C. Katz
Daniel B. Cargile John W. Koeberer
Harry Dudley Raymond C. Lieberenz
William P. Ellison Gary L. Napier
Garry D. Fish Eugene F. Penne
Max M. Froome Terrance A. Rust
2. To approve a Plan of Reorganization and Merger Agreement, dated as of
February 12, 1997 (the "Reorganization Agreement"), by and among the Bank,
Bancorp
<PAGE>
and Tehama Merger Corporation, a wholly-owned subsidiary of Bancorp (the
"Subsidiary"), and all transactions contemplated thereby, including the merger
(the "Merger") of the Subsidiary with and into the Bank, pursuant to which the
Bank will become the wholly-owned subsidiary of Bancorp.
/ / Yes / / No / / Abstain
3. In their discretion, to transact such other business as may
properly come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS
NOMINATED BY THE BOARD OF DIRECTORS AND "FOR" APPROVAL OF THE REORGANIZATION
AGREEMENT. THE PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS MADE, IT WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS NOMINATED BY
THE BOARD OF DIRECTORS AND "FOR" APPROVAL OF THE REORGANIZATION AGREEMENT.
SHAREHOLDER(S) NO. OF COMMON SHARES
- - ------------------------------ -------------------------
- - ------------------------------ -------------------------
Date:
-------------------------
Please date and sign exactly as your name(s) appears. When signing as attorney,
executor, administrator, trustee, or guardian, please give full title. If more
than one trustee, all should sign. All joint owners should sign. WHETHER OR
NTO YOU PLAN TO ATTEND THIS MEETING, PLEASE SIGN AND RETURN THIS PROXY AS
PROMPTLY AS POSSIBLE IN THE ENCLOSED POST-PAID ENVELOPE.
I/we do / / or do not / / expect to attend this meeting.
THIS PROXY IS SOLICITED BY, AND ON BEHALF OF, THE BOARD OF
DIRECTORS AND MAY BE REVOKED PRIOR TO ITS EXERCISE.
