<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2, 1997
REGISTRATION NO. 333-23525
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE
AMENDMENT NO. 1 TO
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/
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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
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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
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<TABLE>
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ITEM OF FORM S-4 CAPTION IN PROSPECTUS/PROXY STATEMENT
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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 OFFENSE.
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>
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PAGE
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<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
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PAGE
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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 No.
333-23525 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, an expected fifteen 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 have obtained 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 by their
independent public accountants 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 is located, subject to the ground lease described below, and
leases the building in which its Red Bluff administrative headquarters is
located adjacent to the Red Bluff branch office. 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.
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Bancorp has not yet commenced active operations. After consummation of the
Merger, Bancorp will act as 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
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or real property; engaging in community development activities; performing
certain data processing 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 FRB has been given 60 days' prior
written notice of the proposed acquisition and within that time period the FRB
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 FRB 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
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all affiliates may not exceed 20% of the capital stock and surplus of the
institution. A bank generally may 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 administrative headquarters 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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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.
36
<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>
- ------------------------
* Previously filed.
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 Pre-Effective Amendment No. 1 to its 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 April 2, 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: April 2,
1997 /s/ WILLIAM P. ELLISON (*)
-------------------------------------------------------
William P. Ellison, President and Chief Executive Officer
<S> <C>
Date: April 2,
1997 /s/ FRANK S. ONIONS
-------------------------------------------------------
Frank S. Onions, Senior Vice President and Cashier
(Principal Financial Officer and Principal Accounting Officer)
Date: April 2,
1997 /s/ HENRY CLAY ARNEST III (*)
-------------------------------------------------------
Henry Clay Arnest III, Director
Date: April 2,
1997 /s/ LOUIS J. BOSETTI (*)
-------------------------------------------------------
Louis J. Bosetti, Director
Date: April 2,
1997 /s/ DANIEL B. CARGILE (*)
-------------------------------------------------------
Daniel B. Cargile, Director
Date: April 2,
1997 /s/ HARRY DUDLEY (*)
-------------------------------------------------------
Harry Dudley, Director
Date: April 2,
1997 /s/ WILLIAM P. ELLISON (*)
-------------------------------------------------------
William P. Ellison, Director
Date: April 2,
1997 /s/ GARRY D. FISH (*)
-------------------------------------------------------
Garry D. Fish, Director
Date: April 2,
1997 /s/ MAX M. FROOME (*)
-------------------------------------------------------
Max M. Froome, Director
Date: April 2,
1997 /s/ ORVILLE K. JACOBS (*)
-------------------------------------------------------
Orville K. Jacobs, Director
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C>
Date: April 2,
1997 /s/ GARY C. KATZ (*)
-------------------------------------------------------
Gary C. Katz, Director
Date: April 2,
1997 /s/ JOHN W. KOEBERER (*)
-------------------------------------------------------
John W. Koeberer, Director and Chairman of the Board
Date: April 2,
1997 /s/ RAYMOND C. LIEBERENZ (*)
-------------------------------------------------------
Raymond C. Lieberenz, Director and Secretary of the Board
Date: April 2,
1997 /s/ GARY L. NAPIER (*)
-------------------------------------------------------
Gary L. Napier, Director and Vice Chairman of the Board
Date: April 2,
1997 /s/ GENE PENNE (*)
-------------------------------------------------------
Gene Penne, Director
Date: April 2,
1997 /s/ TERRANCE A. RUST (*)
-------------------------------------------------------
Terrance A. Rust, Director
</TABLE>
(*) By: /S/ FRANK S. ONIONS
--------------------------------
Frank S. Onions
ATTORNEY-IN-FACT
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>
- ------------------------
* Previously filed.
