<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 15, 1999.
REGISTRATION NO. 333-76401
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PACIFIC COMMUNITY BANKING GROUP
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C> <C>
CALIFORNIA 6712 33-0778067
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>
--------------------------
23332 MILL CREEK DRIVE, SUITE 230
LAGUNA HILLS, CALIFORNIA 92653
(949) 460-4540
(Address, including zip code, and telephone number, including area code, or
registrant's principal executive offices)
--------------------------
E. LYNN CASWELL
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
PACIFIC COMMUNITY BANKING GROUP
23332 MILL CREEK DRIVE, SUITE 230
LAGUNA HILLS, CALIFORNIA 92653
(949) 460-4540
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
With copies to:
<TABLE>
<S> <C> <C>
HENRY M. FIELDS, ESQ. LOREN P. HANSEN, ESQ. GARY S. FINDLEY, ESQ.
ELLEN R. MARSHALL, ESQ. KNECHT & HANSEN GARY STEVEN FINDLEY
CHARLES S. KAUFMAN, ESQ. 1301 DOVE STREET, SUITE 900 & ASSOCIATES
MORRISON & FOERSTER LLP NEWPORT BEACH, CA 92660 1470 N. HUNDLEY ST.
555 WEST FIFTH STREET (949) 851-8070 ANAHEIM, CA 92806
LOS ANGELES, CA 90013-1024 (714) 630-7136
(213) 892-5200
<CAPTION>
HENRY M. FIELDS, ESQ. MARK E. ALDRICH, ESQ.
CHARLES S. KAUFMAN, ESQ. 18200 VON KARMAN AVE.,
MORRISON & FOERSTER LLP SU. 730
555 WEST FIFTH STREET IRVINE, CA 92623-1029
LOS ANGELES, CA 90013-1024 (949) 474-1944
(213) 892-5200
<CAPTION>
ELLEN R. MARSHALL, ESQ. ALDRICH & BONNEFIN, P.L.C.
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable following the effective time of this registration
statement and the satisfaction or waiver of all other conditions to the
acquisitions described in the enclosed proxy statement/prospectus.
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ______
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ______
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. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
TITLE OF EACH CLASS AMOUNT SHARE(3) PRICE(3) FEE(3)
<S> <C> <C> <C> <C>
Common Stock, no par value.................. 5,264,913 shares(1)(2) $5.72 $30,111,892 $8,371.09(5)
Ten-Year Warrants........................... 1,307,000 warrants $0 (4) $0 (4) $0 (4)
</TABLE>
(1) Represents the estimated maximum number of shares of Pacific Community
Banking Group common stock that may be issued upon consummation of the
acquisition of The Bank of Hemet and Valley Bank as wholly owned
subsidiaries of Pacific Community Banking Group.
(2) Includes 1,307,913 shares of common stock underlying warrants.
(3) Estimated solely for the purposes of calculating the registration fee and
calculated pursuant to Rule 457(f)(2).
(4) Pacific Community Bank Group has calculated the registration fee based on
the total book value of the securities received without allocating the
consideration between shares and warrants offered.
(5) Previously paid with the initial filing on April 16, 1999.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article V of the Registrant's Articles of Incorporation provides that the
liability of the directors of the corporation for monetary damages shall be
eliminated to the fullest extent permissible under California law. Article VI of
the Registrant's Articles of Incorporation provides that the corporation is
authorized to provide for the indemnification of agents (as defined in Section
317 of the California General Corporation Law) of the corporation in excess of
that expressly permitted by such Section 317 for breach of duty to the
corporation and its shareholders to the fullest extent permissible under
California law.
Article III of the Registrant's Bylaws provides, in pertinent part, that
each person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another foreign or domestic corporation
or other entity, shall be indemnified by the Registrant to the full extent
permitted by the General Corporation Law of the State of California or any other
applicable laws. Article III also authorizes the registrant to enter into one or
more agreements with any person which provides for indemnification greater or
different than that provided for in that Article.
The Registrant has entered into an indemnification agreement with its
Chairman and Chief Executive Officer on the forms incorporated by reference as
Exhibit 10.1 to this Registration Statement.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
2.1* First Restatement of Agreement and Plan of Reorganization by and between
Registrant and The Bank of Hemet dated January 5, 1999.
2.2* First Amendment to First Restatement of Agreement and Plan of
Reorganization by and between Registrant and The Bank of Hemet dated
March 24, 1999.
2.3* Second Amendment to First Restatement of Agreement and Plan of
Reorganization by and between Registrant and The Bank of Hemet dated
April 2, 1999.
2.4* First Restatement of Agreement and Plan of Reorganization by and between
Registrant and Valley Bank dated as of January 5, 1999.
2.5* First Amendment to First Restatement of Agreement and Plan of
Reorganization by and between Registrant and Valley Bank dated March 4,
1999.
2.6* Second Amendment to First Restatement of Agreement and Plan of
Reorganization by and between Registrant and Valley Bank dated April 12,
1999.
3.1* Articles of Incorporation of Registrant.
3.2* Certificate of Amendment of Articles of Incorporation of Registrant
3.3* Restated Bylaws of Registrant.
3.4* Certificate of Determination.
4.1* Specimen Stock Certificate.
4.2* Form of Warrant to Purchase Stock of Pacific Community Banking Group
5.1* Opinion of Morrison & Foerster LLP.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
8.1* Tax Opinion of Arthur Andersen LLP.
10.1* Form of Indemnification Agreement.
10.2* Employment Agreement between Registrant and E. Lynn Caswell.
10.3* Agreement between Registrant and Harold R. Williams, Jr.
10.4* Registrant's 1999 Stock Option Plan.
10.5* Shareholder Agreement.
10.6* Form of Warrant Purchase Agreement.
10.7* Form of Non-competition and Consulting Agreements.
10.8* Form of Continuation Agreement between The Bank of Hemet and certain
executives (Jaqua, McDonough) dated March 22, 1995, as amended.
10.9* Head Office Lease, 1600 E. Florida Avenue, Hemet, California.
10.10* Form of Executive Employment Agreement dated September 26, 1996 between
Valley Bank and each of Marvin Lentini, Mark Nugent, Bonnie Parrott and
Dianna Williams.
10.11* Executive Employment Agreement dated September 26, 1996, as amended
October 30, 1997, between Valley Bank and N. Douglas Mills.
10.12* Executive Salary Continuation Agreement, dated October 19, 1995, as
amended October 30, 1997, between Valley Bank and N. Douglas Mills.
10.13* Second Amendment to Employment Agreement between Valley Bank and N.
Douglas Mills.
10.14* Form of The Bank of Hemet Proxy.
10.15* Form of Valley Bank Proxy.
10.16* Fairness Opinion of Baxter Fentriss & Company with reference to The Bank
of Hemet-- Appendix B of The Bank of Hemet proxy statement/prospectus
incorporated by reference.
10.17* Fairness Opinion of Baxter Fentriss & Company with reference to Valley
Bank-- Appendix B of Valley Bank proxy statement/prospectus incorporated
by reference.
10.18* Consulting Agreement between The Bank of Hemet and James B. Jaqua.
10.19* Noncompetition Agreement between The Bank of Hemet and James B. Jaqua.
10.20* Amendment No. 3 to Executive Salary Continuation Agreement.
23.1* Consent of Morrison & Foerster LLP (included in their opinion filed as
Exhibit 5.1).
23.2* Consent of Arthur Andersen, LLP for Financial Statements.
23.3* Consent of McGladrey Pullen LLP for Valley Bank Financial Statements.
24.1* Power of Attorney. (Please refer to p. II-4 of Registration Statement S-4
filed April 16, 1999)
27.1* Financial Data Schedule for the year ended December 31, 1998.
99.1* Consent of James Jaqua
99.2* Consent of N. Douglas Mills
99.3* Consent of Marion V. Ashley
99.4* Consent of Harold R. Williams, Jr.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
99.5* Consent of John J. McDonough
99.6* Consent of Clayton A. Record
99.7* Consent of E. Kenneth Hyatt
99.8* Consent of Jack E. Gosch
99.9* Consent of Baxter Fentriss and Company
99.10 Form of Transmittal Letter for Surrender and Exchange of Shares by The
Bank of Hemet Shareholders.
99.11 Form of Transmittal Letter for Surrender and Exchange of Shares by Valley
Bank Shareholders.
99.12* Letter to Brokers, Dealers, Commercial Bankers, Trust Companies and other
nominees (for The Bank of Hemet)
99.13* Letter to Brokers, Dealers, Commercial Bankers, Trust Companies and other
nominees (for Valley Bank)
99.14 Form of Transmittal Letter for Cancellation of The Bank of Hemet Options
in Exchange for Shares and Warrants of Pacific Community Banking Group
99.15 Form of Transmittal Letter for Cancellation of Valley Bank Options in
Exchange for Shares and Warrants of Pacific Community Banking Group
99.16 Follow-Up Letter to Shareholders of The Bank of Hemet
99.17 Follow-Up Letter to Shareholders of Valley Bank
</TABLE>
- ------------------------
* Filed previously.
(b) Financial Statement Schedules
No schedules are included because the information required to be set forth
therein is not applicable or is shown in the financial statements or notes
thereto.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
2. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE>
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(b)(1)The undersigned registrant hereby undertakes as follows: That prior to
any public reoffering of the securities registered hereunder through 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
issuer 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 the other Items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (h)(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 (Section 230.415 of this
chapter), will be filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and that, for purposes
of determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officer and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, Pacific
Community Banking Group has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the joint proxy
statement/prospectus pursuant to Item 4 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.
(e) The undersigned 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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Post-Effective Amendment No 1 to the
Registration Statement on Form S-4 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Laguna Hills, County of
Orange, State of California, on July 15, 1999.
<TABLE>
<S> <C> <C>
PACIFIC COMMUNITY BANKING GROUP
By: /s/ E. LYNN CASWELL
-----------------------------------------
Chairman of the Board, Chief Executive
Officer and Chief Financial Officer
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to the Registration Statement on Form S-4 has
been signed by the following persons in the capacities indicated, on July 15,
1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<C> <S>
E. Lynn Caswell, Chairman
/s/ E. LYNN CASWELL of the Board of
- ------------------------------ Directors, Chief
E. Lynn Caswell Executive Officer and
Chief Financial Officer
MITCHELL ALLEN*
- ------------------------------ Mitchell Allen, Director
Mitchell Allen
ALFRED JANNARD*
- ------------------------------ Alfred Jannard, Director
Alfred Jannard
CARLOS SAENZ*
- ------------------------------ Carlos Saenz, Director
Carlos Saenz
HENRY SCHIELEIN*
- ------------------------------ Henry Schielein, Director
Henry Schielein
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ E. LYNN CASWELL
-------------------------
E. Lynn Caswell
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
2.1* First Restatement of Agreement and Plan of Reorganization by and between Registrant and The Bank of
Hemet dated January 5, 1999.
2.2* First Amendment to First Restatement of Agreement and Plan of Reorganization by and between Registrant
and The Bank of Hemet dated March 24, 1999.
2.3* Second Amendment to First Restatement of Agreement and Plan of Reorganization by and between Registrant
and The Bank of Hemet dated April 2, 1999.
2.4* First Restatement of Agreement and Plan of Reorganization by and between Registrant and Valley Bank
dated as of January 5, 1999.
2.5* First Amendment to First Restatement of Agreement and Plan of Reorganization by and between Registrant
and Valley Bank dated March 4, 1999.
2.6* Second Amendment to First Restatement of Agreement and Plan of Reorganization by and between Registrant
and Valley Bank dated April 13, 1999.
3.1* Articles of Incorporation of Registrant.
3.2* Certificate of Amendment of Articles of Incorporation.
3.3* Restated Bylaws of Registrant.
3.4* Certificate of Determination.
4.1* Specimen Stock Certificate.
4.2* Form of Warrant to Purchase Stock of Pacific Community Banking group.
5.1* Opinion of Morrison & Foerster LLP.
8.1* Tax Opinion of Arthur Andersen LLP.
10.1* Form of Indemnification Agreement.
10.2* Employment Agreement between Registrant and E. Lynn Caswell.
10.3* Agreement between Registrant and Harold R. Williams, Jr.
10.4* Registrant's 1999 Stock Option Plan.
10.5* Shareholder Agreement.
10.6* Form of Warrant Purchase Agreement.
10.7* Form of Non-competition and Consulting Agreements.
10.8* Form of Continuation Agreement between The Bank of Hemet and certain executives (Jaqua, McDonough) dated
March 22, 1995, as amended.
10.9* Head Office Lease, 1600 E. Florida Avenue, Hemet, California.
10.10* Form of Executive Employment Agreement dated September 26, 1996 between Valley Bank and each of Marvin
Lentini, Mark Nugent, Bonnie Parrott and Dianna Williams.
10.11* Executive Employment Agreement dated September 26, 1996, as amended October 30, 1997, between Valley
Bank and N. Douglas Mills.
10.12* Executive Salary Continuation Agreement, dated October 19, 1995, as amended October 30, 1997, between
Valley Bank and N. Douglas Mills.
10.13* Second Amendment to Employment Agreement between Valley Bank and N. Douglas Mills.
10.14* Form of The Bank of Hemet Proxy.
10.15* Form of Valley Bank Proxy.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.16* Fairness Opinion of Baxter Fentriss & Company with reference to The Bank of Hemet-- Appendix B of The
Bank of Hemet proxy statement/prospectus incorporated by reference.
10.17* Fairness Opinion of Baxter Fentriss & Company with reference to Valley Bank--Appendix B of Valley Bank
proxy statement/prospectus incorporated by reference.
10.18* Consulting Agreement between The Bank of Hemet and James B. Jaqua.
10.19* Noncompetition Agreement between The Bank of Hemet and James B. Jaqua.
10.20* Amendment No. 3 to Executive Salary Continuation Agreement.
23.1* Consent of Morrison & Foerster LLP (included in their opinion filed as Exhibit 5.1).
23.2* Consent of Arthur Andersen, LLP for Financial Statements.
23.3* Consent of McGladrey Pullen LLP for Valley Bank Financial Statements.
24.1* Power of Attorney. (Please refer to p. II-4 of Registration Statement S-4 filed April 16, 1999)
27.1* Financial Data Schedule for the year ended December 31, 1998.
99.1* Consent of James Jaqua
99.2* Consent of N. Douglas Mills
99.3* Consent of Marion V. Ashley
99.4* Consent of Harold R. Williams, Jr.
99.5* Consent of John J. McDonough
99.6* Consent of Clayton A. Record
99.7* Consent of E. Kenneth Hyatt
99.8* Consent of Jack E. Gosch
99.9* Consent of Baxter Fentriss and Company
99.10 Form of Transmittal Letter for Surrender and Exchange of Shares by The Bank of Hemet Shareholders.
99.11 Form of Transmittal Letter for Surrender and Exchange of Shares by Valley Bank Shareholders.
99.12* Letter to Brokers, Dealers, Commercial Bankers, Trust Companies and other nominees (for The Bank of
Hemet)
99.13* Letter to Brokers, Dealers, Commercial Bankers, Trust Companies and other nominees (for Valley Bank)
99.14 Form of Transmittal Letter for Cancellation of The Bank of Hemet Options in Exchange for Shares and
Warrants of Pacific Community Banking Group
99.15 Form of Transmittal Letter for Cancellation of Valley Bank Options in Exchange for Shares and Warrants
of Pacific Community Banking Group
99.16 Follow-Up Letter to Shareholders of The Bank of Hemet
99.17 Follow-Up Letter to Shareholders of Valley Bank
</TABLE>
- ------------------------
* Filed previously.
<PAGE>
INSTRUCTIONS AND
CUSTODY AGREEMENT, LETTER OF TRANSMITTAL, POWER OF ATTORNEY
AND OFFER OF SALE
FOR CUSTODY AND EXCHANGE OF COMMON STOCK OF
THE BANK OF HEMET
AND FOR CUSTODY AND SALE OF COMMON STOCK OF
PACIFIC COMMUNITY BANKING GROUP
------------------
U.S. STOCK TRANSFER CORPORATION
EXCHANGE AGENT AND CUSTODIAN
THE RIGHT TO PARTICIPATE IN THE PUBLIC OFFERING
WILL EXPIRE AT 5:00 P.M., JULY 23, 1999, CALIFORNIA TIME.
THE EXCHANGE AGENT MUST RECEIVE THESE DOCUMENTS
BY THAT TIME.
June 28, 1999
Dear Shareholder:
Enclosed is a set of shareholder documents. Please read these documents
carefully. Please complete and return these documents to U.S. Stock Transfer,
which is the exchange agent and custodian in the proposed acquisition of The
Bank of Hemet by Pacific Community Banking Group. Or if you received these
documents from your broker please follow his or her instructions. Detailed
instructions for completing the forms begin on page three, preceded by
frequently asked questions and answers. When the acquisition is completed, we
will need these documents to ensure you promptly receive certificates for your
new shares of Pacific Community Banking Group Common Stock and warrants, and so
that you can participate in the initial public offering of Pacific Community
Banking Group.
- PLEASE USE THE ENCLOSED PINK BUSINESS RETURN ENVELOPES FOR YOUR PROXY CARD
ONLY.
- USE THE WHITE RETURN ENVELOPES TO RETURN THE SIGNED SHAREHOLDER DOCUMENTS
AND YOUR STOCK CERTIFICATES BY CERTIFIED MAIL IN SEPARATE ENVELOPES.
<PAGE>
QUESTIONS AND ANSWERS FOR SHAREHOLDERS OF THE BANK OF HEMET
ABOUT THE
SHAREHOLDER DOCUMENTS
Q: I AM A SHAREHOLDER OF THE BANK OF HEMET. WHY MUST I COMPLETE THESE
DOCUMENTS?
A: Pacific Community Banking Group has agreed to acquire The Bank of Hemet. You
have received a proxy statement/prospectus that describes Pacific Community
Banking Group and the acquisition. If the shareholders approve the
acquisition, The Bank of Hemet needs the shareholder documents to complete
the acquisition and to arrange for you to receive the cash, stock and
warrants you will be entitled to receive.
Q: WHAT IS THE CUSTODY AGREEMENT, LETTER OF TRANSMITTAL, POWER OF ATTORNEY AND
OFFER OF SALE?
A: You should read the entire document. But in summary, the Custody Agreement,
Letter of Transmittal, Power of Attorney and Offer of Sale is a binding
agreement by you that principally provides the following:
- You appoint a custodian, which will hold your shares and deliver them as
necessary to complete the acquisition and the public offering.
- You provide your name, address and other necessary information to ensure
that you receive the cash, stock and warrants to which you are entitled,
and you state a preference to receive a greater amount of cash or of stock
after the close of the acquisition and the public offering. You also
promise that you own your shares and have the power to sell them.
- You give a special power of attorney to two individuals, referred to as
the "Attorneys-in-Fact," who will take limited legal actions on your
behalf to establish the final price of your Pacific Community Banking
Group stock and sell some or all of that stock to the underwriters.
- You offer the shares of Pacific Community Banking Group common stock you
will receive in the acquisition to the underwriters. The underwriters will
be able to purchase some or all of the shares for resale at a price to the
public of at least $15 per share.
Q: WHO IS THE CUSTODIAN AND WHAT WILL THE CUSTODIAN DO?
A: U.S. Stock Transfer Corporation will be the custodian. You should send your
certificates to the custodian now, along with the selling shareholder
documents. If the acquisition closes, the custodian will surrender the
certificates for your shares of The Bank of Hemet common stock. In exchange
for each share so surrendered you will receive 3.4 shares of Pacific
Community Banking Group common stock and one warrant for the purchase of one
share of Pacific Community Banking Group common stock. The custodian will
keep custody of your shares of Pacific Community Banking Group for the brief
period until the public offering closes, then deliver the shares you sell to
the underwriter, send you the money received from the sale and send you
certificates for the shares you don't sell and for your warrants.
Q: WHO ARE THE "ATTORNEYS-IN-FACT" AND WHAT POWER WILL THEY HAVE?
A: An individual that has the power to act on your behalf under the Power of
Attorney is called an "Attorney-in-Fact." You will authorize any of two
persons, James B. Jaqua and John J. McDonough, to act in this capacity. They
will negotiate the final price to the public of the shares of Pacific
Community
2
<PAGE>
Banking Group common stock you sell, with a minimum price of $15. They will
sell your shares of Pacific Community Banking Group common stock to the
underwriters on those terms. The Attorneys-in-Fact will consider the
preference for cash or stock that you have stated. But they will have the
discretion to designate some or all of your stock to be sold to the public,
in order to meet the terms of the acquisition agreement. They can also sign
any documents necessary to complete the sale, on your behalf, including an
underwriting agreement, without further consultation with you.
Q: CAN I ELECT TO RECEIVE CASH ONLY OR PACIFIC COMMUNITY BANKING GROUP COMMON
STOCK ONLY?
A: No. You will be able to indicate your preference to have cash or stock of
Pacific Community Banking Group after the close of the acquisitions and the
initial public offering. The Attorneys-in-Fact will consider this when
determining how much of your Pacific Community Banking Group common stock to
sell to the underwriters. But even if you indicate a preference for stock,
it is likely that most of your shares will be sold because the acquisition
agreement requires that the underwriters purchase and resell between 75% and
88% of the total shares received by shareholders of The Bank of Hemet.
Similarly, even if you indicate a preference to receive all cash, you may be
required to keep some amount of Pacific Community Banking Group stock.
Q: WHAT OTHER KINDS OF INFORMATION WILL I NEED TO PROVIDE?
A: In addition to your name and address, you will give instructions for where
the transfer agent should send the money received from the sale and any
remaining shares and your warrants. If you have more than one certificate,
or have a number of separate purchases on your brokerage account, you can
indicate which of them you prefer to sell first, which can affect the amount
of taxable capital gain you realize if you paid different amounts per share
in your original purchases. You will also need to return a completed form
W-9 for tax reporting purposes. Please consult your tax advisor if you have
questions about the tax effects of designating particular shares for sale.
Q: WHAT IF I DON'T HAVE PHYSICAL CERTIFICATES FOR MY SHARES, BUT HOLD THEM
THROUGH AN ACCOUNT AT MY BROKER?
A: If you don't have certificates, but hold your shares of The Bank of Hemet
common stock "in street name," that is, through a brokerage account, you
should still complete all of the enclosed shareholder documents. Your broker
will tell you where and how to return the completed documents. Then the
surrender and exchange of certificates, and the sale of stock, will take
place on your behalf. You will receive the cash proceeds from the sale of
your Pacific Community Banking Group common stock. Any remaining shares of
Pacific Community Banking Group common stock and your warrants will be
recorded on your brokerage account.
Q: WHAT IF THE ACQUISITION OR THE PUBLIC OFFERING IS NOT COMPLETED?
A: If either the acquisition or the public offering fails to take place, the
custodian will return to you the certificates for the shares of The Bank of
Hemet common stock you surrendered, or send you replacement certificates.
Q: WHAT IF I LOST THE CERTIFICATES FOR MY SHARES?
A: If you have lost the certificates for your shares, please complete and
return the enclosed Lost Certificate Declaration, along with the other
applicable shareholder documents.
3
<PAGE>
Q: IS IT SAFE TO SEND MY CERTIFICATES BY MAIL OR BY OVERNIGHT EXPRESS?
A: Please do NOT send signed stock certificates by mail or by overnight
express. Unless you will hand deliver your certificates, sign one of the
enclosed Stock Powers for each of your certificates rather than signing the
certificates. Then send the certificates and the stock powers by certified
mail IN SEPARATE ENVELOPES.
Q: WILL I BE RESPONSIBLE FOR ANY OF THE COSTS OF THE PUBLIC OFFERING?
A: No. Pacific Community Banking Group will pay the underwriters' fees and all
other costs of reselling your shares in the public offering. You will
receive the public offering price for each share that you sell in the public
offering, without deduction for any costs.
INSTRUCTIONS
(FOR COMPLETING THE CUSTODY AGREEMENT, LETTER OF TRANSMITTAL,
POWER OF ATTORNEY AND OFFER OF SALE)
A. You have been sent five copies of the Custody Agreement, Letter of
Transmittal, Power of Attorney and Offer of Sale (the "Agreement"). Please
complete and return four copies of the Agreement and stock certificate(s) as set
forth in paragraph D below. PLEASE BE SURE TO INDICATE YOUR PREFERENCE FOR CASH
OR STOCK. A fully signed copy of the Agreement will be returned to you.
B. Complete Schedule I attached hereto.
C. You must sign each copy of the Agreement and for each stock certificate
you deposit along with this Agreement you must either (a) sign each stock
certificate or (b) sign a separate stock power (stock power forms are provided
with this Agreement). YOU SHOULD NOT SIGN THE STOCK CERTIFICATES UNLESS YOU
DELIVER THE CERTIFICATES AND THE FOUR SIGNED COPIES OF THE AGREEMENT BY HAND.
ALL OF YOUR SIGNATURES MUST BE MEDALLION GUARANTEED by an eligible guarantor
institution, such as a bank, a stock broker, savings and loan association, or
credit union, with membership in an approved medallion signature program. If you
bring the documents and your photo indentification to the offices of Merrill
Lynch, 1565 West Florida Avenue, Hemet, California, (909) 658-2600, a
representative of Merrill Lynch will provide the required medallion guarantee.
PLEASE SIGN THE STOCK CERTIFICATE(S) OR STOCK POWER AND THE AGREEMENT EXACTLY AS
YOUR NAME APPEARS ON YOUR STOCK CERTIFICATE(S).
D. Promptly return signed stock certificate(s), or stock certificate(s) with
separate stock powers, along with all four signed copies of the completed
Agreement, by hand delivery or certified mail appropriately insured to:
U.S. Stock Transfer Corporation
1745 Gardena Avenue, Suite 200
Glendale, CA 91204
If sending through the mail or by courier, please do not sign the
certificate(s), but send a signed stock power or powers in the separate envelope
provided.
E. You may elect to retain shares of Pacific Community Banking Group common
stock rather than offering to sell them to the Underwriters. Also, each
shareholder may be required to retain some shares of Pacific Community Banking
Group common stock to satisfy the terms of the First Restatement of the
Agreement and Plan of Reorganization between The Bank of Hemet and Pacific
Community Banking Group. In either case, the Custodian will cause to be
delivered to you in due course, but not earlier than ten days after the closing
for the purchase of firm shares by the Underwriters, a certificate for the
number of shares of Pacific Community Banking Group common stock and warrants
that you have received but that were not sold in the public offering.
F. If you have lost any of your stock certificates, complete the Lost
Certificate Declaration and include it with the other documents.
G. ALL SHAREHOLDERS MUST RETURN A TAX IDENTIFICATION NUMBER AND THE
CERTIFICATION ON THE IRS FORM W-9 PROVIDED.
4
<PAGE>
------------------------
(Name of Shareholder)
CUSTODY AGREEMENT, LETTER OF TRANSMITTAL, POWER OF ATTORNEY
AND OFFER OF SALE
FOR CUSTODY AND EXCHANGE OF COMMON STOCK OF
THE BANK OF HEMET
AND FOR CUSTODY AND SALE OF COMMON STOCK OF
PACIFIC COMMUNITY BANKING GROUP
James B. Jaqua
John J. McDonough
As Attorneys-in-Fact
c/o The Bank of Hemet
3715 Sunnyside Drive
Riverside, CA 92506
U.S. Stock Transfer Company
As Custodian
1745 Gardena Avenue, Suite 200
Gardena, CA 91204
Sutro & Co. Incorporated
As Representative of the several Underwriters
c/o Sutro & Co. Incorporated
11150 Santa Monica Boulevard, Suite 1500
Los Angeles, California 90025
Ladies and Gentlemen:
The undersigned (the "Shareholder") is a shareholder of The Bank of Hemet
("The Bank of Hemet"), a California corporation. Pacific Community Banking
Group, a California corporation, and The Bank of Hemet have signed a First
Restatement of Agreement and Plan of Reorganization (as amended, the
"Acquisition Agreement") providing for the acquisition of The Bank of Hemet by
Pacific Community Banking Group. If the acquisition is completed, the
Shareholder's shares of The Bank of Hemet will automatically convert into a
right to receive shares of Pacific Community Banking Group. Pacific Community
Banking Group and the Shareholder proposes to sell some or all of the shares of
Pacific Community Banking Group common stock received by the Shareholder to
underwriters (the "Underwriters") for whom Sutro & Co. Incorporated will act as
representative (the "Representative" ), for distribution under a Registration
Statement on Form S-1 (the "Registration Statement") to the public at a price
and on terms to be hereafter determined. It is understood that at this time
there is no commitment on the part of the Underwriters to purchase any shares of
Pacific Community Banking Group common
1
<PAGE>
stock and no assurance that an offering of Pacific Community Banking Group
common stock will take place. The shares of Pacific Community Banking Group
common stock received by the Shareholder in exchange for shares of The Bank of
Hemet common stock, all of which the Shareholder will hereby offer to sell to
the Underwriters, are referred to herein as the "Shares."
1. APPOINTMENT AND POWERS OF ATTORNEYS-IN-FACT.
A. The Shareholder irrevocably constitutes and appoints James B. Jaqua and
John J. McDonough (the "Attorneys-in-Fact"), and each of them, its agent and
attorney-in-fact, with full power of substitution, with respect to all matters
arising in connection with the public offering and sale of the Shares,
including, but not limited to, the power and authority on behalf of the
Shareholder to do or cause to be done any of the following things:
(i) to instruct the Custodian (as defined below) to surrender certificates
for all of the Shareholders' shares of common stock of The Bank of Hemet
in exchange for shares of Pacific Community Banking Group as provided in
the Acquisition Agreement;
(ii) to negotiate, determine and agree upon (a) the price at which the
Shares will be initially offered to the public by the Underwriters,
provided that the price shall not be less than $15 per share, and (b)
the price at which the Shares will be sold to the Underwriters;
(iii) to execute on behalf of the Shareholder an underwriting agreement as
follows: (a) making the representations and warranties of the
Shareholder contained in this Agreement to the Underwriters; (b)
undertaking the obligations of the Shareholder contained in this
Agreement, for the benefit of the Underwriters; and (c) indemnifying
the Underwriters, on a joint and several basis with Pacific Community
Banking Group and the other Shareholders, for losses resulting from a
breach of those representations, warranties and obligations, up to the
amount of consideration received by the Shareholder for shares of
Pacific Community Banking Group sold to the public in the initial
public offering. Such indemnification may include a provision for
interim reimbursement and contribution, with the underwriters having a
similar obligation to the shareholders participating in the public
offering.
(iv) to allocate the number of shares of Pacific Community Banking Group
common stock owned by the Shareholder that shall be sold to the
Underwriters and the number of shares of Pacific Community Banking
Group common stock that shall be retained by the Shareholder, in
satisfaction of the terms of the Acquisition Agreement. NOTWITHSTANDING
THE STATEMENT OF PREFERENCE MADE BY THE SHAREHOLDER HEREIN, THE
ATTORNEYS-IN-FACT ARE AUTHORIZED, IN THEIR SOLE DISCRETION, TO SELL UP
TO THE TOTAL NUMBER OF SHARES OF PACIFIC COMMUNITY BANKING STOCK OWNED
BY THE SHAREHOLDER.
(v) to sell, assign, transfer and deliver the Shares to the Underwriters and
deliver to the Underwriters certificates for the Shares so sold;
(vi) take any and all steps deemed necessary or desirable by the
Attorneys-in-Fact in connection with the registration of the Shares
under the Securities Act of 1933, as amended (the "Securities Act"),
the Securities Exchange Act of 1934, as amended, and under the
securities or "blue sky" laws of various states and jurisdictions,
including, without limitation, the giving or making of such
undertakings, representations and agreements and the taking of such
other steps as the Attorneys-in-Fact may deem necessary or advisable;
(vii) instruct Pacific Community Banking Group and the Custodian (as
hereinafter defined) on all matters pertaining to the sale of the
Shares and delivery of certificates therefor; and
(viii) otherwise take all actions and do all things necessary or proper,
required, contemplated or deemed advisable or desirable by the
Attorneys-in-Fact in their discretion, including the
2
<PAGE>
execution and delivery of any documents, and generally act for and in
the name of the Shareholder with respect to the sale of the Shares to
the Underwriters and the reoffering of the Shares by the Underwriters
as fully as could the Shareholder if then personally present and
acting.
B. Each Attorney-in-Fact may act alone in exercising the rights and powers
conferred on the Attorneys-in-Fact by this Custody Agreement, Letter of
Transmittal, Power of Attorney and Offer of Sale (this "Agreement"), and the act
of any Attorney-in-Fact shall be the act of the Attorneys-in-Fact. Each
Attorney-in-Fact is hereby empowered to determine, in his sole and absolute
discretion, the time or times when, the purposes for which, and the manner in
which, any power herein conferred upon the Attorneys-in-Fact shall be exercised.
C. The Custodian, the Representatives, Pacific Community Banking Group and
all other persons dealing with the Attorneys-in-Fact as such may rely and act
upon any writing believed in good faith to be signed by one or more of the
Attorneys-in-Fact.
D. The Attorneys-in-Fact shall not receive any compensation from the
Shareholder for their services rendered hereunder.
2. APPOINTMENT OF CUSTODIAN; DEPOSIT OF SHARES.
A. In connection with and to facilitate the exchange of shares of The Bank
of Hemet common stock and the sale of the Shares to the Underwriters, the
Shareholder hereby appoints U.S. Stock Transfer Corporation as custodian (the
"Custodian") and herewith deposits with the Custodian one or more certificates
for The Bank of Hemet common stock which represent the total number of the
shares of The Bank of Hemet common stock held by the Shareholder, and which
number is set forth on Schedule I hereto. Each such certificate so deposited is
in negotiable and proper deliverable form and either (a) the certificate has
been endorsed in blank with the signature of the Shareholder thereon, medallion
guaranteed by an eligible guarantor institution, such as a bank, a stock broker,
savings and loan association, or credit union, with membership in an approved
medallion signature program, or (b) the shareholder has separately provided a
duly executed stock power or powers in blank, bearing the signature of the
Shareholder, medallion guaranteed in the same manner. The Custodian is hereby
authorized and directed, subject to the instructions of the Attorneys-in-Fact,
to act as follows:
(i) to surrender the certificates for Shareholder's shares of The Bank of
Hemet in exchange for certificates of Pacific Community Banking Group
common stock in accordance with the Acquisition Agreement;
(ii) to hold in custody the certificate or certificates deposited herewith
and any other certificates or instruments exchanged therefor;
(iii) to deliver or to authorize Pacific Community Banking Group's transfer
agent to deliver the certificates of Pacific Community Banking Group
common stock received in exchange for the certificates deposited
herewith (or replacement certificate(s) for the Shares) to or at the
direction of the Attorneys-in-Fact; and
(iv) to return or cause Pacific Community Banking Group's transfer agent to
return to the Shareholder cash in lieu of fractional shares and new
certificate(s) for the shares of Pacific Community Banking Group common
stock and warrants that are received in exchange for any certificate
deposited hereunder but that are not sold to the Underwriters.
B. Until the shares of The Bank of Hemet common stock deposited hereunder
have been exchanged for Pacific Community Banking Group common stock, the
Shareholder shall retain all rights of ownership with respect to the shares of
The Bank of Hemet common stock deposited hereunder, including the right to vote
and to receive all dividends and payments thereon, except the right to retain
custody of or dispose
3
<PAGE>
of such Shares, which right is subject to this Agreement. Until the Shares have
been delivered to the Underwriters against payment therefor, the Shareholder
shall retain all rights of ownership with respect to the Shares, including the
right to vote and to receive all dividends and payment thereon, except the right
to retain custody of or dispose of such Shares, which right is subject to this
Agreement.
3. IRREVOCABLE OFFER TO SELL SHARES OF PACIFIC COMMUNITY BANKING GROUP
COMMON STOCK.
The Shareholder offers for sale to the Underwriters any and all shares of
Pacific Community Banking Group common stock received in exchange for the shares
of The Bank of Hemet common stock transmitted herewith. This offer is made
without conditions, except as provided in this Agreement, and may be accepted
and executed without prior notice to the Shareholder. The Shareholder may not
revoke this offer; however, this offer will expire if not accepted in whole or
in part by the Underwriters on or before August 4, 1999, unless extended by one
or both of the Attorneys-in-Fact.
4. PREFERENCE TO RECEIVE CASH OR SHARES OF PACIFIC COMMUNITY BANKING GROUP
COMMON STOCK
The Shareholder hereby instructs the Attorney-in-Fact that the shareholder
prefers to receive consideration for the surrendered shares of The Bank of Hemet
common stock as indicated on the Statement of Preference attached in this
Agreement. The Shareholder acknowledges that this preference is subject to the
power of the Attorney-in-Fact to allocate the number of Shareholders' shares
sold to the Underwriters to satisfy the terms of the Acquisition Agreement, in
the sole discretion of the Attorney-in-Fact.
5. SALE OF SHARES; REMITTING NET PROCEEDS.
The Attorneys-in-Fact are hereby authorized and directed to deliver or cause
the Custodian or Pacific Community Banking Group's transfer agent to deliver
certificates for the Shares to the Representatives, against delivery to the
Attorneys-in-Fact, for the account of the Shareholder, of the purchase price of
the Shares. The Attorneys-in-Fact are authorized, on behalf of the Shareholder,
to accept and acknowledge receipt of the payment of the purchase price for the
Shares and shall promptly deposit such proceeds with the Custodian. The
Custodian shall promptly remit to the Shareholder his or her share of the
proceeds.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
To induce the Underwriters to enter into an underwriting agreement with
Pacific Community Banking Group and certain of its shareholders, and in
consideration of the performance of this Agreement by the other parties thereto,
the Shareholder represents and warrants to, and agrees with, the Underwriters,
Pacific Community Banking Group, the Attorneys-in-Fact and the Custodian as
follows:
A. The Shareholder has full legal right, power and authority to enter into
and perform this Agreement. This Agreement has been duly executed and delivered
by the Shareholder and (assuming this Agreement is a binding Agreement of the
other parties thereto) constitutes the valid and binding agreement of the
Shareholder, enforceable against the Shareholder in accordance with its terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting the enforcement of creditors' rights and the
application of equitable principles relating to the availability of remedies,
and except as rights to indemnity or contribution may be limited by federal or
state securities law and the public policy underlying such laws).
B. None of the execution, delivery or performance of this Agreement and the
consummation of the transactions herein contemplated will conflict with or
result in a breach of, or default under, any indenture, mortgage, deed or trust,
voting trust agreement, shareholders' agreement, note agreement or other
agreement or instrument to which the Shareholder is a party or by which the
Shareholder is bound or to which any of his or its property is or may be
subject, or any statute, judgment, decree, order, rule or
4
<PAGE>
regulation applicable to the Shareholder of any government, arbitrator, court,
regulatory body or administrative agency or other governmental agency or body,
domestic or foreign, having jurisdiction over the Shareholder or any of his
activities or properties.
C. At the date hereof, the Shareholder has full right, power and authority
to sell, assign, transfer and deliver the shares of The Bank of Hemet common
stock to be surrendered in exchange for the Shares, and at the time of delivery
of the Shares to be sold by the Shareholder to the several Underwriters, the
Shareholder will have full right, power and authority to sell, assign, transfer
and deliver the Shares to be sold by the Shareholder hereunder. At the date
hereof the Shareholder is the lawful owner of and has good and marketable title
to the shares of The Bank of Hemet common stock to be surrendered in exchange
for the Shares, free and clear of any and all encumbrances, and at the time of
delivery of the Shares to be sold by the Shareholder, the Shareholder will be
the lawful owner of and will have good and marketable title to the Shares free
and clear of any and all encumbrances.
D. To the Shareholder's knowledge, the Shareholder has not taken any action
designed to stabilize or manipulate the price of any security of Pacific
Community Banking Group, or which has constituted or which might in the future
reasonably be expected to cause or result in stabilization or manipulation of
the price of any security of Pacific Community Banking Group, to facilitate the
sale or resale of the Shares or otherwise.
E. If the Shareholder is acting as a fiduciary, officer, partner or agent,
the Shareholder is enclosing with this Agreement certified copies of the
appropriate instruments pursuant to which the Shareholder is authorized to act
hereunder. If the Shareholder is an individual and is married, and the spouse is
not named as an owner on the stock certificate, the Shareholder is enclosing
with this Agreement a duly completed and executed consent of his or her spouse,
in the form attached to this Agreement as Annex A.
F. The Shareholder agrees to deliver to the Attorneys-in-Fact such
documentation as the Attorneys-in-Fact, The Bank of Hemet, Pacific Community
Banking Group or the Underwriters or any of their respective counsel may
reasonably request in order to effectuate any of the provisions hereof, in form
and substance satisfactory in all respects to the Attorneys-in-Fact.
G. The foregoing representations, warranties and agreements are made for
the benefit of, and may be relied upon by, the Attorneys-in-Fact, The Bank of
Hemet, Pacific Community Banking Group, the Custodian, the Underwriters and
their respective representatives, agents and counsel.
7. IRREVOCABILITY OF INSTRUMENTS; TERMINATION OF THIS AGREEMENT.
A. This Agreement, the deposit of The Bank of Hemet common stock pursuant
hereto and all authority hereby conferred, is granted, made and conferred
subject to and in consideration of (a) the interests of the Attorneys-in-Fact,
the Underwriters, The Bank of Hemet and Pacific Community Banking Group in and
for the purpose of completing the transactions contemplated hereunder and by the
Acquisition Agreement and the Underwriting Agreement between Pacific Community
Banking Group, certain other selling shareholders and the Underwriters, and (b)
the completion of the registration of Pacific Community Banking Group common
stock pursuant to the Registration Statement and the other acts of the
above-mentioned parties from the date hereof to and including the time the
Shares are purchased by the Underwriters, and the Attorneys-in-Fact are hereby
further vested with an estate, right, title and interest in and to the Shares
deposited herewith for the purpose of irrevocably empowering and securing to
them authority sufficient to consummate said transactions. Accordingly, this
Agreement and the offer of the Shares made herein shall be irrevocable prior to
August 4, 1999, and shall remain in full force and effect until that date, which
may be extended by one or both of the Attorneys-in-Fact. The Shareholder further
agrees that this Agreement shall not be terminated by operation of law or upon
the occurrence of any event whatsoever, including the death, disability or
incompetence of the Shareholder or, if the Shareholder is not a natural person,
upon any dissolution, winding up, distribution of assets or other event
affecting the legal existence of the Shareholder. If any event referred to in
the preceding sentence
5
<PAGE>
shall occur, whether with or without notice thereof to the Attorneys-in-Fact,
any of the Underwriters or any other person, the Attorneys-in-Fact shall
nevertheless be authorized and empowered to deliver and deal with the Shares
deposited under the Agreement by the Shareholder in accordance with the terms
and provisions of this Agreement as if such event had not occurred.
B. If the transactions contemplated in the Acquisition Agreement are not
completed by August 4, 1999, this Agreement shall terminate (without affecting
any lawful action of the Attorneys-in-Fact or the Custodian prior to such
termination), unless extended by one or both of the Attorneys-in-Fact, and the
Attorneys-in-Fact shall cause the Custodian to return to the Shareholder all
certificates for The Bank of Hemet common stock deposited hereunder.
8. LIABILITY AND INDEMNIFICATION OF THE ATTORNEYS-IN-FACT AND CUSTODIAN.
The Attorneys-in-Fact and the Custodian assume no responsibility or
liability to the Shareholder or to any other person, other than to deal with The
Bank of Hemet common stock deposited hereunder, the Pacific Community Banking
Group common stock exchanged therefor, the proceeds from the sale of the Shares
and any other shares of Pacific Community Banking Group common stock deposited
with the Custodian pursuant to the terms of this Agreement in accordance with
the provisions hereof. The Shareholder hereby agrees to indemnify and hold
harmless the Attorneys-in-Fact and the Custodian, and their respective officers,
agents, successors, assigns and personal representatives with respect to any act
or omission of or by any of them in good faith in connection with any and all
matters contemplated by this Agreement or the Underwriting Agreement.
9. INTERPRETATION.
A. The representations, warranties and agreements of the Shareholder
contained herein shall survive the sale and delivery of the Shares and the
termination of this Agreement.
B. The validity, enforceability, interpretation and construction of this
Agreement shall be determined in accordance with the laws of the State of
California applicable to contracts made and to be performed within the State of
California, and this Agreement shall inure to the benefit of, and be binding
upon, the Shareholder and the Shareholder's heirs, executors, administrators,
successors and assigns, as the case may be.
C. Wherever possible each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
such provision shall be prohibited by or invalid under applicable law, it shall
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
D. The use of the masculine gender in this Agreement includes the feminine
and neuter, and the use of the singular includes the plural, wherever
appropriate.
THE NEXT PAGE IS THE SIGNATURE PAGE.
6
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Custody Agreement, Letter
of Transmittal, Power of Attorney and Offer of Sale this ____ day of
____________, 1999.
<TABLE>
<S> <C>
Signature of Shareholder
Medallion Guaranteed by:
(Please sign exactly as your name
appears on your stock
certificate(s).)*
Name and address to which notices,
funds and stock certificates shall be
sent.
(NAME)
(STREET)
(CITY) (STATE) (ZIP)
</TABLE>
* The signature MUST BE MEDALLION GUARANTEED by an eligible guarantor
institution, such as a bank, or a stock broker, savings and loan
association, or credit union, with membership in an approved medallion
signature program.
<TABLE>
<S> <C>
ACCEPTED by the Attorneys-in-Fact as of the ACCEPTED by the Custodian as of the of the
date above set forth: date above set forth:
James B. Jaqua U.S. STOCK TRANSFER CORPORATION
By:
John J. McDonough Name:
Its:
</TABLE>
SEE THE ATTACHED INSTRUCTIONS
7
<PAGE>
SCHEDULE I
CERTIFICATE(S) FOR SHARES OF COMMON STOCK OF
THE BANK OF HEMET
DEPOSITED UNDER
Custody Agreement, Letter of Transmittal, Power of Attorney and Offer of Sale
<TABLE>
<CAPTION>
Certificate Number
(or purchase date if held in street Number of Shares of
name) The Bank of Hemet Common Stock
- ------------------------------------- --------------------------------
<S> <C> <C>
........................
........................
........................
........................
........................
........................
Total Shares:
</TABLE>
The Attorneys-in-fact may not be able to sell all of the Pacific Community
Banking Group common stock received in exchange for your shares listed above or
you may have requested to sell some shares and keep some shares. If you wish to
do so for income tax purposes, please give the order in which you would like
your shares sold, listing by the certificate number, or date of purchase if held
in street name, in order from those you want the Attorneys-in-Fact to sell first
to those you want sold last.
<TABLE>
<S> <C> <C>
1. 2. 3.
4. 5. 6.
7. 8. 9.
10.
</TABLE>
8
<PAGE>
STATEMENT OF PREFERENCE
INSTRUCTION: See Section 4 of the Custody Agreement, Letter of Transmittal,
Power of Attorney and Offer of Sale.
CHECK THE BOX BELOW THAT APPLIES.
/ / A. I prefer to sell all of the shares of Pacific Community Banking Group
common stock that I will receive in the acquisition.
/ / B. I prefer to retain all of the shares of Pacific Community Banking
Group common stock that I will receive in the acquisition.
/ / C. I prefer to sell ____% of the shares of Pacific Community Banking
Group common stock that I will receive in the acquisition. IF YOU CHECK
THIS BOX, PLEASE FILL IN THE PERCENTAGE; OTHERWISE, WE WILL CONSIDER YOU
TO HAVE MADE NO ELECTION AND THE ATTORNEYS-IN-FACT WILL HAVE THE
DISCRETION TO SELL YOUR SHARES AS THEY DETERMINE.
Statement of Preference
9
<PAGE>
ANNEX A
INSTRUCTION: See Section 6, paragraph E, of the Custody Agreement, Letter of
Transmittal, Power of Attorney and Offer of Sale.
CONSENT OF SPOUSE
I am the spouse of ____________. On behalf of myself, my heirs, legatees,
and assigns, I hereby join in and consent to the terms of the foregoing Custody
Agreement, Letter of Transmittal, Power of Attorney and Offer of Sale (the
"Agreement"), and I agree to the sale of the shares of common stock of Pacific
Community Banking Group, a California corporation, to be received in exchange
for the shares of common stock of The Bank of Hemet registered in the name of my
spouse or otherwise registered, which my spouse has offered to sell in the
Agreement.
Dated: ____________, 1999
______________________________________
(Signature of Spouse)
<PAGE>
INSTRUCTION:See Instruction D. Shareholders sign only the spaces marked "X"; DO
NOT FILL IN THE TOP OF THE FORM OR DATE.
STOCK POWER
FOR VALUE RECEIVED, ________________________ hereby sells, assigns and
transfers unto ________________________ , ________________________ shares of the
Common Stock of The Bank of Hemet, and does hereby irrevocably constitute and
appoint _________________________________ attorney to transfer such shares on
the books of Valley Bank with full power of substitution in the premises.
Dated: ______________ , 1999
<TABLE>
<S> <C>
X
X
(Please sign exactly as your name
appears on your stock
certificate(s).)
Signature medallion guaranteed by:
By:
</TABLE>
- ------------------------
* The signature MUST BE MEDALLION GUARANTEED by an eligible guarantor
institution, such as a bank, a stock broker, savings and loan association,
or credit union, with membership in an approved medallion signature program.
<PAGE>
THE BANK OF HEMET
DECLARATION REGARDING LOST SHARE CERTIFICATE
AND UNDERTAKING TO INDEMNIFY
The undersigned hereby declares and certifies as of _________ __, 1999, that
TODAY'S DATE
1. The undersigned is the record and beneficial owner of
________________________________________
NUMBER OF SHARES IN
LOST CERTIFICATE
shares of the common stock (the "SHARES") of The Bank of Hemet, a California
corporation (the Company).
2. The certificate issued to the undersigned representing the Shares (the
"CERTIFICATE") has been lost, destroyed or misplaced and, in spite of a diligent
search for the Certificate, it has not been located.
3. The undersigned did not endorse, transfer or intentionally dispose of
the Certificate and has not pledged, hypothecated, assigned or otherwise
transferred any of the undersigned's interest in the Shares. The undersigned is
entitled to exclusive ownership and possession of the Shares. The undersigned
does not know of any person, firm or corporation that claims, or may claim, any
interest in the Certificate or the Shares.
4. The undersigned makes this Declaration to request of and to induce The
Bank of Hemet to cause its Transfer Agent to surrender the Shares to Pacific
Community Banking Group in exchange for the common stock of the Pacific
Community Banking Group, and to induce Pacific Community Banking Group to issue
shares of its common stock to the undersigned in exchange for the Shares.
5. In consideration of the fact that The Bank of Hemet and Pacific
Community Banking Group will not require the undersigned to post a lost
instrument bond, the undersigned hereby agrees at all times to indemnify and
hold harmless The Bank of Hemet and Pacific Community Banking Group against any
and all claims, liabilities, losses, damages, judgments and expenses (including
reasonable attorneys' fees) which The Bank of Hemet or Pacific Community Banking
Group may sustain or incur by reason of a claim under the Certificate or
otherwise arising out of the Shares.
6. The undersigned represents that if the Certificate ever comes into the
hands of the undersigned, the undersigned will immediately and without
consideration surrender the Certificate to The Bank of Hemet for cancellation
or, if the acquisition of The Bank of Hemet by Pacific Community Banking Group
has concluded, the undersigned will immediately and without consideration
surrender the Certificate to Pacific Community Banking Group.
7. The undersigned agrees to make such further assurances, and to deliver
such further documents, as may be reasonably necessary to verify the
undersigned's ownership of the Shares.
IN WITNESS WHEREOF, the undersigned hereby declares that the facts set forth
in this Declaration Regarding Lost Share Certificate and Undertaking to
Indemnify are true.
Shareholder:
______________________________________
Name: ________________________________
______________________________________
Name: ________________________________
<PAGE>
[W-9]
<PAGE>
INSTRUCTIONS AND
CUSTODY AGREEMENT, LETTER OF TRANSMITTAL, POWER OF ATTORNEY
AND OFFER OF SALE
FOR CUSTODY AND EXCHANGE OF COMMON STOCK OF
VALLEY BANK
AND FOR CUSTODY AND SALE OF COMMON STOCK OF
PACIFIC COMMUNITY BANKING GROUP
------------------
U.S. STOCK TRANSFER CORPORATION
EXCHANGE AGENT AND CUSTODIAN
THE RIGHT TO PARTICIPATE IN THE PUBLIC OFFERING
WILL EXPIRE AT 5:00 P.M., JULY 23, 1999, CALIFORNIA TIME.
THE EXCHANGE AGENT MUST RECEIVE THESE DOCUMENTS
BY THAT TIME.
June 28, 1999
Dear Shareholder:
Enclosed is a set of shareholder documents. Please read these documents
carefully. Please complete and return these documents to U.S. Stock Transfer,
which is the exchange agent and custodian in the acquisition. Or if you received
these documents from your broker, please follow his or her instructions.
Detailed instructions for completing the forms begin on page three, preceded by
frequently asked questions and answers. When the acquisition is completed, we
will need these documents to ensure you promptly receive certificates for your
new shares of Pacific Community Banking Group Common Stock and warrants, and so
that you can participate in the initial public offering of Pacific Community
Banking Group.
- PLEASE USE THE ENCLOSED PINK BUSINESS RETURN ENVELOPES FOR YOUR PROXY CARD
ONLY.
- USE THE WHITE RETURN ENVELOPES TO RETURN THE SIGNED SHAREHOLDER DOCUMENTS
AND YOUR STOCK CERTIFICATES BY CERTIFIED MAIL IN SEPARATE ENVELOPES.
<PAGE>
QUESTIONS AND ANSWERS FOR SHAREHOLDERS OF VALLEY BANK
ABOUT THE
SHAREHOLDER DOCUMENTS
Q: I AM A SHAREHOLDER OF VALLEY BANK. WHY MUST I COMPLETE THESE DOCUMENTS?
A: Pacific Community Banking Group has agreed to acquire Valley Bank. You have
received a proxy statement/prospectus that describes Pacific Community
Banking Group and the acquisition. If the shareholders approve the
acquisition, Valley Bank needs the shareholder documents to complete the
acquisition and to arrange for you to receive the cash, stock and warrants
you will be entitled to receive.
Q: WHAT IS THE CUSTODY AGREEMENT, LETTER OF TRANSMITTAL, POWER OF ATTORNEY AND
OFFER OF SALE?
A: You should read the entire document. But in summary, the Custody Agreement,
Letter of Transmittal, Power of Attorney and Offer of Sale is a binding
agreement by you that principally provides the following:
- You appoint a custodian, which will hold your shares and deliver them as
necessary to complete the acquisition and the public offering.
- You provide your name, address and other necessary information to ensure
that you receive the cash, stock and warrants to which you are entitled,
and you state a preference to receive a greater amount of cash or of stock
after the close of the acquisition and the public offering. You also
promise that you own your shares and have the power to sell them.
- You give a special power of attorney to two individuals, referred to as
the 'Attorneys-in-Fact,' who will take limited legal actions on your
behalf to establish the final price of your Pacific Community Banking
Group stock and sell some or all of that stock to the underwriters.
- You offer the shares of Pacific Community Banking Group common stock you
will receive in the acquisition to the underwriters. The underwriters will
be able to purchase some or all of the shares for resale at a price to the
public of at least $15 per share.
Q: WHO IS THE CUSTODIAN AND WHAT WILL THE CUSTODIAN DO?
A: U.S. Stock Transfer Corporation will be the custodian. You should send your
certificates to the custodian now, along with the selling shareholder
documents. If the acquisition closes, the custodian will surrender the
certificates for your shares of Valley Bank common stock. In exchange for
each share so surrendered you will receive two thirds of a share of Pacific
Community Banking Group common stock and one third of a warrant. The
custodian will keep custody of your shares of Pacific Community Banking
Group for the brief period until the public offering closes, then deliver
the shares you sell to the underwriter, send you the money received from the
sale and send you certificates for the shares you don't sell, and for your
warrants.
Q: WHO ARE THE "ATTORNEYS-IN-FACT" AND WHAT POWER WILL THEY HAVE?
A: An individual that has the power to act on your behalf under the Power of
Attorney is called an "Attorney-in-Fact." You will authorize any of two
persons, Marion V. Ashley and N. Douglas Mills, to act in this capacity.
They will negotiate the final price to the public of the shares of Pacific
Community Banking Group common stock you sell, with a minimum price of $15.
They will sell your shares of
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<PAGE>
Pacific Community Banking Group common stock to the underwriters on those
terms. The Attorneys-in-Fact will consider the preference for cash or stock
that you have stated. But they will have the discretion to designate some or
all of your stock to be sold to the public, in order to meet the terms of
the acquisition agreement. They can also sign any documents necessary to
complete the sale, on your behalf, including an underwriting agreement,
without further consultation with you.
Q: CAN I ELECT TO RECEIVE CASH ONLY OR PACIFIC COMMUNITY BANKING GROUP COMMON
STOCK ONLY?
A: No. You will be able to indicate your preference to have (a) 100% cash or
(b) 100% stock of Pacific Community Banking Group or (c) 60% cash and 40%
stock of Pacific Community Banking Group after the close of the acquisitions
and the initial public offering. The Attorneys-in-Fact will consider this
when determining how much of your Pacific Community Banking Group common
stock to sell to the underwriters. But even if you indicate a preference for
100% stock, it is likely that some of your shares will be sold because the
acquisition agreement requires that the underwriters purchase and resell 60%
of the total shares received by shareholders of Valley Bank. Similarly, even
if you indicate a preference to receive all cash, you may be required to
keep some amount of Pacific Community Banking Group Stock.
Q: WHAT OTHER KINDS OF INFORMATION WILL I NEED TO PROVIDE?
A: In addition to your name and address, you will give instructions for where
the transfer agent should send the money received from the sale and any
remaining shares and your warrants. If you have more than one certificate,
or have a number of separate purchases on your brokerage account, you can
indicate which of them you prefer to sell first, which can affect the amount
of taxable capital gain you realize if you paid different amounts per share
in your original purchases. You will also need to return a completed form
W-9 for tax reporting purposes. Please consult your tax advisor if you have
questions about the tax effects of designating particular shares for sale.
Q: WHAT IF I DON'T HAVE PHYSICAL CERTIFICATES FOR MY SHARES, BUT HOLD THEM
THROUGH AN ACCOUNT AT MY BROKER?
A: If you don't have certificates, but hold your shares of Valley Bank common
stock "in street name," that is, through a brokerage account, you should
still complete all of the enclosed shareholder documents. Your broker will
tell you where and how to return the completed documents. Then the surrender
and exchange of certificates, and the sale of stock, will take place on your
behalf. You will receive the cash proceeds from the sale of your Pacific
Community Banking Group common stock. Any remaining shares of Pacific
Community Banking Group common stock and the warrants will be recorded on
your brokerage account.
Q: WHAT IF THE ACQUISITION OR THE PUBLIC OFFERING IS NOT COMPLETED?
A: If either the acquisition or the public offering fails to take place, the
custodian will return to you the certificates for the shares of Valley Bank
common stock you surrendered, or send you replacement certificates.
Q: WHAT IF I LOST THE CERTIFICATES FOR MY SHARES?
A: If you have lost the certificates for your shares, please complete and
return the enclosed Lost Certificate Declaration, along with the other
applicable shareholder documents.
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<PAGE>
Q: IS IT SAFE TO SEND MY CERTIFICATES BY MAIL OR BY OVERNIGHT EXPRESS?
A: Please do NOT send signed stock certificates by mail or by overnight
express. Unless you will hand deliver your certificates, sign one of the
enclosed Stock Powers for each of your certificates rather than signing the
certificates. Then send the certificates and the stock powers by certified
mail IN SEPARATE ENVELOPES.
Q: WILL I BE RESPONSIBLE FOR ANY OF THE COSTS OF THE PUBLIC OFFERING?
A: No. Pacific Community Banking Group will pay the underwriters' commissions
and other costs of reselling your shares in the public offering. You will
receive the gross amount obtained for the shares you sell immediately.
INSTRUCTIONS
(FOR COMPLETING THE CUSTODY AGREEMENT, LETTER OF TRANSMITTAL,
POWER OF ATTORNEY AND OFFER OF SALE)
A. You have been sent five copies of the Custody Agreement, Letter of
Transmittal, Power of Attorney and Offer of Sale (the 'Agreement'). Please
complete and return four copies of the Agreement and stock certificate(s) as set
forth in paragraph D below. PLEASE BE SURE TO INDICATE YOUR PREFERENCE FOR CASH
OR STOCK. A fully signed copy of the Agreement will be returned to you.
B. Complete Schedule I attached hereto.
C. You must sign each copy of the Agreement and for each stock certificate
you deposit along with this Agreement you must either (a) sign each stock
certificate or (b) sign a separate stock power (stock power forms are provided
with this Agreement). YOU SHOULD NOT SIGN THE STOCK CERTIFICATES UNLESS YOU
DELIVER THE CERTIFICATES AND THE FOUR SIGNED COPIES OF THE AGREEMENT BY HAND.
ALL OF YOUR SIGNATURES MUST BE MEDALLION GUARANTEED by an eligible guarantor
institution, such as a bank, a stock broker, savings and loan association, or
credit union, with membership in an approved medallion signature program. If you
bring the documents and your photo identification to the Main Branch of Valley
Bank, 24010 Sunnymead Blvd., Moreno Valley, California, (909) 242-1959, a
representative of Valley Bank will provide the required medallion
guarantee.PLEASE SIGN THE STOCK CERTIFICATE(S) OR STOCK POWER AND THE AGREEMENT
EXACTLY AS YOUR NAME APPEARS ON YOUR STOCK CERTIFICATE(S).
D. Promptly return signed stock certificate(s), or stock certificate(s) with
separate stock powers, along with all four signed copies of the completed
Agreement, by hand delivery or certified mail appropriately insured to:
U.S. Stock Transfer Corporation
1745 Gardena Avenue, Suite 200
Glendale, CA 91204
If sending through the mail or by courier, please do not sign the
certificate(s), but send a signed stock power or powers in the separate envelope
provided.
E. You may elect to retain shares of Pacific Community Banking Group common
stock rather than offering to sell them to the Underwriters. Also, each
shareholder may be required to retain some shares of Pacific Community Banking
Group common stock to satisfy the terms of the First Restatement of the
Agreement and Plan of Reorganization between Valley Bank and Pacific Community
Banking Group. In either case, the Custodian will cause to be delivered to you
in due course, but not earlier than ten days after the closing for the purchase
of firm shares by the Underwriters, a certificate for the number of shares of
Pacific Community Banking Group common stock and warrants that you have received
but that were not sold in the public offering.
F. If you have lost any of your stock certificates, complete the Lost
Certificate Declaration and include it with the other declaration.
G. All Shareholders must return a tax identification number and the
certification on the IRS Form W-9 provided.
4
<PAGE>
------------------------
(Name of Shareholder)
CUSTODY AGREEMENT, LETTER OF TRANSMITTAL, POWER OF ATTORNEY
AND OFFER OF SALE
FOR CUSTODY AND EXCHANGE OF COMMON STOCK OF
VALLEY BANK
AND FOR CUSTODY AND SALE OF COMMON STOCK OF
PACIFIC COMMUNITY BANKING GROUP
Marion V. Ashley
N. Douglas Mills
As Attorneys-in-Fact
c/o Valley Bank
24010 Sunnymead Boulevard
Moreno Valley CA 92553
U.S. Stock Transfer Company
As Custodian
1745 Gardena Avenue, Suite 200
Glendale, CA 91204
Sutro & Co. Incorporated
As Representative of the several Underwriters
c/o Sutro & Co. Incorporated
11150 Santa Monica Boulevard, Suite 1500
Los Angeles, California 90025
Ladies and Gentlemen:
The undersigned (the "Shareholder") is a shareholder of Valley Bank ("Valley
Bank"), a California corporation. Pacific Community Banking Group, a California
corporation, and Valley Bank have signed a First Restatement of Agreement and
Plan of Reorganization (as amended, the "Acquisition Agreement") providing for
the acquisition of Valley Bank by Pacific Community Banking Group. If the
acquisition is completed, the Shareholder's shares of Valley Bank will
automatically convert into a right to receive shares of Pacific Community
Banking Group. Pacific Community Banking Group and the Shareholder propose to
sell some or all of the shares of Pacific Community Banking Group common stock
received by the Shareholder to underwriters (the "Underwriters") for whom Sutro
& Co. Incorporated will act as representative (the "Representative" ), for
distribution under a Registration Statement on Form S-1 (the "Registration
Statement") to the public at a price and on terms to be hereafter determined. It
is understood that at this time there is no commitment on the part of the
Underwriters to purchase any shares of Pacific Community Banking Group common
stock and no assurance that an offering of Pacific
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<PAGE>
Community Banking Group common stock will take place. The shares of Pacific
Community Banking Group common stock received by the Shareholder in exchange for
shares of Valley Bank common stock, all of which the Shareholder will hereby
offer to sell to the Underwriters, are referred to herein as the "Shares."
1. APPOINTMENT AND POWERS OF ATTORNEYS-IN-FACT.
A. The Shareholder irrevocably constitutes and appoints Marion V. Ashley
and N. Douglas Mills (the "Attorneys-in-Fact"), and each of them, its agent and
attorney-in-fact, with full power of substitution, with respect to all matters
arising in connection with the public offering and sale of the Shares,
including, but not limited to, the power and authority on behalf of the
Shareholder to do or cause to be done any of the following things:
(i) to instruct the Custodian (as defined below) to surrender certificates
for all of the Shareholders' shares of common stock of Valley Bank in
exchange for shares of Pacific Community Banking Group as provided in
the Acquisition Agreement;
(ii) to negotiate, determine and agree upon (a) the price at which the
Shares will be initially offered to the public by the Underwriters,
provided that the price shall not be less than $15 per share, and (b)
the price at which the Shares will be sold to the Underwriters;
(iii) to execute on behalf of the Shareholder an underwriting agreement as
follows: (a) making the representations and warranties of the
Shareholder contained in this Agreement to the Underwriters; (b)
undertaking the obligations of the Shareholder contained in this
agreement, for the benefit of the Underwriters; and (c) indemnifying
the Underwriters, on a joint and several basis with Pacific Community
Banking Group and the other Shareholders, for losses resulting from a
breach of those representations, warranties and obligations, up to the
amount of consideration received by the Shareholder for shares of
Pacific Community Banking Group sold to the public in the initial
public offering. Such indemnification may include a provision for
interim reimbursement and contribution, with the underwriters having a
similar obligation to the shareholders participating in the public
offering.
(iv) to allocate the number of shares of Pacific Community Banking Group
common stock owned by the Shareholder that shall be sold to the
Underwriters and the number of shares of Pacific Community Banking
Group common stock that shall be retained by the Shareholder, in
satisfaction of the terms of the Acquisition Agreement. NOTWITHSTANDING
THE STATEMENT OF PREFERENCE MADE BY THE SHAREHOLDER HEREIN, THE
ATTORNEYS-IN-FACT ARE AUTHORIZED, IN THEIR SOLE DISCRETION, TO SELL UP
TO THE TOTAL NUMBER OF SHARES OF PACIFIC COMMUNITY BANKING STOCK OWNED
BY THE SHAREHOLDER.
(v) to sell, assign, transfer and deliver the Shares to the Underwriters and
deliver to the Underwriters certificates for the Shares so sold;
(vi) take any and all steps deemed necessary or desirable by the
Attorneys-in-Fact in connection with the registration of the Shares
under the Securities Act of 1933, as amended (the "Securities Act"),
the Securities Exchange Act of 1934, as amended, and under the
securities or "blue sky" laws of various states and jurisdictions,
including, without limitation, the giving or making of such
undertakings, representations and agreements and the taking of such
other steps as the Attorneys-in-Fact may deem necessary or advisable;
(vii) instruct Pacific Community Banking Group and the Custodian (as
hereinafter defined) on all matters pertaining to the sale of the
Shares and delivery of certificates therefor; and
(viii) otherwise take all actions and do all things necessary or proper,
required, contemplated or deemed advisable or desirable by the
Attorneys-in-Fact in their discretion, including the
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<PAGE>
execution and delivery of any documents, and generally act for and in
the name of the Shareholder with respect to the sale of the Shares to
the Underwriters and the reoffering of the Shares by the Underwriters
as fully as could the Shareholder if then personally present and
acting.
B. Each Attorney-in-Fact may act alone in exercising the rights and powers
conferred on the Attorneys-in-Fact by this Custody Agreement, Letter of
Transmittal, Power of Attorney and Offer of Sale (this "Agreement"), and the act
of any Attorney-in-Fact shall be the act of the Attorneys-in-Fact. Each
Attorney-in-Fact is hereby empowered to determine, in his sole and absolute
discretion, the time or times when, the purposes for which, and the manner in
which, any power herein conferred upon the Attorneys-in-Fact shall be exercised.
C. The Custodian, the Representatives, Pacific Community Banking Group and
all other persons dealing with the Attorneys-in-Fact as such may rely and act
upon any writing believed in good faith to be signed by one or more of the
Attorneys-in-Fact.
D. The Attorneys-in-Fact shall not receive any compensation from the
Shareholder for their services rendered hereunder.
2. APPOINTMENT OF CUSTODIAN; DEPOSIT OF SHARES.
A. In connection with and to facilitate the exchange of shares of Valley
Bank common stock and the sale of the Shares to the Underwriters, the
Shareholder hereby appoints U.S. Stock Transfer Corporation as custodian (the
"Custodian") and herewith deposits with the Custodian one or more certificates
for Valley Bank common stock which represent the total number of the shares of
Valley Bank common stock held by the Shareholder, and which number is set forth
on Schedule I hereto. Each such certificate so deposited is in negotiable and
proper deliverable form and either (a) the certificate has been endorsed in
blank with the signature of the Shareholder thereon, medallion guaranteed by an
eligible guarantor institution, such as a bank, a stock broker, savings and loan
association, or credit union, with membership in an approved medallion signature
program, or (b) the Shareholder has separately provided a duly executed stock
power or powers in blank, bearing the signature of the Shareholder, medallion
guaranteed in the same manner. The Custodian is hereby authorized and directed,
subject to the instructions of the Attorneys-in-Fact, to act as follows:
(i) to surrender the certificates for Shareholder's shares of Valley Bank
in exchange for certificates of Pacific Community Banking Group common
stock in accordance with the Acquisition Agreement;
(ii) to hold in custody the certificate or certificates deposited herewith
and any other certificates or instruments exchanged therefor;
(iii) to deliver or to authorize Pacific Community Banking Group's transfer
agent to deliver the certificates of Pacific Community Banking Group
common stock received in exchange for the certificates deposited
herewith (or replacement certificate(s) for the Shares) to or at the
direction of the Attorneys-in-Fact; and
(iv) to return or cause Pacific Community Banking Group's transfer agent to
return to the Shareholder cash in lieu of fractional shares and new
certificate(s) for the shares of Pacific Community Banking Group common
stock and warrants that are received in exchange for any certificate
deposited hereunder but that are not sold to the Underwriters.
B. Until the shares of Valley Bank common stock deposited hereunder have
been exchanged for Pacific Community Banking Group common stock, the Shareholder
shall retain all rights of ownership with respect to the shares of Valley Bank
common stock deposited hereunder, including the right to vote and to receive all
dividends and payments thereon, except the right to retain custody of or dispose
of such Shares,
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<PAGE>
which right is subject to this Agreement. Until the Shares have been delivered
to the Underwriters against payment therefor, the Shareholder shall retain all
rights of ownership with respect to the Shares, including the right to vote and
to receive all dividends and payment thereon, except the right to retain custody
of or dispose of such Shares, which right is subject to this Agreement.
3. IRREVOCABLE OFFER TO SELL SHARES OF PACIFIC COMMUNITY BANKING GROUP
COMMON STOCK.
The Shareholder offers for sale to the Underwriters any and all shares of
Pacific Community Banking Group common stock received in exchange for the shares
of Valley Bank common stock transmitted herewith. This offer is made without
conditions, except as provided in this Agreement, and may be accepted and
executed without prior notice to the Shareholder. The Shareholder may not revoke
this offer; however, this offer will expire if not accepted in whole or in part
by the Underwriter on or before August 4, 1999, unless extended by one or both
of the Attorneys-in-Fact.
4. PREFERENCE TO RECEIVE CASH OR SHARES OF PACIFIC COMMUNITY BANKING GROUP
COMMON STOCK
The Shareholder hereby instructs the Attorney-in-Fact that the shareholder
prefers to receive consideration for the surrendered shares of Valley Bank
common stock as indicated on the Statement of Preference attached to this
Agreement. The Shareholder acknowledges that this preference is subject to the
power of the Attorney-in-Fact to allocate the number of Shareholders' shares
sold to the Underwriters to satisfy the terms of the Acquisition Agreement, in
the sole discretion of the Attorney-in-Fact.
5. SALE OF SHARES; REMITTING NET PROCEEDS.
The Attorneys-in-Fact are hereby authorized and directed to deliver or cause
the Custodian or Pacific Community Banking Group's transfer agent to deliver
certificates for the Shares to the Representatives, against delivery to the
Attorneys-in-Fact, for the account of the Shareholder, of the purchase price of
the Shares. The Attorneys-in-Fact are authorized, on behalf of the Shareholder,
to accept and acknowledge receipt of the payment of the purchase price for the
Shares and shall promptly deposit such proceeds with the Custodian. The
Custodian shall promptly remit to the Shareholder his or her share of the
proceeds.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
To induce the Underwriters to enter into an underwriting agreement with
Pacific Community Banking Group and certain of its shareholders, and in
consideration of the performance of this Agreement by the other parties thereto,
the Shareholder represents and warrants to, and agrees with, the Underwriters,
Pacific Community Banking Group, the Attorneys-in-Fact and the Custodian as
follows:
A. The Shareholder has full legal right, power and authority to enter into
and perform this Agreement. This Agreement has been duly executed and delivered
by the Shareholder and (assuming this Agreement is a binding Agreement of the
other parties thereto) constitutes the valid and binding agreement of the
Shareholder, enforceable against the Shareholder in accordance with its terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting the enforcement of creditors' rights and the
application of equitable principles relating to the availability of remedies,
and except as rights to indemnity or contribution may be limited by federal or
state securities law and the public policy underlying such laws).
B. None of the execution, delivery or performance of this Agreement and the
consummation of the transactions herein contemplated will conflict with or
result in a breach of, or default under, any indenture, mortgage, deed of trust,
voting trust agreement, shareholders' agreement, note agreement or other
agreement or instrument to which the Shareholder is a party or by which the
Shareholder is bound or to which any of his or its property is or may be
subject, or any statute, judgment, decree, order, rule or regulation applicable
to the Shareholder of any government, arbitrator, court, regulatory body or
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<PAGE>
administrative agency or other governmental agency or body, domestic or foreign,
having jurisdiction over the Shareholder or any of his activities or properties.
C. At the date hereof, the Shareholder has full right, power and authority
to sell, assign, transfer and deliver the shares of Valley Bank common stock to
be surrendered in exchange for the Shares, and at the time of delivery of the
Shares to be sold by the Shareholder to the several Underwriters, the
Shareholder will have full right, power and authority to sell, assign, transfer
and deliver the Shares to be sold by the Shareholder hereunder. At the date
hereof the Shareholder is the lawful owner of and has good and marketable title
to the shares of Valley Bank common stock to be surrendered in exchange for the
Shares, free and clear of any and all encumbrances, and at the time of delivery
of the Shares to be sold by the Shareholder, the Shareholder will be the lawful
owner of and will have good and marketable title to the Shares free and clear of
any and all encumbrances.
D. To the Shareholder's knowledge, the Shareholder has not taken any action
designed to stabilize or manipulate the price of any security of Pacific
Community Banking Group, or which has constituted or which might in the future
reasonably be expected to cause or result in stabilization or manipulation of
the price of any security of Pacific Community Banking Group, to facilitate the
sale or resale of the Shares or otherwise.
E. If the Shareholder is acting as a fiduciary, officer, partner or agent,
the Shareholder is enclosing with this Agreement certified copies of the
appropriate instruments pursuant to which the Shareholder is authorized to act
hereunder. If the Shareholder is an individual and is married, and the spouse is
not named as an owner on the stock certificate, the Shareholder is enclosing
with this Agreement a duly completed and executed consent of his or her spouse,
in the form attached to this Agreement as Annex A.
F. The Shareholder agrees to deliver to the Attorneys-in-Fact such
documentation as the Attorneys-in-Fact, Valley Bank, Pacific Community Banking
Group or the Underwriters or any of their respective counsel may reasonably
request in order to effectuate any of the provisions hereof, in form and
substance satisfactory in all respects to the Attorneys-in-Fact.
G. The foregoing representations, warranties and agreements are made for
the benefit of, and may be relied upon by, the Attorneys-in-Fact, Valley Bank,
Pacific Community Banking Group, the Custodian, the Underwriters and their
respective representatives, agents and counsel.
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<PAGE>
7. IRREVOCABILITY OF INSTRUMENTS; TERMINATION OF THIS AGREEMENT.
A. This Agreement, the deposit of Valley Bank common stock pursuant hereto
and all authority hereby conferred, is granted, made and conferred subject to
and in consideration of (a) the interests of the Attorneys-in-Fact, the
Underwriters, Valley Bank and Pacific Community Banking Group in and for the
purpose of completing the transactions contemplated hereunder and by the
Acquisition Agreement and the Underwriting Agreement between Pacific Community
Banking Group, certain other selling shareholders and the Underwriters, and (b)
the completion of the registration of Pacific Community Banking Group common
stock pursuant to the Registration Statement and the other acts of the above-
mentioned parties from the date hereof to and including the time the Shares are
purchased by the Underwriters, and the Attorneys-in-Fact are hereby further
vested with an estate, right, title and interest in and to the Shares deposited
herewith for the purpose of irrevocably empowering and securing to them
authority sufficient to consummate said transactions. Accordingly, this
Agreement and the offer of the Shares made herein shall be irrevocable prior to
August 4, 1999, and shall remain in full force and effect until that date, which
may be extended by either or both of the Attorneys-in-Fact. The Shareholder
further agrees that this Agreement shall not be terminated by operation of law
or upon the occurrence of any event whatsoever, including the death, disability
or incompetence of the Shareholder or, if the Shareholder is not a natural
person, upon any dissolution, winding up, distribution of assets or other event
affecting the legal existence of the Shareholder. If any event referred to in
the preceding sentence shall occur, whether with or without notice thereof to
the Attorneys-in-Fact, any of the Underwriters or any other person, the
Attorneys-in-Fact shall nevertheless be authorized and empowered to deliver and
deal with the Shares deposited under the Agreement by the Shareholder in
accordance with the terms and provisions of this Agreement as if such event had
not occurred.
B. If the transactions contemplated in the Acquisition Agreement are not
completed by August 4, 1999, this Agreement shall terminate (without affecting
any lawful action of the Attorneys-in-Fact or the Custodian prior to such
termination) unless extended by either or both of the Attorneys-in-Fact, and the
Attorneys-in-Fact shall cause the Custodian to return to the Shareholder all
certificates for Valley Bank common stock deposited hereunder.
8. LIABILITY AND INDEMNIFICATION OF THE ATTORNEYS-IN-FACT AND CUSTODIAN.
The Attorneys-in-Fact and the Custodian assume no responsibility or
liability to the Shareholder or to any other person, other than to deal with
Valley Bank common stock deposited hereunder, the Pacific Community Banking
Group common stock exchanged therefor, the proceeds from the sale of the Shares
and any other shares of Pacific Community Banking Group common stock deposited
with the Custodian pursuant to the terms of this Agreement in accordance with
the provisions hereof. The Shareholder hereby agrees to indemnify and hold
harmless the Attorneys-in-Fact and the Custodian, and their respective officers,
agents, successors, assigns and personal representatives with respect to any act
or omission of or by any of them in good faith in connection with any and all
matters contemplated by this Agreement or the Underwriting Agreement.
9. INTERPRETATION.
A. The representations, warranties and agreements of the Shareholder
contained herein shall survive the sale and delivery of the Shares and the
termination of this Agreement.
B. The validity, enforceability, interpretation and construction of this
Agreement shall be determined in accordance with the laws of the State of
California applicable to contracts made and to be performed within the State of
California, and this Agreement shall inure to the benefit of, and be binding
upon, the Shareholder and the Shareholder's heirs, executors, administrators,
successors and assigns, as the case may be.
6
<PAGE>
C. Wherever possible each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
such provision shall be prohibited by or invalid under applicable law, it shall
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
D. The use of the masculine gender in this Agreement includes the feminine
and neuter, and the use of the singular includes the plural, wherever
appropriate.
THE NEXT PAGE IS THE SIGNATURE PAGE.
7
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Custody Agreement, Letter
of Transmittal, Power of Attorney and Offer of Sale this ____ day of
____________, 1999.
<TABLE>
<S> <C>
Signature of Shareholder
Medallion Guaranteed by:
(Please sign exactly as your name
appears on your stock
certificate(s).)*
Name and address to which notices,
funds and stock certificates shall be
sent.
(NAME)
(STREET)
(CITY) (STATE) (ZIP)
</TABLE>
* The signature MUST BE MEDALLION GUARANTEED by an eligible guarantor
institution, such as a bank, or a stock broker, savings and loan
association, or credit union, with membership in an approved medallion
signature program.
<TABLE>
<S> <C>
ACCEPTED by the Attorneys-in-Fact as of the ACCEPTED by the Custodian as of the of the
date above set forth: date above set forth:
Marion V. Ashley U.S. STOCK TRANSFER CORPORATION
By:
N. Douglas Mills Name:
Its:
</TABLE>
SEE THE ATTACHED INSTRUCTIONS
8
<PAGE>
SCHEDULE I
CERTIFICATE(S) FOR SHARES OF COMMON STOCK OF
VALLEY BANK
DEPOSITED UNDER
Custody Agreement, Letter of Transmittal, Power of Attorney and Offer of Sale
<TABLE>
<CAPTION>
Certificate Number
(or purchase date if held in street Number of Shares of
name) Valley Bank Common Stock
- ------------------------------------- -------------------------
<S> <C> <C>
...............................
...............................
...............................
...............................
...............................
...............................
Total Shares:
</TABLE>
The Attorneys-in-Fact may not be able to sell all of the Pacific Community
Banking Group common stock received in exchange for your shares listed above or
you may have requested to sell some shares and keep some shares. If you wish to
do so for income tax purposes, please give the order in which you would like
your shares sold, listing by the certificate number, or date of purchase if held
in street name, in order from those you want the Attorneys-in-Fact to sell first
to those you want sold last.
<TABLE>
<S> <C> <C>
1. 2. 3.
4. 5. 6.
7. 8. 9.
10.
</TABLE>
9
<PAGE>
STATEMENT OF PREFERENCE
INSTRUCTION:See Section 4 of the Custody Agreement, Letter of Transmittal, Power
of Attorney and Offer of Sale.
CHECK THE BOX BELOW THAT APPLIES.
/ / A. I prefer to sell 100% of the shares of Pacific Community Banking
Group common stock that I will receive in the acquisition.
/ / B. I prefer to retain all of the shares of Pacific Community Banking
Group common stock that I will receive in the acquisition.
/ / C. I prefer to sell 60% and retain 40% of the shares of Pacific
Community Banking Group common stock that I will receive in the
acquisition.
Statement of Preference
10
<PAGE>
ANNEX A
INSTRUCTION: See Section 6, paragraph E, of the Custody Agreement, Letter of
Transmittal, Power of Attorney and Offer of Sale.
CONSENT OF SPOUSE
I am the spouse of ____________. On behalf of myself, my heirs, legatees,
and assigns, I hereby join in and consent to the terms of the foregoing Custody
Agreement, Letter of Transmittal, Power of Attorney and Offer of Sale (the
"Agreement"), and I agree to the sale of the shares of common stock of Pacific
Community Banking Group, a California corporation, to be received in exchange
for the shares of common stock of Valley Bank registered in the name of my
spouse or otherwise registered, which my spouse has offered to sell in the
Agreement.
Dated: ____________, 1999
______________________________________
(Signature of Spouse)
<PAGE>
INSTRUCTION:See Instruction D. Shareholders sign only the spaces marked "X"; DO
NOT FILL IN THE TOP OF THE FORM OR DATE.
STOCK POWER
FOR VALUE RECEIVED, ________________________ hereby sells, assigns and
transfers unto ________________________ , ________________________ shares of the
Common Stock of Valley Bank, and does hereby irrevocably constitute and appoint
_________________________________ attorney to transfer such shares on the books
of Valley Bank with full power of substitution in the premises.
Dated: ______________ , 1999
<TABLE>
<S> <C>
X
X
(Please sign exactly as your name
appears on your stock
certificate(s).)
Signature medallion guaranteed by:
By:
</TABLE>
- ------------------------
* The signature MUST BE MEDALLION GUARANTEED by an eligible guarantor
institution, such as a bank, a stock broker, savings and loan association,
or credit union, with membership in an approved medallion signature program.
<PAGE>
VALLEY BANK
DECLARATION REGARDING LOST SHARE CERTIFICATE
AND UNDERTAKING TO INDEMNIFY
The undersigned hereby declares and certifies as of _________ __, 1999, that
TODAY'S DATE
1. The undersigned is the record and beneficial owner of
________________________________________
NUMBER OF SHARES IN
LOST CERTIFICATE
shares of the common stock (the "SHARES") of Valley Bank, a California
corporation (the Company).
2. The certificate issued to the undersigned representing the Shares (the
"CERTIFICATE") has been lost, destroyed or misplaced and, in spite of a diligent
search for the Certificate, it has not been located.
3. The undersigned did not endorse, transfer or intentionally dispose of
the Certificate and has not pledged, hypothecated, assigned or otherwise
transferred any of the undersigned's interest in the Shares. The undersigned is
entitled to exclusive ownership and possession of the Shares. The undersigned
does not know of any person, firm or corporation that claims, or may claim, any
interest in the Certificate or the Shares.
4. The undersigned makes this Declaration to request of and to induce
Valley Bank to cause its Transfer Agent to surrender the Shares to Pacific
Community Banking Group in exchange for the common stock of the Pacific
Community Banking Group, and to induce Pacific Community Banking Group to issue
shares of its common stock to the undersigned in exchange for the Shares.
5. In consideration of the fact that Valley Bank and Pacific Community
Banking Group will not require the undersigned to post a lost instrument bond,
the undersigned hereby agrees at all times to indemnify and hold harmless Valley
Bank and Pacific Community Banking Group against any and all claims,
liabilities, losses, damages, judgments and expenses (including reasonable
attorneys' fees) which Valley Bank or Pacific Community Banking Group may
sustain or incur by reason of a claim under the Certificate or otherwise arising
out of the Shares.
6. The undersigned represents that if the Certificate ever comes into the
hands of the undersigned, the undersigned will immediately and without
consideration surrender the Certificate to Valley Bank for cancellation or, if
the acquisition of Valley Bank by Pacific Community Banking Group has concluded,
the undersigned will immediately and without consideration surrender the
Certificate to Pacific Community Banking Group.
7. The undersigned agrees to make such further assurances, and to deliver
such further documents, as may be reasonably necessary to verify the
undersigned's ownership of the Shares.
IN WITNESS WHEREOF, the undersigned hereby declares that the facts set forth
in this Declaration Regarding Lost Share Certificate and Undertaking to
Indemnify are true.
Shareholder:
______________________________________
Name: ________________________________
______________________________________
Name: ________________________________
<PAGE>
[W-9]
<PAGE>
CANCELLATION AGREEMENT
FOR CANCELLATION OF OPTIONS TO PURCHASE COMMON STOCK OF
THE BANK OF HEMET
IN EXCHANGE FOR SHARES OF THE COMMON STOCK AND WARRANTS OF
PACIFIC COMMUNITY BANKING GROUP
AND
CUSTODY AGREEMENT, LETTER OF TRANSMITTAL, POWER OF ATTORNEY AND OFFER OF SALE
FOR CUSTODY AND SALE OF COMMON STOCK OF
PACIFIC COMMUNITY BANKING GROUP
______________________
THE RIGHT TO PARTICIPATE IN THE PUBLIC OFFERING
WILL EXPIRE AT 5:00 P.M., JULY 23, 1999, CALIFORNIA TIME
THE EXCHANGE AGENT MUST RECEIVE THESE DOCUMENTS
BY THAT TIME
_________________________________
IF THE ATTORNEYS-IN-FACT DO NOT RECEIVE THE ATTACHED OPTION
CANCELLATION AGREEMENT BY THE CLOSING OF THE ACQUISITION
YOUR OPTIONS WILL TERMINATE
July 13, 1999
Dear Option Holder:
Enclosed is a set of documents for option holders of The Bank of Hemet.
Please read these documents carefully. Please complete and return these
documents to James B. Jaqua and John J. McDonough, the attorneys-in-fact, using
the enclosed envelope. Detailed instructions for completing the forms begin on
page three, preceded by frequently asked questions and answers. When the
acquisition is completed, we will need these documents to ensure that you
promptly receive certificates for your new shares of Pacific Community Banking
Group.
1
<PAGE>
QUESTIONS AND ANSWERS FOR OPTION HOLDERS OF THE BANK OF HEMET
ABOUT THE
OPTION HOLDER DOCUMENTS
Q: I AM AN OPTION HOLDER OF THE BANK OF HEMET. WHY MUST I COMPLETE THESE
DOCUMENTS?
A: Pacific Community Banking Group has agreed to acquire The Bank of Hemet.
The accompanying proxy statement/prospectus describes the acquisition,
including the rights of option holders. Your options will all expire if
you do not return the Option Cancellation Agreement and the shareholders
approve the acquisition. The Bank of Hemet needs the option holder
documents to arrange for you to receive any cash, stock and warrants you
will be entitled to receive.
Q: WHAT IF MY OPTIONS HAVEN'T VESTED?
A: All of your options will be treated as vested for purposes of cancellation
and exchange in the acquisition.
Q: WHAT IS THE OPTION CANCELLATION AGREEMENT?
A: The Option Cancellation Agreement cancels your options in exchange for a
right to receive common stock and warrants of Pacific Community Banking
Group. The common stock may be sold in the public offering subject to the
limitations described below. IF YOU DO NOT COMPLETE AND RETURN THIS
AGREEMENT IN TIME, YOUR OPTIONS WILL SIMPLY EXPIRE WHEN THE ACQUISITION IS
COMPLETE.
Q: HOW MUCH STOCK AND WARRANTS WILL I RECEIVE?
A: You will receive a number of shares of Pacific Community Banking Group
Stock as follows:
3.4 x ($51 minus the exercise price of the option)
--------------------------------------------------
$51
You will receive one warrant for each 3.4 shares of Pacific Community
Banking Group common stock you receive. The terms of the warrants are
described in the proxy statement/prospectus. You will receive more cash
for shares sold if the price of Pacific Community Banking Group common
stock in the initial public offering is more than $15.00. You will receive
cash instead of fractional shares. No fractional warrants shall be issued.
Q: WHAT IS THE CUSTODY AGREEMENT, LETTER OF TRANSMITTAL, POWER OF ATTORNEY AND
OFFER OF SALE?
A: You should read the entire document, which is necessary for you to sell any
of your new shares of Pacific Community Banking Group common stock in the
offering. In summary,
2
<PAGE>
the Custody Agreement, Letter of Transmittal, Power of Attorney and Offer
of Sale is a binding agreement by you that principally provides the
following:
- You provide your name, address and other necessary information to
ensure that you receive the cash, stock and warrants to which you are
entitled in exchange for your options, and you state a preference to
receive a greater amount of cash or of stock after the close of the
acquisition and the public offering. You also promise that you own
your options and have the power to sell them.
- You give a special power of attorney to two individuals, referred to
as the "Attorneys-in-Fact," who will take limited legal actions on
your behalf to establish the final price of your Pacific Community
Banking Group stock and sell some or all of that stock to the
underwriters.
- You offer the shares of Pacific Community Banking Group common stock
you will receive in the acquisition to the underwriters. The
underwriters will be able to purchase some or all of the shares for
resale at a price to the public of at least $15 per share.
- You appoint custodians of your new Pacific Community Banking Group
common stock and warrants.
Q: WHO ARE THE "ATTORNEYS-IN-FACT" AND WHAT POWER WILL THEY HAVE?
A: An individual that has the power to act on your behalf under the Power of
Attorney is called an "Attorney-in-Fact." You will authorize any of two
persons, James B. Jaqua and John J. McDonough, to act in this capacity.
They will negotiate the final price to the public of the shares of Pacific
Community Banking Group common stock you sell, with a minimum price of $15.
They will sell your shares of Pacific Community Banking Group common stock
to the underwriters on those terms. The Attorneys-in-Fact will consider
the preference for cash or stock that you have stated. But they will have
the discretion to designate some or all of your stock to be sold to the
public, in order to meet the terms of the acquisition agreement. They can
sign any documents necessary to complete the sale, on your behalf, without
further consultation with you.
Q: WHO ARE THE CUSTODIANS AND WHAT WILL THE CUSTODIANS DO?
A: James B. Jaqua and John J. McDonough will be the custodians. They will
keep custody of your new shares of Pacific Community Banking Group Common
Stock for the brief period until the public offering closes, then deliver
shares you sell to the underwriter, send The Bank of Hemet the money
received from the sale (which The Bank of Hemet will in turn deliver to
you), and instruct the transfer agent to send you certificates for the
shares you don't sell and certificates for your warrants.
Q: CAN I ELECT TO RECEIVE CASH ONLY OR PACIFIC COMMUNITY BANKING GROUP COMMON
STOCK ONLY?
A: No. You will be able to indicate your preference to have cash or stock of
Pacific
3
<PAGE>
Community Banking Group or a combination of the two after the close
of the acquisitions and the initial public offering. The Attorneys-in-Fact
will consider this when determining how much of your Pacific Community
Banking Group common stock to sell to the underwriters. But even if you
indicate a preference for stock, it is likely that most of your shares will
be sold because the acquisition agreement requires that the underwriters
purchase and resell between 75% and 88% of the total shares received by
shareholders and option holders of The Bank of Hemet. Similarly, if you
indicate a preference to receive all cash, you may be required to retain
some amount of Pacific Community Banking Group common stock.
Q: WHAT OTHER KINDS OF INFORMATION WILL I NEED TO PROVIDE?
A: In addition to your name and address, you will give instructions where The
Bank of Hemet should send the money received from the sale and where the
Transfer Agent should send any remaining shares and your warrants. You
will also need to return a completed form W-9 for tax reporting purposes.
Please consult your tax advisor if you have questions about the tax effects
of designating particular shares for sale.
Q: WHAT IF THE ACQUISITION OR THE PUBLIC OFFERING IS NOT COMPLETED?
A: If either the acquisition or the public offering fails to take place, your
options will not be canceled and will remain in effect under their previous
terms.
Q: WILL I BE RESPONSIBLE FOR ANY OF THE COSTS OF THE PUBLIC OFFERING?
A: No. Pacific Community Banking Group will pay the underwriters' commissions
and other costs of reselling your shares in the public offering. You will
receive the gross amount obtained for the shares you sell immediately in
the public offering.
INSTRUCTIONS
(For completing the
Custody Agreement, Letter of Transmittal, Power of Attorney and Offer of Sale)
A. This booklet contains two agreements: an Option Cancellation Agreement,
and a Custody Agreement, Letter of Transmittal, Power of Attorney and Offer of
Sale (the "Agreement"). You must have your SIGNATURES ON BOTH DOCUMENTS
NOTARIZED.
B. Complete and sign the Option Cancellation Agreement. BE SURE TO
COMPLETE THE LIST OF OPTIONS IN SCHEDULE A AND SCHEDULE B OF THE OPTION
CANCELLATION AGREEMENT.
C. Complete and sign the Custody Agreement, Letter of Transmittal, Power of
Attorney and Offer of Sale, and return the Agreement as set forth in paragraph D
below. PLEASE BE SURE TO INDICATE YOUR PREFERENCE FOR CASH OR STOCK .
D. Promptly send the completed agreements to the attorneys-in-fact at the
following address:
James B. Jaqua and John J. McDonough
4
<PAGE>
The Bank of Hemet
3715 Sunnyside Drive
Riverside, California 92506
The attorneys-in-fact must receive these documents by July 23, 1999 for you to
participate in the public offering. They must receive the Option Cancellation
Agreement by the closing date of the acquisition or all of your options will
cancelled without compensation to you.
E. You may elect to retain shares of Pacific Community Banking Group common
stock rather than offering to sell them to the Underwriters. Also, each option
holder of The Bank of Hemet may be required to retain some shares of Pacific
Community Banking Group common stock to satisfy the terms of the First
Restatement of the Agreement and Plan of Reorganization between The Bank of
Hemet and Pacific Community Banking Group. In either case, the Custodians will
cause to be delivered to you in due course, but not earlier than ten days after
the closing for the purchase of firm shares by the Underwriters, a certificate
for the number of shares of Pacific Community Banking Group common stock and
warrants that you have received but that were not sold in the public offering.
5
<PAGE>
OPTION CANCELLATION AGREEMENT
THIS AGREEMENT ("Agreement"), dated as of July ___, 1999, is entered into by and
between The Bank of Hemet, a California state chartered banking institution
("Bank"), and _________________________________ ("Optionee").
RECITALS
A. Bank and Pacific Community Banking Group, a California corporation ("PCBG")
entered into that First Restatement of Agreement and Plan of Reorganization
dated as of January 5, 1999 and amended March 24, 1999 and April 2, 1999
(the "Reorganization Agreement") whereby Bank will be acquired and become a
wholly owned subsidiary of PCBG.
B. Optionee currently has stock options ("Options") under The Bank of Hemet
1994 Stock Option Plan, as set forth in the Exhibit A.
C. Under the Reorganization Agreement, (a) each share of The Bank of Hemet
common stock acquirable under the Options shall be canceled by Optionee and
for each share subject to the Options receive in exchange (i) shares of
common stock of PCBG equal to (A) 3.4 shares minus (B) the exercise price
of the Options and (ii) one warrant to acquire one share of common stock of
PCBG common stock for each 3.4 shares of common stock of PCBG paid by PCBG
in exchange for options on The Bank of Hemet common stock, (b) there will
be no fractional warrants issued and no cash paid in lieu of fractional
warrants, and (c) the Optionee may elect to sell the shares of PCBG common
stock in the public offering subject to the allocation requirements in the
Reorganization Agreement. The amount to be paid to Optionee in cash and/or
in PCBG common stock for the cancellation of the options pursuant to the
Reorganization Agreement shall be hereinafter referred to as the "Option
Consideration."
D. Optionee desires to cancel his or her Options in exchange for the Option
Consideration which is computed and set forth in Exhibit B. Optionee
further desires to (a) establish the withholding amounts for federal and
state tax purposes with respect to the payment of the Option Consideration,
(b) provide payment to the Bank in the event there is insufficient cash
funds from the Option Consideration to pay the necessary withholdings and
(c) provide the Bank with an indemnification to the Bank in the event the
Bank is required to pay withholdings to any governmental agency because
such amounts were not withheld from the Option Consideration paid to
Optionee.
E. Unless otherwise provided in this Agreement, capitalized terms shall have
the meanings given to them in the Reorganization Agreement.
NOW THEREFORE, in consideration of the premises and of the respective
representations, warranties and covenants, agreements and conditions contained
herein and in the Reorganization Agreement, and intending to be legally bound
hereby, Bank and Optionee agree as follows:
1. CANCELLATION OF THE OPTIONS IN EXCHANGE FOR THE OPTION CONSIDERATION.
Optionee and Bank agree to the cancellation of the Options in exchange for
Option Consideration.
2. WITHHOLDING. Optionee understands that Bank is allowing Optionee to
elect the amount to be withheld from the payment of the Option Consideration for
federal and state income taxes and that such election is not binding on the
Bank. The Bank may be required by federal and state tax law to withhold a
minimum of 28% for federal tax purposes and 6% for California state tax purposes
from the Option Consideration notwithstanding the election by Optionee.
Optionee understands that the Bank is
6
<PAGE>
required by federal and state law to withhold additional amounts for other
purposes including Medicare, Social Security and SDI.
Optionee, to extent allowed, elects to have the following percentages of the
total Option Consideration withheld.
Federal Income Tax Withheld _____%
California Income Tax Withheld_____%
If no election is made, the minimum withholding rates of 28% for Federal income
taxes and 6% for California income taxes will be used.
In the event the cash consideration portion of the Option Consideration is
insufficient to pay the minimum aggregate withholding amount ("Withholding
Amount') for the Option Consideration as determined by the Bank, Optionee
further agrees to pay the difference ("Difference") between the Withholding
Amount and the cash consideration portion of the Option Consideration to the
Bank. Optionee understands that payment of the Option Consideration to Optionee
is subject to Optionee prior payment to the Bank of the Difference.
3. HOLD HARMLESS AND INDEMNIFICATION. Optionee agrees to hold the Bank
harmless from any liability, losses, costs, damages or attorney's fees for any
action taken by the Bank with respect to complying with the Optionee's election
as to the amount of withholding in Section 2 of this Agreement. Optionee agrees
to indemnify Bank for any and all costs including any amounts that should have
been withheld from the Option Consideration, expenses, damages and attorney's
fees incurred by the Bank arising from any action taken by the Bank with respect
to complying with Optionee's election under Section 2 of this Agreement.
4. GOVERNING LAW. This Agreement is governed by and is to be construed
and enforced in accordance with the laws of the State of California. If under
such law, any portion of this Agreement is at any time deemed to be in conflict
with any applicable statute, rule, regulation or ordinance, such portion shall
be deemed to be modified or altered to conform thereto or, if that is not
possible, to be omitted from this Agreement; the invalidity of any such portion
shall not affect the force, effect and validity of the remaining portion hereof.
5. TERMINATION. If the transactions contemplated in the Reorganization
Agreement are not completed, the Options shall not be cancelled and shall remain
in full force and effect, and subject to their original terms and conditions.
6. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding
among Bank, PCBG and Optionee with respect to the subject matter hereof and
supersedes and cancels all prior written and oral agreements and understandings
with respect to the subject matter of this Agreement. This Agreement may be
amended but only by a subsequent written agreement of the parties.
7. EFFECT OF AGREEMENT. In the event that the Reorganization Agreement
is terminated, this Agreement shall automatically terminate.
8. DISPUTE RESOLUTION. Any dispute regarding this Agreement shall only
be heard and resolved in a court of competent jurisdiction located in the County
of Riverside, California.
9. LEGAL COSTS. If either party commences an action against the other
party arising or in connection with this Agreement, the prevailing party shall
be entitled to have and recover from the losing party reasonable attorney's fees
and costs of suit.
7
<PAGE>
10. SUCCESSORS AND ASSIGNS. All terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective transferees, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Option Cancellation
Agreement as of the year and day first above written.
THE BANK OF HEMET
By
-----------------------------------------
Its
----------------------------------------
OPTIONEE
__________________________________________
8
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Optionee Grant Amount Date of Grant Exercise Price Expiration Date
</TABLE>
9
<PAGE>
EXHIBIT B
Computation of Option Consideration:
Total Options:__________ Average Option Price for all Options:___________
Total Options x ($51-Average Option Price)/$15 =Total Shares of PCBG Common
Stock Deliverable
Total Shares of PCBG Common Stock Deliverable in Exchange for all
Options:_______
Cash Equivalent of the Total Shares of PCBG if All Shares of PCBG Common
Stock is Converted into Cash: $___________
Total Warrants of PCBG Deliverable in Exchange for all Options:_________
(same figure as Total Shares of PCBG Common Stock Deliverable)
10
<PAGE>
CONSENT OF THE OPTIONEE'S SPOUSE
TO THE AGREEMENT:
I, _____________________________, being the spouse of ________________________,
after being afforded the opportunity to consult with independent counsel of my
choosing, do hereby acknowledge that I have read, agree and consent to the
Agreement entered into by my spouse on ______________, 1999. I understand that
the Agreement and withholding election may adversely affect my community
property interest. I understand that I have been advised to consult with an
attorney of my choice prior to executing this consent, so that such attorney can
explain the effects of this consent.
Dated: _____________, 1999 _____________________________
Spouse
11
<PAGE>
CERTIFICATE OF ACKNOWLEDGMENT
OF NOTARY PUBLIC
State of California )
) ss.
County of Riverside )
On ______________, 1999, before me, ___________________________________, Notary
Public, State of California, personally appeared ______________________________
[ ] personally known to me - OR
[ ] proved to me on the basis of satisfactory evidence
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signatures(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
______________________________
Notary Public
State of California
(Seal)
12
<PAGE>
_____________________________
(Name of Option Holder)
CUSTODY AGREEMENT, LETTER OF TRANSMITTAL, POWER OF ATTORNEY
AND OFFER OF SALE
FOR CUSTODY AND SALE OF COMMON STOCK OF
PACIFIC COMMUNITY BANKING GROUP
TO BE RECEIVED BY HOLDERS OF OPTIONS TO PURCHASE COMMON STOCK OF
THE BANK OF HEMET
James B. Jaqua
John J. McDonough
As Attorneys-in-Fact
and Custodians
c/o The Bank of Hemet
3715 Sunnyside Drive
Riverside, CA 92506
Sutro & Co. Incorporated
As Representative of the several Underwriters c/o Sutro & Co. Incorporated
11150 Santa Monica Boulevard, Suite 1500 Los Angeles, California 90025
Ladies and Gentlemen:
The undersigned (the "Option Holder") holds options to purchase the
common stock of The Bank of Hemet ("The Bank of Hemet"), a California
corporation. Pacific Community Banking Group, a California corporation, and
The Bank of Hemet have signed a First Restatement of Agreement and Plan of
Reorganization (as amended, the "Acquisition Agreement") providing for the
acquisition of The Bank of Hemet by Pacific Community Banking Group. If the
acquisition is completed, the Option Holder's shares of The Bank of Hemet
will automatically convert into a right to receive shares of Pacific
Community Banking Group. Pacific Community Banking Group and the Option
Holder proposes to sell some or all of the shares of Pacific Community
Banking Group common stock received by the Option Holder to underwriters (the
"Underwriters") for whom Sutro & Co. Incorporated will act as representative
(the "Representative" ), for distribution under a Registration Statement on
Form S-1 (the "Registration Statement") to the public at a price and on terms
to be hereafter determined. It is understood that at this time there is no
commitment on the part of the Underwriters to purchase any shares of Pacific
Community Banking Group common stock and no assurance that an offering of
Pacific Community Banking Group common stock will take place. The shares of
Pacific Community Banking Group common stock received by the Option Holder in
exchange for shares of The Bank of Hemet common stock, all of which the
Option Holder will hereby offer to sell to the Underwriters, are referred to
herein as the "Shares."
1. APPOINTMENT AND POWERS OF ATTORNEYS-IN-FACT.
13
<PAGE>
A. The Option Holder irrevocably constitutes and appoints James B. Jaqua
and John J. McDonough (the "Attorneys-in-Fact"), and each of them, its agent and
attorney-in-fact, with full power of substitution, with respect to all matters
arising in connection with the public offering and sale of the Shares,
including, but not limited to, the power and authority on behalf of the Option
Holder to do or cause to be done any of the following things:
(i) to negotiate, determine and agree upon (a) the price at which the
Shares will be initially offered to the public by the Underwriters,
provided that the price shall not be less than $15 per share, and
(b) the price at which the Shares will be sold to the Underwriters;
(ii) to execute on behalf of the Option Holder an underwriting agreement
as follows: (a) making the representations and warranties of the
Option Holder contained in this Agreement to the Underwriters; (b)
undertaking the obligations of the Option Holder contained in this
agreement, for the benefit of the Underwriters; and (c) indemnifying
the Underwriters, on a joint and several basis with Pacific
Community Banking Group and the other selling shareholders of
Pacific Community Banking Group, for losses resulting from a breach
of those representations, warranties and obligations, up to the
amount of consideration received by the Option Holder for shares of
Pacific Community Banking Group sold to the public in the initial
public offering. Such indemnification may include a provision for
interim reimbursement and contribution, provided the underwriters
have a reciprocal obligation to the shareholders of Pacific
Community Banking Group participating in the public offering.
(iii) to allocate the number of shares of Pacific Community Banking Group
common stock owned by the Option Holder that shall be sold to the
Underwriters and the number of shares of Pacific Community Banking
Group common stock that shall be retained by the Option Holder, in
satisfaction of the terms of the Acquisition Agreement.
NOTWITHSTANDING THE STATEMENT OF PREFERENCE MADE BY THE OPTION
HOLDER HEREIN, THE ATTORNEYS-IN-FACT ARE AUTHORIZED, IN THEIR SOLE
DISCRETION, TO SELL UP TO THE TOTAL NUMBER OF SHARES OF PACIFIC
COMMUNITY BANKING STOCK OWNED BY THE OPTION HOLDER.
(iv) to sell, assign, transfer and deliver the Shares to the Underwriters
and deliver to the Underwriters certificates for the Shares so sold;
(v) take any and all steps deemed necessary or desirable by the
Attorneys-in-Fact in connection with the registration of the Shares
under the Securities Act of 1933, as amended (the "Securities Act"),
the Securities Exchange Act of 1934, as amended, and under the
securities or "blue sky" laws of various states and jurisdictions,
including, without limitation, the giving or making of such
undertakings, representations and agreements and the taking of such
other steps as the Attorneys-in-Fact may deem necessary or
advisable;
(vi) instruct Pacific Community Banking Group and the Custodian (as
hereinafter defined) on all matters pertaining to the sale of the
Shares and delivery of certificates therefor; and
(viii) otherwise take all actions and do all things necessary or proper,
required, contemplated or deemed advisable or desirable by the
Attorneys-in-Fact in their discretion, including the execution and
delivery of any documents, and generally act for and in the name of
the Option Holder with respect to the sale of the Shares to the
Underwriters and the reoffering of the Shares by the Underwriters as
fully as could the Option Holder if then personally present and
acting.
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B. Each Attorney-in-Fact may act alone in exercising the rights and powers
conferred on the Attorneys-in-Fact by this Custody Agreement, Letter of
Transmittal, Power of Attorney and Offer of Sale (this "Agreement"), and the act
of any Attorney-in-Fact shall be the act of the Attorneys-in-Fact. Each
Attorney-in-Fact is hereby empowered to determine, in his sole and absolute
discretion, the time or times when, the purposes for which, and the manner in
which, any power herein conferred upon the Attorneys-in-Fact shall be exercised.
C. The Custodians, the Representatives, Pacific Community Banking Group
and all other persons dealing with the Attorneys-in-Fact as such may rely and
act upon any writing believed in good faith to be signed by one or more of the
Attorneys-in-Fact.
D. The Attorneys-in-Fact shall not receive any compensation from the
Option Holder for their services rendered hereunder.
2. APPOINTMENT OF CUSTODIANS; DEPOSIT OF SHARES.
A. In connection with and to facilitate the exchange of shares of The Bank
of Hemet common stock and the sale of the Shares to the Underwriters, the Option
Holder hereby appoints James B. Jaqua and John J. McDonough as custodians
(collectively, the "Custodians") and hereby instructs Pacific Community Banking
Group to deposit with the Custodians certificates for all shares and warrants of
Pacific Community Banking Group issued on cancellation of the Option Holder's
options. The Custodians are hereby authorized and directed, subject to the
instructions of the Attorneys-in-Fact, to act as follows:
(i) to accept custody of Option Holder's shares of Pacific Community
Banking Group common stock and warrants issued pursuant to the Option
Cancellation Agreement;
(ii) to hold in custody the certificate or certificates deposited herewith
and any other certificates or instruments exchanged therefor;
(iii) to deliver or to authorize Pacific Community Banking Group's transfer
agent to deliver the certificates of Pacific Community Banking Group common
stock received in exchange for the certificates deposited herewith (or
replacement certificate(s) for the Shares) to or at the direction of the
Attorneys-in-Fact; and
(iv) to return or cause Pacific Community Banking Group's transfer agent to
return to the Option Holder new certificate(s) for the shares of Pacific
Community Banking Group common stock and warrants that are received in exchange
for any certificate deposited hereunder but that are not sold to the
Underwriters, and cash in place of any fractional share interest in Pacific
Community Banking Group.
B. Until the Shares have been delivered to the Underwriters against
payment therefor, the Option Holder shall retain all rights of ownership with
respect to the Shares, including the right to vote and to receive all dividends
and payment thereon, except the right to retain custody of or dispose of such
Shares, which right is subject to this Agreement.
C. Each of the Custodians may act alone in performing the obligations
crated by this Agreement, and the act of either of the Custodians shall be the
act of the Custodians. The Custodians shall not receive any compensation for
their services rendered hereunder.
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<PAGE>
3. IRREVOCABLE OFFER TO SELL SHARES OF PACIFIC COMMUNITY BANKING GROUP
COMMON STOCK.
The Option Holder offers for sale to the Underwriters any and all shares
of Pacific Community Banking Group common stock received upon cancellation of
options to purchase stock of The Bank of Hemet as provided in the Option
Cancellation Agreement. This offer is made without conditions, except as
provided in this Agreement, and may be accepted and executed without prior
notice to the Option Holder. The Option Holder may not revoke this offer;
however, this offer will expire if not accepted in whole or in part by the
Underwriters on or before August 4, 1999, unless extended by one or both of
the Attorneys-in-Fact.
4. PREFERENCE TO RECEIVE CASH OR SHARES OF PACIFIC COMMUNITY BANKING
GROUP COMMON STOCK.
The Option Holder hereby instructs the Attorneys-in-Fact that the
shareholder prefers to receive consideration for the cancelled options of The
Bank of Hemet common stock as indicated on the Statement of Preference
attached in this Agreement. The Option Holder acknowledges that this
preference is subject to the power of the Attorneys-in-Fact to allocate the
number of Option Holders' shares sold to the Underwriters to satisfy the
terms of the Acquisition Agreement, in the sole discretion of the
Attorneys-in-Fact.
5. SALE OF SHARES; REMITTING NET PROCEEDS.
The Attorneys-in-Fact are hereby authorized and directed to deliver or
cause the Custodians or Pacific Community Banking Group's transfer agent to
deliver certificates for the Shares to the Representatives, against delivery
to the Attorneys-in-Fact, for the account of the Option Holder, of the
purchase price of the Shares. The Attorneys-in-Fact are authorized, on behalf
of the Option Holder, to accept and acknowledge receipt of the payment of the
purchase price for the Shares and shall promptly deposit such proceeds with
the Custodians. The Custodians shall promptly remit to the Option Holder his
or her share of the proceeds, less taxes and other withholdings withheld
pursuant to Section 2 of the Option Cancellation Agreement.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
To induce the Underwriters to enter into an underwriting agreement with
Pacific Community Banking Group and certain of its shareholders, and in
consideration of the performance of this Agreement by the other parties
thereto, the Option Holder represents and warrants to, and agrees with, the
Underwriters, Pacific Community Banking Group, the Attorneys-in-Fact and the
Custodians as follows:
A. The Option Holder has full legal right, power and authority to enter
into and perform this Agreement. This Agreement has been duly executed and
delivered by the Option Holder and (assuming this Agreement is a binding
Agreement of the other parties thereto) constitutes the valid and binding
agreement of the Option Holder, enforceable against the Option Holder in
accordance with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application relating to or affecting the enforcement of creditors'
rights and the application of equitable principles relating to the
availability of remedies, and except as rights or affecting the enforcement
of creditors' rights and except as rights to indemnity or contribution may be
limited by federal or state securities law and the public policy underlying
such laws).
B. None of the execution, delivery or performance of this Agreement and
the consummation of the transactions herein contemplated will conflict with
or result in a breach of, or default under, any
16
<PAGE>
indenture, mortgage, deed or trust, voting trust agreement, shareholders'
agreement, note agreement or other agreement or instrument to which the
Option Holder is a party or by which the Option Holder is bound or to which
any of his or its property is or may be subject, or any statute, judgment,
decree, order, rule or regulation applicable to the Option Holder of any
government, arbitrator, court, regulatory body or administrative agency or
other governmental agency or body, domestic or foreign, having jurisdiction
over the Option Holder or any of his activities or properties.
C. At the date hereof, the Option Holder has full right, power and
authority to sell, assign, transfer and deliver the options to purchase
shares of The Bank of Hemet common stock to be cancelled in exchange for the
Shares, and at the time of delivery of the Shares to be sold by the Option
Holder to the several Underwriters, the Option Holder will have full right,
power and authority to sell, assign, transfer and deliver the Shares to be
sold by the Option Holder hereunder. At the date hereof the Option Holder is
the lawful owner of and has good title to the options to purchase shares of
The Bank of Hemet common stock to be cancelled in exchange for the Shares,
free and clear of any and all claims, and at the time of delivery of the
Shares to be sold by the Option Holder, the Option Holder will be the lawful
owner of and will have good and marketable title to the Shares free and clear
of any and all encumbrances.
D. To the Option Holder's knowledge, the Option Holder has not taken
any action designed to stabilize or manipulate the price of any security of
Pacific Community Banking Group, or which has constituted or which might in
the future reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of Pacific Community Banking Group,
to facilitate the sale or resale of the Shares or otherwise.
E. If the Option Holder is an individual and is married, and the spouse
is not named as an owner on the option agreement, the Option Holder is
enclosing with this Agreement a duly completed and executed consent of his or
her spouse, in the form attached to this Agreement as Annex A.
F. The Option Holder agrees to deliver to the Attorneys-in-Fact such
documentation as the Attorneys-in-Fact, The Bank of Hemet, Pacific Community
Banking Group or the Underwriters or any of their respective counsel may
reasonably request in order to effectuate any of the provisions hereof, in
form and substance satisfactory in all respects to the Attorneys-in-Fact.
G. The foregoing representations, warranties and agreements are made
for the benefit of, and may be relied upon by, the Attorneys-in-Fact, The
Bank of Hemet, Pacific Community Banking Group, the Custodian, the
Underwriters and their respective representatives, agents and counsel.
7. IRREVOCABILITY OF INSTRUMENTS; TERMINATION OF THIS AGREEMENT.
A. This Agreement, the deposit of Pacific Community Banking Group
common stock pursuant hereto and all authority hereby conferred, is granted,
made and conferred subject to and in consideration of (a) the interests of
the Attorneys-in-Fact, the Underwriters, The Bank of Hemet and Pacific
Community Banking Group in and for the purpose of completing the transactions
contemplated hereunder and by the Acquisition Agreement and the Underwriting
Agreement between Pacific Community Banking Group, certain other selling
shareholders and the Underwriters, and (b) the completion of the registration
of Pacific Community Banking Group common stock pursuant to the Registration
Statement and the other acts of the above-mentioned parties from the date
hereof to and including the time the Shares are purchased by the
Underwriters, and the Attorneys-in-Fact are hereby further vested with an
estate, right, title and interest in and to the Shares deposited herewith for
the purpose of irrevocably empowering and securing to them authority
sufficient to consummate said transactions. Accordingly, this Agreement and
the offer of the Shares made herein shall be irrevocable prior to August 4,
1999, and shall remain in full
17
<PAGE>
force and effect until that date, which may be extended by either or both of
the Attorneys-in-Fact. The Option Holder further agrees that this Agreement
shall not be terminated by operation of law or upon the occurrence of any
event whatsoever, including the death, disability or incompetence of the
Option Holder. If any event referred to in the preceding sentence shall
occur, whether with or without notice thereof to the Attorneys-in-Fact, any
of the Underwriters or any other person, the Attorneys-in-Fact shall
nevertheless be authorized and empowered to deliver and deal with the Shares
deposited under the Agreement by the Option Holder in accordance with the
terms and provisions of this Agreement as if such event had not occurred.
B. If the transactions contemplated in the Acquisition Agreement are
not completed by August 4, 1999, this Agreement shall terminate (without
affecting any lawful action of the Attorneys-in-Fact or Custodians prior to
such termination) unless extended by either or both of the Attorneys-in-Fact.
8. LIABILITY AND INDEMNIFICATION OF THE ATTORNEYS-IN-FACT AND CUSTODIAN.
The Attorneys-in-Fact and the Custodians assume no responsibility or
liability to the Option Holder or to any other person, other than to deal
with the Pacific Community Banking Group common stock exchanged on
cancellation of the Option Holder's options to purchase common stock of The
Bank of Hemet, the proceeds from the sale of the Shares and any other shares
of Pacific Community Banking Group common stock deposited with the Custodians
pursuant to the terms of this Agreement in accordance with the provisions
hereof. The Option Holder hereby agrees to indemnify and hold harmless the
Attorneys-in-Fact and the Custodians, and their respective officers, agents,
successors, assigns and personal representatives with respect to any act or
omission of or by any of them in good faith in connection with any and all
matters contemplated by this Agreement or the Underwriting Agreement.
9. INTERPRETATION.
A. The representations, warranties and agreements of the Option Holder
contained herein shall survive the sale and delivery of the Shares and the
termination of this Agreement.
B. The validity, enforceability, interpretation and construction of
this Agreement shall be determined in accordance with the laws of the State
of California applicable to contracts made and to be performed within the
State of California, and this Agreement shall inure to the benefit of, and be
binding upon, the Option Holder and the Option Holder's heirs, executors,
administrators, successors and assigns, as the case may be.
C. Wherever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any such provision shall be prohibited by or invalid under applicable
law, it shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
D. The use of the masculine gender in this Agreement includes the
feminine and neuter, and the use of the singular includes the plural,
wherever appropriate.
THE NEXT PAGE IS THE SIGNATURE PAGE.
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IN WITNESS WHEREOF, the undersigned has executed this Custody Agreement,
Letter of Transmittal, Power of Attorney and Offer of Sale this ____ day of
____________, 1999.
Signature of Option Holder _____________________________________
_____________________________________
(Please sign exactly as your name
appears on your option agreement.)
STATE OF _______________ )
) ss.
COUNTY OF _____________ )
On _______________________, 1999, before me, the undersigned notary public in
and for said County and State, personally
appeared_______________________________________________________________________
_______________________________________________________________________________,
____ personally known to me [OR]
____ proved to me on the basis of satisfactory evidence
to be the person(s) whose name(s) __________________ subscribed to the within
instrument and acknowledged to me that __________________ executed the same in
____________________ authorized capacity(ies) and that, by _______________
signature(s) on the instrument, the person(s) or the entity(ies) upon behalf of
which the person(s) acted executed the instrument.
WITNESS my hand and official seal.
________________________________
MY COMMISSION EXPIRES ON
________________________________
Name and address to which notices, funds
and stock certificates shall be sent.
______________________________________
(name)
______________________________________
(street)
______________________________________
(city) (state) (zip)
ACCEPTED by the Attorneys-in-Fact and Custodians as of the date above set
forth:
____________________________________
James B. Jaqua
____________________________________
John J. McDonough
SEE THE ATTACHED INSTRUCTIONS
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<PAGE>
STATEMENT OF PREFERENCE
STATEMENT OF PREFERENCE
INSTRUCTION: See Section 4 of the Custody Agreement, Letter of Transmittal,
Power of Attorney and Offer of Sale.
CHECK THE BOX BELOW THAT APPLIES.
- --------------------------------------------------------------------------------
/ / A. I prefer to sell all of the shares of Pacific Community
Banking Group common stock that I will receive in the acquisition.
- --------------------------------------------------------------------------------
/ / B. I prefer to retain all of the shares of Pacific Community
Banking Group common stock that I will receive in the acquisition.
- --------------------------------------------------------------------------------
/ / C. I prefer to sell ___% of the shares of Pacific Community
Banking Group common stock that I will receive in the acquisition.
IF YOU CHECK THIS BOX, PLEASE FILL IN THE PERCENTAGE; OTHERWISE,
WE WILL CONSIDER YOU TO HAVE MADE NO ELECTION.
- --------------------------------------------------------------------------------
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<PAGE>
ANNEX A
INSTRUCTION: See Section 6, paragraph E, of the Custody Agreement, Letter of
Transmittal, Power of Attorney and Offer of Sale.
CONSENT OF SPOUSE
I am the spouse of ____________. On behalf of myself, my heirs, legatees, and
assigns, I hereby join in and consent to the terms of the foregoing Custody
Agreement, Letter of Transmittal, Power of Attorney and Offer of Sale (the
"Agreement"), and I agree to the sale of the shares of common stock of
Pacific Community Banking Group, a California corporation, to be received in
exchange for the options to purchase shares of common stock of The Bank of
Hemet registered in the name of my spouse or otherwise registered, which my
spouse has offered to sell in the Agreement.
Dated: ____________, 1999
(Signature of Spouse)
21
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[INSERT FORM W-9]
22
<PAGE>
CANCELLATION AGREEMENT
FOR CANCELLATION OF OPTIONS TO PURCHASE COMMON STOCK OF
VALLEY BANK
IN EXCHANGE FOR SHARES OF THE COMMON STOCK AND WARRANTS OF
PACIFIC COMMUNITY BANKING GROUP
AND
CUSTODY AGREEMENT, LETTER OF TRANSMITTAL, POWER OF ATTORNEY
AND OFFER OF SALE
FOR CUSTODY AND SALE OF COMMON STOCK OF
PACIFIC COMMUNITY BANKING GROUP
______________________
THE RIGHT TO PARTICIPATE IN THE PUBLIC OFFERING
WILL EXPIRE AT 5:00 P.M., JULY 23, 1999, CALIFORNIA TIME
THE EXCHANGE AGENT MUST RECEIVE THESE DOCUMENTS
BY THAT TIME
_________________________________
IF VALLEY BANK DOES NOT RECEIVE THE ATTACHED OPTION
CANCELLATION AGREEMENT BY THE CLOSING OF THE ACQUISITION,
YOUR OPTIONS WILL EXPIRE.
JULY 13, 1998
Dear Option Holder:
Enclosed is a set of documents for option holders of Valley Bank. Please
read these documents carefully. Please complete and return these documents to
Mr. Marion V. Ashley and Mr. N. Douglas Mills, the attorneys-in-fact for Valley
Bank, at the Moreno Valley office of Valley Bank. Detailed instructions for
completing the forms begin on page three, preceded by frequently asked questions
and answers. When the acquisition is completed, we will need these documents
to ensure that you promptly receive certificates for your new shares of Pacific
Community Banking Group.
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<PAGE>
QUESTIONS AND ANSWERS FOR OPTION HOLDERS OF VALLEY BANK
ABOUT THE
OPTION HOLDER DOCUMENTS
Q: I AM AN OPTION HOLDER OF VALLEY BANK. WHY MUST I COMPLETE THESE DOCUMENTS?
A: Pacific Community Banking Group has agreed to acquire Valley Bank. The
accompanying proxy statement/prospectus describes the acquisition,
including the rights of option holders. Your options will all expire if
you do not return the Option Cancellation Agreement and the shareholders
approve the acquisition. Valley Bank needs the remaining option holder
documents to complete the acquisition and to arrange for you to receive any
cash, stock and warrants you will be entitled to receive.
Q: WHAT IF MY OPTIONS HAVEN'T VESTED?
A: All of your options will be treated as vested for purposes of cancellation
and exchange in the acquisition.
Q: WHAT IS THE OPTION CANCELLATION AGREEMENT?
A: The Option Cancellation Agreement cancels your options in exchange for a
right to receive common stock and warrants of Pacific Community Banking
Group. The common stock may be sold in the public offering subject to the
limitations described below. IF YOU DO NOT COMPLETE AND RETURN THIS
AGREEMENT IN TIME, YOUR OPTIONS WILL SIMPLY EXPIRE WHEN THE ACQUISITION IS
COMPLETE.
Q: HOW MUCH STOCK AND WARRANTS WILL I RECEIVE?
A: You will receive a number of shares of Pacific Community Banking Group
Stock as follows:
($10 minus the exercise price of the option)
--------------------------------------------
15
You will receive one warrant for every two shares of Pacific Community
Banking Group common stock you receive. The terms of the warrants are
described in the proxy statement/prospectus. You will receive more cash for
shares sold if the price of Pacific Community Banking Group common stock in
the initial public offering is more than $15.00. You will receive cash
instead of fractional shares. No fractional warrants shall be issued.
Q: WHAT IS THE CUSTODY AGREEMENT, LETTER OF TRANSMITTAL, POWER OF ATTORNEY AND
OFFER OF SALE?
A: You should read the entire document, which is necessary for you to sell any
of your new shares of Pacific Community Banking Group common stock in the
offering. In summary, the Custody Agreement, Letter of Transmittal, Power
of Attorney and Offer of Sale is a
2
<PAGE>
binding agreement by you that principally provides the following:
- You provide your name, address and other necessary information to
ensure that you receive the cash, stock and warrants to which you are
entitled in exchange for your options, and you state a preference to
receive a greater amount of cash or of stock after the close of the
acquisition and the public offering. You also promise that you own
your options and have the power to sell them.
- You give a special power of attorney to two individuals, referred to
as the "Attorneys-in-Fact," who will take limited legal actions on
your behalf to establish the final price of your Pacific Community
Banking Group stock and sell some or all of that stock to the
underwriters.
- You offer the shares of Pacific Community Banking Group common stock
you will receive in the acquisition to the underwriters. The
underwriters will be able to purchase some or all of the shares for
resale at a price to the public of at least $15 per share.
- You appoint custodians of your new Pacific Community Banking Group
common stock and warrants.
Q: WHO ARE THE "ATTORNEYS-IN-FACT" AND WHAT POWER WILL THEY HAVE?
A: An individual that has the power to act on your behalf under the Power of
Attorney is called an "Attorney-in-Fact." You will authorize any of two
persons, Marion V. Ashley and N. Douglas Mills, to act in this capacity.
They will negotiate the final price to the public of the shares of Pacific
Community Banking Group common stock you sell, with a minimum price of $15.
They will sell your shares of Pacific Community Banking Group common stock
to the underwriters on those terms. The Attorneys-in-Fact will consider
the preference for cash or stock that you have stated. But they will have
the discretion to designate some or all of your stock to be sold to the
public, in order to meet the terms of the acquisition agreement. They can
sign any documents necessary to complete the sale, on your behalf, without
further consultation with you.
Q: WHO ARE THE CUSTODIANS AND WHAT WILL THE CUSTODIANS DO?
A: Marion V. Ashley and N. Douglas Mills will also act as custodians. They
will keep custody of your new shares of Pacific Community Common Stock for
the brief period until the public offering closes, then deliver shares you
sell to the underwriter, send Valley Bank the money received from the sale
(which Valley Bank will in turn deliver to you), and instruct the transfer
agent to send you certificates for the shares you don't sell and for your
warrants.
Q: CAN I ELECT TO RECEIVE CASH ONLY OR PACIFIC COMMUNITY BANKING GROUP COMMON
STOCK ONLY?
A: No. You will be able to indicate your preference to have cash or stock or
a combination thereof of Pacific Community Banking Group after the close of
the acquisitions and the
3
<PAGE>
initial public offering. The Attorneys-in-Fact will consider this when
determining how much of your Pacific Community Banking Group common stock
to sell to the underwriters. But even if you indicate a preference for
stock, it is likely that most of your shares will be sold because the
acquisition agreement requires that the underwriters purchase and resell
60% of the total shares received by shareholders and option holders of
Valley Bank. Similarly, if you indicate a preference to receive all
cash, you may be required to retain some amount of Pacific Community
Banking Group common stock.
Q: WHAT OTHER KINDS OF INFORMATION WILL I NEED TO PROVIDE?
A: In addition to your name and address, you will give instructions where
Valley Bank should send the money received from the sale and where the
transfer agent should send any remaining shares and your warrants. You
will also need to return a completed form W-9 for tax reporting purposes.
Please consult your tax advisor if you have questions about the tax effects
of designating particular shares for sale.
Q: WHAT IF THE ACQUISITION OR THE PUBLIC OFFERING IS NOT COMPLETED?
A: If either the acquisition or the public offering fails to take place, your
options will not be canceled and will remain in effect under their previous
terms.
Q: WILL I BE RESPONSIBLE FOR ANY OF THE COSTS OF THE PUBLIC OFFERING?
A: No. Pacific Community Banking Group will pay the underwriters' commissions
and other costs of reselling your shares in the public offering. You will
receive the gross amount obtained for the shares you sell immediately in
the public offering.
4
<PAGE>
INSTRUCTIONS
(For completing the
Custody Agreement, Letter of Transmittal, Power of Attorney and Offer of Sale)
A. This booklet contains two agreements: an Option Cancellation
Agreement, and a Custody Agreement, Letter of Transmittal, Power of Attorney
and Offer of Sale (the "Agreement"). You must have your SIGNATURES ON BOTH
DOCUMENTS NOTARIZED.
B. Complete and sign the Option Cancellation Agreement. BE SURE TO
VERIFY THE LIST OF OPTIONS IN SCHEDULE A AND SCHEDULE B OF THE OPTION
CANCELLATION AGREEMENT.
C. Complete and sign the Custody Agreement, Letter of Transmittal, Power
of Attorney and Offer of Sale, and return the Agreement as set forth in
paragraph D below. PLEASE BE SURE TO INDICATE YOUR PREFERENCE FOR CASH OR
STOCK.
D. Promptly send the completed Agreement to:
Messrs. Marion V. Ashley and N. Douglas Mills
Valley Bank
24010 Sunnymead Boulevard
Moreno Valley, California 92553
The attorneys-in-fact must receive these documents by July 23, 1999 for you to
participate in the public offering. The attorneys-in-fact must receive the
Option Cancellation Agreement by the closing of the acquisition or all of your
options will cancelled without compensation to you.
E. You may elect to retain shares of Pacific Community Banking Group
common stock rather than offering to sell them to the Underwriters. Also, each
option holder of Valley Bank may be required to retain some shares of Pacific
Community Banking Group common stock to satisfy the terms of the First
Restatement of the Agreement and Plan of Reorganization between Valley Bank and
Pacific Community Banking Group. In either case, the custodians will cause to
be delivered to you in due course, but not earlier than ten days after the
closing for the purchase of firm shares by the Underwriters, a certificate for
the number of shares of Pacific Community Banking Group common stock and
warrants that you have received but that were not sold in the public offering.
OPTION CANCELLATION AGREEMENT
THIS AGREEMENT ("Agreement"), dated as of July ___, 1999, is entered into by and
between Valley Bank, a California state chartered banking institution ("Bank"),
and _________________________________ ("Optionee").
RECITALS
A. Bank and Pacific Community Banking Group, a California corporation ("PCBG")
entered into that First Restatement of Agreement and Plan of Reorganization
dated as of January 5, 1999 as amended (the "Reorganization Agreement")
whereby Bank will be acquired and become a wholly owned subsidiary of PCBG.
1
<PAGE>
B. Optionee currently has stock options ("Options") issued under one of the
Bank's stock option plans, as set forth in Exhibit A.
C. Under the Reorganization Agreement, (a) the options to acquire shares of
Valley Bank common stock shall be canceled by Optionee and the Optionee
shall receive in exchange (i) shares of common stock of PCBG equal to the
number of shares of Valley Bank common stock subject to options, multiplied
by (A) $10.00 minus (B) the exercise price of the Options, all divided by
$15.00, and (ii) one warrant to acquire one share of common stock of PCBG
for every two shares of common stock of PCBG issued in accordance with the
preceding subsection, (b) there will be no fractional warrants issued and
no cash paid in lieu of fractional warrants, and (c) the Optionee may elect
to sell the shares of PCBG common stock in the public offering subject to
the allocation requirements in the Reorganization Agreement. The amount to
be paid to Optionee in cash and/or in PCBG common stock for the
cancellation of the options pursuant to the Reorganization Agreement shall
be hereinafter referred to as the "Option Consideration."
D. Optionee desires to cancel his or her Options in exchange for the Option
Consideration which is computed and set forth in Exhibit B. Optionee
further desires to (a) establish the withholding amounts for federal and
state tax purposes with respect to the payment of the Option Consideration,
(b) provide payment to the Bank in the event there is insufficient cash
funds from the Option Consideration to pay the necessary withholdings and
(c) provide indemnification to the Bank in the event the Bank is required
to pay withholdings to any governmental agency because such amounts were
not withheld from the Option Consideration paid to Optionee.
E. Unless otherwise provided in this Agreement, capitalized terms shall have
the meanings given to them in the Reorganization Agreement.
NOW THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions contained
herein and in the Reorganization Agreement, and intending to be legally bound
hereby, Bank and Optionee agree as follows:
1. CANCELLATION OF THE OPTIONS IN EXCHANGE FOR THE OPTION CONSIDERATION.
Optionee and Bank agree to the cancellation of the Options in exchange for the
Option Consideration.
2. WITHHOLDING. Optionee understands that Bank is allowing Optionee to
elect the amount to be withheld from the payment of the Option Consideration for
federal and state income taxes and that such election is not binding on the
Bank. The Bank may be required by federal and state tax law to withhold a
minimum of 28% for federal tax purposes and 6% for California state tax purposes
from the Option Consideration notwithstanding the election by Optionee.
Optionee understands that the Bank is required by federal and state law to
withhold additional amounts for other purposes including Medicare, Social
Security and SDI.
Optionee, to extent allowed, elects to have the following percentages of the
total Option Consideration withheld.
Federal Income Tax Withheld _____%
California Income Tax Withheld_____%
If no election is made, the minimum withholding rates of 28% for Federal income
taxes and 6% for California income taxes will be used.
In the event the cash consideration portion of the Option Consideration is
insufficient to pay the minimum aggregate withholding amount ("Withholding
Amount") for the Option Consideration as determined by the Bank, Optionee
further agrees to pay the difference ("Difference") between the Withholding
Amount
2
<PAGE>
and the cash portion of the Option Consideration to the Bank. Optionee
understands that payment of the Option Consideration to Optionee is subject to
Optionees' prior payment to the Bank of the Difference.
3. HOLD HARMLESS AND INDEMNIFICATION. Optionee agrees to indemnify and
hold the Bank harmless from any liability, losses, costs including any amounts
that should have been withheld from the Option Consideration,, damages or
attorney's fees for any action taken by the Bank with respect to complying with
the Optionee's election as to the amount of withholding in Section 2 of this
Agreement.
4. GOVERNING LAW. This Agreement is governed by and is to be construed
and enforced in accordance with the laws of the State of California. If under
such law, any portion of this Agreement is at any time deemed to be in conflict
with any applicable statute, rule, regulation or ordinance, such portion shall
be omitted from this Agreement; the invalidity of any such portion shall not
affect the force, effect and validity of the remaining portion hereof.
5. TERMINATION. If the transactions contemplated in the Reorganization
Agreement are not completed, the Options shall not be cancelled and shall remain
in full force and effect, subject to their original terms and conditions.
6. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding
between Bank and Optionee with respect to the subject matter hereof and
supersedes and cancels all prior written and oral agreements and understandings
with respect to the subject matter of this Agreement. This Agreement may be
amended only by a subsequent written agreement of the parties.
7. EFFECT OF AGREEMENT. In the event that the Reorganization Agreement
is terminated, this Agreement shall automatically terminate.
8. DISPUTE RESOLUTION. Any dispute regarding this Agreement shall only
be heard and resolved in a court of competent jurisdiction located in the County
of Riverside, California.
9. LEGAL COSTS. If either party commences an action against the other
party arising from or in connection with this Agreement, the prevailing party
shall be entitled to have and recover from the other party reasonable attorneys'
fees and costs of suit.
10. SUCCESSORS AND ASSIGNS. All terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective transferees, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Option Cancellation
Agreement as of the year and day first above written.
VALLEY BANK
By
-----------------------------------------
Its
----------------------------------------
OPTIONEE
-------------------------------------------
3
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
Optionee Grant Amount Date of Grant Exercise Price Expiration Date
<S> <C> <C> <C> <C>
</TABLE>
4
<PAGE>
EXHIBIT B
Computation of Option Consideration:
Total Options:__________ Weighted Average Option Exercise Price for all
Options:___________
Total Options x ($10-Average Option Exercise Price)/$15=Total Shares of PCBG
Common Stock Deliverable
Total Shares of PCBG Common Stock Deliverable in Exchange for all
Options:_______
Cash Equivalent of the Total Shares of PCBG if all Shares of PCBG Common
Stock are Converted into Cash (at $15.00 per share): $___________
Total PCBG Warrants Deliverable in Exchange for all Options:_________
5
<PAGE>
CONSENT OF THE OPTIONEE'S SPOUSE
TO THE AGREEMENT:
I, _____________________________, being the spouse of ________________________,
after being afforded the opportunity to consult with independent counsel of my
choosing, do hereby acknowledge that I have read, agree and consent to the
Agreement regarding cancellation of his/her Valley Bank stock option entered
into by my spouse on ______________, 1999. I understand that the Agreement and
withholding election may adversely affect my community property interest. I
understand that I have been advised to consult with an attorney of my choice
prior to executing this consent, so that such attorney can explain the effects
of this consent.
Dated: _____________, 1999 _____________________________
Spouse
6
<PAGE>
CERTIFICATE OF ACKNOWLEDGMENT
OF NOTARY PUBLIC
State of California )
) ss.
County of ________ )
On ________________, 1999, before me, __________________________________, Notary
Public, State of California, personally appeared _______________________________
[ ] personally know to me - OR
[ ] proved to me on the basis of satisfactory evidence
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signatures(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
______________________________
Notary Public
State of California
(Seal)
1
<PAGE>
_____________________________
(Name of Option Holder)
CUSTODY AGREEMENT, LETTER OF TRANSMITTAL, POWER OF ATTORNEY
AND OFFER OF SALE
FOR CUSTODY AND SALE OF COMMON STOCK OF
PACIFIC COMMUNITY BANKING GROUP
TO BE RECEIVED BY HOLDERS OF OPTIONS TO PURCHASE COMMON STOCK OF
VALLEY BANK
Marion V. Ashley
N. Douglas Mills
As Attorneys-in-Fact
and Custodians
c/o Valley Bank
24010 Sunnymead Boulevard
Moreno Valley, CA 92553
Sutro & Co. Incorporated
As Representative of the several Underwriters c/o Sutro & Co. Incorporated
11150 Santa Monica Boulevard, Suite 1500 Los Angeles, California 90025
Ladies and Gentlemen:
The undersigned (the "Option Holder") holds options to purchase the
common stock of Valley Bank ("Valley Bank"), a California corporation.
Pacific Community Banking Group, a California corporation, and Valley Bank
have signed a First Restatement of Agreement and Plan of Reorganization (as
amended, the "Acquisition Agreement") providing for the acquisition of Valley
Bank by Pacific Community Banking Group. If the acquisition is completed, the
Option Holder's shares of Valley Bank will automatically convert into a right
to receive shares of Pacific Community Banking Group. Pacific Community
Banking Group and the Option Holder proposes to sell some or all of the
shares of Pacific Community Banking Group common stock received by the Option
Holder to underwriters (the "Underwriters") for whom Sutro & Co. Incorporated
will act as representative (the "Representative" ), for distribution under a
Registration Statement on Form S-1 (the "Registration Statement") to the
public at a price and on terms to be hereafter determined. It is understood
that at this time there is no commitment on the part of the Underwriters to
purchase any shares of Pacific Community Banking Group common stock and no
assurance that an offering of Pacific Community Banking Group common stock
will take place. The shares of Pacific Community Banking Group common stock
received by the Option Holder in exchange for shares of Valley Bank common
stock, all of which the Option Holder will hereby offer to sell to the
Underwriters, are referred to herein as the "Shares."
1. APPOINTMENT AND POWERS OF ATTORNEYS-IN-FACT.
1
<PAGE>
A. The Option Holder irrevocably constitutes and appoints Marion V.
Ashley and N. Douglas Mills (the "Attorneys-in-Fact"), and each of them, its
agent and attorney-in-fact, with full power of substitution, with respect to
all matters arising in connection with the public offering and sale of the
Shares, including, but not limited to, the power and authority on behalf of
the Option Holder to do or cause to be done any of the following things:
(i) to negotiate, determine and agree upon (a) the price at which the
Shares will be initially offered to the public by the Underwriters,
provided that the price shall not be less than $15 per share, and (b)
the price at which the Shares will be sold to the Underwriters;
(ii) to execute on behalf of the Option Holder an underwriting agreement
as follows: (a) making the representations and warranties of the
Option Holder contained in this Agreement to the Underwriters; (b)
undertaking the obligations of the Option Holder contained in this
agreement, for the benefit of the Underwriters; and (c)
indemnifying the Underwriters, on a joint and several basis with
Pacific Community Banking Group and the other selling shareholders
of Pacific Community Banking Group, for losses resulting from a
breach of those representations, warranties and obligations, up to
the amount of consideration received by the Option Holder for
shares of Pacific Community Banking Group sold to the public in
the initial public offering. Such indemnification may include a
provision for interim reimbursement and contribution, provided the
underwriters have a reciprocal obligation to the shareholders of
Pacific Community Banking Group participating in the public
offering.
(iii) to allocate the number of shares of Pacific Community Banking Group
common stock owned by the Option Holder that shall be sold to the
Underwriters and the number of shares of Pacific Community Banking
Group common stock that shall be retained by the Option Holder, in
satisfaction of the terms of the Acquisition Agreement.
NOTWITHSTANDING THE STATEMENT OF PREFERENCE MADE BY THE OPTION
HOLDER HEREIN, THE ATTORNEYS-IN-FACT ARE AUTHORIZED, IN THEIR SOLE
DISCRETION, TO SELL UP TO THE TOTAL NUMBER OF SHARES OF PACIFIC
COMMUNITY BANKING STOCK OWNED BY THE OPTION HOLDER.
(iv) to sell, assign, transfer and deliver the Shares to the Underwriters
and deliver to the Underwriters certificates for the Shares so sold;
(v) take any and all steps deemed necessary or desirable by the
Attorneys-in-Fact in connection with the registration of the
Shares under the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as
amended, and under the securities or "blue sky" laws of various
states and jurisdictions, including, without limitation, the
giving or making of such undertakings, representations and
agreements and the taking of such other steps as the
Attorneys-in-Fact may deem necessary or advisable;
(vi) instruct Pacific Community Banking Group and the Custodians (as
hereinafter defined) on all matters pertaining to the sale of the
Shares and delivery of certificates therefor; and
(viii)otherwise take all actions and do all things necessary or proper,
required, contemplated or deemed advisable or desirable by the
Attorneys-in-Fact in their discretion, including the execution and
delivery of any documents, and generally act for and in the name of
the Option Holder with respect to the sale of the Shares to the
Underwriters and the reoffering of the Shares by the Underwriters as
fully as could the Option Holder if then personally present and
acting.
2
<PAGE>
B. Each Attorney-in-Fact may act alone in exercising the rights and powers
conferred on the Attorneys-in-Fact by this Custody Agreement, Letter of
Transmittal, Power of Attorney and Offer of Sale (this "Agreement"), and the act
of any Attorney-in-Fact shall be the act of the Attorneys-in-Fact. Each
Attorney-in-Fact is hereby empowered to determine, in his sole and absolute
discretion, the time or times when, the purposes for which, and the manner in
which, any power herein conferred upon the Attorneys-in-Fact shall be exercised.
C. The Custodians, the Representatives, Pacific Community Banking Group
and all other persons dealing with the Attorneys-in-Fact as such may rely and
act upon any writing believed in good faith to be signed by one or more of the
Attorneys-in-Fact.
D. The Attorneys-in-Fact shall not receive any compensation from the
Option Holder for their services rendered hereunder.
2. APPOINTMENT OF CUSTODIANS; DEPOSIT OF SHARES.
A. In connection with and to facilitate the exchange of shares of
Valley Bank common stock and the sale of the Shares to the Underwriters, the
Option Holder hereby appoints Marion V. Ashley and N. Douglas Mills, or
either of them, as custodian (collectively, the "Custodians") and hereby
instructs Pacific Community Banking Group to deposit with the Custodians
certificates for all shares and warrants of Pacific Community Banking Group
issued on cancellation of the Option Holder's options. The Custodians are
hereby authorized and directed, subject to the instructions of the
Attorneys-in-Fact, to act as follows:
(i) to accept custody of Option Holder's shares of Pacific Community
Banking Group common stock and warrants issued pursuant to the Option
Cancellation Agreement;
(ii) to hold in custody the certificate or certificates deposited herewith
and any other certificates or instruments exchanged therefor;
(iii) to deliver or to authorize Pacific Community Banking Group's transfer
agent to deliver the certificates of Pacific Community Banking Group common
stock received in exchange for the certificates deposited herewith (or
replacement certificate(s) for the Shares) to or at the direction of the
Attorneys-in-Fact; and
(iv) to return or cause Valley Bank to return to the Option Holder new
certificate(s) for the shares of Pacific Community Banking Group common stock
and warrants that are received in exchange for any certificate deposited
hereunder but that are not sold to the Underwriters, and cash in place of any
fractional share interest in Pacific Community Banking Group.
B. Until the Shares have been delivered to the Underwriters against
payment therefor, the Option Holder shall retain all rights of ownership with
respect to the Shares, including the right to vote and to receive all dividends
and payment thereon, except the right to retain custody of or dispose of such
Shares, which right is subject to this Agreement.
C. Each of the Custodians may act alone in performing the obligations
created by this Agreement, and the act of either of the Custodians shall be the
act of the Custodians. The Custodians shall not receive any compensation for
their services rendered hereunder.
3
<PAGE>
3. IRREVOCABLE OFFER TO SELL SHARES OF PACIFIC COMMUNITY BANKING GROUP
COMMON STOCK.
The Option Holder offers for sale to the Underwriters any and all shares of
Pacific Community Banking Group common stock received upon cancellation of
options to purchase stock of Valley Bank. This offer is made without
conditions, except as provided in this Agreement, and may be accepted and
executed without prior notice to the Option Holder. The Option Holder may not
revoke this offer; however, this offer will expire if not accepted in whole or
in part by the Underwriters on or before August 4, 1999, unless extended by one
or both of the Attorneys-in Fact.
4. PREFERENCE TO RECEIVE CASH OR SHARES OF PACIFIC COMMUNITY BANKING GROUP
COMMON STOCK.
The Option Holder hereby instructs the Attorneys-in-Fact that the
shareholder prefers to receive consideration for the cancelled options of Valley
Bank common stock as indicated on the Statement of Preference attached in this
Agreement. The Option Holder acknowledges that this preference is subject to the
power of the Attorneys-in-Fact to allocate the number of Option Holders' shares
sold to the Underwriters to satisfy the terms of the Acquisition Agreement, in
the sole discretion of the Attorneys-in-Fact.
5. SALE OF SHARES; REMITTING NET PROCEEDS.
The Attorneys-in-Fact are hereby authorized and directed to deliver or
cause the Custodians or Pacific Community Banking Group's transfer agent to
deliver certificates for the Shares to the Representatives, against delivery to
the Attorneys-in-Fact, for the account of the Option Holder, of the purchase
price of the Shares. The Attorneys-in-Fact are authorized, on behalf of the
Option Holder, to accept and acknowledge receipt of the payment of the purchase
price for the Shares and shall promptly deposit such proceeds with the
Custodians. The Custodians shall promptly remit to the Option Holder his or her
share of the proceeds, less taxes withheld pursuant to Section 2 of the Option
Cancellation Agreement.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
To induce the Underwriters to enter into an underwriting agreement with
Pacific Community Banking Group and certain of its shareholders, and in
consideration of the performance of this Agreement by the other parties thereto,
the Option Holder represents and warrants to, and agrees with, the Underwriters,
Pacific Community Banking Group, the Attorneys-in-Fact and the Custodians as
follows:
A. The Option Holder has full legal right, power and authority to enter
into and perform this Agreement. This Agreement has been duly executed and
delivered by the Option Holder and (assuming this Agreement is a binding
Agreement of the other parties thereto) constitutes the valid and binding
agreement of the Option Holder, enforceable against the Option Holder in
accordance with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting the enforcement of creditors'
rights and the application of equitable principles relating to the availability
of remedies, and except as rights or affecting the enforcement of creditors'
rights and except as rights to indemnity or contribution may be limited by
federal or state securities law and the public policy underlying such laws).
B. None of the execution, delivery or performance of this Agreement and
the consummation of the transactions herein contemplated will conflict with or
result in a breach of, or default under, any indenture, mortgage, deed or trust,
voting trust agreement, shareholders' agreement, note agreement or
4
<PAGE>
other agreement or instrument to which the Option Holder is a party or by
which the Option Holder is bound or to which any of his or its property is or
may be subject, or any statute, judgment, decree, order, rule or regulation
applicable to the Option Holder of any government, arbitrator, court,
regulatory body or administrative agency or other governmental agency or
body, domestic or foreign, having jurisdiction over the Option Holder or any
of his activities or properties.
C. At the date hereof, the Option Holder has full right, power and
authority to sell, assign, transfer and deliver the options to purchase shares
of Valley Bank common stock to be cancelled in exchange for the Shares, and at
the time of delivery of the Shares to be sold by the Option Holder to the
several Underwriters, the Option Holder will have full right, power and
authority to sell, assign, transfer and deliver the Shares to be sold by the
Option Holder hereunder. At the date hereof the Option Holder is the lawful
owner of and has good and marketable title to the options to purchase shares of
Valley Bank common stock to be cancelled in exchange for the Shares, free and
clear of any and all encumbrances, and at the time of delivery of the Shares to
be sold by the Option Holder, the Option Holder will be the lawful owner of and
will have good and marketable title to the Shares free and clear of any and all
encumbrances.
D. To the Option Holder's knowledge, the Option Holder has not taken any
action designed to stabilize or manipulate the price of any security of Pacific
Community Banking Group, or which has constituted or which might in the future
reasonably be expected to cause or result in stabilization or manipulation of
the price of any security of Pacific Community Banking Group, to facilitate the
sale or resale of the Shares or otherwise.
E. If the Option Holder is acting as a fiduciary, officer, partner or
agent, the Option Holder is enclosing with this Agreement certified copies of
the appropriate instruments pursuant to which the Option Holder is authorized to
act hereunder. If the Option Holder is an individual and is married, and the
spouse is not named as an owner on the option agreement, the Option Holder is
enclosing with this Agreement a duly completed and executed consent of his or
her spouse, in the form attached to this Agreement as Annex A.
F. The Option Holder agrees to deliver to the Attorneys-in-Fact such
documentation as the Attorneys-in-Fact, Valley Bank, Pacific Community Banking
Group or the Underwriters or any of their respective counsel may reasonably
request in order to effectuate any of the provisions hereof, in form and
substance satisfactory in all respects to the Attorneys-in-Fact.
G. The foregoing representations, warranties and agreements are made for
the benefit of, and may be relied upon by, the Attorneys-in-Fact, Valley Bank,
Pacific Community Banking Group, the Custodians, the Underwriters and their
respective representatives, agents and counsel.
7. IRREVOCABILITY OF INSTRUMENTS; TERMINATION OF THIS AGREEMENT.
A. This Agreement, the deposit of Pacific Community Banking Group
common stock pursuant hereto and all authority hereby conferred, is granted,
made and conferred subject to and in consideration of (a) the interests of
the Attorneys-in-Fact, the Underwriters, Valley Bank and Pacific Community
Banking Group in and for the purpose of completing the transactions
contemplated hereunder and by the Acquisition Agreement and the Underwriting
Agreement between Pacific Community Banking Group, certain other selling
shareholders and the Underwriters, and (b) the completion of the registration
of Pacific Community Banking Group common stock pursuant to the Registration
Statement and the other acts of the above-mentioned parties from the date
hereof to and including the time the Shares are purchased by the
Underwriters, and the Attorneys-in-Fact are hereby further vested with an
estate, right, title and interest in and to the Shares deposited herewith for
the purpose of irrevocably empowering and
5
<PAGE>
securing to them authority sufficient to consummate said transactions.
Accordingly, this Agreement and the offer of the Shares made herein shall be
irrevocable prior to August 4, 1999, and shall remain in full force and
effect until that date, which may be extended by either or both of the
Attorneys-in-Fact. The Option Holder further agrees that this Agreement shall
not be terminated by operation of law or upon the occurrence of any event
whatsoever, including the death, disability or incompetence of the Option
Holder or, if the Option Holder is not a natural person, upon any
dissolution, winding up, distribution of assets or other event affecting the
legal existence of the Option Holder. If any event referred to in the
preceding sentence shall occur, whether with or without notice thereof to the
Attorneys-in-Fact, any of the Underwriters or any other person, the
Attorneys-in-Fact shall nevertheless be authorized and empowered to deliver
and deal with the Shares deposited under the Agreement by the Option Holder
in accordance with the terms and provisions of this Agreement as if such
event had not occurred.
B. If the transactions contemplated in the Acquisition Agreement are
not completed by August 4, 1999, this Agreement shall terminate (without
affecting any lawful action of the Attorneys-in-Fact or the Custodians prior
to such termination), unless extended by either or both of the
Attorneys-in-Fact.
8. LIABILITY AND INDEMNIFICATION OF THE ATTORNEYS-IN-FACT AND CUSTODIAN.
The Attorneys-in-Fact and the Custodians assume no responsibility or
liability to the Option Holder or to any other person, other than to deal with
the Pacific Community Banking Group common stock exchanged on cancellation of
the Option Holder's options to purchase common stock of Valley Bank, the
proceeds from the sale of the Shares and any other shares of Pacific Community
Banking Group common stock deposited with the Custodians pursuant to the terms
of this Agreement in accordance with the provisions hereof. The Option Holder
hereby agrees to indemnify and hold harmless the Attorneys-in-Fact and the
Custodians, and their respective officers, agents, successors, assigns and
personal representatives with respect to any act or omission of or by any of
them in good faith in connection with any and all matters contemplated by this
Agreement or the Underwriting Agreement.
9. INTERPRETATION.
A. The representations, warranties and agreements of the Option Holder
contained herein shall survive the sale and delivery of the Shares and the
termination of this Agreement.
B. The validity, enforceability, interpretation and construction of this
Agreement shall be determined in accordance with the laws of the State of
California applicable to contracts made and to be performed within the State of
California, and this Agreement shall inure to the benefit of, and be binding
upon, the Option Holder and the Option Holder's heirs, executors,
administrators, successors and assigns, as the case may be.
C. Wherever possible each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
such provision shall be prohibited by or invalid under applicable law, it shall
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
D. The use of the masculine gender in this Agreement includes the feminine
and neuter, and the use of the singular includes the plural, wherever
appropriate.
THE NEXT PAGE IS THE SIGNATURE PAGE.
6
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Custody Agreement, Letter
of Transmittal, Power of Attorney and Offer of Sale this ____ day of
____________, 1999.
Signature of Option Holder _____________________________________
_____________________________________
(Please sign exactly as your name
appears on your option agreement.)
STATE OF _______________ )
) ss.
COUNTY OF ______________ )
On _______________________, 1999, before me, the undersigned notary public in
and for said County and State, personally
appeared_______________________________________________________________________
_______________________________________________________________________________,
____ personally known to me [OR]
____ proved to me on the basis of satisfactory evidence
to be the person(s) whose name(s) __________________ subscribed to the within
instrument and acknowledged to me that __________________ executed the same in
____________________ authorized capacity(ies) and that, by _______________
signature(s) on the instrument, the person(s) or the entity(ies) upon behalf of
which the person(s) acted executed the instrument.
WITNESS my hand and official seal.
________________________________
MY COMMISSION EXPIRES ON
________________________________
Name and address to which notices,
funds and stock certificates shall be
sent.
___________________________________________
(name)
___________________________________________
(street)
___________________________________________
(city) (state) (zip)
ACCEPTED by the Attorneys-in-Fact and Custodians as of the date above set
forth:
____________________________________
Marion V. Ashley
____________________________________
N. Douglas Mills
SEE THE ATTACHED INSTRUCTIONS
7
<PAGE>
STATEMENT OF PREFERENCE
INSTRUCTION: See Section 4 of the Custody Agreement, Letter of Transmittal,
Power of Attorney and Offer of Sale.
CHECK THE BOX BELOW THAT APPLIES.
- -------------------------------------------------------------------------------
/ / A. I prefer to sell 100% of the shares of Pacific Community
Banking Group common stock that I will receive in the acquisition.
- -------------------------------------------------------------------------------
/ / B. I prefer to retain all of the shares of Pacific Community
Banking Group common stock that I will receive in the acquisition.
- -------------------------------------------------------------------------------
/ / C. I prefer to sell 60% and retain 40% of the shares of Pacific
Community Banking Group common stock that I will receive in the
acquisition.
- -------------------------------------------------------------------------------
8
<PAGE>
ANNEX A
INSTRUCTION: See Section 6, paragraph E, of the Custody Agreement, Letter of
Transmittal, Power of Attorney and Offer of Sale.
CONSENT OF SPOUSE
I am the spouse of ____________. On behalf of myself, my heirs, legatees, and
assigns, I hereby join in and consent to the terms of the foregoing Custody
Agreement, Letter of Transmittal, Power of Attorney and Offer of Sale (the
"Agreement"), and I agree to the sale of the shares of common stock of Pacific
Community Banking Group, a California corporation, to be received in exchange
for the options to purchase shares of common stock of Valley Bank registered in
the name of my spouse or otherwise registered, which my spouse has offered to
sell in the Agreement.
Dated: ____________, 1999
(Signature of Spouse)
9
<PAGE>
[INSERT FORM W-9]
10
<PAGE>
TO THE SHAREHOLDERS OF THE BANK OF HEMET
We recently sent you the proxy statement/prospectus for our Annual Meeting
and a green set of materials for the custody and exchange of shares in the
proposed acquisition of our bank by Pacific Community Banking Group.
CORRECTION
We wish to correct an item of information in those materials. The
Instructions on page 4 state that you would receive five copies of the Custody
Agreement, Letter of Transmittal, Power of Attorney and Offer of Sale (the
"Agreement"). In fact, you received only one copy. THIS IS TO ADVISE YOU THAT
YOU WILL ONLY NEED TO SIGN AND RETURN ONE COPY OF THE AGREEMENT, TOGETHER WITH
YOUR STOCK CERTIFICATE(S).
Follow the instructions on page 4 of the Instructions regarding how to
complete the Agreement. After you send the signed Agreement to U.S. Stock
Transfer Corporation, a copy of the signature page of your Agreement,
countersigned by U.S. Stock Transfer Corporation, will be returned to you, upon
request. If you wish to retain a copy of the entire text of the Agreement, you
may photocopy it before sending.
In addition, the Stock Power included in your materials inadvertently refers
to the wrong bank in the last line of text. Please replace the words "Valley
Bank" with "The Bank of Hemet" in the line above the signature. If you do not
make this replacement, the Exchange Agent will do it for you.
REMINDER:
THE RIGHT TO PARTICIPATE IN THE PUBLIC OFFERING WILL EXPIRE AT 5:00 P.M., JULY
23, 1999, CALIFORNIA TIME. U.S. STOCK TRANSFER CORPORATION MUST RECEIVE YOUR
AGREEMENT AND STOCK CERTIFICATE(S) BY THAT TIME.
<PAGE>
TO THE SHAREHOLDERS OF VALLEY BANK
We recently sent you the proxy statement/prospectus for our Annual Meeting
and a blue set of materials for the custody and exchange of shares in the
proposed acquisition of our bank by Pacific Community Banking Group.
CORRECTION
We wish to correct an item of information in those materials. The
Instructions on page 4 state that you would receive five copies of the Custody
Agreement, Letter of Transmittal, Power of Attorney and Offer of Sale (the
"Agreement"). In fact, you received only one copy. THIS IS TO ADVISE YOU THAT
YOU WILL ONLY NEED TO SIGN AND RETURN ONE COPY OF THE AGREEMENT, TOGETHER WITH
YOUR STOCK CERTIFICATE(S).
Follow the instructions on page 4 of the Instructions regarding how to
complete the Agreement. After you send the signed Agreement to U.S. Stock
Transfer Corporation, a copy of the signature page of your Agreement,
countersigned by U.S. Stock Transfer Corporation, will be returned to you, upon
request. If you wish to retain a copy of the entire text of the Agreement, you
may photocopy it before sending.
In addition, we wish to notify you that you may, upon request, review or
obtain from Valley Bank a copy of the Valley Bank bylaws, including the
procedure for nomination of directors.
REMINDER:
THE RIGHT TO PARTICIPATE IN THE PUBLIC OFFERING WILL EXPIRE AT 5:00 P.M., JULY
23, 1999, CALIFORNIA TIME. U.S. STOCK TRANSFER CORPORATION MUST RECEIVE THE
AGREEMENT AND STOCK CERTIFICATE(S) BY THAT TIME.
