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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
VALLEY NATIONAL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
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Delaware 6710 33-0825336
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(State or Other Jurisdiction of (Primary Standard Industrial (IRS Employer Identification No.)
Incorporation or Organization) Classification Code Number)
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1234 East Main Street
El Cajon, CA 92021
(619) 593-3330
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Mr. William V. Ehlen, President Copies of communications to:
Valley National Corporation James K. Sterrett, Esq.
1234 East Main Street Dostart Clapp Sterrett & Coveney, LLP
El Cajon, CA 92021 4370 La Jolla Village Dr., Suite. 970
(619) 593-3330 San Diego, CA 92122
(619) 593-3344 FAX (619) 623-4200
(619) 623-4299 FAX
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Mr. William V. Ehlen, President
Valley National Corporation
1234 East Main Street
El Cajon, CA 92021
(619) 593-3330
(619) 593-3344 FAX
Approximate date of commencement of proposed sale of the securities to the
public: as soon as practicable after this registration statement becomes
effective.
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount of
Class of Securities Amount to be Offering Price Per Aggregate Offering Registration
to be Registered Registered Share (1) Price (1) Fee (1)
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Common Stock,
$0.0001 par value 6,000 $18.75 $112,500 $31.28
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(1) The registration fee has been computed pursuant to Rule 457(c) as of
February 18, 1999.
The Registrant hereby files this registration statement pursuant to Reg.
230.462(b). This registration statement is for registering 6,000 additional
shares of the same class as were included in an earlier registration statement
of the Registrant on Form S-4, filed November 20, 1998, SEC File No. 333-67661,
as amended by Amendment No. 1 to Form S-4, filed January 26, 1999, and as
amended by Amendment No. 2 to Form S-4, filed February 18, 1999, for the same
offering and declared effective by the commission and this new registration
statement registers additional securities in an amount and at a price that
together represent no more than 20% of the maximum aggregate offering price set
forth for each class of securities in the "Calculation of Registration Fee"
table contained in such earlier registration statement.
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VALLE DE ORO BANK, N.A.
1234 EAST MAIN STREET
EL CAJON, CALIFORNIA 92021
2,646,062 SHARES OF VALLEY NATIONAL CORPORATION COMMON STOCK
BANK HOLDING COMPANY REORGANIZATION PROPOSED - YOUR VOTE IS IMPORTANT
Dear Stockholder:
The Board of Directors of Valle de Oro Bank, N.A. has voted in favor of
a reorganization creating a bank holding company to be called Valley National
Corporation. If shareholders approve the reorganization, we will exchange each
of your Valle de Oro Bank shares for two shares of Valley National Corporation.
Thus, instead of owning Valle de Oro Bank directly, you will own shares in
Valley National Corporation which will own Valle de Oro Bank.
The reorganization cannot be completed unless holders of at least
two-thirds of the outstanding shares of Valle de Oro Bank vote for it. We have
scheduled a special meeting for our stockholders to vote on the reorganization.
The date, time and place of the special meeting are: Tuesday, March 23, 1999,
8:00 a.m. at Valle de Oro Bank, N.A., located at 1234 East Main Street, El
Cajon, California.
Whether or not you plan to attend the meeting, please take the time to
complete and MAIL YOUR PROXY TO US AT YOUR EARLIEST OPPORTUNITY, BUT NO LATER
THAN MARCH 17, 1999. If you return an unmarked proxy form, your proxy will be
counted as a vote in favor of the reorganization. If you do not return your
proxy, you will be treated as having voted against the reorganization.
We are pleased to enclose for your review this proxy statement -
prospectus that provides you with the information you need to evaluate the
reorganization. We encourage you to review it carefully.
I strongly support the organization of Valley National Corporation and
enthusiastically recommend that you vote in favor of it.
Very truly yours,
William V. Ehlen
President and Chief Executive Officer
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The reorganization involves risks. SEE RISK FACTORS ON PAGE 6.
These securities are not deposits or accounts, and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
Neither the Securities and Exchange Commission, the Federal Deposit Insurance
Corporation, the Office of the Comptroller of the Currency nor any state
securities commission has approved or disapproved of these securities or passed
upon the adequacy or accuracy of this proxy statement - prospectus. Any
representation to the contrary is a criminal offense.
February 18, 1999
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VALLEY DE ORO BANK, N.A.
AND
VALLEY NATIONAL CORPORATION
PROXY STATEMENT - PROSPECTUS
TABLE OF CONTENTS
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Summary.............................................................................................. 4
Formation of a Bank Holding Company Which Will Own the Bank...................................... 4
The Two Shares for One Share Exchange............................................................ 4
Stockholders' Approval........................................................................... 4
What Should Stockholders Do?..................................................................... 4
Dissenters Appraisal Rights...................................................................... 4
Directors Approval............................................................................... 5
Reorganization will be Tax-Free Except for Dissenters............................................ 5
The Companies.................................................................................... 5
Management....................................................................................... 5
Differences in Stockholders' Voting Rights and Funds Available for Dividends..................... 5
Public Trading of Valley National Stock.......................................................... 6
Risk Factors......................................................................................... 6
Valley National's Stock Price May Fall if the Bank Has Poor Earnings............................. 6
Competition May Adversely Affect the Profitability of Valley National............................ 6
Anti-takeover Provisions May Discourage Purchase Offers You May Want to Consider................. 6
Additional Information............................................................................... 7
Bank Holding Company Reorganization.................................................................. 7
Reasons for the Reorganization................................................................... 7
Conversion and Exchange of Stock................................................................. 8
Affiliate Restrictions........................................................................... 8
Conditions to Completion......................................................................... 9
Other Considerations............................................................................. 9
Expenses......................................................................................... 9
Reorganization will be Tax-Free Except for Dissenters............................................ 9
State Tax Consequences........................................................................... 10
Appraisal Rights of Dissenting Stockholders...................................................... 10
Anti-takeover Measures............................................................................... 11
The Purpose of the Anti-takeover Provisions...................................................... 11
Summary of Fair price and Supermajority Vote Provisions.......................................... 12
Classified Board of Directors.................................................................... 13
Additional Considerations........................................................................ 13
Market Prices of Stock............................................................................... 14
Valley National Corporation...................................................................... 14
Valle de Oro Bank ............................................................................... 14
Dividends............................................................................................ 15
Valley National Corporation...................................................................... 15
Valle de Oro Bank................................................................................ 16
Financial Statements................................................................................. 16
History and Business of Valley National Corporation.................................................. 17
General.......................................................................................... 17
Employees........................................................................................ 17
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Board of Directors........................................................................ 18
Remuneration of Directors and Officers.................................................... 18
Indemnification........................................................................... 18
History and Business of Valle de Oro Bank..................................................... 19
General................................................................................... 19
Competition............................................................................... 20
Employees................................................................................. 21
Property.................................................................................. 21
Year 2000 Issue........................................................................... 21
Litigation................................................................................ 23
Board of Directors and Officers........................................................... 24
Compensation of Executive Officers and Directors.............................................. 28
Executive Officers' Compensation.......................................................... 28
401(k) Retirement Plan.................................................................... 29
Employee Stock Ownership Plan............................................................. 29
Stock Option Plans........................................................................ 30
Directors' Compensation................................................................... 31
Committees................................................................................ 31
Transactions With Directors and Officers...................................................... 32
Supervision and Regulation.................................................................... 33
Valley National Corporation Regulation.................................................... 33
Capital................................................................................... 33
Additional Regulation..................................................................... 34
Dividend Regulation....................................................................... 34
Government Policies and Legislation....................................................... 34
Comparative Description of Common Stock....................................................... 35
General................................................................................... 35
Voting Rights............................................................................. 35
Right of Redemption....................................................................... 35
Liquidation Rights........................................................................ 36
Preemptive Rights......................................................................... 36
Cumulative Voting......................................................................... 36
Indemnification........................................................................... 36
Dividend Rights........................................................................... 36
Transfer and Accessibility................................................................ 37
Anti-takeover Measures.................................................................... 37
Reports....................................................................................... 38
Legal Opinion................................................................................. 38
Other Matters................................................................................. 38
Consolidation Agreement....................................................................... Appendix I
Dissenters' Statute 12 U.S.C. Section 215 and Banking Circular 259............................ Appendix II
Certificate of Incorporation of Valley National Corporation................................... Appendix III
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THE REORGANIZATION
SUMMARY
We recommend that you read all of this proxy statement-prospectus
carefully.
FORMATION OF A BANK HOLDING COMPANY WHICH WILL OWN THE BANK
The Board of Directors is asking you to vote on a proposal to organize a
bank holding company, Valley National Corporation, which will own Valle de Oro
Bank. The new corporate structure will permit Valley National Corporation and
Valle de Oro Bank greater financial and corporate flexibility in the areas of
acquisitions and debt financing. In addition, it will allow us to:
- Offer new services.
- Enjoy access to new markets.
- Participate in activities which are not permissible for Valle
de Oro Bank to engage in directly.
THE TWO SHARES FOR ONE SHARE EXCHANGE
If the reorganization is approved, we will exchange your Valle de Oro
Bank shares for stock in Valley National Corporation. You will receive two
shares of Valley National Corporation stock for each share of your Valle de Oro
Bank stock.
The Boards of Directors of Valle de Oro Bank and Valley National
Corporation established the two shares of Valley National Corporation stock for
one share of bank stock exchange so that the market price for shares of Valley
National Corporation after the reorganization could be in the range of $15 to
$20 per share. The Boards of Directors believe that this price range will make
the shares affordable for a larger group of potential stockholders, increasing
the liquidity of the shares.
STOCKHOLDERS' APPROVAL
In order to complete the reorganization, we need the approval of owners
of at least two-thirds of the outstanding shares of common stock of Valle de Oro
Bank. As of February 5, 1999, the date on which a person must be a stockholder
to be entitled to vote, there were 1,323,031 shares of common stock outstanding
and entitled to vote. Therefore, we will need the owners of 882,021 shares to
vote in favor of the reorganization. The Board of Directors of Valle de Oro Bank
unanimously recommends voting in favor of the reorganization.
WHAT SHOULD STOCKHOLDERS DO?
If you want to vote in favor of the reorganization, mail your signed
proxy card in the enclosed envelope as soon as possible so that your shares can
be voted at the stockholders' meeting.
If you want to vote against the reorganization, you do not need to do
anything. If you do not send in your proxy card, your shares will automatically
be counted against the reorganization.
DISSENTERS' APPRAISAL RIGHTS
If you vote against the reorganization or do not vote, you will be
entitled to receive cash payment for your Valle de Oro Bank common stock. You
will need to follow the procedures in Appendix II to receive the value of your
shares in cash.
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DIRECTORS' APPROVAL
All of the directors of Valle de Oro Bank have signed the Consolidation
Agreement and have agreed to vote their Valle de Oro Bank stock in favor of the
reorganization.
REORGANIZATION WILL BE TAX-FREE EXCEPT FOR DISSENTERS
Legal counsel, Dostart Clapp Sterrett Coveney, LLP, San Diego, has
stated their opinion that no gains or losses will be recognized by either Valle
de Oro Bank or Valley National Corporation or their stockholders as a result of
the reorganization, except for those stockholders who vote against the
reorganization or do not vote at all and receive cash for their shares.
Each stockholder should consult his own tax advisor about how the
reorganization will affect his own income taxes.
THE COMPANIES
VALLEY NATIONAL CORPORATION
Valley National Corporation has not engaged in any business since its
incorporation. After the reorganization, Valley National Corporation will become
a registered bank holding company, whose principal asset will be its
stockholdings in Valle de Oro Bank.
VALLE DE ORO BANK
Valle de Oro Bank engages in the commercial banking business in East San
Diego County, California.
MANAGEMENT
The directors and officers of Valle de Oro Bank will continue to be
directors and officers of the bank following the reorganization. After the
reorganization, the present directors of Valley National Corporation will
continue to be directors of Valley National Corporation. The stockholders of
Valley National Corporation will only elect the directors of Valley National
Corporation after the reorganization. Valley National Corporation will elect the
directors of Valle de Oro Bank.
DIFFERENCES IN STOCKHOLDERS' VOTING RIGHTS AND FUNDS AVAILABLE FOR DIVIDENDS
Stockholders of Valley National Corporation will have rights comparable
to those rights which they now possess as stockholders of Valle de Oro Bank. For
a complete discussion of the differences in voting rights, see "Comparative
Description of Common Stock - Voting Rights and Cumulative Voting" on pages 35
and 36.
The differences in the provisions of the Certificate of Incorporation
and Bylaws of Valley National Corporation and the Articles of Association and
Bylaws of Valle de Oro Bank will affect stockholders. The Certificate of
Incorporation and Bylaws of Valley National Corporation provide for a staggered
board of directors. The board of directors is divided into three classes with
directors being elected for three year terms. Each year, the terms of the
directors of one of the classes expire. The staggered board provisions are
designed to discourage hostile takeover bids. Valle de Oro, on the other hand,
does not have any staggered board provisions.
Another difference is that Valle de Oro stockholders have the right to
vote on any mergers under Valle de Oro Bank's Articles of Association. Valley
National Corporation stockholders will not have the right to vote on mergers in
which stockholders of the merged corporation will not receive shares of Valley
National Corporation in an amount more than 20% of the shares of Valley National
Corporation outstanding immediately prior to the completion of the merger. For a
more complete discussion regarding other differences, see "Anti-takeover
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Measures" on page 11 and "Comparative Description of Common Stock" on page 35.
There are also differences in the availability of funds for the payment
of dividends by Valle de Oro Bank and Valley National Corporation. (See
"Dividends" on page 15).
PUBLIC TRADING OF VALLEY NATIONAL STOCK
Valle de Oro Bank stock is listed for quotation on the National Market
System of the Nasdaq Stock Market under the trading symbol "VADO." After the
reorganization, Valley National Corporation stock will be listed for quotation
on the National Market System and will use the same trading symbol, "VADO."
RISK FACTORS
Risks associated with the combined business of Valley National
Corporation and Valle de Oro Bank as a result of the reorganization are
presented below.
VALLEY NATIONAL'S STOCK PRICE MAY FALL IF THE BANK HAS POOR EARNINGS
Valley National Corporation's financial condition following the
reorganization will depend on the operation and profitability of Valle de Oro
Bank. Valley National Corporation has no history of financial performance
because it is a newly-formed corporation. Stockholders that receive Valley
National Corporation stock will not have the opportunity to analyze the
historical financial performance of Valley National Corporation.
Valley National Corporation's profitability may be affected by other
factors including:
- businesses started or acquired by Valley National Corporation
other than Valle de Oro Bank; and
- laws and regulations that apply to Valley National Corporation.
Although Valley National Corporation intends to operate Valle de Oro Bank in
substantially the same manner that it has been operated to date, changes to the
operations of Valle de Oro Bank and new businesses may affect the financial
performance and condition of Valley National Corporation as a whole and the
return to stockholders of Valley National Corporation.
COMPETITION MAY ADVERSELY AFFECT THE PROFITABILITY OF VALLEY NATIONAL
Bigger banks and other financial institutions have more capital and
offer more financial services and products. The reorganization will not
immediately overcome these competitive disadvantages.
ANTI-TAKEOVER PROVISIONS MAY DISCOURAGE PURCHASE OFFERS YOU WANT TO CONSIDER
Valley National Corporation's Certificate of Incorporation and Bylaws
contain provisions intended to prevent hostile takeovers. They may also
discourage potential buyers from making offers that you would like to consider.
For a complete discussion of these anti-takeover provisions, see "Anti-Takeover
Measures" on page 11.
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ADDITIONAL INFORMATION
Valley National Corporation, 1234 East Main Street, El Cajon, CA 92021,
(619) 593-3330, has filed a Registration Statement with the Securities and
Exchange Commission for the securities it proposes to issue as part of its plan
of reorganization, described in this proxy statement - prospectus. This proxy
statement - prospectus is part of the Registration Statement, but does not
contain all the information from the Registration Statement and its exhibits.
Portions of the Registration Statement and its exhibits have been omitted from
this proxy statement - prospectus in accordance with the rules and regulations
of the Securities and Exchange Commission.
The Registration Statement may be inspected, without charge, at the
principal office of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, D.C., and you may order copies of all or part of it from the
Securities and Exchange Commission upon payment of its fees. In addition, you
can view the Registration Statement and all the exhibits on the Securities and
Exchange Commission's Web Site at: http:// www.sec.gov.
Valle de Oro Bank's common stock is registered under Section 12(g) of
the Securities and Exchange Act of 1934, which requires it to file annual and
quarterly financial reports with the Office of the Comptroller of the Currency.
Valle de Oro Bank's Form 10-KSB Annual Report which includes financial
statements and schedules, by reference, is filed with the Office of the
Comptroller of the Currency in Washington, D.C. A copy of this report is
available to stockholders upon request to the Secretary, Valle de Oro Bank,
N.A., 1234 Main Street, El Cajon, California, 92021, (619) 593-3330. The first
copy will be provided without charge. Neither the annual report to stockholders
nor the Form 10-KSB are part of the proxy solicitation material, nor have they
been made a part of it by mentioning them. Additionally, the Form 10-KSB Annual
Report may be inspected and copied at the offices of the Office of the
Comptroller of the Currency, 490 L'Enfante Plaza, S.W., Washington, D.C., 20219.
BANK HOLDING COMPANY REORGANIZATION
The Board of Directors of Valle de Oro Bank has approved a plan of
reorganization under which the business of Valle de Oro Bank will be conducted
as a wholly-owned subsidiary of Valley National Corporation.
REASONS FOR THE REORGANIZATION
A bank holding company form of organization will increase the corporate
and financial flexibility of the businesses operated by Valle de Oro Bank
through the combined business of Valle de Oro Bank and Valley National
Corporation. Examples are:
- increased structural alternatives for acquisitions;
- the ability to augment Valle de Oro Bank capital by means of
Valley National Corporation debt;
- the ability of Valley National Corporation to redeem its own
stock.
A bank holding company can engage in some non-bank-related activities in
which Valle de Oro Bank cannot presently engage. The reorganization will broaden
the scope of services which could be offered to the public. Valley National
Corporation has not made any specific
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determination of which of these types of activities it may engage in after the
completion of the reorganization.
CONVERSION AND EXCHANGE OF STOCK
Upon completion of the reorganization, each outstanding share of Valle
de Oro Bank stock will be converted into two shares of Valley National
Corporation stock. Each holder of Valle de Oro Bank stock certificates upon
surrender of the certificates for cancellation will be entitled to receive
certificates representing twice as many shares of Valley National Corporation
stock.
Stock certificates representing shares of Valley National Corporation's
common stock will be generally distributed to stockholders of Valle de Oro Bank
by approximately March 31, 1999. The distribution of stock certificates to you
will be dependent upon the date of receipt of your Valley de Oro Bank stock
certificate for exchange. Stockholders of Valle de Oro Bank will continue to be
entitled to sell or transfer their bank stock through the date of the completion
of the transaction. Further, you may sell Valley National Corporation stock
after the effective date of the reorganization but before receipt of
certificates representing Valley National Corporation stock. The sales will only
require presentation of your Valle de Oro Bank stock certificate.
Until so surrendered, Valle de Oro Bank stock certificates will be
deemed for all purposes to evidence twice as many shares of Valley National
Corporation stock. No dividends will be paid upon Valle de Oro Bank stock
certificates after the completion of the reorganization, but the dividends will
be accumulated and paid, without interest, at the time of surrender of bank
stock certificates for Valley National Corporation stock certificates.
AFFILIATE RESTRICTIONS
The shares of Valley National Corporation stock will be registered under
the Securities Act of 1933. However, the resale of these shares by the
directors, principal officers and principal stockholders may be restricted by
the 1933 Act and by SEC rules if the directors, principal officers, and
principal stockholders are deemed to be "affiliates" as that term is defined by
the 1933 Act and SEC rules.
Persons considered to be in control of an issuer are considered as
"affiliates" and may include officers, directors and stockholders who own 10% or
more of the outstanding stock. Valley National Corporation stock received after
the transaction by "affiliates" of Valley National Corporation will be control
stock, which can be sold only if they are registered or transferred in a
transaction exempt from registration under the 1933 Act, for instance under SEC
Rules 144 and 145, or through a private placement. SEC Rules 144 and 145
generally require that before an affiliate can sell control stock:
- There must be on file with the SEC public information filed by
the issuer;
- The affiliate must sell his stock in a unsolicited broker's
transaction or directly to a market maker; and
- During any three-month period, the amount of the securities that
can be sold is limited to the greater of 1% of the outstanding
stock of the issuer or the average weekly trading volume during
the last four calendar weeks.
It may be advisable for those stockholders who may become "affiliates"
of Valley National Corporation to consult their legal counsel before selling any
Valley National Corporation stock.
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CONDITIONS TO COMPLETION
The obligation of Valle de Oro Bank and Valley National Corporation to
complete the reorganization is conditioned upon the following:
- the absence of any action, suit, proceeding or claim, made or
threatened, related to the consolidation;
- any development which makes the completion of the consolidation
inadvisable in the opinion of either Board of Directors;
- the receipt of a favorable opinion of legal counsel on the tax
consequences of the consolidation;
- the receipt of all necessary regulatory approvals; and
- the performance of all covenants and agreements.
OTHER CONSIDERATIONS
Valley National Corporation is a business corporation formed under
Delaware law. It will have greater flexibility than Valle de Oro Bank in
specific corporate procedures, for instance:
- incurring debt for leveraged growth;
- redeeming stock; and
- operating related financially-oriented businesses.
Valley National Corporation will be a registered bank holding company
governed by the Federal Bank Holding Company Act of 1956.
EXPENSES
The reorganization will cost about $100,000. The expenses cover things
like:
- legal fees;
- accounting fees;
- application fees;
- printing costs; and
- other expenses.
REORGANIZATION WILL BE TAX-FREE EXCEPT FOR DISSENTERS
An opinion of special legal counsel, Dostart Clapp Sterrett Coveney,
LLP, has been obtained to the following effect:
- the transaction will qualify as a reorganization within the
meaning of Internal Revenue Code section 368(a)(1)(A) and
(a)(2)(E);
- no gain or loss will be recognized for federal income tax
purposes by Valle de Oro Bank stockholders upon conversion of
bank stock into Valley National Corporation stock, except for
those stockholders who dissent and exercise their appraisal
rights;
- the tax basis of Valley National Corporation stock will be the
same as the tax basis of Valle de Oro Bank stock surrendered by
the stockholders; and
- the holding period of Valley National Corporation stock will
include the holding period of Valle de Oro Bank stock
surrendered by Valle de Oro Bank stockholders, provided that the
bank stock is held as a capital asset on the date of the
completion of the consolidation.
Stockholders who dissent from the transaction and receive cash in
exchange for their Valle de Oro Bank shares will recognize taxable gain or loss
in an amount equal to the difference between their basis in the shares and the
amount of cash received. The tax treatment of gain or loss will depend on the
particular circumstances of each dissenting stockholder.
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STATE TAX CONSEQUENCES
Depending upon your state of residence, the transaction may subject you
to particular state law provisions relating to capital gains tax. Shares of
Valle de Oro Bank stock may in some jurisdictions have advantages not available
to shares of Valley National Corporation stock, for instance exemption from
personal property taxes, exemption from taxation on dividend income, and
qualification as a legal investment. For residents of California, there are no
material differences in the state tax treatment of gains, losses and
distributions from Valle de Oro Bank or Valley National Corporation nor are
there any other significant differences of the tax treatment of shares of Valle
de Oro Bank or Valley National Corporation.
Stockholders are urged to review their tax status under any state or
local tax laws with their own tax advisors.
APPRAISAL RIGHTS OF DISSENTING STOCKHOLDERS
According to the provisions of Section 215 of Title 12 of the United
States Code, the Consolidation Agreement provides that any stockholder of Valle
de Oro Bank who has voted against the Consolidation Agreement, or who has given
prior notice in writing to the Chairman of the Meeting or the Secretary of Valle
de Oro Bank that the stockholder dissents, shall be entitled to receive the
value of Valle de Oro Bank stock held by the stockholder.
The relevant portions of Section 215 of Title 12 of the United States
Code are attached as Appendix II. If a stockholder does not follow the
procedures in Section 215, that stockholder's appraisal rights will terminate.
It is important for each stockholder of Valle de Oro Bank who wants to exercise
appraisal rights to review Section 215 and follow its provisions.
If you do not vote against the Consolidation Agreement or give notice in
writing at or before the meeting, you will lose your right of appraisal. Any
Valle de Oro Bank stockholder who votes against the reorganization, or who gives
prior notice of his dissent, will be notified in writing of the date of the
reorganization of Valle de Oro Bank as a bank holding company.
In order to receive the value of Valle de Oro Bank stock held, a
stockholder must make a written request for payment to Valle de Oro Bank before
30 days after the date of completion, accompanied by the surrender of the
stockholder's Valle de Oro Bank stock certificates. This written request for
payment should be sent to: Valle de Oro Bank, 1234 East Main Street, El Cajon,
California 92021, Attention: Secretary.
The value of the shares of any dissenting stockholder will be
ascertained, as of the effective date, by an appraisal made by a committee of
three persons comprised of:
- one selected by the vote of the holders of the majority of Valle
de Oro Bank stock, the owners of which requested appraisal;
- one selected by the Directors of the Valle de Oro Bank; and
- one selected by the two so selected.
The valuation agreed upon by any two of the three appraisers shall govern.
If the value so fixed shall not be satisfactory to any dissenting
stockholder, that stockholder may, within five days after being notified of the
appraised value of the shares, appeal to the Office of the Comptroller of the
Currency, which shall cause a final reappraisal to be made. If within 90 days
from the date of completion, for any reason one or more of the appraisers is not
selected as above provided, or if the appraisers fail to determine the value of
the shares, the Office of the Comptroller of the
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Currency shall, upon written request of any interested party, cause an appraisal
to be made which shall be final and binding on all parties.
The expenses of the Office of the Comptroller of the Currency in making
an appraisal shall be paid by Valle de Oro Bank. The value of the shares
ascertained shall be promptly paid to the dissenting stockholders by Valle de
Oro Bank. In performing the appraisal or reappraisal, the Office of the
Comptroller of the Currency selects an appropriate valuation method, or
combination of methods, after reviewing the facts of each case. The Office of
the Comptroller of the Currency may review the market value of the shares being
appraised, the investment value of the shares based upon earnings of Valle de
Oro Bank and similarly situated banks, and the adjusted book value of the
shares. A combination of methods may be used with the Office of the Comptroller
of the Currency applying varying weights to the different methods. See Banking
Circular 259 in Appendix II to this proxy statement prospectus for a more
complete description of the valuation methods used by the Office of the
Comptroller of the Currency.
ANTI-TAKEOVER MEASURES
THE PURPOSE OF THE ANTI-TAKEOVER PROVISIONS
Valley National Corporation's Certificate of Incorporation contains
"Fair price" and "supermajority vote" provisions. We included them because
particular tactics have become relatively common in corporate takeover practice,
including:
- an accumulation of a substantial block of stock as a prelude to
an attempted takeover or proxy fight, or a partial tender offer
- followed by a second step business combination involving less
favorable considerations than were offered in the partial tender
offer.
We believe these tactics can be highly disruptive and can result in
dissimilar and unfair treatment of stockholders. We are not aware of any current
efforts to obtain control of Valle de Oro Bank or to accumulate substantial
portions of its stock.
The Fair price and supermajority vote provisions are designed to
encourage potential takeover bidders to negotiate at arm's length with the Board
of Directors. In the absence of negotiations, the provisions are intended to
assure any multi-step attempt to take over Valley National Corporation is made
on terms that offer similar treatment to all stockholders. Neither the proposed
Fair price provision nor the supermajority vote provision will impede a takeover
that is approved by a majority of the directors of Valley National Corporation
who are unaffiliated with a 10% or more stockholder.
There have been several takeovers of publicly-held corporations
accomplished by the purchase of a control block of stock by means of open market
purchases or by means of a tender offer made directly to a target corporation's
stockholders at a price above the prevailing market price, followed by a
second-step consolidation or other business combination. The value of the
consideration given for the shares in the second step of an acquisition
frequently has been less than the value paid in the first step. We are concerned
that the interest of all stockholders may not be adequately protected in a
two-step acquisition.
Valle de Oro Bank has a large number of long-term stockholders who each
hold a relatively small number of bank shares. We believe that sophisticated
arbitrageurs and other market professionals are generally in a better position
to
11
<PAGE> 14
take advantage of the more lucrative first step transaction, while long-term
stockholders will often, as a practical matter, be compelled to accept the less
favorable consideration payable in the second step consolidation or other
business combination.
The potential for future use of the two-step acquisition have convinced
us that these provisions are desirable in order to preserve for the stockholders
the benefits which will accrue to Valley National Corporation and its
subsidiary, Valle de Oro Bank, including its increased ability to compete in the
significantly deregulated banking industry.
SUMMARY OF FAIR PRICE AND SUPERMAJORITY VOTE PROVISIONS
Under the "Fair price" provision, no Business Combination may be
effected without the approval of the Continuing Directors, unless either:
- it is approved by holders of not less than two-thirds of the
voting stock held by all independent stockholders voting
together as a class; or
- the minimum price and other requirements are met.
The minimum price is the highest price per share paid by an interested
stockholder, plus interest paid on the property from the date the offeror became
an interested stockholder to the date of completion. It is possible that, if the
interested stockholder has not made a recent purchase of Valley National
Corporation stock, the Fair price might be a price paid by the interested
stockholder several years ago. That price may have no relation to the present
market value of the stock, particularly if the stock has declined in value
during the interim.
Therefore, a determination of whether the price paid satisfies the
minimum price provision conceivably may not be made until the date of
completion. This uncertainty may preclude an interested stockholder from
determining the price required to satisfy the minimum price provision, even if
the interested stockholder had every intention of doing so. The uncertainty
associated with the minimum price provision may have the effect of encouraging
an interested stockholder who is not assured of a supermajority vote to
negotiate any proposed business combination with the Continuing Directors.
The purpose of the foregoing conditions is to require, in the absence of
the approval of the directors or holders of at least two-thirds of all voting
stock held by the independent stockholders, that the independent stockholders
receive the minimum price. The form of the consideration must be the same as
previously paid by the interested stockholder to acquire the largest number of
shares of the class or series.
The Certificate of Incorporation also contains a "supermajority vote"
provision. The vote required is in addition to any vote required by the Fair
price provision. No business combination with an interested stockholder may be
effected without the approval of the directors, unless approved by holders of
not less than 80% of the outstanding stock, including the shares held by the
interested stockholders. This vote is required notwithstanding that no
stockholder vote or a lesser percentage stockholder vote may be required by law
or other provisions of the Certificate of Incorporation.
All actions required to be taken by the directors shall be taken by the
vote of two-thirds of the directors. In the event that the number of directors
is at any time less than five, all power and authority of the directors to
approve business combinations and successor directors and filling director
vacancies ceases. The directors are given authority to determine the matters
regarding whether any person is an interested stockholder,
12
<PAGE> 15
the fair market value of property, securities and other noncash considerations,
and the like.
We have determined that encouraging a prospective purchaser to negotiate
directly with the Board will be beneficial to all stockholders. We believe that,
in consultation with our professional advisors, we are in the best position to
assess the business and prospects of Valley National Corporation. Accordingly,
we are of the opinion that negotiations between Valley National Corporation and
a potential acquirer will increase the likelihood that stockholders will receive
a higher price for their shares.
The Fair price and supermajority vote provisions may have the effect of
protecting the incumbent Board of Directors by discouraging takeover attempts
which are not supported by the Board. As a result, stockholders may not have the
opportunity to sell some or all of their shares in a takeover attempt. Tender
offers for control usually involve a purchase price higher than the prevailing
market price and may result in a bidding contest between competing takeover
bidders.
An effect of the Fair price and supermajority vote provisions is to make
more difficult the completion of a business combination with a 10% or more
stockholder in the absence of the approval of the Board of Directors.
Accordingly, the provisions may discourage takeover attempts which are not
supported by the Board of Directors even in transactions which may be supported
by a majority of stockholders.
These anti-takeover provisions could affect the price of Valley National
Corporation's shares by making it less attractive to persons who invest in
securities in anticipation of an increase in price if a takeover attempt occurs.
The Fair price and supermajority vote provisions may also deter an interested
stockholder from proceeding with a second-step business combination unless
approved by the directors, especially if the market price of Valley National
Corporation shares had declined from the highest price paid by the interested
stockholder in acquiring shares of that class. Unless the directors approve a
business combination, these anti-takeover provisions will give the holder of a
minority of the total outstanding shares the veto power over a business
combination with an interested stockholder, notwithstanding that the other
stockholders, may believe the business combination to be desirable or
beneficial.
CLASSIFIED BOARD OF DIRECTORS
Valley National Corporation's Board of Directors is divided into three
classes of two directors each. Each class will be elected for a three-year term.
The classified election system for directors provides continuity of directors
and also serves as a defense against unwanted takeovers. Stockholders desiring
to change a majority of the Board would have to wait at least two years, because
only one class of the directors is elected annually. This may discourage
potential buyers from making acquisitions of Valley National Corporation's
stock.
ADDITIONAL CONSIDERATIONS
Federal law requires prior approval by the Board of Governors of the
Federal Reserve System before any company acquires control of a bank holding
company. In addition, under national banking law, no person or entity may
directly or indirectly, acquire a controlling interest in a bank without the
prior written approval of Office of the Comptroller of the Currency. Independent
of any provision of Valley National Corporation's Certificate of Incorporation
or Bylaws, the requirement for regulatory approval may delay efforts to obtain
control over Valley National Corporation.
Valley National Corporation has 10,000,000 shares of authorized common
stock of which, after completion of the reorganization, there will be 2,646,062
shares issued and
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<PAGE> 16
outstanding. Therefore, Valley National Corporation will have 7,353,938 shares
of its authorized common stock available for future issuance by the Board of
Directors for any proper corporate purpose. These shares could be issued into
friendly hands by the Board of Directors in the event of an attempt to gain
control of Valley National Corporation. Because Valley National Corporation's
authorized but unissued shares could be issued and used in this manner, they
represent another potential anti-takeover device.
Valley National Corporation's Certificate of Incorporation and Bylaws
currently contain no other provisions that were intended to be or could fairly
be considered as anti-takeover in nature or effect. The Board of Directors has
no present intention to amend the Certificate of Incorporation to add any
anti-takeover provisions.
MARKET PRICES OF STOCK
VALLEY NATIONAL CORPORATION
Valley National Corporation was incorporated on October 7, 1998. No
shares of Valley National Corporation have been publicly traded since the date
of its incorporation to the present time. Therefore, no meaningful market exists
at this time for Valley National Corporation's stock. Valle de Oro Bank
stockholders will exchange their bank stock for Valley National Corporation
stock. Shares of Valley National Corporation will be listed for quotation on the
National Market System with the same trading symbol (VADO) as that used for
Valle de Oro Bank shares.
VALLE DE ORO BANK
Until November 17, 1998, there had been only a limited over-the-counter
market for Valle de Oro Bank's common stock. On November 17, 1998, Valle de Oro
Bank's common stock was listed for quotation on the National Market System of
the Nasdaq Stock Market. Valle de Oro Bank had approximately 1248 stockholders
as of September 30, 1998.
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<PAGE> 17
The following table sets forth the high and low trading prices of Valle
de Oro Bank's common stock for the quarters indicated based on transactions of
which Management is aware. Prices have been adjusted for each of the 5% common
stock dividends declared and paid by Valle de Oro Bank in 1996, 1997 and 1998.
TRADING PRICES
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1996
First Quarter $12.33 $11.31
Second Quarter $14.51 $12.70
Third Quarter $14.74 $13.61
Fourth Quarter $15.88 $13.82
1997
First Quarter $16.32 $14.29
Second Quarter $22.14 $17.14
Third Quarter $23.10 $22.14
Fourth Quarter $25.24 $24.11
1998
First Quarter $30.48 $24.29
Second Quarter $34.25 $27.00
Third Quarter $34.75 $29.00
</TABLE>
DIVIDENDS
VALLEY NATIONAL CORPORATION
Since the date of its incorporation, Valley National Corporation has
paid no dividends. After completion of the reorganization, the amount and timing
of future dividends will be determined by its Board of Directors and will
substantially depend upon the earnings and financial condition of its principal
subsidiary, Valle de Oro Bank. The ability of Valley National Corporation to
obtain funds for the payment of dividends and for other cash requirements is
largely dependent on the amount of dividends which may be declared by its
subsidiary, Valle de Oro Bank.
The power of the Board of Directors of a national bank, as Valle de Oro
Bank, to declare a cash dividend is limited by statutory and regulatory
restrictions which restrict the amount available for cash dividends depending
upon the earnings, financial condition and cash needs of Valle de Oro Bank, as
well as general business conditions. A national bank is prohibited from
15
<PAGE> 18
paying dividends out of common capital. Dividends must be paid out of undivided
profits. If losses have, at any time, been sustained equal to or exceeding a
bank's undivided profits then on hand, no dividend may be paid. Moreover, even
if a national bank's surplus exceeded its common capital and its undivided
profits exceed its losses, the approval of the Comptroller is required for the
payment of dividends if the total of all dividends declared by a national bank
in any calendar year would exceed the total of its net profits of that year
combined with its net profits of the two preceding years, less any required
transfers to surplus.
VALLE DE ORO BANK
Valle de Oro Bank paid quarterly cash dividends of $0.06 per share in
the first and second quarters of 1998, and in each quarter of 1997 and 1996. In
the third quarter of 1998, a dividend of $0.07 per share was paid. Valle de Oro
Bank has paid 5% stock dividends to stockholders in each year since 1988. Cash
was paid in lieu of fractional shares.
Valley National Corporation anticipates continuing to pay dividends in
the future.
FINANCIAL STATEMENTS
Valle de Oro Bank's audited Balance Sheets as of December 31, 1997 and
1996, the related audited Statements of Earnings, Changes in Stockholders'
Equity and Cash Flows for each of the two years ended December 31, 1997 and 1996
are included in Valle de Oro Bank's Annual Report, which was sent to each
stockholder prior to the Annual Meeting of stockholders held May 5, 1998.
Financial statements of Valle de Oro Bank are not included in this proxy
statement-prospectus as they are not deemed material to the exercise of
prudent judgment by stockholders on the matters to be acted upon at the special
meeting of Valle de Oro Bank stockholders. If any stockholder so desires, he may
obtain an additional copy of the financial statements upon written request to:
William V. Ehlen, President, Valle de Oro Bank, 1234 East Main Street, El Cajon,
California 92021.
Provided on the next page is a five-year summary of selected financial
data of Valle de Oro Bank. In addition, selected financial data is presented for
the nine months ended and as of September 30, 1998. Per share information is
adjusted to account for a 5% stock dividend in each year.
16
<PAGE> 19
SELECTED FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
As of or for the Periods Ended
-------------------------------------------------------------------------
December 31,
Sept.30, ------------------------------------------------------------
1998 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Interest Income $ 13,369 $ 16,270 $ 14,865 $ 13,573 $ 11,487 $ 9,379
Interest Expense 4,772 5,940 5,316 4,329 2,866 2,649
-------- -------- -------- -------- -------- --------
Net Interest Income $ 8,597 $ 10,330 $ 9,549 $ 9,244 $ 8,621 $ 6,730
Provision for Loan Losses $ 488 $ 497 $ 1,062 $ 862 $ 837 $ 920
Other Income 2,181 2,744 2,249 2,112 1,781 1,570
Other Expenses 7,704 9,688 8,542 8,644 7,839 5,850
Income Taxes 914 1,037 791 707 676 625
-------- -------- -------- -------- -------- --------
$ 1,672 $ 1,852 $ 1,403 $ 1,143 $ 1,050 $ 905
Net Earnings
Per Share Data:
Basic Net Earnings $ 1.28 $ 1.43 $ 1.09 $ 0.89 $ 1.07 $ 1.07
Diluted Net Earnings $ 1.18 $ 1.33 $ 1.06 $ 0.88 $ 1.06 $ 1.02
Cash Dividends Declared per
Common Share $ 0.19 $ 0.24 $ 0.24 $ 0.20 $ 0.15 none
Balance Sheet Data:
Net Loans $145,153 $134,837 $118,219 $103,457 $ 94,274 $ 84,412
Total Deposits $212,233 $188,147 $167,059 $141,968 $114,701 $112,055
Total Assets $231,981 $206,083 $183,449 $156,838 $128,620 $120,885
Total Stockholders' Equity $ 18,812 $ 17,026 $ 15,397 $ 14,303 $ 13,249 $ 8,301
Long-term Debt $ 60 $ 83 $ 112 $ 139 $ 163 $ 185
</TABLE>
HISTORY AND BUSINESS OF VALLEY NATIONAL CORPORATION
GENERAL
Valley National Corporation was incorporated under the laws of the State
of Delaware on October 7, 1998, for the purpose of becoming the holding company
of Valle de Oro Bank. Stockholders of Valle de Oro Bank will become stockholders
of Valley National Corporation, if they do not exercise their dissenters'
rights. Valley National Corporation will become the sole stockholder of Valle de
Oro Bank. The executive offices of Valley National Corporation are located at
1234 East Main Street, El Cajon, California 92021. A copy of Valley National
Corporation's Certificate of Incorporation is attached as Appendix III.
EMPLOYEES
Valley National Corporation has no employees other than its officers,
each of whom is also an employee and officer of Valle de Oro Bank and who serve
in their capacity as officers of Valley National Corporation without additional
compensation. Upon completion of the reorganization, Valley National
Corporation,
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<PAGE> 20
whose sole business function will be to hold 100% of Valle de Oro Bank stock,
does not anticipate any immediate change in the number of or status of its
employee officers. The status of Valle de Oro Bank's employees is not expected
to be affected by the reorganization.
BOARD OF DIRECTORS
The Directors of Valley National Corporation are James F. Carroll,
Samuel M. Ciccati, Ph.D., Obert D. "Dale" Conway, William V. Ehlen, C.K. Hill,
O.D., and Philip J. Gelber, M.D., each of whom also serve as Directors of Valle
de Oro Bank. Directors of Valley National Corporation are elected to staggered
three-year terms. Upon completion of the reorganization, the Directors of Valley
National Corporation will own the following percentages of Valley National
Corporation stock.
<TABLE>
<CAPTION>
Directors Percentage of Common Stock
--------- --------------------------
<S> <C>
James F. Carroll 3.5%
Samuel M. Ciccati, Ph.D. 1.0%
Obert D. "Dale" Conway 6.2%
William V. Ehlen 4.6%
Philip J. Gelber, M.D. 0.9%
C.K. Hill, O.D. 2.5%
All directors as a group (6 persons) 18.7%
</TABLE>
REMUNERATION OF DIRECTORS AND OFFICERS
Valley National Corporation has paid no remuneration to its officers and
directors since its incorporation. It is not anticipated that Valley National
Corporation's officers and directors will initially be paid any additional
compensation by Valley National Corporation other than that currently paid to
them by Valle de Oro Bank.
INDEMNIFICATION
Valley National Corporation's Certificate of Incorporation and Bylaws
provide for indemnification of officers, directors, employees and agents to the
fullest extent permitted by Delaware law.
Delaware law generally provides for the payment of expenses, including
attorney's fees, judgments, fines and amounts paid in settlement reasonably
incurred by the indemnitee provided the person acted in good faith and in a
manner he reasonably believed not to be opposed to the best interests of the
corporation. However, in derivative suits, if the suit is lost, no
indemnification is permitted if the prospective indemnitee is found to be liable
for misconduct in the performance of his duty to the corporation. No
indemnification may be provided in any action or suit in which the only
liability asserted against a director is under a statutory provision outlawing
loans, dividends, and distribution of assets under specific circumstances.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling
Valley National Corporation under the provisions in Valley National
Corporation's Certificate of Incorporation and Bylaws, Valley National
Corporation has been informed that, in the opinion of the SEC, this kind of
indemnification is against public policy as
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<PAGE> 21
expressed in the securities Act of 1933, and is therefore unenforceable.
The reorganization of Valle de Oro Bank into a subsidiary of Valley
National Corporation is not expected to have any effect on the ability of Valle
de Oro Bank or Valley National Corporation to obtain officers and directors
indemnification insurance, or the rates at which this type of insurance is
available. The provisions regarding indemnification may not apply under some
federal banking laws and regulations.
HISTORY AND BUSINESS OF VALLE DE ORO BANK
GENERAL
Valle de Oro Bank opened in 1983. Valle de Oro Bank conducts
substantially the same business operations as a typical independent, commercial
bank including accepting demand, savings and time deposits and making
commercial, real estate and consumer loans. It has six offices:
- - Casa de Oro 9832 Campo Road
Spring Valley
- - Sweetwater 491 Sweetwater Road
Spring Valley
- - Rancho San Diego 2986 Jamacha Road
El Cajon
- - Grossmont Center 8690 Center Drive
La Mesa
- - Santee 8867 Cuyamaca Street
Santee
- - El Cajon 1234 East Main Street
El Cajon
Valle de Oro Bank issues cashier's checks and money orders, sells
traveler's cheques and provides other customary banking services. Valle de Oro
Bank also offers mortgage brokerage services, including a variety of
conventional and FHA/VA residential real estate loan products as well as
commercial loan products. Valle de Oro Bank sells to its customers, through a
third party broker/dealer, nondeposit investment products including mutual
funds, fixed and variable annuities, stocks, bonds and other nondeposit
investment products. Valle de Oro Bank does not operate or have any present
intention to seek authority to operate a trust department.
Valle de Oro Bank has always emphasized consumer and small business
banking. Most of Valle de Oro Bank's depositors are consumers and small business
customers.
As of December 31, 1997, Valle de Oro Bank has concentrated its lending
activities in three areas:
- real estate loans (49%)
- commercial loans to small businesses (41%)
- consumer loans (10%).
Valle de Oro Bank's real estate loan portfolio is comprised of
amortizing loans and consumer lines of credit secured by residential properties,
loans secured by commercial real estate, and construction loans. These loans are
made primarily for the purpose of purchasing or improving residential real
estate, to purchase or improve commercial real estate and to construct
owner-occupied, single family residential real estate. Commercial loans to small
businesses, including Small Business Administration loans, are made essentially
to provide working capital and equipment financing for small business customers.
Consumer loans are for household expenditures including automobiles, recreation
and other personal expenditures.
Valle de Oro Bank evaluates each borrower's credit-worthiness on a
case-by-case basis. The amount of collateral obtained by Valle
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<PAGE> 22
de Oro Bank, if necessary, is based upon management's credit evaluation of the
borrower. Collateral held varies but may include certificates of deposit,
accounts receivable, inventory, property, plant and equipment, residential real
estate and income-producing commercial properties. Valle de Oro Bank's lending
activities are concentrated in San Diego County.
Valle de Oro Bank has a borrower assessment program for Y2K issues.
Valle de Oro Bank's program includes commercial, real estate and consumer
borrowers. The program is designed to evaluate each borrower's exposure to Y2K
issues, their preparedness in addressing this exposure, and an assessment of the
borrower's ability to meet its obligations under a worst case Y2K scenario.
Valle de Oro Bank provides 24-hour daily banking transactional service
through its electronic Automatic Teller Machines (ATMs) at all of its offices,
and is a member of the STAR SYSTEM, PLUS and VISA ATM networks. In 1997, Valle
de Oro Bank introduced its VISA Check Card where purchases are charged directly
to the customer's checking account rather than a credit card line, but looks
similar to a credit card and can be used anywhere a VISA credit card is
accepted. Valle de Oro Bank also provides automated clearing house services for
both origination and receipt of funds through the California Clearing House
Association.
Most of Valle de Oro Bank's business originates from its primary service
areas, consisting of the communities of Spring Valley, El Cajon, Lemon Grove, La
Mesa and Santee, all located in eastern San Diego County, California. Valle de
Oro Bank does not attract deposits from and has not made loans to foreign
governments or foreigners. Valle de Oro Bank's business is not seasonal. There
has been no material effect upon Valle de Oro Bank's capital expenditures,
earnings or competitive position as a result of federal, state or local
environmental regulations.
Valle de Oro Bank does not obtain a material portion of its deposits
from a single person or few persons, nor is a material portion of Valle de Oro
Bank's loans concentrated within a single industry or group of related
industries. Valle de Oro Bank's deposits are insured by the Federal Deposit
Insurance Corporation to applicable legal limits, and Valle de Oro Bank is
supervised and regulated by the Office of the Comptroller of the Currency.
COMPETITION
The banking business in California generally, and specifically in Valle
de Oro Bank's primary service areas, loans and deposits, is highly competitive
and is dominated by a relatively small number of major banks which have many
offices operating over wide geographic areas. Valle de Oro Bank competes for
deposits and loans principally with these major banks, but also with small
independent banks and credit unions located in its service area. Among the
advantages which the major banks have over Valle de Oro Bank is their ability to
finance extensive advertising campaigns and to allocate their investment assets
to regions of highest yield and demand. Many of the major commercial banks
operating in Valle de Oro Bank's service area offer specific services (for
instance, trust and international banking services) which are not offered
directly by Valle de Oro Bank. By virtue of their greater total capitalization,
these banks also have substantially higher lending limits than Valle de Oro
Bank.
Banks generally, and Valle de Oro Bank in particular, face increasing
competition for loans and deposits from non-bank financial intermediaries
including credit unions, savings and loan associations, brokerage firms, thrift
and loan companies, mortgage companies, insurance companies, and other financial
and non-financial institutions. In addition, there is increased competition
among banks, savings and loan
20
<PAGE> 23
institutions, and credit unions for the deposit and loan business of
individuals.
The recent trend has been for other institutions, including brokerage
firms, credit card companies and retail establishments to offer banking services
to consumers, including money market funds with check access and cash advances
on credit card accounts. In addition, other entities (both public and private)
seeking to raise capital through the issuance and sale of debt or equity
securities compete with banks in the acquisition of deposits. While the
direction of recent legislation and economic developments seems to favor
increased competition between different types of financial institutions for both
deposits and loans, resulting in increased cost of funds to banks, it is not
possible to predict the full impact these developments will have on commercial
banking or Valle de Oro Bank.
In order to compete with other financial institutions in its service
area, Valle de Oro Bank relies principally upon local promotional activity
including:
- direct mail;
- advertising in the local media;
- personal contacts by its directors, officers, employees and
stockholders; and
- specialized services.
Valle de Oro Bank's promotional activities emphasize the advantages of dealing
with a locally-owned and headquartered institution attuned to the particular
needs of the community. For customers whose loan demands exceed Valle de Oro
Bank's lending limits, the bank attempts to arrange for the loan on the
participation basis with other financial institutions. The bank also assists
customers requiring services not offered by Valle de Oro Bank to obtain these
services from its correspondent banks.
EMPLOYEES
As of September 30, 1998, Valle de Oro Bank had 113 full-time employees
and 7 part-time employees. Valle de Oro Bank provides several benefits for its
full-time employees, including health and life insurance, workers' compensation,
social security, paid vacations, bank services and a retirement plan.
PROPERTY
Valle de Oro Bank operates six offices, all in the "East County" area of
San Diego County, California. Valle de Oro Bank owns the Casa de Oro and Santee
offices. It owns the Sweetwater building and leases the land. The bank's other
facilities are leased.
Valle de Oro Bank has three properties classified as other real estate
owned with a carrying value of $1.4 million as of September 30, 1998. These
properties are comprised of two parcels of unimproved land and one parcel of
commercial real estate. The unimproved land parcels are located in the Otay Mesa
area of San Diego County. Valle de Oro Bank maintains active sales programs for
these properties.
YEAR 2000 ISSUE
The Year 2000 ("Y2K") issue is the result of computer programs being
written using two digits rather than four to define the applicable year. Any of
Valle de Oro Bank's programs that have time sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a variety of system miscalculations, operating problems and system failures.
Valle de Oro Bank is addressing its Y2K issues using a five phase
program. The five phases are awareness, assessment, renovation, validation and
implementation. A brief description of each phase and the bank's progress toward
completing each phase follows.
21
<PAGE> 24
The awareness phase:
- identifies potential Y2K problems,
- develops an overall strategy for addressing the issues,
- obtains support from the Board of Directors and management,
- appoints a project team of employees to direct the bank's
activities, and
- implements an internal and external communication program to
raise awareness of the problems and issues.
Valle de Oro Bank completed the awareness phase March 31, 1998.
The assessment phase identifies all information technology systems,
including hardware, software, networks and ATMs, and non-information technology
systems, including alarm and security systems, and environmental controls. This
phase also develops a system to evaluate and assess borrower and vendor
preparedness, including a tracking and monitoring system to identify potential
problems.
Valle de Oro Bank has completed all of its information and
non-information technology system assessments. In addition, it has communicated
with borrowers and vendors, established a monitoring system, logged responses,
and assigned risk factors. The bank has begun quantifying the Y2K risk factors
associated with its borrowers and assigned preliminary allocations of the
allowance for loan losses. This allocation process will be reviewed and revised
on a quarterly basis through, at least, the first quarter of 2000. Accordingly,
monitoring and communication with borrowers and vendors is ongoing.
Based on the initial results of the assessment phase, additional amounts
are specifically allocated, as necessary, to cover potential losses for
borrowers considered having a high Y2K risk rating. In addition, funds have been
allocated to cover potential Y2K related losses, in general, without regard to
specific borrowers.
Valle de Oro Bank has also made initial assessments of its liquidity
position in case of a loss of one or more of its larger depositors due to Y2K,
and the impact of Y2K, in general, upon its deposit base. To ensure Y2K issues
do not have an adverse effect on depositors or liquidity, the bank intends to
perform this assessment on a quarterly basis.
The renovation phase involves making the necessary information
technology and non-information technology changes and upgrades necessary to be
Y2K compliant. Valle de Oro Bank has purchased and installed new item processing
and voice response software, in addition to local area network servers and
security and alarm systems. The bank is awaiting installation of three new
automated teller machines. Renovation continues on less critical internal
PC-based accounting and information systems with a target completion date of
December 31, 1998 for this phase.
The validation phase is the testing phase. Valle de Oro Bank uses a
third party data processing vendor whose software is Y2K compliant. However, the
software is currently undergoing proxy testing by several of its users and is
expected to be complete by March 31, 1999. The bank is currently testing its
other internal specialized systems and expects to complete this phase by
December 31, 1998.
The implementation phase introduces system changes into our operating
environment. Once tested, Y2K compliant systems are ready to be introduced into
Valle de Oro Bank's operating environment. The target date for implementation of
all systems is September 30, 1999.
Contingency planning has begun. The Board of Directors has appointed a
contingency planning project manager. A workgroup has been established and is
preparing a Y2K contingency
22
<PAGE> 25
plan. A planning event timeline, incorporating the Y2K renovation and testing
milestones, to date, has been prepared. Valle de Oro Bank intends to complete a
full business resumption plan by December 31, 1998.
Valle de Oro Bank's direct expenses for Y2K have been mitigated, to some
degree, by its use of a third-party data processor and its policy of
periodically upgrading in-house hardware and software systems. Valle de Oro Bank
has spent approximately $20,000 on assessing, renovating and testing. This does
not include the cost of a significant amount of bank staff time spent on Y2K
issues. In addition, the bank has spent approximately $67,000 to replace capital
equipment, which would not have been replaced except for Y2K.
Valle de Oro Bank's 1998 budget for Y2K expenses is approximately
$40,000. In 1999, the bank's operating budget is $50,500 and in 2000 $13,500 for
a total of $104,000. Valle de Oro Bank's 1998 capital budget for Y2K related
expenditures is $155,000. In 1999, its capital budget is $40,000.
At this time, management thinks the most likely worst case Y2K scenario
will involve the inability of our utility and telephone service providers to
furnish consistent, uninterrupted power and telecommunication services to the
bank in the early part of 2000. This view is based solely on a lack of material
direct disclosure provided to us by these companies on their Y2K efforts. Due to
the complexity of today's power and telecommunication systems, management feels
that there may be a good chance of occasional power outages, or loss of
telephone service that may last for several hours or even several days.
Electrical service is a vital part of the bank's operation. Today, if
the bank lost power for more than a few hours it, most likely, would have to
close its doors and discontinue normal operations. To prevent disruptions of
this type, the bank is planning to acquire an electrical generator to provide
power to one of its offices. The generator has the capacity to provide
consistent, uninterrupted power for approximately several days, depending upon
fuel supplies, which management feels is sufficient to keep the bank operating
with limited services.
If the bank lost telephone service for a few hours, it would be
disruptive and change normal operations but, most likely, the bank would not
have to close its doors. The bank has undertaken a plan to receive and use data
in hardcopy form and use cellular communications in the event of telephone
service disruptions.
LITIGATION
There is no material pending litigation to which Valley National Corporation or
Valle de Oro Bank is a party, other than routine litigation incidental to the
business of Valle de Oro Bank. Further, there is no material legal proceeding in
which any director, executive officer, principal stockholder, or affiliate of
Valley National Corporation or Valle de Oro Bank or any associate of any
director, executive officer, or principal stockholder is a party and has a
significant interest opposed to the interests of Valley National Corporation or
Valle de Oro Bank. None of the routine litigation in which Valle de Oro Bank is
involved is expected to have a material adverse impact upon the financial
position or results of operations of Valley National Corporation or Valle de Oro
Bank.
23
<PAGE> 26
BOARD OF DIRECTORS AND OFFICERS
Valle de Oro Bank's Board of Directors is presently composed of 10
members, each of whom stand for election each year.
The following table presents for each of the directors, name, age (as of
September 30, 1998), principal occupation during the past five years, the year
each first became a director, and the number of shares of Valle de Oro Bank
beneficially owned, and the shares owned by all directors and executive officers
as a group (15 persons) and one other stockholder which owns more than 5% of the
outstanding shares of Valle de Oro Bank. Shares are beneficially owned, directly
and indirectly, together with spouses, and, unless otherwise indicated, holders
share voting power with their spouses. The business address for each of the
persons listed in the table is 1234 East Main Street, El Cajon, California,
92021, unless otherwise indicated.
<TABLE>
<CAPTION>
Year First Number of Shares
Appointed or Of Common Stock
Elected Beneficially Percent
Name and Title Other Than Director Age Director Owned of Class
- ---------------------------------- --- ------------ ---------------- --------
<S> <C> <C> <C> <C>
James F. Carroll, Chairman of the Board 69 1983 46,537(1) 3.5%
Samuel M. Ciccati, Ph.D. 62 1995 13,306(2) 1.0%
Obert D. "Dale" Conway, Vice Chairman 71 1985 81,959(3) 6.2%
William V. Ehlen, President and Chief
Executive Officer 51 1983 62,575(4) 4.6%
Myron D. Fessler, M.D. 67 1985 20,996(5) 1.6%
Philip J. Gelber, M.D. 64 1996 11,701(6) 0.9%
C.K. Hill, O.D., Secretary 79 1984 33,349(7) 2.5%
Janet L. Johnson 64 1983 26,957(8) 2.0%
Lloyd E. Peterson 72 1983 25,741(9) 1.9%
Joseph G. Vehige 77 1985 17,562(10) 1.3%
Financial Institution Partners, L.P.
1824 Jefferson Place, N.W.
Washington, D.C. 20036 72,684 5.5%
All directors and executive officers as a
group (15 persons) 450,320(11) 31.5%
</TABLE>
(1) Includes 10,719 shares which Mr. Carroll has the right to acquire within
60 days of September 30, 1998 according to the exercise of options.
(2) Includes 11,695 shares held in trust for which Dr. Ciccati is the
trustee and 1,611 shares which Dr. Ciccati has the right to acquire
within 60 days of September 30, 1998 according to the exercise of
options.
(3) Includes 74,816 shares held in trust for which Mr. Conway is trustee and
6,286 shares which Mr. Conway has the right to acquire within 60 days of
September 30, 1998 according to the exercise of options.
24
<PAGE> 27
(4) Includes 38,262 shares which Mr. Ehlen has the right to acquire within
60 days of September 30, 1998 according to the exercise of options and
685 shares in a 401(k) plan.
(5) Includes 8,887 shares held in trust for which Dr. Fessler is co-trustee,
4,983 shares held in a pension plan, 330 shares held in custody for
minor family members and 6,286 shares which Dr. Fessler has the right to
acquire within 60 days of September 30, 1998 according to the exercise
of options.
(6) Includes 11,260 shares held in trust for which Dr. Gelber is trustee and
441 shares which Dr. Gelber has the right to acquire within 60 days of
September 30, 1998 according to the exercise of options.
(7) Includes 28,716 shares held in trust for which Dr. Hill is co-trustee
and 4,633 shares which Dr. Hill has the right to acquire within 60 days
of September 30, 1998 according to the exercise of options.
(8) Includes 5,786 shares which Mrs. Johnson has the right to acquire within
60 days of September 30, 1998 according to the exercise of options.
(9) Includes 3,094 shares held jointly with family members and 6,286 shares
which Mr. Peterson has the right to acquire within 60 days of September
30, 1998 according to the exercise of options.
(10) Includes 13,536 shares held in trust for which Mr. Vehige is co-trustee
and 4,026 shares which Mr. Vehige has the right to acquire within 60
days of September 30, 1998 according to the exercise of options.
(11) Includes 108,314 shares which the directors and executive officers have
the right to acquire within 60 days of September 30, 1998 according to
the exercise of options.
-------------------------
25
<PAGE> 28
Biographical information regarding the directors of Valle de Oro Bank is
described below:
<TABLE>
<CAPTION>
Name Biographical Information
- ---- ------------------------
<S> <C>
James F. Carroll: Chairman of the Board of Directors of Valle de Oro Bank;
President of Data Disposal, Inc. since 1985; member of the
Association of Naval Aviation, the Tailhook Association and the
Retired Officers Association.
Samuel M. Ciccati, Ph.D.: Investor in real estate during the past five years; formerly
President of Cuyamaca College, El Cajon from 1984 until his
retirement in 1993.
Obert D. "Dale" Conway: Vice Chairman of the Board of
Directors of Valle de Oro Bank; owner (since
1987) of Continental Investors, a firm which
makes investments in cleaning establishments.
William V. Ehlen: President and Chief Executive Officer of Valle de Oro Bank since
its inception in 1983.
Myron D. Fessler, M.D.: Physician with Comp
Health/Kron since 1993; previously in private
practice in Jamul from 1988 to 1993.
Philip J. Gelber: Ophthalmologist in practice in San Diego, California since 1969;
Medical Director of the San Diego Eye Bank; past President of the
San Diego Ophthalmologic Society.
C.K. Hill: Owner of Casa de Oro Travel since 1978; active in the Spring
Valley Rotary Club.
Janet L. Johnson: Owner of M. C. Johnson Scraper Rental, a National City
earthmoving business, which she has operated since 1975.
Lloyd E. Peterson: Builder of custom homes for the past five years.
Joseph G. Vehige: Real estate and securities investor for the past five years.
</TABLE>
None of the directors of Valle de Oro Bank were selected under
arrangements or understandings other than with the directors and stockholders of
Valle de Oro Bank acting within their capacity as directors and stockholders of
Valle de Oro Bank. There are no family relationships between any of the
directors, and none of the directors serve as a director of any company which
has a class of securities registered under the Securities Exchange Act of 1934,
as amended, or is required to file periodic reports with the SEC, or any company
registered as an investment company under the Investment Company Act of 1940.
26
<PAGE> 29
The following is a list of executive officers of Valle de Oro Bank,
other than William V. Ehlen, who is listed above, together with share ownership
information. The shares are beneficially owned, directly and indirectly,
together with spouses, and, unless otherwise indicated, holders share voting
power with their spouses.
<TABLE>
<CAPTION>
Number of Shares of Percent
First Year Common Stock of
Name and Title Age Appointed Beneficially Owned Class
-------------- --- --------- ------------------ -----
<S> <C> <C> <C> <C>
Tom Ferrara, Executive Vice President
and Chief Credit Officer 55 1986 29,495 (1) 2.2%
Michael P. Foley, Senior Vice
President and Senior Lending
Officer 52 1993 3,514 0.3%
Paul M. Cable, Senior Vice President
and Chief Financial Officer 48 1998 1,383 0.1%
Connie Goules, Senior Vice President
and Chief Administrative Officer 48 1998 2,561 0.2%
</TABLE>
- ---------------
(1) Includes 19,018 shares which Mr. Ferrara has the right to acquire within 60
days of September 30, 1998 according to the exercise of options, 788 shares in
an IRA account and 59 shares in a 401(k) plan.
Biographical information regarding these officers of Valle de Oro Bank
is described below:
<TABLE>
<CAPTION>
Name Biographical Information
- ---- ------------------------
<S> <C>
Thomas Ferrara: Executive Vice President and Chief Credit Officer of
Valle de Oro Bank, a position he has held since
joining the Bank in 1986.
Michael P. Foley: Senior Vice President and Senior Lending
Officer of Valle de Oro Bank, a position he has held
since joining the Bank in 1993; Executive Vice
President, Chief Credit Officer of the Bank
of San Diego from 1992 to 1993; Executive Vice
President, Chief Operating Officer of American Valley
Bank, from 1977 to 1992.
Paul M. Cable: Senior Vice President and Chief Financial
Officer of Valle de Oro Bank, a position he has held
since July, 1998; previously Vice President and
Controller of Valle de Oro Bank since 1995; Senior
Vice President and Chief Financial Officer of First
National Bank of North County, from 1991 to 1995.
Connie Goules: Senior Vice President and Chief Administrative
Officer of Valle de Oro Bank, a position she has held
since June, 1998; joined Valle de Oro Bank in 1991 as
Customer Accounting Manager; from 1992 to 1998 rose
from Assistant Vice President and Administrative
Officer to 1st Vice
President and Administrative Officer.
</TABLE>
27
<PAGE> 30
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
EXECUTIVE OFFICERS' COMPENSATION
Information concerning the annual and long-term compensation for
services rendered in all capacities for the fiscal years ended December 31,
1997, 1996 and 1995 of the Chief Executive Officer and the only other executive
officer at December 31, 1997, whose salary and bonus exceeded $100,000, is
described below:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------- ------------
Securities All
Underlying Other
Name and Position Year Salary($) Bonus($) Options Compensation
----------------- ---- --------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
William V. Ehlen, 1997 $175,000 $25,957 - $38,913
President and Chief 1996 $175,000 $21,995 - $38,662
Executive Officer(1) 1995 $172,500 $29,063 - $3,410
Thomas Ferrara, 1997 $109,500 $4,079 - $11,002
Executive Vice President and 1996 $106,000 $1,221 - $10,830
Chief Credit Officer(2) 1995 $106,100 $10,904 - $12,420
</TABLE>
- ---------------
(1) Mr. Ehlen's other compensation includes (i) accrued "salary
continuation" benefits of $37,704 for 1997 and $37,704 for 1996, (ii)
employer profit sharing and matching contributions of $833, $722 and
$3,014 to the Profit Sharing and Salary Deferral 401(k) Plan for 1997,
1996 and 1995, respectively; (iii) amounts paid for credit life and
disability insurance incentives of $176 in 1997, $236 in 1996 and $346
in 1995; and (iv) mortgage banking incentives of $200 in 1997 and $50 in
1995.
(2) Mr. Ferrara's other compensation includes (i) employer profit sharing
and matching contributions of $702, $630 and $2,220 in the Profit
Sharing and Salary Deferral 401(k) Plan for 1997, 1996 and 1995,
respectively; (ii) automobile allowances of $10,200, $10,200 and $10,100
in 1997, 1996 and 1995, respectively; and (iii) mortgage banking
incentives of $100 in both 1997 and 1995.
Valle de Oro Bank entered into an employment agreement on July 1, 1995
with Mr. Ehlen as its President and Chief Executive Officer. The agreement,
which expires July 1, 1999, provides for a minimum base salary of $175,000
annually, use of a bank-owned automobile and some insurance benefits. Valle de
Oro Bank has not entered into any other employment agreements. The employment
agreement is governed by Title 12 United States Code Section 24 which provides
that all officers
28
<PAGE> 31
of a national bank may be dismissed at the pleasure of the Board of Directors.
On January 10, 1996, Valle de Oro Bank entered into a Salary
Continuation Agreement with Mr. Ehlen providing for the payment of specific
benefits to him. Under the terms of the Salary Continuation Agreement, upon
retirement after age 62 or in the event Mr. Ehlen dies while in the employ of
Valle de Oro Bank, the bank shall be obligated to pay Mr. Ehlen or his estate
$108,000 per year, payable monthly for a period of 180 months. In the event Mr.
Ehlen terminates employment with Valle de Oro Bank prior to age 62, the bank is
obligated to pay Mr. Ehlen an amount based on the actuarial reduction of the
amount of salary continuation liability accrued to the date of termination. In
addition, the Salary Continuation Agreement provides that in the event Mr.
Ehlen's employment is terminated by reason of, or within two years after, a
"change in control" of Valle de Oro Bank, the bank is obligated to pay Mr. Ehlen
$108,000 per year, payable monthly for a period of 180 months. A "change in
control" is deemed to occur:
- when there is a change in the composition of Valle de Oro Bank's
Board of Directors, as a result of which fewer than two-thirds
of the incumbent directors are directors who either (a) had been
directors of Valle de Oro Bank 24 months prior to the change or
(b) were elected, or nominated for election, to the Board with
the votes of at least a majority of the directors who had been
directors of Valle de Oro Bank 24 months prior to the change and
who were still in office at the time of the election or
nomination; and
- with specific exceptions, whenever any person is or becomes the
beneficial owner, directly or indirectly, of 26% or more of the
combined voting power of Valle de Oro Bank's then outstanding
securities having the right to vote for the election of
directors.
In the event Mr. Ehlen's employment is terminated by Valle de Oro Bank
for cause, the bank is under no obligation to make any payments to Mr. Ehlen
under the Salary Continuation Agreement. No compensation under the Salary
Continuation Agreement was paid to Mr. Ehlen in 1997.
401(k) RETIREMENT PLAN
The Board of Directors has adopted a Profit Sharing and Salary Deferral
401(k) Plan for the benefit of Valle de Oro Bank's eligible employees. During
1997, 1996 and 1995, the Board of Directors approved contributions of $120,000,
$62,000 and $51,000, respectively, to the 401(k) Plan.
EMPLOYEE STOCK OWNERSHIP PLAN
Valle de Oro Bank has established an employee stock ownership plan
effective January 1, 1998. Valle de Oro Bank believes that giving employees an
indirect ownership interest in their employer encourages maximum efforts on
behalf of the bank. The main investment in the plan will be the common stock of
Valle de Oro Bank. Contributions to the plan are made annually from pre-tax
earnings at the discretion of the Board of Directors.
To be eligible, employees of Valle de Oro Bank must be:
- at least 21 years of age;
- employed for a period of at least 1,000 hours during any plan
year; and o employed on the last day of the plan year.
Employees become vested at the rate of 20% per year and are fully vested
after five years of service (1,000 hours of service per year). Employees become
fully vested sooner only if
29
<PAGE> 32
they die, become totally and permanently disabled, or retire at the age of 65 or
later.
STOCK OPTION PLANS
THE 1982 STOCK OPTION PLAN. In 1983, Valle de Oro Bank adopted the 1982
Stock Option Plan whereby both incentive and nonqualified options to purchase
shares of the bank's common stock were granted to full-time salaried officers
and employees of the bank. Nonqualified options to purchase shares of the bank's
common stock were granted to the bank's directors. The 1982 Plan terminated in
1992, except for unexercised and unexpired outstanding options. As of September
30, 1998, there were outstanding under the 1982 Plan options for 42,767 shares,
all of which were fully vested. This number of shares does not take into account
the the two shares of Valley National Corporation stock for each share of Valle
de Oro Bank stock stock exchange that will occur if the reorganization is
completed.
THE 1994 STOCK OPTION PLAN. The Valle de Oro Bank 1994 Stock Option Plan
was approved by the Board of Directors and the stockholders in 1994. The 1994
Plan is administered by a Committee composed of at least two disinterested
members of the Board of Directors. Under the 1994 Plan, the Committee has the
authority, within specific limits, to determine, among other things, to whom
options will be granted, the number of option shares, the term during which an
option may be exercised and the rate at which the options may vest. Under the
1994 Plan, 250,000 shares of common stock have been reserved for issuance upon
exercise of options.
The 1994 Plan provides for the grant of both incentive stock options
("ISOs") intended to qualify under section 422 of the Internal Revenue Code, as
amended, and nonstatutory stock options ("NSOs"). ISOs may be granted only to
employees of the bank (including officers and specific directors who are also
employees). NSOs may be granted to employees and non-employee directors of the
bank. The maximum term of each option which may be granted under the 1994 Plan
is 10 years (five years in the case of an ISO granted to a 10% stockholder). The
exercise price for ISOs and NSOs will be no less than 100% of fair market value
on the date of grant.
Non-employee directors are not eligible to receive stock options under
the 1994 Plan other than an automatic grant of an NSO for 2,000 shares in each
even-numbered year after 1995 at the conclusion of the regular annual meeting of
stockholders of the bank for that year. In addition, each nonemployee director
who is newly elected or appointed after July 1, 1994 is entitled to a one-time
grant of an NSO for 1,000 shares on the first business day after his or her
initial election or appointment. No director will receive both the 2,000 NSO
grant and 1,000 NSO grant in the same calendar year.
All options granted to nonemployee directors have an exercise price
equal to 100% of the fair market value of the common stock on the date of grant
and will have a 10-year term; however, the options will expire in the event that
the director's service terminates. The Board of Directors may amend or terminate
the 1994 Plan from time to time, except that any amendment or termination shall
not affect any option previously granted.
As of September 30, 1998, there were outstanding under the 1994 Plan
options for 172,073 shares, 84,816 of which were vested, 34,815 of which will
vest in 1999 and the remainder of which vest from 2000 through 2003. This number
of shares does not take into account the the two shares of Valley National
Corporation stock for each share of Valle de Oro Bank stock stock exchange that
will occur if the reorganization is completed.
30
<PAGE> 33
OPTION EXERCISES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
AND OPTION VALUES AT SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying In-The-Money Options
Shares Unexercised Options @ at 9/30/98
Acquired On Value 9/30/98 Exercisable/ Exercisable/
Name Exercise Realized Unexercisable(1) Unexercisable(2)
---- -------- -------- --------------------- --------------------
<S> <C> <C> <C> <C>
William V. Ehlen
President & Chief - - 38,263/7,293 $777,465/$145,614
Executive Officer
Thomas Ferrara
Executive Vice
President & - - 17,018/3,647 $386,308/$72,807
Chief Credit
Officer
</TABLE>
- ---------------------
(1) The number of securities underlying unexercised options do not take into
account the the two shares of Valley National Corporation stock for each
share of Valle de Oro Bank stock stock exchange that will occur if the
reorganization is completed.
(2) Calculated on the basis of the fair market value of the underlying
securities at September 30, 1998, including the exercise price.
DIRECTORS' COMPENSATION
Members of the Board of Directors, other than the Chairman of the Board,
committee chairmen, and those who are not full-time employees of the bank,
receive $725 monthly for regularly scheduled meetings of the Board plus a $100
monthly retainer for committee participation. The Chairman of the Board receives
$1,875 monthly, the Vice Chairman receives $1,500 monthly and each committee
chairperson receives $850 monthly plus a $125 monthly retainer for committee
participation. The bank plans to continue the payment of the fees for regular
meetings of the Board. No other arrangements exist for compensation of the
bank's directors. Under the bank's 1994 Plan, nonemployee directors receive
automatic grants of options as described in "Stock Options - The 1994 Stock
Option Plan," above.
COMMITTEES
During 1997, the Board of Directors held 12 regular meetings and one
organizational meeting. All members of the Board attended at least 75% of the
regular meetings of the Board of Directors and of the committees to which they
were appointed to serve. The Board of Directors has appointed an Audit
Committee, Executive Committee, Investment Committee, a Loan and Discount
Committee and Compensation and Human Resources Committee. The bank does not have
a Nominating Committee.
31
<PAGE> 34
<TABLE>
<CAPTION>
Number of
Meetings
Committee Members Function (1997)
- --------- ------- -------- ---------
<S> <C> <C> <C>
Audit Gelber, Hill, Johnson and Engages independent CPA's; 4
Peterson (directors); Audrey oversees internal auditor;
Wilson (internal auditor); receives and reviews quarterly
Ehlen (ex officio member). and annual management reports
from independent CPA's
Executive Carroll, Conway, Ehlen, Serves as the planning arm of 6
Fessler and Hill (directors). the Board of Directors
Investment Ehlen, Gelber, Johnson and Reviews management's adherence 4
Vehige (directors); Cable to investments and funds
(chief financial officer) management policy.
Loan and Discount Ciccati, Conway, Ehlen and Establishes credit policy and 15
Fessler (directors); Ferrara approves loans in excess of
and Foley (lending officers). management's internal limits.
Compensation & Human Ciccati, Ehlen, Peterson and Reviews the compensation plan 7
Resources Vehige (directors); Elizabeth for the bank's employees; makes
I. Sigal (human resources recommendations to the Board
director). regarding salaries of executive
officers.
</TABLE>
TRANSACTIONS WITH DIRECTORS AND OFFICERS
Some of the directors and executive officers of Valle de Oro Bank and
the companies with which they are associated are customers of, and have had
banking transactions with, the bank in the ordinary course of the bank's
business. The bank expects to have banking transactions with these persons and
companies in the future. In management's opinion, all loans and commitments to
lend included in said transactions were made in compliance with applicable laws
on substantially the same terms, including interest rates and collateral, as
those prevailing for comparable contemporaneous transactions with other persons
of similar creditworthiness, and did not involve more than a normal risk of
collectability or present other unfavorable features. The aggregate amount of
all of these types of loans made during 1997 amounted to $236,000 and during the
nine months ended September 30, 1998 amounted to $474,000, including in both
cases renewals of previous loans. The balance of these loans and loans made in
prior years outstanding at September 30, 1998 amounted to $1,158,000.
32
<PAGE> 35
SUPERVISION AND REGULATION
The following is a summary of particular statutes and regulations
affecting Valley National Corporation and Valle de Oro Bank. This summary is
qualified in its entirety by the statutes and regulations.
VALLEY NATIONAL CORPORATION REGULATION
Valley National Corporation will be a registered bank holding company
under the Bank Holding Company Act of 1956 as amended, and will be regulated by
the Federal Reserve Board. A bank holding company is required to file with the
Federal Reserve Board annual reports and other information regarding its
business operations and those of its subsidiaries. A bank holding company and
its subsidiary banks may also be examined by the Federal Reserve Board.
The Bank Holding Company Act requires every bank holding company to
obtain the prior approval of the Federal Reserve Board before acquiring
substantially all the assets of any bank or bank holding company or ownership or
control of any voting shares of any bank or bank holding company, if, after the
acquisition, it would own or control, directly or indirectly, more than 5% of
the voting shares of the bank or bank holding company.
In approving acquisitions by bank holding companies of companies engaged
in banking-related activities, the Federal Reserve Board considers whether the
performance of any activity by a subsidiary of the holding company reasonably
can be expected to produce benefits to the public, including greater
convenience, increased competition, or gains in efficiency, which outweigh
possible adverse effects, including overconcentration of resources, decrease of
competition, conflicts of interest, or unsound banking practices.
Bank holding company transactions with subsidiaries and other affiliates
are restricted.
CAPITAL
The Federal Reserve Board, Office of the Comptroller of the Currency and
Federal Deposit Insurance Corporation require banks and holding companies to
maintain minimum capital ratios.
The Federal Reserve Board and the Federal Deposit Insurance Corporation
have adopted substantially similar risk-based capital guidelines. These ratios
involve a mathematical process of assigning various risk weights to different
classes of assets and then evaluating the sum of the risk-weighted balance sheet
structure against the capital base of the bank and the holding company. The
rules set the minimum guidelines for the ratio of Total Capital to risk-weighted
assets (counting specific off-balance sheet activities, including standby
letters of credit) at 8% and the ratio of Tier 1 Capital to risk-weighted assets
(including specific off-balance sheet activities) at 4%. To be well capitalized,
the minimum ratio for Total Capital is 10% and the minimum ratio for Tier 1
Capital is 6%. At least half of the total capital is to be composed of common
equity, retained earnings, and a limited amount of perpetual preferred stock
less specific goodwill items ("Tier 1 Capital"). The remainder may consist of a
limited amount of subordinated debt, other preferred stock, or a limited amount
of loan loss reserves. At September 30, 1998, on a hypothetical basis as if the
reorganization had been completed on that date, Valley National Corporation's
consolidated risk-adjusted Tier 1 Capital and Total Capital, as defined by the
regulatory agencies based on the fully phased in 1992 guidelines, were 11.5 %
and 12.49% of risk-weighted assets, respectively, well above the minimum and
well-capitalized standards mandated by the regulatory agencies.
33
<PAGE> 36
In addition, the federal banking regulatory agencies have adopted
leverage capital guidelines for banks and bank holding companies. Under these
guidelines, banks and bank holding companies must maintain a minimum ratio of 3%
Tier 1 Capital (as defined for purposes of the risk-based capital guidelines) to
total assets. However, most banking organizations are expected to maintain
capital ratios well in excess of the minimum levels and generally must keep the
Tier 1 ratio at or above 5%. To be well capitalized, the minimum Tier 1 ratio
must be 6%. As of September 30, 1998, on a hypothetical basis as if the
reorganization had been completed on that date, Valley National Corporation's
leverage ratio was 7.99%, well above the regulatory minimum and well-capitalized
standards.
Regulatory authorities may increase minimum requirements for all banks
and bank holding companies or for specified banks or bank holding companies.
Increases in the minimum required ratios could adversely affect Valle de Oro
Bank and Valley National Corporation, including their ability to pay dividends.
ADDITIONAL REGULATION
Valle de Oro Bank is also regulated regarding the matters of required
reserves, limitations on the nature and amount of its loans and investments,
regulatory approval of any consolidation, or issuance or retirement by the bank
of its own securities, limitations upon the payment of dividends and other
aspects of banking operations. In addition, the activities and operations of
Valle de Oro Bank are restricted by a number of additional detailed, complex and
sometimes overlapping laws and regulations. These include:
- state usury and consumer credit laws,
- laws relating to fiduciaries,
- the Federal Truth-in-Lending Act and Regulation Z,
- the Federal Equal Credit Opportunity Act and Regulation B,
- the Fair Credit Reporting Act,
- the Truth in Savings Act,
- the Community Reinvestment Act,
- anti-redlining legislation, and
- antitrust laws.
DIVIDEND REGULATION
The ability of Valley National Corporation to obtain funds for the
payment of dividends and for other cash requirements is largely dependent on the
amount of dividends which may be declared by its subsidiary, Valle de Oro Bank.
Generally, a national banking association may not declare a dividend without the
approval of the Office of the Comptroller of the Currency, if the total of
dividends declared by that bank in a calendar year exceeds the total of its net
profits for that year combined with its retained profits of the preceding two
years. In addition, dividends paid by a national bank are regulated by the
Office of the Comptroller of the Currency under its general supervisory
authority as it relates to a bank's requirement to maintain adequate capital.
GOVERNMENT POLICIES AND LEGISLATION
The policies of regulatory authorities, including the Office of the
Comptroller of the Currency, Federal Reserve Board, Federal Deposit Insurance
Corporation and the Depository Institutions Deregulation Committee, have had a
significant effect on the operating results of commercial banks in the past and
are expected to do so in the future. An important function of the Federal
Reserve System is to regulate aggregate national credit and money supply through
the means of open market dealings in securities, establishment of the discount
rate on member bank borrowings, and changes in reserve requirements against
member bank deposits. Policies of these agencies may be influenced by many
factors, including inflation,
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unemployment, short-term and long-term changes in the international trade
balance and fiscal policies of the United States government.
The United States Congress has periodically considered and adopted
legislation which has resulted in further deregulation of both banks and other
financial institutions, including mutual funds, securities brokerage firms and
investment banking firms. No assurance can be given concerning whether any
additional legislation will be adopted or regarding the effect the legislation
will have on the business of Valle de Oro Bank or Valley National Corporation.
In addition to the relaxation or elimination of geographic restrictions on banks
and bank holding companies, a number of regulatory and legislative initiatives
have the potential for eliminating many of the product line barriers presently
separating the services offered by commercial banks from those offered by
nonbanking institutions.
COMPARATIVE DESCRIPTION OF COMMON STOCK
GENERAL
The authorized common stock of Valley National Corporation consists of
10,000,000 shares of voting common stock, with $0.0001 par value per share. The
authorized capital stock of Valle de Oro Bank consists of 10,000,000 shares of
$3.33 par value per share, 1,323,031 of which were outstanding as of February 5,
1999.
Assuming the completion of the reorganization and no dissenters to the
transaction, Valley National Corporation will issue 2,646,062 shares of its
common stock to existing stockholders of Valle de Oro Bank on the basis of two
shares of Valley National Corporation common stock for each share of common
stock of the bank. Valley National Corporation will have a capital structure of
10,000,000 authorized shares of $0.0001 par value common stock of which
2,646,062 shares will be outstanding.
VOTING RIGHTS
Each share of common stock of Valley National Corporation and Valle de
Oro Bank entitles the holder thereof to one vote on all matters, except in the
election of directors. Stockholders of Valle de Oro Bank have, and stockholders
of Valley National Corporation will have the right to cast as many votes for
directors in favor of one nominee as they have shares of stock multiplied by the
number of directors to be elected. (See "Comparative Description of Common Stock
- - Cumulative Voting.") Under Valley National Corporation's Bylaws, the vote of
at least 75% of the shares represented at a duly called meeting for that purpose
may remove any one or all of the directors of Valley National Corporation. Under
federal banking law, a majority of shares represented may remove any one or all
of the directors of Valle de Oro Bank. A special meeting of stockholders of
Valle de Oro Bank may be called by stockholders of the bank who own not less
than 25% of the voting power of the bank. A special meeting of stockholders of
Valley National Corporation may be called by stockholders who own in the
aggregate not less than 50% of the stock of Valley National Corporation.
RIGHT OF REDEMPTION
Valle de Oro Bank has limited ability to buy its outstanding shares from
its stockholders. Valley National Corporation is empowered by the law of
Delaware to buy its shares of outstanding common stock from its stockholders, at
the mutual accord of the stockholder and Valley National Corporation.
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LIQUIDATION RIGHTS
In the event of liquidation, holders of common stock of Valley National
Corporation and Valle de Oro Bank are entitled to similar rights to assets
distributable to stockholders on a pro rata basis.
PREEMPTIVE RIGHTS
Holders of common stock of Valley National Corporation will not have the
preemptive right to subscribe for or to purchase any additional securities which
may be issued by Valley National Corporation. Holders of common stock of Valle
de Oro Bank do not have preemptive rights to subscribe for or to purchase
additional securities issued by the bank.
CUMULATIVE VOTING
Each share of common stock of Valle de Oro Bank entitles the holder to
one vote on all matters except for the election of directors where each
stockholder is entitled to cast votes equal to the number of shares he owns
times the number of directors to be elected in favor of one nominee or allocate
his votes among the nominees as he determines. Each stockholder of Valley
National Corporation will have a right to one vote per share on all matters and
will have the right to cast votes equal to the number of shares he owns times
the number of directors to be elected in favor of one nominee or allocate his
votes among the nominees as he determines, in the election of directors.
INDEMNIFICATION
Valley National Corporation's Certificate of Incorporation and Bylaws
provide for indemnification of officers, directors, employees and agents to the
fullest extent permitted by Delaware law. Similarly, the Articles of Association
of Valle de Oro Bank provide for indemnification of directors and officers of
the bank.
Delaware law generally provides for the payment of expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement reasonably
incurred by the indemnitees provided the person acted in good faith and in a
manner he reasonably believed not to be against the best interests of the
corporation and in any criminal action or proceeding if he had no reasonable
cause to believe his conduct was unlawful. However, in derivative suits, if the
suit is lost, no indemnification is permitted for any claim for which the
prospective indemnitee is adjudged to be liable for misconduct in the
performance of his duty to the corporation and then only if, and only to the
extent that, a court of competent jurisdiction determines the prospective
indemnitee is fairly and reasonably entitled to indemnity for the expenses as
the court deems proper. Finally, no indemnification may be provided in any
action or suit in which the only liability asserted against a director is under
a statutory provision outlawing loans, dividends, and distribution of assets
under specific circumstances.
The provisions regarding indemnification may not be applicable under
federal banking and securities laws and regulations.
DIVIDEND RIGHTS
Dividends may be paid on common stock of Valley National Corporation as
are declared by the Board of Directors from funds that the law allows to be used
for dividends. Dividends may not exceed the surplus of Valley National
Corporation, as defined by the Delaware General Corporation Law, and may not be
declared if Valley National Corporation is insolvent or would be made insolvent.
Dividends may be paid on common stock of Valle de Oro Bank as are
declared by the Board of Directors from funds that the law allows to be used for
dividends. Dividends paid by Valle
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de Oro Bank on its common stock must be declared out of the net profits of the
bank.
TRANSFER AND ACCESSIBILITY
Transfer of common stock of Valley National Corporation may not be
restricted by Valley National Corporation. When issued, common stock of Valley
National Corporation will be fully paid and nonassessable.
The transfer of common stock of Valle de Oro Bank may not be restricted,
except as is reasonably calculated by the bank to simplify the work of the bank
relating to stock transfers, voting at stockholders' meetings and related
matters, and to protect it against fraudulent transfers. The common stock of
Valle de Oro Bank can be assessed by the Board of Directors in order to restore
capital impaired by losses or otherwise, and shares owned by public stockholders
who fail to pay any assessment may be sold at public or private sale. The common
stock of Valley National Corporation can not be assessed.
ANTI-TAKEOVER MEASURES
A vote of the holders of at least two-thirds of the outstanding common
shares of capital stock of Valle de Oro Bank is required to effectuate a
voluntary liquidation of the bank, reorganization of the bank, merger or
consolidation of the bank with another bank, or increase or decrease of the
bank's authorized or outstanding capital stock. A majority vote of the
outstanding stock is required for these types of transactions of Valley National
Corporation, unless a higher or lower voting requirement is established in
Valley National Corporation's Certificate of Incorporation.
According to the Certificate of Incorporation of Valley National
Corporation, a majority vote of the issued and outstanding shares is sufficient
to amend the Certificate of Incorporation of Valley National Corporation, other
than Article XII. In accordance with Article XII of the Certificate of
Incorporation of Valley National Corporation, a "Business Combination" (which
includes any consolidation, sale, lease or other disposition of greater than 10%
of the assets of Valley National Corporation; issuance or sale of any securities
of Valley National Corporation; and adoption of a plan of liquidation) requires
the approval of 80% of the total outstanding shares of common stock and
two-thirds of the outstanding shares of common stock held by the Independent
Stockholders, unless the Business Combination has been approved by the
"Continuing Directors." In addition, if an amendment of Article XII of Valley
National Corporation's Certificate of Incorporation is not approved by the
Continuing Directors, it may require the vote of 80% of Valley National
Corporation's outstanding shares and shares held by two-thirds of the
Independent Stockholders.
Because the executive officers and directors of Valley National
Corporation will own approximately 31.5% of the shares of Valley National
Corporation (assuming completion of the reorganization and assuming there are no
dissenting stockholders to the transaction), a Business Combination with an
Interested Stockholder may be difficult to approve without the consent of the
Continuing Directors and Management. Valle de Oro Bank has no anti-takeover
provision which is substantially similar to Article XII of Valley National
Corporation's Certificate of Incorporation.
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REPORTS
Valle de Oro Bank currently files periodic reports with the Office of
the Comptroller of the Currency as required by the 1934 Act as a reporting
company. Subsequent to the completion of the transaction, Valley National
Corporation as successor to Valle de Oro Bank will file similar reports with the
SEC. Each year, Valley National Corporation will deliver to the stockholders of
Valley National Corporation an annual report containing audited financial
information, a proxy statement and Form 10K-SB, the annual report filed with the
SEC, as required under the 1934 Act. While Valley National Corporation will file
quarterly reports with the SEC, copies of which may be obtained from the SEC,
Valley National Corporation is not obligated and does not currently intend to
provide copies of quarterly reports to stockholders.
LEGAL OPINION
Legal matters relating to the issuance of common stock of Valley
National Corporation in the reorganization will be passed upon by special
counsel, Dostart Clapp Sterrett & Coveney, LLP, San Diego, California.
OTHER MATTERS
The management of Valle de Oro Bank is not aware of any other matters to
be presented for consideration at the meeting or any adjournments. If any other
matters should properly come before the meeting, it is intended that the
persons' names in the enclosed proxy will vote your shares in accordance with
their judgment.
By Order of the Board of Directors
C.K. Hill, Secretary
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APPENDIX I
CONSOLIDATION AGREEMENT
This CONSOLIDATION AGREEMENT (hereinafter called the "Agreement") dated as
of this _____ day of November, 1998 between Valle de Oro Bank, N.A. (the "Bank")
and Valley National Corporation (the "Corporation").
WITNESSETH:
WHEREAS, the Bank is a national banking association duly organized under
the laws of the United States, with its principal office in Spring Valley,
California. The Bank is a banking corporation engaged in the business of
banking.
WHEREAS, the Corporation is a corporation duly organized under the laws of
the State of Delaware with its principal office in Spring Valley, California.
The Corporation will be the parent company of Valle de Oro Interim Bank, N.A.
(the "Interim Bank") upon its organization.
WHEREAS, the Interim Bank will be organized as a national banking
association under the laws of the United States, with its principal office in
Spring Valley, California. The Interim Bank will be a banking corporation which
will not be engaged in the business of banking prior to the consolidation as
provided herein. The Corporation will be the parent company of the Interim Bank
upon its organization.
WHEREAS, the Interim Bank will be capitalized with capital stock of
$200,000, divided into 2,000 shares of common stock with a par value of $100 per
share and paid-in surplus of $40,000 for total capital funds of $240,000, and
WHEREAS, it is anticipated that the Interim Bank will join in this
Agreement once it is organized.
WHEREAS, the Bank and the Interim Bank, upon its organization, shall
consolidate pursuant to the provisions of 12 U.S.C. Section 215 of the banking
laws of the United States, under the charter of the Bank and with the name
"Valle de Oro Bank, N.A.", and
WHEREAS, as of December 31, 1997, the capital funds of the Bank consisted
of capital stock of $4,110,000, divided into 1,234,117 shares of common stock
with a par value of $3.33 per share, surplus of $8,698,000 and undivided
profits, including capital reserves and unrealized gains on "available for sale
securities" of $4,142,000, for total equity capital of $17,026,000, and
WHEREAS, an application to charter the Interim Bank and to consolidate the
Interim Bank with the Bank will be submitted to the Office of the Comptroller of
the Currency for approval and, upon the effective date of the Consolidation, the
Interim Bank will have capital stock of $200,000, divided into 2,000 shares of
common stock with a par value of $100 per share and paid-in surplus of $40,000
for total capital funds of $240,000, and
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WHEREAS, all of the shares of the Bank and the Interim Bank outstanding
immediately prior to the Consolidation of the Bank and the Interim Bank (the
"Consolidation") will be owned by the Corporation immediately following the
Consolidation, and such shares of the Interim Bank will be retired and canceled
by the Corporation immediately subsequent to the Consolidation, and the initial
capital of the Interim Bank in the amount of $240,000 consisting of $200,000 of
capital stock and $40,000 of paid-in surplus shall be returned to the
Corporation, and
WHEREAS, the Corporation as of the date hereof has 10,000,000 common
shares with $0.0001 par value authorized, and
WHEREAS, from and after the time the Consolidation becomes effective, and
as and when required by the provisions of this Agreement, the Corporation will
issue shares of its common stock as hereinafter provided, and
WHEREAS, a majority of the Board of Directors of the Bank has approved
this Agreement and authorized its execution, and a majority of the Board of
Directors of the Corporation has approved this Agreement, such that the
Corporation shall join in and be bound by it, and has authorized the undertaking
hereinafter made by the Corporation.
NOW, THEREFORE, in consideration of the promises, covenants and conditions
contained herein, the Bank and the Corporation hereby enter into this Agreement
and prescribe the terms and conditions set forth herein.
1. Consolidation. The Interim Bank upon its organization and the Bank shall be
consolidated under the Charter of the Bank pursuant to the provisions of, and
with the effect provided under 12 U.S.C. Section 215.
2. Name, Articles and Bylaws. Upon the Consolidation becoming effective, the
name of the Bank (the "Consolidated Bank" whenever reference is made to it as of
the time of Consolidation or thereafter) shall be "Valle de Oro Bank, N.A.," its
Articles of Association shall be the current Articles of Association of the
Bank, and its Bylaws shall be the current Bylaws of the Bank upon the effective
date of the Consolidation. The principal office of the Consolidated Bank shall
be the currently existing principal office of the Bank and the Consolidated Bank
shall continue to operate all legally established branches of the Bank.
3. Effect of Consolidation. Upon the Consolidation becoming effective, the
corporate existence of the Bank and the Interim Bank shall be consolidated into
and continued in the Consolidated Bank, as provided by the aforementioned
federal banking laws, and the Consolidated Bank shall be deemed to be the same
association as the Bank and the Interim Bank combined, possessing all the
rights, interests, privileges, powers and franchises and being subject to all
restrictions, liabilities and duties of each. All and each of the rights,
interests, privileges and franchises of the Bank and Interim Bank and all
property, real, personal and mixed, and all debts due to the Bank and Interim
Bank on whatever account, shall be transferred to and vested in the Consolidated
Bank without any deed or other transfer and without any order or other action on
the part of any court or otherwise; and, all property, rights, privileges,
powers,
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franchises and interests and each and every other interest of the Bank or
Interim Bank shall be thereafter the property of the Consolidated Bank. The
Consolidated Bank, by virtue of the Consolidation, and without any order or
other action on the part of any court or otherwise, shall hold and enjoy the
same and all rights of property, franchises and interests, including
appointments, designations and nominations and all other rights and interests as
trustee, executor, administrator, registrar of stocks and bonds, guardian of
estates, assignee, receiver, guardian of mentally incompetent persons and in
every other fiduciary capacity, in the same manner and to the same extent as
such rights, franchises and interests were held or enjoyed by the Bank and
Interim Bank immediately prior to the Consolidation of the Bank and the Interim
Bank.
4. Liabilities. Upon the Consolidation becoming effective, the Consolidated Bank
shall be liable for all deposits, debts, liabilities, obligations and contracts
of the Bank and of the Interim Bank, respectively, matured or unmatured, whether
accrued, absolute, contingent or otherwise; and whether or not reflected or
reserved against on balance sheets, books of account, or records of the Bank or
the Interim Bank, as the case may be, shall be those of the Consolidated Bank,
and shall not be released or impaired by the Consolidation; and, all rights of
creditors and other obligees and all liens on property of either the Bank or the
Interim Bank shall be preserved unimpaired.
5. Conversion, Exchange and Consolidation of Shares. Upon the Consolidation
becoming effective:
(a) The shareholders of the Bank of record at the time the
Consolidation becomes effective shall be allocated and entitled to
receive shares of the common stock of the Corporation, $0.0001 par
value, at the rate of two such shares of the Corporation for each
one share of the common stock of the Bank.
(b) Each share of the common stock of the Bank shall, ipso facto and
without any action on the part of the holder thereof, become and be
converted into two shares of the common stock of the Corporation,
and outstanding certificates representing shares of the common
stock of the Bank shall thereafter represent shares of the common
stock of the Corporation, and such certificates may be exchanged by
the holders thereof, after the Consolidation becomes effective, for
the new certificates for the appropriate number of shares bearing
the name of the Corporation.
(c) Upon the effective date of the Consolidation, the initial capital
of the Interim Bank in the amount of $240,000 consisting of
$200,000 of capital stock and $40,000 of paid-in surplus shall be
returned to the Corporation and the capital stock of the Interim
Bank shall be retired and canceled.
(d) Upon and by reason of the Consolidation becoming effective, stock
shall be allocated as follows:
(i) To shareholders of the Bank of record at the time the
Consolidation becomes effective there shall be allocated two
shares of common stock of the
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Corporation for each one share of common stock of the Bank
held of record at the time of the Consolidation; and
(ii) To the Corporation there shall be allocated the amount and
the number of shares of capital stock of the Consolidated
Bank of the par value of $3.33 each, which shall be equal to
the amount and the number of shares of capital stock of the
Bank outstanding immediately before the Consolidation.
(e) No dividend, except if and to the extent permitted by the
Board of Directors of the Corporation, payable by the
Corporation as of any date subsequent to the date the
Consolidation becomes effective, shall be payable to any
holder of shares of the Corporation evidenced by any
certificate for stock of the Bank outstanding on the effective
date of the Consolidation, unless and until such outstanding
certificate for Bank stock shall have been surrendered to the
Corporation in exchange for a certificate or certificates
evidencing shares of the common stock of the Corporation. Upon
the surrender of any such Bank certificate for a new
certificate or certificates evidencing shares of the common
stock of the Corporation, there shall be paid to the holder of
the certificate the amount of dividends payable by the
Corporation as of a date subsequent to the effective date of
the Consolidation and not theretofore paid on such shares of
its common stock.
6. Employee Benefit Plans. Any employee benefit plan of Bank shall not be
terminated upon consummation of the Consolidation, but shall continue thereafter
as the plan of the Consolidated Bank. The parties hereto may enter into a
succession agreement relating to such plans to reflect such continuation, to
adapt such plans to the corporate structure existing from and after the
Consolidation becomes effective, and to make provisions for the employees of the
Corporation to participate therein, all in such manner as the Boards of
Directors of the respective parties may deem necessary or desirable.
7. Directors and Officers. The Board of Directors and Officers of the
Consolidated Bank, upon the Consolidation becoming effective, shall consist of
all persons who are directors or officers, as the case may be, of the Bank
immediately before the Consolidation becomes effective.
8. Stockholder and Regulatory Approvals. This Agreement shall be submitted to
the shareholders of the Bank for ratification and confirmation at meetings to be
called and held in accordance with the applicable provisions of law and the
Articles of Association and Bylaws of the Bank. The Bank shall proceed
expeditiously and cooperate fully in the procurement of any other consents and
approvals and in the taking of any other action, and the satisfaction of all
other requirements prescribed by law or otherwise, necessary for consummation of
the Consolidation on the terms herein provided; including, without being limited
to, the preparation and submission of an application to the Office of the
Comptroller of the Currency to charter Interim Bank and application for approval
under the provisions of Section 18(c) of the Federal Deposit Insurance Act, as
amended, for prior approval to effect the Consolidation, and, incident thereto,
to establish a branch or branches under Section 9 of the Federal Reserve Act (12
U.S.C.
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321), and an application by the Corporation to the Federal Reserve System to
acquire the Bank through the Consolidation.
9. Dissenters' Rights. A shareholder of the Bank who votes against the
Consolidation at the meeting of shareholders of the Bank held for the purpose of
considering the Consolidation or who gives notice in writing to the Bank at or
prior to such meeting that he dissents from the Consolidation, shall be entitled
to receive in cash, as provided in 12 U.S.C. Section 215, from the Consolidated
Bank if and when the Consolidation is consummated. A copy of the relevant
portions of Section 215 of the National Banking Laws is attached hereto as
Exhibit A.
10. Conditions. Effectuation of the Consolidation herein provided is conditioned
upon the following:
(a) Ratification and confirmation of this Agreement by vote of the
shareholders of the Bank, as required by law; and
(b) Procurement of the consent of the Office of the Comptroller of the
Currency, Board of Governors of the Federal Reserve, and all other
necessary consents and approvals, and satisfaction of all other
requirements prescribed by law which are necessary for consummation
of the Consolidation.
11. Termination. If any of the following shall occur, then this Agreement may be
terminated at any time before the Consolidation becomes effective, by the
written notice by the Bank, which is authorized or approved by a resolution
adopted by the Board of Directors of the Bank:
(a) The number of shares of capital stock of the Bank voted against the
Consolidation, or in respect of which written notice is given
purporting to dissent from the Consolidation, shall exceed five
percent (5%) of the outstanding shares; or
(b) Any action, suit, proceeding or claim has been instituted, made or
threatened relating to the proposed Consolidation; or
(c) Any action, consent or approval, governmental or otherwise, which
is, or in the opinion of counsel for the Bank, may be necessary to
permit or enable the Consolidated Bank, upon and after the
Consolidation, to conduct all or any part of the business
activities of the Bank up to the time of the Consolidation, in the
manner in which such activities and businesses are then conducted,
shall not have been obtained; or
(d) Rulings from the Internal Revenue Service, or any opinion of
counsel in lieu thereof, satisfactory in form and substance to the
Bank and counsel for the Bank with respect to tax consequences of
the Consolidation and transactions referred to herein shall not
have been obtained and remain in effect.
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12. Effective Time. Subject to the terms of this Agreement and upon
satisfaction of all requirements of law and the conditions specified in
this Agreement, the Consolidation shall become effective at the time
specified in the certificate of the Comptroller of the Currency approving
the Consolidation.
13. Agreement of Directors. Each of the natural persons whose signature is
appended to this Agreement as a Director of the Bank hereby covenants and
agrees with each of the other natural persons and with each of the
corporate parties to the Agreement, that he will vote any and all shares
of the capital stock of the Bank now owned, held, or standing in his name
in his individual, fiduciary, or other capacity that he may or shall be or
become entitled to vote, in favor of the adoption of this Agreement in any
meeting of shareholders of the Bank called for the purpose of voting on
this Agreement.
14. Agreement of Affiliates. The Bank shall obtain agreements in the form set
forth as Exhibit B attached hereto, executed by each person, who is
identified as an "affiliate" (as such term is defined in Rule 144 under
the Securities Act of 1933) of the Bank.
15. Miscellaneous.
(a) Any of the terms or conditions of this Agreement may be waived at
any time by any party hereto, by action of its Board of Directors,
evidenced by a certificate signed by its President or other duly
authorized person.
(b) To the extent permitted by law, this Agreement may be amended or
supplemented at any time, whether before or after the vote of
shareholders of the Bank or Interim Bank, by written amendment
authorized by the Boards of Directors of each of the parties and
executed by a majority of members of the Boards of Directors of
each party.
(c) This Agreement and the instruments referred to herein constitute
the entire contract among the parties and supersede all other
understandings with respect to the subject matter hereof.
(d) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original but all of which together
shall be deemed one and the same Agreement, and shall become
binding on the parties hereto when one or more counterparts have
been signed by each of the parties and delivered to the other
parties.
(e) Any notices or other communications required or permitted
hereunder shall be sufficiently given if hand delivered or sent by
registered mail or certified mail, postage prepaid, addressed, if
to the Corporation, the Bank, or the Interim Bank, at 9832 Campo
Road, Spring Valley, California 91977, or such other address as
shall be furnished in writing by any party, and any such notice or
communication shall be deemed to have been given as of the date so
mailed (except that a notice of
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change of address shall not be deemed to have been given until
received by the addressee).
(f) This Agreement shall be governed by and construed in accordance
with the laws of the United States.
(g) The descriptive headings of the several articles, sections and
paragraphs of this Agreement are inserted for convenience only and
do not constitute a part of this Agreement.
IN WITNESS WHEREOF, the Bank and the Corporation have caused this
Consolidation Agreement to be executed in counterpart by their duly authorized
officers as of the date first above written.
VALLE DE ORO BANK, N.A.
By:_______________________________ By:______________________________________
William V. Ehlen, President C.K. Hill, Secretary
VALLEY NATIONAL CORPORATION
By:_______________________________ By:______________________________________
William V. Ehlen, President C.K. Hill, Secretary
The undersigned Directors of Valle de Oro Bank, N.A. execute this Consolidation
Agreement pursuant to the provisions of Section 13.
__________________________________ _________________________________________
William V. Ehlen, Director Philip J. Gelber, M.D., Director
__________________________________ _________________________________________
James F. Carroll, Director C.K. Hill, Director
__________________________________ _________________________________________
Samuel M. Ciccati, Ph.D., Director Janet L. Johnson, Director
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__________________________________ _________________________________________
Obert D. Conway, Director Lloyd E. Peterson, Director
__________________________________ _________________________________________
Myron D. Fessler, M.D., Director Joseph G. Vehige, Director
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EXHIBIT A
DISSENTERS' RIGHTS {12 U.S.C. SECTION 215(b), (c) and (d)}
(b) The consolidated association shall be liable for all liabilities of the
respective consolidating banks or associations. The capital stock of such
consolidated association shall not be less than that required under existing law
for the organization of a national bank in the place in which it is located:
Provided, That if such consolidation shall be voted for at such meetings by the
necessary majorities of the shareholders of each association and State bank
proposing to consolidate, and thereafter the consolidation shall be approved by
the Comptroller, any shareholder of any of the associations or State banks so
consolidated who has voted against such consolidation at the meeting of the
association or bank of which he is a shareholder, or who has given notice in
writing at or prior to such meeting to the presiding officer that he dissents
from the plan of consolidation, shall be entitled to receive the value of the
shares so held by him when such consolidation is approved by the Comptroller
upon written request made to the consolidated association at any time before
thirty days after the date of consummation of the consolidation, accompanied by
the surrender of his stock certificates.
(c) The value of the shares of any dissenting shareholder shall be ascertained,
as of the effective date of the consolidation, by an appraisal made by a
committee of three persons, composed of (1) one selected by the vote of the
holders of the majority of the stock, the owners of which are entitled to
payment in cash; (2) one selected by the directors of the consolidated banking
association; and (3) one selected by the two so selected. The valuation agreed
upon by any two of the three appraisers shall govern. If the value so fixed
shall not be satisfactory to any dissenting shareholder who has requested
payment, that shareholder may, within five days after being notified of the
appraised value of his shares, appeal to the Comptroller, who shall cause a
reappraisal to be made which shall be final and binding as to the value of the
shares of the appellant.
(d) If, within 90 days from the date of consummation of the consolidation, for
any reason one or more of the appraisers is not selected as herein provided, or
the appraisers fail to determine the value of such shares, the Comptroller shall
upon written request of any interested party cause an appraisal to be made which
shall be final and binding on all parties. The expenses of the Comptroller in
making the reappraisal or the appraisal, as the case may be, shall be paid by
the consolidated banking association. The value of the shares ascertained shall
be promptly paid to the dissenting shareholders by the consolidated banking
association. Within thirty days after payment has been made to all dissenting
shareholders as provided for in this section the shares of stock of the
consolidated banking association which would have been delivered to such
dissenting shareholders had they not requested payment shall be sold by the
consolidated banking association at an advertised public auction, unless some
other method of sale is approved by the Comptroller, and the consolidated
banking association shall have the right to purchase any of such shares at such
public auction, if it is the highest bidder therefor, for the purpose of
reselling such shares within thirty days thereafter to such person or persons
and at such price not less than par as its board of directors by resolution may
determine. If the shares are sold at public auction at a price greater than the
amount paid to the dissenting shareholders
9
<PAGE> 50
the excess in such sale price shall be paid to such dissenting shareholders. The
appraisal of such shares of stock in any State bank shall be determined in the
manner prescribed by the law of the State in such cases, rather than as provided
in this section, if such provision is made in the State law; and no such
consolidation shall be in contravention of the law of the State under which such
bank is incorporated.
10
<PAGE> 51
EXHIBIT B
Affiliate Letter
Valley National Corporation
1234 E. Main Street
El Cajon, California 92021
Gentlemen:
I have been advised that I may be deemed an "affiliate," within the meaning of
Paragraph (c) of Rule 145 of the Rules and Regulations of the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933 (the "Act"), of
Valle de Oro Bank, N.A., Spring Valley, CA, a national banking association (the
"Bank"), and may be deemed such at the time of the Consolidation
("Consolidation") of the Bank with Valle de Oro Interim Bank, N.A., a newly
chartered national banking association organized by Valley National Corporation
(the "Holding Company") for the sole purpose of effecting the affiliation of the
Holding Company and the Bank. Pursuant to the Consolidation, I will acquire two
shares of the Common Stock of the Holding Company ("Holding Company Common
Stock") in exchange for each share of the Bank stock held by me and elected for
such exchange. I agree that I will not make any sale, transfer or other
disposition of the Holding Company Common Stock in violation of the Act or the
rules and regulations promulgated thereunder by the SEC.
I have been advised that the issuance of the Holding Company Common Stock to me
pursuant to the Consolidation has been registered under the Act by the Holding
Company by the filing of a Registration Statement with the SEC or is exempt from
such registration. I have also been advised that such registration does not
apply to any distribution by me of the Holding Company Common Stock received by
me in the Consolidation. I have also been advised that, since at the effective
time of the Consolidation, I may be deemed to have been an "affiliate" of the
Bank, any offering or sale by me of any of the Holding Company Common Stock
will, under current law, require either: (i) the further registration under the
Act of the Holding Company Common Stock to be sold; (ii) compliance with Rule
145 promulgated under the Act; or (iii) the availability of another exemption
from such registration. In addition, I have been advised that any transferee in
a private offering or other similar disposition will be subject to the same
limitations as those imposed on me.
I represent and warrant to the Company that:
1. I have carefully read this letter and discussed its requirements and
other applicable limitations upon the sale, transfer or other
disposition of the Holding Company Common Stock and to the extent I felt
necessary, with my legal counsel or legal counsel for the Bank.
2. I have been informed by the Holding Company that the Holding Company
Common Stock must be held by me indefinitely unless: (i) any of the
Holding Company Common Stock received by me in the Consolidation and to
be distributed by me has been registered under the Act other than by the
registration by the Holding Company referred
11
<PAGE> 52
to above; (ii) a sale of the Holding Company Common Stock is made in
conformity with the volume and other applicable limitations of Rule 144;
or (iii) some other exemption from registration is available with
respect to any such proposed sale, transfer or other disposition of the
Holding Company Common Stock. I will be required to deliver to the
Holding Company evidence of compliance with such requirements In
connection with any proposed sale, transfer or other disposition by me
which may include, in the case of a distribution under some other
exemption from registration, an opinion of legal counsel satisfactory to
legal counsel for the Holding Company that such exemption is available.
3. I understand that the Holding Company is under no obligation to register
the Holding Company Common Stock that I may wish to sell, transfer, or
otherwise dispose of or to take any other action necessary in order to
make compliance with an exemption from registration available.
4. If I rely on the exemption from the registration provisions contained in
Section 4 of the Act (other than that contained in Rule 144 and 145), I
will obtain and deliver to the Holding Company a copy of a letter from
any prospective transferee which will contain: (a) representations
reasonably satisfactory to the Holding Company as to the nondistributive
intent, sophistication, ability to bear risk, and access to information
of such transfer of the Holding Company Common Stock; and (b) an
assumption of the obligations of the undersigned under this Paragraph 4.
5. I also understand that to enforce the foregoing commitments, stop
transfer instructions will be given to the Holding Company's transfer
agent with respect to the Holding Company Common Stock and that there
will be placed on the certificates for the Holding Company Common Stock,
or any substitutions therefor, a legend stating in substance:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IN COMPLIANCE
WITH THE REQUIREMENTS OF RULE 145 OR PURSUANT TO A REGISTRATION
STATEMENT UNDER SAID ACT OR AN EXEMPTION FROM SUCH REGISTRATION.
Very truly yours,
______________________________
12
<PAGE> 53
AMENDMENT TO CONSOLIDATION AGREEMENT
This AMENDMENT TO CONSOLIDATION AGREEMENT (hereinafter called the
"Amendment") dated as of this _____ day of __________________, 1998 is entered
into by and among Valle de Oro Bank, N.A. (the "Bank"), Valley National
Corporation (the "Corporation") and Valle de Oro Interim Bank, N.A (the "Interim
Bank").
WITNESSETH:
WHEREAS, the Bank is a national banking association duly organized under
the laws of the United States, with its principal office in Spring Valley,
California. The Bank is a banking corporation engaged in the business of
banking, and
WHEREAS, the Corporation is a corporation duly organized under the laws of
the State of Delaware with its principal office in Spring Valley, California.
The Corporation is the parent company of the Interim Bank, and
WHEREAS, the Interim Bank is a national banking association duly organized
under the laws of the United States, with its principal office in Spring Valley,
California. The Interim Bank is will not be engaged in the business of banking
prior to the consolidation, and
WHEREAS, the Interim Bank is capitalized with capital stock of $200,000,
divided into 2,000 shares of common stock with a par value of $100 per share and
paid-in surplus of $40,000 for total capital funds of $240,000, and
WHEREAS, the Corporation and the Bank have previously entered into a
Consolidation Agreement as of November ___, 1998, and the Interim Bank desires
to join in said Consolidation Agreement, and
WHEREAS, a majority of the Boards of Directors of the Bank, the
Corporation and the Interim Bank have approved this Amendment and authorized its
execution.
NOW, THEREFORE, in consideration of the promises, covenants and conditions
contained herein, the Bank, the Corporation and the Interim Bank hereby enter
into this Amendment and agree to be bound by all of the terms and conditions set
forth in said Consolidation Agreement and this Amendment.
1. Stockholder and Regulatory Approvals. This Amendment shall be submitted to
the shareholders of the Bank and the Interim Bank for ratification and
confirmation at meetings to be called and held in accordance with the applicable
provisions of law and the Articles of Association and Bylaws of the Bank and the
Interim Bank. The Bank and the Interim Bank shall proceed expeditiously and
cooperate fully in the procurement of any other consents and approvals and in
the taking of any other action, and the satisfaction of all other requirements
prescribed by law or otherwise, necessary for consummation of the Consolidation
on the terms
2
<PAGE> 54
provided in said Consolidation Agreement and this Amendment; including, without
being limited to, the preparation and submission of an application to the Office
of the Comptroller for approval under the provisions of Section 18(c) of the
Federal Deposit Insurance Act, as amended, for prior approval to effect the
Consolidation, and, incident thereto, to establish a branch or branches under
Section 9 of the Federal Reserve Act (12 U.S.C. 321), and an application by the
Corporation to the Federal Reserve System to acquire the Bank through the
Consolidation.
2. Conditions. Effectuation of the Consolidation provided in said Consolidation
Agreement is conditioned upon the ratification and confirmation of this
Amendment by vote of the shareholders of the Bank and the Interim Bank, as
required by law, in addition to the other terms and conditions set forth in said
Consolidation Agreement and this Amendment.
3. Termination. If any of the following shall occur, then said Consolidation
Agreement, including this Amendment, may be terminated at any time before the
Consolidation becomes effective, by the written notice by the Bank or the
Interim Bank, to the other of them, which is authorized or approved by
resolution adopted by the Board of Directors of one of them giving such notice:
(a) The number of shares of capital stock of the Bank voted against the
Consolidation, or in respect of which written notice is given
purporting to dissent from the Consolidation, shall exceed five
percent (5%) of the outstanding shares; or
(b) Any action, suit, proceeding or claim has been instituted, made or
threatened relating to the proposed Consolidation; or
(c) Any action, consent or approval, governmental or otherwise, which
is, or in the opinion of counsel for the Bank, may be necessary to
permit or enable the Consolidated Bank, upon and after the
Consolidation, to conduct all or any part of the business
activities of the Bank up to the time of the Consolidation, in the
manner in which such activities and businesses are then conducted,
shall not have been obtained; or
(d) Rulings from the Internal Revenue Service, or any opinion of
counsel in lieu thereof, satisfactory in form and substance to the
Bank and counsel for the Bank with respect to tax consequences of
the Consolidation and transactions referred to in said
Consolidation Agreement shall not have been obtained and remain in
effect.
4. Agreement of Directors. Each of the natural persons whose signature is
appended to this Amendment as a Director of the Bank hereby covenants and agrees
with each of the other natural persons and with each of the corporate parties to
the Amendment, that he will vote any and all shares of the capital stock of the
Bank now owned, held, or standing in his name in his individual, fiduciary, or
other capacity that he may or shall be or become entitled to vote, in favor
3
<PAGE> 55
of the adoption of this Amendment in any meeting of shareholders of the Bank
called for the purpose of voting on this Amendment.
5. General Provisions.
(a) Any of the terms or conditions of this Amendment may be waived at
any time by any party hereto, by action of its Board of Directors,
evidenced by a certificate signed by its President or other duly
authorized person.
(b) To the extent permitted by law, this Amendment may be amended or
supplemented at any time, whether before or after the vote of
shareholders of the Bank or the Interim Bank, by written amendment
authorized by the Boards of Directors of each of the parties and
executed by a majority of members of the Boards of Directors of
each party.
(c) This Amendment and the instruments referred to herein constitute
the entire contract among the parties and supersede all other
understandings with respect to the subject matter hereof.
(d) This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall
be deemed one and the same Amendment, and shall become binding on
the parties hereto when one or more counterparts have been signed
by each of the parties and delivered to the other parties.
(e) Any notices or other communications required or permitted hereunder
shall be sufficiently given if hand delivered or sent by registered
mail or certified mail, postage prepaid, addressed, if to the
Corporation, the Bank, or the Interim Bank, at 9832 Campo Road,
Spring Valley, California 91977, or such other address as shall be
furnished in writing by any party, and any such notice or
communication shall be deemed to have been given as of the date so
mailed (except that a notice of change of address shall not be
deemed to have been given until received by the addressee).
(f) This Amendment shall be governed by and construed in accordance
with the laws of the United States.
(g) The descriptive headings of the sections and paragraphs of this
Amendment are inserted for convenience only and do not constitute a
part of this Amendment.
///
4
<PAGE> 56
IN WITNESS WHEREOF, the Bank, the Corporation, and the Interim Bank have
caused this Amendment to be executed in counterpart by their duly authorized
officers as of the date first above written.
VALLE DE ORO BANK, N.A.
By:_______________________________ By:______________________________________
William V. Ehlen, President C.K. Hill, Secretary
VALLEY NATIONAL CORPORATION
By:_______________________________ By:______________________________________
William V. Ehlen, President C.K. Hill, Secretary
VALLE DE ORO INTERIM BANK, N.A.
By:_______________________________ By:______________________________________
William V. Ehlen, President C.K. Hill, Secretary
The undersigned Directors of Valle de Oro Bank, N.A. execute this Amendment
pursuant to the provisions of Section 4.
__________________________________ _________________________________________
William V. Ehlen, Director Philip J. Gelber, M.D., Director
__________________________________ _________________________________________
James F. Carroll, Director C.K. Hill, Director
__________________________________ _________________________________________
Samuel M. Ciccati, Ph.D., Director Janet L. Johnson, Director
__________________________________ _________________________________________
Obert D. Conway, Director Lloyd E. Peterson, Director
__________________________________ _________________________________________
Myron D. Fessler, M.D., Director Joseph G. Vehige, Director
5
<PAGE> 57
APPENDIX II
DISSENTERS' STATUTE
12 U.S.C. Section 215
and OCC Banking Circular 259 (issued March 5, 1992)
Dissenters' Rights {12 U.S.C. Section 215(b), (c) and (d)}
(b) The consolidated association shall be liable for all liabilities of
the respective consolidating banks or associations. The capital stock of such
consolidated association shall not be less than that required under existing law
for the organization of a national bank in the place in which it is located:
Provided, That if such consolidation shall be voted for at such meetings by the
necessary majorities of the shareholders of each association and State bank
proposing to consolidate, and thereafter the consolidation shall be approved by
the Comptroller, any shareholder of any of the associations or State banks so
consolidated who has voted against such consolidation at the meeting of the
association or bank of which he is a shareholder, or who has given notice in
writing at or prior to such meeting to the presiding officer that he dissents
from the plan of consolidation, shall be entitled to receive the value of the
shares so held by him when such consolidation is approved by the Comptroller
upon written request made to the consolidated association at any time before
thirty days after the date of consummation of the consolidation, accompanied by
the surrender of his stock certificates.
(c) The value of the shares of any dissenting shareholder shall be
ascertained, as of the effective date of the consolidation, by an appraisal made
by a committee of three persons, composed of (1) one selected by the vote of the
holders of the majority of the stock, the owners of which are entitled to
payment in cash; (2) one selected by the directors of the consolidated banking
association; and (3) one selected by the two so selected. The valuation agreed
upon by any two of the three appraisers shall govern. If the value so fixed
shall not be satisfactory to any dissenting shareholder who has requested
payment, that shareholder may, within five days after being notified of the
appraised value of his shares, appeal to the Comptroller, who shall cause a
reappraisal to be made which shall be final and binding as to the value of the
shares of the appellant.
(d) If, within 90 days from the date of consummation of the
consolidation, for any reason one or more of the appraisers is not selected as
herein provided, or the appraisers fail to determine the value of such shares,
the Comptroller shall upon written request of any interested party cause an
appraisal to be made which shall be final and binding on all parties. The
expenses of the Comptroller in making the reappraisal or the appraisal, as the
case may be, shall be paid by the consolidated banking association. The value of
the shares ascertained shall be promptly paid to the dissenting shareholders by
the consolidated banking association. Within thirty days after payment has been
made to all dissenting shareholders as provided for in this section the shares
of stock of the consolidated banking association which would have been delivered
to such dissenting shareholders had they not requested payment shall be sold by
the consolidated banking association at an advertised public auction, unless
some other method of sale is approved by the Comptroller, and the consolidated
banking association shall have the right to purchase any of such shares at such
public auction, if it is the highest bidder therefor, for the purpose of
reselling such shares within thirty days thereafter to such person or persons
and at such price not less than par as its board of directors by resolution may
determine. If the shares are sold at public auction at a price greater than the
amount paid to the dissenting shareholders the excess in such sale price shall
be paid to such dissenting shareholders. The appraisal of such shares of stock
in any State bank shall be determined in the manner prescribed by the law of the
State in such
1
<PAGE> 58
cases, rather than as provided in this section, if such provision
is made in the State law; and no such consolidation shall be in contravention of
the law of the State under which such bank is incorporated
<PAGE> 59
BC-259
Date: March 5, 1992
BANKING ISSUANCE
- --------------------------------------------------------------------------------
Comptroller of the Currency
Administrator of National Banks
- --------------------------------------------------------------------------------
Type: Banking Circular Subject: Stock Appraisals
- --------------------------------------------------------------------------------
To: Chief Executive Officers of National Banks, Deputy Comptrollers
(District), Department and Division Heads, and Examining Personnel
PURPOSE
This banking circular informs all national banks of the valuation
methods used by the Office of the Comptroller of the Currency (OCC) to estimate
the value of a bank's shares when requested to do so by a shareholder dissenting
to the conversion, merger, or consolidation of its bank. The results of
appraisals performed by the OCC between January 1, 1985 and September 30, 1991
are summarized. References: 12 U.S.C. 214a, 215 and 215a; 12 CFR 11.590 (Item 2)
BACKGROUND
Under 12 U.S.C. Section 214a, a shareholder dissenting from a
conversion, consolidation, or merger involving a national bank is entitled to
receive the value of his or her shares from the resulting bank. A valuation of
the shares shall be made by a committee of three appraisers (a representative of
the dissenting shareholder, a representative of the resulting bank, and a third
appraiser selected by the other two). If the committee is formed and renders an
appraisal that is acceptable to the dissenting shareholder, the process is
complete and the appraised value of the shares is paid to the dissenting
shareholder by the resulting bank. If, for any reason, the committee is not
formed or if it renders an appraisal that is not acceptable to the dissenting
shareholder, an interested party may request an appraisal by the OCC. 12 U.S.C.
Section 215 provides these appraisal rights to any shareholder dissenting to a
consolidation. Any dissenting shareholder of a target bank in a merger is also
entitled to these appraisal rights pursuant to 12 U.S.C. Section 215a.
The above provides only a general overview of the appraisal process. The
specific requirements of the process are set forth in the statutes themselves.
METHODS OF VALUATION USED
Through its appraisal process, the OCC attempts to arrive at a fair
estimate of the value of a bank's shares. After reviewing the particular facts
in each case and the available information on a bank's shares, the OCC selects
an appropriate valuation method, or combination of methods, to determine a
reasonable estimate of the shares' value.
Market Value. The OCC uses various methods to establish the market value
of shares being appraised. If sufficient trading in the shares exists and the
prices are available from direct quotes from the Wall Street Journal or a
market-maker, those quotes are considered in determining the market value.
1
<PAGE> 60
If no market value is readily available, or if the market value available is not
well-established, the OCC may use other methods of estimating market value, such
as the investment value and adjusted book value methods.
Investment Value. Investment value requires an assessment of the value
to investors of a share in the future earnings of the target bank. Investment
value is estimated by applying an average price/earnings ratio of banks with
similar earnings potential to the earnings capacity of the target bank.
The peer group selection is based on location, size, and earnings
patterns. If the state in which the subject bank is located provides a
sufficient number of comparable banks using location, size and earnings patterns
as the criteria for selection, the price/earnings ratios assigned to the banks
are applied to the earnings per share estimated for the subject bank. In order
to select a reasonable peer group when there are too few comparable independent
banks in a location that is comparable to that of the subject bank, the pool of
banks from which a peer group is selected is broadened by including one-bank
holding company banks in a comparable location, and/or by selecting banks in
less comparable locations, including adjacent states, that have earnings
patterns similar to the subject bank.
Adjusted Book Value. The OCC also uses an "adjusted book value" method
for estimating value. Historically, the OCC has not placed any weight on the
bank's "unadjusted book value," since that value is based on historical
acquisition costs of the bank's assets, and does not reflect investors'
perceptions of the value of the bank as an ongoing concern. Adjusted book value
is calculated by multiplying the book value of the target bank's assets per
share times the average market price to book value ratio of comparable banking
organizations. The average market price to book value ratio measures the premium
or discount to book value, which investors attribute to shares of similarly
situated banking organizations.
Both the investment value method and the adjusted book value method
present appraised values which are based on the target bank's value as a going
concern. These techniques provide estimates of the market value of the shares of
the subject bank.
OVERALL VALUATION
The OCC may use more than one of the above-described methods in deriving
the value of shares of stock. If more than one method is used, varying weights
may be applied in reaching an overall valuation. The weight given to the value
by a particular valuation method is based on how accurately the given method is
believed to represent market value. For example, the OCC may give more weight to
a market value representing infrequent trading by shareholders than to the value
derived from the investment value method when the subject bank's earnings trend
is so irregular that it is considered to be a poor predictor of future earnings.
PURCHASE PREMIUMS
For mergers and consolidations, the OCC recognizes that purchase
premiums do exist and may, in some instances, be paid in the purchase of small
blocks of shares. However, the payment of purchase premiums depends entirely on
the acquisition or control plans of the purchasers, and such payments are not
regular or predictable elements of market value. Consequently, the OCC's
valuation methods do not include consideration of purchase premiums in arriving
at the value of shares.
2
<PAGE> 61
STATISTICAL DATA
The chart below lists the results of appraisals the OCC performed
between January 1, 1985 and September 30, 1991. The OCC provides statistical
data on book value and price/earnings ratios for comparative purposes, but does
not necessarily rely on such data in determining the value of the banks' shares.
Dissenting shareholders should not view these statistics as determinative for
future appraisals.
In connection with disclosures given to shareholders under 12 CFR 11.590
(Item 2), banks may provide shareholders a copy of this banking circular or
disclose the information in the banking circular, including the past results of
OCC appraisals. If the bank discloses the past results of the OCC appraisals, it
should advise shareholders that: (1) the OCC did not rely on all the information
set forth in the chart in performing each appraisal; and (2) the OCC's past
appraisals are not necessarily determinative of its future appraisals of a
particular bank's shares.
APPRAISAL RESULTS
<TABLE>
<CAPTION>
Average Price/Earnings
Appraisal Date* OCC Appraisal Value Price Offered Book Value Ratio of Peer Group
--------------- ------------------- ------------- ---------- -------------------
<S> <C> <C> <C> <C>
8/22/86 103.53 106.67 136.23 NC
12/26/86 16.66 NA 43.57 4.0
12/31/86 53.39 95.58 69.66 7.1
5/1/87 186.42 NA 360.05 5.1
6/11/87 50.46 70.00 92.35 4.5
6/11/87 38.53 55.00 77.75 4.5
7/31/87 13.10 NA 20.04 6.7
8/26/87 55.92 57.52 70.88 NC
8/31/87 19.55 23.75 30.64 5.0
8/31/87 10.98 NA 17.01 4.2
10/6/87 56.48 60.00 73.11 5.6
3/15/88 297.63 NA 414.95 6.1
6/2/88 27.26 NA 28.45 5.4
6/30/88 137.78 NA 215.36 6.0
8/30/88 768.62 677.00 1,090.55 10.7
3/31/89 773.62 NA 557.30 7.9
5/26/89 136.47 180.00 250.42 4.5
5/29/90 9.87 NA 11.04 9.9
</TABLE>
*-The "Appraisal Date" is the consummation date for the conversion,
consolidation, or merger.
NA - Not Available NC - Not Computed
For more information regarding the OCC's stock appraisal process,
contact the Officer of the Comptroller of the Currency, Bank Organization and
Structure.
Frank Maguire
Acting Senior Deputy Comptroller Corporate Policy and Economic Analysis
3
<PAGE> 62
APPENDIX III
CERTIFICATE OF INCORPORATION
OF
VALLEY NATIONAL CORPORATION
ARTICLE I
NAME AND PRINCIPAL OFFICE
The name of the Corporation shall be Valley National Corporation.
ARTICLE II
REGISTERED AGENT
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
PURPOSES AND GENERAL POWERS
The purpose of this Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware. This Corporation shall have all of the powers
enumerated in the Delaware General Corporation Law, as the same now exists and
as hereafter amended, and all such other powers as are permitted by applicable
law, including, without limitation the power to act as a bank holding company
and, to the extent permitted under applicable federal and state laws, now or
hereafter existing, relating to bank holding companies and their activities.
ARTICLE IV
CAPITAL STOCK
A. The total number of shares of stock which this Corporation shall have
authority to issue is 10,000,000. All such shares are to be Common Stock, par
value $0.0001 per share and are to be of one class.
B. Voting Rights. The Common Stock shall possess and exercise exclusive
voting rights.
C. No Preemptive Rights. No stockholder of the Corporation shall have
the right, upon the sale for cash or otherwise, of any new stock of the
Corporation or of any stock of the Corporation held by it in its treasury or
otherwise, of the same or any other kind, class or series as that which he
already holds, to purchase his pro rata or any other share of such stock at the
same price at which it is offered to others or any other price.
D. Relative Rights. Each share of Common Stock shall have the same
relative rights as and be identical in all respects with all other shares of
common stock.
<PAGE> 63
ARTICLE V
INCORPORATION
The incorporators of this Corporation are William V. Ehlen and C.K.
Hill, whose mailing address is 1234 East Main Street, El Cajon, California
92021. The powers of the incorporators are to terminate upon the filing of this
Certificate of Incorporation.
ARTICLE VI
BOARD OF DIRECTORS
The business of the Corporation shall be conducted by a Board of
Directors. The following provisions shall apply with respect to the election or
removal of directors as the case may be:
A. At all elections of directors of this Corporation, each holder of
Common Stock shall be entitled at all elections of directors to as many votes as
shall equal the number of votes which (except for this provision as to
cumulative voting) he would be entitled to cast for the election of directors
with respect to his shares of stock multiplied by the number of directors to be
elected, and such holder may cast all of such votes for a single director of may
distribute them among the number to be voted for, or for any two or more of them
as he may see fit, and to one vote for each share upon all other matters.
B. The number of directors constituting the entire Board shall be not
less than three nor more than nine as fixed from time to time by vote of a
majority of the entire Board; provided, however, that the number of directors
shall not be reduced so as to shorten the term of any director at the time in
office, and provided further, that the number of directors constituting the
entire Board shall be six until otherwise fixed by a majority of the entire
Board. Each director shall be the record owner of one or more shares of Common
Stock of the Corporation.
C. The Board of Directors shall be divided into three classes, as nearly
equal in numbers as the then total number of directors constituting the entire
Board permits with the term of office of one class expiring each year. At the
annual meeting of stockholders in 1998, directors of the first class shall be
elected to hold office for a term expiring at the next succeeding annual
meeting, directors of the second class shall be elected to hold office for a
term expiring at the second succeeding annual meeting and directors of the third
class shall be elected to hold office for a term expiring at the third
succeeding annual meeting. Any vacancies in the Board of Directors for any
reason, and any directorships resulting from any increase in the number of
directors, may be filled by the Board of Directors, acting by a majority of the
directors then in office, although less than a quorum, and any directors so
chosen shall hold office until the next election of the class for which such
directors shall have been chosen and until their successors shall be elected and
qualified. Subject to the foregoing, at each annual meeting of stockholders the
successors to the class of directors whose term shall then expire shall be
elected to hold office for a term expiring at the third succeeding annual
meeting.
D. Notwithstanding any other provisions of this Certificate of
Incorporation or the Bylaws of the Corporation (and notwithstanding the fact
that some lesser percentage may be
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specified by law, this Certificate of Incorporation or the Bylaws of the
Corporation), any director or the entire Board of Directors of the Corporation
may be removed at any time, but only for cause and only by the affirmative vote
of the holders of 75% or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors (considered
for this purpose as one class) cast at a meeting of the stockholders called for
that purpose.
E. The election or directors need not be by written ballot unless the
Bylaws of this Corporation so provide.
ARTICLE VII
NO ACTION WITHOUT A MEETING
No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a meeting,
to the taking of any action is specifically denied.
.
ARTICLE VIII
BYLAWS
Except as otherwise provided by law, the power to adopt, alter, amend or
repeal the Bylaws shall be vested in the Board of Directors. The stockholders of
the Corporation may adopt or amend a Bylaw that fixes a greater quorum or voting
requirement for stockholders (or voting groups of stockholders) than is required
by the Delaware General Corporation Law.
ARTICLE IX
LIMITED LIABILITY OF DIRECTORS
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended. Any repeal or modification of this
Article by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.
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ARTICLE X
INDEMNIFICATION
A. Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he, or a person of whom he is the legal representative,
is or was a director or officer of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action or omission in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his heirs,
executors and administrators; provided, however, that except as provided in
Subdivision B of this Article hereof, the Corporation shall indemnify any such
person seeking indemnification In connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Article shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law requires, the payment of
such expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Corporation
of an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Article or otherwise. The
Corporation may, by action of its Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
B. If a claim under Subdivision A of this Article is not paid in full by
the Corporation within 30 days after a written claim has been received by the
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors,
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independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
C. The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Article shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise.
D. The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
E. The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification and to the advancement
of expenses to any directors, officer, employee or agent of the Corporation,
whether or not acting in his or her capacity as such or at the request of the
Corporation, to the fullest extent of the provisions of this Article with
respect to the indemnification and advancement of expenses of directors and
officers of the Corporation.
F. The Board of Directors may, without stockholder approval, authorize
the Corporation to enter into agreements, including any amendments or
modifications thereto, with any of its directors, officers or other persons
described in Subdivision A of this Article providing for indemnification of such
persons to the maximum extent permitted under Delaware General Corporation Law
and the Corporation's Certificate of Incorporation and Bylaws.
G. For purposes of this Article, references to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, it is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this Article with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
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ARTICLE XI
AMENDMENT
This Corporation reserves the right to amend or repeal any provisions
contained in this Certificate of Incorporation, or any amendment hereto, subject
to the consent thereof by the holders of a majority of the shares entitled to
vote thereon, and any right conferred upon the stockholders is subject to this
reservation.
ARTICLE XII
FAIR PRICE AND SUPERMAJORITY VOTE REQUIREMENT
A. Definitions as Used in This Article XII.
(1) "Affiliate" or "Associate" shall have the respective meanings
given to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934.
(2) A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly, any shares of
Voting Stock;
(ii) which such person or any of its Affiliates or Associates
has by itself or with others: (a) the right to acquire
(whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options,
or otherwise, or (b) the right to vote pursuant to any
agreement, arrangement or understanding; or
(iii) which is beneficially owned, directly or indirectly, by
any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement
or understanding for the purpose of acquiring, holding,
voting or disposing of any shares of Voting Stock.
(3) "Business Combination" shall include:
any merger or consolidation of the Corporation or any of its subsidiaries with
or into an Interested Stockholder, regardless of which person is the surviving
entity; any sale, lease, exchange, mortgage, pledge, or other disposition (in
one transaction or a series of transactions) from the Corporation or any of its
subsidiaries to an Interested Stockholder, or from an Interested Stockholder to
the Corporation or any of its subsidiaries, of assets having an aggregate Fair
Market Value of 5% or more of the Corporation's total stockholders' equity; the
issuance, sale or other transfer by the Corporation or any subsidiary thereof of
any securities of the Corporation or any subsidiary thereof to an Interested
Stockholder (other than an issuance or transfer of securities which is effected
on a pro rata basis to all stockholders of the Corporation); the acquisition by
the Corporation or any of its subsidiaries of any securities of an Interested
Stockholder; the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Stockholder;
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any reclassification or recapitalization of securities of the Corporation if the
effect, directly or indirectly, of any transaction is to increase the relative
voting power of an Interested Stockholder; or any agreement, contract or other
arrangement providing for or resulting in any of the transactions described in
this definition of Business Combination.
(4) "Disinterested Director" shall mean any member of the Board of
Directors of the Corporation who is unaffiliated with the
Interested Stockholder and was a member of the Board of Directors
prior to the time that the Interested Stockholder became an
Interested Stockholder; any successor of a Disinterested Director
who is unaffiliated with the Interested Stockholder and is
approved to succeed a Disinterested Director by the Disinterested
Directors; any member of the Board of Directors who is
unaffiliated with the Interested Stockholder and is approved by
the Disinterested Directors.
(5) "Fair Market Value" shall mean:
(i) in the case of securities listed on a national
securities exchange or quoted in the National
Association of Securities Dealers Automated Quotations
System (or any successor thereof), the highest sales
price or bid quotation, as the case may be, reported for
securities of the same class or series traded on a
national securities exchange or in the over-the-counter
market during the 30-day period immediately prior to the
date in question, or if no such report or quotation is
available, the fair market value as determined by the
Disinterested Directors; and
(ii) in the case of other securities and of other property or
consideration (other than cash), the Fair Market Value
as determined by the Disinterested Directors; provided,
however, in the event the prior authority of the
Disinterested Directors ceases and terminates pursuant
to Subdivision F of this Article XII as a result of
there being less than five Disinterested Directors at
any time, then: (a) for purpose of clause (ii) of the
definition of "Business Combination," any sale, lease,
exchange, mortgage, pledge or other disposition of
assets from the Corporation or any of its subsidiaries
to an Interested Stockholder or from an Interested
Stockholder to the Corporation or any of its
subsidiaries, regardless of the Fair Market Value
thereof, shall constitute a Business Combination; and
(b) for purposes of Paragraph 1 of Subdivision D of this
Article XII, in determining the amount of consideration
received or to be received per share by the Independent
Stockholders in a Business Combination, there shall be
excluded all consideration other than cash and the Fair
Market Value of securities listed on a national
securities exchange or quoted in the National
Association of Securities Dealers Automated Quotations
System (or any successor thereof) for which there is a
reported sales price or bid quotation, as the case may
be, during the 30-day period immediately prior to the
date in question.
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(6) "Independent Stockholder" shall mean stockholders of the
Corporation other than the Interested Stockholder engaged in or
proposing the Business Combination.
(7) "Interested Stockholder" shall mean: (a) any person (other than
the Corporation or any of its subsidiaries); and (b) the
Affiliates and Associates of such person, who, or which
together, are:
(i) the beneficial owner, directly or indirectly, of 10% or
more of the outstanding Voting Stock or were within the
two-year period immediately prior to the date in
question the beneficial owner, directly or indirectly,
of 10 % or more of the then outstanding Voting Stock; or
(ii) an assignee of or other person who has succeeded to any
shares of the Voting Stock which were at any time within
the two-year period immediately prior to the date in
question beneficially owned by an Interested
Stockholder, if such assignment or succession shall have
occurred in the course of a transaction or series of
transactions not involving a public offering within the
meaning of the Securities Act of 1933.
Notwithstanding the foregoing, no trust department, or designated
fiduciary or other trustee of such trust department of the Corporation
or a subsidiary of the Corporation, or other similar fiduciary capacity
of the Corporation with direct voting control of the outstanding Voting
Stock shall be included or considered as an Interested Stockholder.
Further, no profit-sharing, employee stock ownership, employee stock
purchase and savings, employee pension or other employee benefit plan of
the Corporation or any of its subsidiaries, and no trustee of any such
plan in its capacity as such trustee, shall be included or considered as
an Interested Stockholder.
(8) A "person" shall mean an individual, partnership, trust,
corporation, or other entity and includes two or more of the
foregoing acting in concert.
(9) "Voting Stock" shall mean all outstanding shares of capital stock
of the Corporation entitled to vote generally in the election of
directors of the Corporation.
B. Supermajority Vote to Effect Business Combination.
No Business Combination shall be effected or consummated unless:
(1) Authorized and approved by the Disinterested Directors and, if
otherwise required by law to authorize or approve the
transaction, the approval or authorization of stockholders of the
Corporation, by the affirmative vote of the holders of such
number of shares as is mandated the Delaware General Corporation
Law; or
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(2) Authorized and approved by the affirmative vote of holders of not
less than 80% of the outstanding Voting Stock voting together as
a single class.
The authorization and approval required by this Subdivision B is in
addition to any authorization and approval required by Subdivision C of
this Article XII.
C. Fair price Required to Effect Business Combination.
No Business Combination shall be effected or consummated unless:
(1) All the conditions and requirements set forth in Subdivision D of
this Article XII have been satisfied; or
(2) Authorized and approved by the Disinterested Directors; or
(3) Authorized and approved by the affirmative vote of holders of not
less than two-thirds of the outstanding Voting Stock held by all
Independent Stockholders voting together as a single class.
Any authorization and approval required by this Subdivision C is in
addition to any authorization and approval required by Subdivision B of
this Article XII.
D. Conditions and Requirements to Fair price.
All the following conditions and requirements must be satisfied in order
for clause (1) of Subdivision C of this Article XII to be applicable.
(1) The cash and Fair Market Value of the property, securities or
other consideration to be received by the Independent
Stockholders in the Business Combination per share for each class
or series of capital stock of the Corporation must not be less
than the sum of:
(i) the highest per share price (including brokerage
commissions, transfer taxes, soliciting dealer's fees and
similar payments) paid by the Interested Stockholder in
acquiring any shares of such class or series,
respectively, and, in the case of Preferred Stock, if
greater, the amount of the per share redemption price; and
(ii) the amount, if any, by which interest on the per share
price, calculated at the Treasury Bill Rate from time to
time in effect, from the date the Interested Stockholder
first became an Interested Stockholder until the Business
Combination has been consummated, exceeds the per share
amount of cash dividends received by the Independent
Stockholders during such period. The "Treasury Bill Rate"
means for each calendar quarter, or part thereof, the
interest rate of the last auction in the preceding
calendar of 91-day United States Treasury Bills expressed
as a bond equivalent yield.
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For purposes of this paragraph (1), per share amounts shall be
appropriately adjusted for any recapitalization,
reclassification, stock dividend, stock split, reverse split or
other similar transaction. Any Business Combination which does
not result in the Independent Stockholders receiving
consideration for or in respect of their shares of capital stock
of the Corporation shall not be treated as complying with the
requirements of this paragraph (1).
(2) The form of the consideration to be received by the Independent
Stockholders owning the Corporation's shares must be the same as
was previously paid by the Interested Stockholders for shares of
the same class or series; provided, however, if the Interested
Stockholders previously paid for shares of such class or series
with different forms of consideration, the form of the
consideration to be received by the Independent Stockholders
owning shares of such class or series must be in the form as was
previously paid by the Interested Stockholders in acquiring the
largest number of shares of such class or series previously
acquired by the Interested Stockholders, provided, further, in
the event no shares of the same class or series had been
previously acquired by the Interested Stockholders, the form of
consideration must be cash. The provisions of this paragraph (2)
are not intended to diminish the aggregate amount of cash and
Fair Market Value of any other consideration that any holder of
the Corporation's shares is otherwise entitled to receive upon
the liquidation or dissolution of the Corporation, under the
terms of any contract with the Corporation or an Interested
Stockholder, or otherwise.
(3) From the date the Interested Stockholder first became an
Interested Stockholder until the Business Combination has been
consummated, the following requirements must be complied with
unless the Disinterested Directors otherwise approve:
(i) the Interested Stockholder has not received, directly or
indirectly, the benefit (except proportionately as a
stockholder) of any loan, advance, guaranty, pledge, or
other financial assistance, tax credit or deduction, or
other benefit from the Corporation or any of its
subsidiaries;
(ii) there shall have been no failure to declare and pay in
full, when and as due or scheduled, any dividends required
to be paid on any class or series of the Corporation's
shares.
(iii) there shall have been: (a) no reduction in the annual rate
of dividends paid on shares of Common Stock of the
Corporation (except as necessary to reflect any split of
such shares); and (b) an increase in the annual rate of
dividends as necessary to reflect reclassification
(including a reverse split), recapitalization or any
similar transaction which has the effect of reducing the
number of outstanding shares of Common Stock; and
(iv) there shall have been no amendment or other modification
to any profit-sharing, employee stock ownership, employee
stock purchase and savings, employee pension or other
employee benefit plan of the Corporation or any of its
subsidiaries, the effect of which is to change in any
manner the
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provisions governing the voting of any shares of capital
stock of the Corporation in or covered by such plan.
(4) A proxy or information statement describing the Business
Combination and complying with the requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations
under it (or any subsequent provisions replacing that Act and the
rules and regulations under it) has been mailed at least 30 days
prior to the completion of the Business Combination to the
holders of all outstanding Voting Stock. If deemed advisable by
the Disinterested Directors, the proxy or information statement
shall contain a recommendation by the Disinterested Directors as
to the advisability (or inadvisability) of the Business
Combination, or an opinion by an investment banking firm,
selected by the Disinterested Directors and retained at the
expense of the Corporation, as to the fairness (or unfairness) of
the Business Combination to the Independent Stockholders, or
both.
E. Other Applicable Voting Requirement.
The affirmative votes or approvals required to be received from
stockholders of the Corporation under Subdivisions B, C and H of this
Article XII are in addition to the vote of the holders of any class of
shares of capital stock of the Corporation otherwise required by law, or
by other provisions of this Certificate of Incorporation, or by the
express terms of the shares of such class. The affirmative votes or
approvals required to be received from stockholders of the Corporation
under Subdivisions B, C and H of this Article XII shall apply even
though no vote or a lesser percentage vote, may be required by law, or
by other provisions of this Certificate of Incorporation, or otherwise.
Any authorization, approval or other action of the Disinterested
Directors under this Article XII is in addition to any required
authorization, approval or other action of the Board of Directors.
F. Disinterested Directors.
All actions required or permitted to be taken by the Disinterested
Directors shall be taken with or without a meeting by the vote or
written consent of two-thirds of the Disinterested Directors, regardless
of whether the Disinterested Directors constitute a quorum of the
members of the Board of Directors then in office. In the event that the
number of Disinterested Directors is at any time less than five, all
power and authority of the Disinterested Directors under this Article
XII shall thereupon cease and terminate, including, without limitation,
the authority of the Disinterested Directors to authorize and approve a
Business Combination under Subdivisions B and C of this Article XII and
to approve a successor Disinterested Director. Two-thirds of the
Disinterested Directors shall have the power and duty, consistent with
their fiduciary obligations, to determine for the purpose of this
Article XII, on the basis of information known to them:
(1) Whether any person is an Interested Stockholder;
(2) Whether any person is an Affiliate or Associate of another;
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(3) Whether any person has an agreement, arrangement, or
understanding with another or is acting in concert with another;
and
(4) The Fair Market Value of property, securities or other
consideration (other than cash).
The good faith determination of the Disinterested Directors on such
matters shall be binding and conclusive for purposes of this Article
XII.
G. Effect on Fiduciary Obligations of Interested Stockholders.
Nothing contained in this Article XII shall be construed to relieve any
Interested Stockholder from any fiduciary obligations imposed by law.
H. Repeal.
Notwithstanding any other provisions of this Certificate of
Incorporation (and notwithstanding the fact that a lesser percentage
vote may be required by law or other provision of this Certificate of
Incorporation), the provisions of this Article XII may not be repealed,
amended, supplemented or otherwise modified, unless:
(1) The Disinterested Directors (or, if there is no Interested
Stockholder, a majority vote of the whole Board of Directors of
the Corporation) recommend such repeal, amendment, supplement or
modification and such repeal, amendment or modification is
approved by the affirmative vote of the holders of not less than
two-thirds of the outstanding Voting Stock; or
(2) Such repeal, amendment, supplement or modification is approved by
the affirmative vote of holders of: (a) not less than 80% of the
outstanding Voting Stock voting together as a single class; and
(b) not less than two-thirds of the outstanding Voting Stock held
by all stockholders other than Interested Stockholders voting
together as a single class.
I. Further Considerations to Effect Business Combination.
No Business Combination shall be effected or consummated unless, in
addition to the consideration set forth in Subdivisions B, C, D and E of
this Article XII, the Board of Directors of the Corporation, including
the Disinterested Directors, shall consider all of the following factors
and any other factors which they deem relevant:
(1) The social and economic effects of the transaction on the
Corporation and its subsidiaries, employees, depositors, loan and
other customers, creditors and other elements of the communities
in which the Corporation and its subsidiaries operate or are
located;
(2) The business and financial conditions and earnings prospects of
the Interested Stockholder, including, but not limited to, debt
service and other existing or likely financial obligations of the
Interested Stockholder, and the possible effect on other
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elements of the communities in which the Corporation and its
subsidiaries operate or are located; and
(3) The competence, experience and integrity of Interested
Stockholders and their management.
ARTICLE XIII
COMPROMISES OR ARRANGEMENTS WITH CREDITORS
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them, or between this Corporation
and its stockholders or any class of them, or both, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
Section 279 of Title 8 if the Delaware Code order a meeting of the creditors or
class of creditors, or of the stockholders or class of stockholders of this
Corporation, or both, as the case may be, to be summoned in such manner as the
said court directs. If a majority in number representing three-fourths in value
of the creditors or class of creditors, or of the stockholders or class of
stockholders of this Corporation, or both, as the case may be, agree to any
compromise or arrangement and to any reorganization of this Corporation as
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, or on all the stockholders, or both, as the case may be, and
also on this Corporation.
We, the Undersigned, for the purpose of forming a corporation under the laws of
the State of Delaware, do make, file and record this Certificate, and do certify
that the facts herein stated are true, and we have accordingly hereunto set our
hands this 7th day of October, 1998.
_________________________________
William V. Ehlen, Incorporator
_________________________________
C.K. Hill, Incorporator
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VALLE DE ORO BANK, N.A.
SPRING VALLEY, CALIFORNIA
2,646,062 Shares
of
Common Stock
----------------------------
PROXY STATEMENT - PROSPECTUS
----------------------------
----------------------------
February 18, 1999
----------------------------
No person has been authorized to give any information or to make any
representation other than as contained herein In connection with the offer
contained in this Proxy Statement Prospectus, and if given or made, such
information or representation must not be relied upon. This Proxy Statement -
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any of the securities offered by this Proxy Statement - Prospectus in any
state to any person to whom it would be unlawful to make such an offer or
solicitation. The delivery of this Proxy Statement - Prospectus at any time does
not imply that the information herein is correct as of any time subsequent to
the date hereof.
<PAGE> 76
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Certificate of Incorporation and Bylaws provide for
indemnification of its officers, directors, employees and agents to the fullest
extent permitted by Delaware law.
Section 145 of Section 8 of the Delaware Code provides that corporations
may indemnify an individual made a party to any threatened, pending, or
completed action, suit or proceeding whether civil, criminal, administrative or
investigative, because the individual is or was a director, officer, employee or
agent of the corporation, against liability incurred in the proceeding if the
person acted in good faith and reasonably believed his conduct was in the
corporation's best interest or was not opposed to the corporation's best
interest.
Section 145(c) further provides that a corporation shall indemnify an
individual who was fully successful on the merits or otherwise in any proceeding
to which the director or officer was a party because the individual was or is a
director or officer of the corporation, for reasonable expenses incurred by the
director in connection with the proceeding. Section 145(g) provides that a
corporation may purchase and maintain insurance on behalf of the individual who
is or was a director, officer, employee or agent of the corporation or who,
while a director, officer, employee or agent of the corporation is or was
serving at the request of the corporation as a director, officer, partner,
trustee, employer or agent of another corporation, partnership, joint venture,
trust, or other enterprise, against liability asserted against or incurred by
the individual in that capacity or arising from the individual status as a
director, officer, employee, or agent.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS
The exhibits filed pursuant to this Item 21 immediately follow the
Exhibit Index. The following is a description of the applicable exhibits
required for Form S-4 provided by Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
Exhibit Number Description
<S> <C>
(1) Not Applicable.
(2) The Consolidation Agreement by and between Valle de Oro
Bank, N.A. and Valley National Corporation and the
Amendment to Consolidation Agreement by and among Valle
de Oro Bank, N.A., Valley National Corporation and
Valle de Oro Interim Bank, N.A. are attached as
Appendix I to the Proxy Statement - Prospectus forming
a part of this Registration Statement.
(3) Certificate of Incorporation and Bylaws.
A. A copy of the Certificate of Incorporation of
the Registrant is included as Exhibit 3.A to the
Registration Statement.
B. A copy of the Bylaws of the Registrant is included
as Exhibit 3.B to this Registration Statement.
</TABLE>
Part II-1
<PAGE> 77
<TABLE>
<CAPTION>
Exhibit Number Description
<S> <C>
(4) Instruments defining the rights of security holders,
including indentures.
A. Instruments defining the rights of security holders
are included in the Certificate of Incorporation
and Bylaws (see Exhibit 3.A. and B.).
(5) Opinion of Dostart Clapp Sterrett & Coveney, LLP regarding
Valley National Corporation Common Stock, and Consent
(6) Not Applicable.
(7) Not Applicable.
(8) Opinion of Dostart Clapp Sterrett & Coveney, LLP,
regarding certain tax matters, and Consent.
(9) Not Applicable.
(10) Data Processing Services Agreement between Valle de Oro
Bank, N.A. and M & I Data Services, Inc. dated
September 25, 1991; Visa/Master Money Card Amendment to
Data Processing Services Agreement dated September 25,
1991; Amendment to Data Processing Services Agreement
dated October 24, 1995; Amendment to Data Processing
Services Agreement dated April 3, 1998;
PC Teller Software License Agreement between Valle de Oro Bank, N.A. and
M & I Data Services, Inc. dated December 19, 1991; Amendment No. 1 to
PC Teller Software License Agreement dated February 19, 1993;
Backup Facility Agreement between Valle de Oro Bank, N.A. and M & I Data
Services dated April 10, 1995;
Employment Agreement between Valle de Oro Bank, N.A. and William V. Ehlen
dated July 1, 1995;
Salary Continuation Agreement between Valle de Oro Bank, N.A. and William
V. Ehlen dated January 10, 1996;
Director Deferred Fee Agreement between Valle de Oro Bank, N.A. and
Samuel Ciccati dated April 15, 1998;
Director Deferred Fee Agreement between Valle de Oro Bank, N.A. and
Philip Gelber dated April 15, 1998;
Valle de Oro Bank, N.A. 401(k) Plan;
Valle de Oro Bank, N.A. 1994 Stock Option Plan;
Valle de Oro Bank, N.A. Employee Stock Ownership Plan;
Sublease between Valle de Oro Bank, N.A. and Ervin S. Wheeler, M.D., a
Medical corporation, dated January 28, 1997;
</TABLE>
Part II-2
<PAGE> 78
<TABLE>
<CAPTION>
Exhibit Number Description
<S> <C>
Lease between Valle de Oro Bank, N.A. and Wellesley company, N. V., a
Netherlands Antilles corporation, dated September 1, 1994;
Amendment No. 1 and Assignment Agreement (Lease) by and among Valle de
Oro Bank, N.A., Grossmont Land Company and BSD Service Company dated
January 29, 1993;
Lease between Valle de Oro Bank and Reseda Investors dated November 15,
1987; and
Consent to Assignment of Lease between Valle de Oro Bank,
N.A., Alcott Estates and Bank of America National Trust
and Savings Association dated June 12, 1985 and
underlying lease between Pacific Coast Properties, Inc.
and Bank of America National Trust and Savings
Association dated November 9, 1960.
(11) Not Applicable.
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
(15) Not Applicable.
(16) Not Applicable.
(17) Not Applicable.
(18) Not Applicable.
(19) Not Applicable.
(20) Not Applicable.
(21) None.
(22) None.
(23) Consents of Experts and Counsel.
A. Consent of Dostart Clapp Sterrett & Coveney, LLP (the
consent is contained in that firm's opinions filed as
Exhibits (5) and (8)).
(24) Power of Attorney.
(25) Not Applicable.
(26) Not Applicable.
(27) Not Applicable.
</TABLE>
Part II-3
<PAGE> 79
<TABLE>
<CAPTION>
Exhibit Number Description
<S> <C>
(99) Additional Exhibits.
A. Form of Proxy to be delivered to Shareholders of Valle
de Oro Bank, N.A.
</TABLE>
ITEM 22. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes as follows:
(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 of 1933;
(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: Notwithstanding the
foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) (Section
230.424(b) of this chapter) if, in the aggregate,
the changes in volume and price represent no more
than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective
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 the information set forth 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.
(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) The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933,
each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated
Part II-4
<PAGE> 80
by reference in this Registration Statement 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 officers, directors,
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant 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 that matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question of 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.
B. The undersigned Registrant hereby undertakes to respond to requests for
information that are incorporated by reference into the Proxy Statement
- Prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within
one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt
means. This includes information contained in the documents filed
subsequent to the Effective Date of this Registration Statement through
the date of responding to the request.
C. 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 this Registration Statement when it became effective.
Part II-5
<PAGE> 81
SIGNATURES
Pursuant to requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-4 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of El Cajon, State of California, this 19th day of
February 1999.
Valley National Corporation
/s/ WILLIAM V. EHLEN
----------------------------------------
William V. Ehlen, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 19th day of February 1999.
Signature Title
- --------- -----
/s/ William V. Ehlen President and Director
- ----------------------------------
William V. Ehlen
/s/ C.K. Hill Secretary and Director
- ----------------------------------
C.K. Hill
/s/ James F. Carroll Director and Chairman of the Board
- ----------------------------------
James F. Carroll
/s/ William V. Ehlen
- ----------------------------------
By: William V. Ehlen
His Attorney-in-Fact
/s/ Samuel M. Ciccati Director
- ----------------------------------
Samuel M. Ciccati
/s/ William V. Ehlen
- ----------------------------------
By: William V. Ehlen
His Attorney-in-Fact
/s/ Obert D. "Dale" Conway Director
- ----------------------------------
Obert D. "Dale" Conway
/s/ William V. Ehlen
- ----------------------------------
By: William V. Ehlen
His Attorney-in-Fact
/s/ Philip J. Gelber Director
- ----------------------------------
Philip J. Gelber
/s/ William V. Ehlen
- ----------------------------------
By: William V. Ehlen
His Attorney-in-Fact
/s/ Paul M. Cable Treasurer, Principal Accounting Officer
- ---------------------------------- and Chief Financial Officer
Paul M. Cable
Part II-6
<PAGE> 82
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No.
-----------
<S> <C>
3.A (1) A copy of the Registrant's Certificate of Incorporation
3.B (1) A copy of the Registrant's Bylaws
5.0 (1) Opinion of Dostart Clapp Sterrett & Coveney, LLP regarding
Valley National Corporation Common Stock and Consent
8.0 (1) Opinion of Dostart Clapp Sterrett & Coveney, LLP, Attorneys,
regarding certain Tax Matters and Consent
10.0 (1) Data Processing Services Agreement between Valle de Oro
Bank, N.A. and M & I Data Services, Inc. dated September 25,
1991; Visa/Master Money Card Amendment to Data Processing
Services Agreement dated September 25, 1991; Amendment to
Data Processing Services Agreement dated October 24, 1995;
Amendment to Data Processing Services Agreement dated April
3, 1998
10.1 (1) PC Teller Software License Agreement between Valle de Oro
Bank, N.A. and M & I Data Services, Inc. dated December 19,
1991; Amendment No. 1 to PC Teller Software License
Agreement dated February 19, 1993
10.2 (1) Backup Facility Agreement between Valle de Oro Bank, N.A.
and M & I Data Services dated April 10, 1995
10.3 (1) Employment Agreement between Valle de Oro Bank, N.A. and
William V. Ehlen dated July 1, 1995
10.4 (1) Salary Continuation Agreement between Valle de Oro Bank,
N.A. and William V. Ehlen dated January 10, 1996
10.5 (1) Director Deferred Fee Agreement between Valle de Oro Bank,
N.A. and Samuel Ciccati dated April 15, 1998
10.6 (1) Director Deferred Fee Agreement between Valle de Oro Bank,
N.A. and Philip Gelber dated April 15, 1998
10.7 (1) Valle de Oro Bank, N.A. 401(k) Plan
10.8 (1) Valle de Oro Bank, N.A. 1994 Stock Option Plan
10.9 (1) Valle de Oro Bank, N.A. Employee Stock Ownership Plan
</TABLE>
1
<PAGE> 83
<TABLE>
<S> <C>
10.10 (1) Sublease between Valle de Oro Bank, N.A. and Ervin S.
Wheeler, M.D., a Medical corporation, dated January 28, 1997
10.11 (1) Lease between Valle de Oro Bank, N.A. and Wellesley Company,
N. V., a Netherlands Antilles corporation, dated
September 1, 1994
10.12 (1) Amendment No. 1 and Assignment Agreement (Lease) by and
among Valle de Oro Bank, N.A., Grossmont Land Company and
BSD Service Company dated January 29, 1993
10.13 (1) Lease between Valle de Oro Bank, N.A. and Reseda Investors
dated November 15, 1987
10.14 (1) Consent to Assignment of Lease between Valle de Oro Bank,
N.A., Alcott Estates and Bank of America National Trust and
Savings Association dated June 12, 1985 and underlying lease
between Pacific Coast Properties, Inc. and Bank of America
National Trust and Savings Association dated November 9,
1960
23.0 (1) Contained in Opinions at 5.0 and 8.0
24.0 (2) Power of Attorney
99.A (1) Form of Proxy to be delivered to Shareholders of Valle de
Oro Bank, N.A.
</TABLE>
- ---------------
(1) Incorporated by reference to the Registrant's Form S-4, filed November 20,
1998, SEC File No. 333-67661, as amended by Amendment No. 1 to Form S-4,
filed January 26, 1999, and as amended by Amendment No. 2 to Form S-4,
filed February 18, 1999.
(2) Filed herein.
2
<PAGE> 1
EXHIBIT 24.0
POWERS OF ATTORNEY
DIRECTORS OF VALLEY NATIONAL CORPORATION
Know all men by these presents that each person whose name is signed
below has made, constituted and appointed, and by this instrument does make,
constitute and appoint William V. Ehlen and C.K. Hill, or either one of them,
his true and lawful attorney with full power of substitution and resubstitution
to affix for him and in his name, place and stead, as attorney-in-fact, his
signature as director or officer, or both, of Valley National Corporation, a
Delaware corporation (the "Holding Company"), to a Registration Statement on
Form S-4 registering under the Securities Act of 1933, common stock to be issued
in connection with the acquisition of Valle de Oro Bank, N.A., and to any and
all amendments, post effective amendments and exhibits to that Registration
Statement, and to any and all applications and other documents pertaining
thereto, giving and granting to such attorney-in-fact full power and authority
to do and perform every act and thing whatsoever necessary to be done in the
premises, as fully as he might or could do if personally present, and hereby
ratifying and confirming all that said attorney-in-fact or any such substitute
shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney has been signed at El Cajon,
California, this 5th day of November, 1998.
/s/ WILLIAM V. EHLEN /s/ C.K. HILL
- --------------------------------- -----------------------------------
William V. Ehlen, Director C.K. Hill, O.D., Director
/s/ JAMES F. CARROLL /s/ PHILIP J. GELBER
- --------------------------------- -----------------------------------
James F. Carroll, Director Philip J. Gelber, M.D., Director
/s/ SAMUEL M. CICCATI /s/ OBERT D. "DALE" CONWAY
- --------------------------------- -----------------------------------
Samuel M. Ciccati, Ph.D., Director Obert D. "Dale" Conway, Director
/s/ PAUL M. CABLE
- ---------------------------------
Paul M. Cable, Treasurer and
Chief Financial Officer
