<PAGE>
Filed pursuant to Rule 424(b)(3)
Registration No. 333-17335
[LETTERHEAD OF WESTAMERICA BANCORPORATION]
January 7, 1997
Dear Shareholder:
You are cordially invited to attend a Special Meeting of the Shareholders of
Westamerica Bancorporation ("Westamerica") to be held at 4550 Mangels
Boulevard, Fairfield, California, at 10:00 a.m., local time, on Monday,
February 24, 1997 (the "Westamerica Special Meeting").
At the Westamerica Special Meeting, Westamerica shareholders will be asked
to consider and vote upon a proposal to approve and adopt an Agreement and
Plan of Reorganization dated as of November 11, 1996 (the "Agreement"), by and
among Westamerica, ValliCorp Holdings, Inc. ("ValliCorp"), and ValliWide Bank
("ValliWide"), and an Agreement and Plan of Merger between Westamerica and
ValliCorp (the "Merger Agreement" and, collectively with the Agreement, the
"Agreements") and the transactions contemplated thereby, including without
limitation, certain provisions benefiting directors, executive officers and
employees of ValliCorp, as more fully described in the accompanying Joint
Proxy Statement/Prospectus. Copies of the Agreements are attached to the Joint
Proxy Statement/Prospectus as Annex A. As more fully described therein,
pursuant to the Agreements, ValliCorp will merge with and into Westamerica
(the "Merger"). No other business is expected to be transacted at the
Westamerica Special Meeting other than matters incidental to the conduct of
the Westamerica Special Meeting.
As a result of the Merger, each share of ValliCorp common stock, $0.01 par
value per share ("ValliCorp Common Stock"), outstanding at the effective time
of the Merger will be converted into the right to receive $21.00 of value in
Westamerica common stock, without par value ("Westamerica Common Stock"),
subject to certain potential adjustments as described in the Agreement and the
accompanying Joint Proxy Statement/Prospectus. No fractional shares of
Westamerica Common Stock will be issued to holders of shares of ValliCorp
Common Stock, and, in lieu thereof, cash will be paid to ValliCorp
shareholders in accordance with the Agreement.
Under applicable law, the approval and adoption of the Agreements and the
transactions contemplated thereby requires the affirmative vote of the holders
of a majority of the outstanding shares of both Westamerica Common Stock and
ValliCorp Common Stock. The proposed Merger is also subject to certain
regulatory approvals and the satisfaction of the conditions contained in the
Agreement. Your Board of Directors has determined that the Agreements, the
Merger and the transactions contemplated thereby are in the best interests of
Westamerica and its shareholders.
THE WESTAMERICA BOARD OF DIRECTORS, BY UNANIMOUS VOTE OF ALL DIRECTORS, HAS
APPROVED THE AGREEMENTS AND THE TRANSACTIONS CONTEMPLATED THEREBY AND
RECOMMENDS THAT WESTAMERICA SHAREHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE
AGREEMENTS AND THE TRANSACTIONS CONTEMPLATED THEREBY AT THE WESTAMERICA
SPECIAL MEETING.
The accompanying Notice and Joint Proxy Statement/Prospectus describe the
matters to be acted upon at the Westamerica Special Meeting. Shareholders are
urged to review carefully the attached Joint Proxy Statement/Prospectus,
including the annexes thereto. Such documents contain a detailed description
of the transactions contemplated by the Agreements, including the Merger and
its terms and conditions.
Because of the significance of the proposed Merger to Westamerica, your
representation and vote at the Westamerica Special Meeting, in person or by
proxy, is especially important. Consummation of the proposed Merger requires,
among other conditions, regulatory approval and the approval of the Agreements
by the holders of a majority of the Common Stock of both Westamerica and
ValliCorp. I urge you to vote FOR approval and adoption of the Agreements.
<PAGE>
Your continuing support of Westamerica is appreciated. Whether or not you
plan to attend the Westamerica Special Meeting, please sign, date and mail the
enclosed Proxy promptly in the postage-paid envelope that has been provided to
you for your convenience. If you wish to vote in accordance with the
recommendations of the Board of Directors of Westamerica, it is not necessary
to specify your choices; you may merely sign, date and return the enclosed
Proxy. If you attend the Westamerica Special Meeting and vote in person, your
vote will supersede your Proxy.
Sincerely,
/s/ David L. Payne
-----------------------------------
David L. Payne
Chairman of the Board of Directors,
President and Chief Executive
Officer
2
<PAGE>
WESTAMERICA BANCORPORATION
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 24, 1997
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Westamerica
Bancorporation ("Westamerica") will be held at 4550 Mangels Boulevard,
Fairfield, California, on Monday, February 24, 1997 at 10:00 a.m., local time
(the "Westamerica Special Meeting"), for the following purposes, all of which
are more fully described in the accompanying Joint Proxy Statement/Prospectus:
To consider and vote upon a proposal to adopt and approve the Agreement and
Plan of Reorganization dated as of November 11, 1996 (the "Agreement"), by
and among Westamerica, ValliCorp Holdings, Inc. ("ValliCorp"), and
ValliWide Bank ("ValliWide"), and an Agreement and Plan of Merger between
Westamerica and ValliCorp (the "Merger Agreement" and, collectively with
the Agreement, the "Agreements") and the transactions contemplated thereby,
including without limitation, certain provisions benefiting directors,
executive officers and employees of ValliCorp and the proposed merger of
ValliCorp with and into Westamerica (the "Merger").
The Agreements are set forth in Annex A to the accompanying Joint Proxy
Statement/Prospectus.
If the Merger is consummated, holders of Westamerica Common Stock who comply
with the requirements of Chapter 13 of the California General Corporation Law
("Chapter 13") may have the right to receive from Westamerica a cash payment
of the fair market value of their shares determined in accordance with Chapter
13. See "DISSENTERS' RIGHTS OF APPRAISAL--APPRAISAL RIGHTS OF WESTAMERICA
SHAREHOLDERS" in the attached Joint Proxy Statement/Prospectus for a
discussion of the availability of dissenters' rights and a description of the
procedures which must be followed to enforce such rights under Chapter 13, a
copy of which is included as Annex E thereto and incorporated herein by this
reference.
No other business will be transacted at the Westamerica Special Meeting,
other than matters incidental to the conduct of the Westamerica Special
Meeting.
The Westamerica Board of Directors has fixed the close of business on
January 7, 1997 as the record date for the Westamerica Special Meeting. Only
Westamerica shareholders of record at the close of business on such date are
entitled to notice of and to vote at the Westamerica Special Meeting. Approval
of the Merger requires the affirmative vote of the holders of a majority of
the outstanding shares of Westamerica Common Stock.
Your vote is important regardless of the number of shares you own. Each
shareholder, even though he or she may now plan to attend the Westamerica
Special Meeting in person, is requested to sign, date and return the enclosed
Proxy without delay in the enclosed postage-paid envelope. You may revoke your
Proxy at any time prior to its exercise. Any shareholder present in person at
the Westamerica Special Meeting or at any adjournments or postponements
thereof may revoke his or her Proxy and vote personally on each matter brought
before the Westamerica Special Meeting.
By Order of the Board of Directors,
/s/ Mary Anne Bell
-----------------------------------
Mary Anne Bell
Assistant Corporate Secretary
January 7, 1997
San Rafael, California
THE WESTAMERICA BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
APPROVAL AND ADOPTION OF THE AGREEMENTS AND THE TRANSACTIONS CONTEMPLATED
THEREBY.
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
<PAGE>
[LETTERHEAD OF VALLICORP HOLDINGS, INC.]
January 7, 1997
Dear Shareholder:
You are cordially invited to attend a Special Meeting of the Shareholders of
ValliCorp Holdings, Inc. ("ValliCorp"), to be held at the Fresno Art Museum,
2233 North First Street, Fresno, California, at 5:00 p.m., local time, on
Monday, February 24, 1997 (the "ValliCorp Special Meeting").
At the ValliCorp Special Meeting, ValliCorp shareholders will be asked to
consider and vote upon a proposal to approve and adopt an Agreement and Plan
of Reorganization dated as of November 11, 1996 (the "Agreement"), by and
among ValliCorp, ValliWide Bank ("ValliWide") and Westamerica Bancorporation
("Westamerica"), and an Agreement and Plan of Merger between Westamerica and
ValliCorp (the "Merger Agreement" and, collectively with the Agreement, the
"Agreements") and the transactions contemplated thereby, including without
limitation, certain provisions benefiting directors, executive officers and
employees of ValliCorp, as more fully described in the accompanying Joint
Proxy Statement/Prospectus. Copies of the Agreements are attached to the Joint
Proxy Statement/Prospectus as Annex A. As more fully described therein,
pursuant to the Agreements, ValliCorp will merge with and into Westamerica
(the "Merger"). No other business is expected to be transacted at the
ValliCorp Special Meeting other than matters incidental to the conduct of the
ValliCorp Special Meeting.
As a result of the Merger, each share of ValliCorp common stock, $0.01 par
value per share ("ValliCorp Common Stock"), outstanding at the effective time
of the Merger will be converted into the right to receive $21.00 of value in
Westamerica common stock, without par value ("Westamerica Common Stock"),
subject to certain potential adjustments as described in the Agreement and the
accompanying Joint Proxy Statement/Prospectus. No fractional shares of
Westamerica Common Stock will be issued to holders of shares of ValliCorp
Common Stock, and, in lieu thereof, cash will be paid to ValliCorp
shareholders in accordance with the Agreement.
Under applicable law, the approval and adoption of the Agreements and the
transactions contemplated thereby requires the affirmative vote of the holders
of a majority of the outstanding shares of both Westamerica Common Stock and
ValliCorp Common Stock. The proposed Merger is also subject to certain
regulatory approvals and the satisfaction of the conditions contained in the
Agreement. Your Board of Directors has determined that the Agreements, the
Merger and the transactions contemplated thereby are in the best interests of
ValliCorp and its shareholders.
THE VALLICORP BOARD OF DIRECTORS, BY UNANIMOUS VOTE OF ALL DIRECTORS, HAS
APPROVED THE AGREEMENTS AND THE TRANSACTIONS CONTEMPLATED THEREBY AND
RECOMMENDS THAT VALLICORP SHAREHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE
AGREEMENTS AND THE TRANSACTIONS CONTEMPLATED THEREBY AT THE VALLICORP SPECIAL
MEETING.
The accompanying Notice and Joint Proxy Statement/Prospectus describe the
matters to be acted upon at the ValliCorp Special Meeting. Shareholders are
urged to review carefully the attached Joint Proxy Statement/Prospectus,
including the annexes thereto. Such documents contain a detailed description
of the transactions contemplated by the Agreements, including the Merger and
its terms and conditions.
Because of the significance of the proposed Merger to ValliCorp, your
representation and vote at the ValliCorp Special Meeting, in person or by
proxy, is especially important. Consummation of the proposed Merger requires,
among other conditions, regulatory approval and the approval of the Agreements
by the holders of a majority of the Common Stock of both ValliCorp and
Westamerica. I urge you to vote FOR approval and adoption of the Agreements.
<PAGE>
Your continuing support of ValliCorp is appreciated. Whether or not you plan
to attend the ValliCorp Special Meeting, please sign, date and mail the
enclosed Proxy promptly in the postage-paid envelope that has been provided to
you for your convenience. If you wish to vote in accordance with the
recommendations of the Board of Directors of ValliCorp, it is not necessary to
specify your choices; you may merely sign, date and return the enclosed Proxy.
If you attend the ValliCorp Special Meeting and vote in person, your vote will
supersede your Proxy.
Sincerely,
/s/ J. Mike McGowan
-----------------------------------
J. Mike McGowan
Chairman and Chief Executive Officer
2
<PAGE>
VALLICORP HOLDINGS, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 24, 1997
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of ValliCorp
Holdings, Inc. ("ValliCorp"), will be held at the Fresno Art Museum, 2233
North First Street, Fresno, California, on Monday, February 24, 1997 at 5:00
p.m., local time (the "ValliCorp Special Meeting"), for the following
purposes, all of which are more fully described in the accompanying Joint
Proxy Statement/Prospectus:
To consider and vote upon a proposal to adopt and approve the Agreement and
Plan of Reorganization dated as of November 11, 1996 (the "Agreement"), by
and among ValliCorp, ValliWide Bank ("ValliWide") and Westamerica
Bancorporation ("Westamerica"), and an Agreement and Plan of Merger between
Westamerica and ValliCorp (the "Merger Agreement" and, collectively with
the Agreement, the "Agreements") and the transactions contemplated thereby,
including without limitation, certain provisions benefiting directors,
executive officers and employees of ValliCorp and the proposed merger of
ValliCorp with and into Westamerica (the "Merger").
The Agreements are set forth in Annex A to the accompanying Joint Proxy
Statement/Prospectus.
No other business will be transacted at the ValliCorp Special Meeting, other
than matters incidental to the conduct of the ValliCorp Special Meeting.
The ValliCorp Board of Directors has fixed the close of business on January
7, 1997 as the record date for the ValliCorp Special Meeting. Only ValliCorp
shareholders of record at the close of business on such date are entitled to
notice of and to vote at the ValliCorp Special Meeting. Approval of the Merger
requires the affirmative vote of the holders of a majority of the outstanding
shares of ValliCorp common stock.
Your vote is important regardless of the number of shares you own. Each
shareholder, even though he or she may now plan to attend the ValliCorp
Special Meeting in person, is requested to sign, date and return the enclosed
Proxy without delay in the enclosed postage-paid envelope. You may revoke your
Proxy at any time prior to its exercise. Any shareholder present in person at
the ValliCorp Special Meeting or at any adjournments or postponements thereof
may revoke his or her Proxy and vote personally on each matter brought before
the ValliCorp Special Meeting.
By Order of the Board of Directors,
/s/ E. L. Herbert
-----------------------------------
E. L. Herbert
Executive Vice President,
General Counsel and Secretary
January 7, 1997
Fresno, California
THE VALLICORP BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
APPROVAL AND ADOPTION OF THE AGREEMENTS AND THE TRANSACTIONS CONTEMPLATED
THEREBY.
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
<PAGE>
WESTAMERICA BANCORPORATION
AND
VALLICORP HOLDINGS, INC.
JOINT PROXY STATEMENT
---------------
WESTAMERICA BANCORPORATION
PROSPECTUS
This Joint Proxy Statement/Prospectus (the "Joint Proxy
Statement/Prospectus") is being furnished to shareholders of ValliCorp
Holdings, Inc. ("ValliCorp") and Westamerica Bancorporation ("Westamerica") in
connection with the solicitation of proxies by the respective Boards of
Directors of such corporations for use at their respective Special Meetings of
Shareholders.
This Joint Proxy Statement/Prospectus relates to the proposed merger of
ValliCorp with and into Westamerica (the "Merger") pursuant to the Agreement
and Plan of Reorganization, dated as of November 11, 1996 (the "Agreement"),
among Westamerica, ValliCorp and ValliWide Bank ("ValliWide"), a related
Agreement and Plan of Merger (the "Merger Agreement," and, collectively with
the Agreement, the "Agreements") and the transactions contemplated thereby.
Upon consummation of the Merger, each outstanding share of the Common Stock,
par value $.01 per share, of ValliCorp ("ValliCorp Common Stock" or "ValliCorp
Share") will, with certain exceptions, be converted into the right to receive
$21.00 of value in the Common Stock, without par value, of Westamerica
(including certain common stock purchase rights which will not be exercisable
or be evidenced separately from the Westamerica Common Stock prior to the
occurrence of certain events) (the "Westamerica Common Stock"), subject to
adjustment as described generally below and in detail in the Agreement.
Specifically, as set forth in the Agreement, the purchase price to be paid
to ValliCorp shareholders in the form of Westamerica Common Stock will be as
follows. If the average closing price of Westamerica Common Stock on the
Nasdaq National Market System ("NMS") for a period of 20 consecutive trading
days ending five trading days prior to the effective date of the Merger (the
"Average Price") is between $48.69 and $53.81 (inclusive), then ValliCorp
shareholders will receive $21.00 of value in Westamerica Common Stock for each
outstanding share of ValliCorp Common Stock (thus, the exchange ratio will be
determined by dividing $21.00 by the Average Price). If the Average Price is
above $53.81, the exchange ratio will be adjusted such that ValliCorp
shareholders will receive the equivalent of 40% of the appreciation above that
amount. If the Average Price is below $48.69, then ValliCorp shareholders will
receive .4313 of a share of Westamerica Common Stock in exchange for each
ValliCorp Share; provided, however, that if the Average Price falls below
$46.13, the Board of Directors of ValliCorp may choose to either maintain an
exchange ratio of .4313 or exercise a right to terminate the Agreement. If
ValliCorp exercises its right to terminate the Agreement, Westamerica may
choose to either increase the exchange ratio to a ratio which will provide
approximately $19.90 of value in Westamerica Common Stock for each ValliCorp
Share (whereupon no termination shall have occurred), or allow the Agreement
to be terminated. In addition, the purchase price per ValliCorp Share may be
further adjusted downward if ValliCorp's consolidated book value, calculated
in the manner and based on certain adjustments set forth in the Agreement,
falls below $138,885,000.
This Joint Proxy Statement/Prospectus also serves as a prospectus for
Westamerica under the Securities Act of 1933, as amended (the "Securities
Act"), for the issuance of shares of Westamerica Common Stock (including the
associated common stock purchase rights described herein under "Description of
Westamerica Capital Stock and Indebtedness--Shareholder Rights Plan" with
respect to such shares) in the Merger. On January 3, 1997, the closing price
of Westamerica Common Stock on the NMS was $57.875 and the closing price of
ValliCorp Common Stock on the NMS was $20.00. If the Average Price at the
effective date is the same as the aforesaid closing price of Westamerica
Common Stock and assuming ValliCorp's consolidated book value remains at or
above $138,885,000, the exchange ratio would be .3738, which equates to a
purchase price of $21.63 in value of Westamerica Common Stock per ValliCorp
Share.
This Joint Proxy Statement/Prospectus does not cover resales of Westamerica
Common Stock to be received by ValliCorp shareholders upon consummation of the
Merger, and no person is authorized to make any use of this Joint Proxy
Statement/Prospectus in connection with any such resale. This Joint Proxy
Statement/Prospectus and the accompanying forms of Proxy are first being
mailed to shareholders of Westamerica and ValliCorp on or about January 14,
1997.
SEE "CERTAIN CONSIDERATIONS" BEGINNING ON PAGE 20 FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE WESTAMERICA COMMON STOCK.
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS JOINT PROXY STATEMENT/
PROSPECTUS. THE PROPOSED MERGER IS A COMPLEX TRANSACTION.
SHAREHOLDERS ARE STRONGLY URGED TO READ AND CONSIDER
CAREFULLY THIS JOINT PROXY STATEMENT/PROSPECTUS IN ITS
ENTIRETY.
---------------
THE SECURITIES TO BE ISSUED IN THE MERGER HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------
The date of this Joint Proxy Statement/Prospectus is January 7, 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION..................................................... 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 2
SUMMARY................................................................... 4
The Parties............................................................. 4
The Meetings and Votes Required......................................... 4
Certain Considerations.................................................. 5
Background of the Merger................................................ 6
Reasons for the Merger; Recommendations of the Boards of Directors...... 6
Opinion of ValliCorp's Financial Advisor................................ 6
Opinion of Westamerica's Financial Advisor.............................. 7
Effective Date of the Merger............................................ 7
Purchase Price and Potential Adjustments................................ 7
Treatment of Stock Options.............................................. 8
Conditions and Regulatory Approvals..................................... 8
Covenants............................................................... 9
Stock Option Agreement.................................................. 10
Agreements with ValliCorp Directors..................................... 10
Noncompetition Agreements............................................... 11
Amendment and Termination............................................... 11
Expenses................................................................ 12
Certain Federal Income Tax Consequences................................. 12
Accounting Treatment.................................................... 12
Interests of Certain Persons in the Merger.............................. 12
Dissenters' Rights of Appraisal......................................... 14
Market Price and Dividend Data.......................................... 14
Differences in Charter Documents........................................ 15
Selected Historical and Pro Forma Financial Data........................ 15
CERTAIN CONSIDERATIONS.................................................... 20
Shares Eligible for Future Sale; Dilution............................... 20
Interests of ValliCorp Officers and Directors in the Merger............. 20
ValliCorp's Results of Operations....................................... 22
Real Estate Lending; Impact of Recession and Nonperforming Assets....... 22
Organizational Structure and Operations Upon the Merger................. 23
Effect of Shareholder Rights Plan....................................... 23
Legislative and Regulatory Environment.................................. 24
INTRODUCTION.............................................................. 25
INFORMATION ABOUT WESTAMERICA............................................. 25
Supervision and Regulation.............................................. 26
INFORMATION ABOUT VALLICORP AND VALLIWIDE BANK............................ 28
THE MEETINGS.............................................................. 29
Matters to be Considered at the Meetings................................ 29
THE MERGER................................................................ 32
Background of the Merger................................................ 32
Reasons for the Merger; Recommendations of the Boards of Directors...... 33
Opinion of ValliCorp's Financial Advisor................................ 35
Opinion of Westamerica's Financial Advisor.............................. 39
Effective Date of the Merger............................................ 43
Purchase Price and Potential Adjustments................................ 44
Conversion of Shares of ValliCorp Common Stock.......................... 45
Exchange of ValliCorp Stock Certificates; Fractional Interests.......... 45
Treatment of Stock Options.............................................. 46
Covenants of Westamerica and ValliCorp; Conduct of Business Prior to the
Merger................................................................. 47
Representations and Warranties; Conditions to the Merger................ 54
Management and Operations Following the Merger.......................... 55
Required Regulatory Approvals........................................... 56
Amendment; Termination.................................................. 58
Expenses................................................................ 59
Agreements with ValliCorp Directors..................................... 59
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Noncompetition Agreements............................................... 59
Stock Option Agreement.................................................. 60
Certain Federal Income Tax Consequences................................. 64
Accounting Treatment.................................................... 64
Trading Markets for Stock............................................... 65
Resales of Westamerica Common Stock..................................... 65
DISSENTERS' RIGHTS OF APPRAISAL........................................... 65
ValliCorp Shareholders.................................................. 65
Appraisal Rights of Westamerica Shareholders............................ 65
PRO FORMA COMBINED FINANCIAL INFORMATION.................................. 66
MARKET PRICE AND DIVIDEND INFORMATION..................................... 76
Market Quotations....................................................... 76
Dividends and Dividend Policy........................................... 76
CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS............................. 78
General................................................................. 78
Certain Anti-Takeover Measures.......................................... 78
Quorum Requirements..................................................... 78
Cumulative Voting....................................................... 78
Classified Board of Directors........................................... 79
Indemnification of Directors and Executive Officers..................... 79
Elimination of Directors' Monetary Liability for Breach of Duty of Care. 81
Shareholder Meetings and Action by Written Consent...................... 82
Amendment of Bylaws..................................................... 83
Removal of Directors.................................................... 83
Filling Vacancies on the Board of Directors............................. 83
Amendment of Articles or Certificate.................................... 84
Notice of Shareholder Business.......................................... 84
Notice of Director Nominations.......................................... 85
Limitation on Action by Shareholders--Call of Annual or Special Meeting
of Shareholders........................................................ 85
Westamerica "Interested Person" Provision............................... 85
Delaware Anti-takeover Statute.......................................... 86
Series A Preferred Stock Purchase Rights Accompanying ValliCorp Common
Stock.................................................................. 86
Consideration of Factors Other Than Price............................... 86
Shareholder Vote for Mergers and Other Reorganizations.................. 87
Inspection of Shareholder Lists......................................... 87
DESCRIPTION OF WESTAMERICA CAPITAL STOCK AND INDEBTEDNESS................. 87
Common Stock............................................................ 87
Preferred Stock and Class B Common Stock................................ 88
Debt Agreement.......................................................... 88
Shareholder Rights Plan................................................. 88
Automatic Dividend Reinvestment Service and Employee Stock Purchase
Plan................................................................... 90
DESCRIPTION OF VALLICORP CAPITAL STOCK AND INDEBTEDNESS................... 90
Common Stock............................................................ 90
Dividend Reinvestment and Stock Purchase Plan........................... 91
Series A Preferred Stock Purchase Rights................................ 91
Debt Agreements......................................................... 94
EXPERTS................................................................... 94
LEGAL MATTERS............................................................. 95
SOLICITATION OF PROXIES................................................... 95
PROPOSALS OF SECURITY HOLDERS............................................. 95
</TABLE>
ANNEX A--Agreement and Plan of Reorganization and Agreement and Plan of Merger
ANNEX B--Stock Option Agreement
ANNEX C--Fairness Opinion of Montgomery Securities
ANNEX D--Fairness Opinion of Hoefer & Arnett, Inc.
ANNEX E--California General Corporation Law Chapter 13--Dissenters' Rights
i
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS OR IN
THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN, IN CONNECTION WITH THE
SOLICITATION AND THE OFFERING MADE BY THIS JOINT PROXY STATEMENT/PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY WESTAMERICA OR VALLICORP. THIS JOINT PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY OR AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES IN
ANY JURISDICTION IN WHICH A SOLICITATION OR OFFER MAY NOT LAWFULLY BE MADE.
THE INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS SPEAKS AS
OF THE DATE HEREOF UNLESS OTHERWISE SPECIFICALLY INDICATED.
NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL IMPLY THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN, IN THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN OR IN THE AFFAIRS OF WESTAMERICA OR VALLICORP SINCE THE DATE
HEREOF.
AVAILABLE INFORMATION
Westamerica and ValliCorp are each subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In
accordance therewith, Westamerica and ValliCorp each file reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information filed
by Westamerica and ValliCorp with the Commission can be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C., the Chicago Regional Office,
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois, and the New York Regional Office, Seven World Trade Center, 13th
Floor, New York, New York. Copies of such material also can be obtained from
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C., at prescribed rates. In addition, the Commission maintains a
World Wide Web site on the Internet at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The Westamerica
Common Stock and the ValliCorp Common Stock are each listed on the NMS.
Reports, proxy statements and other information concerning Westamerica and
ValliCorp can also be inspected at the offices of the National Association of
Securities Dealers at 1735 K Street, N.W., Washington, D.C.
Westamerica has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act relating to the shares of Westamerica Common
Stock to be issued in connection with the Merger (together with any amendments
thereto, the "Registration Statement"). This Joint Proxy Statement/Prospectus
also constitutes the Prospectus of Westamerica filed as part of the
Registration Statement and does not contain all of the information set forth
in the Registration Statement and exhibits thereto. The Registration Statement
and the exhibits thereto may be inspected and copied, at prescribed rates, at
the public reference facilities maintained by the Commission at the addresses
set forth above.
Statements contained in this Joint Proxy Statement/Prospectus or in any
document incorporated by reference herein relating to the contents of any
contract or other document referred to herein or therein are not necessarily
complete, and in each instance reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement or such
other document, each such statement being qualified in all respects by such
reference.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE BY WESTAMERICA (OTHER THAN CERTAIN EXHIBITS
TO SUCH DOCUMENTS WHICH EXHIBITS ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE IN SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE UPON REQUEST FROM
MARY ANNE BELL, ASSISTANT CORPORATE SECRETARY, WESTAMERICA BANCORPORATION,
1108 FIFTH AVENUE, SAN RAFAEL, CALIFORNIA 94901 (TELEPHONE (415) 257-8000).
THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE BY VALLICORP (OTHER THAN
CERTAIN EXHIBITS TO SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE UPON REQUEST
FROM E. L. HERBERT, SECRETARY, VALLICORP HOLDINGS, INC., 8405 NORTH FRESNO
STREET, FRESNO, CALIFORNIA 93720 (TELEPHONE (209) 437-5700). IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS IN ADVANCE OF THE MEETINGS TO WHICH
THIS JOINT PROXY STATEMENT/PROSPECTUS RELATES, ANY REQUEST SHOULD BE MADE BY
FEBRUARY 13, 1997.
The following documents of Westamerica are hereby incorporated by reference
in this Joint Proxy Statement/Prospectus and shall be deemed to be a part
hereof from the date of filing of those documents: Westamerica's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995; Westamerica's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996;
Westamerica's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996; Westamerica's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996; Westamerica's Current Report on Form 8-K dated February
21, 1996; Westamerica's Current Report on Form 8-K dated July 31, 1996;
Westamerica's Current Report on Form 8-K dated November 13, 1996; and all
other reports and documents filed by Westamerica pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Joint
Proxy Statement/Prospectus and prior to the time at which the special meeting
of shareholders of Westamerica has been finally adjourned.
The following documents of ValliCorp are hereby incorporated by reference in
this Joint Proxy Statement/Prospectus and shall be deemed to be a part hereof
from the date of filing of those documents: ValliCorp's Supplemental
Consolidated Financial Statements as of December 31, 1995 and 1994
(incorporated by reference from ValliCorp's Registration Statement on Form S-4
(333-06411)); ValliCorp's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995; ValliCorp's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996; ValliCorp's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996; ValliCorp's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996; ValliCorp's Current Report on Form 8-K dated
February 2, 1996 (and a Current Report on Form 8-K/A dated February 2, 1996);
ValliCorp's Current Report on Form 8-K dated March 22, 1996; ValliCorp's
Current Report on Form 8-K dated March 27, 1996; ValliCorp's Registration
Statement on Form 8-A dated April 4, 1996; ValliCorp's Current Report on Form
8-K dated November 13, 1996; and all other reports and documents filed by
ValliCorp pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Joint Proxy Statement/Prospectus and prior to
the time at which the special meeting of shareholders of ValliCorp has been
finally adjourned.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Joint Proxy Statement/Prospectus to the extent that such
statement is modified or replaced by a statement contained herein or in any
other subsequently filed document that also is or is deemed to be incorporated
by reference into this Joint Proxy Statement/Prospectus. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Joint Proxy Statement/Prospectus.
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THIS JOINT PROXY STATEMENT/PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
BUSINESS OF WESTAMERICA FOLLOWING THE CONSUMMATION OF THE MERGER, INCLUDING
STATEMENTS RELATING TO THE COST SAVINGS TO BE REALIZED FROM THE MERGER, THE
EXPECTED IMPACT OF THE MERGER ON WESTAMERICA'S FINANCIAL PERFORMANCE AND
EARNINGS ESTIMATES FOR THE COMBINED COMPANY (SEE "CERTAIN CONSIDERATIONS",
"THE MERGER--REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF
DIRECTORS" AND "PRO FORMA COMBINED FINANCIAL INFORMATION"). THESE FORWARD-
LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. FACTORS THAT MAY
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH
FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES:
(1) EXPECTED COST SAVINGS FROM THE MERGER CANNOT BE FULLY REALIZED; (2)
DEPOSIT ATTRITION, CUSTOMER LOSS OR REVENUE LOSS FOLLOWING THE MERGER IS
GREATER THAN EXPECTED; (3) COMPETITIVE PRESSURE IN THE BANKING INDUSTRY
INCREASES SIGNIFICANTLY; (4) COSTS OR DIFFICULTIES RELATED TO THE INTEGRATION
OF THE BUSINESSES OF WESTAMERICA AND VALLICORP ARE GREATER THAN EXPECTED; (5)
CHANGES IN THE INTEREST RATE ENVIRONMENT REDUCE MARGINS; (6) GENERAL ECONOMIC
CONDITIONS, EITHER NATIONALLY OR REGIONALLY, ARE LESS FAVORABLE THAN EXPECTED,
RESULTING IN, AMONG OTHER THINGS, A DETERIORATION IN CREDIT QUALITY; (7)
CHANGES IN THE REGULATORY ENVIRONMENT; (8) CHANGES IN BUSINESS CONDITIONS AND
INFLATION; AND (9) CHANGES IN THE SECURITIES MARKETS. THE FORWARD-LOOKING
EARNINGS ESTIMATES INCLUDED IN THIS JOINT PROXY STATEMENT/ PROSPECTUS HAVE NOT
BEEN EXAMINED OR COMPILED BY THE INDEPENDENT PUBLIC ACCOUNTANTS OF WESTAMERICA
OR VALLICORP NOR HAVE SUCH ACCOUNTANTS APPLIED ANY PROCEDURES THERETO.
ACCORDINGLY, SUCH ACCOUNTANTS DO NOT EXPRESS AN OPINION OR ANY OTHER FORM OF
ASSURANCE ON THEM. FURTHER INFORMATION ON OTHER FACTORS WHICH COULD AFFECT THE
FINANCIAL RESULTS OF WESTAMERICA AFTER THE MERGER IS INCLUDED IN THE
COMMISSION FILINGS INCORPORATED BY REFERENCE HEREIN.
ALL INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS RELATING
TO WESTAMERICA HAS BEEN SUPPLIED BY WESTAMERICA, AND ALL INFORMATION RELATING
TO VALLICORP HAS BEEN SUPPLIED BY VALLICORP. NEITHER WESTAMERICA NOR VALLICORP
WARRANTS THE ACCURACY OR COMPLETENESS OF INFORMATION RELATING TO THE OTHER
PARTY.
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SUMMARY
The following is a summary of certain information contained elsewhere in this
Joint Proxy Statement/Prospectus. Reference is made to, and this Summary is
qualified in its entirety by, the more detailed information contained elsewhere
in this Joint Proxy Statement/Prospectus, in the attached Annexes and in the
documents incorporated herein by reference. Shareholders are urged to read
carefully this Joint Proxy Statement/Prospectus and the attached Annexes in
their entirety. Certain capitalized terms which are used but not defined in
this Summary are defined elsewhere in this Joint Proxy Statement/Prospectus or
in the Agreement.
THE PARTIES
Westamerica is a bank holding company, headquartered in San Rafael,
California, incorporated under the laws of the State of California and
registered under the Bank Holding Company Act of 1956, as amended (the "BHC
Act"). Westamerica's wholly-owned banking subsidiaries, Westamerica Bank and
Bank of Lake County, are California state-chartered banks, insured by the
Federal Deposit Insurance Corporation (the "FDIC") and members of the Federal
Reserve System. Westamerica's subsidiary banks presently operate 57 banking
offices in 13 Northern California counties. At September 30, 1996, Westamerica
had consolidated assets of approximately $2.5 billion, deposits of
approximately $2.1 billion and shareholders' equity of approximately $229
million. Westamerica's principal executive offices are located at 1108 Fifth
Avenue, San Rafael, California 94901, and Westamerica's telephone number at
that location is (415) 257-8000.
ValliCorp is a bank holding company, headquartered in Fresno, California,
incorporated under the laws of the State of Delaware and registered under the
BHC Act. ValliCorp owns all of the outstanding shares of ValliWide Bank, a
California state-chartered bank ("ValliWide"), insured by the FDIC and a member
of the Federal Reserve System. ValliWide presently operates 55 banking offices
located in the California counties of Calaveras, Fresno, Kern, Kings, Madera,
Merced, Nevada, Placer, Sacramento, San Luis Obispo, Stanislaus, Tulare,
Tuolumne and Yolo. At September 30, 1996, ValliCorp had consolidated assets of
approximately $1.3 billion, deposits of approximately $1.2 billion and
stockholders' equity of approximately $139 million. ValliCorp's principal
executive offices are located at 8405 North Fresno Street, Fresno, California
93720, and ValliCorp's telephone number at that location is (209) 437-5700.
THE MEETINGS AND VOTES REQUIRED
Westamerica. The Westamerica Special Meeting (including any adjournments or
postponements thereof) will be held at 4550 Mangels Boulevard, Fairfield,
California, on Monday, February 24, 1997, at 10:00 a.m., local time. At the
Westamerica Special Meeting, holders of Westamerica Common Stock will consider
and vote upon a proposal to adopt and approve the Agreements and the
transactions contemplated thereby, including without limitation, certain
provisions benefiting directors, executive officers and employees of ValliCorp.
Only holders of record of Westamerica Common Stock at the close of business on
January 7, 1997 (the "Record Date") will be entitled to notice of, and to vote
at, the Westamerica Special Meeting. See "The Meetings."
As of the Record Date, there were approximately 9,434,870 shares of
Westamerica Common Stock outstanding, of which 440,486 shares were beneficially
owned by executive officers and directors of Westamerica. It is anticipated
that all such shares of Westamerica Common Stock will be voted for approval of
the Agreements and the transactions contemplated thereby. Accordingly, approval
of the Agreements and the transactions contemplated thereby at the Westamerica
Special Meeting is expected to require the affirmative vote of an additional
4,276,950 shares of Westamerica Common Stock outstanding on the Record Date to
be voted by the remaining shareholders of Westamerica. To ValliCorp's
knowledge, as of the Record Date, directors and executive officers of ValliCorp
did not beneficially own any shares of Westamerica Common Stock.
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ValliCorp. The ValliCorp Special Meeting (including any adjournments or
postponements thereof) will be held at the Fresno Art Museum, 2233 North First
Street, Fresno, California, on Monday, February 24, 1997, at 5:00 p.m., local
time. At the ValliCorp Special Meeting, holders of ValliCorp Common Stock will
consider and vote upon a proposal to adopt and approve the Agreements and the
transactions contemplated thereby, including without limitation, certain
provisions benefiting directors, executive officers and employees of ValliCorp.
Only holders of record of ValliCorp Common Stock at the close of business on
the Record Date will be entitled to notice of, and to vote at, the ValliCorp
Special Meeting. See "The Meetings."
As of the Record Date, there were approximately 14,093,317 shares of
ValliCorp Common Stock outstanding, of which 746,517 shares or 5.3% were
subject to sole or shared voting power by directors of ValliCorp. The directors
of ValliCorp have agreed to vote such shares of ValliCorp Common Stock for
approval of the Agreements and the transactions contemplated thereby.
Additionally, Westamerica owns 115,500 ValliCorp Shares, all of which
Westamerica intends to vote for approval of the Agreements and the transactions
contemplated thereby. Accordingly, approval of the Agreements and the
transactions contemplated thereby at the ValliCorp Special Meeting is expected
to require the affirmative vote of an additional 6,184,643 shares of ValliCorp
Common Stock outstanding on the Record Date to be voted by the remaining
shareholders of ValliCorp. In addition, as of the Record Date, non-director
executive officers of ValliCorp owned an additional 27,082 shares of ValliCorp
Common Stock. To Westamerica's knowledge, as of the Record Date, directors and
executive officers of Westamerica did not beneficially own any shares of
ValliCorp Common Stock.
Approval of the Agreements by a majority of the shareholders of each of the
Westamerica and ValliCorp Common Stock will constitute approval of the
Agreements, and each of the transactions contemplated thereby, including,
without limitation, certain provisions benefiting directors, executive officers
and employees of ValliCorp, as more fully described herein. See "Certain
Considerations--Interests of ValliCorp Officers and Directors in the Merger."
The affirmative vote of the holders of a majority of the outstanding shares of
both Westamerica and ValliCorp Common Stock entitled to vote at the Westamerica
Special Meeting and the ValliCorp Special Meeting, respectively, is required to
approve and adopt the Agreements and the transactions contemplated thereby.
Such approvals are conditions to, and required for, consummation of the Merger.
See "The Meetings" and "The Merger--Treatment of Stock Options" and "--
Representations and Warranties; Conditions to the Merger."
A shareholder giving a Proxy has the power to revoke that Proxy prior to its
exercise. See "The Meetings--Matters to be Considered at the Meetings."
CERTAIN CONSIDERATIONS
See "Certain Considerations" for a discussion of certain factors which should
be carefully considered by shareholders in deciding whether to vote for
approval of the Agreements and the transactions contemplated thereby. Such
section discusses shares of Westamerica Common Stock eligible for future sale
which may have a dilutive effect, interests of ValliCorp Officers and Directors
in the Merger, real estate lending activities and nonperforming assets,
organizational structure and operations after the Merger, the effect of the
Westamerica shareholder rights plan, the legislative and regulatory environment
and ValliCorp's results of operations.
CERTAIN MATTERS DISCUSSED OR INCORPORATED BY REFERENCE IN THIS JOINT PROXY
STATEMENT/PROSPECTUS ARE FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO RISKS
AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS. SUCH RISKS AND UNCERTAINTIES
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DESCRIBED IN THE SECTIONS HEREOF
ENTITLED "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE", "CERTAIN
CONSIDERATIONS", "THE MERGER--REASONS FOR THE MERGER; RECOMMENDATIONS OF THE
BOARDS OF DIRECTORS" AND "PRO FORMA COMBINED FINANCIAL INFORMATION". THEREFORE,
THE INFORMATION SET FORTH THEREIN SHOULD BE CAREFULLY CONSIDERED WHEN
EVALUATING THE BUSINESS AND PROSPECTS OF WESTAMERICA AND VALLICORP.
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BACKGROUND OF THE MERGER
The Boards of Directors of Westamerica and ValliCorp began to consider the
possibility of a business combination of their respective institutions during
the second quarter of 1996. After various discussions and negotiations between
certain of their directors and officers, Westamerica accepted a confidentiality
agreement presented by ValliCorp on June 25, 1996, for the purpose of
conducting a preliminary due diligence examination of ValliCorp. Early in the
third quarter, representatives of Montgomery Securities ("Montgomery") met with
the ValliCorp Board of Directors to discuss, among other things, the interest
of Westamerica in acquiring ValliCorp, a proposed restructuring plan under
which ValliCorp would have remained independent and alternatives to the
overtures by Westamerica. The ValliCorp Board of Directors formed a special
committee of the board to evaluate ValliCorp's alternatives. Shortly
thereafter, said committee authorized Montgomery to begin contacting
prospective purchasers. Initially, 12 prospective purchasers, including
Westamerica, were contacted. Based on the responses from the prospective
purchasers, Westamerica and ValliCorp and their respective attorneys and
financial advisors entered into additional discussions and negotiations.
However, the ValliCorp Board of Directors terminated negotiations with
Westamerica late in the third quarter of 1996. Promptly following such
termination, ValliCorp management and Montgomery began acquisition discussions
with two additional financial institutions; however, both institutions
subsequently decided not to proceed further. During the fourth quarter of 1996,
negotiations were reopened between Westamerica and ValliCorp. During these new
negotiations, Westamerica completed additional due diligence of ValliCorp and
ValliCorp conducted a due diligence examination of Westamerica. Upon completion
of such due diligence examinations and after certain additional discussions and
negotiations, each of the Westamerica Board and ValliCorp Board held a meeting
on November 11, 1996 to discuss and evaluate the proposed Merger and the
Agreements. Both Boards unanimously approved the Agreements, a related Stock
Option Agreement and other ancillary matters and the Agreement and the Stock
Option Agreement were entered into on November 11, 1996. See "The Merger--
Background of the Merger."
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
Each of the Westamerica Board and ValliCorp Board believes the Merger to be
in the best interests of their respective institutions, shareholders,
communities and banking customers. Each Board expects that Westamerica, as the
surviving company, will be stronger in terms of growth opportunities and
profitability than is either institution at present. Westamerica will also have
the advantage of consolidation and centralization of certain management and
operations functions and certain economies of scale. Furthermore, it is
believed that Westamerica, the surviving company, as a stronger independent
financial institution with a retail branch network extending south into Kern
County, north into Mendocino County and from the central coast to the Sierra
foothills, will be better able to compete with major banks in the communities
now served by each company. Local communities within California will also
benefit through the provision of increased banking services. ACCORDINGLY, THE
BOARDS OF DIRECTORS OF WESTAMERICA AND VALLICORP HAVE APPROVED THE AGREEMENTS
AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, AND RECOMMEND
APPROVAL OF THE AGREEMENTS BY THE SHAREHOLDERS OF WESTAMERICA AND VALLICORP,
RESPECTIVELY.
In evaluating the recommendations of the Boards of Directors summarized
above, shareholders should carefully consider the matters described under
"Certain Considerations" and "The Merger--Background of the Merger" and "--
Reasons for the Merger; Recommendations of the Boards of Directors."
OPINION OF VALLICORP'S FINANCIAL ADVISOR
Montgomery has rendered an opinion, dated November 11, 1996 (the "Montgomery
Fairness Opinion"), to the ValliCorp Board of Directors that the consideration
to be received by the holders of ValliCorp Common Stock pursuant to the Merger
is fair to such holders from a financial point of view, as of the date of such
opinion. The text of the Montgomery Fairness Opinion, which sets forth certain
assumptions made, matters considered
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and limits on the review undertaken by Montgomery, is attached to this Joint
Proxy Statement/Prospectus as Annex C. ValliCorp shareholders are urged to read
the Montgomery Fairness Opinion in its entirety. The Agreement does not require
that the Montgomery Fairness Opinion be updated prior to the Effective Date.
See "The Merger--Opinion of ValliCorp's Financial Advisor," which also contains
a discussion of the fees paid and to be paid to Montgomery. The remaining fees
to be paid to Montgomery are primarily contingent upon consummation of the
Merger.
OPINION OF WESTAMERICA'S FINANCIAL ADVISOR
Hoefer & Arnett, Inc. ("H&A"), has rendered an opinion, dated November 11,
1996 (the "H&A Fairness Opinion"), to the Westamerica Board of Directors that
the Merger is fair, from a financial point of view, to the shareholders of
Westamerica, as of the date of such opinion. The H&A Fairness Opinion, which
sets forth certain assumptions made, matters considered and limits on the
review undertaken, by H&A, is attached to this Joint Proxy Statement/Prospectus
as Annex D. Westamerica shareholders are urged to read the H&A Fairness Opinion
in its entirety. The Agreement does not require that the H&A Fairness Opinion
be updated prior to the Effective Date. See "The Merger--Opinion of
Westamerica's Financial Advisor," which also contains a discussion of the fees
to be paid to H&A. The fees to be paid to H&A are contingent upon consummation
of the Merger.
EFFECTIVE DATE OF THE MERGER
The Merger will be effective upon the date of the filing with the California
Secretary of State of a duly executed Merger Agreement and the officers'
certificates prescribed by Section 1103 of the California General Corporation
Law (the "GCL") and/or other documents as required by the Delaware General
Corporation Law (the "DGCL") or upon any subsequent date specified in the
Merger Agreement (the "Effective Time"). The date on which the Effective Time
occurs as specified in the Merger Agreement is referred to herein as the
"Effective Date." It is presently anticipated that the Merger will be
consummated in the second quarter of 1997.
PURCHASE PRICE AND POTENTIAL ADJUSTMENTS
The purchase price (the "Purchase Price") to be paid for each share of
ValliCorp Common Stock is $21.00 of value in Westamerica Common Stock, subject
to adjustment under certain circumstances as described below and in the
Agreement.
Specifically, as set forth in the Agreement, the Purchase Price to be paid to
ValliCorp shareholders in the form of Westamerica Common Stock will be as
follows. If the average closing price of Westamerica Common Stock on the NMS
for a period of 20 consecutive trading days ending five trading days prior to
the Effective Date (the "Average Price") is between $48.69 and $53.81
(inclusive), then ValliCorp shareholders will receive $21.00 of value in
Westamerica Common Stock for each outstanding share of ValliCorp Common Stock
(thus, the Exchange Ratio is determined by dividing $21.00 by the Average
Price). If the Average Price is above $53.81, the Exchange Ratio will be
adjusted such that ValliCorp shareholders will receive the equivalent of 40% of
the appreciation above that amount. Under this formula, for every $1.00 that
the Average Price is above $53.81, ValliCorp shareholders will receive
approximately an additional $0.16 of value in Westamerica Common Stock. If the
Average Price is below $48.69, then the Exchange Ratio is fixed at .4313 so
that ValliCorp shareholders will receive .4313 of a share of Westamerica Common
Stock in exchange for each share of ValliCorp Common Stock; provided, however,
that if the Average Price falls below $46.13, the Board of Directors of
ValliCorp may choose to either maintain an Exchange Ratio of .4313 or exercise
a right to terminate the Agreement. If ValliCorp exercises its right to
terminate the Agreement, Westamerica may choose to either increase the Exchange
Ratio to a ratio which will provide approximately $19.90 of value in
Westamerica Common Stock for each ValliCorp Share (whereupon no termination
shall have occurred), or allow the Agreement to be terminated.
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In addition, the Purchase Price may be further adjusted downward based on a
measure of ValliCorp's consolidated book value calculated in the manner and
based on certain adjustments as set forth in the Agreement. Generally, at the
end of the calendar quarter prior to the Effective Date, ValliCorp's book value
must be equal to or in excess of $138,885,000. If said amount is less than
$138,885,000 but more than $125,000,000, then the Exchange Ratio will be
adjusted downward based on a formula set forth in the Agreement. The formula
takes the consolidated book value (calculated in the manner set forth in the
Agreement), divides it by $138,885,000 (to determine the fraction of book value
attained) and then multiplies the result by the prior Exchange Ratio to yield
the final Exchange Ratio. However, if said consolidated book value (calculated
in the manner set forth in the Agreement) is below $125,000,000, no further
adjustment to the Exchange Ratio will occur and, at Westamerica's option,
Westamerica may terminate the Agreement.
If the Average Price at the Effective Date is the same as the closing price
of Westamerica Common Stock on January 3, 1997 of $57.875, and assuming
ValliCorp's consolidated book value remains at or above $138,885,000, the
Exchange Ratio would be .3738, which equates to a purchase price of $21.63 in
value of Westamerica Common Stock per ValliCorp Share.
Immediately following consummation of the Merger, based on the number of
shares of Westamerica Common Stock and ValliCorp Common Stock outstanding on
the Record Date, the former shareholders of ValliCorp will hold between
approximately 39.0% and 36.6% of the shares of the issued and outstanding
Common Stock of Westamerica assuming the Average Price remains between $48.69
and $53.81 (inclusive). To the extent the Average Price is above $53.81, the
percentage of Westamerica Common Stock which former ValliCorp shareholders will
hold following the Effective Date will be less than 36.6% of Westamerica's
issued and outstanding Common Stock. In general, since the Exchange Ratio will
be fixed at .4313 if the Average Price is less than $48.69, the maximum
percentage of Westamerica Common Stock which former ValliCorp shareholders will
own after the Effective Date will remain at approximately 39.0%. If the Average
Price as of the Effective Date is $57.875 and ValliCorp's consolidated book
value (calculated in the manner set forth in the Agreement) as of the calendar
quarter prior to the Effective Date is at or above $138,885,000, the former
shareholders of ValliCorp will hold approximately 35.6% of the issued and
outstanding shares of Westamerica Common Stock (based on the number of shares
outstanding on the Record Date). Each share of Westamerica Common Stock issued
and outstanding immediately prior to consummation of the Merger will remain
outstanding and unchanged as a result of the Merger. See "The Merger--Purchase
Price and Potential Adjustments" and "--Conversion of Shares of ValliCorp
Common Stock."
TREATMENT OF STOCK OPTIONS
As of the Record Date, options to purchase 764,740 shares of ValliCorp Common
Stock were outstanding pursuant to ValliCorp's stock option plans or stock
option plans of companies acquired by ValliCorp (collectively, the "ValliCorp
Stock Option Plan"). The Agreement provides that, following the Effective Date,
all outstanding options under the ValliCorp Stock Option Plan will be assumed
by Westamerica or replaced by options for an equivalent number of shares of
Westamerica Common Stock with an exercise price calculated in accordance with
the Exchange Ratio, but otherwise on terms and conditions that are consistent
with the terms and conditions of the existing ValliCorp Stock Option Plan stock
options. See "The Merger--Treatment of Stock Options" and "Certain
Considerations--Interests of ValliCorp Officers and Directors in the Merger."
CONDITIONS AND REGULATORY APPROVALS
The respective obligations of Westamerica and ValliCorp to effect the Merger
are subject to various conditions described in "The Merger--Representations and
Warranties; Conditions to the Merger."
The Merger will occur only if all required government approvals are in effect
or have been obtained (without the imposition of any conditions or requirements
as determined in the reasonable opinion of
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Westamerica or ValliCorp to materially and adversely affect the anticipated
economic and business benefits of the Merger), the Agreements are approved by
the majority of the outstanding shares of ValliCorp Common Stock and of
Westamerica Common Stock and certain other conditions are satisfied, including,
but not limited to, the Merger being accounted for as a pooling of interests,
ValliCorp's consolidated book value as of the calendar quarter preceding the
Effective Date (calculated as set forth in the Agreement) being equal to or
greater than $125,000,000, the Merger qualifying as a tax-free reorganization,
neither party suffering a Material Adverse Effect since September 30, 1996 and
the absence of any investigation, legal action, proceeding or legal impediment
to the Merger which so adversely affects the anticipated economic and business
benefits to Westamerica of the Merger as to render consummation of the Merger
inadvisable.
COVENANTS
The Agreement contains covenants of Westamerica and ValliCorp which provide,
among other things, that ValliCorp and its subsidiaries will conduct their
respective business in the ordinary course as such was conducted prior to
entering into the Agreement. The Agreement further provides that, unless
Westamerica has given its previous written consent to any act or omission to
the contrary (which consent shall not be unreasonably withheld), ValliCorp and
its subsidiaries will not, until the Effective Date, do certain things, as
further described below. See "The Merger--Covenants of Westamerica and
ValliCorp; Conduct of Business Prior to the Merger."
The Agreement also provides that, except with the prior written consent of
Westamerica, neither ValliCorp nor any ValliCorp subsidiary will propose,
declare, set aside or pay any dividend or distribution in respect of its common
stock other than regular quarterly cash dividends in amounts substantially
equivalent to dividends paid in the two years prior to the Agreement.
Westamerica and ValliCorp will also coordinate the declaration of any dividends
in respect of Westamerica Common Stock and ValliCorp Common Stock. ValliCorp
has agreed not to increase its quarterly dividend to a level that is greater
than .4098 times Westamerica's then current dividend, but may increase its
dividend to that level without violating this covenant.
ValliCorp will not, directly or indirectly, solicit, initiate, or encourage,
or take any other action to facilitate, any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, any
Takeover Proposal, or agree to endorse any Takeover Proposal, or participate in
any negotiations, or provide third parties with any nonpublic information,
relating to any such inquiry or proposal; provided, however, that prior to
receipt of the ValliCorp shareholder approval of the Agreements the foregoing
covenant is subject to certain exceptions to allow the ValliCorp Board to
satisfy its fiduciary duties. If the ValliCorp Board, in the exercise of its
fiduciary duties, exercises its right to accept a Superior Proposal, it may
only do so based on the advice of a financial advisor of nationally recognized
reputation that said proposal would, if consummated, be more favorable, from a
financial point of view, to ValliCorp's shareholders than the Merger and by
paying a Termination Fee of $6 million.
If the Agreement is terminated pursuant to its terms other than solely
because (i) the Federal Reserve Board or Superintendent issues a final order
denying approval of the Merger, (ii) the Westamerica shareholders do not
approve the Merger, (iii) a Material Adverse Effect occurs with respect to
Westamerica and its subsidiaries taken as a whole since September 30, 1996, or
(iv) a material breach of the Agreement by Westamerica is not cured within 30
days after written notice thereof by ValliCorp, and an Acquisition Event occurs
with respect to ValliCorp within 18 months after the date of such termination,
ValliCorp is obligated to pay a $6 million Termination Fee to Westamerica.
With respect to five ValliWide branches which, prior to November 11, 1996,
ValliWide had considered closing or consolidating, ValliWide has agreed it will
so close or consolidate said branches prior to the Effective Date. ValliWide
has also agreed that it will utilize all commercially reasonable efforts to
sell, close or consolidate certain additional branches prior to the Effective
Date, subject to certain closing conditions.
Westamerica has agreed that, promptly following the Effective Date,
Westamerica will take those actions necessary to cause three persons who are
currently directors of ValliCorp to become directors of Westamerica.
9
<PAGE>
Westamerica has also agreed that, following the Effective Date, it will
indemnify all persons who are or become directors or officers of ValliCorp or
any of its subsidiaries prior to the Effective Date to the fullest extent
permitted by applicable law on the basis set forth in the Agreement, and all
rights to indemnification and all limitations on liability existing in favor of
said directors and officers in effect on November 11, 1996 shall survive the
Merger and be honored by Westamerica for six years after the Effective Date.
Westamerica will also cause all such directors and officers to be covered by
ValliCorp's existing directors' and officers' liability insurance policy for no
less than three years after the Effective Date, provided that Westamerica will
not be obligated to make annual premium payments for such insurance to the
extent such premiums exceed 150% of the most recent premium paid by ValliCorp.
In addition, Westamerica has agreed not to accept any offer from any third
party regarding a Takeover Proposal of Westamerica with any other entity unless
such offer is expressly conditioned upon the performance by Westamerica or its
successor in interest of its obligations under the Agreement.
STOCK OPTION AGREEMENT
As a condition to and in consideration for entering into the Agreement,
ValliCorp granted Westamerica an option to purchase up to 3,747,187 shares of
ValliCorp Common Stock (the "Option Shares") at an exercise price of $18.00 per
share (the "Stock Option"). The Option Shares, if issued pursuant to the Stock
Option Agreement entered into between Westamerica and ValliCorp (the "Stock
Option Agreement"), would represent approximately 19.9% of the issued and
outstanding shares (excluding treasury shares) of ValliCorp Common Stock after
giving effect to the issuance of any shares pursuant to an exercise of the
Stock Option, but in no event will the number of Option Shares exceed 19.9% of
ValliCorp's issued and outstanding Common Stock.
The number of Option Shares will be increased to the extent that ValliCorp
issues additional shares of Common Stock (otherwise than pursuant to an
exercise of the Stock Option) such that the number of Option Shares will
continue to equal 19.9% of the then issued and outstanding shares of ValliCorp
Common Stock without giving effect to the issuance of shares pursuant to an
exercise of the Stock Option. The number of shares of ValliCorp Common Stock
subject to the Stock Option, and the applicable exercise price per Option
Share, also will be appropriately adjusted in the event of any stock dividend,
split-up, merger, recapitalization, combination, subdivision, exchange of
shares, or similar event relating to ValliCorp. In the event that ValliCorp
issues or agrees to issue any shares of Common Stock (other than as permitted
under the Agreement) at a price less than $18.00 per share (or lower than an
adjusted price per share), the exercise price will be equal to such lesser
price.
The Stock Option is exercisable only upon the occurrence of both an "Initial
Triggering Event" and a "Subsequent Triggering Event" prior to termination of
the Stock Option, as set forth in the Stock Option Agreement, none of which has
occurred as of the date hereof. See "The Merger--Stock Option Agreement."
Westamerica has agreed that the aggregate amount of gain realized by
Westamerica pursuant to the Stock Option Agreement, when added to the
Termination Fee, if any, received by Westamerica, will not exceed $15 million.
AGREEMENTS WITH VALLICORP DIRECTORS
Westamerica has entered into a Shareholder Agreement with all of the
directors of ValliCorp (collectively, the "ValliCorp Directors"), pursuant to
which the ValliCorp Directors have agreed generally (i) to vote all shares of
ValliCorp Common Stock as to which they have sole or shared voting power (the
"Shares") in favor of the approval of the Agreement, thereby increasing the
likelihood that the Agreement will be approved by the shareholders of ValliCorp
and (ii) not to sell, assign, transfer or otherwise take any action that will
alter or affect in any way the right to vote any of their Shares of ValliCorp
Common Stock prior to and through the date of the ValliCorp Special Meeting.
See "The Merger--Agreements with ValliCorp Directors."
10
<PAGE>
NONCOMPETITION AGREEMENTS
As a condition to consummation of the Merger under the Agreement, the non-
employee directors of ValliCorp and ValliWide (collectively, the "Non-Employee
Directors") have entered into noncompetition agreements (the "Noncompetition
Agreements") with Westamerica. Pursuant to the Noncompetition Agreements, after
the Effective Date, the Non-Employee Directors will not be permitted, without
Westamerica's written consent, to engage in activities which are similar to or
competitive with the activities of Westamerica, ValliCorp or ValliWide within
Calaveras, Fresno, Kern, Kings, Merced, Madera, Nevada, Placer, Stanislaus,
Tulare, Tuolumne, Sacramento, San Luis Obispo or Yolo Counties in the State of
California. The Noncompetition Agreements expire two years after the Effective
Date.
In addition, the Noncompetition Agreements require the Non-Employee Directors
to treat as confidential all information concerning the records, properties,
books, contracts, commitments and affairs of Westamerica, ValliCorp or their
respective subsidiaries, even if a Noncompetition Agreement is terminated or
expires. See "The Merger--Noncompetition Agreements."
AMENDMENT AND TERMINATION
The Agreements may be amended or supplemented at any time by mutual agreement
of Westamerica and ValliCorp. Any amendment or supplement must be in writing
and approved by the boards of directors and/or officers authorized by the
boards. The Agreements may be terminated by the mutual consent of the Boards of
Directors of both Westamerica and ValliCorp at any time prior to the
consummation of the Merger.
The Agreements may also be terminated as follows: (i) by the Board of
Directors of Westamerica on or after August 15, 1997, if (A) any of the
conditions precedent of Westamerica in the Agreement have not been fulfilled,
or (B) such conditions have been fulfilled or waived by Westamerica and
ValliCorp has failed to complete the Merger; (ii) by the Board of Directors of
Westamerica if a Material Adverse Effect has occurred with respect to ValliCorp
and its subsidiaries taken as a whole since September 30, 1996, or there has
been a failure or prospective failure on the part of ValliCorp or ValliWide to
comply with its obligations under the Agreement, or any failure or prospective
failure to comply with any of the conditions precedent; (iii) by Westamerica
if, after the date of the Agreement, any person (other than Westamerica or any
subsidiary thereof) becomes and remains for 10 Business Days the beneficial
owner of 10% or more of the then outstanding shares of ValliCorp or any person
(other than Westamerica or a subsidiary thereof) commences a bona fide tender
offer or exchange offer to acquire at least 10% of the then outstanding shares
of ValliCorp; (iv) by the Board of Directors of ValliCorp on or after August
15, 1997, if (A) any of the conditions precedent of ValliCorp have not been
fulfilled, or (B) such conditions have been fulfilled or waived by ValliCorp
but Westamerica has failed to complete the Merger; provided, however, that if
Westamerica is engaged at the time in litigation (including an administrative
appeal procedure) relating to an attempt to obtain one or more of the
Governmental Approvals or if Westamerica is contesting in good faith any
litigation which seeks to prevent consummation of the transactions contemplated
by the Agreement, such nonfulfillment will not give ValliCorp the right to
terminate the Agreement until the earlier of (A) 12 months after the date of
the Agreement and (B) 60 days after the completion of such litigation and of
any further action by a governmental agency as a result of any judicial remand,
order or directive or otherwise any waiting period with respect thereto; (v) by
the Board of Directors of ValliCorp if (A) a Material Adverse Effect occurs
with respect to Westamerica and its subsidiaries taken as a whole since
September 30, 1996, or (B) there has been any failure or prospective failure to
comply with any condition precedent of ValliCorp; and (vi) by the Board of
Directors of ValliCorp, if the Board of Directors so determines by a vote of a
majority of the members of the entire Board, at any time during the two-day
period commencing one day after the Determination Date, if the Average Price as
of the Determination Date of shares of Westamerica Common Stock shall be less
than $46.13 (the "Minimum Price"), subject to Westamerica's right to adjust the
Exchange Ratio such that the purchase price for each ValliCorp Share would be
approximately $19.90 of value in Westamerica Common Stock. See "The Merger--
Amendment; Termination."
11
<PAGE>
EXPENSES
Westamerica and ValliCorp have each agreed to pay their own costs incurred
incident to the performance of their obligations under the Agreements, except
that each shall bear and pay 50% of all printing and mailing costs and filing
fees associated with the Registration Statement and the Joint Proxy
Statement/Prospectus. See "The Merger--Expenses" and "--Amendment;
Termination."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is anticipated that the principal federal income tax consequences of the
Merger will be as follows: (a) the Merger will constitute a reorganization
within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of
1986, as amended (the "Code"); (b) no gain or loss will be recognized by the
shareholders of ValliCorp who receive Westamerica Common Stock in exchange for
the shares of ValliCorp Common Stock which they hold, except in respect of cash
received for fractional shares; (c) the holding period of the Westamerica
Common Stock in the hands of the former ValliCorp shareholders will generally
include the holding period of their exchanged ValliCorp Common Stock; (d) the
tax basis of the shares of Westamerica Common Stock received by the
shareholders of ValliCorp will be the same as the tax basis of their exchanged
shares of ValliCorp Common Stock (less any basis allocable to fractional
shares); and (e) the Merger will not result in any recognized gain or loss to
Westamerica, ValliCorp or the existing Westamerica shareholders (other than
dissenting shareholders of Westamerica). As a condition to the consummation of
the Merger, Westamerica and ValliCorp will each receive an opinion of
Westamerica's legal counsel to the effect that the Merger will have the
foregoing federal income tax consequences. For a detailed discussion of the
income tax consequences of the Merger, see "The Merger--Certain Federal Income
Tax Consequences." SHAREHOLDERS SHOULD CONSULT THEIR PERSONAL TAX ADVISORS AS
TO THE TAX CONSEQUENCES OF THE MERGER TO THEM UNDER UNITED STATES FEDERAL,
STATE OR LOCAL TAX LAW OR APPLICABLE FOREIGN TAX LAWS.
ACCOUNTING TREATMENT
The Merger is expected to be accounted for as a pooling of interests, and it
is a condition to Westamerica's obligation to consummate the Merger that
Westamerica shall have received a letter from KPMG Peat Marwick LLP,
Westamerica's independent public accountants ("KPMG"), to the effect that the
Merger will qualify for such accounting treatment. See "The Merger--
Representations and Warranties; Conditions to the Merger" and "--Accounting
Treatment."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As of the Record Date, the directors and executive officers of ValliCorp
beneficially owned 773,599 shares of ValliCorp Common Stock, not including
shares such persons may acquire through the exercise of stock options or the
conversion of Convertible Debentures. On such date, the directors and executive
officers of ValliCorp held options to acquire 435,792 shares of ValliCorp
Common Stock. Options not exercised prior to the Effective Date will be
converted into options to acquire Westamerica Common Stock on substantially the
same terms and conditions as the options to purchase ValliCorp Common Stock
held by such persons prior to the Merger. Under the general conversion rules
set forth in the Agreement, each option shall be deemed to continue as an
option to purchase the number of shares of Westamerica Common Stock equal to
the Exchange Ratio multiplied by the number of shares of ValliCorp Common Stock
previously covered by such option at an option exercise price for each such
share of Westamerica Common Stock equal to the previous option exercise price
for each share of ValliCorp Common Stock divided by the Exchange Ratio. See
"The Merger--Treatment of Stock Options." Additionally, as of the Record Date,
directors of ValliCorp also owned approximately $270,774 of Convertible
Debentures which will be assumed by Westamerica to the extent that such
Debentures have not been converted into ValliCorp Common Stock prior to the
Effective Date. Such debentures are convertible into as many as 49,231 shares
of ValliCorp Common Stock at a price of $5.50 per share. Following the
Effective Date, the directors owning such debentures will have the right to
convert the debentures into that number of shares of Westamerica Common Stock
multiplied by the Exchange Ratio. See "Description of ValliCorp Capital Stock
and Indebtedness--Debt Agreements."
12
<PAGE>
J. Mike McGowan, Chairman of the Board and Chief Executive Officer of
ValliCorp, and Steven C. Pumphrey, Director, President and Chief Operating
Officer of ValliCorp, are parties to employment agreements dated July 1, 1996
that provide for severance benefits, which include a cash lump sum payment of
three times their annual salary (including bonus), continuation of certain
welfare benefits coverage for up to three years and a prorated cash bonus for
the year of termination. Executive officers John H. Tait, Edwin L. Herbert and
Wolfgang T.N. Muelleck are parties to similar agreements dated July 1, 1996
providing for severance benefits, which include a cash lump sum payment of two
times their annual salary (including bonus), continuation of certain welfare
benefits coverage for up to two years and a prorated cash bonus for the year of
termination. As of the Record Date, J. Mike McGowan, Steven C. Pumphrey, John
H. Tait, Edwin L. Herbert, and Wolfgang T.N. Muelleck held stock options to
purchase ValliCorp Shares (which will be assumed by Westamerica with the
substitution of shares of Westamerica Common Stock) in approximately the
following amounts: 130,897, 50,000, 51,752, 35,000 and 50,128, respectively.
Pursuant to the terms of their option agreements, any of these options which
are unvested will become fully vested at the Effective Date. All of the
contracts provide for an additional lump sum cash payment (the "Gross-Up
Payment") equal to the sum of any federal excise taxes payable by the
executives, with respect to the severance benefits and the fully vested
options, plus all federal, state and local income, employment and excise taxes
payable by the executives on said Gross-Up Payment. Upon consummation of the
Merger, it is anticipated that J. Mike McGowan, Steven C. Pumphrey, John H.
Tait, Edwin L. Herbert and Wolfgang T.N. Muelleck will receive lump sum
severance benefits estimated to be worth approximately $2,514,377, $1,430,956,
$494,887, $399,986 and $648,416, respectively (certain of which amounts may
include an approximation of the anticipated Gross-Up Payments). The actual
amount of said severance benefits could differ from the amounts set forth in
the preceding sentence because the amount of the severance benefits for each of
the five executive officers will be based, in part, on a complex calculation
pursuant to applicable tax law which factors into said calculation, among other
factors, the closing price per share of Westamerica Common Stock on the
Effective Date. Six other key employees (including two executive officers) of
ValliCorp will become entitled to receive up to two years of severance payments
in a single payment upon consummation of the Merger. See "Certain
Considerations--Interests of ValliCorp Officers and Directors in the Merger."
At the Effective Time, the Board of Directors of Westamerica will be
comprised of 12 directors. Westamerica has agreed that, promptly following the
Closing Date, Westamerica will take those actions necessary to add three
current ValliCorp directors, none of whom has yet been identified, to the
Westamerica Board.
The former officers and employees of ValliCorp who become officers or
employees of Westamerica will be entitled to participate in all employee
benefits and benefit programs of Westamerica, in accordance with the terms of
such plans or programs.
Westamerica has also agreed that, following the Effective Date, it will
indemnify all persons who are or become directors or officers of ValliCorp or
any of its subsidiaries prior to the Effective Date to the fullest extent
permitted by applicable law on the basis set forth in the Agreement, and all
rights to indemnification and all limitations of liability existing in favor of
said directors and officers in effect on November 11, 1996 shall survive the
Merger and be honored by Westamerica for six years after the Effective Date.
Westamerica has agreed that, for three years after the Effective Date, it will
cause the persons who served as directors or officers of ValliCorp and its
subsidiaries on or before the Effective Date to be covered by ValliCorp's
existing directors' and officers' liability insurance policy (although
Westamerica may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are not less advantageous than
such policy) or so-called tail coverage obtained in connection with ValliCorp's
directors' and officers' liability insurance policies in effect as of the
Effective Date; provided that Westamerica will not be obligated to make annual
premium payments for such insurance to the extent such premiums exceed 150% of
the most recent premium paid by ValliCorp.
Westamerica has authorized ValliCorp to make retention bonus payments to
certain key ValliCorp employees who maintain their employment at least through
the Closing Date. ValliCorp has agreed not to make retention bonus payments
without Westamerica's consent (which shall not be unreasonably withheld).
The Agreement provides that the service of a non-employee director of
ValliCorp for purposes of the ValliCorp director stock option plan does not
terminate so long as such individual remains a director or advisory
13
<PAGE>
director of ValliWide or its successors on and after the Effective Date.
Similarly, the service of non-employee directors under the 1994 Mineral King
Continuation Stock Option Plan will continue as long as such directors remain
as a director or advisory director of ValliWide and its successors on or after
the Effective Date. These provisions have the effect of allowing such non-
employee directors who become directors or advisory directors of ValliWide or
its successors to retain all of their stock options which otherwise may lapse
following the Effective Time. This is not the case, however, with respect to
one ValliCorp director with options under the 1996 Auburn Continuation Stock
Option Plans. Westamerica has agreed to offer all non-employee directors of
ValliCorp a position as director or advisory director of ValliWide or any
successor in interest thereto.
DISSENTERS' RIGHTS OF APPRAISAL
Westamerica Shareholders. Because Westamerica Common Stock is traded on the
NMS, dissenters' rights will be available to the shareholders of Westamerica
only if the holders of five percent (5%) or more of Westamerica Common Stock
make a written demand upon Westamerica for the purchase of dissenting shares in
accordance with Chapter 13 of the GCL ("Chapter 13"). If this condition is
satisfied and the Merger is consummated, shareholders of Westamerica who
dissent from the Merger by complying with the procedures set forth in Chapter
13 would be entitled to receive an amount equal to the fair market value of
their shares as of November 11, 1996, the day before the public announcement of
the Merger. The high, low and closing sales prices for Westamerica Common Stock
on November 11, 1996 were $52.50, $52.00 and $52.50, respectively. A copy of
Chapter 13 is attached hereto as Annex E and should be read for more complete
information concerning dissenters' rights. THE REQUIRED PROCEDURE SET FORTH IN
CHAPTER 13 OF THE CALIFORNIA GENERAL CORPORATION LAW MUST BE FOLLOWED EXACTLY
OR ANY DISSENTERS' RIGHTS MAY BE LOST. See "Dissenters' Rights of Appraisal--
Appraisal Rights of Westamerica Shareholders."
ValliCorp Shareholders. Under applicable provisions of the DGCL, holders of
record of ValliCorp Common Stock are not entitled to appraisal rights in
connection with the Merger. See "Dissenters' Rights of Appraisal--ValliCorp
Shareholders."
MARKET PRICE AND DIVIDEND DATA
Westamerica Common Stock is listed and traded on the NMS under the symbol
"WABC." ValliCorp Common Stock is listed and traded on the NMS under the symbol
"VALY."
The following table sets forth the last reported sales price per share for
Westamerica Common Stock and ValliCorp Common Stock as reported on the NMS on
November 11, 1996, the trading date prior to the public announcement of the
Merger, and on January 3, 1997, the latest practicable trading day before the
printing of this Joint Proxy Statement/Prospectus, and equivalent per share
prices for ValliCorp Common Stock based on the prices of Westamerica Common
Stock:
<TABLE>
<CAPTION>
HISTORICAL EQUIVALENT
MARKET VALUE PRO FORMA
PER SHARE MARKET VALUE
--------------------- PER SHARE OF
VALLICORP WESTAMERICA VALLICORP(1)
--------- ----------- ------------
<S> <C> <C> <C>
Last Trade:
November 11, 1996....................... $18.75 $52.25 $21.00
January 3, 1997......................... 20.00 57.875 21.63
</TABLE>
- --------
(1) The equivalent pro forma market value per share of ValliCorp Common Stock
represents the last reported sales price per share of Westamerica Common
Stock prior to announcement of the Agreement and as of the most recent
practicable date prior to the date of this Joint Proxy Statement/Prospectus
multiplied by an Exchange Ratio of .4019 and .3738, respectively. The
Exchange Ratio is subject to potential adjustments as provided in the
Agreement. See "The Merger--Purchase Price and Potential Adjustments"
14
<PAGE>
Following the Merger, no shares of ValliCorp Common Stock will be outstanding
and Westamerica Common Stock will continue to be traded on the NMS.
Westamerica has paid quarterly cash dividends since it commenced operations
on January 1, 1973. The Westamerica Board of Directors considers the
advisability and amount of proposed dividends each quarter. Westamerica's
primary source of funds for the payment of dividends is its principal banking
subsidiary, Westamerica Bank, whose ability to pay dividends to Westamerica is
subject to various legal and regulatory restrictions. See "Market Price and
Dividend Information--Dividends and Dividend Policy." Westamerica is subject to
certain restrictions on its ability to pay dividends under a Westamerica debt
agreement. See "Description of Westamerica Capital Stock and Indebtedness--Debt
Agreement."
ValliCorp has paid quarterly cash dividends since the second quarter of 1991.
The ValliCorp Board of Directors considers the advisability and amount of
proposed dividends each quarter. ValliCorp's primary source of funds for the
payment of dividends is its principal banking subsidiary, ValliWide, whose
ability to pay dividends to ValliCorp is subject to various legal and
regulatory restrictions. See "Market Price and Dividend Information--Dividends
and Dividend Policy."
DIFFERENCES IN CHARTER DOCUMENTS
Westamerica is organized under the GCL and ValliCorp is organized under the
DGCL. Accordingly, there are differences in their respective charter documents
and rights of shareholders. See "Certain Differences in Rights of
Shareholders."
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following tables present selected historical and pro forma combined
consolidated financial information for Westamerica and ValliCorp. The following
financial data should be read in conjunction with the historical consolidated
financial statements of Westamerica, the supplemental consolidated financial
statements of ValliCorp, the unaudited interim historical consolidated
financial statements, and the unaudited pro forma combined consolidated
financial information and the notes to such statements, certain of which are
included elsewhere in this Joint Proxy Statement/Prospectus. The selected
supplemental historical financial information for ValliCorp includes El Capitan
Bancshares, Inc., and CoBank Financial Corporation with which ValliCorp
consummated business combinations accounted for as poolings of interests as of
February 2, 1996 and March 22, 1996, respectively, and the September 13, 1996
purchase of Auburn Bancorp. The unaudited pro forma combined financial
information presents selected financial information based on the historical and
supplemental financial statements of the parties, giving effect to the proposed
Merger under the pooling of interests method of accounting and the assumptions
and adjustments described in the notes thereto. See "Pro Forma Combined
Financial Information." The unaudited pro forma combined and pro forma
equivalent financial statements do not indicate the results or financial
position that would have occurred if the Merger had been in effect for the
periods or on the dates indicated or that may occur in the future.
15
<PAGE>
WESTAMERICA
UNAUDITED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Results of operations:
Interest income....... $ 129,952 $ 130,717 $ 174,377 $ 166,094 $ 165,975 $ 185,060 $ 212,811
Interest expense...... 45,738 43,716 58,612 49,860 51,158 69,951 103,233
Net interest income... 84,214 87,001 115,765 116,234 114,817 115,109 109,578
Provision for loan
losses............... 3,525 4,320 5,595 7,420 10,581 8,410 12,201
Noninterest income.... 16,282 16,090 21,533 25,999 33,806 30,646 28,485
Noninterest expense... 56,297 66,520 86,340 94,341 121,441 111,662 103,358
Income before income
taxes................ 40,674 32,251 45,363 40,472 16,601 25,683 22,504
Provision for income
taxes................ 12,708 9,775 13,979 12,810 4,507 9,642 7,742
Net income.......... 27,966 22,476 31,384 27,662 12,094 16,041 14,762
Balance sheet (end of
period):
Total assets.......... $2,529,167 $2,428,676 $2,490,944 $2,457,427 $2,428,848 $2,376,715 $2,366,705
Net loans............. 1,381,949 1,334,546 1,353,732 1,354,539 1,368,923 1,424,436 1,494,766
Deposits.............. 2,069,143 2,005,382 2,049,521 2,071,692 2,110,031 2,142,085 2,145,431
Other borrowed funds.. 206,460 186,613 195,622 160,950 112,649 38,468 39,278
Shareholders' equity.. 229,200 218,295 223,937 204,661 188,644 177,640 162,583
Financial ratios:
Total capital to risk-
adjusted assets...... 14.89% 15.51% 15.18% 15.01% 14.13% 12.25% 11.12%
Tier 1 capital to
average total assets. 8.99 9.02 9.12 8.37 7.83 7.67 7.05
Reserve for loan
losses to total
loans................ 2.43 2.42 2.42 2.34 2.15 2.03 1.85
Return on average
assets............... 1.51 1.25 1.30 1.13 0.51 0.68 0.64
Return on average
equity............... 16.68 14.08 14.61 14.13 6.73 9.49 9.33
Nonperforming assets
to total assets...... 0.56 0.70 0.61 0.81 1.30 2.38 2.52
Per share:
Net income............ $ 2.89 $ 2.27 $ 3.18 $ 2.79 $ 1.22 $ 1.66 $ 1.54
Dividends declared.... 0.69 0.57 0.77 0.64 0.57 0.51 0.44
Book value............ 24.28 22.18 22.87 20.67 19.03 18.18 17.12
Average shares
outstanding............ 9,672 9,893 9,877 9,916 9,884 9,678 9,587
Dividend payout ratio... 23.88% 25.11% 24.21% 22.94% 46.72% 30.72% 28.57%
</TABLE>
16
<PAGE>
VALLICORP
UNAUDITED SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- ------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- -------- --------
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Results of operations:
Interest income....... $ 74,072 $ 81,644 $ 109,324 $ 90,544 $ 71,190 $ 67,954 $ 71,349
Interest expense...... 23,012 27,524 37,015 23,461 21,093 24,108 32,447
Net interest income... 51,060 54,120 72,309 67,083 50,097 43,846 38,902
Provision for loan
losses............... 5,629 7,813 9,633 3,958 2,922 2,227 1,361
Noninterest income.... 10,398 9,326 12,696 11,663 10,476 8,329 7,113
Noninterest expense... 44,924 40,806 55,620 56,520 39,819 34,893 31,545
Income before income
taxes................ 10,905 14,827 19,752 18,268 17,832 15,055 13,109
Provision for income
taxes................ 4,471 5,934 7,950 7,817 6,596 5,614 4,917
Net income.......... 6,434 8,893 11,802 10,451 11,236 9,441 8,192
Balance sheet (end of
period):
Total assets.......... $1,329,555 $1,362,439 $1,390,035 $1,335,769 $1,215,061 $857,769 $812,798
Net loans*............ 865,899 889,209 850,763 865,583 708,800 544,802 521,565
Deposits.............. 1,150,950 1,196,718 1,221,386 1,178,131 1,084,364 779,833 740,845
Other borrowed funds.. 30,096 32,505 31,342 31,623 1,262 1,582 1,719
Stockholders' equity.. 139,376 126,438 127,121 116,508 112,026 69,966 62,391
Financial ratios:
Total capital to risk-
adjusted assets...... 13.99% 13.14% 13.37% 12.63% 14.60% 12.11% 11.75%
Tier 1 capital to
average total assets. 9.98 8.72 8.74 8.69 8.73 7.58 7.28
Reserve for loan
losses to total
loans................ 1.75 2.05 1.73 1.61 1.73 1.47 1.41
Return on average
assets............... 0.99 0.91 0.87 0.86 1.19 1.13 1.09
Return on average
equity............... 10.01 9.87 9.49 9.04 13.95 14.30 14.00
Nonperforming assets
to total assets...... 1.36 2.08 1.46 0.86 0.87 0.88 0.70
Per share:
Net income............ $ 0.48 $ 0.66 $ 0.88 $ 0.78 $ 1.08 $ 0.98 $ 0.85
Dividends paid........ 0.30 0.27 0.36 0.32 0.27 0.23 0.15
Book value............ 9.97 9.55 9.58 8.91 8.94 7.19 6.91
Average shares outstand-
ing.................... 13,525 13,464 13,525 13,402 10,490 9,725 9,661
Dividend payout ratio .. 70.35% 31.89% 39.08% 34.67% 22.29% 21.91% 20.21%
</TABLE>
- -------
*Excludes loans held for sale
17
<PAGE>
WESTAMERICA AND VALLICORP
UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------------- ------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Results of operations:
Interest income....... $ 203,988 $ 212,361 $ 283,701 $ 256,638 $ 237,165 $ 253,014 $ 284,160
Interest expense...... 68,750 71,240 95,627 73,321 72,251 94,059 135,680
Net interest income... 135,238 141,121 188,074 183,317 164,914 158,955 148,480
Provision for loan
losses............... 9,154 12,133 15,228 11,378 13,503 10,637 13,562
Noninterest income.... 26,680 25,416 34,229 36,929 44,249 38,975 35,598
Noninterest expense... 101,221 107,326 141,960 150,128 161,227 146,555 134,903
Income before income
taxes................ 51,543 47,078 65,115 58,740 34,433 40,738 35,613
Provision for income
taxes................ 17,164 15,709 21,929 20,627 11,103 15,256 12,659
Net income............ 34,379 31,369 43,186 38,113 23,330 25,482 22,954
Balance sheet (end of
period):
Total assets.......... $3,856,758(1) $3,791,115 $3,880,299(1) $3,793,196 $3,643,909 $3,234,484 $3,179,503
Net loans............. 2,247,848 2,223,755 2,204,495 2,220,122 2,077,723 1,969,238 2,016,331
Deposits.............. 3,220,093 3,202,100 3,270,907 3,249,823 3,194,395 2,921,918 2,886,276
Other borrowed funds.. 236,556 219,118 226,964 192,573 113,911 40,050 40,997
Shareholders' equity.. 366,743(1)(6) 344,733 350,378(1) 321,169 300,670 247,606 224,974
Financial ratios:
Total capital to risk-
adjusted assets...... 14.52% 14.62% 14.50% 14.13% 14.28% 12.21% 11.27%
Tier 1 capital to
average total assets. 9.28 8.91 8.97 8.48 8.14 7.65 7.11
Reserve for loan
losses to total
loans................ 2.17 2.27 2.15 2.05 2.00 1.86 1.73
Return on average
assets............... 1.22 1.11 1.14 1.04 0.94 1.08 1.00
Return on average
equity............... 13.14 12.41 12.73 12.24 11.97 10.85 10.53
Nonperforming assets
to total assets...... 0.84 1.19 0.92 0.83 1.15 1.98 2.06
Per share:(2)(5)
Net income............ $ 2.27(3) $ 2.04 $ 2.80(3) $ 2.47 $ 1.64 $ 1.87 $ 1.69
Book value............ 24.26 22.58 23.04 21.05 19.94 18.24 17.05
Average shares
outstanding(2)(5)...... 15,170(3) 15,411 15,399(3) 15,408 14,183 13,663 13,546
Equivalent pro forma
ValliCorp per
share:(4)(5)
Net income.............. $ 0.93 $ 0.84 $ 1.15 $ 1.01 $ 0.67 $ 0.76 $ 0.69
Book value.............. 9.94 9.25 9.44 8.63 8.17 7.47 6.99
</TABLE>
18
<PAGE>
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(1) On September 30, 1996 and December 31, 1995, Westamerica owned 115,500 and
50,000 shares of ValliCorp Common Stock with a cost basis of $1,653,699 and
$679,688, respectively. Amounts indicated here have been adjusted to
eliminate these shares as a result of the Merger.
(2) The pro forma combined per share data for net income has been calculated
using pro forma combined average shares outstanding. Westamerica and
ValliCorp pro forma combined average shares outstanding have been
calculated using the number of Westamerica average shares outstanding
during the periods presented, increased by the anticipated number of shares
of Westamerica Common Stock to be issued to ValliCorp shareholders using an
Exchange Ratio of .4098, assuming an Average Price of $51.25 per share of
Westamerica Common Stock, for each of the average shares of ValliCorp
Common Stock outstanding during each of the periods presented as if these
shares were outstanding during each of the periods presented. Such pro
forma per share data assumes no dissenting Westamerica shareholders and no
exercise of outstanding ValliCorp or Westamerica stock options or other
similar rights or conversion of ValliCorp Convertible Debentures. The
Exchange Ratio is subject to potential adjustments in certain circumstances
as provided in the Agreement.
See "The Merger--Purchase Price and Potential Adjustments." See also "Pro
Forma Combined Financial Information."
(3) During the nine months ended September 30, 1996 and the 12 months ended
December 31, 1995, Westamerica owned 108,164 and 1,699 average shares of
ValliCorp Common Stock, respectively. Amounts indicated have been adjusted
to eliminate these shares as a result of the Merger.
(4) The equivalent pro forma ValliCorp per share information has been
calculated by multiplying the pro forma combined per share data by an
Exchange Ratio of .4098, assuming an Average Price of $51.25. There can be
no assurance that the Average Price will not be higher or lower than
$51.25.
(5) Using an Exchange Ratio of .3738, which assumes an Average Price of a share
of Westamerica Common Stock of $57.875 (which corresponds to the closing
price per share of $57.875 for Westamerica Common Stock on January 3,
1997), for each of the average shares of ValliCorp Common Stock outstanding
during the nine-month period ended September 30, 1996, the net income per
share, book value per share and average shares outstanding would have been
$2.34, $25.09 and 14,684,000, respectively, and the equivalent pro forma
ValliCorp net income per share and book value per share would have been
$0.88 and $9.38, respectively.
(6) Merger-related expenses to be incurred by Westamerica and ValliCorp
subsequent to September 30, 1996 are currently estimated to be $10 million
after-tax based on information available as of the date of this Joint Proxy
Statement/Prospectus. These expenses, relating to separation and benefit
costs, professional and investment banking fees, and other non-recurring
Merger-related expenses, will be charged against income of the combined
company upon consummation of the Merger or the period in which such costs
are incurred. Accordingly, the effect of these costs has not been reflected
in the unaudited pro forma combined consolidated financial information. The
amount of Merger-related costs disclosed in these unaudited pro forma
combined financial statements may change as additional information becomes
available.
19
<PAGE>
CERTAIN CONSIDERATIONS
CERTAIN MATTERS DISCUSSED OR INCORPORATED BY REFERENCE IN THIS JOINT PROXY
STATEMENT/PROSPECTUS ARE FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO RISKS
AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS. SUCH RISKS AND
UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DESCRIBED IN THE SECTIONS
HEREOF ENTITLED "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE", "CERTAIN
CONSIDERATIONS", "THE MERGER--REASONS FOR THE MERGER; RECOMMENDATIONS OF THE
BOARDS OF DIRECTORS" AND "PRO FORMA COMBINED FINANCIAL INFORMATION."
THEREFORE, THE INFORMATION SET FORTH THEREIN SHOULD BE CAREFULLY CONSIDERED
WHEN EVALUATING THE BUSINESS AND PROSPECTS OF WESTAMERICA AND VALLICORP.
In deciding whether to approve the Merger, shareholders should consider the
following factors, in addition to the other matters set forth or incorporated
by reference herein:
SHARES ELIGIBLE FOR FUTURE SALE; DILUTION
Shares of Westamerica Common Stock eligible for future sale could have a
dilutive effect on the market for Westamerica Common Stock and could adversely
affect the market price. The Articles of Incorporation of Westamerica
authorize the issuance of 50,000,000 shares of common stock, of which
approximately 9,434,870 shares were outstanding at January 7, 1997. Pursuant
to its stock option plans, at January 7, 1997, Westamerica had outstanding
restricted performance shares and options to purchase an aggregate of 739,992
shares of Westamerica Common Stock. As of January 7, 1997, 354,215 shares of
Westamerica Common Stock remained available for option grants under
Westamerica's stock option plans. Sales of substantial amounts of Westamerica
Common Stock in the public market following the Merger could adversely affect
the market price of Westamerica Common Stock. There are no restrictions in the
Agreement preventing Westamerica from issuing additional shares.
Westamerica has previously announced its intention to pursue acquisitions of
other financial institutions from time to time where such acquisitions are
believed by Westamerica to enhance shareholder value or satisfy other
strategic objectives of Westamerica. Other acquisitions, if any, could be
accomplished by the issuance of additional shares of Westamerica Common Stock
or other securities convertible into or exercisable for such Westamerica
Common Stock. See "Pro Forma Combined Financial Information" and "Description
of Westamerica Capital Stock and Indebtedness."
There can be no assurance given as to the market value of Westamerica Common
Stock after the Merger based on future acquisitions, if any, or other factors,
including but not limited to, general economic conditions or fluctuating
interest rates.
INTERESTS OF VALLICORP OFFICERS AND DIRECTORS IN THE MERGER
As of the Record Date, the directors and executive officers of ValliCorp
beneficially owned 773,599 shares of ValliCorp Common Stock not including
shares such persons may acquire through the exercise of stock options and
Convertible Debentures. On such date, the directors and executive officers of
ValliCorp held options to acquire 435,792 shares of ValliCorp Common Stock,
all of which were vested as of the date hereof or will vest as a result of the
Merger. Options not exercised prior to the Effective Date will be converted
into vested options to acquire Westamerica Common Stock on substantially the
same terms and conditions as the options to purchase ValliCorp Common Stock
held by such persons prior to the Merger. Under the general conversion rules
set forth in the Agreement, an option to acquire ValliCorp Common Stock shall
be deemed to continue as an option to purchase the number of shares of
Westamerica Common Stock equal to the Exchange Ratio multiplied by the number
of shares of ValliCorp Common Stock previously covered by such option at an
option exercise price for each such share of Westamerica Common Stock equal to
the previous option exercise price for each ValliCorp Share divided by the
Exchange Ratio. Additionally, three directors of ValliCorp, including its
Chairman and Chief Executive Officer, J. Mike McGowan, also owned in the
aggregate approximately $270,774 of Convertible Debentures which will be
assumed by Westamerica to the extent that such debentures have not been
converted
20
<PAGE>
into ValliCorp Common Stock prior to the Effective Date. Such debentures are
convertible into as many as 49,231 ValliCorp Shares at a price of $5.50 per
share. Following the Effective Date, the directors owning such debentures will
have the right to convert the debentures into that number of shares of
Westamerica Common Stock multiplied by the Exchange Ratio.
J. Mike McGowan, Chairman of the Board and Chief Executive Officer of
ValliCorp, and Steven C. Pumphrey, Director, President and Chief Operating
Officer of ValliCorp, are parties to employment agreements dated July 1, 1996
that provide for severance benefits, which include a cash lump sum payment of
three times their annual salary (including bonus), continuation of certain
welfare benefits coverage for up to three years and a prorated cash bonus for
the year of termination. Executive officers John H. Tait, Edwin L. Herbert and
Wolfgang T.N. Muelleck are parties to similar agreements dated July 1, 1996
providing for severance benefits, which include a cash lump sum payment of two
times their annual salary (including bonus), continuation of certain welfare
benefits coverage for up to two years and a prorated cash bonus for the year
of termination. As of the Record Date, J. Mike McGowan, Steven C. Pumphrey,
John H. Tait, Edwin L. Herbert, and Wolfgang T.N. Muelleck held stock options
to purchase ValliCorp Shares (which will be assumed by Westamerica with the
substitution of shares of Westamerica Common Stock) in approximately the
following amounts: 130,897, 50,000, 51,752, 35,000 and 50,128, respectively.
Pursuant to the terms of their option agreements, any of these options which
are unvested will become fully vested at the Effective Date. All of the
contracts provide for an additional lump sum cash payment (the "Gross-Up
Payment") equal to the sum of any federal excise taxes payable by the
executives with respect to the severance benefits and the fully vested
options, plus all federal, state and local income, employment and excise taxes
payable by the executives on said Gross-Up Payment. Upon consummation of the
Merger, it is anticipated that J. Mike McGowan, Steven C. Pumphrey, John H.
Tait, Edwin L. Herbert and Wolfgang T.N. Muelleck will receive lump sum
severance benefits estimated to be worth approximately $2,514,377, $1,430,956,
$494,887, $399,986 and $648,416, respectively (certain of which amounts may
include an approximation of the anticipated Gross-Up Payments). The actual
amount of said severance benefits could differ from the amounts set forth in
the preceding sentence because the amount of the severance benefits for each
of the five executive officers will be based, in part, on a complex
calculation pursuant to applicable tax law which factors into said
calculation, among other factors, the closing price per share of Westamerica
Common Stock on the Effective Date. Six other key employees (including two
executive officers) of ValliCorp will become entitled to receive up to two
years of severance payments in a single payment upon consummation of the
Merger.
At the Effective Time, the Board of Directors of Westamerica will be
comprised of 12 directors. Westamerica has agreed that, promptly following the
Closing Date, Westamerica will take those actions necessary to add three
current ValliCorp directors, none of whom has yet been identified, to the
Westamerica Board.
The former officers and employees of ValliCorp who become officers or
employees of Westamerica will be entitled to participate in all employee
benefits and benefit programs of Westamerica, in accordance with the terms of
such plans or programs.
Westamerica has also agreed that, following the Effective Date, it will
indemnify all persons who are or become directors or officers of ValliCorp or
any of its subsidiaries prior to the Effective Date to the fullest extent
permitted by applicable law on the basis set forth in the Agreement, and all
rights to indemnification and all limitations of liability existing in favor
of said directors and officers in effect on November 11, 1996 shall survive
the Merger and be honored by Westamerica for six years after the Effective
Date. Westamerica has agreed that, for three years after the Effective Date,
it will cause the persons who served as directors or officers of ValliCorp and
its subsidiaries on or before the Effective Date to be covered by ValliCorp's
existing directors' and officers' liability insurance policy (although
Westamerica may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are not less advantageous than
such policy) or so-called tail coverage obtained in connection with
ValliCorp's directors' and officers' liability insurance policies in effect as
of the Effective Date; provided that Westamerica will not be obligated to make
annual premium payments for such insurance to the extent such premiums exceed
150% of the most recent premium paid by ValliCorp.
21
<PAGE>
Westamerica has agreed to the payment of retention bonus payments to certain
key ValliCorp employees who maintain their employment at least through the
Closing Date. ValliCorp has agreed not to make retention bonus payments
without Westamerica's consent (which shall not be unreasonably withheld).
The Agreement provides that the service of a non-employee director of
ValliCorp for purposes of the ValliCorp Stock Option Plan does not terminate
so long as such individual remains a director or advisory director of
ValliWide or its successors on and after the Effective Date. Similarly, the
service of non-employee directors under the 1994 Mineral King Continuation
Stock Option Plan will continue as long as such directors remain as a director
or advisory director of ValliWide and its successors on or after the Effective
Date. These provisions have the effect of allowing such non-employee directors
who become directors or advisory directors of ValliWide or its successors to
retain all of their stock options which otherwise may lapse following the
Effective Time. This is not the case, however, with respect to one ValliCorp
director with options under the 1996 Auburn Continuation Stock Option Plans.
Westamerica has agreed to offer all non-employee directors (who do not become
Westamerica directors) a position as an advisory director.
VALLICORP'S RESULTS OF OPERATIONS
For the nine months ended September 30, 1996, ValliCorp reported net income
of approximately $6,434,000, or $0.48 per share, compared to $8,893,000, or
$0.66 per share, for the same period in 1995. The reduction in net income for
the nine months ended September 30, 1996 compared to the same period in 1995
is principally the result of costs and expenses, including professional and
investment banking fees, associated with the acquisitions consummated by
ValliCorp during the first nine months of 1996. ValliCorp anticipates that its
net income for the fourth quarter of 1996 will also be negatively impacted by,
among other factors, the costs and expenses, including legal and investment
banking fees, associated with the Merger, restructuring of certain ValliWide
branches and increased reserves. Accordingly, it is presently estimated by
ValliCorp management that the above described costs, expenses and increased
reserves will likely result in net income for the three months ended December
31, 1996 of between $2,000,000 and $3,000,000. However, no assurance can be
given as to the level of earnings which will result for the three months ended
December 31, 1996.
Because the costs and expenses associated with the Merger, including but not
limited to the ValliWide branch restructurings, will continue into 1997, such
factors could also adversely impact ValliCorp's results of operations during
1997.
REAL ESTATE LENDING; IMPACT OF RECESSION AND NONPERFORMING ASSETS
The loan portfolios of Westamerica and ValliCorp are dependent on real
estate. At September 30, 1996, real estate served as the principal source of
collateral with respect to approximately 52% of ValliCorp's loan portfolio,
56% of Westamerica's loan portfolio and 54% of pro forma combined Westamerica
and ValliCorp's loan portfolio. A worsening of current economic conditions or
rising interest rates could have an adverse effect on the demand for new
loans, the ability of borrowers to repay outstanding loans, the value of real
estate and other collateral securing loans and the value of the available-for-
sale investment portfolio, as well as Westamerica's and ValliCorp's financial
condition and results of operations in general and the market value for
Westamerica Common Stock and ValliCorp Common Stock. Acts of nature, including
earthquakes and floods, which may cause uninsured damage and other loss of
value to real estate that secures these loans, may also negatively impact
Westamerica's and ValliCorp's financial condition.
ValliCorp's nonperforming assets were approximately $18 million, or 1.36% of
total assets, at September 30, 1996, as compared to approximately $20 million,
or 1.46% of total assets, at December 31, 1995, approximately $12 million, or
0.86% of total assets, at December 31, 1994, and approximately $11 million, or
0.87% of total assets, at December 31, 1993. Westamerica's nonperforming
assets were approximately $14 million, or 0.56% of total assets, at September
30, 1996, as compared to approximately $15 million, or 0.61% of total assets,
at December 31, 1995, approximately $20 million, or 0.82% of total assets, at
December 31, 1994,
22
<PAGE>
and approximately $32 million, or 1.30% of total assets, at December 31, 1993.
There can be no assurances that nonperforming assets will not increase and
adversely affect the financial condition and results of operations of
ValliCorp and/or Westamerica.
ORGANIZATIONAL STRUCTURE AND OPERATIONS UPON THE MERGER
Upon the consummation of the Merger, the separate corporate existence of
ValliCorp will cease and ValliCorp will be merged with and into Westamerica,
and ValliWide will be a subsidiary of Westamerica. It is also anticipated that
ValliWide will be merged into Westamerica Bank during mid-1997. At that time,
it is anticipated that five ValliWide branches located in Fresno, Kern and
Sacramento counties will have been closed or consolidated and that up to an
additional eight ValliWide branches may (subject to regulatory approvals) have
been closed, sold or consolidated. In most cases, management of Westamerica
expects that Westamerica will be able to serve customers of said branches at
other existing Westamerica or ValliWide branches.
Westamerica anticipates that, after the Effective Date, a significant
percentage of ValliWide's existing employees and customers will be retained.
Westamerica has identified and offered employment to certain key employees of
ValliCorp. There can be no assurances that ValliWide customers will not move
their banking relationships (including deposits) to other financial
institutions and that a greater than anticipated number of ValliWide employees
will not remain employed by Westamerica after the Merger. In addition, while
management of Westamerica believes it can achieve pre-tax operating cost
savings prior to the end of 1997 of approximately 43% of ValliCorp's projected
non-interest expense through the elimination of duplicative corporate and
administrative expenses and the consolidation of banking operations, there can
be no assurance that Westamerica will be able to realize such cost savings or
that such cost savings will be realized as anticipated. The combined company's
ability to achieve these cost savings is dependent upon various factors, a
number of which will be beyond the control of Westamerica, including
regulatory and economic conditions, unanticipated changes in business
conditions and inflation. See "The Merger--Covenants of Westamerica and
ValliCorp; Conduct of Business Prior to the Merger" and "--Management and
Operations Following the Merger." See cautionary statement included under
"Incorporation of Certain Documents by Reference" regarding these forward-
looking statements.
EFFECT OF SHAREHOLDER RIGHTS PLAN
Westamerica has a Shareholder Rights Plan, which is implemented pursuant to
an Amended and Restated Rights Agreement dated as of March 23, 1995 (the
"Amended and Restated Rights Agreement"), that could discourage potential
takeover attempts and which could eliminate the possibility that Westamerica
shareholders might realize a premium of the kind which often results from
actual or rumored takeover attempts. The Amended and Restated Rights Agreement
entitles the holders of each share of Westamerica Common Stock to the right
(each, a "Westamerica Right"), when exercisable, to purchase from Westamerica
one share of Westamerica Common Stock at a price of $65.00 per share, subject
to adjustment in certain circumstances. A Westamerica Right is attached to
each share of Westamerica Common Stock. The Westamerica Rights only become
exercisable and trade separately from Westamerica Common Stock following the
earlier of (i) a public announcement that a person or group of affiliated or
associated persons has become the beneficial owner of Westamerica securities
having 15% or more of Westamerica's voting power (an "Acquiring Person") or
(ii) 10 days following the commencement of, or a public announcement of an
intention to make, a tender or exchange offer which would result in any person
having beneficial ownership of securities having 15% or more of such voting
power. Upon becoming exercisable, each holder of a Westamerica Right (other
than an Acquiring Person whose rights will become null and void) will, for at
least a 60-day period thereafter, have the right (subject to the following
sentence), upon payment of the exercise price of $65.00, to receive upon
exercise that number of shares of Westamerica Common Stock having a market
value of twice the exercise price of the Westamerica Right, to the extent
available. Subject to applicable law, the Board of Directors, at its option,
may at any time after a Person becomes an Acquiring Person (but not after the
acquisition by such Person of 50% or more of the outstanding Westamerica
Common Stock), exchange all or part of the then outstanding and exercisable
23
<PAGE>
Westamerica Rights (except for Westamerica Rights which have become void) for
shares of Westamerica Common Stock equivalent to one share of Westamerica
Common Stock per Westamerica Right or, alternatively, for substitute
consideration consisting of cash, securities of Westamerica or other assets
(or any combination thereof). See "Description of Westamerica Capital Stock
and Indebtedness--Shareholder Rights Plan."
LEGISLATIVE AND REGULATORY ENVIRONMENT
The banking and financial services businesses in which Westamerica,
ValliCorp, ValliWide and Westamerica Bank engage are highly regulated. The
laws and regulations affecting such businesses are under constant review by
Congress and applicable regulatory agencies and may be changed dramatically in
the future. Such changes could affect the business of bank holding companies
and banks. For example, in 1994, the President signed legislation amending the
BHC Act and the Federal Deposit Insurance Act to provide for interstate
banking and branching. Such changes will affect the competitive environment in
which Westamerica Bank and ValliWide operate and may affect the amount of
capital that banks and bank holding companies are required to maintain, the
premiums paid for or the availability of deposit insurance or other matters
directly affecting earnings. It is not certain what changes will occur or the
effect that any such changes would have on the profitability of the combined
company, its ability to achieve certain cost savings or compete effectively or
its ability to take advantage of new opportunities after the Merger. See
"Information About Westamerica--Supervision and Regulation," "The Merger--
Management and Operations Following the Merger," and "Incorporation of Certain
Documents by Reference."
Westamerica is organized under the corporate law of California. ValliCorp is
organized under the corporate law of Delaware. While similarities in rights
exist for shareholders of Westamerica and ValliCorp, there are significant
differences in the laws applicable to each company and in their respective
charter documents. See "--Effect of Shareholder Rights Plan" and "Certain
Differences in Rights of Shareholders."
24
<PAGE>
INTRODUCTION
This Joint Proxy Statement/Prospectus is being furnished to shareholders of
Westamerica Bancorporation ("Westamerica") in connection with the solicitation
of proxies by the Board of Directors of Westamerica for use at the Special
Meeting of Shareholders of Westamerica (the "Westamerica Special Meeting") to
be held at 4550 Mangels Boulevard, Fairfield, California, on Monday, February
24, 1997, at 10:00 a.m., local time, and at any adjournments or postponements
thereof.
This Joint Proxy Statement/Prospectus is also being furnished to
shareholders of ValliCorp Holdings, Inc. ("ValliCorp"), in connection with the
solicitation of proxies by the Board of Directors of ValliCorp for use at the
Special Meeting of Shareholders of ValliCorp (the "ValliCorp Special Meeting"
and, together with the Westamerica Special Meeting, the "Meetings") to be held
at the Fresno Art Museum, 2233 North First Street, Fresno, California, on
Monday, February 24, 1997, at 5:00 p.m., local time, and at any adjournments
or postponements thereof.
At the Meetings, the shareholders of ValliCorp and Westamerica will consider
and vote upon a proposal to approve and adopt the Agreement and Plan of
Reorganization, dated as of November 11, 1996 (the "Agreement"), by and among
Westamerica, ValliCorp and ValliWide Bank ("ValliWide"), and an Agreement and
Plan of Merger between Westamerica and ValliCorp (the "Merger Agreement" and,
collectively with the Agreement, the "Agreements") and the transactions
contemplated thereby, including but not limited to, the Merger (as defined
below). Copies of the Agreements are attached as Annex A hereto and more fully
described herein. The Agreements provide, among other things, that ValliCorp
will merge with and into Westamerica with Westamerica as the surviving entity
(the "Merger") and, except as described herein, each share of ValliCorp Common
Stock will be converted into a right to receive $21.00 of value in Westamerica
common stock, without par value ("Westamerica Common Stock"), subject to
certain potential adjustments as set forth in the Agreement. See "The Merger--
Purchase Price and Potential Adjustments," "--Conversion of Shares of
ValliCorp Common Stock" and "--Treatment of Stock Options." The date on which
this Joint Proxy Statement/Prospectus is first being sent to shareholders of
Westamerica and ValliCorp is on or about January 14, 1997.
This Joint Proxy Statement/Prospectus also serves as a prospectus for
Westamerica under the Securities Act of 1933, as amended (the "Securities
Act"), for the Westamerica Common Stock and certain common stock purchase
rights associated therewith to be issued in connection with the consummation
of the Merger.
INFORMATION ABOUT WESTAMERICA
Westamerica is a bank holding company registered under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"), which was incorporated in the
State of California in 1972. At September 30, 1996, Westamerica had total
consolidated assets of approximately $2.5 billion, deposits of approximately
$2.1 billion and shareholders' equity of approximately $229 million.
Westamerica's wholly-owned banking subsidiaries, Westamerica Bank and Bank of
Lake County, are California state-chartered banks insured by the Federal
Deposit Insurance Corporation (the "FDIC") with 57 banking offices throughout
Northern California and in the Central California cities of Modesto, Ceres and
Turlock.
Westamerica was formed pursuant to a plan of reorganization among three
previously unaffiliated banks: Bank of Marin, Bank of Sonoma County and First
National Bank of Mendocino County (formerly First National Bank of
Cloverdale). Subsequent to its incorporation, Westamerica acquired the Bank of
Lake County (1974), Gold Country Bank (1979) and Vaca Valley Bank (1981). In
1983, Westamerica merged all of its banking subsidiaries into a single
commercial bank known as "Westamerica Bank, N.A." In 1988, Westamerica created
a new national bank called Bank of Lake County, N.A., which it promptly sold
to Napa Valley Bancorp, a bank holding company headquartered in Napa,
California ("Napa Valley Bancorp"). In 1992, Westamerica acquired John Muir
National Bank and merged it with and into Westamerica Bank. In 1993,
Westamerica acquired by merger Napa Valley Bancorp and its wholly-owned
banking subsidiaries, Napa Valley Bank, Bank of Lake
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County, N.A., and Suisun Valley Bank, along with Napa Valley Development, a
California corporation which developed real estate and provided real estate
consulting services to Napa Valley Bancorp. Napa Valley Development has since
been dissolved. Suisun Valley Bank was subsequently merged with and into
Westamerica Bank. In addition, as part of the Napa Valley Bancorp merger,
Westamerica acquired a majority interest in Sonoma Valley Bank, which was
subsequently sold. In 1993, Westamerica Bank, N.A., was converted to a
California state-chartered bank and became a member of the Federal Reserve
System. In 1994, Bank of Lake County, N.A., was converted to a California
state-chartered bank.
In 1995, Westamerica acquired by merger PV Financial, a bank holding company
that was headquartered in Modesto, California ("PV Financial"), and PV
Financial's wholly-owned subsidiary, Pacific Valley National Bank. Pacific
Valley National Bank was subsequently merged with and into Westamerica Bank.
In 1995, Westamerica acquired by merger CapitolBank Sacramento, a California
state-chartered bank headquartered in Sacramento, California. CapitolBank was
subsequently merged with and into Westamerica Bank. In 1996, Westamerica
acquired by merger North Bay Bancorp, a bank holding company that was
headquartered in Novato, California, and its wholly-owned subsidiary, Novato
National Bank. Novato National Bank was subsequently merged with and into
Westamerica Bank. During 1996, Napa Valley Bank was merged into Westamerica
Bank. Bank of Lake County became a member of the Federal Reserve System in
1996.
Westamerica's subsidiary, Community Banker Services Corporation ("CBSC"),
provides centralized services to Westamerica's banking subsidiaries. Through
its subsidiary, Weststar Mortgage Corporation, CBSC conducts mortgage
servicing activities. Another Westamerica subsidiary, Westamerica Commercial
Credit, Inc., commenced a commercial lending business during November 1996.
Westamerica, through its banking subsidiaries, provides checking and savings
deposit services, commercial, real estate and personal loans and trust
services. In addition, most branches offer safe deposit facilities, automated
teller units, collection services and other investment services.
Westamerica's principal executive offices are located at 1108 Fifth Avenue,
San Rafael, California 94901, and its telephone number at that location is
(415) 257-8000.
SUPERVISION AND REGULATION
General. As a registered bank holding company, Westamerica is subject to the
supervision of, and to regular inspection by, the Federal Reserve Board.
Westamerica Bank and Bank of Lake County (collectively, the "Banks") are
organized as California state-chartered banks, which are subject to
regulation, supervision and examination by the California Superintendent of
Banks (the "Superintendent"). The Banks are also subject to regulation by the
FDIC and Federal Reserve Board. In addition to banking laws, regulations and
regulatory agencies, Westamerica and its subsidiaries and affiliates are
subject to various other laws and regulations and supervision and examination
by other regulatory agencies, all of which directly or indirectly affect
Westamerica's operations, management and ability to make distributions. The
following discussion summarizes certain aspects of those laws and regulations
that affect Westamerica.
The activities of Westamerica, and those of companies which it controls or
in which it holds more than 5% of the voting stock, are limited to banking or
managing or controlling banks or furnishing services to or performing services
for its subsidiaries, or any other activity which the Federal Reserve Board
determines to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto. In making such determinations, the
Federal Reserve Board is required to consider whether the performance of such
activities by a bank holding company or its subsidiaries can reasonably be
expected to produce benefits to the public, such as greater convenience,
increased competition or gains in efficiency, that outweigh possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest or unsound banking practices. Generally,
bank holding companies, such as Westamerica, are required to obtain prior
approval of the Federal Reserve Board to engage in any new activity not
previously approved by the Federal Reserve Board or to acquire more than 5% of
any class of voting stock of any company.
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Bank holding companies are also generally required to obtain the prior
approval of the Federal Reserve Board before acquiring more than 5% of any
class of voting stock of any bank which is not already controlled by such bank
holding company. Pursuant to the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Banking and Branching Act"), a bank
holding company became able to acquire banks in states other than its home
state beginning September 29, 1995 without regard to the permissibility of
such acquisitions under state law, but subject to any state requirement that
the bank has been organized and operating for a minimum period of time, not to
exceed five years, and the requirement that the bank holding company, prior to
or following the proposed acquisition, controls no more than 10% of the total
amount of deposits of insured depository institutions in the United States and
no more than 30% of such deposits in that state (or such lesser or greater
amount set by state law).
The Interstate Banking and Branching Act also authorizes banks to merge
across state lines, thereby creating interstate branches, beginning June 1,
1997. Under such legislation, each state has the opportunity to "opt out" of
this provision, thereby prohibiting interstate branching in such states, or to
"opt in" at an earlier time, thereby allowing interstate branching within that
state prior to June 1, 1997. Furthermore, pursuant to such Act, a bank is now
able to open new branches in a state in which it does not already have banking
operations, if the laws of such state permit such de novo branching.
California enacted legislation to "opt in" to the Interstate Banking and
Branching Act provisions regarding interstate branching, allowing a state bank
chartered in a state other than California to acquire by merger or purchase,
at any time after effectiveness of the Caldera, Weggeland, and Killea
California Interstate Banking and Branching Act of 1995 ("IBBA"), a California
bank or industrial loan company which is at least five (5) years old and
thereby establish one or more California branch offices. However, the IBBA
prohibits a state bank chartered in a state other than California from
entering California by purchasing a California branch office of a California
bank or industrial loan company without purchasing the entire entity or by
establishing a de novo California branch office.
Proposals to change the laws and regulations governing the banking industry
are frequently introduced in Congress, in the state legislatures and before
the various bank regulatory agencies.
Capital and Operational Requirements. The Federal Reserve Board and the FDIC
have issued substantially similar risk-based and leverage capital guidelines
applicable to United States banking organizations. In addition, those
regulatory agencies may from time to time require that a banking organization
maintain capital above the minimum levels, whether because of its financial
condition or actual or anticipated growth.
The Federal Reserve Board risk-based guidelines define a two-tier capital
framework. Tier 1 capital consists of common and qualifying preferred
shareholders' equity, less certain intangibles and other adjustments. Tier 2
capital consists of subordinated and other qualifying debt, and the allowance
for credit losses up to 1.25% of risk-weighted assets. The sum of Tier 1
capital and Tier 2 capital less investments in unconsolidated subsidiaries
represents qualifying total capital, at least 50% of which must consist of
Tier 1 capital. Risk-based capital ratios are calculated by dividing Tier 1
capital and total capital by risk-weighted assets. Assets and off-balance
sheet exposures are assigned to one of four categories of risk-weights, based
primarily on relative credit risk. The minimum Tier 1 capital ratio is 4% and
the minimum total capital ratio is 8%.
The leverage ratio is determined by dividing Tier 1 capital by adjusted
average total assets. Although the stated minimum ratio is 3%, most banking
organizations are required to maintain ratios of at least 100 to 200 basis
points above 3%.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), among other things, identifies five capital categories for insured
depository institutions (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized) and requires the respective Federal regulatory agencies to
implement systems for "prompt corrective action" for insured depository
institutions that do not meet minimum capital requirements within such
categories. FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions, depending on the category in
which an institution is classified. Failure to meet the capital guidelines
could also subject a banking
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institution to capital raising requirements. An "undercapitalized" bank must
develop a capital restoration plan and its parent holding company must
guarantee that bank's compliance with the plan. The liability of the parent
holding company under any such guarantee is limited to the lesser of 5% of the
bank's assets at the time it became "undercapitalized" or the amount needed to
comply with the plan. Furthermore, in the event of the bankruptcy of the
parent holding company, such guarantee would take priority over the parent's
general unsecured creditors. In addition, FDICIA requires the various
regulatory agencies to prescribe certain non-capital standards for safety and
soundness relating generally to operations and management, asset quality and
executive compensation and permits regulatory action against a financial
institution that does not meet such standards.
The various regulatory agencies have adopted substantially similar
regulations that define the five capital categories identified by FDICIA,
using the total risk-based capital, Tier 1 risk-based capital and leverage
capital ratios as the relevant capital measures. Such regulations establish
various degrees of corrective action to be taken when an institution is
considered undercapitalized. Under the regulations, a "well capitalized"
institution must have a Tier 1 risk-based capital ratio of at least 6%, a
total risk-based capital ratio of at least 10% and a leverage ratio of at
least 5% and not be subject to a capital directive order. An "adequately
capitalized" institution must have a Tier 1 risk-based capital ratio of at
least 4%, a total risk-based capital ratio of at least 8% and a leverage ratio
of at least 4%, or 3% in some cases. Under these guidelines, as of September
30, 1996, each of the Banks was considered well capitalized.
Banking agencies have recently adopted final regulations which mandate that
regulators take into consideration concentrations of credit risk and risks
from non-traditional activities, as well as an institution's ability to manage
those risks, when determining the adequacy of an institution's capital. This
evaluation will be made as a part of the institution's regular safety and
soundness examination. Banking agencies also have recently adopted final
regulations requiring regulators to consider interest rate risk (when the
interest rate sensitivity of an institution's assets does not match the
sensitivity of its liabilities or its off-balance-sheet position) in the
evaluation of a bank's capital adequacy. Concurrently, banking agencies have
proposed a methodology for evaluating interest rate risk. After gaining
experience with the proposed measurement process, those banking agencies
intend to propose further regulations to establish an explicit risk-based
capital charge for interest rate risk.
Source of Strength. According to Federal Reserve Board policy, bank holding
companies are expected to act as a source of financial strength to each
subsidiary bank and to commit resources to support each subsidiary. This
support may be required at times when a bank holding company may not be able
to provide such support. In the event of a loss suffered or anticipated by the
FDIC--either as a result of default of a banking subsidiary of Westamerica or
related to FDIC assistance provided to a subsidiary in danger of default--the
other banking subsidiaries of Westamerica may be assessed for the FDIC's loss,
subject to certain exceptions.
INFORMATION ABOUT VALLICORP AND VALLIWIDE BANK
ValliCorp is a Delaware corporation, headquartered in Fresno, California.
Its principal wholly-owned subsidiary, ValliWide Bank ("ValliWide," formerly
Bank of Fresno), was incorporated in 1973. At September 30, 1996, ValliCorp's
only subsidiary bank was ValliWide. At September 30, 1996, ValliCorp had total
consolidated assets of approximately $1.3 billion, deposits of approximately
$1.2 billion and stockholders' equity of approximately $139 million.
ValliCorp commenced operations by way of a consolidation through merger in
November 1989 of two bank holding companies: Fresno Bancorp and Western
Commercial, Inc. ("Western Commercial"). Both of these holding companies were
headquartered in Fresno. As a part of a companion bank merger, Fresno Bank of
Commerce, a wholly-owned subsidiary of Western Commercial ("Commerce"), was
merged into Bank of Fresno, the wholly-owned subsidiary of Fresno Bancorp. At
the time of the merger of the two banks, Bank of Fresno became a wholly-owned
subsidiary of ValliCorp and Commerce ceased to exist. Merced Bank of Commerce,
another wholly-owned subsidiary of Western Commercial, based in Merced,
California, became a
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subsidiary of ValliCorp. In January 1991, ValliCorp completed the acquisition
of Madera Valley Bank, based in Madera, California, which was merged into Bank
of Fresno. In November 1993, ValliCorp completed a merger with Pacific
Bancorporation, with headquarters in Bakersfield, California, and its wholly-
owned subsidiary, Community First Bank.
In August 1994, Merced Bank of Commerce was merged into Bank of Fresno.
Concurrently with such merger, Bank of Fresno's name was changed to ValliWide
Bank. In June 1995, Community First Bank was merged into ValliWide.
In December 1994, ValliCorp completed two acquisitions. It acquired Bank
One, Fresno, N.A., based in Fresno, California, which was merged into
ValliWide. It also acquired by merger Mineral King Bancorp, Inc.,
headquartered in Visalia, California, which was the parent of Mineral King
National Bank. In February 1995, Mineral King National Bank was merged into
ValliWide.
In 1996, ValliCorp consummated three acquisitions. In the first quarter of
1996, ValliCorp completed the acquisitions of El Capitan Bancshares, Inc.,
based in Sonora, California, along with its wholly-owned subsidiary, El
Capitan National Bank, and CoBank Financial Corporation, based in San Luis
Obispo, California, along with its wholly-owned subsidiary, Commerce Bank of
San Luis Obispo, N.A. El Capitan Bancshares and CoBank Financial Corporation
were merged into ValliCorp, and El Capitan National Bank and Commerce Bank of
San Luis Obispo, N.A. were merged into ValliWide. In September 1996, ValliCorp
completed the acquisition by merger of Auburn Bancorp, based in Auburn,
California. Auburn's wholly-owned subsidiary, The Bank of Commerce, N.A., was
also merged into ValliWide.
ValliCorp is the largest independent bank holding company headquartered in
Central California, defined by ValliCorp as a 40,000 square mile area covering
a 16 county area, primarily including the San Joaquin Valley and extending
from Placer County in the north to Kern County in the south. ValliWide
operates 55 branches in 14 counties. ValliWide provides traditional banking
services, including personal and business checking and savings accounts,
insured money market deposit accounts, time deposits and IRA and trustee
control (pension fund) accounts; commercial, construction, mortgage and
consumer loans; travelers' checks; safe deposit boxes; cashier's checks and
money orders; and other customary banking services. ValliWide actively engages
in both retail and wholesale commercial banking, principally serving small-
and medium-sized businesses, professionals and the title and escrow industry.
As of September 30, 1996, ValliCorp and its subsidiaries had approximately
824 employees, including seven executive officers.
THE MEETINGS
MATTERS TO BE CONSIDERED AT THE MEETINGS
Westamerica. At the Westamerica Special Meeting, holders of record of
Westamerica Common Stock will consider and vote upon a proposal to approve and
adopt the Agreements and the transactions contemplated thereby.
THE WESTAMERICA BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AGREEMENTS
AND THE TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS THAT WESTAMERICA
SHAREHOLDERS VOTE "FOR" THE APPROVAL AND ADOPTION OF THE AGREEMENTS AND THE
TRANSACTIONS CONTEMPLATED THEREBY.
Only holders of record of Westamerica Common Stock at the close of business
on January 7, 1997 (the "Record Date") will be entitled to notice of, and to
vote at, the Westamerica Special Meeting. As of the Record Date, there were
approximately 9,434,870 shares of Westamerica Common Stock outstanding. Each
share of Westamerica Common Stock will entitle the holder thereof to one vote
per share held.
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Under the GCL, the approval and adoption of the Agreements and the
transactions contemplated thereby requires the affirmative vote of the holders
of a majority of the outstanding shares of Westamerica Common Stock. Holders
of a majority of the outstanding shares of Westamerica Common Stock must be
represented, either in person or by proxy, at the Westamerica Special Meeting
for a quorum to be present.
Each properly completed proxy returned in time for voting at the Westamerica
Special Meeting, unless revoked by the Westamerica shareholder, will be voted
in accordance with the instructions indicated on the proxy, or, if no
instructions are provided, will be voted "FOR" the approval and adoption of
the Agreements and the transactions contemplated thereby, including the
Merger. No matters other than those referred to in this Joint Proxy
Statement/Prospectus will be brought before the Westamerica Special Meeting,
except for matters incidental to the conduct of the Westamerica Special
Meeting. Pursuant to the Agreement, neither Westamerica or ValliCorp nor any
member of their respective Boards of Directors will submit any other matters
for approval at the Meetings, except with the other's prior approval. The
grant of a proxy will also confer discretionary authority on the persons named
in the proxy to vote on matters incident to the conduct of the Westamerica
Special Meeting, including any adjournment or postponement thereof.
A Westamerica shareholder may revoke a proxy at any time before it is voted
by filing with Mary Anne Bell, Assistant Corporate Secretary of Westamerica,
1108 Fifth Avenue, San Rafael, California 94901, a written instrument revoking
the proxy, or by submitting a duly executed proxy bearing a later date or by
attending the Westamerica Special Meeting and voting in person.
Shares of Westamerica Common Stock which abstain from voting and "broker
non-votes" (shares as to which brokerage firms have not received voting
instructions from their clients and therefore do not have the authority to
vote the shares at the Westamerica Special Meeting) will be counted for
purposes of determining a quorum. Because the affirmative vote of a majority
of the outstanding shares of Westamerica Common Stock is required to approve
the Merger, both abstentions and broker non-votes will have the same legal
effect as votes against the Merger. See "Dissenters' Rights of Appraisal--
Appraisal Rights of Westamerica Shareholders."
WESTAMERICA SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY
CARDS AND WILL NOT EXCHANGE THEIR CERTIFICATES AFTER THE MERGER.
As of the Record Date, there were approximately 9,434,870 shares of
Westamerica Common Stock outstanding, of which 440,486 shares or 4.7% were
beneficially owned by executive officers and directors of Westamerica. It is
anticipated that all such Westamerica Common Stock will be voted for approval
of the Merger. Accordingly, approval of the Agreements and the transactions
contemplated thereby at the Westamerica Special Meeting is expected to require
the affirmative vote of an additional 4,276,950 shares of Westamerica Common
Stock outstanding on the Record Date to be voted by the remaining shareholders
of Westamerica. To ValliCorp's knowledge, as of the Record Date, directors and
executive officers of ValliCorp did not beneficially own any shares of
Westamerica Common Stock.
ValliCorp. At the ValliCorp Special Meeting, holders of ValliCorp Common
Stock will consider and vote upon a proposal to approve and adopt the
Agreements and the transactions contemplated thereby, including the Merger.
ValliCorp shareholders will also consider and vote upon such other matters as
may properly be brought before the ValliCorp Special Meeting or any
adjournments or postponements thereof.
THE BOARD OF DIRECTORS OF VALLICORP HAS UNANIMOUSLY APPROVED THE AGREEMENTS
AND THE TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS THAT VALLICORP
SHAREHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE AGREEMENTS AND THE
TRANSACTIONS CONTEMPLATED THEREBY.
Only holders of record of ValliCorp Common Stock at the close of business on
January 7, 1997 (the "Record Date") will be entitled to notice of, and to vote
at, the ValliCorp Special Meeting. As of the Record Date, there were
approximately 14,093,317 shares of ValliCorp Common Stock outstanding. Each
share of ValliCorp Common Stock will entitle the holder thereof to one vote
per share held.
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Under the DGCL, the approval and adoption of the Agreements and the
transactions contemplated thereby requires the affirmative vote of the holders
of a majority of the outstanding shares of ValliCorp Common Stock. Holders of
at least a majority of the outstanding shares of ValliCorp Common Stock must
be represented, either in person or by proxy, at the ValliCorp Special Meeting
for a quorum to be present.
Each properly completed proxy returned in time for voting at the ValliCorp
Special Meeting will be voted in accordance with the instructions indicated on
the proxy, or, if no instructions are provided, will be voted "FOR" approval
and adoption of the Agreements and the transactions contemplated thereby,
including the Merger. It is not expected that any matters other than those
referred to in this Joint Proxy Statement/Prospectus will be brought before
the ValliCorp Special Meeting. The grant of a proxy will also confer
discretionary authority on the persons named in the proxy to vote on matters
incident to the conduct of the ValliCorp Special Meeting, including any
adjournment or postponement thereof, except that Proxies which have been voted
against the proposal to approve the Agreements and the transactions
contemplated thereby may not be voted by the Proxy holder for any proposal to
adjourn the Meeting.
A ValliCorp shareholder may revoke a proxy at any time before it is voted by
filing with E. L. Herbert, Corporate Secretary of ValliCorp, 8405 North Fresno
Street, Fresno, California 93720, an instrument revoking the proxy, or by
submitting a duly executed proxy bearing a later date, or by attending the
ValliCorp Special Meeting and voting in person. Attendance at the ValliCorp
Special Meeting will not by itself constitute revocation of a proxy.
Shares of ValliCorp Common Stock which abstain from voting and "broker non-
votes" (shares as to which brokerage firms have not received voting
instructions from their clients and therefore do not have the authority to
vote the shares at the ValliCorp Special Meeting) will be counted for purposes
of determining a quorum. Because the affirmative vote of a majority of the
outstanding shares of ValliCorp Common Stock is required to approve the
Merger, both abstentions and broker non-votes will have the same legal effect
as votes against the Merger.
VALLICORP SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY
CARDS. A TRANSMITTAL FORM WITH INSTRUCTIONS WITH RESPECT TO THE SURRENDER OF
VALLICORP STOCK CERTIFICATES WILL BE MAILED TO EACH VALLICORP SHAREHOLDER AS
SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE MERGER.
As of the Record Date, there were approximately 14,093,317 shares of
ValliCorp Common Stock outstanding, of which 746,517 shares or 5.3% were
subject to sole or shared voting power by directors of ValliCorp. The
directors of ValliCorp have agreed to vote such shares of ValliCorp Common
Stock for the approval of the Merger. Additionally, as of the Record Date,
Westamerica owned 115,500 ValliCorp Shares. Accordingly, approval of the
Merger at the ValliCorp Special Meeting is expected to require the affirmative
vote of an additional 6,184,643 shares of ValliCorp Common Stock outstanding
on the Record Date to be voted by the remaining shareholders of ValliCorp. As
of the Record Date, non-director executive officers of ValliCorp owned an
additional 27,082 shares of ValliCorp Common Stock. To Westamerica's
knowledge, as of the Record Date, directors and executive officers of
Westamerica did not beneficially own any shares of ValliCorp Common Stock.
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THE MERGER
BACKGROUND OF THE MERGER
The following is a brief description of the events that resulted in the
execution of the Agreement and Plan of Reorganization dated as of November 11,
1996 among ValliCorp, ValliWide and Westamerica.
Discussions concerning the possibility of a business combination between
ValliCorp and Westamerica began during the second quarter of 1996. After
various discussions and negotiations between certain of ValliCorp's and
Westamerica's directors and officers, Westamerica commenced a preliminary due
diligence examination pursuant to a confidentiality agreement dated June 25,
1996.
In connection with these discussions and ValliCorp's interest in evaluating
other possible strategic initiatives, in July 1996, Montgomery was engaged as
financial advisor to ValliCorp. In addition, the Board of Directors of
ValliCorp appointed a special committee to participate with its financial
advisor in the evaluation of ValliCorp's alternatives. As part of this
process, Montgomery contacted 12 financial institutions to determine their
level of interest in a possible business combination. As a result of this
process, only Westamerica responded favorably to ValliCorp's criteria for such
a transaction.
At a meeting of the Board of Directors of ValliCorp held on July 10, 1996,
Montgomery presented its evaluation of ValliCorp's alternatives. At this
meeting, ValliCorp's Board of Directors determined to proceed with further
discussions with Westamerica concerning the possibility of a business
combination. During much of the remainder of the third quarter of 1996, the
parties and their respective attorneys and financial advisors conducted
additional discussions and negotiations. However, these negotiations reached
an impasse, and ValliCorp's discussions with Westamerica were terminated on
September 16, 1996.
Following ValliCorp's public announcement that merger discussions had
terminated, two additional financial institutions inquired of ValliCorp's
financial advisor concerning ValliCorp's interest in a business combination.
In response to these inquiries, on September 17, 1996, ValliCorp's Board of
Directors authorized its financial advisor to ascertain the level of interest
of these institutions. However, after preliminary discussions with each
institution, neither expressed any further interest.
Near the end of September 1996, Westamerica contacted ValliCorp expressing
continued interest in further discussions of a business combination. On
October 8, 1996, a committee of the ValliCorp Board of Directors, assisted by
ValliCorp's attorneys and financial advisor, began discussions and
negotiations anew. During these negotiations, Westamerica completed additional
due diligence of ValliCorp and ValliCorp conducted a due diligence examination
of Westamerica. At the October 28, 1996 meeting of ValliCorp's Board of
Directors, ValliCorp's attorneys and financial advisor provided the Board with
a report on the progress of these negotiations and their preliminary analysis
of the possible terms of a transaction with Westamerica. Upon completion of
each party's due diligence examination and after certain additional
discussions and negotiations, each of the Westamerica Board of Directors and
ValliCorp Board of Directors held meetings on November 11, 1996 to discuss and
evaluate the proposed Merger and the Agreements. At the ValliCorp Board
meeting, ValliCorp received an oral opinion of Montgomery, supported by
certain financial analysis and other data, that the proposed business
combination with Westamerica was fair from a financial point of view. This
oral opinion was confirmed by a written opinion of Montgomery, dated November
11, 1996. Both Boards approved the Agreements, a related Stock Option
Agreement and other ancillary matters, and the Agreement and the Stock Option
Agreement were entered into on November 11, 1996.
Annex A to this Joint Proxy Statement/Prospectus contains copies of the
Agreements, which Agreements are incorporated by reference herein.
See "--Reasons for the Merger; Recommendations of the Boards of Directors,"
"--Opinion of ValliCorp's Financial Advisor" and "--Opinion of Westamerica's
Financial Advisor" below.
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REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
Westamerica. The strategy of the Board of Directors of Westamerica (the
"Westamerica Board") for enhancing long-term value for Westamerica
shareholders recognizes that further consolidation will occur in the banking
and financial services industry in the United States and that Westamerica must
be in a position to take advantage of this change. Pursuant to this strategy,
management of Westamerica, at the direction of the Westamerica Board,
continually explores and evaluates acquisition opportunities, such as the
merger of ValliCorp with and into Westamerica.
On November 11, 1996, the Westamerica Board held a special meeting to give
final consideration to the proposed Merger, the Agreements and the Stock
Option Agreement. At the meeting, Westamerica's senior management and its
financial and legal advisors explained the proposed terms of the Agreement and
summarized for the directors the results of due diligence efforts. H&A gave an
explanation of the methodologies used in determining the fair value of
ValliCorp and advised the Westamerica Board that, in the opinion of H&A, as of
that date, the consideration to be paid by Westamerica in the Merger was fair
to the shareholders of Westamerica from a financial point of view. See "--
Opinion of Westamerica's Financial Advisor." After discussion regarding the
Merger and other transactions contemplated by the Agreement and consideration,
among other things, of the matters set forth below, the Westamerica Board
unanimously approved the Agreement and the Stock Option Agreement and the
transactions contemplated thereby.
The Board of Directors of Westamerica did not assign any relative or
specific weights to the factors considered and individual directors may have
assigned different weights to the following factors:
(1) the Board of Directors' familiarity with and review of ValliCorp's
business, results of operations, prospects and financial condition and the
willingness of the Board of Directors of ValliCorp to consider a merger
with Westamerica;
(2) economic conditions and prospects for the markets in which
Westamerica and ValliCorp operate, and competitive pressures in the
financial services industry in general and the banking industry in
particular;
(3) the enhancement of Westamerica's competitiveness and its ability to
serve its customers, depositors, creditors, other constituents and the
communities in which it operates as a result of a business combination with
another California bank holding company, such as ValliCorp;
(4) information concerning the business, results of operations, asset
quality and financial condition of Westamerica and ValliCorp on a stand-
alone and combined basis, and the future growth prospects of Westamerica
and ValliCorp following the Merger. In this regard, the Westamerica Board
gave extensive consideration to the results of the initial review conducted
by Westamerica's management with respect to ValliCorp's business and
operations, including, in particular, its asset quality and certain related
conditions in the Agreement. Such review included an assessment of the
opportunities to achieve increased market penetration in certain existing
markets and to expand into ValliCorp's market areas in Central California;
(5) the possibility of achieving cost savings and operational synergies
which the management of Westamerica believes may be achieved as a result of
the Merger through the elimination of duplicative efforts;
(6) an assessment that ValliCorp is the largest of the remaining
independent financial institutions contiguous to Westamerica's primary
market area that provide potential expansion opportunities for Westamerica;
(7) an assessment that, in the current economic environment, expansion
through acquisition of another financial institution is most economically
advantageous to Westamerica's shareholders when compared to other
alternatives such as de novo branch openings or branch acquisitions;
(8) the geographic and business fit of Westamerica and ValliCorp and the
complementary nature of their respective businesses;
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(9) information with respect to historical trading ranges and multiples
for Westamerica Common Stock and ValliCorp Common Stock, and possible
trading ranges and multiples for each on a stand-alone basis and for the
two companies on a combined basis and the Westamerica Board's evaluation of
the financial terms of the Merger and their effect on the shareholders of
Westamerica and the Westamerica's Board's belief that such terms are fair
to Westamerica and its shareholders, based in part on the expression of
H&A's opinion as to the fairness to Westamerica of the consideration to be
paid by Westamerica in the Merger;
(10) the expectation that for federal income tax purposes the Merger will
constitute a tax-free reorganization to Westamerica and its subsidiaries;
(11) the expectation that the Merger will be accounted for under the
pooling of interests method of accounting;
(12) the terms and conditions of the Agreements;
(13) the likelihood of the Merger being approved by the appropriate
regulatory authorities; and
(14) the structure of the Merger and the resulting corporate entities.
Based upon all of these matters, and such other matters as deemed relevant,
the Westamerica Board unanimously approved the Agreements, the Stock Option
Agreement and the issuance of Westamerica Common Stock in connection
therewith.
THE BOARD OF DIRECTORS OF WESTAMERICA UNANIMOUSLY RECOMMENDS THAT
WESTAMERICA SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
AGREEMENTS AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE ISSUANCE
OF WESTAMERICA COMMON STOCK UPON CONSUMMATION OF THE MERGER.
ValliCorp. The strategy of the ValliCorp Board of Directors (the "ValliCorp
Board") for enhancing long-term value for ValliCorp shareholders includes
providing high quality financial services to communities within its target
market and to continually seek to increase its market share through its
existing branches in the communities it serves and acquisitions of other
financial institutions and/or branches within its target market. The
Agreements and the Merger were considered by the ValliCorp Board in this
context.
On November 11, 1996, the ValliCorp Board held a special meeting to give
final consideration to the proposed Merger, the Agreements and the Stock
Option Agreement. At the meeting, ValliCorp's senior management and its
financial and legal advisors explained the proposed terms of the Agreement and
summarized for the directors the results of due diligence efforts. Montgomery
gave a detailed explanation of the methodologies used in determining fairness
of the consideration to be received by ValliCorp shareholders and advised the
ValliCorp Board that, in the opinion of Montgomery, as of that date, the
consideration to be paid by Westamerica in the Merger was fair to ValliCorp's
shareholders from a financial point of view. See "--Opinion of ValliCorp's
Financial Advisor." After discussion regarding the Merger and other
transactions contemplated by the Agreement and consideration, among other
things, of the matters set forth below, the ValliCorp Board unanimously
approved the Agreement and the Stock Option Agreement and the transactions
contemplated thereby.
The Board of Directors of ValliCorp did not assign any relative or specific
weights to the factors considered and individual directors may have assigned
different weights to the following factors:
(1) the Board of Directors' familiarity with and review of Westamerica's
business, results of operations, prospects and financial condition and the
willingness of the Board of Directors of Westamerica to consider a merger
with ValliCorp;
(2) economic conditions and prospects for the markets in which
Westamerica and ValliCorp operate, and competitive pressures in the
financial services industry in general and the banking industry in
particular;
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(3) the enhancement of ValliCorp's competitiveness and its ability to
serve its customers, depositors, creditors, other constituents and the
communities in which it operates as a result of a business combination with
another California bank holding company, such as Westamerica;
(4) information concerning the business, results of operations, asset
quality and financial condition of Westamerica and ValliCorp on a stand-
alone and combined basis, and the future growth prospects of Westamerica
and ValliCorp following the Merger. In this regard, the ValliCorp Board
gave consideration to the results of the due diligence review conducted by
ValliCorp's management with respect to Westamerica's business and
operations, including, in particular, its asset quality;
(5) the possibility of achieving cost savings and operational synergies
which the management of ValliCorp believes may be achieved as a result of
the Merger through the elimination of duplicative efforts;
(6) an assessment that in the current economic environment, the Merger is
most economically advantageous to ValliCorp's shareholders when compared to
other alternatives such as de novo branch openings or acquisitions of other
financial institutions or branches of other financial institutions;
(7) the geographic and business fit of Westamerica and ValliCorp and the
complementary nature of their respective businesses;
(8) information with respect to historical trading ranges and multiples
for Westamerica Common Stock and ValliCorp Common Stock, and possible
trading ranges and multiples for each on a stand-alone basis and for the
two companies on a combined basis and the ValliCorp Board's evaluation of
the financial terms of the Merger and their effect on the shareholders of
ValliCorp and the ValliCorp Board's belief that such terms are fair to
ValliCorp's shareholders, based in part on the expression of Montgomery's
opinion as to the fairness to ValliCorp's shareholders of the consideration
to be paid by Westamerica in the Merger;
(9) the expectation that for federal income tax purposes the Merger will
constitute a tax-free reorganization to ValliCorp's shareholders;
(10) the expectation that the Merger will be accounted for under the
pooling of interests method of accounting;
(11) the terms and conditions of the Agreements;
(12) the likelihood of the Merger being approved by the appropriate
regulatory authorities; and
(13) the structure of the Merger and the resulting corporate entities.
Based upon all of these matters, and such other matters as deemed relevant,
the ValliCorp Board unanimously approved the Agreements, the Merger and the
transactions contemplated thereby.
THE BOARD OF DIRECTORS OF VALLICORP UNANIMOUSLY RECOMMENDS THAT VALLICORP
SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE AGREEMENTS AND THE
TRANSACTIONS CONTEMPLATED THEREBY.
OPINION OF VALLICORP'S FINANCIAL ADVISOR
General. Pursuant to an engagement letter dated July 16, 1996 (the
"Engagement Letter"), ValliCorp engaged Montgomery to assist in identifying
opportunities for maximizing shareholder value, including the potential sale
of ValliCorp, and advising ValliCorp in connection with such opportunities.
Montgomery is a nationally recognized investment banking firm and, as part of
its investment banking activities, is regularly engaged in the valuation of
businesses and their securities in connection with merger transactions and
other types of acquisitions, negotiated underwritings, private placements and
valuations for corporate and other purposes. ValliCorp selected Montgomery to
render the opinion on the basis of its experience and expertise in
transactions similar to the Merger and its reputation in the banking and
investment communities. No limitations were imposed by ValliCorp on Montgomery
with respect to the investigations made or procedures followed in rendering
its opinion.
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At a meeting of the ValliCorp Board on November 11, 1996, Montgomery
delivered its oral opinion that the consideration to be received by the
holders of ValliCorp Common Stock pursuant to the Merger was fair to such
shareholders from a financial point of view, as of the date of such opinion.
Montgomery's oral opinion was subsequently confirmed in writing as of such
date.
THE FULL TEXT OF MONTGOMERY'S WRITTEN OPINION TO THE VALLICORP BOARD, DATED
NOVEMBER 11, 1996, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED,
AND LIMITATIONS OF THE REVIEW, BY MONTGOMERY, IS ATTACHED HERETO AS ANNEX C
AND IS INCORPORATED HEREIN BY REFERENCE. THE FOLLOWING SUMMARY OF MONTGOMERY'S
OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
OPINION, WHICH SHOULD BE READ CAREFULLY AND IN ITS ENTIRETY. IN FURNISHING
SUCH OPINION, MONTGOMERY DOES NOT ADMIT THAT IT IS AN EXPERT WITH RESPECT TO
THE REGISTRATION STATEMENT OF WHICH THIS JOINT PROXY STATEMENT/PROSPECTUS IS
PART WITHIN THE MEANING OF THE TERM "EXPERTS" AS USED IN THE SECURITIES ACT
AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER NOR DOES IT ADMIT THAT
ITS OPINION CONSTITUTES A REPORT OR VALUATION WITHIN THE MEANING OF SECTION 11
OF THE SECURITIES ACT. MONTGOMERY'S OPINION IS DIRECTED TO THE VALLICORP
BOARD, COVERS ONLY THE FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY HOLDERS
OF VALLICORP COMMON STOCK FROM A FINANCIAL POINT OF VIEW AS OF THE DATE OF THE
OPINION AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF VALLICORP
COMMON STOCK AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE VALLICORP SPECIAL
MEETING.
In connection with its November 11, 1996 opinion, Montgomery, among other
things: (i) reviewed certain publicly available financial and other data with
respect to ValliCorp and Westamerica, including the consolidated financial
statements for recent years and interim periods to September 30, 1996 and
certain other relevant financial and operating data relating to ValliCorp and
Westamerica made available to Montgomery from published sources and from the
internal records of ValliCorp and Westamerica; (ii) reviewed the Agreement;
(iii) reviewed certain publicly available information concerning the trading
of, and the trading market for, ValliCorp Common Stock and Westamerica Common
Stock; (iv) compared ValliCorp and Westamerica from a financial point of view
with certain other companies in the banking industry which Montgomery deemed
to be relevant; (v) considered the financial terms, to the extent publicly
available, of selected recent business combinations of companies in the
banking industry which Montgomery deemed to be comparable, in whole or in
part, to the Merger; (vi) reviewed and discussed with representatives of the
management of ValliCorp certain information of a business and financial nature
regarding ValliCorp, furnished to Montgomery by them, including financial
forecasts and related assumptions of ValliCorp; (vii) reviewed and discussed
with representatives of the management of Westamerica certain information of a
business and financial nature regarding Westamerica, including third party
analyst estimates with respect to Westamerica; (viii) made inquiries regarding
and discussed the Merger and the Agreement and other matters related thereto
with ValliCorp's counsel; and (ix) performed such other analyses and
examinations as Montgomery deemed appropriate.
In connection with its review, Montgomery did not assume any obligation
independently to verify the foregoing information and relied on such
information being accurate and complete in all material respects. With respect
to the financial forecasts for ValliCorp provided to Montgomery by its
management, the financial forecasts for Westamerica derived from Zack's
consensus earnings estimates, and the forecasts regarding the impact of cost
savings on the combined companies, Montgomery assumed for purposes of its
opinion and with ValliCorp's consent that the forecasts were reasonably
prepared on bases reflecting the best available estimates at the time of
preparation as to the future financial performance of ValliCorp, Westamerica
and the combined companies and that they provided a reasonable basis upon
which Montgomery could form its opinion. Montgomery also assumed that there
were no material changes in ValliCorp's or Westamerica's assets, financial
condition, results of operations, business or prospects since the respective
dates of their last financial statements made available to it. Montgomery
relied on advice of counsel to ValliCorp as to all legal matters with respect
to ValliCorp, the Merger and the Agreement. ValliCorp acknowledged that
Montgomery did not discuss with ValliCorp's independent accountants any
financial reporting matters with respect to ValliCorp, the Merger or the
Agreement. ValliCorp informed Montgomery, and Montgomery assumed, that the
Merger would be recorded as a "pooling of interests" under generally accepted
accounting principles. Montgomery assumed that the Merger
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would be consummated in a manner that complies in all respects with the
applicable provisions of the Securities Act, the Exchange Act and all other
applicable federal and state statutes, rules and regulations.
Montgomery is not an expert in the evaluation of loan portfolios for
purposes of assessing the adequacy of the allowances for losses with respect
thereto and it assumed, with ValliCorp's consent, that such allowances for
each of ValliCorp and Westamerica are in the aggregate adequate to cover such
losses. In addition, Montgomery did not assume responsibility for reviewing
any individual credit files, or making an independent evaluation, appraisal or
physical inspection of any of the assets or liabilities (contingent or
otherwise) of ValliCorp or Westamerica, nor was Montgomery furnished with any
such appraisals. Finally, Montgomery's opinion was based on economic, monetary
and market and other conditions as in effect on, and the information made
available to Montgomery as of, November 11, 1996. Accordingly, although
subsequent developments may affect Montgomery's opinion, it has not assumed
any obligation to update, revise or reaffirm such opinion.
Set forth below is a brief summary of the report presented by Montgomery to
the ValliCorp Board on November 11, 1996 in connection with its opinion.
Analysis of Selected Merger Transactions. Montgomery reviewed the
consideration paid in recently announced transactions whereby certain banks
were acquired. Specifically, Montgomery reviewed 73 transactions involving
acquisitions of banks based in California announced since January 1, 1992 (the
"California Bank Acquisitions"), 29 transactions involving selected
acquisitions of banks in the United States with consideration between $200
million and $500 million announced since January 1, 1992 (the "National Bank
Acquisitions") and five acquisitions of commercial banks by Westamerica since
September 1, 1991 (the "Westamerica Bank Acquisitions"). For each bank
acquired or to be acquired in such transactions, Montgomery analyzed data
illustrating, among other things, the ratio of the premium (i.e., purchase
price in excess of tangible book value) to core deposits, purchase price to
deposits, purchase price to tangible book value and purchase price to last 12
months' ("LTM") earnings.
The figures for the California Bank Acquisitions, National Bank Acquisitions
and Westamerica Bank Acquisitions produced, respectively: (i) median
percentage of premium to core deposits of 6.18%, 10.78% and 4.73%; (ii) median
percentage of purchase price to deposits of 15.96%, 18.05% and 11.42%; (iii)
median multiple of purchase price to tangible book value of 1.60x, 2.16x and
1.67x; and (iv) median multiple of purchase price to LTM earnings of 16.82x,
16.57x and 28.98x. In comparison, based upon an assumed purchase price of
$21.00 for each share of ValliCorp Common Stock, Montgomery determined that
the consideration to be received by the holders of ValliCorp Common Stock in
the Merger represented a percentage of premium to core deposits of 17.74%, a
percentage of purchase price to deposits of 26.47%, a multiple of price to
tangible book value of 2.49x and a multiple of price to ValliCorp's LTM
earnings for the 12 months ended September 30, 1996 of 39.11x.
Montgomery used the National Bank Acquisitions to analyze premiums paid
compared to the seller's stock price at various times prior to the
announcement of the acquisition. These figures for all of the identified
transactions produced: (i) a median premium to the seller's stock price one
month prior to announcement of 30.0%; (ii) a median premium to the seller's
stock price six days prior to announcement of 25.4%; and (iii) a median
premium to the seller's stock price the day prior to announcement of 15.2%. In
comparison, based upon an assumed purchase price of $21.00 per share of
ValliCorp Common Stock, the consideration payable by Westamerica in the Merger
exceeded ValliCorp's stock price one month prior to November 8, 1996 by 32.3%,
the stock price six days prior to November 8, 1996 by 33.3% and the stock
price one day prior to November 8, 1996 by 16.7%.
No other company or transaction used in the above analysis as a comparison
is identical to ValliCorp or the Merger. Accordingly, an analysis of the
results of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the
public trading value and the announced acquisition prices of the companies to
which ValliCorp and the Merger are being compared.
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Contribution Analysis. Montgomery analyzed the contribution of each of
ValliCorp and Westamerica to, among other things, total tangible common
equity, assets, LTM net income, gross loans and core deposits of the pro forma
combined companies at or for the period ended September 30, 1996. This
analysis showed, among other things, that based on pro forma combined balance
sheets for ValliCorp and Westamerica at September 30, 1996, ValliCorp would
have contributed 34.79% of tangible common equity, 34.46% of assets, 38.36% of
loans and 35.53% of core deposits. Pro forma income statements for the latest
12 months ended September 30, 1996 indicated that ValliCorp would have
contributed 17.44% of the net income of the pro forma combined companies.
Based upon analysis assuming an Average Price for Westamerica Common Stock of
$51.25 and therefore an exchange ratio in the Merger of .4098 of a share of
Westamerica Common Stock for each share of ValliCorp Common Stock, holders of
ValliCorp Common Stock would own approximately 38.58% of the combined
companies based on fully diluted shares outstanding on November 11, 1996.
Dilution Analysis. Using estimates of future earnings of ValliCorp and
Westamerica prepared by ValliCorp management and Westamerica's 1997 Zack's
consensus earnings estimate, respectively, Montgomery compared the fiscal year
1997 estimated earnings per share for Westamerica to the fiscal year 1997
estimated earnings per share of the common stock of the pro forma combined
companies. Based on an exchange ratio in the Merger of .4098 of a share of
Westamerica Common Stock for each share of ValliCorp Common Stock, the
proposed transaction would have a dilutive impact on Westamerica's estimated
earnings. This analysis did not account for costs associated with the Merger
or expense savings or other synergies that may result from the Merger.
The summary set forth above does not purport to be a complete description of
the presentation by Montgomery to the ValliCorp Board or of the analyses
performed by Montgomery. The preparation of a fairness opinion is not
necessarily susceptible to partial analysis or summary description. Montgomery
believes that its analyses and the summary set forth above must be considered
as a whole and that selecting a portion of its analyses and factors, without
considering all analyses and factors, would create an incomplete view of the
process underlying the analyses set forth in its presentation to the ValliCorp
Board. In addition, Montgomery may have given various analyses more or less
weight than other analyses, and may have deemed various assumptions more or
less probable than other assumptions, so that the ranges of valuations
resulting from any particular analysis described above should not be taken to
be Montgomery's view of the actual value of ValliCorp or the combined
companies. The fact that any specific analysis has been referred to in the
summary above is not meant to indicate that such analysis was given greater
weight than any other analysis.
In performing its analyses, Montgomery made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of ValliCorp or
Westamerica. The analyses performed by Montgomery are not necessarily
indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of Montgomery's analysis of the fairness
of the consideration to be received by the holders of ValliCorp Common Stock
in the Merger and were provided to the ValliCorp Board in connection with the
delivery of Montgomery's opinion. The analyses do not purport to be appraisals
or to reflect the prices at which a company might actually be sold or the
prices at which any securities may trade at the present time or any time in
the future. The forecasts utilized by Montgomery in certain of its analyses
are based on numerous variables and assumptions which are inherently
unpredictable and must be considered not certain of occurrence as projected.
Accordingly, actual results could vary significantly from those contemplated
in such forecasts.
As described above under the heading "--Reasons for the Merger;
Recommendations of the Boards of Directors", Montgomery's opinion and
presentation to the ValliCorp Board were among the many factors taken into
consideration by the ValliCorp Board in making its determination to approve
the Agreement.
Pursuant to the Engagement Letter, ValliCorp paid Montgomery a retainer fee
of $100,000 upon engagement, a fee of $500,000 upon delivery of its November
11, 1996 fairness opinion and an additional $500,000 upon the mailing of this
Joint Proxy Statement/Prospectus. Additionally, Montgomery will receive
approximately $1,600,000 upon the closing of the Merger (based upon assumed
consideration payable in the
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Merger of $21.63 per ValliCorp Share). Accordingly, a significant portion of
Montgomery's fee is contingent upon the closing of the Merger. ValliCorp has
also agreed to reimburse Montgomery for its reasonable out-of-pocket expenses,
including any fees and disbursements for Montgomery's legal counsel and other
experts retained by Montgomery. ValliCorp has agreed to indemnify Montgomery,
its affiliates, and their respective partners, directors, officers, agents,
consultants, employees and controlling persons against certain liabilities,
including liabilities under the federal securities laws. Over the past two
years, Montgomery has provided investment banking services to ValliCorp for
which it has been paid fees totaling $418,775.
In the ordinary course of its business, Montgomery may trade equity
securities of Westamerica and ValliCorp for its own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
OPINION OF WESTAMERICA'S FINANCIAL ADVISOR
Westamerica retained Hoefer & Arnett ("H&A") to render financial advisory
and investment banking services in connection with the proposed Merger of
Westamerica with ValliCorp pursuant to an engagement letter dated as of May
31, 1996. H&A has rendered a written opinion dated November 11, 1996 (the "H&A
Fairness Opinion") to the Westamerica Board of Directors to the effect that
the consideration to be paid by Westamerica in the Merger is fair, from a
financial point of view, to the holders of Westamerica Common Stock. No
limitations were imposed by the Westamerica Board of Directors upon H&A with
respect to the investigations made or procedures followed in rendering the H&A
Fairness Opinion.
THE FULL TEXT OF THE H&A FAIRNESS OPINION, DATED AS OF NOVEMBER 11, 1996,
WHICH SETS FORTH CERTAIN ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON
THE REVIEW UNDERTAKEN BY H&A, IS ATTACHED HERETO AS ANNEX D. WESTAMERICA
SHAREHOLDERS ARE URGED TO READ THE H&A FAIRNESS OPINION IN ITS ENTIRETY. IN
FURNISHING SUCH FAIRNESS OPINION, H&A DOES NOT ADMIT THAT IT IS AN EXPERT WITH
RESPECT TO THE REGISTRATION STATEMENT OF WHICH THIS JOINT PROXY
STATEMENT/PROSPECTUS IS PART WITHIN THE MEANING OF THE TERM "EXPERTS" AS USED
IN THE SECURITIES ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER NOR
DOES IT ADMIT THAT ITS OPINION CONSTITUTES A REPORT OR VALUATION WITHIN THE
MEANING OF SECTION 11 OF THE SECURITIES ACT. THE SUMMARY OF THE PROCEDURES AND
ANALYSIS PERFORMED AND ASSUMPTIONS USED BY H&A SET FORTH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE TEXT OF
SUCH FAIRNESS OPINION. THE H&A FAIRNESS OPINION IS DIRECTED TO THE WESTAMERICA
BOARD OF DIRECTORS AND IS DIRECTED ONLY TO THE CONSIDERATION TO BE PAID BY
WESTAMERICA IN THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
WESTAMERICA SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE
WESTAMERICA SPECIAL MEETING. NO OTHER EXPERTS NAMED ELSEWHERE IN THIS JOINT
PROXY STATEMENT/PROSPECTUS HAVE BEEN INVOLVED IN OR CONSULTED WITH RESPECT TO
THE H&A FAIRNESS OPINION.
In arriving at its opinion, H&A has reviewed and analyzed, among other
things, the following: (i) the Agreement; (ii) certain publicly available
financial and other data with respect to ValliCorp and Westamerica, including
consolidated financial statements for recent years and unaudited interim
periods to September 30, 1996; (iii) certain other publicly available
financial and other information concerning Westamerica and ValliCorp and the
trading markets for the publicly traded securities of Westamerica and
ValliCorp; (iv) publicly available information concerning other banks and
holding companies, the trading markets for their securities and the nature and
terms of certain other merger transactions H&A believes relevant to its
inquiry; and (v) evaluations and analyses prepared and presented to the Board
of Directors of Westamerica or a committee thereof in connection with the
Merger. H&A has held discussions with senior management of Westamerica and of
ValliCorp concerning their past and current operations, financial condition
and prospects.
H&A reviewed with the senior management of Westamerica earnings projections
for Westamerica as a stand-alone entity, assuming the Merger does not occur.
H&A reviewed ValliCorp's five-year Strategic Plan and 1997 Profit Improvement
Plan for ValliCorp as a stand-alone entity, assuming the Merger does not
occur. H&A also reviewed with the senior management of Westamerica the
projected operating cost savings reasonably expected by Westamerica to be
achieved in each such year resulting from the Merger with ValliCorp. Certain
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financial projections for the combined companies and for Westamerica and
ValliCorp as stand-alone entities were derived by H&A based partially upon the
projections described above, as well as H&A's own assessment of general
economic, market and financial conditions.
H&A took into account its assessment of general economic, market and
financial conditions and its experience in other transactions as well as its
experience in securities valuation and its knowledge of the banking industry
generally. H&A considered such financial and other factors as it deemed
appropriate under the circumstances. The H&A Fairness Opinion was necessarily
based upon conditions as they existed and could only be evaluated on the date
thereof and the information made available to H&A through the date thereof.
In conducting its review and in arriving at its Fairness Opinion, H&A relied
upon and assumed the accuracy and completeness of the financial and other
information provided to it or publicly available and did not attempt
independently to verify the same. H&A relied upon the management of
Westamerica and ValliCorp as to the reasonableness of the financial and
operating forecasts, projections and projected operating cost savings. H&A
also assumed, without independent verification, that the aggregate allowances
for loan losses for Westamerica and ValliCorp were adequate to cover such
losses. H&A did not make or obtain any evaluations or appraisals of the
property of Westamerica or ValliCorp, nor did H&A examine any individual loan
credit files. The H&A Fairness Opinion is limited to the fairness, from a
financial point of view, to the shareholders of Westamerica of the
consideration to be paid by Westamerica in the Merger which was determined by
arms' length negotiations and does not address Westamerica's underlying
decision to proceed with the Merger.
In connection with rendering its Fairness Opinion to the Westamerica Board
of Directors, H&A performed certain financial analyses, which are summarized
below. The summary set forth below does not purport to be a complete
description of the presentation by H&A to Westamerica's Board or of the
analyses performed by H&A. H&A believes that its analysis must be considered
as a whole and that selecting portions of such analyses and the factors
considered therein, without considering all factors and analyses, could create
an incomplete view of the analysis and the processes underlying the H&A
Fairness Opinion. The preparation of a fairness opinion is a complex process
involving subjective judgments and is not necessarily susceptible to partial
analysis or summary description. In its analysis, H&A made numerous
assumptions with respect to industry performance, business and economic
conditions, and other matters, many of which are beyond the control of
Westamerica and ValliCorp. Any estimates contained in H&A's analyses are not
necessarily indicative of future results or values, which may be significantly
more or less favorable than such estimates. Estimates of values of companies
do not purport to be appraisals or necessarily reflect the prices at which
companies or their securities may actually be sold. None of the financial
analyses performed by H&A was assigned a greater significance by H&A than any
other.
Neither Westamerica nor ValliCorp publicly discloses internal management
financial forecasts and projections of the type provided to H&A in connection
with its review of the proposed Merger. Such forecasts and projections were
not prepared with a view towards public disclosure. The forecasts, projections
and projected operating cost savings prepared by H&A were based on numerous
variables and assumptions which are inherently uncertain, including, without
limitation, factors related to general economic and market conditions.
Accordingly, actual results could vary significantly from those set forth in
such forecasts and projections.
Set forth below is a brief summary of the analysis performed by H&A in
reaching its Fairness Opinion. H&A assumed for purposes of its opinion that
the Merger will be accounted for as a pooling of interests transaction under
generally accepted accounting principles. Unless otherwise noted in this
analysis, H&A used an Exchange Ratio of .4098 of a share of Westamerica Common
Stock at time of closing, the level at which ValliCorp Common Stock would be
exchanged if the Effective Date were the same as the date of the H&A Fairness
Opinion. The Exchange Ratio and possible adjustments to the Exchange Ratio
were developed pursuant to extensive negotiations between Westamerica and
ValliCorp. H&A analyzed certain effects of the Merger assuming an Exchange
Ratio, among others, of .4098. The .4098 Exchange Ratio does not necessarily
reflect the highest possible Exchange Ratio under the terms of the Agreement,
and there can be no assurance that the Exchange Ratio as finally determined in
accordance with the Agreement will not be higher than .4098. The
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<PAGE>
analysis also focuses on core financial and operating projections and
statistics which are not specifically adjusted for non-recurring charges,
unless otherwise stated.
Pro Forma Merger and Contribution Analysis. H&A analyzed the changes in the
amount of earnings, book value and indicated dividends attributable to one
share of Westamerica Common Stock before the Merger to those attributable to
one share of Westamerica Common Stock as a result of the proposed Merger. The
following assumptions regarding earnings and dividends underlie the pro forma
results. The analysis assumes a dividend payout ratio consistent with
Westamerica's recent historical dividend payout ratio. The analysis further
assumes, unless otherwise stated, Merger-related operating cost savings to be
fully realized during 1997 and assumes the Merger is completed during the
second quarter of 1997. These projected operating cost savings represent
approximately 43% of ValliCorp's projected non-interest expense on a pre-tax
basis. This level of projected operating cost savings, expressed as a percent
of the target institution's projected non-interest expense, is within a range
of the level of operating cost savings, expressed as a percentage of the
target institution's non-interest expense, achieved by Westamerica in previous
transactions reviewed by H&A. H&A performed pro forma merger analyses assuming
the stated earnings projections and the Merger-related projected operating
cost savings by Westamerica. In addition, H&A analyzed certain pro forma
merger scenarios in order to assess the impact on Westamerica of some levels
of volatility in ValliCorp's and Westamerica's projected earnings as well as
volatility in the levels of Merger-related projected operating cost savings.
The impact on Westamerica of volatility in ValliCorp's earnings was shown by
calculating pro forma results assuming ValliCorp's earnings as projected, as
well as Westamerica's earnings to the pro forma results. H&A also examined the
earnings impact on Westamerica resulting at those projected earnings, the
impact on Westamerica of volatility in the level of Merger-related projected
operating cost savings was shown by calculating pro forma results assuming
cost savings as projected, as well as 75% to 125% of ValliCorp's projected
earnings. In order to measure the impact on Westamerica of volatility of
Westamerica's earnings to the pro forma results, H&A also examined the
earnings impact on Westamerica resulting at those levels of ValliCorp earnings
if Westamerica achieved 75% and 125% of its projected earnings. The impact on
Westamerica of volatility in the level of Merger-related projected operating
cost savings was shown by calculating pro forma results assuming cost savings
as projected, as well as 125% and 75% of projected cost savings. H&A analyzed
the changes in earnings and book value for the years 1998, 1999 and 2000
resulting from various combinations of stand-alone and pro forma projected
earnings and cost savings volatility assumptions described above. The analyses
showed that for the year 1998 the change in earnings per share ranged from
0.27% to 51.84% and the change in book value per share ranged from -4.75% to -
0.27%. For the year 1999 the change in earnings per share ranged from -0.21%
to 54.32% and the change in book value per share ranged from -4.26% to 3.82%.
For the year 2000 the change in earnings per share ranged from -0.68% to
56.84% and the change in book value per share ranged from -3.88% to 7.77%.
Analysis of Other Merger Transactions. H&A analyzed other bank merger and
acquisition transactions where the total target asset size was over $750
million and less than $3 billion for the periods January 1, 1995 to November
11, 1996. The transactions analyzed were: Magna Group/Homeland Bankshares,
ABN-AMRO Holding/CNBC Bancorp, Inc., Hibernia Corporation/C M Bank Holding
Co., ABN-AMRO Holding/Comerica Bank-IL, US Bancorp/California Bancshares,
NationsBank Corp./Charter Bancshares, Firstar Corp/American Bancorp., Norwest
Corporation/Victoria Bankshares, Peoples Heritage Financial/Bank of NH Corp.,
Regions Financial/First National Bancorp, Mercantile Bancorp/Hawkeye Bancorp,
NationsBank Corp./Intercontinental Bank, Union Planters Corp/Capital Bancorp,
Meridian Commerce Corp/Central Corporation, and Comerica Inc./Metrobank. This
analysis showed that the Exchange Ratio represented a multiple of: (i) 2.40x
ValliCorp's tangible book value compared to a high multiple of 3.17x, a median
multiple of 2.01x and a low multiple of 1.37x for the comparable transactions;
and (ii) 21.00x ValliCorp's latest 12 months' earnings per share, compared to
a high multiple of 19.12x, a median multiple of 15.38x, and a low multiple of
12.74x for the comparable transactions. H&A noted that no transaction reviewed
was identical to the Merger and that, accordingly, any analysis of comparable
transactions necessarily involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
parties to the transactions being compared.
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<PAGE>
Discounted Cash Flow Analysis. H&A examined the results of a discounted cash
flow analysis designed to compare the present value, under certain
assumptions, that would be attained if Westamerica remained independent
through 2001 or was acquired in 2001 by a larger financial institution, with
the present value of the combined institution at an Exchange Ratio, among
others, of .4098. The results produced in the analysis did not purport to be
indicative of actual values or expected values of Westamerica or the shares of
Westamerica Common Stock. All cases were analyzed assuming realization of the
operating cost savings, in the amounts and time periods previously indicated,
unless otherwise stated (see Pro Forma Merger and Contribution Analysis
above).
In calculating the present values through the discounted cash flow analysis,
H&A analyzed the effect of possible earnings volatility and potential Merger-
related operating cost savings volatility, among other items, by assuming
varying levels of projected earnings for Westamerica and ValliCorp. The three
cases examined were: Westamerica earnings as projected and ValliCorp earnings
as projected; Westamerica earnings 75% of projected earnings and ValliCorp
earnings 125% of projected earnings; and Westamerica earnings 125% of
projected earnings and ValliCorp earnings 75% of projected earnings. Pro forma
combined cash flows were calculated assuming the combinations of the cash
flows in each of these cases, and were compared to the cash flows of
Westamerica on a stand-alone basis as well as to the cash flows of Westamerica
acquired in 2001 by a larger financial institution. All cases were analyzed
assuming realization of the operating cost savings, in the amounts and time
periods previously indicated, unless otherwise stated (see Pro Forma Merger
and Contribution Analysis above).
The discount rates used ranged from 10.0% to 14.0%. For the Westamerica
stand-alone analyses, the terminal price multiples applied to 2001 estimated
earnings per share ranged from 12.00x to 18.00x. The lower levels of the
price-to-earnings per share multiples range reflected an estimated future
trading range of Westamerica, while the higher levels of the price-to-earnings
per share multiples were more indicative of a future sale of Westamerica's
stock to a larger financial institution. For the pro forma combined analyses,
the terminal price-to-earnings per share multiples also ranged from 12.00x to
18.00x.
For the Westamerica stand-alone analyses, the cash flows were comprised of
the projected stand-alone dividends per share in years 1997 through 2001 plus
the terminal value of Westamerica Common Stock at year-end 2001 (calculated by
applying each one of the assumed terminal price-to-earnings per share
multiplies as stated above to 2001 projected Westamerica earnings per share).
For the pro forma combined analyses, the cash flows were comprised of the
projected pro forma combined dividends per share in years 1997 through 2001
plus the terminal value of the pro forma combined entity's stock at year-end
2001 (calculated by applying each one of the assumed terminal price-to-
earnings per share multiples as stated above to 2001 projected pro forma
combined earnings per share). H&A also calculated the present values that
would be attained in each case if 75% or 125% of projected operating cost
savings were realized.
These analyses showed a range of stand-alone present values per share for
Westamerica from $37.96 to $72.07, as compared to a range of pro forma
combined present values per share of $50.97 to $60.30. These analyses do not
purport to be indicative of actual values or expected values of the shares of
Westamerica Common Stock. Discounted present value analysis is a widely used
valuation methodology which relies on numerous assumptions, including asset
and earnings growth rates, dividend payout rates, terminal values and discount
rates. The analysis showed that use of a higher (lower) level of projected
ValliCorp earnings raised (lowered) the resulting present value for a given
level of Westamerica earnings, on a pro forma combined basis. The analysis
also showed that use of a lower (higher) discount rate or a higher (lower)
terminal price-to-earnings per share multiple raised (lowered) the calculated
present values.
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<PAGE>
Comparable Company Analysis. H&A examined recent historical data on
Westamerica and ValliCorp based upon information from ValliCorp's 1995 Annual
Report to Shareholders and subsequent quarterly information. H&A analyzed
certain credit and operating statistics for Westamerica and ValliCorp,
comparing these statistics to data for a peer group of California banks using
the publicly available Hoefer & Arnett Banking Universe, West and Southwest
Coverage Area, Second Quarter 1996 Performance Updates (the "Universe"). The
Universe includes 86 independent California banking institutions. Both
Westamerica and ValliCorp are included in the Universe. The comparisons made
are of or for the period ending June 30, 1996, unless otherwise noted. In this
analysis, for comparison purposes, H&A used the closing stock prices of
ValliCorp and Westamerica for August 30, 1996, prices which coincide with
stock prices and comparative pricing data which appear in the Universe. The
analysis necessarily involved complex considerations and judgments concerning
differences in financial and operating characteristics of the comparable
companies.
<TABLE>
<CAPTION>
VALLICORP WESTAMERICA INDEX MEDIAN
---------- ----------- ------------
<S> <C> <C> <C>
Total assets (dollars in thousands)..... $1,258,059 $2,504,881 $213,712
Market capitalization (1) (dollars in
thousands)............................. 211,865 473,801 23,900
Price to tangible equity per share (1).. 1.85x 2.03x 1.31x
Tangible equity to tangible assets...... 9.82% 9.33% 8.95%
Nonperforming assets to total assets
(2).................................... 1.34% 0.60% 1.10%
Loan loss reserve to nonperforming
loans.................................. 90.12% 402.47% 134.98%
Return on assets........................ 1.18% 1.51% 1.23%
Return on equity........................ 11.80% 16.49% 12.67%
Efficiency ratio (3).................... 61.80% 55.12% 67.64%
</TABLE>
- --------
(1) Statistics calculated based on bid prices at August 30, 1996, the latest
available prices prior to publishing the second quarter 1996 Universe.
(2) Nonperforming assets include loans which are 90 days past due and still
accruing in addition to nonaccrual and restructured loans and other real
estate owned.
(3) Efficiency ratio represents noninterest expenses as a percent of total
revenues.
H&A is an investment banking firm continually engaged in the valuation of
businesses and securities, including financial institutions and their
securities, in connection with mergers and acquisitions, negotiated
underwritings, private offerings of securities, secondary distributions of
listed and unlisted securities and valuations for estate, corporate and other
purposes. H&A is a market maker in the common shares of both Westamerica and
ValliCorp. H&A has previously provided investment banking services to
Westamerica and has provided investment banking services to companies acquired
by both Westamerica and ValliCorp.
Financial Advisory Fees. In consideration of the rendering of financial
advice and for the preparation and rendering of the H&A Fairness Opinion,
Westamerica has agreed to pay H&A a fee to be paid at closing equal to 0.75%
of the aggregate consideration paid to the shareholders of ValliCorp on the
date of closing. It is estimated that said fee will be approximately
$2,400,000 (based upon assumed consideration payable in the Merger of $21.63
in value of Westamerica Common Stock per ValliCorp Share). Such fee is
contingent on the Merger being consummated. Westamerica will also reimburse
H&A for up to $40,000 of its reasonable out-of-pocket expenses which may be
incurred in connection with the rendering of the H&A Fairness Opinion.
Westamerica has agreed to indemnify H&A, its affiliates, and their respective
partners, directors, officers, agents, employees and controlling persons
against certain liabilities, including liabilities under the federal
securities laws. No portion of the fee is contingent upon the conclusions
reached in the H&A Fairness Opinion.
EFFECTIVE DATE OF THE MERGER
The Agreement provides that the Merger will be effective upon the date of
the filing with the California Secretary of State of a duly executed Plan of
Merger and officers' certificates prescribed by Section 1103 of the GCL and/or
other documents as required by the DGCL, or at such time thereafter as is
provided by mutual agreement in the Merger Agreement (the "Effective Time").
The date on which the Merger is effective as specified in the Merger Agreement
is referred to herein as the Effective Date. Although the parties have not
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<PAGE>
adopted any formal timetable, it is presently anticipated that the Merger will
be consummated during the second quarter of 1997 assuming all of the
conditions set forth in the Agreement are theretofore satisfied or waived.
PURCHASE PRICE AND POTENTIAL ADJUSTMENTS
The Purchase Price to be paid for each share of ValliCorp Common Stock is
$21.00 of value in Westamerica Common Stock, subject to adjustment under
certain circumstances as discussed herein and in the Agreement.
Specifically, as set forth in the Agreement, the Purchase Price to be paid
to ValliCorp shareholders in the form of Westamerica Common Stock will be as
follows. If the average closing price of Westamerica Common Stock on the NMS
for a period of 20 consecutive trading days ending five trading days prior to
the Effective Date (the "Average Price") is between $48.69 and $53.81
(inclusive), then ValliCorp shareholders will receive $21.00 of value in
Westamerica Common Stock for each outstanding share of ValliCorp Common Stock
(thus, the Exchange Ratio is determined by dividing $21.00 by the Average
Price). If the Average Price is above $53.81, the Exchange Ratio will be
adjusted such that ValliCorp shareholders will receive the equivalent of 40%
of the appreciation above that amount. Under this formula, for every $1.00
that the Average Price is above $53.81, ValliCorp shareholders will receive
approximately an additional $0.16 of value in Westamerica Common Stock. If the
Average Price is below $48.69, then the Exchange Ratio is fixed at .4313 so
that ValliCorp shareholders will receive .4313 of a share of Westamerica
Common Stock in exchange for each share of ValliCorp Common Stock; provided,
however, that if the Average Price falls below $46.13, the Board of Directors
of ValliCorp may choose to either maintain an Exchange Ratio of .4313 or
exercise a right to terminate the Agreement. If ValliCorp exercises its right
to terminate the Agreement, Westamerica may choose to either increase the
Exchange Ratio to a ratio which will provide approximately $19.90 of value in
Westamerica Common Stock for each ValliCorp Share (whereupon no termination
shall have occurred), or allow the Agreement to be terminated.
The following table illustrates a range of possible Exchange Ratios based
upon the illustrated Average Prices of Westamerica Common Stock:
<TABLE>
<CAPTION>
EQUIVALENT
AVERAGE PRICE VALUE OF
OF WESTAMERICA EXCHANGE VALLICORP COMMON
COMMON STOCK RATIO STOCK
-------------- -------- ----------------
<S> <C> <C>
Less than $48.69................................ .4313 Less than $21.00
$48.69........................................ .4313 $21.00
50.00........................................ .4200 21.00
51.00........................................ .4118 21.00
52.00........................................ .4038 21.00
53.00........................................ .3962 21.00
53.81........................................ .3903 21.00
55.00........................................ .3852 21.19
56.00........................................ .3811 21.34
57.00........................................ .3772 21.50
58.00........................................ .3733 21.65
59.00........................................ .3697 21.81
60.00........................................ .3661 21.97
</TABLE>
In addition, the Purchase Price may be further adjusted downward based on a
measure of ValliCorp's consolidated book value calculated in the manner and
based on certain adjustments set forth in the Agreement. Generally, at the end
of the quarter prior to the Effective Date, ValliCorp's consolidated book
value (calculated in the manner set forth in the Agreement) must be greater
than or equal to $138,885,000. If said amount is less than $138,885,000 but
more than $125,000,000, then the Exchange Ratio will be adjusted downward
based on a formula set forth in the Agreement. The formula takes the
consolidated book value calculated in the manner set forth in the Agreement,
divides it by $138,885,000 (to determine the fraction of book value attained)
and then
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<PAGE>
multiplies the result by the prior Exchange Ratio to yield the adjusted
Exchange Ratio. However, if said consolidated book value is below
$125,000,000, no additional adjustment to the Purchase Price will occur, but
Westamerica may, at its option, terminate the Agreement.
The following table illustrates a range of possible adjusted Exchange Ratios
based upon various levels of ValliCorp's consolidated book value calculated in
the manner set forth in the Agreement.
<TABLE>
<CAPTION>
AVERAGE PRICE VALLICORP'S CONSOLIDATED BOOK VALUE
OF --------------------------------------
WESTAMERICA $138,885,000
COMMON STOCK OR MORE $131,942,500 $125,000,000
------------- ------------ ------------ ------------
<S> <C> <C> <C>
$48.69........................... .4313 .4097 .3882
50.00........................... .4200 .3990 .3780
51.00........................... .4118 .3912 .3706
52.00........................... .4038 .3837 .3635
53.00........................... .3962 .3764 .3566
53.81........................... .3903 .3708 .3512
55.00........................... .3852 .3659 .3467
56.00........................... .3811 .3621 .3430
57.00........................... .3772 .3583 .3395
58.00........................... .3733 .3547 .3360
59.00........................... .3697 .3512 .3327
60.00........................... .3661 .3478 .3295
</TABLE>
The above table can be used to determine the potential purchase price per
share of ValliCorp Common Stock (in the form of Westamerica Common Stock) by
multiplying the Exchange Ratio from any particular point in the table by the
Average Price corresponding to said Exchange Ratio.
If the Average Price at the Effective Date is the same as the closing price
of Westamerica Common Stock on January 3, 1997 of $57.875, and assuming
ValliCorp's consolidated book value remains at or above $138,885,000, the
Exchange Ratio would be .3738, which would equate to a purchase price of
$21.63 in value of Westamerica Common Stock per ValliCorp Share.
CONVERSION OF SHARES OF VALLICORP COMMON STOCK
At the Effective Time, by virtue of the Merger and without any action on the
part of the holders of ValliCorp Common Stock, each issued and outstanding
ValliCorp Share (other than fractional shares) will be converted into the
right to receive shares of Westamerica Common Stock as discussed above. See
"--Purchase Price and Potential Adjustments." All such ValliCorp Shares shall
no longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each certificate previously representing any such
shares shall thereafter represent the Westamerica Shares into which such
ValliCorp Shares have been converted. Certificates previously representing
ValliCorp Shares shall be exchanged for certificates representing whole shares
of Westamerica Common Stock issued in consideration therefor upon the
surrender of such certificates. Cash will be paid in lieu of any fractional
share of Westamerica Common Stock. See "--Exchange of ValliCorp Stock
Certificates; Fractional Interests." From and after the Effective Date, the
holders of certificates formerly representing ValliCorp Shares shall cease to
have any rights with respect thereto.
EXCHANGE OF VALLICORP STOCK CERTIFICATES; FRACTIONAL INTERESTS
Prior to the Effective Date, Westamerica has agreed to appoint Chemical
Trust Company of California or its successor as exchange agent (the "Exchange
Agent") for the purpose of exchanging certificates representing shares of
ValliCorp Common Stock, and at and after the Effective Date, Westamerica will
issue and deliverto the Exchange Agent certificates representing the shares of
Westamerica Common Stock to be delivered to holders of ValliCorp Shares. As
soon as practicable after the Effective Date, each holder of ValliCorp Shares,
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<PAGE>
upon surrender to the Exchange Agent of one or more certificates for such
ValliCorp Shares for cancellation, will be entitled to receive a certificate
representing the number of shares of Westamerica Common Stock into which such
number of ValliCorp Shares will have been converted and a payment in cash with
respect to fractional shares, if any. Each certificate representing shares of
Westamerica Common Stock will bear a notation incorporating the terms of the
Amended and Restated Rights Agreement by reference and will evidence the
Westamerica Rights as set forth in and subject to the terms of the Amended and
Restated Rights Agreement. Certificates issued for the shares of Westamerica
Common Stock will be deemed to be certificates for said Westamerica Rights.
For a discussion of the Amended and Restated Rights Agreement, see
"Description of Westamerica Capital Stock and Indebtedness--Shareholder Rights
Plan" and "Certain Considerations--Effect of Shareholder Rights Plan."
No dividends or other distributions of any kind which are declared payable
to shareholders of record of the shares of Westamerica Common Stock after the
Effective Date will be paid to persons entitled to receive such certificates
for shares of Westamerica Common Stock until such persons surrender their
certificates representing ValliCorp Shares. Upon surrender of certificates
representing ValliCorp Shares, the holder thereof will be paid, without
interest, any dividends or other distributions with respect to the shares of
Westamerica Common Stock as to which the record date and payment date occurred
on or after the Effective Date and on or before the date of surrender.
If any certificate for shares of Westamerica Common Stock is to be issued in
a name other than that in which the certificate for ValliCorp Shares
surrendered in exchange therefor is registered, it will be a condition of such
exchange that the person requesting such exchange will pay to the Exchange
Agent any transfer costs, taxes or other expenses required by reason of the
issuance of certificates for such shares of Westamerica Common Stock in a name
other than the registered holder of the certificate surrendered, or such
persons will establish to the satisfaction of Westamerica and the Exchange
Agent that such costs, taxes or other expenses have been paid or are not
applicable.
All dividends or distributions, and any cash to be paid in lieu of
fractional shares, if held by the Exchange Agent for payment or delivery to
the holders of unsurrendered certificates representing ValliCorp Shares and
unclaimed at the end of one year from the Effective Date, will (together with
any interest earned thereon) at such time be paid or redelivered by the
Exchange Agent to Westamerica, and after such time any holder of a certificate
representing ValliCorp Shares who has not surrendered such certificate to the
Exchange Agent will, subject to applicable law, look as a general creditor
only to Westamerica for payment or delivery of such shares of Westamerica
Common Stock and dividends or distributions or cash, as the case may be.
No fractional shares of Westamerica Common Stock will be issued to holders
of ValliCorp Shares. In lieu thereof, each such holder entitled to a fraction
of a share of Westamerica Common Stock will receive, at the time of surrender
of the certificate or certificates representing such holder's ValliCorp
Shares, an amount in cash equal to the Average Price multiplied by the
fraction of a share of Westamerica Common Stock to which such holder otherwise
would be entitled. No such holder will be entitled to dividends, voting
rights, interest on the value of, or any other rights in respect of, a
fractional share.
TREATMENT OF STOCK OPTIONS
On the Effective Date, the obligations under any stock option plans of
ValliCorp will be assumed by Westamerica. On the Effective Date, options to
purchase shares of ValliCorp Common Stock issued pursuant to ValliCorp's stock
option plans or stock option plans of companies acquired by ValliCorp that are
outstanding will be converted, without any action on the part of the holders
thereof, into options to acquire, upon payment of the adjusted exercise price
(which will equal the exercise price per share for the options immediately
prior to the Merger, divided by the Exchange Ratio), the number of shares of
Westamerica Common Stock the option holder would have received pursuant to the
Merger if he or she had exercised all of his or her options immediately prior
thereto. Under the terms of ValliCorp's director stock option plan and key
employee stock option plan, all stock options held by ValliCorp directors and
officers under those plans will vest upon the Merger. Except as noted above,
each ValliCorp stock option will otherwise continue on terms and conditions
that are consistent with those that were applicable on the Effective Date.
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<PAGE>
Westamerica has agreed that it will, for purposes of the ValliCorp director
stock option plan, at or immediately following the Effective Date, offer each
current non-officer Director of ValliCorp (who does not become a director of
Westamerica) a position as Director or advisory Director of ValliWide and
that, should ValliWide be merged into any other subsidiary of Westamerica,
each current non-officer Director will be offered a position, for purposes of
said director stock option plan, as an advisory Director of the successor in
interest to ValliWide. See "Certain Considerations--Interests of ValliCorp
Officers and Directors in the Merger."
Subject to the mutual intent of the parties that the Merger will be
accounted for under the pooling of interests method, ValliCorp will otherwise
amend its option plans and obtain any required shareholder approval of such
option plan amendments and will amend, as necessary, any and all option
agreements (including obtaining any required participant consents) prior to
the Effective Date to make them consistent with the terms of the Agreement.
COVENANTS OF WESTAMERICA AND VALLICORP; CONDUCT OF BUSINESS PRIOR TO THE
MERGER
The Agreement contains covenants of Westamerica and ValliCorp concerning,
among other things, (i) the cooperation of each party in obtaining all
necessary or appropriate government approvals in order to cause the Merger to
be consummated; (ii) the prompt notification by either party of any event
which would cause or constitute a breach of any of the representations,
warranties or covenants of that party; (iii) the right of each party to review
each other's books and records and the delivery of financial statements to
both parties; (iv) the cooperation by both parties in the issuance of any
press releases; (v) restrictions on ValliCorp's ability to enter into a
merger, consolidation, or other takeover proposal involving any third party;
(vi) the requirement that in the event Westamerica agrees to be acquired by a
third party that said third party agree to carry out the terms and provisions
of the Agreement; (vii) certain restrictions on increases in compensation of
directors, officers, employees or agents of ValliCorp and its subsidiaries;
(viii) restrictions on the payment of dividends by ValliCorp; and (ix) the
termination, modification or merger of ValliCorp's employee welfare benefits
plan into Westamerica's employee welfare benefits plan.
Westamerica has agreed to honor in accordance with their terms all
employment, severance and employee benefits and compensation plans, contracts,
agreements, arrangements, and understandings disclosed to Westamerica as of
November 11, 1996 (collectively, the "ValliCorp Employment Arrangements"), and
ValliCorp has agreed to notify Westamerica substantially concurrently with the
making of any salary increase or bonus payment required due to a contractual
obligation under the terms of any ValliCorp Employment Arrangement.
Westamerica and ValliCorp have also agreed that, promptly following the
Effective Time, Westamerica shall, at a meeting of its directors (or pursuant
to written consent), take those actions necessary to cause three persons who
are currently directors of ValliCorp to become directors of Westamerica.
Westamerica has also agreed that, following the Effective Date, it will
indemnify all persons who are or become directors or officers of ValliCorp or
any of its subsidiaries prior to the Effective Date to the fullest extent
permitted by applicable law on the basis set forth in the Agreement, and all
rights to indemnification and all limitations on liability existing in favor
of said directors and officers in effect on November 11, 1996 shall survive
the Merger and be honored by Westamerica for six years after the Effective
Date. Westamerica has agreed that for three years after the Effective Date, it
will cause the persons who served as directors or officers of ValliCorp and
its subsidiaries to be covered by ValliCorp's existing directors' and
officers' liability insurance policy (although Westamerica may substitute
therefor policies of at least the same coverage and amounts containing terms
and conditions which are not less advantageous than such policy) or so-called
tail coverage obtained in connection with ValliCorp's directors' and officers'
liability insurance policies in effect as of the Effective Date; provided that
Westamerica will not be obligated to make annual premium payments for such
insurance to the extent such premiums exceed 150% of the most recent premium
paid by ValliCorp.
Westamerica will reserve and make available for issuance in connection with
the Merger and in accordance with the terms of the Agreement (i) the
Westamerica Common Stock; and (ii) the maximum number of shares of Westamerica
Common Stock to which holders of Convertible Debentures or the optionholders
of ValliCorp may be entitled to at or after the Effective Date. Westamerica
will also use all reasonable efforts to cause the shares
47
<PAGE>
of Westamerica Common Stock to be issued in the Merger and the shares of
Westamerica Common Stock to be reserved for issuance upon exercise of former
ValliCorp stock options to be approved for listing on the NMS, subject to
official notice of issuance, prior to the Closing Date.
ValliCorp has agreed that neither ValliCorp nor its subsidiaries will make
or approve any increase in the compensation payable or to become payable by
ValliCorp to any of its (or its subsidiaries') directors, officers, employees
or agents with annual base salaries in excess of $50,000 (excluding
compensation through any profit sharing, pension, retirement, severance,
incentive or other employee benefit program or arrangement) except such
increases in compensation or bonuses payable pursuant to the terms of written
agreements between ValliCorp (or its subsidiaries) and its directors,
officers, employees or agents (which agreements have been previously disclosed
as of November 11, 1996 and have not been amended on or after the date of the
Agreement), nor will any other bonus payment or any agreement or commitment to
make a bonus payment in excess of $5,000 be made other than pursuant to
incentive plans as set forth in the Agreement (except with Westamerica's prior
approval, which shall not be unreasonably withheld). Further, no employment
agreement (other than any such employment agreement that may arise by
operation of law upon the hiring of any new employee) or consulting agreement
will be entered into by ValliCorp or its subsidiaries with any directors,
officers, employees or agents, unless Westamerica has given its prior written
consent (which will not be unreasonably withheld). Without the prior written
consent of Westamerica (which will not be unreasonably withheld) or except as
necessary to comply with the orders, directives or requests of its regulators,
neither ValliCorp nor its subsidiaries will hire any new employee at an annual
base salary in excess of $50,000 per year.
The Agreement provides that ValliCorp and its subsidiaries will conduct
their respective businesses in the ordinary course as such were conducted
prior to entering into the Agreement. The Agreement further provides that,
unless Westamerica has given its previous written consent to any act or
omission to the contrary (which consent shall not be unreasonably withheld),
ValliCorp and its subsidiaries will, until the Effective Date, cause their
respective officers to: (i) use all commercially reasonable efforts to
preserve their respective businesses and business organizations intact; (ii)
use all commercially reasonable efforts to preserve the goodwill of customers
and others having business relations with them and take no action that would
impair the benefit to Westamerica of the goodwill of ValliCorp and its
subsidiaries or the other benefits of the Merger; (iii) consult with
Westamerica as to the making of any decisions or the taking of any actions in
matters other than in the Ordinary Course of Business; (iv) maintain their
respective properties in customary repair, working order and condition
(reasonable wear and tear excepted); (v) comply in all material respects with
all laws, regulations and decrees applicable to the conduct of their
respective businesses; (vi) use all commercially reasonable efforts to keep in
force at not less than their present limits all policies of insurance
(including deposit insurance of the FDIC) to the extent reasonably practicable
in light of the prevailing market conditions in the insurance industry; (vii)
use, in cooperation with Westamerica, all reasonable efforts to keep available
to Westamerica the services of their present officers and employees (it being
understood that ValliCorp and its subsidiaries shall have the right to
terminate the employment of any officer or employee in accordance with their
established employment procedures); (viii) comply in all material respects
with all orders, agreements and memoranda of understanding with respect to
ValliCorp and its subsidiaries made by or with the Commission, the Federal
Reserve Board, the FDIC, or any other regulatory authority of competent
jurisdiction, and promptly forward to Westamerica all communications received
from any such authority and inform Westamerica of any material restrictions
imposed by any governmental authority on the business of ValliCorp or its
subsidiaries; (ix) file in a timely manner all reports, tax returns and other
documents required to be filed with federal, state, local and other
authorities; and (x) conduct such environmental audits as ValliCorp or
Westamerica deems necessary prior to foreclosure or otherwise (if information
is or becomes available indicating a risk of environmental contamination) on
any property concerning which ValliCorp or any ValliCorp Subsidiary has
knowledge that asbestos or asbestos-containing materials, PCBs or PCB-
contaminated materials, any petroleum product, or hazardous substance or waste
(as defined under any applicable environmental laws) was or is present,
manufactured, recycled, reclaimed, released, stored, treated, or disposed of,
and provide the results of any such audits to and consult with Westamerica
regarding the significance of the audit prior to the foreclosure on any such
property; provided, however, that if Westamerica requests any environmental
audit(s) which is (are) not required by applicable law or regulation or
ValliCorp's existing policies, Westamerica shall pay the costs of any such
audit(s).
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The Agreement further provides that ValliCorp and its subsidiaries will not,
without the prior written consent of Westamerica (such consent not to be
unreasonably withheld), among other things, (i) sell, lease, pledge, assign,
encumber or otherwise dispose of any of its assets or stock except in the
Ordinary Course of Business, and only then for adequate value, without
recourse and consistent with its customary practice, provided that ValliCorp
will not sell or otherwise transfer all or any portion of its mortgage
servicing portfolio; (ii) with respect to any extension of credit in excess of
$100,000, waive or release any right or collateral or cancel or compromise any
debt or claim, except in the Ordinary Course of Business; (iii) make,
renegotiate, renew, increase, extend or purchase any loans, advances or loan
commitments, in each case to any of its officers except in the Ordinary Course
of Business consistent with ValliCorp's established loan procedures and in
compliance with Federal Reserve Board Regulation O as applicable to ValliCorp
and its subsidiaries under relevant state or federal law; (iv) take any action
to create, relocate or terminate the operations of any banking office or
branch, or to form any new subsidiary or affiliated entity except as agreed by
the parties and as further discussed below under "Structural Changes to
Certain ValliWide Branches"; and (v) settle or otherwise take any action to
release or reduce any of its rights with respect to any litigation involving a
claim of more than $100,000 in which it is a party.
The Agreement also provides that ValliCorp and its subsidiaries will not,
without the prior consent of Westamerica (such consent not to be unreasonably
withheld), among other things, (i) commit to or renew any loan with a
principal amount in excess of $250,000, unless Westamerica's comments
concerning said commitment are addressed by ValliWide; provided, however, that
if any loan commitment or loan renewal involves a loan to a borrower who has
(a) any other classified or criticized asset, (b) a total lending relationship
of $250,000 or more, or (c) a renewal involving a classified or criticized
asset, then the relevant loan subject to this provision shall be $100,000;
(ii) purchase any investment security with a maturity in excess of three
years, or sell any investment security in which a gain is recognized; (iii)
issue any certificate of deposit with a rate of interest which exceeds the
prevailing rates at commercial banks in ValliWide's market area; (iv) commit
to new capital commitments or expenditures in excess of $50,000; and (v)
commit to make any construction loan if based on existing construction loans
and anticipated fundings such commitment would, with respect to ValliCorp and
its subsidiaries on an aggregate basis, cause their respective total
construction loans and construction loan commitments outstanding at the
Effective Date to exceed their respective level of construction loans and
construction loan commitments as of October 31, 1996 (provided, however, that
notwithstanding the foregoing, ValliCorp may make or commit to make up to an
additional $10,000,000 in construction loans over the amount of such
construction loans and commitments thereof existing as of said date).
Except with the prior written consent of Westamerica, neither ValliCorp nor
any ValliCorp Subsidiary will propose, declare, set aside or pay any dividend
or other distribution in respect of its common stock (including, without
limitation, any stock dividend or distribution) other than regular quarterly
cash dividends on its common stock in amounts substantially equivalent to
dividends paid in the two years prior to the Agreement date, provided that no
ValliCorp Subsidiary will declare or pay a cash dividend if, as a result
thereof, the ValliCorp Subsidiary would cease to be adequately capitalized
within the meaning of applicable bank regulations. The parties agreed that
ValliCorp may increase its quarterly dividend to a level that is no more than
.4098 times Westamerica's then current dividend.
After the date of the Agreement, each of Westamerica and ValliCorp have
agreed to coordinate with the other the declaration of any dividends in
respect of Westamerica Common Stock and ValliCorp Common Stock and the record
dates and payment dates relating thereto, it being the intention of the
parties that holders of Westamerica Common Stock or ValliCorp Common Stock not
receive two dividends, or fail to receive one dividend, for any single
calendar quarter with respect to their shares of Westamerica Common Stock
and/or ValliCorp Common Stock and any shares of Westamerica Common Stock any
such holder receives in exchange therefor in the Merger.
No Merger or Solicitation. ValliCorp will not, nor will it permit any
ValliCorp Subsidiaries, or authorize or permit any of its officers, directors
or employees or any investment banker, financial advisor, attorney, accountant
or other representative or agent retained by it or any ValliCorp Subsidiaries,
to, directly or indirectly, solicit, initiate, or encourage (including by way
of furnishing nonpublic information), or take any other action to
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facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Takeover Proposal (as defined
below), or agree to or endorse any Takeover Proposal, or participate in any
discussions or negotiations, or provide third parties with any nonpublic
information, relating to any such inquiry or proposal; provided, however, that
prior to receipt of ValliCorp shareholder approval of the Merger, to the
extent required by the fiduciary obligations of the Board of Directors of
ValliCorp, as determined in good faith by the Board of Directors based on the
advice of independent counsel, ValliCorp may, (i) in response to an
unsolicited Takeover Proposal, with prompt notification to Westamerica,
furnish information with respect to ValliCorp and its Subsidiaries to any
person pursuant to a customary confidentiality agreement (as determined by
ValliCorp's independent counsel) and answer questions about such information
(but not the terms of any possible Takeover Proposal) with such Person and
(ii) upon receipt by ValliCorp of an unsolicited Takeover Proposal, with
prompt notification to Westamerica, participate in negotiations regarding such
Takeover Proposal. "Takeover Proposal" means any written inquiry, proposal or
offer from any person relating to any direct or indirect acquisition or
purchase of a substantial amount of the assets of ValliCorp or any of its
Subsidiaries, other than the transactions contemplated by the Agreement and
the Stock Option Agreement, or of 50% or more of any class of equity
securities of ValliCorp or any of its Subsidiaries or any tender offer or
exchange offer that if consummated would result in any Person beneficially
owning 50% or more of any class of equity securities of ValliCorp or any of
its Subsidiaries, or any merger, consolidation, business combination, sale of
substantially all assets, recapitalization, liquidation, dissolution or
similar transaction involving ValliCorp or any of its Subsidiaries, other than
the transactions contemplated by the Agreement and the Stock Option Agreement.
Except as allowed in the Agreement, neither the Board of Directors of
ValliCorp nor any committee thereof will (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Westamerica, the approval or
recommendation by such Board of Directors or any such committee of the
Agreement or the Merger, (ii) approve or recommend, or propose to approve or
recommend, any Takeover Proposal, or (iii) enter into any agreement with
respect to any Takeover Proposal. Notwithstanding the foregoing, prior to the
receipt of ValliCorp shareholder approval, the Board of Directors of
ValliCorp, to the extent required by its fiduciary obligations, as determined
in good faith by the Board of Directors based on the advice of independent
counsel, may (subject to the following sentences) withdraw or modify its
approval or recommendation of the Agreement or the Merger, approve or
recommend any Superior Proposal (as defined below), enter into an agreement
with respect to such Superior Proposal or terminate the Agreement, in each
case at any time after the third Business Day following Westamerica's receipt
of a written notice advising Westamerica that the ValliCorp Board of Directors
has received a Superior Proposal, specifying the material terms and conditions
of such Superior Proposal and identifying the person making such Superior
Proposal (it being understood that any amendment to a Superior Proposal will
necessitate an additional three Business Day period). In addition, if
ValliCorp proposes to enter into an agreement with respect to any Takeover
Proposal, it will concurrently with entering into such agreement pay, or cause
to be paid, to Westamerica the Termination Fee as described below. For
purposes of the Agreement, "Superior Proposal" means any bona fide written
Takeover Proposal made by a third party to acquire, directly or indirectly,
for consideration consisting of cash and/or securities, more than 50% of the
shares of ValliCorp Common Stock then outstanding or all or substantially all
of the assets of ValliCorp and otherwise on terms which the Board of Directors
of ValliCorp determines in its good faith judgment are reasonably capable of
being completed, taking into account all legal, financial, regulatory and
other aspects of the proposal and the Person making the proposal and (based on
the advice of a financial advisor of nationally recognized reputation) such
Takeover Proposal would, if consummated, be more favorable to ValliCorp's
shareholders from a financial point of view than the Merger.
In addition to the obligation of ValliCorp set forth in the preceding
paragraph, ValliCorp promptly will advise Westamerica orally and in writing of
any request for information or of any Takeover Proposal, or any inquiry with
respect to or which could lead to any Takeover Proposal, the material terms
and conditions of such request, Takeover Proposal or inquiry and the identity
of the Person making any such request, Takeover Proposal or inquiry. ValliCorp
will keep Westamerica fully informed of the status and details (including
amendments or proposed amendments) of any such request, Takeover Proposal or
inquiry.
If the Agreement is terminated pursuant to its terms other than by
Westamerica or ValliCorp solely because the Federal Reserve Board or
Superintendent issues a final order denying approval of the Merger, a failure
of the
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condition requiring Westamerica shareholder approval of the Merger occurs, or
other than by ValliCorp pursuant to a Material Adverse Effect which has
occurred with respect to Westamerica and its subsidiaries taken as a whole
since September 30, 1996 or pursuant to a material breach by either party not
cured within 30 days after written notice thereof, and an Acquisition Event
(as defined below) occurs within 18 months after the date of such termination,
ValliCorp will pay promptly, but in no event later than two Business Days
after the occurrence of such Acquisition Event, by wire transfer of
immediately available Federal Funds to such account as Westamerica shall
designate, $6 million (the "Termination Fee") (but only if a Termination Fee
has not theretofore been paid in accordance with the second preceding
paragraph). For purposes of this subsection, the term "Acquisition Event"
means any of the following: (i) any Person (other than Westamerica or any
Subsidiary thereof) will have acquired pursuant to a tender offer or otherwise
beneficial ownership of 20% or more of the outstanding shares of ValliCorp
Common Stock; (ii) ValliCorp or ValliWide will have authorized, recommended,
proposed or publicly announced an intention to authorize, recommend or
propose, or entered into, an agreement with any Person (other than Westamerica
or a Subsidiary thereof) to (a) effect a merger, consolidation or similar
transaction (or series of unrelated and non-integrated mergers, consolidations
or similar transactions) involving ValliCorp or ValliWide (other than a
merger, consolidation or similar transaction in which those holders of
ValliCorp Common Stock outstanding immediately prior to each such transaction
continue to own at least 80% of the ValliCorp Common Stock outstanding
immediately after such transaction), (b) sell, lease or otherwise dispose of
assets of ValliCorp or its subsidiaries representing 20% or more of the
consolidated assets of ValliCorp and its subsidiaries, or (c) issue, sell or
otherwise dispose of (including by way of merger, consolidation, share
exchange or any similar transaction) securities representing 20% or more of
the voting power of ValliCorp or its subsidiaries (but excluding a series of
unrelated and non-integrated issues, sales or other dispositions).
Westamerica has agreed that, in the event ValliCorp makes payment of the
Termination Fee to Westamerica upon the occurrence of an Acquisition Event in
accordance with the terms of the preceding paragraph, neither Westamerica nor
any of its Affiliates will for a period of five years after the payment of
said Termination Fee (the last day of such period, the "Standstill Termination
Date"), unless specifically invited in writing to do so by ValliCorp and then
only to the extent stated therein, in any manner acquire or agree to acquire
or make any proposal to acquire, directly or indirectly, the beneficial
ownership of any common stock, equity securities or other securities having
voting power with respect to the election of directors of ValliCorp ("Voting
Equity"), or any other securities convertible into Voting Equity or any
options, warrants or other rights to acquire Voting Equity (such convertible
securities, options, warrants or other rights, together with Voting Equity,
being hereinafter called "Voting Securities") of ValliCorp or its Affiliates.
From the date the Termination Fee is paid until the Standstill Termination
Date, neither Westamerica nor any of its Affiliates will, except with the
express written consent of ValliCorp and then only to the extent stated in
such written consent, make or in any way participate, directly or indirectly,
in any "solicitation" of "proxies" (as such terms are defined in Regulation
14A under the Exchange Act) to vote or seek to advise or influence any person
with respect to the voting of any Voting Securities of ValliCorp or its
Affiliates. Westamerica has agreed that, from the date a Termination Fee is
paid until the Standstill Termination Date, neither it nor any of its
Affiliates will (i) make any Acquisition Proposal (as defined below) or
proposal with respect to a Business Combination (as defined below), joint
venture, or any other extraordinary business arrangement, including, but not
limited to, a business arrangement which could result in a change of control
of ValliCorp, in each case in respect of ValliCorp or any of its Affiliates,
(ii) take any initiatives involving ValliCorp that would otherwise require
ValliCorp to make a public announcement or make any public comment or proposal
with respect to any Acquisition Proposal or Business Combination, (iii) join a
partnership, limited partnership, syndicate or other group for the purpose of
acquiring, holding, voting or disposing of Voting Securities of ValliCorp or
otherwise become a "person" within the meaning of Section 13(d)(3) of the
Exchange Act with respect to any Voting Securities of ValliCorp or its
Affiliates, (iv) enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of the foregoing, (v)
knowingly advise, assist or encourage any third party in connection with any
of the foregoing, or (vi) otherwise seek to control or influence ValliCorp or
its management or Board of Directors. "Acquisition Proposal" means any tender
offer or exchange offer or proposal to ValliCorp (including, without
limitation, any proposal or offer to shareholders of ValliCorp) with respect
to a Business Combination or
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involving the purchase of 25% or more of the outstanding Voting Securities of
ValliCorp. "Business Combination" means (i) a merger, consolidation,
acquisition, scheme or other analogous arrangement in which ValliCorp is a
constituent corporation or party and pursuant to which Voting Securities of
ValliCorp are or may be exchanged for cash, securities or other property or
(ii) a sale of all or substantially all of the assets of ValliCorp and its
Affiliates. Notwithstanding anything in the Agreement to the contrary,
Westamerica may vote any ValliCorp Common Stock it beneficially owned as of
November 11, 1996 or sell said stock through any broker/dealer.
ValliCorp Accruals and Reserves. Prior to the Effective Date, ValliCorp and
its subsidiaries will review and, to the extent determined necessary or
advisable by Westamerica in its sole discretion, consistent with GAAP and the
accounting rules, regulations and interpretations of the Commission and its
staff, modify and change its loan, OREO, accrual and reserve policies and
practices (including loan classifications and levels of tax, loan and OREO
reserves and accruals) to (A) reflect Westamerica's plans with respect to the
conduct of ValliCorp's business following the Merger, and (B) make adequate
provision for the costs and expenses relating thereto so as to be applied
consistently on a mutually satisfactory basis with those of Westamerica. Prior
to the Effective Date, ValliCorp also will adjust loan loss and OREO reserves
(A) in a manner consistent with its policies and practices as in effect on the
date hereof and (B) as may be appropriate, consistent with generally accepted
accounting principles and the accounting rules, regulations and
interpretations of the Commission and its staff, to the extent determined by
Westamerica to be necessary or advisable in its sole discretion in light of
the then anticipated post-closing grading, classification or disposition of
certain ValliCorp assets; provided, however, that ValliCorp has agreed in no
event will its reserve for loan losses constitute less than 100% of total
Nonperforming Loans (as defined below) and 1.6% of total loans as of the close
of business on the last Business Day of the calendar quarter preceding the
month during which the Effective Date occurs.
"Nonperforming Loans" mean all loans, leases, other extensions of credit or
commitments of ValliCorp and its subsidiaries finally classified by, among
others, ValliCorp, its subsidiaries or any bank regulatory agency as
"Doubtful," "Loss" or words of similar import in the case of loans (or that
would have been so classified in the case of other interest-bearing assets
which would be subject to a provision for loan and lease losses) or any loans
or extensions of credit which are on nonaccrual or accruing and 90 days or
more past due in the payment of principal and interest.
The parties have agreed to cooperate in preparing for the implementation of
the adjustments contemplated by the above paragraph. Notwithstanding the
foregoing, ValliCorp will not be obligated to take in any respect any action
pursuant to the above paragraph (other than pursuant to the preceding
sentence) unless and until Westamerica acknowledges that, as of the date of
said acknowledgment, certain material conditions to its obligation to
consummate the Merger have been satisfied or waived and Westamerica reasonably
believes the Merger will close.
As of the end of the calendar quarter immediately prior to the Effective
Date, ValliCorp and its subsidiaries will create on their books one or more
reserves and accruals adequate to cover a reasonable estimate, as mutually
agreed to by Westamerica and ValliCorp, of the loss contingencies (consistent
with GAAP) associated with any of the litigation matters or claims previously
disclosed or any environmental contamination on any property of ValliCorp or
any ValliCorp Subsidiary as to which environmental audits will be conducted,
unless outside counsel to ValliCorp has rendered its written opinion to the
parties to the Agreement that the likelihood of the incurrence of such loss is
remote; provided, however, that if the parties to the Agreement cannot agree
on what constitutes a reasonable estimate of such amount by 15 days prior to
the end of such quarter, then either Westamerica or ValliCorp may require that
such matter be submitted to counsel independent of all such parties, which
will be satisfactory to both Westamerica and ValliCorp, for resolution. Such
independent counsel will render a written determination with respect to the
matter not later than 15 days after the end of such calendar quarter. Such
determination will be conclusive and binding on the parties to the Agreement.
As of the end of the calendar quarter immediately prior to the Effective
Date, ValliCorp and its subsidiaries will create on their books such tax
reserves and accruals as will be adequate to cover a reasonable estimate, as
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mutually agreed to by Westamerica and ValliCorp, of tax accruals, interest and
penalties (consistent with GAAP) associated with or related to any existing or
threatened tax audit. If Westamerica and ValliCorp cannot agree on what
constitutes a reasonable estimate of such tax liability by 15 days prior to
the end of such quarter, then the matter will be submitted forthwith to the
independent accountants of Westamerica and ValliCorp for resolution, provided
that if such independent accountants are unable to resolve the matter by
agreement by the end of such quarter, the matter will be referred to a third
independent accounting firm, selected by the mutual agreement of Westamerica
and ValliCorp, who will determine the matter within 15 days of the end of such
calendar quarter. Such determination will be conclusive and binding on the
parties to the Agreement.
Asset Review. ValliCorp will continue to engage its internal asset review
examiners to identify potential losses with respect to loans and other assets
on the books of ValliCorp and its Subsidiaries and who will have reviewed all
Nonperforming Assets and other classified or criticized assets as of a date
within three months preceding the Effective Date. ValliCorp will promptly
provide a copy of such reports to Westamerica. Prior to January 31, 1997, all
assets of ValliCorp and its Subsidiaries, including classified or criticized
and Nonperforming Assets, may be reviewed by Westamerica and Westamerica may
provide a report thereon to ValliCorp setting forth Westamerica's grading or
other assessment thereof (including accounting treatment and loss recognition)
utilizing ValliCorp's regular loan/OREO review criteria consistent with GAAP
and RAP. ValliCorp may either accept and implement Westamerica's grading or
other assessments (including accounting treatment and loss recognition)
concerning loans or OREO by January 31, 1997, or, if it does not agree with
Westamerica's conclusions as set forth in the report, refer the matter for
resolution by one or more of the independent loan and appraisal experts agreed
upon by the parties (each, an "Independent Loan Reviewer" or "Independent
Appraiser") who will immediately review and/or appraise said loan(s) or OREO
utilizing ValliCorp's regular loan/OREO review criteria consistent with GAAP
and RAP. The parties have agreed that if the Independent Loan Reviewer
believes it necessary to retain an Independent Appraiser (or if such an
Appraiser is required by the penultimate sentence below), the selection and
supervision of said Appraiser will be at the discretion and under the control
of the Independent Loan Reviewer. ValliCorp and its subsidiaries have agreed
to recognize on their books and records all loan losses and to record all OREO
at their net realizable value (and record related OREO expenses) based on the
review/appraisal by the Independent Loan Reviewer or Independent Appraiser no
later than March 15, 1997. With respect to any OREO, based on all known
information available from time to time, if it appears that the then current
independent appraisals may not be accurate or upon request of and at the
expense of Westamerica, ValliCorp will immediately obtain updated independent
appraisals by an Independent Appraiser (utilizing ValliCorp's regular criteria
consistent with GAAP and RAP) and provide copies of all such appraisals to
Westamerica. Any new or additional write-downs or OREO expenses will be
recorded immediately upon receiving any updated independent appraisal.
Structural Changes to Certain ValliWide Branches. With respect to five
ValliWide branches, prior to signing the Agreement ValliCorp had decided to
close or consolidate said branches (the "Category A Branches"), and ValliCorp
has agreed that up to eight additional branches may be sold, closed or
consolidated by it (the "Category B Branches"), subject to regulatory
approvals. Three of the Category A Branches had been closed as of January 7,
1997. Except as otherwise agreed by the parties, ValliCorp has agreed to use
its commercially reasonable efforts to effect closure, consolidation or sale
of the Categories A and B Branches prior to the end of the calendar quarter
immediately prior to the Effective Date, provided that as to the Category B
Branches, ValliCorp will not be required to actually effect closure,
consolidation or sale of any such branches if, under the circumstances then
existing, it is reasonably likely that any of certain material conditions to
the Merger set forth in the Agreement will not be satisfied. Applications have
been filed with and are pending the approval of state and federal regulators
with respect to eight Valliwide branches located in the cities of Fresno,
Altaville, Columbia, Arnold, Groveland, Ridgecrest and Sonora.
Retention Bonuses. The parties have agreed to cooperate in all reasonable
respects to, by mutual agreement, identify those persons who will receive
retention bonus payments. Such retention bonus payments will be payable to
those persons identified pursuant to the foregoing sentence in accordance with
the terms of retention agreements, which agreements will be in a form
reasonably acceptable to Westamerica.
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REPRESENTATIONS AND WARRANTIES; CONDITIONS TO THE MERGER
The Agreement contains representations and warranties by Westamerica and
ValliCorp regarding, among other things: their respective organization; good
standing under the laws of their jurisdiction of incorporation or
organization; authorization to enter into the Agreements; corporate power to
carry out the terms of the Agreements; capitalization; ownership and
capitalization of subsidiaries; the accuracy of Commission documents and
regulatory filings; the lack of any material adverse change; the absence of
undisclosed liabilities; legal actions and proceedings; employee benefit
plans; the accuracy of their respective financial statements, books and
records; compliance with laws, regulations and decrees; brokers and finders;
pooling of interests; loan loss reserves; information furnished for inclusion
in the Registration Statement or Joint Proxy Statement/Prospectus; derivatives
contracts and structured notes; and various aspects of their loans and other
assets.
ValliCorp has made further representations and warranties to Westamerica
regarding the following: regulatory proceedings; the timely filing of tax
returns; title to its real property; certain environmental liabilities;
employment agreements and contracts, as well as compensation of officers and
employees; certain contracts; insurance; the completeness and accuracy of its
Certificate or Articles of Incorporation, bylaws, books and records;
restrictions on investments; transactions with affiliates; the nonexistence of
brokered deposits; steps taken for exemption of the transaction from Delaware
takeover laws; and receipt of a fairness opinion of Montgomery regarding the
Merger.
The Merger will occur only if all required government approvals are in
effect or have been obtained (without the imposition of any conditions or
requirements which, as determined by the Board of Directors of Westamerica or
ValliCorp in its reasonable judgment, in general, materially and adversely
affect the economic and business benefits to the parties of the Merger) (see
"--Required Regulatory Approvals"), the Agreements are approved by the
majority of the outstanding shares of ValliCorp Common Stock and of
Westamerica Common Stock and the representations and warranties of the parties
are true and correct in all material respects, and all covenants complied
with, in all material respects, on and as of the Effective Date.
Consummation of the Merger is subject to satisfaction of certain other
conditions or the waiver of such conditions by the party entitled to do so.
Such conditions include, among other things: (i) the absence, on a
consolidated basis, of any Material Adverse Effect to either party since
September 30, 1996; (ii) the effectiveness of a registration statement with
respect to the shares of Westamerica Common Stock to be issued to ValliCorp
shareholders as a result of the Merger; (iii) the approval for listing on the
NMS of the shares of Westamerica Common Stock that may be issued in the
Merger; (iv) delivery by Westamerica to ValliCorp of a certificate, dated the
Closing Date and signed by Westamerica's Chairman, President or any Executive
Vice President to the effect that the conditions regarding representations,
warranties and covenants are satisfied; (v) receipt by ValliCorp of an opinion
of Westamerica's counsel, dated the Effective Date; (vi) receipt of an opinion
of legal counsel to Westamerica to the effect that, among other things, under
federal tax laws, the Merger will not result in any recognized gain or loss to
Westamerica or ValliCorp and, except for any cash received in lieu of any
fractional shares, no gain or loss will be recognized by holders of ValliCorp
Common Stock who receive Westamerica Common Stock in exchange for the
ValliCorp Common Stock which they hold (see "--Certain Federal Income Tax
Consequences"); (vii) receipt by ValliCorp from KPMG of letters addressed to
ValliCorp not more than two Business Days prior to the effective date of the
Registration Statement and a date not more than ten Business Days prior to the
Effective Date, with respect to certain financial information regarding
Westamerica, each in form and substance which is customary in transactions of
the nature contemplated by the Agreement; (viii) lack of an occurrence of an
event that will preclude, in the opinion of KPMG, the Merger from being
accounted for as a pooling of interests and receipt of a letter from KPMG to
the effect that the Merger will qualify for the pooling of interests method of
accounting in accordance with generally accepted accounting principles (see
"--Accounting Treatment"); (ix) receipt by each party of such certificates and
closing documents as counsel for each party reasonably requests; and (x)
receipt by each party (or satisfaction of forthcoming receipt) of all consents
of other parties to and required by material mortgages, notes, leases,
franchises, agreements, licenses and permits applicable to ValliCorp or
Westamerica, as the case may be, and no such consent or license or permit will
have been withdrawn or suspended, unless the failure to obtain such consents,
individually or in the aggregate, would not have a Material Adverse Effect on
ValliCorp or Westamerica, as the case may be.
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In addition, certain other conditions must be satisfied, or be waived by
Westamerica, in order for Westamerica to be obligated to consummate the
Merger, including, but not limited to, the conditions that (i) Westamerica has
received noncompetition agreements from each Non-Employee Director; (ii)
ValliCorp will have delivered to Westamerica a certificate to the effect that
the conditions set forth in the Agreement have been satisfied; (iii)
Westamerica will have received from Deloitte & Touche LLP ("Deloitte &
Touche") letters addressed to Westamerica dated not more than two Business
Days prior to the effective date of the Registration Statement and a date not
more than ten Business Days prior to the Effective Date, with respect to
certain financial information regarding ValliCorp, each in form and substance
which is customary in transactions of the nature contemplated by the
Agreement; (iv) Westamerica will have received opinions of legal counsel to
ValliCorp satisfactory to Westamerica, dated the Effective Date; (v) the
rights issued pursuant to the ValliCorp Rights Agreement will not have become
nonredeemable, exercisable, distributed or triggered pursuant to the terms of
such agreement; (vi) no investigation, legal action, proceeding or legal
impediment pertaining to the Merger shall have arisen or be pending or
threatened which, in the reasonable opinion of Westamerica, so adversely
affects the anticipated economic and business benefits to Westamerica of the
transactions contemplated by the Agreement as to render consummation of such
transactions inadvisable; (vii) at least three days prior to Closing,
Westamerica will have received a letter from each director of ValliWide and
any other ValliCorp Subsidiary tendering his or her resignation as of the
Effective Date; and (vii) Westamerica will have received consolidated
financial statements of ValliCorp and its subsidiaries (which financial
statements will be accompanied by those footnotes required by GAAP), as of
December 31, 1996. Such financial statements (referred to in the preceding
paragraph) will also have been audited by Deloitte & Touche, which audit shall
have been conducted in accordance with generally accepted auditing standards.
Such financial statements shall also be accompanied by the auditor's report,
which shall state that in Deloitte & Touche's opinion, such financial
statements present fairly, in all material respects, the financial position
and results of ValliCorp and its subsidiaries as of the date of such financial
statements in accordance with GAAP, and which report and opinion will not be
qualified in a manner not acceptable to Westamerica in the exercise of its
business judgment. Based on the audited balance sheet, ValliCorp must have a
consolidated book value (calculated as set forth in the Agreement) as of
December 31, 1996 of at least $138,885,000. Based on said audited balance
sheet (calculated as set forth in the Agreement) and ValliCorp's unaudited
consolidated balance sheet as of March 31, 1997, ValliCorp must have a
consolidated book value (calculated as set forth in the Agreement) as of March
31, 1997 of at least $138,885,000. No more than ten Business Days after March
31, 1997 or the quarter end immediately preceding the Effective Date,
whichever occurs last, Westamerica will have received a consolidated balance
sheet of ValliCorp and its subsidiaries as of such quarter end. Based on said
balance sheet, ValliCorp must have a consolidated book value (calculated as
set forth in the Agreement) as of such quarter end of at least $138,885,000.
The parties agreed that if ValliCorp's consolidated book value (calculated as
set forth in the Agreement) as of March 31, 1997 (or subsequent quarter end,
if applicable) is less than $138,885,000 but more than $125,000,000, then the
Exchange Ratio, as adjusted for all other adjustments provided for in the
Agreement, will be adjusted downward according to the following formula (and
no failure of a condition will have occurred):
[ Book Value (March 31, 1997 ]
Exchange Ratio = [Prior Exchange X or subsequent quarter end, if applicable)]
[ Ratio -----------------------------------------]
[ $138,885,000 ]
If ValliCorp's consolidated book value (calculated as set forth in the
Agreement) as of the end of the calendar quarter preceding the Effective Date
is less than $125,000,000, this condition will not be satisfied. See "--
Purchase Price and Potential Adjustments."
MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
Upon the consummation of the Merger, the separate corporate existence of
ValliCorp will cease and ValliCorp will be merged with and into Westamerica,
and ValliWide will be a subsidiary of Westamerica. It is also anticipated that
ValliWide will be merged into Westamerica Bank during mid-1997. At that time,
it is anticipated that five ValliWide branches located in Fresno, Kern and
Sacramento counties will have been closed or consolidated and that up to an
additional eight ValliWide branches in Fresno, Kern, Tuolumne and
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Calaveras Counties may (subject to regulatory approvals) have been closed,
sold or consolidated. In most cases, management of Westamerica expects that
Westamerica will be able to serve customers of said branches at other existing
Westamerica or ValliWide branches. All rights, franchises and interests of
ValliCorp will be assumed by and vested in Westamerica. The Articles of
Incorporation and Bylaws of Westamerica in effect immediately prior to the
Effective Date shall be and continue to be the Articles of Incorporation and
Bylaws of Westamerica following the Merger. With the exception of three
ValliCorp directors to be added to the Westamerica Board, the directors and
executive officers of Westamerica immediately prior to the Effective Date will
be the directors and executive officers of Westamerica following the Merger.
Each other current non-officer director of ValliCorp will be offered a
position as a director or advisory director of ValliWide at or immediately
following the Effective Date.
ValliCorp has agreed that ValliCorp's employee benefit plans, as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended, may be terminated, frozen, modified or merged into Westamerica's
employee benefit plans before, on or after the Effective Date, as determined
by Westamerica in its sole discretion, subject to compliance with applicable
law. ValliCorp will continue to pay all administrative and termination
expenses for the ValliCorp plans prior to the Effective Date.
REQUIRED REGULATORY APPROVALS
The Merger must be approved by the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") pursuant to the provisions of the BHC
Act. This federal statute provides that no transaction may be approved which
would result in a monopoly or (i) which would be in furtherance of any
combination or conspiracy to monopolize, or to attempt to monopolize, the
business of banking in any part of the United States, or (ii) whose effect in
any section of the country may be substantially to lessen competition, or to
tend to create a monopoly, or which in any manner would be in restraint of
trade, unless the Federal Reserve Board finds that the anticompetitive effects
of the proposed transaction are clearly outweighed in the public interest by
the probable effect of the transaction in meeting the convenience and needs of
the community to be served. In conducting a review of any application for a
merger, the Federal Reserve Board is required to consider the financial and
managerial resources and future prospects of the companies and the banks
concerned and the convenience and needs of the community to be served. The
Federal Reserve Board has the authority to deny an application if it concludes
that the requirements of the Community Reinvestment Act of 1977, as amended,
are not satisfied.
Westamerica filed a final application to merge ValliCorp with and into
Westamerica on December 13, 1996. Receipt of final regulatory approval by the
Federal Reserve Board is a precondition to the consummation of the Merger. See
"--Representations and Warranties; Conditions to the Merger." Westamerica
expects that the Federal Reserve Board will act on and approve its application
in the first half of 1997.
A transaction approved by the Federal Reserve Board may not be consummated
for at least 30 days (in some circumstances a 15-day waiting period is
allowed) after such approval. During such period, the Department of Justice
may commence a legal action challenging the transaction under federal
antitrust laws. If the Department of Justice does not commence a legal action
during such 30-day period (in some circumstances a 15-day waiting period is
allowed), it may not thereafter challenge the transaction except in an action
commenced under the antimonopoly provisions of Section 2 of the Sherman
Antitrust Act.
The BHC Act provides for the publication of notice and the opportunity for
administrative hearings relating to an application for approval under the BHC
Act and authorizes the Federal Reserve Board to permit interested parties to
intervene in the proceedings. If an interested party is permitted to
intervene, such intervention could substantially delay the regulatory approval
required for consummation of the Merger.
The Merger must also be approved by the California Superintendent of Banks
(the "Superintendent") pursuant to the California Financial Code which
provides, in relevant part, that no person shall, directly or indirectly,
acquire control of a bank or controlling person of a bank without the
Superintendent's approval.
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Pursuant to the California Financial Code, the Superintendent shall approve an
application to acquire control if he finds that none of the following factors
are true: (i) that the proposed acquisition of control would result in a
monopoly or would be in furtherance of any combination to monopolize the
business of banking in any part of California; (ii) that the effect of the
proposed acquisition of control in any section of the state may be
substantially to lessen competition or to tend to create a monopoly or be in
restraint of trade, and that the anticompetitive effects of the proposed
acquisition are not clearly outweighed in the public interest by the probable
effect of the transaction in meeting the convenience and needs of the
community; (iii) that the financial condition of any acquiring person is such
as might jeopardize the financial stability of the bank or controlling person,
or prejudice the interests of the depositors, creditors or shareholders; (iv)
that plans or proposals to merge or consolidate the bank or the controlling
person, or to make any other major changes in the business, corporation
structure or management of the bank or the controlling person are not fair and
reasonable to the depositors, creditors and shareholders; (v) that the
competence, experience or integrity of any acquiring person indicates that it
would not be in the interest of the depositors, creditors or shareholders of
the bank or the controlling person or in the interest of the public to permit
such person to control the bank or the controlling person; (vi) that the
proposed acquisition is unfair, unjust or inequitable to the bank or the
controlling person or to the depositors, creditors or shareholders of the bank
or the controlling person; or (vii) that the applicant neglects, fails or
refuses to furnish to the Superintendent all the information required by the
Superintendent.
Westamerica filed with the Superintendent an application to acquire control
of ValliCorp and ValliWide on December 16, 1996. Receipt of final regulatory
approval by the Superintendent is a precondition to consummation of the
Merger. Westamerica expects that the Superintendent will act on and approve
its application in the first half of 1997.
In addition to the prior approval of the Merger by the Federal Reserve Board
and the Superintendent, consummation of the Merger is conditioned upon receipt
of all other governmental consents and approvals required by law, including
but not limited to those required with respect to the closure or consolidation
of certain ValliWide branches. See "--Management and Operations Following the
Merger."
Under the Agreement, prior to the Merger, all Governmental Approvals shall
be in effect, and all conditions or requirements prescribed by law or any
Governmental Approval shall be satisfied. However, no Governmental Approval
shall be deemed to have been received if it imposes any condition or
requirement or disapproves any aspect of any applications which, in the
reasonable opinion of the Board of Directors of Westamerica or ValliCorp,
materially and adversely affects the anticipated economic and business
benefits to Westamerica or ValliCorp of the transactions contemplated by the
Agreement as to render consummation of such transaction inadvisable. For
purposes of the Agreement, no condition, requirement or disapproval shall be
deemed to so adversely affect the anticipated economic and business benefits
to Westamerica or ValliCorp of the transactions contemplated by the Agreement
as to render consummation of such transactions inadvisable, if such condition
does not materially differ from conditions regularly imposed by the
governmental authority in orders approving transactions of the type
contemplated by the Agreement or compliance with such condition, requirement
or disapproval would not (A) require or prevent the taking of any action
inconsistent with the manner in which Westamerica or ValliCorp has conducted
its business previously or as contemplated by the Agreement, (B) have a
Material Adverse Effect upon Westamerica or ValliCorp, or (C) preclude
satisfaction of any of the conditions to consummation of the transactions
contemplated by the Agreement.
Based on current precedents, the respective managements of Westamerica and
ValliCorp believe that the Merger and other consents and approvals related to
the closure or consolidation of ValliWide branches will be approved by the
Federal Reserve Board and the Superintendent and the Merger will not be
subject to challenge by the Department of Justice under federal antitrust
laws. However, no assurance can be provided that the Federal Reserve Board,
the Superintendent or the Department of Justice will concur in this assessment
or that, in connection with the grant of any approval by the Federal Reserve
Board or the Superintendent, any action taken, or statute, rule, regulation or
order enacted, entered, enforced or deemed applicable to the Merger or
transactions contemplated thereby, will not contain conditions or requirements
which so materially and adversely affect the anticipated economic and business
benefits of the Merger as further described in the Agreement. If such a
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material and adverse condition or requirement is imposed in connection with a
Governmental Approval, a condition to Westamerica's obligation to consummate
the Merger will be deemed not to have occurred and Westamerica will have the
right to terminate the Agreement.
AMENDMENT; TERMINATION
The Agreement and Merger Agreement may be amended or supplemented at any
time by mutual agreement of the parties. Any such amendment or supplement must
be in writing and approved by their respective boards of directors and/or
officers authorized thereby.
The Agreement and Merger Agreement may be terminated: (i) by the mutual
consent of the Boards of Directors of both Westamerica and ValliCorp at any
time prior to the consummation of the Merger; (ii) by the Board of Directors
of Westamerica on or after August 15, 1997, if (A) any of the conditions
precedent of Westamerica in the Agreement have not been fulfilled, or (B) such
conditions have been fulfilled or waived by Westamerica and ValliCorp has
failed to complete the Merger; (iii) by the Board of Directors of Westamerica
if a Material Adverse Effect has occurred with respect to ValliCorp and its
subsidiaries taken as a whole since September 30, 1996, or there has been
failure or prospective failure on the part of ValliCorp or ValliWide to comply
with its obligations under the Agreement, or any failure or prospective
failure to comply with any of the conditions precedent; (iv) by Westamerica
if, after the date of the Agreement, any person (other than Westamerica or any
subsidiary thereof) becomes and remains for 10 Business Days the beneficial
owner of 10% or more of the then outstanding shares of ValliCorp or any person
(other than Westamerica or a Subsidiary thereof) commences a bona fide tender
offer or exchange offer to acquire at least 10% of the then outstanding shares
of ValliCorp; (v) by the Board of Directors of ValliCorp on or after August
15, 1997, if (A) any of the conditions precedent of ValliCorp have not been
fulfilled, or (B) such conditions have been fulfilled or waived but
Westamerica has failed to complete the Merger; provided, however, that if
Westamerica is engaged at the time in litigation (including an administrative
appeal procedure) relating to an attempt to obtain one or more of the
Governmental Approvals or if Westamerica is contesting in good faith any
litigation which seeks to prevent consummation of the transactions
contemplated by the Agreement, such nonfulfillment will not give ValliCorp the
right to terminate the Agreement until the earlier of (x) 12 months after the
date of the Agreement and (y) 60 days after the completion of such litigation
and of any further action by a governmental agency as a result of any judicial
remand, order or directive or otherwise any waiting period with respect
thereto; (vi) by the Board of Directors of ValliCorp if (A) a Material Adverse
Effect occurs with respect to Westamerica and its subsidiaries taken as a
whole since September 30, 1996, or (B) there has been failure or prospective
failure to comply with any condition precedent of ValliCorp; and (vii) by the
Board of Directors of ValliCorp, if the Board of Directors so determines by a
vote of a majority of the members of its entire Board, at any time during the
two-day period commencing one day after the Determination Date, if the Average
Price of shares of Westamerica Common Stock as of the Determination Date (as
defined below) shall be less than $46.13 (the "Minimum Price"); subject,
however, to the following three sentences. If ValliCorp elects to exercise its
termination right pursuant to the immediately preceding sentence, it will give
prompt written notice to Westamerica; provided that such notice of election to
terminate may be withdrawn at any time within the aforementioned two-day
period. During the two-day period commencing on the day after receipt of such
notice, Westamerica will have the option, in the case of a failure to satisfy
the condition set forth in this clause, of adjusting the Exchange Ratio to
equal a number equal to a quotient (rounded to the nearest ten thousandth),
the numerator of which is the product of the Minimum Price and .4313 and the
denominator of which is the Average Price. If Westamerica makes an election
contemplated by the preceding sentence, within such two-day period, it will
give prompt written notice to ValliCorp of such election and the revised
Exchange Ratio, whereupon no termination will have occurred pursuant to the
foregoing and the Agreement will remain in effect in accordance with its terms
(except as the Exchange Ratio will have been so modified), and any references
in the Agreement to "Exchange Ratio" will thereafter be deemed to refer to the
Exchange Ratio as adjusted pursuant to the foregoing. "Determination Date"
means the last day of the 20 trading day period referred to in the definition
of Average Price.
If there has been a material breach by either party in the performance of
any obligations under the Agreement, which will not have been cured within 30
days after written notice thereof has been given to the
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defaulting party, the nondefaulting party will have the right to terminate the
Agreement upon written notice to the other party. In any event, the
nondefaulting party will have no obligation to consummate any transaction or
take any further steps toward such consummation contemplated under the
Agreement until such breach is cured.
EXPENSES
Unless otherwise agreed by the parties in writing or as otherwise provided
in the Agreement, each party hereto will bear and pay all costs and expenses
incurred by it incident to preparing, entering into and carrying out the
Agreement and to consummating the Merger, including fees and expenses of its
own financial consultants, accountants and counsel, except that Westamerica
and ValliCorp each shall bear and pay 50% of all printing and mailing costs
and filing fees associated with the Registration Statement and this Joint
Proxy Statement/Prospectus. Notwithstanding the foregoing, if the Agreement
and the Merger Agreement are terminated by either party pursuant to a willful
breach by the other party of any representation, warranty, covenant or
agreement, and provided that the terminating party shall not have been in
breach of any representation and warranty (in any material respect), covenant
or agreement contained herein or in the Merger Agreement, then the breaching
party shall bear and pay all of the costs and expenses incurred by the
parties, with respect to the fees and expenses of financial and other
consultants, investment bankers, accountants, counsel, printers and persons
involved in the transactions contemplated by the Agreement, including the
preparation of the Registration Statement and this Joint Proxy
Statement/Prospectus and the solicitation of proxies, in each case that are
not employees of the party that incurred such fees and expenses. Final
settlement with respect to the payment of such fees and expenses by the
parties shall be made within 30 days of the termination of the Agreement and
the Merger Agreement.
Notwithstanding anything to the contrary contained in the Agreement, the
aggregate amount of gain realized by Westamerica from ValliCorp (or the
Substitute Option Seller (as defined in the Stock Option Agreement)) pursuant
to the Stock Option Agreement, when added to the Termination Fee, if any,
received by Westamerica, may not in the aggregate exceed $15,000,000, and, in
the event Westamerica realizes gain in excess of such amount under the Stock
Option Agreement from ValliCorp (or the Substitute Option Seller), Westamerica
has agreed promptly to pay back to ValliCorp, by wire transfer of immediately
available funds, the amount of such excess.
AGREEMENTS WITH VALLICORP DIRECTORS
Westamerica has entered into a Shareholder Agreement with each of
ValliCorp's directors, all of whom are shareholders of ValliCorp (the
"ValliCorp Directors"), pursuant to which the ValliCorp Directors have agreed
generally (i) to vote all shares of ValliCorp Common Stock as to which they
have sole or shared voting power (the "Shares") in favor of the approval of
the Agreement, thereby increasing the likelihood that the Agreement will be
approved by the shareholders of both companies and (ii) not to sell or
otherwise transfer any of the Shares prior to the Effective Time that will
alter or affect in any way the right to vote the Shares, except (a) with the
prior written consent of Westamerica or (b) to change such right from that of
a shared right of the shareholder to vote the Shares to a sole right of the
shareholder to vote the Shares.
The Shareholder Agreements cover, in the aggregate, 746,517 shares of
ValliCorp's Common Stock or 5.3% of ValliCorp's outstanding shares as of the
Record Date.
NONCOMPETITION AGREEMENTS
The non-employee directors of ValliCorp and ValliWide (collectively, the
"Non-Employee Directors") have entered into noncompetition agreements (the
"Noncompetition Agreements") with Westamerica. Pursuant to the Noncompetition
Agreements, as of the Effective Time, except as director, officer or employee
of Westamerica or any subsidiary thereof, the Non-Employee Directors will not
be permitted to, without the prior written consent of Westamerica, (i)
directly or indirectly, within Calaveras, Fresno, Kern, Kings, Madera, Merced,
Nevada, Placer, Stanislaus, Tulare, Tuolumne, Sacramento, San Luis Obispo or
Yolo Counties (the "Counties") in the State of California, whether or not for
compensation, engage in, or have any material interest
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in, any person, firm, corporation or business (whether as an employee,
officer, director, agent, shareholder holding, directly or indirectly, 5% or
more of the voting securities thereof, partner, consultant or adviser or
otherwise) that engages in any activity within any of the Counties which is
the same as, similar to, or competitive with any material activity now engaged
in by ValliCorp or ValliWide or any transferee of all or substantially all of
the assets of Westamerica, ValliCorp, or their Subsidiaries or any other
successor thereof (except that nothing in the Noncompetition Agreements shall
prohibit any of the Non-Employee Directors from providing professional
services, such as legal or accounting advice, to clients) (and except that a
Non-Employee Director may engage in an activity otherwise prohibited if such
activity is conducted by or through any entity which has operations in the
Counties if such Non-Employee Director's occupation, activity, assignment or
duties with or for such entity do not directly or indirectly relate to or
involve the entity's business, operations or other activities in the
Counties); or (ii) induce any employee of ValliCorp or ValliWide to leave the
employ of Westamerica or any subsidiary thereof.
The Noncompetition Agreements require the Non-Employee Directors to treat as
confidential all information concerning the records, properties, books,
contracts, commitments and affairs of Westamerica (which includes but is not
limited to, in the case of the Noncompetition Agreements, information
regarding accounts, shareholders, finances, strategies, marketing, customers
and potential customers (their identities, preferences, likes and dislikes)
and other information of a similar nature not available to the public), of
ValliCorp or their respective subsidiaries. If a Noncompetition Agreement is
terminated or expires, the Non-Employee Directors will continue to treat all
such information as confidential and will return such documents and any
electronic storage media concerning such information as will reasonably be
requested by Westamerica.
STOCK OPTION AGREEMENT
The following is a summary of the material provisions of the Stock Option
Agreement entered into between Westamerica and ValliCorp following the
execution of the Agreement (the "Stock Option Agreement"), which is attached
as Annex B to this Joint Proxy Statement/Prospectus and is incorporated herein
by reference. This summary is qualified in its entirety by reference to the
Stock Option Agreement. Certain capitalized terms which are used but not
defined herein have the meanings assigned thereto in the Stock Option
Agreement.
The Stock Option Agreement could have the effect of discouraging persons who
now or prior to the Effective Date might be interested in acquiring all or a
significant interest in ValliCorp from considering or proposing such an
acquisition, even if such persons were prepared to propose greater
consideration per share for ValliCorp Common Stock than the consideration per
share represented by the pricing structure in the Agreement. In addition, the
Agreement provides that ValliCorp and its subsidiaries will not, directly or
indirectly, solicit or encourage, or take any other action to facilitate, any
inquiries or the making of any proposal which constitutes, or may reasonably
be expected to lead to, any takeover proposal. See "--Covenants of Westamerica
and ValliCorp; Conduct of Business Prior to the Merger" and "Summary--
Covenants."
Shares Subject to the Option. The Stock Option Agreement provides for the
purchase by Westamerica of up to 3,474,187 shares, subject to certain
adjustments, of ValliCorp Common Stock (the "Option Shares") at an exercise
price, subject to certain adjustments, of $18.00 per share, payable in cash
(the "Stock Option"). The Option Shares, if issued pursuant to the Stock
Option Agreement, would represent approximately 19.9% of the issued and
outstanding shares (excluding treasury shares) of ValliCorp Common Stock after
giving effect to the issuance of any shares pursuant to an exercise of the
Stock Option, and in no event will the number of Option Shares exceed 19.9% of
ValliCorp's issued and outstanding Common Stock.
Adjustment of Number of Shares Subject to the Option. The number of shares
of ValliCorp Common Stock subject to the Stock Option will be increased to the
extent that ValliCorp issues additional shares of Common Stock (otherwise than
pursuant to an exercise of the Stock Option) such that the number of Option
Shares will continue to equal 19.9% of the then issued and outstanding shares
of ValliCorp Common Stock without giving effect to the issuance of shares
pursuant to an exercise of the Stock Option. In the event that ValliCorp
issues or agrees to issue any shares of Common Stock (other than as permitted
under the Agreement) at a price less than
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$18.00 per share (or lower than an adjusted price per share), the exercise
price will be equal to such lesser price. The number of shares of ValliCorp
Common Stock subject to the Stock Option, and the applicable exercise price
per Option Share, also will be appropriately adjusted in the event of any
stock dividend, split-up, merger, recapitalization, combination, subdivision,
conversion, exchange of shares or similar event relating to ValliCorp.
Exercise of the Option. Westamerica or any other holder or holders of the
Stock Option (collectively, the "Holder") may exercise the Stock Option, in
whole or in part, subject to regulatory approval, at any time within 30 days
(subject to extension as provided in the Stock Option Agreement) after both an
"Initial Triggering Event" and a "Subsequent Triggering Event" (as such terms
are hereinafter defined) occur prior to termination of the Stock Option.
"Initial Triggering Event" is defined as the occurrence of any of the
following events:
(i) ValliCorp or any ValliCorp Subsidiary, without Westamerica's prior
written consent, shall enter into an agreement with any person (other than
Westamerica or any subsidiary of Westamerica (individually, a "Westamerica
Subsidiary," and collectively, the "Westamerica Subsidiaries")) to engage
in, or the ValliCorp Board recommends that the holders of ValliCorp Common
Stock approve or accept (other than as contemplated by the Agreement), (x)
a merger or consolidation, or similar transaction involving ValliCorp or
any significant ValliCorp subsidiary, (y) the purchase, lease or other
acquisition representing 15% or more of the consolidated assets of
ValliCorp or any significant ValliCorp subsidiary, or (z) the purchase or
other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 10% or more of the voting
power of ValliCorp or any significant ValliCorp subsidiary (each of the
transactions described in the preceding clauses (x), (y) and (z) being
referred to in this paragraph and in the Stock Option Agreement as an
"Acquisition Transaction");
(ii) ValliCorp or any ValliCorp subsidiary, without having received
Westamerica's prior written consent, shall have authorized, recommended,
proposed or publicly announced its intention to authorize, recommend or
propose, an agreement to engage in an Acquisition Transaction with any
person other than Westamerica or a Westamerica Subsidiary, or the ValliCorp
Board shall have publicly withdrawn or modified, or publicly announced its
intent to withdraw or modify, its recommendation that the holders of
ValliCorp Common Stock approve the transactions contemplated by the
Agreement;
(iii) any person (other than Westamerica, any Westamerica Subsidiary or
any ValliCorp subsidiary acting in a fiduciary capacity) shall acquire
beneficial ownership or the right to acquire beneficial ownership of 10% or
more of the outstanding shares of ValliCorp Common Stock;
(iv) any person (other than Westamerica or any Westamerica Subsidiary)
shall make a bona fide proposal to ValliCorp or its shareholders, by public
announcement or written communication, that is or becomes subject to public
disclosure, to engage in an Acquisition Transaction;
(v) a third party shall make a proposal to ValliCorp or its shareholders
to engage in an Acquisition Transaction, followed by ValliCorp breaching
any covenant or obligation contained in the Agreement, such breach
entitling Westamerica to terminate the Agreement, and such breach not being
cured prior to the date that Westamerica sends notice of its exercise of
the Stock Option to ValliCorp; or
(vi) any person (other than Westamerica or any Westamerica Subsidiary),
other than in connection with a transaction to which Westamerica has given
its prior written consent, shall file an application or notice with the
Federal Reserve Board, or other federal or state bank regulatory authority,
which application or notice has been accepted for processing, for approval
to engage in an Acquisition Transaction.
"Subsequent Triggering Event" is defined as either (A) the acquisition by
any person of beneficial ownership of 15% or more of the then outstanding
ValliCorp Common Stock, or (B) the occurrence of the Initial Triggering Event
described in clause (i) above, except that the percentage referred to in
subclause (z) shall be 15%.
61
<PAGE>
Termination of the Option. The Stock Option Agreement terminates (i) at the
effective time of the Merger, (ii) upon termination of the Agreement in
accordance with the terms thereof if such termination occurs prior to the
occurrence of an Initial Triggering Event, or (iii) 12 months after
termination of the Agreement following the occurrence of an Initial Triggering
Event (provided that if an Initial Triggering Event occurs after or continues
beyond such termination, the Stock Option will terminate 12 months from the
expiration of the last Initial Triggering Event, but in no event more than 18
months after such termination).
Within 30 days (subject to extension as provided in the Stock Option
Agreement) after a Subsequent Triggering Event and prior to the termination of
the Stock Option, Westamerica (on behalf of itself or any subsequent Holder)
may demand that the Stock Option and the related Option Shares be registered
under the Securities Act. Upon such demand, ValliCorp must promptly prepare,
file and keep current a shelf registration, subject to certain exceptions.
Westamerica is entitled to two such registrations so long as the second
request is within 18 months of the first request.
Notwithstanding any other provision of the Stock Option Agreement, if a
Holder, the owner of the Option Shares from time to time (the "Owner"), or
certain related parties offer or propose to engage in an Acquisition
Transaction (other than as contemplated by the Agreement) without the prior
written consent of ValliCorp, then (i) in the case of a Holder or related
party thereof, the Stock Option held by it will immediately terminate and be
of no further force or effect and (ii) in the case of an Owner or any related
party thereof, the Option Shares held by it will be repurchasable by ValliCorp
immediately at the then applicable Stock Option exercise price.
If the Stock Option terminates under certain circumstances as described in
the Stock Option Agreement, Westamerica (or any subsequent Holder) may have as
many as 30 days subsequent to such termination to exercise the Stock Option
(or Substitute Option (as hereinafter defined)) in connection with the resale
of ValliCorp Common Stock or other securities pursuant to a registration
statement as provided in the Stock Option Agreement.
Repurchase at Option of Westamerica. Within 30 days (subject to extension as
provided in the Stock Option Agreement) after a Subsequent Triggering Event
and prior to termination of the Stock Option, subject to regulatory approval,
ValliCorp is required (i) at the request of the Holder, to repurchase the
Stock Option from the Holder at a price (the "Option Repurchase Price") equal
to the amount by which (x) the "market/offer price" (as hereinafter defined)
exceeds (y) the then applicable Stock Option exercise price, multiplied by the
number of shares for which the Stock Option may then be exercised plus
Westamerica's Out-of-Pocket Expenses (as hereinafter defined) to the extent
not previously reimbursed; and (ii) at the request of the Owner, to repurchase
such number of Option Shares from the Owner as the Owner designates at a price
per share (the "Option Share Repurchase Price") equal to the "market/offer
price" multiplied by the number of Option Shares so designated plus
Westamerica's Out-of-Pocket Expenses to the extent not previously reimbursed.
"Out-of-Pocket Expenses" means Westamerica's reasonable out-of-pocket expenses
incurred in connection with the transactions contemplated by the Agreement,
including legal, accounting and investment banking fees. "Market/offer price"
means the highest of (A) the highest price per share of ValliCorp Common Stock
at which a tender offer or exchange offer therefor has been made, (B) the
price per share of ValliCorp Common Stock to be paid by any third party
pursuant to an agreement with ValliCorp, (C) the highest closing price for
shares of ValliCorp Common Stock quoted on the NMS or other principal trading
market, if applicable, within the six-month period immediately preceding the
date the Holder gives notice of the required repurchase of the Stock Option or
the Owner gives notice of the required repurchase of the Option Shares, as the
case may be, or (D) in the event of a sale representing 15% or more of
ValliCorp's net assets, the sum of the price paid in such sale for such assets
and the current market value of the remaining assets of ValliCorp as
determined by a nationally recognized investment banking firm, selected by the
Holder or the Owner, as the case may be, divided by the number of shares of
ValliCorp Common Stock outstanding at the time of such sale.
Substitute Option. In the event that, prior to termination of the Stock
Option, ValliCorp enters into an agreement (i) to consolidate with or merge
into any entity other than Westamerica or any Westamerica Subsidiary and shall
not be the continuing or surviving corporation of such consolidation or
merger, (ii) to permit
62
<PAGE>
any entity other than Westamerica or any Westamerica Subsidiary to merge into
ValliCorp with ValliCorp as the continuing or surviving corporation, but in
connection therewith the then outstanding shares of ValliCorp Common Stock are
changed into or exchanged for stock or other securities of any other person or
cash or any other property, or the then outstanding shares or share
equivalents of the merged company, or (iii) to sell or transfer all or
substantially all of its assets to any entity other than to Westamerica or any
Westamerica Subsidiary, then the Stock Option will be converted into, or
exchanged for, an option (a "Substitute Option") to purchase shares of common
stock of, at the Holder's option, either the continuing or surviving
corporation of a merger or a consolidation, the transferee of all or
substantially all of ValliCorp's assets, or the person controlling such
continuing or surviving corporation or transferee. The number of shares
subject to the Substitute Option and the exercise price per share will be
determined in accordance with a formula in the Stock Option Agreement. To the
extent possible, the Substitute Option will contain other terms and conditions
that are the same as those in the Stock Option Agreement (after giving effect
to the provisions described in the next paragraph).
Repurchase of Substitute Option or Shares. Subject to regulatory approval,
the issuer of a Substitute Option will be required to repurchase such option
at the request of the holder thereof and to repurchase any shares of such
issuer's common stock ("Substitute Common Stock") issued upon exercise of a
Substitute Option ("Substitute Shares") at the request of the owner thereof.
The repurchase price for a Substitute Option will equal the amount by which
(A) the Highest Closing Price (as hereinafter defined) exceeds (B) the
exercise price of the Substitute Option, multiplied by the number of
Substitute Shares to be repurchased, plus Westamerica's Out-of-Pocket
Expenses. As used herein, "Highest Closing Price" means the highest closing
price for shares of Substitute Common Stock within the six-month period
immediately preceding the date the Holder gives notice of the required
repurchase of the Substitute Option or the Owner gives notice of the required
repurchase of Substitute Shares, as the case may be.
Assignability. Neither Westamerica nor ValliCorp may assign any of its
respective rights and obligations under the Stock Option Agreement or the
Stock Option to any other person without the other party's written consent,
except that if a Subsequent Triggering Event occurs prior to termination of
the Stock Option, within 30 days thereafter (subject to extension as provided
in the Stock Option Agreement), Westamerica, subject to the Stock Option
Agreement, may assign in whole or in part its rights and obligations
thereunder. In addition, until 30 days after the Federal Reserve Board
approves an application by Westamerica to acquire the Option Shares,
Westamerica may not assign its rights under the Stock Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
ValliCorp, (iii) an assignment to a single party for the purpose of conducting
a widely dispersed public distribution on Westamerica's behalf, or (iv) any
other manner approved by the Federal Reserve Board.
Notice of Exercise. In the event Westamerica (or any subsequent Holder)
wishes to exercise the Stock Option, it must send to ValliCorp a written
notice (the date of which is referred to as the "Notice Date") specifying (i)
the total number of shares it will purchase pursuant to such exercise and (ii)
a Closing Date not less than three nor more than 60 days from the Notice Date.
If the purchase and sale of the Stock Option cannot be consummated because of
an applicable judgment, decree, order, law or regulation, the period of time
referred to in this paragraph shall run from the date that the restriction on
consummation lapses. If prior notification of or approval of the Federal
Reserve Board is required, Westamerica (or any subsequent Holder) will
promptly file the required notice or application. In such a case, the period
of time referred to in this paragraph will run from the date the notification
period expires or any necessary approval is granted. In no event shall the
Closing Date be more than 18 months after the related Notice Date.
The rights and obligations of Westamerica under the Stock Option Agreement
are subject to receipt of any required regulatory approvals. Without the prior
approval of the Federal Reserve Board, Westamerica may not acquire more than
5% of the outstanding Common Stock of ValliCorp. Westamerica filed an
application for such approval on December 16, 1996.
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<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
As a condition to consummation of the Merger, ValliCorp and Westamerica must
each receive an opinion from Westamerica's counsel to the effect that, based
upon the assumptions and understandings contained in the opinion, the Merger
will constitute a reorganization within the meaning of Section 368(a)(1)(A) of
the Code and that, accordingly, for federal income tax purposes:
(i) the Merger will not result in any recognized gain or loss to
ValliCorp, Westamerica or the Westamerica shareholders (other than
dissenting shareholders of Westamerica);
(ii) no gain or loss will be recognized by holders of ValliCorp Common
Stock who receive solely Westamerica Common Stock in exchange for the
ValliCorp Common Stock which they hold;
(iii) the holding period of Westamerica Common Stock exchanged for
ValliCorp Common Stock will include the holding period of the ValliCorp
Common Stock for which it is exchanged, assuming the shares of ValliCorp
Common Stock are capital assets in the hands of the holder thereof at the
Effective Time;
(iv) a holder of ValliCorp Common Stock receiving in the exchange cash in
lieu of a fractional interest in Westamerica Common Stock will be treated
as if such holder actually received such fractional share interest which
was subsequently redeemed by Westamerica, resulting in the cash such holder
receives in lieu of such fractional share interest being treated as having
been received as full payment in exchange for stock redeemed as provided in
Section 302(a) of the Code; and
(v) the basis of the Westamerica Common Stock received in the exchange
will be the same as the basis of the ValliCorp Common Stock for which it
was exchanged, less any basis attributable to fractional shares for which
cash is received.
Westamerica's legal counsel have advised Westamerica that they currently
expect to be able to deliver the foregoing opinion.
Each person who holds an unexercised option to acquire ValliCorp Common
Stock pursuant to the ValliCorp Option Plans at the Effective Time and who
receives an option to acquire Westamerica Common Stock in exchange therefor
should not recognize any gain or loss at the time of the exchange, provided
that such option (i) was issued in connection with the performance of services
and (ii) did not when issued and does not at the Effective Time have a readily
ascertainable fair market value (within the meaning of Section 1.83-7(b) of
the Income Tax Regulations). Any such unexercised option to acquire ValliCorp
Common Stock which was an "incentive stock option" prior to the Merger should
remain an "incentive stock option" after its conversion into an option to
acquire Westamerica Common Stock.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS BASED UPON CURRENT LAW
AND IS INTENDED FOR GENERAL INFORMATION ONLY. EACH WESTAMERICA AND VALLICORP
SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR CONCERNING THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH SHAREHOLDER, INCLUDING THE
APPLICABILITY AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
ValliCorp and Westamerica expect that the Merger will qualify for pooling of
interests accounting treatment. Under this method of accounting, Westamerica's
prior period financial statements will be restated on a combined basis with
those of ValliCorp, with all intercompany accounts being eliminated and all
expenses relating to the Merger being deducted from combined income.
It is a condition to Westamerica's obligation to consummate the Merger that,
among other things, Westamerica receive a letter from KPMG Peat Marwick LLP
("KPMG"), its independent public accountants, to the effect that KPMG believes
that the Merger will qualify for the pooling of interests method of accounting
in accordance with generally accepted accounting principles and all applicable
rules, regulations and policies of
64
<PAGE>
the Commission. In addition, it is also a condition to such obligation of
Westamerica that no determination will have been made by any court, tribunal,
regulatory agency or other governmental entity that the Merger fails or will
fail to qualify for pooling of interests accounting treatment.
TRADING MARKETS FOR STOCK
The Westamerica Common Stock is listed on the NMS. Westamerica intends to
cause the shares of Westamerica Common Stock to be issued in the Merger and
the shares of Westamerica Common Stock to be reserved for issuance upon the
exercise of existing ValliCorp stock options to be approved for listing on the
NMS, subject to official notice of issuance, prior to the Effective Date.
The ValliCorp Common Stock is currently listed on the NMS. If the Merger is
consummated, Westamerica will take action to cause such shares to cease to be
listed on the NMS and public trading of such shares will cease.
RESALES OF WESTAMERICA COMMON STOCK
The Westamerica Common Stock issued pursuant to the Merger will be freely
transferable under the Securities Act, except for shares issued to any
ValliCorp shareholder who may be deemed to be an "affiliate" of Westamerica or
ValliCorp for purposes of Rule 145 under the Securities Act. Each director and
executive officer of ValliCorp is deemed to be such an affiliate. It is
expected that each such director and executive officer and each other person
deemed to be an affiliate will enter into an agreement with Westamerica
providing that such person will not transfer any Westamerica Common Stock
received in the Merger, except in compliance with the Securities Act and
applicable rules thereunder. See "--Representations and Warranties; Conditions
to the Merger."
DISSENTERS' RIGHTS OF APPRAISAL
VALLICORP SHAREHOLDERS
UNDER THE DGCL, DISSENTERS' RIGHTS ARE NOT AVAILABLE TO VALLICORP
SHAREHOLDERS BECAUSE VALLICORP COMMON STOCK IS LISTED ON THE NMS AND HELD OF
RECORD BY MORE THAN 2,000 SHAREHOLDERS.
APPRAISAL RIGHTS OF WESTAMERICA SHAREHOLDERS
Because Westamerica Common Stock is traded on NMS, dissenters' rights will
be available to the shareholders of Westamerica only if the holders of five
percent (5%) or more of Westamerica Common Stock make a written demand upon
Westamerica for the purchase of dissenting shares in accordance with Chapter
13 of the GCL ("Chapter 13"). If this condition is satisfied and the Merger is
consummated, shareholders of Westamerica who dissent from the Merger, by
complying with the procedures set forth in Chapter 13, would be entitled to
receive an amount equal to the fair market value of their shares as of
November 11, 1996, the day before the public announcement of the Merger. The
high, low and closing sales prices for Westamerica Common Stock on November
11, 1996 were $52.50, $52.00 and $52.25, respectively. A copy of Chapter 13 is
attached hereto as Annex E and should be read for more complete information
concerning dissenters' rights. THE REQUIRED PROCEDURE SET FORTH IN CHAPTER 13
OF THE CALIFORNIA GENERAL CORPORATION LAW MUST BE FOLLOWED EXACTLY OR ANY
DISSENTERS' RIGHTS MAY BE LOST. The information set forth below is a general
summary of dissenters' rights as they apply to Westamerica shareholders and is
qualified in its entirety by reference to Annex E.
In order to be entitled to exercise dissenters' rights, a shareholder of
Westamerica must vote "Against" the Merger. Thus, any Westamerica shareholder
who wishes to dissent and executes and returns a proxy in the accompanying
form must specify that his or her shares are to be voted "Against" the Merger.
If the shareholder returns a proxy without voting instructions or with
instructions to vote "For" the Merger, his or her shares will automatically be
voted in favor of the Merger and the shareholder will lose any dissenters'
rights. In addition, if the shareholder abstains from voting his or her
shares, the shareholder will lose his or her dissenters' rights.
65
<PAGE>
Furthermore, in order to preserve his or her dissenters' rights, a
Westamerica shareholder must make a written demand upon Westamerica for the
purchase of dissenting shares and payment to such shareholder of their fair
market value, specifying the number of shares held of record by such
shareholder and a statement of what the shareholder claims to be the fair
market value of those shares as of November 11, 1996. Such demand must be
addressed to Westamerica, 1108 Fifth Avenue, San Rafael, California 94901;
Attention: Assistant Corporate Secretary, and must be received by Westamerica
not later than the date of the Westamerica Special Meeting. A vote "Against"
the Merger does not constitute such written demand.
If the holders of five percent (5%) or more of the outstanding shares of
Westamerica Common Stock have submitted a written demand for Westamerica to
purchase their shares, these demands are received by Westamerica on or before
the date of the Westamerica Special Meeting and the Merger is approved by the
shareholders, Westamerica will have 10 days after such approval to send to
those shareholders who have voted against the approval of the Merger written
notice of such approval accompanied by a copy of Chapter 13, a statement of
the price determined by Westamerica to represent the fair market value of the
dissenting shares as of November 11, 1996, and a brief description of the
procedure to be followed if a shareholder desires to exercise dissenters'
rights. Within 30 days after the date on which the notice of the approval of
the Merger is mailed, the dissenting shareholder must surrender to
Westamerica, at the office designated in the notice of approval, the
certificates representing the dissenting shares to be stamped or endorsed with
a statement that they are dissenting shares or to be exchanged for
certificates of appropriate denomination so stamped or endorsed. Any shares of
Westamerica Common Stock that are transferred prior to their submission for
endorsement lose their status as dissenting shares.
If Westamerica and the dissenting shareholder agree that the surrendered
shares are dissenting shares and agree upon the price of such shares, the
dissenting shareholder will be entitled to the agreed price with interest
thereon at the legal rate on judgments from the date of such agreement.
Payment of the fair market value of the dissenting shares shall be made within
30 days after the amount thereof has been agreed upon or 30 days after any
statutory or contractual conditions to the Merger have been satisfied,
whichever is later, subject to the surrender of the certificates therefor,
unless provided otherwise by agreement.
If Westamerica denies that the shares surrendered are dissenting shares, or
Westamerica and the dissenting shareholder fail to agree upon a fair market
value of such shares of Westamerica Common Stock, then the dissenting
shareholder of Westamerica must, within six months after the notice of
approval is mailed, file a complaint at the Superior Court of the proper
county requesting the court to make such determinations or intervene in any
pending action brought by any other dissenting shareholder. If the complaint
is not filed or intervention in a pending action is not made within the
specified six-month period, the dissenters' rights are lost. If the fair
market value of the dissenting shares is at issue, the court will determine,
or will appoint one or more impartial appraisers to determine, such fair
market value.
A dissenting shareholder may not withdraw his or her dissent or demand for
payment unless Westamerica consents to such withdrawal.
PRO FORMA COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Consolidated Financial Statements
give effect to the Merger on a pooling of interests basis. The Unaudited Pro
Forma Combined Consolidated Statements of Income assume the Merger was
effective as of the beginning of each of the nine months ended September 30,
1996 and 1995 and each of the years ended December 31, 1995, 1994 and 1993.
For a description of the pooling of interests accounting with respect to the
Merger, see "The Merger--Accounting Treatment." This pro forma financial data
and the accompanying notes should be read in conjunction with and are
qualified in their entirety by the historical consolidated financial
statements of Westamerica and the supplemental consolidated financial
statements of ValliCorp, including the respective notes thereto, and the
unaudited condensed consolidated historical and other pro forma financial
information, including the notes thereto, appearing elsewhere in this Joint
Proxy Statement/Prospectus or incorporated herein by reference.
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The pro forma financial data do not give effect to any potential cost
savings which may be achieved subsequent to the Merger. In addition, the pro
forma combined per share data for net income has been calculated using pro
forma combined average shares outstanding. Westamerica and ValliCorp pro forma
combined average shares outstanding have been calculated using the number of
Westamerica average shares outstanding during the periods presented, increased
by the anticipated number of shares of Westamerica Common Stock to be issued
to ValliCorp shareholders using an Exchange Ratio of .4098, assuming an
Average Price of $51.25 per share of Westamerica Common Stock, for each of the
average shares of ValliCorp Common Stock outstanding during each of the
periods presented as if these shares were outstanding during each of the
periods presented. Such pro forma per share data assumes no dissenting
Westamerica shareholders and no exercise of outstanding ValliCorp or
Westamerica stock options or other similar rights or conversion of ValliCorp
Convertible Debentures. The Exchange Ratio is subject to potential adjustments
in certain circumstances as provided in the Agreement. See "The Merger--
Purchase Price and Potential Adjustments."
Using an Exchange Ratio of .3738, which assumes an Average Price of a share
of Westamerica Common Stock of $57.875 (which corresponds to the closing price
per share of $57.875 for Westamerica Common Stock on January 3, 1997), for
each of the average shares of ValliCorp Common Stock outstanding during the
nine-month period ended September 30, 1996, the net income per share, book
value per share and average shares outstanding would have been $2.34, $25.09
and 14,684,000, respectively, and the equivalent pro forma ValliCorp net
income per share and book value per share would have been $0.88 and $9.38,
respectively.
The pro forma financial data are presented for illustrative purposes only
and are not necessarily indicative of the operating results or financial
position that would have occurred had the Merger been consummated as of the
date or the beginning of the periods indicated or that may be obtained in the
future.
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SUMMARY UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- ------------------------------
1996 1995 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Interest Income:
Loans.................... $154,224 $163,895 $217,824 $192,504 $181,709
Money market assets and
funds sold.............. 3,369 2,344 3,880 2,375 2,177
Trading account securi-
ties.................... 1 1 1 2 6
Investment securities ... 46,394 46,121 61,996 61,757 53,273
-------- -------- -------- -------- --------
Total interest income.. 203,988 212,361 283,701 256,638 237,165
Interest Expense:
Deposits................. 57,607 61,938 83,434 64,873 68,074
Funds purchased.......... 8,077 6,588 8,706 5,600 2,061
Notes and mortgages pay-
able.................... 3,066 2,714 3,487 2,848 2,116
-------- -------- -------- -------- --------
Total interest expense. 68,750 71,240 95,627 73,321 72,251
-------- -------- -------- -------- --------
Net Interest Income....... 135,238 141,121 188,074 183,317 164,914
Provision for loan losses. 9,154 12,133 15,228 11,378 13,503
-------- -------- -------- -------- --------
Net Interest Income After
Provision for Loan
Losses................... 126,084 128,988 172,846 171,939 151,411
Non-Interest Income:
Service charges on de-
posit accounts.......... 16,905 16,509 21,268 21,812 21,033
Merchant credit card..... 3,499 2,603 3,594 3,266 2,770
Mortgage banking......... 1,536 1,652 2,069 4,791 9,668
Financial services com-
missions................ 852 662 850 885 839
Trust fees............... 275 494 615 751 689
Net investment securities
gains (losses).......... 57 (126) (94) (53) 583
Other.................... 3,556 3,622 5,927 5,477 8,667
-------- -------- -------- -------- --------
Total non-interest in-
come.................. 26,680 25,416 34,229 36,929 44,249
Non-Interest Expense:
Salaries and related ben-
efits................... 46,065 50,581 66,464 70,433 69,096
Occupancy................ 12,761 12,210 16,783 16,080 15,660
Equipment................ 7,671 8,158 11,092 10,442 10,470
Check & data processing.. 4,466 3,650 5,605 6,209 5,384
Professional fees........ 3,752 4,717 6,253 6,016 5,666
Other real estate owned.. 758 1,247 1,830 877 12,186
FDIC insurance........... 77 3,511 3,780 7,272 6,930
Merger costs............. 5,121 280 700 3,367 0
Other.................... 20,550 22,972 29,453 29,432 35,835
-------- -------- -------- -------- --------
Total non-interest ex-
pense................. 101,221 107,326 141,960 150,128 161,227
-------- -------- -------- -------- --------
Income Before Income Tax-
es....................... 51,543 47,078 65,115 58,740 34,433
Provision for income tax-
es...................... 17,164 15,709 21,929 20,627 11,103
-------- -------- -------- -------- --------
Net Income................ $ 34,379 $ 31,369 $ 43,186 $ 38,113 $ 23,330
======== ======== ======== ======== ========
Average shares outstand-
ing(1)................... 15,170(2) 15,411 15,399(2) 15,408 14,183
Per Share Data:
Earnings per share(1).... $ 2.27 $ 2.04 $ 2.80 $ 2.47 $ 1.64
</TABLE>
See Notes to Unaudited Pro Forma Combined Consolidated Financial Statements
68
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
-------------------------------------------------
WESTAMERICA AND
PRO FORMA VALLICORP PRO
WESTAMERICA VALLICORP ADJUSTMENTS FORMA COMBINED
----------- --------- ----------- ---------------
<S> <C> <C> <C> <C>
Interest Income:
Loans....................... $ 93,224 $61,000 $ $154,224
Money market assets and
funds sold................. 0 3,369 3,369
Trading account securities.. 1 0 1
Investment securities....... 36,727 9,703 (36) 46,394
-------- ------- ---- --------
Total interest income..... 129,952 74,072 (36) 203,988
Interest Expense:
Deposits.................... 35,951 21,656 57,607
Funds purchased............. 7,717 360 8,077
Notes and mortgages payable. 2,070 996 3,066
-------- ------- ---- --------
Total interest expense.... 45,738 23,012 0 68,750
-------- ------- ---- --------
Net Interest Income.......... 84,214 51,060 (36) 135,238
Provision for loan losses.... 3,525 5,629 9,154
-------- ------- ---- --------
Net Interest Income After
Provision for Loan Losses... 80,689 45,431 (36) 126,084
Non-Interest Income:
Service charges on deposit
accounts................... 9,651 7,254 16,905
Merchant credit card........ 2,020 1,479 3,499
Mortgage banking............ 994 542 1,536
Financial services commis-
sions 572 280 852
Trust fees.................. 275 0 275
Net investment securities
gains...................... 35 22 57
Other....................... 2,735 821 3,556
-------- ------- ---- --------
Total non-interest income. 16,282 10,398 0 26,680
Non-Interest Expense:
Salaries and related bene-
fits....................... 28,579 17,486 46,065
Occupancy................... 7,914 4,847 12,761
Equipment................... 4,139 3,532 7,671
Check & data processing..... 2,973 1,493 4,466
Professional fees........... 1,605 2,147 3,752
Other real estate owned..... 326 432 758
FDIC insurance.............. 16 61 77
Merger costs................ 0 5,121 5,121
Other....................... 10,745 9,805 20,550
-------- ------- ---- --------
Total non-interest ex-
pense.................... 56,297 44,924 0 101,221
-------- ------- ---- --------
Income Before Income Taxes... 40,674 10,905 (36) 51,543
Provision for income taxes.. 12,708 4,471 (15) 17,164
-------- ------- ---- --------
Net Income................... $ 27,966 $ 6,434 $(21) $ 34,379
======== ======= ==== ========
Average shares outstand-
ing(1)...................... 9,672 13,525 15,170(2)
Per Share Data:
Earnings per share(1)....... $ 2.89 $ 0.48 $ 2.27
</TABLE>
See Notes to Unaudited Pro Forma Combined Consolidated Financial Statements
69
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1995
-------------------------------------------------
WESTAMERICA AND
PRO FORMA VALLICORP PRO
WESTAMERICA VALLICORP ADJUSTMENTS FORMA COMBINED
----------- --------- ----------- ---------------
<S> <C> <C> <C> <C>
Interest Income:
Loans....................... $ 96,507 $67,388 $ $163,895
Money market assets and
funds sold................. 276 2,068 2,344
Trading account securities.. 1 0 1
Investment securities....... 33,933 12,188 46,121
-------- ------- ---- --------
Total interest income..... 130,717 81,644 0 212,361
Interest Expense:
Deposits.................... 35,949 25,989 61,938
Funds purchased............. 6,394 194 6,588
Notes and mortgages payable. 1,373 1,341 2,714
-------- ------- ---- --------
Total interest expense.... 43,716 27,524 0 71,240
-------- ------- ---- --------
Net Interest Income.......... 87,001 54,120 0 141,121
Provision for loan losses.... 4,320 7,813 12,133
-------- ------- ---- --------
Net Interest Income After
Provision for Loan Losses... 82,681 46,307 0 128,988
Non-Interest Income:
Service charges on deposit
accounts................... 9,528 6,981 16,509
Merchant credit card........ 1,767 836 2,603
Mortgage banking............ 1,093 559 1,652
Financial services commis-
sions...................... 472 190 662
Trust fees.................. 494 0 494
Net investment securities
gains (losses)............. 19 (145) (126)
Other....................... 2,717 905 3,622
-------- ------- ---- --------
Total non-interest income. 16,090 9,326 0 25,416
Non-Interest Expense:
Salaries and related bene-
fits....................... 31,642 18,939 50,581
Occupancy................... 8,005 4,205 12,210
Equipment................... 4,680 3,478 8,158
Check & data processing..... 3,213 437 3,650
Professional fees........... 3,597 1,120 4,717
Other real estate owned..... 604 643 1,247
FDIC insurance.............. 2,185 1,326 3,511
Merger costs................ 0 280 280
Other....................... 12,594 10,378 22,972
-------- ------- ---- --------
Total non-interest ex-
pense.................... 66,520 40,806 0 107,326
-------- ------- ---- --------
Income Before Income Taxes... 32,251 14,827 0 47,078
Provision for income taxes.. 9,775 5,934 15,709
-------- ------- ---- --------
Net Income................... $ 22,476 $ 8,893 $ 0 $ 31,369
======== ======= ==== ========
Average shares outstand-
ing(1)...................... 9,893 13,464 15,411
Per Share Data:
Earnings per share(1)....... $ 2.27 $ 0.66 $ 2.04
</TABLE>
See Notes to Unaudited Pro Forma Combined Consolidated Financial Statements
70
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------
WESTAMERICA AND
PRO FORMA VALLICORP PRO
WESTAMERICA VALLICORP ADJUSTMENTS FORMA COMBINED
----------- --------- ----------- ---------------
<S> <C> <C> <C> <C>
Interest Income:
Loans....................... $128,264 $ 89,560 $ $217,824
Money market assets and
funds sold................. 276 3,604 3,880
Trading account securities.. 1 0 1
Investment securities....... 45,836 16,160 61,996
-------- -------- ---- --------
Total interest income..... 174,377 109,324 0 283,701
Interest Expense:
Deposits.................... 48,479 34,955 83,434
Funds purchased............. 8,403 303 8,706
Notes and mortgages payable. 1,730 1,757 3,487
-------- -------- ---- --------
Total interest expense.... 58,612 37,015 0 95,627
-------- -------- ---- --------
Net Interest Income.......... 115,765 72,309 0 188,074
Provision for loan losses.... 5,595 9,633 15,228
-------- -------- ---- --------
Net Interest Income After
Provisions for Loan Losses.. 110,170 62,676 0 172,846
Non-Interest Income:
Service charges on deposit
accounts................... 12,734 8,534 21,268
Merchant credit card........ 2,422 1,172 3,594
Mortgage banking............ 1,479 590 2,069
Financial services commis-
sions...................... 611 239 850
Trust fees.................. 615 0 615
Net investment securities
gains (losses)............. 19 (113) (94)
Other....................... 3,653 2,274 5,927
-------- -------- ---- --------
Total non-interest income. 21,533 12,696 0 34,229
-------- -------- ---- --------
Non-Interest Expense:
Salaries and related bene-
fits....................... 41,171 25,293 66,464
Occupancy................... 10,684 6,099 16,783
Equipment................... 6,255 4,837 11,092
Check & data processing..... 4,239 1,366 5,605
Professional fees........... 3,905 2,348 6,253
Other real estate owned..... 890 940 1,830
FDIC insurance.............. 2,375 1,405 3,780
Merger costs................ 0 700 700
Other....................... 16,821 12,632 29,453
-------- -------- ---- --------
Total non-interest ex-
pense.................... 86,340 55,620 0 141,960
-------- -------- ---- --------
Income Before Income Taxes... 45,363 19,752 0 65,115
Provision for income taxes.. 13,979 7,950 21,929
-------- -------- ---- --------
Net Income................... $ 31,384 $ 11,802 $ 0 $ 43,186
======== ======== ==== ========
Average shares outstand-
ing(1)...................... 9,877 13,525 15,399 (2)
Per Share Data:
Earnings per share(1)....... $ 3.18 $ 0.88 $ 2.80
</TABLE>
See Notes to Unaudited Pro Forma Combined Consolidated Financial Statements
71
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
-------------------------------------------------
WESTAMERICA AND
PRO FORMA VALLICORP PRO
WESTAMERICA VALLICORP ADJUSTMENTS FORMA COMBINED
----------- --------- ----------- ---------------
<S> <C> <C> <C> <C>
Interest Income:
Loans....................... $120,115 $ 72,389 $ $192,504
Money market assets and
funds sold................. 1,367 1,008 2,375
Trading account securities.. 2 0 2
Investment securities....... 44,610 17,147 61,757
-------- -------- ---- --------
Total interest income..... 166,094 90,544 0 256,638
Interest Expense:
Deposits.................... 41,967 22,906 64,873
Funds purchased............. 5,281 319 5,600
Notes and mortgages payable. 2,612 236 2,848
-------- -------- ---- --------
Total interest expense.... 49,860 23,461 0 73,321
-------- -------- ---- --------
Net Interest Income.......... 116,234 67,083 0 183,317
Provision for loan losses.... 7,420 3,958 11,378
-------- -------- ---- --------
Net Interest Income After
Provision for Loan Losses... 108,814 63,125 0 171,939
Non-Interest Income:
Service charges on deposit
accounts................... 12,948 8,864 21,812
Merchant credit card........ 2,401 865 3,266
Mortgage banking............ 4,270 521 4,791
Financial services commis-
sions...................... 673 212 885
Trust fees.................. 751 0 751
Net investment securities
gains (losses)............. (60) 7 (53)
Other....................... 5,016 461 5,477
-------- -------- ---- --------
Total non-interest income. 25,999 10,930 0 36,929
Non-Interest Expense:
Salaries and related bene-
fits....................... 45,106 25,327 70,433
Occupancy................... 10,632 5,448 16,080
Equipment................... 6,149 4,293 10,442
Check & data processing..... 4,466 1,743 6,209
Professional fees........... 4,079 1,937 6,016
Other real estate owned..... 623 254 877
FDIC insurance.............. 4,683 2,589 7,272
Merger costs................ 0 3,367 3,367
Other....................... 18,603 10,829 29,432
-------- -------- ---- --------
Total non-interest ex-
pense.................... 94,341 55,787 0 150,128
-------- -------- ---- --------
Income Before Income Taxes... 40,472 18,268 0 58,740
Provision for income taxes.. 12,810 7,817 20,627
-------- -------- ---- --------
Net Income................... $ 27,662 $ 10,451 $ 0 $ 38,113
======== ======== ==== ========
Average shares outstand-
ing(1)...................... 9,916 13,402 15,408
Per Share Data:
Earnings per share(1)....... $ 2.79 $ 0.78 $ 2.47
</TABLE>
See Notes to Unaudited Pro Forma Combined Consolidated Financial Statements
72
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
-------------------------------------------------
WESTAMERICA AND
PRO FORMA VALLICORP PRO
WESTAMERICA VALLICORP ADJUSTMENTS FORMA COMBINED
----------- --------- ----------- ---------------
<S> <C> <C> <C> <C>
Interest Income:
Loans....................... $124,060 $ 57,649 $ $181,709
Money market assets and
funds sold................. 1,159 1,018 2,177
Trading account securities.. 6 6
Investment securities....... 40,750 12,523 53,273
-------- -------- ---- --------
Total interest income..... 165,975 71,190 0 237,165
Interest Expense:
Deposits.................... 47,123 20,951 68,074
Funds purchased............. 2,018 43 2,061
Notes and mortgages payable. 2,017 99 2,116
-------- -------- ---- --------
Total interest expense.... 51,158 21,093 0 72,251
-------- -------- ---- --------
Net Interest Income.......... 114,817 50,097 0 164,914
Provision for loan losses.... 10,581 2,922 13,503
-------- -------- ---- --------
Net Interest Income After
Provision for Loan Losses... 104,236 47,175 0 151,411
Non-Interest Income:
Service charges on deposit
accounts................... 13,920 7,113 21,033
Merchant credit card........ 2,338 432 2,770
Mortgage banking............ 8,052 1,616 9,668
Financial services commis-
sions...................... 839 0 839
Trust fees.................. 689 0 689
Net investment securities
gains...................... 351 232 583
Other....................... 7,617 1,050 8,667
-------- -------- ---- --------
Total non-interest income. 33,806 10,443 0 44,249
Non-Interest Expense:
Salaries and related bene-
fits....................... 49,163 19,933 69,096
Occupancy................... 11,822 3,838 15,660
Equipment................... 7,514 2,956 10,470
Check & data processing..... 4,297 1,087 5,384
Professional fees........... 4,313 1,353 5,666
Other real estate owned..... 11,589 597 12,186
FDIC insurance.............. 4,952 1,978 6,930
Merger costs................ 0 0 0
Other....................... 27,791 8,044 35,835
-------- -------- ---- --------
Total non-interest ex-
pense.................... 121,441 39,786 0 161,227
-------- -------- ---- --------
Income Before Income Taxes... 16,601 17,832 0 34,433
Provision for income taxes.. 4,507 6,596 11,103
-------- -------- ---- --------
Net Income................... $ 12,094 $ 11,236 $ 0 $ 23,330
======== ======== ==== ========
Average shares outstand-
ing(1)...................... 9,884 10,490 14,183
Per Share Data:
Earnings per share(1)....... $ 1.22 $ 1.08 $ 1.64
</TABLE>
See Notes to Unaudited Pro Forma Combined Consolidated Financial Statements
73
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1996
-------------------------------------------------------
WESTAMERICA AND
PRO FORMA VALLICORP PRO
WESTAMERICA VALLICORP ADJUSTMENTS(5) FORMA COMBINED
----------- ---------- -------------- ---------------
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equiva-
lents................. $ 153,553 $ 189,314 $ $ 342,867
Money market assets.... 250 0 250
Trading account securi-
ties.................. 0 0 0
Loans held for sale.... 0 3,898 3,898
Investment securities
available for sale.... 700,114 178,551 (1,964)(3) 876,701
Investment securities
held to maturity...... 199,641 20,103 219,744
Loans, net of reserve
for loan losses....... 1,381,949 865,899 2,247,848
Other real estate
owned................. 5,313 3,607 8,920
Premises and equipment,
net................... 34,947 29,857 64,804
Interest receivable and
other assets.......... 53,400 38,326 91,726
---------- ---------- -------- ----------
Total assets......... $2,529,167 $1,329,555 $ (1,964) $3,856,758
========== ========== ======== ==========
LIABILITIES:
Deposits:
Non-interest bearing.. $ 496,425 $ 292,792 $ $ 789,217
Interest bearing:
Transaction.......... 356,166 342,517 698,683
Savings & Time....... 1,216,552 515,641 1,732,193
---------- ---------- -------- ----------
Total deposits....... 2,069,143 1,150,950 0 3,220,093
Funds purchased........ 163,960 8,700 172,660
Liability for interest,
taxes and other ex-
penses................ 24,364 9,133 (131)(3) 33,366
Notes and mortgages
payable............... 42,500 21,396 63,896
---------- ---------- -------- ----------
Total liabilities.... 2,299,967 1,190,179 (131) 3,490,015
Shareholders' Equity:
Common stock.......... 93,430 140 (1)(3) 186,006
92,437 (4)
Capital surplus....... 0 94,097 (1,653)(3) 0
(92,444)(4)
Unrealized gain (loss)
on securities avail-
able for sale........ 4,978 (2,037) (179)(3) 2,762
Treasury stock........ 0 (7) 7 (4) 0
Retained earnings..... 130,792 47,183 177,975
---------- ---------- -------- ----------
Total shareholders'
equity............... 229,200 139,376 (1,833) 366,743
---------- ---------- -------- ----------
Total liabilities and
shareholders' equi-
ty.................. $2,529,167 $1,329,555 $ (1,964) $3,856,758
========== ========== ======== ==========
</TABLE>
See Notes to Unaudited Pro Forma Combined Consolidated Financial Statements
74
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(1) The pro forma combined per share data for net income has been calculated
using pro forma combined average shares outstanding. Westamerica and
ValliCorp pro forma combined average shares outstanding have been
calculated using the number of Westamerica average shares outstanding
during the periods presented, increased by the anticipated number of
shares of Westamerica Common Stock to be issued to ValliCorp shareholders
using an Exchange Ratio of .4098, assuming an Average Price of $51.25 per
share of Westamerica Common Stock, for each of the average shares of
ValliCorp Common Stock outstanding during each of the periods presented as
if these shares were outstanding during each of the periods presented.
Such pro forma per share data assumes no dissenting Westamerica
shareholders and no exercise of outstanding ValliCorp or Westamerica stock
options or other similar rights or conversion of ValliCorp Convertible
Debentures. The Exchange Ratio is subject to potential adjustments in
certain circumstances as provided in the Agreement. See "The Merger--
Purchase Price and Potential Adjustments."
Using an Exchange Ratio of .3738, which assumes an Average Price of a share
of Westamerica Common Stock of $57.875 (which corresponds to the closing
price per share of $57.875 for Westamerica Common Stock on January 3, 1997),
for each of the average shares of ValliCorp Common Stock outstanding during
the nine-month period ended September 30, 1996, the net income per share,
book value per share and average shares outstanding would have been $2.34,
$25.09 and 14,684,000, respectively, and the equivalent pro forma ValliCorp
net income per share and book value per share would have been $0.88 and
$9.38, respectively.
(2) During the nine months ended September 30, 1996 and the 12 months ended
December 31, 1995, Westamerica owned 108,164 and 1,699 average shares of
ValliCorp Common Stock, respectively. Amounts indicated have been adjusted
to eliminate these shares as a result of the Merger.
(3) On September 30, 1996, Westamerica owned 115,500 shares of ValliCorp
Common Stock with a cost basis of $1,653,699. Amounts indicated here have
been adjusted to eliminate these shares as a result of the Merger.
(4) Pro forma pooling of interests adjustment to reflect the capital structure
of Westamerica.
(5) Merger-related expenses to be incurred by Westamerica and ValliCorp
subsequent to September 30, 1996 are currently estimated to be $10 million
after-tax based on information available as of the date of this Joint
Proxy Statement/Prospectus. These expenses, relating to separation and
benefit costs, professional and investment banking fees, and other
nonrecurring Merger-related expenses, will be charged against income of
the combined company upon consummation of the Merger or the period in
which such costs are incurred. Accordingly, the effect of these costs has
not been reflected in the unaudited pro forma combined consolidated
financial information. The amount of Merger-related costs disclosed in
these unaudited pro forma combined financial statements may change as
additional information becomes available.
75
<PAGE>
MARKET PRICE AND DIVIDEND INFORMATION
MARKET QUOTATIONS
Both the Westamerica Common Stock and the ValliCorp Common Stock are listed
and traded on the NMS. As of the Record Date, there were approximately 3,360
holders of record of ValliCorp Common Stock and approximately 6,739 holders of
record of Westamerica Common Stock.
The following table sets forth for the Westamerica Common Stock and the
ValliCorp Common Stock the high and low closing prices for the quarters
indicated.
<TABLE>
<CAPTION>
WESTAMERICA VALLICORP
COMMON STOCK COMMON STOCK
------------- -------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
1995
First Quarter................................... $33.25 $29.50 $16.50 $14.00
Second Quarter.................................. 37.50 33.00 16.75 14.50
Third Quarter................................... 38.50 36.50 18.75 13.75
Fourth Quarter.................................. 43.25 38.50 14.50 12.00
1996
First Quarter................................... $47.50 $42.25 $15.75 $13.50
Second Quarter.................................. 51.00 46.00 17.13 12.50
Third Quarter................................... 51.50 46.25 19.25 14.50
Fourth Quarter.................................. 58.75 49.50 20.75 15.25
</TABLE>
At the close of business on November 11, 1996, immediately prior to the
first public announcement of the Merger, the high, low and closing prices for
Westamerica Common Stock on the NMS were $52.50, $52.00 and $52.25,
respectively. At the close of business on November 11, 1996, immediately prior
to the first public announcement of the Merger, the high, low and closing
prices for ValliCorp Common Stock on the NMS were $18.75, $18.25 and $18.75,
respectively.
At the close of business on January 3, 1997, the high, low and closing
prices for Westamerica Common Stock on the NMS were $58.50, $57.75 and
$57.875, respectively. At the close of business on January 3, 1997, the high,
low and closing prices for ValliCorp Common Stock on the NMS were $20.375,
$19.625 and $20.00, respectively.
DIVIDENDS AND DIVIDEND POLICY
The following table sets forth the per share cash dividends declared by
Westamerica and paid by ValliCorp for the periods indicated:
<TABLE>
<CAPTION>
WESTAMERICA VALLICORP
COMMON STOCK COMMON STOCK
------------ ------------
<S> <C> <C>
1994
First Quarter..................................... $0.15 $0.08
Second Quarter.................................... 0.15 0.08
Third Quarter..................................... 0.17 0.08
Fourth Quarter.................................... 0.17 0.08
1995
First Quarter..................................... $0.17 $0.09
Second Quarter.................................... 0.20 0.09
Third Quarter..................................... 0.20 0.09
Fourth Quarter.................................... 0.20 0.09
1996
First Quarter..................................... $0.23 $0.10
Second Quarter.................................... 0.23 0.10
Third Quarter..................................... 0.23 0.10
Fourth Quarter.................................... 0.26 0.10
</TABLE>
76
<PAGE>
Westamerica has paid quarterly cash dividends since it commenced operations
on January 1, 1973. Westamerica is subject to certain regulatory and
contractual restrictions on its ability to pay dividends. Holders of
Westamerica Common Stock are entitled to receive dividends as and when
declared by the Board of Directors of Westamerica out of funds legally
available therefor under the laws of the State of California. The GCL provides
that a corporation may make a distribution to its shareholders if the
corporation's retained earnings equal at least the amount of the proposed
distribution. The GCL further provides that, in the event sufficient retained
earnings are not available for the proposed distribution, a corporation may
nevertheless make a distribution to its shareholders if, after giving effect
to the distribution, it meets two conditions, which generally stated are as
follows: (i) the corporation's assets must equal at least 125% of its
liabilities; and (ii) the corporation's current assets must equal at least its
current liabilities or, if the average of the corporation's earnings before
taxes on income and before interest expense for the two preceding fiscal years
was less than the average of the corporation's interest expense for such
fiscal years, then the corporation's current assets must equal at least 125%
of its current liabilities.
Westamerica is also subject to certain restrictions on its ability to pay
dividends under the terms of a certain debt agreement. See "Description of
Westamerica Capital Stock and Indebtedness--Debt Agreement."
Beginning in the second quarter of 1991, ValliCorp implemented a dividend
policy which established a regular quarterly cash dividend program.
ValliCorp's objective is to maintain a consistent quarterly cash dividend
representing a dividend payout ratio of between twenty percent (20%) and
twenty-five percent (25%) of net income. However, management considers various
other factors in determining this dividend, including ValliCorp's current and
projected net income, current dividend yield and regulatory capital
requirements, with particular emphasis on exceeding the applicable regulatory
capital requirements. There are regulatory limitations on cash dividends that
may be paid by ValliCorp, as well as limitations on cash dividends that may be
paid by ValliCorp's subsidiary bank, ValliWide, which could, in turn, limit
ValliCorp's ability to pay dividends.
Under Delaware law, holders of ValliCorp Common Stock are entitled to
receive dividends when and as declared by ValliCorp's Board of Directors out
of funds legally available therefor, subject to the dividend preference, if
any, on preferred stock that may be outstanding in the future. As a Delaware
corporation, ValliCorp may make stock repurchases or redemptions that do not
impair capital and may pay dividends out of any surplus account or out of net
profits of the current and preceding fiscal years, subject to certain
limitations. Under Delaware law, surplus may be created by a reduction of
capital and may be distributed by board action, so long as capital is
maintained in an amount not less than the aggregate par value of the remaining
outstanding shares plus the stated value of any shares not having par value.
The ability of a Delaware corporation to pay dividends on, or to make
repurchases or redemptions of, its shares is dependent on the financial status
of the corporation standing alone and is not determined on a consolidated
basis.
Pursuant to the terms of the Agreement, ValliCorp and ValliWide are subject
to certain covenants which may restrict their ability to pay or increase
dividends. See "The Merger--Covenants of Westamerica and ValliCorp; Conduct of
Business Prior to the Merger."
The Federal Reserve Board generally prohibits a bank holding company from
declaring or paying a cash dividend which would impose undue pressure on the
capital of subsidiary banks or would be funded only through borrowing or other
arrangements that might adversely affect a bank holding company's financial
position. The Federal Reserve Board's policy is that a bank holding company
should not continue its existing rate of cash dividends on its common stock
unless its net income is sufficient to fully fund each dividend and its
prospective rate of earnings retention appears consistent with its capital
needs, asset quality and overall financial condition.
77
<PAGE>
CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS
GENERAL
Upon consummation of the Merger, the shareholders of ValliCorp will become
shareholders of Westamerica. Westamerica is a California corporation and,
accordingly, is governed by the GCL and by its Articles of Incorporation (the
"Westamerica Articles") and Bylaws (the "Westamerica Bylaws"). ValliCorp is a
Delaware Corporation and is governed by the DGCL and by its Certificate of
Incorporation (the "ValliCorp Certificate") and Bylaws (the "ValliCorp
Bylaws"). The ValliCorp Certificate and the ValliCorp Bylaws differ in certain
material respects from the Westamerica Articles and the Westamerica Bylaws.
The following is a general comparison of certain similarities and material
differences between the rights of Westamerica and ValliCorp shareholders under
their respective governing law and charter documents. This discussion is only
a summary of certain provisions and does not purport to be a complete
description of such similarities and differences, and is qualified in its
entirety by reference to the GCL and the DGCL, the common law thereunder and
the full text of the Westamerica Articles, Westamerica Bylaws, ValliCorp
Certificate and ValliCorp Bylaws.
CERTAIN ANTI-TAKEOVER MEASURES
Some of the provisions in the Westamerica Articles and the Westamerica
Bylaws discussed below may deter efforts to obtain control of Westamerica on a
basis which some shareholders might deem favorable. Such provisions are
designed to encourage any person attempting a change in control of Westamerica
to enter into negotiations with the Board of Directors of Westamerica. For
example, the Westamerica Articles contain an "interested person" provision,
requiring the affirmative vote of more than a majority of the outstanding
shares of Westamerica Common Stock for certain transactions with an
"interested person," including a sale of assets, merger or consolidation
transaction. See "--Westamerica "Interested Person" Provision." In addition,
the Westamerica Board of Directors is authorized to issue Preferred Stock or
Class B Common Stock which may have the effect of delaying or preventing a
change in control of Westamerica. See "Description of Westamerica Capital
Stock and Indebtedness--Preferred Stock and Class B Common Stock." The
foregoing anti-takeover measures may decrease the likelihood that a person or
group would obtain control of Westamerica or may perpetuate incumbent
management.
Some of the provisions in the ValliCorp Certificate and the ValliCorp Bylaws
discussed below may deter efforts to obtain control of ValliCorp on a basis
which some shareholders might deem favorable, as further discussed below.
QUORUM REQUIREMENTS
The Westamerica Bylaws provide that the presence in person or by proxy of
the holders of one-third of the shares entitled to vote at any meeting of the
shareholders shall constitute a quorum for the transaction of business. The
ValliCorp Bylaws provide that a majority of all of the shares of stock
entitled to vote at the meeting, present in person or by proxy, shall
constitute a quorum for all purposes.
CUMULATIVE VOTING
Under the GCL, the holders of Westamerica Common Stock, upon notice given by
a shareholder at a shareholders' meeting in compliance with the GCL, may
cumulate votes for the election of directors. Under cumulative voting, each
share is entitled to a number of votes equal to the number of directors to be
elected. Votes may be cast for a single candidate or may be distributed among
two or more candidates in such proportions as the shareholder may determine.
The candidates receiving the highest number of votes, up to the number of
directors to be elected, are elected. On all other matters, each share of
Westamerica Common Stock has one
78
<PAGE>
vote. Under cumulative voting, shareholders who own far less than a majority
of a corporation's outstanding stock can obtain representation on the Board of
Directors. If voting is not conducted by cumulative voting, each share is
entitled to one vote and the holders of a majority of shares voting at the
meeting can elect all of the directors if they choose to do so, and the other
shareholders cannot elect any director.
Under the DGCL, the shareholders of ValliCorp are not entitled to cumulate
their votes in the election of directors unless ValliCorp's certificate of
incorporation so provides. The ValliCorp Certificate does not provide for
cumulative voting.
CLASSIFIED BOARD OF DIRECTORS
The Westamerica Bylaws, pursuant to the GCL, require that each director be
elected for a term ending at the next annual meeting of shareholders and until
his or her successor is duly elected and qualified. Pursuant to the Bylaws,
the authorized number of directors shall be not less than eight nor more than
15. The number of directors is currently fixed at 12.
The ValliCorp Certificate, pursuant to the DGCL, provides for a classified
Board of Directors. The board is divided into three classes, designated Class
"A", Class "B" and Class "C". Class "A" initially consisted of four (4)
directors, Class "B" initially consisted of four (4) directors and Class "C"
initially consisted of five (5) directors. There are now two (2) directors in
Class "A," four (4) in Class "B," and five (5) in Class "C." Each class serves
a three-year term, but the terms of the classes are staggered over three
years.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
Section 317 of the GCL ("Section 317") expressly grants to each California
corporation the power to indemnify its directors, officers and agents against
certain liabilities and expenses incurred in the performance of their duties.
Rights to indemnification beyond those provided by Section 317 may be valid to
the extent that such rights are authorized in the corporation's articles of
incorporation. Indemnification may not be made, however, with respect to
liability incurred in connection with any of the following acts for which the
liability of directors may not be limited under the GCL: (i) acts or omissions
that involve intentional misconduct or a knowing and culpable violation of
law; (ii) acts or omissions that a director believes to be contrary to the
best interests of the corporation or its shareholders or that involve the
absence of good faith on the part of the director; (iii) any transaction from
which a director derived a personal benefit; (iv) acts or omissions that show
a reckless disregard for the director's duty to the corporation or its
shareholders in circumstances in which the director was aware, or should have
been aware, in the ordinary course of performing a director's duties, of a
risk of serious injury to the corporation or its shareholders; (v) acts or
omissions that constitute an unexcused pattern of inattention that amounts to
an abdication of the director's duty to the corporation or its shareholders;
(vi) acts or omissions arising out of certain interested party transactions;
or (vii) acts in connection with illegal distributions, loans or guarantees.
With respect to all proceedings other than shareholder derivative actions,
Section 317 permits a California corporation to indemnify any of its
directors, officers or other agents only if such person acted in good faith
and in a manner such person reasonably believed to be in the best interests of
the corporation and, in the case of a criminal proceeding, had no reasonable
cause to believe the conduct of such person was unlawful. In the case of
derivative actions, a California corporation may indemnify any of its
directors, officers or agents only if such person acted in good faith and in a
manner such person believed to be in the best interests of the corporation and
its shareholders. Furthermore, in derivative actions, no indemnification is
permitted (i) with respect to any matter with respect to which the person to
be indemnified has been held liable to the corporation, unless such
indemnification is approved by the court; (ii) of amounts paid in settling or
otherwise disposing of a pending action without court approval; or (iii) of
expenses incurred in defending a pending action which is settled or otherwise
disposed of without court approval. To the extent that a director, officer or
agent of a corporation has been successful on the merits in defense of any
proceeding for which indemnification is permitted by Section 317, a
corporation is obligated by Section 317 to indemnify such person against
expenses actually and reasonably incurred by him in connection with the
proceeding.
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The Westamerica Articles eliminate the liability of its directors for
monetary damages to the fullest extent permissible under California law and
grant to Westamerica the power to indemnify its directors, officers and agents
through agreements with such persons or through bylaw provisions, or both, in
excess of the indemnification otherwise permitted by Section 317, subject to
applicable statutory prohibitions upon indemnification.
The Westamerica Bylaws obligate Westamerica to indemnify its directors and
provide that Westamerica has the right but not the obligation to indemnify its
officers and other agents against liabilities and expenses incurred in the
performance of their duties, subject to the prohibitions of the GCL.
Westamerica maintains directors' and officers' liability insurance policies
that indemnify its directors and officers against certain losses in connection
with claims made against them for certain wrongful acts. In addition,
Westamerica has entered into separate indemnification agreements with its
directors and officers that require Westamerica, among other things, (i) to
maintain directors' and officers' insurance in reasonable amounts in favor of
such individuals, and (ii) to indemnify them against certain liabilities that
may arise by reason of their status or service as agents of Westamerica to the
fullest extent permitted by California law.
The Westamerica Bylaws and indemnification agreements with its directors
entitle the directors of Westamerica to be indemnified against liabilities and
reasonable expenses incurred in connection with any claims brought against
them by reason of the fact that they are or were directors and are expressly
stated to be contract rights. Westamerica directors have been granted the
right to be paid by Westamerica the expenses incurred in defending the
proceedings specified above in advance of their final disposition, but the
indemnification agreements require the directors to undertake to return any
amounts advanced to the extent that it is ultimately determined that they were
not legally entitled to be indemnified by Westamerica in the proceeding. The
Westamerica Bylaws and the indemnification agreements grant to the directors
the right to bring suit against Westamerica to recover unpaid amounts claimed
with respect to indemnification and any expenses incurred in bringing such an
action. The Westamerica Bylaws and the indemnification agreements provide that
while it is a defense to such a suit that indemnification is prohibited by the
GCL, the burden of proving such a defense is on Westamerica.
The Westamerica Bylaws and the indemnification agreements obligate
Westamerica to indemnify its directors except (i) where such indemnification
is prohibited by law; (ii) with respect to settlements made by the directors
without the prior approval of Westamerica; and (iii) for any expenses or
liabilities incurred in connection with proceedings brought by the directors
against Westamerica, other than actions brought to enforce its indemnification
obligations.
Federal law authorizes the FDIC to limit, by regulation or order, the
payment of indemnification by insured banks or bank holding companies to their
directors and officers. Pursuant to this authority, the FDIC has proposed a
regulation that permits the payment of indemnification by banks and bank
holding companies to institution-affiliated directors, officers and other
parties only if certain requirements are satisfied. If adopted as presently
written, this regulation would permit an institution to make an
indemnification payment to, or for the benefit of, a director, officer or
other party only if the institution's board of directors, in good faith,
certifies in writing that the individual has a substantial likelihood of
prevailing on the merits and that the payment of indemnification will not
adversely affect the institution's safety and soundness. An institution's
board of directors is obligated to cease making or authorizing indemnification
payments in the event that it believes, or reasonably should believe, that the
conditions discussed in the preceding sentence are no longer being met.
Further, an institution's board of directors must provide the FDIC and any
other appropriate bank regulatory agency with prior written notice of any
authorization of indemnification. In addition, indemnification payments
related to an administrative proceeding or civil action instituted by an
appropriate federal bank regulatory agency are limited to the payment or
reimbursement of reasonable legal or other professional expenses. Finally, the
director, officer or other party must agree in writing to reimburse the
institution for any indemnification payments received should the proceeding
result in a final order being instituted against the individual assessing a
civil money penalty, removing the individual from office or requiring the
individual to cease and desist from certain institutional activity.
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Under the ValliCorp Bylaws, if ValliCorp does not elect to assume the
defense of a lawsuit brought against one of its directors or executive
officers, as defined in the ValliCorp Bylaws, it must advance expenses
incurred by the director or executive officer subject to delivery of an
undertaking by or on behalf of the director or executive officer to repay the
expenses only if it is ultimately determined that the director or executive
officer is not entitled to indemnification. However, ValliCorp is not required
to advance expenses or to assume the defense in a particular proceeding if the
corporation's disinterested directors or an independent board committee
determine(s) in good faith that, in all likelihood, the director or executive
officer will not be entitled to indemnification under the ValliCorp Bylaws.
The ValliCorp Bylaws are broader than the DGCL and provide that each person
who was or is made a party to, or is involved in, any action, suit or
proceeding by reason of the fact that he or she is or was a director or
executive officer of ValliCorp (or was serving at the request of ValliCorp as
a director, officer, employee or agent for another entity) while serving in
such capacity shall, except in certain suits initiated by such persons, be
indemnified and held harmless by ValliCorp, to the full extent authorized by
the DGCL, as in effect (or, to the extent authority for indemnification is
broadened, as it may be amended), against all expense, liability or loss
(including attorneys' fees, judgments, fines, Employee Retirement Income
Security Act ("ERISA") excise taxes or penalties, amounts paid or to be paid
in settlement and amounts expended in seeking indemnification granted to such
person), reasonably incurred or suffered by such person in connection
therewith.
THE DGCL PROVIDES THAT RIGHTS TO INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
NEED NOT BE LIMITED TO THOSE EXPRESSLY PROVIDED BY STATUTE. As a result, under
the DGCL and the ValliCorp Bylaws, ValliCorp would be permitted to indemnify
its directors, executive officers and employees, within the limits established
by law and public policy, pursuant to an express contract, bylaw or charter
provision, shareholder vote or otherwise.
As noted above, the ValliCorp Certificate generally requires ValliCorp to
indemnify its directors and executive officers to the fullest extent permitted
by the DGCL and, in most respects, is intended to provide the maximum
protection available under the DGCL. Because this provision is tied to the
DGCL, it may be modified by future changes in such law without further
shareholder action. The ValliCorp Bylaws expressly provide however, that any
such modification would be effective (for acts or omissions prior to the date
of a change) only to the extent it would provide broader indemnification
rights than those available under then existing law. In addition, the
ValliCorp Bylaws provide that all rights to indemnification and advances
granted by such Bylaws shall be deemed to be contractual obligations between
ValliCorp and its directors and executive officers. Accordingly, the Bylaw
provision cannot be repealed without the consent of the indemnitee. Repeal or
modification of the Bylaw provision would only be effective on a prospective
basis and would not affect rights to indemnification and expense advances in
effect at the time of any act or omission that is the subject of a proceeding
against a director or executive officer. Indemnification under any contract or
agreement entered into between ValliCorp and its directors and executive
officers would likewise not be affected by any such Bylaw repeal or
modification.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, executive officers and other agents of
ValliCorp and Westamerica pursuant to the foregoing provisions or otherwise,
ValliCorp and Westamerica have been advised that, in the opinion of the
Commission, such indemnification is contrary to public policy expressed in the
Securities Act and is therefore unenforceable, absent a decision to the
contrary by a court of competent jurisdiction.
ELIMINATION OF DIRECTORS' MONETARY LIABILITY FOR BREACH OF DUTY OF CARE
The ValliCorp Certificate provides that, to the fullest extent permitted by
the DGCL, as the same exists or may hereafter be amended, no director of
ValliCorp shall be personally liable to the corporation or to its shareholders
for monetary damages for breach of fiduciary duty as a director. The fiduciary
duty is a duty of care owed by directors in making corporate business
decisions. The Delaware Supreme Court has held that the
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duty of care requires the exercise of an informed business judgment. An
informed business judgment means that directors have informed themselves of
all material information reasonably available to them. Having become so
informed, they then must act with requisite care in the discharge of their
duties.
The ValliCorp Certificate does not eliminate the duty of care but eliminates
the remedy of monetary damage awards occasioned by breaches of that duty.
Thus, any shareholder may seek to enjoin a proposed transaction from occurring
or seek other non-monetary relief. After the transaction has occurred,
however, the shareholder would no longer have a claim for monetary damages
against the directors based on a breach of the duty of care even if that
breach involved gross negligence on the part of the directors.
The ValliCorp Certificate does not limit or eliminate liability arising from
or based upon (a) any breach of a director's duty of loyalty to the
corporation or its shareholders, (b) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (c) acts
under Title 8, Section 174 of the DGCL, which imposes liability on all
directors, except absent or dissenting directors, under whose administration
there occurs a willful or negligent violation of certain purchases or stock
redemptions, or (d) any transaction from which a director derived an improper
personal benefit. Thus, liability for monetary damages still exists if it is
based on these grounds.
The Westamerica Articles currently provide that the liability of directors
for monetary damages is eliminated to the fullest extent permissible under the
GCL. This provision relieves directors of Westamerica of liability to
Westamerica for simple negligence but not for liability where the director was
either grossly negligent or guilty of a willful breach of his or her loyalty
to Westamerica. The Westamerica Articles do not, and under the GCL cannot,
eliminate or limit the liability of a director resulting from the following
actions:
(a) acts or omissions that involve intentional conduct or a knowing and
culpable violation of law;
(b) acts or omissions that a director believes to be contrary to the best
interests of the corporation or its shareholders or that involve the
absence of good faith on part of the director;
(c) any transaction from which a director derived an improper personal
benefit;
(d) acts or omissions that show a reckless disregard for the director's
duty to the corporation or its shareholders in circumstances in which the
director was aware, or should have been aware, in the ordinary course of
performing a director's duties, of a risk of serious injury to the
corporation or its shareholders;
(e) acts or omissions that constitute an unexcused pattern of inattention
that amounts to an abdication of the director's duty to the corporation or
its shareholders;
(f) any transaction between the corporation and (i) a director, or (ii) a
corporation, firm or association in which the director has a material
financial interest; or
(g) any distribution to shareholders, and for any loan or guaranty to
officers or directors, that violates specified provisions of the GCL.
SHAREHOLDER MEETINGS AND ACTION BY WRITTEN CONSENT
The Westamerica Bylaws provide for shareholder action by written consent,
including the requirement for unanimous written consent for the election of
directors. The Westamerica Bylaws permit a director to be elected at any time
to fill a vacancy on the board of directors that has not been filled by the
directors by the written consent of the holders of a majority of the
outstanding shares entitled to vote for the election of directors.
The ValliCorp Bylaws provide that any action required or permitted to be
taken by shareholders of ValliCorp must be effected at an annual or special
meeting and may not be effected by any consent in writing by the shareholders.
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AMENDMENT OF BYLAWS
The Westamerica Bylaws may be amended or repealed by the affirmative vote or
written consent of a majority of the outstanding shares entitled to vote. The
Westamerica Bylaws require that if the Westamerica Articles set forth the
number of authorized directors of Westamerica, the authorized number of
directors may be changed only by an amendment of the Westamerica Articles. The
Westamerica Articles do not currently set forth the number of authorized
directors.
Subject to the rights of shareholders to amend the bylaws, the Westamerica
Bylaws provide that the bylaws may be adopted, amended or repealed by its
Board of Directors.
The ValliCorp Certificate provides that a majority of the directors or the
affirmative vote of two-thirds of the voting power of the outstanding shares
of ValliCorp Common Stock is required to approve amendments to the ValliCorp
Bylaws.
REMOVAL OF DIRECTORS
Under the GCL, a director of Westamerica may be removed without cause by a
majority of the outstanding shares entitled to vote, provided that the shares
voted against such removal would not be sufficient to elect the director under
California's cumulative voting rules. The GCL also allows removal of a
director for cause by the Superior Court.
The ValliCorp Certificate provides that directors may be removed without
cause by the affirmative vote of at least sixty-six and two-thirds percent (66
2/3%) of the outstanding shares. Directors may be removed for cause upon a
vote of the majority of outstanding shares. The ValliCorp Bylaws define
"cause" to mean: (i) declaration of unsound mind by order of court; (ii)
conviction of a felony or misdemeanor involving moral turpitude; (iii) a final
judgment by a court of competent jurisdiction that the director committed a
gross dereliction of his or her duties as a director which resulted in
material injury to ValliCorp; (iv) a final judgment by a court of competent
jurisdiction that the director willfully violated any banking law, rule,
regulation or final cease-and-desist order entered by federal or state banking
regulations; or (v) a final judgment by a court of competent jurisdiction that
the director engaged in intentional misconduct or a knowing violation of law,
and that such misconduct or violation resulted in both material injury to
ValliCorp and an improper substantial personal benefit.
FILLING VACANCIES ON THE BOARD OF DIRECTORS
The Westamerica Bylaws provide that vacancies occurring on the Westamerica
Board of Directors may be filled by a vote of a majority of the remaining
directors, though less than a quorum, or by a sole remaining director, except
that a vacancy created by the removal of a director by the shareholders or by
court order may only be filled by the vote of a majority of the shares
entitled to vote represented at a duly held meeting or by written consent of a
majority of the outstanding shares entitled to vote. The Westamerica Bylaws
also provide that the shareholders may elect a director at any time to fill
any vacancy not filled by the directors, except that any election by written
consent, other than to fill a vacancy created by removal of a director,
requires the consent of a majority of the outstanding shares entitled to vote.
In addition, the GCL provides that if, after the filling of any vacancy by the
directors, the directors then in office who have been elected by the
shareholders constitute less than a majority of the directors then in office,
(i) any holder or holders of an aggregate of 5% or more of the total number of
shares at the time outstanding having the right to vote for such directors may
call a special meeting of shareholders; or (ii) the California Superior Court
of the proper county shall, upon application of such shareholder or
shareholders, summarily order a special meeting of shareholders, to be held to
elect the entire Board of Directors.
The ValliCorp Bylaws provide that a vacancy on the Board of Directors
occurring for cause during the course of the year, including a vacancy created
by an increase in the number of directors, may be filled by the remaining
directors or by the shareholders at a special or annual meeting. These
provisions further provide that any directors so appointed will serve for the
remainder of the full term for which elected, and no decrease in the
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number of directors shall reduce the term of any incumbent. Under the DGCL,
however, if at the time of filling any vacancy or newly created directorship
the directors then in office constitute less than a majority of the entire
Board of Directors as constituted immediately prior to any such increase, the
Delaware Court of Chancery may, under certain circumstances, order an election
to be held to fill any such vacancies or newly created directorships or to
replace the directors chosen by the directors then in office. Additionally,
when a director has been removed from office with or without cause by the
shareholders, the shareholders have the right to fill such vacancy by the
affirmative vote of at least a majority of the voting power of the then
outstanding stock. If the shareholders fail to fill such vacancy, the Board
may then do so as set forth above.
AMENDMENT OF ARTICLES OR CERTIFICATE
The Westamerica Articles may be amended if such amendment is approved by the
Board of Directors and by a majority of the outstanding shares of Westamerica.
Under certain circumstances the articles of incorporation of a California
corporation may be amended without shareholder approval in connection with
stock splits.
Under the DGCL, the ValliCorp Certificate may be amended if such amendment
is approved by the Board of Directors and by a majority of the shareholders.
In addition, if ValliCorp were to have more than one class of stock
outstanding, amendments that would adversely affect the rights of any class
would require the vote of a majority of the shares of that class. The
ValliCorp Certificate further provides that the vote of two-thirds ( 2/3) of
all of the outstanding shares of the stock of ValliCorp entitled to vote is
required to amend or repeal the provisions of the ValliCorp Certificate
relating to:
(a) The elimination of the right of the shareholders to call a special
shareholders' meeting and the elimination of the right of shareholders to
act without a meeting (see "--Limitation on Action by Shareholders--Call of
Annual or Special Meeting of Shareholders");
(b) The number of authorized directors, the right of such directors to
change that number and to fill vacancies on the Board of Directors, the
terms of office of the members of the Board of Directors and the provisions
setting forth the vote of the shareholders required to remove a director
for cause;
(c) The authority of the Board of Directors and the shareholders to amend
the ValliCorp Bylaws;
(d) The elimination of directors' personal liability for monetary damages
arising from their negligence and gross negligence;
(e) The percentage of the shares of ValliCorp stock necessary to amend
the ValliCorp Certificate; and
(f) The authority of the directors to consider factors other than price
when evaluating whether to accept an offer to take over ValliCorp.
In addition, the vote of a majority of the shareholders other than any
Interested Shareholder (as defined in Section 203 of the DGCL, but generally a
holder of 15% or more of the voting power of all stock of the corporation) is
required to approve amendments to amend or repeal the provision permitting the
directors to consider factors other than price in evaluating takeover bids.
NOTICE OF SHAREHOLDER BUSINESS
Under the Westamerica Bylaws, a shareholder must give 14 to 50 days' prior
notice to Westamerica's Corporate Secretary of any business the shareholder
wishes to bring before an annual meeting of shareholders, except that if less
than 21 days' notice of the date of the meeting is given to shareholders, a
shareholder must provide notice to Westamerica within seven days of the date
Westamerica mailed notice of the annual meeting. The notice must contain a
brief description of the business that the shareholder wishes to bring before
the meeting, the reasons for conducting such business at the meeting, the name
and residential address of the proposing shareholder, the number of shares the
shareholder owns and any material interest of the shareholder in the business
that the shareholder wishes to bring before the meeting.
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The ValliCorp Bylaws provide that at a meeting of the shareholders no matter
will be considered unless notice of such matter is provided to the corporation
thirty (30) days before the meeting or, if, on the day notice of the meeting
is given to the shareholders, less than forty (40) days remain until the
meeting, ten (10) days after notice is given (the "Nomination Notice Date").
NOTICE OF DIRECTOR NOMINATIONS
Under the Westamerica Bylaws, a shareholder must give 14 to 50 days' prior
notice to Westamerica's Corporate Secretary if the shareholder wishes to
nominate any person for election as a Westamerica director at any meeting
called for the election of directors, except that if less than 21 days' notice
of the meeting is given to shareholders, a shareholder must provide notice to
Westamerica within seven days of the date Westamerica mailed notice of the
meeting. The notice of the shareholder to nominate must contain the following
information: the name and address of each proposed nominee; the principal
occupation of each proposed nominee; the total number of shares of stock of
Westamerica that the shareholder expects will be voted for each proposed
nominee; the name and residence address of the shareholder; and the number of
shares of stock of Westamerica owned by the shareholder.
ValliCorp shareholders are also not permitted to nominate individuals to
serve as directors of ValliCorp unless notice of such nomination is given to
ValliCorp by the Nomination Notice Date.
LIMITATION ON ACTION BY SHAREHOLDERS--CALL OF ANNUAL OR SPECIAL MEETING OF
SHAREHOLDERS
The Westamerica Bylaws provide that annual meetings of shareholders may be
called by the President, the Chairman of the Board of Directors, the Board of
Directors, or the holders of not less than 10% of the shares entitled to vote
at the meeting. Under the Westamerica Bylaws, a special meeting of the
shareholders may be called at any time by the Board of Directors, or by the
Chairman of the Board, or by the President, or by one or more shareholders
holding shares in the aggregate entitled to cast not less than 10% of the
votes at that meeting.
The ValliCorp Bylaws provide that annual meetings may be called by a
majority of the total number of authorized directors or the holders of at
least ten percent (10%) of the voting power of the then outstanding stock.
WESTAMERICA "INTERESTED PERSON" PROVISION
The Westamerica Articles contain an "interested person" provision which
applies to transactions with persons or entities holding 10% or more of the
outstanding shares of Westamerica Common Stock (each, an "Interested Person").
Subject to certain exceptions, the Interested Person provision requires the
affirmative vote of 80% of the outstanding shares of Westamerica Common Stock
to authorize any of the following transactions with an Interested Person: (i)
a merger or consolidation; (ii) the sale or disposition of all or a
substantial part of Westamerica's assets to an Interested Person; (iii) the
purchase or other acquisition by Westamerica of all or a substantial part of
the assets of an Interested Person; or (iv) any other transaction with an
Interested Person which requires the approval of the Westamerica shareholders
pursuant to the GCL.
The special approval requirements of the Interested Person provision do not
apply if the transaction in question was (i) approved by the Westamerica Board
of Directors before the other person or entity involved became an Interested
Person; or (ii) approved by a majority of the Westamerica Board of Directors
while the other person or entity was an Interested Person and the
consideration to be received by Westamerica shareholders is not less per share
than the highest price per share (including brokerage commissions and/or
dealer fees) paid by the Interested Person for any shares of Westamerica stock
from the time the Interested Person obtained beneficial ownership in excess of
5% of the outstanding shares of Westamerica Common Stock. This Interested
Person provision may have the effect of deterring efforts to change control of
Westamerica on a basis which some shareholders may deem favorable.
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DELAWARE ANTI-TAKEOVER STATUTE
Section 203 of the DGCL would prohibit a "business combination" (defined
generally to include mergers, sales and leases of assets, issuances of
securities and similar transactions) by ValliCorp or a subsidiary with an
Interested Shareholder (as defined in the DGCL) within three years after the
person or entity becomes an Interested Shareholder, unless (a) prior to the
person or entity becoming an Interested Shareholder, the business combination
or the transaction pursuant to which such person or entity became an
Interested Shareholder shall have been approved by the Board of Directors of
ValliCorp, (b) upon the consummation of the transaction in which the person or
entity became an Interested Shareholder, the Interested Shareholder holds at
least 85% of the voting stock of ValliCorp (excluding shares held by persons
who are both officers and directors of ValliCorp and shares held by certain
employee benefit plans), or (c) the business combination is approved by the
Board of Directors of ValliCorp and by the holders of at least two-thirds (
2/3) of the outstanding voting stock of ValliCorp, excluding shares held by
the Interested Shareholder. The Merger is not subject to the limitations set
forth in Section 203.
The GCL requires that in certain transactions involving tender offers or
acquisition proposals made to a target corporation's shareholders by a person
who either (a) controls the target corporation, (b) is an officer or director
of the target or is controlled by an officer or director of the target, or (c)
is an entity in which a director or executive officer of the target has a
material interest, a written opinion of an independent expert be provided as
to the fairness of the consideration to the shareholders of the target
corporation. The statute also provides that if a competing proposal is made at
least ten (10) days before shareholders are to vote or shares are to be
purchased under the pending offer by the affiliated party, the latter offer
must be communicated to shareholders and they must be given a reasonable
opportunity to revoke their vote or withdraw their shares, as the case may be.
SERIES A PREFERRED STOCK PURCHASE RIGHTS ACCOMPANYING VALLICORP COMMON STOCK
ValliCorp adopted a shareholder rights plan pursuant to a Rights Agreement
between ValliCorp and First Interstate Bank of California dated as of March
25, 1996 (the "ValliCorp Rights Agreement"). Subsequently, ChaseMellon
Shareholder Services, L.L.C. became the Rights Agent. Each outstanding share
of ValliCorp Common Stock is accompanied by one ValliCorp Right to purchase
Series A Preferred Stock of ValliCorp under the terms of the ValliCorp Rights
Agreement. The ValliCorp Rights may have the effect of encouraging potential
acquirors of ValliCorp to negotiate with the Board of Directors and may also
discourage potential acquirors in certain circumstances. See "Description of
ValliCorp Capital Stock and Indebtedness--Series A Preferred Stock Purchase
Rights."
On November 11, 1996, the ValliCorp Rights Agreement was amended to provide
that the Agreements and transactions contemplated thereby will not result in
the grant of any ValliCorp Rights to any person or enable or require the
ValliCorp Rights to be exercised or triggered.
Westamerica also has a shareholders rights plan which is discussed at
"Description of Westamerica Capital Stock and Indebtedness--Shareholder Rights
Plan" and "Certain Considerations--Effect of Shareholder Rights Plan."
CONSIDERATION OF FACTORS OTHER THAN PRICE
Although both the DGCL and the GCL require the board of directors to act in
the best interests of its shareholders, judicial decisions under the GCL are
unclear as to whether a board may consider factors other than the price per
share when making a determination whether a transaction is in the best
interests of a company and its shareholders. The ValliCorp Certificate
includes a provision expressly stating that, in evaluating any tender or
exchange offer made for the securities of ValliCorp, or if another type of
business combination with ValliCorp is proposed, it is proper for the
directors to consider the best interests of ValliCorp as a whole, including
without limitation, whether the transaction is in the best interests of
ValliCorp's shareholders, complies with state and federal laws, provides a
fair and adequate price per share, and has adverse social, legal and economic
effects
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upon employees, suppliers, customers and others having similar relationships
with ValliCorp and the communities in which ValliCorp conducts its business.
The ValliCorp Board of Directors is also expressly authorized to conduct
investigations into such matters. The Westamerica Articles do not include any
similar type of provision.
SHAREHOLDER VOTE FOR MERGERS AND OTHER REORGANIZATIONS
Generally, the GCL requires a shareholder vote for mergers and other
reorganizations in more situations than does Delaware law. For example, the
DGCL generally provides for a vote by the shareholders of each "constituent
corporation" to a merger and by shareholders of a corporation selling all or
substantially all of its assets, whereas, in addition to the foregoing,
California law provides for a shareholder vote (a) of an acquiring corporation
in either a share-for-share exchange or a sale-of-assets reorganization, and
(b) of a parent corporation (even though it is not a "constituent
corporation") whose equity securities are being issued in connection with a
corporate reorganization such as a triangular merger. With certain exceptions,
the GCL also requires a class vote when a shareholder vote is required in
connection with these transactions. In contrast, the DGCL generally does not
require class voting, except where the transaction involves an amendment to
the certificate of incorporation that adversely affects a class of shares.
The DGCL does not require a shareholder vote of the surviving constituent
corporation in a merger if (a) the merger agreement does not amend the
existing certificate of incorporation, (b) each outstanding share of the
surviving corporation before the merger is unchanged after the merger, and (c)
the merger involves the issuance of no more than 20% of the shares of the
surviving corporation outstanding immediately prior to such issuance.
California law contains a similar exception to its voting requirements for
reorganizations where shareholder control is not diluted by more than one-
sixth as a result of the reorganization.
INSPECTION OF SHAREHOLDER LISTS
The GCL provides a right of inspection of the corporation's shareholder list
to any shareholder holding five percent (5%) or more of a corporation's voting
shares or a shareholder holding one percent (1%) or more of a corporation's
shares who has filed a Schedule 14B with the Commission (Schedule 14B is filed
in connection with certain proxy contests relating to the election of
directors). In addition, the GCL provides a right of inspection of shareholder
lists by any shareholder for a purpose reasonably related to such holder's
interest as a shareholder. The DGCL does not provide any similar absolute
right of inspection, but does permit any shareholder of record to inspect the
shareholder list for any purpose reasonably related to such person's interest
as a shareholder and, for a ten-day period preceding a shareholders' meeting,
for any purpose germane to the meeting.
DESCRIPTION OF WESTAMERICA CAPITAL STOCK AND INDEBTEDNESS
The authorized capital stock of Westamerica consists of 50,000,000 shares of
Westamerica Common Stock, without par value, and 1,000,000 shares each of
Class B Common Stock and Preferred Stock. As of the Record Date, approximately
9,434,870 shares of Westamerica Common Stock and no shares of either the Class
B Common Stock or the Preferred Stock were outstanding and an additional
354,215 shares of the authorized Westamerica Common Stock were available for
future grant and reserved for issuance to holders of outstanding stock options
and restricted performance shares under Westamerica's stock option plans.
COMMON STOCK
Holders of Westamerica Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of shareholders, except
that, upon giving the notice required by the Westamerica Bylaws, shareholders
may cumulate their votes for the election of directors. Shareholders are
entitled to receive ratably such dividends as may be legally declared by
Westamerica's Board of Directors. There are legal and regulatory
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restrictions on the ability of Westamerica to declare and pay dividends. See
"Market Price and Dividend Information--Dividends and Dividend Policy."
Westamerica is also subject to certain restrictions on its ability to pay
dividends and the amount thereof under the terms a certain debt agreement. See
"--Debt Agreement." In the event of a liquidation, common shareholders are
entitled to share ratably in all assets remaining after payment of liabilities
and liquidation preference for securities with a priority over the Westamerica
Common Stock. Attached to each outstanding share of Westamerica Common Stock
is a common stock purchase right which entitles the holder to certain rights
as set forth in the Amended and Restated Rights Agreement. See "--Shareholder
Rights Plan." Shareholders of Westamerica Common Stock have no preemptive or
conversion rights. Westamerica Common Stock is not subject to calls or
assessments. The transfer agent and registrar for Westamerica Common Stock is
Chemical Trust Company of California. See "Certain Differences in Rights of
Shareholders--Westamerica "Interested Person" Provision."
PREFERRED STOCK AND CLASS B COMMON STOCK
The Westamerica Board of Directors is authorized to fix the rights,
preferences, privileges and restrictions of the Preferred Stock and the Class
B Common Stock and may establish series of such stock and determine the
variations between series. If and when any Preferred Stock is issued, the
holders of Preferred Stock may have a preference over holders of Westamerica
Common Stock upon the payment of dividends, upon liquidation of Westamerica,
in respect of voting rights and in the redemption of the capital stock of
Westamerica. The Westamerica Articles provide that, except as otherwise
provided by law or by the Westamerica Board of Directors, shares of Class B
Common Stock shall have no voting rights. The issuance of any Preferred Stock
or Class B Common Stock may have the effect of delaying, deferring or
preventing a change in control of Westamerica without further action of its
shareholders. The issuance of such stock with voting and conversion rights may
adversely affect the voting power of the holders of Westamerica Common Stock.
Westamerica has no present plans to issue any shares of Preferred Stock or
Class B Common Stock.
DEBT AGREEMENT
Westamerica is a party to a certain debt agreement containing restrictions
on the payment of dividends and the amount thereof, as well as financial and
other covenants, as described below.
In 1996, Westamerica issued and sold $22,500,000 aggregate principal amount
of its 7.11% Senior Notes due February 1, 2006 (the "Senior Notes"), payable
semiannually, pursuant to a Senior Note Agreement dated as of February 1, 1996
(the "Senior Note Agreement"). The Senior Notes require that, commencing
February 1, 2000 and ending February 1, 2005, Westamerica shall make principal
repayments of the lesser of $3,214,286 or the principal amount then
outstanding. The Senior Note Agreement contains covenants and other provisions
usual and customary for senior indebtedness of this type, including, but not
limited to, capital debt maintenance ratios, maintenance of specified levels
of consolidated tangible net worth, limitations on indebtedness, a fixed
charge coverage ratio and restrictions on the payment of dividends or other
distributions. Westamerica is in full compliance with the terms of the Senior
Note Agreement.
The Senior Note Agreement does not prohibit Westamerica from executing and
delivering the Agreements or consummating the Merger, nor does it currently
limit the payment of regular quarterly dividends.
SHAREHOLDER RIGHTS PLAN
On December 18, 1986, the Board of Directors of Westamerica adopted a
Shareholder Rights Plan by declaring a dividend distribution of one
Westamerica Right for each outstanding share of Westamerica Common Stock,
payable to shareholders of record on January 20, 1987 and future shares of
Westamerica Common Stock. The terms of the Westamerica Rights were amended by
the Westamerica Board of Directors on September 28, 1989, May 25, 1992 and
March 23, 1995. When exercisable, each Westamerica Right entitles the holder
to purchase from Westamerica one share of Westamerica Common Stock at a price
of $65.00 per share (the "Exercise Price"), subject to adjustment in certain
circumstances. The description and terms of the Westamerica Rights are set
forth in and qualified in their entirety by reference to the Amended and
Restated Rights Agreement dated as of March 23, 1995 between Westamerica and
Chemical Trust Company of California, the Rights Agent (the "Amended and
Restated Rights Agreement").
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Until a Distribution Date occurs, as described below, the Westamerica Rights
are not exercisable and remain attached to the shares of Westamerica Common
Stock associated therewith. The Westamerica Rights will become exercisable and
trade separately from the Westamerica Common Stock and a Distribution Date
will occur on the tenth day (or such later date as a majority of the
Westamerica Board of Directors may determine) following the earlier to occur
of (i) a public announcement that an Acquiring Person has become the
beneficial owner of securities having 15% or more of Westamerica's voting
power; or (ii) ten days (unless such date is extended by the Westamerica Board
of Directors) following the commencement of, or a public announcement of an
intention to make, a tender or exchange offer which would result in any
Acquiring Person having beneficial ownership of securities having 15% or more
of such voting power.
Unless the Westamerica Rights are earlier redeemed, in the event that a
person or group of affiliated or associated persons becomes the beneficial
owner of securities having 15% or more of the voting power of all then
outstanding voting securities of Westamerica (unless pursuant to a tender or
exchange offer for all outstanding shares of Westamerica Common Stock at a
price and on terms determined by at least a majority of the members of the
Board of Directors who are not officers of Westamerica to be in the best
interests of Westamerica and its shareholders), then each holder of a
Westamerica Right (other than an Acquiring Person, whose rights will thereupon
become null and void) will for at least a 60-day period thereafter have the
right, when exercisable, to receive upon exercise (subject to the last
sentence of this paragraph) that number of shares of Westamerica Common Stock
having a market value of twice the exercise price of the Westamerica Right, to
the extent available. If a sufficient number of shares are not available, the
holder will also receive a common stock equivalent (such as preferred stock or
another equity security with at least the same economic value as the
Westamerica Common Stock) which, together with the Westamerica Common Stock
received, has an aggregate market value of twice the exercise price of the
Westamerica Right (the "Subscription Right"). Subject to applicable law, the
Board of Directors, at its option, may at any time after a Person becomes an
Acquiring Person (but not after the acquisition by such Person of 50% or more
of the outstanding Common Stock), exchange all or part of the then outstanding
and exercisable Westamerica Rights (except for Westamerica Rights which have
become void) for shares of Westamerica Common Stock equivalent to one share of
Westamerica Common Stock per Westamerica Right ("Exchange Shares") or,
alternatively, for substitute consideration consisting of cash, common stock
or common stock equivalents, debt securities or other assets (or any
combination thereof) ("Substitute Consideration").
Unless the Westamerica Rights are earlier redeemed or the Board of Directors
exercises its option to exchange the Westamerica Rights for Exchange Shares or
Substitute Consideration, in the event that, after the first date of public
announcement by Westamerica or an Acquiring Person that an Acquiring Person
exists, (i) Westamerica is acquired in a merger or consolidation; (ii) any
bank subsidiary of Westamerica is acquired in a merger or consolidation; or
(iii) 50% or more of Westamerica's assets or earnings power is sold, then each
holder of a Westamerica Right (other than such Acquiring Person) will
thereafter have the right to receive, upon exercise and payment of the
exercise price of the Westamerica Right, that number of shares of common stock
of the surviving entity in the business combination, which at the time of such
transaction would have a market value of at least two times the exercise price
of the Westamerica Right.
At any time prior to a person becoming an Acquiring Person without
Westamerica's consent, Westamerica may redeem the Westamerica Rights in whole,
but not in part, at a price of $0.05 per Westamerica Right (the "Redemption
Price"). The Westamerica Rights may also be redeemed under certain
circumstances: (i) following an event giving rise to, and the expiration of
the exercise period for, the Subscription Right, if and for as long as an
Acquiring Person beneficially owns securities having less than 15% of
Westamerica's voting power and at the time of redemption there are no other
persons who are Acquiring Persons; or (ii) in connection with a business
combination involving Westamerica but not involving an Acquiring Person.
Immediately upon the action of the Westamerica Board of Directors
authorizing redemption of the Westamerica Rights, the right to exercise the
Westamerica Rights will terminate and the only right of the holders of
Westamerica Rights will be to receive the Redemption Price. Unless earlier
redeemed by Westamerica, the Westamerica Rights will expire at the close of
business on December 31, 1999. The foregoing description of the
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Amended and Restated Rights Agreement and the Westamerica Rights is qualified
in its entirety by reference to the Amended and Restated Rights Agreement.
The Westamerica Shareholder Rights Plan may discourage or make more
difficult or expensive certain mergers, tender offers or other purchases of
Westamerica Common Stock. The Westamerica Shareholder Rights Plan therefore
may deprive shareholders in certain circumstances of an opportunity to sell
some or all of their shares at a premium over then prevailing market prices.
Moreover, the Westamerica Shareholder Rights Plan may decrease the likelihood
that a person or group would take control of Westamerica through such a tender
offer, merger or other purchase of stock and remove incumbent management even
if the holders of a majority of Westamerica's voting stock would favor such a
change of control. Dilution of stock interests under the Westamerica
Shareholder Rights Plan generally would not result from a proxy contest to
take control of Westamerica, even if the proxy contest were to be successful.
However, the Westamerica Shareholder Rights Plan will effectively limit to
less than 15% the percentage of the Westamerica Common Stock outstanding which
may be beneficially owned by the person or group soliciting proxies in
opposition to the Westamerica Board of Directors. This may discourage a person
or group from waging, or decrease its prospects for winning, a proxy contest.
See "Certain Considerations--Effect of Shareholder Rights Plan."
AUTOMATIC DIVIDEND REINVESTMENT SERVICE AND EMPLOYEE STOCK PURCHASE PLAN
Pursuant to the Westamerica Automatic Dividend Reinvestment Service and the
Employee Stock Purchase Plan, Westamerica provides eligible shareholders and
employees of Westamerica and its subsidiaries a method of investing cash
dividends and optional cash payments in additional shares of Westamerica
Common Stock without payment of any brokerage commission or service charge.
The Automatic Dividend Reinvestment Service and the Employee Stock Purchase
Plan include certain dollar limitations on additional cash payments.
DESCRIPTION OF VALLICORP CAPITAL STOCK AND INDEBTEDNESS
The authorized capital stock of ValliCorp is 45,000,000 shares, consisting
of 5,000,000 shares of Preferred Stock, par value one cent ($.01) per share,
and 40,000,000 shares of Common Stock, par value one cent ($.01) per share. As
of the Record Date, there were approximately 14,093,317 shares of Common Stock
and no shares of Preferred Stock outstanding. As of such date, an additional
764,740 shares of the authorized Common Stock were reserved for issuance
pursuant to outstanding stock options or available for grant under stock
option plans of ValliCorp.
Although ValliCorp has not issued Preferred Stock to date, ValliCorp is
authorized to issue Preferred Stock without obtaining the approval of the
holders of the ValliCorp Common Stock. The Board of Directors of ValliCorp has
broad authority relating to the issuance of Preferred Stock, including the
authority to set one or more series of Preferred Stock, to fix the number of
shares constituting any such series, and to fix or alter the rights,
preferences, privileges and restrictions granted to and imposed upon any
wholly unissued class or series of Preferred Stock. The issuance of Preferred
Stock may have the effect of delaying, deferring or preventing a change in
control of ValliCorp. Such issuance could also adversely affect the voting
power of holders of ValliCorp Common Stock. The Board of Directors of
ValliCorp has filed with the Delaware Secretary of State a Certificate of
Designations, Powers and Preferences of Series A Junior Participating
Preferred Stock which authorizes the issuance of Series A Preferred Stock. A
discussion of the Series A Preferred Stock of ValliCorp appears below under
"--Series A Preferred Stock Purchase Rights."
COMMON STOCK
Holders of ValliCorp Common Stock are entitled to receive dividends when and
as declared by ValliCorp's Board of Directors, out of funds legally available
therefor, subject to the dividend preference, if any, on preferred stock that
may be outstanding and also subject to the restrictions set forth in the DGCL.
A Delaware corporation may make stock repurchases or redemptions that do not
impair capital, and may pay dividends out of any surplus account or out of net
profits of the current and preceding fiscal years, subject to certain
limitations. Under Delaware law, surplus may be created by a reduction of
capital and may be distributed
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by board action, so long as capital is maintained in an amount not less than
the aggregate par value of the remaining outstanding shares plus the stated
value of any shares not having par value. The ability of a Delaware
corporation to pay dividends on, or to make repurchases or redemptions of, its
shares is dependent on the financial status of the corporation standing alone
and is not determined on a consolidated basis.
Dividends on the ValliCorp Common Stock will be paid when and if the Board
of Directors of ValliCorp declares such dividends. The payment of cash
dividends by ValliCorp will depend on various factors, including its earnings
and capital requirements, and other financial conditions under the terms of
ValliCorp's Convertible Debentures. See "--Debt Agreements." In addition, the
payment of cash dividends by ValliWide is subject to certain statutory and
bank regulatory requirements.
All voting rights with respect to ValliCorp are vested in the holders of
ValliCorp Common Stock. However, if ValliCorp issues Preferred Stock in the
future, such stock may have voting rights, and the voting rights of the
holders of ValliCorp Common Stock may be affected thereby. Each share of
ValliCorp Common Stock is entitled to one vote.
Holders of ValliCorp Common Stock have no preemptive rights, which are
rights to subscribe to a pro rata amount of any shares or other securities
which ValliCorp offers in the future. Therefore, shares of ValliCorp Common
Stock or other securities may be offered in the future to the investing public
or to existing shareholders at the discretion of the Board of Directors.
The holders of ValliCorp Common Stock will be entitled to share equally in
the net assets of ValliCorp in the event of liquidation or dissolution,
subject to the preferential rights, if any, of the holders of senior
securities that may be outstanding. ValliCorp Common Stock is not subject to
assessment, as the ValliCorp Certificate does not confer upon its Board of
Directors the authority to order such assessment. There are no conversion
rights, redemption provisions or sinking fund provisions applicable to shares
of ValliCorp Common Stock.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
Pursuant to the Dividend Reinvestment and Stock Purchase Plan (the
"ValliCorp Reinvestment and Purchase Plan") approved by the ValliCorp Board of
Directors in November 1995, ValliCorp provides eligible shareholders and
employees of ValliCorp and its subsidiaries with a method of investing cash
dividends and optional cash payments in additional shares of ValliCorp Common
Stock without payment of any brokerage commission or service charge. The
ValliCorp Reinvestment and Purchase Plan includes certain dollar limitations
on participation and provides for eligible shareholders to elect dividend
reinvestment on only a part of the shares registered in the name of a
participant (while continuing to receive cash dividends on remaining shares).
The ValliCorp Reinvestment and Purchase Plan will terminate on the Effective
Date. Following the Merger, former ValliCorp shareholders who become
Westamerica shareholders will be eligible to participate in and will receive
information regarding the Westamerica Automatic Dividend Reinvestment Service
and Employee Stock Purchase Plan. See "Description of Westamerica Capital
Stock and Indebtedness--Automatic Dividend Reinvestment Service and Employee
Stock Purchase Plan."
SERIES A PREFERRED STOCK PURCHASE RIGHTS
On March 25, 1996, the Board of Directors of ValliCorp declared a dividend
distribution of one ValliCorp Right for each outstanding share of ValliCorp
Common Stock to shareholders of record at the close of business on April 8,
1996. One ValliCorp Right will also be distributed for each share of ValliCorp
Common Stock issued after April 8, 1996 until the Distribution Date (as
described below). Each ValliCorp Right entitles the registered holder to
purchase from ValliCorp a unit consisting of one one-hundredth of a share (a
"Unit") of Series A Preferred Stock at a price (the "Purchase Price") of
$45.00 per Unit, subject to adjustment. The description and terms of the
ValliCorp Rights are set forth in the ValliCorp Rights Agreement.
Initially, the ValliCorp Rights will be attached to all ValliCorp Common
Stock certificates representing shares then outstanding, and no separate
certificates (the "Rights Certificates") will be distributed. The
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ValliCorp Rights will be separate from the ValliCorp Common Stock and a
Distribution Date will occur upon the earlier of (a) the close of business on
the tenth business day after a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of 10% or more of the
outstanding shares of ValliCorp Common Stock (the "Stock Acquisition Date") or
(b) the close of business on the tenth business day after the latest of (i)
the date of a tender or exchange offer that, if consummated, would result in a
person or group beneficially owning 10% or more of the outstanding shares of
ValliCorp Common Stock, (ii) the date on which all regulatory approvals
required for acquisition of stock pursuant to the tender or exchange offer
referred to in clause (i) have been obtained or waived, or (iii) the date on
which any approval required of the security holders of the person or group
publishing or sending or giving the tender or exchange offer referred to in
clause (i) for the acquisition of stock pursuant to such tender or exchange
offer is obtained or waived.
Until the Distribution Date (a) the ValliCorp Rights will be evidenced by
the ValliCorp Common Stock certificates and will be transferred with and only
with such ValliCorp Common Stock certificates, (b) new ValliCorp Common Stock
certificates issued after April 8, 1996 will contain a notation incorporating
the ValliCorp Rights Agreement by reference, and (c) the surrender for
transfer of any certificate for outstanding ValliCorp Common Stock will also
constitute the transfer of the ValliCorp Rights associated with the ValliCorp
Common Stock represented by such certificate.
The ValliCorp Rights are not exercisable until the Distribution Date and
will expire at the close of business on April 8, 2006, unless earlier redeemed
by ValliCorp as described below.
As soon as practicable after the Distribution Date, Rights Certificates will
be mailed to holders of record of the ValliCorp Common Stock as of the close
of business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the ValliCorp Rights. Except for certain
issuances in connection with outstanding options and convertible securities of
ValliCorp and as otherwise determined by the ValliCorp Board of Directors,
only shares of ValliCorp Common Stock issued prior to the Distribution Date
will be issued with ValliCorp Rights.
In the event that at any time following the Distribution Date, a person
becomes the beneficial owner of 10% or more of the then outstanding shares of
ValliCorp Common Stock (a "Triggering Event"), each holder of a ValliCorp
Right will thereafter have the right to purchase at the time specified in the
ValliCorp Rights Agreement, upon exercise and payment of the Purchase Price,
Units of Series A Preferred Stock having a value equal to two times the
Purchase Price of the ValliCorp Right. For this purpose, a Unit of Series A
Preferred Stock is deemed to have the same value as the market price of
ValliCorp Common Stock at that time. One Unit of Series A Preferred Stock has
rights which are comparable in terms of dividends and voting power and upon
liquidation to one share of ValliCorp Common Stock. The rights and privileges
of the Series A Preferred Stock are set forth in the ValliCorp Rights
Agreement (the "Certificate of Designations, Powers, and Preferences of Series
A Junior Participating Preferred Stock" being an exhibit thereto), and the
foregoing description is qualified by reference thereto. Alternatively, upon
the occurrence of an event described in the first sentence of this paragraph,
the ValliCorp Board of Directors would have the discretion, upon exercise of
ValliCorp Rights, to distribute to the exercising holders thereof, Units of
Series A Preferred Stock (or, in certain circumstances, cash, property, or
other securities of ValliCorp) having a value equal to the difference between
the Purchase Price of the ValliCorp Rights and the value of the consideration
which would be transferred to the holders of the ValliCorp Rights upon such
exercise, in the absence of the exercise by the ValliCorp Board of Directors
of its discretion to invoke the provisions described in this sentence.
Notwithstanding the foregoing, following the occurrence of any of the events
set forth in the first sentence of the preceding paragraph, all ValliCorp
Rights that are, or (under certain circumstances specified in the ValliCorp
Rights Agreement) were, beneficially owned by any Acquiring Person will be
null and void. However, ValliCorp Rights are not exercisable following the
occurrence of either of the events set forth above until such time as the
ValliCorp Rights are no longer redeemable by ValliCorp as set forth below.
For example, at a Purchase Price of $45.00 per ValliCorp Right, each
ValliCorp Right not owned by an Acquiring Person (or by certain related
parties) would, following an Acquiring Person's becoming the beneficial
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owner of 10% or more of the ValliCorp Common Stock, entitle the holder of the
ValliCorp Right to purchase $90.00 worth of Series A Preferred Stock (or other
consideration as noted above) for $45.00. Assuming that the ValliCorp Common
Stock had a per share market value of $15.00 at such time, the holder of each
valid ValliCorp Right would be entitled to purchase six Units of Series A
Preferred Stock, having rights comparable to six shares of ValliCorp Common
Stock, for $45.00. Alternatively, at the discretion of the ValliCorp Board of
Directors, following an event set forth in the first sentence of this
paragraph, without payment of the Purchase Price, each ValliCorp Right would
entitle its holder to receive from ValliCorp three Units of Series A Preferred
Stock (or other consideration as noted above), based on the assumptions
described in this paragraph.
In the event that, at any time following the Stock Acquisition Date, (a)
ValliCorp is acquired in a merger or other business combination transaction in
which ValliCorp is not the surviving corporation, or (b) 50% or more of
ValliCorp's assets or earning power is sold or transferred, each holder of a
ValliCorp Right (except ValliCorp Rights which previously have been voided as
set forth above) shall thereafter have the right to receive, upon exercise,
common stock of the acquiring company having a value equal to two times the
Purchase Price of the ValliCorp Right.
A person or group of affiliated persons will not trigger the separation and
exercisability of the ValliCorp Rights if such person or group becomes the
beneficial owner of 10% or more of the ValliCorp Common Stock solely as a
result of ValliCorp reducing the number of outstanding shares, unless such
person or group subsequently acquires an additional 1% or more of the then
outstanding shares of ValliCorp Common Stock.
In general, ValliCorp may redeem the ValliCorp Rights in whole, but not in
part, at a price of $.001 per ValliCorp Right, at any time until 10 business
days following the Stock Acquisition Date. After the redemption period has
expired, ValliCorp's right of redemption may be reinstated if an Acquiring
Person reduces his beneficial ownership to less then 10% of the outstanding
shares of ValliCorp Common Stock in a transaction or series of transactions
not involving ValliCorp and there are no other Acquiring Persons. Immediately
upon the action of the ValliCorp Board of Directors ordering redemption of the
ValliCorp Rights, the ValliCorp Rights will terminate and the only right of
the holders of ValliCorp Rights will be to receive the $.001 redemption price.
Until a ValliCorp Right is exercised, the holder thereof, as such, will have
no rights as a shareholder of ValliCorp, including, without limitation, the
right to vote or receive dividends. While the distribution of the ValliCorp
Rights will not be taxable to shareholders or to ValliCorp, ValliCorp
shareholders may, depending upon the circumstances, recognize taxable income
in the event that the ValliCorp Rights become exercisable for stock (or other
consideration) of ValliCorp or for common stock of the acquiring company as
set forth above.
Other than those provisions relating to the principal economic terms of the
ValliCorp Rights, any of the provisions of the ValliCorp Rights Agreement may
be amended by the Board of Directors of ValliCorp prior to the Distribution
Date. After the Distribution Date, the provisions of the ValliCorp Rights
Agreement may be amended by such Board in order to cure any ambiguity, to make
changes which do not adversely affect the interests of holders of ValliCorp
Rights (excluding the interests of any Acquiring Person), or to shorten or
lengthen any time period under the ValliCorp Rights Agreement; provided,
however, that no amendment to adjust the time period governing redemption
shall be made when the ValliCorp Rights are not redeemable.
On November 11, 1996, the ValliCorp Rights Agreement was amended to provide
that the Agreements and transactions contemplated thereby will not result in
the grant of any ValliCorp Rights to any person or enable or require the
ValliCorp Rights to be exercised or triggered.
A copy of the ValliCorp Rights Agreement has been filed with the Commission
as an exhibit to a Registration Statement on Form 8-A dated April 4, 1996.
This summary description of the ValliCorp Rights does not purport to be
complete and is qualified in its entirety by reference to the ValliCorp Rights
Agreement, which is incorporated herein by reference.
The ValliCorp Rights have certain anti-takeover effects. The ValliCorp
Rights may cause substantial dilution to a person or group that attempts to
acquire ValliCorp without the approval of the Board of Directors.
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The ValliCorp Rights, however, should not affect any prospective offeror
willing to make an offer for all outstanding shares of ValliCorp Common Stock
at a fair price and otherwise in the best interests of ValliCorp and its
shareholders as determined by the ValliCorp Board of Directors or affect any
prospective offeror willing to negotiate with such Board. The ValliCorp Rights
should not interfere with any merger or other business combination approved by
the ValliCorp Board of Directors since such Board may, at its option, at any
time until 10 days following the Stock Acquisition Date redeem the then
outstanding ValliCorp Rights at the redemption price.
DEBT AGREEMENTS
As of September 30, 1996, ValliCorp had outstanding approximately $136,406
principal amount of its Floating Rate Optional Convertible Subordinated
Debentures ("Optional Debentures") convertible into shares of ValliCorp Common
Stock at $5.50 per share. Interest on the Optional Debentures accrues at the
annual floating rate of prime plus 0.75% and is paid quarterly. The principal
is payable quarterly in installments of $22,734, with the final payment due
April 1, 1998.
As of September 30, 1996, ValliCorp had outstanding approximately $727,500
in principal amount of its Floating Rate Mandatory Convertible Subordinated
Debentures ("Mandatory Debentures" and, together with the Optional Debentures,
the "Convertible Debentures") convertible into shares of ValliCorp Common
Stock at $5.50 per share. Interest on the Mandatory Debentures accrues at the
annual floating rate of prime plus 1.50% and is paid quarterly. To the extent
not converted prior to that date, the principal must be converted into
ValliCorp Common Stock on April 1, 1998, the maturity date.
Both the Optional Debentures and the Mandatory Debentures are subordinate to
the claims of creditors of ValliCorp, except for claims of holders of the
debentures ranking on a parity with or junior to such Debentures. As of
September 30, 1996, the Optional Debentures and the Mandatory Debentures were
convertible into approximately 157,073 shares of ValliCorp Common Stock.
EXPERTS
The consolidated financial statements of Westamerica as of December 31, 1995
and 1994, and for each of the years in the three-year period ended December
31, 1995, have been incorporated by reference herein and in the Registration
Statement in reliance upon the reports of KPMG Peat Marwick LLP, Arthur
Andersen LLP, and Grant Thornton LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firms as experts in accounting and auditing.
The supplemental consolidated financial statements of ValliCorp as of
December 31, 1995 and 1994 and for the years then ended incorporated by
reference from ValliCorp's Registration Statement on Form S-4 (No. 333-06411)
in this Joint Proxy Statement/Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report dated June 17,
1996 (which includes an emphasis paragraph relating to the restatement of the
supplemental consolidated financial statements for poolings of interests
subsequent to the date of the historical financial statements and an
explanatory paragraph referring to a 1994 change in method of accounting for
securities) which is incorporated by reference herein. The consolidated
financial statements of El Capitan Bancshares, Inc. as of December 31, 1995
and 1994 and for each of the three years in the period then ended (combined
with those of ValliCorp in the supplemental consolidated financial statements)
have been audited by Grant Thornton LLP, as stated in their report which is
incorporated by reference herein. Such supplemental consolidated financial
statements of ValliCorp are incorporated by reference in this Joint Proxy
Statement/Prospectus in reliance upon the reports of such firms given upon
their authority as experts in accounting and auditing.
The consolidated financial statements of ValliCorp (before giving effect to
the 1996 poolings of interests with El Capitan Bancshares, Inc. and CoBank
Financial Corporation and the 1994 pooling of interests with Mineral King
Bancorp, Inc.) for the year ended December 31, 1993, have been audited by
Ernst & Young LLP, and the consolidated financial statements of Mineral King
Bancorp, Inc., for the year ended December 31, 1993 have been audited by Price
Waterhouse LLP, as stated in their reports, which are incorporated by
reference
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herein. The consolidated financial statements of CoBank Financial Corporation
for the year ended December 31, 1993 have been audited by Deloitte & Touche
LLP as stated in their report referred to in the preceding paragraph. The
supplemental consolidated financial statements of ValliCorp for such year
included in this Joint Proxy Statement/Prospectus give retroactive effect to
the combination of ValliCorp, Mineral King Bancorp, Inc., El Capitan
Bancshares, Inc., and CoBank Financial Corporation, using the pooling of
interests accounting method. Such combination for the year ended December 31,
1993 was also audited by Deloitte & Touche LLP, as stated in their report
referred to in the preceding paragraph. Such supplemental consolidated
financial statements of ValliCorp for the year ended December 31, 1993 have
been incorporated herein by reference in this Joint Proxy Statement/Prospectus
in reliance upon the reports of such firms, given upon their authority as
experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares of Westamerica Common Stock offered hereby and
certain legal matters in connection with the Merger will be passed upon for
Westamerica by Pillsbury Madison & Sutro LLP, San Francisco, California.
SOLICITATION OF PROXIES
Each of Westamerica and ValliCorp will bear the cost of the solicitation of
proxies from their respective shareholders. Westamerica and ValliCorp have
each retained ChaseMellon Shareholder Services, L.L.C. ("ChaseMellon"), to act
as proxy solicitor with respect to the Special Meetings of Shareholders of
Westamerica and ValliCorp, respectively. The agreement between Westamerica and
ChaseMellon provides for ChaseMellon to receive compensation in the amount of
$5,500, plus reimbursement for reasonable out-of-pocket expenses, for
providing such services. The agreement between ValliCorp and ChaseMellon
provides for ChaseMellon to receive compensation in the amount of $5,500, plus
$500 for a non-objecting shareholder list and reimbursement for reasonable
out-of-pocket expenses.
In addition to solicitation by mail, the directors, officers and employees
of Westamerica and ValliCorp may solicit proxies from their respective
shareholders by telephone or telegram or in person. Such persons will not be
additionally compensated, but will be reimbursed for reasonable out-of-pocket
expenses incurred in connection with such solicitation. Arrangements will also
be made with brokerage firms, nominees, fiduciaries and other custodians, for
the forwarding of solicitation materials to the beneficial owners of shares
held of record by such persons, and Westamerica and ValliCorp will reimburse
such persons for their reasonable out-of-pocket expenses in connection
therewith.
PROPOSALS OF SECURITY HOLDERS
As specified in ValliCorp's Proxy Statement dated April 12, 1996, the
deadline for shareholders to submit proposals for inclusion in the proxy
statement and form of proxy for the 1997 Annual Meeting of Shareholders of
ValliCorp was December 12, 1996. All proposals should be submitted in
accordance with the applicable provisions of the ValliCorp Bylaws. However, if
the Merger is consummated as contemplated by the Agreements, ValliCorp will no
longer exist as a separate legal entity and there will be no 1997 ValliCorp
Annual Meeting of Shareholders.
Proposals of shareholders of Westamerica to be considered for inclusion in
Westamerica's proxy statement for the 1997 Annual Meeting of Shareholders
should have been received at Westamerica's offices, 1108 Fifth Avenue, San
Rafael, California 94901, no later than November 19, 1996.
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ANNEX A
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AGREEMENT AND PLAN OF REORGANIZATION
Among
VALLICORP HOLDINGS, INC.,
VALLIWIDE BANK
And
WESTAMERICA BANCORPORATION
DATED AS OF
NOVEMBER 11, 1996
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TABLE OF CONTENTS
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ARTICLE 1 Definitions........................................................ 1
ARTICLE 2 The Merger......................................................... 7
2.1 Effective Date..................................................... 7
2.2 Effect of the Merger............................................... 7
2.3 Conversion of ValliCorp Common Stock............................... 8
2.4 Fractional Shares.................................................. 9
2.5 Surrender of Shares of ValliCorp Common Stock...................... 9
2.6 No Further Transfers of Shares of ValliCorp Common Stock.......... 10
2.7 Adjustments....................................................... 10
2.8 Treatment of Stock Options........................................ 11
ARTICLE 3 Representations and Warranties of ValliCorp and ValliWide......... 11
3.1 Capital Structure of ValliCorp.................................... 12
3.2 Organization, Standing and Authority of ValliCorp................. 13
3.3 Ownership of Subsidiaries; Capital Structure of Subsidiaries...... 13
3.4 Authorized and Effective Agreement................................ 14
3.5 SEC Documents; Regulatory Filings................................. 15
3.6 Financial Statements; Books and Records........................... 15
3.7 Material Adverse Change........................................... 16
3.8 Absence of Undisclosed Liabilities................................ 16
3.9 Properties........................................................ 17
3.10 Tax Matters....................................................... 20
3.11 Employee Benefit Plans............................................ 21
3.12 Certain Contracts................................................. 23
3.13 Legal Actions and Proceedings..................................... 24
3.14 Compliance with Laws, Regulations and Decrees..................... 24
3.15 Brokers and Finders............................................... 25
3.16 Insurance......................................................... 26
3.17 Pooling of Interests.............................................. 26
3.18 Certificate or Articles, Bylaws, Books and Records................ 26
3.19 Loans and Other Assets............................................ 26
3.20 Restrictions on Investments....................................... 27
3.21 Collective Bargaining and Employment Agreements................... 27
3.22 Compensation of Officers and Employees............................ 28
3.23 Loan Loss Reserves................................................ 28
3.24 Transactions With Affiliates...................................... 28
3.25 Information in Registration Statement............................. 28
3.26 No Brokered Deposits.............................................. 29
3.27 Ownership of WABC Common Stock.................................... 29
3.28 Delaware Takeover Laws Inapplicable............................... 29
3.29 Derivatives Contracts; Structured Notes; Etc...................... 29
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3.30 Fairness Opinion............................................................ 29
ARTICLE 4 Representations and Warranties of WABC...................................... 30
4.1 Capital Structure of WABC................................................... 30
4.2 Organization, Standing and Authority of WABC................................ 30
4.3 Ownership of WABC Subsidiaries; Capital Structure of WABC
Subsidiaries................................................................ 30
4.4 Organization, Standing and Authority of WABC Subsidiaries................... 31
4.5 Authorized and Effective Agreement.......................................... 31
4.6 SEC Documents; Regulatory Filings........................................... 32
4.7 Financial Statements; Books and Records..................................... 32
4.8 Material Adverse Change..................................................... 33
4.9 Absence of Undisclosed Liabilities.......................................... 33
4.10 Legal Proceedings........................................................... 33
4.11 Compliance with Laws........................................................ 34
4.12 Brokers and Finders......................................................... 35
4.13 Information in Registration Statement....................................... 35
4.14 Pooling of Interests........................................................ 35
4.15 Tax Matters................................................................. 35
4.16 Employee Benefit Plans...................................................... 37
4.17 Loans and Other Assets...................................................... 39
4.18 Loan Loss Reserves.......................................................... 40
4.19 Derivatives Contracts; Structured Notes; Etc................................ 40
ARTICLE 5 Covenants................................................................... 41
5.1 Covenants of WABC........................................................... 41
(a) Approval by WABC's Shareholders....................................... 41
(b) Reservation, Issuance and Registration of WABC Common
Stock................................................................. 41
(c) Government Approvals.................................................. 41
(d) Press Releases........................................................ 42
(e) Takeover Proposals.................................................... 42
(f) ValliCorp Employees; Directors and Management;
Indemnification....................................................... 42
(g) Financial Statements.................................................. 45
(h) Stock Exchange Listing................................................ 46
5.2 Covenants of ValliCorp...................................................... 46
(a) Approval by ValliCorp's Shareholders.................................. 46
(b) Shareholder Lists and Other Information............................... 46
(c) Government Approvals.................................................. 46
(d) Financial Statements.................................................. 46
(e) Compensation.......................................................... 47
(f) Conduct of Business in the Ordinary Course............................ 48
(g) Press Releases........................................................ 52
(h) No Merger or Solicitation............................................. 52
(i) ValliCorp 401(k) Plan, Profit Sharing Plan and Benefit Plans.......... 56
</TABLE>
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(j) ValliCorp Accruals and Reserves....................................... 56
(k) Asset Review.......................................................... 58
(l) Changes in Capital Stock; ValliCorp Dividends......................... 59
(m) Indebtedness.......................................................... 60
(n) Execution and Delivery of Stock Option Agreement...................... 60
(o) Noncompetition Agreements............................................. 60
5.3 Covenants of WABC and ValliCorp............................................. 60
(a) Proxy Statement; Registration Statement............................... 60
(b) Commercially Reasonable Efforts....................................... 61
(c) Investigation......................................................... 61
(d) Access to Properties, Books and Records; Confidentiality.............. 62
(e) Accounting Methods.................................................... 62
(f) Affiliates............................................................ 62
(g) Structural Changes to Certain ValliWide Branches...................... 63
(h) FHLB Advances and Security Agreement.................................. 63
(i) Available for Sale Investment Securities Portfolio of ValliCorp....... 64
(j) Retention Bonus Payments.............................................. 64
(k) Notification re: Book Value Test...................................... 64
5.4 Closing..................................................................... 64
(a) Closing Date.......................................................... 64
(b) Delivery of Documents................................................. 64
(c) Filings............................................................... 64
ARTICLE 6 Conditions Precedent........................................................ 65
6.1 Conditions Precedent - WABC and ValliCorp................................... 65
6.2 Conditions Precedent - ValliCorp............................................ 66
6.3 Conditions Precedent - WABC................................................. 67
ARTICLE 7 Termination, Waiver and Amendment........................................... 70
7.1 Termination................................................................. 70
(a) Termination........................................................... 70
(b) Notice................................................................ 72
(c) Breach of Obligations................................................. 72
(d) Termination and Expenses.............................................. 72
7.2 Survival of Representations, Warranties and Covenants....................... 72
7.3 Amendment or Supplement..................................................... 72
ARTICLE 8 Miscellaneous............................................................... 73
8.1 Fees and Expenses........................................................... 73
8.2 Entire Agreement; Severability.............................................. 73
8.3 Binding Agreement........................................................... 74
8.4 No Assignment............................................................... 74
8.5 Notices..................................................................... 74
8.6 Captions.................................................................... 75
8.7 Counterparts................................................................ 75
8.8 Governing Law............................................................... 76
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8.9 Attorneys' Fees................................................... 76
8.10 Specific Performance.............................................. 76
8.11 Waivers........................................................... 76
</TABLE>
Annexes
Annex A - Plan of Merger
Exhibits
Exhibit 5.2(a) Form of Shareholder Agreement
Exhibit 5.2(o)(i) Form of Noncompetition Agreement (Directors)
Exhibit 5.2(o)(ii) Noncompetition Agreement Signatories
Exhibit 5.3(f)(i) Form of Affiliates Agreement (ValliCorp)
Exhibit 5.3(f)(ii) Form of Affiliates Agreement (WABC)
Exhibit 6.2(d) Opinion of Pillsbury Madison & Sutro LLP
Exhibit 6.3(g) Opinion of ValliCorp Counsel
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AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION ("Reorganization Agreement" or
"Agreement") dated as of November 11, 1996, among ValliCorp Holdings, Inc., a
Delaware corporation having its principal executive office at 8405 North Fresno
Street, Fresno, California ("ValliCorp"), ValliWide Bank, a California chartered
bank having its principal executive office at 8401 North Fresno Street, Fresno,
California ("ValliWide"), and Westamerica Bancorporation, a California
corporation having its principal executive office at 1108 Fifth Avenue, San
Rafael, California ("WABC").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of the parties hereto deem it advisable
and in their best interests and the interests of their respective shareholders
that ValliCorp shall be merged with and into WABC ("Merger") pursuant to an
Agreement and Plan of Merger substantially in the form attached hereto as Annex
A ("Plan of Merger");
WHEREAS, the Merger is intended to qualify as a tax-free reorganization
within the meaning of the provisions of Section 368 of the Internal Revenue Code
of 1986, as amended; and
WHEREAS, the parties hereto desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein and intending to be legally bound
hereby, the parties hereto do hereby agree as follows:
ARTICLE 1
Definitions
-----------
1.1 "Acquisition Event" shall have the meaning set forth in Section
5.2(h)(4).
1.2 "Acquisition Proposal" shall have the meaning set forth in Section
5.2(h)(5).
1.3 "Affiliates" shall mean, with respect to any Person, any Person that,
directly or indirectly, controls or is controlled by or is under common control
with such Person.
1.4 "Amended Rights Agreement" shall mean that certain Amended and
Restated Rights Agreement between WABC and Chemical Trust Company of California,
as Rights Agent, dated as of March 23, 1995.
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1.5 "Applications" shall have the meaning set forth in Section 3.25.
1.6 "Associates" means associates as defined in Rule 405 under the
Securities Act.
1.7 "Average Price" means the average of the closing prices of WABC Common
Stock as quoted on the Nasdaq for the 20 consecutive trading days immediately
preceding five trading days prior to the Effective Date, rounded to four decimal
places, whether or not trades occurred on those days (subject to adjustment as
provided below). The term "trading day" shall mean a day on which trading
generally takes place on the Nasdaq and on which trading in WABC Common Stock
has not been halted or suspended. In the event WABC pays, declares or otherwise
effects a stock split, reverse stock split, reclassification or stock dividend
or distribution with respect to the WABC Common Stock between the date of this
Agreement and the Effective Time, appropriate adjustments will be made to the
Average Price of WABC Common Stock.
1.8 "Bank Holding Company Act" shall mean the Bank Holding Company Act of
1956, as amended.
1.9 "Business Combination" shall have the meaning set forth in Section
5.2(h)(5).
1.10 "Business Day" shall mean a day on which commercial banks are open
for business in California and which is not a Saturday or Sunday.
1.11 "Call Reports" shall have the meaning set forth in Section 3.5.
1.12 "Capital Transactions" shall have the meaning set forth in Section
6.3(l).
1.13 "Claim" shall mean any and all actions, causes of action, claims,
costs, counterclaims, cross-claims, damages, debts, demands, expenses,
liabilities, losses, obligations, proceedings and suits of every kind and
nature, liquidated or unliquidated, fixed or contingent, in law, equity or
otherwise, and whether presently known or unknown.
1.14 "Closing" shall have the meaning set forth in Section 5.4(a).
1.15 "Closing Date" shall mean the date specified pursuant to Section
5.4(a) hereof as the date on which the parties hereto shall close the
transactions contemplated herein.
1.16 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.17 "Commission" or "SEC" shall mean the Securities and Exchange
Commission.
1.18 "Convertible Debentures" shall have the meaning set forth in Section
3.1(a).
1.19 "Covered Parties" shall have the meaning set forth in Section
5.1(f)(3).
1.20 "Derivatives Contract" shall have the meaning set forth in Section
3.29.
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1.21 "Determination Date" shall have the meaning set forth in Section
7.1(a)(7).
1.22 "Determination Letters" shall have meaning set forth in Section
3.11(j).
1.23 "DGCL" shall mean the Delaware General Corporation Law.
1.24 "DPC Shares" shall have the meaning set forth in Section 2.3(b)(2).
1.25 "Effective Date" shall have the meaning set forth in Section 2.1.
1.26 "Effective Time" shall have the meaning set forth in Section 2.1.
1.27 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.28 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.29 "Exchange Agent" shall have the meaning set forth in Section 2.5(a).
1.30 "Exchange Ratio" shall have the meaning set forth in Section
2.3(a)(i).
1.31 "FDIA" shall mean the Federal Deposit Insurance Act.
1.32 "FDIC" shall mean the Federal Deposit Insurance Corporation.
1.33 "Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System.
1.34 "GAAP" shall have the meaning set forth in Section 3.6.
1.35 "GCL" shall have the meaning set forth in Section 2.1.
1.36 "Government Approvals" shall have the meaning set forth in Section
5.1(c).
1.37 "Governmental Entity" shall have the meaning set forth in Section
3.4(d).
1.38 "Independent Appraiser" or "Independent Loan Reviewer" shall have the
meaning set forth in Section 5.2(k).
1.39 "IRS" shall mean the Internal Revenue Service.
1.40 "Letter Agreement" shall have the meaning set forth in Section
5.3(d).
1.41 "Material Adverse Effect" shall mean, with respect to ValliCorp or
WABC, as the case may be, a material adverse effect on the financial condition,
assets, business or results of operations of such party and its subsidiaries
taken as a whole, or on the ability of
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such party to consummate the transactions contemplated hereby. For purposes of
this Agreement, the parties agree that if any action is or actions are taken by
ValliCorp or ValliWide solely at WABC's request or by WABC solely at ValliCorp's
request (or with the consent of the other party or pursuant to this Agreement)
which results in a condition or occurrence, or result in conditions or
occurrences, which would otherwise constitute a Material Adverse Effect (but for
this sentence), said action(s), condition(s) or occurrence(s) shall not be
considered in determining whether a Material Adverse Effect has occurred, unless
said action(s), condition(s) or occurrence(s) had been planned by the party
impacted thereby prior to the date hereof or it was or they were required by
applicable law, regulation, GAAP, RAP or order of a regulatory agency.
1.42 "Merger" shall have the meaning set forth in the Recitals.
1.43 "Minimum Price" shall have the meaning set forth in Section
7.1(a)(7).
1.44 "Nonperforming Assets" shall mean all Nonperforming Loans and OREO.
1.45 "Nonperforming Loans" shall mean all loans, leases, other extensions
of credit or commitments of ValliCorp and the ValliCorp Subsidiaries finally
classified by ValliCorp, the ValliCorp Subsidiaries, any bank regulatory agency,
or ValliCorp's independent auditors as "Doubtful," "Loss" or words of similar
import in the case of loans (or that would have been so classified in the case
of other interest-bearing assets which would be subject to a provision for loan
and lease losses) or any loans or extensions of credit which are on nonaccrual
or accruing and 90 days or more past due in the payment of principal or
interest.
1.46 "OCC" shall have the meaning set forth in Section 5.1(g)(3).
1.47 "Ordinary Course of Business" shall have the meaning set forth in
Section 5.2(f)(1).
1.48 "OREO" shall have the meaning set forth in Section 3.19(a).
1.49 "Person" or "person" shall mean any individual, corporation,
association, partnership, limited liability company, group (as defined in
section 13(d)(3) of the Exchange Act), joint venture, trust or unincorporated
organization, or a government or any agency or political subdivision thereof.
1.50 "Plan of Merger" shall have the meaning set forth in the Recitals.
1.51 "Previously Disclosed" shall mean disclosed in a letter from the
party making such disclosure and delivered to the other party. The disclosure
of any matter by one party to the other for any purpose in the aforesaid letter
shall be deemed to be disclosure for all purposes thereunder; provided that each
party shall attempt to disclose matters therein wherever relevant. The
inclusion of any matter in information Previously Disclosed shall not be deemed
an admission or otherwise to imply that any such matter is material for purposes
of this Agreement.
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1.52 "Proxy Statement" shall mean the joint proxy statement/prospectus (or
similar documents), together with any supplements thereto, sent to the
shareholders of ValliCorp and WABC to solicit their respective approvals of the
Agreement, the Plan of Merger and any other matters properly before said
shareholders.
1.53 "RAP" shall have the meaning set forth in Section 3.7.
1.54 "Registration Statement" shall mean the registration statement with
respect to the WABC Common Stock to be issued in connection with the Merger as
declared effective by the Commission under the Securities Act.
1.55 "Rights" shall mean warrants, options, rights, convertible securities
and other arrangements or commitments which obligate an entity or its
subsidiaries to issue, sell, pledge, assign or otherwise encumber, or to
purchase, redeem or otherwise acquire, any of its or their capital stock, and
stock appreciation rights, performance units and other similar stock-based
rights whether they obligate the issuer thereof to issue stock or other
securities or to pay cash.
1.56 "SEC Documents" shall mean all reports and registration statements
filed by a party hereto pursuant to the Securities Laws.
1.57 "Securities Act" shall mean the Securities Act of 1933, as amended.
1.58 "Securities Laws" shall mean the Securities Act; the Exchange Act;
the Investment Company Act of 1940, as amended; the Investment Advisers Act of
1940, as amended; the Trust Indenture Act of 1939, as amended; the rules and
regulations of the Commission promulgated thereunder; and applicable state
securities laws, rules and regulations.
1.59 "Standstill Termination Date" shall have the meaning set forth in
Section 5.2(h)(5).
1.60 "Stock Option Agreement" shall mean the Stock Option Agreement dated
of even date herewith granted by ValliCorp to WABC to induce WABC to enter into
this Agreement.
1.61 "Superintendent" shall mean the California Superintendent of Banks.
1.62 "Superior Proposal" shall have the meaning set forth in Section
5.2(h)(2).
1.63 "Surviving Corporation" shall have the meaning set forth in Section
2.2.
1.64 "Takeover Proposal" shall have the meaning set forth in Section
5.2(h)(1).
1.65 "Termination Fee" shall have the meaning set forth in Section
5.2(h)(4).
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1.66 "Trust Account Shares" shall have the meaning set forth in Section
2.3(b)(2).
1.67 "ValliCorp Certificate" shall have the meaning set forth in Section
2.3(b)(1).
1.68 "ValliCorp Common Stock" shall have the meaning set forth in Section
3.1(a).
1.69 "ValliCorp Financial Statements" shall mean (i) the consolidated
balance sheets of ValliCorp as of September 30, 1996 and as of December 31,
1995, 1994, 1993, 1992 and 1991 and the related consolidated statements of
income, cash flows and changes in shareholders' equity (including related notes,
if any) for the period ended September 30, 1996 and each of the five years ended
December 31, 1995, 1994, 1993, 1992 and 1991 as filed by ValliCorp in SEC
Documents and (ii) the consolidated balance sheets of ValliCorp and related
consolidated statements of income, cash flows and changes in shareholders'
equity (including related notes, if any) as filed by ValliCorp in SEC Documents
with respect to periods ended subsequent to September 30, 1996.
1.70 "ValliCorp Plans" shall have the meaning set forth in Section
3.11(j).
1.71 "ValliCorp Preferred Stock" shall have the meaning set forth in
Section 3.1(a).
1.72 "ValliCorp Rights Agreement" shall have the meaning set forth in
Section 3.1(a).
1.73 "ValliCorp Subsidiary" or "ValliCorp Subsidiaries" shall have the
meaning set forth in Section 3.3.
1.74 "ValliCorp Trusts" shall have the meaning set forth in Section
3.11(j).
1.75 "Violation" shall have the meaning set forth in Section 3.4(c).
1.76 "Voting Equity" shall have the meaning set forth in Sections
5.2(h)(5).
1.77 "Voting Securities" shall have the meaning set forth in Section
5.2(h)(5).
1.78 "WABC Common Stock" shall mean the common stock, no par value, of
WABC.
1.79 "WABC Financial Statements" shall mean (i) the consolidated balance
sheets of WABC as of September 30, 1996 and as of December 31, 1995, 1994, 1993,
1992 and 1991 and the related consolidated statements of income, cash flows and
changes in shareholders' equity (including related notes, if any) for the
periods ended September 30, 1996 and each of the five years ended December 31,
1995, 1994, 1993, 1992 and 1991 as filed by WABC in SEC Documents and (ii) the
consolidated balance sheets of WABC and related consolidated statements of
income, cash flows and changes in shareholders' equity (including related notes,
if any) as filed by WABC in SEC Documents with respect to periods ended
subsequent to September 30, 1996.
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1.80 "WABC Plans" shall have the meaning set forth in Section 4.16(j).
1.81 "WABC Rights" shall have the meaning set forth in Section 2.5(a).
1.82 "WABC Subsidiary" or "WABC Subsidiaries" shall have the meaning set
forth in Section 4.3.
1.83 "WABC Trusts" shall have the meaning set forth in Section 4.16(j).
ARTICLE 2
The Merger
----------
2.1 Effective Date. Subject to the terms and conditions of this
--------------
Agreement, the Merger shall become effective upon the filing with the California
Secretary of State and the Delaware Secretary of State of a duly executed Plan
of Merger and officers' certificates prescribed by section 1103 of the
California General Corporation Law (the "GCL") and/or other documents as
required by the DGCL, or at such time thereafter as is provided by mutual
agreement in the Plan of Merger (the "Effective Time"). The date on which the
Effective Time occurs as specified in the Plan of Merger shall be referred to
herein as the "Effective Date."
2.2 Effect of the Merger. Subject to the terms and conditions of this
--------------------
Agreement and the Plan of Merger, at the Effective Time, ValliCorp shall be
merged with and into WABC and WABC shall be the surviving corporation (the
"Surviving Corporation") in the Merger. All assets, rights, goodwill,
privileges, immunities, powers, franchises and interests of ValliCorp and WABC
in and to every type of property (real, personal and mixed) and choses in
action, as they exist as of the Effective Time, including appointments,
designations and nominations and all other rights and interests as trustee,
executor, administrator, registrar of stocks and bonds, guardian of estate,
assignee, receiver and in every other fiduciary capacity, shall pass and be
transferred to and vest in the Surviving Corporation by virtue of the Merger at
the Effective Time without any deed, conveyance or other transfer; the separate
existence of ValliCorp shall cease and the corporate existence of WABC as the
Surviving Corporation shall continue unaffected and unimpaired by the Merger;
and the Surviving Corporation shall be deemed to be the same entity as each of
ValliCorp and WABC and shall be subject to all of their duties and liabilities
of every kind and description. The Surviving Corporation shall be responsible
and liable for all the liabilities and obligations of each of WABC and
ValliCorp; and any claim existing or action or proceeding pending by or against
WABC or ValliCorp may be prosecuted as if the Merger had not taken place, or the
Surviving Corporation may be substituted in its place. Neither the rights of
creditors nor any liens upon the property of either WABC or ValliCorp shall be
impaired by reason of the Merger.
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2.3 Conversion of ValliCorp Common Stock. At the Effective Time, subject
------------------------------------
to Sections 2.3(c) and 2.4 hereof, by virtue of the Merger and without any
action on the part of WABC, ValliCorp or the holder of any ValliCorp Common
Stock:
(a) Each share of ValliCorp Common Stock issued and outstanding prior to
the Effective Time (other than shares of ValliCorp Common Stock held (x) in
ValliCorp's treasury or (y) directly or indirectly by WABC or ValliCorp or any
of their respective Subsidiaries (except for Trust Account Shares and DPC
Shares) shall be converted into the right to receive per share consideration in
the amount calculated as set forth hereinbelow in the form of WABC Common Stock,
unless said Exchange Ratio is further adjusted pursuant to Section 6.3(l) or
7.1(a)(7), as follows:
(i) If the Average Price of WABC Common Stock is not less than $48.69
and is not more than $53.81, the Exchange Ratio shall be determined by
dividing $21.00 by the Average Price (the "Exchange Ratio");
(ii) Subject to Section 7.1(a)(7), if the Average Price is less than
$48.69, the Exchange Ratio shall be .4313; and
(iii) If the Average Price is greater than $53.81, the Exchange Ratio
shall be adjusted, as follows:
Exchange Ratio = $21.00 - $21.00 x 40% + $21.00
-------- ------------- ----------
$53.81 Average Price
Average Price
(b)(1) All of the shares of ValliCorp Common Stock converted into WABC
Common Stock pursuant to this Article 2 shall no longer be outstanding and shall
automatically be canceled and shall cease to exist as of the Effective Time, and
each certificate (each a "ValliCorp Certificate") previously representing any
such shares of ValliCorp Common Stock shall thereafter represent the right to
receive (i) a certificate representing the number of whole shares of WABC Common
Stock and (ii) cash in lieu of fractional shares into which the shares of
ValliCorp Common Stock represented by such ValliCorp Certificate have been
converted pursuant to this Section 2.3 and Section 2.4 hereof.
(b)(2) At the Effective Time, all shares of ValliCorp Common Stock that
are owned by ValliCorp as treasury stock and all shares of ValliCorp Common
Stock that are owned directly or indirectly by WABC or ValliCorp or any of their
respective Subsidiaries (other than shares of ValliCorp Common Stock held
directly or indirectly in trust accounts, managed accounts and the like or
otherwise held in a fiduciary capacity that are beneficially owned by third
parties (any such shares, and shares of WABC Common Stock that are similarly
held, whether held directly or indirectly by WABC or ValliCorp, as the case may
be, being referred to herein as "Trust Account Shares") and other than any
shares of ValliCorp Common Stock held by WABC or ValliCorp or any of their
respective Subsidiaries in respect of a debt previously contracted (any such
shares of ValliCorp Common Stock, and shares of WABC Common Stock that are
similarly held, whether held
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<PAGE>
directly or indirectly by WABC or ValliCorp or any of their respective
Subsidiaries, being referred to herein as "DPC Shares")) shall be canceled and
shall cease to exist and no stock of WABC or other consideration shall be
delivered in exchange therefor. All shares of WABC Common Stock that are owned
by ValliCorp or any of its Subsidiaries (other than Trust Account Shares and DPC
Shares) shall become authorized but unissued stock of WABC. Subject to Section
2.3(c), each share of WABC Common Stock issued and outstanding immediately prior
to the Effective Time shall remain an issued and outstanding share of common
stock of the Surviving Corporation and shall not be converted or otherwise
affected by the Merger.
(c) From and after the Effective Date, the holders of ValliCorp
Certificates formerly representing shares of ValliCorp Common Stock shall cease
to have any rights with respect thereto other than any dissenters' rights they
have perfected pursuant to Chapter 262 of the DGCL. All shareholders of WABC
Common Stock shall be entitled to dissenters' rights under the GCL to the extent
set forth in Chapter 13 of the GCL.
2.4 Fractional Shares. Notwithstanding any other provision hereof, no
-----------------
fractional shares of WABC Common Stock shall be issued to holders of shares of
ValliCorp Common Stock. In lieu thereof, each such holder entitled to a
fraction of a share of WABC Common Stock shall receive, at the time of surrender
of the ValliCorp Certificates, an amount in cash equal to the Average Price,
multiplied by the fraction of a share of WABC Common Stock to which such holder
otherwise would be entitled. No such holder shall be entitled to dividends,
voting rights, interest on the value of, or any other rights in respect of a
fractional share.
2.5 Surrender of Shares of ValliCorp Common Stock.
---------------------------------------------
(a) Prior to the Effective Date, WABC shall appoint Chemical Trust
Company of California or its successor, or any other bank or trust company
(having capital of at least $50 million) mutually acceptable to ValliCorp and
WABC, as exchange agent (the "Exchange Agent") for the purpose of exchanging
certificates representing the WABC Common Stock, and at and after the Effective
Date, WABC shall issue and deliver to the Exchange Agent certificates
representing the shares of WABC Common Stock, as shall be required to be
delivered to holders of shares of ValliCorp Common Stock pursuant to Section 2.3
of this Agreement. As soon as practicable after the Effective Date, each holder
of shares of ValliCorp Common Stock converted pursuant to Section 2.3, upon
surrender to the Exchange Agent of one or more ValliCorp Certificates for
cancellation, will be entitled to receive a certificate representing the number
of shares of WABC Common Stock determined in accordance with Section 2.3 and a
payment in cash with respect to fractional shares, if any, determined in
accordance with Section 2.4. All references in this Agreement and the Plan of
Merger to WABC Common Stock shall be deemed to include the corresponding rights
("WABC Rights") to purchase shares of WABC Common Stock pursuant to the Amended
Rights Agreement, except where the context otherwise requires, and each
certificate representing shares of WABC Common Stock will bear a notation
incorporating the Amended Rights Agreement by reference. Certificates issued for
shares of WABC Common Stock shall be deemed to be certificates for the WABC
Rights.
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<PAGE>
(b) No dividends or other distributions of any kind which are declared
payable to shareholders of record of the shares of WABC Common Stock after the
Effective Date will be paid to persons entitled to receive such certificates for
shares of WABC Common Stock until such persons surrender their ValliCorp
Certificates. Upon surrender of such ValliCorp Certificate, the holder thereof
shall be paid, without interest, any dividends or other distributions with
respect to the shares of WABC Common Stock as to which the record date and
payment date occurred on or after the Effective Date and on or before the date
of surrender.
(c) If any certificate for shares of WABC Common Stock is to be issued
in a name other than that in which the ValliCorp Certificate surrendered in
exchange therefor is registered, it shall be a condition of such exchange that
the person requesting such exchange shall pay to the Exchange Agent any transfer
costs, taxes or other expenses required by reason of the issuance of
certificates for such shares of WABC Common Stock in a name other than the
registered holder of the ValliCorp Certificate surrendered, or such persons
shall establish to the satisfaction of WABC and the Exchange Agent that such
costs, taxes or other expenses have been paid or are not applicable.
(d) All dividends or distributions, and any cash to be paid in lieu of
fractional shares pursuant to Section 2.4, if held by the Exchange Agent for
payment or delivery to the holders of unsurrendered ValliCorp Certificates
representing shares of ValliCorp Common Stock and unclaimed at the end of one
year from the Effective Date, shall (together with any interest earned thereon)
at such time be paid or redelivered by the Exchange Agent to WABC, and after
such time any holder of a ValliCorp Certificate who has not surrendered such
ValliCorp Certificate to the Exchange Agent shall, subject to applicable law,
look as a general creditor only to WABC for payment or delivery of such
dividends or distributions or cash, as the case may be.
2.6 No Further Transfers of Shares of ValliCorp Common Stock. At the
--------------------------------------------------------
Effective Date, the stock transfer books of ValliCorp shall be closed and no
transfer of shares of ValliCorp Common Stock theretofore outstanding shall
thereafter be made.
2.7 Adjustments. If, between the date of this Agreement and the
-----------
Effective Date, the outstanding shares of WABC Common Stock shall have been
changed into a different number of shares or a different class by reason of any
reclassification, recapitalization, split up, combination, exchange of shares or
readjustment, or a stock dividend thereon shall be declared with a record date
within such period, the number of shares of WABC Common Stock to be issued and
delivered in the Merger in exchange for each outstanding share of ValliCorp
Common Stock shall be correspondingly adjusted.
2.8 Treatment of Stock Options.
--------------------------
(a) On the Effective Date, the obligations under any stock option plans
of ValliCorp shall be assumed by WABC. On the Effective Date, options to
purchase shares of ValliCorp Common Stock issued pursuant to ValliCorp's stock
option plans or stock option plans of companies acquired by ValliCorp that are
outstanding shall be converted, without
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<PAGE>
any action on the part of the holders thereof, into options to acquire, upon
payment of the adjusted exercise price (which shall equal the exercise price per
share for the options immediately prior to the Merger, divided by the Exchange
Ratio), the number of shares of WABC Common Stock the option holder would have
received pursuant to the Merger if he or she had exercised all his or her
options immediately prior thereto. WABC acknowledges that the transactions
contemplated hereby will accelerate the vesting of all stock options outstanding
under the Key Employees Stock Option Plan and the Directors Stock Option Plan,
and WABC agrees that all such options under the Key Employees Stock Option Plan
and Directors Stock Option Plan shall be immediately exercisable in full from
and after the Effective Date. Except as noted above each ValliCorp stock option
shall otherwise continue on terms and conditions that are consistent with those
that were applicable on the Effective Date.
(b) The ValliCorp Directors Stock Option Plan shall be deemed to be
amended by ValliCorp to the effect that a non-officer Director's service does
not terminate as long as he remains a Director or advisory Director of ValliWide
or its successors on and after the Effective Date. WABC covenants that it will,
for purposes of the Directors Stock Option Plan, at or immediately following the
Effective Date, offer each current non-officer Director of ValliCorp (who does
not become a director of WABC) a position as Director or advisory Director of
ValliWide and that should ValliWide be merged into any other subsidiary of WABC
each current non-officer Director shall be offered a position, for purposes of
the Directors Stock Option Plan, as an advisory Director of the successor in
interest to ValliWide.
(c) Subject to the mutual intent of the parties that the Merger will be
accounted for under the pooling-of-interests method, ValliCorp shall otherwise
amend its option plans and obtain any required shareholder approval of such
option plan amendments and shall amend, as necessary, any and all option
agreements (including obtaining any required participant consents) prior to the
Effective Date to make them consistent with this Section 2.8.
ARTICLE 3
Representations and Warranties of ValliCorp and ValliWide
---------------------------------------------------------
ValliCorp, with respect to ValliCorp, and ValliWide, with respect to
ValliWide, hereby represent and warrant to WABC as follows, except, in the case
of each representation and warranty contained in this Article 3, as Previously
Disclosed:
3.1 Capital Structure of ValliCorp.
------------------------------
(a) The authorized capital stock of ValliCorp consists of (i)
40,000,000 shares of common stock, $.01 par value ("ValliCorp Common Stock"),
13,984,039 shares of which, as of the date hereof, are issued and outstanding
and no shares are held in treasury, and (ii) 5,000,000 shares of preferred
stock, par value $.01 per share ("ValliCorp Preferred Stock"), none of which are
issued and outstanding. No other equity securities of ValliCorp
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<PAGE>
have been issued or are outstanding. As of the date hereof, no shares of
ValliCorp Preferred Stock or ValliCorp Common Stock were reserved for issuance,
except that (i) 886,689 shares of ValliCorp Common Stock were reserved for
issuance upon the exercise of stock options, at a weighted average exercise
price of $12.2642 per share, all of which have been granted pursuant to
ValliCorp's stock option plans or stock option plans of companies acquired by
ValliCorp (as Previously Disclosed), (ii) 250,000 shares of ValliCorp Preferred
Stock were reserved for issuance upon exercise of rights pursuant to the Rights
Agreement dated as of March 25, 1996, between ValliCorp and First Interstate
Bank of California, as amended (the "ValliCorp Rights Agreement"), and (iii)
152,939 shares of ValliCorp Common Stock were reserved for issuance pursuant to
ValliCorp's Mandatory Convertible Subordinated Debentures due 1998 and Optional
Convertible Subordinated Debentures due 1998 (collectively, "Convertible
Debentures"). Otherwise, there are no outstanding (i) options, agreements,
calls or commitments of any character which would obligate ValliCorp or the
ValliCorp Subsidiaries to issue, sell, pledge, assign or otherwise encumber or
dispose of, or to purchase, redeem or otherwise acquire, any ValliCorp Common
Stock or any other equity security of ValliCorp or the ValliCorp Subsidiaries;
or (ii) warrants or options relating to, rights to acquire, or debt or equity
securities convertible into, shares of ValliCorp Common Stock or any other
equity security of ValliCorp or the ValliCorp Subsidiaries. The outstanding
common stock of ValliCorp has been duly and validly registered with the
Commission pursuant to the Exchange Act, to the extent required thereunder. As
of the date hereof, neither ValliCorp nor the ValliCorp Subsidiaries have any
bonds, debentures, notes or other indebtedness the holders of which have the
right to vote (or which are convertible into or exercisable for securities
having the right to vote) with the shareholders of ValliCorp (or the ValliCorp
Subsidiaries) on any matter or to approve the transactions contemplated hereby,
other than the Convertible Debentures. All outstanding shares of ValliCorp
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable. Said stock has been issued in compliance with all applicable
Securities Laws. The stock options described in clause (i) of the fourth
sentence of this Section 3.1(a) were granted and, upon issuance in accordance
with the terms of the outstanding options, such shares shall be issued, in
compliance with all applicable laws. ValliCorp does not have and is not bound
by any Rights which are authorized, issued or outstanding with respect to the
capital stock of ValliCorp or any ValliCorp Subsidiary and except for rights
issued pursuant to the ValliCorp Rights Agreement. None of the shares of
ValliCorp's capital stock has been issued in violation of the preemptive rights
of any person. ValliCorp has taken all action necessary so that the approval,
execution and delivery of this Reorganization Agreement, the Stock Option
Agreement and the Plan of Merger and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the acquisition
of shares of ValliCorp Common Stock by WABC pursuant to the Stock Option
Agreement, do not and will not result in the grant of any Rights to any person
under the ValliCorp Rights Agreement or enable, require or otherwise cause the
Rights thereunder to be exercised, distributed or triggered and in no event will
WABC become an Acquiring Person within the meaning of the ValliCorp Rights
Agreement.
(b) The authorized capital stock of ValliWide consists of 6,000,000
shares of common stock, $2.00 par value, 50 shares of which, as of the date
hereof, are issued and
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<PAGE>
outstanding. No other equity securities of ValliWide have been issued or are
outstanding. No shares of equity securities of ValliWide were reserved for
issuance. All outstanding shares of common stock of ValliWide have been duly
authorized and validly issued and are fully paid and nonassessable (except
pursuant to the California Financial Code). Said stock has been issued in
compliance with all applicable Securities Laws.
3.2 Organization, Standing and Authority of ValliCorp. Each of
-------------------------------------------------
ValliCorp and its Subsidiaries is a bank or corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization. Through its banking subsidiary, ValliWide,
ValliCorp holds current valid licenses to engage in the commercial banking
business in California at its banking offices in California and, along with
ValliWide, ValliCorp is in material compliance with all agreements,
understandings or orders of the Federal Reserve Board, the FDIC, the
Superintendent or any other regulatory authority having jurisdiction over its or
their business or any of its or their assets or properties. Neither the scope of
the business of ValliCorp or its Subsidiaries nor the location of their
properties requires any of them to be licensed to do business in any
jurisdiction other than the State of California. The deposits of ValliWide are
insured by the FDIC to the maximum extent permitted by applicable law and
regulation. ValliCorp is a bank holding company registered under the Bank
Holding Company Act. ValliWide is a member of the Federal Reserve System.
3.3 Ownership of Subsidiaries; Capital Structure of Subsidiaries.
------------------------------------------------------------
Except as listed below, neither ValliCorp nor ValliWide owns, directly or
indirectly, a five percent or greater equity interest or interest convertible
into a five percent or greater equity interest in any corporation, bank or other
Person (collectively, the "ValliCorp Subsidiaries" and, individually, a
"ValliCorp Subsidiary").
Name of Subsidiary Ownership
------------------ ---------
ValliWide Bank Wholly Owned
Commerce Securities Corporation Wholly Owned by ValliWide
California Valley Securities Corporation Wholly Owned by ValliWide
The outstanding shares of capital stock of each ValliCorp Subsidiary
have been duly authorized and validly issued and are fully paid and, except for
ValliWide, nonassessable, and all such shares are directly or indirectly owned
by ValliCorp free and clear of all liens, claims and encumbrances. No ValliCorp
Subsidiary has or is bound by any Rights which are authorized, issued or
outstanding with respect to the capital stock of any ValliCorp Subsidiary, and
there are no agreements, understandings or commitments relating to the right of
ValliCorp to vote or to dispose of said shares. None of the shares of capital
stock of any ValliCorp Subsidiary has been issued in violation of the preemptive
rights of any person.
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<PAGE>
3.4 Authorized and Effective Agreement.
----------------------------------
(a) Each of ValliCorp and ValliWide, as applicable, has all requisite
corporate power and authority to enter into this Agreement, the Plan of Merger
and the Stock Option Agreement and, subject to the adoption of this Agreement
and the Plan of Merger by the holders of ValliCorp Common Stock, to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement, the Plan of Merger and the Stock Option Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action in respect thereof on
the part of ValliCorp or ValliWide, as applicable (including without limitation
the approval of this Agreement by the unanimous vote of all members of
ValliCorp's Board of Directors, which approval includes a resolution directing,
subject to Sections 5.2(a) and 5.2(h) hereof, that the Proxy Statement contain a
recommendation by the Board of Directors that the shareholders of ValliCorp
approve this Agreement and the transactions contemplated hereby), subject in the
case of this Agreement only to the provisions of Section 5.2(h) and the
affirmative vote of the holders of a majority of the outstanding shares of
ValliCorp Common Stock as required under the DGCL and ValliCorp's Restated
Certificate of Incorporation and Bylaws. The Board of Directors of ValliCorp
has directed that this Agreement and the Plan of Merger be submitted to
ValliCorp's shareholders for approval at a special meeting to be held as soon as
practicable. This Agreement has been duly executed and delivered by ValliCorp
and ValliWide, and the Stock Option Agreement has been duly executed and
delivered by ValliCorp.
(b) Assuming the accuracy of the representation contained in Section
4.5(b) hereof, this Agreement, the Plan of Merger and the Stock Option Agreement
constitute legal, valid and binding obligations of ValliCorp and ValliWide, as
applicable, enforceable against ValliCorp and ValliWide, as applicable, in
accordance with their respective terms, subject, as to enforceability, to
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(c) Neither the execution and delivery of this Agreement, the Plan of
Merger or the Stock Option Agreement, nor consummation of the transactions
contemplated hereby or thereby, nor compliance by ValliCorp and ValliWide, as
applicable, with any of the provisions hereof or thereof shall (i) conflict with
or result in any violation of, or default (with or without notice or lapse of
time, or both) under or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or the
creation of a lien, pledge, security interest, charge or other encumbrance on
assets (any such conflict, violation, default, right of termination,
cancellation or acceleration, loss or creation, a "Violation") pursuant to any
provision of the articles or certificate of incorporation or association,
charter or by-laws of ValliCorp or any ValliCorp Subsidiary, (ii) cause a
Violation of any loan or credit agreement, note, bond, mortgage, indenture,
license, lease or other agreement, instrument or obligation, or (iii) assuming
the consents which are Previously Disclosed are duly obtained, result in any
Violation of any order, writ, injunction, decree, statute, law, ordinance, rule
or regulation applicable to ValliCorp or any ValliCorp Subsidiary.
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<PAGE>
(d) No consent, approval, order or authorization of, or declaration,
notice, filing or registration with, any court, administrative agency or
commission or other governmental or regulatory authority, or instrumentality,
foreign or domestic (each, a "Governmental Entity"), is required by or with
respect to ValliCorp or any ValliCorp Subsidiary in connection with the
execution, delivery and performance of this Agreement, the Plan of Merger and
the Stock Option Agreement or the consummation by ValliCorp and ValliWide, as
applicable, of the transactions contemplated hereby or thereby.
3.5 SEC Documents; Regulatory Filings. ValliCorp has filed all SEC
---------------------------------
Documents and other documents required by the Securities Laws and such SEC
Documents and other documents complied, as of their respective dates, in all
material respects with the Securities Laws. As of their respective dates, none
of such SEC Documents and other documents contained, as of the date hereof, or
will contain, as to documents filed after the date hereof, any untrue statement
of material fact or omitted or will omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made or will be made, not misleading;
provided, however, that information as of a later date shall be deemed to modify
- -------- -------
information as of any earlier date. ValliCorp and each of the ValliCorp
Subsidiaries has filed all material documents and reports relating to ValliCorp
and the ValliCorp Subsidiaries required to be filed by them with the SEC,
Federal Reserve Board, FDIC, Superintendent or any other governmental authority
having jurisdiction over their businesses or any of their assets or properties,
and such documents and reports conformed in all material respects with the
applicable statutes, regulations and instructions (including regulatory
accounting practices) in existence as of the date of filing of such documents
and reports. ValliWide has delivered to WABC true and complete copies of its
most recent annual and quarterly Consolidated Reports of Condition and Income
filed with the Federal Reserve Board and Superintendent and will promptly
deliver to WABC true and complete copies of such reports after the filing
thereof with the Federal Reserve Board and Superintendent (as such reports have
since the time of their filing been amended, or may after their filing, if after
the date hereof, be amended, the "Call Reports").
3.6 Financial Statements; Books and Records. The ValliCorp Financial
---------------------------------------
Statements fairly present the consolidated financial position of ValliCorp and
its consolidated subsidiaries as of the dates indicated and the consolidated
results of operations, changes in shareholders' equity and cash flows of
ValliCorp and its consolidated subsidiaries for the periods then ended in
conformity with generally accepted accounting principles ("GAAP") applicable to
financial institutions applied on a consistent basis except as disclosed
therein. Such consolidated financial statements as of any fiscal year end have
been audited by independent auditors and include an unqualified opinion(s) of
such auditing firm(s) to the effect that such financial statements have been
prepared in accordance with GAAP and present fairly, in all material respects,
the consolidated financial position, results of operations and cash flows of
ValliCorp at the dates indicated and for the periods then ending. The books and
records (including ValliCorp Financial Statements) of ValliCorp and each
ValliCorp Subsidiary fairly reflect in all material respects the transactions to
which it is a party or by which its properties are subject or bound and such
books and records have been properly kept and maintained. The financial records
of ValliCorp and the ValliCorp
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Subsidiaries have been, and are being and shall be, maintained in all material
respects in accordance with all applicable legal and accounting requirements
sufficient to insure that all transactions reflected therein are, in all
material respects, executed in accordance with management's general or specific
authorization and recorded in conformity with GAAP at the time in effect.
Management of ValliCorp believes that the data processing equipment, data
transmission equipment, related peripheral equipment and software used by
ValliCorp in the operation of its business to generate and retrieve its
financial records are adequate for the current needs of ValliCorp.
3.7 Material Adverse Change. ValliCorp has not, on a consolidated
-----------------------
basis, suffered any material adverse change in its financial condition, assets,
business or results of operations from the financial condition, assets, business
or results of operations indicated in the financial statements of ValliCorp at
December 31, 1995, which financial statements have heretofore been provided to
WABC. For purposes of this Section, the parties agree that if any action is or
actions are taken by ValliCorp or ValliWide solely at WABC's request (or with
the consent of WABC or pursuant to this Agreement) which results in a condition
or occurrence, or results in conditions or occurrences, which would otherwise
constitute a Material Adverse Effect (but for this sentence), said action(s),
condition(s) or occurrence(s) shall not be considered in determining whether a
Material Adverse Effect has occurred, unless said action(s), condition(s) or
occurrence(s) had been planned by ValliCorp prior to the date hereof or it was
or they were required by applicable law, regulation, GAAP, regulatory accounting
practices ("RAP") or order of a regulatory agency.
3.8 Absence of Undisclosed Liabilities. Neither ValliCorp nor any
----------------------------------
ValliCorp Subsidiary has incurred or discharged, and is legally obligated with
respect to, any material indebtedness, liability (including, without limitation,
a liability arising out of an indemnification, guarantee, hold harmless or
similar arrangement) or obligation (accrued or contingent, whether due or to
become due, and whether or not subordinated to the claims of its general
creditors), that is material to ValliCorp on a consolidated basis, or that, when
combined with all similar liabilities, would be material to ValliCorp on a
consolidated basis, except for items reflected on or for which reserves have
been established in the unaudited balance sheets of ValliCorp and the ValliCorp
Subsidiaries as of September 30, 1996 in accordance with GAAP, and except for
liabilities incurred in the ordinary course of business subsequent to September
30, 1996. No agreement pursuant to which any loans or other assets have been or
will be sold by ValliCorp entitled the buyer of such loans or other assets,
unless there is material breach of a representation or covenant by ValliCorp, to
cause ValliCorp or the ValliCorp Subsidiaries to repurchase such loan or other
asset or the buyer to pursue any other form of recourse against ValliCorp or the
ValliCorp Subsidiaries. No cash, stock or other dividend or any other
distribution with respect to (i) the stock of ValliCorp, or (ii) except as
disclosed in writing to WABC as of the date hereof or hereafter, the ValliCorp
Subsidiaries, has been declared, set aside or paid. Except as Previously
Disclosed, no shares of the stock of ValliCorp or the ValliCorp Subsidiaries
have been purchased, redeemed or otherwise acquired, directly or indirectly, by
ValliCorp since December 31, 1994, and no agreements have been made to do the
foregoing.
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3.9 Properties.
----------
(a) ValliCorp or the ValliCorp Subsidiaries have good, marketable and
insurable title, free and clear of all liens, encumbrances, charges, defaults,
equitable interests and the right of possession, subject to existing leaseholds
as heretofore disclosed to WABC, to all real properties and good title to all
other property and assets, tangible and intangible, which are reflected on the
ValliCorp Financial Statements as of December 31, 1995, or acquired after such
date (except property held as lessee under leases disclosed in writing to WABC
prior to the date hereof and except personal property sold or otherwise disposed
of since December 31, 1995, in the ordinary course of ValliCorp's business),
except (i) liens for taxes or assessments not yet due and payable, (ii) pledges
to secure deposits and other liens incurred in the ordinary course of banking
business, (iii) such other liens and encumbrances and imperfections of title, if
any, as do not materially affect the value of such property as reflected in
ValliCorp's balance sheet as of December 31, 1995, or as currently shown on the
books and records of ValliCorp and the ValliCorp Subsidiaries and which do not
interfere with or impair its present and continued use, or (iv) exceptions
disclosed in title reports and preliminary title reports, copies of which have
heretofore been provided to WABC. To ValliCorp's knowledge, all tangible
properties of ValliCorp and the ValliCorp Subsidiaries conform in all material
respects with all applicable ordinances, regulations and zoning laws. All
tangible properties of ValliCorp and the ValliCorp Subsidiaries with book values
of $250,000 or more are in a good state of maintenance and repair (reasonable
wear and tear excepted) and are adequate for the current business of ValliCorp
or the ValliCorp Subsidiaries.
(b)(1) For purposes of this Section 3.9(b) only, the following terms shall
have the indicated meaning:
"Business" means the business conducted at any Real Property (as
defined below).
"Environmental Law" means any and all applicable federal, state and
local laws (whether under common law, statute, rule, regulation or
otherwise), requirements under permits issued with respect thereto, and
other orders, decrees, judgments, directives or other requirements of any
governmental authority relating to the environment, or to any Hazardous
Substances (as defined below).
"Hazardous Substances" means any chemical, compound, material,
mixture, living organism or substance that is now defined or listed in, or
otherwise classified or regulated in any way pursuant to, any
Environmental Laws as a "hazardous waste," "hazardous substance,"
"hazardous material," "extremely hazardous waste," "infectious waste,"
"toxic substance," or "toxic pollutants," such materials, including without
limitation, oil, waste oil, petroleum, waste petroleum, polychlorinated
biphenyls ("PCBs"), asbestos, radon, natural gas, natural gas liquids,
liquefied natural gas, or synthetic gas usable for fuel (or mixtures of
natural gas and such synthetic gas).
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"Real Property" means all interests in real property of ValliCorp
or the ValliCorp Subsidiaries, including without limitation, interests in
fee, leasehold, interest as mortgagee or secured party, or option or
contract to purchase or acquire.
"Reportable Quantity" means the quantity set forth in 40 C.F.R.
Part 302 as it is in effect on the effective date of this Agreement for the
particular Hazardous Substances set forth therein. With respect to
Hazardous Substances not listed in that part, if any, "reportable quantity"
means one (1) pound. "Reportable Quantity" shall be determined based on a
single release or series of related releases or threatened releases.
"To ValliCorp's knowledge" shall mean to the best knowledge, after
reasonable inquiry, of the following officers of ValliCorp or ValliWide:
Chief Executive Officer, Chief Operating Officer, Chief Financial Officer,
Chief Credit Officer, and General Counsel.
(2) Except as Previously Disclosed, to ValliCorp's knowledge, there are no
pending or threatened claims, actions or proceedings against ValliCorp or any
person relating to:
(i) any asserted liability of ValliCorp or any of its Affiliates
or any current or prior owner, operator, occupier or user of any Real
Property under any Environmental Law, including without limitation, the
terms and conditions of any permit, license, authority, settlement or other
obligation arising under any Environmental Law;
(ii) any handling, storage, use or disposal of Hazardous
Substances on, under or within any Real Property or any transportation or
removal of Hazardous Substances to or from any Real Property;
(iii) any actual or threatened discharge, release or emission of
Hazardous Substances from, on, under or within any Real Property into the
air, water, surface water, groundwater, land surface or subsurface strata;
or
(iv) any actual or asserted claims for personal injuries, illness
or damage to real or personal property related to or arising out of
exposure to Hazardous Substances discharged, released or emitted from, on,
under, within or into, or transported from or to, any Real Property.
(3) Except as Previously Disclosed, to ValliCorp's knowledge, no Hazardous
Substances are present on, under or within any Real Property (except those
Hazardous Substances used in the normal course of operating or maintaining the
business of ValliCorp or any ValliCorp Subsidiary) and, except as Previously
Disclosed, the presence of these Hazardous Substances does not violate any
Environmental Law. Except as Previously Disclosed, to ValliCorp's knowledge,
there are no storage tanks underground or otherwise present on any Real Property
and all such tanks Previously Disclosed comply with
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applicable law, all permits in respect thereof are in full force and effect and
there have been no releases or discharges of Hazardous Substances from such
tanks to the environment.
(4) To ValliCorp's knowledge, no Hazardous Substances have been, or have
been threatened to be, discharged, released or emitted in a Reportable Quantity
into the air, water, surface water, groundwater, land surface or subsurface
strata or transported to or from the Real Property except in accordance with
Environmental Laws (in particular, but without limitation, in accordance with
any permits issued pursuant thereto) and as Previously Disclosed. To
ValliCorp's knowledge all notifications, remediation, removal or other response
actions of any kind whatsoever, in respect of such discharges, releases and
emissions which are required by Environmental Laws, and by applicable agreements
with third parties, have been made within the time limits prescribed by such
Environmental Laws and such third party agreements. Copies of all such
notifications or documents relating to any remediation,removal or response
action have previously been provided to WABC.
(5) To ValliCorp's knowledge, except as Previously Disclosed, ValliCorp
and its Affiliates are in compliance, in all material respects, with all
Environmental Laws related to the ownership, operation, use and occupation of
the Real Property.
(6) To ValliCorp's knowledge, except as Previously Disclosed, no part of
any Real Property is listed on CERCLIS or the National Priorities List created
pursuant to the Comprehensive Environmental Response Compensation and Liability
Act of 1980, as amended, as a site containing Hazardous Substances.
(7) ValliCorp has provided WABC with copies of all material notices
required under any Environmental Law with respect to the Real Property at which
the business of ValliCorp or ValliCorp's Subsidiaries is conducted, including
without limitation, notices required under California Health & Safety Code
section 25359.7.
(8) All properties held by ValliCorp or the ValliCorp Subsidiaries under
leases are held by them under valid, binding and enforceable leases, with such
exceptions as are not material and do not interfere with the conduct of the
business of ValliCorp, and ValliCorp enjoys quiet and peaceful possession of
such leased property. ValliCorp and the ValliCorp Subsidiaries are not in
default in any material respect under any material lease, agreement or
obligation regarding their properties to which they are a party or by which they
are bound.
(9) Except as Previously Disclosed, all of ValliCorp's and the ValliCorp
Subsidiaries' rights and obligations under the leases referred to in Section
3.9(b)(8) above do not require the consent of any other party to the
transactions contemplated by this Agreement.
3.10 Tax Matters.
-----------
(a) ValliCorp and each ValliCorp Subsidiary have timely filed federal
income tax returns for each year through December 31, 1995 and have timely
filed, or caused to be filed, all other federal, state, county, local and
foreign tax returns (including, without
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limitation, estimated tax returns, returns required under sections 1441-1446 and
6031-6060 of the Code and the regulations thereunder and any comparable state,
foreign and local laws, any other information returns, withholding tax returns,
FICA and FUTA returns and back up withholding returns required under section
3406 of the Code and any comparable state, foreign and local laws) required to
be filed with respect to ValliCorp or any ValliCorp Subsidiary, including,
without limitation, estimated tax, use tax, excise tax, real property and
personal property tax reports and returns, employer's withholding tax returns,
other withholding tax returns and Federal Unemployment Tax Returns, and all
other reports or other information required to be filed by each of them, and
each such return, report or other information is complete and accurate in all
material respects. All taxes, fees and other governmental charges, including
any interest and penalties thereon, due in respect of the periods covered by
such tax returns have been paid or adequate reserves have been established for
the payment of such amounts, except where any such failure to pay or establish
adequate reserves, except those that are being contested in good faith, which
contested matters existing as of the date hereof have been disclosed to WABC in
writing and through the Effective Date any other contested matters will have
been disclosed to WABC in writing, and, as of the Effective Date, all taxes due
in respect of any subsequent periods ending on or prior to the Closing Date will
have been paid or adequate reserves will have been established for the payment
thereof. ValliCorp or the ValliCorp Subsidiaries have not been requested to
give any currently effective waivers extending the statutory period of
limitation applicable to any tax return required to be filed by any of them for
any period and, as of the date of this Agreement and the Effective Date (except
as disclosed to WABC in writing with respect to occurrences after the date
hereof) (A) there are no claims pending against ValliCorp and the ValliCorp
Subsidiaries for any alleged deficiency in the payment of any taxes, and
ValliCorp does not know of any pending or threatened audits, investigations or
claims for unpaid taxes or relating to any liability in respect of any taxes;
and (B) to the knowledge of ValliCorp, there have been no events, including a
change in ownership, that would result in a reappraisal and establishment of a
new base-year full value for purposes of Articles XIII.A of the California
Constitution, of any real property with a book value in excess of $250,000 owned
in whole or in part by ValliCorp and the ValliCorp Subsidiaries or to the best
of ValliCorp's knowledge, of any real property with aggregate remaining lease
payments of $250,000 or more leased by ValliCorp and the ValliCorp Subsidiaries.
Neither ValliCorp nor any ValliCorp Subsidiary will have any liability for any
such taxes in excess of the amounts so paid or reserves or accruals so
established.
(b) Neither ValliCorp nor any ValliCorp Subsidiary is delinquent in the
payment of any material tax, assessment or governmental charge, and, except as
Previously Disclosed, none of them has requested any extension of time within
which to file any tax returns in respect of any fiscal year or portion thereof
which have not since been filed. No material deficiencies for any tax,
assessment or governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against ValliCorp or any ValliCorp Subsidiary which
have not been settled and paid.
(c) ValliCorp has made available to WABC copies of all its and the
ValliCorp Subsidiaries' tax returns with respect to taxes payable to the United
States of America and
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the State of California for the fiscal years ended December 31, 1995, 1994,
1993, 1992 and 1991.
(d) No consent has been filed relating to ValliCorp pursuant to section
341(f) of the Code.
3.11 Employee Benefit Plans.
----------------------
(a) ValliCorp has heretofore delivered to WABC an accurate list setting
forth all qualified pension or profit-sharing plans, any deferred compensation,
stock option, consulting, bonus or group insurance contract, severance,
hospitalization, medical, dental, vision, group insurance, death benefits,
disability and other material fringe benefit plans, trust agreements,
arrangements and commitments of ValliCorp and the ValliCorp Subsidiaries, if
any, or any other material incentive, welfare or employee benefit plan or
agreement maintained or contributed to by ValliCorp or any ValliCorp Subsidiary
for the benefit of employees or former employees of ValliCorp or any ValliCorp
Subsidiary, together with copies of all such plans, agreements, arrangements and
commitments that are documented, and any and all written contracts of
employment. ValliCorp has also made available to WABC any Board of Directors'
minutes (or committee minutes) authorizing, approving or guaranteeing such plans
and contracts and will make available to WABC upon request (i) the most recent
actuarial and financial reports prepared with respect to any qualified plans,
(ii) the most recent annual reports filed with any government agency and (iii)
all rulings and determination letters and any open requests for rulings or
letters that pertain to any qualified plan. None of such plans is a
multiemployer plan (within the meaning of section 3(37) of ERISA).
(b) Neither ValliCorp nor any ValliCorp Subsidiary (nor any pension plan
maintained by any of them) has incurred or reasonably expects to incur any
material liability to the Pension Benefit Guaranty Corporation or to the IRS
with respect to any pension plan qualified under section 401 of the Code except
liabilities to the Pension Benefit Guaranty Corporation pursuant to section 4007
of ERISA, all of which have been fully paid. No reportable event under section
4043(b) of ERISA has occurred with respect to any such pension plan, other than
a reportable event that occurs by reason of the transactions contemplated by
this Agreement or an event for which the 30-day notice requirement has been
waived by the Pension Benefit Guaranty Corporation.
(c) Neither ValliCorp nor any ValliCorp Subsidiary participates in, or has
incurred any liability under section 4201 of ERISA for a complete or partial
withdrawal from a multiemployer plan (as such term is defined in ERISA).
(d) With respect to each employee benefit plan (as defined in section 3(3)
of ERISA) of ValliCorp which is subject to the reporting, disclosure and record
retention requirements set forth in the Code and Part 1 of Subtitle B of Title I
of ERISA and the regulations thereunder, each of such requirements has been
fully met on a timely basis in all material respects.
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(e) With respect to each employee benefit plan (as defined in section 3(3)
of ERISA) of ValliCorp which is subject to Part 4 of Subtitle B of Title I of
ERISA, none of the following now exists or has existed within the six-year
period ending on the date hereof:
(1) Any act or omission by ValliCorp, a ValliCorp Subsidiary or any
of their employees constituting a material violation of section 402 of
ERISA;
(2) Any act or omission by ValliCorp, a ValliCorp Subsidiary or any
of their employees constituting a violation of section 403 of ERISA;
(3) Any act or omission by ValliCorp or any of the ValliCorp
Subsidiaries, or by any director, officer or employee thereof, constituting
a violation of sections 404 and 405 of ERISA;
(4) To the knowledge of ValliCorp or any of the ValliCorp
Subsidiaries, any act or omission by any other person constituting a
violation of section 404 or 405 of ERISA;
(5) Any act or omission by ValliCorp, a ValliCorp Subsidiary or any
of their employees which constitutes a violation of sections 406 or 407 of
ERISA and is not exempted by section 408 of ERISA or which constitutes a
violation of section 4975(c) of the Code and is not exempted by section
4975(d) of the Code; or
(6) Any act or omission by ValliCorp, a ValliCorp Subsidiary or any
of their employees constituting a violation of section 503, 510 or 511 of
ERISA.
(f) All contributions, premiums or other payments due from ValliCorp and
the ValliCorp Subsidiaries to (or under) any plan listed in subsection (a) have
been fully paid or adequately provided for to the extent required by GAAP, on
the audited financial statements for the year ended December 31, 1995 and period
ended September 30, 1996. All accruals thereon (including, where appropriate,
proportional accruals for partial periods) have been made in accordance with
GAAP consistently applied on a reasonable basis.
(g) Each plan of ValliCorp complies in all material respects with the
applicable requirements of (i) the Age Discrimination in Employment Act of 1967,
as amended, and the regulations thereunder; (ii) Title VII of the Civil Rights
Act of 1964, as amended, and the regulations thereunder; and (iii) the Americans
with Disabilities Act.
(h) Each plan of ValliCorp complies in all material respects with the
applicable requirements of the health care continuation coverage provisions of
the Consolidated Omnibus Budget Reconciliation Act of 1985, and the regulations
thereunder. ValliCorp does not sponsor or contribute to any retiree medical
plan.
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(i) ValliCorp has heretofore made available to WABC the names of each
director, officer and employee of ValliCorp and the ValliCorp Subsidiaries as of
September 30, 1996.
(j) With respect to each employee pension plan (within the meaning of
section 3(2) of ERISA) that is sponsored or maintained by ValliCorp or a
ValliCorp Subsidiary and that is intended to be "qualified" under section 401(a)
of the Code (the "ValliCorp Plans") and their related trusts (the "ValliCorp
Trusts"), as of the Effective Time (i) the ValliCorp Plans will in all material
respects be (and currently are) in compliance with all the applicable
requirements of section 401(a) of the Code; (ii) the ValliCorp Plans and
ValliCorp Trusts have received favorable determination letters from the IRS
("Determination Letters") with respect to their initial qualification and, if
applicable, covering the Tax Equity and Fiscal Responsibility Act of 1982, the
Tax Reform Act of 1984, the Retirement Equity Act of 1984 and the Tax Reform Act
of 1986; (iii) ValliCorp shall not have amended the ValliCorp Plans or
administered the ValliCorp Plans in such a manner since receipt of the most
recent Determination Letter that would preclude the issuance of a favorable
Determination Letter to the ValliCorp Plans and ValliCorp Trusts and if the
ValliCorp Plans and ValliCorp Trusts were terminated they could be amended as
necessary to receive a favorable Determination Letter; (iv) no contributions
have exceeded the limitations set forth in section 415 of the Code; (v) all
material filings required to be filed by ValliCorp or the ValliCorp Plan
administrator with the IRS, Department of Labor and any other governmental
agencies with respect to the ValliCorp Plans and the ValliCorp Trusts for all
periods ending at or prior to the Effective Time will have been made on a timely
basis by ValliCorp or the ValliCorp Plan administrator; (vi) there shall have
been no material violation of Parts 1 and 4 of Subtitle B of Title I of ERISA or
of section 4975 of the Code; and (vii) there shall have been no action, claim or
demand of any kind known to ValliCorp brought or threatened by any potential
claimant or representative of such claimant (other than routine claims for
benefits) under the ValliCorp Plans or ValliCorp Trusts where ValliCorp may be
either (A) liable directly on such action, claim or demand, or (B) obligated to
indemnify any person, group of persons or entity with respect to such action,
claim or demand, unless such action, claim or demand is covered by adequate
reserves reflected in ValliCorp's September 30, 1996 financial statements or an
insurer of ValliCorp has agreed to defend against and pay the amount of any
resulting liability without reservation.
3.12 Certain Contracts. As of the date of this Agreement and the
-----------------
Effective Date (except as Previously Disclosed), neither ValliCorp nor any
ValliCorp Subsidiary is a party to, or is bound by, any contract or other
agreement made in the ordinary course of business which involves aggregate
future payments by or to ValliCorp or the ValliCorp Subsidiaries of more than
$100,000 and which is made for a fixed period expiring more than one year from
the date hereof, and ValliCorp and the ValliCorp Subsidiaries are not parties to
or bound by any agreement not made in the ordinary course of business which is
to be performed at or after the date hereof (in each case, excluding loans,
lines of credit, loan commitments, letters of credit or deposits to which
ValliCorp or the ValliCorp Subsidiaries are a party). Each of the contracts and
agreements disclosed to WABC pursuant to this Section 3.12 is a legal and
binding obligation of ValliCorp or the ValliCorp Subsidiary which is a party
thereto (subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and subject, as to enforceability, to equitable
principles
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of general applicability), and no breach or default (and no condition which,
with notice or passage of time, or both, could become a breach or default) on
the part of ValliCorp or the ValliCorp Subsidiary which is a party thereto
exists with respect thereto. Except as Previously Disclosed, no power of
attorney or similar authorization given directly or indirectly by ValliCorp or
the ValliCorp Subsidiaries is currently outstanding.
3.13 Legal Actions and Proceedings. Except as disclosed to WABC in
-----------------------------
writing with respect to occurrences after the date hereof, to the knowledge of
the Chief Executive Officer, the Chief Operating Officer, the Chief Financial
Officer, the Chief Credit Officer or the General Counsel or other in-house
lawyers at the date of this Agreement and the Effective Date, there are no
actions, suits, proceedings, investigations or claims instituted, pending or, to
the knowledge of such officers of ValliCorp, threatened against ValliCorp or any
ValliCorp Subsidiary or against any asset, interest or right of ValliCorp or any
ValliCorp Subsidiary or to which ValliCorp or any ValliCorp Subsidiary is a
party before any court, any arbitrator of any kind or any government agency, and
ValliCorp and the ValliCorp Subsidiaries are not subject to any potential
adverse claim, the outcome of which could reasonably be expected to involve the
payment or receipt of any amount in excess of $50,000, unless an insurer of
ValliCorp has agreed to defend against and pay the amount of any resulting
liability without reservation, or, if any such legal action, proceeding,
investigation or claim will not involve the payment by ValliCorp or the
ValliCorp Subsidiaries of a monetary amount, which could materially adversely
affect ValliCorp or the ValliCorp Subsidiaries or their business or property or
the transactions contemplated hereby. To the knowledge of ValliCorp, there are
no actual or threatened actions, suits or proceedings which present a claim to
restrain or prohibit the transactions contemplated herein or to impose any
material liability in connection therewith. ValliCorp has no knowledge of any
pending or threatened claims or charges under the Community Reinvestment Act,
before the Equal Employment Opportunity Commission, the California Department of
Fair Housing and Economic Development, the California Unemployment Appeals
Board, or any human relations commission. There is no labor dispute, strike,
slow-down or stoppage pending or, to the best of the knowledge of ValliCorp,
threatened against ValliCorp or the ValliCorp Subsidiaries.
3.14 Compliance with Laws, Regulations and Decrees.
---------------------------------------------
(a) ValliCorp and each ValliCorp Subsidiary have the corporate power to
own or lease their properties and to conduct their businesses as currently
conducted, is in compliance with and is not in default of any statutes and
regulations applicable to the conduct of its business and the ownership of their
properties, including but not limited to all federal and state laws (including
but not limited to the Bank Secrecy Act), rules and regulations relating to the
offer, sale or issuance of securities, and the operation of a commercial bank,
other than where such noncompliance or default is not likely to result in a
material limitation on the conduct of the business of ValliCorp or the ValliCorp
Subsidiaries or is not likely to otherwise have a Material Adverse Effect on
ValliCorp or the ValliCorp Subsidiaries, considered individually or taken as a
whole.
(b) ValliCorp and the ValliCorp Subsidiaries have all approvals,
authorizations, consents, licenses, clearances and orders of, and have currently
effective all registrations
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with, all governmental and regulatory authorities which are necessary to the
business and operations of ValliCorp and the ValliCorp Subsidiaries as now being
conducted. All compliance or corrective action relating to ValliCorp and the
ValliCorp Subsidiaries required by governmental authorities and regulatory
agencies having jurisdiction over ValliCorp and the ValliCorp Subsidiaries have
been taken within the times specified by said authorities or agencies. As of
the date of this Agreement and the Effective Date (except as disclosed to WABC
in writing with respect to occurrences after the date hereof), ValliCorp and the
ValliCorp Subsidiaries have received no notification, formally or informally,
from any agency or department of any federal, state or local government or any
regulatory agency or the staff thereof (A) asserting that ValliCorp and the
ValliCorp Subsidiaries are not in compliance with any of the statutes,
regulations or ordinances which such government or regulatory authority
enforces, or (B) threatening to revoke any license, franchise, permit or
governmental authorization of ValliCorp or any ValliCorp Subsidiary.
(c) Except as Previously Disclosed, neither ValliCorp nor any ValliCorp
Subsidiary is a party to any written agreement or memorandum of understanding
with, or a party to any commitment letter or similar undertaking to, or is
subject to any order or directive by, or is a recipient of any supervisory
letter from, any bank regulator which requires notification of the board of
directors or action or responses by the board of directors or which restricts
the conduct of its business, or in any manner relates to its capital adequacy,
its credit policies or its management, nor has ValliCorp or any ValliCorp
Subsidiary been advised by any bank regulator that it is contemplating issuing
or requesting (or is considering the appropriateness of issuing or requesting)
any such order, decree, agreement, memorandum of understanding, supervisory
letter, commitment letter or similar submission. ValliCorp and the ValliCorp
Subsidiaries have paid all assessments made or imposed by any governmental
agency.
(d) ValliCorp and each of the ValliCorp Subsidiaries have undergone full
regulatory compliance examinations, including Community Reinvestment Act
compliance, in 1996, have taken all corrective action required as a result of
such examinations and as of the date hereof are in compliance with all
requirements arising from such examinations.
3.15 Brokers and Finders. Neither ValliCorp nor any ValliCorp Subsidiary,
-------------------
nor any of their respective officers, directors or employees, has employed any
broker, agent, finder, consultant, financial advisor or other party or incurred
any liability for any fees or commissions in connection with the transactions
contemplated herein or the Plan of Merger, other than outside counsel and
independent auditors and except for ValliCorp's retention of Montgomery
Securities to perform certain financial advisory services. ValliCorp has
provided WABC with a true and accurate copy of its agreement(s) with Montgomery
Securities.
3.16 Insurance. ValliCorp has Previously Disclosed a list identifying all
---------
insurance policies maintained on behalf of ValliCorp and the ValliCorp
Subsidiaries. All of the material insurance policies and bonds maintained by
ValliCorp and the ValliCorp Subsidiaries are in full force and effect, ValliCorp
and the ValliCorp Subsidiaries are not in default thereunder and all material
claims thereunder have been filed in due and timely fashion. In the best
judgment of the management of ValliCorp, such insurance coverage is
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adequate for ValliCorp and the ValliCorp Subsidiaries. Since December 31, 1995,
there has not been any damage to, destruction of, or loss of any assets of
ValliCorp and the ValliCorp Subsidiaries (whether or not covered by insurance)
that could have a Material Adverse Effect on ValliCorp. Neither ValliCorp nor
any ValliCorp Subsidiary has received any notice of a premium increase or
cancellation with respect to any of its insurance policies or bonds, and within
the last three years, neither ValliCorp nor any ValliCorp Subsidiary has been
refused any insurance coverage sought or applied for, and ValliCorp has no
reason to believe that existing insurance coverage cannot be renewed as and when
the same shall expire, upon terms and conditions as favorable as those presently
in effect, other than possible increases in premiums or unavailability in
coverage that have not resulted from any extraordinary loss experience of
ValliCorp or any ValliCorp Subsidiary. The deposits of ValliWide are insured by
the FDIC in accordance with the FDIA, and ValliWide has paid all assessments and
filed all reports required by the FDIA.
3.17 Pooling of Interests. ValliCorp knows of no reason relating to it or
--------------------
any of the ValliCorp Subsidiaries which would reasonably cause it to believe
that the Merger will not qualify as a pooling of interests for financial
accounting purposes.
3.18 Certificate or Articles, Bylaws, Books and Records. The copies of
--------------------------------------------------
the Certificate or Articles of Incorporation or Articles of Association and
Bylaws of ValliCorp and the ValliCorp Subsidiaries that have been provided to
WABC are complete and accurate copies thereof as in effect on the date hereof.
The minute books of ValliCorp and the ValliCorp Subsidiaries which have been
made available to WABC contain a complete and accurate record of all meetings of
the respective Boards of Directors (and committees thereof) and shareholders.
The Certificate or Articles of Incorporation or Association and Bylaws of
ValliCorp and the ValliCorp Subsidiaries and all amendments thereto have been
duly approved by all requisite corporate action and by the appropriate regulator
to the extent required by law.
3.19 Loans and Other Assets.
----------------------
(a) ValliCorp has disclosed to WABC prior to the date hereof and the
Effective Date the amounts of all loans, leases, other extensions of credit,
commitments or other interest-bearing assets presently owned by ValliCorp and
the ValliCorp Subsidiaries that have been finally classified by any bank
regulatory agency, ValliCorp's independent auditors, or the management of
ValliCorp or any ValliCorp Subsidiary as "Other Loans Especially Mentioned,"
"Substandard," "Doubtful," or "Loss" or classified using categories with similar
import. All such assets or portions thereof classified "Loss" have been charged
off on a timely basis in full, collected or otherwise placed in a bankable
condition. ValliCorp regularly reviews and appropriately classifies its and the
ValliCorp Subsidiaries' loans and other assets in accordance with all applicable
legal and regulatory requirements and GAAP. ValliCorp has disclosed to WABC the
amounts and identities of all other real estate owned ("OREO") that have been
finally classified as of the date hereof or hereafter (with respect to
subsequent occurrences) by ValliCorp's independent auditors, management or any
bank regulatory agency. As of the date hereof and the last day of the month
preceding the month during which the Effective Date occurs, the recorded values
of all
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OREO on the books of ValliCorp and the ValliCorp Subsidiaries do or will
accurately reflect the net realizable values of each OREO parcel thereof in
compliance with GAAP and applicable RAP. ValliCorp and the ValliCorp
Subsidiaries have recorded on a timely basis all expenses associated with or
incidental to its OREO including but not limited to taxes, maintenance and
repairs as required by GAAP and RAP.
(b) All loans, leases, other extensions of credit, commitments or other
interest-bearing assets and investments of ValliCorp and the ValliCorp
Subsidiaries are legal, valid and binding obligations enforceable in accordance
with their respective terms and are not subject to any setoffs, counterclaims or
disputes known to ValliCorp (subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general applicability), except as
Previously Disclosed to WABC or reserved for in the unaudited balance sheet of
ValliCorp as of September 30, 1996 in accordance with GAAP, and were duly
authorized under and made in compliance with applicable federal and state laws
and regulations. ValliCorp and the ValliCorp Subsidiaries do not have any
extensions or letters of credit, investments, guarantees, indemnification
agreements or commitments for the same (including without limitation commitments
to issue letters of credit, to create acceptances, or to repurchase securities,
federal funds or other assets) other than those documented on the books and
records of ValliCorp and the ValliCorp Subsidiaries.
3.20 Restrictions on Investments. Except for pledges to secure public and
---------------------------
trust deposits and repurchase agreements in the ordinary course of business,
none of the investments reflected in the ValliCorp balance sheet as of September
30, 1996, and none of the investments made by ValliCorp and the ValliCorp
Subsidiaries since September 30, 1996, is subject to any restriction, whether
contractual or statutory, which materially impairs the ability of ValliCorp or
the ValliCorp Subsidiaries freely to dispose of such investment at any time.
3.21 Collective Bargaining and Employment Agreements. Except as
-----------------------------------------------
Previously Disclosed, ValliCorp and the ValliCorp Subsidiaries do not have any
union or collective bargaining or written employment agreements, contracts or
other agreements with any labor organization or with any member of management or
its board of directors, or any management or consultation agreement not
terminable at will by ValliCorp or the ValliCorp Subsidiaries without liability
and no such contract or agreement has been requested by, or is under discussion
by management or its directorate with, any group of employees relating to their
employment, any member of management or any other Person. There are no material
controversies pending between ValliCorp or the ValliCorp Subsidiaries and any
current or former employees relating to their employment, and, to the best of
ValliCorp's knowledge, there are no efforts presently being made by any labor
union seeking to organize any of such employees.
3.22 Compensation of Officers and Employees. Except as Previously
--------------------------------------
Disclosed to WABC, (i) no officer or employee of ValliCorp or the ValliCorp
Subsidiaries is receiving aggregate direct remuneration at a rate exceeding
$50,000 per annum, and (ii) the consummation of the transactions contemplated by
this Agreement will not (either alone or
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upon the occurrence of any additional or further acts or events) result in any
payment (whether of severance pay or otherwise) becoming due from ValliCorp or
the ValliCorp Subsidiaries or WABC to any employee or consultant of ValliCorp
and the ValliCorp Subsidiaries.
3.23 Loan Loss Reserves. The reserve for loan losses in ValliCorp's
------------------
balance sheets dated September 30, 1996, December 31, 1996 and as of the
Effective Date are or will be adequate in all material respects under the
requirements of all applicable state and federal laws and regulations to provide
for possible loan losses on outstanding loans.
3.24 Transactions With Affiliates. Except as may arise in the ordinary
----------------------------
course of business, ValliCorp has not extended credit, committed itself to
extend credit, or transferred any asset to or assumed or guaranteed any
liability of the employees or directors of ValliCorp and the ValliCorp
Subsidiaries, or any spouse or child of any of them, or to any of their
Affiliates or Associates. ValliCorp has not entered into any other transactions
with the employees or directors of ValliCorp and the ValliCorp Subsidiaries or
any spouse or child of any of them, or any of their Affiliates or Associates, in
any case that would be required to be disclosed under Item 404 of Regulation S-K
except as Previously Disclosed to WABC. Any such transactions have been on
terms no less favorable than those which would prevail in an arm's-length
transaction with an independent third party.
3.25 Information in Registration Statement. The information pertaining to
-------------------------------------
ValliCorp and the ValliCorp Subsidiaries which has been or will be furnished to
WABC for or on behalf of ValliCorp for inclusion in the Registration Statement
or the Proxy Statement does not and will not contain any untrue statement of any
material fact or omit or will not omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading; provided, however, that
-------- -------
information as of a later date shall be deemed to modify information as of any
earlier date. All financial statements of ValliCorp included in the Proxy
Statement will present fairly the consolidated financial condition and results
of operations of ValliCorp and its consolidated subsidiaries at the dates and
for the periods covered by such statements in accordance with GAAP consistently
applied throughout the periods covered by such statements. ValliCorp shall
promptly advise WABC in writing if prior to the Effective Time ValliCorp shall
obtain knowledge of any facts that would make it necessary to amend the
Registration Statement, the Proxy Statement or any Application, or to supplement
the prospectus, in order to make the statements therein not misleading or to
comply with applicable law. The information pertaining to ValliCorp and the
ValliCorp Subsidiaries which has been or will be furnished to WABC on behalf of
ValliCorp for inclusion in the applications to be filed to obtain the Government
Approvals (the "Applications") was or will be prepared in all material respects
in accordance with applicable statutes, regulations and instructions (including
regulatory accounting practices) in existence as of the date of filing of the
Applications.
3.26 No Brokered Deposits. Except as Previously Disclosed, ValliCorp and
--------------------
ValliWide do not now have and shall not accept prior to or have on the Effective
Date any
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"brokered deposits" as such deposits are defined by applicable regulations of
the FDIC as of the date hereof.
3.27 Ownership of WABC Common Stock. As of the date hereof, neither
------------------------------
ValliCorp nor any ValliCorp Subsidiary (i) beneficially owns, directly or
indirectly, or (ii) is a party to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of, in each case, any
shares of capital stock of WABC.
3.28 Delaware Takeover Laws Inapplicable. The Board of Directors of
-----------------------------------
ValliCorp has taken all actions required to be taken by it to provide that this
Agreement and any amendment or revision thereto, and the transactions
contemplated hereby or thereby, shall be exempt from the requirements of section
203 of the DGCL.
3.29 Derivatives Contracts; Structured Notes; Etc. Except as Previously
---------------------------------------------
Disclosed, neither ValliCorp nor any ValliCorp Subsidiary is a party to or has
agreed to enter into an exchange traded or over-the-counter equity, interest
rate, foreign exchange or other swap, forward, future, option, cap, floor or
collar or any other contract that is not included on the balance sheet and is a
derivatives contract (including various combinations thereof) (each, a
"Derivatives Contract") or owns securities that (1) are referred to generically
as "structured notes," "high risk mortgage derivatives," "capped floating rate
notes" or "capped floating rate mortgage derivatives" or (2) are likely to have
changes in value as a result of interest or exchange rate changes that
significantly exceed normal changes in value attributable to interest or
exchange rate changes, except for those Derivatives Contracts and other
instruments legally purchased or entered into in the ordinary course of
business, consistent with safe and sound banking practices and regulatory
guidance, and Previously Disclosed. All of such Derivatives Contracts or other
instruments are legal, valid and binding obligations of ValliCorp or one of the
ValliCorp Subsidiaries enforceable in accordance with their terms (except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally), and are in full force and
effect. ValliCorp and each of the ValliCorp Subsidiaries have duly performed in
all material respects all of their material obligations thereunder to the extent
that such obligations to perform have accrued; and, to ValliCorp's knowledge,
there are no breaches, violations or defaults or allegations or assertions of
such by any party thereunder which would have or would reasonably be expected to
have a Material Adverse Effect on ValliCorp.
3.30 Fairness Opinion. The Board of Directors of ValliCorp has received
----------------
an opinion of Montgomery Securities dated the date hereof to the effect that the
Exchange Ratio is fair, from a financial point of view, to ValliCorp's
shareholders.
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ARTICLE 4
Representations and Warranties of WABC
--------------------------------------
WABC hereby represents and warrants to ValliCorp and ValliWide as follows,
except, in the case of each representation and warranty contained in this
Article 4, as Previously Disclosed:
4.1 Capital Structure of WABC. All outstanding shares of WABC capital
-------------------------
stock have been duly issued and are validly outstanding, fully paid and
nonassessable. None of the shares of WABC's capital stock has been issued in
violation of the preemptive rights of any person. The shares of WABC Common
Stock to be issued in connection with the Merger have been duly authorized and,
when issued in accordance with the terms of this Agreement and the Plan of
Merger, will be validly issued, fully paid, nonassessable and free and clear of
any preemptive rights.
4.2 Organization, Standing and Authority of WABC. Each of WABC and
--------------------------------------------
its Subsidiaries is a bank or corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation or
organization. Through its banking subsidiaries, Westamerica Bank and Bank of
Lake County, WABC holds current valid licenses to engage in the commercial
banking business in California at its banking offices in California and, along
with both Westamerica Bank and Bank of Lake County, WABC is in material
compliance with all agreements, understandings or orders of the Federal Reserve
Board, the FDIC, the Superintendent or any other regulatory authority having
jurisdiction over its or their business or any of its or their assets or
properties. Neither the scope of the business of WABC or its Subsidiaries nor
the location of their properties requires any of them to be licensed to do
business in any jurisdiction other than the State of California. The deposits
of Westamerica Bank and Bank of Lake County are insured by the FDIC to the
maximum extent permitted by applicable law and regulation. WABC is a bank
holding company registered under the Bank Holding Company Act. Westamerica Bank
is a member of the Federal Reserve System.
4.3 Ownership of WABC Subsidiaries; Capital Structure of WABC
---------------------------------------------------------
Subsidiaries. WABC does not own, directly or indirectly, 25% or more of the
- ------------
outstanding capital stock or other voting securities of any corporation, bank or
other organization except as Previously Disclosed (collectively, the "WABC
Subsidiaries" and, individually, a "WABC Subsidiary"). The outstanding shares
of capital stock of the WABC Subsidiaries are validly issued and outstanding,
fully paid and (except as provided in the California Financial Code)
nonassessable and all such shares are directly or indirectly owned by WABC free
and clear of all liens, claims and encumbrances. No WABC Subsidiary has or is
bound by any Rights which are authorized, issued or outstanding with respect to
the capital stock of any WABC Subsidiary and, there are no agreements,
understandings or commitments relating to the right of WABC to vote or to
dispose of said shares. None of the shares of capital stock of any WABC
Subsidiary has been issued in violation of the preemptive rights of any person.
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4.4 Organization, Standing and Authority of WABC Subsidiaries. Each WABC
---------------------------------------------------------
Subsidiary is a duly organized corporation or banking association, validly
existing and in good standing under applicable laws. Each WABC Subsidiary (i)
has full power and authority to carry on its business as now conducted, and (ii)
is duly licensed or qualified to do business in the states of the United States
and foreign jurisdictions where its ownership or leasing of property or the
conduct of its business requires such licensing or qualification and where
failure to be licensed or qualified would have a Material Adverse Effect on
WABC.
4.5 Authorized and Effective Agreement.
----------------------------------
(a) WABC has all requisite corporate power and authority to enter into and
perform all of its obligations under this Reorganization Agreement, the Plan of
Merger and the Stock Option Agreement. The execution and delivery of this
Reorganization Agreement, the Plan of Merger and the Stock Option Agreement and
the consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action in respect thereof
on the part of WABC, except that the affirmative vote of the holders of a
majority of the outstanding shares eligible to vote is required to approve the
principle terms of the Merger and the Plan of Merger in accordance with
California law. The Board of Directors of WABC has directed that this Agreement,
the Plan of Merger and the transactions contemplated hereby and thereby be
submitted to WABC's shareholders for approval at a special meeting to be held as
soon as practicable.
(b) Assuming the accuracy of the representation contained in Section
3.4(b) hereof, this Agreement, the Plan of Merger and the Stock Option Agreement
constitute legal, valid and binding obligations of WABC, enforceable against it
in accordance with their respective terms, subject to applicable bankruptcy,
insolvency and civil laws affecting creditors' rights generally, and subject, as
to enforceability, to equitable principles of general applicability.
(c) Neither the execution and delivery of this Agreement, the Plan of
Merger and the Stock Option Agreement, nor consummation of the transactions
contemplated hereby or thereby, nor compliance by WABC with any of the
provisions hereof or thereof shall (i) conflict with or result in a breach of
any provision of the articles of incorporation or by-laws of WABC or any WABC
Subsidiary, (ii) assuming the consents and approvals contemplated by Section
5.3(b)(1) hereof and which are Previously Disclosed are duly obtained,
constitute or result in a breach of any term, condition or provision of, or
constitute a default under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of WABC or any WABC
Subsidiary pursuant to, any note, bond, mortgage, indenture, license, agreement
or other instrument or obligation, or (iii) assuming the consents and approvals
contemplated by Section 5.3(b)(1) hereof and which are Previously Disclosed are
duly obtained, violate any order, writ, injunction, decree, statute, rule or
regulation applicable to WABC or any WABC Subsidiary, except (in the case of
clauses (ii) and (iii) above) for such violations, rights, conflicts, breaches,
creations or defaults which, either individually or in the aggregate, will not
have a Material Adverse Effect on WABC.
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<PAGE>
(d) Except for approvals specified in Section 5.3(b)(1) hereof,
except as Previously Disclosed and except as expressly referred to in this
Agreement, no consent, approval or authorization of, or declaration, notice,
filing or registration with, any governmental or regulatory authority, or any
other person, is required to be made or obtained by WABC on or prior to the
Closing Date in connection with the execution, delivery and performance of this
Agreement and the Plan of Merger or the consummation of the transactions
contemplated hereby or thereby.
4.6 SEC Documents; Regulatory Filings. WABC has filed all SEC Documents
---------------------------------
and other documents required by the Securities Laws and such SEC
Documents and other documents complied, as of their respective dates, in all
material respects with the Securities Laws. As of their respective dates, none
of such SEC Documents and other documents contained, as of the date hereof, or
will contain, as to documents filed after the date hereof, any untrue statement
of material fact or omitted or will omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made or will be made, not misleading;
provided, however, that information as of a later date shall be deemed to modify
- -------- -------
information as of any earlier date. WABC and each of the WABC Subsidiaries has
filed all material documents and reports relating to WABC and the WABC
Subsidiaries required to be filed by them with the SEC, Federal Reserve Board,
FDIC, Superintendent or any other governmental authority having jurisdiction
over their businesses or any of their assets or properties, and such documents
and reports conformed in all material respects with the applicable statutes,
regulations and instructions (including regulatory accounting practices) in
existence as of the date of filing of such documents and reports.
4.7 Financial Statements; Books and Records. The WABC Financial
---------------------------------------
Statements fairly present the consolidated financial position of WABC and its
consolidated subsidiaries as of the dates indicated and the consolidated results
of operations, changes in shareholders' equity and cash flows of WABC and its
consolidated subsidiaries for the periods then ended in conformity with GAAP
applicable to financial institutions applied on a consistent basis except as
disclosed therein. Such consolidated financial statements as of any fiscal year
end have been audited by independent auditors and include an unqualified
opinion(s) of such auditing firm(s) to the effect that such financial statements
have been prepared in accordance with GAAP and present fairly, in all material
respects, the consolidated financial position, results of operations and cash
flows of WABC at the dates indicated and for the periods then ending. The books
and records (including the WABC Financial Statements) of WABC and each WABC
Subsidiary fairly reflect in all material respects the transactions to which it
is a party or by which its properties are subject or bound and such books and
records have been properly kept and maintained. The financial records of WABC
and the WABC Subsidiaries have been, and are being and shall be, maintained in
all material respects in accordance with all applicable legal and accounting
requirements sufficient to insure that all transactions reflected therein are,
in all material respects, executed in accordance with management's general or
specific authorization and recorded in conformity with GAAP at the time in
effect. Management of WABC believes that the data processing equipment, data
transmission equipment, related peripheral equipment and software used by WABC
in the
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operation of its business to generate and retrieve its financial records are
adequate for the current needs of WABC.
4.8 Material Adverse Change. WABC has not, on a consolidated basis,
-----------------------
suffered any material adverse change in its financial condition, assets,
business or results of operations indicated in the financial statements of WABC
at December 31, 1995, which financial statements have heretofore been provided
to ValliCorp. For purposes of this Section, the parties agree that if any
action is or actions are taken by WABC solely at ValliCorp's request (or with
the consent of ValliCorp) which results in a condition or occurrence, or results
in conditions or occurrences, which would otherwise constitute a Material
Adverse Effect (but for this sentence), said action(s), condition(s) or
occurrence(s) shall not be considered in determining whether a Material Adverse
Effect has occurred, unless said action(s), condition(s) or occurrence(s) had
been planned by WABC prior to the date hereof or it was or they were required by
applicable law, regulation, GAAP, RAP or order of a regulatory agency.
4.9 Absence of Undisclosed Liabilities. Neither WABC nor any WABC
----------------------------------
Subsidiary has incurred or discharged, and is legally obligated with respect to,
any material indebtedness, liability (including, without limitation, a liability
arising out of an indemnification, guarantee, hold harmless or similar
arrangement) or obligation (accrued or contingent, whether due or to become due,
and whether or not subordinated to the claims of its general creditors), that is
material to WABC on a consolidated basis, or that, when combined with all
similar liabilities, would be material to WABC on a consolidated basis, except
for items reflected on or for which reserves have been established in the
unaudited balance sheets of WABC and the WABC Subsidiaries as of September 30,
1996 in accordance with GAAP, and except for liabilities incurred in the
ordinary course of business subsequent to September 30, 1996. No agreement
pursuant to which any loans or other assets have been or will be sold by WABC
entitled the buyer of such loans or other assets, unless there is material
breach of a representation or covenant by WABC, to cause WABC or the WABC
Subsidiaries to repurchase such loan or other asset or the buyer to pursue any
other form of recourse against WABC or the WABC Subsidiaries. No cash, stock or
other dividend or any other distribution with respect to (i) the stock of WABC,
or (ii) except as disclosed in writing to ValliCorp as of the date hereof or
hereafter, the WABC Subsidiaries, has been declared, set aside or paid. Except
as Previously Disclosed, no shares of the stock of WABC or the WABC Subsidiaries
have been purchased, redeemed or otherwise acquired, directly or indirectly, by
WABC since December 31, 1994, and no agreements have been made to do the
foregoing.
4.10 Legal Proceedings. There are no actions, suits or proceedings
-----------------
instituted, pending or, to the knowledge of WABC, threatened against WABC or any
WABC Subsidiary or against any asset, interest or right of WABC or any WABC
Subsidiary as to which there is a reasonable probability of an unfavorable
outcome and which, if such an unfavorable outcome was rendered, would,
individually or in the aggregate, have a Material Adverse Effect on WABC. To
the knowledge of WABC, there are no actual or threatened actions, suits or
proceedings which present a claim to restrain or prohibit the transactions
contemplated herein or to impose any material liability in connection therewith
as to which
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<PAGE>
there is a reasonable probability of an unfavorable outcome and which, if such
an unfavorable outcome was rendered, would, individually or in the aggregate,
have a Material Adverse Effect on WABC.
4.11 Compliance with Laws.
--------------------
(a) WABC and each WABC Subsidiary have the corporate power to own or
lease their properties and to conduct their businesses as currently conducted,
is in compliance with and is not in default of any statutes and regulations
applicable to the conduct of its business and the ownership of their properties,
including but not limited to all federal and state laws (including but not
limited to the Bank Secrecy Act), rules and regulations relating to the offer,
sale or issuance of securities, and the operation of a commercial bank, other
than where such noncompliance or default is not likely to result in a material
limitation on the conduct of the business of WABC or the WABC Subsidiaries or is
not likely to otherwise have a Material Adverse Effect on WABC or the WABC
Subsidiaries, considered individually or taken as a whole.
(b) Except as Previously Disclosed, WABC and the WABC Subsidiaries
have all approvals, authorizations, consents, licenses, clearances and orders
of, and have currently effective all registrations with, all governmental and
regulatory authorities which are necessary to the business and operations of
WABC and the WABC Subsidiaries as now being conducted. All compliance or
corrective action relating to WABC and the WABC Subsidiaries required by
governmental authorities and regulatory agencies having jurisdiction over WABC
and the WABC Subsidiaries have been taken within the times specified by said
authorities or agencies. As of the date of this Agreement and the Effective
Date (except as disclosed to ValliCorp in writing with respect to occurrences
after the date hereof), WABC and the WABC Subsidiaries have received no
notification, formally or informally, from any agency or department of any
federal, state or local government or any regulatory agency or the staff thereof
(A) asserting that WABC and the WABC Subsidiaries are not in compliance with any
of the statutes, regulations or ordinances which such government or regulatory
authority enforces, or (B) threatening to revoke any license, franchise, permit
or governmental authorization of WABC or any WABC Subsidiary.
(c) Except as Previously Disclosed, neither WABC nor any WABC
Subsidiary is a party to any written agreement or memorandum of understanding
with, or a party to any commitment letter or similar undertaking to, or is
subject to any order or directive by, or is a recipient of any supervisory
letter from, any bank regulator which requires notification of the board of
directors or action or responses by the board of directors or which restricts
the conduct of its business, or in any manner relates to its capital adequacy,
its credit policies or its management, nor has WABC or any WABC Subsidiary been
advised by any bank regulator that it is contemplating issuing or requesting (or
is considering the appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum of understanding, supervisory letter, commitment
letter or similar submission. WABC and the WABC Subsidiaries have paid all
assessments made or imposed by any governmental agency.
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<PAGE>
(d) WABC and each of the WABC Subsidiaries have undergone full
regulatory compliance examinations, including Community Reinvestment Act
compliance, in 1996, have taken all corrective action required as a result of
such examinations and as of the date hereof are in compliance with all
requirements arising from such examinations.
4.12 Brokers and Finders. Neither WABC nor any WABC Subsidiary, nor
-------------------
any of their respective officers, directors or employees, has employed any
broker, agent, finder, consultant, financial advisor or other party or incurred
any liability for any fees or commissions in connection with the transactions
contemplated herein or the Plan of Merger, other than outside counsel and
independent auditors and except for WABC's retention of Hoefer & Arnett, Inc. to
perform certain financial advisory services.
4.13 Information in Registration Statement. The information
-------------------------------------
pertaining to WABC and the WABC Subsidiaries which will be included in the
Registration Statement or the Proxy Statement, excluding any information in the
Registration Statement or Proxy Statement provided by ValliCorp, will not
contain any untrue statement of any material fact and will not omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading; provided, however, that information as of a later date shall be
-------- -------
deemed to modify information as of any earlier date. All financial statements
of WABC included in the Proxy Statement will present fairly the consolidated
financial condition and results of operations of WABC and its consolidated
subsidiaries at the dates and for the periods covered by such statements in
accordance with GAAP consistently applied throughout the periods covered by such
statements. WABC shall promptly advise ValliCorp in writing if, prior to the
Effective Time, WABC shall obtain knowledge of any facts that would make it
necessary to amend the Registration Statement, the Proxy Statement or any
Application, or to supplement the prospectus, in order to make the statements
therein not misleading or to comply with applicable law. The information
pertaining to WABC and the WABC Subsidiaries which will be included in the
Applications, excluding any information in the Applications provided by
ValliCorp, was or will be prepared in all material respects in accordance with
applicable statutes, regulations and instructions (including regulatory
accounting practices) in existence as of the date of filing of the Applications.
4.14 Pooling of Interests. WABC knows of no reason relating to it or
--------------------
any of its Subsidiaries which would reasonably cause it to believe that the
Merger will not qualify as a pooling of interests for financial accounting
purposes.
4.15 Tax Matters.
-----------
(a) WABC and each WABC Subsidiary have timely filed federal income
tax returns for each year through December 31, 1995 and have timely filed, or
caused to be filed, all other federal, state, county, local and foreign tax
returns (including, without limitation, estimated tax returns, returns required
under sections 1441-1446 and 6031-6060 of the Code and the regulations
thereunder and any comparable state, foreign and local laws, any other
information returns, withholding tax returns, FICA and FUTA returns and back up
withholding returns required under section 3406 of the Code and any comparable
state,
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<PAGE>
foreign and local laws) required to be filed with respect to WABC or any WABC
Subsidiary, including, without limitation, estimated tax, use tax, excise tax,
real property and personal property tax reports and returns, employer's
withholding tax returns, other withholding tax returns and Federal Unemployment
Tax Returns, and all other reports or other information required to be filed by
each of them, and each such return, report or other information is complete and
accurate in all material respects. All taxes, fees and other governmental
charges, including any interest and penalties thereon, due in respect of the
periods covered by such tax returns have been paid or adequate reserves have
been established for the payment of such amounts, except where any such failure
to pay or establish adequate reserves, except those that are being contested in
good faith, which contested matters existing as of the date hereof have been
disclosed to ValliCorp in writing and through the Effective Date any other
contested matters will have been disclosed to ValliCorp in writing, and, as of
the Effective Date, all taxes due in respect of any subsequent periods ending on
or prior to the Closing Date will have been paid or adequate reserves will have
been established for the payment thereof. WABC or the WABC Subsidiaries have
not been requested to give any currently effective waivers extending the
statutory period of limitation applicable to any tax return required to be filed
by any of them for any period and, as of the date of this Agreement and the
Effective Date (except as disclosed to ValliCorp in writing with respect to
occurrences after the date hereof) (A) there are no claims pending against WABC
and the WABC Subsidiaries for any alleged deficiency in the payment of any
taxes, and, except as Previously Disclosed, WABC does not know of any pending or
threatened audits, investigations or claims for unpaid taxes or relating to any
liability in respect of any taxes; and (B) to the knowledge of WABC, there have
been no events, including a change in ownership, that would result in a
reappraisal and establishment of a new base-year full value for purposes of
Articles XIII.A of the California Constitution, of any real property with a book
value in excess of $250,000 owned in whole or in part by WABC and the WABC
Subsidiaries or to the best of WABC's knowledge, of any real property with
aggregate remaining lease payments of $250,000 or more leased by WABC and the
WABC Subsidiaries. Neither WABC nor any WABC Subsidiary will have any liability
for any such taxes in excess of the amounts so paid or reserves or accruals so
established.
(b) Neither WABC nor any WABC Subsidiary is delinquent in the payment
of any material tax, assessment or governmental charge, and, except as
Previously Disclosed, none of them has requested any extension of time within
which to file any tax returns in respect of any fiscal year or portion thereof
which have not since been filed. No material deficiencies for any tax,
assessment or governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against WABC or any WABC Subsidiary which have not
been settled and paid.
(c) WABC has made or will make available to ValliCorp copies of all
its and the WABC Subsidiaries' tax returns with respect to taxes payable to the
United States of America and the State of California for the fiscal years ended
December 31, 1995, 1994, 1993, 1992 and 1991.
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<PAGE>
(d) No consent has been filed relating to WABC pursuant to section
341(f) of the Code.
4.16 Employee Benefit Plans.
----------------------
(a) WABC has made or will make available to ValliCorp an accurate
list setting forth all qualified pension or profit-sharing plans, any deferred
compensation, stock option, consulting, bonus or group insurance contract,
severance, hospitalization, medical, dental, vision, group insurance, death
benefits, disability and other material fringe benefit plans, trust agreements,
arrangements and commitments of WABC and the WABC Subsidiaries, if any, or any
other material incentive, welfare or employee benefit plan or agreement
maintained or contributed to by WABC or any WABC Subsidiary for the benefit of
employees or former employees of WABC or any WABC Subsidiary, together with
copies of all such plans, agreements, arrangements and commitments that are
documented, and any and all written contracts of employment. WABC has made or
will make available to ValliCorp any Board of Directors' minutes (or committee
minutes) authorizing, approving or guaranteeing such plans and contracts and
will make available to ValliCorp upon request (i) the most recent actuarial and
financial reports prepared with respect to any qualified plans, (ii) the most
recent annual reports filed with any government agency and (iii) all rulings and
determination letters and any open requests for rulings or letters that pertain
to any qualified plan. None of such plans is a multiemployer plan (within the
meaning of section 3(37) of ERISA).
(b) Neither WABC nor any WABC Subsidiary (nor any pension plan
maintained by any of them) has incurred or reasonably expects to incur any
material liability to the Pension Benefit Guaranty Corporation or to the IRS
with respect to any pension plan qualified under section 401 of the Code except
liabilities to the Pension Benefit Guaranty Corporation pursuant to section 4007
of ERISA, all of which have been fully paid. No reportable event under section
4043(b) of ERISA has occurred with respect to any such pension plan, other than
a reportable event that occurs by reason of the transactions contemplated by
this Agreement or an event for which the 30 day notice requirement has been
waived by the Pension Benefit Guaranty Corporation.
(c) Neither WABC nor any WABC Subsidiary participates in, or has
incurred any liability under section 4201 of ERISA for a complete or partial
withdrawal from a multiemployer plan (as such term is defined in ERISA).
(d) With respect to each employee benefit plan (as defined in section
3(3) of ERISA) of WABC which is subject to the reporting, disclosure and record
retention requirements set forth in the Code and Part 1 of Subtitle B of Title I
of ERISA and the regulations thereunder, each of such requirements has been
fully met on a timely basis in all material respects.
(e) With respect to each employee benefit plan (as defined in section
3(3) of ERISA) of WABC which is subject to Part 4 of Subtitle B of Title I of
ERISA, none of the following now exists or has existed within the six-year
period ending on the date hereof:
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<PAGE>
(1) Any act or omission by WABC, a WABC Subsidiary or any of their
employees constituting a material violation of section 402 of ERISA;
(2) Any act or omission by WABC, a WABC Subsidiary or any of their
employees constituting a violation of section 403 of ERISA;
(3) Any act or omission by WABC or any of the WABC Subsidiaries, or
by any director, officer or employee thereof, constituting a violation of
sections 404 and 405 of ERISA;
(4) To the knowledge of WABC or any of the WABC Subsidiaries, any act
or omission by any other person constituting a violation of section 404 or
405 of ERISA;
(5) Any act or omission by WABC, a WABC Subsidiary or any of their
employees which constitutes a violation of section 406 or 407 of ERISA and
is not exempted by section 408 of ERISA or which constitutes a violation
of section 4975(c) of the Code and is not exempted by section 4975(d) of
the Code; or
(6) Any act or omission by WABC, a WABC Subsidiary or any of their
employees constituting a violation of section 503, 510 or 511 of ERISA.
(f) All contributions, premiums or other payments due from WABC and the
WABC Subsidiaries to (or under) any plan listed in subsection (a) have been
fully paid or adequately provided for to the extent required by GAAP, on the
audited financial statements for the year ended December 31, 1995 and unaudited
Financial Statements for the period ended September 30, 1996. All accruals
thereon (including, where appropriate, proportional accruals for partial
periods) have been made in accordance with generally accepted accounting
principles consistently applied on a reasonable basis.
(g) Each plan of WABC complies in all material respects with the
applicable requirements of (A) the Age Discrimination in Employment Act of 1967,
as amended, and the regulations thereunder; (B) Title VII of the Civil Rights
Act of 1964, as amended, and the regulations thereunder; and (C) the Americans
with Disabilities Act.
(h) Each plan of WABC complies in all material respects with the
applicable requirements of the health care continuation coverage provisions of
the Consolidated Omnibus Budget Reconciliation Act of 1985, and the regulations
thereunder. WABC does not sponsor or contribute to any retiree medical plan.
(i) WABC has made or will make available to ValliCorp the names of each
director, officer and employee of WABC and the WABC Subsidiaries as of September
30, 1996.
(j) With respect to each employee pension plan (within the meaning of
section 3(2) of ERISA) that is sponsored or maintained by WABC or a WABC
Subsidiary and that is
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intended to be "qualified" under section 401(a) of the Code (the "WABC Plans")
and their related trusts (the "WABC Trusts"), as of the Effective Time (i) the
WABC Plans will in all material respects be (and currently are) in compliance
with all the applicable requirements of section 401(a) of the Code; (ii) the
WABC Plans and WABC Trusts have received favorable Determination Letters with
respect to their initial qualification and, if applicable, covering the Tax
Equity and Fiscal Responsibility Act of 1982, the Tax Reform Act of 1984, the
Retirement Equity Act of 1984 and the Tax Reform Act of 1986; (iii) WABC shall
not have amended the WABC Plans or administered the WABC Plans in such a manner
since receipt of the most recent Determination Letter that would preclude the
issuance of a favorable Determination Letter to the WABC Plans and WABC Trusts
and if the WABC Plans and WABC Trusts were terminated they could be amended as
necessary to receive a favorable Determination Letter; (iv) no contributions
have exceeded the limitations set forth in section 415 of the Code; (v) all
filings required to be filed by WABC or the WABC Plan administrator with the
IRS, Department of Labor and any other governmental agencies with respect to the
WABC Plans and the WABC Trusts for all periods ending at or prior to the
Effective Time will have been made on a timely basis by WABC or the WABC Plan
administrator; (vi) there shall have been no material violation of Parts 1 and 4
of Subtitle B of Title I of ERISA or of section 4975 of the Code; and (vii)
there shall have been no action, claim or demand of any kind known to WABC
brought or threatened by any potential claimant or representative of such
claimant (other than routine claims for benefits) under the WABC Plans or WABC
Trusts where WABC may be either (A) liable directly on such action, claim or
demand, or (B) obligated to indemnify any person, group of persons or entity
with respect to such action, claim or demand, unless such action, claim or
demand is covered by adequate reserves reflected in WABC's September 30, 1996,
financial statements or an insurer of WABC has agreed to defend against and pay
the amount of any resulting liability without reservation.
4.17 Loans and Other Assets.
----------------------
(a) WABC has or will make available to ValliCorp a list disclosing and
will disclose prior to the Effective Date the amounts of all loans, leases,
other extensions of credit, commitments or other interest-bearing assets
presently owned by WABC and the WABC Subsidiaries that have been classified by
any bank regulatory agency, WABC's independent auditor, outside reviewer or the
management of WABC or any WABC Subsidiary as "Other Loans Especially Mentioned,"
"Substandard," "Doubtful," or "Loss" or classified using categories with similar
import. All such assets or portions thereof classified "Loss" have been charged
off on a timely basis in full, collected or otherwise placed in a bankable
condition. WABC regularly reviews and appropriately classifies its and the WABC
Subsidiaries' loans and other assets in accordance with all applicable legal and
regulatory requirements and GAAP. WABC has Previously Disclosed to ValliCorp
the amounts and identities of all OREO that have been classified as of the date
hereof or hereafter (with respect to subsequent occurrences) by WABC's
independent auditor, any outside reviewer, management or any bank regulatory
agency. As of the date hereof and the last day of the month preceding the month
during which the Effective Date occurs, the recorded values of all OREO on the
books of WABC and the WABC Subsidiaries do or will accurately reflect the net
realizable values of each OREO parcel thereof in compliance with
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GAAP and RAP. WABC and the WABC Subsidiaries have recorded on a timely basis
all expenses associated with or incidental to its OREO including but not limited
to taxes, maintenance and repairs as required by GAAP and RAP.
(b) All loans, leases, other extensions of credit, commitments or other
interest-bearing assets and investments of WABC and the WABC Subsidiaries are
legal, valid and binding obligations enforceable in accordance with their
respective terms and are not subject to any setoffs, counterclaims or disputes
(subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and subject, as to enforceability, to equitable
principles of general applicability), except as Previously Disclosed to
ValliCorp or reserved for in the unaudited balance sheet of WABC as of September
30, 1996 in accordance with GAAP, and were duly authorized under and made in
compliance with applicable federal and state laws and regulations. WABC and the
WABC Subsidiaries do not have any extensions or letters of credit, investments,
guarantees, indemnification agreements or commitments for the same (including
without limitation commitments to issue letters of credit, to create
acceptances, or to repurchase securities, federal funds or other assets) other
than those documented on the books and records of WABC and the WABC
Subsidiaries.
4.18 Loan Loss Reserves. The reserve for loan losses in WABC's balance
------------------
sheets dated September 30, 1996, December 31, 1996 and as of the Effective Date
are or will be adequate in all material respects under the requirements of all
applicable state and federal laws and regulations to provide for possible loan
losses on outstanding loans.
4.19 Derivatives Contracts; Structured Notes; Etc. Except as Previously
---------------------------------------------
Disclosed, neither WABC nor any WABC Subsidiary is a party to or has agreed to
enter into any Derivatives Contract or owns securities that (1) are referred to
generically as "structured notes," "high risk mortgage derivatives," "capped
floating rate notes" or "capped floating rate mortgage derivatives" or (2) are
likely to have changes in value as a result of interest or exchange rate changes
that significantly exceed normal changes in value attributable to interest or
exchange rate changes, except for those Derivatives Contracts and other
instruments legally purchased or entered into in the ordinary course of
business, consistent with safe and sound banking practices and regulatory
guidance, and Previously Disclosed. All of such Derivatives Contracts or other
instruments are legal, valid and binding obligations of WABC or one of the WABC
Subsidiaries enforceable in accordance with their terms (except as enforcement
may be limited by general principles of equity whether applied in a court of law
or a court of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally), and are in full force and effect.
WABC and each of the WABC Subsidiaries have duly performed in all material
respects all of their material obligations thereunder to the extent that such
obligations to perform have accrued; and, to WABC's knowledge, there are no
breaches, violations or defaults or allegations or assertions of such by any
party thereunder which would have or would reasonably be expected to have a
Material Adverse Effect on WABC.
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ARTICLE 5
Covenants
---------
5.1 Covenants of WABC.
-----------------
(a) Approval by WABC's Shareholders. WABC shall cause this Agreement
-------------------------------
and the Merger to be submitted promptly for the approval of its shareholders at
a special or regular meeting to be called and held in accordance with applicable
laws. WABC shall use all commercially reasonable efforts to cause such meeting
of its shareholders to take place not later than March 17, 1997. WABC and
ValliCorp shall coordinate and cooperate with respect to the timing of said
meeting and the date on which ValliCorp holds its shareholder meeting. In
connection with the call of such meeting, WABC shall cause the Proxy Statement
to be mailed to its shareholders. Subject to section 5 of the Securities Act,
section 14 of the Exchange Act and the fiduciary duties of the Board of
Directors under applicable law, the Board of Directors of WABC shall at all
times prior to and during such meeting of WABC's shareholders recommend that the
transactions contemplated hereby be adopted and approved by WABC's shareholders
and shall, subject to such matters, use its commercially reasonable efforts to
cause such adoption and approval.
(b) Reservation, Issuance and Registration of WABC Common Stock.
-----------------------------------------------------------
WABC shall reserve and make available for issuance in connection with the Merger
and in accordance with the terms of this Agreement (i) the WABC Common Stock;
and (ii) the maximum number of shares of WABC Common Stock to which holders of
Convertible Debentures or the optionholders of ValliCorp may be entitled to
hereunder at or after the Effective Date. All WABC Common Stock will, when
issued and delivered pursuant to and in accordance with the terms of this
Agreement, be duly authorized, legally and validly issued, fully paid and
nonassessable. As promptly as practicable after the date hereof, WABC shall
file and cause to be declared effective pursuant to the Securities Act one or
more registration statements covering all such shares and shall cause all such
shares to be issued in compliance with the Securities Act and in compliance with
all applicable state securities laws and regulations.
(c) Government Approvals. Prior to the Effective Date, WABC, with
--------------------
the cooperation of ValliCorp and the ValliCorp Subsidiaries, shall use its
commercially reasonable efforts in good faith to take or cause to be taken as
promptly as practicable all such steps as shall be necessary to obtain (i) the
prior approval of the Merger by the Federal Reserve Board under the Bank Holding
Company Act; (ii) the prior approval of the Superintendent under the California
Financial Code; and (iii) all other consents and approvals of government
agencies as are required by law or otherwise (including those required pursuant
to Section 5.3(g)) and shall do any and all acts deemed by WABC to be reasonably
necessary or appropriate in order to cause the Merger to be consummated on the
terms provided in this Agreement as promptly as practicable. All consents or
approvals referred to in clauses (i), (ii) and (iii) of this Section 5.1(c) are
hereinafter referred to as the "Government Approvals." Notwithstanding anything
herein to the contrary, in connection with the Government Approvals, WABC shall
not be obligated to take any action pursuant
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to this Section 5.1(c) if the taking of such action or the obtaining of such
consent or approval or obtaining any authorization, order or exemption would
not, in WABC's reasonable opinion, be required to be taken under Section 6.1(h).
(d) Press Releases. WABC shall not issue any press release or
--------------
written statement for general circulation relating to the Merger, this Agreement
or the Plan of Merger unless previously provided to ValliCorp for review and
approval (which approval will not be unreasonably withheld or delayed) and shall
cooperate with ValliCorp in the development and distribution of all news
releases and other public information disclosures with respect to this Agreement
or the Merger; provided that WABC may, without the consent of ValliCorp, make
any disclosures with regard to this Agreement or the Merger which, based on the
advice of its counsel, are required under any applicable law or regulation.
(e) Takeover Proposals. WABC shall not accept any offer from any
------------------
third party regarding a Takeover Proposal (as defined in Section 5.2(h)(1),
however, references therein to ValliCorp shall be deemed for purposes of this
Section 5.1(e) to refer to WABC) of WABC with any other entity unless such offer
is expressly conditioned upon the performance by WABC or its successor in
interest of its obligations under this Agreement. WABC acknowledges that the
restrictions and agreements contained in this Section 5.1(e) of this Agreement
are reasonable and necessary to protect the legitimate interests of ValliCorp,
and that any violation of this Section 5.1(e) will cause substantial and
irreparable injury to ValliCorp that would not be quantifiable and for which no
adequate remedy would exist at law and agrees and consents to, in addition to
all other remedies which may be available to ValliCorp, the entry of an
injunction by any court of competent jurisdiction against consummation of any
transaction involving WABC and another party which does not comply with this
Section 5.1(e) until such transaction does comply with this Section 5.1(e).
(f) ValliCorp Employees; Directors and Management; Indemnification.
--------------------------------------------------------------
(1) WABC agrees to honor in accordance with their terms all
employment, severance and employee benefit and compensation plans,
contracts, agreements, arrangements, and understandings Previously
Disclosed (collectively, the "ValliCorp Employment Arrangements"), and
ValliCorp agrees to notify WABC substantially concurrently with the
making of any salary increase or bonus payment required due to a
contractual obligation under the terms of any ValliCorp Employment
Arrangement.
(2) Promptly following the Effective Time WABC shall, at a
meeting of its directors (or pursuant to a written consent), take
those actions necessary to cause three (3) persons who are directors
of ValliCorp to become directors of WABC.
(3) From and after the Effective Date, in the event of any
threatened or actual claim, action, suit, proceeding or investigation,
whether civil, criminal or administrative, including, without
limitation, any such claim, action, suit, proceeding or investigation
in which any person who is as of the
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date hereof, or who becomes prior to the Effective Date, a director or
officer of ValliCorp or any ValliCorp Subsidiary (the "Covered
Parties") is, or is threatened to be, made a party based in whole or
in part on, or arising in whole or in part out of, or pertaining to
(i) the fact that he is or was a director, officer, or employee of
ValliCorp, any of the ValliCorp Subsidiaries or any of their
respective predecessors or (ii) this Agreement, the Plan of Merger, or
any of the transactions contemplated hereby or thereby, whether in any
case asserted or arising before or after the Effective Date with
respect to matters occurring prior to the Effective Date, provided the
Covered Party acted in good faith and in a manner he/she believed to
be in the best interests of Vallicorp or the applicable Vallicorp
Subsidiary (or other standard of conduct applicable under the
circumstances), WABC shall indemnify and hold harmless, as and to the
fullest extent permitted by applicable law, subject, however, to any
applicable provisions of federal banking law or regulation, each such
Covered Party against any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorney's fees and expenses in advance
of the final disposition of any claim, suit, proceeding or
investigation to each Covered Party to the fullest extent permitted by
applicable law upon receipt of any undertaking required by applicable
law), judgments, fines and amounts paid in settlement in connection
with any such threatened or actual claim, action, suit, proceeding or
investigation (whether asserted or arising before or after the
Effective Date with respect to matters occurring prior to the
Effective Date), the Covered Parties as a group may retain counsel
reasonably satisfactory to them; provided, however, that (x)
-------- -------
WABC shall have the right to assume the defense thereof and upon such
assumption WABC shall not be liable to any Covered Party for any legal
expenses of other counsel or any other expenses subsequently incurred
by any Covered Party in connection with the defense thereof, except
that if WABC elects not to assume such defense or counsel for the
Covered Parties reasonably advises the Covered Parties that there are
issues which raise conflicts of interest between WABC and the Covered
Parties, the Covered Parties may retain counsel (subject to the
following sentence) reasonably satisfactory to them, and WABC shall
pay the reasonable fees and expenses of such counsel for the Covered
Parties, (y) WABC shall not be liable for any settlement effected
without its prior written consent (which consent shall not be
unreasonably withheld) and (z) WABC shall have no obligation hereunder
to any Covered Party when and if a court of competent jurisdiction
shall ultimately determine, and such determination shall have become
final and nonappealable, that indemnification of such Covered Party in
the manner contemplated hereby is prohibited by applicable law or
regulation. For purposes of this Section, the Covered Parties as a
group may retain only one law firm reasonably acceptable to the group
unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or
more Covered Parties. Notwithstanding anything to the contrary
contained elsewhere herein, WABC's agreement set forth above shall be
limited to cover claims only to the extent those claims are not
covered under Vallicorp's
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directors' and officers' or any other insurance policies. WABC's
obligations under this Section 5.1(f)(3) continue in full force and
effect for a period of six (6) years from the Effective Date;
provided, however, that all rights to indemnification in respect of
any Claim asserted or made within such period shall continue until the
final disposition of such Claim .
(4) WABC agrees that all rights to indemnification and all
limitations on liability existing in favor of the Covered Parties as
provided in their Certificate or Articles of Incorporation, By-Laws or
similar governing document as in effect as of the date of this
Agreement with respect to matters occurring prior to the Effective
Date shall survive the Merger and shall continue in full force and
effect, and shall be honored by WABC or its successors from and after
the Effective Time as if they were the indemnifying party thereunder,
without any amendment thereto, for a period of six (6) years from the
Effective Date; provided, however, that all rights to indemnification
-------- -------
in respect of any Claim asserted or made within such period shall
continue until the final disposition of such Claim. WABC hereby
expressly assumes the indemnification obligations of ValliCorp under
the following agreements: (i) Section 6.8 of the Agreement and Plan of
Reorganization between ValliCorp and Mineral King Bancorp, Inc. dated
as of June 20, 1994; (ii) Section 6.7 of the Agreement and Plan of
Reorganization between ValliCorp and El Capitan Bancshares, Inc. dated
as of May 11, 1995, as amended; (iii) Section 6.6 of the Agreement and
Plan of Reorganization between ValliCorp and CoBank Financial
Corporation dated as of July 20, 1995, as amended; and (iv) Section
6.7 of the Agreement and Plan of Reorganization between ValliCorp and
Auburn Bancorp dated as of March 27, 1996.
(5) WABC, from and after the Effective Date, will directly or
indirectly cause the persons who served as directors or officers of
ValliCorp and the ValliCorp Subsidiaries on or before the Effective
Date to be covered by ValliCorp's existing directors' and officers'
liability insurance policy (provided that WABC may substitute therefor
policies of at least the same coverage and amounts containing terms
and conditions which are not less advantageous than such policy) or
so-called tail coverage obtained in connection with ValliCorp's
directors' and officers' liability insurance policies in effect as of
the Effective Date; provided that WABC shall not be obligated to make
annual premium payments for such insurance to the extent such premiums
exceed 150% of the premiums paid as of the date hereof by ValliCorp
for such insurance. Subject to the preceding sentence, such insurance
coverage, shall commence on the Effective Date and will be provided
for a period of no less than three (3) years after the Effective Date.
From the date hereof through the Effective Date and subject to the
foregoing, ValliCorp shall use its best efforts to arrange for tail
coverage related to its then current policies of directors' and
officers' liability insurance and
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following the Effective Date WABC shall exercise those rights which it
may have to in order to commence such coverage.
(6) In the event WABC or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, to
the extent necessary, proper provision shall be made so that the
successors and assigns of WABC assume the obligations set forth in
this section.
(7) The provisions of Section 5.1(f)(3), (4), (5) and (6) are
intended to be for the benefit of, and shall be enforceable by, each
Covered Party and their respective heirs and representatives. In the
event any Covered Party brings any action or suit to enforce any
rights under the aforesaid subsections, the prevailing party shall be
entitled to reasonable legal fees and costs pursuant to Section 8.9
(as if he were a party to this Agreement).
(g) Financial Statements.
--------------------
(1) WABC has delivered, or shall promptly deliver when
available, to ValliCorp prior to the Effective Date true and correct
copies of the WABC Financial Statements.
(2) WABC and its Subsidiaries have delivered, or shall deliver
promptly when available, to ValliCorp, at or prior to the Effective
Date, copies of all financial statements and proxy statements issued
or to be issued to WABC's shareholders after December 31, 1994.
(3) WABC and its Subsidiaries have delivered, or shall deliver
promptly when available, to ValliCorp true and complete copies of
their respective Annual Report to Shareholders for the years ended
December 31, 1995 and 1994, all periodic reports required to be filed
by it or them pursuant to section 13(a) or 15(d) of the Exchange Act
since December 31, 1993, all registration statements filed by WABC
with the SEC since December 31, 1993, all proxy statements and other
written material furnished to WABC's shareholders since December 31,
1994, and all other material reports, including call reports, relating
to WABC and its Subsidiaries filed by WABC and its Subsidiaries with
the SEC, the FDIC, the Superintendent, the Federal Reserve Board, or
Comptroller of the Currency ("OCC") during 1994 through the date
hereof and prior to the Effective Date. Except where prohibited by
law, WABC and its Subsidiaries shall promptly provide ValliCorp (or
its counsel) with copies of all other filings (other than information
or documents therein as to which WABC is not permitted to disclose
said information or document to third parties) with any state or
federal governmental entity in connection with this Agreement or the
transactions contemplated hereby.
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(h) Stock Exchange Listing. WABC shall use all reasonable efforts to
----------------------
cause the shares of WABC Common Stock to be issued in the Merger and the shares
of WABC Common Stock to be reserved for issuance upon exercise of former
ValliCorp stock options to be approved for listing on the Nasdaq, subject to
official notice of issuance, prior to the Closing Date.
5.2 Covenants of ValliCorp.
----------------------
(a) Approval by ValliCorp's Shareholders. ValliCorp shall cause the
------------------------------------
Merger, this Agreement and the Plan of Merger to be submitted promptly for the
approval of its shareholders at a regular or special meeting to be called and
held in accordance with applicable laws. ValliCorp shall use all commercially
reasonable efforts to cause such meeting of its shareholders to take place not
later than March 17, 1997. ValliCorp and WABC shall coordinate and cooperate
with respect to the timing of said meeting and the date on the same day on which
WABC holds its shareholder meeting. In connection with the call of such
meeting, ValliCorp shall cause the Proxy Statement to be mailed to its
shareholders. Subject to Section 5.2(h) herein, Section 5 of the Securities Act
and Section 14 of the Exchange Act, the Board of Directors of ValliCorp shall at
all times prior to and during such meeting of ValliCorp shareholders recommend
that the transactions contemplated hereby be adopted and approved by the
ValliCorp shareholders and, subject to such matters, use its commercially
reasonable efforts to cause such adoption and approval. At the time of
execution and delivery of this Agreement, individual members of the Board of
Directors of ValliCorp shall have delivered to WABC a Shareholder Agreement
substantially in the form attached hereto as Exhibit 5.2(a). Except with the
prior approval of WABC and except for the election of directors and the
ratification of the selection of independent auditors at a regular meeting,
neither ValliCorp nor any member of its Board of Directors shall, at the
ValliCorp shareholders' meeting, submit any other matters for approval of its
shareholders.
(b) Shareholder Lists and Other Information. After execution hereof,
---------------------------------------
ValliCorp shall from time to time make available to WABC, upon request, a list
of its shareholders and their addresses, a list showing all transfers of
ValliCorp or the ValliCorp Subsidiaries' common stock (and any other classes of
stock) and such other information as WABC shall reasonably request regarding
both the ownership and prior transfers of the common stock of ValliCorp and the
ValliCorp Subsidiaries.
(c) Government Approvals. ValliCorp will (and will take all commercially
--------------------
reasonable actions to cause the ValliCorp Subsidiaries to) cooperate in all
reasonable respects with WABC in their undertaking in Section 5.1(c) to obtain
the Government Approvals.
(d) Financial Statements.
--------------------
(i) ValliCorp has delivered, or shall promptly deliver when
available, to WABC prior to the Effective Date true and correct copies of
the ValliCorp Financial Statements.
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(ii) ValliCorp and the ValliCorp Subsidiaries have delivered, or
shall deliver promptly when available, to WABC, at or prior to the
Effective Date, copies of all financial statements and proxy statements
issued or to be issued to ValliCorp's shareholders and/or directors after
December 31, 1991.
(iii) ValliCorp and the ValliCorp Subsidiaries have delivered, or
shall deliver promptly when available, to WABC true and complete copies of
their respective Annual Report to Shareholders for the years ended December
31, 1995 and 1994, all periodic reports required to be filed by it or them
pursuant to section 13(a) or 15(d) of the Exchange Act since December 31,
1993, all registration statements filed by ValliCorp with the SEC since
December 31, 1993, any final offering materials filed with the
Superintendent by the ValliCorp Subsidiaries since December 31, 1993, all
proxy statements and other written material furnished to ValliCorp's or the
ValliCorp Subsidiaries' shareholders since December 31, 1993, and all other
material reports, including call reports, relating to ValliCorp and its
Subsidiaries filed by ValliCorp and the ValliCorp Subsidiaries with the
SEC, FDIC, Superintendent, Federal Reserve Board, or OCC during 1993
through the date hereof and the Effective Date. Except where prohibited by
law, ValliCorp and the ValliCorp Subsidiaries shall promptly provide WABC
(or its counsel) with copies of all other filings with any state or federal
governmental entity in connection with this Agreement or the transactions
contemplated hereby.
(e) Compensation. ValliCorp and the ValliCorp Subsidiaries shall not make
------------
or approve any increase in the compensation payable or to become payable by
ValliCorp to any of its (or the ValliCorp Subsidiaries') directors, officers,
employees or agents with annual base salaries in excess of $50,000 (excluding
compensation through any profit sharing, pension, retirement, severance,
incentive or other employee benefit program or arrangement) except such
increases in compensation or bonuses payable pursuant to the terms of written
agreements between ValliCorp (or the ValliCorp Subsidiaries) and its directors,
officers, employees or agents (which agreements have been Previously Disclosed
and have not been amended on or after the date hereof), nor shall any other
bonus payment or any agreement or commitment to make a bonus payment in excess
of $5,000 be made other than pursuant to incentive plans as set forth in the
next sentence (except with WABC's prior approval which shall not be unreasonably
withheld). Nothing herein shall prevent the payment to ValliCorp or ValliCorp
Subsidiary employees of salary increases or bonus payments approved by the
Compensation Committee of ValliCorp's Board of Directors; provided, however,
-------- -------
that any such proposed salary increases and bonus payments in excess of $5,000
shall be consistent with ValliCorp's present policies, procedures and plans in
effect for the calendar year 1996 (which shall also be applicable to calendar
year 1997 unless and until modified by WABC after the Effective Date), if all
such policies, procedures and plans have been Previously Disclosed to WABC;
provided, further, however, that to enable WABC to have a reasonable opportunity
- -------- ------- -------
to verify such consistency, ValliCorp shall notify WABC in writing of any such
intended bonuses or salary increases at least 15 days prior to advising the
employee thereof and WABC shall not within such time have reasonably interposed
an objection based upon the failure of such proposed action to satisfy such
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criteria. Further, no employment agreement (other than any such employment
agreement that may arise by operation of law upon the hiring of any new
employee) or consulting agreement will be entered into by ValliCorp or the
ValliCorp Subsidiaries with any directors, officers, employees or agents, unless
WABC has given its prior written consent (which shall not be unreasonably
withheld). Without the prior written consent of WABC (which shall not be
unreasonably withheld) or except as necessary to comply with the orders,
directives or requests of its regulators, neither ValliCorp nor the ValliCorp
Subsidiaries shall hire any new employee at an annual base salary in excess of
$50,000 per year.
(f) Conduct of Business in the Ordinary Course. Prior to the Effective
------------------------------------------
Time, ValliCorp and the ValliCorp Subsidiaries:
(1) Shall conduct their respective businesses in the ordinary course
as heretofore conducted except to the extent otherwise contemplated herein.
For purposes of this Agreement, the "Ordinary Course of Business" of
ValliCorp and the ValliCorp Subsidiaries shall consist of the banking and
related businesses as presently conducted by ValliCorp and the ValliCorp
Subsidiaries and permitted under the Bank Holding Company Act, the
California Financial Code and other applicable laws and, provided ValliCorp
has consulted with WABC, shall include the sale of OREO and real estate
held for sale. For purposes of this Section 5.2(f), if ValliCorp seeks any
consent required hereunder from an officer authorized or designated by WABC
for said purpose and WABC has not approved or disapproved the request
within one Business Day after the consent has been requested, said consent
shall be deemed to have been approved. Unless WABC has given its previous
written consent (subject to the preceding sentence) to any act or omission
to the contrary (which consent shall not be unreasonably withheld),
ValliCorp and the ValliCorp Subsidiaries shall, until the Effective Date,
cause their respective officers to:
(A) use all commercially reasonable efforts to preserve their
respective businesses and business organizations intact;
(B) use all commercially reasonable efforts to preserve the goodwill
of customers and others having business relations with them and take no
action that would impair the benefit to WABC of the goodwill of ValliCorp
and the ValliCorp Subsidiaries or the other benefits of the Merger;
(C) consult with WABC as to the making of any decisions or the taking
of any actions in matters other than in the Ordinary Course of Business;
(D) maintain their respective properties in customary repair, working
order and condition (reasonable wear and tear excepted);
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(E) comply in all material respects with all laws, regulations and
decrees applicable to the conduct of their respective businesses;
(F) use all commercially reasonable efforts to keep in force at not
less than their present limits all policies of insurance (including deposit
insurance of the FDIC) to the extent reasonably practicable in light of the
prevailing market conditions in the insurance industry;
(G) use, in cooperation with WABC, all reasonable efforts to keep
available to WABC the services of their present officers and employees (it
being understood that ValliCorp and the ValliCorp Subsidiaries shall have
the right to terminate the employment of any officer or employee in
accordance with their established employment procedures);
(H) comply in all material respects with all orders, agreements and
memoranda of understanding with respect to ValliCorp and the ValliCorp
Subsidiaries made by or with the SEC, Federal Reserve Board, FDIC, or any
other regulatory authority of competent jurisdiction, and promptly forward
to WABC all communications received from any such authority and inform WABC
of any material restrictions imposed by any governmental authority on the
business of ValliCorp or the ValliCorp Subsidiaries;
(I) file in a timely manner (taking into account any extensions duly
obtained) all reports, tax returns and other documents required to be filed
with federal, state, local and other authorities;
(J) conduct such environmental audits as ValliCorp or WABC deems
necessary prior to foreclosure or otherwise (if information is or becomes
available indicating a risk of environmental contamination) on any property
concerning which ValliCorp or any ValliCorp Subsidiary has knowledge that
asbestos or asbestos-containing materials, PCBs or PCB-contaminated
materials, any petroleum product, or hazardous substance or waste (as
defined under any applicable environmental laws) was or is present,
manufactured, recycled, reclaimed, released, stored, treated, or disposed
of, and provide the results of any such audits to and consult with WABC
regarding the significance of the audit prior to the foreclosure on any
such property; provided, however, that if WABC requests any environmental
-------- -------
audit(s) which is (are) not required by applicable law or regulation or
ValliCorp's existing policies, WABC shall pay the costs of any such
audit(s);
(K) not sell, lease, pledge, assign, encumber or otherwise dispose of
any of its assets or stock except in the Ordinary Course of Business, and
only then for adequate value, without recourse and consistent with its
customary practice; provided, however, that notwithstanding Section
-------- -------
5.2(f)(1) hereof ValliCorp shall not sell or otherwise transfer all or any
portion of its mortgage servicing portfolio;
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(L) with respect to any extension of credit in excess of $100,000,
not waive or release any right or collateral or cancel or compromise any
debt or claim, except in the Ordinary Course of Business;
(M) not make, renegotiate, renew, increase, extend or purchase any
loans, advances or loan commitments, in each case to any of its officers,
directors or any affiliated or related persons of such directors or
officers except in the Ordinary Course of Business consistent with
ValliCorp's established loan procedures and in compliance with Federal
Reserve Board Regulation O as applicable to ValliCorp and the ValliCorp
Subsidiaries under relevant state or federal law;
(N) not take any action to create, relocate or terminate the
operations of any banking office or branch, or to form any new subsidiary
or affiliated entity except pursuant to Section 5.3(g) hereof; and
(O) shall not settle or otherwise take any action to release or
reduce any of its rights with respect to any litigation involving a claim
of more than $100,000 in which it is a party.
(2) ValliCorp and the ValliCorp Subsidiaries will not, without first
having obtained the written consent (subject to the third sentence of
clause (f)(1) above) of WABC (which consent will not be unreasonably
withheld), cause the officers of ValliCorp or the ValliCorp Subsidiaries
to:
(A) commit to or renew any loan with a principal amount exceeding
$250,000 (subject to the proviso at the end of this subsection), unless
WABC's comments concerning said commitment are addressed by ValliWide after
WABC has been presented with the same information provided to the relevant
loan committee (or loan officer, if no committee approval is required) and
such other information as WABC may reasonably request has been provided in
order to allow WABC to make an informed judgment; provided, however, that
-------- -------
if any new loan commitment or loan renewal involves a loan to a borrower
(or his Associates and Affiliates) who has (i) any other classified or
criticized asset, (ii) a total lending relationship of $250,000 or more, or
(iii) a renewal involving a classified or criticized asset, then the
relevant loan subject to this subsection shall be $100,000;
(B) purchase any investment security with a maturity in excess of
three years, or, notwithstanding the consent standard in subsection (ii)
above, sell any investment security in which a gain is recognized;
(C) issue any certificate of deposit with a rate of interest which
exceeds the prevailing rates at commercial banks in ValliWide's market
area;
(D) commit to any new capital expenditure in excess of $50,000;
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(E) commit to make any construction loan if based on existing
construction loans and anticipated fundings such commitment would, with
respect to ValliCorp and the ValliCorp Subsidiaries on an aggregate basis,
cause their respective total construction loans and construction loan
commitments outstanding at the Effective Date to exceed their respective
level of construction loans and construction loan commitments as of the
month end preceding the date hereof; provided, however, that
-------- -------
notwithstanding the foregoing, ValliCorp may make or commit to make up to
an additional $10,000,000 in construction loans (subject to its existing
lending criteria as of the date hereof as Previously Disclosed to WABC)
over the amount of such construction loans and commitments thereof existing
as of the date hereof; provided, further, however, that any such
-------- ------- -------
construction loan which is in excess of the applicable amount specified in
Section 5.2(f)(2)(A) above, shall not be made or committed to be made
unless ValliCorp shall have given WABC at least one Business Day's advance
written notice of the proposal to make such loan or commitment, which
written notice shall provide to WABC the same information provided to the
relevant loan committee (or loan officer, if no committee approval is
required) of ValliCorp or the applicable ValliCorp Subsidiary, and shall
have furnished WABC with such other information as WABC may reasonably have
requested, and unless the comments of WABC on the proposal shall have
thereafter been addressed by ValliCorp or the applicable ValliCorp
Subsidiary. For purposes of this subsection, the phrase "construction loan
commitments" shall include both disbursed and undisbursed loan commitments.
The construction loans and construction loan commitments of ValliCorp and
the ValliCorp Subsidiaries as of the month end prior to the date of this
Agreement shall have been Previously Disclosed; or
(3) ValliCorp and the ValliCorp Subsidiaries shall promptly notify
WABC in writing if any one of the Chief Executive Officer, the Chief
Operating Officer, the Chief Financial Officer, the Chief Credit Officer or
the General Counsel or any other in-house lawyer becomes aware of the
occurrence of any of the following:
(A) the classification of any loans, leases, other extensions of
credit or commitments, or other interest-bearing assets of ValliCorp and
its Subsidiaries of $100,000 or more by any internal bank examiner,
management, any bank regulatory agency or ValliCorp's independent
auditor(s) as "Other Loans Especially Mentioned," "Substandard,"
"Doubtful," "Loss," or words of similar import in the case of loans (or
that would have been so classified in the case of other assets, had they
been loans) and the placement of any interest-bearing asset on a watch list
whether by said persons or entities; or
(B) the filing or commencement of any legal or regulatory action or
other proceeding or investigation involving ValliCorp or the ValliCorp
Subsidiaries.
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(g) Press Releases. ValliCorp and the ValliCorp Subsidiaries shall not
--------------
issue any press release or written statement for general circulation relating to
this Agreement or the Merger unless previously provided to WABC for review and
approval (which approval will not be unreasonably withheld or delayed) and shall
cooperate with WABC in the development and distribution of all news releases and
other public information disclosures with respect to this Agreement or the
Merger; provided that ValliCorp may, without the consent of WABC, make any
disclosure with regard to this Agreement or the Merger which, based on the
advice of its counsel, is required under any applicable law or regulation.
(h) No Merger or Solicitation.
-------------------------
(1) ValliCorp shall not, nor shall it permit any ValliCorp
Subsidiaries, or authorize or permit any of its officers, directors or
employees or any investment banker, financial advisor, attorney, accountant
or other representative or agent retained by it or any ValliCorp
Subsidiaries, to, directly or indirectly, solicit, initiate, or encourage
(including by way of furnishing nonpublic information), or take any other
action to facilitate, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any Takeover
Proposal (as defined below), or agree to or endorse any Takeover Proposal,
or participate in any discussions or negotiations, or provide third parties
with any nonpublic information, relating to any such inquiry or proposal;
provided, however, that prior to receipt of the ValliCorp shareholder
-------- -------
approval described in Section 5.2(a), to the extent required by the
fiduciary obligations of the Board of Directors of ValliCorp, as determined
in good faith by the Board of Directors based on the advice of independent
counsel, ValliCorp may, (A) in response to an unsolicited Takeover Proposal
and subject to compliance with Section 5.2(h)(3), furnish information with
respect to ValliCorp and its Subsidiaries to any person pursuant to a
customary confidentiality agreement (as determined by ValliCorp's
independent counsel) and answer questions about such information (but not
the terms of any possible Takeover Proposal) with such Person and (B) upon
receipt by ValliCorp of an unsolicited Takeover Proposal and subject to
compliance with Section 5.2(h)(3), participate in negotiations regarding
such Takeover Proposal. Without limiting the foregoing, it is understood
that any violation of the restrictions set forth in the preceding sentence
by any director or executive officer of ValliCorp or any of its
Subsidiaries or any investment banker, attorney or other advisor or
representative of ValliCorp or any of its Subsidiaries, whether or not such
Person is purporting to act on behalf of ValliCorp or any of its
Subsidiaries or otherwise, shall be deemed to be a breach of this Section
5.2(h)(1) by ValliCorp. For purposes of this Agreement, "Takeover
Proposal" means any written inquiry, proposal or offer from any person
relating to any direct or indirect acquisition or purchase of a substantial
amount of the assets of ValliCorp or any of its Subsidiaries, other than
the transactions contemplated by this Agreement and the Stock Option
Agreement, or of 50% or more of any class of equity securities of ValliCorp
or any of its Subsidiaries or any tender offer
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or exchange offer that if consummated would result in any Person
beneficially owning 50% or more of any class of equity securities of
ValliCorp or any of its Subsidiaries, or any merger, consolidation,
business combination, sale of substantially all assets, recapitalization,
liquidation, dissolution or similar transaction involving ValliCorp or any
of its Subsidiaries other than the transactions contemplated by this
Agreement and the Stock Option Agreement.
(2) Except as set forth herein, neither the Board of Directors of
ValliCorp nor any committee thereof shall (i) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to WABC, the approval or
recommendation by such Board of Directors or any such committee of this
Agreement or the Merger, (ii) approve or recommend, or propose to approve
or recommend, any Takeover Proposal, or (iii) enter into any agreement with
respect to any Takeover Proposal. Notwithstanding the foregoing, prior to
the receipt of the shareholder approval described in Section 5.2(a), the
Board of Directors of ValliCorp, to the extent required by its fiduciary
obligations, as determined in good faith by the Board of Directors based on
the advice of independent counsel, may (subject to the following sentences)
withdraw or modify its approval or recommendation of this Agreement or the
Merger, approve or recommend any Superior Proposal (as defined below),
enter into an agreement with respect to such Superior Proposal or terminate
this Agreement, in each case at any time after the third Business Day
following WABC's receipt of a written notice advising WABC that the
ValliCorp Board of Directors has received a Superior Proposal, specifying
the material terms and conditions of such Superior Proposal and identifying
the person making such Superior Proposal (it being understood that any
amendment to a Superior Proposal shall necessitate an additional three
Business Day period). In addition, if ValliCorp proposes to enter into an
agreement with respect to any Takeover Proposal, it shall concurrently with
entering into such agreement pay, or cause to be paid, to WABC the
Termination Fee (as defined in Section 5.2(h)(4)) in accordance with the
provisions of Section 5.2(h)(4). For purposes of this Agreement, "Superior
Proposal" means any bona fide written Takeover Proposal made by a third
party to acquire, directly or indirectly, for consideration consisting of
cash and/or securities, more than 50% of the shares of ValliCorp Common
Stock then outstanding or all or substantially all the assets of ValliCorp
and otherwise on the terms which the Board of Directors of ValliCorp
determines in its good faith judgment that said bona fide Takeover Proposal
is reasonably capable of being completed, taking into account all legal,
financial, regulatory and other aspects of the proposal and the Person
making the proposal and (based on the advice of a financial advisor of
nationally recognized reputation) would, if consummated, be more favorable
to ValliCorp's shareholders from a financial point of view than the Merger.
(3) In addition to the obligation of ValliCorp set forth in paragraph
(2) above, the Company promptly shall advise WABC orally and in writing of
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any request for information or of any Takeover Proposal, or any inquiry
with respect to or which could lead to any Takeover Proposal, the material
terms and conditions of such request, Takeover Proposal or inquiry and the
identity of the Person making any such request, Takeover Proposal or
inquiry. ValliCorp will keep WABC fully informed of the status and details
(including amendments or proposed amendments) of any such request, Takeover
Proposal or inquiry.
(4) If this Agreement is terminated pursuant to its terms other than
by WABC or ValliCorp solely because the Federal Reserve Board or
Superintendent shall have issued a final order denying approval of the
Merger, a failure of the condition in Section 6.1(a)(ii) occurs, or other
than by ValliCorp pursuant to Section 7.1(a)(6)(i) or Section 7.1(c), and
an Acquisition Event shall occur after the date hereof and within 18 months
after the date of such termination, ValliCorp shall pay promptly, but in no
event later than two Business Days after the occurrence of such Acquisition
Event, by wire transfer of immediately available Federal Funds to such
account as WABC shall designate, $6 million (the "Termination Fee") (but
only if a Termination Fee shall not theretofore have been paid under
Section 5.2(h)(2) hereof). For purposes of this subsection, the term
"Acquisition Event" shall mean any of the following: (i) any Person (other
than WABC or any Subsidiary thereof) shall have acquired pursuant to a
tender offer or otherwise beneficial ownership of 20% or more of the
outstanding shares of ValliCorp Common Stock; (ii) ValliCorp or ValliWide
shall have authorized, recommended, proposed or publicly announced an
intention to authorize, recommend or propose, or entered into, an agreement
with any Person (other than WABC or a Subsidiary thereof) to (A) effect a
merger, consolidation or similar transaction (or series of unrelated and
non-integrated mergers, consolidations or similar transactions) involving
ValliCorp or ValliWide (other than a merger, consolidation or similar
transaction in which those holders of ValliCorp Common Stock outstanding
immediately prior to each such transaction continue to own at least 80% of
the ValliCorp Common Stock outstanding immediately after such transaction),
(B) sell, lease or otherwise dispose of assets of ValliCorp or the
ValliCorp Subsidiaries representing 20% or more of the consolidated assets
of ValliCorp and the ValliCorp Subsidiaries, or (C) issue, sell or
otherwise dispose of (including by way of merger, consolidation, share
exchange or any similar transaction) securities representing 20% or more of
the voting power of ValliCorp or the ValliCorp Subsidiaries (but excluding
a series of unrelated and non-integrated issues, sales or other
dispositions).
(5) WABC covenants and agrees that, in the event ValliCorp makes
payment of the Termination Fee to WABC upon the occurrence of an
Acquisition Event in accordance with the terms of paragraph (4) above,
neither WABC nor any of its Affiliates will for a period of five years
after the payment of said Fee (the last day of such period, the "Standstill
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Termination Date"), unless specifically invited in writing to do so by
ValliCorp and then only to the extent stated therein, in any manner acquire
or agree to acquire or make any proposal to acquire, directly or
indirectly, the beneficial ownership of any common stock, equity securities
or other securities having voting power with respect to the election of
directors of ValliCorp ("Voting Equity"), or any other securities
convertible into Voting Equity or any options, warrants or other rights to
acquire Voting Equity (such convertible securities, options, warrants or
other rights, together with Voting Equities, being hereinafter called
"Voting Securities") of ValliCorp or its Affiliates. From the date the
Termination Fee is paid until the Standstill Termination Date, neither WABC
nor any of its Affiliates will, except with the express written consent of
ValliCorp and then only to the extent stated in such written consent, make
or in any way participate, directly or indirectly, in any "solicitation" of
"proxies" (as such terms are defined in Regulation 14A under the Exchange
Act) to vote or seek to advise or influence any person with respect to the
voting of any Voting Securities of ValliCorp or its Affiliates. WABC
covenants and agrees that, from the date the Termination Fee is paid until
the Standstill Termination Date, neither it nor any of its Affiliates shall
(i) make any Acquisition Proposal (as defined below) or proposal with
respect to a Business Combination (as defined below), joint venture, or any
other extraordinary business arrangement, including, but not limited to, a
business arrangement which could result in a change of control of
ValliCorp, in each case in respect of ValliCorp or any of its Affiliates,
(ii) take any initiatives involving ValliCorp that would otherwise require
ValliCorp to make a public announcement or make any public comment or
proposal with respect to any Acquisition Proposal or Business Combination,
(iii) join a partnership, limited partnership, syndicate or other group for
the purpose of acquiring, holding, voting or disposing of Voting Securities
of ValliCorp or otherwise become a "person" within the meaning of section
13(d)(3) of the Exchange Act with respect to any Voting Securities of
ValliCorp or its Affiliates, (iv) enter into any discussions, negotiations,
arrangements or understandings with any third party with respect to any of
the foregoing, (v) knowingly advise, assist or encourage any third party in
connection with any of the foregoing, or (vi) otherwise seek to control or
influence ValliCorp or its management or Board of Directors. "Acquisition
Proposal" shall mean any tender offer or exchange offer or proposal to
ValliCorp (including, without limitation, any proposal or offer to
stockholders of ValliCorp) with respect to a Business Combination or
involving the purchase of 25% or more of the outstanding Voting Securities
of ValliCorp. "Business Combination" shall mean (a) a merger,
consolidation, acquisition, scheme or other analogous arrangement in which
ValliCorp is a constituent corporation or party and pursuant to which
Voting Securities of ValliCorp are or may be exchanged for cash, securities
or other property or (b) a sale of all or substantially all of the assets
of ValliCorp and its Affiliates. Notwithstanding anything herein to the
contrary, nothing herein shall prevent or restrict WABC from voting any
ValliCorp Common Stock it beneficially
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owns as of the date hereof or from selling said stock through any
broker/dealer.
(i) ValliCorp 401(k) Plan, Profit Sharing Plan and Benefit Plans. On and
------------------------------------------------------------
after the Effective Date all persons who are employed by ValliCorp and/or
ValliCorp Subsidiaries on such date shall be eligible for benefits which in the
aggregate are no less favorable with respect to their employment by WABC and its
Subsidiaries after the Effective Date than those generally afforded to other
employees of WABC and its Subsidiaries holding similar positions, subject to the
terms and conditions under which those employee benefits are made available to
such employees and provided that for purposes of determining eligibility for and
vesting of such employee benefits, service with ValliCorp or a ValliCorp
Subsidiary or any predecessor thereto prior to the Effective Date shall be
treated as service with an "employer" to the same extent as if such persons had
been employees of WABC. ValliCorp agrees that the ValliCorp 401(k) Plan or any
other 401(k) plans may be terminated, frozen, modified or merged into the
appropriate WABC qualified plans before or after the Effective Date, as
determined by WABC in its sole discretion and that the ValliCorp Profit Sharing
Plans and other qualified plans may be terminated, frozen, modified or merged
into the appropriate WABC qualified plans after the Effective Time; provided,
---------
however, that Vallicorp shall not be required to take any such action prior to
- -------
the Effective Date unless and until WABC acknowledges that all conditions to its
obligation to consummate the Merger in Sections 6.1(a), (b), (g), (h), 6.3(a),
(b), (c), (h), (i), (j), (k) and (l) have been satisfied or waived and WABC
reasonably believes the Merger will close. ValliCorp and any ValliCorp
Subsidiaries will not cash out any unused vacation solely as a result of the
termination of its vacation plan and WABC will recognize the unused, accrued
vacation of ValliCorp's and the ValliCorp Subsidiaries' vacation plans under its
plan subject to the WABC plan's limitations on the accrual of unused vacation;
provided, however, that any employee of ValliCorp or any ValliCorp Subsidiary
- -------- -------
who has unused, accrued vacation time which exceeds the amount of such time such
employee would be entitled to accrue under WABC's plans shall be paid for such
excess time as soon as practicable after the Effective Date. ValliCorp's and
the ValliCorp Subsidiaries' severance policy will be amended immediately before
the Effective Date to state that no severance pay will be paid solely as a
result of the transactions contemplated hereunder. Effective as of the Closing
Date, WABC shall assume liability for severance pay payable to any employee of
ValliCorp or ValliWide who is terminated by WABC after the Closing Date. Such
payment shall be made pursuant to WABC's normal severance policy, and WABC shall
compute severance pay by giving all employees of ValliCorp and ValliWide full
credit for all years of service since their date of last hire with ValliCorp or
ValliWide, as the case may be, except that employees of ValliCorp or ValliWide
who joined ValliCorp or ValliWide prior to the date hereof as the result of the
acquisition of another institution will also be given full credit for service
with such institution.
(j) ValliCorp Accruals and Reserves. (1) Prior to the Effective Date,
-------------------------------
ValliCorp and the ValliCorp Subsidiaries shall review and, to the extent
determined necessary or advisable by WABC in its sole discretion, consistent
with GAAP and the accounting rules, regulations and interpretations of the SEC
and its staff, modify and change its loan, OREO, accrual and reserve policies
and practices (including loan classifications and levels of tax, loan and
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OREO reserves and accruals) to (i) reflect WABC's plans with respect to the
conduct of ValliCorp's business following the Merger, and (ii) make adequate
provision for the costs and expenses relating thereto so as to be applied
consistently on a mutually satisfactory basis with those of WABC.
(2) Prior to the Effective Date, ValliCorp also will adjust loan loss and
OREO reserves (i) in a manner consistent with its policies and practices as in
effect on the date hereof and (ii) as may be appropriate, consistent with
generally accepted accounting principles and the accounting rules, regulations
and interpretations of the SEC and its staff, to the extent determined by WABC
to be necessary or advisable in its sole discretion in light of the then
anticipated post-closing grading, classification or disposition of certain
ValliCorp assets; provided, however, that ValliCorp agrees in no event shall
-------- -------
ValliCorp's reserve for loan losses constitute less than 100% of total
Nonperforming Loans and 1.6% of total loans as of the close of business on the
last Business Day of the calendar quarter preceding the month during which the
Effective Date occurs.
(3) The parties agree to cooperate in preparing for the implementation of
the adjustments contemplated by this Section 5.2(j). Notwithstanding the
foregoing, ValliCorp shall not be obligated to take in any respect any such
action pursuant to subsections 5.2(j)(1)(i), (1)(ii) or 2(ii) (other than
pursuant to the preceding sentence) unless and until WABC acknowledges that, as
of the date of said acknowledgment, all conditions to its obligation to
consummate the Merger in Sections 6.1(a), (b), (g), (h) and 6.3(a), (b), (c),
(h), (i), (j), (k) and (l) have been satisfied or waived and WABC reasonably
believes the Merger will close.
(4) As of the end of the calendar quarter immediately prior to the
Effective Date, ValliCorp and the ValliCorp Subsidiaries shall create and
maintain on their books one or more reserves and accruals adequate to cover a
reasonable estimate, as mutually agreed to by WABC and ValliCorp, of the loss
contingencies (consistent with GAAP) associated with any of the litigation
matters, claims Previously Disclosed or similar matters arising after the date
hereof or any environmental contamination on any property of ValliCorp or any
ValliCorp Subsidiary as to which environmental audits shall be conducted
pursuant to Section 5.2(f)(1)(J) hereof, unless outside counsel to ValliCorp
shall have rendered its written opinion to the parties hereto that the
likelihood of the incurrence of such loss is remote; provided, however, that if
-------- -------
the parties hereto cannot agree on what constitutes a reasonable estimate of
such amount by 15 days prior to the end of such quarter, then either WABC or
ValliCorp may require that such matter be submitted to counsel independent of
all parties hereto, which shall be satisfactory to both WABC and ValliCorp, for
resolution. Such independent counsel shall be a retired general counsel or
director of litigation of a major publicly-held company in the financial
services industry. Each of WABC and ValliCorp shall be entitled to make, within
five days after such date, one written submission of not more than five pages in
length to such independent counsel and one additional submission of not more
than two pages in length within five days of receipt of the other party's
submission. Such independent counsel shall render a written determination with
respect to the matter not later than 15 days after the end of such calendar
quarter. Such
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determination shall be conclusive and binding on the parties hereto. The fees
and expenses of such independent counsel shall be shared equally by WABC and
ValliCorp.
(5) As of the end of the calendar quarter immediately prior to the
Effective Date, ValliCorp and the ValliCorp Subsidiaries shall create and
maintain on their books such tax reserves and accruals as shall be adequate to
cover a reasonable estimate, as mutually agreed to by WABC and ValliCorp, of tax
accruals, interest and penalties (consistent with GAAP) associated with or
related to any existing or threatened tax audit. If WABC and ValliCorp cannot
agree on what constitutes a reasonable estimate of such tax liability by 15 days
prior to the end of such quarter, then the matter shall be submitted forthwith
to the independent accountants of WABC and ValliCorp for resolution, provided
--------
that if such independent accountants are unable to resolve the matter by
agreement by the end of such quarter, the matter shall be referred to a third
independent accounting firm, selected by the mutual agreement of WABC and
ValliCorp, who shall determine the matter within 15 days of the end of such
calendar quarter. Such determination shall be conclusive and binding on the
parties hereto. The fees and expenses of WABC's accountants shall be borne by
WABC and those of ValliCorp's independent accountants shall be borne by
ValliCorp, and the fees and expenses of any such third independent accounting
firm shall be shared equally by WABC and ValliCorp.
(k) Asset Review. ValliCorp shall continue to engage its internal asset
------------
review examiners to identify potential losses with respect to loans and other
assets on the books of ValliCorp and its Subsidiaries and who shall have
reviewed all Nonperforming Assets and other classified or criticized assets as
of a date within three months preceding the Effective Date. ValliCorp shall
promptly provide a copy of such reports to WABC. Between the date of this
Agreement and January 31, 1997, all assets of ValliCorp and its Subsidiaries,
including classified or criticized and Nonperforming Assets, may be reviewed by
WABC and WABC may provide a report thereon to ValliCorp setting forth WABC's
grading or other assessment thereof (including accounting treatment and loss
recognition) utilizing ValliCorp's regular loan/OREO review criteria consistent
with GAAP and RAP. WABC shall use its commercially reasonable efforts to
complete such review as promptly as practicable but in any event shall complete
such review by January 31, 1997. ValliCorp may either accept and implement
WABC's grading or other assessments (including accounting treatment and loss
recognition) concerning loans or OREO by January 31, 1997, or, if it does not
agree with WABC's conclusions as set forth in the report, refer the matter for
resolution by one or more of the independent loan and appraisal experts
Previously Disclosed by WABC (the "Independent Loan Reviewer" or "Independent
Appraiser") who shall immediately review and/or appraise said loan(s) or OREO
utilizing ValliCorp's regular loan/OREO review criteria consistent with GAAP and
RAP. The parties agree that if the Independent Loan Reviewer believes it
necessary to retain an Independent Appraiser (or if such an Appraiser is
required by the penultimate sentence below), the selection and supervision
thereof of said Appraiser shall be at the discretion and under the control of
the Independent Loan Reviewer. ValliCorp and the ValliCorp Subsidiaries agree
to recognize on their books and records all loan losses and record all OREO at
their net realizable value (and record related OREO expenses) based on the
review/appraisal by the Independent Loan Reviewer or Independent Appraiser no
later than March 15, 1997. WABC agrees to accept
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the views of the Independent Loan Reviewer and Independent Appraiser.
Additionally, ValliCorp agrees that through the Effective Date, it and the
ValliCorp Subsidiaries shall maintain consistent loan grades with respect to any
of their respective loans which have been or are participated to any other
ValliCorp Subsidiary or to ValliCorp. With respect to any OREO, based on all
known information available from time to time, if it appears that the then
current independent appraisals may not be accurate or upon request of and at the
expense of WABC, ValliCorp shall immediately obtain updated independent
appraisals by an Independent Appraiser (utilizing ValliCorp's regular criteria
consistent with GAAP and RAP) and provide copies of all such appraisals to WABC.
Any new or additional write-downs or OREO expenses shall be recorded immediately
upon receiving any updated independent appraisal.
(l) Changes in Capital Stock; ValliCorp Dividends. At or after the date
---------------------------------------------
hereof and at or prior to the Effective Time, except with the prior written
consent of WABC or as otherwise provided in this Agreement:
(1) Neither ValliCorp nor any ValliCorp Subsidiary shall amend its or
their Certificate or Articles of Incorporation or Association, as the case
may be, or Bylaws; make any change in their respective authorized, issued
or outstanding capital stock or any other equity security; issue, sell,
pledge, assign or otherwise encumber or dispose of, or purchase, redeem or
otherwise acquire, any of their shares of capital stock or other equity
securities or enter into any agreement, call or commitment of any character
so to do; grant or issue any stock option or warrant relating to, right to
acquire, or security convertible into, shares of their capital stock or
other equity security; purchase, redeem, retire or otherwise acquire (other
than in a fiduciary capacity) any shares of, or any security convertible
into, capital stock or other equity security of their respective companies,
or agree to do any of the foregoing except with respect to the exercise of
stock options or voluntary conversion of the Convertible Debentures
currently outstanding on the date hereof.
(2) Neither ValliCorp nor any ValliCorp Subsidiary shall propose,
declare, set aside or pay any dividend or other distribution in respect of
its common stock (including, without limitation, any stock dividend or
distribution) other than regular quarterly cash dividends on its common
stock in amounts substantially equivalent to dividends paid in the two
years prior to the date hereof (it being understood that declaration of a
quarterly dividend equal to the most recent previous quarterly dividend or
pursuant to the last sentence of Section 5.2(l)(3) below will be deemed to
meet this standard), provided that no ValliCorp Subsidiary shall declare or
pay a cash dividend if as a result thereof the ValliCorp Subsidiary would
cease to be adequately capitalized within the meaning of applicable bank
regulations and except as permitted elsewhere in this Section 5.2(l),
ValliCorp shall not declare, set aside or pay any dividends or other
distributions prior to the Effective Time.
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(3) After the date of this Agreement, each of WABC and ValliCorp
shall coordinate with the other the declaration of any dividends in respect
of WABC Common Stock and ValliCorp Common Stock and the record dates and
payment dates relating thereto, it being the intention of the parties
hereto that holders of WABC Common Stock or ValliCorp Common Stock shall
not receive two dividends, or fail to receive one dividend, for any single
calendar quarter with respect to their shares of WABC Common Stock and/or
ValliCorp Common Stock and any shares of WABC Common Stock any such holder
receives in exchange therefor in the Merger. ValliCorp agrees not to
increase its quarterly dividend to a level that is greater than .4098 times
WABC's then current dividend, but may increase its dividend to that level
without breaching this Section 5.2(l)(3).
(m) Indebtedness. Neither ValliCorp nor any of the ValliCorp Subsidiaries
------------
shall incur any long-term indebtedness for borrowed money or guarantee any such
long-term indebtedness or issue or sell any long-term debt securities or
warrants or rights to acquire any long-term debt securities of such party or
guarantee any long-term debt securities of others other than in replacement for
existing or maturing debt.
(n) Execution and Delivery of Stock Option Agreement. ValliCorp agrees
------------------------------------------------
that as a condition of and inducement to WABC to enter into this Agreement it
will enter into the Stock Option Agreement dated the date hereof which shall be
executed and delivered to WABC immediately upon the execution and delivery of
this Agreement.
(o) Noncompetition Agreements. On the date of this Agreement, ValliCorp
-------------------------
shall deliver to WABC the director noncompetition agreements in substantially
the form attached hereto as Exhibit 5.2(o)(i), dated the date hereof, from the
directors listed on Exhibit 5.2(o)(ii) (it being agreed by WABC that said
agreements shall not be effective until the Effective Time).
5.3 Covenants of WABC and ValliCorp.
-------------------------------
(a) Proxy Statement; Registration Statement. As promptly as practicable
---------------------------------------
after the date hereof, WABC and ValliCorp shall cooperate in the preparation of
the Proxy Statement to be mailed to the shareholders of ValliCorp and WABC in
connection with the Merger and the transactions contemplated thereby and to be
filed by WABC as part of the Registration Statement. WABC will advise
ValliCorp, promptly after it receives notice thereof, of the time when the
Registration Statement or any post-effective amendment thereto has become
effective or any supplement or amendment has been filed, of the issuance of any
stop order, of the suspension of qualification of the WABC Common Stock issuable
in connection with the Merger for offering or sale in any jurisdiction, or the
initiation or threat of any proceeding for any such purpose, or of any request
by the SEC for the amendment or supplement of the Registration Statement or for
additional information.
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(b) Commercially Reasonable Efforts.
-------------------------------
(1) WABC and ValliCorp shall each use all commercially reasonable
efforts in good faith, and each of them shall cause their respective
subsidiaries to use all commercially reasonable efforts in good faith, to
(i) furnish such information as may be required in connection with the
preparation of the documents referred to in Section 5.3(a), and (ii) take
or cause to be taken all action necessary or desirable on its part so as to
permit consummation of the Merger at the earliest possible date, including,
without limitation, (1) obtaining the consent or approval of each
individual, partnership, corporation, association or other business or
professional entity whose consent or approval is required for consummation
of the transactions contemplated hereby, and (2) requesting the delivery of
appropriate opinions, consents and letters from its counsel and independent
auditors. No party hereto shall take or fail to take, or cause or permit
its subsidiaries to take or fail to take, or to the best of its ability
permit to be taken or omitted to be taken by any third persons, any action
that would substantially impair the prospects of completing the Merger
pursuant to this Agreement and the Plan of Merger, that would materially
delay such completion, or that would adversely affect the qualification of
the Merger for pooling of interests accounting treatment or as a
reorganization within the meaning of section 368(a) of the Code. In the
event that either party has taken any action, whether before, on or after
the date hereof, that would adversely affect such qualification, each party
shall take such action as the other party may reasonably request to cure
such effect to the extent curable without a Material Adverse Effect on
either of the parties.
(2) ValliCorp shall give prompt written notice to WABC, and WABC
shall give prompt written notice to ValliCorp, of (i) the occurrence,
impending or threatened occurrence or failure to occur, of any event which
would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at any time
from the date hereof to the Closing Date and (ii) any material failure of
ValliCorp or WABC, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder, and each party shall use its best efforts to prevent or remedy
such failure promptly.
(c) Investigation. ValliCorp and WABC each will keep the other advised of
-------------
all material developments relevant to its business and to consummation of the
transactions contemplated herein and in the Plan of Merger. WABC and ValliCorp
each may make or cause to be made such investigation of the financial and legal
condition of the other as such party reasonably deems necessary or advisable in
connection with the transactions contemplated herein and in the Plan of Merger;
provided, however, that such investigation shall be reasonably related to such
- -------- -------
transactions and shall not interfere unnecessarily with normal operations. WABC
and ValliCorp agree to furnish the other and the other's advisors with
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such financial data and other information with respect to its business and
properties as such other party shall from time to time reasonably request. No
investigation by WABC or ValliCorp shall affect or be deemed to modify any
representation or warranty made by, or the conditions to the obligations to
consummate the Merger of, any party hereto, and such representations, warranties
and conditions shall survive such investigation.
(d) Access to Properties, Books and Records; Confidentiality. Upon
--------------------------------------------------------
reasonable notice, WABC and ValliCorp shall each (and shall cause each of their
respective Subsidiaries to) afford to the officers, accountants, counsel and
other representatives of the other, access, during normal business hours during
the period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and all other information concerning its business,
properties and personnel as such other party may reasonably request. ValliCorp
shall also provide to WABC copies of all annual management letters and opinions
and other correspondence and documents in its files prepared by its certified
public accountants since January 1, 1992, and shall use its commercially
reasonable efforts to cause Deloitte & Touche and Ernst & Young to make
available to WABC, its accountants, counsel and other agents, to the extent
reasonably requested in connection with such review, their respective work
papers and documentation relating to its work papers and its audits of the books
and records of ValliCorp and the ValliCorp Subsidiaries. The nonpublic
information provided hereunder shall be held in confidence to the extent
provided in the letter agreement dated June 25, 1996, between WABC and ValliCorp
(the "Letter Agreement"), the terms and provisions of which the parties hereby
reaffirm. Each party shall use its commercially reasonable efforts to cause its
officers, directors, employees, auditors, and attorneys to cooperate with the
other in its reasonable requests for information.
(e) Accounting Methods. Neither ValliCorp nor WABC shall change its
------------------
methods of accounting in effect at December 31, 1995, except as required by
changes in GAAP as concurred in by such party's independent auditor.
(f) Affiliates.
----------
(1) ValliCorp and WABC shall cooperate and use their commercially
reasonable efforts to identify those persons who may be deemed to be
"affiliates" of ValliCorp or WABC within the meaning of Rule 145
promulgated by the Commission under the Securities Act and for purposes of
qualifying the Merger for "pooling of interests" accounting treatment.
ValliCorp and WABC shall use their respective commercially reasonable
efforts to cause each person so identified to deliver to WABC, no later
than 40 days prior to the Effective Date, a written agreement (which
agreement shall be substantially in the form of Exhibit 5.3(f)(i) (in the
case of ValliCorp Affiliates) and 5.3(f)(ii) (in the case of WABC
Affiliates) hereof). Shares of WABC Common Stock issued to such Affiliates
of ValliCorp and WABC in exchange for ValliCorp Common Stock or previously
owned by them shall not be transferable until such time as financial
results covering at least 30 days of combined operations of WABC and
ValliCorp have been published within the meaning of section 201.01 of the
Commission's Codification of
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Financial Reporting Policies, regardless of whether each such Affiliate has
provided the written agreement referred to in this Section. WABC shall
have no obligation to deliver a certificate for WABC Common Stock in
exchange for the ValliCorp Certificates held by any affiliate until said
affiliate has executed and delivered the written agreement described in
this Section 5.3(f).
(2) WABC shall use all commercially reasonable efforts to publish as
soon as practicable after the end of the first month after the Effective
Date in which there are at least thirty (30) days of post-Merger combined
operations (which month may be the month in which the Effective Date
occurs), combined sales and net income figures as contemplated by and in
accordance with the terms of SEC Accounting Series Release No. 135.
(g) Structural Changes to Certain ValliWide Branches. Attached to the
------------------------------------------------
WABC disclosure letter is a schedule of certain ValliWide branches which (a)
ValliCorp has determined to close or consolidate (the "Category A Branches") and
(b) certain additional branches which ValliCorp has indicated will be sold,
closed or consolidated (the "Category B Branches"). Except as set forth in the
WABC disclosure letter, Vallicorp shall use its commercially reasonable efforts
to effect closure, consolidation or sale (in the case of the branch designated
in such disclosure letter as being offered for sale) of the Categories A and B
Branches prior to the end of the calendar quarter immediately prior to the
Effective Date (which efforts shall include but not be limited to the immediate
preparation and filing of appropriate governmental applications to sell, close
or consolidate all of said branches), provided that as to the Category B
Branches, ValliCorp shall not be required to actually effect closure,
consolidation or sale of any such branches if under the circumstances then
existing it is reasonably likely that any of the conditions to the Merger set
forth in Sections 6.1(a), (b), (c), (g), (h) or 6.2(a), (b) or 6.3(i) or (l)
will not be satisfied. Any costs, expenses or restructuring charges relating to
the consolidation or closure of the Category A Branches shall be reflected on
the books and records of ValliCorp for purposes of determining satisfaction of
the condition set forth in Section 6.3(l) hereof, and any such costs, expenses
or restructuring charges with respect to the sale, consolidation or closure of
the Category B Branches shall be disregarded for such purpose but shall, except
as provided in the WABC disclosure letter, be reflected on the ValliCorp
Financial Statements as of the end of the calendar quarter immediately prior to
the Effective Date. After the date hereof, WABC may designate other branches of
ValliWide in addition to those referred to above in this subsection as WABC may
deem appropriate for structural changes, including sales, consolidations and
closures, for implementation after the Effective Date. Upon WABC's request,
ValliCorp shall promptly cause there to be prepared and submitted to WABC for
review drafts of such filings, notices or applications as may be necessary or
appropriate to obtain any required Governmental Approvals with respect to such
structural changes of the branches described in the immediately preceding
sentence, but ValliCorp shall not be required to file or publish any thereof
prior to the Effective Date.
(h) FHLB Advances and Security Agreement. Following the date hereof,
------------------------------------
ValliCorp and ValliWide shall cooperate in all reasonable respects with WABC in
connection with WABC's determination with respect to the assumption of that
certain Advances and Security
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Agreement dated as of January 24, 1994, entered into by and between the Federal
Home Loan Bank of San Francisco and Bank of Fresno, and four confirmations of
advances, dated December 15, 1995.
(i) Available for Sale Investment Securities Portfolio of ValliCorp. WABC
---------------------------------------------------------------
and ValliCorp agree to cooperate in all reasonable respects to minimize
depreciation of ValliCorp's available for sale investment securities portfolio
from and after the date hereof.
(j) Retention Bonus Payments. Subject to the WABC disclosure letter,
------------------------
ValliCorp shall not make retention bonus payments without WABC's consent (which
shall not be unreasonably withheld). To that end, the parties shall cooperate
in all reasonable respects to, by mutual agreement, identify those persons who
shall receive retention bonus payments. Such retention bonus payments shall be
payable to those persons identified pursuant to the foregoing sentence in
accordance with the terms of retention agreements, which agreements shall be in
a form reasonably acceptable to WABC.
(k) Notification re: Book Value Test. ValliCorp shall notify WABC in
--------------------------------
writing immediately if it determines that it will not satisfy the book value
test set forth in Section 6.3(l) hereof as of December 31, 1996. If ValliCorp
sends such a notice, WABC shall have ten (10) Business Days after receipt of
such notice to notify ValliCorp whether it will terminate this Agreement
pursuant to Section 7.1(a).
5.4 Closing.
-------
(a) Closing Date. The closing (the "Closing") shall, unless another date,
------------
time or place is agreed to in writing by WABC and ValliCorp, be a date and time
as soon as practicable, which shall be no later than sixty (60) days after
receipt of all Government Approvals; provided, however, that in no event will
-------- -------
WABC be required to close prior to May 1, 1997; and provided further that WABC
shall provide ValliCorp with at least 10 calendar days' notice of the
anticipated Effective Date. Notwithstanding anything to the contrary contained
in this Agreement, if for any reason the adjustments required under Section
5.2(j), Section 5.2(k) or Section 5.3(g) hereof have not been recorded on
ValliCorp's books for the quarter ended prior to the Effective Date, then WABC
in its sole and absolute discretion may elect to close the Merger on any date up
to and including August 15, 1997. The Closing will be held at the offices of
Pillsbury Madison & Sutro LLP, 235 Montgomery Street, San Francisco, California
or such other place as may be agreed by the parties.
(b) Delivery of Documents. At the Closing, the opinions, certificates and
---------------------
other documents required to be delivered by this Agreement shall be delivered.
(c) Filings. At the Closing, WABC and ValliCorp shall instruct their
-------
respective representatives to make or confirm such filings as shall be required
in the opinion of counsel to WABC and ValliCorp to give effect to the Merger.
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ARTICLE 6
Conditions Precedent
--------------------
6.1 Conditions Precedent - WABC and ValliCorp.
-----------------------------------------
The respective obligations of the parties to effect the Merger shall
be subject to satisfaction or waiver of the following conditions at or prior to
the Closing Date:
(a) This Agreement and the transactions contemplated hereby shall
have been approved and adopted by the requisite affirmative vote of the holders
of (i) ValliCorp Common Stock entitled to vote thereon and (ii) WABC Common
Stock entitled to vote thereon;
(b) The Registration Statement (including any post-effective
amendment thereto) shall be effective under the Securities Act, and no
proceeding shall be pending or to the knowledge of WABC threatened by the
Commission to suspend the effectiveness of such Registration Statement, and WABC
shall have received all state securities or "Blue Sky" permits or other
authorizations, or confirmations as to the availability of an exemption from
registration requirements as may be necessary;
(c) No event shall have occurred that shall preclude, in the opinion
of KPMG Peat Marwick, the Merger from being accounted for as a pooling of
interests, and the parties shall have received a letter from KPMG Peat Marwick
to the effect that the Merger shall qualify for such pooling-of-interests method
of accounting in accordance with generally accepted accounting principles and
all applicable rules, regulations and policies of the Commission;
(d) Neither WABC nor ValliCorp or ValliWide shall be subject to any
order, decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of the transactions contemplated by this
Agreement and the Plan of Merger;
(e) The shares of WABC Common Stock that may be issued in the Merger
shall have been approved for listing on Nasdaq, subject to official notice of
issuance;
(f) WABC and ValliCorp shall have each received such certificates and
other closing documents as counsel for WABC and ValliCorp shall reasonably
request;
(g) Each party hereto shall have received, or the other party hereto
shall have satisfied itself that such party will receive, all consents of other
parties to and required by material mortgages, notes, leases, franchises,
agreements, licenses and permits applicable to ValliCorp or WABC, as the case
may be, and no such consent or license or permit shall have been withdrawn or
suspended, unless the failure to obtain such consents, individually or in the
aggregate, would not have a Material Adverse Effect on ValliCorp or WABC, as the
case may be; and
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(h) All Government Approvals shall be in effect, and all conditions
or requirements prescribed by law or by any Government Approval shall have been
satisfied; provided, however, that no Government Approval shall be deemed to
-------- -------
have been received if it imposes any condition or requirement or disapproves any
aspect of any Application which, in the reasonable opinion of the Board of
Directors of WABC or ValliCorp so materially and adversely affects the
anticipated economic and business benefits to WABC or ValliCorp of the
transactions contemplated by this Agreement as to render consummation of such
transactions inadvisable (in which case WABC shall promptly notify ValliCorp).
For purposes of this Agreement, no condition, requirement or disapproval shall
be deemed to so adversely affect the anticipated economic and business benefits
to WABC or ValliCorp of the transactions contemplated by this Agreement as to
render consummation of such transactions inadvisable, if such condition does not
materially differ from conditions regularly imposed by the governmental
authority in orders approving transactions of the type contemplated by this
Agreement or compliance with such condition, requirement or disapproval would
not (A) require or prevent the taking of any action inconsistent with the manner
in which WABC or ValliCorp has conducted its business previously or as
contemplated by this Agreement, (B) have a Material Adverse Effect upon WABC or
ValliCorp, or (C) preclude satisfaction of any of the conditions to consummation
of the transactions contemplated by this Agreement. Notwithstanding any other
provision of this subsection, the conditions set forth in this subsection shall
not be deemed to be satisfied if any Governmental Approval or any order relating
thereto shall contain any terms or conditions which shall be such as to prevent
WABC from effecting achievement of the level of operating efficiency
improvements as Previously Disclosed by WABC to ValliCorp.
6.2 Conditions Precedent - ValliCorp. The obligations of ValliCorp
--------------------------------
to effect the Merger shall be subject to satisfaction of the following
additional conditions at or prior to the Effective Date unless waived by
ValliCorp pursuant to Section 8.11 hereof:
(a) The representations and warranties of WABC set forth in Article 4
hereof that are qualified as to materiality shall be true and correct and any
representations and warranties that are not so qualified shall be true and
correct in all material respects as of the date of this Reorganization Agreement
and as of the Effective Date as though made on and as of the Effective Date (or
on the date when made in the case of any representation and warranty which
specifically relates to an earlier date) unless the failures or inaccuracies of
such representations and warranties to be so true and correct could not
reasonably be expected to result in or constitute, individually or in the
aggregate, a Material Adverse Effect on WABC;
(b) WABC shall have in all material respects performed all
obligations and complied in all material respects with all covenants required by
this Agreement and the Plan of Merger, unless the failure to perform or comply
with any obligation or covenant relates to an immaterial obligation or covenant
which, taken together with all similar failures, does not constitute a material
failure to perform or a material failure to comply;
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(c) WABC shall have delivered to ValliCorp a certificate, dated the
Closing Date and signed by its respective Chairman, President or Executive Vice
President to the effect that the conditions set forth in paragraphs (a) and (b)
of this Section have been satisfied;
(d) ValliCorp shall have received the opinion of Pillsbury Madison &
Sutro LLP, dated the Closing Date, as to the matters specified in Exhibit 6.2(d)
hereto;
(e) ValliCorp shall have received an opinion of Pillsbury Madison &
Sutro LLP in form and substance reasonably satisfactory to ValliCorp satisfying
Section 6.3(h) herein;
(f) WABC shall not, on a consolidated basis, have suffered any
Material Adverse Effect since September 30, 1996; and
(g) ValliCorp shall have received from KPMG Peat Marwick LLP letters
addressed to ValliCorp not more than two (2) Business Days prior to the
effective date of the Registration Statement and a date not more than ten (10)
Business Days prior to the Effective Date, with respect to certain financial
information regarding WABC, each in form and substance which is customary in
transactions of the nature contemplated by this Agreement.
6.3 Conditions Precedent - WABC. The respective obligations of WABC
---------------------------
to effect the Merger shall be subject to satisfaction of the following
additional conditions at or prior to the Closing Date unless waived by WABC
pursuant to Section 8.11 hereof:
(a) The representations and warranties of ValliCorp and ValliWide set
forth in Article 3 hereof that are qualified as to materiality shall be true and
correct and any representations and warranties that are not so qualified shall
be true and correct in all material respects as of the date of this
Reorganization Agreement and as of the Effective Date as though made on and as
of the Effective Date (or on the date when made in the case of any
representation and warranty which specifically relates to an earlier date)
unless the failures or inaccuracies of such representations and warranties to be
so true and correct could not reasonably be expected to result in or constitute,
individually or in the aggregate, a Material Adverse Effect on ValliCorp;
(b) ValliCorp and ValliWide shall have in all material respects
performed all obligations and complied in all material respects with all
covenants required by this Reorganization Agreement and the Plan of Merger,
unless the failure to perform or comply with any obligation or covenant relates
to an immaterial obligation or covenant which, taken together with all similar
failures, does not constitute a material failure to perform or a material
failure to comply;
(c) ValliCorp shall not, on a consolidated basis, have suffered any
Material Adverse Effect since September 30, 1996;
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(d) ValliCorp shall have delivered to WABC a certificate, dated the
Closing Date and signed by its Chairman, President or any Executive Vice
President to the effect that the conditions set forth in this Section have been
satisfied;
(e) The Rights issued pursuant to the ValliCorp Rights Agreement
shall not have become nonredeemable, exercisable, distributed or triggered
pursuant to the terms of such agreement;
(f) WABC shall have received from Deloitte & Touche LLP letters
addressed to WABC dated not more than two (2) Business Days prior to the
effective date of the Registration Statement and a date not more than ten (10)
Business Days prior to the Closing Date, with respect to certain financial
information regarding ValliCorp, each in form and substance which is customary
in transactions of the nature contemplated by this Agreement;
(g) WABC shall have received opinions of Lillick & Charles and
McCormick, Barstow, Sheppard, Wayte & Carruth or other legal counsel to
ValliCorp satisfactory to WABC, dated the Closing Date, as to the matters
specified in Exhibit 6.3(g) hereto; and
(h) WABC shall have received an opinion of Pillsbury Madison & Sutro
LLP reasonably satisfactory in form and substance to WABC substantially to the
effect that the Merger when consummated in accordance with the terms hereof and
the Plan of Merger will constitute a reorganization within the meaning of
section 368(a) of the Code, and that the exchange of ValliCorp Common Stock to
the extent exchanged for WABC Common Stock will not give rise to recognition of
gain or loss for federal income tax purposes to the shareholders of ValliCorp.
(i) No investigation, legal action, proceeding or legal impediment
pertaining to the Merger or any transactions contemplated hereby or related
thereto or hereto shall have arisen or be pending or threatened which, in the
reasonable opinion of WABC, so adversely affects the anticipated economic and
business benefits to WABC of the transactions contemplated by this Agreement as
to render consummation of such transactions inadvisable.
(j) WABC shall have received executed noncompetition agreements
pursuant to Section 5.2(o) with respect to the directors of ValliCorp.
(k) At least three days prior to Closing, WABC shall have received a
letter from each director of ValliWide and any other ValliCorp Subsidiary
tendering his or her resignation as of the Effective Date.
(l) Prior to March 1, 1997 (unless a later date is necessary due to
the provisions of Section 5.2(k)) WABC shall have received consolidated
financial statements of ValliCorp and the ValliCorp Subsidiaries (which
financial statements shall be accompanied by those footnotes required by GAAP),
as of December 31, 1996. Such financial statements shall be warranted by
ValliCorp to present fairly the information stated therein at the date thereof,
in accordance with GAAP, such accounting principles having been consistently
applied (except for inconsistencies, if any, attributable to changes promulgated
by the Financial Accounting
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Standards Board). Such financial statements shall also have been audited by
Deloitte & Touche, which audit shall have been conducted in accordance with
generally accepted auditing standards; and such financial statements shall be
accompanied by the auditor's report, which shall state that in Deloitte &
Touche's opinion, such financial statements present fairly, in all material
respects, the financial position and results of ValliCorp and the ValliCorp
Subsidiaries as of the date of such financial statements in accordance with
GAAP, and which report and opinion shall not be qualified in a manner not
acceptable to WABC in the exercise of its business judgment. Based on said
audited balance sheet, ValliCorp shall have a consolidated book value as of
December 31, 1996 of at least $138,885,000. Based on said audited balance sheet
and ValliCorp's unaudited consolidated balance sheet as of March 31, 1997,
ValliCorp shall have a consolidated book value as of March 31, 1997 of at least
$138,885,000.
No more than ten (10) Business Days after March 31, 1997 or the
quarter end immediately preceding the Effective Date, whichever shall last
occur, WABC shall have received a consolidated balance sheet of ValliCorp and
the ValliCorp Subsidiaries as of such quarter end. In addition, such balance
sheet shall be warranted by ValliCorp to present fairly the information stated
therein at the date thereof, in accordance with GAAP, such accounting principles
having been consistently applied (except for inconsistencies, if any,
attributable to changes promulgated by the Financial Accounting Standards
Board). Based on said balance sheet, ValliCorp shall have a consolidated book
value as of such quarter end of at least $138,885,000; provided, however, that
-------- -------
for purposes of preparing the preceding calculation for such quarter end any
charges, writedowns, reserves, provisions and similar expenses which are
required to be made pursuant to Section 5.2(j)(2)(i) (including without
limitation any charges or reserves required to achieve compliance with the
proviso in Section 5.2(j)(2)), (4) or (5), or Section 5.2(k) or Section 5.3(g)
but not recorded in ValliCorp's books because not required to be so recorded
pursuant to ValliCorp's policies and practices, shall be recorded on a pro forma
basis such that the parties can determine whether the preceding book value test
will be actually satisfied. Immediately upon the determination of the amount of
such items pursuant to Sections 5.2(j)(2), (4) or (5), 5.2(k) and 5.3(g),
ValliCorp shall record (to the extent not previously recorded) all such charges,
writedowns, reserves, provisions and similar expenses to the extent consistent
with GAAP in its March 31, 1997 financial statements if such financial
statements have not been previously issued publicly (or subsequent quarter end
financial statements if the financial statements for the quarter ended March 31,
1997 have previously been so issued).
The parties agree that all investment banking, legal and accounting
expenses in excess of $1,500,000 that have been or will be incurred by ValliCorp
in connection with the Merger from and after June 25, 1996 and recorded on its
books as of March 31, 1997 shall be excluded for purposes of calculating the
book value tests as set forth in this Section 6.3(l). The parties further agree
that the effect of Capital Transactions (as defined below), losses reflected in
shareholders' equity pursuant to GAAP, if any, existing as of the date hereof,
or which result after the date hereof, in ValliCorp's available for sale
investment portfolio due to rising interest rates, and any adjustments to
ValliCorp's books pursuant to Section 5.2(j)(1) or 2(ii) shall be disregarded
for purposes of calculating the book value tests as set forth in this Section
6.3(l). "Capital Transactions" shall include all ValliCorp stock
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option exercises, debt conversions, ESOP and DRIP share issuances, net of any
ValliCorp share repurchases, to the extent that any such exercises, conversions,
issuances or repurchases shall have occurred after June 30, 1996. The parties
agree that if ValliCorp's consolidated book value (determined in the manner
described above) as of March 31, 1997 (or subsequent quarter end, if applicable)
is less than $138,885,000 but more than $125,000,000, then the Exchange Ratio as
adjusted for all other adjustments provided for in this Agreement shall be
adjusted downward according to the following formula (and no failure of a
condition shall have occurred):
Book Value (March 31, 1997
Exchange Ratio = Prior Exchange X (or subsequent quarter end, if applicable))
Ratio -------------------------------------------
$138,885,000
If ValliCorp's consolidated book value (as determined in the manner described
above) as of the end of the calendar quarter preceding the Effective Date is
less than $125,000,000, this Section 6.3(l) shall not be satisfied.
ARTICLE 7
Termination, Waiver and Amendment
---------------------------------
7.1 Termination.
-----------
(a) Termination. This Agreement and the Plan of Merger may be terminated
-----------
as follows:
(1) By the mutual consent of the Boards of Directors of both WABC and
ValliCorp at any time prior to the consummation of the Merger.
(2) By the Board of Directors of WABC on or after August 15, 1997, if
(A) any of the conditions in Section 6.3 to which the obligations of WABC
are subject have not been fulfilled, or (B) such conditions have been
fulfilled or waived by WABC and ValliCorp shall have failed to complete the
Merger.
(3) By the Board of Directors of WABC if a Material Adverse Effect
shall have occurred with respect to ValliCorp and the ValliCorp
Subsidiaries taken as a whole since September 30, 1996, or there has been
failure or prospective failure on the part of ValliCorp or ValliWide to
comply with its obligations under this Agreement, or any failure or
prospective failure to comply with any of the conditions set forth in
Section 6.3 hereof.
(4) By WABC if, after the date hereof, any person (other than WABC or
any Subsidiary thereof) shall become and remain for ten Business Days the
beneficial owner of 10% or more of the then outstanding shares of ValliCorp
or any Person (other than WABC or a subsidiary thereof) shall have
commenced a bona fide tender offer or exchange offer to acquire at least
10% of the then outstanding shares of ValliCorp.
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(5) By the Board of Directors of ValliCorp on or after August 15,
1997, if (A) any of the conditions contained in Section 6.2 to which the
obligations of ValliCorp are subject have not been fulfilled, or (B) such
conditions have been fulfilled or waived but WABC shall have failed to
complete the Merger; provided, however, that if WABC is engaged at the time
-------- -------
in litigation (including an administrative appeal procedure) relating to an
attempt to obtain one or more of the Government Approvals or if WABC shall
be contesting in good faith any litigation which seeks to prevent
consummation of the transactions contemplated hereby, such nonfulfillment
shall not give ValliCorp the right to terminate this Agreement until the
earlier of (A) twelve (12) months after the date of this Agreement and (B)
sixty (60) days after the completion of such litigation and of any further
regulatory or judicial action pursuant thereto, including any further
action by a governmental agency as a result of any judicial remand, order
or directive or otherwise or any waiting period with respect thereto.
(6) By the Board of Directors of ValliCorp if (i) a Material Adverse
Effect shall have occurred with respect to WABC and the WABC Subsidiaries
taken as a whole since September 30, 1996, or (ii) there has been failure
or prospective failure on the part of WABC to comply with its obligations
under this Agreement, or (iii) any failure or prospective failure to comply
with any condition set forth in Section 6.2.
(7) By the Board of Directors of ValliCorp, if the Board of Directors
so determines by a vote of a majority of the members of its entire Board,
at any time during the two-day period commencing one day after the
Determination Date, if the Average Price as of the Determination Date of
shares of WABC Common Stock shall be less than $46.13 (the "Minimum
Price"); subject, however, to the following three sentences. If ValliCorp
------- -------
elects to exercise its termination right pursuant to the immediately
preceding sentence, it shall give prompt written notice to WABC; provided
that such notice of election to terminate may be withdrawn at any time
within the aforementioned two-day period. During the two-day period
commencing on the day after receipt of such notice, WABC shall have the
option in the case of a failure to satisfy the condition set forth in this
clause, of adjusting the Exchange Ratio to equal a number equal to a
quotient (rounded to the nearest ten thousandth), the numerator of which is
the product of the Minimum Price and .4313 and the denominator of which is
the Average Price. If WABC makes an election contemplated by the preceding
sentence, within such two-day period, it shall give prompt written notice
to ValliCorp of such election and the revised Exchange Ratio, whereupon no
termination shall have occurred pursuant to this Section and this
Reorganization Agreement shall remain in effect in accordance with its
terms (except as the Exchange Ratio shall have been so modified), and any
references in this Agreement to "Exchange Ratio" shall thereafter be deemed
to refer to the Exchange Ratio as adjusted pursuant to this Section.
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For purposes of this subsection, "Determination Date" shall mean the
last day of the 20 trading day period referred to in the definition of
Average Price.
(b) Notice. The power of termination hereunder may be exercised by WABC
------
or ValliCorp, as the case may be, only by giving written notice, signed on
behalf of such party by its Chairman of the Board or President, to the other
party.
(c) Breach of Obligations. If there has been a material breach by either
---------------------
party in the performance of any of the obligations herein which shall not have
been cured within thirty (30) days after written notice thereof has been given
to the defaulting party, the nondefaulting party shall have the right to
terminate this Agreement upon written notice to the other party. In any event,
the nondefaulting party shall have no obligation to consummate any transaction
or take any further steps toward such consummation contemplated hereunder until
such breach is cured.
(d) Termination and Expenses. Termination of this Agreement shall not
------------------------
terminate or affect the Stock Option Agreement or the representations and
warranties in Article 3 insofar as they relate to the Stock Option Agreement or
the obligations of the parties under Section 5.1(e), 5.2(h) or 8.1 or otherwise
to pay expenses as provided elsewhere herein, to maintain the confidentiality of
the other party's information pursuant to Section 5.3(d), or the provisions of
this Section 7.1(d) or of Section 8.5, 8.8 or 8.9 or the second sentence of
Section 8.3 and shall not affect any agreement after such termination. The
parties agree that any termination of this Agreement shall not in any manner
release or be construed as so releasing the nonterminating party or parties or
their respective officers or directors from any liability or damage to the other
party or parties arising out of, in connection with or otherwise relating to,
directly or indirectly, such parties' willful breach of its covenants,
agreements, representations or warranties hereunder.
7.2 Survival of Representations, Warranties and Covenants. No
-----------------------------------------------------
investigation by WABC or ValliCorp made before or after the date hereof shall
affect the representations and warranties which are contained in this Agreement;
provided that all representations, warranties, covenants and agreements in this
Reorganization Agreement and the Plan of Merger or in any instrument delivered
pursuant hereto or thereto shall expire on, and be terminated and extinguished
at, the Effective Date other than covenants and agreements that by their terms
are to survive or be performed, in whole or in part, after the Effective Date,
provided that no such representations, warranties or covenants shall be deemed
to be terminated or extinguished so as to deprive WABC or ValliCorp (or any
director, officer or controlling person thereof) of any defense in law or equity
which otherwise would be available against the claims of any person, including,
without limitation, any shareholder or former shareholder of either WABC or
ValliCorp, the aforesaid representations, warranties, covenants and agreements
being material inducements to the consummation by WABC and ValliCorp of the
transactions contemplated herein.
7.3 Amendment or Supplement. This Reorganization Agreement and the Plan
-----------------------
of Merger may be amended or supplemented at any time by mutual agreement of the
parties
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hereto or thereto. Any such amendment or supplement must be in writing and
approved by their respective boards of directors and/or officers authorized
thereby.
ARTICLE 8
Miscellaneous
-------------
8.1 Fees and Expenses.
-----------------
(a) Unless otherwise agreed by the parties in writing or as otherwise
provided herein, each party hereto shall bear and pay all costs and expenses
incurred by it incident to preparing, entering into and carrying out this
Agreement and to consummating the Merger, including fees and expenses of its own
financial consultants, accountants and counsel, except that WABC and ValliCorp
each shall bear and pay 50% of all printing and mailing costs and filing fees
associated with the Registration Statement and the Proxy Statement.
Notwithstanding the foregoing provisions of this Section 8.1, if this Agreement
and the Plan of Merger are terminated by either party pursuant to Section 7.1(c)
hereof because of a willful breach by the other party of any representation,
warranty, covenant or agreement as set forth in Section 7.1(c), and provided
that the terminating party shall not have been in breach of any representation
and warranty (in any material respect), covenant or agreement contained herein
or in the Plan of Merger, then the breaching party shall bear and pay all the
costs and expenses incurred by the parties, with respect to the fees and
expenses of financial and other consultants, investment bankers, accountants,
counsel printers and persons involved in the transactions contemplated by this
Reorganization Agreement, including the preparation of the Registration
Statement and Proxy Statement and the solicitation of proxies, in each case that
are not employees of the party that incurred such fees and expenses. Final
settlement with respect to the payment of such fees and expenses by the parties
shall be made within thirty days of the termination of this Reorganization
Agreement and the Plan of Merger.
(b) Notwithstanding anything to the contrary contained herein, the
aggregate amount of gain realized by WABC pursuant to the Stock Option Agreement
from ValliCorp (or the Substitute Option Seller (as defined in the Stock Option
Agreement)), when added to the Termination Fee, if any, received by WABC shall
not in the aggregate exceed $15,000,000, and, in the event WABC realizes gain in
excess of such amount under the Stock Option Agreement from the Company (or the
Substitute Option Seller), WABC undertakes promptly to pay back to ValliCorp, by
wire transfer of immediately available funds, the amount of such excess.
8.2 Entire Agreement; Severability. This Agreement, the Plan of Merger,
------------------------------
the Stock Option Agreement and the documents, certificates, agreements, letters
and schedules and exhibits attached or required to be delivered pursuant hereto
or thereto and the Letter Agreement set forth the entire agreement and
understanding of the parties with respect to the transactions contemplated
hereunder and thereunder and supersede all prior agreements, arrangements or
understandings with respect thereto. Each provision of this Agreement, the Plan
of Merger and the Stock Option Agreement shall be interpreted in a manner to be
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effective and valid under applicable law, but if any provision hereof or thereof
shall be prohibited or ruled invalid under applicable law, the validity,
legality and enforceability of the remaining provisions shall not, except as
otherwise required by law, be affected or impaired as a result of such
prohibition or ruling.
8.3 Binding Agreement. The terms and conditions of this Agreement and the
-----------------
Plan of Merger shall inure to the benefit of and be binding upon the parties
hereto and thereto and their respective successors and permitted assigns. This
Agreement is not made for the benefit of any person, firm, corporation or
association not a party hereto, and no other person, firm, corporation or
association shall acquire or have any right under or by virtue of this
Agreement. Except as specifically set forth herein, or in the Plan of Merger,
nothing in this Agreement or the Plan of Merger, expressed or implied, is
intended to confer upon any party, other than the parties hereto and thereto,
and their respective successors and permitted assigns, any rights, remedies,
obligations or liabilities.
8.4 No Assignment. No party hereto may assign this Agreement or any of
-------------
its rights, privileges, duties or obligations hereunder (whether by operation of
law or otherwise) to any other Person without the prior written consent of the
other parties to this Agreement. Any such purported assignment or delegation
that is made without the prior written consent of the other parties to this
Agreement shall be void and of no effect.
8.5 Notices. All notices or other communications which are required or
-------
permitted hereunder shall be effective only if in writing and delivered
personally or sent by facsimile transmission or overnight express or by
registered or certified mail, postage prepaid, addressed as follows:
If to ValliCorp or ValliWide:
ValliCorp Holdings, Inc.
8405 North Fresno Street
Fresno, CA 93720
Attention: J. Mike McGowan
Chairman and Chief Executive Officer
Tele. No.: (209) 437-5705
Fax No.: (209) 437-0231
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<PAGE>
With a required copy to:
ValliCorp Holdings, Inc.
8405 North Fresno Street
Fresno, California 93720
Attention: E. L. Herbert, Esq.
Tele. No.: (209) 437-5705
Fax No.: (209) 437-0231
and to:
Lillick & Charles
Two Embarcadero Center
San Francisco, California 94111
Attention: Ronald Bachli, Esq.
Tele. No.: (415) 984-8200
Fax No.: (415) 984-8300
If to WABC:
David L. Payne
Chairman of the Board
Westamerica Bancorporation
1108 Fifth Avenue
San Rafael, CA 94901
Tele. No.: (415) 257-8000
Fax No.: (415) 257-8015
With a required copy to:
Pillsbury Madison & Sutro LLP
P.O. Box 7880
San Francisco, CA 94120-7880
Attention: Jonathan D. Joseph, Esq.
Tele. No.: (415) 983-1000
Fax No.: (415) 983-1200
or to such other address as either party may designate by notice to the other,
and shall be deemed to have been given upon receipt.
8.6 Captions. The captions contained in this Agreement are for reference
--------
purposes only and are not part of this Agreement.
8.7 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original instrument, but
all of which together shall constitute one and the same instrument.
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8.8 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California applicable to agreements
made and entirely to be performed within such jurisdiction, except to the extent
federal law is mandatorily applicable, and the laws of California shall govern
the validly and interpretation hereof and the performance of the parties hereto
of their respective duties and obligations hereunder.
8.9 Attorneys' Fees. In any action at law or suit in equity in relation
---------------
to this Agreement, the prevailing party in such action or suit shall be entitled
to receive a reasonable sum for its attorneys' fees and all other reasonable
costs and expenses incurred in such action or suit.
8.10 Specific Performance. The parties hereby acknowledge and agree that
--------------------
the failure of either ValliCorp, ValliWide or WABC to fulfill any of its
respective covenants and agreements hereunder, including the failure to take all
such actions as are necessary on its part to cause the consummation of the
Merger, will cause irreparable injury to the other party (or parties) for which
damages, even if available, will not be an adequate remedy. Accordingly, each
party hereto does hereby consent to the issuance of injunctive relief by any
court of competent jurisdiction to compel performance of its obligations and to
the granting by any such court of the remedy of the specific performance by it
of its obligations hereunder.
8.11 Waivers. Prior to or at the Effective Time, except with respect to
-------
any required shareholder or regulatory approval, WABC and ValliCorp,
respectively, by written instrument signed by an executive officer of such
party, may at any time (whether before or after approval of this Reorganization
Agreement and the Plan of Merger by the shareholders of ValliCorp and WABC)
extend the time for the performance of any of the obligations or other acts of
ValliCorp, on the one hand, or WABC, on the other hand, and may waive (i) any
inaccuracies of such parties in the representations or warranties contained in
this Agreement, the Plan of Merger or any document delivered pursuant hereto or
thereto, (ii) compliance with any of the covenants, undertakings or agreements
of such parties, or satisfaction of any of the conditions precedent to its
obligations, contained herein or in the Plan of Merger or (iii) the performance
by such parties of any of its obligations set out herein or therein; provided,
--------
however, that no such waiver executed after approval of this Agreement and the
- -------
Plan of Merger by the shareholders of ValliCorp or WABC shall change the number
of shares of WABC Common Stock into which each share of ValliCorp Common Stock
shall be converted pursuant to the Merger. No failure to exercise and no delay
in exercising any right, remedy or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy or power
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy or power provided herein or by law or in equity. The waiver
by any party of the time for performance of any act or condition hereunder does
not constitute a waiver of the act or
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<PAGE>
condition itself. Any requests for waivers or waivers granted pursuant to this
Section 8.11 shall be in accordance with the provisions of Section 8.5 hereof.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed in counterparts by their duly
authorized officers and their corporate seal to be hereunto affixed and attested
by their officers thereunto duly authorized, all as of the day and year first
above written.
Attest VALLICORP HOLDINGS, INC.
/s/ E. L. Herbert By /s/ J. Mike McGowan
- ---------------------------------- --------------------------------------
E. L. Herbert J. Mike McGowan
Executive Vice President, General Chairman and Chief Executive Officer
Counsel and Secretary
(SEAL)
Attest VALLIWIDE BANK
/s/ E. L. Herbert By /s/ J. Mike McGowan
- ---------------------------------- --------------------------------------
E. L. Herbert J. Mike McGowan
Executive Vice President, General Chairman and Chief Executive Officer
Counsel and Secretary
(SEAL)
Attest WESTAMERICA BANCORPORATION
/s/ Mary Anne Bell By /s/ David L. Payne
- ---------------------------------- --------------------------------------
Mary Anne Bell David L. Payne
Assistant Corporate Secretary Chairman, President and Chief
Executive Officer
(SEAL)
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<PAGE>
Annex A
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER, dated as of ________________, 1996 (this
"Merger Agreement"), is made and entered into by and between ValliCorp Holdings,
Inc., a Delaware corporation ("Seller") and Westamerica Bancorporation, a
California corporation ("Buyer").
W I T N E S S E T H:
A. The Boards of Directors of Buyer and Seller have approved, and deem it
advisable and in the best interests of Buyer, Seller and their respective
shareholders, that Buyer and Seller consummate the business transaction provided
for herein in which Seller would merge with and into Buyer (the "Merger").
B. Buyer and Seller have entered into an Agreement and Plan of
Reorganization dated as of November 11, 1996 (the "Agreement"), providing, among
other things, for the execution and filing of this Merger Agreement and the
consummation of the Merger.
NOW, THEREFORE, in consideration of the promises and mutual agreements
contained in this Merger Agreement, the parties to this Merger Agreement hereby
agree that Seller shall be merged with and into Buyer in accordance with the
provisions of the laws of the State of California and the State of Delaware upon
the terms and subject to the conditions set forth as follows:
1. The Merger.
----------
1.1 Effective Time. On ____________, 199_ and (i) upon the filing with
--------------
the California Secretary of State of a duly executed counterpart of this Merger
Agreement with the officers' certificates prescribed by Section 1103 of the
California General Corporation Law attached thereto, and (ii) upon the filing
with the Delaware Secretary of State of a duly executed counterpart of this
Merger Agreement ("Effective Date") the Merger shall become effective. The
effective time of the Merger on the Effective Date shall be 11:59 p.m., Pacific
-----
Standard Time.
1.2 Effect of the Merger. On the Effective Date, Seller shall be merged
--------------------
with and into Buyer and the separate corporate existence of Seller shall cease.
Buyer shall be the surviving corporation (the "Surviving Corporation") in the
Merger. It shall thereupon succeed, without other transfer, to all rights and
properties of, and shall be subject to all the debts and liabilities of, Seller
and the separate existence of Buyer as a California corporation, with all its
purposes, objects, rights, powers, privileges and franchises shall continue
unaffected and unimpaired by the Merger.
-1-
<PAGE>
2. Corporate Governance Matters.
----------------------------
2.1 From and after the Effective Date and until thereafter amended as
provided by law: (a) the Articles of Incorporation of Buyer as in effect
immediately prior to the Effective Date shall be and continue to be the Articles
of Incorporation of the Surviving Corporation; and (b) the Bylaws of Buyer as in
effect immediately prior to the Effective Date shall be and continue to be the
Bylaws of the Surviving Corporation.
2.2 On the Effective Date: (a) the directors of the Surviving Corporation
shall be those persons who are the directors of Buyer immediately prior to the
Effective Date; and (b) the officers of the Surviving Corporation shall be those
persons who are the officers of Buyer at the Effective Date. Additional members
of the Board of Directors and officers of the Surviving Corporation may be
elected or appointed subsequent to the Effective Date pursuant to the terms of
the Agreement and in accordance with the Bylaws of the Surviving Corporation.
Such directors and officers shall continue to hold office from and after the
Effective Date until they shall have resigned or shall have been legally removed
or until their respective successors shall have been elected and qualified.
Removal and replacement of such directors and officers, subject to any
contractual rights they may have, shall be governed by the Bylaws of the
Surviving Corporation and the General Corporation Law of the State of
California. If, at the Effective Date, a vacancy shall exist on the Board of
Directors or in the officers of Buyer, such vacancy may be filled in the manner
provided in the Bylaws of the Surviving Corporation.
3. Conversion of Shares.
--------------------
3.1 Conversion of Seller Shares. As of the Effective Date, by virtue of
---------------------------
the Merger and without any action on the part of the holder of the common stock
of Seller, par value $.01 per share (a "Seller Share" or "Seller Common Stock"):
(a) Each issued and outstanding Seller Share (other than fractional
shares, or any shares as to which dissenters' rights have been perfected),
including each attached right issued pursuant to the Rights Agreement dated
as of March 25, 1996 between Seller and First Interstate Bank of
California, shall be converted into _______ shares of the common stock,
without par value, of Buyer ("Buyer Common Stock" or a "Buyer Share").
(b) From and after the Effective Date, the holders of certificates
formerly representing Seller Shares shall cease to have any rights with
respect thereto other than any dissenters' rights they have perfected
pursuant to Section 262 of the General Corporation Law of the State of
Delaware.
(c) On the Effective Date, all shares of Seller Common Stock held in
the treasury of Seller or owned beneficially by any subsidiary of Seller
other than in a fiduciary capacity or in connection with a debt previously
contracted and all shares of Seller Common Stock owned by Buyer or owned
beneficially by any subsidiary of Buyer other than in a fiduciary capacity
or
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<PAGE>
in connection with a debt previously contracted shall be canceled and no
cash, stock or other property shall be delivered in exchange therefor.
3.2 Fractional Shares. Notwithstanding any other provision hereof, no
-----------------
fractional shares of Buyer Common Stock shall be issued to holders of Seller
Shares. In lieu thereof, each such holder entitled to a fraction of a share of
Buyer Common Stock shall receive, at the time of surrender of the certificate or
certificates representing such holder's Seller Shares, an amount in cash equal
to the market value per share of the Common Stock of Buyer, calculated by taking
the average of the closing price quoted on the Nasdaq, as reported in The Wall
Street Journal, for each of the twenty consecutive trading days prior to five
trading days prior to the Effective Date, rounded to 4 decimal places (whether
or not there were any trades in Buyer Common Stock on such days), multiplied by
the fraction of a share of Buyer Common Stock to which such holder otherwise
would be entitled. No such holder shall be entitled to dividends, voting
rights, interest on the value of, or any other rights in respect of, a
fractional share.
3.3 Surrender of Seller Shares.
--------------------------
(a) Prior to the Effective Date, Buyer shall appoint Chemical Trust
Company of California or its successor, or any other bank or trust company
(having capital of at least $50 million) mutually acceptable to Seller and
Buyer, as exchange agent (the "Exchange Agent") for the purpose of exchanging
certificates representing the Buyer Common Stock, and at and after the Effective
Date, Buyer shall issue and deliver to the Exchange Agent certificates
representing the Buyer Common Stock, as shall be required to be delivered to
holders of Seller Shares pursuant to Section 3.1 of this Merger Agreement. As
soon as practicable after the Effective Date, each holder of Seller Shares
converted pursuant to Section 3.1, upon surrender to the Exchange Agent of one
or more certificates for such Seller Shares for cancellation, along with duly
executed transmittal materials to be mailed after the Effective Date by the
Exchange Agent, will be entitled to receive a certificate representing the
number of shares of Buyer Common Stock determined in accordance with Section 3.1
and a payment in cash with respect to fractional shares, if any, determined in
accordance with Section 3.2. Each certificate representing Buyer Common Stock
will bear a notation incorporating the Amended Rights Agreement (as that term is
defined in Section 1.4 of the Agreement) by reference and certificates
representing the Buyer Common Stock will evidence and entitle the holders
thereof to certain rights as set forth in and subject to the terms of the
Amended Rights Agreement ("Rights"). Certificates issued for the Buyer Common
Stock shall be deemed to be certificates for said Rights.
(b) No dividends or other distributions of any kind which are declared
payable to shareholders of record of the Buyer Common Stock after the Effective
Date will be paid to persons entitled to receive such certificates for Buyer
Common Stock until such persons surrender their certificates representing Seller
Shares. Upon surrender of such certificates representing Seller Shares, the
holder thereof shall be paid, without interest, any dividends or other
distributions with respect to the Buyer Common Stock as to which the record date
and payment date occurred on or after the Effective Date and on or before the
date of surrender.
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<PAGE>
(c) If any certificate for a Buyer Share is to be issued in a name other
than that in which the certificate for a Seller Share surrendered in exchange
therefor is registered, it shall be a condition of such exchange that the person
requesting such exchange shall pay to the Exchange Agent any transfer costs,
taxes or other expenses required by reason of the issuance of certificates for
such Buyer Share in a name other than the registered holder of the certificate
surrendered, or such persons shall establish to the satisfaction of Buyer and
the Exchange Agent that such costs, taxes or other expenses have been paid or
are not applicable.
(d) All dividends or distributions, and any cash to be paid pursuant to
Section 3.2 in lieu of fractional shares, if held by the Exchange Agent for
payment or delivery to the holders of unsurrendered certificates representing
Seller Shares and unclaimed at the end of one year from the Effective Date,
shall (together with any interest earned thereon) at such time be paid or
redelivered by the Exchange Agent to Buyer, and after such time any holder of a
certificate representing a Seller Share who has not surrendered such certificate
to the Exchange Agent shall, subject to applicable law, look as a general
creditor only to Buyer for payment or delivery of such dividends or
distributions or cash, as the case may be. Buyer shall not be liable to any
holder of a share of Seller Common Stock for such share (or dividends or
distributions with respect thereto) delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
(e) Upon the Effective Date, the stock transfer books of Seller shall be
closed and no transfer of Seller Common Stock shall thereafter be made or
recognized.
(f) In the event that prior to the Effective Date the outstanding shares
of Buyer Common Stock or Seller Common Stock shall have been increased,
decreased or changed into or exchanged for a different number or kind of shares
or securities by recapitalization, reclassification, stock dividend, stock split
or other like changes in Buyer's or Seller's capitalization, or a distribution
shall be made on Buyer Common Stock or Seller Common Stock in any security
convertible into Buyer Common Stock or Seller Common Stock, respectively
(provided that no such action shall be taken by Seller without Buyer's prior
written consent pursuant to Section 5.2 of the Agreement), then an appropriate
and proportionate adjustment shall be made in the number and kind of shares of
Buyer Common Stock to be thereafter delivered pursuant to this Merger Agreement.
3.4 All shares of Buyer Common Stock shall remain outstanding and
unaffected by the Merger.
4. Termination and Amendment.
-------------------------
4.1 The obligations of the parties to effect the Merger shall be subject
to all the terms and conditions contained in the Agreement. Notwithstanding the
approval of this Merger Agreement by the shareholders of Seller or Buyer, this
Merger Agreement shall terminate forthwith in the event that the Agreement shall
be terminated as therein provided.
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<PAGE>
4.2 This Merger Agreement may be amended by Buyer and Seller at any time
prior to the Effective Date without the approval of the shareholders of Seller
or Buyer with respect to any of its terms except the terms relating to the form
or amount of consideration to be delivered to the Seller shareholders in the
Merger. This Merger Agreement may not be amended, except by an instrument in
writing signed on behalf of each of the parties hereto.
4.3 This Merger Agreement may be signed in any number of counterparts,
each of which shall be deemed an original, and all of which shall be deemed but
one and the same instrument.
5. Miscellaneous.
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5.1 The Agreement is and will be maintained on file at the principal place
of business of the Surviving Corporation. The address of the principal place of
business of the Surviving Corporation is 4550 Mangels Boulevard, Fairfield,
California 94585.
5.2 A copy of the Agreement will be furnished by the Surviving
Corporation, on request and without cost to any stockholder of Seller or Buyer.
5.3 The Agreement between the parties to the Merger has been approved,
adopted, certified, executed and acknowledged by each of the Seller and Buyer in
accordance with the requirements of Chapter 12 of the California General
Corporation Law and Section 252 of the General Corporation Law of the State of
Delaware.
5.4 The Surviving Corporation agrees that it may be served with process in
the State of Delaware in any proceeding for enforcement of any obligation of
Seller, as well as for enforcement of any obligation of the Surviving
Corporation arising from the Merger, including any suit or other proceedings to
enforce the right of any stockholders as determined in appraisal proceedings
pursuant to the provisions of Section 262 of the General Corporation Law of the
State of Delaware, and irrevocably appoints the Secretary of State of the State
of Delaware as its agent to accept service of process in any such suit or other
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<PAGE>
proceedings and directs the Secretary of State of the State of Delaware to mail
copies of such process to the following address: 4550 Mangels Boulevard,
Fairfield, California 94585.
IN WITNESS WHEREOF, the parties have duly executed this Merger Agreement as
of the date first written above.
BUYER
By
-----------------------------
David L. Payne, President and
Chief Executive Officer
By
-----------------------------
Mary Anne Bell, Assistant
Corporate Secretary
SELLER
By
-----------------------------
J. Mike McGowan, Chairman and
Chief Executive Officer
By
-----------------------------
Edwin L. Herbert, Secretary
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<PAGE>
ANNEX B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated November 11, 1996, between Westamerica
Bancorporation, a California corporation ("Buyer"), and ValliCorp Holdings,
Inc., a Delaware corporation ("Seller").
W I T N E S S E T H:
WHEREAS, Buyer, Seller and ValliWide Bank (Seller's subsidiary) have
entered into an Agreement and Plan of Reorganization of even date herewith (the
"Merger Agreement"), which agreement has been executed by the parties hereto
immediately prior to this Agreement; and
WHEREAS, as a condition to Buyer's entering into the Merger Agreement
and in consideration therefor, Seller has agreed to grant Buyer the Option (as
hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Seller hereby grants to Buyer an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 3,474,187
fully paid and nonassessable shares of Seller's Common Stock, par value $.01 per
share ("Common Stock"), at a price of $18.00 per share; provided, however, that
-----------------
in the event Seller issues or agrees to issue any shares of Common Stock (other
than as permitted under the Merger Agreement) at a price less than $18.00 per
share (as adjusted pursuant to subsection (b) of Section 5), such price shall be
equal to such lesser price (such price, as adjusted if applicable, the "Option
Price"); provided further that in no event shall the number of shares for which
----------------
this Option is exercisable exceed 19.9% of the Seller's issued and outstanding
common shares. The number of shares of Common Stock that may be received upon
the exercise of the Option and the Option Price are subject to adjustment as
herein set forth.
(b) In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date hereof (or any treasury
shares held by Seller have been or are sold after the date hereof) (other than
pursuant to this Agreement), the number of shares of Common Stock subject to the
Option shall be increased so that, after such issuance, it equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject to or issued pursuant to the Option. Nothing
contained in this Section 1(b) or elsewhere in this Agreement shall be deemed to
authorize Seller or Buyer to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option,
in whole or part, and from time to time, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as
hereinafter defined) shall have occurred
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<PAGE>
prior to the occurrence of an Exercise Termination Event (as hereinafter
defined), provided that the Holder shall have sent the written notice of such
--------
exercise (as provided in subsection (e) of this Section 2) within 30 days
following such Subsequent Triggering Event. Each of the following shall be an
Exercise Termination Event: (i) the effective time of the Merger on the
Effective Date; (ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence of an
Initial Triggering Event; or (iii) the passage of 12 months after termination of
the Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event (provided that if an Initial Triggering Event continues or
--------
occurs beyond such termination, the Exercise Termination Event shall be 12
months from the expiration of the Last Triggering Event but in no event more
than 18 months after such termination). The "Last Triggering Event" shall mean
the last Initial Triggering Event to occur. The term "Holder" shall mean the
holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Seller or any of its Subsidiaries (each a "Seller
Subsidiary"), without having received Buyer's prior written consent, shall
have entered into an agreement to engage in an Acquisition Transaction (as
hereinafter defined) with any person (the term "person" for purposes of
this Agreement having the meaning assigned thereto in Sections 3(a)(9) and
13(d)(3) of the Exchange Act, and the rules and regulations thereunder)
other than Buyer or any of its Subsidiaries (each a "Buyer Subsidiary") or
the Board of Directors of Seller shall have recommended that the
stockholders of Seller approve or accept any Acquisition Transaction other
than as contemplated by the Merger Agreement. For purposes of this
Agreement, "Acquisition Transaction" shall mean (x) a merger or
consolidation, or any similar transaction, involving Seller or any
Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X
promulgated by the SEC) of Seller, (y) a purchase, lease or other
acquisition representing 15% or more of the consolidated assets of Seller
and its Subsidiaries, or (z) a purchase or other acquisition (including by
way of merger, consolidation, share exchange or otherwise) of securities
representing 10% or more of the voting power of Seller or any Significant
Subsidiary of Seller;
(ii) Seller or any Seller Subsidiary, without having received
Buyer's prior written consent, shall have authorized, recommended, proposed
or publicly announced its intention to authorize, recommend or propose, an
agreement to engage in an Acquisition Transaction with any person other
than Buyer or a Buyer Subsidiary, or the Board of Directors of Seller shall
have publicly withdrawn or modified, or publicly announced its intent to
withdraw or modify, in any manner adverse to Buyer, its recommendation that
the stockholders of Seller approve the transactions contemplated by the
Merger Agreement;
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<PAGE>
(iii) Any person other than Buyer, any Buyer Subsidiary or
any Seller Subsidiary acting in a fiduciary capacity shall have acquired
beneficial ownership or the right to acquire beneficial ownership of 10% or
more of the outstanding shares of Common Stock (the term "beneficial
ownership" for purposes of this Agreement having the meaning assigned
thereto in Section 13(d) of the Exchange Act, and the rules and regulations
thereunder);
(iv) Any person other than Buyer or any Buyer Subsidiary
shall have made a bona fide proposal to Seller or its stockholders by
public announcement or written communication that is or becomes the subject
of public disclosure to engage in an Acquisition Transaction;
(v) After a proposal is made by a third party to Seller
or its stockholders to engage in an Acquisition Transaction, Seller shall
have breached any covenant or obligation contained in the Merger Agreement
and such breach (x) would entitle Buyer to terminate the Merger Agreement
and (y) shall not have been cured prior to the Notice Date (as defined
below); or
(vi) Any person other than Buyer or any Buyer Subsidiary,
other than in connection with a transaction to which Buyer has given its
prior written consent, shall have filed an application or notice with the
Federal Reserve Board, or other federal or state bank regulatory authority,
which application or notice has been accepted for processing, for approval
to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of
the following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of
15% or more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described
in clause (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (z) shall be 15%.
(d) Seller shall notify Buyer promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
(together, a "Triggering Event"), it being understood that the giving of such
notice by Seller shall not be a condition to the right of the Holder to exercise
the Option.
(e) In the event the Holder is entitled to and wishes to exercise
the Option, it shall send to Seller a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares it will purchase pursuant to such exercise and (ii) a place and date not
earlier than three business days nor later than 60 business days from the Notice
Date for the closing of such purchase (the "Closing Date"); provided, that if
--------
the closing of the purchase and sale pursuant to the Option (the "Closing")
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<PAGE>
cannot be consummated by reason of any applicable judgment, decree, order, law
or regulation, the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which such restriction on
consummation has expired or been terminated; and provided further, without
----------------
limiting the foregoing, that if prior notification to or approval of the Federal
Reserve Board or any other regulatory agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application for
approval and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date on
which any required notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or periods shall
have passed. Any exercise of the Option shall be deemed to occur on the Notice
Date relating thereto. Notwithstanding this subsection (e), in no event shall
any Closing Date be more than 18 months after the related Notice Date, and if
the Closing Date shall not have occurred within 18 months after the related
Notice Date due to the failure to obtain any such required approval, the
exercise of the Option effected on the Notice Date shall be deemed to have
expired. In the event (i) Buyer receives official notice that an approval of
the Federal Reserve Board or any other regulatory authority required for the
purchase of Option Shares (as hereinafter defined) would not be issued or
granted, (ii) a Closing Date shall not have occurred within 18 months after the
related Notice Date due to the failure to obtain any such required approval or
(iii) Holder (or Substitute Holder) shall have the right pursuant to the last
sentence of Section 7 (or Section 9) to exercise the Option (or Substitute
Option), Buyer shall nevertheless be entitled to exercise its right as set forth
in Section 7 and Buyer or Holder (or Substitute Holder) shall be entitled to
exercise the Option (or Substitute Option) in connection with the resale of
Seller Common Stock or other securities pursuant to a registration statement as
provided in Section 6.
(f) At the Closing referred to in subsection (e) of this Section 2,
the Holder shall pay to Seller the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Seller,
provided that failure or refusal of Seller to designate such a bank account
- --------
shall not preclude the Holder from exercising the Option.
(g) At such Closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Seller shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Seller a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement. If at the time of
issuance of any Option Shares pursuant to an exercise of all or part of the
Option hereunder, Seller shall not have redeemed the Rights (as defined in the
Stockholders' Rights Plan adopted by Seller on March 25, 1996, as amended (the
"Rights Agreement")), or shall have issued any similar securities, then each
Option Share issued pursuant to such exercise shall also represent rights or new
rights with terms substantially the same as and at least as favorable to Buyer
as are provided under the Rights Agreement or any similar agreement then in
effect.
-4-
<PAGE>
(h) Certificates for Common Stock delivered at a closing hereunder may
be endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder
hereof and Seller and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on
file at the principal office of Seller and will be provided to the
holder hereof without charge upon receipt by Seller of a written
request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the Holder shall have
delivered to Seller a copy of a letter from the staff of the SEC, or an opinion
of counsel, in form and substance reasonably satisfactory to Seller, to the
effect that such legend is not required for purposes of the Securities Act; (ii)
the reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
(i) Upon the giving by the Holder to Seller of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Seller shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder or the Seller
shall have failed or refused to designate the bank account described in
subsection (f) of this Section 2. Seller shall pay all expenses, and any and
all United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issuance and delivery of stock
certificates under this Section 2 in the name of the Holder or its assignee,
transferee or designee.
3. Seller agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock (and other securities issuable pursuant to Section 5(a)) so that
the Option may be exercised without additional authorization of Common Stock (or
such other securities) after giving effect to all other options, warrants,
convertible securities and other rights to purchase Common Stock (or such other
securities); (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Seller; (iii) promptly to take all action as may from time to time
be required (including (x) complying with all premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. (S) 18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding
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<PAGE>
Company Act of 1956, as amended ("BHCA"), or the Change in Bank Control Act of
1978, as amended, or any state banking law, prior approval of or notice to the
Federal Reserve Board or to any state regulatory authority is necessary before
the Option may be exercised, to cooperate fully with the Holder in preparing
such applications or notices and to provide such information to the Federal
Reserve Board or such state regulatory authority as they may require) in order
to permit the Holder to exercise the Option and the Seller duly and effectively
to issue shares of Common Stock pursuant hereto; and (iv) promptly to take all
action provided herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Seller, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Seller of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Seller will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Seller, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1 of
this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option shall be subject to adjustment from time to time as
provided in this Section 5.
(a) In the event of any change in Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or the like, the type
and number of shares of Common Stock purchasable upon exercise hereof
shall be appropriately adjusted so that Buyer shall receive upon
exercise of the Option and payment of the aggregate Option Price
hereunder the number and class of shares or other securities or
property that Buyer would have received in respect of Common Stock if
the Option had been exercised in full immediately prior to such event,
or the record date therefor, as applicable.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option
Price shall be adjusted by multiplying the Option Price by a fraction,
the numerator of which shall be equal to the number of shares of
Common Stock purchasable prior to the adjustment and the denominator
of which shall be
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<PAGE>
equal to the number of shares of Common Stock purchasable after the
adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event (or as otherwise provided in the last
sentence of Section 2(e)), Seller shall, at the request of Buyer delivered
within 30 days after such Subsequent Triggering Event (or such trigger date as
is provided in the last sentence of Section 2(e)) (whether on its own behalf or
on behalf of any subsequent holder of this Option (or part thereof) or any of
the shares of Common Stock issued pursuant hereto), promptly prepare, file and
keep current a shelf registration statement under the Securities Act covering
any shares issued and issuable pursuant to this Option and shall use its best
efforts to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of any shares of Common
Stock issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Buyer. Seller will use its
best efforts to cause such registration statement first to become effective and
then to remain effective for such period not in excess of 180 days from the day
such registration statement first becomes effective or such shorter time as may
be reasonably necessary to effect such sales or other dispositions. Buyer for a
period of 18 months following such first request shall have the right to demand
a second such registration if reasonably necessary to effect such sales or
dispositions. The foregoing notwithstanding, if, at the time of any request by
Buyer for registration of Option Shares as provided above, Seller is in
registration with respect to an underwritten public offering of shares of Common
Stock, and if in the good faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters, of such
offering the inclusion of the Holder's Option or Option Shares would interfere
with the successful marketing of the shares of Common Stock offered by Seller,
the number of Option Shares otherwise to be covered in the registration
statement contemplated hereby may be reduced; and provided, however, that after
-----------------
any such required reduction the number of Option Shares to be included in such
offering for the account of the Holder shall constitute at least 25% of the
total number of shares to be sold by the Holder and Seller in the aggregate; and
provided further, however, that if such reduction occurs, then the Seller shall
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file a registration statement for the balance as promptly as practical and no
reduction shall thereafter occur (and such registration shall not be charged
against the Holder). Each such Holder shall provide all information reasonably
requested by Seller for inclusion in any registration statement to be filed
hereunder. If requested by any such Holder in connection with such registration,
Seller shall become a party to any underwriting agreement relating to the sale
of such shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements for the Seller. Upon receiving any
request under this Section 6 from any Holder, Seller agrees to send a copy
thereof to any other person known to Seller to be entitled to registration
rights under this Section 6, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to receive such
copies.
7. (a) Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, (i) at the request of the Holder,
delivered within 30 days after such occurrence (or such later period as provided
in Section 10 or the last
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<PAGE>
sentence of Section 2(e)), Seller (or any successor thereto) shall repurchase
the Option from the Holder at a price (the "Option Repurchase Price") equal to
(x) the amount by which (A) the market/offer price (as defined below) exceeds
(B) the Option Price, multiplied by the number of shares for which this Option
may then be exercised plus (y) Buyer's Out-of-Pocket Expenses (as defined below)
(to the extent not previously reimbursed) and (ii) at the request of the owner
of Option Shares from time to time (the "Owner"), delivered within 30 days after
such occurrence (or such later period as provided in Section 10), Seller shall
repurchase such number of the Option Shares from the Owner as the Owner shall
designate at a price (the "Option Share Repurchase Price") equal to (x) the
market/offer price multiplied by the number of Option Shares so designated plus
(y) Buyer's Out-of-Pocket Expenses (to the extent not previously reimbursed).
The term "Out-of-Pocket Expenses" shall mean Buyer's reasonable out-of-pocket
expenses incurred in connection with the transactions contemplated by the Merger
Agreement, including, without limitation, legal, accounting and investment
banking fees. The term "market/offer price" shall mean the highest of (i) the
highest price per share of Common Stock at which a tender offer or exchange
offer therefor has been made, (ii) the price per share of Common Stock to be
paid by any third party pursuant to an agreement with Seller, (iii) the highest
closing price for shares of Common Stock quoted in the New York Stock Exchange
(or if Common Stock is not quoted in the New York Stock Exchange, the highest
bid price per share as quoted on the National Association of Securities Dealers
Automated Quotation Systems, or, if the shares of Common Stock are not quoted
thereon, on the principal trading market on which such shares are traded as
reported by a recognized source) within the six-month period immediately
preceding the date the Holder gives notice of the required repurchase of Option
Shares, as the case may be, or (iv) in the event of a sale of assets
representing 15% or more of the consolidated assets of Seller and its
Subsidiaries, the sum of the price paid in such sale for such assets and the
current market value of the remaining assets of Seller as determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, divided by the number of shares of Common Stock of
Seller outstanding at the time of such sale. In determining the market/offer
price, the value of consideration other than cash shall be determined by a
nationally recognized investment banking firm selected by the Holder or Owner,
as the case may be.
(b) The Holder or the Owner, as the case may be, may exercise its
right to require Seller to repurchase the Option and any Option Shares pursuant
to this Section 7 by surrendering for such purpose to Seller, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Seller to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within five business
days after the surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating thereto, Seller shall
deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or the portion
thereof that Seller is not then prohibited under applicable law and regulation
from so delivering.
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<PAGE>
(c) To the extent that Seller is prohibited under applicable law
or regulation, or as a consequence of administrative policy, from repurchasing
the Option and/or the Option Shares in full, Seller shall immediately so notify
the Holder and/or the Owner and thereafter deliver or cause to be delivered,
from time to time, to the Holder and/or the Owner, as appropriate, the portion
of the Option Repurchase Price and the Option Share Repurchase Price,
respectively, that it is no longer prohibited from delivering, within five
business days after the date on which Seller is no longer so prohibited;
provided, however, that if Seller at any time after delivery of a notice of
- -----------------
repurchase pursuant to paragraph (b) of this Section 7 is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
delivering to the Holder and/or the Owner, as appropriate, the Option Repurchase
Price and the Option Share Repurchase Price, respectively, in full (and Seller
hereby undertakes to use its best efforts to obtain all required regulatory and
legal approvals and to file any required notices as promptly as practicable in
order to accomplish such repurchase), the Holder or Owner may revoke its notice
of repurchase of the Option or the Option Shares either in whole or to the
extent of the prohibition, whereupon, in the latter case, Seller shall promptly
(i) deliver to the Holder and/or the Owner, as appropriate, that portion of the
Option Repurchase Price or the Option Share Repurchase Price that Seller is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Holder, a new Stock Option Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock Option
Agreement was exercisable at the time of delivery of the notice of repurchase by
a fraction, the numerator of which is the Option Repurchase Price less the
portion thereof theretofore delivered to the Holder and the denominator of which
is the Option Repurchase Price, or (B) to the Owner, a certificate for the
Option Shares it is then so prohibited from repurchasing. If an Exercise
Termination Event shall have occurred prior to the date of the notice by Seller
described in the first sentence of this subsection (c), or shall be scheduled to
occur at any time before the expiration of a period ending on the thirtieth day
after such date, the Holder shall nonetheless have the right to exercise the
Option until the expiration of such 30-day period.
8. (a) In the event that prior to an Exercise Termination Event,
Seller shall enter into an agreement (i) to consolidate with or merge into any
person, other than Buyer or one of its Subsidiaries, and shall not be the
continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Buyer or one of its Subsidiaries, to merge into
Seller and Seller shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Buyer or one of
its Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
-9-
<PAGE>
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Seller (if
other than Seller), (ii) Seller in a merger in which Seller is the
continuing or surviving person, and (iii) the transferee of all or
substantially all of Seller's assets.
(2) "Substitute Common Stock" shall mean the common stock issued
by the issuer of the Substitute Option upon exercise of the Substitute
Option.
(3) "Assigned Value" shall mean the market/offer price, as defined
in Section 7.
(4) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of Substitute Common
Stock on the day preceding such consolidation, merger or sale;
provided that if Seller is the issuer of the Substitute Option, the
--------
Average Price shall be computed with respect to a share of common
stock issued by the person merging into Seller or by any company which
controls or is controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
- --------
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option
shall also enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this Agreement (after giving
effect for such purpose to the provisions of Section 9), which agreement shall
be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value multiplied
by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute Option.
In the event that the Substitute Option would be exercisable for more than 19.9%
of the shares of Substitute Common Stock outstanding prior to exercise but for
this clause (e), the issuer of the Substitute Option (the
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<PAGE>
"Substitute Option Seller") shall make a cash payment to Holder equal to the
excess of (i) the value of the Substitute Option without giving effect to the
limitation in this clause (e) over (ii) the value of the Substitute Option after
giving effect to the limitation in this clause (e). This difference in value
shall be determined by a nationally recognized investment banking firm selected
by the Holder.
(f) Seller shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Seller hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Seller shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to (x) the amount by which (i) the Highest
Closing Price (as hereinafter defined) exceeds (ii) the exercise price of the
Substitute Option, multiplied by the number of shares of Substitute Common Stock
for which the Substitute Option may then be exercised plus (y) Buyer's Out-of-
Pocket Expenses (to the extent not previously reimbursed), and at the request of
the owner (the "Substitute Share Owner") of shares of Substitute Common Stock
(the "Substitute Shares"), the Substitute Option Seller shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to
(x) the Highest Closing Price multiplied by the number of Substitute Shares so
designated plus (y) Buyer's Out-of-Pocket Expenses (to the extent not previously
reimbursed). The term "Highest Closing Price" shall mean the highest closing
price for shares of Substitute Common Stock within the six-month period
immediately preceding the date the Substitute Option Holder gives notice of the
required repurchase of the Substitute Option or the Substitute Share Owner gives
notice of the required repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as
the case may be, may exercise its respective right to require the Substitute
Option Seller to repurchase the Substitute Option and the Substitute Shares
pursuant to this Section 9 by surrendering for such purpose to the Substitute
Option Seller, at its principal office, the agreement for such Substitute Option
(or, in the absence of such an agreement, a copy of this Agreement) and
certificates for Substitute Shares accompanied by a written notice or notices
stating that the Substitute Option Holder or the Substitute Share Owner, as the
case may be, elects to require the Substitute Option Seller to repurchase the
Substitute Option and/or the Substitute Shares in accordance with the provision
of this Section 9. As promptly as practicable, and in any event within five
business days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Seller shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or the portion thereof which the Substitute Option Seller is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Seller is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from repurchasing the
-11-
<PAGE>
Substitute Option and/or the Substitute Shares in part or in full, the
Substitute Option Seller shall immediately so notify the Substitute Option
Holder and/or the Substitute Share Owner and thereafter deliver or cause to be
delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price or the Substitute Share Repurchase Price, respectively, which
it is no longer prohibited from delivering, within five business days after the
date on which the Substitute Option Seller is no longer so prohibited; provided,
---------
however, that if the Substitute Option Seller is at any time after delivery of a
- -------
notice of repurchase pursuant to subsection (b) of this Section 9 prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from delivering to the Substitute Option Holder and/or the Substitute
Share Owner, as appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the Substitute
Option Seller shall use its best efforts to receive all required regulatory and
legal approvals as promptly as practicable in order to accomplish such
repurchase), the Substitute Option Holder or Substitute Share Owner may revoke
its notice of repurchase of the Substitute Option or the Substitute Shares
either in whole or to the extent of the prohibition, whereupon, in the latter
case, the Substitute Option Seller shall promptly (i) deliver to the Substitute
Option Holder or Substitute Share Owner, as appropriate, that portion of the
Substitute Option Repurchase Price or the Substitute Share Repurchase Price that
the Substitute Option Seller is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, or (B) to the Substitute Share Owner, a certificate for the
Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the notice
by the Substitute Option Seller described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the expiration
of a period ending on the thirtieth day after such date, the Substitute Option
Holder shall nevertheless have the right to exercise the Substitute Option until
the expiration of such 30 day period.
10. The 30-day period for exercise of certain rights under Sections
2, 6, 7, 9 and 12 shall be extended: (i) to the extent necessary to obtain all
regulatory approvals for the exercise of such rights, and for the expiration of
all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the Exchange Act by reason of such exercise.
11. Seller hereby represents and warrants to Buyer as follows:
(a) Seller has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Seller and no other
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<PAGE>
corporate proceedings on the part of Seller are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by Seller. This Agreement is the
valid and legally binding obligation of Seller, enforceable against Seller in
accordance with its terms.
(b) Seller has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
(c) Seller has taken all action (including if required redeeming all
of the Rights or amending or terminating the Rights Agreement) so that the
entering into of this Option Agreement, the acquisition of shares of Common
Stock hereunder and the other transactions contemplated hereby do not and will
not result in the grant of any rights to any person under the Rights Agreement
or enable or require the Rights to be exercised, distributed or triggered.
(d) Except as disclosed pursuant to the Merger Agreement, the
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
Violation pursuant to any provisions of the Certificate of Incorporation or by-
laws of Seller or any Subsidiary of Seller or, subject to obtaining any
approvals or consents contemplated hereby, result in any Violation of any loan
or credit agreement, note, mortgage, indenture, lease, Plan or other agreement,
obligation, instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Seller or any
Subsidiary of Seller or their respective properties or assets which Violation
would have a Material Adverse Effect on Seller.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Buyer, subject to the express provisions hereof, may
assign in whole or in part its rights and obligations hereunder within 30 days
following such Subsequent Triggering Event (or such later period as provided in
Section 10); provided, however, that until the date 30 days following the date
-----------------
on which the Federal Reserve Board approves an application by Buyer under the
BHCA to acquire the shares of Common Stock subject to the Option, Buyer may not
assign its rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party acquires the right
to purchase in excess of 2% of the voting shares of Seller, (iii) an assignment
to a single party (e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on Buyer's behalf, or (iv) any
other manner approved by the Federal Reserve Board.
-13-
<PAGE>
13. Immediately following an Initial Triggering Event, each of Buyer
and Seller will use its best efforts to make all filings with, and to obtain
consents of, all third parties and governmental authorities necessary to the
consummation of the transactions contemplated by this Agreement, including
without limitation making application to list the shares of Common Stock
issuable hereunder on the NASDAQ.NMS upon official notice of issuance and
applying to the Federal Reserve Board under the BHCA for approval to acquire the
shares issuable hereunder, but Buyer shall not be obligated to apply to state
banking authorities for approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
14. Notwithstanding anything to the contrary herein, in the event that
the Holder or Owner or any Related Person thereof is a person making without the
prior written consent of Seller an offer or proposal to engage in an Acquisition
Transaction (other than the transaction contemplated by the Merger Agreement),
then (i) in the case of a Holder or any Related Person thereof, the Option held
by it shall immediately terminate and be of no further force or effect, and (ii)
in the case of an Owner or any Related Person thereof, the Option Shares held by
it shall be immediately repurchasable by Seller at the Option Price. A Related
Person of a Holder or Owner means any Affiliate (as defined in Rule 12b-2 of the
rules and regulations under the Exchange Act) of the Holder or Owner and any
person that is the beneficial owner of 20% or more of the voting power of the
Holder or Owner, as the case may be.
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder or Substitute Option Holder is not permitted to acquire, or
Seller or Substitute Option Seller is not permitted to repurchase pursuant to
Section 7 or Section 9, as the case may be, the full number of shares of Common
Stock provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or
Section 5 hereof), it is the express intention of Seller to allow the Holder to
acquire or to require Seller to repurchase such lesser number of shares as may
be permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
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<PAGE>
19. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
20. Except as otherwise expressly provided herein or in the Merger
Agreement, each of the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein. Any provision of this
Agreement may be waived at any time by the party that is entitled to the
benefits of such provision. This Agreement may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
22. In the event of any exercise of the Option by Buyer, Seller and
Buyer shall execute and deliver all other documents and instruments and take all
other action that may be reasonably necessary in order to consummate the
transactions provided for by such exercise.
23. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
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<PAGE>
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
VALLICORP HOLDINGS, INC.
By: /s/ J. Mike McGowan
-----------------------
Name: J. Mike McGowan
Attest: /s/ E. L. Herbert Title: Chairman and Chief Executive
----------------------- Officer
Name: E. L. Herbert
Title: Executive Vice President, General
Counsel and Secretary
WESTAMERICA BANCORPORATION
By: /s/ David L. Payne
----------------------
Name: David L. Payne
Attest: /s/ Mary Anne Bell Title: Chairman, President and
----------------------- Chief Executive Officer
Name: Mary Anne Bell
Title: Assistant Corporate Secretary
-16-
<PAGE>
ANNEX C
[LETTERHEAD OF MONTGOMERY SECURITIES]
November 11, 1996
Board of Directors
ValliCorp Holdings, Inc.
8405 North Fresno Street
Fresno, CA 93720
Gentlemen:
We understand that ValliCorp Holdings, Inc., a Delaware corporation ("Seller"),
and Westamerica Bancorporation, a California corporation ("Buyer"), propose to
enter into an Agreement and Plan of Reorganization dated November 11, 1996 (the
"Merger Agreement"), pursuant to which Seller will be merged with and into
Buyer, which will be the surviving entity (the "Merger"). Pursuant to the
Merger, as more fully described in the Merger Agreement and as further described
to us by management of Seller, we understand that each outstanding share of the
common stock, $0.01 par value per share ("Seller Common Stock"), of Seller will
be converted into the right to receive the number of shares of the common
stock, no par value per share ("Buyer Common Stock"), of Buyer which is equal to
that number of shares determined by dividing $21.00 by the Average Price (as
defined in the Merger Agreement), subject to adjustment if, among other things,
the Average Price is less than $48.69 or more than $53.81 (the "Consideration").
The terms and conditions of the Merger are set forth in more detail in the
Merger Agreement.
You have asked for our opinion as investment bankers as to whether the
Consideration to be received by the shareholders of Seller pursuant to the
Merger is fair to such shareholders from a financial point of view, as of the
date hereof.
In connection with our opinion, we have, among other things: (i) reviewed
certain publicly available financial and other data with respect to Seller and
Buyer, including the consolidated
<PAGE>
ValliCorp Holdings, Inc.
November 11, 1996
Page 2
financial statements for recent years and interim periods to September 30, 1996
and certain other relevant financial and operating data relating to Seller and
Buyer made available to us from published sources and from the internal records
of Seller and Buyer; (ii) reviewed the Merger Agreement; (iii) reviewed certain
publicly available information concerning the trading of, and the trading market
for, Seller Common Stock and Buyer Common Stock; (iv) compared Seller and Buyer
from a financial point of view with certain other companies in the banking
industry which we deemed to be relevant; (v) considered the financial terms, to
the extent publicly available, of selected recent business combinations of
companies in the banking industry which we deemed to be comparable, in whole or
in part, to the Merger; (vi) reviewed and discussed with representatives of the
management of Seller certain information of a business and financial nature
regarding Seller, furnished to us by them, including financial forecasts and
related assumptions of Seller; (vii) reviewed and discussed with representatives
of the management of Buyer certain information of a business and financial
nature regarding the Buyer, including third party analyst estimates with respect
to Buyer; (viii) made inquiries regarding and discussed the Merger and the
Merger Agreement and other matters related thereto with Seller's counsel; and
(xi) performed such other analyses and examinations as we have deemed
appropriate.
In connection with our review, we have not assumed any obligation independently
to verify the foregoing information and have relied on its being accurate and
complete in all material respects. With respect to the financial forecasts for
Seller provided to us by Seller's management, the financial forecasts for Buyer
derived from third party analyst estimates, and the forecasts regarding the
impact of cost savings on the combined companies, with your consent we have
assumed for purposes of our opinion that the forecasts (including without
limitation the assumptions regarding cost savings) have been reasonably prepared
on bases reflecting the best available estimates at the time of preparation as
to the future financial performance of Seller, Buyer and the combined companies
and that they provide a reasonable basis upon which we can form our opinion. We
have also assumed that there have been no material changes in Seller's or
Buyer's assets, financial condition, results of operations, business or
prospects since the respective dates of their last financial statements made
available to us. We have relied on advice of counsel to Seller as to all legal
matters with respect to Seller, the Merger and the Merger Agreement. You
acknowledge that we have not discussed with Seller's independent accountants any
financial reporting matters with respect to Seller, the Merger and the Merger
Agreement. You have informed us, and we have assumed, that the Merger will be
recorded as a "pooling of interests" under generally accepted accounting
principles. We have assumed that the Merger will be consummated in a manner that
complies in all respects with the applicable provisions of the Securities Act of
1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934 and
all other applicable federal and state statutes, rules and regulations. We are
not experts in the evaluation of loan portfolios for purposes of assessing the
adequacy of the allowances for losses with respect thereto and have assumed,
with your consent, that such allowances for each of Seller and Buyer are in the
aggregate adequate to cover such losses. In addition, we have not assumed
responsibility for reviewing any individual credit files, or making an
independent evaluation, appraisal or physical inspection of any of the assets or
liabilities (contingent or otherwise) of Seller or Buyer, nor have we been
furnished with any such appraisals. Finally, our
<PAGE>
ValliCorp Holdings, Inc.
November 11, 1996
Page 3
opinion is based on economic, monetary and market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
Accordingly, although subsequent developments may affect this opinion, we have
not assumed any obligation to update, revise or reaffirm this opinion.
We have further assumed with your consent that the Merger will be consummated in
accordance with the terms described in the Merger Agreement, without any further
amendments thereto, and without waiver by Seller of any of the conditions to its
obligations thereunder.
We have acted as financial advisor to Seller in connection with the Merger and
will receive a fee for our services, including rendering this opinion, a
significant portion of which is contingent upon the consummation of the Merger.
In the ordinary course of our business, we actively trade the equity securities
of Seller for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
We have also acted as an underwriter in connection with an offering of
securities of Seller and performed various investment banking services for
Seller.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Consideration to be received by the shareholders of
Seller pursuant to the Merger is fair to such shareholders from a financial
point of view, as of the date hereof.
This opinion is directed to the Board of Directors of Seller in its
consideration of the Merger and is not a recommendation to any shareholder as to
how such shareholder should vote with respect to the Merger. Further, this
opinion addresses only the financial fairness of the Consideration to the
shareholders and does not address any other aspect of the Merger. This opinion
may not be used or referred to by Seller, or quoted or disclosed to any person
in any manner, without our prior written consent, which consent is hereby given
to the inclusion of this opinion in any proxy statement or prospectus filed with
the Securities and Exchange Commission in connection with the Merger. In
furnishing this opinion, we do not admit that we are experts within the meaning
of the term "experts" as used in the Securities Act and the rules and
regulations promulgated thereunder, nor do we admit that this opinion
constitutes a report or valuation within the meaning of Section 11 of the
Securities Act.
Very truly yours,
/s/ MONTGOMERY SECURITIES
-------------------------
MONTGOMERY SECURITIES
<PAGE>
ANNEX D
[LETTERHEAD OF HOEFER & ARNETT INCORPORATED]
November 11, 1996
Members of the Board of Directors
Westamerica Bancorporation
1108 Fifth Avenue
San Rafael, CA 94915
Members of the Board:
You have requested our opinion as investment bankers as to the fairness, from a
financial point of view, to the holders of common shares of Westamerica
Bancorporation ("Westamerica") of the consideration to be paid by Westamerica,
in the proposed merger (the "Merger") of ValliCorp Holdings, Inc. ("ValliCorp")
with and into Westamerica. Pursuant to the Agreement and Plan of Reorganization
(the "Agreement") and subject to the terms and conditions therein, each holder
of common shares of ValliCorp will receive, in exchange for common shares of
ValliCorp, Westamerica common shares in the ratio of 0.4098 shares of
Westamerica common shares for each share of ValliCorp common stock subject
certain adjustments as described in the Agreement.
We have acted for Westamerica and for the Board of Directors as financial
advisor in connection with this transaction and will receive a fee for our
services. We have previously provided investment banking and financial advisory
services to Westamerica and have acted as financial advisor to companies
acquired by both Westamerica and ValliCorp. We currently are a market maker in
both Westamerica and ValliCorp common shares.
In arriving at our opinion, we have reviewed and analyzed, among other things,
the following: (i) the Agreement; (ii) certain publicly available financial and
other data with respect to ValliCorp and Westamerica, including consolidated
financial statements for recent years and interim periods to September 30, 1996;
(iv) certain other publicly available financial and other information concerning
Westamerica and ValliCorp and the trading markets for the publicly traded
securities of Westamerica and ValliCorp; (v) publicly available information
concerning other banks and holding companies, the trading markets for their
securities and the nature and terms of certain other merger transactions we
believed relevant to our inquiry; and (vi) evaluations and analyses prepared and
presented to the Board of Directors of Westamerica or a committee thereof in
connection with the Merger. We have held discussions with senior management of
Westamerica and of ValliCorp concerning their past and current operations,
financial condition and prospects.
We have reviewed with senior management of Westamerica earnings projections for
Westamerica as a stand-alone entity, assuming the Merger does not occur,
prepared by Westamerica. We reviewed ValliCorp's five year Strategic Plan and
Profit Improvement Plan for ValliCorp as a stand-alone entity, assuming the
Merger does not occur prepared by ValliCorp. We have also reviewed with the
senior management of Westamerica the projected operating cost savings reasonably
expected by Westamerica resulting from the Merger with ValliCorp. Certain pro
forma financial projections for the combined companies and for Westamerica and
ValliCorp as stand-alone entities were derived by us based upon the projections
and growth assumptions discussed above, as well as our own
<PAGE>
Westamerica Bancorporation
November 11, 1996
Page 2
assessment of general economic, market and financial conditions. In certain
cases, such combined pro forma financial projections included projected
operating cost savings derived by us based upon the projections discussed above
and believed by us to be realizable in the Merger.
In conducting our review and in arriving at our opinion, we have relied upon and
assumed the accuracy and completeness of the financial and other information
provided to us or publicly available, and we have not assumed any responsibility
for independent verification of the same. We have relied upon the managements of
Westamerica and ValliCorp as to the reasonableness of the financial and
operating forecasts, projections and projected operating cost savings (and the
assumptions and bases therefor) provided to us, and we have assumed that such
forecasts, projections and projected operating cost savings reflect the best
currently available estimates and judgments of the applicable managements. We
have also assumed, without assuming any responsibility for the independent
verification of same, that the aggregate allowances for loan losses for
Westamerica and ValliCorp are adequate to cover such losses. We have not made or
obtained any evaluations or appraisals of the property of Westamerica or
ValliCorp, nor have we examined any individual loan credit files. For purposes
of this opinion, we have assumed that the Merger will have the tax, accounting
and legal effects (including, without limitation, that the Merger will be
accounted for as a pooling-of-interests) described in the Agreement and assumed
the accuracy of the disclosures set forth in the Agreement. Our opinion as
expressed herein is limited to the fairness, from a financial point of view, to
the holders of common shares of Westamerica of the consideration to be paid by
Westamerica in the Merger and does not address Westamerica's underlying business
decision to proceed with the Merger.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including among others the following: (i)
the historical and current financial position and results of operations of
Westamerica and ValliCorp, including interest income, interest expense, net
interest income, net interest margin, provision for loan losses, non-interest
income, non-interest expense, earnings, dividends, internal capital generation,
book value, intangible assets, return on assets, return on shareholders' equity,
capitalization, the amount and type of non-performing assets, loan losses and
the reserve for loan losses, all as set forth in the financial statements for
Westamerica and for ValliCorp; (ii) the assets and liabilities of Westamerica
and ValliCorp, including the loan, investment and mortgage portfolios, deposits,
other liabilities, historical and current liability sources and costs and
liquidity; and (iii) the nature and terms of certain other merger transactions
involving banks and bank holding companies. We have also taken into account our
assessment of general economic, market and financial conditions and our
experience in other transactions, as well as our experience in securities
valuation and our knowledge of the banking industry generally. Our opinion is
necessarily based only upon conditions as they exist and can be evaluated on the
date hereof and the information made available to us through the date hereof.
<PAGE>
Westamerica Bancorporation
November 11, 1996
Page 3
It is understood that this letter is for the information of the Board of
Directors of Westamerica and may not be relied upon by any other person or used
for any other purpose without our prior written consent. This letter does not
constitute a recommendation to the Board of Directors or to any shareholder of
Westamerica with respect to any approval of the Merger.
Based upon and subject to the foregoing, we are of the opinion as investment
bankers that, as of the date hereof, the consideration to be paid by
Westamerica in the Merger is fair, from a financial point of view, to the
holders of the common shares of Westamerica.
Very truly yours,
/s/ HOEFER & ARNETT INCORPORATED
- --------------------------------
HOEFER & ARNETT INCORPORATED
<PAGE>
ANNEX E
CALIFORNIA GENERAL CORPORATION LAW
(S) 1300. REORGANIZATION OR SHORT-FORM MERGER; DISSENTING SHARES; CORPORATE
PURCHASE AT FAIR MARKET VALUE; DEFINITIONS
(a) If the approval of the outstanding shares (Section 152) of a
corporation is required for a reorganization under subdivisions (a) and (b) or
subdivision (e) or (f) of Section 1201, each shareholder of the corporation
entitled to vote on the transaction and each shareholder of a subsidiary
corporation in a short-form merger may, by complying with this chapter, require
the corporation in which the shareholder holds shares to purchase for cash at
their fair market value the shares owned by the shareholder which are dissenting
shares as defined in subdivision (b). The fair market value shall be determined
as of the day before the first announcement of the terms of the proposed
reorganization or short-form merger, excluding any appreciation or depreciation
in consequence of the proposed action, but adjusted for any stock split, reverse
stock split, or share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which
come within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or short-
form merger either (A) listed on any national securities exchange certified by
the Commissioner of Corporations under subdivision (o) of Section 25100 or (B)
listed on the list of OTC margin stocks issued by the Board of Governors of the
Federal Reserve System, and the notice of meeting of shareholders to act upon
the reorganization summarizes this section and Sections 1301, 1302, 1303 and
1304; provided, however, that this provision does not apply to any shares with
respect to which there exists any restriction on transfer imposed by the
corporation or by any law or regulation; and provided, further, that this
provision does not apply to any class of shares described in subparagraph (A) or
(B) if demands for payment are filed with respect to 5 percent or more of the
outstanding shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted in
favor of the reorganization or, (B) if described in subparagraph (A) or (B) of
paragraph (1) (without regard to the provisos in that paragraph), were voted
against the reorganization, or which were held of record on the effective date
of a short-form merger; provided, however, that subparagraph (A) rather than
subparagraph (B) of this paragraph applies in any case where the approval
required by Section 1201 is sought by written consent rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of record.
(S) 1301. NOTICE TO HOLDERS OF DISSENTING SHARES IN REORGANIZATIONS; DEMAND FOR
PURCHASE; TIME; CONTENTS
(a) If, in the case of a reorganization, any shareholders of a
corporation have a right under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, to require the corporation to
purchase their shares for cash, such corporation shall mail to each such
shareholder a notice of the approval of the reorganization by its outstanding
shares (Section 152) within 10 days after the date of such approval, accompanied
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<PAGE>
by a copy of Sections 1300, 1302, 1303, 1304 and this section, a statement of
the price determined by the corporation to represent the fair market value of
the dissenting shares, and a brief description of the procedure to be followed
if the shareholder desires to exercise the shareholder's right under such
sections. The statement of price constitutes an offer by the corporation to
purchase at the price stated any dissenting shares as defined in subdivision (b)
of Section 1300, unless they lose their status as dissenting shares under
Section 1309.
(b) Any shareholder who has a right to require the corporation to
purchase the shareholder's shares for cash under Section 1300, subject to
compliance with paragraphs (3) and (4) of subdivision (b) thereof, and who
desires the corporation to purchase such shares shall make written demand upon
the corporation for the purchase of such shares and payment to the shareholder
in cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause [(A)] or [(B)] of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of
record by the shareholder which the shareholder demands that the corporation
purchase and shall contain a statement of what such shareholder claims to be the
fair market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market
value constitutes an offer by the shareholder to sell the shares at such price.
(S) 1302. SUBMISSION OF SHARE CERTIFICATES FOR ENDORSEMENT; UNCERTIFICATED
SECURITIES
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation,
the new certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with the name
of the original dissenting holder of the shares.
(S) 1303. PAYMENT OF AGREED PRICE WITH INTEREST; AGREEMENT FIXING FAIR MARKET
VALUE; FILING; TIME OF PAYMENT
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the
fair market value of any dissenting shares as between the corporation and the
holders thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair
market value of dissenting shares shall be made within 30 days after the amount
thereof has been agreed or within 30 days after any statutory or contractual
conditions to the reorganization are satisfied, whichever is later, and in the
case of certificated securities, subject to surrender of the certificates
therefor, unless provided otherwise by agreement.
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<PAGE>
(S) 1304. ACTION TO DETERMINE WHETHER SHARES ARE DISSENTING SHARES OR FAIR
MARKET VALUE; LIMITATION; JOINDER; CONSOLIDATION; DETERMINATION OF ISSUES;
APPOINTMENT OF APPRAISERS
(a) If the corporation denies that the shares are dissenting shares,
or the corporation and the shareholder fail to agree upon the fair market value
of the shares, then the shareholder demanding purchase of such shares as
dissenting shares or any interested corporation, within six months after the
date on which notice of the approval by the outstanding shares (Section 152) or
notice pursuant to subdivision (i) of Section 1110 was mailed to the
shareholder, but not thereafter, may file a complaint in the superior court of
the proper county praying the court to determine whether the shares are
dissenting shares or the fair market value of the dissenting shares or both or
may intervene in any action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be
joined as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues.
If the status of the shares as dissenting shares is in issue, the court shall
first determine that issue. If the fair market value of the dissenting shares
is in issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
(S) 1305. REPORT OF APPRAISERS; CONFIRMATION; DETERMINATION BY COURT; JUDGMENT;
PAYMENT; APPEAL; COSTS
(a) If the court appoints an appraiser or appraisers, they shall
proceed forthwith to determine the fair market value per share. Within the time
fixed by the court, the appraisers, or a majority of them, shall make and file a
report in the office of the clerk of the court. Thereupon, on the motion of any
party, the report shall be submitted to the court and considered on such
evidence as the court considers relevant. If the court finds the report
reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a
report within 10 days from the date of their appointment or within such further
time as may be allowed by the court or the report is not confirmed by the court,
the court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be
rendered against the corporation for payment of an amount equal to the fair
market value of each dissenting share multiplied by the number of dissenting
shares which any dissenting shareholder who is a party, or who has intervened,
is entitled to require the corporation to purchase, with interest thereon at the
legal rate from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
(S) 1306. PREVENTION OF IMMEDIATE PAYMENT; STATUS AS CREDITORS; INTEREST
To the extent that the provisions of Chapter 5 prevent the payment to
any holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest
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<PAGE>
at the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
(S) 1307. DIVIDENDS ON DISSENTING SHARES
Cash dividends declared and paid by the corporation upon the
dissenting shares after the date of approval of the reorganization by the
outstanding shares (Section 152) and prior to payment for the shares by the
corporation shall be credited against the total amount to be paid by the
corporation therefor.
(S) 1308. RIGHTS OF DISSENTING SHAREHOLDERS PENDING VALUATION; WITHDRAWAL OF
DEMAND FOR PAYMENT
Except as expressly limited in this chapter, holders of dissenting
shares continue to have all the rights and privileges incident to their shares,
until the fair market value of their shares is agreed upon or determined. A
dissenting shareholder may not withdraw a demand for payment unless the
corporation consents thereto.
(S) 1309. TERMINATION OF DISSENTING SHARE AND SHAREHOLDER STATUS
Dissenting shares lose their status as dissenting shares and the
holders thereof cease to be dissenting shareholders and cease to be entitled to
require the corporation to purchase their shares upon the happening of any of
the following:
(a) The corporation abandons the reorganization. Upon abandonment of
the reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter all
necessary expenses incurred in such proceedings and reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for
endorsement in accordance with Section 1302 or are surrendered for conversion
into shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon
the status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice of
the approval by the outstanding shares or notice pursuant to subdivision (i) of
Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
(S) 1310. SUSPENSION OF RIGHT TO COMPENSATION OR VALUATION PROCEEDINGS;
LITIGATION OF SHAREHOLDERS' APPROVAL
If litigation is instituted to test the sufficiency or regularity of
the votes of the shareholders in authorizing a reorganization, any proceedings
under Sections 1304 and 1305 shall be suspended until final determination of
such litigation.
(S) 1311. EXEMPT SHARES
This chapter, except Section 1312, does not apply to classes of shares
whose terms and provisions specifically set forth the amount to be paid in
respect to such shares in the event of a reorganization or merger.
(S) 1312. RIGHT OF DISSENTING SHAREHOLDER TO ATTACK, SET ASIDE OR RESCIND
MERGER OR REORGANIZATION; RESTRAINING ORDER OR INJUNCTION; CONDITIONS
(a) No shareholder of a corporation who has a right under this chapter
to demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the
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<PAGE>
reorganization or short-form merger, or to have the reorganization or short-form
merger set aside or rescinded, except in an action to test whether the number of
shares required to authorize or approve the reorganization have been legally
voted in favor thereof; but any holder of shares of a class whose terms and
provisions specifically set forth the amount to be paid in respect to them in
the event of a reorganization or short-form merger is entitled to payment in
accordance with those terms and provisions or, if the principal terms of the
reorganization are approved pursuant to subdivision (b) of Section 1202, is
entitled to payment in accordance with the terms and provisions of the approved
reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the consummation of the transaction except upon 10 days'
prior notice to the corporation and upon a determination by the court that
clearly no other remedy will adequately protect the complaining shareholder or
the class of shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled.
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<PAGE>
WESTAMERICA BANCORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
WESTAMERICA BANCORPORATION
FOR THE SPECIAL MEETING OF SHAREHOLDERS ON FEBRUARY 24, 1997
The undersigned holder hereby authorizes David L. Payne to represent and
vote, as designated on the reverse side, all shares of Common Stock of
Westamerica Bancorporation which the undersigned would be entitled to vote at
the Special Meeting of Shareholders of said corporation to be held at 4550
Mangels Boulevard, Fairfield, California at 10:00 a.m. on Monday, February 24,
1997, upon the matters set forth on the reverse side of this Proxy and described
in the accompanying Joint Proxy Statement/Prospectus.
This Proxy, when properly executed, will be voted as directed herein by the
undersigned shareholder. If no direction is indicated, this Proxy will be
voted FOR Item 1.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY PROMPTLY, USING THE ENCLOSED
ENVELOPE.
- -------------------------------------------------------------------------------
COMMENTS/ADDRESS CHANGE:
(Continued and to be signed on reverse side)
________________________________________________________________________________
. FOLD AND DETACH HERE .
WESTAMERICA BANCORPORATION
SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 24, 1997 10:00 A.M.
4550 MANGELS BOULEVARD
FAIRFIELD, CALIFORNIA
<PAGE>
- --------------------------------------------------------------------------------
[X] Please mark
your vote
as this
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1.
Item 1 -- Adoption and approval of the Agreement and Plan of Reorganization
dated as of November 11, 1996 among Westamerica Bancorporation, ValliCorp
Holdings, Inc., and ValliWide Bank, and an Agreement and Plan of Merger between
Westamerica and ValliCorp and the transactions contemplated thereby, including
without limitation, certain provisions benefiting directors, executive officers
and employees of ValliCorp and the proposed merger of ValliCorp with and into
Westamerica.
[_] FOR [_] AGAINST [_] ABSTAIN
COMMENTS/ADDRESS CHANGE
I have made an address change or comment on the reverse side of this proxy. [_]
Receipt is acknowledged of the Joint Proxy Statement/Prospectus for the
Special Meeting. Whether or not you expect to attend the Special Meeting, you
are urged to execute and return this proxy, which may be revoked at any time
prior to its use.
Signature(s) ___________________________ Date _________________________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
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. FOLD AND DETACH HERE .
<PAGE>
WESTAMERICA BANCORPORATION
CONFIDENTIAL VOTING INSTRUCTIONS
TO THE TRUSTEE SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
WESTAMERICA BANCORPORATION
FOR THE SPECIAL MEETING OF SHAREHOLDERS ON FEBRUARY 24, 1997
The undersigned holder hereby authorizes and instructs the Trustee of the
Westamerica Bancorporation Tax Deferred Savings/Retirement Plan to represent
and vote, as designated on the reverse side, all shares of Common Stock of
Westamerica Bancorporation which the undersigned would be entitled to vote at
the Special Meeting of Shareholders of said corporation to be held at 4550
Mangels Boulevard, Fairfield, California at 10:00 a.m. on Monday, February 24,
1997, upon the matters set forth on the reverse side of this Proxy and described
in the accompanying Joint Proxy Statement/Prospectus.
These confidential voting instructions to the Trustee, when properly
executed, will be voted as directed herein by the undersigned shareholder. If
no instructions are received, the Trustee will vote all of the shares for
which you are entitled to provide instruction in the same proportion as shares
for which instructions are received.
PLEASE MARK, SIGN, DATE AND MAIL THESE CONFIDENTIAL VOTING INSTRUCTIONS
PROMPTLY, USING THE ENCLOSED ENVELOPE.
- -------------------------------------------------------------------------------
COMMENTS/ADDRESS CHANGE:
(Continued and to be signed on reverse side)
________________________________________________________________________________
. FOLD AND DETACH HERE .
WESTAMERICA BANCORPORATION
SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 24, 1997 10:00 A.M.
4550 MANGELS BOULEVARD
FAIRFIELD, CALIFORNIA
<PAGE>
- --------------------------------------------------------------------------------
[X] Please mark
your vote
as this
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1.
Item 1 -- Adoption and approval of the Agreement and Plan of Reorganization
dated as of November 11, 1996 among Westamerica Bancorporation, ValliCorp
Holdings, Inc., and ValliWide Bank, and an Agreement and Plan of Merger between
Westamerica and ValliCorp and the transactions contemplated thereby, including
without limitation, certain provisions benefiting directors, executive officers
and employees of ValliCorp and the proposed merger of ValliCorp with and into
Westamerica.
[_] FOR [_] AGAINST [_] ABSTAIN
COMMENTS/ADDRESS CHANGE
I have made an address change or comment on the reverse side of this proxy. [_]
Receipt is acknowledged of the Joint Proxy Statement/Prospectus for the Special
Meeting. Whether or not you expect to attend the Special Meeting, you are urged
to execute and return this proxy, which may be revoked at any time prior to its
use.
Signature(s) ___________________________ Date _________________________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
January 14, 1997
[WESTAMERICA BANCORPORATION LOGO]
Dear Participant:
As a participant in the Westamerica Bancorporation Tax Deferred
Savings/Retirement Plan (the "Plan"), you have an interest in the Special
Meeting of Shareholders of Westamerica Bancorporation which will be held on
Monday, February 24, 1997 (the "Special Meeting"). You may direct the
Trustee of the Plan how to vote all full and fractional shares of
Westamerica Bancorporation stock standing to the credit of your individual
account(s) (from the Supplemental Retirement Plan Account, Employer Matching
Contributions and Employee Contributions) as of January 7, 1997 and your pro
rata share of any unallocated shares held by the Plan as of January 7, 1997.
For your information, we have enclosed a copy of the Joint Proxy
Statement/Prospectus supplied to shareholders of Westamerica
Bancorporation. The enclosed Joint Proxy Statement/Prospectus describes the
proposal to be voted on by the shareholders of Westamerica Bancorporation
at the Special Meeting. The Board of Directors of Westamerica
Bancorporation recommends a vote FOR Item 1. Please instruct the
Trustee how to vote on the proposal by indicating your selection on the
above Proxy.
If the Trustee does not receive written instructions from you before the
close of business on February 18, 1997, it will vote all of the shares
for which you are entitled to provide instruction in the same proportion
as shares for which instructions are received. Under the terms of the Plan,
with respect to fractional shares in plan accounts (from the Supplemental
Retirement Plan Account, Employer Matching Contributions and Employee
Contributions), the Trustee may pool the results of instructions received
from all participants to whom fractional shares have been allocated and
vote such shares accordingly.
Please instruct the Trustee how to vote your shares. A return envelope is
enclosed for your convenience.
Sincerely yours,
/s/ Mary Anne Bell
--------------------------------
Mary Anne Bell
Assistant Corporate Secretary
<PAGE>
VALLICORP HOLDINGS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
VALLICORP HOLDINGS, INC.
FOR THE SPECIAL MEETING OF SHAREHOLDERS ON FEBRUARY 24, 1997
The undersigned holder hereby authorizes Louis H. Herwaldt, J. Mike McGowan
and Patrick J. Mon Pere, each with full power of substitution, to represent and
vote, as designated on the reverse side, all shares of Common Stock of
ValliCorp Holdings, Inc. which the undersigned would be entitled to vote at
the Special Meeting of Shareholders of said corporation to be held at the Fresno
Art Museum, 2233 North First Street, Fresno, California at 5:00 p.m. on Monday,
February 24, 1997, upon the matters set forth on the reverse side of this Proxy
and described in the accompanying Joint Proxy Statement/Prospectus.
This Proxy, when properly executed, will be voted as directed herein by the
undersigned shareholder. If no direction is indicated, this Proxy will be
voted FOR Item 1.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY PROMPTLY, USING THE ENCLOSED
ENVELOPE.
- -------------------------------------------------------------------------------
COMMENTS/ADDRESS CHANGE:
(Continued and to be signed on reverse side)
________________________________________________________________________________
. FOLD AND DETACH HERE .
VALLICORP HOLDINGS, INC.
SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 24, 1997 5:00 P.M.
THE FRESNO ART MUSEUM
2233 NORTH FIRST STREET
FRESNO, CALIFORNIA
<PAGE>
- --------------------------------------------------------------------------------
[X] Please mark
your vote
as this
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1.
Item 1 -- Adoption and approval of the Agreement and Plan of Reorganization
dated as of November 11, 1996 among Westamerica Bancorporation, ValliCorp
Holdings, Inc., and ValliWide Bank, and an Agreement and Plan of Merger between
Westamerica and ValliCorp and the transactions contemplated thereby, including
without limitation, certain provisions benefiting directors, executive officers
and employees of ValliCorp and the proposed merger of ValliCorp with and into
Westamerica.
[_] FOR [_] AGAINST [_] ABSTAIN
COMMENTS/ADDRESS CHANGE
I have made an address change or comment on the reverse side of this proxy. [_]
Receipt is acknowledged of the Joint Proxy Statement/Prospectus for the Special
Meeting. Whether or not you expect to attend the Special Meeting, you are urged
to execute and return this proxy, which may be revoked at any time prior to its
use.
Signature(s) ___________________________ Date _________________________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
. FOLD AND DETACH HERE .
