<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 11, 1996
ValliCorp Holdings, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 18202 77-0229483
- -------------------------------------------------------------------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
8405 North Fresno Street, Fresno, California 93720
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (209) 437-5700
--------------
(Former name or former address, if changed since last report)
EXHIBIT INDEX AT PAGE 3
<PAGE>
ITEM 5. OTHER EVENTS.
------------
On November 11, 1996, the Registrant entered into an Agreement and Plan
of Reorganization ("Agreement") with Westamerica Bancorporation ("WABC") and the
Registrant's subsidiary, ValliWide Bank, pursuant to which the Registrant will
be merged ("Merger") with and into WABC and each issued and outstanding share of
the Registrant's common stock will be converted into shares of WABC common stock
with a value equal to $21.00, subject to upward or downward adjustment if WABC's
average stock price (as defined) at closing is more than $53.81 or less than
$48.69, as set forth in the Agreement. The Registrant also entered into a Stock
Option Agreement with WABC pursuant to which WABC was granted an option to
acquire up to 19.9% of the shares of the Registrant's common stock under certain
circumstances specified therein. For information regarding the Merger and the
Agreement, reference is made to the Agreement, the Stock Option Agreement and
the joint press release of WABC and the Registrant, copies of which are
attached hereto as Exhibits 99.1, 99.2 and 99.3, respectively, and incorporated
herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
-------------------------------------------------------------------
(1) Exhibits
99.1 Agreement and Plan of Reorganization, dated as of November 11, 1996, by
and among Westamerica Bancorporation, ValliCorp Holdings, Inc. and
ValliWide Bank, and attached form of Plan of Merger between Westamerica
Bancorporation and ValliCorp Holdings, Inc.
99.2 Stock Option Agreement, dated as of November 11, 1996, by and between
Westamerica Bancorporation and ValliCorp Holdings, Inc.
99.3 Joint Press Release dated November 12, 1996.
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DATED: November 13, 1996
VALLICORP HOLDINGS, INC.
By: /s/ E.L. Herbert
------------------
E. L. HERBERT, Executive Vice President,
General Counsel and Secretary
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page Number
Designation Description in Sequential
- ----------- ----------- Numbering System
----------------
<S> <C> <C>
99.1 Agreement and Plan of 4
Reorganization dated as of
November 11, 1996
99.2 Stock Option Agreement dated 88
as of November 11, 1996
99.3 Joint Press Release dated 104
November 12, 1996
</TABLE>
3
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Exhibit 99.1
Execution Copy
==============================================================================
AGREEMENT AND PLAN OF REORGANIZATION
Among
VALLICORP HOLDINGS, INC.,
VALLIWIDE BANK
And
WESTAMERICA BANCORPORATION
DATED AS OF
NOVEMBER 11, 1996
===============================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
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
3.30 Fairness Opinion ......................................... 29
<PAGE>
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
(j) ValliCorp Accruals and Reserves .................. 56
(k) Asset Review ..................................... 58
(l) Changes in Capital Stock; ValliCorp Dividends .... 59
(m) Indebtedness ..................................... 60
<PAGE>
(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
8.9 Attorneys' Fees .......................................... 76
8.10 Specific Performance ..................................... 76
8.11 Waivers .................................................. 76
<PAGE>
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
<PAGE>
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.
1.5 "Applications" shall have the meaning set forth in Section 3.25.
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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.
1.21 "Determination Date" shall have the meaning set forth in
Section7.1(a)(7).
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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
theFederal 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 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
3
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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;
providedthat 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.
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.
4
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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).
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
5
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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.
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).
6
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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.
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");
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(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 $21.00 - $21.00 x 40% + $21.00
------ ------------- -------------
Ratio = $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 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.
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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.
(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.
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(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 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
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<PAGE>
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 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
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<PAGE>
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 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").
12
<PAGE>
<TABLE>
<CAPTION>
Name of Subsidiary Ownership
------------------ ---------
<S> <C>
ValliWide Bank Wholly Owned
Commerce Securities Corporation Wholly Owned by ValliWide
California Valley Securities Corporation Wholly Owned by ValliWide
</TABLE>
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.
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.
13
<PAGE>
(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.
(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
14
<PAGE>
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
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
15
<PAGE>
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.
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).
16
<PAGE>
"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).
"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
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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 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.
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(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 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
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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 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
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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 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 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
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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 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
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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
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
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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 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,
25
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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 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
26
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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 "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
27
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"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.
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
oard, the FDIC, the Superintendent or any other regulatory authority having
jurisdiction over its or their business or
28
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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.
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 or
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.
29
<PAGE>
(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.
(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
30
<PAGE>
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 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.
31
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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 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
32
<PAGE>
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.
(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
33
<PAGE>
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
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.
(d) No consent has been filed relating to WABC pursuant to section
341(f) of the Code.
34
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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:
(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;
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(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 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
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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
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
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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.
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
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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
Caifornia 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 herein-after 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 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
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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
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 trans-actions
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
40
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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
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
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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 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.
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(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.
(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
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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.
(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
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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 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
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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);
(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
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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;
(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;
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(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;
(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
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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.
(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
49
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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 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.
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(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 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 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
51
<PAGE>
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
secrities, 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
ith 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
orporation 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 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 empoyed by ValliCorp and/or
ValliCorp Subsidiaries on such date shall be eligible for benefits which in the
aggregate are no less favorable with respect
52
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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 ABC 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 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
53
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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 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
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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 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,
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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.
(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.
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(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.
(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
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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 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.
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(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 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
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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 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
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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.
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;
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(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
(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;
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(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;
(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 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 &
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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 share-holders' 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 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
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<PAGE>
adjustments provided for in this Agreement shall be adjusted downward according
to the following formula (and no failure of a condition shall have occurred):
Exchange
Ratio = Book Value (March 31, 1997
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.
(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
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<PAGE>
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.
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.
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<PAGE>
(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 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.
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<PAGE>
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 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.
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<PAGE>
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
70
<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.
71
<PAGE>
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
72
<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 Counsel Chairman and Chief Executive Officer
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 Counsel Chairman and Chief Executive Officer
and Secretary
(SEAL)
Attest WEST AMERICA 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)
73
<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.
<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 in connection with a debt previously contracted shall be canceled
and no cash, stock or other property shall be delivered in exchange therefor.
2
<PAGE>
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.
(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
3
<PAGE>
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.
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
<PAGE>
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.
-------------
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 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: /s/David L. Payne
_____________________________
David L. Payne, President and
Chief Executive Officer
By: /s/Mary Anne Bell
____________________________
Mary Anne Bell, Assistant
Corporate Secretary
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<PAGE>
SELLER
By: /s/J. Mike McGowan
____________________________
J. Mike McGowan, Chairman and
Chief Executive Officer
By: /s/Edwin L. Herbert
____________________________
Edwin L. Herbert, Secretary
6
<PAGE>
EXHIBIT 99.2
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 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
<PAGE>
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.
(C) 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;
(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);
2
<PAGE>
(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")
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
3
<PAGE>
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 r equired 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.
(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
therefore."
4
<PAGE>
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 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
5
<PAGE>
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 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
6
<PAGE>
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 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 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
7
<PAGE>
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.
(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
8
<PAGE>
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.
(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
9
<PAGE>
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 "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
10
<PAGE>
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 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
11
<PAGE>
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 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
12
<PAGE>
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. 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.
13
<PAGE>
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.
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.
14
<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
15
<PAGE>
WESTAMERICA BANCORPORATION
By /s/ David L. Payne
----------------------------------------------------------------------------
David L. Payne
Chairman, President and Chief Executive Officer
16
<PAGE>
EXHIBIT 99.3
FOR IMMEDIATE RELEASE FOR ADDITIONAL INFORMATION
Tuesday, November 12, 1996 Contacts: ValliCorp Holdings, Inc.
J. Mike McGowan
(209) 437-5700
Westamerica Bancorporation
E. Joseph Bowler
(707) 863-6840
WESTAMERICA BANCORPORATION AND VALLICORP HOLDINGS, INC.
SIGN DEFINITIVE MERGER AGREEMENT
San Rafael and Fresno, CA - Westamerica Bancorporation (NASDAQ:
WABC) and ValliCorp Holdings, Inc. (NASDAQ: VALY) jointly announced today the
signing of a Definitive Merger Agreement under which Westamerica will acquire
the outstanding shares of common stock of ValliCorp Holdings, Inc. pursuant to
a tax-free exchange of Westamerica Common Stock for all common stock of
ValliCorp. ValliCorp, parent company of ValliWide Bank, headquartered in
Fresno, California, with approximately $1.3 billion in assets and $1.2 billion
in deposits, operates 58 offices in 14 counties primarily in the Central Valley
of California. The merger between the Northern California based Westamerica
Bancorporation and the Fresno, California based ValliCorp will result in the
formation of a financial institution with $3.9 billion in assets and with the
eighth largest bank deposit share in California.
The Definitive Merger Agreement, which has been approved
unanimousily by the boards of Directors of both companies, is subject to
conditions usual and customary for merger transactions of this type, including
approval by both Westamerica and ValliCorp shareholders, approval by the Federal
Reserve Board and California Superintendent of Banks, and satisfaction of
certain other terms and conditions.
The merger will be accounted for as a pooling of interests in
which, for each outstanding share of ValliCorp Common Stock, ValliCorp
shareholders will receive $21.00 of value in Westamerica Bancorporation Common
Stock, subject to upward or downward adjustments if Westamerica's average stock
price at closing (as defined) is more than $53.81 or less than $48.69. At
September 30, 1996, Westamerica had approximately 9.4 million shares outstanding
and ValliCorp had approximately 14.0 million shares outstanding. The
transaction, based upon Westamerica's closing price on November 11, of $52.25,
is valued at approximately $304 million. Although the parties have not adopted
any formal timetable, subject to satisfying the conditions in the Agreement, it
is presently estimated the merger will be consummated in the second quarter of
1997.
ValliCorp's Chairman and CEO, J. Mike McGowan, stated: "We are
excited about joining one of the most successful community banks in California.
In the current environment of rapid change and consolidation in the banking
industry, we concluded that merging with Westamerica presented an outstanding
course of action for our shareholders and employees and an unparalleled
opportunity to join a premier California community bank. Westamerica brings
to the
<PAGE>
affiliation a stellar record of earnings and dividend growth, strong asset
quality, a wide branch network, and the capital resources needed to develop the
profitable segments in our banking business. Most importantly, Westamerica is
committed to developing a strong partnership with their customers which is a
philosophy ValliCorp has always pursued. We believe this merger is right for the
customers and communities served by ValliCorp."
David L. Payne, Chairman, President and CEO of Westamerica,
said: "We are extremely pleased with this opportunity to expand Westamerica's
community banking franchise into the Central Valley of California. ValliCorp
is a logical merger partner for Westamerica due to it strong business banking
position in this large and growing part of our state. We believe the earnings
potential of our company has been dramatically strengthened providing further
growth opportunities for Westamerica Bancorporation shareholders."
ValliCorp has also granted Westamerica an option to purchase up
to 19.9 percent of the outstanding shares of ValliCorp Common Stock if certain
events and conditions (as defined in the option agreement) occur, including a
third party merger proposal or tender offer.
Westamerica Bancorporation operates as a multi-bank holding
company with 57 branches in 13 Northern California Counties. Westamerica's
assets at September 30, 1996 were approximately $2.5 billion. Westamerica
reported record net income of $9.5 million or $1.00 per share for the quarter
ending September 30, 1996 and record net income of $28.0 million or $2.89 per
share for the first nine months of 1996.
(NOTE: A registration statement relating to the Westamerica Common Stock to be
exchanged for shares of ValliCorp Holdings, Inc. Common Stock will be filed
with the Securities and Exchange Commission ("SEC"). The Westamerica Common
Stock may not be exchanged, nor may offers to exchange be accepted, prior to
the time the registration statement becomes effective. This press release shall
not constitute an offer to exchange or the solicitation of an offer to exchange
nor shall there be any exchange of the Westamerica Common Stock in any state in
which such offer, solicitation, or exchange would be unlawful prior to
registration or qualification under the securities laws of any such state. The
Westamerica Common Stock to be exchanged will be offered only by means of a
prospectus filed with the SEC.)
