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Exhibit 99.1
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated November 11, 1996, between Westamerica
Bancorporation, a California corporation ("Buyer"), and ValliCorp Holdings,
Inc., a Delaware corporation ("Seller").
W I T N E S S E T H:
WHEREAS, Buyer, Seller and ValliWide Bank (Seller's subsidiary) have
entered into an Agreement and Plan of Reorganization of even date herewith (the
"Merger Agreement"), which agreement has been executed by the parties hereto
immediately prior to this Agreement; and
WHEREAS, as a condition to Buyer's entering into the Merger Agreement
and in consideration therefor, Seller has agreed to grant Buyer the Option (as
hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Seller hereby grants to Buyer an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 3,474,187
fully paid and nonassessable shares of Seller's Common Stock, par value $.01 per
share ("Common Stock"), at a price of $18.00 per share; provided, however, that
in the event Seller issues or agrees to issue any shares of Common Stock (other
than as permitted under the Merger Agreement) at a price less than $18.00 per
share (as adjusted pursuant to subsection (b) of Section 5), such price shall be
equal to such lesser price (such price, as adjusted if applicable, the "Option
Price"); provided further that in no event shall the number of shares for which
this Option is exercisable exceed 19.9% of the Seller's issued and outstanding
common shares. The number of shares of Common Stock that may be received upon
the exercise of the Option and the Option Price are subject to adjustment as
herein set forth.
(b) In the event that any additional shares of Common Stock are issued
or otherwise become outstanding after the date hereof (or any treasury shares
held by Seller have been or are sold after the date hereof) (other than pursuant
to this Agreement), the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, it equals 19.9% of the number
of shares of Common Stock then issued and outstanding without giving effect to
any shares subject to or issued pursuant to the Option. Nothing contained in
this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize
Seller or Buyer to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as
hereinafter defined) shall have occurred
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prior to the occurrence of an Exercise Termination Event (as hereinafter
defined), provided that the Holder shall have sent the written notice of such
exercise (as provided in subsection (e) of this Section 2) within 30 days
following such Subsequent Triggering Event. Each of the following shall be an
Exercise Termination Event: (i) the effective time of the Merger on the
Effective Date; (ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence of an
Initial Triggering Event; or (iii) the passage of 12 months after termination of
the Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event (provided that if an Initial Triggering Event continues or
occurs beyond such termination, the Exercise Termination Event shall be 12
months from the expiration of the Last Triggering Event but in no event more
than 18 months after such termination). The "Last Triggering Event" shall mean
the last Initial Triggering Event to occur. The term "Holder" shall mean the
holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Seller or any of its Subsidiaries (each a "Seller
Subsidiary"), without having received Buyer's prior written consent,
shall have entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person (the term "person"
for purposes of this Agreement having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act, and the rules and
regulations thereunder) other than Buyer or any of its Subsidiaries
(each a "Buyer Subsidiary") or the Board of Directors of Seller shall
have recommended that the stockholders of Seller approve or accept any
Acquisition Transaction other than as contemplated by the Merger
Agreement. For purposes of this Agreement, "Acquisition Transaction"
shall mean (x) a merger or consolidation, or any similar transaction,
involving Seller or any Significant Subsidiary (as defined in Rule 1-02
of Regulation S-X promulgated by the SEC) of Seller, (y) a purchase,
lease or other acquisition representing 15% or more of the consolidated
assets of Seller and its Subsidiaries, or (z) a purchase or other
acquisition (including by way of merger, consolidation, share exchange
or otherwise) of securities representing 10% or more of the voting
power of Seller or any Significant Subsidiary of Seller;
(ii) Seller or any Seller Subsidiary, without having received
Buyer's prior written consent, shall have authorized, recommended,
proposed or publicly announced its intention to authorize, recommend or
propose, an agreement to engage in an Acquisition Transaction with any
person other than Buyer or a Buyer Subsidiary, or the Board of
Directors of Seller shall have publicly withdrawn or modified, or
publicly announced its intent to withdraw or modify, in any manner
adverse to Buyer, its recommendation that the stockholders of Seller
approve the transactions contemplated by the Merger Agreement;
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(iii) Any person other than Buyer, any Buyer Subsidiary or any
Seller Subsidiary acting in a fiduciary capacity shall have acquired
beneficial ownership or the right to acquire beneficial ownership of
10% or more of the outstanding shares of Common Stock (the term
"beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the Exchange Act, and the
rules and regulations thereunder);
(iv) Any person other than Buyer or any Buyer Subsidiary shall
have made a bona fide proposal to Seller or its stockholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(v) After a proposal is made by a third party to Seller or its
stockholders to engage in an Acquisition Transaction, Seller shall have
breached any covenant or obligation contained in the Merger Agreement
and such breach (x) would entitle Buyer to terminate the Merger
Agreement and (y) shall not have been cured prior to the Notice Date
(as defined below); or
(vi) Any person other than Buyer or any Buyer Subsidiary,
other than in connection with a transaction to which Buyer has given
its prior written consent, shall have filed an application or notice
with the Federal Reserve Board, or other federal or state bank
regulatory authority, which application or notice has been accepted for
processing, for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of
15% or more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described
in clause (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (z) shall be 15%.
(d) Seller shall notify Buyer promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Seller shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Seller a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided, that if the
closing of the purchase and sale pursuant to the Option (the "Closing")
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cannot be consummated by reason of any applicable judgment, decree, order, law
or regulation, the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which such restriction on
consummation has expired or been terminated; and provided further, without
limiting the foregoing, that if prior notification to or approval of the Federal
Reserve Board or any other regulatory agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application for
approval and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date on
which any required notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or periods shall
have passed. Any exercise of the Option shall be deemed to occur on the Notice
Date relating thereto. Notwithstanding this subsection (e), in no event shall
any Closing Date be more than 18 months after the related Notice Date, and if
the Closing Date shall not have occurred within 18 months after the related
Notice Date due to the failure to obtain any such required approval, the
exercise of the Option effected on the Notice Date shall be deemed to have
expired. In the event (i) Buyer receives official notice that an approval of the
Federal Reserve Board or any other regulatory authority required for the
purchase of Option Shares (as hereinafter defined) would not be issued or
granted, (ii) a Closing Date shall not have occurred within 18 months after the
related Notice Date due to the failure to obtain any such required approval or
(iii) Holder (or Substitute Holder) shall have the right pursuant to the last
sentence of Section 7 (or Section 9) to exercise the Option (or Substitute
Option), Buyer shall nevertheless be entitled to exercise its right as set forth
in Section 7 and Buyer or Holder (or Substitute Holder) shall be entitled to
exercise the Option (or Substitute Option) in connection with the resale of
Seller Common Stock or other securities pursuant to a registration statement as
provided in Section 6.
(f) At the Closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Seller the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Seller, provided that
failure or refusal of Seller to designate such a bank account shall not preclude
the Holder from exercising the Option.
(g) At such Closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Seller shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Seller a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement. If at the time of
issuance of any Option Shares pursuant to an exercise of all or part of the
Option hereunder, Seller shall not have redeemed the Rights (as defined in the
Stockholders' Rights Plan adopted by Seller on March 25, 1996, as amended (the
"Rights Agreement")), or shall have issued any similar securities, then each
Option Share issued pursuant to such exercise shall also represent rights or new
rights with terms substantially the same as and at least as favorable to Buyer
as are provided under the Rights Agreement or any similar agreement then in
effect.
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(h) Certificates for Common Stock delivered at a closing hereunder may
be endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder
hereof and Seller and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on file
at the principal office of Seller and will be provided to the holder
hereof without charge upon receipt by Seller of a written request
therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the Holder shall have
delivered to Seller a copy of a letter from the staff of the SEC, or an opinion
of counsel, in form and substance reasonably satisfactory to Seller, to the
effect that such legend is not required for purposes of the Securities Act; (ii)
the reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
(i) Upon the giving by the Holder to Seller of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Seller shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder or the Seller
shall have failed or refused to designate the bank account described in
subsection (f) of this Section 2. Seller shall pay all expenses, and any and all
United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issuance and delivery of stock
certificates under this Section 2 in the name of the Holder or its assignee,
transferee or designee.
3. Seller agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock (and other securities issuable pursuant to Section 5(a)) so that
the Option may be exercised without additional authorization of Common Stock (or
such other securities) after giving effect to all other options, warrants,
convertible securities and other rights to purchase Common Stock (or such other
securities); (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Seller; (iii) promptly to take all action as may from time to time
be required (including (x) complying with all premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Bank Holding
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Company Act of 1956, as amended ("BHCA"), or the Change in Bank Control Act of
1978, as amended, or any state banking law, prior approval of or notice to the
Federal Reserve Board or to any state regulatory authority is necessary before
the Option may be exercised, to cooperate fully with the Holder in preparing
such applications or notices and to provide such information to the Federal
Reserve Board or such state regulatory authority as they may require) in order
to permit the Holder to exercise the Option and the Seller duly and effectively
to issue shares of Common Stock pursuant hereto; and (iv) promptly to take all
action provided herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Seller, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Seller of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Seller will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Seller, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1 of
this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option shall be subject to adjustment from time to time as
provided in this Section 5.
(a) In the event of any change in Common Stock by reason of
stock dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or the like, the type
and number of shares of Common Stock purchasable upon exercise hereof
shall be appropriately adjusted so that Buyer shall receive upon
exercise of the Option and payment of the aggregate Option Price
hereunder the number and class of shares or other securities or
property that Buyer would have received in respect of Common Stock if
the Option had been exercised in full immediately prior to such event,
or the record date therefor, as applicable.
(b) Whenever the number of shares of Common Stock purchasable
upon exercise hereof is adjusted as provided in this Section 5, the
Option Price shall be adjusted by multiplying the Option Price by a
fraction, the numerator of which shall be equal to the number of shares
of Common Stock purchasable prior to the adjustment and the denominator
of which shall be
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equal to the number of shares of Common Stock purchasable after the
adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event (or as otherwise provided in the last
sentence of Section 2(e)), Seller shall, at the request of Buyer delivered
within 30 days after such Subsequent Triggering Event (or such trigger date as
is provided in the last sentence of Section 2(e)) (whether on its own behalf or
on behalf of any subsequent holder of this Option (or part thereof) or any of
the shares of Common Stock issued pursuant hereto), promptly prepare, file and
keep current a shelf registration statement under the Securities Act covering
any shares issued and issuable pursuant to this Option and shall use its best
efforts to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of any shares of Common
Stock issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Buyer. Seller will use its
best efforts to cause such registration statement first to become effective and
then to remain effective for such period not in excess of 180 days from the day
such registration statement first becomes effective or such shorter time as may
be reasonably necessary to effect such sales or other dispositions. Buyer for a
period of 18 months following such first request shall have the right to demand
a second such registration if reasonably necessary to effect such sales or
dispositions. The foregoing notwithstanding, if, at the time of any request by
Buyer for registration of Option Shares as provided above, Seller is in
registration with respect to an underwritten public offering of shares of Common
Stock, and if in the good faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters, of such
offering the inclusion of the Holder's Option or Option Shares would interfere
with the successful marketing of the shares of Common Stock offered by Seller,
the number of Option Shares otherwise to be covered in the registration
statement contemplated hereby may be reduced; and provided, however, that after
any such required reduction the number of Option Shares to be included in such
offering for the account of the Holder shall constitute at least 25% of the
total number of shares to be sold by the Holder and Seller in the aggregate; and
provided further, however, that if such reduction occurs, then the Seller shall
file a registration statement for the balance as promptly as practical and no
reduction shall thereafter occur (and such registration shall not be charged
against the Holder). Each such Holder shall provide all information reasonably
requested by Seller for inclusion in any registration statement to be filed
hereunder. If requested by any such Holder in connection with such registration,
Seller shall become a party to any underwriting agreement relating to the sale
of such shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements for the Seller. Upon receiving any
request under this Section 6 from any Holder, Seller agrees to send a copy
thereof to any other person known to Seller to be entitled to registration
rights under this Section 6, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to receive such
copies.
7. (a) Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, (i) at the request of the Holder,
delivered within 30 days after such occurrence (or such later period as provided
in Section 10 or the last
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sentence of Section 2(e)), Seller (or any successor thereto) shall repurchase
the Option from the Holder at a price (the "Option Repurchase Price") equal to
(x) the amount by which (A) the market/offer price (as defined below) exceeds
(B) the Option Price, multiplied by the number of shares for which this Option
may then be exercised plus (y) Buyer's Out-of- Pocket Expenses (as defined
below) (to the extent not previously reimbursed) and (ii) at the request of the
owner of Option Shares from time to time (the "Owner"), delivered within 30 days
after such occurrence (or such later period as provided in Section 10), Seller
shall repurchase such number of the Option Shares from the Owner as the Owner
shall designate at a price (the "Option Share Repurchase Price") equal to (x)
the market/offer price multiplied by the number of Option Shares so designated
plus (y) Buyer's Out-of-Pocket Expenses (to the extent not previously
reimbursed). The term "Out-of-Pocket Expenses" shall mean Buyer's reasonable
out-of-pocket expenses incurred in connection with the transactions contemplated
by the Merger Agreement, including, without limitation, legal, accounting and
investment banking fees. The term "market/offer price" shall mean the highest of
(i) the highest price per share of Common Stock at which a tender offer or
exchange offer therefor has been made, (ii) the price per share of Common Stock
to be paid by any third party pursuant to an agreement with Seller, (iii) the
highest closing price for shares of Common Stock quoted in the New York Stock
Exchange (or if Common Stock is not quoted in the New York Stock Exchange, the
highest bid price per share as quoted on the National Association of Securities
Dealers Automated Quotation Systems, or, if the shares of Common Stock are not
quoted thereon, on the principal trading market on which such shares are traded
as reported by a recognized source) within the six-month period immediately
preceding the date the Holder gives notice of the required repurchase of Option
Shares, as the case may be, or (iv) in the event of a sale of assets
representing 15% or more of the consolidated assets of Seller and its
Subsidiaries, the sum of the price paid in such sale for such assets and the
current market value of the remaining assets of Seller as determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, divided by the number of shares of Common Stock of
Seller outstanding at the time of such sale. In determining the market/offer
price, the value of consideration other than cash shall be determined by a
nationally recognized investment banking firm selected by the Holder or Owner,
as the case may be.
(b) The Holder or the Owner, as the case may be, may exercise its right
to require Seller to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Seller, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Seller to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within five business
days after the surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating thereto, Seller shall
deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or the portion
thereof that Seller is not then prohibited under applicable law and regulation
from so delivering.
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(c) To the extent that Seller is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Seller shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Seller is no longer so prohibited; provided, however, that if
Seller at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Seller hereby
undertakes to use its best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either in whole or to the extent
of the prohibition, whereupon, in the latter case, Seller shall promptly (i)
deliver to the Holder and/or the Owner, as appropriate, that portion of the
Option Repurchase Price or the Option Share Repurchase Price that Seller is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Holder, a new Stock Option Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock Option
Agreement was exercisable at the time of delivery of the notice of repurchase by
a fraction, the numerator of which is the Option Repurchase Price less the
portion thereof theretofore delivered to the Holder and the denominator of which
is the Option Repurchase Price, or (B) to the Owner, a certificate for the
Option Shares it is then so prohibited from repurchasing. If an Exercise
Termination Event shall have occurred prior to the date of the notice by Seller
described in the first sentence of this subsection (c), or shall be scheduled to
occur at any time before the expiration of a period ending on the thirtieth day
after such date, the Holder shall nonetheless have the right to exercise the
Option until the expiration of such 30-day period.
8. (a) In the event that prior to an Exercise Termination Event, Seller
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Buyer or one of its Subsidiaries, and shall not be the continuing or
surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Buyer or one of its Subsidiaries, to merge into Seller and
Seller shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding shares and share equivalents
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Buyer or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
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(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Seller (if
other than Seller), (ii) Seller in a merger in which Seller is the
continuing or surviving person, and (iii) the transferee of all or
substantially all of Seller's assets.
(2) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(3) "Assigned Value" shall mean the market/offer price, as
defined in Section 7.
(4) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of Substitute Common
Stock on the day preceding such consolidation, merger or sale; provided
that if Seller is the issuer of the Substitute Option, the Average
Price shall be computed with respect to a share of common stock issued
by the person merging into Seller or by any company which controls or
is controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option shall
also enter into an agreement with the then Holder or Holders of the Substitute
Option in substantially the same form as this Agreement (after giving effect for
such purpose to the provisions of Section 9), which agreement shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value multiplied
by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the
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"Substitute Option Seller") shall make a cash payment to Holder equal to the
excess of (i) the value of the Substitute Option without giving effect to the
limitation in this clause (e) over (ii) the value of the Substitute Option after
giving effect to the limitation in this clause (e). This difference in value
shall be determined by a nationally recognized investment banking firm selected
by the Holder.
(f) Seller shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Seller hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Seller shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to (x) the amount by which (i) the Highest
Closing Price (as hereinafter defined) exceeds (ii) the exercise price of the
Substitute Option, multiplied by the number of shares of Substitute Common Stock
for which the Substitute Option may then be exercised plus (y) Buyer's
Out-of-Pocket Expenses (to the extent not previously reimbursed), and at the
request of the owner (the "Substitute Share Owner") of shares of Substitute
Common Stock (the "Substitute Shares"), the Substitute Option Seller shall
repurchase the Substitute Shares at a price (the "Substitute Share Repurchase
Price") equal to (x) the Highest Closing Price multiplied by the number of
Substitute Shares so designated plus (y) Buyer's Out-of-Pocket Expenses (to the
extent not previously reimbursed). The term "Highest Closing Price" shall mean
the highest closing price for shares of Substitute Common Stock within the
six-month period immediately preceding the date the Substitute Option Holder
gives notice of the required repurchase of the Substitute Option or the
Substitute Share Owner gives notice of the required repurchase of the Substitute
Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective right to require the Substitute Option
Seller to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Seller,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Seller to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provision of this
Section 9. As promptly as practicable, and in any event within five business
days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Seller shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or the portion thereof which the Substitute Option Seller is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Seller is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the
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Substitute Option and/or the Substitute Shares in part or in full, the
Substitute Option Seller shall immediately so notify the Substitute Option
Holder and/or the Substitute Share Owner and thereafter deliver or cause to be
delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price or the Substitute Share Repurchase Price, respectively, which
it is no longer prohibited from delivering, within five business days after the
date on which the Substitute Option Seller is no longer so prohibited; provided,
however, that if the Substitute Option Seller is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9 prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from delivering to the Substitute Option Holder and/or the Substitute
Share Owner, as appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the Substitute
Option Seller shall use its best efforts to receive all required regulatory and
legal approvals as promptly as practicable in order to accomplish such
repurchase), the Substitute Option Holder or Substitute Share Owner may revoke
its notice of repurchase of the Substitute Option or the Substitute Shares
either in whole or to the extent of the prohibition, whereupon, in the latter
case, the Substitute Option Seller shall promptly (i) deliver to the Substitute
Option Holder or Substitute Share Owner, as appropriate, that portion of the
Substitute Option Repurchase Price or the Substitute Share Repurchase Price that
the Substitute Option Seller is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, or (B) to the Substitute Share Owner, a certificate for the
Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the notice
by the Substitute Option Seller described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the expiration
of a period ending on the thirtieth day after such date, the Substitute Option
Holder shall nevertheless have the right to exercise the Substitute Option until
the expiration of such 30 day period.
10. The 30-day period for exercise of certain rights under Sections 2,
6, 7, 9 and 12 shall be extended: (i) to the extent necessary to obtain all
regulatory approvals for the exercise of such rights, and for the expiration of
all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the Exchange Act by reason of such exercise.
11. Seller hereby represents and warrants to Buyer as follows:
(a) Seller has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Seller and no other
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corporate proceedings on the part of Seller are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by Seller. This Agreement is the
valid and legally binding obligation of Seller, enforceable against Seller in
accordance with its terms.
(b) Seller has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
(c) Seller has taken all action (including if required redeeming all of
the Rights or amending or terminating the Rights Agreement) so that the entering
into of this Option Agreement, the acquisition of shares of Common Stock
hereunder and the other transactions contemplated hereby do not and will not
result in the grant of any rights to any person under the Rights Agreement or
enable or require the Rights to be exercised, distributed or triggered.
(d) Except as disclosed pursuant to the Merger Agreement, the execution
and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
Violation pursuant to any provisions of the Certificate of Incorporation or
by-laws of Seller or any Subsidiary of Seller or, subject to obtaining any
approvals or consents contemplated hereby, result in any Violation of any loan
or credit agreement, note, mortgage, indenture, lease, Plan or other agreement,
obligation, instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Seller or any
Subsidiary of Seller or their respective properties or assets which Violation
would have a Material Adverse Effect on Seller.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Buyer, subject to the express provisions hereof, may
assign in whole or in part its rights and obligations hereunder within 30 days
following such Subsequent Triggering Event (or such later period as provided in
Section 10); provided, however, that until the date 30 days following the date
on which the Federal Reserve Board approves an application by Buyer under the
BHCA to acquire the shares of Common Stock subject to the Option, Buyer may not
assign its rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party acquires the right
to purchase in excess of 2% of the voting shares of Seller, (iii) an assignment
to a single party (e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on Buyer's behalf, or (iv) any
other manner approved by the Federal Reserve Board.
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13. Immediately following an Initial Triggering Event, each of Buyer
and Seller will use its best efforts to make all filings with, and to obtain
consents of, all third parties and governmental authorities necessary to the
consummation of the transactions contemplated by this Agreement, including
without limitation making application to list the shares of Common Stock
issuable hereunder on the NASDAQ.NMS upon official notice of issuance and
applying to the Federal Reserve Board under the BHCA for approval to acquire the
shares issuable hereunder, but Buyer shall not be obligated to apply to state
banking authorities for approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
14. Notwithstanding anything to the contrary herein, in the event that
the Holder or Owner or any Related Person thereof is a person making without the
prior written consent of Seller an offer or proposal to engage in an Acquisition
Transaction (other than the transaction contemplated by the Merger Agreement),
then (i) in the case of a Holder or any Related Person thereof, the Option held
by it shall immediately terminate and be of no further force or effect, and (ii)
in the case of an Owner or any Related Person thereof, the Option Shares held by
it shall be immediately repurchasable by Seller at the Option Price. A Related
Person of a Holder or Owner means any Affiliate (as defined in Rule 12b-2 of the
rules and regulations under the Exchange Act) of the Holder or Owner and any
person that is the beneficial owner of 20% or more of the voting power of the
Holder or Owner, as the case may be.
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder or Substitute Option Holder is not permitted to acquire, or
Seller or Substitute Option Seller is not permitted to repurchase pursuant to
Section 7 or Section 9, as the case may be, the full number of shares of Common
Stock provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or
Section 5 hereof), it is the express intention of Seller to allow the Holder to
acquire or to require Seller to repurchase such lesser number of shares as may
be permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
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19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Except as otherwise expressly provided herein or in the Merger
Agreement, each of the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein. Any provision of this
Agreement may be waived at any time by the party that is entitled to the
benefits of such provision. This Agreement may not be modified, amended, altered
or supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
22. In the event of any exercise of the Option by Buyer, Seller and
Buyer shall execute and deliver all other documents and instruments and take all
other action that may be reasonably necessary in order to consummate the
transactions provided for by such exercise.
23. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
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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
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