10-K
1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED COMMISSION FILE NUMBER
DECEMBER 31, 1994 1-9383
WESTAMERICA BANCORPORATION
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2156203
(State of incorporation) (I.R.S. Employer
Identification Number)
1108 FIFTH AVENUE, SAN RAFAEL, CALIFORNIA 94901
(Address of principal executive offices and zip code)
(415) 257-8000
Registrant's area code and telephone number
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF CLASS
Common Stock, no par value
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO ___
Aggregate market value of the voting stock held by non-affiliates of
the registrant, computed by reference to the closing price of such stock,
as of March 24, 1995: $281,124,395
Number of shares outstanding of each of the registrant's classes of
common stock, as of March 24, 1995.
Title of Class Shares Outstanding
Common Stock, no par value 9,200,164
Documents Incorporated by Reference
Document* Incorporated Into:
Proxy Statement dated March 21, 1995
for Annual Meeting of Shareholders
to be held on April 25, 1995 Part III
* Only selected portions of the documents specified are
incorporated by reference into this report, as more particularly
described herein. Except to the extent expressly incorporated
herein by reference, such documents shall not be deemed to be
filed as part of this Annual Report on Form 10-K.
TABLE OF CONTENTS
Page
PART-I
Item 1 Business. . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2 Description of Property . . . . . . . . . . . . . . . . . 12
Item 3 Legal Proceedings . . . . . . . . . . . . . . . . . . . . 13
Item 4 Submission of Matters to a Vote of Security Holders . . . 13
PART-II
Item 5 Market for Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . . . . . . 13
Item 6 Selected Financial Data . . . . . . . . . . . . . . . . . 15
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 16
Item 8 Financial Statements and Supplementary Data . . . . . . . 35
Item 9 Disagreements on Accounting and Financial Disclosure. . . 65
PART-III
Item 10 Directors and Executive Officers of the Registrant. . . . 65
Item 11 Executive Compensation. . . . . . . . . . . . . . . . . . 65
Item 12 Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . . . . . 65
Item 13 Certain Relationships and Related Transactions. . . . . . 65
PART-IV
Item 14 Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . 66
PART I
ITEM I. Business
WESTAMERICA BANCORPORATION (the "Company") is a bank holding company
registered under the Bank Holding Company Act of 1956 ("BHC"), as amended.
It was incorporated under the laws of the State of California as
"Independent Bankshares Corporation" on February 11, 1972. Its principal
executive offices are located at 1108 Fifth Avenue, San Rafael, California
94901, and its telephone number is (415) 257-8000. The Company provides a
full range of banking services to individual and corporate customers in
Northern California through its subsidiary banks (the "Banks"), Westamerica
Bank and Subsidiary, Bank of Lake County and Napa Valley Bank. The Banks
are subject to competition from other financial institutions and
regulations of certain agencies and undergo periodic examinations by those
regulatory authorities.
The Company was originally formed pursuant to a plan of reorganization
among three previously unaffiliated banks: Bank of Marin, Bank of Sonoma
County and First National Bank of Mendocino County (formerly First National
Bank of Cloverdale). The reorganization was consummated on December 31,
1972, and, on January 1, 1973, the Company began operations as a bank
holding company. Subsequently, the Company acquired Bank of Lake County
(a California chartered bank) in 1974, Gold Country Bank in 1979 and Vaca
Valley Bank in 1981, in each case by the exchange of the Company's Common
Stock for the outstanding shares of the acquired banks.
In mid-1983, the Company consolidated the six subsidiary banks into a
single subsidiary bank. The consolidation was accomplished by the merger
of the five state chartered banks (Bank of Marin, Bank of Sonoma County,
Bank of Lake County, Gold Country Bank and Vaca Valley Bank) into First
National Bank of Mendocino County which subsequently changed its name to
Westamerica Bank ("WAB"), a national banking association organized and
existing under the laws of the United States. The Company also owns all
the capital stock of Westcore, formerly Learnex Corp., a newly formed
company which will engage in planning and servicing retirement and employee
benefit programs.
On February 28, 1992 the Company acquired John Muir National Bank through a
merger of such bank into WAB in exchange for the issuance of the Company's
Common Stock for all of the outstanding shares of John Muir National Bank.
This business transaction was accounted for as a pooling-of-interests
basis.
On April 15, 1993, the Company acquired Napa Valley Bancorp, a bank holding
company, whose subsidiaries included Napa Valley Bank, 88 percent interest
in Bank of Lake County, 50 percent interest in Sonoma Valley Bank, Suisun
Valley Bank and Napa Valley Bancorp Services Association, established to
provide data processing and other services to Napa Valley Bancorp's
subsidiaries. This business transaction (the "Merger") was accounted for as
a pooling-of-interests combination and, accordingly, the consolidated
financial statements and financial data for periods prior to the
combination have been restated to include the accounts and results of
operations of Napa Valley Bancorp. Shortly after the Merger Suisun Valley
bank was merged into Westamerica Bank, the name of Napa Valley Bancorp
Services Corporation was changed to Community Banker Services Corporation
and the Company sold its 50 percent interest in Sonoma Valley Bank.
In June, 1993, the Company accepted from Westamerica Bank a dividend in the
form of all outstanding shares of capital stock of that bank's subsidiary,
Weststar Mortgage Corporation, a California corporation established to
conduct mortgage banking activities. Immediately after the receipt of this
dividend, the Company contributed all of the capital stock of Weststar
Mortgage Corporation to its subsidiary, Community Banker Services
Corporation.
Westamerica Bank and Bank of Lake County became state chartered banks in
June 1993 and December 1993, respectively.
In December 1994, the Company finished purchasing the remaining 12 percent
investment in Bank of Lake County from outside investors, becoming the sole
owner of the Bank of Lake County.
Regarding upcoming pending acquisitions, please see Note 18 to the
consolidated financial statements included in this report.
At December 31, 1994, the Company had consolidated assets of approximately
$2.03 billion, deposits of approximately $1.69 billion and shareholders'
equity of approximately $166.2 million.
The Banks are engaged in the banking business through 48 offices in eleven
counties in Northern California, including eleven offices in Marin County,
nine in Sonoma County, seven in Solano County, seven in Napa County, three
in Contra Costa County, four in Lake County, two in Mendocino County, two
in Nevada County, one in Sacramento County, one in San Francisco County and
one in Placer County. All offices are equipped to meet prescribed security
requirements.
The Banks own fifteen banking offices and three administrative service
centers including the Company's and Westamerica Bank's headquarters.
Thirty-three banking offices and two support facilities are leased.
Substantially all of the leases contain multiple renewal options and
provisions for rental increases, principally for changes in the cost of
living index, property taxes and maintenance.
Service Area
The Banks serve the following ten major market areas:
Marin County. Marin County is one of the most affluent counties in
California and has a population of approximately 244,100. San Rafael and
Novato are the largest communities in the county, with populations of
approximately 52,700 and 49,050, respectively, in close proximity to San
Francisco. The area served by WAB is a relatively densely populated area
whose economic make-up is primarily residential, commercial and light
industrial.
Sonoma-Mendocino Counties. Of the eight San Francisco Bay Area counties,
Sonoma County is the largest geographically. The population of the county
is approximately 427,500. The City of Santa Rosa is the largest population
center in Sonoma County with an estimated population of 124,900 people.
Light industry, agriculture and food processing are the primary industries
in Sonoma County, with tourism and recreational activities growing
steadily. WAB also has two branch locations in southern Mendocino County,
population 83,600, where the major business of the county is agriculture.
Nevada County. WAB is currently serving most of Nevada County, the area
generally known as the "Gold Country." The population of the entire county
is approximately 87,700. Tourism, agriculture and wood products
manufacturing are the major industries.
Solano County. WAB serves all of Solano County, with an estimated
population of 375,300. Vallejo is the largest city in the county, with a
population of approximately 116,100. While light industry and the service
sector is growing steadily, the federal government is the largest employer
in the county.
Sacramento County. In 1982, WAB established an office in the city of
Sacramento, the state capital of California. The county has a population
of approximately 1,137,400. Major industries include agriculture,
government, manufacturing and wholesale and retail trade. Sacramento is
also a major transportation center for the State.
Contra Costa County. During 1984, WAB opened an office in the city of
Walnut Creek, to serve Contra Costa County's growing commercial and
industrial construction industry. In 1992, the Company acquired John Muir
National Bank whose four banking offices in Martinez, Pittsburg and Antioch
were merged into WAB. The population of Contra Costa County is
approximately 874,700.
San Francisco County. In 1987, WAB opened an office in the financial
center of the city of San Francisco, with a focus on commercial lending and
deposit relationships in that city.
Placer County. In September 1991, WAB opened a new branch in Roseville,
which is approximately 15 miles east of the Sacramento office and serves
the growing area of the Sierra Nevada foothills. The population of Placer
County is approximately 200,100.
Lake County. Bank of Lake County, ("the Lake County's Bank"), has office
locations in Lake County, with an estimated population of approximately
57,300. Agriculture is the primary industry followed closely by recreation
and tourism.
Napa County. Napa Valley Bank has office locations in Napa County. The
population of the county is approximately 119,000, with agriculture being
its major source of business followed by tourism.
Neither the Company nor its subsidiaries have any foreign or international
activities or operations.
All population figures contained in the previous discussion are 1994
estimates as prepared by the California Department of Finance and are
exclusive of unincorporated areas.
Competition
The Banks compete with other commercial banks, savings & loan
associations, credit unions, brokerage firms, money market mutual funds,
finance and insurance companies and mortgage banking firms.
According to information obtained by the Company through an independent
market research firm, WAB was the third largest financial institution in
terms of deposits in Marin County at June 30, 1994, at which date it had
approximately 15 percent of total deposits held in federally insured
depository institutions in that county. Also, according to such
information, WAB ranked third in Sonoma County at June 30, 1994, with
approximately 8 percent of deposits; WAB was fourth in Contra Costa as of
the same date, with over 4 percent in deposits held in financial
institutions in the county and WAB was third in deposits in Solano County,
with approximately 12 percent of deposits at June 30, 1994. The share of
the market for deposits and loans held by WAB in Mendocino, Placer, San
Francisco and Sacramento Counties is not significant.
According to the same source of information NVB was the largest financial
institution in terms of deposits in the Napa Valley service area as of June
30, 1994, with over 19 percent market share.
The same source of data reports that as of June 30, 1994, BLC ranked second
in market share in terms of deposits in the Lake County service area, with
15 percent of the total.
All Banks provide checking and savings deposit services as well as
commercial, real estate and personal loans. In addition, most of the
branches offer safe deposit facilities, automated teller units, collection
services and other investment services.
The Banks believe that personal, prompt, professional service and community
identity are important in the banking business. To this end, each Bank
subsidiary has actively sought to retain its community identity and has
emphasized personalized services through "big bank resources with small
bank resourcefulness."
Competitive conditions continue to intensify as legislative enactments
dissolve historical barriers to limit participation in financial markets.
Competition is expected to further increase in the state of California, as
a result of legislation enacted in 1986 and 1989. In part, the legislation
enabled bank holding companies based outside California to own and operate
banks or bank holding companies in California on a reciprocal basis as of
January 1, 1991.
Legislative changes, as well as technological and economic factors, can be
expected to have an ongoing impact on competitive conditions within the
financial services industry. As an active participant in the financial
markets, the Company continually adapts to these changing competitive
conditions.
Employees
At December 31, 1994, the Company employed 1,067 people (773 full-time
equivalent staff). Employee relations are believed to be good.
Supervision and Regulation
Regulation of Westamerica Bancorporation
The Company is a bank holding company registered under the BHC Act. As
such, it is subject to the supervision of the Federal Reserve Board ("FRB")
and is required to file with that entity an annual report and such other
additional information as the FRB may require pursuant to the BHC Act. The
FRB may also conduct examinations of the Company and its respective
subsidiaries.
Under the BHC Act, bank holding companies are generally required to obtain
the prior approval of the FRB before they may (i) acquire control of or
merge with another bank holding company; (ii) acquire direct ownership or
control of 5 percent or more of the voting shares of a bank; or (iii)
otherwise acquire control of another bank. Moreover, the BHC Act generally
prohibits the Company or any of its subsidiaries from acquiring the voting
shares of, interest in or assets of, any bank located outside of California
unless the laws of such state expressly authorize such an acquisition.
Under the BHC Act, the Company is prohibited from engaging in any business
other than managing or controlling banks, or furnishing services to its
subsidiaries, unless the business proposed to undertake has been deemed
by the FRB to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto. With certain exceptions, the
Company is prohibited from acquiring direct or indirect ownership or
control of more than 5 percent of the voting securities or assets of any
company unless that company engages in activities which are permissible for
bank holding companies and the FRB is given notice thereof or approves the
acquisition in advance.
Holding companies and any of their subsidiary banks are prohibited from
engaging in certain tie-in arrangements in connection with the extension of
credit. For example, a subsidiary bank generally may not extend credit on
the condition that the customer obtain some additional service from such
bank or its holding company, or refrain from obtaining such service from a
competitor.
The Company is also a bank holding company within the meaning of Section
3700 of the California Financial Code. As such, the Company and its
subsidiaries are subject to examination by, and may be required to file
reports with, the Superintendent of California State Banking Department.
Regulations have not yet been proposed or adopted, nor have steps otherwise
been taken, to implement the Superintendent's powers under this statute.
Regulation of Bank Subsidiaries
The deposits of the Banks are insured by the FDIC in an amount up to
$100,000 per depositor and is therefore subject to applicable provisions of
the Federal Deposit Insurance Act and the regulations thereunder, including
the obligation to pay assessments for such insurance.
Transactions with affiliates of a bank must be on substantially the same
terms as would be available for nonaffiliates. This restriction applies
to (i) a bank's sale of assets, payment of money or furnishing of services
to an affiliate; (ii) transactions with the bank in which an affiliate acts
as agent or broker; and (iii) transactions with the bank and a third party
in which an affiliate is also a participant or has a financial interest.
The FDIC has issued an advance notice of proposed rulemaking which would
prohibit insured banks from paying excessive fees for services provided by
their parent holding companies. The FDIC has also proposed rules which
would authorize to rescind contracts between depository institutions and
any person in connection with providing goods, products or services if the
performance of such contract would adversely affect the safety or soundness
of the institution.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
contains a "cross-guarantee" provision which could result in any insured
depository institution owned by a holding company (i.e., any bank
subsidiary) being assessed for losses incurred by the FDIC in connection
with assistance provided to, or the failure of, any other depository
institution owned by such holding company.
As a consequence of the extensive regulation of commercial banking
activities in the United States, the business of the Company and its
subsidiary banks is particularly susceptible to being affected by enactment
of federal and state legislation which may have the effect of increasing or
decreasing the cost of doing business, modifying permissible activities, or
enhancing the competitive position of other financial institutions. In
response to various business failures in the savings and loan industry and
more recently in the banking industry, in December 1991, Congress enacted
and the President signed significant banking legislation entitled the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA").
FDICIA substantially revises the bank regulatory and funding provisions of
the Federal Deposit Insurance Act and makes revisions to several other
federal banking statutes.
Among other things, FDICIA provides increased funding for the Bank
Insurance Fund (the "BIF") of the FDIC, primarily by increasing the
authority of the FDIC to borrow from the United States Treasury Department.
It also provides for expanded regulation of depository institutions and
their affiliates. A significant portion of the borrowings would be repaid
by insurance premiums assessed on BIF members, including the Banks and
their subsidiaries. In addition, FDICIA generally mandates that the FDIC
achieve a ratio of reserves to insured deposits of 1.25 percent within the
next 15 years, also to be financed by insurance premiums. The result of
these provisions could be a significant increase in the assessment rate on
deposits of BIF members. FDICIA also provides authority for special
assessments against insured deposits. No assurance can be given at this
time as to what the future level of premiums will be.
As required by FDICIA, the FDIC adopted a transitional risk-based
assessment system for deposit insurance premiums which became effective
January 1, 1993. Under this system, depository institutions are charged
anywhere from 23 cents to 31 cents for every $100 in insured domestic
deposits, based on such institutions' capital levels and supervisory
ratings. FDICIA prohibits assessment rates from falling below the current
annual assessment rate of 23 cents per $100 of eligible deposits if the
FDIC has outstanding borrowings from the United States Treasury Department
or the 1.25 percent designated reserve ratio has not been met.
FDICIA also restricts the acceptance of brokered deposits by insured
depository institutions and contains a number of consumer banking
provisions, including disclosure requirements and substantive contractual
limitations with respect to deposit accounts.
FDICIA contains numerous other provisions, including new reporting,
examination and auditing requirements, termination of the "too big to fail"
doctrine except in special cases, limitations on the FDIC's payment of
deposits at foreign branches, and revised regulatory standards for, among
other things, real estate lending and capital adequacy.
Implementation of the various provisions of FDICIA are subject to the
adoption of regulations by the various banking agencies or to certain
phase-in periods. The effect of FDICIA on the Company and its subsidiary
banks cannot be determined until implementing regulations are adopted by
the agencies.
Regulations Applicable to Bank Subsidiaries. The Company's subsidiary banks
are state-chartered banks and subject to regulation, supervision and
regular examinations by the State of California Banking Department as well
as the FDIC. The regulations of these agencies and the FRB affect most
aspects of the banking business and prescribe permissible types of loans
and investments, requirements for branch offices, the permissible scope of
activities and various other requirements. As WAB is also a member of the
Federal Reserve System, it is subject to certain other regulations of the
FRB dealing primarily with check clearing activities, establishment of
banking reserves, truth-in-lending, truth-in-savings and equal credit
opportunity.
Capital Requirements
Risk-Based Capital Ratio. The agencies which regulate financial
institutions have adopted risk-based capital adequacy standards applicable
to financial institutions. These guidelines provide a measure of capital
adequacy and are intended to reflect the degree of risk associated with
both on and off balance sheet items, including residential loans sold with
recourse, legally binding loan commitments and standby letters of credit.
Under these regulations, financial institutions are required to maintain
capital to support activities which in the past did not require capital.
Failure to meet the minimum capital requirements established by the
regulators will result in an institution being classified as
"undercapitalized", "significantly undercapitalized", or "critically
undercapitalized".
A financial institution's risk-based capital ratio is calculated by
dividing its qualifying capital by its risk-weighted assets. Financial
institutions generally are expected to meet a minimum ratio of qualifying
total capital to risk-weighted assets of 8 percent, of which at least 4
percent of qualifying total capital must be in the form of core capital
(Tier 1), i.e., common stock, noncumulative perpetual preferred stock,
minority interests, retained earnings in equity capital accounts of
consolidated subsidiaries and allowed mortgage servicing rights less all
intangible assets other than allowed mortgage servicing rights.
Supplementary capital (Tier 2) consists of the allowance for loan losses up
to 1.25 percent of risk-weighted assets, cumulative preferred stock, term
preferred stock, hybrid capital instruments and term subordinated debt.
The maximum amount of Tier 2 capital which may be recognized for risk-based
capital purposes is limited to 100 percent of Tier 1 capital (after any
deductions for disallowed intangibles). Certain other limitations and
restrictions apply as well.
The risk-based capital ratio analysis establishes minimum supervisory
guidelines and standards. The guidelines do not currently evaluate all
factors affecting an organization's financial condition. Factors which are
not evaluated include (i) overall interest rate exposure; (ii) liquidity,
funding and market risks; (iii) quality and level of earnings; (iv)
investment or loan portfolio concentrations; (v) quality of loans and
investments; (vi) the effectiveness of loan and investment policies; and
(vii) management's overall ability to monitor and control other financial
and operating risks. FDICIA also requires the guidelines to reflect the
actual performance and expected risk of loss of multifamily mortgages.
These provisions will affect the capital positions and capital standing of
all institutions and may result in the need for increased capital.
However, the ultimate effect of FDICIA risk-based capital provisions cannot
be determined until final regulations are adopted. Until such time,
however, the capital adequacy assessment of federal bank regulators will
continue to include analysis of the foregoing elements and, in particular,
the level and severity of problem and classified assets.
Minimum Leverage Ratio. The FDIC and the FRB have also adopted a 3 percent
minimum leverage ratio which is intended to supplement risk-based capital
requirements and to ensure that all financial institutions, even those that
invest predominantly in low risk assets, continue to maintain a minimum
level of Tier 1 capital. A financial institution's minimum leverage ratio
is determined by dividing its Tier 1 capital by its quarterly average total
assets, less intangibles not includable in Tier 1 capital.
Under the guidelines, a minimum leverage ratio of 3 percent is required for
institutions which have been determined to be in the highest of five
categories used by regulators to rate financial institutions. All other
organizations are required to maintain leverage ratios of at least 100 to
200 basis points above the 3 percent minimum. It is improbable, however,
that an institution with a 3 percent leverage ratio would be rated in the
highest category since a strong capital position is also a requirement for
the highest rating. Therefore, the "minimum" leverage ratio is, for all
practical purposes, significantly above 3 percent.
The leverage ratio establishes a limit on the ability of banking
organizations, including the Company, to increase assets and liabilities
without increasing capital proportionately. The Company's Management
believes that conformance with the leverage ratio will not have an adverse
effect on the operations of the Company or require it to raise additional
capital in the foreseeable future.
New Capital Standards. FDICIA requires the federal banking regulators to
take "prompt corrective action" with respect to banks that do not meet
minimum capital requirements. In response to this requirement, the FDIC
and the FRB participated in the adoption of final rules based upon
FDICIA's five capital tiers. These rules provide that an institution is
"well capitalized" if its risk-based capital ratio is 10 percent or
greater; its Tier 1 risk-based capital ratio is 6 percent or greater; its
leverage ratio is 5 percent or greater; and the institution is not subject
to a capital directive. A bank is "adequately capitalized" if its
risk-based capital ratio is 8 percent or greater; its Tier 1 risk-based
capital ratio is 4 percent or greater; and its leverage ratio is 4 percent
or greater (3 percent or greater for one rated institutions). An
institution is considered "undercapitalized" if its risk-based capital
ratio is less than 8 percent; its Tier 1 risk-based capital ratio is less
than 4 percent; or its leverage ratio is 4 percent or less. An institution
is "significantly undercapitalized" if its risk-based capital ratio is less
than 6 percent; its Tier 1 risk-based capital ratio is less than 3 percent;
or its leverage ratio is less than 3 percent. A bank is deemed to be
"critically undercapitalized" if its ratio of tangible equity (Tier 1
capital) to total assets is equal to or less than 2 percent. An
institution may be deemed to be in a capitalization category that is lower
than is indicated by its actual capital position if it engages in unsafe or
unsound banking practices.
No sanctions apply to institutions which are well capitalized. Adequately
capitalized institutions are prohibited from accepting brokered deposits
without the consent of the primary regulator. Undercapitalized
institutions are required to submit a capital restoration plan for
improving capital. In order to be accepted, such plan must include a
financial guaranty from the institution's holding company that the
institution will return to capital compliance. If such a guarantee were
deemed to be a commitment to maintain capital under the Federal Bankruptcy
Code, a claim for a subsequent breach of the obligations under such
guarantee in a bankruptcy proceeding involving the holding company would be
entitled to a priority over third party general unsecured creditors of the
holding company. Undercapitalized institutions are prohibited from making
capital distributions or paying management fees to controlling persons; may
be subject to limitations pertaining to growth; and are restricted from
acquisitions, branching and entering into new lines of business. Finally,
the institution's regulatory agency has discretion to impose certain of the
restrictions generally applicable to significantly undercapitalized
institutions.
In the event an institution is deemed to be significantly undercapitalized,
it may be required to: sell stock; merge or be acquired; restrict
transactions with affiliates including restrictions on payment of
dividends; restrict interest rates paid; divest a subsidiary; or dismiss
specified directors or officers. If the institution is a bank holding
company, it may be prohibited from making any capital distributions without
prior approval of the FRB and may be required to divest a subsidiary. A
critically undercapitalized institution is generally prohibited from making
payments on subordinated debt and may not, without the approval of the
FDIC, enter into a material transaction other than in the ordinary course
of business; engage in any covered transaction; or pay excessive
compensation or bonuses. Critically undercapitalized institutions are
subject to appointment of a receiver or conservator.
As of December 31, 1994, the Company was in compliance with applicable
capital and risk-based capital ratio requirements.
ITEM 2. Descrpition of Property
Branch Offices and Facilities
The Banks are engaged in the banking business through 48 offices in eleven
counties in Northern California, including eleven offices in Marin County,
nine in Sonoma County, seven in Solano County, seven in Napa County, three
in Contra Costa County, four in Lake County, two in Mendocino County, two
in Nevada County, one in Sacramento County, one in San Francisco County and
one in Placer County. All offices are constructed and equipped to meet
prescribed security requirements.
The Banks own fifteen banking office locations and three administrative
buildings, including the Company's headquarters. Thirty-three banking
offices and two support facilities are leased. Substantially all of the
leases contain multiple five-year renewal options and provisions for rental
increase, principally for changes in the cost of living index, property
taxes and maintenance.
ITEM 3. Legal Proceedings
The Company and its subsidiaries are defendants in various legal actions
which, in the opinion of management based on discussions with independent
legal counsel, will be resolved with no material effect on the Company's
consolidated results of operations or financial position.
ITEM 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to the shareholders during the fourth
quarter of 1994.
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder
Matters
The Company's common stock is traded on the NASDAQ National Market Exchange
(NASDAQ) under the symbol "WABC". The following table shows the high and
low closing price for the common stock, for each quarter, as reported by
NASDAQ, previously reported on the American Stock Exchange.
Period High Low
1994
--------------------------------------------------------------
First quarter ........................... $29.25 $25.88
Second quarter ........................... 32.50 27.00
Third quarter ........................... 33.25 29.25
Fourth quarter ........................... 33.25 29.00
1993
--------------------------------------------------------------
First quarter ........................... $30.25 $22.13
Second quarter ........................... 28.75 23.88
Third quarter ........................... 28.50 25.13
Fourth quarter ........................... 28.50 25.75
As of December 31, 1994, there were 5,101 holders of record of the
Company's common stock. This number does not include Napa Valley Bancorp.
stockholders that as of December 31, 1994 had not yet tendered their
shares for conversion to Company Common Stock.
The Company has paid cash dividends on its common stock in every quarter
since commencing operations on January 1, 1973, and it is currently the
intention of the Board of Directors of the Company to continue payment of
cash dividends on a quarterly basis. There is no assurance, however, that
any dividends will be paid since they are dependent upon the earnings,
financial condition and capital requirements of the Company and its
subsidiaries. Furthermore, the Company's ability to pay future dividends is
subject to contractual restrictions under the terms of the note
agreement, as discussed in Note 6 to the Consolidated Financial
Statements. Under the most restrictive of these contractual provisions,
$24.4 million of retained earnings was available for the payment of
dividends at December 31, 1994. Limitations of the Company's ability to
pay dividends is discussed in Note 15 to the Consolidated Financial
Statements on page 58 of this report.
Additional information (required by Item 5) regarding the amount of cash
dividends declared on common stock for the two most recent fiscal years is
discussed in Note 17 to the consolidated financial statements on page 61
of this report.
As discussed in Note 7 of the notes to the consolidated financial
statements, in December 1986, the Company declared a dividend distribution
of one common share purchase right (a "Right") for each outstanding share
of common stock. The terms of the Rights were amended and restated on
September 28, 1989. On March 23, 1995, the Board of Directors of the
Company approved a further amendment and restatement of the Rights. Among
other things, the amendments approved on that date included a provision to
the effect that, after an acquisition of 15 percent of the Company's common
stock without the prior consent of the Company, the Board of Directors will
have the power to cause each Right to be exchanged for one share of common
stock of the Company.
ITEM 6. Selected Financial Data
Financial Summary
(In thousands, except per share data and number of shareholders)
----------------------------------------------------------------------------------------------------
Years ended December 31 1994 1993 1992 1991 1990
----------------------------------------------------------------------------------------------------
Interest income $134,238 $136,916 $154,753 $176,552 $187,550
Interest expense 41,115 42,271 58,892 87,357 98,653
----------------------------------------------------------------------------------------------------
Net interest income 93,123 94,645 95,861 89,195 88,897
Provision for loan losses 5,880 9,452 7,005 10,418 8,138
Non-interest income 19,421 23,946 23,827 23,976 22,339
Non-interest expense 71,123 96,645 89,604 84,943 81,641
----------------------------------------------------------------------------------------------------
Income before income taxes 35,541 12,494 23,079 17,810 21,457
Provision for income taxes 10,868 3,039 7,857 5,833 6,838
----------------------------------------------------------------------------------------------------
Net income $24,673 $9,455 $15,222 $11,977 $14,619
====================================================================================================
Per share:
Net income $3.06 $1.17 $ 1.92 $1.52 $1.89
Dividends declared .64 .57 .51 .44 .41
Book value at December 31 20.65 18.87 17.96 16.49 15.44
Average common
shares outstanding 8,074 8,054 7,933 7,855 7,736
Shares outstanding
at December 31 8,048 8,080 8,000 7,847 7,758
Estimated number of shareholders
at December 31 7,255 7,351 7,595 7,940 8,069
----------------------------------------------------------------------------------------------------
At December 31 1994 1993 1992 1991 1990
----------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 112,401 $102,618 $139,497 $124,136 $128,813
Investment securities and
money market assets 759,589 726,136 571,602 517,394 435,033
Loans, net 1,076,171 1,089,152 1,166,205 1,242,108 1,277,417
Other assets 82,074 86,513 104,045 82,443 79,142
-----------------------------------------------------------------------------------------------------
Total assets $2,030,235 $2,004,419 $1,981,349 $1,966,081 $1,920,405
=====================================================================================================
Non-interest
bearing deposits $381,354 $369,820 $323,719 $283,594 $285,336
Interest bearing deposits 1,307,526 1,361,408 1,466,199 1,505,707 1,437,763
Other liabilities 175,150 120,744 47,757 47,360 77,495
Shareholders' equity 166,205 152,447 143,674 129,420 119,811
-----------------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $2,030,235 $2,004,419 $1,981,349 $1,966,081 $1,920,405
=====================================================================================================
Financial Ratios
For the year:
Return on assets 1.21% .48% .77% .62% .77%
Return on equity 15.59 6.51 11.16 9.52 12.87
Net interest margin (FTE)* 5.31 5.48 5.50 5.21 5.30
Net loan losses to
average loans .36 .69 .50 .44 .39
At December 31:
Equity to assets 8.19 7.61 7.25 6.58 6.24
Total capital to
risk-adjusted assets 15.32 14.40 12.01 10.82 10.55
Loan loss reserve
to loans 2.50 2.30 2.08 1.88 1.47
[FN]
*Fully taxable equivalent
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion addresses information pertaining to the financial
condition and results of operations of Westamerica Bancorporation (the
"Company") that may not be otherwise apparent from a review of the
consolidated financial statements and related footnotes. It should be read
in conjunction with those statements and notes found on pages 36 through
62, as well as with the other information presented throughout the report.
All data presented for 1992 include the April 15, 1993 acquisition of Napa
Valley Bancorp.
The Company achieved record earnings of $24.7 million in 1994, representing
a 161 percent increase from the $9.5 million earned in 1993 and 62 percent
higher than 1992 earnings of $15.2 million. The reduced level of earnings
in 1993 was mostly due to $10.5 million in after-tax charges resulting from
the April 15, 1993 merger with Napa Valley Bancorp (the "Merger"), that
were taken in the form of asset write-downs, an additional loan loss
provision and other merger-related charges. The asset write-downs and the
additional loan loss provision reflect the Company's plan of non-performing
asset resolution.
Components of Net Income
-----------------------------------------------------------------------
(Percent of average earning assets) 1994 1993 1992
-----------------------------------------------------------------------
Net interest income* 5.31% 5.48% 5.50%
Provision for loan losses (.32) (.53) (.39)
Non-interest income 1.05 1.34 1.33
Non-interest expense (3.84) (5.43) (5.00)
Taxes* (.87) (.33) (.59)
-----------------------------------------------------------------------
Net income 1.33% .53% .85%
=======================================================================
Net income as a percentage of
average total assets 1.21% .48% .77%
=======================================================================
* Fully taxable equivalent (FTE)
On a per share basis, 1994 net income was $3.06, compared to $1.17 and
$1.92 in 1993 and 1992, respectively. During 1994, the Company continued to
benefit from reductions in cost of funds and expense controls which offset
declines in non-interest income. Earnings in 1993 were favorably affected
compared to 1992 by reductions in cost of funds, increases in service fees
and other non-interest income, and expense controls. However,
merger-related costs more than offset those benefits. The Company's return
on average total assets was 1.21 percent in 1994, compared to .48 percent
and .77 percent in 1993 and 1992, respectively. Return on average equity in
1994 was 15.59 percent, compared to 6.51 percent and 11.16 percent,
respectively, in the two previous years.
Net Interest Income
Due to increases in the level of average earning assets and a more
favorable composition of deposits represented by increasing volumes of
lower-costing demand and savings account balances and a reduction in the
volumes of higher costing time deposits, the Company was able to generate
higher net interest income (FTE) in 1994 when compared to 1993. However,
net interest income (FTE) was still slightly lower than 1992. Continuing
decreases in higher-yielding loan volumes and the growth of the
lower-yielding investment securities portfolio more than offset the effect
of increasing market interest rates and the Company's containment of rates
paid on interest-bearing liabilities, resulting in a lower net interest
margin for 1994.
Components of Net Interest Income
--------------------------------------------------------------------
(In millions) 1994 1993 1992
--------------------------------------------------------------------
Interest income $ 134.2 $ 137.0 $ 154.8
Interest expense (41.1) (42.3) (58.9)
FTE adjustment 5.3 2.8 2.7
--------------------------------------------------------------------
Net interest income (FTE) $ 98.4 $ 97.5 $ 98.6
====================================================================
Average earning assets $1,851.9 $1,779.3 $1,793.8
Net interest margin (FTE) 5.31% 5.48% 5.50%
====================================================================
Net interest income (FTE) in 1994 increased $900,000 from 1993 to $98.4
million. Interest income decreased $2.8 million from 1993, as a result of
the combined effect of a 32 basis point decline in earning-asset yields
partially offset by a $72.6 million increase in average balances. During
1994, increases in the balance of tax-exempt municipal securities resulted
in an FTE adjustment $2.5 million higher than 1993. Interest expense
decreased $1.2 million from 1993, the result of a decrease of 11 basis
points in rates paid partially offset by an increase of $11.8 million in
the average balance of interest-bearing liabilities.
Summary of Average Balances, Yields/Rates and Interest Differential
The following tables present, for the periods indicated, information
regarding the consolidated average assets, liabilities and shareholders'
equity, the amounts of interest income from average earning assets and the
resulting yields, and the amount of interest expense paid on
interest-bearing liabilities. Average loan balances include non-performing
loans. Interest income includes proceeds from loans on non-accrual status
only to the extent cash payments have been received and applied as interest
income. Yields on securities and certain loans have been adjusted upward
to reflect the effect of income thereon exempt from federal income
taxation at the current statutory tax rate. Amortized loan fees, which are
included in interest and fee income on loans were $1.2 million lower in
1994 than in 1993 and $1.5 million lower in 1993 than in 1992.
Distribution of Average Assets, Liabilities and Shareholders' equity
Yield/Rates and Interest Margin
-----------------------------------------------------------------------
(In thousands) 1994
-----------------------------------------------------------------------
Interest Rates
Average income/ earned/
balance expense paid
-----------------------------------------------------------------------
Assets
Money market assets and funds sold $ 250 $ -- -- %
Trading account securities 37 2 4.24
Investment securities 763,360 45,711 5.99
Loans:
Commercial 593,548 52,777 8.89
Real estate construction 37,968 3,890 10.24
Real estate residential 178,946 12,566 7.02
Consumer 277,780 24,583 8.85
---------------------------------------------------------------
Earning assets 1,851,889 139,529 7.53
Other assets 187,012
-------------------------------------------------------
Total assets $2,038,901
=======================================================
Liabilities and shareholders' equity
Deposits
Non-interest bearing demand $ 359,768 $ -- -- %
Savings and interest-bearing
transaction 970,592 18,785 1.94
Time less than $100,000 282,530 11,034 3.91
Time $100,000 or more 97,928 3,545 3.62
---------------------------------------------------------------
Total interest-bearing deposits 1,351,050 33,364 2.47
Funds purchased 126,225 5,139 4.17
Notes and mortgages payable 29,690 2,612 8.80
---------------------------------------------------------------
Total interest-bearing liabilities 1,506,965 41,115 2.73
Other liabilities 13,887
Shareholders' equity 158,281
-------------------------------------------------------
Total liabilities and shareholders' equity $2,038,901
=======================================================
Net interest spread (1) 4.80 %
Net interest income and interest margin (2) $98,414 5.31 %
=======================================================================
(1) Net interest spread represents the average yield earned on
interest-earning assets less the average rate paid on
interest-bearing liabilities.
(2) Net interest margin is computed by dividing net interest
income by total average earning assets.
Distribution of Average Assets, Liabilities and Shareholders' equity
Yield/Rates and Interest Margin
----------------------------------------------------------------------
(in thousands) 1993
-----------------------------------------------------------------------
Interest Rates
Average income/ earned/
balance expense paid
-----------------------------------------------------------------------
Assets
Money market assets and funds sold $ 4,463 $ 170 3.80 %
Trading account securities 183 6 3.14
Investment securities 631,700 39,794 6.30
Loans:
Commercial 615,981 53,990 8.76
Real estate construction 55,038 4,745 8.62
Real estate residential 168,379 13,322 7.91
Consumer 303,567 27,726 9.13
---------------------------------------------------------------
Earning assets 1,779,311 139,753 7.85
Other assets 200,561
-------------------------------------------------------
Total assets $1,979,872
=======================================================
Liabilities and shareholders' equity
Deposits
Non-interest bearing demand $ 330,867 $ -- -- %
Savings and interest-bearing
transaction 938,475 19,305 2.06
Time less than $100,000 340,122 14,176 4.17
Time $100,000 or more 135,505 4,837 3.57
---------------------------------------------------------------
Total interest-bearing deposits 1,414,102 38,318 2.71
Funds purchased 57,135 1,937 3.39
Notes and mortgages payable 17,959 2,016 11.22
---------------------------------------------------------------
Total interest-bearing liabilities 1,489,196 42,271 2.84
Other liabilities 14,652
Shareholders' equity 145,157
-------------------------------------------------------
Total liabilities and shareholders' equity $1,979,872
=======================================================
Net interest spread (1) 5.01 %
Net interest income and interest margin (2) $97,482 5.48 %
=======================================================================
(1) Net interest spread represents the average yield earned on
interest-earning assets less the average rate paid on
interest-bearing liabilities.
(2) Net interest margin is computed by dividing net interest
income by total average earning assets.
Distribution of Average Assets, Liabilities and Shareholders' equity
Yield/Rates and Interest Margin
------------------------------------------------------------------------
(in thousands) 1992
------------------------------------------------------------------------
Interest Rates
Average income/ earned/
balance expense paid
-----------------------------------------------------------------------
Assets
Money market assets and funds sold $ 42,964 $ 1,765 -- %
Trading account securities 103 4 3.67
Investment securities 534,793 40,332 7.54
Loans:
Commercial 646,359 60,050 9.29
Real estate construction 76,173 7,058 9.27
Real estate residential 168,030 15,314 9.11
Consumer 325,393 33,003 10.14
---------------------------------------------------------------
Earning assets 1,793,815 157,526 8.78
Other assets 175,609
-------------------------------------------------------
Total assets $1,969,424
=======================================================
Liabilities and shareholders' equity
Deposits
Non-interest bearing demand $ 284,366 $ -- -- %
Savings and interest-bearing
transaction 903,211 26,518 2.94
Time less than $100,000 406,161 20,948 5.16
Time $100,000 or more 184,799 8,365 4.53
---------------------------------------------------------------
Total interest-bearing deposits 1,494,171 55,831 3.74
Funds purchased 15,729 698 4.44
Notes and mortgages payable 20,439 2,363 11.56
---------------------------------------------------------------
Total interest-bearing liabilities 1,530,339 58,892 3.85
Other liabilities 18,263
Shareholders' equity 136,456
-------------------------------------------------------
Total liabilities and shareholders' equity $1,969,424
=======================================================
Net interest spread (1) 4.93 %
Net interest income and interest margin (2) $98,634 5.50 %
=======================================================================
(1) Net interest spread represents the average yield earned on
interest-earning assets less the average rate paid on
interest-bearing liabilities.
(2) Net interest margin is computed by dividing net interest
income by total average earning assets.
Rate and volume variances
The following table sets forth a summary of the changes in interest income
and interest expense from changes in average assets and liability balances
(volume) and changes in average interest rates for the periods indicated.
Changes not solely attributable to volume or rates have been allocated in
proportion to the respective volume and rate components.
(In thousands) For the years ended December 31,
------------------------------------------------------------------------------------------------------------
1994 compared with 1993 1993 compared with 1992
--------------------------- ----------------------------
Volume Rate Total Volume Rate Total
-------------------------------------------------------------- -----------------------------
Increase (decrease) in
interest and fee income:
MMkt. assets and funds sold $ (83) ($ 87) ($170) $(1,473) $ (122) ($1,595)
Trading account securities (7) 3 (4) 2 (-) 2
Investment securities 7,756 (1,839) 5,917 (5,899) 5,361 (538)
Loans:
Commercial (2,014) 801 (1,213) (2,750) (3,310) (6,060)
Real estate construction (2,176) 1,321 (855) (1,849) (464) (2,313)
Real estate residential 955 (1,711) (756) 32 (2,024) (1,992)
Consumer (2,302) (841) (3,143) (2,125) (3,152) (5,277)
-------------------------------------------------------------- -------------------------------------
Total loans (5,537) (430) (5,967) (6,692) (8,950) (15,642)
-------------------------------------------------------------- -------------------------------------
Total decrease in interest
and fee income 2,129 (2,353) (224) ($14,062) ($3,711) ($17,773)
-------------------------------------------------------------- -------------------------------------
Increase (decrease) in interest expense:
Deposits:
Savings/interest-
bearing deposits 714 (1,234) (520) 1,082 (8,295) (7,213)
Time less than $ 100,000 (2,290) (852) (3,142) (3,106) (3,666) (6,772)
Time $ 100,000 or more (1,361) 69 (1,292) (1,968) (1,560) (3,528)
-------------------------------------------------------------- -------------------------------------
Total interest-bearing (2,937) (2,017) (4,954) (3,992) (13,521) (17,513)
Funds purchased 2,746 456 3,202 1,361 (122) 1,239
Notes and mortgages payable 890 (294) 596 (280) (67) (347)
-------------------------------------------------------------- -------------------------------------
Total (decrease) increase in
interest expense 699 (1,855) (1,156) (2,911) (13,710) (16,621)
-------------------------------------------------------------- -------------------------------------
Increase (decrease) in
net interest income $1,430 ($498) $932 ($11,151) $9,999 ($1,152)
============================================================== =====================================
[FN]
(1) Amounts calculated on a fully taxable equivalent basis using the current
statutory federal tax rate.
Provision for Loan Losses
The level of the provision for loan losses reflects the Company's
continuing efforts to improve loan quality by enforcing strict underwriting
and administration procedures and aggressively pursuing collection efforts
with troubled debtors. The provision for loan losses was $5.9 million for
1994, compared to $9.5 million in 1993 and $7.0 million in 1992. The 1993
provision included a $3.1 million merger-related provision, reflecting an
aggressive workout strategy for problem loans and properties acquired in
the Merger. For further information regarding net credit losses and the
reserve for loan losses, see the "Asset Quality" section of this report.
Investment Portfolio
The Company maintains a securities portfolio consisting of U.S. Treasury,
U.S. Government Agencies and Corporations, State and political
subdivisions, asset-backed and other securities. Investment securities are
held in safekeeping by an independent custodian. In May 1993, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS No.115"). The statement addresses the accounting and
reporting for investments in equity securities that have a readily
determinable fair value and for all investments in debt securities. The
statement requires that all securities be classified, at acquisition, into
one of three categories: held to maturity, available for sale, and trading.
In classifying securities as being held to maturity, available for sale or
trading, the Banks consider their collateral needs, asset/liability
management strategies, liquidity needs, interest rate sensitivity and other
factors that will determine the intent and ability to hold the securities
to maturity. SFAS No. 115 was effective for fiscal years beginning after
December 15, 1993.
The objective of the investment securities held to maturity is to
strengthen the portfolio yield, and to provide collateral to pledge for
federal, state and local government deposits and other borrowing
facilities. The investments held to maturity had an average term to
maturity of 43 months at December 31, 1994 and, as of the same date, those
investments included $594.8 million in fixed rate and $3.9 million in
adjustable rate securities.
Investment securities available for sale are typically used to supplement
the Banks' liquidity. Unrealized net gains and losses on these securities
are recorded as an adjustment to equity net of taxes, and are not reflected
in the current earnings of the Company. If the security is sold, any gain or
loss is recorded as a charge to earnings and the equity adjustment is
reversed. At December 31, 1994, the Banks held $160.6 million classified as
investments available for sale. At December 31, 1994, a net unrealized loss
of $1.8 million net of taxes of $1.2 million related to these securities
was held in stockholders' equity.
The Company had no trading securities at December 31, 1994.
For more information on investment securities, see Notes 1 and 2 to the
consolidated financial statements.
The following table shows the amortized cost of the Company's investment
securities as of the dates indicated:
-----------------------------------------------------------
December 31,
(in thousands) 1994 1993 1992
-----------------------------------------------------------
U.S. Treasury $241,322 $245,586 $126,522
U.S. government agencies
and corporations 256,133 254,635 237,753
States and political
subdivisions (domestic) 198,135 127,302 87,031
Asset backed securities 37,162 65,433 82,270
Other securities 29,632 28,529 36,660
-----------------------------------------------------------
Total $762,384 $721,485 $570,236
===========================================================
The following table is a summary of the relative maturities and
yields of the Company's investment securities as of December 31,
1994. Weighted average yields have been computed by dividing annual
interest income, adjusted for amortization of premium and accretion
of discount, by the book value of the related securities. Yields on
state and political subdivision securities have been calculated on
a fully taxable equivalent basis using the federal tax rate of 35
percent.
After one but After five but
(in thousands) Within one within five within ten After
year years years ten years Total
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
--------------------------------------------------------------------------------------------------------------------------
Investment securities available for sale
----------------------------------------
U.S. Treasury $15,304 5.37% $ 66,574 5.99% $ - -% $ - -% $81,878 5.87%
U.S. Government Agencies
and Corporations 2,002 6.20% 13,179 6.14% - -% 38,644 5.82% 53,825 5.91%
States and Political
Subdivisions 9,423 6.72% - -% - -% - -% 9,423 6.72%
Asset backed - - -% - -% - -% -
Other 8,503 7.59% 10,025 6.54% - -% - -% 18,528 7.02%
--------------------------------------------------------------------------------------------------------------------------
Total $35,232 6.32% $ 89,778 6.07% $ - -% $ 38,644 3.82% $163,654 6.07%
==========================================================================================================================
Investment securities held to maturity
--------------------------------------
U.S. Treasury $21,084 4.08% $138,360 4.92% $ - -% $ - -% $159,444 4.81%
U.S. Government Agencies
and Corporations - -% 52,245 5.52% 77,912 5.49% 72,151 5.65% 202,308 5.55%
States and Political
Subdivisions 4,496 9.12% 24,744 8.25% 43,037 8.06% 116,435 8.14% 188,712 8.16%
Asset backed - -% 37,162 5.11% - -% - -% 37,162 5.11%
Other 6,700 6.00% 2,911 6.91% - -% 1,493 6.00% 11,104 6.24%
--------------------------------------------------------------------------------------------------------------------------
Total $32,280 5.18% $255,422 5.42% $120,949 6.40% $190,079 7.18% $598,730 6.16%
==========================================================================================================================
Loan Portfolio
The following table shows the composition of loans of the Company by
type of loan or type of borrower, on the dates indicated.
Composition of the loan portfolio
1994 1993 1992 1991 1990
--------------------------------------------------------------------------------------------
Commercial and
commercial real estate $ 605,245 $ 612,756 $ 635,895 $ 667,082 $ 670,364
Real estate construction 27,278 40,533 63,886 89,946 122,988
Real estate residential 193,061 172,245 175,834 163,938 148,460
Consumer 292,735 304,993 334,215 364,276 377,112
Unearned income (14,548) (15,788) (18,883) (19,281) (22,504)
--------------------------------------------------------------------------------------------
Gross loans $1,103,771 $1,114,739 $1,190,947 $1,265,961 $1,296,420
Reserve for loan losses (27,600) (25,587) (24,742) (23,853) (19,001)
--------------------------------------------------------------------------------------------
Net loans $1,076,171 $1,089,152 $1,166,205 $1,242,108 $1,277,419
============================================================================================
Maturities and Sensitivity of Selected Loans to Changes in Interest Rates
The following table shows the maturity distribution and
interest rate sensitivity of Commercial and Real estate
construction loans at December 31, 1994.*
Within One to After
one year five years five years Total
---------------------------------------------------------------------------------
Commercial and Commercial
real estate** $349,444 $91,367 $164,434 $605,245
Real estate construction 25,542 1,736 0 27,278
---------------------------------------------------------------------------------
Total $374,986 $93,103 $164,434 $632,523
=================================================================================
Loans with fixed interest rates $ 31,060 $93,103 $164,434 $288,597
Loans with floating interest rates 343,926 0 0 343,926
---------------------------------------------------------------------------------
Total $374,986 $93,103 $164,434 $632,523
=================================================================================
[FN]
* Excludes loans to individuals and residential mortgages totaling
$471,248. These types of loans are typically paid in monthly
installments over a number of years.
**Includes demand loans
Commitments and Lines of Credit
It is not the policy of the Company to issue formal commitments on lines of
credit except to a limited number of well established and financially
responsible local commercial enterprises. Such commitments can be either
secured or unsecured and are typically in the form of revolving lines of
credit for seasonal working capital needs. Occasionally, such commitments
are in the form of Letters of Credit to facilitate the customer's
particular business transaction. Commitment fees generally are not charged
except where Letters of Credit are involved. Commitments and lines of
credit typically mature within one year. See also Note 12 of the
consolidated notes to the financial statements.
Asset Quality
The Company closely monitors the markets in which it conducts its lending
operations. The Company continues its strategy to control its exposure to
loans with higher credit risk and increase diversification of earning
assets into less risky investments. Asset reviews are performed using
grading standards and criteria similar to those employed by bank regulatory
agencies. Assets receiving lesser grades fall under the "classified assets"
category which includes all non-performing assets and potential problem
loans. These lesser grades occur when known information about possible
credit problems causes doubts about the ability of such borrowers to comply
with loan repayment terms. These loans have varying degrees of uncertainty
and may become non-performing assets. Classified assets receive an elevated
level of attention by Management to ensure collection. Total classified
assets peaked during the second quarter of 1993 as a result of the Merger
but declined significantly to $63.6 million by December 31, 1993, mainly
due to improvements in the Napa Valley Bank classified asset portfolio.
Continuing write-downs, loan collections, real estate liquidations and
restructuring reflecting the Company's workout strategy, resulted in
classified assets of $46.5 million at December 31, 1994, a decrease of
$17.1 million, or 27 percent, from the previous year end.
Non-Performing Assets
Non-performing assets include non-accrual loans, loans 90 or more days past
due and still accruing, other real estate owned and loans classified as
substantively foreclosed. Loans are placed on non-accrual status upon
reaching 90 days or more delinquent, unless the loan is well secured and in
the process of collection. Interest previously accrued on loans placed on
non-accrual status is charged against interest income. Loans secured by
real estate with temporarily impaired values and commercial loans to
borrowers experiencing financial difficulties are placed on non-accrual
status even though the borrowers continue to repay the loans as scheduled.
Such loans are classified by Management as "performing non-accrual" and are
included in total non-performing assets.
Performing non-accrual loans are reinstated to accrual status when
improvements in credit quality eliminate the doubt as to the full
collectibility of both interest and principal and the loan is brought
current. When the ability to fully collect non-accrual loan principal is in
doubt, cash payments received are applied against the principal balance of
the loans until such time as full collection of the remaining recorded
balance is expected. Any additional payments received after that point are
recorded as interest income on a cash basis.
Non performing assets
------------------------------------------------------------------------------------
(in millions) 1994 1993 1992 1991 1990
------------------------------------------------------------------------------------
Performing non-accrual loans $ 2.0 $ 1.9 $ 1.1 $ 2.2 $16.0
Non-performing non-accrual loans 5.1 7.2 14.9 37.7 9.3
------------------------------------------------------------------------------------
Total non-accrual loans 7.1 9.1 16.0 39.9 25.3
Loans 90 or more days past due
and still accruing 0.4 0.3 0.1 1.0 6.2
Loan collateral substantively
foreclosed -- 5.4 16.6 7.1 6.0
Other real estate owned 7.4 12.5 17.9 4.9 2.7
------------------------------------------------------------------------------------
Total non-performing assets $14.9 $27.3 $50.6 $52.9 $40.2
====================================================================================
Reserve for loan losses as a
percentage of non-accrual loans
and loans 90 or more past
due and still accruing 369% 272% 153% 58% 60%
Performing non-accrual loans increased $100,000 to $2.0 million at December
31, 1994 while non-performing non-accrual loans decreased $2.1 million to
$5.1 million at December 31, 1994, due to loan collections, write-downs and
foreclosure of loan collateral. The amount of gross interest income that
would have been recorded for non-accrual loans for the year ended December
31, 1994, if all such loans had been current in accordance with their
original terms while outstanding during the period was $814,000. The amount
of interest income that was recognized on non-accrual loans from cash
payments made during the year ended December 31, 1994 totaled $386,000,
representing an annualized yield of 4.39 percent. Cash payments received
which were applied against the book balance of performing and
non-performing non-accrual loans outstanding at December 31, 1994, totaled
$248,000 compared to $534,000 in 1993. Of the $5.4 million loan collateral
substantively foreclosed at December 31, 1993, a total of $415,000 was
reclassified as non-accrual loans at December 31, 1994 and the rest was
either foreclosed or liquidated. The declining OREO balance during 1994 and
1993 is due to asset write-downs and liquidations.
Summary of non-accrual loans
(In thousands)
--------------------------------------------------------------------------------------------------------
December 31, 1994 1993 1992 1991 1990
--------------------------------------------------------------------------------------------------------
Performing non-accrual loans $1,943 $1,855 $1,083 $2,227 $9,281
Non-performing non-accrual loans 5,126 7,215 14,856 37,665 4,832
--------------------------------------------------------------------------------------------------------
Total non-accrual loans $7,069 $9,070 $15,939 $39,892 $14,113
Performing non-accrual loans
Commercial 1,761 1,126 1,009 2,227 4,291
Real estate construction 156 729 -- -- 4,961
Real estate residential -- -- 74 -- --
Consumer 26 -- -- -- 29
--------------------------------------------------------------------------------------------------------
Total performing non-accrual loans 1,943 1,855 1,083 2,227 9,281
Non-performing non-accrual loans
Commercial 3,484 4,373 13,575 19,277 3,639
Real estate construction 1,247 2,106 573 17,305 7,500
Real estate residential 252 197 481 796 4,455
Consumer 143 539 227 287 411
--------------------------------------------------------------------------------------------------------
Total non-performing non-accrual loans 5,126 7,215 14,856 37,665 16,005
--------------------------------------------------------------------------------------------------------
Total non-accrual loans $7,069 $9,070 $15,939 $39,892 $25,286
========================================================================================================
The Company's reserve for loan losses is maintained at a level estimated
by Management to be adequate to provide for losses that can be reasonably
anticipated based upon specific conditions as determined by Management,
credit loss experience, the amount of past due and non-performing loans,
recommendations of regulatory authorities, prevailing economic conditions
and other factors. The reserve is allocated to segments of the loan
portfolio based in part on quantitative analysis of historical credit loss
experience. Criticized and classified loan balances are analyzed using a
linear regression model or standard allocation percentages. The results of
this analysis are applied to current criticized and classified loan
balances to allocate the reserve to the respective segments of the loan
portfolio. In addition, loans with similar characteristics not usually
criticized using regulatory guidelines due to their small balances and
numerous accounts, are analyzed based on the historical rate of net losses
and delinquency trends grouped by the number of days the payments on those
loans are delinquent. While these factors are essentially judgmental and
may not be reduced to a mathematical formula, Management considers the
$27.6 million reserve for loan losses, which constituted 2.50 percent of
total loans at December 31, 1994, to be adequate as a reserve against
inherent losses. Management continues to evaluate the loan portfolio and
assess current economic conditions that will dictate future reserve levels.
The following table summarizes the loan loss experience of the Company for
the periods indicated:
Loan loss experience
(In thousands)
--------------------------------------------------------------------------------------------------------
December 31, 1994 1993 1992 1991 1990
--------------------------------------------------------------------------------------------------------
Total loans outstanding $1,103,771 $1,114,739 $1,190,947 $1,265,961 $1,296,420
Average loans outstanding during the period 1,088,242 1,142,965 1,215,955 1,276,098 1,306,992
Analysis of the reserve:
Balance, beginning of period $25,587 $24,742 $23,852 $19,001 $15,960
Credit losses:
Commercial, commercial real estate (2,646) (5,560) (4,081) (4,770) (5,647)
Real estate construction (747) (1,908) (1,657) (50) --
Real estate residential -- (66) -- -- --
Consumer (2,528) (2,557) (3,055) (4,320) (4,542)
--------------------------------------------------------------------------------------------------------
Total (5,921) (10,091) (8,793) (9,140) (10,189)
Credit loss recoveries:
Commercial, commercial real estate 811 972 1,105 878 2,551
Real estate construction -- -- -- -- 239
Real estate residential -- -- 18 -- --
Consumer 1,243 1,196 1,555 2,695 2,302
--------------------------------------------------------------------------------------------------------
Total 2,054 2,168 2,678 3,573 5,092
--------------------------------------------------------------------------------------------------------
Net credit losses (3,867) (7,923) (6,115) (5,567) (5,097)
Sale of Sonoma Valley Bank -- (684) -- -- --
Additions to the reserve charged to
operating expense 5,880 9,452 7,005 10,418 8,138
--------------------------------------------------------------------------------------------------------
Balance, end of period $27,600 $25,587 $24,742 $23,852 $19,001
========================================================================================================
Net credit losses to average loans 0.36% 0.69% 0.50% 0.44% 0.39%
Reserve for loan losses as a percentage
of loans outstanding 2.50% 2.30% 2.08% 1.88% 1.47%
In May 1993, the Financial Accounting Standards Board ("FASB") issued
Statement No. 114, "Accounting by Creditors for Impairment of a Loan"
("SFAS 114"), which addresses the accounting treatment of certain impaired
loans and amends FASB Statements No. 5 and No. 15. In October, 1994, the
FASB issued statement No. 118, "Accounting by Creditors for Impairment of a
Loan" Income Recognition and Disclosures" ("SFAS 118"), which amends the
income recognition and disclosure provisions of SFAS 114. SFAS 114 and SFAS
118 are effective January 1, 1995.
Under SFAS 114, a loan is considered impaired when, based on current
information and events, it is probable that a creditor will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. Under SFAS 114, impairment may be measured based on the present
value of the expected future cash flows discounted at the loan's effective
interest rate. Alternatively, impairment may be measured by using the
loan's observable market price or the fair value of the collateral if
repayment is expected to be provided solely by the underlying collateral.
The Company will implement SFAS 114, as amended by SFAS 118, in January,
1995. Management believes that the adoption of this pronouncement will not
significantly impact the Company's financial statements.
The following tables present the allocation of the loan loss reserve
balance on the dates indicated:
Allocation of the loan loss reserve:
-----------------------------------------------------------------------------------
December 31,
----------------------------------------------
1994 1993
---------------------- ----------------------
Allocation Loans as Allocation Loans as
of reserve percent of of reserve percent of
balance total loans balance total loans
---------- ----------- ---------- -----------
Type of loan
Commercial $10,705 54.8% $12,537 55.0%
Real estate construction 1,987 2.5 2,538 3.6
Real estate residential 47 17.5 85 15.5
Consumer 3,765 25.2 3,921 25.9
Unallocated portion of the reserve 11,096 - 6,506 -
----------------------------------------------------------------------------------
Total $27,600 100.0% $25,587 100.0%
==================================================================================
----------------------------------------------------------------------------------
December 31,
---------------------------------------------
1992 1991
--------------------- ---------------------
Allocation Loans as Allocation Loans as
of reserve percent of of reserve percent of
balance total loans balance total loans
--------- ----------- --------- -----------
Type of loan
Commercial $13,551 53.4% $8,325 52.7%
Real estate construction 964 5.4 2,336 7.1
Real estate residential 545 14.8 50 12.9
Consumer 3,872 26.4 2,363 27.3
Unallocated portion of the reserve 5,810 - 10,778 -
----------------------------------------------------------------------------------
Total $24,742 100.0% $23,852 100.0%
==================================================================================
------------------------------------------------------------
December 31,
-----------------------
1990
-----------------------
Allocation Loans as
of reserve percent of
balance total loans
------- -----------
Type of loan
Commercial $2,698 52.5%
Real estate construction 4,360 9.5
Real estate residential 29 10.4
Consumer 1,782 27.6
Unallocated portion of the reserve 10,132 -
----------------------------------------------------------
Total $19,001 100.0%
==========================================================
The reduced allocation to commercial loans from December 31, 1993 to
December 31, 1994 is primarily due to a reduction in the balance of
criticized loans. The unallocated component includes Management's
judgemental determination of the amounts necessary for concentrations,
economic uncertainties and other subjective factors. The changes in the
allocation to loan portfolio segments from December 31, 1992 to December
31, 1993 reflect changes in criticized and classified loan balances. The
increased allocation to construction loans is attributable to an increase
in criticized loans due to the recessionary environment. The decreased
allocation to commercial and consumer loans is attributable to a higher
level of recoveries.
Asset and Liability Management
The fundamental objective of the Company's management of assets and
liabilities is to maximize its economic value while maintaining adequate
liquidity and a conservative level of interest-rate risk. The principal
sources of asset liquidity are marketable investment and money market
securities available for sale. At December 31, 1994, investment securities
available for sale totaled $160.6 million. As in previous years, decreased
loan balances resulted in an increase in the size of the securities
portfolio.
The Company generates significant liquidity from its operating activities.
The Company's profitability in 1994, 1993 and 1992 generated cash flows
provided from operations for such years of $27.7 million, $28.4 million and
$33.4 million, respectively.
Additional cash flow may be provided by financing activities, primarily
the acceptance of customer deposits and short-term borrowings from banks.
Over the last three years, deposit balances have either remained flat, as
in 1992, or declined, as in 1993 and 1994. The decline in 1993 was mainly
due to the sale of its 50 percent interest in Sonoma Valley Bank. During
1994, the Company paid off $9.8 million in principal of its high-rate
long-term debt. To compensate for decreases in deposits and long-term debt,
the Company increased its short-term borrowings, which grew $64.2 million,
$57.0 million and $2.5 million in 1994, 1993 and 1992, respectively. In
addition, in December, 1993, Westamerica Bank issued a ten-year, $20.0
million subordinated capital note that qualifies as Tier II Capital, to be
used as a source of working capital.
The Company uses cash flow from operating and financing activities to make
investments in loans, money market assets and investment securities. The
Company's strategy to reduce its exposure to high-risk loans is shown in
the reduction of loan volumes over the past three years, when balances
decreased $11.0 million, $68.1 million and $32.8 million in 1994, 1993 and
1992, respectively. The smaller decline in 1994 reflects efforts of the
Company to stabilize loan volume without jeopardizing credit quality. The
net repayment of loans resulted in added liquidity for the Company, which
increased its investment securities portfolio by $40.9 million, $153.3
million, and $54.7 million in 1994, 1993 and 1992, respectively.
Interest rate risk is influenced by market forces. However, that risk may
be controlled by monitoring and managing the repricing characteristics of
interest-bearing assets and liabilities. The primary analytical tool used
by Management to gauge interest-rate sensitivity is a simulation model used
by many major banks and bank regulators. This industry standard model is
used to simulate the effects on net interest income of changes in market
interest rates that are up to 2 percent higher or 2 percent lower than
current levels. The results of the model indicate that the mix of
interest-rate sensitive assets and liabilities at December 31, 1994 would
not, in the view of Management, expose the Company to an unacceptable level
of interest-rate risk.
Capital Resources
The current and projected capital position of the Company and the impact of
capital plans and long-term strategies is reviewed regularly by Management.
The Company's capital position represents the level of capital available
to support continuing operations and expansion. The Company's primary
capital resource is shareholders' equity, which increased $13.8 million or
9 percent from the previous year end and increased $22.5 million from
December 31, 1992. During 1994, the Board of Directors approved a 13
percent increase in the cash dividend on the Company's Common Stock, from
15 cents to 17 cents per share. During 1994, the Company recorded common
stock dividends of $5.2 million. The ratio of total risk-based capital to
risk-adjusted assets increased to 15.32 percent at December 31, 1994, from
14.40 percent at December 31, 1993. Tier I risk-based capital to
risk-adjusted assets increased to 12.57 percent at December 31, 1994, from
11.11 percent at year-end 1993.
Capital to Risk-Adjusted Assets
Minimum Regulatory Capital
Minimum
Regulatory
Capital
At December 31, 1994 1993 Requirements
-----------------------------------------------------------------------
Tier I Capital 12.57% 11.11% 4.00%
Total Capital 15.32 14.40 8.00
Leverage ratio 8.23 7.42 3.00
The risk-based capital ratios improved in 1994 due to a more rapid growth
in equity than total assets, in conjunction with the decline in loan
volumes and increase in investment securities, which reduced the level of
risk-adjusted assets. Capital ratios are reviewed on a regular basis to
ensure that capital exceeds the prescribed regulatory minimums and is
adequate to meet the Company's future needs. All ratios are in excess of
regulatory definitions of "well capitalized".
Financial Ratios
The following table shows key financial ratios for the periods indicated:
For the Years Ended
------------------------------------------------------------------------------------
1994 1993 1992
------------------------------------------------------------------------------------
Return on average total assets 1.21% .48% .77%
Return on average shareholders' equity 15.59 6.51 11.16
Average shareholders' equity as a percent of:
Average total assets 7.76 7.33 6.93
Average total loans 14.54 12.70 11.22
Average total deposits 9.25 8.32 7.67
Deposits
The following table sets forth, by time remaining to maturity, the
Company's domestic time deposits in amounts of $100,000 or more.
Time Remaining to Maturity
December 31,
----------------------------------------------------------------
(in thousands) 1994 1993 1992
----------------------------------------------------------------
Three months or less $49,939 $ 73,988 $ 92,581
Three to six months 25,114 23,817 46,378
Six months to twelve months 13,453 10,503 12,895
Over twelve months 8,055 4,685 6,630
----------------------------------------------------------------
Total $96,561 $112,993 $158,484
================================================================
Short-term borrowings
The following table sets forth the short-term borrowings of the Company.
December 31,
-----------------------------------------------------------------------
(in thousands) 1994 1993 1992
-----------------------------------------------------------------------
Federal funds purchased $ 1,300 $25,000 $ --
Other borrowed funds:
Retail repurchase agreements 111,957 28,038 4,099
Other 19,961 16,026 7,939
-----------------------------------------------------------------------
Total other borrowed funds $131,918 $44,064 $12,038
-----------------------------------------------------------------------
Total funds purchased $133,218 $69,064 $12,038
=======================================================================
Further details of the other borrowed funds are:
December 31,
-----------------------------------------------------------------------
(in thousands) 1994 1993 1992
-----------------------------------------------------------------------
Outstanding
Average during the year $118,263 $37,284 $11,509
Maximum during the year 167,081 68,608 19,055
Interest rates
Average during the period 4.11% 3.13% 4.73%
Average at period end 5.07 3.04 3.23
Non-Interest Income
Components of Non-Interest Income
---------------------------------------------------------------
(In millions) 1994 1993 1992
---------------------------------------------------------------
Service charges on deposit accounts $11.8 $12.8 $12.4
Merchant credit card 2.3 2.2 2.9
Mortgage banking .8 1.5 1.8
Brokerage commissions .7 .8 .6
Net investment securities gain - .1 1.1
Sale of Sonoma Valley Bank - .7 -
Automobile receivable servicing - 1.3 -
Other 3.8 4.5 5.0
---------------------------------------------------------------
Total $19.4 $23.9 $23.8
===============================================================
Non-interest income was $19.4 million in 1994. The $4.5 million decrease
from 1993 resulted from the 1993 recognition of a deferred gain on an
earlier sale of automobile receivables, the gain on the sale of the
Company's 50 percent interest in Sonoma Valley Bank, and gains from the
sale of credit cardholders' portfolios acquired through the Merger,
partially offset by refunds from prior years' income tax returns recognized
in 1994. In addition, the decrease was the result of lower service charges
on deposit accounts, and lower mortgage banking income and brokerage
commissions, partially offset by higher merchant credit card fees.
In 1993 non-interest income increased $100,000 from the previous year, as
the items recognized in 1993 were partially offset by a $1.1 million gain
on the sale of securities available for sale recognized in 1992. In
addition, service charges on deposit accounts and brokerage commissions
which were higher in 1993 when compared to 1992, were partially offset by
lower merchant credit card and mortgage banking income.
Non-Interest Expense
Components of Non-Interest Expense
------------------------------------------------------------------
(In millions) 1994 1993 1992
------------------------------------------------------------------
Salaries $27.4 $31.6 $33.7
Other personnel benefits 7.0 7.4 7.2
Occupancy 7.3 8.6 8.5
Equipment 4.9 6.2 5.3
FDIC insurance assessment 3.9 4.1 4.0
Data processing 3.7 3.7 3.1
Professional fees 2.1 3.1 3.3
Loan expense 1.4 1.6 1.4
Stationery and supplies 1.3 1.9 1.7
Advertising and public relations 1.2 1.8 1.8
Operational losses 1.1 2.0 .7
Other real estate owned 1.0 11.5 6.2
Merchant credit card .8 1.1 1.7
Insurance .6 .9 1.0
Other 7.4 11.1 10.0
------------------------------------------------------------------
Total $71.1 $96.6 $89.6
==================================================================
Average full-time equivalent staff 796 905 1,092
Average assets per full-time
equivalent staff $2,561 $2,188 $1,804
Non-interest expense decreased $25.5 million or 26 percent in 1994 compared
to 1993 which, in turn, increased $7.0 million or 8 percent from 1992.
Lower expenses in 1994 reflect the Company's improved efficiency and
exercise of cost controls, plus the effect of consolidating operations
after the Merger. The combination of these effects is the main reason for
the $4.6 million decrease in personnel-related expenses, $1.0 million
reduction in professional fees, and other reductions in most non-interest
expense categories. Higher expenses in 1993 are the direct result of
merger-related foreclosed real estate owned expenses, including a $10.0
million write-down of assets acquired in the Merger to net realizable value
and chargeoffs of excess furniture, equipment and stationery and supplies
also associated with the Merger. The ratio of average assets per full-time
equivalent staff was $2.6 million in 1994 compared to $2.2 million and $1.8
million in 1993 and 1992, respectively. The Company's strategy to improve
efficiency can be seen in the reduction of the average number of full-time
equivalent staff from 1,092 in 1992 to 905 and 796 in 1993 and 1994,
respectively.
Provision for Income Tax
The provision for income tax increased $7.9 million in 1994 as a direct
result of higher pretax income partially offset by an increase in
tax-exempt interest income from municipal securities. The provision was
$10.9 million in 1994, reflecting an effective tax rate of 31 percent,
compared to $3.0 million in 1993 and $7.9 million in 1992, reflecting
effective tax rates of 24 percent and 34 percent, respectively.
ITEM 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Page
Consolidated Balance Sheets as of December 31, 1994 and 1993 36
Consolidated Statements of Income for the years ended
December 31, 1994, 1993 and 1992 37
Consolidated Statements of Changes in Shareholders' Equity
for the years ended December 31, 1994, 1993 and 1992 38
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992 39
Notes to consolidated financial statements 40
Management's Letter of Financial Responsibility 63
Independent Auditors' Report 64
WESTAMERICA BANCORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
-------------------------------------------------------------------------------
December 31, 1994 1993
-------------------------------------------------------------------------------
Assets
Cash and cash equivalents (Note 15) $ 112,401 $ 102,618
Money market assets 250 250
Trading account securities - 10
Investment securities available for sale;
fair value (Note 2) 160,609 168,819
Investment securities held to maturity;
market value of $569,684 in 1994
and $563,563 in 1993 (Note 2) 598,730 557,057
Loans, net of reserve for loan losses of:
$27,600 at December 31, 1994
$25,587 at December 31, 1993
(Notes 3, 4 and 14) 1,076,171 1,089,152
Loan collateral substantively foreclosed
and other real estate owned 7,431 17,905
Premises and equipment, net (Notes 5 and 6 23,287 25,341
Interest receivable and other assets (Note 8) 51,356 43,267
--------------------------------------------------------------------------
Total assets $2,030,235 $2,004,419
==========================================================================
Liabilities
Deposits:
Non-interest bearing $ 381,354 $ 369,820
Interest bearing:
Transaction 285,153 289,322
Savings 659,434 654,766
Time (Note 6) 362,939 417,320
--------------------------------------------------------------------------
Total deposits 1,688,880 1,731,228
Funds purchased 133,218 69,064
Liability for interest, taxes,
other expenses, minority interest and
other (Note 8) 16,408 15,328
Notes and mortgages payable (Notes 6 and 15) 25,524 36,352
--------------------------------------------------------------------------
Total liabilities 1,864,030 1,851,972
Commitments and contingent
liabilities (Notes 4, 11 and 12) - -
Shareholders' Equity (Notes 7 and 15)
Common stock (no par value)
Authorized- 20,000 shares
Issued and outstanding- 8,048 shares
in 1994 and 8,080 shares in 1993 53,510 52,499
Capital surplus 10,289 10,831
Unrealized net (loss) gain on
securities available for sale (1,753) 2,527
Retained earnings 104,159 86,590
--------------------------------------------------------------------------
Total shareholders' equity 166,205 152,447
--------------------------------------------------------------------------
Total liabilities and shareholders' equity $2,030,235 $2,004,419
==========================================================================
[FN]
See accompanying notes to consolidated financial statements.
WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
---------------------------------------------------------------------------------
For the years ended December 31, 1994 1993 1992
--------------------------------------------------------------------------------
Interest Income
Loans $93,140 $99,607 $115,357
Money market assets and federal funds sold - 298 1,745
Trading account securities 1 6 4
Investment securities available for sale:
Taxable 9,057 - -
Non-taxable 174 - -
Investment securities held to maturity:
Taxable 22,658 31,265 32,343
Non-taxable 9,208 5,740 5,304
--------------------------------------------------------------------------------
Total interest income 134,238 136,916 154,753
--------------------------------------------------------------------------------
Interest Expense
Transaction deposits 2,804 4,219 7,680
Savings deposits 15,981 15,085 18,838
Time deposits (Note 6) 14,579 19,014 29,314
Funds purchased 5,139 1,937 698
Notes and mortgages (Note 6) 2,612 2,016 2,362
--------------------------------------------------------------------------------
Total interest expense 41,115 42,271 58,892
--------------------------------------------------------------------------------
Net Interest Income 93,123 94,645 95,861
Provision for loan losses (Note 3) 5,880 9,452 7,005
--------------------------------------------------------------------------------
Net interest income after provision
for loan losses 87,243 85,193 88,856
--------------------------------------------------------------------------------
Non-Interest Income
Service charges on deposit accounts 11,815 12,809 12,437
Merchant credit card 2,251 2,217 2,900
Mortgage banking 801 1,467 1,808
Brokerage commissions 650 839 555
Net gain on sales of securities
available for sale 24 68 1,066
Other 3,880 6,546 5,061
--------------------------------------------------------------------------------
Total non-interest income 19,421 23,946 23,827
--------------------------------------------------------------------------------
Non-Interest Expense
Salaries and related benefits (Note 13) 34,346 39,007 40,826
Occupancy (Notes 5 and 11) 7,323 8,625 8,524
Equipment (Notes 5 and 11) 4,851 6,195 5,302
FDIC insurance assessment 3,930 4,079 4,021
Data processing 3,712 3,658 3,137
Professional fees 2,086 3,071 3,332
Other real estate owned 1,042 11,526 5,183
Other 13,833 20,484 19,279
--------------------------------------------------------------------------------
Total non-interest expense 71,123 96,645 89,604
--------------------------------------------------------------------------------
Income Before Income Taxes 35,541 12,494 23,079
Provision for income taxes (Note 8) 10,868 3,039 7,857
--------------------------------------------------------------------------------
Net Income $24,673 $ 9,455 $ 15,222
================================================================================
Average common shares outstanding 8,074 8,054 7,933
Per Share Data (Notes 7 and 18)
Net income $ 3.06 $ 1.17 $ 1.92
Dividends declared .64 .57 .51
[FN]
See accompanying notes to consolidated financial statements.
WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands)
------------------------------------------------------------------------------------------
Unrealized Net Unrealized
Gain (Loss) on (Loss) Gain on
Securities Marketable
Capital Available Retained Equity
Common Stock Surplus for Sale Earnings Securities Total
------------------------------------------------------------------------------------------
December 31, 1991 $ 49,088 $ 10,786 $ - $ 69,555 $ (9) $ 129,420
Net income - - - 15,222 - 15,222
Stock issued (Note 7) 2,169 45 - - - 2,214
Retirement of stock (204) - - - - (204)
Dividends declared - - - (2,987) - (2,987)
Unrealized gain on securities - - - - 9 9
------------------------------------------------------------------------------------------
December 31, 1992 $ 51,053 $ 10,831 $ - $ 81,790 $ - $ 143,674
------------------------------------------------------------------------------------------
Net income - - - 9,455 - 9,455
Stock issued (Note 7) 1,446 - - - - 1,446
Dividends declared - - - (4,655) - (4,655)
Unrealized gain on securities - - 2, 527 - - 2,527
------------------------------------------------------------------------------------------
December 31, 1993 $ 52,499 $ 10,831 $ 2,527 $ 86,590 $ - 152,447
------------------------------------------------------------------------------------------
Net income - - - 24,673 - 24,673
Stock issued (Note 7) 1,567 (542) - - - 1,025
Retirement of stock (556) - - (1,932) - (2,488)
Dividends declared - - - (5,172) - (5,172)
Unrealized loss on securities - - (4,280) - - (4,280)
------------------------------------------------------------------------------------------
December 31, 1994 $ 53,510 $ 10,289 $( 1,753) $104,159 $ - $166,205
==========================================================================================
[FN]
See accompanying notes to consolidated financial statements.
WESTAMERICA BANCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
---------------------------------------------------------------------------------
For the years ended December 31, 1994 1993 1992
---------------------------------------------------------------------------------
Operating Activities
Net income $24,673 $ 9,455 $ 15,222
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 3,708 3,622 4,198
Loan loss provision 5,880 9,452 7,005
Amortization of deferred net
loan (cost)/fees (1,159) (462) 615
(Increase) decrease in interest
income receivable (1,491) (2,542) 1,070
(Increase) decrease in other assets (2,129) 2,888 (3,204)
Decrease in income taxes payable (677) (1,529) (1,179)
Increase (decrease) in interest
expense payable 467 (1,169) (1,933)
(Decrease) increase in accrued expenses (20) (1,809) 1,420
Gain on sale of securities (538) (68) (1,066)
Loss on sale of securities 514 - -
Loss on sale of developed land - - 2,930
Loss on sale/write-down
of premises and equipment 179 1,476 225
Originations of loans for resale (26,634) (92,374) (100,055)
Proceeds from sale of loans
originated for resale 24,762 92,536 103,855
Loss on sale/write-down of
property acquired
in satisfaction of debt 175 9,618 3,507
Gain on sale of Sonoma Valley Bank - (668) -
Net maturities (purchases)
of trading securities 10 (10) 779
---------------------------------------------------------------------------------
Net cash provided by operating activities 27,720 28,416 33,389
---------------------------------------------------------------------------------
Investing Activities
Net repayments of loans 11,021 68,109 32,782
Purchases of money market assets - (325) (16,833)
Purchases of investment securities (266,792) (427,886) (339,583)
Purchases of property, plant and equipment (1,833) (3,481) (4,416)
Improvements on developed land - - (1,435)
Proceeds from maturity/sale of
money market assets - 1,441 17,574
Proceeds from maturity of securities 142,798 274,451 263,793
Proceeds from sale of securities 83,117 184 21,128
Proceeds from sale of property and equipment - - 1,640
Net proceeds from sale of developed land - 356 1,928
Proceeds from disposition of property
acquired in satisfaction of debt 5,955 6,313 4,513
Proceeds from sale of Sonoma Valley Bank - 2,733 -
Net repayments on loan collateral
substantively foreclosed 3,455 669 1,187
---------------------------------------------------------------------------------
Net cash used in investing activities (22,279) (77,436) (17,722)
---------------------------------------------------------------------------------
Financing Activities
Net (decrease) increase in deposits (42,349) (58,691) 617
Net increase in federal funds purchased 64,154 57,026 2,468
Issuance of notes payable - 20,000 -
Principal and interest payments on notes
and mortgages payable (10,828) (2,985) (2,423)
Exercise of stock options 1,025 1,446 2,214
Retirement of stock (2,488) - (204)
Unrealized loss in marketable
equity securities - - 9
Dividends paid (5,172) (4,655) (2,987)
---------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 4,342 12,141 (306)
---------------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents 9,783 (36,879) 15,361
---------------------------------------------------------------------------------
Cash and cash equivalents at
beginning of year 102,618 139,497 124,136
---------------------------------------------------------------------------------
Cash and cash equivalents at
end of period $112,401 $102,618 $139,497
=================================================================================
Supplemental disclosures:
Loans transferred to other real estate owned
and substantively repossessed $ 3,892 $ 16,111 $ 36,572
Interest paid 41,582 42,982 57,491
Income tax payments 11,725 5,700 9,773
Unrealized (loss) gain on securities
available for sale (4,280) 2,527 -
[FN]
See accompanying notes to consolidated financial statements.
WESTAMERICA BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Business and Accounting Policies
Westamerica Bancorporation, a registered bank holding Company, (the
"Company"), provides a full range of banking services to individual and
corporate customers in Northern California through its subsidiary banks
(the "Banks"), Westamerica Bank and Subsidiary, Bank of Lake County and
Napa Valley Bank. The Banks are subject to competition from other financial
institutions and to regulations of certain agencies and undergo periodic
examinations by those regulatory authorities.
Summary of Significant Accounting Policies
The consolidated financial statements are prepared in conformity with
generally accepted accounting principles and general practices within the
banking industry. The following is a summary of significant policies used
in the preparation of the accompanying financial statements. In preparing
the financial statements, Management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as
of the dates of the balance sheets and revenues and expenses for the
periods indicated.
Principles of Consolidation
The financial statements include the accounts of the Company, and all the
Company's subsidiaries which include the Banks, Community Banker Services
Corporation and Subsidiary and Westcore, a newly formed company which will
engage in planning and servicing retirement and employee benefit programs.
Significant intercompany transactions have been eliminated in
consolidation. All data presented for 1992 has been restated to include the
April 15, 1993 acquisition of Napa Valley Bancorp on a pooling-of-interests
basis.
Cash Equivalents
Cash equivalents include Due From Banks balances and Federal Funds Sold
which are both readily convertible to known amounts of cash and are so near
their maturity that they present insignificant risk of changes in value
because of interest rate volatility.
Securities
Investment securities consist of U.S. Treasury, federal agencies, state,
county and municipal securities, mortgage-backed, corporate debt and equity
securities. Under the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", the Company classifies its debt and marketable equity
securities in one of three categories: trading, available for sale or held
to maturity. Trading securities are bought and held principally for the
purpose of selling them in the near term. Held-to-maturity securities are
those securities in which the Company has the ability and intent to hold
the security until maturity. All other securities not included in trading
or held to maturity are classified as available for sale. Trading and
available-for-sale securities are recorded at fair value. Held-to-maturity
securities are recorded at amortized cost, adjusted for the amortization or
accretion of premiums or discounts. Unrealized gains and losses on trading
securities are included in earnings.
Unrealized gains and losses, net of the related tax effect, on
available-for-sale securities are excluded from earnings and are reported
as a separate component of shareholders' equity until realized.
A decline in the market value of any available-for-sale or held-to-maturity
security below cost that is deemed other than temporary, results in a
charge to earnings and the establishment of a new cost basis for the
security.
Premiums and discounts are amortized or accreted over the life of the
related investment security as an adjustment to yield using the effective
interest method. Dividend and interest income are recognized when earned.
Realized gains and losses for securities classified as available for sale
are included in earnings and are derived using the specific identification
method for determining the cost of securities sold.
Loans and Reserve for Loan Losses
The reserve for loan losses is a combination of specific and general
reserves available to absorb estimated future losses throughout the loan
portfolio and is maintained at a level considered adequate to provide for
such losses. Credit reviews of the loan portfolio, designed to identify
problem loans and to monitor these estimates, are conducted continually,
taking into consideration market conditions, current and anticipated
developments applicable to the borrowers and the economy, and the results
of recent examinations by regulatory agencies. Management approves the
conclusions resulting from credit reviews. Ultimate losses may vary from
current estimates. Adjustments to previous estimates of loan losses are
charged to income in the period which they become known.
Unearned interest on discounted loans is amortized over the life of these
loans, using the sum-of-the-months digits formula for which the results are
not materially different from those obtained by using the interest method.
For all other loans, interest is accrued daily on the outstanding balances.
Loans which are more than 90 days delinquent with respect to interest or
principal, unless they are well secured and in the process of collection,
and other loans on which full recovery of principal or interest is in
doubt, are placed on non-accrual status.
Non-refundable fees and certain costs associated with originating or
acquiring loans are deferred and amortized as an adjustment to interest
income over the estimated respective loan lives. Loans held for sale are
identified upon origination and are reported at the lower of cost or market
value on an individual loan basis.
Other Real Estate Owned and Loan Collateral Substantively Foreclosed
Other real estate owned includes property acquired through foreclosure or
forgiveness of debt. These properties are transferred at fair value, which
becomes the new cost basis of the property. Losses recognized at the time
of acquiring property in full or partial satisfaction of loans are charged
against the reserve for loan losses. Subsequent losses incurred due to the
declines in property values as identified in annual independent property
appraisals are recognized as non-interest expense. Routine holding costs,
such as property taxes, insurance and maintenance, and losses from sales
and dispositions are recognized as non-interest expense. In 1993, the
Company had loans classified as "loan collateral substantially foreclosed"
when the borrower had little or no equity in the collateral, when proceeds
for repayment of the loan were expected to come only from the operation or
sale of the collateral, and the debtor had either formally or effectively
abandoned control of the collateral to the Company or had retained control
of the collateral but, because of the current financial condition of the
debtor or the economic prospects for the debtor and/or collateral in the
foreseeable future, there were doubts about the ability of the debtor to
rebuild equity in the collateral or otherwise repay the loan in the near
term. Losses recognized at the time the loans were reclassified as
substantive foreclosures were charged against the reserve for loan losses.
Subsequent losses incurred due to declines in property values, were
recognized as non-interest expense as were other routine holding costs. The
Company had no loans classified as substantively foreclosed at December 31,
1994.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation is computed substantially on the
straight-line method over the estimated useful life of each type of asset.
Estimated useful lives of premises and equipment range from 20 to 50 years
and from 3 to 20 years, respectively. Leasehold improvements are amortized
over the terms of the lease or their estimated useful life, whichever is
shorter. Fully depreciated and/or amortized assets are removed from the
Company's balance sheet.
Interest Rate Swap Agreements
The Company uses interest rate swap agreements as an asset/liability
management strategy to reduce interest rate risk. These agreements are
exchanges of fixed and variable interest payments based on a notional
principal amount. The primary risk associated with swaps is the exposure to
movements in interest rates and the ability of the counterparties to meet
the terms of the contracts. The Company controls the credit risk of these
agreements through credit approvals, limits and monitoring procedures. The
Company is not a dealer but an end user of these instruments and does not
use them for trading purposes. As a hedging mechanism, the differential to
be paid or received on such agreements is recognized as an adjustment to
interest income in the period received or paid. Payments made and/or
received in connection with early termination of interest rate swap
agreements are recognized over the remaining original term of the swap
agreement.
Earnings Per Share
Earnings per share amounts are computed on the basis of the weighted
average of common and common equivalent shares outstanding during each of
the years.
Income Taxes
The Company and its subsidiaries file consolidated tax returns. For
financial reporting purposes, the income tax effects of transactions are
recognized in the year in which they enter into the determination of
recorded income, regardless of when they are recognized for income tax
purposes. Accordingly, the provisions for income taxes in the consolidated
statements of income include charges or credits for deferred income taxes
relating to temporary differences between the tax basis of assets and
liabilities and their reported amounts in the financial statements.
Other
Securities and other property held by the Banks in a fiduciary or agency
capacity are not included in the consolidated financial statements since
such items are not assets of the Company or its subsidiaries. Certain
amounts in prior years' financial statements have been reclassified to
conform with the current presentation. These reclassification have no
effect on previously reported income.
Note 2: Investment Securities
An analysis of available for sale investment securities portfolio as
of December 31, 1994 follows:
------------------------------------------------------------------------------------------------------------------
(In thousands) One One Five Over
year or to five to ten ten Amortized Unrealized Unrealized Fair
Maturity in Years less years years years Cost gains losses Value
------------------------------------------------------------------------------------------------------------------
December 31, 1994:
U.S. Treasury Securities $15,304 $66,574 $-- $ -- $ 81,878 $ 19 $(1,706) $ 80,191
Securities of U.S. Govt.
Agencies and Corporations * 2,002 13,179 -- 38,644 53,825 140 (805) 53,160
Obligations of States and
Political Subdivisions 9,423 -- -- -- 9,423 2 (29) 9,396
Asset Backed (Automobile
Receivables) -- -- -- -- -- -- -- --
Other Securities (Preferred
Stocks and Corporate Bonds) 8,503 10,025 -- -- 18,528 19 (685) 17,862
------------------------------------------------------------------------------------------------------------------
Total $35,232 $89,778 $-- $38,644 $163,654 $180 $(3,225) $160,609
==================================================================================================================
Fair Value by Maturity $34,334 $88,220 $-- $38,055
======================================================================
[FN]
* Includes $46.8 million in Collateralized Mortgage Obligations with the
following maturities: 1 to 5 years $10.2 million; over 10 years $36.6
million. The average yield of these securities is 5.91 percent.
An analysis of held to maturity investment securities portfolio as of
December 31, 1994 follows:
------------------------------------------------------------------------------------------------------------------
(In thousands) One One Five Over
year or to five to ten ten Amortized Unrealized Unrealized Fair
Maturity in Years less years years years Cost gains losses Value
------------------------------------------------------------------------------------------------------------------
December 31, 1994:
U.S. Treasury Securities $21,084 $138,360 $ -- $ -- $159,444 $ -- $ (7,481) $151,963
Securities of U.S. Govt.
Agencies and Corporations * -- 52,245 77,912 72,151 202,308 291 (10,784) 191,815
Obligations of States and
Political Subdivisions 4,496 24,744 43,037 116,435 188,712 365 (10,487) 178,590
Asset Backed (Automobile
Receivables) -- 37,162 -- -- 37,162 -- (933) 36,229
Other Securities (Preferred
Stocks and Corporate Bonds) 6,700 2,911 -- 1,493 11,104 3 (20) 11,087
------------------------------------------------------------------------------------------------------------------
Total $32,280 $255,422 $120,949 $190,079 $598,730 $659 $(29,705) $569,684
==================================================================================================================
Fair Value by Maturity $31,889 $244,831 $115,552 $177,412
======================================================================
[FN]
* Includes $155.1 million in Collateralized Mortgage Obligations with the
following maturities: 1 to 5 years $16.6 million; 5 to 10 years $71.6
million; over 10 years $66.9 million. These securities have a market
value of $146.6 million and an average yield of 5.28 percent.
An analysis of available for sale investment securities portfolio as
of December 31, 1993 follows:
------------------------------------------------------------------------------------------------------------------
(In thousands) One One Five Over
year or to five to ten ten Amortized Unrealized Unrealized Fair
Maturity in Years less years years years Cost gains losses Value
------------------------------------------------------------------------------------------------------------------
December 31, 1993:
U.S. Treasury Securities $11,044 $109,473 $ -- $ -- $120,517 $4,029 $ (2) $124,544
Securities of U.S. Govt.
Agencies and Corporations * 9,582 18,478 2,008 1,571 31,639 275 (219) 31,695
Obligations of States and
Political Subdivisions 3,005 -- -- -- 3,005 -- (5) 3,000
Asset Backed (Automobile
Receivables) -- -- -- -- -- -- -- --
Other Securities (Preferred
Stocks and Corporate Bonds) 6,250 3,017 -- -- 9,267 313 -- 9,580
------------------------------------------------------------------------------------------------------------------
Total $29,881 $130,968 $2,008 $1,571 $164,428 $4,617 $(226) $168,819
==================================================================================================================
Fair Value by Maturity $30,103 $135,100 $2,001 $1,615
======================================================================
[FN]
* Includes $24.6 million in Collateralized Mortgage Obligations with the
following maturities: 1 year or less $9.4 million; 1 to 5 years $15.2
million. The average yield of these securities is 5.56 percent.
An analysis of held to maturity investment securities portfolio as of
December 31, 1993 follows:
------------------------------------------------------------------------------------------------------------------
(In thousands) One One Five Over
year or to five to ten ten Amortized Unrealized Unrealized Fair
Maturity in Years less years years years Cost gains losses Value
------------------------------------------------------------------------------------------------------------------
December 31, 1993:
U.S. Treasury Securities $ 3,029 $122,040 $ -- $ -- $125,069 $ 540 $ (270) $125,339
Securities of U.S. Govt.
Agencies and Corporations * 9,886 51,668 80,419 81,023 222,996 1,859 (793) 224,062
Obligations of States and
Political Subdivisions 11,823 23,185 38,065 51,224 124,297 4,548 (758) 128,087
Asset Backed (Automobile
Receivables) 152 65,281 -- -- 65,433 665 (34) 66,064
Other Securities (Preferred
Stocks and Corporate Bonds) 12,999 3,115 1,654 1,494 19,262 749 -- 20,011
------------------------------------------------------------------------------------------------------------------
Total $37,889 $265,289 $120,138 $133,741 $557,057 $8,361 $(1,855) $563,563
==================================================================================================================
Fair Value by Maturity $38,638 $266,843 $120,892 $137,190
======================================================================
[FN]
* Includes $162.6 million in Collateralized Mortgage Obligations with the
following maturities: 1 year or less $9.9 million; 1 to 5 years $9.3
million; 5 to 10 years $71.3 million; over 10 years $72.1 million.
These obligations have a market value of $162.4 million and an average
yield of 5.45 percent.
As of December 31, 1994, $248.1 million of investment securities held to
maturity were pledged to secure public deposits.
Note 3: Loans and Reserve for Loan Losses
Loans at December 31, consisted of the following:
----------------------------------------------------------------
(In thousands) 1994 1993
----------------------------------------------------------------
Commercial $262,518 $266,448
Real estate-commercial 342,727 346,308
Real estate-construction 27,278 40,533
Real estate-residential 193,061 172,245
----------------------------------------------------------------
Total real estate loans 563,066 559,086
Installment and personal 292,735 304,993
Unearned income (14,548) (15,788)
----------------------------------------------------------------
Gross loans 1,103,771 1,114,739
Loan loss reserve (27,600) (25,587)
----------------------------------------------------------------
Net loans $1,076,171 $1,089,152
================================================================
Included in real estate-residential at December 31, 1994 and 1993 are loans
held for resale of $1.9 million and $5.9 million, respectively, the cost of
which approximates market value.
Changes in the loan loss reserve were:
------------------------------------------------------------------
(In thousands) 1994 1993 1992
------------------------------------------------------------------
Balance at January 1, $25,587 $24,742 $23,853
Sale of Sonoma Valley Bank - (684) -
Provision for loan losses 5,880 9,452 7,005
Credit losses (5,921) (10,091) (8,794)
Credit loss recoveries 2,054 2,168 2,678
------------------------------------------------------------------
Net chargeoffs (3,867) (7,923) (6,116)
------------------------------------------------------------------
Balance at December 31, $27,600 $25,587 $24,742
==================================================================
Restructured loans were $4.4 million at December 31, 1994 and at
December 31; 1993, they were $319,000 at December 31, 1992.
The following is a summary of interest foregone on restructured loans
for the years ended December 31:
------------------------------------------------------------------------
(In thousands) 1994 1993 1992
------------------------------------------------------------------------
Interest income that would have
been recognized had the loans
performed in accordance with
their original terms $380 $472 $135
Less: Interest income recognized
on restructured loans (264) (218) -
------------------------------------------------------------------------
Interest foregone on restructured loans $116 $254 $135
========================================================================
There were no commitments to lend additional funds to borrowers whose loans
are included above.
Note 4: Concentrations of Credit Risk
The Company's business activity is with customers in Northern California.
The loan portfolio is well diversified with no industry comprising greater
than ten percent of total loans outstanding as of December 31, 1994.
The Company has a significant amount of credit arrangements that are
secured by real estate collateral. In addition to real estate loans
outstanding as disclosed in Note 3, the Company had loan commitments and
stand-by letters of credit related to real estate loans of $11.8 million at
December 31, 1994. The Company requires collateral on all real estate loans
and generally attempts to maintain loan-to-value ratios no greater than 75
percent on commercial real estate loans and no greater than 80 percent on
residential real estate loans.
Note 5: Premises and Equipment
A summary as of December 31, follows:
-------------------------------------------------------------------------
Accumulated
Depreciation and Net
(In thousands) Cost Amortization Book Value
-------------------------------------------------------------------------
1994
Land $ 3,735 $ - $ 3,735
Buildings and improvements 19,861 (7,286) 12,575
Leasehold improvements 2,276 (1,520) 756
Furniture and equipment 13,737 (7,516) 6,221
-------------------------------------------------------------------------
Total $39,609 $(16,322) $23,287
=========================================================================
1993
Land $ 3,735 $ - $ 3,735
Buildings and improvements 20,072 (6,876) 13,196
Leasehold improvements 2,537 (1,513) 1,024
Furniture and equipment 14,347 (6,961) 7,386
-------------------------------------------------------------------------
Total $40,691 $(15,350) $25,341
=========================================================================
Depreciation and amortization included in non-interest expense amount to
$3,708,000 in 1994, $3,622,000 in 1993 and $4,198,000 in 1992.
Note 6: Borrowed Funds
Notes payable include the unsecured obligations of the Company as of
December 31, 1994 and 1993, as follows:
-----------------------------------------------------------------------
(In thousands) 1994 1993
-----------------------------------------------------------------------
Unsecured note dated September, 1976, interest
payable semiannually at 9 7/8% and principal
payments of $267,000 due annually to September
1, 1996. Note was paid off in September, 1994. $ - $ 196
Unsecured note dated May, 1984, interest
payable quarterly at 12.95% and principal
payments of $1,000,000 due annually beginning
September 1, 1991 and ending on September 1,
1996. Note was paid off in October, 1994. - 2,100
Equity contract notes, originated in April, 1986
and maturing on April 1, 1996. Interest payable
semiannually at 11 5/8% and principal payments
of $2,500,000 due annually, on April 1, starting
in 1993. Notes were paid off in April, 1994. - 7,500
Senior notes, originated in May, 1988 and
maturing on June 30, 1995. Interest payable
semiannually at 10.87% and principal
payment due at maturity. 5,000 5,000
Subordinated note, issued by Westamerica Bank,
originated in December, 1993 and maturing
September 30, 2003. Interest of 6.99% per
annum is payable semiannually on March 31
and September 30, with principal due at
maturity. 20,000 20,000
-----------------------------------------------------------------------
Total notes payable $25,000 $34,796
=======================================================================
Mortgages payable of $524,000 consist of a note of Westamerica Bank secured
by a deed of trust on premises having a net book value of $756,000 at
December 31, 1994. The note, which has an effective interest rate of 10
percent, is scheduled to mature in April, 1995.
At December 31, 1994, the Company had unused lines of credit amounting to
$2.5 million. Compensating balance arrangements are not significant to the
operations of the Company.
At December 31, 1994, the Banks had $96.6 million in time deposit accounts
in excess of $100,000; interest on these accounts in 1994 was $3.5 million.
Note 7: Shareholders' Equity
In April 1982, the Company adopted an Incentive Stock Option Plan and
413,866 shares were reserved for issuance. Under this plan, all options are
currently exercisable and terminate 10 years from the grant. At December
31, 1994, 17,340 options were outstanding and exercisable. Under the Stock
Option Plan adopted by the Company in 1985, 750,000 shares have been
reserved for issuance. Stock appreciation rights, incentive stock options
and non-qualified stock options are available under this plan. Options are
granted at fair market value and are generally exercisable in equal
installments over a three-year period with the first installment
exercisable one year after the date of the grant. Each incentive stock
option has a maximum ten-year term while non-qualified stock options may
have a longer term. The 1985 plan was amended in 1990 to provide for
restricted performance shares ("RPS") grants. RPS's granted were 33,900,
24,700, and 27,450, for the years ended December 31, 1994, 1993 and 1992,
respectively. The related expense for those years was $960,000, $740,000,
and $315,000, respectively. An RPS grant becomes fully vested after three
years of being awarded, provided that the Company has attained its
performance goals for such three-year period. At December 31, 1994, 167,209
options were available for grant under the 1985 Stock Option Plan.
Information with respect to options outstanding and options exercised under
the plans is summarized in the following table:
-----------------------------------------------------------------------------
Number Option Price
of shares $ per share $ Total
-----------------------------------------------------------------------------
Shares under option at December 31:
1994 399,741 8.50 - 28.06 8,628,494
1993 313,564 8.50 - 24.50 5,766,400
1992 278,544 6.06 - 22.00 4,249,399
Options exercised during:
1994 31,742 8.88 - 24.50 456,150
1993 51,260 8.88 - 22.00 692,157
1992 168,423 6.06 - 13.29 1,975,000
At December 31, 1994, options for 204,104 shares were exercisable.
Shareholders have authorized issuance of two new classes of 1,000,000
shares each, to be denominated "Class B Common Stock" and "Preferred
Stock", respectively, in addition to the 20,000,000 shares of Common Stock
presently authorized. At December 31, 1994, no shares of Class B or
Preferred Stock had been issued.
In December 1986, the Company declared a dividend distribution of one
common share purchase right (the "Right") for each outstanding share of
common stock. The Rights are exercisable only in the event of an
acquisition of, or announcement of a tender offer to acquire, 15 percent or
more of the Company's stock without the prior consent of the Board of
Directors. If the Rights become exercisable, the holder may purchase one
share of the Company's common stock for $65. Following an acquisition of 15
percent of the Company's common stock or 50 percent or more of its assets
without prior consent of the Company, each right will also entitle the
holder to purchase $130 worth of common stock of the Company for $65. Under
certain circumstances, the Rights may be redeemed by the Company at a price
of $.05 per right prior to becoming exercisable and in certain
circumstances thereafter. The Rights expire on December 31, 1999, or
earlier, in connection with certain Board-approved transactions.
Note 8: Income Taxes
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes", ("SFAS 109"). Under SFAS 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement reported amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
The components of the net deferred tax assets as of December 31 are as
follows:
------------------------------------------------------------------------
(In thousands) 1994 1993
------------------------------------------------------------------------
Deferred tax asset
Reserve for loan losses $11,280 $10,321
State franchise taxes 1,318 676
Securities available for sale 1,293 -
Deferred compensation 998 534
Real estate owned 2,135 2,742
Other 1,187 1,037
------------------------------------------------------------------------
18,211 15,310
Valuation allowance - -
------------------------------------------------------------------------
Total deferred tax asset 18,211 15,310
Deferred tax liability
Net deferred loan costs 452 502
Fixed assets 1,076 1,164
Securities available for sale - 1,864
Other 23 148
------------------------------------------------------------------------
Total deferred tax liability 1,551 3,678
------------------------------------------------------------------------
Net deferred tax asset $16,660 $11,632
========================================================================
The Company believes a valuation allowance is not needed to reduce the
deferred tax asset because it is more likely than not that the deferred tax
asset will be realized through recoverable taxes or future taxable income.
The provisions for federal and state income taxes consist of amounts
currently payable and amounts deferred which, for the years ended December
31, are as follows:
-----------------------------------------------------------------
(In thousands) 1994 1993 1992
-----------------------------------------------------------------
Current income tax expense:
Federal $ 8,693 $2,501 $6,977
State 4,045 2,195 3,130
-----------------------------------------------------------------
Total current 12,738 4,696 10,107
-----------------------------------------------------------------
Deferred income tax benefit:
Federal (1,590) (646) (1,758)
State (280) (617) (492)
-----------------------------------------------------------------
Total deferred (1,870) (1,263) (2,250)
Adjustment of net deferred tax asset
for enacted changes in tax rates:
Federal - (304) -
State - (90) -
-----------------------------------------------------------------
Provision for income taxes $10,868 $3,039 $7,857
=================================================================
The provisions for income taxes differ from the provisions computed by
applying the statutory federal income tax rate to income before taxes, as
follows:
-----------------------------------------------------------------
(In thousands) 1994 1993 1992
-----------------------------------------------------------------
Federal income taxes due
at statutory rate $12,433 $4,248 $7,846
(Reductions) increases in
income taxes resulting from:
Interest not taxable for federal
income tax purposes (3,362) (1,895) (1,735)
State franchise taxes, net of
federal income tax benefit 2,447 982 1,753
Deferred benefit and other (650) (296) (7)
-----------------------------------------------------------------
Provision for income taxes $10,868 $3,039 $7,857
=================================================================
Note 9: Fair Value of Financial Instruments
The following fair values of financial instruments do not represent actual
amounts that may be realized upon any sale or liquidation of the related
assets or liabilities. In addition, these values do not give effect to
discounts to fair value which may occur when financial instruments are sold
in larger quantities. The fair values presented represent the Company's
best estimate of fair value using the methodologies discussed below. The
fair value of financial instruments which have a relatively short period of
time between their origination and their expected realization was estimated
using historical cost. The estimated fair value of such financial
instruments at December 31, was:
---------------------------------------------------------------------------
(In thousands) 1994 1993
---------------------------------------------------------------------------
Cash and cash equivalents $ 112,401 $ 102,618
Money market assets 250 250
Interest and taxes receivable 34,777 28,799
Non-interest bearing and interest-bearing
transaction and savings deposits 1,325,941 1,313,908
Funds purchased 133,218 69,064
Interest payable 3,167 2,700
The fair value at December 31, of the following financial instruments was
estimated using quoted market prices:
--------------------------------------------------------------------------
(In thousands) 1994 1993
--------------------------------------------------------------------------
Investment securities available for sale $ 160,609 $ 168,819
Investment securities held to maturity 569,684 563,563
Trading account securities - 10
Loans were separated into two groups for valuation. Variable rate loans,
except for those which have reached their maximum contractual rates, which
reprice frequently with changes in market rates were valued using
historical data. Fixed rate loans were valued by discounting the future
cash flows expected to be received from the loans using current interest
rates charged on loans with similar characteristics. Additionally, the
$27,600,000 reserve for loan losses was applied against the estimated fair
value to recognize future defaults of contractual cash flows. The estimated
fair value of loans at December 31, was:
---------------------------------------------------------------------------
(In thousands) 1994 1993
---------------------------------------------------------------------------
Loans $1,054,768 $1,096,164
The fair value of time deposits and notes and mortgages payable was
estimated by discounting future cash flows related to these financial
instruments using current market rates for financial instruments with
similar characteristics.
The estimated fair values at December 31, were:
--------------------------------------------------------------------------
(In thousands) 1994 1993
--------------------------------------------------------------------------
Time deposits $ 362,186 $ 420,475
Notes and mortgages payable 22,898 36,014
The estimated fair value of the Company's interest rate swaps, which are
determined by dealer quotes and generally represent the amount that the
Company would pay to terminate its swap contracts were $1,071,000 and
$593,000, respectively, at December 31, 1994 and 1993.
Note 10: Interest Rate Risk Management
The Company considers the effects of various factors in implementing
interest rate risk management activities, including the utilization of
interest-rate swaps. The notional amounts of interest rate swaps
outstanding were:
--------------------------------------------------------------------
(In thousands) 1994 1993 1992
--------------------------------------------------------------------
Balance, January 1, $110,000 $ 50,000 $75,000
Contracts entered - 60,000 50,000
Contracts matured (50,000) - (75,000)
--------------------------------------------------------------------
Balance, December 31, $ 60,000 $110,000 $50,000
--------------------------------------------------------------------
Fair value, December 31, $ (1,071) $ (593) $ -
====================================================================
Under interest rate swaps, the Company agrees with other parties to
exchange, at specified intervals, the difference between fixed-rate and
floating-rate interest amounts calculated by reference to the notional
amounts. For the $60 million of interest rate swaps outstanding at December
31, 1994, comprised of two contracts with notional amounts of $30 million
each, the Company pays a floating rate, based on the three-month London
Interbank Offering Rate (LIBOR), and receives a weighted average fixed rate
of 4.11 percent. The LIBOR rate has averaged 4.43 percent from the date
these swaps were entered into through December 31, 1994. The Company is
exposed to credit-related losses in the event of non-performance by the
counterparty but does not expect this event to occur, as the Company deals
only with highly rated counterparties. At December 31, 1994 and 1993, due
to the loss position, no credit exposure existed in connection with the
interest rate swaps. These swap contracts are scheduled to mature in
August, 1995.
Note 11: Lease Commitments
Fifteen banking offices and three administrative service centers are owned
and thirty-three banking offices and two support facilities are leased.
Substantially all the leases contain multiple renewal options and
provisions for rental increases, principally for cost of living index,
property taxes and maintenance. The Company also leases certain pieces of
equipment. Minimum future rental payments, net of sublease income, at
December 31, 1994, are as follows:
(In thousands)
Year Amount
--------------------------------------
1995 $ 3,600
1996 2,933
1997 1,772
1998 1,262
1999 825
Thereafter 2,600
--------------------------------------
Total minimum lease payments $12,992
======================================
Total rentals for premises and equipment net of sublease income included in
non-interest expense were $3,129,000 in 1994, $3,862,000 in 1993 and
$3,910,000 in 1992.
Note 12: Commitments and Contingent Liabilities
Loan commitments are agreements to lend to a customer provided there is no
violation of any condition established in the agreement. Commitments
generally have fixed expiration dates or other termination clauses. Since
many of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future funding
requirements. Loan commitments are subject to the Company's normal credit
policies and collateral requirements. Unfunded loan commitments were $161.8
million at December 31, 1994.
Standby letters of credit commit the Company to make payments on behalf of
customers when certain specified future events occur. Standby letters of
credit are primarily issued to support customers' short-term financing
requirements and must meet the Company's normal credit policies and
collateral requirements. Standby letters of credit outstanding totaled $6.5
million and $6.4 million at December 31, 1994 and 1993, respectively. The
Company, because of the nature of its business, is subject to various
threatened or filed legal cases. The Company, based on the advice of the
legal counsel, does not expect such cases will have a material, adverse
effect on its financial position or results of operations.
Note 13: Retirement Benefit Plans
The Company sponsors a defined benefit Retirement Plan covering
substantially all of its salaried employees with one or more years of
service. The Company's policy is to expense costs as they accrue as
determined by the Projected Unit Cost method. The Company's funding policy
is to contribute annually the maximum amount that can be deducted for
federal income tax purposes.
The following table sets forth the Retirement Plan's funded status as of
December 31 and the pension cost for the years ended December 31:
--------------------------------------------------------------------------
(In thousands) 1994 1993
--------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested benefit obligation $ (8,870) $(11,245)
--------------------------------------------------------------------------
Accumulated benefit obligation $(10,120) $(11,430)
--------------------------------------------------------------------------
Projected benefit obligation $(10,331) $(11,612)
Plan assets at fair market value 10,430 11,677
--------------------------------------------------------------------------
Funded status - projected benefit obligation
less than plan assets $ 99 $ 65
==========================================================================
Comprised of:
Prepaid pension cost $ 69 $ 22
Unrecognized net (loss) gain 27 (75)
Unrecognized prior service cost 362 529
Unrecognized net obligation, net
of amortization (359) (411)
--------------------------------------------------------------------------
Total $ 99 $ 65
==========================================================================
--------------------------------------------------------------------------
(In thousands) 1994 1993
--------------------------------------------------------------------------
Net pension costs includes the
following components:
Service cost during the period $ 372 $ 364
Interest cost on projected
benefit obligation 776 744
Actual return on plan assets (68) (1,012)
Net amortization and deferral (775) 64
--------------------------------------------------------------------------
Net periodic pension cost $ 305 $ 160
==========================================================================
The discount rate and rate of increase in future compensation levels used
in determining the actuarial present value of the projected benefit
obligation were 7.25 percent and 4.50 percent, respectively, at December
31, 1994 and 6.75 percent and 4.50 percent, respectively, at December 31,
1993. The expected long-term rate of return on plan assets in 1994 and 1993
was 7 percent.
Effective January 1, 1992, the Company adopted a defined contribution
Deferred Profit Sharing Plan covering substantially all of its salaried
employees with one or more years of service. Participant deferred profit
sharing account balances offset benefits accrued under the Retirement Plan
which was amended effective January 1, 1992 to coordinate benefits with the
Deferred Profit Sharing Plan. The coordination of benefits results in the
Retirement Plan benefit formula establishing the minimum value of
participant retirement benefits which, if not provided by the Deferred
Profit Sharing Plan, are guaranteed by the Retirement Plan.
The costs charged to non-interest expense related to benefits provided by
the Retirement Plan and the Deferred Profit Sharing Plan were $1,327,000 in
1994, $1,160,000 in 1993 and $1,037,000 in 1992.
In addition to the Retirement Plan and the Deferred Profit Sharing Plan,
all salaried employees are eligible to participate in the voluntary Tax
Deferred Savings/Retirement Plan (ESOP) upon completion of a 90-day
introductory period. This plan allows employees to defer, on a pretax
basis, a portion of their salaries as contributions to the plan.
Participants may invest in five funds, including Westamerica Bancorporation
Common Stock Fund. The matching contributions charged to operating expense
were $477,000 in 1994, $482,000 in 1993 and $462,000 in 1992.
Effective December 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions", ("SFAS No. 106"). Adoption of SFAS No. 106
required a change from the cash method to an actuarial based accrual method
of accounting for postretirement benefits other than pensions. The Company
offers continuation of group insurance coverage to employees electing early
retirement, as defined by the Retirement Plan, for the period from the date
of early retirement until age sixty five. The Company contributes an amount
toward early retirees' insurance premiums which is fixed at the time of
early retirement. The Company reimburses Medicare Part B premiums for all
retirees over age sixty five, as defined by the Retirement Plan.
The following table sets forth the net periodic postretirement benefit cost
for the years ended December 31 and the funded status of the plan at
December 31:
----------------------------------------------------------------------
(In thousands) 1994 1993
----------------------------------------------------------------------
Service cost $ - $ -
Interest cost 105 107
Actual return on plan assets - -
Amortization of unrecognized
transition obligation 61 61
Other, net - -
----------------------------------------------------------------------
Net periodic cost $ 166 $ 168
----------------------------------------------------------------------
Accumulated postretirement benefit
obligation attributable to:
Retirees $1,140 $1,130
Fully eligible participants 239 265
Other 188 158
----------------------------------------------------------------------
Total $1,567 $1,553
======================================================================
Fair value of plan assets $ - $ -
Accumulated postretirement benefit
obligation in excess of plan assets 1,567 $1,553
Comprised of:
Unrecognized prior service cost - -
Unrecognized net gain (loss) - -
Unrecognized transition obligation 1,407 1,471
Recognized postretirement obligation 160 82
----------------------------------------------------------------------
Total $1,567 $1,553
======================================================================
The discount rate used in measuring the accumulated postretirement benefit
obligation was 7.25 percent at December 31, 1994 and 6.75 percent at
December 31, 1993. The assumed health care cost trend rate used to measure
the expected cost of benefits covered by the plan was 8 percent for 1995
and declined steadily to an ultimate trend rate of 4 percent beginning in
1999. The effect of a one percentage point increase on the assumed health
care cost trend for each future year would increase the aggregate of the
service cost components of the 1994 and 1993 net periodic cost by $87,000
and $73,000, respectively, and increase the accumulated postretirement
benefit obligation at December 31, 1994 and 1993 by $255,000 and $204,000,
respectively.
Note 14: Related Party Transactions
Certain directors and executive officers of the Company and/or its
subsidiaries were loan customers of the Banks during 1994 and 1993. All
such loans were made in the ordinary course of business on normal credit
terms, including interest rate and collateral requirements. No related
party loans represent more than normal risk of collection. Such loans were
$3,108,000 and $5,238,000 at December 31, 1994 and 1993, respectively.
Note 15: Restrictions
Payment of dividends to the Company by Westamerica Bank, the largest
subsidiary bank, is limited under regulations for Federal Reserve member
banks. The amount that can be paid in any calendar year, without prior
approval from regulatory agencies, cannot exceed the net profits (as
defined) for that year plus the net profits of the preceding two calendar
years less dividends declared. Under this regulation, Westamerica Bank was
not restricted as to the payment of $11.4 million in dividends to the
Company as of December 31, 1994. During 1992 and 1993, Napa Valley Bank, a
banking subsidiary, was operating under a regulatory order which disallowed
payment of dividends to the Company unless it reduced the level of problem
loans, liquidated or reserved adequately against the real estate investment
in its subsidiary company, and strengthened its loan loss reserve. Napa
Valley Bank has complied with all conditions of the regulatory order, which
was removed by the regulators early in 1994. Napa Valley Bank began to pay
dividends to the Company in the fourth quarter of 1994. Bank of Lake
County, another subsidiary bank, started to pay dividends to the Company in
the third quarter of 1994. Payment of dividends by the Company is also
restricted under the terms of the note agreements as discussed in Note 6.
Under the most restrictive of these agreements, $24.4 million was available
for payment of dividends as of December 31, 1994. The Banks are required to
maintain reserves with the Federal Reserve Bank equal to a percentage of
its reservable deposits. The Banks' daily average on deposit at the Federal
Reserve Bank was $43.0 million in 1994 and $40.4 million in 1993.
Note 16: Westamerica Bancorporation (Parent Company Only)
Statements of Income (In thousands)
-----------------------------------------------------------------------------
Years ended December 31, 1994 1993 1992
-----------------------------------------------------------------------------
Dividends from subsidiaries $19,680 $16,671 $ 8,630
Interest from subsidiaries 101 315 61
Other income 3,752 2,781 1,158
-----------------------------------------------------------------------------
Total income 23,533 19,767 9,849
-----------------------------------------------------------------------------
Interest on borrowings 1,029 1,958 2,434
Salaries and benefits 5,529 4,526 782
Other non-interest expense 2,927 5,464 3,451
-----------------------------------------------------------------------------
Total expenses 9,485 11,948 6,667
-----------------------------------------------------------------------------
Income before income tax benefit and
equity in undistributed income
of subsidiaries 14,048 7,819 3,182
Income tax benefit 2,463 3,478 1,890
Equity in undistributed income
(loss) of subsidiaries 8,162 (1,842) 10,150
-----------------------------------------------------------------------------
Net income $24,673 $ 9,455 $15,222
=============================================================================
Balance Sheets (In thousands)
-----------------------------------------------------------------------
Years ended December 31, 1994 1993
-----------------------------------------------------------------------
Assets
Cash and cash equivalents $ 4,526 $ 4,790
Investment securities held to maturity 6,750 9,250
Loans 148 149
Investment in subsidiaries 158,168 154,257
Premises and equipment 55 29
Accounts receivable from subsidiaries 156 65
Other assets 5,741 2,056
-----------------------------------------------------------------------
Total assets $175,544 $170,596
=======================================================================
Liabilities
Long-term debt $ 5,000 $ 14,796
Other liabilities 4,339 3,353
-----------------------------------------------------------------------
Total liabilities 9,339 18,149
Shareholders' equity 166,205 152,447
-----------------------------------------------------------------------
Total liabilities and
shareholders' equity $175,544 $170,596
=======================================================================
Statements of Cash Flows (In thousands)
---------------------------------------------------------------------------
Years ended December 31, 1994 1993 1992
---------------------------------------------------------------------------
Operating Activities
Net income $ 24,673 $ 9,455 $ 15,222
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 65 108 67
Undistributed earnings (loss)
of affiliates (8,162) 607 (10,150)
Increase in equity in affiliates - - (1,797)
(Increase) decrease in receivables
from affiliates (91) 197 1,020
Net change in income taxes (1,740) 60 2,633
(Increase) decrease in other assets (2,295) 1,183 (1,394)
Increase in other liabilities 1,448 1,583 301
Gain on sale of Sonoma Valley Bank - (668) -
Net gain on sale of land - - 43
---------------------------------------------------------------------------
Net cash provided by operating
activities 13,898 12,525 5,945
---------------------------------------------------------------------------
Investing Activities
Purchases of premises and equipment (92) - (2,189)
Net change in land held for sale - (800) -
Net change in loan balances 1 (149) -
Investment in subsidiaries (140) (8,639) (485)
Purchase of investment securities (4,500) (9,700) (13,991)
Proceeds from maturities
of investment securities 7,000 14,191 10,500
Proceeds from sale of premises
and equipment - 2,369 2,149
Proceeds from sale of Sonoma Valley Bank - 2,733 -
---------------------------------------------------------------------------
Net cash provided by (used in)
investing activities 2,269 5 (4,016)
---------------------------------------------------------------------------
Financing Activities
Net decrease in short-term debt - - (656)
Principal reductions of long-term debt (9,796) (6,260) (2,611)
Proceeds from issuance of note
payable to affiliate - - 1,368
Proceeds from exercise of stock options 1,025 1,446 2,139
Retirement of stock (2,488) - -
Unrealized loss on marketable
equity securities - - 9
Dividends paid (5,172) (4,655) (2,987)
---------------------------------------------------------------------------
Net cash used in financing activities (16,431) (9,469) (2,738)
---------------------------------------------------------------------------
Net (decrease) increase in cash and
cash equivalents (264) 3,061 (809)
Cash and cash equivalents at
prior year end 4,790 1,729 2,538
---------------------------------------------------------------------------
Cash and cash equivalents at
December 31, $ 4,526 $ 4,790 $ 1,729
===========================================================================
Note 17: Quarterly Financial Information (Unaudited)
(In thousands except per share data and price of common stock)
March 31, June 30, Sept. 30, Dec. 31,
1994
---------------------------------------------------------------------------------
Interest income $32,478 $33,382 $34,006 $34,372
Net interest income 22,821 23,336 23,421 23,545
Provision for loan losses 1,605 1,605 1,470 1,200
Non-interest income 5,404 4,812 4,536 4,669
Non-interest expense 17,784 17,752 17,575 18,013
Income before taxes 8,836 8,791 8,912 9,001
Net income 5,995 6,023 6,286 6,369
Net income per share .74 .75 .78 .79
Dividends declared per share .15 .15 .17 .17
Price range,
common stock $25.88-29.25 $27.00-32.50 $29.25-33.25 $29.00-33.25
1993
------------------------------------------------------------------------------------
Interest income $35,946 $34,293 $33,215 $33,462
Net interest income 24,174 23,392 23,301 23,778
Provision for loan losses 1,550 4,692 1,605 1,605
Non-interest income 5,018 8,344 5,575 5,009
Non-interest expense 23,314 34,245 19,594 19,492
Income (loss) before taxes 4,328 (7,201) 7,677 7,690
Net income (loss) 3,019 (4,070) 5,125 5,381
Net income (loss) per share .38 (.50) .63 .67
Dividends declared per share .14 .14 .14 .15
Price range,
common stock $22.13-30.25 $23.88-28.75 $25.13-28.50 $25.75-28.50
Note 18: Acquisitions (Unaudited)
a) Consumated acquisitions
On April 15, 1993, the Company issued approximately 2,122,740 shares of its
common stock in exchange for all of the outstanding common stock of Napa
Valley Bancorp, a bank holding company. This business transaction was
accounted for as a pooling-of-interests combination and, accordingly, the
consolidated financial data for periods prior to the combination include
the accounts and results of operations of Napa Valley Bancorp. Certain
reclassification have been made to Napa Valley Bancorp to conform to
Westamerica Bancorporation's presentation. The total interest and total
non-interest income previously reported by Napa Valley Bancorp included in
the accompanying 1992 consolidated financial statements were $49.9 million
and $7.1 million, respectively. The net income reported by Napa Valley
Bancorp for 1992 was $1.2 million.
b) Pending acquisitions
On July 25, 1994, the Company announced the signing of a Definitive Merger
Agreement under which the Company will acquire all of the outstanding
shares of common stock of PV Financial, a bank holding company located in
Modesto, California. Shareholders of PV Financial approved the proposed
merger with and into the Company on November 14, 1994 and the merger date
was effective January 31, 1995. Under the terms of this agreement, all of
the outstanding shares of PV Financial Common Stock will be converted into
the right to receive .5348 of a share of the Company's Common Stock,
pursuant to a tax-free exchange.
On November 17, 1994, the Company announced the signing of a Definitive
Merger Agreement under which the Company will acquire all of the
outstanding shares of common stock of CapitolBank Sacramento, headquartered
in Sacramento, California. This agreement provides for an exchange ratio of
.0938 of a share of the Company's Common Stock for each outstanding share
of CapitolBank Common Stock. Pursuant to this agreement, the exchange ratio
is subject to adjustments if certain conditions in connection with the
Company's average share price occur and other conditions as defined in the
definitive merger agreement. The parties have not yet adopted a formal
timetable, but it is estimated that the merger will be consummated by mid
1995.
On December 8, 1994, the Company and North Bay Bancorp, a bank holding
company located in Novato, California, signed a Definitive Merger Agreement
under which all of the outstanding shares of North Bay Bancorp Common Stock
will be exchanged for shares of the Company's Common Stock. This agreement
provides that holders of each share of North Bay Bancorp will be entitled
to receive, on a tax-free basis, .3600 of a share of the Company's common
stock. Pursuant to this agreement, the exchange ratio is subject to an
adjustment if certain conditions in connection with the Company's average
share price occur and other conditions as defined in the definitive merger
agreement.
The following unaudited pro forma combined financial information, based on
the historical financial statements of the parties, summarizes the combined
results of operations of the Company, PV Financial, Capitol Bank and North
Bay on a pooling-of-interests basis, as if the combinations had been
consummated on January 1 of each of the periods presented.
(In thousands, except per share data)
------------------------------------------------------------------
Years Ended December 31, 1994 1993 1992
------------------------------------------------------------------
Total assets at year end $2,457,463 $2,428,848 $2,377,028
Net loans at year end 1,353,468 1,363,543 1,407,612
Deposits at year end 2,071,668 2,109,514 2,141,800
Shareholders' equity at
year end 204,704 188,644 177,639
Net interest income 116,234 113,786 114,149
Net income 27,705 12,023 16,040
Earnings per share 2.77 1.20 1.63
Management's Letter of Financial Responsibility
To the Shareholders:
The Management of Westamerica Bancorporation is responsible for the preparation,
integrity, reliability and consistency of the information contained in this
annual report. The financial statements, which necessarily include amounts
based on judgments and estimates, were prepared in conformity with generally
accepted accounting principles and prevailing practices in the banking
industry. All other financial information appearing throughout this annual
report is presented in a manner consistent with the financial statements.
Management has established and maintains a system of internal controls that
provides reasonable assurance that the underlying financial records are
reliable for preparing the financial statements, and that assets are
safeguarded from unauthorized use or loss. This system includes extensive
written policies and operating procedures and a comprehensive internal audit
function, and is supported by the careful selection and training of staff,
an organizational structure providing for division of responsibility, and a
Code of Ethics covering standards of personal and business conduct.
Management believes that, as of December 31, 1994 the Corporation's internal
control environment is adequate to provide reasonable assurance as to the
integrity and reliability of the financial statements and related financial
information contained in the annual report.
The system of internal controls is under the general oversight of the Board of
Directors acting through its Audit Committee, which is comprised entirely of
outside directors.
The Audit Committee monitors the effectiveness of and compliance with internal
controls through a continuous program of internal audit and credit examinations.
This is accomplished through periodic meetings with Management, internal
auditors, loan quality examiners, regulatory examiners and independent auditors
to assure that each is carrying out their responsibilities.
The Corporation's financial statements have been audited by KPMG Peat Marwick
LLP, independent certified public accountants elected by the shareholders. All
financial records and related data, as well as the minutes of shareholders and
directors meetings, have been made available to them. Management believes that
all representations made to the independent auditors during their audit were
valid and appropriate.
David L. Payne
Chairman, President and CEO
James M. Barnes
Executive Vice President and CFO
Dennis R. Hansen
Senior Vice President and Controller
Independent Auditor's Report
The Board of Directors and Shareholders of Westamerica Bancorporation
We have audited the accompanying consolidated balance sheets of Westamerica
Bancorporation and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of income, changes in shareholders' equity,
and cash flows for each of the years in the three year period ended
December 31, 1994. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits. As discussed in Note 1 to the consolidated financial statements,
the consolidated statements of income, changes in shareholders' equity, and
cash flows for the period ended December 31, 1992, include the April 15,
1993 acquisition of Napa Valley Bancorp on a pooling-of-interests basis. We
did not audit the financial statements of Napa Valley Bancorp as of and for
the period ended December 31, 1992, which statements reflect total interest
and non-interest income constituting 32 percent in 1992 of the related
consolidated total. Those statements were audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it relates to
the amounts included for Napa Valley Bancorp, is based solely on the report
of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits and
the report of the other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the report of the other auditors,
the consolidated financial statements referred to above present fairly, in
all material respects, the financial position of Westamerica Bancorporation
and subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the years in the three year
period ended December 31, 1994 in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick
San Francisco, California
February 13, 1995
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item 10 is incorporated herein by
reference from the "Election of Directors" and "Executive Officers" section
on Pages 2 through 10 of the Company's Proxy Statement dated March 21,
1995, which has been filed with the Commission pursuant to Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated herein by
reference from the "Executive Compensation" and "Retirement
Benefits and Other Arrangements" section on Pages 11 through 15 of the
Company's Proxy Statement dated March 21, 1995, which has been filed with
the Commission pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required by this Item 12 is incorporated herein by
reference from the "Security Ownership of Certain Beneficial Owners and
Management" section on Pages 8 and 9 of the Company's Proxy Statement
dated March 21, 1995, which has been filed with the Commission pursuant
to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 13 is incorporated herein by
reference from the "Indebtedness of Directors and Management" section on
Page 6 of the Company's Proxy Statement dated March 21, 1995, which has
been filed with the Commission pursuant to Regulation 14A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. All Financial Statements
See Index to Financial Statements on page 35.
(a) 2. Financial statement schedules required by Item 8 of
Form 10-K and by Item 14(d).
None (Information included in Financial Statements).
(a) 3. Exhibits
The following documents are included or incorporated by
reference in this annual report on Form 10-K.
Exhibit
Number
3(a) Restated Articles of Incorporation (composite copy).
3(b)** By-laws.
4(a) Ammended and Restated Rights Agreement - March 23, 1995.
10 Material contracts:
(a)* Incentive Stock Option Plan
(b)*** James M. Barnes --January 7, 1987 (Employment)
(c)*** E. Joseph Bowler --January 7, 1987 (Employment)
(d)*** Robert W. Entwisle --January 7, 1987 (Employment)
(e)**** Amended and Restated Agreement and Plan of Reorganization
by and between Westamerica Bancorporation and John Muir
National Bank, proxy and prospectus dated November 27, 1991.
(f)***** Agreement and Plan of Merger by and between Westamerica
Bancorporation and Napa Valley Bancorp, proxy and
prospectus dated November 12, 1992.
21 Subsidiaries of the registrant.
23 Consent of experts
*Exhibit 10(a) is incorporated by reference from Exhibit A to
the Company's Proxy Statement dated March 22, 1983, which was
filed with the Commission pursuant to Regulation 14A.
**Exhibits 3(b), is incorporated by reference from Exhibit 3(b) to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1986.
***Exhibits 3(a), 10(b), 10(c) and 10(d) are incorporated herein
by reference from Exhibits 3(a), 10(n), 10(o), and 10(q) to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1986.
****Exhibit 3(e) is incorporated herein by reference from the Form S-4
dated November 27, 1991.
*****Exhibit 3(f) is incorporated herein by reference from the Form S-4
dated November 12, 1992.
The Corporation will furnish to shareholders a copy of any exhibit listed
above, but not contained herein, upon written request to Office of the
Corporate Secretary, Westamerica Bancorporation, P. O. Box 567, San
Rafael, California 94915, and payment to the Corporation of $.25 per page.
(b) Report on Form 8-K
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
WESTAMERICA BANCORPORATION
By Dennis R. Hansen By James M. Barnes
---------------------- ----------------------
Senior Vice President and Controller Executive Vice President and
(Principal Accounting Officer) Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature Title Date
David L. Payne Chairman of the Board and 3/23/95
------------------------------ Director and President and CEO
David L. Payne
E. Joseph Bowler Senior Vice President 3/23/95
------------------------------ and Treasurer
E. Joseph Bowler
Etta Allen Director 3/23/95
------------------------------
Etta Allen
Louis E. Bartolini Director 3/23/95
------------------------------
Louis E. Bartolini
Charles I. Daniels, Jr. Director 3/23/95
------------------------------
Charles I. Daniels, Jr.
Don Emerson Director 3/23/95
------------------------------
Don Emerson
Arthur C. Latno Director 3/23/95
------------------------------
Arthur C. Latno
Patrick D. Lynch Director 3/23/95
------------------------------
Patrick D. Lynch
Catherine Cope MacMillan Director 3/23/95
------------------------------
Catherine Cope MacMillan
Director 3/23/95
------------------------------
James Maggetti
Dwight H. Murray, Jr. M.D. Director 3/23/95
------------------------------
Dwight H. Murray, Jr., M.D.
Ronald A. Nelson Director 3/23/95
------------------------------
Ronald A. Nelson
Carl Otto Director 3/23/95
------------------------------
Carl Otto
Edward B. Sylvester Director 3/23/95
-----------------------------
Edward B. Sylvester
Exhibit 21
WESTAMERICA BANCORPORATION
SUBSIDIARIES AS OF DECEMBER 31, 1994
State of Incorporation
Westamerica Bank California
Napa Valley Bank California
Bank of Lake County California
Community Banker Services Corporation California
Westcore California
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Form 10-K, filed by
Westamerica Bancorporation, of our reports dated March 31, 1993
on our audits of Napa Valley Bancorp's financial statements for
the year ended December 31, 1992. It should be noted that we
have performed no audit procedures subsequent to March 31, 1993,
the date of our report. Furthermore, we have not audited any
financial statements of Napa Valley Bancorp as of any date or
for any periods subsequent to December 31, 1992.
/s/ Arthur Andersen LLP
San Francisco, California
March 27, 1995
EX-4
2
____________________________________________________________
____________________________________________________________
Westamerica Bancorporation
and
Chemical Trust Company of California
Rights Agent
_______________________
Amended and Restated Rights Agreement
Dated as of March 23, 1995
____________________________________________________________
____________________________________________________________
TABLE OF CONTENTS
Section Page
1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Appointment of Rights Agent . . . . . . . . . . . . . . . . . . . . 4
3. Issue of Rights Certificates. . . . . . . . . . . . . . . . . . . . 4
4. Form of Rights Certificates . . . . . . . . . . . . . . . . . . . . 6
5. Countersignature and Registration . . . . . . . . . . . . . . . . . 7
6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7. Exercise of Rights; Purchase Price; Expiration Date of Rights . . . 8
8. Cancellation and Destruction of Rights Certificates . . . . . . . 10
9. Reservation and Availability of Common Stock. . . . . . . . . . . 11
10. Common Stock Record Date. . . . . . . . . . . . . . . . . . . . . 12
11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights . . . . . . . . . . . . . . . . . . . . . . . . 12
12. Certificate of Adjusted Purchase Price or Number of Shares. . . . 20
13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power. . . . . . . . . . . . . . . . . . . . . . . . . . 21
14. Additional Covenants. . . . . . . . . . . . . . . . . . . . . . . 24
15. Fractional Rights and Fractional Shares . . . . . . . . . . . . . 24
16. Rights of Action. . . . . . . . . . . . . . . . . . . . . . . . . 26
17. Agreement of Rights Holders . . . . . . . . . . . . . . . . . . . 26
18. Rights Certificate Holder Not Deemed a Stockholder. . . . . . . . 27
19. Concerning the Rights Agent . . . . . . . . . . . . . . . . . . . 27
20. Merger or Consolidation or Change of Name of Rights Agent . . . . 28
21. Duties of Rights Agent. . . . . . . . . . . . . . . . . . . . . . 28
22. Change of Rights Agent. . . . . . . . . . . . . . . . . . . . . . 31
23. Issuance of New Rights Certificates . . . . . . . . . . . . . . . 32
24. Redemption, Termination and Exchange. . . . . . . . . . . . . . . 32
25. Notice of Certain Events. . . . . . . . . . . . . . . . . . . . . 35
26. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
27. Supplements and Amendments. . . . . . . . . . . . . . . . . . . . 37
28. Determination and Actions by the Board of Directors, etc. . . . . 37
29. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
30. Benefits of This Agreement. . . . . . . . . . . . . . . . . . . . 38
31. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
32. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 38
33. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
34. Descriptive Headings. . . . . . . . . . . . . . . . . . . . . . . 38
Exhibit A -- Form of Rights Certificate . . . . . . . . . . . . . . . A-1
Exhibit B -- Amended and Restated Summary of Rights to
Purchase Common Stock . . . . . . . . . . . . . . . . . . B-1
AMENDED AND RESTATED RIGHTS AGREEMENT
This Amended and Restated Agreement, dated as of March 23, 1995,
between Westamerica Bancorporation, a California corporation (the
"Company"), and Chemical Trust Company of California (the "Rights
Agent").
W I T N E S S E T H:
WHEREAS, the Company and Bank of America, NT&SA (the "Original Rights
Agent") entered into a Rights Agreement dated as of December 18, 1986
(the "Original Rights Agreement") in connection with which the Company
authorized and declared a dividend distribution of one right for each
share of common stock, no par value, of the Company outstanding on
January 20, 1987 (the "Record Date") (as subsequently adjusted for the
stock split on May 15, 1987, "Common Stock"), and contemplates the
issuance of one right (subject to adjustment) for each share of Common
Stock issued between the Record Date and the earlier of the Distribution
Date and the Expiration Date (as such terms are hereafter defined), each
right representing the right to purchase one share of Common Stock (as
adjusted) upon the terms and subject to the conditions set forth in the
Original Rights Agreement (such rights, as their terms are hereinafter
amended, being hereinafter referred to as the "Rights"); and
WHEREAS, Section 27 of the Original Rights Agreement provides that
the Company and the Original Rights Agent may amend the Original Rights
Agreement without approval of any holders of Rights Certificates, prior
to the Distribution Date (as such term is defined in Section 3(a)), in
order to change or supplement the provisions thereunder as the Company
deems necessary and desirable; and
WHEREAS, the Original Rights Agreement was amended and restated on
September, 1989 by the Company and the Original Rights Agent (the
"Restated Rights Agreement"); and
WHEREAS, pursuant to an Appointment and Acceptance Agreement dated
May 25, 1992 between the Company and the Rights Agent, the Original
Rights Agent was replaced by the Rights Agent to act as rights agent in
accordance with the terms and conditions of the Restated Rights
Agreement; and
WHEREAS, Section 27 of the Restated Rights Agreement provides that
the Company and the Rights Agent may amend the Restated Rights Agreement
without approval of any holders of Rights Certificates, prior to the
Distribution Date (as such term is defined in Section 3(a)), in order to
change or supplement the provisions thereunder as the Company deems
necessary and desirable; and
WHEREAS, the Company deems it desirable to amend and supplement the
Restated Rights Agreement, in accordance with such section;
NOW, THEREFORE, the Restated Rights Agreement is hereby amended and
restated to read, from and after the date hereof, in its entirety as set
forth below:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term
is hereinafter defined) who or which, together with all
Affiliates (as such term is hereinafter defined) and Associates
(as such term is hereinafter defined) of such Person, without the
prior approval of the Company, shall be the Beneficial Owner (as
such term is hereinafter defined) of securities representing 15%
or more of the Voting Power (as such term is hereinafter defined)
or who was such a Beneficial Owner at any time after the date
hereof, whether or not such Person continues to be the Beneficial
Owner of securities representing 15% or more of the Voting Power,
provided, however, that in no event shall a Person who or which,
together with all Affiliates and Associates of such Person, is
the Beneficial Owner of less than 15% of the Company's
outstanding shares of Common Stock become an Acquiring Person
solely as a result of a reduction of the number of shares of
outstanding Common Stock, including repurchases of outstanding
shares of Common Stock by the Company, which reduction increases
the percentage of outstanding shares of Common Stock beneficially
owned by such Person, and provided further that Acquiring Person
shall not mean (i) any Person, not otherwise an Acquiring Person,
who has purchased all shares validly tendered pursuant to a
Permitted Offer (as such term is defined in Section 11(a)(ii))
made by such Person or (ii) the Company, any subsidiary of the
Company (as such term is hereinafter defined), any employee
benefit plan of the Company or any of its subsidiaries or any
entity holding securities of the Company organized, appointed or
established by the Company or any of its subsidiaries for or
pursuant to the terms of any such plan.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), as in effect on the date of this
Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or
indirectly;
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right or obligation to
acquire (whether such right or obligation is
exercisable or effective immediately or only after the
passage of time) pursuant to any agreement, arrangement
or understanding (whether or not in writing) or upon
the exercise of conversion rights, exchange rights,
rights (other than these Rights), warrants or options,
or otherwise; provided, however, that a Person shall
not be deemed the "Beneficial Owner" of, or to
"beneficially own," securities tendered pursuant to a
tender or exchange offer made by such Person or any of
such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or
exchange; or (B) the right to vote pursuant to any
agreement, arrangement or understanding (whether or not
in writing); provided, however, that a Person shall not
be deemed the "Beneficial Owner" of, or to
"beneficially own," any security under this clause (B)
if the agreement, arrangement or understanding to vote
such security (1) arises solely from a revocable proxy
given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with,
the applicable rules and regulations of the Exchange
Act and (2) is not also then reportable by such Person
on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or
Associate thereof) with which such Person or any of such
Person's Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in writing)
(other than customary agreements with and between
underwriters and selling group members with respect to a
bona fide public offering of securities), or with which
such Person or any of such Person's Affiliates have
otherwise formed a group, for the purpose of acquiring,
holding, voting (except pursuant to a revocable proxy as
described in clause (B) of subparagraph (ii) of this
paragraph (c)) or disposing of any securities of the
Company.
(d) "Business Day" shall mean any day other than a
Saturday, Sunday, or a day on which banking institutions in the
State of California are authorized or obligated by law or
executive order to close.
(e) "Close of business" on any given date shall mean
5:00 p.m., San Francisco, California time, on such date;
provided, however, that if such date is not a Business Day it
shall mean 5:00 p.m., San Francisco, California time, on the next
succeeding Business Day.
(f) "Common Stock" shall mean the Common Stock, no par
value, of the Company, except that "Common Stock" when used with
reference to stock issued by any Person other than the Company
shall mean the capital stock with the greatest aggregate voting
power, or the equity securities or other equity interest having
power to control or direct the management, of such Person or, if
such Person is a subsidiary of another Person, of the Person
which ultimately controls such first-mentioned Person and which
has issued and outstanding such capital stock, equity securities
or equity interests.
(g) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(h) "Stock Acquisition Date" shall mean the first date of
public announcement by the Company or an Acquiring Person that an
Acquiring Person has become such.
(i) A "subsidiary" of any Person shall mean any corporation
or other entity of which a majority of the voting power of the
voting equity securities or voting interests is owned, directly
or indirectly, by such Person, or which is otherwise controlled
by such Person.
(j) "Voting Power" shall mean the voting power of all
securities of the Company then outstanding generally entitled to
vote for the election of directors of the Company.
Section 2. Appointment of Rights Agent. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the
Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the Common Stock) in accordance
with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time appoint
such Co-Rights Agents as it may deem necessary or desirable. In the
event the Company appoints one or more Co-Rights Agents, the respective
duties of the Rights Agents and any Co-Rights Agents shall be as the
Company shall determine.
Section 3. Issue of Rights Certificates.
(a) Until the earlier of (i) the Stock Acquisition Date or (ii) the
tenth day after the date of the commencement of, or first public
announcement of the intent of any Person (other than the Company, any
subsidiary of the Company, or any employee benefit plan of the Company
or any of its subsidiaries) to commence (which intention to commence
remains in effect for five Business Days after such announcement), a
tender or exchange offer which would result in such Person becoming an
Acquiring Person, unless such date is extended by the Board of
Director's of the Company (but no later than the Stock Acquisition Date)
(the earlier of such dates being herein referred to as the "Distribution
Date"), (x) the Rights will be evidenced (subject to the provisions of
paragraph (b) of this Section 3) by the certificates for Common Stock
registered in the names of the holders of the Common Stock (which
certificates for Common Stock shall be deemed also to be certificates
for Rights) and not by separate certificates, and (y) the Rights (and
the right to receive certificates therefor) will be transferable only in
connection with the transfer of the underlying shares of Common Stock.
As soon as practicable after the Distribution Date, the Rights Agent
will send by first-class, insured, postage prepaid mail, to each record
holder of the Common Stock as of the close of business on the
Distribution Date, at the address of such holder shown on the records of
the Company, a certificate for Rights, in substantially the form of
Exhibit A hereto (the "Rights Certificates"), evidencing one Right for
each share of Common Stock so held. As of and after the Distribution
Date, the Rights will be evidenced solely by such Rights Certificates.
With respect to certificates for the Common Stock outstanding as of
the date hereof, until the Distribution Date (or earlier redemption,
expiration or termination of the Rights), the Rights will be evidenced
by such certificates for the Common Stock and the registered holders of
the Common Stock shall also be the registered holders of the associated
Rights. Until the Distribution Date (or earlier redemption, expiration
or termination of the Rights), the surrender for transfer of any of the
certificates for the Common Stock outstanding on the date hereof shall
also constitute the transfer of the Rights associated with the Common
Stock represented by such certificate.
(b) Certificates issued for Common Stock (including, without
limitation, certificates issued upon transfer or exchange of Common
Stock) after the date hereof, but prior to the earlier of the
Distribution Date or the Expiration Date (as such term is hereinafter
defined), shall be deemed also to be certificates for Rights, and shall
have impressed, printed, stamped, written or otherwise affixed onto them
the following legend:
This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in a Amended and Restated
Rights Agreement between Westamerica Bancorporation and Chemical
Trust Company of California (the "Rights Agent") dated as of
March 23, 1995 (the "Rights Agreement"), the terms of which are
hereby incorporated herein by reference and a copy of which is on
file at the principal offices of Westamerica Bancorporation.
Under certain circumstances, as set forth in the Rights
Agreement, such Rights may be redeemed, may expire, or may be
evidenced by separate certificates and will no longer be
evidenced by this certificate. Westamerica Bancorporation will
mail to the holder of this certificate a copy of the Rights
Agreement without charge within five days after receipt of a
written request therefor. Under certain circumstances, Rights
issued to Acquiring Persons (as defined in the Rights Agreement)
or certain related persons and any subsequent holder of such
Rights may become null and void.
With respect to such certificates containing the foregoing legend, until
the Distribution Date (or earlier redemption, expiration or termination
of the Rights), the Rights associated with the Common Stock represented
by such certificates shall be evidenced by such certificates alone, and
the surrender for transfer of any of such certificates shall also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to purchase
shares and of assignment to be printed on the reverse thereof) shall
each be substantially in the form set forth in Exhibit A hereto and may
have such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any applicable law or
with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of
Section 11 and Section 23 hereof, the Rights Certificates, whenever
distributed, shall be dated as of the Record Date, and on their face
shall entitle the holders thereof to purchase such number of shares of
Common Stock as shall be set forth therein at the price per share set
forth therein (the "Purchase Price"), but the number of such shares and
the Purchase Price shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) hereof
that represents Rights beneficially owned by an Acquiring Person or any
Associate or Affiliate thereof and any Rights Certificate issued at any
time upon the transfer of any Rights to such an Acquiring Person or any
Associate or Affiliate thereof or to any nominee of such Acquiring
Person, Associate or Affiliate, and any Rights Certificate issued
pursuant to Section 6 or Section 11 upon transfer, exchange, replacement
or adjustment of any other Rights Certificate referred to in this
sentence, shall contain the following legend:
The Rights represented by this Rights Certificate were issued to
a Person who was an Acquiring Person or an Affiliate or an
Associate of an Acquiring Person, as such terms are defined in
the Rights Agreement. This Rights Certificate and the Rights
represented hereby may become void under the circumstances
specified in Section 7(e) of the Rights Agreement.
The provisions of Section 7(e) of this Rights Agreement shall be
operative whether or not the foregoing legend is contained on any such
Rights Certificate.
Section 5. Countersignature and Registration. The Rights
Certificates shall be executed on behalf of the Company by its Chairman
of the Board, any Vice Chairman of the Board, any President or any Vice
President, either manually or by facsimile signature, and shall have
affixed thereto the Company's seal or a facsimile thereof which shall be
attested by the Secretary or an Assistant Secretary of the Company,
either manually or by facsimile signature. The Rights Certificates
shall be countersigned by the Rights Agent, either manually or by
facsimile signature and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed
any of the Rights Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent, and issued and delivered by the
Company with the same force and effect as though the person who signed
such Rights Certificates had not ceased to be such officer of the
Company; and any Rights Certificates may be signed on behalf of the
Company by any person who, at the actual date of the execution of such
Rights Certificate, shall be a proper officer of the Company to sign
such Rights Certificate, although at the date of the execution of this
Rights Agreement any such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at its office designated for such purpose, books for
registration and transfer of the Rights Certificates issued hereunder.
Such books shall show the names and addresses of the respective holders
of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
Subject to the provisions of Section 15 hereof, at any time after the
close of business on the Distribution Date, and at or prior to the close
of business on the Expiration Date, any Rights Certificate or
Certificates may be transferred, split up, combined or exchanged for
another Rights Certificate or Rights Certificates, entitling the
registered holder to purchase a like number of shares of Common Stock as
the Rights Certificate or Rights Certificates surrendered then entitled
such holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate shall make such
request in writing delivered to the Rights Agent, and shall surrender
the Rights Certificate or Rights Certificates to be transferred, split
up, combined or exchanged at the principal office of the Rights Agent.
Thereupon the Rights Agent shall countersign and deliver to the Person
entitled thereto a Rights Certificate or Rights Certificates, as the
case may be, as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed
in connection with any transfer, split up, combination or exchange of
Rights Certificates.
Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to them,
and reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate if mutilated, the Company will
execute and deliver a new Rights Certificate of like tenor to the Rights
Agent for countersignature and delivery to the registered owner in lieu
of the Rights Certificates so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) The registered holder of any Rights Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole
or in part at any time after the Distribution Date upon presentation of
the Rights Certificate, with the appropriate form of election to
purchase on the reverse side thereof duly executed, to the Rights Agent
at the principal office of the Rights Agent, together with payment of
the Purchase Price for each share of Common Stock (or such other number
of shares or other securities) as to which the Rights are exercised, at
or prior to the earliest of (i) the close of business on December 31,
1999 (the "Final Expiration Date"), or (ii) the time at which the Rights
are redeemed as provided in Section 24(a) hereof, (iii) the consummation
of a transaction contemplated by Section 13(f) hereof or (iv) the time
at which the Rights are exchanged as provided in Section 24(c) hereof
(such earliest time being herein referred to as the "Expiration Date").
Notwithstanding any other provision of this Agreement, any Person who
prior to the Distribution Date becomes and remains a record holder of
shares of Common Stock may exercise all of the rights of a registered
holder of a Rights Certificate with respect to the Rights associated
with such shares of Common Stock in accordance with and subject to the
provisions of this Agreement, including the provisions of Section 7(e)
hereof, as of the date such Person becomes a record holder of shares of
Common Stock.
(b) The Purchase Price for each share of Common Stock to be
purchased pursuant to the exercise of a Right shall initially be $65,
shall be subject to adjustment from time to time as provided in
Sections 11 and 13 hereof and shall be payable in lawful money of the
United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the appropriate form of election to purchase duly executed,
accompanied by payment of the Purchase Price for the shares (or other
securities or property) to be purchased and an amount equal to any
applicable transfer tax (as determined by the Rights Agent) in cash, or
by certified check or bank draft payable to the order of the Company,
the Rights Agent shall, subject to Section 21(k), thereupon promptly
(i) (A) requisition from any transfer agent of the shares of Common
Stock (or make available, if the Rights Agent is the transfer agent)
certificates for the number of shares of Common Stock to be purchased,
and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) if the Company, in its sole
discretion, shall have elected to deposit the shares of Common Stock
issuable upon exercise of the Rights hereunder into a depositary,
requisition from the depositary agent depositary receipts representing
such number of shares of Common Stock as are to be purchased (in which
case certificates for the shares of Common Stock represented by such
receipts shall be deposited by the transfer agent with the depositary
agent) and the Company will direct the depositary agent to comply with
such request, (ii) when appropriate, requisition from the Company the
amount of cash, if any, to be paid in lieu of issuance of fractional
shares in accordance with Section 15, (iii) promptly after receipt of
such certificates or depositary receipts, cause the same to be delivered
to or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by
such holder and (iv) when appropriate, after receipt promptly deliver
such cash to or upon the order of the registered holder of such Rights
Certificate. In the event that the Company is obligated to issue other
securities of the Company, and/or distribute other property pursuant to
Section 11(a), the Company will make all arrangements necessary so that
such other securities and/or property are available for distribution by
the Rights Agent, if and when appropriate. In addition, in the case of
an exercise of the Rights by a holder pursuant to Section 11(a)(ii), the
Rights Agent shall return such Rights Certificate to the registered
holder thereof after imprinting, stamping or otherwise indicating
thereon that the rights represented by such Rights Certificate no longer
include the rights provided by Section 11(a)(ii) of the Rights Agreement
and if less than all the Rights represented by such Rights Certificate
were so exercised, the Rights Agent shall indicate on the Rights
Certificate the number of Rights represented thereby which continue to
include the rights provided by Section 11(a)(ii).
(d) In case the registered holder of any Rights Certificate shall
exercise (except pursuant to Section 11(a)(ii)) less than all the Rights
evidenced thereby, a new Rights Certificate evidencing Rights equivalent
to the Rights remaining unexercised shall be issued by the Rights Agent
and delivered to the registered holder of such Rights Certificate or to
his duly authorized assigns, subject to the provisions of Section 15
hereof.
(e) Notwithstanding anything in this Agreement to the contrary, if
there occurs any of the events set forth in Section 11(a)(ii) or Section
13(a) then any Rights that are or were on or after the earlier of the
Distribution Date or the Stock Acquisition Date beneficially owned by an
Acquiring Person or any Associate or Affiliate of an Acquiring Person
shall become null and void, without any further action, and any holder
of such Rights shall thereafter have no rights whatsoever with respect
to such Rights, whether under any provision of this Agreement or
otherwise.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake
any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless the
certificate contained in the appropriate form of election to purchase
set forth on the reverse side of the Rights Certificate surrendered for
such exercise shall have been properly completed and duly executed by
the registered holder thereof and the Company shall have been provided
with such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the
Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to the Company
or any of its agents, be delivered to the Rights Agent for cancellation
or in cancelled form, or, if surrendered to the Rights Agent, shall be
cancelled by it, and no Rights Certificates shall be issued in lieu
thereof except as expressly permitted by any of the provisions of this
Rights Agreement. The Company shall deliver to the Rights Agent for
cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent
shall deliver all cancelled Rights Certificates to the Company, or
shall, at the written request of the Company, destroy such cancelled
Rights Certificates, and in such case shall deliver a certificate of
destruction thereof to the Company.
Section 9. Reservation and Availability of Common Stock. The
Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued shares of Common Stock, or
any authorized and issued shares of Common Stock held in its treasury,
the number of shares of Common Stock that will be sufficient to permit
the exercise in full of all outstanding Rights and, after the occurrence
of an event specified in Sections 11 and 13, shall so reserve and keep
available a sufficient number of shares of Common Stock (and/or other
securities) which may be required to permit the exercise in full of the
Rights pursuant to this Agreement.
So long as the shares of Common Stock (and, after the occurrence of
an event specified in Sections 11 and 13, any other securities) issuable
upon the exercise of the Rights may be listed on any national securities
exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares (or other
securities) reserved for such issuance to be listed on such exchange
upon official notice of issuance upon such exercise.
The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all shares of Common Stock and/or other
securities delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such shares or other securities
(subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares or
securities.
The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the
Rights Certificates or of any certificates for shares of Common Stock
and/or other securities upon the exercise of Rights. The Company shall
not, however, be required to pay any transfer tax which may be payable
in respect of any transfer or delivery of Rights Certificates to a
Person other than, or in respect of the issuance or delivery of the
shares of Common Stock and/or other securities in a name other than that
of, the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for
shares of Common Stock, and/or other securities in a name other than
that of the registered holder upon the exercise of any Rights until such
tax shall have been paid (any such tax being payable by the holder of
such Rights Certificate at the time of surrender) or until it has been
established to the Company's satisfaction that no such tax is due.
The Company shall use its best efforts to (i) file, as soon as
practicable following the Distribution Date, a registration statement on
an appropriate form under the Securities Act of 1933, as amended (the
"Act"), with respect to the securities purchasable upon exercise of the
Rights, (ii) cause such registration statement to become effective as
soon as practicable after such filing, and (iii) cause such registration
statement to remain effective (with a prospectus at all times meeting
the requirements of the Act and the rules and regulations thereunder)
until the expiration of the Rights. The Company will also take such
action as may be appropriate under the blue sky laws of the various
states.
Section 10. Common Stock Record Date. Each person in whose name any
certificate for shares of Common Stock (or other securities) is issued
upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of the shares of Common Stock (or other
securities) represented thereby on, and such certificate shall be dated,
the date upon which the Rights Certificate evidencing such Rights was
duly presented and payment of the Purchase Price (and any applicable
transfer taxes) was made; provided, however, that if the date of such
presentation and payment is a date upon which the Common Stock (or other
securities) transfer books of the Company are closed, such Person shall
be deemed to have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on which
the Common Stock (or other securities) transfer books of the Company are
open. Prior to the exercise of the Rights evidenced thereby, the holder
of a Rights Certificate, as such, shall not be entitled to any rights of
a stockholder of the Company with respect to shares for which the Rights
shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive any notice of
any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights. The Purchase Price, the number of shares covered
by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after
the date of this Agreement (A) declare a dividend on the Common
Stock payable in shares of Common Stock, (B) subdivide the
outstanding Common Stock, (C) combine the outstanding Common
Stock into a smaller number of shares or (D) issue any shares of
its capital stock in a reclassification of the Common Stock
(including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation) the Purchase Price in effect at the time
of the record date for such dividend or of the effective date of
such subdivision, combination or reclassification, and the number
and kind of shares of capital stock issuable on such date, shall,
except as otherwise provided in this Section 11(a) and in Section
7(e), be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock and other
securities which, if such Right had been exercised immediately
prior to such date and at a time when the Common Stock transfer
books of the Company were open, the holder would have owned upon
such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification. If an
event occurs which would require an adjustment under both Section
11(a)(i) and Section 11(a)(ii), the adjustment provided for in
this Section 11(a)(i) shall be in addition to, and shall be made
prior to, any adjustment required pursuant to Section 11(a)(ii).
(ii) Subject to Section 24(c) of this Agreement, in the
event that any Person (other than the Company, any subsidiary of
the Company, any employee benefit plan of the Company or any of
its subsidiaries or any entity holding securities of the Company
organized, appointed or established by the Company or any of its
subsidiaries for or pursuant to the terms of any such plan),
alone or together with its Affiliates and Associates, shall
become an Acquiring Person (except pursuant to a tender or
exchange offer for all outstanding shares of Common Stock at a
price and on terms determined by at least a majority of the
members of the Board of Directors who are not officers of the
Company to be both adequate and otherwise in the best interests
of the Company and its shareholders (other than the Person or an
Affiliate or Associate thereof on whose behalf the offer is being
made) (a "Permitted Offer")), then proper provision shall be made
so that each holder of a Right, except as provided in Section
7(e) hereof, shall, for a period of 60 days after the later of
the occurrence of any such event and the effective date of an
appropriate registration statement pursuant to Section 9, have a
right to receive, upon exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement
such number of shares of Common Stock of the Company as shall
equal the result obtained by (x) multiplying the then current
Purchase Price by the then number of shares of Common Stock for
which a Right is then exercisable and (y) dividing that product
by 50% of the current market price per one share of Common Stock
(determined pursuant to Section 11(d)) on the date of the
occurrence of the event set forth in this subparagraph (ii) (such
number of shares being referred to as the "number of Adjustment
Shares"); provided, however, that if the transaction that would
otherwise give rise to the foregoing adjustment is also subject
to the provisions of Section 13 hereof, then only the provisions
of Section 13 hereof shall apply and no adjustment shall be made
pursuant to this section 11(a)(ii).
(iii) In the event that there shall not be sufficient
treasury shares or authorized but unissued shares of Common Stock
to permit the exercise in full of the Rights in accordance with
the foregoing subparagraph (ii) and the Rights become so
exercisable, notwithstanding any other provision of this
Agreement, to the extent necessary and permitted by applicable
law and any agreements in effect on the date hereof to which it
is a party, each Right shall thereafter represent the right to
receive, upon exercise thereof at the then current Purchase Price
in accordance with the terms of this Agreement, a number of
shares, or units of shares, of (x) Common Stock (up to the
maximum number of shares of Common Stock which may permissibly be
issued using the allocation procedure specified in the second
sentence of Section 11(k)) and (y) preferred stock (or other
equity securities) of the Company equal in the aggregate to the
number of Adjustment Shares where the Board of Directors of the
Company shall have deemed such shares or units, other than the
shares of Common Stock, to have at least the same economic value
and voting rights as the Common Stock (a "common stock
equivalent"); provided, however, if there are unavailable
sufficient shares (or fractions of shares) of Common Stock and/or
common stock equivalents, then the Company shall take all such
action as may be necessary to authorize additional shares of
Common Stock or common stock equivalents for issuance upon
exercise of the Rights, including the calling of a meeting of
shareholders; and provided, further, that the Company shall issue
no common stock equivalent upon exercise of the Rights until the
Company has first issued all authorized and unreserved shares of
Common Stock; and provided, further, that if the Company is
unable to cause sufficient shares of Common Stock and/or common
stock equivalents to be available for issuance upon exercise in
full of the Rights, then each Right shall thereafter represent
the right to receive the Adjusted Number of Common Shares upon
exercise at the Adjusted Purchase Price (as such terms are
hereinafter defined). As used herein, the term Adjusted Number
of Common Shares shall be equal to that number of shares (or
fractions of shares) of Common Stock (and/or shares or units of
common stock equivalents) equal to the product of (x) the number
of Adjustment Shares and (y) a fraction, the numerator of which
is the number of shares of Common Stock (and/or shares or units
of common stock equivalents) available for issuance upon exercise
of the Rights and the denominator of which is the aggregate
number of Adjustment Shares otherwise issuable upon exercise in
full of all Rights (assuming there were sufficient shares of
Common Stock available) (such fraction being referred to as the
"Proration Factor"). The Adjusted Purchase Price shall mean the
product of the Purchase Price and the Proration Factor. The
Board of Directors may, but shall not be required to, establish
procedures to allocate the right to receive Common Stock and
common stock equivalents upon exercise of the Rights among
holders of Rights.
(b) If the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Common Stock entitling
them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Common Stock (or shares having the
same or more favorable rights, privileges and preferences as the Common
Stock ("equivalent common stock")) or securities convertible into Common
Stock or equivalent common stock at a price per share of Common Stock or
per share of equivalent common stock (or having a conversion price per
share, if a security convertible into Common Stock or equivalent common
stock) less than the current market price (as defined in Section 11(d))
per share of Common Stock on such record date, the Purchase Price to be
in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of shares of Common
Stock outstanding on such record date, plus the number of shares of
Common Stock which the aggregate offering price of the total number of
shares of Common Stock and/or equivalent common stock to be offered
(and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current market price
and the denominator of which shall be the number of shares of Common
Stock outstanding on such record date, plus the number of additional
shares of Common Stock and/or equivalent common stock to be offered for
subscription or purchase (or into which the convertible securities so to
be offered are initially convertible). In case such subscription price
may be paid in a consideration part or all of which shall be in a form
other than cash, the value of such consideration shall be determined
reasonably and with good faith to the holders of Rights by the Board of
Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights
Agent. Shares of Common Stock owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such rights or warrants are
not so issued, the Purchase Price shall be adjusted to be the Purchase
Price which would then be in effect if such record date had not been
fixed.
(c) If the Company shall fix a record date for the making of a
distribution to all holders of Common Stock (including any such
distribution made in connection with a consolidation or merger in which
the Company is the continuing corporation) of evidences of indebtedness,
cash (other than a regular quarterly cash dividend out of the earnings
or retained earnings of the Company), assets (other than a dividend
payable in Common Stock, but including any dividend payable in stock
other than Common Stock) or subscription rights or warrants (excluding
those referred to in Section 11(b)), the Purchase Price to be in effect
after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the current market price (as defined in
Section 11(d)) per share of Common Stock on such record date, less the
fair market value (as determined reasonably and with good faith to the
holders of Rights by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent) of the portion of the
cash, assets or evidences of indebtedness so to be distributed or of
such subscription rights or warrants distributable in respect of one
share of Common Stock and the denominator of which shall be the current
market price (as defined in Section 11(d)) per share of the Common
Stock. Such adjustments shall be made successively whenever such a
record date is fixed; and in the event that such distribution is not so
made, the Purchase Price shall again be adjusted to be the Purchase
Price which would be in effect if such record date had not been fixed.
(d) For the purpose of any computation hereunder, other than in
Section 11(a)(iii), the "current market price" per share of Common Stock
on any date shall be deemed to be the average of the daily closing
prices per share of such Common Stock for the 30 consecutive Trading
Days (as such term is hereinafter defined) immediately prior to such
date; provided, however, that in the event that the current per share
market price of the Common Stock is determined during a period following
the announcement by the issuer of such Common Stock of (A) a dividend or
distribution on such Common Stock payable in shares of such Common Stock
or securities convertible into shares of such Common Stock or (B) any
subdivision, combination or reclassification of such Common Stock, and
prior to the expiration of 30 Trading Days after the ex-dividend date
for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each such
case, the "current market price" shall be properly adjusted to take into
account ex-dividend trading. The closing price for each day shall be
the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the shares of
Common Stock are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal
national securities exchange on which the shares of Common Stock are
listed or admitted to trading or, if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported by the
Nasdaq National Market, the Nasdaq Stock Market or such other system
then in use, or, if on any such date the shares of Common Stock are not
quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market
in the Common Stock selected by the Board of Directors of the Company.
If on any such date no market maker is making a market in the Common
Stock, the fair value of such shares on such date as determined
reasonably and with good faith by the Board of Directors of the Company
shall be used and shall be binding on the Rights Agent. The term
"Trading Day" shall mean a day on which the principal national
securities exchange on which the shares of Common Stock are listed or
admitted to trading is open for the transaction of business or, if the
shares of Common Stock are not listed or admitted to trading on any
national securities exchange, a Business Day. If the Common Stock is
not publicly held or not so listed or traded, "current market price" per
share shall mean the fair value per share determined reasonably and with
good faith to the holders of Rights by the Board of Directors of the
Company, whose determination shall be described in a statement filed
with the Rights Agent and shall be binding on the Rights Agent.
(e) Anything herein to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in the Purchase Price;
provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest
ten-thousandth of a share of Common Stock or other share, as the case
may be. Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the
earlier of (i) one year from the date of the transaction which mandates
such adjustment or (ii) the Expiration Date.
(f) If as a result of any provision of Section 11(a), the holder of
any Right thereafter exercised shall become entitled to receive any
shares of capital stock of the Company other than Common Stock,
thereafter the number of such other shares so receivable upon exercise
of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to the shares contained in Section 11(a) through
(c), inclusive, and the provisions of Sections 7, 9, 10, 13 and 15
hereof with respect to the Common Stock shall apply on like terms to any
such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right
to purchase, at the adjusted Purchase Price, the number of shares of
Common Stock purchasable from time to time hereunder upon exercise of
the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result
of the calculations made in Section 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Purchase
Price, that number of shares of Common Stock (calculated to the nearest
ten-thousandth) obtained by (i) multiplying (x) the number of shares of
Common Stock covered by a Right immediately prior to this adjustment by
(y) the Purchase Price in effect immediately prior to such adjustment of
the Purchase Price and (ii) dividing the product so obtained by the
Purchase Price in effect immediately after such adjustment of the
Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in substitution for
any adjustment in the number of shares of Common Stock purchasable upon
the exercise of a Right. Each of the Rights outstanding after the
adjustment in the number of Rights shall be exercisable for the number
of shares of Common Stock for which a Right was exercisable immediately
prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase
Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price. The Company shall make a public announcement of its
election to adjust the number of Rights, indicating the record date for
the adjustment, and, if known at the time, the amount of the adjustment
to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights Certificates
have been issued, shall be at least 10 days later than the date of the
public announcement. If Rights Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights
Certificates evidencing, subject to Section 15 hereof, the additional
Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement
for the Rights Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the
adjusted Purchase Price) and shall be registered in the names of the
holders of record of Rights Certificates on the record date specified in
the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of shares of Common Stock issuable upon the exercise of
the Rights, the Rights Certificates theretofore and thereafter issued
may continue to express the Purchase Price per share and the number of
shares which were expressed in the initial Rights Certificates issued
hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the shares of
Common Stock or other securities issuable upon exercise of the Rights,
the Company shall take any corporate action which, in the opinion of its
counsel, may be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock or
other securities at such adjusted Purchase Price. If upon any exercise
of the Rights, a holder is to receive a combination of Common Stock and
common stock equivalents, a portion of the consideration paid upon such
exercise, equal to at least the then par value of a share of Common
Stock of the Company, shall be allocated as the payment for each share
of Common Stock of the Company so received.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date
for a specified event, the Company may elect to defer until the
occurrence of such event the issuing to the holder of any Right
exercised after such record date the shares of Common Stock and other
capital stock or securities of the Company, if any, issuable upon such
exercise over and above the shares of Common Stock and other capital
stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due
bill or other appropriate instrument evidencing such holder's right to
receive such additional shares upon the occurrence of the event
requiring such adjustment.
(m) Anything to the contrary in this Section 11 notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price,
in addition to those adjustments expressly required by this Section 11,
as and to the extent that it in its sole discretion shall determine to
be advisable in order that any consolidation or subdivision of the
Common Stock, issuance wholly for cash of any shares of Common Stock at
less than the current market price, issuance wholly for cash of shares
of Common Stock or securities which by their terms are convertible into
or exchangeable for shares of Common Stock, stock dividends or issuance
of rights, options or warrants referred to hereinabove in this
Section 11, hereafter made by the Company to holders of its Common Stock
shall not be taxable to such stockholders.
(n) The exercise of Rights under Section 11(a)(ii) shall only result
in the loss of rights under Section 11(a)(ii) to the extent so exercised
and shall not otherwise affect the rights represented by the Rights
under this Rights Agreement, including the rights represented by Section
13.
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Sections 11 and
13 hereof, the Company shall (a) promptly prepare a certificate setting
forth such adjustment and a brief statement of the facts accounting for
such adjustment, (b) promptly file with the Rights Agent and with each
transfer agent for the Common Stock a copy of such certificate and
(c) mail a brief summary thereof to each holder of Rights in accordance
with Section 26 hereof. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, following the Stock Acquisition Date,
directly or indirectly, (w) the Company shall consolidate with, or merge
with and into, any other Person, (x) any Person shall consolidate with
the Company, or merge with and into the Company and the Company shall be
the continuing or surviving corporation of such merger, (y) any
subsidiary bank of the Company shall consolidate with, or merge with and
into any other Person or any Person shall consolidate with, or merge
with and into, any subsidiary bank of the Company (other than, in the
case of any transaction described in (w), (x) or (y), a merger or
consolidation which would result in all of the Voting Power represented
by the securities of the Company or subsidiary bank outstanding
immediately prior thereto continuing to represent, directly or
indirectly (either by remaining outstanding or by being converted into
securities of the surviving entity), all of the Voting Power represented
by the securities of the Company, subsidiary bank or such surviving
entity outstanding immediately after such merger or consolidation and
the holders of such securities not having changed as a result of such
merger or consolidation), or (z) the Company shall sell, mortgage or
otherwise transfer (or one or more of its subsidiaries shall sell,
mortgage or otherwise transfer), in one or more transactions, assets or
earnings power aggregating more than 50% of the assets or earning power
of the Company and its subsidiaries (taken as a whole) to any other
Person (other than to the Company or any of its subsidiaries), then, and
in each such case, proper provision shall be made so that (i) following
the Distribution Date, each holder of a Right (other than as provided in
Section 7(e) hereof) shall have the right to receive, upon the exercise
thereof at the then current Purchase Price in accordance with the terms
of this Agreement, such number of shares of freely tradeable Common
Stock of the Principal Party (as hereinafter defined), free and clear of
liens, rights of call or first refusal, encumbrances or other adverse
claims, as shall be equal to the result obtained by (1) multiplying the
then current Purchase Price by the number of shares of Common Stock for
which a Right is then exercisable and (2) dividing that product by 50%
of the current market price per share of the Common Stock of such
Principal Party (determined pursuant to Section 11(d) hereof) on the
date of consummation of such consolidation, merger, sale or transfer;
(ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such consolidation, merger, sale or transfer, all
the obligations and duties of the Company pursuant to this Agreement;
(iii) the term "Company" shall thereafter be deemed to refer to such
Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply to such Principal Party; and (iv) such
Principal Party shall take such steps (including, but not limited to,
the reservation of a sufficient number of shares of its Common Stock in
accordance with Section 9 hereof) in connection with such consummation
as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to
its shares of Common Stock thereafter deliverable upon the exercise of
the Rights.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in (w) or (x) of
the first sentence of this Section 13, the Person that is the issuer
of any securities into which shares of Common Stock of the Company
are converted in such merger or consolidation, and if no securities
are so issued, the Person that is the other party to the merger or
consolidation;
(ii) in the case of any transaction described in (y) of the
first sentence of this Section 13, the surviving or resulting Person
in such merger or consolidation; and
(iii) in the case of any transaction described in (z) of the
first sentence in this Section 13, the Person that is the party
receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of
such Person is not at such time and has not been continuously over the
preceding 12-month period registered under Section 12 of the Exchange
Act, and such Person is a direct or indirect subsidiary or Affiliate of
one or more other Persons, "Principal Party" shall refer to any such
other Person the Common Stock of which is and has been so registered,
unless the Common Stocks of two or more of such other Persons are and
have been so registered, in which case "Principal Party" shall refer to
whichever of such Persons is the issuer of the Common Stock having the
greatest aggregate market value, (2) if the Common Stock of such Person
is and has not been so registered and such Person is a direct or
indirect subsidiary or Affiliate of one or more other Persons, the
Common Stocks of none of which are and have been so registered,
"Principal Party" shall refer to the senior such Person having
outstanding Common Stock, and (3) in case such Person is owned, directly
or indirectly, by a joint venture or partnership formed by two or more
Persons that are not owned, directly or indirectly, by the same Person,
the rules set forth in (1) and (2) above shall apply to each of the
chains of ownership having an interest in such joint venture or
partnership as if such party were a "Subsidiary" of both or all of such
joint venturers or partners and the Principal Parties in each such chain
shall bear the obligations set forth in this Section 13 in the same
ratio as their direct or indirect interests in such Person bear to the
total of such interests.
(c) The Company shall not consummate, nor will it permit any
subsidiary bank to consummate, any such consolidation, merger, sale or
transfer unless prior thereto the Company, the subsidiary bank, if
appropriate, and each Principal Party and each other Person who may
become a Principal Party as a result of such consolidation, merger, sale
or transfer shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs
(a) and (b) of this Section 13 and further providing that, as soon as
practicable after the date of any consolidation, merger, sale or
transfer of assets mentioned in paragraph (a) of this Section 13, the
Principal Party at its own expense will:
(i) prepare and file a registration statement under the Act
with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, will use its best
efforts to cause such registration statement to become effective as
soon as practicable after such filing and will use its best efforts
to cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until
the Expiration Date;
(ii) use its best efforts to qualify or register the Rights and
the securities purchasable upon exercise of the Rights under the blue
sky laws of such jurisdictions as may be necessary or appropriate;
and
(iii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which
comply in all material respects with the requirements for
registration on Form 10 under the Exchange Act.
(d) The provisions of this Section 13 are intended to provide to the
holders of Rights a significant continuing equity interest in the
business of the Company following the consummation of any transaction of
the types described in paragraph (a) of this Section 13, and any attempt
by any Acquiring Person or Principal Party to avoid the provisions of
this Section 13 or to limit the impact thereof shall not be given any
effect.
(e) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. The
Company will cause its subsidiary bank or banks to adhere to the terms
and provisions of this Agreement, to the extent applicable to such
subsidiary bank. The rights under this Section 13 shall be in addition
to the rights to exercise Rights and adjustments under Section 11(a)(ii)
and shall survive any exercise thereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in
subparagraphs (w), (x) and (y) of Section 13(a) if (i) such transaction
is consummated with a Person or Persons who acquired shares of Common
Stock pursuant to a Permitted Offer (or a wholly owned subsidiary of any
such Person or Persons), (ii) the price per share of Common Stock
offered in such transaction is not less than the price per share of
Common Stock paid to all holders of Common Stock whose shares were
purchased pursuant to such Permitted Offer and (iii) the form of
consideration being offered to the remaining holders of Common Stock
pursuant to such transaction is the same as the form of consideration
paid pursuant to such Permitted Offer. Upon consummation of any such
transaction contemplated by this subsection (d), all Rights hereunder
shall expire.
Section 14. Additional Covenants.
(a) After the Stock Acquisition Date, the Company covenants and
agrees that it shall not (i) consolidate with, (ii) merge with or into,
or (iii) sell or transfer to, in one or more transactions, assets or
earning power aggregating more than 50% of the assets or earning power
of the Company and its subsidiaries taken as a whole, any other Person
if at the time of or after such consolidation, merger or sale there are
any charter or by-law provisions or any rights, warrants or other
instruments outstanding or any other action taken which would diminish
or otherwise eliminate the benefits intended to be afforded by the
Rights. The Company shall not consummate any such consolidation, merger
or sale unless prior thereto the Company and such other Person shall
have executed and delivered to the Rights Agent a supplemental agreement
evidencing compliance with this subsection.
(b) The Company covenants and agrees that, after the Stock
Acquisition Date, it will not, except as permitted by Section 24 hereof,
take any action the purpose or effect of which is to diminish or
otherwise eliminate the benefits intended to be afforded by the Rights.
Section 15. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights
or to distribute Rights Certificates which evidence fractional Rights.
In lieu of such fractional Rights, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional
Rights would otherwise be issuable, an amount in cash equal to the same
fraction of the current market value of a whole Right. For the purposes
of this Section 15(a), the current market value of a whole Right shall
be the closing price per Right of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day
shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the
Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal
national securities exchange on which the Rights are listed or admitted
to trading, or if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the Nasdaq National Market, the
Nasdaq Stock Market or such other system then in use or, if on any such
date the Rights are not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market
maker making a market in the Rights selected by the Board of Directors
of the Company. If on any such date no such market maker is making a
market in the Rights, the fair value of the Rights on such date as
determined reasonably and with good faith to the holders of Rights by
the Board of Directors of the Company shall be used and shall be binding
on the Rights Agent.
(b) The Company shall not be required to issue fractions of shares
of Common Stock upon exercise of the Rights or to distribute
certificates which evidence fractional shares of Common Stock. In lieu
of fractional shares of Common Stock the Company may pay to the
registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same
fraction of the current market value of shares of Common Stock. For
purposes of this Section 15(b), the current market value of one share of
Common Stock shall be the closing price of a share of Common Stock (as
determined pursuant to Section 11(d) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) Following the occurrence of one of the transactions or events
specified in Section 11 or Section 13 giving rise to the right to
receive common stock equivalents (other than Common Stock) or other
securities upon the exercise of a Right, the Company shall not be
required to issue fractions of shares or units of such common stock
equivalents or other securities upon exercise of the Rights or to
distribute certificates which evidence fractional shares of such common
stock equivalents or other securities. In lieu of fractional shares or
units of such common stock equivalents or other securities, the Company
may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of a share or unit of such
common stock equivalent or other securities. For purposes of this
Section 15(c), the current market value shall be determined in the
manner set forth in Section 11(d) hereof for the Trading Day immediately
prior to the date of such exercise and, if such common stock equivalent
is not traded, each such common stock equivalent shall have the value of
one share of Common Stock.
(d) Except as otherwise expressly provided herein, the holder of a
Right by the acceptance of the Rights expressly waives his right to
receive any fractional Rights or any fractional shares upon exercise of
a Right.
Section 16. Rights of Action. All rights of action in respect of
this Agreement are vested in the respective registered holders of the
Rights Certificates (and, prior to the Distribution Date, the registered
holders of the Common Stock); and any registered holder of any Rights
Certificate (or, prior to the Distribution Date, of the Common Stock),
without the consent of the Rights Agent or of the holder of any other
Rights Certificate (or, prior to the Distribution Date, of the Common
Stock), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the
Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner
provided in such Rights Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of
Rights, it is specifically acknowledged that the holders of Rights would
not have an adequate remedy at law for any breach of this Agreement and
shall be entitled to specific performance of the obligations hereunder
and injunctive relief against actual or threatened violations of the
obligations hereunder of any Person subject to this Agreement. Holders
of Rights shall be entitled to recover the reasonable costs and
expenses, including attorneys' fees, incurred by them in any action to
enforce the provisions of this Agreement.
Section 17. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights
Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if
surrendered at the principal office of the Rights Agent, duly endorsed
or accompanied by a proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the Person
in whose name a Rights Certificate (or, prior to the Distribution Date,
the associated Common Stock certificate) is registered as the absolute
owner thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Rights Certificates or the
associated Common Stock certificate made by anyone other than the
Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent shall be affected by any notice to the
contrary.
Section 18. Rights Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Rights Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the shares
of Common Stock or any other securities of the Company which may at any
time be issuable on the exercise of the Rights represented thereby, nor
shall anything contained herein or in any Rights Certificate be
construed to confer upon the holder of any Rights Certificate, as such,
any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to
any corporate action, or to receive notice of meetings or other actions
affecting stockholders (except as provided in Section 25 hereof), or to
receive dividends or subscription rights, or otherwise, until the Right
or Rights evidenced by such Rights Certificate shall have been exercised
in accordance with the provisions thereof.
Section 19. Concerning the Rights Agent. The Company agrees to pay
to the Rights Agent reasonable compensation for all services rendered by
it hereunder and, from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and disbursements and other
disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent for, and to hold it
harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent in connection
with the acceptance and administration of this Agreement, including the
costs and expenses of defending against any claim of liability arising
therefrom, directly or indirectly.
The Rights Agent shall be protected and shall incur no liability for
or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon
any Rights Certificate or certificate for Common Stock or for other
securities of the Company, instrument of assignment or transfer, power
of attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons.
Section 20. Merger or Consolidation or Change of Name of Rights
Agent. Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the
Rights Agent or any successor Rights Agent shall be a party, or any
corporation succeeding to the corporate trust business of the Rights
Agent or any successor Rights Agent, shall be the successor to the
Rights Agent under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties hereto,
provided that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 22 hereof. In
case at the time such successor Rights Agent shall succeed to the agency
created by this Agreement, any of the Rights Certificates shall have
been countersigned but not delivered, any such successor Rights Agent
may adopt the countersignature of the predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned,
any successor Rights Agent may countersign such Rights Certificates
either in the name of the predecessor or in the name of the successor
Rights Agent; and in all such cases such Rights Certificates shall have
the full force provided in the Rights Certificates in this Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates
shall not have been countersigned, the Rights Agent may countersign such
Rights Certificates either in its prior name or in its changed name; and
in all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.
Section 21. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following
terms and conditions, by all of which the Company and the holders of
Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel selected by it
(who may be legal counsel for the Company), and the opinion of such
counsel shall be full and complete authorization and protection to the
Rights Agent as to any action taken or omitted by it in good faith and
in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring
Person) be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed
by the Chairman of the Board, any Vice Chairman of the Board, any
President, any Vice President, the Treasurer, any Assistant Treasurer,
the Secretary or any Assistant Secretary of the Company and delivered to
the Rights Agent; and such certificate shall be full authorization to
the Rights Agent for any action taken or suffered in good faith by it
under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the
Rights Certificates (except as to the fact that it has countersigned the
Rights Certificates) or be required to verify the same, but all such
statements and recitals are and shall be deemed to have been made by the
Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except
its countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in this
Agreement or in any Rights Certificate; nor shall it be responsible for
any adjustment required under the provisions of Section 11 or 13 hereof
or responsible for the manner, method or amount of any such adjustment
or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights evidenced
by Rights Certificates after actual notice of any such adjustment); nor
shall it be responsible for any determination by the Board of Directors
of the Company of the current market value of the Rights or Common Stock
pursuant to the provisions of Section 15 hereof; nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock or other
securities to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock or other
securities will, when so issued, be validly authorized and issued, fully
paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as
may reasonably be required by the Rights Agent for the carrying out or
performing by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder and
certificates delivered pursuant to any provision hereof from the
Chairman of the Board, any Vice Chairman of the Board, any President,
any Vice President, the Secretary, any Assistant Secretary, the
Treasurer or any Assistant Treasurer of the Company, and is authorized
to apply to such officers for advice or instructions in connection with
its duties, and it shall not be liable for any action taken or suffered
to be taken by it in good faith in accordance with instruction of any
such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights
or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with
or lend money to the Company or otherwise act as fully and freely as
though it were not Rights Agent under this Agreement. Nothing herein
shall preclude the Rights Agent from acting in any other capacity for
the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not
be answerable or accountable for any act, omission, default, neglect or
misconduct of any such attorneys or agents or for any loss to the
Company or to the holders of the Rights resulting from any such act,
omission, default, neglect or misconduct, provided reasonable care was
exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of
its rights if there shall be reasonable grounds for believing that
repayment of such funds or adequate indemnification against such risk or
liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the
form of assignment or form of election to purchase, as the case may be,
has either not been completed or indicates an affirmative response to
clause 1 and/or 2 thereof, the Rights Agent shall not take any further
action with respect to such requested exercise of transfer without first
consulting with the Company.
Section 22. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties
under this Agreement upon 30 days' notice in writing mailed to the
Company and to each transfer agent of the Common Stock by registered or
certified mail, and to holders of the Rights by first-class mail. The
Company may remove the Rights Agent or any successor Rights Agent upon
30 days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the
Common Stock by registered or certified mail, and to the holders of the
Rights by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to
make such appointment within a period of 30 days after giving notice of
such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent
or by the holder of a Right (who shall, with such notice, submit his
Rights Certificate (if any) for inspection by the Company), then the
registered holder of any Rights may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall
be (a) a corporation organized and doing business under the laws of the
United States or of the State of California or the State of New York (or
of any other state of the United States so long as such corporation is
authorized to do business as a banking institution in the State of
California or the State of New York), in good standing, having a
principal office in the State of California or the State of New York,
which is authorized under such laws to exercise corporate trust powers
and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50,000,000 or (b) an affiliate
of a corporation described in clause (a) of this sentence. After
appointment, the successor Rights Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor
Rights Agent shall deliver and transfer to the successor Rights Agent
any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the
purpose. Not later than the effective date of any such appointment the
Company shall file notice thereof in writing with the predecessor Rights
Agent and each transfer agent of the Common Stock, and mail a notice
thereof in writing to the registered holders of the Rights. Failure to
give any notice provided for in this Section 22, however, or any defect
therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights
Agent, as the case may be.
Section 23. Issuance of New Rights Certificates. Notwithstanding any
of the provisions of this Agreement or of the Rights to the contrary,
the Company may, at its option, issue new Rights Certificates evidencing
Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price per share and the
number or kind or class of shares or other securities or property
purchasable under the Rights Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the
issuance or sale of shares of Common Stock following the Distribution
Date and prior to the redemption or expiration of the Rights, the
Company (a) shall, with respect to shares of Common Stock so issued or
sold pursuant to the exercise of stock options or otherwise under any
employee plan or arrangement, which plan or arrangement is existing as
of the Distribution Date, or upon the exercise, conversion or exchange
of any other securities issued by the Company on or prior to the
Distribution Date, and (b) may, in any other case, if deemed necessary
or appropriate by the Board of Directors of the Company, issue Rights
Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) no such Rights
Certificates shall be issued if, and to the extent that, the Company
shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or
the Person to whom such Rights Certificates would be issued, and (ii) no
such Rights Certificates shall be issued if, and to the extent that
appropriate adjustment shall otherwise have been made in lieu of the
issuance thereof.
Section 24. Redemption, Termination and Exchange.
(a)(i) The Board of Directors of the Company may, at its option, at
any time prior to the earlier of (x) the time that any person becomes an
Acquiring Person without the prior consent of the Company or (y) 5:00
P.M., San Francisco, California time, on the Final Expiration Date,
redeem all but not less than all of the then outstanding Rights at a
redemption price of $.05 per Right, appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after
the date hereof (such redemption price being hereinafter referred to as
the "Redemption Price").
(ii) In addition, and notwithstanding the provisions of Section
24(a)(i), the Board of Directors of the Company may redeem all but not
less than all of the then outstanding Rights at the Redemption Price
following the occurrence of a Stock Acquisition Date but prior to any
event described in Section 13(a), either (x) following the occurrence of
an event set forth in, and the expiration of any period during which the
holder of Rights may exercise the rights under, Section 11(a)(ii) if and
for as long as the Acquiring Person is not thereafter the Beneficial
Owner of securities representing 15% or more of the outstanding shares
of the Voting Power, and at the time of redemption there are no other
persons who are Acquiring Persons or (y) in connection with any event
specified in Section 13(a) not involving an Acquiring Person or an
Affiliate or Associate of an Acquiring Person or any other Person in
which such Acquiring Person, Affiliate or Associate has any interest, or
any other Person acting directly or indirectly on behalf of or in
association with any such Acquiring Person, Affiliate or Associate.
(b) In the case of a redemption permitted under Section 24(a)(i),
immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights and without any further action and
without any notice, the right to exercise the Rights will terminate and
the only right thereafter of the holders of Rights shall be to receive
the Redemption Price. In the case of a redemption permitted only under
Section 24(a)(ii), the right to exercise the Rights will terminate and
represent only the right to receive the Redemption Price only after the
giving of notice of such redemption to the holder of such Rights if no
event set forth in Section 11(a)(ii) shall have occurred, upon the later
of ten Business Days following the giving of such notice or the
expiration of any period during which the rights under Section 11(a)(ii)
may be exercised. After the action of the Board of Directors ordering
any such redemption of the Rights, the Company shall promptly give
notice of such redemption to the Rights Agent and the holders of the
then outstanding Rights by mailing such notice to the Rights Agent and
to all such holders at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date,
on the registry books of the Transfer Agent for the Common Stock. Any
notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice
of redemption will state the method by which the payment of the
Redemption Price will be made.
In the case of a redemption permitted under Section 24(a)(i) or (ii),
the Company may, at its option, discharge all of its obligations with
respect to the Rights by (i) issuing a press release announcing the
manner of redemption of the Rights and (ii) mailing payment of the
Redemption Price to the registered holders of the Rights at their last
addresses as they appear on the registry books of the Rights Agent, or,
prior to the Distribution Date, on the registry books of the Transfer
Agent of the Common Stock, and upon such action, all outstanding Rights
Certificates shall be null and void without any further action by the
Company.
(c) (i) Subject to the limitations of applicable law, the Board of
Directors of the Company may, at its option, at any time after any
Person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 7(e) hereof) for
(A) shares of Common Stock at an exchange ratio of one share of Common
Stock per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof
(the "Exchange Shares") or (B) Substitute Consideration (as that term is
defined below). The Board of Directors may determine, in its sole
discretion, whether to deliver Exchange Shares or Substitute
Consideration. Notwithstanding the foregoing, the Board of Directors
shall not be empowered to effect such exchange at any time after any
Person (other than the Company, any subsidiary of the Company, any
employee benefit plan of the Company or any such subsidiary, or any
entity holding Common Stock for or pursuant to the terms of any such
plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Common Stock then
outstanding.
(ii) In the event the Board of Directors shall determine to deliver
Substitute Consideration in exchange for Rights, the Company shall (1)
determine the value of the Exchange Shares (the "Exchange Value"), and
(2) with respect to each Right to be exchanged, make adequate provision
to substitute for Exchange Shares the following (the "Substitute
Consideration"): (v) cash, (w) Common Stock or common stock equivalents
(as that term is defined in Section 11(a)(iii) hereof), (x) debt
securities of the Company, (y) other assets, or (z) any combination of
the foregoing, having an aggregate value equal to the Exchange Value,
where such aggregate value has been determined by the Board of Directors
of the Company based upon the advice of a nationally recognized
investment banking firm selected by the Board of Directors of the
Company. For purposes of this Section 24(c), the value of a share of
Common Stock shall be the current market price (as determined pursuant
to Section 11(d) hereof) per share of Common Stock on the day that is
the later of (x) the first occurrence of an event described in Section
11(a)(ii) hereof and (y) the date on which the Company's right of
redemption pursuant to Section 24(a) expires; and the value of any
common stock equivalent shall be deemed to have the same value as the
Common Stock on such date.
(iii) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to this
Section 24(c), and without any further action and without any notice,
the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive Exchange
Shares or Substitute Consideration for each Right exchanged by such
holder. The Company shall promptly give public notice of any such
exchange; provided, however, that the failure to give, or any defect in,
such notice shall not affect the validity of such exchange. The Company
promptly shall mail a notice of any such exchange to all of the holders
of such Rights at their last addresses as they appear upon the registry
books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the method
by which the exchange of Common Stock for Rights will be effected and,
in the event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights (other than Rights which have become void pursuant to
the provisions of Section 7(e) hereof) held by each holder of Rights.
(iv) In the event that there shall not be sufficient shares of
Common Stock issued but not outstanding or authorized but unissued to
permit any exchange of Rights as contemplated in accordance with this
Section 24(c), the Company shall take all such action as may be
necessary to authorize additional shares of Common Stock for issuance
upon exchange of the Rights.
(v) The Company shall not be required to issue fractions of shares
of Common Stock or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of such fractional shares of Common
Stock, the Company shall pay to the registered holders of the Rights
Certificates with regard to which such fractional shares of Common Stock
would otherwise be issuable an amount in cash equal to the same fraction
of the current market value of a whole share of Common Stock. For the
purposes of this Section 24(c)(v), the current market value of a whole
share of Common Stock shall be the closing price of a share of Common
Stock (as determined pursuant to Section 11(d) hereof) for the Trading
Day immediately prior to the date of exchange pursuant to this
Section 24(c).
Section 25. Notice of Certain Events. In case the Company shall
propose (a) to pay any dividend payable in stock of any class to the
holders of Common Stock or to make any other distribution to the holders
of Common Stock (other than a regular quarterly cash dividend out of
earnings or retained earnings of the Company) or (b) to offer to the
holders of Common Stock rights or warrants to subscribe for or to
purchase any additional shares of Common Stock or shares of stock of any
class or any other securities, rights or options, or (c) to effect any
reclassification of its Common Stock (other than a reclassification
involving only the subdivision of outstanding shares of Common Stock),
or (d) to effect any consolidation or merger into or with, or to effect
any sale or other transfer (or to permit one or more of its subsidiaries
to effect any sale or other transfer), in one or more transactions, of
more than 50% of the assets or earning power of the Company and its
subsidiaries (taken as a whole) to, any other Person, or (e) to effect
the liquidation, dissolution or winding up of the Company, then, in each
such case, the Company shall give to each holder of a Rights
Certificate, in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of
such stock dividend, distribution of rights or warrants, or the date on
which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Common Stock, if
any such date is to be fixed, and such notice shall be so given in the
case of any action covered by clause (a) or (b) above at least 20 days
prior to the record date for determining holders of the shares of Common
Stock for purposes of such action, and in the case of any such other
action, at least 20 days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of
the shares of Common Stock whichever shall be the earlier.
In case any of the events set forth in Section 11(a)(ii) or 13(a) of
this Agreement shall occur, then, in any such case, the Company or the
Principal Party, as the case may be, shall as soon as practicable
thereafter give to each holder of a Rights Certificate, in accordance
with Section 26 hereof, a notice of the occurrence of such event, which
shall specify the event and the consequences of the event to holders of
Rights under Section 11(a)(ii) or 13(a) hereof, as the case may be.
Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of
any Rights Certificate to or on the Company shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Rights Agent) as follows:
Westamerica Bancorporation
1108 5th Avenue
San Rafael, California 94901
Attention: David L. Payne
President and Chief Executive
Officer
Subject to the provisions of Section 22, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of
any Rights Certificate to or on the Rights Agent shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed
(until another address is filed in writing with the Company) as follows:
Chemical Trust Company of California
50 California Street, 10th Floor
San Francisco, California 94111
Attention: Michael B. Levinson
Notices or demands authorized by this Agreement to be given or made by
the Company or the Rights Agent to the holder of any Rights Certificate
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Company.
Section 27. Supplements and Amendments. The Company and the Rights
Agent may from time to time supplement or amend this Agreement without
approval of any holders of Right Certificates in order (i) to cure any
ambiguity, (ii) to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provisions herein,
(iii) prior to the Distribution Date, to change or supplement the
provisions hereunder which the Company may deem necessary or desirable
or (iv) following the Distribution Date, to change or supplement the
provisions hereunder in any manner which the Company may deem necessary
or desirable and which shall not adversely affect the interests of the
holders of Rights Certificates. Upon the delivery of a certificate from
an appropriate officer of the Company which states that the proposed
supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall execute such supplement or amendment unless
the Rights Agent shall have determined in good faith that such
supplement or amendment would adversely affect its interests under this
Agreement. Prior to the Distribution Date, the interests of the holders
of Rights shall be deemed coincident with the interests of the holders
of Common Stock.
Section 28. Determination and Actions by the Board of Directors,
etc. For all purposes of this Agreement, any calculation of the number
of shares of Common Stock outstanding at any particular time, including
for purposes of determining the particular percentage of such
outstanding shares of Common Stock or any other securities of which any
Person is the Beneficial Owner, shall be made in accordance with the
last sentence of Rule 13d-3(d)(1)(i) of the General Rules and
Regulations under the Exchange Act as in effect on the date of this
Agreement. The Board of Directors of the Company shall have the
exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board of
Directors, or the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the
right and power to (i) interpret the provisions of this Agreement, and
(ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including a determination to redeem or
not redeem the Rights or to amend the Agreement). All such actions,
calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the
foregoing) which are done or made by the Board in good faith, shall (x)
be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights Certificates and all other parties, and (y) not
subject the Board to any liability to the holders of the Rights
Certificates.
Section 29. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 30. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the
Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, the Common Stock) any
legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company,
the Rights Agent and the registered holders of the Rights Certificates
(and, prior to the Distribution Date, the Common Stock).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way
be affected, impaired or invalidated.
Section 32. Governing Law. This Agreement, each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of California and for all purposes
shall be governed by and construed in accordance with the laws of such
State applicable to contracts to be made and to be performed entirely
within such State.
Section 33. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the
provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto
affixed and attested, all as of the day and year first above written.
Attest: WESTAMERICA BANCORPORATION
[Seal]
______________________________ By __________________________
Name: James M. Barnes Name: David L. Payne
Title: Executive Vice President Title: President and Chief
& Chief Financial Officer Executive Officer
Attest: CHEMICAL TRUST COMPANY OF CALIFORNIA
[Seal]
_____________________________ By __________________________
Name: Name: Michael B. Levinson
Title: Title: Assistant Vice President
Exhibit A
[Form of Rights Certificate]
Certificate No R- _____________ Rights
NOT EXERCISABLE AFTER DECEMBER 31, 1999 OR EARLIER IF NOTICE
OF REDEMPTION IS GIVEN. THE RIGHTS ARE SUBJECT TO
REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.05 PER RIGHT
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE WERE ISSUED TO A
PERSON WHO WAS AN ACQUIRING PERSON OR AN AFFILIATE OR AN
ASSOCIATE OF AN ACQUIRING PERSON, AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT. THIS RIGHTS CERTIFICATE AND THE
RIGHTS REPRESENTED HEREBY MAY BECOME VOID UNDER THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS
AGREEMENT.]
Rights Certificate
Westamerica Bancorporation
This certifies that ____________________________, or registered
assigns, is the registered owner of the number of ____ Rights set forth
above, each of which entitles the owner ____________ thereof, subject to
the terms, provisions and conditions of the Amended and Restated Rights
Agreement dated as of March 23, 1995 (the "Rights Agreement") between
Westamerica Bancorporation, a California corporation (the "Company"),
and Chemical Trust Company of California, (the "Rights Agent"), to
purchase from the Company at any time after the Distribution Date (as
such term is defined in the Rights Agreement) and prior to 5:00 P.M.
(San Francisco, California time) on December 31, 1999 at the office of
the Rights Agent designated for such purpose, one fully paid,
nonassessable share of Common Stock (the "Common Stock") of the Company,
at a purchase price of $65 per share (the "Purchase Price"), upon
presentation and surrender of this Rights Certificate with the
appropriate Form of Election to Purchase and Certificate duly executed.
The number of Rights evidenced by this Rights Certificate (and the
number of shares which may be purchased upon exercise thereof) set forth
above, and the Purchase Price set forth above, are the number and
Purchase Price as of March 23, 1995, based on the Common Stock as
constituted at such date.
As provided in the Rights Agreement, the Purchase Price and the
number of shares of Common Stock or other securities which may be
purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the
happening of certain events.
This Rights Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part
hereof and to which Rights Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties
and immunities hereunder of the Rights Agent, the Company and the
holders of the Rights Certificates. Copies of the Rights Agreement are
on file at the principal office of the Company and are also available
upon written request to the Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the office of the Rights Agent designated for such
purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the
holder to purchase a like aggregate number of shares of Common Stock as
the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised (other than pursuant to Section 11(a)(ii)
of the Rights Agreement) in part, the holder shall be entitled to
receive upon surrender hereof another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised. If this
Rights Certificate shall be exercised in whole or in part pursuant to
Section 11(a)(ii) of the Rights Agreement, the holder shall be entitled
to receive this Rights Certificate duly marked to indicate that such
exercise has occurred as set forth in the Rights Agreement.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its
option at a redemption price of $.05 per Right. Subject to the
provisions of the Rights Agreement, the Company, at its option, may
elect to mail payment of the redemption price to the registered holder
of the Right at the time of redemption, in which event this certificate
may become void without any further action by the Company.
The Company is not obligated to issue fractional shares of Common
Stock upon the exercise of any Right or Rights evidenced hereby, but in
lieu thereof a cash payment may be made, as provided in the Rights
Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of
shares of Common Stock or of any other securities of the Company which
may at any time be issuable on the exercise hereof, nor shall anything
contained in the Rights Agreement or herein be construed to confer upon
the holder hereof, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any
matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting shareholders (except as provided in
the Rights Agreement), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights
Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers
of the Company and its corporate seal. Dated as of _________, 19__.
ATTEST: WESTAMERICA BANCORPORATION
_____________________________ By __________________________
Name: James M. Barnes Name: David L. Payne
Title: Executive Vice President Title: President and Chief
& Chief Financial Officer Executive Officer
Countersigned:
CHEMICAL TRUST COMPANY OF CALIFORNIA
_____________________________
Authorized Signature
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED _________________________________________ hereby
sells, assigns and transfers unto ____________________
____________________________________________________________
(Please print name and address of transferee)
____________________________________________________________
this Rights Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
______________________ Attorney, to transfer the within Rights
Certificate on the books of the within-named Company, with full power of
substitution.
Dated: _______________, 19___
____________________________
Signature
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ]
are not being sold, assigned and transferred by or on behalf of a Person
who is or was an Acquiring Person or an Affiliate or Associate of any
such Acquiring Person (as such terms are defined in the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated: _______________, 19__ ___________________________
Signature
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of this Rights Certificate in every particular,
without alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Rights Certificate pursuant to
Section 11(a)(ii) of the Rights Agreement.)
To WESTAMERICA BANCORPORATION:
The undersigned hereby irrevocably elects to exercise __________
Rights represented by this Rights Certificate to purchase the shares of
Common Stock (or such other securities of the Company) issuable upon the
exercise of the Rights and requests that certificates for such shares be
issued in the name of:
________________________________________________________________
(Please insert social security or other identifying number)
________________________________________________________________
(Please print name and address)
________________________________________________________________
The Rights Certificate indicating the balance, if any, of such Rights
which may still be exercised pursuant to Section 11(a)(ii) of the Rights
Agreement shall be returned to the undersigned unless such Person
requests that the Rights Certificate be registered in the name of and
delivered to:
________________________________________________________________
Please insert social security or other identifying number (complete only
if Rights Certificate is to be registered in a name other than the
undersigned)
________________________________________________________________
(Please print name and address)
________________________________________________________________
Dated: ____________, 19__.
__________________________________
Signature
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Acquiring
Person (as such terms are defined pursuant to the Rights Agreement);
(2) this Rights Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as
such terms are defined in the Rights Agreement);
(3) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated: ____________, 19__.
__________________________________
Signature
NOTICE
The signature to the foregoing Election to Purchase must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Rights Certificate other than pursuant to
Section 11(a)(ii) of the Rights Agreement.)
To WESTAMERICA BANCORPORATION:
The undersigned hereby irrevocably elects to exercise __________
Rights represented by this Rights Certificate to purchase the shares of
Common Stock (or such other securities of the Company or any other
Person) issuable upon the exercise of the Rights and requests that
certificates for such shares be issued in the name of:
________________________________________________________________
(Please insert social security or other identifying number)
________________________________________________________________
(Please print name and address)
________________________________________________________________
The Rights Certificate indicating the balance, if any, of such Rights
which may still be exercised pursuant to Section 11(a)(ii) of the Rights
Agreement shall be returned to the undersigned unless such Person
requests that the Rights Certificate be registered in the name of and
delivered to:
________________________________________________________________
Please insert social security or other identifying number (complete only
if Rights Certificate is to be registered in a name other than the
undersigned)
________________________________________________________________
(Please print name and address)
________________________________________________________________
Dated: ____________, 19__.
__________________________________
Signature
Signature Guaranteed: CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Acquiring
Person (as such terms are defined pursuant to the Rights Agreement);
(2) this Rights Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as
such terms are defined in the Rights Agreement);
(3) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated: ____________, 19__.
__________________________________
Signature
NOTICE
The signature to the foregoing Election to Purchase must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
Exhibit B
AMENDED AND RESTATED SUMMARY OF RIGHTS
TO PURCHASE COMMON STOCK
On December 18, 1986, the Board of Directors of Westamerica
Bancorporation (the "Company") declared a dividend distribution of one
Right for each outstanding share of common stock, no par value (the
"Common Stock"), of the Company to shareholders of record at the close
of business on January 20, 1987 (the "Record Date").
The Rights Agreement, which provides the description and terms of the
Rights, was previously amended and restated on September 28, 1989 and on
May 25, 1992 the current Rights Agent, Chemical Trust Company of
California, replaced the original Rights Agent. On March 23, 1995, the
Company and Chemical Trust Company of California as Rights Agent,
amended and restated the Rights Agreement (referred to herein, as
amended and restated, as the "Amended and Restated Rights Agreement").
A summary of the Amended and Restated Rights Agreement is set forth
below.
Except as set forth below, each Right, when exercisable, entitles the
registered holder to purchase from the Company one share of Common
Stock, at a price of $65 per share (the "Purchase Price"), subject to
adjustment. The Rights are not exercisable until the Distribution Date
(as defined below).
The Rights are currently attached to all Common Stock certificates
representing shares outstanding, and no separate Right Certificates will
be distributed until the earlier to occur of (i) a public announcement
that, without the prior consent of the Company, a Person or group of
affiliated or associated Persons (an "Acquiring Person") has acquired,
or obtained the right to acquire, beneficial ownership of securities
having 15% or more of the voting power of all outstanding voting
securities of the Company, or (ii) ten days (unless such date is
extended by the Board of Directors) following the commencement of (or a
public announcement of an intention to make) a tender offer or exchange
offer which would result in any Person or group and related Persons
becoming an Acquiring Person (the earlier of such dates being called the
"Distribution Date"). Until the Distribution Date the Rights will be
evidenced, with respect to any of the Common Stock certificates
outstanding as of the Record Date, by such Common Stock certificate
together with this Amended and Restated Summary of Rights. The Amended
and Restated Rights Agreement provides that, until the Distribution
Date, the Rights will be transferred with and only with Common Stock
certificates.
From as soon as practicable after the Record Date and until the
Distribution Date (or earlier redemption or expiration of the Rights),
new Common Stock certificates issued after the Record Date upon transfer
or new issuance of the Common Stock will contain a notation
incorporating the Amended and Restated Rights Agreement by reference.
Until the Distribution Date (or earlier redemption or expiration of the
Rights), the surrender for transfer of any certificates for Common Stock
outstanding as of the Record Date (with or without this Amended and
Restated Summary of Rights attached) will also constitute the transfer
of the Rights associated with the Common Stock represented by such
certificate. As soon as practicable following the Distribution Date,
separate certificates evidencing the Rights ("Rights Certificates") will
be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date, and the separate Rights Certificates
alone will evidence the Rights.
The Rights will expire on the earliest of (i) December 31, 1999
(ii) consummation of a merger transaction with a Person or group who
acquired Common Stock pursuant to a Permitted Offer (as defined below),
and is offering in the merger the same price per share and form of
consideration paid in the Permitted Offer, or (iii) redemption by the
Company as described below.
The Purchase Price payable, and the number of shares of the Common
Stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution
(i) in the event of a stock dividend on, or a subdivision, combination
or reclassification of the Common Stock, (ii) upon the grant to holders
of the Common Stock of certain rights or warrants to subscribe for
Common Stock, certain convertible securities or securities having the
same or more favorable rights, privileges and preferences as the Common
Stock at less than the current market price of the Common Stock or (iii)
upon the distribution to holders of the Common Stock of evidences of
indebtedness or assets (excluding regular quarterly cash dividends out
of earnings or retained earnings and dividends payable in Common Stock)
or of subscription rights or warrants (other than those referred to
above).
In the event that, after the first date of public announcement by the
Company or an Acquiring Person that an Acquiring Person has become such,
(i) the Company is acquired in a merger or other business combination
transaction in which the Common Stock is exchanged or changed, (ii) any
bank subsidiary of the Company is involved in a merger or other business
combination transaction or (iii) 50% or more of its assets or earning
power are sold (in one transaction or a series of transactions), proper
provision shall be made so that each holder of a Right (other than such
Acquiring Person) shall thereafter have the right to receive, upon the
exercise thereof at the then current exercise price of the Right, that
number of shares of common stock of the surviving or resulting Person in
the merger or business combination transaction or the Person acquiring
the greatest portion of the assets, as appropriate, or, in either case,
its publicly traded parent company or affiliate, which at the time of
such transaction would have a market value of two times the exercise
price of the Right (such right being called the "Merger Right").
In the event that a Person becomes the beneficial owner of securities
having 15% or more of the voting power of all then outstanding voting
securities of the Company (unless pursuant to a tender offer or exchange
offer for all outstanding shares of Common Stock at a price and on terms
determined by at least a majority of the members of the Board of
Directors who are not officers of the Company to be both adequate and
otherwise in the best interests of the Company and its stockholders (a
"Permitted Offer")), proper provision shall be made so that each holder
of a Right will for a 60-day period thereafter have the right to receive
upon exercise that number of shares of Common Stock having a market
value of two times the exercise price of the Right, to the extent
available, and then (after all authorized and unreserved shares of
Common Stock have been issued) a common stock equivalent (such as
Preferred Stock or another equity security with at least the same
economic value as the Common Stock) having a market value of two times
the exercise price of the Right, with Common Stock to the extent
available being issued first (such right being called the "Subscription
Right"). The holder of a Right will continue to have the Merger Right
whether or not such holder exercises the Subscription Right. Upon the
occurrence of any of the events giving rise to the exercisability of the
Merger Right or the Subscription Right, any Rights that are or were at
any time after the Distribution Date owned by an Acquiring Person shall
immediately become null and void.
With certain exceptions, no adjustments in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least
1% in such Purchase Price. No fractions of shares will be issued and,
in lieu thereof, an adjustment in cash will be made based on the market
price of the Common Stock on the last trading date prior to the date of
exercise.
At any time prior to the earlier to occur of (i) a Person becoming an
Acquiring Person or (ii) the expiration of the Rights, the Company may
redeem the Rights in whole, but not in part, at a price of $.05 per
Right (the "Redemption Price"), which redemption shall be effective upon
the action of the Board of Directors. Additionally, the Company may
thereafter redeem the then outstanding Rights in whole, but not in part,
at the Redemption Price (i) provided that such redemption is incidental
to a merger or other business combination transaction or series of
transactions involving the Company but not involving an Acquiring Person
or certain related Persons or (ii) following an event giving rise to,
and the expiration of the exercise period for, the Subscription Right if
and for as long as an Acquiring Person beneficially owns securities
representing less than 15% of the voting power of the Company's voting
securities and at the time of redemption there are no other persons who
are Acquiring Persons. The redemption of Rights described in the
preceding sentence shall be effective only as of such time when the
Subscription Right is not exercisable, and in any event, only after 10
Business Days' prior notice.
Subject to applicable law, the Board of Directors, at its option, may
at any time after a Person becomes an Acquiring Person (but not after
the acquisition by such Person of 50% or more of the outstanding Common
Stock), exchange all or part of the then outstanding and exercisable
rights (except for Rights which have become void) for shares of Common
Stock equivalent to one share of Common Stock per Right or,
alternatively, for substitute consideration consisting of cash,
securities of the Company or other assets (or any combination thereof).
Fractional shares of Common Stock will be issuable; however, the
Company may elect to distribute depositary receipts in lieu of such
fractional shares. In lieu of fractional shares an adjustment in cash
may be made based on the market price of the Common Stock on the last
trading date prior to the date of exercise.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends.
A copy of the Amended and Restated Rights Agreement has been filed
with the Securities and Exchange Commission as an Exhibit to a
Form 8-A/A Amendment to a Registration Statement on Form 8-A. A copy of
the Amended and Restated Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not
purport to be complete and is qualified in its entirety by reference to
the Amended and Restated Rights Agreement, which is incorporated herein
by reference.
EX-27
3
9
1000
YEAR
DEC-31-1994
DEC-31-1994
112401
1307526
0
0
160609
598730
569684
1103771
27600
2030235
1688880
133218
16408
25524
53510
0
0
112695
2030235
93140
41097
1
134238
33364
41115
93123
5800
24
71123
35541
0
0
0
24673
3.06
3.06
5.31
7069
400
0
0
25587
5921
2054
27600
27600
0
0