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STOCK OPTION AGREEMENT
DATED AS OF THE 19TH DAY OF DECEMBER, 1996
BY AND BETWEEN
MONARCH BANCORP
AND
CALIFORNIA COMMERCIAL BANKSHARES
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TABLE OF CONTENTS
PAGE
INDEX OF DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . iv
SECTION 1. GRANT OF OPTION. . . . . . . . . . . . . . . . . . . 1
SECTION 2. EXERCISE OF OPTION.. . . . . . . . . . . . . . . . . 1
(a) Timing of Exercise, Termination.. . . . . . . . . . . . 1
(b) Preliminary Purchase Event. . . . . . . . . . . . . . . 2
(c) Purchase Event. . . . . . . . . . . . . . . . . . . . . 4
(d) Notice by Issuer. . . . . . . . . . . . . . . . . . . . 4
(e) Notice of Exercise. . . . . . . . . . . . . . . . . . . 4
(f) Payments. . . . . . . . . . . . . . . . . . . . . . . . 5
(g) Delivery of Common Stock. . . . . . . . . . . . . . . . 5
(h) Common Stock Certificates.. . . . . . . . . . . . . . . 5
(i) Holder of Record. . . . . . . . . . . . . . . . . . . . 6
SECTION 3. ISSUER'S COVENANTS.. . . . . . . . . . . . . . . . . 6
(a) Available Shares. . . . . . . . . . . . . . . . . . . . 6
(b) Compliance. . . . . . . . . . . . . . . . . . . . . . . 6
(c) Certain Actions, Applications and Arrangements. . . . . 6
(d) Dilution. . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 4. EXCHANGE OF OPTION.. . . . . . . . . . . . . . . . . 7
SECTION 5. ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . 7
SECTION 6. REGISTRATION RIGHTS. . . . . . . . . . . . . . . . . 8
SECTION 7. OPTION AND OPTION SHARE REPURCHASE.. . . . . . . . . 9
(a) Right to Repurchase, Price. . . . . . . . . . . . . . . 9
(b) Repurchase Procedure. . . . . . . . . . . . . . . . . . 10
(c) Regulatory Approvals, Partial Repurchase. . . . . . . . 11
SECTION 8. SUBSTITUTE OPTION. . . . . . . . . . . . . . . . . . 12
(a) Grant of Substitute Option. . . . . . . . . . . . . . . 12
(b) Exercise of Substitute Option.. . . . . . . . . . . . . 12
(c) Terms of Substitute Option. . . . . . . . . . . . . . . 13
(d) Substitute Option Definitions.. . . . . . . . . . . . . 13
(e) Cap on Substitute Option . . . . . . . . . . . . . . . .14
SECTION 9. EXTENSION OF EXERCISE RIGHT. . . . . . . . . . . . . 14
SECTION 10. ISSUER REPRESENTATIONS AND WARRANTIES . . . . . . . 15
(a) Corporate Authority . . . . . . . . . . . . . . . . . . 15
(b) Availability of Shares. . . . . . . . . . . . . . . . . 00
-x-
XXXXXXX 00. Assignment. . . . . . . . . . . . . . . . . . . . . 15
(a) Assignment. . . . . . . . . . . . . . . . . . . . . . . 15
(b) Restrictive Legend. . . . . . . . . . . . . . . . . . . 16
SECTION 12. Filings and Consents. . . . . . . . . . . . . . . . 16
SECTION 13. Remedies. . . . . . . . . . . . . . . . . . . . . . 17
SECTION 14. Severability. . . . . . . . . . . . . . . . . . . . 17
SECTION 15. Notices . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 16. Counterparts. . . . . . . . . . . . . . . . . . . . 17
SECTION 17. Expenses. . . . . . . . . . . . . . . . . . . . . . 18
SECTION 18. Entire Agreement. . . . . . . . . . . . . . . . . . 18
SECTION 19. Definitions . . . . . . . . . . . . . . . . . . . . 18
SECTION 20. Effect on Plan. . . . . . . . . . . . . . . . . . . 18
SECTION 21. Selections. . . . . . . . . . . . . . . . . . . . . 18
SECTION 22. Further Assurances. . . . . . . . . . . . . . . . . 18
SECTION 23. Voting. . . . . . . . . . . . . . . . . . . . . . . 18
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INDEX OF DEFINED TERMS
PAGE
Acquiring Corporation. . . . . . . . . . . . . . . . . . . . . . 13
Acquisition Transaction. . . . . . . . . . . . . . . . . . . . . 3
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Average Price. . . . . . . . . . . . . . . . . . . . . . . . . . 13
Beneficial Ownership . . . . . . . . . . . . . . . . . . . . . . 2
BHC Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . 3
Exercise Termination Event . . . . . . . . . . . . . . . . . . . 2
Federal Reserve Board. . . . . . . . . . . . . . . . . . . . . . 3
Governmental Authority . . . . . . . . . . . . . . . . . . . . . 3
Grantee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Grantee Subsidiary . . . . . . . . . . . . . . . . . . . . . . . 2
Initial Price. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Issuer Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . 2
Market Price . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Notice Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notice/Application . . . . . . . . . . . . . . . . . . . . . . . 4
Notification . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Option Notice. . . . . . . . . . . . . . . . . . . . . . . . . . 4
Option Price . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Option Repurchase Price. . . . . . . . . . . . . . . . . . . . . 9
Option Repurchase Request Date . . . . . . . . . . . . . . . . . 9
Option Share Repurchase Price. . . . . . . . . . . . . . . . . . 10
Option Share Repurchase Request Date . . . . . . . . . . . . . . 10
Option Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 8
Owner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Preliminary Purchase Event . . . . . . . . . . . . . . . . . . . 2
Purchase Event . . . . . . . . . . . . . . . . . . . . . . . . . 4
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . 3
Securities Exchange Act. . . . . . . . . . . . . . . . . . . . . 2
Substitute Common Stock. . . . . . . . . . . . . . . . . . . . . 13
Substitute Option. . . . . . . . . . . . . . . . . . . . . . . . 12
Substitute Option Issuer . . . . . . . . . . . . . . . . . . . . 12
Substitute Purchase Price. . . . . . . . . . . . . . . . . . . . 12
Tender Offer . . . . . . . . . . . . . . . . . . . . . . . . . . 3
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STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of the 19th day of December,
1996 (this "Agreement"), between Monarch Bancorp, a California corporation
("Grantee"), and California Commercial Bankshares, a California corporation
("Issuer").
WITNESSETH:
WHEREAS, Grantee and Issuer are entering into an Agreement and
Plan of Merger dated as of the date hereof (the "Plan"), which is being
executed by the parties hereto simultaneously with the execution of this
Agreement; and
WHEREAS, as a condition and inducement to Grantee's entering into
the Plan and in consideration therefor, Issuer has agreed to grant Grantee
the Option (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Plan, the parties
hereto agree as follows:
SECTION 1. GRANT OF OPTION. Issuer hereby grants to Grantee an
unconditional, irrevocable option (the "Option") to purchase, subject to
the terms hereof, up to 635,570 (or such lesser amount as shall constitute
19.9% of the outstanding shares of the Common Stock on the date of
exercise) fully paid and nonassessable shares of Common Stock, no par value
("Common Stock"), of Issuer at a price per share equal to $9.50 per share
(the "Initial Price"); PROVIDED, HOWEVER, that in the event Issuer issues
or agrees to issue (other than pursuant to options and warrants to issue
Common Stock in effect as of the date hereof) any shares of Common Stock at
a price less than the Initial Price (as adjusted pursuant to Section 5(b)),
such price shall be equal to such lesser price (such price, as adjusted as
hereinafter provided, the "Option Price"). The number of shares of Common
Stock that may be received upon the exercise of the Option and the Option
Price are subject to adjustment as herein set forth.
SECTION 2. EXERCISE OF OPTION.
(a) TIMING OF EXERCISE, TERMINATION. Grantee may exercise the
Option, in whole or part, at any time and from time to time following the
occurrence of a Purchase Event (as defined below); PROVIDED that the Option
shall terminate and be of no further force and effect upon the earliest to
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occur of (i) the time immediately prior to the Effective Time, (ii) 12
months after the first occurrence of a Purchase Event (as defined below),
(iii) 18 months after the termination of the Plan following the occurrence
of a Preliminary Purchase Event (as defined below), (iv) termination of the
Plan in accordance with the terms thereof prior to the occurrence of a
Purchase Event or a Preliminary Purchase Event (other than a termination of
the Plan by Grantee pursuant to Section 6.1(b)(iii), (e) or (f) thereof),
or (v) 18 months after the termination of the Plan by Grantee pursuant to
Section 6.1(b)(iii), (e) or (f) thereof. The events described in clauses
(i) - (v) in the preceding sentence are hereinafter collectively referred
to as an "Exercise Termination Event."
(b) PRELIMINARY PURCHASE EVENT. The term "Preliminary Purchase
Event" shall mean any of the following events or transactions occurring
after the date hereof:
(i) Issuer or any of its subsidiaries (each an "Issuer
Subsidiary") without having received Grantee's prior written consent,
shall have entered into an agreement to engage in an Acquisition
Transaction (as defined below) with any Person (the term "Person" for
purposes of this Agreement having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934
(the "Securities Exchange Act"), and the rules and regulations
thereunder) other than Grantee or any of its subsidiaries (each a
"Grantee Subsidiary") or the Board of Directors of Issuer shall have
recommended that the shareholders of Issuer approve or accept any
Acquisition Transaction with any person other than Grantee or any
Grantee Subsidiary. For purposes of this Agreement, "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving Issuer or any of Issuer's subsidiaries, (y) a
purchase, lease or other acquisition of all or substantially all of
the assets of Issuer or any subsidiary or (z) a purchase or other
acquisition (including by way of merger, consolidation, share exchange
or otherwise) of securities representing 10% or more of the voting
power of Issuer or any subsidiary, other than by exercise of options,
warrants or other rights (or in settlement or satisfaction of such
rights) set forth in Annex 2 to the Plan, provided that the term
"Acquisition Transaction" does not include any internal merger or
consolidation involving only Issuer and/or Issuer Subsidiaries;
(ii) Any Person (other than Grantee or any Grantee Subsidiary)
shall have acquired Beneficial
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Ownership or the right to acquire Beneficial Ownership, other than by
exercise of options, warrants or other rights (or in settlement or
satisfaction of such rights) set forth in Annex 2 to the Plan, of
shares of Common Stock (the term "Beneficial Ownership" for purposes
of this Agreement having the meaning assigned thereto in Section 13(d)
of the Securities Exchange Act, and the rules and regulations
thereunder) such that, upon the consummation of such acquisition, such
Person would have Beneficial Ownership, in the aggregate, of 10% or
more of the then outstanding shares of Common Stock if such person is
a director or officer of the Issuer, and 25% or more of the then
outstanding shares of Common Stock if such person is not a director or
officer of the Issuer;
(iii) Any person other than Grantee or any Grantee Subsidiary
shall have made a BONA FIDE proposal to Issuer or its shareholders, by
public announcement or written communication that is or becomes the
subject of public disclosure, to engage in an Acquisition Transaction
(including, without limitation, any situation in which any person
other than Grantee or any subsidiary of Grantee shall have commenced
(as such term is defined in Rule 14d-2 under the Securities Exchange
Act) or shall have filed a registration statement under the Securities
Act of 1933, as amended (the "Securities Act"), with respect to, a
tender offer or exchange offer to purchase any shares of Common Stock
such that, upon consummation of such offer, such person would own or
control 10% or more of the then outstanding shares of Common Stock
(such an offer being referred to herein as a "Tender Offer" or an
"Exchange Offer", respectively));
(iv) After a proposal is made by a third party to Issuer or its
shareholders to engage in an Acquisition Transaction, Issuer shall
have breached any covenant or obligation contained in the Plan and
such breach would entitle Grantee to terminate the Plan or the holders
of Common Stock shall not have approved the Plan at the meeting of
such stockholders held for the purpose of voting on the Plan, such
meeting shall not have been held or shall have been canceled prior to
termination of the Plan or Issuer's Board of Directors shall have
withdrawn or modified in a manner adverse to Grantee the
recommendation of Issuer's Board of Directors with respect to the
Plan;
(v) Any Person other than Grantee or any Grantee Subsidiary,
other than in connection with a transaction
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to which Grantee has given its prior written consent or in connection
with the exercise of options, warrants or other rights (or in
settlement or satisfaction of such rights) set forth in Annex 2 to the
Plan, shall have filed an application or notice with the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board")
or other governmental authority or regulatory or administrative agency
or commission (each, a "Governmental Authority") for approval to
engage in an Acquisition Transaction; or
(vi) The Board of Directors of Issuer does not recommend that
the stockholders of Issuer approve the Plan.
(c) PURCHASE EVENT. The term "Purchase Event" shall mean either
of the following events or transactions occurring after the date hereof:
(i) The acquisition by any person other than Grantee or any
Grantee Subsidiary of Beneficial Ownership of shares of Common Stock,
other than by exercise of options, warrants or other rights (or in
settlement or satisfaction of such rights) set forth in Annex 2 to the
Plan or as a result of the execution and delivery of Shareholders
Agreements referred to in Section 4.16 of the Plan, such that, upon
the consummation of such acquisition, such Person would have
Beneficial Ownership, in the aggregate, of 20% or more of the then
outstanding shares of Common Stock if such person is a director or
officer of the Issuer, and 25% or more of the then outstanding shares
of Common Stock if such person is not a director or officer of the
Issuer; or
(ii) The occurrence of a Preliminary Purchase Event described in
Section 2(b)(i) hereof except that the percentage referred to in
clause (z) shall be 20%.
(d) NOTICE BY ISSUER. Issuer shall notify Grantee promptly in
writing of the occurrence of any Preliminary Purchase Event or Purchase
Event; PROVIDED, HOWEVER, that the giving of such notice by Issuer shall
not be a condition to the right of Grantee to exercise the Option.
(e) NOTICE OF EXERCISE. In the event that Grantee is entitled
to and wishes to exercise the Option, it shall send to Issuer a written
notice (the "Option Notice" and the date of which being hereinafter
referred to as the "Notice Date") specifying (i) the total number of shares
of
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Common Stock it will purchase pursuant to such exercise, (ii) the aggregate
purchase price as provided herein and (iii) a period of time (that shall
not be less than three business days nor more than thirty business days)
running from the Notice Date (the "Closing Date") and a place at which the
closing of such purchase shall take place; PROVIDED, THAT, if prior
notification to or approval of the Federal Reserve Board or any other
Governmental Authority is required in connection with such purchase (each,
a "Notification" or an "Approval," as the case may be), (a) Grantee shall
promptly file, or cause to be filed, the required notice or application for
approval ("Notice/Application"), (b) Grantee shall expeditiously process,
or cause to be expeditiously processed, the Notice/Application and (c) for
the purpose of determining the Closing Date pursuant to clause (iii) of
this sentence, the period of time that otherwise would run from the Notice
Date shall instead run from the later of (x) in connection with any
Notification, the date on which any required notification periods have
expired or been terminated and (y) in connection with any Approval, the
date on which such approval has been obtained and any requisite waiting
period or periods shall have expired. For purposes of Section 2(a) hereof,
any exercise of the Option shall be deemed to occur on the Notice Date
relating thereto. On or prior to the Closing Date, Grantee shall have the
right to revoke its exercise of the Option in the event that the
transaction constituting a Purchase Event that gives rise to such right to
exercise shall not have been consummated.
(f) PAYMENTS. At the closing referred to in Section 2(e)
hereof, Grantee shall pay to Issuer the aggregate Option Price for the
shares of Common Stock specified in the Option Notice in immediately
available funds by wire transfer to a bank account designated by Issuer;
PROVIDED, HOWEVER, that failure or refusal of Issuer to designate such a
bank account shall not preclude Grantee from exercising the Option.
(g) DELIVERY OF COMMON STOCK. At such closing, simultaneously
with the delivery of immediately available funds as provided in Section
2(f) hereof, Issuer shall deliver to Grantee a certificate or certificates
representing the number of shares of Common Stock specified in the Option
Notice and, if the Option should be exercised in part only, a new Option
evidencing the rights of Grantee thereof to purchase the balance of the
shares of Common Stock purchasable hereunder.
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(h) COMMON STOCK CERTIFICATES. Certificates for Common Stock
delivered at a closing hereunder shall be endorsed with a restrictive
legend substantially as follows:
The transfer of the shares represented by this certificate is
subject to resale restrictions arising under the Securities Act
of 1933, as amended, and to certain provisions of an agreement
between Monarch Bancorp and California Commercial Bankshares
("Issuer") dated as of the 19th day of December, 1996. A copy of
such agreement is on file at the principal office of Issuer and
will be provided to the holder hereof without charge upon receipt
by Issuer of a written request therefor.
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if Grantee
shall have delivered to Issuer a copy of a letter from the staff of the
Securities and Exchange Commission (the "SEC"), or an opinion of counsel,
in form and substance satisfactory to Issuer, to the effect that such
legend is not required for purposes of the Securities Act; (ii) the
reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if
the shares have been sold or transferred in compliance with the provisions
of this Agreement and under circumstances that do not require the retention
of such reference; and (iii) the legend shall be removed in its entirety if
the conditions in the preceding clauses (i) and (ii) are both satisfied.
In addition, such certificates shall bear any other legend as may be
required by law. The Grantee agrees that, except as otherwise contemplated
hereby, the Shares to be acquired pursuant hereto will be acquired for
investment only and not with a view to any public distribution thereof, and
Grantee will not offer to sell or otherwise dispose of the Shares in
violation of any of the requirements of the Securities Act.
(i) HOLDER OF RECORD. Upon the giving by Grantee to Issuer of
an Option Notice and the tender of the applicable purchase price in
immediately available funds on the Closing Date, Grantee shall be deemed to
be the holder of record of the number of shares of Common Stock specified
in the Option Notice, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares
of Common Stock shall not then actually be delivered to Grantee. Issuer
shall pay all
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expenses and any and all United States federal, state and local taxes and
other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of
Grantee.
SECTION 3. ISSUER'S COVENANTS.
(a) AVAILABLE SHARES. The Issuer agrees that it shall at all
times until the termination of this Agreement have reserved for issuance
upon the exercise of the Option that number of authorized and reserved
shares of Common Stock equal to the maximum number of shares of Common
Stock at any time and from time to time issuable hereunder, all of which
shares will, upon issuance pursuant hereto, be duly authorized, validly
issued, fully paid, nonassessable, and delivered free and clear of all
claims, liens, encumbrances and security interests.
(b) COMPLIANCE. The Issuer agrees that it will not, by
amendment of its articles of incorporation or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other
voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer.
(c) CERTAIN ACTIONS, APPLICATIONS AND ARRANGEMENTS. Issuer
shall promptly take all action as may from time to time be required
(including (i) complying with all premerger notification, reporting and
waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (ii) in the event, under the Bank
Holding Company Act of 1956, as amended ("BHC Act"), or the Change in Bank
Control Act of 1978, as amended, or any state banking law, prior approval
of or notice to the Federal Reserve Board or to any other Governmental
Authority is necessary before the Option may be exercised, cooperating with
Grantee in preparing such applications or notices and providing such
information to each such Governmental Authority as it may require) in order
to permit Grantee to exercise the Option and Issuer duly and effectively to
issue shares of Common Stock pursuant hereto.
SECTION 4. EXCHANGE OF OPTION. This Agreement and the Option
granted hereby are exchangeable, without expense, at the option of Grantee,
upon presentation and surrender of this Agreement at the principal office
of Issuer, for other agreements providing for Options of different
denominations entitling the holder thereof to purchase, on the same terms
and subject to the same conditions as are set forth herein, in the
aggregate the
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same number of shares of Common Stock purchasable hereunder. The terms
"Agreement" and "Option" as used in this Section 4 include any agreements
and related options for which this Agreement and the Option granted hereby
may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer,
whether or not the Agreement so lost, stolen, destroyed or mutilated shall
at any time be enforceable by anyone.
SECTION 5. ADJUSTMENTS. The number of shares of Common Stock
purchasable upon the exercise of the Option shall be subject to adjustment
from time to time as follows:
(a) In the event of any change in the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or the like, the type and
number of shares of Common Stock purchasable upon exercise hereof shall be
appropriately adjusted and proper provision shall be made so that, in the
event that any additional shares of Common Stock are to be issued or
otherwise to become outstanding as a result of any such change (other than
pursuant to an exercise of the Option or any other options, warrants or
other rights (or in settlement or satisfaction of such rights) set forth in
Annex 2 to the Plan), the number of shares of Common Stock that remain
subject to the Option shall be increased so that, after such issuance and
together with shares of Common Stock previously issued pursuant to the
exercise of the Option (as adjusted on account of any of the foregoing
changes in the Common Stock), it represents the same proportion of the
number of shares of Common Stock then issued and outstanding as such
proportion before the applicable event described in this Section 5(a).
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the
numerator of which shall be equal to the number of shares of Common Stock
purchasable prior to the adjustment and the denominator of which shall be
equal to the number of shares of Common Stock purchasable after the
adjustment.
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SECTION 6. REGISTRATION RIGHTS. (a) Upon the occurrence of a
Purchase Event that occurs prior to an Exercise Termination Event, Issuer
shall, at the request of Grantee (whether on its own behalf or on behalf of
any subsequent holder of the Option (or part thereof) or any of the shares
of Common Stock issued pursuant hereto), promptly prepare and file a
registration statement under the Securities Act covering any shares issued
and issuable pursuant to the Option and shall use its best efforts to cause
such registration statement to become effective, and to remain current and
effective for a reasonable period after such registration statement first
becomes effective, in order to permit the sale or other disposition of any
shares of Common Stock issued upon total or partial exercise of the Option
("Option Shares") in accordance with any plan of disposition requested by
Grantee; PROVIDED, HOWEVER, that Issuer may postpone filing a registration
statement relating to a registration request by Grantee under this Section
6 for a period of time (not in excess of 30 days) if in its judgment such
filing would require the disclosure of material information that Issuer has
a BONA FIDE business purpose for preserving as confidential. Grantee shall
have the right to demand one such registration at the Issuer's expense and
additional registrations at its own expense. The foregoing
notwithstanding, if, at the time of any request by Grantee for registration
of Option Shares as provided above, Issuer is in the process of
registration with respect to an underwritten public offering of shares of
Common Stock, and if in the good faith judgment of the managing underwriter
or managing underwriters, or, if none, the sole underwriter or
underwriters, of such offering, the offering or inclusion of the Option
Shares would interfere materially with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares
otherwise to be covered in the registration statement contemplated hereby
may be reduced; PROVIDED, HOWEVER, that after any such required reduction,
the number of Option Shares to be included in such offering for the account
of Grantee shall constitute at least 33 1/3% of the total number of shares
of Common Stock held by Grantee and Issuer covered in such registration
statement; PROVIDED FURTHER, HOWEVER, that if such reduction occurs, then
Issuer shall file a registration statement for the balance as promptly as
practicable thereafter as to which no reduction pursuant to this Section
6(a) shall be permitted or occur, and the Grantee shall thereafter be
entitled to one additional registration statement at the Grantee's expense.
In addition, if the Company proposes to register its Common Stock or any
other securities on a form that would permit the registration of the Shares
for public sale under the Securities Act (whether proposed to be offered
for sale by
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the Issuer or any other Person) it will give prompt written notice to
Grantee of its intention to do so, specifying the relevant terms of such
proposal, including the proposed maximum offering price thereof. Upon the
written request of the Grantee delivered to the Issuer within 10 business
days after the giving of any such notice, which request shall specify the
number of Shares desired to be disposed by Grantee, the Company will use
its best efforts to effect, in connection with its proposed registration,
the registration under the Securities Act of the Shares set forth in such
request. The Grantee shall be entitled to two such registrations at the
Issuer's expense and additional registrations at its own expense. Grantee
shall provide all information reasonably requested by Issuer for inclusion
in any registration statement to be filed hereunder. In connection with
any such registration, Issuer and Grantee shall provide each other with
representations, warranties, indemnities and other agreements customarily
given in connection with such registrations. If requested by Grantee in
connection with such registration, Issuer and Grantee shall become a party
to any underwriting agreement relating to the sale of such shares, but only
to the extent of obligating themselves in respect of representations,
warranties, indemnities and other agreements customarily included in such
underwriting agreements. Notwithstanding the foregoing, if Grantee revokes
any Option Notice or fails to exercise any Option with respect to any
Option Notice pursuant to Section 2(e) hereof, Issuer shall not be
obligated to continue any registration process with respect to the sale of
Option Shares issuable upon the exercise of such Option and Grantee shall
not be deemed to have demanded registration of Option Shares.
(b) In the event that Grantee requests Issuer to file a
registration statement following the failure to obtain any approval
required to exercise the Option as described in Section 8 hereof, the
closing of the sale or other disposition of the Common Stock or other
securities pursuant to such registration statement shall occur
substantially simultaneously with the exercise of the Option.
SECTION 7. SUBSTITUTE OPTION.
(a) GRANT OF SUBSTITUTE OPTION. In the event that prior to an
Exercise Termination Event, Issuer shall enter into an agreement (i) to
consolidate or merge with any person, other than Grantee or a Grantee
Subsidiary, and shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) to permit any person, other than Grantee
or a Grantee Subsidiary, to merge into Issuer
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and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Common Stock
shall be changed into or exchanged for stock or other securities of any
other person or cash or any other property or the then outstanding shares
of Common Stock shall after such merger represent less than 50% of the
outstanding shares and share equivalents of the merged company, or (iii) to
sell or otherwise transfer all or substantially all of its or any Material
Subsidiary's assets to any person, other than Grantee or a Grantee
Subsidiary, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of such transaction and upon the terms and conditions set
forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of Grantee, of either (x) the
Acquiring Corporation (as defined below) or (y) any person that controls
the Acquiring Corporation (the Acquiring Corporation and any such
controlling person being hereinafter referred to as the "Substitute Option
Issuer").
(b) EXERCISE OF SUBSTITUTE OPTION. The Substitute Option shall
be exercisable for such number of shares of the Substitute Common Stock (as
is hereinafter defined) as is equal to the product of (i) the Market Price
(as defined below) MULTIPLIED by the number of shares of the Issuer Common
Stock for which the Option was theretofore exercisable, DIVIDED by (ii) the
Average Price (as is hereinafter defined). The exercise price of the
Substitute Option per share of the Substitute Common Stock (the "Substitute
Purchase Price") shall then be equal to the product of the Option Price
MULTIPLIED by a fraction in which the numerator is the number of shares of
Common Stock for which the Option was theretofore exercisable and the
denominator is the number of shares for which the Substitute Option is
exercisable. For purposes of this Agreement, the term "Market Price" shall
mean the highest of (i) the price per share of Common Stock paid or to be
paid by any third party pursuant to an agreement with Issuer (whether by
way of a merger, consolidation or otherwise) and (ii) in the event of a
sale of all or substantially all of Issuer's assets, the sum of the price
paid in such sale for such assets and the current market value of the
remaining assets of Issuer as determined by a nationally recognized
independent investment banking firm selected by Grantee divided by the
number of shares of Common Stock of Issuer outstanding at the time of such
sale. In determining the Market Price, the value of consideration other
than cash shall be the value determined by a nationally recognized
independent investment banking firm investing banking firm selected by
Grantee
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whose determination shall be conclusive and binding on all parties.
(c) TERMS OF SUBSTITUTE OPTION. The Substitute Option shall
otherwise have the same terms as the Option, PROVIDED, HOWEVER, that if the
terms of the Substitute Option cannot, for legal reasons, be the same as
the Option, such terms shall be as similar as possible and in no event less
advantageous to Grantee.
(d) SUBSTITUTE OPTION DEFINITIONS. The following terms have the
meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving person, and (iii) the transferee of all or any
substantial part of the Issuer's assets (or the assets of any Issuer
subsidiary);
(ii) "Substitute Common Stock" shall mean the common stock issued
by the Substitute Option Issuer upon exercise of the Substitute
Option; and
(iii) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of the Substitute
Common Stock on the day preceding such consolidation, merger or sale;
PROVIDED, HOWEVER, that if such closing price is not ascertainable due
to an absence of a public market for the Substitute Common Stock,
"Average Price" shall mean the higher of (i) the price per share of
Substitute Common Stock paid or to be paid by any third party pursuant
to an agreement with the issuer of the Substitute Common Stock and
(ii) the book value per share, calculated in accordance with generally
accepted accounting principles, of the Substitute Common Stock
immediately prior to exercise of the Substitute Option; PROVIDED,
FURTHER, that if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of common
stock issued by Issuer, the person merging into Issuer or by any
company which controls or is controlled by such merging person, as
Grantee may elect.
(e) CAP ON SUBSTITUTE OPTION. In no event, pursuant to any of
the foregoing paragraphs, shall the Substitute Option be exercisable for
more than that
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proportion of the outstanding Substitute Common Stock equal to the
proportion of the outstanding Common Stock of the Company which the Grantee
had the right to acquire immediately prior to the issuance of the
Substitute Option. In the event that the Substitute Option would be
exercisable for more than the proportion of the outstanding Substitute
Common Stock referred to in the immediately preceding paragraph but for
this clause (e), the Substitute Option Issuer shall make a cash payment to
Grantee equal to the excess of (i) the value of the Substitute Option
without giving effect to the limitation in this clause (e) over (ii) the
value of the Substitute Option after giving effect to the limitation in
this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by Grantee and the
Substitute Option Issuer.
SECTION 8. EXTENSION OF EXERCISE RIGHT. Notwithstanding
Sections 2 and 6 hereof, if Grantee has given the notice referred to in one
or more of such Sections, the exercise of the rights specified in any such
Section shall be extended (a) if the exercise of such rights requires
obtaining regulatory approvals (including any required waiting periods) to
the extent necessary to obtain all regulatory approvals for the exercise of
such rights, and (b) to the extent necessary to avoid liability under
Section 16(b) of the Securities Exchange Act by reason of such exercise;
PROVIDED, HOWEVER, that in no event shall any closing date occur more than
6 months after the related Notice Date, and, if the closing date shall not
have occurred within such period due to the failure to obtain any required
approval by the Federal Reserve Board or any other Governmental Authority
despite the best efforts of Issuer or the Substitute Option Issuer, as the
case may be, to obtain such approvals, the exercise of the Option shall be
deemed to have been rescinded as of the related Notice Date. In the event
(a) Grantee receives official notice that an approval of the Federal
Reserve Board or any other Governmental Authority required for the purchase
and sale of the Option Shares will not be issued or granted or (b) a
closing date has not occurred within 6 months after the related Notice Date
due to the failure to obtain any such required approval, Grantee shall be
entitled to exercise the Option in connection with the resale of the Option
Shares pursuant to a registration statement as provided in Section 6.
SECTION 9. ISSUER'S REPRESENTATIONS AND WARRANTIES. Issuer
hereby represents and warrants to Grantee as follows:
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(a) CORPORATE AUTHORITY. Issuer has the requisite corporate
power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly approved by the Board of Directors of Issuer and no other
corporate proceedings on the part of Issuer are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This
Agreement has been duly executed and delivered by, and constitutes a valid
and binding obligation of, Issuer, enforceable against Issuer in accordance
with its terms, except as enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought; and
(b) AVAILABILITY OF SHARES. Issuer has taken all necessary
corporate action to authorize and reserve and to permit it to issue, and at
all times from the date hereof through the termination of this Agreement in
accordance with its terms will have reserved for issuance upon the exercise
of the Option, that number of shares of Common Stock equal to the maximum
number of shares of Common Stock at any time and from time to time issuable
hereunder, and all such shares, upon issuance pursuant hereto, will be duly
authorized, validly issued, fully paid, non-assessable, and will be
delivered free and clear of all claims, liens, encumbrances and security
interests.
SECTION 10. ASSIGNMENT.
(a) ASSIGNMENT. Neither of the parties hereto may assign any of
its rights or delegate any of its obligations under this Agreement or the
Option created hereunder to any other person without the express written
consent of the other party, except that Grantee may assign this Agreement
to a wholly owned subsidiary of Grantee and Grantee may assign its rights
hereunder in whole or in part after the occurrence of a Preliminary
Purchase Event; PROVIDED, HOWEVER, that until the date at which the Federal
Reserve Board has approved an application by Grantee under the BHC Act to
acquire the shares of Common Stock subject to the Option, other than to a
wholly owned subsidiary of Grantee, Grantee may not assign its rights under
the Option except in (i) a widely dispersed public distribution, (ii) a
private placement in which no one party acquires the right to purchase in
excess of 2% of the voting shares of Issuer,
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(iii) an assignment to a single party (E.G., a broker or investment banker)
for the purpose of conducting a widely dispersed public distribution on
Grantee's behalf, or (iv) any other manner approved by the Federal Reserve
Board. The term "Grantee" as used in this Agreement shall also be deemed
to refer to Grantee's permitted assigns. Any attempted assignment
prohibited by this Section 10 is void and without effect.
(b) RESTRICTIVE LEGEND. Any assignment of rights of Grantee to
any permitted assignee of Grantee hereunder shall bear the restrictive
legend at the beginning thereof substantially as follows:
The transfer of the option represented by this assignment and the
related option agreement is subject to resale restrictions
arising under the Securities Act of 1933, as amended, and to
certain provisions of an agreement between Monarch Bancorp and
California Commercial Bankshares ("Issuer"), dated as of the 19th
day of December, 1996. A copy of such agreement is on file at
the principal office of Issuer and will be provided to any
permitted assignee of the Option without change upon receipt by
Issuer of a written request therefor.
It is understood and agreed that (i) the reference to the resale
restrictions of the Securities Act in the above legend shall be removed by
delivery of substitute assignments without such reference if Grantee shall
have delivered to Issuer a copy of a letter from the staff of the SEC, or
an opinion of counsel, in form and substance satisfactory to Issuer, to the
effect that such legend is not required for purposes of the Securities Act;
(ii) the reference to the provisions of this Agreement in the above legend
shall be removed by delivery of substitute assignments without such
reference if the Option has been sold or transferred in compliance with the
provisions of this Agreement and under circumstances that do not require
the retention of such reference; and (iii) the legend shall be removed in
its entirety if the conditions in the preceding clauses (i) and (ii) are
both satisfied. In addition, such assignments shall bear any other legend
as may be required by law.
SECTION 11. FILINGS AND CONSENTS. Each of Grantee and Issuer
will use its reasonable efforts to make all filings with, and to obtain
consents of, all third parties and Governmental Authorities necessary to
the consummation of the transactions contemplated by this Agreement,
including, without limitation, making application
-15-
if necessary, for listing of the shares of Common Stock issuable hereunder
on any exchange or quotation system and applying to the Federal Reserve
Board under the BHC Act and to state banking authorities for approval to
acquire the shares issuable hereunder.
SECTION 12. REMEDIES. The parties hereto acknowledge that
damages would be an inadequate remedy for a breach of this Agreement by
either party hereto and that the obligations of the parties shall hereto be
enforceable by either party hereto through injunctive or other equitable
relief. Both parties further agree to waive any requirement for the
securing or posting of any bond in connection with the obtaining of any
such equitable relief and that this provision is without prejudice to any
other rights that the parties hereto may have for any failure to perform
this Agreement.
SECTION 13. SEVERABILITY. If any term, provision, covenant or
restriction contained in this Agreement is held by a court or a federal or
state regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants and
restrictions contained in this Agreement shall remain in full force and
effect, and shall in no way be affected, impaired or invalidated.
SECTION 14. NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be deemed to have been duly given when
delivered in person, by cable, telegram, telecopy or telex, or by
registered or certified mail (postage prepaid, return receipt requested) at
the respective addresses of the parties set forth in the Plan.
SECTION 15. COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same agreement and shall be
effective at the time of execution.
SECTION 16. EXPENSES. Except as otherwise expressly provided
herein, each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
SECTION 17. ENTIRE AGREEMENT. Except as otherwise expressly
provided herein or in the Plan, this Agreement contains the entire
agreement between the parties
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with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors except as assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
SECTION 18. DEFINITIONS. Capitalized terms used in this
Agreement and not defined herein but defined in the Plan shall have the
meanings assigned thereto in the Plan.
SECTION 19. EFFECT ON PLAN. Nothing contained in this Agreement
shall be deemed to authorize Issuer or Grantee to breach any provision of
the Plan.
SECTION 20. SELECTIONS. In the event that any selection or
determination is to be made by Grantee hereunder and at the time of such
selection or determination there is more than one Grantee, such selection
shall be made by a majority in interest of such Grantees.
SECTION 21. FURTHER ASSURANCES. In the event of any exercise of
the option by Grantee, Issuer and such Grantee shall execute and deliver
all other documents and instruments and take all other action that may be
reasonably necessary in order to consummate the transactions provided for
by such exercise.
SECTION 22. VOTING. Except to the extent Grantee exercises the
Option, Grantee shall have no rights to vote or receive dividends or have
any other rights as a shareholder with respect to shares of Common Stock
covered hereby.
SECTION 23. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of California.
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IN WITNESS WHEREOF, each of the parties has caused this Stock
Option Agreement to be executed on its behalf by their officers thereunto
duly authorized, all as of the date first above written.
MONARCH BANCORP
By:/s/ Xxxx X. Xxxxx, Xx.
-----------------------------------------
Name: Xxxx X. Xxxxx, Xx.
Title: Chairman
CALIFORNIA COMMERCIAL BANKSHARES
By:/s/ Xxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Executive Vice President
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