Exhibit 10.1
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of September 16, 1998, between
Antelope Valley Bank, a California banking corporation (the "Issuer") and
Eldorado Bancshares, Inc., a Delaware corporation (the "Grantee").
WHEREAS, the Grantee and the Issuer have entered into an Agreement and
Plan of Merger of even date herewith (as amended and in effect from time to
time, the "Acquisition Agreement"), which agreement is being executed by the
parties thereto prior to the execution of this Agreement; and
WHEREAS, as a condition to the Grantee's entry into the Acquisition
Agreement and in consideration for such entry, the Issuer has agreed to grant to
the Grantee the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Acquisition Agreement, the
parties hereto agree as follows:
1. The Issuer hereby grants to the Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 152,700 fully paid and nonassessable shares (the "Option Shares") of common
stock, no par value per share, of the Issuer ("Common Stock") at a price of
$43.25 per share (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, provided that, except as provided by Section
8 hereof, in no event shall the number of shares for which this Option is
exercisable exceed 19.9% of the Issuer's issued and outstanding shares of Common
Stock (without giving effect to any shares of Common Stock issued pursuant to
the Option) less the number of shares previously issued pursuant to exercise of
the Option.
2. (a) The Holder (as such term is defined in paragraph (c) below) may
exercise the Option, in whole or in part, if, but only if, both an Initial
Triggering Event (as defined in paragraph (e) below) and a Subsequent Triggering
Event (as defined in paragraph (f) below) shall have occurred prior to the
occurrence of an Exercise Termination Event (as defined in paragraph (b) below),
provided that the Holder shall have sent the written notice of such exercise (as
provided in paragraph (h) of this Section 2) within thirty (30) days following
such Subsequent Triggering Event and prior to the Exercise Termination Event.
(b) The term "Exercise Termination Event" shall mean the earliest of
(i) the Effective Time, (ii) any termination of the Acquisition Agreement in
accordance with the provisions thereof if such termination occurs prior to the
occurrence of an Initial Triggering Event, and (iii)
in the event of any termination of the Acquisition Agreement in accordance with
the provisions thereof after the occurrence of an Initial Triggering Event, the
passage of twelve (12) months after such termination. Upon the occurrence of an
Exercise Termination Event, this Option (or such portion hereof as to which the
holder has not theretofore given a notice of exercise in accordance with
paragraph (h) below) shall terminate and become void, without notice or other
action by 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, as amended (the "Exchange Act") and the rules and
regulations thereunder). Notwithstanding the termination of the Option, the
Grantee shall be entitled to purchase those Option Shares with respect to which
it has exercised the Option in whole or in part prior to the termination of the
Option.
(c) The term "Holder" shall mean the holder or holders of the Option.
(d) The term "Schedule 13G Investor" shall mean any person holding
voting securities of the Issuer eligible to report the beneficial ownership of
such securities on Schedule 13G pursuant to the provisions of Rule 13d-1 under
the Exchange Act.
(e) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof.
(i) The Issuer or any subsidiary of the Issuer, without having
received the Grantee's prior written consent, shall have entered into
an agreement to engage in an Acquisition Transaction with any Person,
other than the Grantee or any subsidiary of the Grantee, or, without
the consent of the Grantee, the Board of Directors of the Issuer shall
have approved an Acquisition Transaction or recommended that the
shareholders of the Issuer approve or accept any Acquisition
Transaction other than as contemplated by the Acquisition Agreement.
For purposes of this Agreement, the term "Acquisition Transaction"
shall mean (A) a merger or consolidation, or any similar transaction,
with the Issuer or any Significant Subsidiary of the Issuer (as such
term is defined in Regulation S-X of the Securities and Exchange
Commission), or any subsidiary of the Issuer which, after such
transaction, would be a Significant Subsidiary of the Issuer, (B) a
purchase, lease or other acquisition of all or substantially all of the
assets of the Issuer or any Significant Subsidiary of the Issuer or (C)
a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing
ten percent (10%) or more of the voting power of the Issuer or any
Significant Subsidiary of the Issuer;
(ii) Any Person, other than the Grantee or any subsidiary of
the Grantee or the Issuer in a fiduciary capacity, and other than a
Schedule 13G Investor, shall have acquired beneficial ownership (as
hereinafter defined) or the right to acquire beneficial ownership of
ten percent (10%) or more of the outstanding shares of Common Stock if
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such Person owned beneficially less than ten percent (10%) of the
outstanding shares of Common Stock on the date of this Agreement, or
any Person shall have acquired beneficial ownership of an additional
three percent (3%) of the outstanding shares of Common Stock if such
Person owned beneficially ten percent (10%) or more of the outstanding
shares of Common Stock on the date of this Agreement (the term
"beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the Exchange Act, and in
the rules and regulations thereunder);
(iii) (A) The holders of Common Stock shall not have approved
the Acquisition Agreement at the meeting of such shareholders held for
the purpose of voting on the Acquisition Agreement, (B) such meeting
shall not have been held or shall have been canceled prior to the
termination of the Acquisition Agreement unless the Grantee shall be in
default of any of its obligations under the Acquisition Agreement or
the Issuer shall be entitled to terminate the Acquisition Agreement
pursuant to its terms, or (C) the Issuer's Board of Directors shall
have withdrawn or modified in a manner adverse to Grantee the
recommendation of Issuer's Board of Director's with respect to the
Acquisition Agreement, in each case after it shall have been publicly
announced or become publicly known that (x) any Person, other than the
Grantee or any subsidiary of the Grantee, shall have made a bona-fide
proposal to the Issuer or its shareholders to engage in an Acquisition
Transaction by public announcement or written communication that shall
be or become the subject of public disclosure; or (y) any Person other
than the Grantee or any subsidiary of the Grantee, other than in
connection with a transaction to which the Grantee has given its prior
written consent, shall have filed an application or notice with the
Federal Reserve Board or other federal or state bank regulatory
authority, which application or notice has been accepted for
processing, for approval to engage in an Acquisition Transaction;
(iv) After any Person other than the Grantee or any subsidiary
of the Grantee has made a proposal to the Issuer or its shareholders to
engage in an Acquisition Transaction, the Issuer shall have breached
any covenant or obligation contained in the Acquisition Agreement and
such breach (A) shall remain uncured at the expiration of any
applicable cure period provided for under the Acquisition Agreement,
(B) would entitle the Grantee to terminate the Acquisition Agreement
and (C) shall not have been remedied prior to the Notice Date (as
defined in paragraph (h) below); or
(v) Any person (other than Grantee or any subsidiary of
Grantee) shall have commenced (as such term is defined in Rule 14d-2
under the 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 50% 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).
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(f) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any Person (other than a Schedule 13G
Investor) of beneficial ownership of fifteen percent (15%) or more of
the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described
in subparagraph (i) of paragraph (e) of this Section 2, except that the
percentage referenced in clause (C) thereof shall be fifteen percent
(15%) in lieu of ten percent (10%).
(g) The Issuer shall notify the Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
(together, a "Triggering Event"), it being understood that the giving of such
notice by the Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(h) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to the Issuer a written notice prior to an Exercise
Termination Event (the date of which being herein referred to as the "Notice
Date") specifying (i) the total number of shares of Common Stock it will
purchase pursuant to such exercise, and (ii) a place and date not earlier than
three (3) business days nor later than sixty (60) business days from the Notice
Date for the closing of such purchase (the "Closing"); provided that if prior
notification to or approval of the Federal Reserve Board or any other regulatory
agency is required in connection with such purchase, the Holder shall promptly
file the required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. The term "business
day" for purposes of this Agreement means any day, excluding Saturdays, Sundays
and any other day that is a legal holiday in The Commonwealth of Massachusetts
or a day on which banking institutions in The Commonwealth of Massachusetts are
authorized by law or executive order to close.
(i) At the Closing, the Holder shall pay to the Issuer the aggregate
purchase price for the shares of Common Stock purchased pursuant to the exercise
of the Option in immediately available funds by a wire transfer to a bank
account designated by the Issuer, provided that failure or refusal of the Issuer
to designate such a bank account shall not preclude the Holder from exercising
the Option.
(j) At such Closing, simultaneously with the delivery of immediately
available funds as provided in paragraph (i) above, the Issuer shall deliver to
the Holder a certificate or certificates representing the number of shares of
Common Stock purchased by the Holder and, if the Option should be exercised in
part only, a new Option evidencing the rights of the Holder
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thereof to purchase the balance of the shares purchasable hereunder, and the
Holder shall deliver to the Issuer a copy of this Agreement and a letter
agreeing that the Holder will not offer to sell or otherwise dispose of such
shares in violation of applicable law or the provisions of this Agreement.
(k) Certificates for the Common Stock delivered at a Closing hereunder
may (in the sole discretion of the Issuer) be endorsed with a restrictive legend
that shall read substantially as follows:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO RESTRICTION PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED
AS OF SEPTEMBER __, 1998, A COPY OF WHICH AGREEMENT WILL BE PROVIDED TO
THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A
WRITTEN REQUEST THEREFOR."
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend 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 legend. In addition,
such certificates shall bear any other legend as may be required by law.
(l) Upon the giving by the Holder to the Issuer of the written notice
of exercise of the Option provided for under paragraph (h) above, the tender of
the applicable purchase price in immediately available funds and the tender of a
copy of this Agreement to the Issuer, such Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Issuer shall then be closed
or that certificates representing such shares of Common Stock shall not then be
actually delivered to the Holder. The Issuer shall pay all expenses, and any and
all United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issue and delivery of stock
certificates under this Section 2 in the name of the Holder or its assignee,
transferee or designee.
3. The Issuer agrees (a) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without requiring the Issuer's
shareholders to approve an increase in the number of authorized shares of Common
Stock after giving effect to all other options, warrants, convertible securities
and other rights to purchase Common Stock, (b) that it will not, by charter
amendment or through reorganization, consolidation, merger, dissolution or sale
of assets, or by any other voluntary act, avoid or seek to avoid the observance
or performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by the Issuer, (c) promptly to take all action
as may from time to time be required (including without limitation
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cooperating fully with any Holders in preparing any applications or notices
required under the Bank Holding Company Act of 1956, as amended, or the Change
in Bank Control Act of 1978, as amended, or any state banking law), in order to
permit such Holders to exercise the Option and the Issuer duly and effectively
to issue shares of Common Stock pursuant hereto, and (d) promptly to take all
action provided herein to protect the rights of any Holders against dilution.
4. This Agreement (and the Option granted hereby) is exchangeable,
without expense, at the option of each Holder, upon presentation and surrender
of this Agreement at the principal office of the 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 same number of shares of Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any Stock
Option Agreements and related Options for which this Agreement (and the Option
granted hereby) may be exchanged. Upon receipt by the 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, the Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute for all purposes and under all circumstances an additional
contractual obligation on the part of the Issuer, whether or not this Agreement
so lost, stolen, destroyed or mutilated shall at any time be enforceable by
anyone.
5. The number of Option Shares shall be subject to adjustment from time
to time as provided in this Section 5.
(a) (i) In the event of any change in the shares of Common
Stock by reason of stock dividend, split up, merger, recapitalization,
subdivision, conversion, combination, exchange of shares or similar
transaction, the type and number of Option Shares, and the Option Price
therefor, shall be adjusted appropriately, and proper provision shall
be made in the agreements governing such transaction, so that the
Grantee shall receive upon exercise of the Option the number and class
of shares or other securities or property that the Grantee would have
held immediately after such event if the Option had been exercised
immediately prior to such event, or the record date therefor, as
applicable.
(ii) The Issuer may, at its election, make such increases in
the number of Option Shares, in addition to those required under
subparagraph (a)(i) above, as shall be determined by its Board of
Directors to be advisable in order to avoid taxation, so far as
practicable, of any dividend of stock or stock rights or any event
treated as such for federal income tax purposes to the recipients.
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(b) Whenever the number of Option Shares (or other securities)
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 is equal to the number of Option Shares prior to the
adjustment and the denominator of which is equal to the number of Option Shares
(or other securities) purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within thirty (30) days of such Subsequent Triggering Event (whether
on the Grantor's own behalf or on the behalf of any subsequent Holder of this
Option (or part thereof) or any of the shares of Common Stock issued pursuant
hereto), promptly prepare, file and keep current, with respect to the Option and
the Option Shares, a "shelf" registration statement under Rule 415 of the
Securities Act or any successor provision, and Issuer shall use its best efforts
to qualify such shares under any applicable state securities laws; provided,
however, that the Issuer shall have no obligation to file a registration
statement under the Securities Act with respect to the Option Shares if the
offer and sale of such common stock is exempt from the registration requirements
of the Securities Act pursuant to Section 3 thereof, including without
limitation Section 3(a)(2). Issuer will use all commercially reasonable efforts
to cause such registration statement first to become effective and then to
remain effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect sales or other dispositions of Option Shares.
Grantee shall have the right to demand one such registration. Any registration
statement prepared and filed under this Section 6, and any sales covered
thereby, shall be at Issuer's expense, except for underwriting discounts or
commissions, broker's fees and expenses and the fees and disbursements of
Grantee's counsel related thereto. The foregoing notwithstanding, if, at the
time of any request by Grantee for registration of the Option or Option Shares
as provided above, (i) Issuer is in registration with respect to an underwritten
public offering of shares of Common Stock, and (ii) in the good faith judgment
of the managing underwriter or managing underwriters, or, if none, the sole
underwriter or underwriters, of such offering, the inclusion of the Option or
Option Shares would interfere with the successful marketing of the shares
represented by the Option, the number of Option Shares otherwise to be covered
in the registration statement contemplated hereby may be reduced; provided,
however, that if such reduction occurs, the Issuer shall file a registration
statement for the balance as promptly as practical and no reduction shall
thereafter occur. Each such Holder shall provide all information reasonably
requested by Issuer for inclusion in any registration statement to be filed
hereunder. If requested by any such Holder in connection with such registration,
Issuer shall become a party to any underwriting agreement relating to the sale
of such shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements for the Issuer.
7. (a) Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, and subject in all events to
paragraph (c) hereof, (i) at the
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request of the Holder, delivered within thirty (30) days following such
occurrence (or such later period as provided in Section 10), the Issuer shall
repurchase the Option from the Holder at a price (the "Option Repurchase Price")
equal to the amount by which (A) the market/offer price (as defined below)
exceeds (B) the Option Price, multiplied by the number of shares for which this
Option may then be exercised, and (ii) at the request of any owner of Option
Shares from time to time (the "Owner"), delivered within thirty (30) days
following such occurrence (or such later period as provided in Section 10), the
Issuer shall repurchase such number of the Option Shares from such Owner as the
Owner shall designate at a price per share ("Option Share Repurchase Price")
equal to the greater of (A) the market/offer price and (B) the average exercise
price per share paid by the Owner for the Option Shares so designated. The term
"market/offer price" shall mean the highest of (w) the price per share of the
Common Stock at which a tender offer or exchange offer therefor has been made,
(x) the price per share of the Common Stock to be paid by any Person, other than
the Grantee or a subsidiary of the Grantee, pursuant to an agreement with the
Issuer, (y) the highest sale price for shares of Common Stock within the six (6)
month period immediately preceding the required repurchase of Options or Option
Shares, as the case may be, or (z) in the event of a sale of all or
substantially all of the Issuer's assets, the sum of the price paid, after
deducting therefrom all related expenses, including taxes, in such sale for such
assets and the current market value of the remaining assets of the Issuer as
determined by a nationally recognized investment banking firm selected by a
majority in the interest of the Holders or the Owners, as the case may be, and
reasonably acceptable to the Issuer, divided by the number of shares of Common
Stock of the Issuer outstanding at the time of such sale. In determining the
market/offer price, the value of consideration other than cash shall be
determined by a nationally recognized investment banking firm selected by a
majority in interest of the Holders or the Owners, as the case may be, and
reasonably acceptable to the Issuer.
(b) Each Holder and Owner, as the case may be, may exercise its right
to require the Issuer to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to the Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that such Holder
or Owner elects to require the Issuer to repurchase this Option and/or Option
Shares in accordance with the provisions of this Section 7. As promptly as
practicable, and in any event within ten (10) business days (the "Payment Date")
after the surrender of the Option and/or certificates representing Option Shares
and the receipt of such notice or notices relating thereto (the "Surrender
Date"), the Issuer shall deliver or cause to be delivered to each Holder the
Option Repurchase Price and/or to each Owner the Option Share Repurchase Price
therefor or the portion thereof that the Issuer is not then prohibited under
applicable law and regulation from so delivering in accordance with paragraph
(c) hereof.
(c) To the extent that the Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy or order, or as a
result of a written agreement or other binding obligation with a governmental or
regulatory body or agency (including without
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limitation any resolution of the Issuer's Board of Directors adopted at the
direction or request of any government or regulatory body or agency)
(collectively, "Regulatory Impediment"), from repurchasing the Option and/or the
Option Shares in full or to the extent that the Issuer would not have been
designated "Adequately Capitalized" (as such term is defined by the Issuer's
primary federal bank regulator) as of the last day of the Issuer's most recent
fiscal quarter had the Issuer repurchased the Option and/or the Option Shares in
full as of such date, the Issuer shall immediately so notify each Holder and/or
each Owner and thereafter deliver or cause to be delivered, from time to time,
to such Holder and/or Owner, as appropriate, the portion of the Option
Repurchase Price and the Option Share Repurchase Price, respectively, that it is
no longer prohibited from delivering, within ten (10) business days after the
date on which the Issuer is no longer so prohibited or that the Issuer can
deliver and remain designated "Adequately Capitalized" within the meaning of
this sentence; provided, however, that if the Issuer at any time after delivery
of a notice of repurchase pursuant to paragraph (b) of this Section 7 is
prohibited from delivering as a consequence of a Regulatory Impediment, or the
delivery of which would cause the Issuer not be designated "Adequately
Capitalized" to any Holder and/or Owner, as appropriate, the Option Repurchase
Price and the Option Share Repurchase Price, respectively, in part or in full
(and the Issuer hereby undertakes to use its best efforts to receive all
required regulatory and legal approvals and to file any required notices as
promptly as practicable in order to accomplish such repurchase), such Holder or
Owner may revoke its notice of repurchase of the Option or the Option Shares
either in whole or to the extent of the prohibition, whereupon the Issuer shall
promptly (i) deliver to such Holder and/or Owner, as appropriate, that portion
of the Option Purchase Price or the Option Share Repurchase Price that the
Issuer is not prohibited from delivering or that the Issuer can deliver and
remain designated "Adequately Capitalized;" and (ii) deliver, as appropriate,
either (A) to such Holder, a new Stock Option Agreement evidencing the right of
such Holder to purchase that number of shares of Common Stock obtained by
multiplying the number of shares of Common Stock for which the surrendered Stock
Option Agreement was exercisable at the time of delivery of the notice of
repurchase by a fraction, the numerator of which is the Option Repurchase Price
less the portion thereof theretofore delivered to the Holder and the denominator
of which is the Option Repurchase Price, or (B) to such Owner, a certificate for
the Option Shares it is then so prohibited or restricted from repurchasing.
8. (a) In the event that prior to an Exercise Termination Event, the
Issuer shall enter into an agreement (i) to consolidate with or merge into
any Person, other than the Grantee or one of the Grantee's subsidiaries, and
the Issuer shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any Person, other than the Grantee or
one of its subsidiaries, to merge into the Issuer and the 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 fifty percent (50%) of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise
transfer all or substantially all
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of its assets to any Person, other than the Grantee or one of the Grantee's
subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall upon the
consummation of any such transaction and upon the terms and conditions set
forth herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (A) the Acquiring
Corporation (as defined in paragraph (b) below) or (B) any Person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) The term "Acquiring Corporation" shall mean (A) the
continuing or surviving corporation of a consolidation or merger with
the Issuer (if other than the Issuer), (B) the Issuer in a merger in
which the Issuer is the continuing or surviving Person, and (C) the
transferee of all or substantially all of the Issuer's assets.
(ii) The term "Substitute Common Stock" shall mean the common
stock issued by the issuer of the Substitute Option upon exercise of
the Substitute Option.
(iii) The term "Assigned Value" shall mean the "market/offer
price", as defined in paragraph (a) of Section 7 hereof.
(iv) The term "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the one (1) year
period 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 that if the Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with respect to
a share of common stock issued by the Person merging into the Issuer or
by any company which controls such Person, as the Holder may elect.
(c) Except as set forth in (d) below, the Substitute Option shall have
the same terms as the Option, provided that if the terms of the Substitute
Option cannot, for legal reasons, be the same as the Option, such terms shall,
to the extent legally permissible, be as similar as possible to, and in no event
less advantageous to the Holder than, the terms of the Option. The issuer of the
Substitute Option shall also enter into an agreement with the then Holder or
Holders of the Substitute Option in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of the Substitute Common Stock as is equal to (i) the product of (A) the
Assigned Value and (B) the number of shares of Common Stock for which the Option
is then exercisable, divided by (ii) the Average Price. The exercise price of
the Substitute Option per share of the Substitute Common Stock shall then be
equal to the Option Price multiplied by a fraction in which the numerator is
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the number of Option Shares, as adjusted pursuant to this Section 8(d), and the
denominator is the number of shares of the Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option (without giving effect to any shares of Substitute Common
Stock issued pursuant to the Substitute Option) less the number of shares
previously issued pursuant to the Substitute Option. In the event that the
Substitute Option would be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise but for this paragraph
(e), the issuer of the Substitute Option (the "Substitute Option Issuer") shall
make a cash payment to the Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this paragraph (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this paragraph (e). The difference in value shall be determined by
a nationally recognized investment banking firm selected by a majority in
interest of the Holders or the Owners, as the case may be.
(f) The Issuer shall not enter into any transaction described in
paragraph (a) of this Section 8 unless the Acquiring Corporation and any Person
that controls the Acquiring Corporation shall have assumed in writing all the
obligations of the Issuer hereunder.
9. (a) At the written request of the holder of the Substitute Option
(the "Substitute Option Holder"), and subject to paragraph (c) below, the issuer
of the Substitute Option (the "Substitute Option Issuer") shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to the amount by which (i) the Highest Closing
Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute
Option, multiplied by the number of shares of the Substitute Common Stock for
which the Substitute Option may then be exercised, and at the request of each
owner (the "Substitute Share Owner") of shares of the Substitute Common Stock
(the "Substitute Shares"), the Substitute Option Issuer shall repurchase the
Substitute Shares at a price per share (the "Substitute Share Repurchase Price")
equal to the greater of (A) the Highest Closing Price and (B) the average
exercise price per share paid by the Substitute Share Owner for the Substitute
Shares so designated. The term "Highest Closing Price" shall mean the highest
closing price for shares of the Substitute Common Stock within the six (6) month
period immediately preceding the date the Substitute Option Holder gives notice
of the required repurchase of the Substitute Option or the Substitute Share
Owner gives notice of the required repurchase of the Substitute Shares, as
applicable.
(b) Each Substitute Option Holder and the Substitute Share Owner, as
the case may be, may exercise its respective right to require the Substitute
Option Issuer to repurchase the Substitute Option and the Substitute Shares
pursuant to this Section 9 by surrendering for such purpose to the Substitute
Option Issuer, at its principal office, the agreement for such Substitute
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Option (or, in the absence of such an agreement, a copy of this Agreement) and
certificates for Substitute Shares accompanied by a written notice or notices
stating that such Substitute Option Holder or Substitute Share Owner elects to
require the Substitute Option Issuer to repurchase the Substitute Option and/or
the Substitute Shares in accordance with the provisions of this Section 9. As
promptly as practicable, and in any event within five (5) business days after
the surrender of the Substitute Option and/or the certificates representing
Substitute Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor, or the
portion(s) thereof which the Substitute Option Issuer is not then prohibited
under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, or
as a result of a written agreement or other binding obligation with a
governmental or regulatory body or agency, from repurchasing the Substitute
Option and/or the Substitute Shares in full, the Substitute Option Issuer shall
immediately so notify each Substitute Option Holder and/or the Substitute Share
Owner and thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or Substitute Share Owner, as appropriate, that
portion of the Substitute Option Repurchase Price and the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five (5) business days after the date on which the Substitute
Option Issuer is no longer so prohibited, provided, however, that if the
Substitute Option Issuer is, at any time after delivery of a notice of
repurchase pursuant to paragraph (b) of this Section 9 prohibited under
applicable law or regulation, or as a consequence of administrative policy, or
as a result of a written agreement or other binding obligation with a
governmental or regulatory body or agency, from delivering to the Substitute
Option Holder and/or the Substitute Share Owner, as appropriate, the Substitute
Option Repurchase Price and the Substitute Share Repurchase Price, respectively,
in part or in full (and the Substitute Option Issuer shall use its best efforts
to receive all required regulatory and legal approvals as promptly as
practicable in order to accomplish such repurchase), the Substitute Option
Holder or Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or to the extent of
the prohibition, whereupon the Substitute Option Issuer shall promptly (i)
deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the
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Substitute Share Owner, a certificate for the Substitute Option Shares it is
then so prohibited from repurchasing.
10. The thirty (30) day period for exercise of certain rights under
Sections 2, 6, 7 and 12 hereof shall be extended in each such case: (i) to the
extent necessary to obtain all Regulatory approvals for the exercise of such
rights and for the expiration of all statutory waiting periods; and (ii) to the
extent necessary to avoid liability under Section 16(b) of the Exchange Act by
reason of such exercise, provided that notice of intent to exercise such rights
shall be given to the Issuer within the requisite thirty (30) day period and the
Grantee and the Holders shall use their best efforts to promptly obtain all
requisite approvals and cause the expiration of all requisite waiting periods.
11. The Issuer hereby represents and warrants to the Grantee as
follows:
(a) The Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Issuer and no other corporate proceedings on the part
of the Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by the Issuer. This Agreement is the valid and legally binding
obligation of the Issuer, enforceable against the Issuer in accordance with its
respective terms, except that enforcement thereof may be limited by the
receivership, conservatorship and supervisory powers of bank regulatory agencies
generally as well as bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting enforcement of creditors rights generally and except that
enforcement thereof may be subject to general principles of equity (regardless
of whether enforcement is considered in a proceeding in equity or at law) and
the availability of equitable remedies.
(b) The 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,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other Person, whether by operation of law or otherwise, without the express
written consent of the other party, except that (a) the Grantee shall, at any
time, be permitted to assign its rights under this Option Agreement or the
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Option created hereunder to any Affiliate (as defined in the Acquisition
Agreement) of the Grantee and (b) in the event a Subsequent Triggering Event
shall have occurred prior to an Exercise Termination Event, the Grantee may,
subject to the right of first refusal set forth in Section 13, assign, transfer
or sell in whole or in part its rights and obligations hereunder within thirty
(30) days following such Subsequent Triggering Event (or such later period as
provided in Section 9); provided, however, that in the event the Grantee sells,
assigns or transfers all or a portion of the Option to other Holders as
permitted by this Agreement, the Grantee may exercise its rights hereunder on
behalf of itself and such Holders.
13. If at any time after the occurrence of a Subsequent Triggering
Event and, with respect to shares of Common Stock or other securities acquired
by the Grantee pursuant to an exercise of the Option, prior to the expiration of
twenty-four (24) months after the date on which the Option would have terminated
but for its exercise pursuant to Section 2(b), the Grantee shall desire to sell,
assign, transfer or otherwise dispose of the Option, in whole or in part, or all
or any of the shares of Common Stock or other securities acquired by the Grantee
pursuant to the Option, the Grantee shall give the Issuer written notice of the
proposed transaction (an "Offeror's Notice"), identifying the proposed
transferee, accompanied by a copy of a binding offer to purchase the Option or
such shares or other securities signed by such transferee and setting forth the
terms of the proposed transaction. An Offeror's Notice shall be deemed an offer
by the Grantee to the Issuer, which may be accepted within ten (10) business
days of the receipt of such Offeror's Notice, on the same terms and conditions
and at the same price at which the Grantee is proposing to transfer the Option
or such shares or other securities to such transferee. The purchase of the
Option or such shares or other securities by the Issuer shall be settled within
five (5) business days of the date of the acceptance of the offer and the
purchase price shall be paid to the Grantee in immediately available funds,
provided that, if prior notification to or approval, consent or waiver of the
Federal Reserve Board or any other regulatory authority is required in
connection with such purchase, the Issuer shall promptly file the required
notice or application for approval, consent or waiver and shall expeditiously
process the same (and the Grantee shall cooperate with the Issuer in the filing
of any such notice or application and the obtaining of any such approval) and
the period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which, as the case may be, (a) the required
notification period has expired or been terminated or (b) such approval has been
obtained and, in either event, any requisite waiting period shall have passed.
In the event of the failure or refusal of the Issuer to purchase the Option or
the shares or other securities, as the case may be, covered by an Offeror's
Notice or if the Federal Reserve Board or any other regulatory authority
disapproves the Issuer's proposed purchase of the Option or such shares or other
securities, the Grantee may, within sixty (60) days following the date of the
Offeror's Notice (subject to any necessary extension for regulatory
notification, approval, or waiting periods), sell all, but not less than all, of
the portion of the Option (which may be one hundred percent (100%)) or such
shares or other securities, as the case may be, proposed to be transferred to
the proposed transferee identified in the Offeror's Notice at no less than the
price specified and on terms no more favorable to the proposed transferee than
those set forth in the
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Offeror's Notice. The requirements of this Section 13 shall not apply to (i) any
disposition of the Option or any shares of Common Stock or other securities by a
Person to whom the Grantee has assigned its rights under the Option with the
prior written consent of the Issuer, (ii) any sale by means of a public offering
in which steps are taken to reasonably ensure that no purchaser will acquire
securities representing more than five percent (5%) of the outstanding shares of
Common Stock of the Issuer or (iii) any transfer to a direct or indirect
wholly-owned subsidiary of the Grantee which agrees in writing to be bound by
the terms hereof.
14. Each of the Grantee and the Issuer will use all 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 applying to the
Federal Reserve Board under the Bank Holding Company Act of 1956, as amended,
for approval to acquire the shares issuable hereunder.
15. Notwithstanding anything to the contrary herein, in the event that
the Holder or the Owner or any Related Person thereof (as hereinafter defined)
is a Person making an offer or proposal to engage in an Acquisition Transaction
(other than the transaction contemplated by the Acquisition Agreement), then (a)
in the case of a Holder or any Related Person thereof, the Option held by it
shall immediately terminate and be of no further force or effect, and (b) in the
case of an Owner or any Related Person thereof, the Option Shares held by it
shall be immediately repurchasable by the Issuer at the Option Price. For
purposes of this Agreement, a "Related Person" of a Holder or Owner means any
Affiliate (as defined in Rule 12b-2 of the rules and regulations under the
Exchange Act) of the Holder or the Owner and any Person that is required to file
a Schedule 13D with the Holder or the Owner with respect to shares of Common
Stock or options to acquire the Common Stock.
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or the Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section l(a) hereof (as adjusted pursuant to Sections l(b) or 6(a)
hereof), it is the express intention of the Issuer to allow the Holder to
acquire or to require the Issuer to repurchase such lesser number of shares as
may be permissible, without any amendment or modification hereof.
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18. 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 Acquisition Agreement.
19. This Agreement shall be governed by and construed in accordance
with the laws of the State of California, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
20. 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.
21. 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.
22. Except as otherwise expressly provided herein, this Agreement
contains the entire agreement between the parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereof, written or oral. The terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any party, other than
the parties hereto, and their respective successors and permitted assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Acquisition Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Stock Option
Agreement to be executed as a sealed instrument on its behalf by its officers
thereunder duly authorized, all as of the day and year first above written.
ANTELOPE VALLEY BANK
By:
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Title: President and Chief Executive Officer
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ELDORADO BANCSHARES, INC.
By:
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Title: President and Chief Executive Officer
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