Exhibit 2.2
STOCK OPTION AGREEMENT
DATED AS OF THE 19TH DAY OF DECEMBER, 1996
BY AND BETWEEN
MONARCH BANCORP
AND
CALIFORNIA COMMERCIAL BANKSHARES
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
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 Securi-
ties 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 Sub-
sidiary. 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 sub-
sidiary, 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
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 pur-
poses 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
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
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/Appli-
cation"), (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.
(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 provi-
sions 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 certifi-
cate(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 cer-
tificates representing such shares of Common Stock shall not
then actually be delivered to Grantee. 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 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 regu-
lations 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 Govern-
mental 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
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 obli-
gation 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.
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
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, warran-
ties, 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
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 com-
pany, or (iii) to sell or otherwise transfer all or substan-
tially 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 selected by Grantee
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 consolida-
tion, 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 con-
trolled 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
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 Govern-
mental 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:
(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, xxxx-
torium and other similar laws affecting the enforcement of
creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunc-
tive 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 obliga-
tions 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,
(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 assign-
ments 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
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
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 here-
under 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.
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: Xxxx X. Xxxxx, Xx.
----------------------------
Name: Xxxx X. Xxxxx, Xx.
Title: Chairman
CALIFORNIA COMMERCIAL BANKSHARES
By: Xxxx X. Xxxxxxxx
-----------------------------
Name: Xxxx X. Xxxxxxxx
Title: Executive Vice President
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. . . . . . . . . . . . . 15
SECTION 11. 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
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
