EXHIBIT B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of the 29th day of April, 1997 (this
"AGREEMENT"), between Monarch Bancorp, a California corporation ("GRANTEE"), and
SC Bancorp, a California corporation ("ISSUER").
WITNESSETH:
WHEREAS, Grantee and Issuer are entering into an Agreement and Plan of
Reorganization dated as of the date hereof (the "MERGER AGREEMENT"), 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
Merger Agreement 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 Merger Agreement, 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 1,491,050 (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 $11.875 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 Merger Agreement following the occurrence of a
Preliminary Purchase Event (as defined below), (iv) termination of the Merger
Agreement 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
Merger Agreement by Grantee pursuant to Section 11.1(b)(iii) or (g) thereof), or
(v) 18 months after the termination of the Merger Agreement by Grantee pursuant
to Section 11.1(b)(iii) or (g) thereof. The events described in clauses (i) -
(v) in the preceding sentence are hereinafter collectively referred to as an
"EXERCISE TERMINATION EVENT."
(b) PRELIMINARY PURCHASE EVENT. The term "PRELIMINARY PURCHASE
EVENT" shall mean any of the following events or transactions occurring after
the date hereof:
(i) Issuer or any of its subsidiaries (each an "ISSUER SUBSIDIARY")
without having received Grantee's prior written consent, shall have entered into
an agreement to engage in an Acquisition Transaction (as defined below) with any
Person (the term "PERSON" for purposes of this Agreement having the meaning
assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act
of 1934 (the "SECURITIES EXCHANGE ACT"), and the rules and regulations
thereunder) other than Grantee or any of its subsidiaries (each a "GRANTEE
SUBSIDIARY") or the board of directors of Issuer shall have recommended that the
shareholders of Issuer approve or accept any Acquisition Transaction with any
Person other than Grantee or any Grantee Subsidiary. For purposes of this
Agreement, "ACQUISITION TRANSACTION" shall mean (x) a merger or consolidation,
or any similar transaction, involving Issuer or any of Issuer's subsidiaries,
(y) a purchase, lease or other acquisition of all or substantially all of the
assets of Issuer or any subsidiary or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of Issuer or any
subsidiary, other than by exercise of options, warrants or other rights (or in
settlement or satisfaction of such rights) set forth in Section 4.2(a) of the
SCB Disclosure Letter issued in connection with the Merger Agreement (the "SCB
DISCLOSURE LETTER"), 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 Section 4.2(a) of the SCB Disclosure
Letter, of shares of Common Stock (the term "BENEFICIAL OWNERSHIP" for purposes
of this Agreement having the meaning assigned thereto in Section 13(d) of the
Securities Exchange Act, and the rules and regulations thereunder) such that,
upon the consummation of such acquisition, such Person would have Beneficial
Ownership, in the aggregate, of 10% or more of the then outstanding shares of
Common Stock if such Person is a director or officer of the Issuer, and 25% or
more of the then outstanding shares of Common Stock if such Person is not a
director or officer of the Issuer;
(iii) Any Person other than Grantee or any Grantee Subsidiary shall
have made a bona fide proposal to Issuer or its shareholders, by public
announcement or written communication that is or becomes the subject of public
disclosure, to engage in an Acquisition Transaction (including, without
limitation, any situation in which any
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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 Merger Agreement and such breach
would entitle Grantee to terminate the Merger Agreement or the holders of Common
Stock shall not have approved the Merger Agreement at the meeting of such
stockholders held for the purpose of voting on the Merger Agreement, such
meeting shall not have been held or shall have been canceled prior to
termination of the Merger Agreement 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 Merger Agreement;
(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 Section
4.2(a) of the SCB Dislosure Letter, 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
shareholders of Issuer approve the Merger Agreement.
(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 Section 4.2(a) of the SCB Disclosure Letter or as a
result of the execution and delivery of Shareholders Agreements referred to in
Section 6.5 of the Merger Agreement, 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
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(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 30 business days) running from the Notice Date (the
"CLOSING DATE") and a place at which the closing of such purchase shall take
place; provided, that, if prior notification to or approval of the Federal
Reserve Board or any other Governmental Authority is required in connection with
such purchase (each, a "NOTIFICATION" or an "APPROVAL," as the case may be), (a)
Grantee shall promptly file, or cause to be filed, the required notice or
application for approval ("NOTICE/APPLICATION"), (b) Grantee shall expeditiously
process, or cause to be expeditiously processed, the Notice/Application and (c)
for the purpose of determining the Closing Date pursuant to clause (iii) of this
sentence, the period of time that otherwise would run from the Notice Date shall
instead run from the later of (x) in connection with any Notification, the date
on which any required notification periods have expired or been terminated and
(y) in connection with any Approval, the date on which such approval has been
obtained and any requisite waiting period or periods shall have expired. For
purposes of Section 2(a) hereof, any exercise of the Option shall be deemed to
occur on the Notice Date relating thereto. On or prior to the Closing Date,
Grantee shall have the right to revoke its exercise of the Option in the event
that the transaction constituting a Purchase Event that gives rise to such right
to exercise shall not have been consummated.
(f) PAYMENTS. At the closing referred to in Section 2(e) hereof,
Grantee shall pay to Issuer the aggregate Option Price for the shares of Common
Stock specified in the Option Notice in immediately available funds by wire
transfer to a bank account designated by Issuer; PROVIDED, HOWEVER, that failure
or refusal of Issuer to designate such a bank account shall not preclude Grantee
from exercising the Option.
(g) DELIVERY OF COMMON STOCK. At such closing, simultaneously with
the delivery of immediately available funds as provided in Section 2(f) hereof,
Issuer shall deliver to Grantee a certificate or certificates representing the
number of shares of Common Stock specified in the Option Notice and, if the
Option should be exercised in part only, a new Option evidencing the rights of
Grantee thereof to purchase the balance of the shares of Common Stock
purchasable hereunder.
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(h) COMMON STOCK CERTIFICATES. Certificates for Common Stock
delivered at a closing hereunder shall be endorsed with a restrictive legend
substantially as follows:
THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO RESALE RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND TO CERTAIN PROVISIONS OF AN AGREEMENT BETWEEN MONARCH
BANCORP AND SC BANCORP ("ISSUER") DATED AS OF THE 29TH DAY OF APRIL,
1997. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
ISSUER AND WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON
RECEIPT BY ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if Grantee shall
have delivered to Issuer a copy of a letter from the staff of the Securities and
Exchange Commission (the "COMMISSION"), or an opinion of counsel, in form and
substance satisfactory to Issuer, to the effect that such legend is not required
for purposes of the Securities Act; (ii) the reference to the provisions of this
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law. The Grantee agrees that,
except as otherwise contemplated hereby, the shares to be acquired pursuant
hereto will be acquired for investment only and not with a view to any public
distribution thereof, and Grantee will not offer to sell or otherwise dispose of
the shares in violation of any of the requirements of the Securities Act.
(i) HOLDER OF RECORD. Upon the giving by Grantee to Issuer of an
Option Notice and the tender of the applicable purchase price in immediately
available funds on the Closing Date, Grantee shall be deemed to be the holder of
record of the number of shares of Common Stock specified in the Option Notice,
notwithstanding that the stock transfer books of Issuer shall then be closed or
that certificates representing such shares of Common Stock shall not then
actually be delivered to Grantee. Issuer shall pay all expenses and any and all
United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issuance and delivery of stock
certificates under this Section 2 in the name of Grantee.
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SECTION 3. ISSUER'S COVENANTS.
(a) AVAILABLE SHARES. At all times until the termination of this
Agreement, the Issuer agrees that it shall have reserved for issuance upon the
exercise of the Option that number of authorized and reserved shares of Common
Stock equal to the maximum number of shares of Common Stock at any time and from
time to time issuable hereunder, all of which shares will, upon issuance
pursuant hereto, be duly authorized, validly issued, fully paid, nonassessable,
and delivered free and clear of all claims, liens, encumbrances and security
interests.
(b) COMPLIANCE. The Issuer agrees that it will not, by amendment of
its articles of incorporation or through reorganization, consolidation, merger,
dissolution or sale of assets, or by any other voluntary act, avoid or seek to
avoid the observance or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by Issuer.
(c) CERTAIN ACTIONS, APPLICATIONS AND ARRANGEMENTS. Issuer shall
promptly take all action as may from time to time be required (including (i)
complying with all premerger notification, reporting and waiting period
requirements specified in 15 U.S.C. Section 18a and regulations promulgated
thereunder and (ii) in the event, under the Bank Holding Company Act of 1956, as
amended ("BHC ACT"), or the Change in Bank Control Act of 1978, as amended, or
any state banking law, prior approval of or notice to the Federal Reserve Board
or to any other Governmental Authority is necessary before the Option may be
exercised, cooperating with Grantee in preparing such applications or notices
and providing such information to each such Governmental Authority as it may
require) in order to permit Grantee to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto.
SECTION 4. EXCHANGE OF OPTION.
This Agreement and the Option granted hereby are exchangeable, without
expense, at the option of Grantee, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used in this Section 4 include any
agreements and related options for which this Agreement and the Option granted
hereby may be exchanged.
Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not
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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 Section 4.2(a) of the SCB Disclosure Letter), 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
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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 Option
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
Option 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 Option 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 Option Shares, but only to the extent of
obligating themselves in respect of representations, warranties, indemnities and
other agreements customarily included in such underwriting agreements.
Notwithstanding the foregoing, if Grantee revokes any Option Notice or fails to
exercise any Option with respect to any Option Notice pursuant to Section 2(e)
hereof, Issuer shall not be obligated to continue any registration process with
respect to the sale of Option Shares issuable upon the exercise of such Option
and Grantee shall not be deemed to have demanded registration of Option Shares.
(b) In the event that Grantee requests Issuer to file a registration
statement following the failure to obtain any approval required to exercise the
Option as described
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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 company, or
(iii) to sell or otherwise transfer all or substantially all of its or any
Material Subsidiary's assets to any Person, other than Grantee or a Grantee
Subsidiary, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "SUBSTITUTE
OPTION"), at the election of Grantee, of either (x) the Acquiring Corporation
(as defined below) or (y) any Person that controls the Acquiring Corporation
(the Acquiring Corporation and any such controlling Person being hereinafter
referred to as the "SUBSTITUTE OPTION ISSUER").
(b) EXERCISE OF SUBSTITUTE OPTION. The Substitute Option shall be
exercisable for such number of shares of the Substitute Common Stock (as defined
below) as is equal to (i) the product of the Market Price (as defined below)
multiplied by the number of shares of the Issuer Common Stock for which the
Option was theretofore exercisable, (ii) divided by the Average Price (as
defined below). 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.
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(c) TERMS OF SUBSTITUTE OPTION. The Substitute Option shall
otherwise have the same terms as the Option, provided, however, that if the
terms of the Substitute Option cannot, for legal reasons, be the same as the
Option, such terms shall be as similar as possible and in no event less
advantageous to Grantee.
(d) SUBSTITUTE OPTION DEFINITIONS. The following terms have the
meanings indicated:
(i) "ACQUIRING CORPORATION" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or surviving
Person, and (iii) the transferee of all or any substantial part of the Issuer's
assets (or the assets of any Issuer subsidiary);
(ii) "SUBSTITUTE COMMON STOCK" shall mean the common stock issued by
the Substitute Option Issuer upon exercise of the Substitute Option; and
(iii) "AVERAGE PRICE" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately preceding
the consolidation, merger or sale in question, but in no event higher than
the closing price of the shares of the Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided, however, that if such
closing price is not ascertainable due to an absence of a public market for
the Substitute Common Stock, "Average Price" shall mean the higher of (i) the
price per share of Substitute Common Stock paid or to be paid by any third
party pursuant to an agreement with the issuer of the Substitute Common Stock
and (ii) the book value per share, calculated in accordance with generally
accepted accounting principles, of the Substitute Common Stock immediately
prior to exercise of the Substitute Option; provided, further, that if Issuer
is the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by Issuer, the Person merging
into Issuer or by any company which controls or is controlled by such merging
Person, as Grantee may elect.
(e) CAP ON SUBSTITUTE OPTION. In no event, pursuant to any of the
foregoing paragraphs, shall the Substitute Option be exercisable for more
than that proportion of the outstanding Substitute Common Stock equal to the
proportion of the outstanding Common Stock of the Issuer 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.
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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 six
months after the related Notice Date, and, if the closing date shall not have
occurred within such period due to the failure to obtain any required approval
by the Federal Reserve Board or any other Governmental Authority despite the
best efforts of Issuer or the Substitute Option Issuer, as the case may be, to
obtain such approvals, the exercise of the Option shall be deemed to have been
rescinded as of the related Notice Date. In the event (a) Grantee receives
official notice that an approval of the Federal Reserve Board or any other
Governmental Authority required for the purchase and sale of the Option Shares
will not be issued or granted or (b) a closing date has not occurred within six
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, moratorium and other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought; and
(b) AVAILABILITY OF SHARES. Issuer has taken all necessary corporate
action to authorize and reserve and to permit it to issue, and at all times from
the date hereof through the termination of this Agreement in accordance with its
terms will have reserved for issuance upon the exercise of the Option, that
number of shares of Common Stock equal to the maximum number of shares of Common
Stock at any time and from
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time to time issuable hereunder, and all such shares, upon issuance pursuant
hereto, will be duly authorized, validly issued, fully paid, non-assessable, and
will be delivered free and clear of all claims, liens, encumbrances and security
interests.
SECTION 10. Assignment.
(a) ASSIGNMENT. Neither of the parties hereto may assign any of its
rights or delegate any of its obligations under this Agreement or the Option
created hereunder to any other Person without the express written consent of the
other party, except that Grantee may assign this Agreement to a wholly owned
subsidiary of Grantee and Grantee may assign its rights hereunder in whole or in
part after the occurrence of a Preliminary Purchase Event; PROVIDED, HOWEVER,
that until the date at which the Federal Reserve Board has approved an
application by Grantee under the BHC Act to acquire the shares of Common Stock
subject to the Option, other than to a wholly owned subsidiary of Grantee,
Grantee may not assign its rights under the Option except in (i) a widely
dispersed public distribution, (ii) a private placement in which no one party
acquires the right to purchase in excess of 2% of the voting shares of Issuer,
(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 SC BANCORP
("ISSUER"), DATED AS OF THE 29TH DAY OF APRIL, 1997. 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 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 assignments without such reference if Grantee shall have
delivered to Issuer a copy of a letter from the staff of the Commission, 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
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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 Merger Agreement.
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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 Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
SECTION 18. Definitions.
Capitalized terms used in this Agreement and not defined herein but
defined in the Merger Agreement shall have the meanings assigned thereto in the
Merger Agreement.
SECTION 19. Effect on Merger Agreement.
Nothing contained in this Agreement shall be deemed to authorize
Issuer or Grantee to breach any provision of the Merger Agreement.
SECTION 20. Selections.
In the event that any selection or determination is to be made by
Grantee hereunder and at the time of such selection or determination there is
more than one Grantee, such selection shall be made by a majority in interest of
such Grantees.
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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 interpreted in accordance with
the laws of the State of California without regard to the rules of conflicts of
law thereof.
IN WITNESS WHEREOF, the parties has caused this Stock Option Agreement
to be executed by their respective officers thereunto duly authorized as of the
date first above written above.
MONARCH BANCORP
By: /S/ XXXXXXX X. XXXXXX
----------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
SC BANCORP
By: /S/ XXXXX X. XXXXXXX
----------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
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