EXHIBIT 99B
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STOCK OPTION AGREEMENT
DATED AS OF THE 19TH DAY OF APRIL, 1999
BY AND BETWEEN
MID-STATE BANCSHARES
AND
CITY COMMERCE BANK
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STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of the 19th day of April, 1999, (this
"Agreement"), between MID-STATE BANCSHARES, a California corporation
("Grantee"), and CITY COMMERCE BANK , a California banking corporation
("Issuer")
WITNESSETH:
WHEREAS, Grantee and Issuer are entering into an Agreement to Merge and
Plan of Reorganization dated as of the date hereof (the "Plan"), which is being
executed by the parties hereto simultaneously with the execution of this
Agreement;
WHEREAS, as a condition and inducement to ▇▇▇▇▇▇▇'s entering into the Plan
and in consideration therefor, Issuer has agreed to grant Grantee the Option (as
defined below); and
WHEREAS, the Board of Directors of Issuer has approved the grant of the
Option and the Plan prior to the date hereof;
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.
(a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to 325,884shares of
fully paid and nonassessable shares of Common Stock, no par value per share
("Common Stock"), of Issuer at a fixed price per share of $17.00 (the "Initial
Price"); PROVIDED, HOWEVER, that in the event Issuer issues or agrees to issue
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"); and, PROVIDED
FURTHER, HOWEVER, that in no event shall the number of shares of Common Stock
for which the Option is exercisable exceed 19.9% of the number of shares of
Common Stock then issued and outstanding without giving effect to any shares
subject or issued pursuant to the Option. 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.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof), the number of shares of Common Stock subject to the Option
shall be increased so that after such issuance such number together with any
shares of Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing
contained in this Section 1(b) or elsewhere in this Agreement shall be deemed to
authorize Issuer to issue shares in breach of any provision of the Plan.
SECTION 2. EXERCISE OF OPTION
(a) TIMING OF EXERCISE, TERMINATION. Provided that (i) Grantee shall not
be in material breach of the agreements or covenants contained in this
Agreement or the Plan and (ii) no preliminary or permanent injunction
or other order against delivery of shares covered by the Option issued
by any court of competent jurisdiction in the United States shall be
in effect, Grantee may exercise the
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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, (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
10.1(c), (d) or (f), or by Grantee and Issuer pursuant to Section
10.1(a) thereof if Grantee shall at that time have been entitled to
terminate the Plan pursuant to Section 10.1(c), (d) or (f) thereof),
or (v) 18 months after the termination of the Plan by Grantee pursuant
to Section 10.1(c), (d) or (f) or by Grantee and Issuer pursuant to
Section 10.1(a)thereof if Grantee shall at that time have been
entitled to terminate the Plan pursuant to Section 10.1(c),(d) or
(f)thereof. The events described in clauses (i) - (v) in the
preceding sentence are hereinafter collectively referred to as an
"Exercise Termination Event" Anything herein to the contrary
notwithstanding, any purchase of shares upon exercise of the Option
shall be subject to compliance with applicable law. The rights set
forth in Section 7 hereof shall terminate when the right to exercise
the Option terminates (other than as a result of a complete exercise
of the Option) as set forth herein.
(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")
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
"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 Issuer
Subsidiary, (y) a purchase, lease or other acquisition of all or
substantially all of the assests of or assumption of all or substantially
all the deposits of Issuer or any Issuer Subsidiary or (z) a purchase or
other acquisition (including by way of merger, condolidation, share
exchange or otherwise) of securites representing 10% or more of the voting
power of Issuer or any Issuer Subsidiary, 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 or any
Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of
business) shall have acquired Beneficial Ownership or the right to acquire
Beneficial Ownership, 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 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;
(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 Grantee Subsidiary shall have commenced (as such term is defined in
Rule 14d-2 under the Exchange Act) or shall have filed a
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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, or such third party
states its intention to make such a proposal if the Plan terminates and/or
the Option expires, Issuer shall have breached any covenant or obligation
contained in the Plan and such breach would entitle Grantee to terminate
the Plan (without regard to the cure period provided for therein);
(v) The holders of the Common Stock shall not have approved the Plan
by the requisite vote at the meeting of such shareholders held for the
purpose of voting on the Plan, or such meeting shall not have been held or
shall have been canceled prior to termination of the Plan, in each case
after it shall have been publicly announced that any Person (other than
Grantee or any Grantee Subsidiary) shall have (A) made, or disclosed any
intention to make, a BONA FIDE proposal to engage in an Acquisition
Transaction, (B) commenced a Tender Offer or filed a registration statement
under the Securities Act with respect to an Exchange Offer or (C) filed an
application (or given a notice) with, whether in draft of final form, the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board") or any other governmental authority or regulatory or administrative
agency or commission (each, a Governmental Authority"), for approval to
engage in an Acquisition Transaction;
(vi) 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, shall have filed an application or notice with the Federal
Reserve Board or other Governmental Authority for approval to engage in an
Acquisition Transaction; or
(vii) The Issuer's Board of Directors shall have withdrawn or
modified (or publicly announced its intention to withdraw or modify) in any
manner adverse in any respect to Grantee its recommendation that the
shareholders of Issuer approve the transactions contemplated by the Plan in
anticipation of engaging in an Acquisition Proposal, or Issuer or any
Issuer Subsidiary shall have authorized, recommended, proposed (or publicly
announced in its intention to authorize, recommend or propose) an agreement
to engage in an Acquisition Transaction with any person other than Grantee
or a Grantee Subsidiary.
(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, such that,
upon the consummation of such acquisition, such Person would have
Beneficial ownership, in the aggregate, of 25% or more of the then
outstanding shares of Common Stock; or
(ii) The occurrence of a Preliminary Purchase Event described in
Section 2(b)(i) or (ii) hereof except that the percentage referred to in
either such case shall be 25%.
(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.
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(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 sixty 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) 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 present and surrender this Agreement and 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) 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, 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 and not subject to any preemptive rights.
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(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 pre-merger 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
"BHCA"), or the Change in Bank Control Act of 1978, as amended, or any
California 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 duty and
effectively to issue shares of Common Stock pursuant hereto, and to protect the
rights of Grantee against dilution.
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 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, or distributions in respect of, 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), 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
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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
take such action as may be required under applicable federal or state laws,
including if applicable registering or qualifying any shares issued and issuable
pursuant to the Option for sale or the sale of any such shares or otherwise
securing any necessary governmental permits or approvals for the sale of such
shares (any and all such actions are hereinafter referred to as a
"Registration"), 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. Issuer
will use its best efforts to cause such Registration to remain in effect for
such period not in excess of 180 days from the day such Registration is first
effected. Grantee shall have the right to demand two such Registrations at the
Issuer's expense. The foregoing notwithstanding, if, at the time of any such
request by Grantee as provided above, Issuer is in the process of a 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 such
Registration contemplated hereby may be reduced; PROVIDED, HOWEVER, that after
any such required reduction, the number of Option Shares to be included in such
Registration 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; PROVIDED FURTHER, HOWEVER, that if such reduction occurs,
then Issuer shall effect a Registration for the balance of such shares as
promptly as practicable thereafter as to which no reduction shall thereafter
occur. In addition, if the Issuer proposes to effect a Registration with respect
to its Common Stock or any other securities in such a manner that would permit
the Registration of the Shares or a sale of the Shares for public sale (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 notice 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) delivered to the Issuer within 20
business days after the giving of any such notice, which request shall specify
the number of Shares desired to be disposed by Grantee, the Issuer will use its
best efforts to effect, in connection with such proposed action, the
Registration of the Shares or a sale thereof set forth in such request. Grantee
shall be entitled to two such Registrations at the Issuer's expense. Grantee
shall provide all information reasonably requested by Issuer for inclusion in
connection with any such Registration. In connection with any such Registration,
Issuer and Grantee shall provide each other with representations, warranties,
indemnities and other agreements customarily given in connection with such
Registrations. If requested by Grantee in connection with such Registration,
Issuer and Grantee shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating themselves in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements.
(b) In the event that Grantee requests Issuer to effect a Registration
following the failure to obtain any approval required to exercise the Option as
described in Section 9 hereof, the closing of the sale or other disposition of
the Common Stock or other securities pursuant to such Registration shall occur
substantially simultaneously with the exercise of the Option.
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(c) Except where applicable state law prohibits such payments, Issuer will
pay all expenses (including without limitation registration fees, qualification
fees, blue sky fees and expenses (including the fees and expenses of counsel),
legal expenses, including the reasonable fees and expenses of one counsel to the
holders of Option Shares which are the subject of a Registration, printing
expenses and the costs of special audits or "cold comfort" letters, expenses of
underwriters, excluding discounts and commissions but including liability
insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each Registration pursuant to this Section 6 (including the related
offerings and sales by holders of Option Shares) and all other qualifications,
notification or exemptions pursuant to this Section 6.
(d) In connection with any Registration under this Section 6, Issuer hereby
indemnifies the Grantee, and each officer, director and controlling person of
Grantee and each underwriter thereof, including each person, if any who controls
such holder or underwriter within the meaning of Section 15 of the Securities
Act, against all expenses, losses, claims, damages and liabilities caused by any
untrue, or alleged untrue, statement contained in any registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission,
or alleged omission, to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged untrue statement
that was included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Grantee, or by such underwriter, as the case may be, for all
such expenses, losses, claims, damages and liabilities caused by any untrue, or
alleged untrue, statement, that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon, and in conformity with,
information furnished in writing to Issuer by such holder or such underwriter,
as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 6(d) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 6(d), such indemnified party shall notify
the indemnifying party in writing, of the commencement of such action, but the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 6(d). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying, party either agrees to pay the same, (ii) the indemnifying party
fails to assume the defense of such action with counsel reasonably satisfactory
to the indemnified party, or (iii) the indemnified party has been advised by
counsel that one or more legal defenses may be available to the indemnifying
party that may be contrary to the interests of the indemnified party. No
indemnifying party shall be liable for the fees and expenses of more than one
separate counsel for all indemnified parties or for any settlement entered into
without its consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 6(d) is unavailable to
a party otherwise entitled to be indemnified in respect of any expenses, losses,
claims, damages or liabilities referred to herein, then the indemnifying party,
in lieu of indemnifying such party otherwise entitled to be indemnified, shall
contribute to
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the amount paid or payable by such party to be indemnified as a result of such
expenses, losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of Issuer, the Grantee and the
underwriters in connection with the statements or omissions which resulted in
such expenses, losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable by a party as a
result of the expenses, losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim; PROVIDED HOWEVER that in no case shall the Grantee be responsible, in
the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any Grantee to
indemnify shall be several and not joint with other holders of Option Shares.
SECTION 7. OPTION REPURCHASE.
(a) Upon the occurrence of a Purchase Event that occurs prior to an
Exercise Termination Event, (i) at the request (the date of such request
being the "Request Date") of Grantee, delivered within 30 days of the
Purchase Event (or such later period as may be provided pursuant to Section 9
hereof), Issuer shall repurchase the Option from Grantee at a price (the
"Option Repurchase Price") equal to (x) 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 the Option may then be exercised
and (ii) at the request (the date of such request being the "Request Date")
of the owner of Option Shares from time to time (the "Owner"), delivered
within 3 0) days of a Purchase Event (or such later period as may be provided
pursuant to Section 9 hereof), Issuer shall repurchase such number of the
Option Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to (x) the market/offer price
multiplied by the number of Option Shares so designated. The term
"market/offer price" shall mean the highest of (i) the price per share of
Common Stock at which a tender offer or exchange offer therefor has been made
after the date hereof and on or prior to the Request Date, (ii) 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) or (iv) 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 mutually selected
by Grantee or the Owner, as the case may be, on the one hand, and Issuer, on
the other hand, divided by the number of shares of Common Stock of 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 independent investment banking firm mutually selected
by Grantee or Owner, as the case may be, on the one hand, and Issuer, on the
other hand, whose determination shall be conclusive and binding on all
parties .
(b) Grantee or the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and/or any Option Shares pursuant to
this Section 7 by surrendering for such purpose to 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 Grantee or
the Owner, as the case may be, elects to require Issuer to repurchase the Option
and/or the Option Shares in accordance with the provisions of this Section 7. As
immediately as practicable, and in any event within five business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to Grantee the Option Repurchase Price or to the Owner the
Option Share Repurchase Price or the portion thereof that Issuer is not then
prohibited from so delivering, under applicable law and regulation or as a
consequence of administrative policy.
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(c) Issuer hereby undertakes to use its best efforts to obtain all required
regulatory and legal approvals and to file any required notices as promptly as
practicable in order to accomplish any repurchase contemplated by this Section
7. Nonetheless, to the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full, Issuer
shall immediately so notify Grantee and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to Grantee and/or the 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 five business days after the date on which Issuer is no longer so
prohibited; provide , however, that if Issuer at any time after delivery of a
notice of repurchase pursuant to Section 7(b) is prohibited under applicable
law or regulation from delivering to Grantee and/or the Owner, as appropriate,
the Option Repurchase Price and the Option Share Repurchase Price, respectively,
in full Grantee or Owner may revoke its notice of repurchase of the Option or
the Option Shares either in whole or in part whereupon, in the case of a
revocation in part, Issuer shall promptly (i) deliver to Grantee and/or the
Owner, as appropriate, that portion of the Option Purchase Price or the Option
Share Repurchase Price that Issuer is not prohibited from delivering after
taking into account any such revocation and (ii) deliver, as appropriate, either
(A) to Grantee, a new Agreement evidencing the right of Grantee to purchase that
number of shares of Common Stock equal to the number of shares of Common Stock
purchasable immediately prior to the delivery of the notice of repurchase less
the number of shares of Common Stock covered by the portion of the Option
repurchased or (B) to the Owner, a certificate for the number of Option Shares
covered by the revocation.
(d) Issuer shall not enter into any agreement with any party (other than
Grantee or a Grantee Subsidiary) for an Acquisition Transaction unless the other
party thereto assumes all the obligations of Issuer pursuant to this Section 7
in the event that a Grantee or Owner elects, in its sole discretion, to require
such other party to perform such obligations.
SECTION 8. SUBSTITUTE OPTION.
(a) GRANT OF SUBSTITUTE OPTION. In the event that prior to an Exercise
Termination Event, Issuer shall enter into an agreement (1) 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 Issuer 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 market/offer price (as defined in
Section 7 hereof), MULTIPLIED by the number of shares of the Common Stock for
which the Option was theretofore exercisable, divided by 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
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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.
(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 ding Substitute Common Stock equal to the proportion of the proportion of
the outstanding Common Stock of the Issuer which 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 reasonably acceptable
to the Acquiring Corporation.
SECTION 9. EXTENSION OF EXERCISE RIGHT.
Notwithstanding Sections 2, 6 and 7 and 11 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 Exchange Act by reason of such exercise; PROVIDED,
HOWEVER that in
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no event shall any closing date occur more than 6 months after the related
Notice Date, and, if the closing date shall not have occurred within such period
due to the failure to obtain any required approval by the Federal Reserve Board
or any other Governmental Authority despite the best efforts of Issuer or the
Substitute Option Issuer, as the case may be, to obtain such approvals, the
exercise of the Option shall be deemed to have been rescinded as of the related
Notice Date. In the event (a) Grantee receives official notice .that an approval
of the Federal Reserve Board or any other Governmental Authority required for
the purchase and sale of the Option Shares will not be issued or granted or (b)
a closing date has not occurred within 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 10. ISSUER'S REPRESENTATIONS AND WARRANTIES.
Issuer hereby represents and warrants to Grantee as follows:
(a) CORPORATE AUTHORITY. Issuer has full corporate power arid authority
to execute and deliver this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized 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 authorized, executed and delivered by
the Issuer.
(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 and not subject to any preemptive rights.
(c) NO VIOLATIONS. The execution, delivery and performance of this
Agreement does not or will not, and the consummation by Issuer of any of the
transactions contemplated hereby will not, constitute or result in (A) a breach
or violation of, or a default under, its articles of incorporation or by-laws,
or the comparable governing-instruments of any of the Issuer Subsidiaries, or
(B) a breach or violation of, or a default under, any agreement, lease,
contract, note, mortgage, indenture, arrangement or other obligation of it or
any of the Issuer Subsidiaries (with or without the giving of notice, the lapse
of time or both) or under any law, rule, ordinance or regulation or judgment,
decree, order, award or governmental or non-governmental permit or license to
which it or any of the Issuer Subsidiaries is subject, that would, in any case
give any other person the ability to prevent or enjoin Issuer's performance
under this Agreement in-any material respect.
SECTION 11. ▇▇▇▇▇▇▇'S REPRESENTATIONS AND WARRANTIES.
Grantee hereby represents and warrants to issuer as follows:
(a) CORPORATE AUTHORITY. Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby. The
execution and deliver of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Grantee. This Agreement has been duly authorized, executed and
delivered by ▇▇▇▇▇▇▇.
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(b) INVESTMENT INTENT. The Option is not being, and any shares of Common
Stock or other securities acquired by Grantee upon exercise of the Option will
not be, acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the Securities Act.
SECTION 12. 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 pall after the occurrence
of a Preliminary Purchase Event; PROVIDED, HOWEVER, that until the date at which
both the Federal Reserve Board has approved an application by Grantee under the
BHCA and the California Commissioner of Financial Institutions (the
"Commissioner") has approved or exempted an application by Grantee under Section
700 et. seq. of the California Financial Code 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 ▇▇▇▇▇▇▇'s
behalf, or (iv) any other manner approved by the Federal Reserve Board and the
Commissioner. The term "Grantee" as used in this Agreement shall also be deemed
to refer to ▇▇▇▇▇▇▇'s permitted assigns. Any attempted assignment prohibited by
this Section 12 is void and without effect.
SECTION 13. 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 BHCA and to
state banking authorities for approval to acquire the shares issuable hereunder.
SECTION 14. 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 15. 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. If for any reason such court or regulatory agency determines that
the Holder is not permitted to acquire, or Issuer is not permitted to repurchase
pursuant to
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Section 7, the full number of shares of Common Stock provided in Section 1 (a)
hereof (as adjusted pursuant to Section 1 (b) or Section 5 hereof), it is the
express intention of Issuer to allow Grantee to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible, without any
amendment or modification hereof.
SECTION 16. 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 17. 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 18. 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 19. 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 20. 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 2 1. EFFECT ON PLAN.
Nothing contained in this Agreement shall be deemed to authorize Issuer or
Grantee to breach any provision of the Plan.
SECTION 22. 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 23. 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 24. 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 25. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of California.
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IN WITNESS WHEREOF, each of the parties has caused this Stock Option
Agreement to be executed on its behalf by their officers thereunto duly
authorized, all as of the date first above written.
MID-STATE BANCSHARES
By:
------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Executive Officer
CITY COMMERCE BANK
By:
------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chairman of the Board
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