THE TRANSFER OF THIS AGREEMENT IS
SUBJECT TO CERTAIN PROVISIONS CONTAINED
HEREIN AND TO RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND
APPLICABLE STATE SECURITIES LAWS
STOCK OPTION AGREEMENT
This Stock Option Agreement, dated as of December 14, 1999 (the
"Agreement"), is made by and between Coast Bancorp, a California corporation
("Issuer"), and Greater Bay Bancorp, a California corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Reorganization dated December 14, 1999 (the "Reorganization Agreement"),
providing for, among other things, the merger of Issuer with and into Grantee
(the "Merger"), with Grantee being the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Reorganization Agreement, Issuer has agreed to grant to Grantee the Option (as
defined below).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Reorganization Agreement, and intending to be legally bound hereby, Issuer
and Grantee agree as follows:
1. DEFINED TERMS. Capitalized terms which are used but not
defined herein shall have the meanings ascribed to such terms in the
Reorganization Agreement. As used in this Agreement, the following terms shall
have the meanings indicated:
(a) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(b) "Federal Reserve Board" means the Board of Governors
of the Federal Reserve System.
(c) "Holder" means Grantee and, to the extent Grantee
has assigned its rights and obligations under this Agreement as permitted
herein, any subsidiary or direct or indirect transferee of Grantee.
(d) "Person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act and the rules and regulations
thereunder.
(e) "Securities Act" means the Securities Act of 1933,
as amended.
2. GRANT OF OPTION. Subject to the terms and conditions set
forth herein, Issuer hereby grants to Grantee an irrevocable option (the
"Option") to purchase up to 958,897shares (the "Option Shares") of common stock,
no par value ("Issuer Common Stock"), of Issuer at a purchase price per Option
Share of $21.25 (the "Purchase Price"), but in no event shall the number of
Option Shares exceed 19.9% of the issued and outstanding shares of Issuer Common
Stock. The Purchase Price and the number of Option Shares that may be received
upon the exercise of the Option are subject to adjustment as set forth below.
3. EXERCISE OF OPTION.
(a) The Holder may exercise the Option, in whole or in
part, at any time and from time to time but only 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 (such earliest
date the "Expiration Date"):
(i) the Effective Time of the Merger; or
(ii) 15 months after the first occurrence of a
Purchase Event; or
(iii) 15 months after the termination of the
Reorganization Agreement on or following (x) the occurrence of a Preliminary
Purchase Event (as defined below) or Purchase Event or (y) a termination by
Grantee pursuant to Section 13.1(d), 13.1(i) or 13.1(j) of the Reorganization
Agreement; or
(iv) termination of the Reorganization Agreement
in accordance with the terms thereof prior to the occurrence of a Purchase
Event or a Preliminary Purchase Event other than a termination by Grantee
pursuant to Section 13.1(d), 13.1(i) or 13.1(j) of the Reorganization
Agreement.
Notwithstanding anything to the contrary contained herein, any purchase of
shares upon exercise of the Option shall be subject to compliance with
applicable law, including, without limitation, the Bank Holding Company Act of
1956, as amended.
(b) As used herein, a "Purchase Event" means any of the
following events:
(i) The Board of Directors of Issuer shall have
approved, or recommended to the Issuer's shareholders that they approve, a
proposal received by Issuer from a person (other than Grantee or any subsidiary
of Grantee) to effect an Acquisition Transaction (as defined below), Tender
Offer (as defined below) or Exchange Offer (as defined below); or
(ii) Issuer, without having received Grantee's
prior written consent, shall have entered into an agreement with any person
(other than Grantee or any subsidiary of Grantee) to effect an Acquisition
Transaction; or
(iii) any person (other than Grantee or any
subsidiary of Grantee) shall have acquired beneficial ownership (as such term
is defined in Rule 13d-3 promulgated under the Exchange Act) of or the right to
acquire beneficial ownership of, or any "group" (as such term is defined under
the Exchange Act and the rules and regulations promulgated thereunder) shall
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have been formed which beneficially owns or has the right to acquire beneficial
ownership of twenty percent (20%) or more of the then outstanding shares of
Issuer Common Stock.
As used herein, the term "Acquisition Transaction" shall mean (A) a merger,
consolidation or similar transaction involving Issuer or any of its subsidiaries
(other than internal mergers, reorganizations, consolidations or dissolutions
involving only Issuer and/or existing subsidiaries and other than a merger,
consolidation or similar transaction in which the common shareholders of Issuer
immediately prior thereto in the aggregate own at least seventy-five percent
(75%) of the common stock of the surviving or successor corporation immediately
after the consummation thereof), (B) the disposition, by sale, lease, exchange
or otherwise, of twenty (20%) or more of the consolidated assets or deposit
liabilities of Issuer and its subsidiaries, or (C) a purchase or other
acquisition (including by way of merger, consolidation, share exchange or any
similar transaction), other than by Issuer or its subsidiaries, of securities
representing twenty percent (20%) or more of the voting power of Issuer or any
of its subsidiaries.
(c) As used herein, a "Preliminary Purchase Event"
means any of the following events:
(i) any person (other than Grantee or any
subsidiary of Grantee) shall have acquired beneficial ownership of, or the
right to acquire beneficial ownership of, or any "group" (as defined under the
Exchange Act and the rules and regulations thereunder) shall have been formed
which beneficially owns or has the right to acquire beneficial ownership of,
ten percent (10%) or more of the then outstanding shares of Issuer Common
Stock; or
(ii) any person (other than Grantee or any
subsidiary of Grantee) shall have commenced (as such term is defined in
Rule 14d-2 under the Exchange Act), or shall have filed a registration
statement under the Securities Act with respect to, a tender offer or exchange
offer to purchase any shares of Issuer Common Stock such that, upon
consummation of such offer, such person would own or control ten percent (10%)
or more of the then outstanding shares of Issuer Common Stock (such an offer
being referred to herein as a "Tender Offer" or an "Exchange Offer",
respectively); or
(iii) Issuer, without having received Grantee's
prior written consent, shall have entered into an agreement with any person
(other than Grantee or any subsidiary of Grantee) with respect to, or the
Board of Directors of Issuer shall have recommended that the shareholders of
Issuer approve or accept, a purchase or other acquisition (including by way
of merger, consolidation, share exchange or any similar transaction), other
than by Issuer or its subsidiaries, representing ten percent (10%) or more of
the voting power of Issuer or any of its subsidiaries; or
(iv) any person (other than Grantee or any
subsidiary of Grantee) shall have filed an application or notice with the
Federal Reserve Board or other federal or state regulatory authority, which
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction; or
(v) the holders of Issuer Common Stock shall
not have approved the Reorganization Agreement at the meeting of such
shareholders held for the purpose of voting on
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the Reorganization Agreement, such meeting shall not have been held or shall
have been canceled prior to termination of the Reorganization 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 Reorganization Agreement, in each case after it shall have
been publicly announced that any person (other than Grantee or any subsidiary
of Grantee) shall have (A) made or disclosed an intention to make a proposal
to engage in an Acquisition Transaction or (B) commenced a Tender Offer or
filed a registration statement under the Securities Act with respect to an
Exchange Offer.
(d) Issuer shall notify Grantee promptly in writing of
the occurrence of any Purchase Event or Preliminary Purchase Event; PROVIDED,
HOWEVER, such notice shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event Holder wishes to exercise the Option,
it shall send to Issuer a written notice (dated the date on which it is sent to
Issuer, which date is referred to as the "Notice Date") specifying (i) the total
number of Option Shares it intends to purchase pursuant to such exercise and
(ii) a date not earlier than three (3) business days nor later than fifteen (15)
business days from the Notice Date for the closing (the "Closing") of such
purchase (the "Closing Date"). The Closing shall be held at the Issuer's
principal office or at such other place as Issuer and Holder may agree. If
prior notification to or approval of the Federal Reserve Board or any other
regulatory authority is required as a condition precedent to such purchase, then
(A) Holder shall promptly file and process the required notice or application
for approval; (B) Issuer shall cooperate with Holder in the filing of the
required notice or application for approval and the obtaining of any such
approval; and (C) the Closing Date shall be subject to extension for such period
of time, not to exceed six (6) months, as may be necessary to permit the Holder
to submit such filing to, and, if necessary, to obtain such approval from, the
Federal Reserve Board or other applicable regulatory authority; PROVIDED,
HOWEVER, that the notice of Option exercise and such governmental filing must be
made, and the Notice Date must be, no later than the date on which the Option
would otherwise terminate. Any exercise of the Option shall be deemed to have
occurred on the Notice Date.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to
Issuer, in immediately available funds by wire transfer to a bank account
designated by Issuer, an amount equal to the Purchase Price multiplied by the
number of Option Shares to be purchased on such Closing Date and (ii) present
and surrender this Agreement to the Issuer at the address of the Issuer
specified in Section 12(g) hereof.
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided in
Section 4(a), (i) Issuer shall deliver to Holder (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever, and (B) if the Option is exercised in part
only, an executed new agreement with the same terms as this Agreement evidencing
the right to purchase the balance of the shares of Issuer Common Stock
purchasable hereunder; and (ii) Holder shall deliver to Issuer a letter agreeing
that Holder shall not offer to sell or otherwise dispose of such
4
Option Shares in violation of the provisions of this Agreement or
applicable state and federal securities laws.
(c) Certificates for the Option Shares delivered at each
Closing shall be endorsed with a restrictive legend which shall read
substantially as follows:
THE SECURITIES EVIDENCED BY THIS CERT1FICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") OR QUALIFIED OR REGISTERED UNDER THE SECURITIES LAWS OF ANY
STATE. THEY MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND UNTIL THEY HAVE
BEEN QUALIFIED OR REGISTERED UNDER APPLICABLE STATE SECURITIES
LAWS, UNLESS THE ISSUER RECEIVES AN OPINION OF COUNSEL FOR THE
HOLDER OF THESE SECURITIES, REASONABLY SATISFACTORY TO THE ISSUER,
STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS. THE TRANSFER OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE IS ALSO SUBJECT TO RESALE RESTRICTIONS ARISING
UNDER THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF DECEMBER
14, 1999, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE
OFFICE OF THE SECRETARY OF THE ISSUER.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Holder shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel
in form and substance reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act or
applicable state securities laws.
5. REPRESENTATIONS AND WARRANTIES AND COVENANTS OF ISSUER.
Issuer hereby represents and warrants to Grantee as follows:
(a) DUE AUTHORIZATION. Issuer has all requisite
corporate power and authority to enter into this Agreement and, subject to any
approvals 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 all necessary
corporate action on the part of Issuer. This Agreement has been duly executed
and delivered by Issuer and constitutes a binding agreement of Issuer
enforceable against Issuer in accordance with its terms, except as the
enforceability hereof may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting the rights of creditors generally or by equitable
principles, whether such enforcement is sought in law or equity.
(b) AUTHORIZED STOCK. 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 until the
5
obligation to deliver Issuer Common Stock upon the exercise of the Option
terminates, will have reserved for issuance, upon exercise of the Option,
shares of Issuer Common Stock necessary for Holder to exercise the Option,
and Issuer will take all necessary corporate action to authorize and reserve
for issuance all additional shares of Issuer Common Stock or other securities
which may be issued pursuant to Section 7 upon exercise of the Option. The
shares of Issuer Common Stock to be issued upon due exercise of the Option,
including all additional shares of Issuer Common Stock or other securities
which may be issuable pursuant to Section 7, upon issuance pursuant hereto,
shall be duly and validly issued, fully paid and nonassessable, and shall be
delivered free and clear of all liens, claims, charges and encumbrances of
any kind or nature whatsoever, including any preemptive rights of any
stockholder of Issuer.
(c) NO CONFLICT The execution and delivery by Issuer
of this Agreement and the consummation of the transactions contemplated
hereby do not and will not violate or conflict with Issuer's Articles of
Incorporation or Bylaws, or any statute, regulation, judgment, order, writ,
decree or injunction applicable to Issuer (other than as may be effected by
Grantee's ownership of Issuer Common Stock exceeding certain limits set forth
by statute or regulation) or its properties or assets and do not and will not
violate, conflict with, result in a breach of, constitute a default (or an
event which with due notice and/or lapse of time would constitute a default)
under, result in a termination of, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or
other encumbrance upon any of the properties or assets of Issuer under the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed
of trust, or loan agreement or other agreement, instrument or obligation to
which Issuer is a party, or by which Issuer or any of its properties or
assets may be bound or affected.
(d) OBSERVANCE OF COVENANTS. 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.
(e) COMPLIANCE. Issuer shall promptly take all
action as may from time to time be required (including, complying with all
premerger notification, reporting and waiting period requirements of any
federal or state regulatory authority, as necessary, before the Option may be
exercised, and cooperating fully with Holder in preparing such applications
or notices and providing such information to the Federal Reserve Board, the
Federal Deposit Insurance Corporation, the Department of Financial
Institutions or any other regulatory authority as they may require) in order
to permit Grantee to exercise the Option and Issuer duly and effectively to
issue shares of Common Stock pursuant hereto, and to protect the rights of
Grantee against dilution.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby
represents and warrants to Issuer that this Option is not being, and any Option
Shares 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 and applicable state
securities laws.
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7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by
reason of a stock dividend, stock split, split-up, recapitalization,
combination, exchange of shares or similar transaction, the type and number of
shares or securities subject to the Option, and the Purchase Price therefor,
shall be adjusted appropriately, and proper provision shall be made in the
documentation pertaining to such transaction so that Holder shall receive, upon
exercise of the Option, the number and class of shares or other securities or
property that Holder would have received in respect of Issuer Common Stock if
the Option had been exercised immediately prior to such event, or the record
date therefor, as applicable. If any additional shares of Issuer Common Stock
are issued after the date of this Agreement (whether upon exercise of stock
options or otherwise but excluding any issuance pursuant to an event described
in the first sentence of this Section 7(a)), the number of shares of Issuer
Common Stock subject to the Option shall be adjusted so that, after such
issuance, such number of shares, together with any shares of Issuer Common Stock
previously issued pursuant hereto, equals 19.9% of the number of shares of
Issuer Common Stock then issued and outstanding, without giving effect to any
shares subject to or issued pursuant to the Option (with any fractional share
being rounded up to the next full share). Issuer agrees that in no event shall
the number of shares of Issuer Common Stock issued after the date of this
Agreement pursuant to the preceding sentence, together with the number of shares
of Issuer Common Stock subject to the Option, adjusted as aforesaid, exceed the
number of available authorized but unissued and unreserved shares of Issuer
Common Stock. Nothing contained in this Section 7(a) or elsewhere in this
Agreement shall be deemed to authorize Issuer to issue shares in breach of any
provision of the Reorganization Agreement.
(b) In the event that Issuer shall, prior to the
occurrence of an event set forth in Section 3(a) terminating the Holder's right
to exercise the Option, enter into an agreement (i) to consolidate with or merge
into any person, other than Grantee or one of its subsidiaries, and shall not be
the continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or one of its subsidiaries, to merge into
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Issuer Common Stock
shall be changed into or exchanged for stock or other securities of Issuer or
any other person or cash or any other property or the outstanding shares of
Issuer Common Stock immediately prior to such merger 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 consolidated assets or deposit liabilities to any person other than
Grantee or one of its subsidiaries, then, and in each such case, the agreement
governing such transaction shall make proper provisions so that the Option
shall, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the, election of Grantee, of either (A) the Acquiring
Corporation (as defined below), (B) any person that controls the Acquiring
Corporation, (such person being referred to as the "Substitute Option Issuer"),
or (C) in the case of a merger described in clause (ii), Issuer.
(c) The Substitute Option shall have the same terms as
the Option, PROVIDED THAT if the terms of the Substitute Option cannot, for
legal reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to Grantee. The
7
Substitute Option Issuer shall also enter into an agreement with the then
holder or holders of the Substitute Option in substantially the same form as
this Agreement (after giving effect for such purposes to the provisions of
this Agreement), which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of the Substitute Common Stock (as is hereinafter defined) as
is equal to the Assigned Value (as is hereinafter defined) multiplied by the
number of shares of the Issuer 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 Purchase Price
multiplied by a fraction in which the numerator is the number of shares of the
Issuer Common Stock for which the Option was theretofore exercisable and the
denominator is the number of shares of the Substitute Common Stock for which the
Substitute Option is exercisable.
(e) As used herein, the following terms have the
meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the
continuing or surviving corporation of a consolidation or merger with Issuer
(if other than Issuer), (B) Issuer in a merger in which Issuer is the
continuing or surviving person, and (C) the transferee of all or any
substantial part of the Issuer's assets (or the assets of its subsidiaries).
(ii) "Substitute Common Stock" shall mean the
common stock issued by the Substitute Option Issuer upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the highest of
(A) the price per share of the Issuer Common Stock at which a Tender Offer or
Exchange Offer therefor has been made by any person (other than Grantee or a
subsidiary of Grantee), (B) the price per share of the Issuer Common Stock to
be paid by any person (other than Grantee or a subsidiary of Grantee)
pursuant to an agreement with Issuer, and (C) the highest closing price per
share of Issuer Common Stock as quoted on The Nasdaq Stock Market (or if
Common Stock is not quoted on The Nasdaq Stock Market, the highest bid price
per share on any day as quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a recognized source
chosen by Grantee and reasonably acceptable to Issuer) within the six-month
period immediately preceding the agreement governing the transaction
described in Section 7(b) which gave rise to the Substitute Option; PROVIDED,
HOWEVER, that in the event of a sale of less than all of Issuer's
consolidated assets or deposit liabilities, the Assigned Value shall be the
sum of the price paid in such sale for such assets or deposit liabilities and
the current market value of the remaining consolidated net assets of Issuer
as determined by a nationally recognized investment banking firm selected by
the Holder (or by a majority in interest of the Holders if there shall be
more than one Holder (a "Holder Majority")) and reasonably acceptable to
Issuer, divided by the number of shares of the Issuer Common Stock
outstanding at the time of such sale. In the event that an exchange offer is
made for the Issuer Common Stock or an agreement is entered into for a merger
or consolidation involving consideration other than cash, the value of the
securities or other property issuable or deliverable in exchange for the
Issuer Common Stock shall be determined by a nationally recognized investment
banking firm selected by Holder (or a Holder Majority) and reasonably
acceptable to Issuer.
8
(iv) "Average Price" shall mean the average
closing price of the Substitute Common Stock for the one year immediately
preceding the effective date of the consolidation, merger or sale in
question, but in no event higher than the closing price of the shares of the
Substitute Common Stock on the day preceding such consolidation, merger or
sale; PROVIDED THAT if 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 Holder may elect.
(f) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more than 19.9% of
the aggregate of the shares of the Substitute Common Stock outstanding prior to
exercise of the Substitute Option (with any fractional share being rounded up to
the next full share). In the event that the Substitute Option would be
exercisable for more than 19.9% of the aggregate of the shares of the Substitute
Common Stock but for this clause (f), 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 (f) over (ii) the
value of the Substitute Option after giving effect to the limitation in this
clause (f). The difference in value shall be determined by a nationally
recognized investment banking firm selected by Grantee and reasonably acceptable
to the Substitute Option Issuer, whose determination shall be conclusive and
binding on the parties.
(g) Issuer shall not enter into any transaction
described in subsection (b) of this Section 7 unless the Acquiring Corporation
and any person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder and take all other actions that may be necessary
so that the provisions of this Section 7 are given full force and effect
(including, without limitation, any action that may be necessary so that the
shares of Substitute Common Stock are in no way distinguishable from or have
lesser economic value than other shares of common stock issued by the Substitute
Option Issuer).
(h) At the written request of Holder delivered to the
Substitute Option Issuer prior to the occurrence of an event set forth in
Section 3(a) above terminating the Substitute Option, the Substitute Option
Issuer shall repurchase from Holder (i) the Substitute Option and/or (ii) all
Substitute Common Stock theretofore purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date on which Holder
exercises its rights under this Section 7(h) is referred to as the "Substitute
Option Request Date." Such repurchase shall be at an aggregate price (the
"Substitute Option Repurchase Consideration") equal to the sum of (A) the
excess, if any, of (1) the Highest Closing Price (as defined below) for each
share of Substitute Common Stock over (2) the Substitute Purchase Price per
share of Substitute Common Stock, multiplied by the number of shares of
Substitute Common Stock for which the Substitute Option may then be exercised
and as to which Holder has exercised its repurchase right hereunder, plus (B)
the Highest Closing Price for each share of Substitute Common Stock, multiplied
by the number of shares of Substitute Common Stock previously acquired by Holder
upon exercise of the Option or Substitute Option and as to which Holder has
exercised its repurchase right hereunder. The term "Highest Closing Price"
shall mean the highest closing price per share of Substitute Common Stock on the
Nasdaq National Market (or, if Substitute Common Stock is not quoted on The
Nasdaq Stock Market, the highest bid price per share on any day as quoted on the
principal trading market or securities exchange on which such shares are traded
as reported by a recognized source chosen by Grantee and reasonably
9
acceptable to Issuer) or, if such shares are not traded in a trading market
or listed on an exchange, as quoted by the brokerage firms acting as market
makers for the Substitute Common Stock prior to the trading or listing of the
Substitute Common Stock on any national securities exchange and thereafteras
reported by the principal trading market or securities exchange on which such
shares are traded, during the 60 business days preceding the Substitute
Option Request Date.
(i) The provisions of Sections 8(b), 8(c), 11 and 12
shall apply, with appropriate adjustments, to any securities for which the
Option becomes exercisable pursuant to this Section 7 and as applicable,
references in such sections to "Issuer", "Option", "Purchase Price", "Issuer
Common Stock", "Repurchase Consideration", and "Request Date" shall be deemed to
be references to "Substitute Option Issuer", "Substitute Option", "Substitute
Purchase Price", "Substitute Common Stock", "Substitute Option Repurchase
Consideration", and "Substitute Option Request Date", respectively.
8. REPURCHASE AT THE OPTION OF GRANTEE.
(a) At any time after the first occurrence of a
Repurchase Event (as defined in Section 8(e) below), at the written request of
Holder delivered to Issuer prior to the occurrence of an event set forth in
Section 3(a) above terminating the Option, Issuer shall repurchase from Holder
(i) the Option and (ii) all Option Shares theretofore purchased by Holder
pursuant hereto with respect to which Holder then has beneficial ownership. The
date on which Holder exercises its rights under this Section 8 is referred to as
the "Request Date." Such repurchase shall be at an aggregate price (the
"Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by
Holder for any Option Shares acquired pursuant to the Option with respect to
which Holder then has beneficial ownership;
(ii) the excess, if any, of (A) the Applicable
Price (as defined below) for each Option Share over (B) the Purchase Price
per Option Share (subject to adjustment pursuant to Section 7(a)), multiplied
by the number of Option Shares with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable
Price over the Purchase Price (subject to adjustment pursuant to Section
7(a)) paid (or, in the case of Option Shares with respect to which the Option
has been exercised but the Closing Date has not occurred, payable) by Holder
for each Option Share with respect to which the Option has been exercised and
with respect to which Holder then has beneficial ownership, multiplied by the
number of such shares.
(b) If Holder exercises its rights under this Section 8,
Issuer shall, within ten (10) business days after the Request Date, pay the
Repurchase Consideration to Holder in immediately available funds, and Holder
shall surrender to Issuer the Option and the certificates evidencing the Option
Shares purchased thereunder with respect to which Holder then has beneficial
ownership and has designated to be repurchased, and Holder shall warrant that it
has sole record and beneficial ownership of such shares and that the same are
then free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever.
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(c) Notwithstanding the provisions hereof to the
contrary, to the extent that Issuer is prohibited under applicable law,
regulation or administrative policy from repurchasing all or any portion of the
Option or Option Shares, then (i) Issuer shall promptly give notice of such fact
to Holder; (ii) Issuer shall, from time to time subject to the last sentence of
this Section 8(c), deliver to Holder that portion of the Repurchase
Consideration that it is not then so prohibited from paying; (iii) at Holder's
request, Issuer shall promptly file any required notice or application for
approval and expeditiously process the same. After Holder's receipt of such
notice from Issuer, Issuer shall not be in breach of its repurchase obligation
hereunder to the extent it is or remains, despite reasonable efforts to obtain
any required approvals, legally prohibited from repurchasing the Option or
Option Shares. Holder shall have the right (A) to revoke its request for
repurchase with respect to the portion of the Option or Option Shares that
Issuer is prohibited from repurchasing, (B) to require Issuer to deliver to
Holder the Option and/or Option Shares Issuer is prohibited from repurchasing,
and (C) to exercise the Option as to the number of Option Shares for which the
Option was exercisable at the Request Date less the number of such Option Shares
in respect of which the Repurchase Consideration has been lawfully paid.
Notwithstanding anything herein to the contrary, Issuer shall not be obligated
to repurchase all or any part of the Option or Option Shares pursuant to more
than one written request from Holder, except that Issuer shall be obligated to
repurchase, pursuant to more than one written request, any Option or Option
Shares in the event that Holder (1) has revoked its request for repurchase in
accordance with the provisions of this Section 8 prior to the occurrence of an
event set forth in Section 3(a) terminating the Holder's right to exercise the
Option and (2) has delivered, prior to such event, a new written notice
requesting a repurchase. If an event set forth in Section 3(a) terminating the
Holder's right to exercise the Option occurs prior to, or is scheduled to occur
within, 60 days after the date of the notice by Issuer described in clause
8(c)(i) above, then, notwithstanding the occurrence of such terminating event,
Holder shall have the right to receive the Repurchase Consideration to the
extent Issuer is or becomes, within a 60 day period from the date of such notice
by Issuer, legally permitted to repurchase. Except as set forth in the
preceding sentence, Holder's repurchase rights under this Agreement shall
terminate concurrently with the termination of Holder's right to exercise the
Option, pursuant to Section 3(a).
(d) For purposes of this Agreement, the "Applicable
Price" means the highest of (i) the highest price per share of Issuer Common
Stock paid for any such share by the person or groups described in Section
8(e)(i), (ii) the price per share of Issuer Common Stock received by holders of
Issuer Common Stock in connection with any merger or other business combination
transaction described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the
highest bid price per share of Issuer Common Stock on The Nasdaq Stock Market or
other principal trading market or securities exchange on which such shares are
traded as reported by a recognized source selected by Holder during the 60
business days preceding the Request Date; PROVIDED, HOWEVER, that in the event
of a sale of less than all of Issuer's assets, the Applicable Price shall be the
sum of the price paid in such sale for such assets or deposit liabilities and
the current market value of the remaining consolidated net assets of Issuer as
determined by a nationally recognized investment banking firm selected by Holder
(or the Holder Majority) and reasonably acceptable to Issuer, divided by the
number of shares of the Issuer Common Stock outstanding at the time of such
sale. If the consideration to be offered, paid or received pursuant to either
of the foregoing clauses (i) or (ii) shall be other than in cash, the value of
such consideration shall be determined in good faith by an independent
nationally recognized investment banking firm selected by
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Holder (or the Holder Majority) and reasonably acceptable to Issuer, which
determination shall be conclusive for all purposes of this Agreement.
(e) As used herein, a "Repurchase Event" shall occur if
(i) any person (other than Grantee or any subsidiary of Grantee) shall have
acquired beneficial ownership of (as such term is defined in Rule 13d-3
promulgated under the Exchange Act) or the right to acquire beneficial ownership
of, or any "group" (as such term is defined under the Exchange Act and the rules
and regulations promulgated thereunder) shall have been formed which
beneficially owns, or has the right to acquire beneficial ownership of, fifty
percent (50%) or more of the then outstanding shares of Issuer Common Stock or
(ii) any of the transactions described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii)
shall be consummated.
9. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. Issuer shall, subject
to the conditions of Section 9(c) below, if requested by any Holder,
including Grantee and any permitted transferee ("Selling Shareholder"), after
exercise of the Option and prior to an Expiration Date, expeditiously prepare
and file, a registration statement under the Securities Act if such
registration is necessary in order to permit the sale or other disposition of
any or all shares of Issuer Common Stock or other securities that have been
acquired by or are issuable to the Selling Shareholder upon exercise of the
Option in accordance with the intended method of sale or other disposition
stated by the Selling Shareholder in such request, including without
limitation a "shelf" registration statement under Rule 415 under the
Securities Act or any successor provision, and Issuer shall use its best
efforts to qualify such shares or other securities for sale under any
applicable state securities laws. Issuer shall not be obligated to effect
more than one (1) registration pursuant to this Section 9(a).
(b) ADDITIONAL REGISTRATION RIGHTS. If Issuer at any
time after the exercise of the Option proposes to register any shares of
Issuer Common Stock under the Securities Act in connection with an
underwritten public offering of such Issuer Common Stock, Issuer will
promptly give written notice to the Holders of its intention to do so and,
upon the written request of any Holder given within 30 days after receipt of
any such notice (which request shall specify the number of shares of Issuer
Common Stock intended to be included in such underwritten public offering by
the Holder), Issuer will cause all such shares for which a Holder requests
participation in such registration, to be so registered and included in such
underwritten public offering; provided, however, that Issuer may elect to not
cause all of such shares to be so registered (i) if the managing underwriter
imposes a limitation on the number of shares of Issuer Common Stock that may
be included in the registration because, in such underwriter's judgment, such
limitation would be necessary to effect an orderly public distribution, then
Issuer will be obligated to include only such limited portion, if any, of the
Issuer Common Stock with respect to which the Holders have requested
inclusion hereunder, or (ii) in the case of a registration solely to
implement an employee benefit plan or a registration filed on Form S-4 of the
Securities Act or any successor form, in which case Issuer shall not be
required to include any of Holder's shares in the registration; provided,
further, however, that an election pursuant to (i) may be only made one time.
If some but not all the shares of Issuer Common Stock, with respect to which
Issuer shall have received requests for registration pursuant to this Section
9(b), shall be excluded from such registration, Issuer shall make appropriate
allocation of shares to be
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registered among the Holders desiring to register their shares pro rata in
the proportion that the number of shares requested to be registered by each
such Holder bears to the total number of shares requested to be registered by
all such Holders then desiring to have Issuer Common Stock registered for
sale. Issuer shall not be obligated to effect more than one (1) registration
pursuant to this Section 9(b).
(c) CONDITIONS TO REQUIRED REGISTRATION. Issuer
shall use all reasonable efforts to cause each registration statement
referred to in Section 9(a) above to become effective and to obtain all
consents or waivers of other parties which are required therefor and to keep
such registration statement effective; provided, however, that Issuer may
delay any registration of Option Shares required pursuant to Section 9(a)
above for a period not exceeding 90 days if Issuer determines, in the good
faith exercise of its reasonable business judgment, that such registration
and offering could adversely effect or interfere with bona fide financing
plans of Issuer or would require disclosure of information, the premature
disclosure of which could adversely affect Issuer or any transaction under
active consideration by Issuer. Notwithstanding anything to the contrary
stated herein, Issuer shall not be required to register Option Shares under
the Securities Act pursuant to Section 9(a) above:
(i) on more than one occasion during any
calendar year;
(ii) within 90 days after the effective date of
a registration referred to in Section 9(b) above pursuant to which the
Holders concerned were afforded the opportunity to register or qualify such
shares under the Securities Act and such shares were registered or qualified
as requested, and
(iii) unless a request therefor is made to
Issuer by Holders that hold at least 25% or more of the aggregate number of
Option Shares (including shares of Issuer Common Stock issuable upon exercise
of the Option) then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain the
effectiveness of any registration statement after the expiration of nine months
from the effective date of such registration statement. Issuer shall use all
reasonable efforts to make any filings, and take all steps, under all applicable
state securities laws to the extent necessary to permit the sale or other
disposition of the Option Shares so registered in accordance with the intended
method of distribution for such shares; provided, however, that Issuer shall not
be required to consent to the general jurisdiction or qualify to do business in
any state where it is not otherwise required to so consent to such jurisdiction
or to so qualify to do business.
(d) EXPENSES. Except where applicable state law prohibits such
payments, Issuer will pay the costs of such registration or qualification
expenses, including without limitation registration fees, qualification fees,
blue sky fees and expenses, Issuer's legal expenses, costs of special audits or
"cold comfort" letters, expenses of underwriters, excluding discounts and
commissions, and the reasonable fees and expenses of any necessary special
experts in connection with each registration pursuant to Section 9(a) or (b)
above (including the related offerings and sales by holders of Option Shares)
and all other qualifications, notifications, or exemptions pursuant to Section
9(a) or 9(b) above.
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(e) INDEMNIFICATION. In connection with any registration under
Section 9(a) or 9(b) above, Issuer hereby indemnifies the Selling Shareholders,
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 of a material fact 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 or any
underwriter expressly for use therein, and Issuer and each officer, director and
controlling person of Issuer shall be indemnified by such Selling Shareholders,
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 9(e) 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 9(e), 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 9(e). 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 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 indemnified
party that may be contrary to the interest of the indemnifying party. No
indemnifying party shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 9(e) 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 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
14
as is appropriate to reflect the relative benefits received by Issuer, the
Selling Shareholders and the underwriters from the offering of the securities
and also the relative fault of Issuer, the Selling Shareholders 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 any
Selling Shareholder 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 holder to indemnify shall be
several and not joint with other holders.
In connection with any registration pursuant to Section 9(a) or 9(b)
above, Issuer and each Selling Shareholder (other than Grantee) shall enter into
an agreement containing the indemnification provisions of this Section 9(e).
(f) MISCELLANEOUS REPORTING. Issuer shall comply
with all reporting requirements and will do all such other things as may be
necessary to permit the expeditious sale at any time of any Option Shares by
the Selling Shareholders thereof in accordance with and to the extent
permitted by any rule or regulation promulgated by the SEC from time to time.
Issuer shall at its expense provide the Selling Shareholders with any
information necessary in connection with the completion and filing of any
reports or forms required to be filed by them under the Securities Act or the
Exchange Act, or required pursuant to any state securities laws or the rules
of any stock exchange.
10. LISTING. If Issuer Common Stock or any other securities
to be acquired upon exercise of the Option are not then authorized for
quotation on The Nasdaq Stock Market or any securities exchange, Issuer, upon
the request of Holder, will promptly file an application to authorize for
quotation the shares of Issuer Common Stock or other securities to be
acquired upon exercise of the Option on The Nasdaq Stock Market and will use
its commercially reasonable efforts to obtain approval of such listing as
soon as practicable.
11. DIVISION OF OPTION. This Agreement (and the Option
granted hereby) are exchangeable, without expense, at the option of Holder,
upon presentation and surrender of this Agreement at the principal office of
Issuer for other agreements providing for other options of different
denominations entitling the holder thereof to purchase in the aggregate the
same number of shares of Issuer Common Stock purchasable hereunder. The
terms "other agreements" and "other options" as used in the preceding
sentence mean any other 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
15
the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
12. LIMITATION ON TOTAL PROFIT AND NOTIONAL TOTAL PROFIT.
(a) Notwithstanding anything to the contrary
contained herein, in no event shall Grantee's Total Profit (as defined below
in Section 12(c) hereof) exceed $5,500,000 and, if it otherwise would exceed
such amount, Grantee, at its sole election, shall either (i) reduce the
number of shares of Issuer common stock subject to the Option, (ii) pay cash
to Issuer, or (iii) any combination thereof, so that Grantee's actually
realized Total Profit shall not exceed $5,500,000 after taking into account
the foregoing actions.
(b) Notwithstanding anything to the contrary
contained herein, the Option may not be exercised for a number of shares as
would, as of the date of exercise, result in a Notional Total Profit (as
defined below in Section 12(d) hereof) of more than $5,500,000; provided,
that nothing in this sentence shall restrict any exercise of the Option
permitted hereby on any subsequent date on which the Notional Total Profit
would be less than $5,500,000.
(c) As used herein, the term "Total Profit" shall
mean the aggregate amount (before taxes) of the following: (i) the amount
received by Grantee pursuant to Issuer's repurchase of the Option (or any
portion thereof) pursuant to Section 8 hereof, (ii) (x) the amount received
by Grantee or any affiliate of Grantee pursuant to Issuer's repurchase of
Option Shares pursuant to Section 8 hereof, less (y) Grantee's or any
affiliate of Grantee's purchase price for such Option Shares, (iii) (x) the
net cash amounts received by Grantee or any affiliate of Grantee pursuant to
the sale of Option Shares (or any other securities into which such Option
Shares shall be converted or exchanged) to any unaffiliated party, less (y)
Grantee's or any affiliate of Grantee's purchase price of such Option Shares,
and (iv) any equivalent amounts with respect to the Substitute Option.
(d) As used herein, the term "Notional Total Profit"
with respect to any number of shares as to which Grantee or any affiliate of
Grantee may propose to exercise the Option shall be the Total Profit
determined as of the date of such proposed exercise assuming that the Option
were exercised on such date for such number of shares and assuming that such
shares, together with all other Option Shares held by Grantee or any
affiliate of Grantee as of such date, were sold for cash at the closing
market price for the Issuer Common Stock as of the close of business on the
preceding trading day (less customary brokerage commissions).
(e) Grantee agrees, promptly following any exercise
of all or any portion of the Option, and subject to its rights under Section
8 hereof, to use and cause any wholly owned Subsidiary of Grantee to use
commercially reasonable efforts promptly to maximize the value of Option
Shares purchased taking into account market conditions, the number of Option
Shares, the potential negative impact of substantial sales on the market
price for Issuer Common stock, and the availability of an effective
registration statement to permit public sale of Option Shares.
13. MISCELLANEOUS.
(a) EXPENSES. Except as otherwise provided in Section
9, each of the parties hereto and any Holder shall bear and pay all costs and
expenses incurred by it or on its behalf in
16
connection with the transactions contemplated hereunder, including, without
limitation, fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
(b) WAIVER AND AMENDMENT. Any provision of this
Agreement may be waived at any time by the party that is entitled to the
benefits of such provision. This Agreement may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
(c) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARY. This
Agreement, together with the Reorganization Agreement and the other documents
and instruments referred to herein and therein (i) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof and (ii)
is not intended to confer upon any person other than the parties hereto, and
their respective successors and assigns, any rights or remedies hereunder,
except as expressly provided in this Agreement.
(d) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court or a federal or state
regulatory authority of competent jurisdiction to be invalid, void or
unenforceable, such invalid, void or unenforceable term, provision, covenant or
restriction shall, if it is so susceptible, be deemed modified to the minimum
extent necessary to render the same valid and enforceable and, in all events,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated. Without limiting the foregoing, if for any reason such
court or regulatory authority determines that Holder may not legally acquire, or
Issuer may not legally repurchase, the full number of shares of Issuer Common
Stock as provided in Sections 3 and 8 (as adjusted pursuant to Section 7), it is
the express intention of Issuer to allow Holder to acquire or to require Issuer
to repurchase the maximum number of shares as may be legally permissible without
any amendment or modification hereof.
(e) GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of California without regard
to any applicable conflicts of law rules.
(f) DESCRIPTIVE HEADINGS. The descriptive headings
contained herein are for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
(g) NOTICES. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be given
(and shall be deemed to have been duly received if so given) by personal
delivery, by telecopy (PROVIDED THAT copy is concurrently sent by first class
U.S. mail, postage prepaid), or by mail (registered or certified mail, postage
prepaid, return receipt requested) to the parties as follows:
17
To Grantee: Greater Bay Bancorp
2860 West Bayshore Road
Palo Alto, California 94303
Attention: Steven C. Smith
Facsimile Number: (415) 494-9220
With a copy to: Greater Bay Bancorp
400 Emerson Street, 3rd Floor
Palo Alto, California 94301
Attention: Linda M. Iannone, Esq.
Facsimile Number: (650) 473-9419
To Issuer: Coast Bancorp
740 Front Street, Suite 240
Santa Cruz, California 95060
Attention: Harvey J. Nickelson
Facsimile Number: (831) 458-0460
With a copy to: Lillick & Charles LLP
Two Embarcadero Center, Suite 2700
San Francisco, California 94111
Attention: Steven M. Plevin, Esq.
Facsimile Number: (415) 984-8300
or to such other address as a party may have furnished to the others in writing
in accordance with this paragraph, except that notices of change of address
shall only be effective upon receipt. Any notice, demand or other communication
given pursuant to the provisions of this Section 11(g) shall be deemed to have
been given on the date actually delivered or on the third day following the date
mailed, whichever first occurs.
(h) COUNTERPARTS. This Agreement and any amendments
hereto may be executed in two counterparts, each of which shall be considered
one and the same agreement and shall become effective when both counterparts
have been signed, it being understood that both parties need not sign the same
counterpart.
(i) ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder or under the Option shall be assigned
by any of the parties hereto without the prior written consent of the other
party, except that Grantee may assign this Agreement to a wholly-owned
subsidiary of Grantee and at any time after a Purchase Event occurs, Holder may
assign or transfer its rights and obligations hereunder, in whole or in part, to
any Person or Persons, subject to compliance with applicable laws. In order to
effectuate the foregoing, Grantee shall be entitled to surrender this Agreement
to Issuer in exchange for two or more Agreements entitling the holders thereof
to purchase in the aggregate the same number of shares of Common Stock as may be
purchasable hereunder. Subject to the preceding sentence, this Agreement shall
be binding upon, inure to the benefit of, and be enforceable by the parties and
their respective successors and permitted assigns.
18
(j) FURTHER ASSURANCES. In the event of any exercise of
the Option by Holder, Issuer and Holder 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.
(k) SPECIFIC PERFORMANCE. The parties hereto agree that
this Agreement may be enforced by either party through specific performance,
injunctive relief and 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.
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IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
GREATER BAY BANCORP COAST BANCORP
By: /s/ David L. Kalkbrenner By: /s/ Harvey J. Nickelson
------------------------ -----------------------
David L. Kalkbrenner Harvey J. Nickelson
President and Chief President and Chief
Executive Officer Executive Officer
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