SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ____)
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
PROFESSIONAL BANCORP, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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computed pursuant to Exchange Act Rule 0-11 (set forth the
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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PROFESSIONAL BANCORP, INC.
606 BROADWAY
SANTA MONICA, CALIFORNIA 90401
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 13, 1998
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Dear Professional Bancorp, Inc. Shareholders:
The Annual Meeting of Shareholders of PROFESSIONAL BANCORP, INC. (the
"Company") will be held at the Miramar Sheraton Hotel, 101 Wilshire Boulevard,
Santa Monica, California 90401, on Wednesday, May 13, 1998 at 5:00 p.m., Pacific
Standard Time, for the purpose of considering and voting upon the following
matters:
1. ELECTION OF DIRECTORS. The election of the following seven persons
to the Board of Directors to serve until the 1999 Annual Meeting of Shareholders
and until their successors are elected and have qualified:
Richard A. Berger Ray T. Oyakawa, M.D.
Ronald L. Katz, M.D. Lynn O. Poulson
James A. Markley, Jr. Julie P. Thompson
Walter T. Mullikin, M.D.
2. APPROVAL OF 1998 STOCK OPTION PLAN. The approval of the Professional
Bancorp 1998 Stock Option Plan relating to stock option grants for executive
officers, key employees and directors.
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS.
Ratification of the appointment of KPMG Peat Marwick LLP as independent public
accountants for the Company for the 1998 fiscal year.
4. OTHER BUSINESS. The transaction of such other business as may
properly come before the meeting and any adjournment(s) thereof.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE OF "AUTHORITY GIVEN" ON
PROPOSAL 1 AND A VOTE "FOR" ON PROPOSALS 2 AND 3.
Shareholders of record at the close of business on March 31, 1998 are
entitled to notice of, and to vote at, the meeting and any adjournment(s)
thereof.
By Order of the Board of Directors
JULIE P. THOMPSON
Chairman of the Board
Dated: April 13, 1998
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE BY SIGNING
AND DATING THE ENCLOSED PROXY CARD AND MAILING IT PROMPTLY IN THE ENVELOPE
PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
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The Bylaws of the Company provides for the nomination of directors in the
following manner:
"SECTION 3.3. NOMINATIONS OF DIRECTORS. Nominees for election to the
Board shall be selected by the Board or a committee of the Board to which the
Board has delegated the authority to make such selections pursuant to Section
3.11 of these Bylaws. Effective May 1, 1990, the Board or such committee, as the
case may be, will consider written recommendations from shareholders for
nominees for election to the Board provided such recommendations, together with
(i) such information regarding each nominee as would be required to be included
in a proxy statement filed pursuant to the Exchange Act, (ii) a description of
all arrangements or other understandings among the recommending shareholders and
each nominee and any other person with respect to such nomination, and (iii) the
consent of each nominee to serve as a director are received by the Secretary of
the Corporation, in the case of an annual meeting of shareholders, not later
than the date specified in the most recent proxy statement of the Corporation as
the date by which shareholder proposals for consideration at the next annual
meeting of shareholders must be received, and, in the case of a special meeting
of shareholders, not later than the tenth day after the giving of notice of such
meeting. Only persons duly nominated for election to the Board in accordance
with this Section 3.3 and persons with respect to whose nominations proxies have
been solicited pursuant to the proxy statement filed pursuant to the Exchange
Act shall be eligible for election to the Board. Each notice to shareholders of
a meeting of shareholders at which directors are to be elected shall contain a
statement to the effect set forth in this Section 3.3."
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PROFESSIONAL BANCORP, INC.
606 BROADWAY
SANTA MONICA, CALIFORNIA 90401
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PROXY STATEMENT
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ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 13, 1998
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INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Professional Bancorp, Inc. (the
"Company") for use at the Annual Meeting of Shareholders (the "Meeting"). The
Meeting will be held at the Miramar Sheraton Hotel, 101 Wilshire Boulevard,
Santa Monica, California 90401, on Wednesday, May 13, 1998 at 5:00 p.m., Pacific
Standard Time. These proxy materials are first being mailed to shareholders on
or about April 13, 1998.
THE PROXY
PROXY
The Board of Directors solicits proxies so that each shareholder has
the opportunity to vote on the proposals to be considered at the Meeting. A form
of proxy for voting your shares at the Meeting is enclosed. When you properly
execute and return your proxy, the shares it represents will be voted at the
Meeting in accordance with your instructions on the proxy. If no instruction is
specified on the proxy with respect to a proposal to be acted upon, the shares
represented by your executed proxy will be voted (1) in favor of the election of
the seven director nominees set forth herein, (2) for the approval of the 1998
Stock Option Plan, and (3) for the ratification of the appointment of KPMG Peat
Marwick LLP as independent public accountants for the 1998 fiscal year. If any
other business is properly presented at the Meeting, your proxy will be voted in
accordance with the recommendations of the Board.
REVOCABILITY OF PROXIES
You may revoke your proxy at any time before it is exercised by (i)
filing with the Secretary of the Company a written notice of revocation of your
proxy; (ii) submitting a duly executed proxy bearing a later date; or (iii)
voting in person at the Meeting.
PERSONS MAKING THE SOLICITATION
This solicitation of proxies is being made by the Board of Directors of
the Company. The expense of preparing, assembling, printing and mailing this
Proxy Statement and the materials used in the solicitation of proxies will be
borne by the Company. It is contemplated that proxies will be solicited
principally through the use of the mail, but officers, directors and employees
of the Company and its wholly-owned subsidiary, First Professional Bank, N.A.
(the "Bank"), may solicit proxies personally or by telephone or facsimile, for
which no compensation will be paid. Although there is no formal agreement to do
so, the Company may reimburse banks, brokerage houses and other custodians,
nominees and fiduciaries for their reasonable expenses in forwarding these proxy
materials to shareholders whose shares of the Company's Common Stock are held of
record by such entities.
VOTING SECURITIES AND VOTING
RECORD DATE
The Board of Directors has fixed the close of business on March 31,
1998 as the record date for determining the shareholders entitled to notice of
and to vote at the Meeting (the "Record Date"). There were 1,745,962 shares of
the Company's common stock (the "Common Stock") issued and outstanding on the
Record Date.
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VOTING
You are entitled to one vote for each share of Common Stock you owned
of record on the books of the Company as of the Record Date on any matter
submitted to a shareholder vote at the Meeting. However, in connection with the
election of directors, shares may be voted cumulatively if a shareholder present
and voting at the Meeting gives notice at the Meeting prior to the voting of his
or her intention to vote cumulatively. If any shareholder gives such notice, all
shareholders may cumulate their votes for director nominees. Cumulative voting
means that you have the right to vote the number of shares you owned as of the
Record Date, multiplied by the number of directors to be elected (seven). You
may cast this total number of votes for one nominee or the votes may be
distributed among nominees in any manner you see fit. If cumulative voting is
declared at the Meeting, votes represented by proxies delivered pursuant to this
Proxy Statement may be cumulated in the discretion of the proxy holders, in
accordance with the recommendations of the Board, and discretionary authority to
do so is included in the proxy.
VOTE REQUIRED
At the Meeting, directors will be elected by a plurality of the votes
cast. Therefore, the seven nominees receiving the highest number of affirmative
votes shall be elected directors of the Company. The actual number of directors
elected may be less than seven in the event that fewer than seven nominees
receive any affirmative votes under the rules of cumulative voting. Each other
matter presented at the Meeting will be decided by a majority of the votes cast
on that matter.
QUORUM REQUIREMENT
The presence, in person or by proxy, of the holders of at least a
majority of the total number of outstanding shares of Common Stock is necessary
to constitute a quorum at the Meeting.
METHOD OF COUNTING VOTES
Shares represented by proxies which are marked "authority withheld" or
proxies marked to deny discretionary authority with respect to the election of
any one or more nominees for election as directors will be counted for the
purpose of determining the number of shares represented at the meeting, but will
not be considered as a vote for or as a vote against the respective nominee(s).
Shares voted on one proposal but not all proposals on the proxies returned by
brokers will be counted for the purpose of determining the number of shares
represented at the meeting, but will not be considered as a vote for or against
any matter not voted on. Abstentions will also be counted for the purpose of
determining the number of shares represented at the meeting, but will not be
considered as a vote for or against any matter as to which the abstention is
effective.
PROPOSALS
PROPOSAL 1 - ELECTION OF DIRECTORS
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NOMINEES
The Company's directors are elected each year at the Annual Meeting by
the shareholders. The seven persons named below have been nominated by the Board
for election as directors to serve until the 1999 Annual Meeting of Shareholders
and until their successors are elected and have qualified. All of the director
nominees are independent, meaning that they are not executive officers,
employees or consultants of the Company or First Professional Bank, N.A., the
Company's wholly-owned subsidiary (the "Bank"). All of the nominees are
currently directors of the Company and the Bank.
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<TABLE>
<CAPTION>
YEAR YEAR
BUSINESS EXPERIENCE ELECTED ELECTED BOARD
DURING THE PAST DIRECTOR OF DIRECTOR OF COMMITTEE
NAME AND ADDRESS AGE FIVE YEARS THE COMPANY BANK MEMBERSHIP
- ---------------- --- ---------- ----------- ---- ----------
<S> <C> <C> <C> <C> <C>
Richard A. Berger
45495 Osage Court 66 President, Richard A. Berger & 1982 1982 Audit (Chair);
Indian Wells, CA 92210 Assoc. (Real Estate Investments); Bank Community
Realtor, Fred Sands Desert Realty Reinvestment Act
Ronald L. Katz, M.D. 65 Chairman and Professor of 1982 1982 Asset/Liability
1200 N. State Street Anesthesiology, USC Medical Management and
Suite 14901 Center; Professor (until June, Investment
Los Angeles, CA 90033 1995) and Chairman (until June,
1990) of Anesthesiology, UCLA
Medical Center
James A. Markley, Jr. 77 Consultant, Countrywide 1997 1997 Audit
312 Walnut St., Suite 2100 Investment Company (since
Cincinnati, OH 45202 February, 1997); former
President, Leshner Financial, Inc.
(financial services holding
company) (until February, 1997);
formerly President and Chairman
of the Board of The Provident
Bank, Cincinnati, Ohio; Director
of Sycamore National Bank
Walter T. Mullikin, M.D. 80 Director of MedPartners Inc.; 1997 1997 Asset/Liability
MedPartners/Mullikin Director of Health Net (HMO); Management and
5000 Airport Plaza Drive former Chairman of the Board Investment
Long Beach, CA 90815 and President of Mullikin Medical
Enterprises (until November,
1995)
Ray T. Oyakawa, M.D. 50 Chairman of the Board and 1987-3/96 1987-3/96 Audit;
5670 Wilshire Blvd. former Chief Executive Officer, 7/96 7/96 Compensation
Suite 2350 Pacific EyeNet, Inc., (physician (Chair); Executive
Los Angeles, CA 90036 practice management company); Loan Committee
Director and President of Pacific
EyeNet, Inc., A Medical Group
(a single specialty physician
practice company); President,
Ray T. Oyakawa, M.D., Inc.
(until December, 1993)
Lynn O. Poulson 60 President of Johnson, Poulson, 1982 1982 Compensation;
10880 Wilshire Blvd. Coons & Slater (law firm); Executive Loan
Suite 1100 Secretary, Professional Bancorp, Committee
Los Angeles, CA 90024 Inc. (since May, 1997)
Julie P. Thompson, 39 Chairman of the Board, First 1996 1996 Compensation;
Chairman of the Board Professional Bank, N.A.; Asset/Liability
1640 Marengo Street President and Chief Executive Management and
7th Floor Officer, Health Research Investment (Chair);
Los Angeles, CA 90033 Network (Medical Research) Executive Loan
Committee
</TABLE>
The Company's Bylaws provide that the Board shall consist of one or
more directors as determined by the Board. The Board has fixed the number at
seven. Votes will be cast by the proxy holders in such a way as to effect the
election of all seven nominees, or as many thereof as possible under the rules
of cumulative voting. In the event that any of the nominees should be unable to
serve as a director, it is intended that the proxy will be voted for the
election of such substitute nominees, if any, as shall be designated by the
Board. The Board has no reason to believe that any of the nominees will be
unavailable to serve if elected. Additional nominations can only be made by
complying with the notice provision set forth in the Bylaws of the Company, an
extract of which is included in the Notice of Annual Meeting of Shareholders
accompanying this Proxy Statement. This Bylaw provision is designed to give the
Board advance notice of competing nominations, if any, and the qualifications of
competing nominees, and may have the effect of precluding third-party
nominations if the notice provisions are not followed.
The Board of Directors recommends a vote of "AUTHORITY GIVEN" for all Director
nominees.
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PROPOSAL 2 - 1998 STOCK OPTION PLAN
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The Board of Directors has adopted, subject to shareholder approval,
the Professional Bancorp 1998 Stock Option Plan. The 1998 Stock Option Plan is
intended to facilitate ownership and increase the interest of executive
officers, key employees and directors in the growth and performance of the
Company and motivate them to contribute to the Company's future success, thus
enhancing the value of the Company for the benefit of all shareholders. The 1998
Plan is also intended to attract talented executives and directors to ensure the
continued growth and success of the Company.
The 1998 Plan provides for the grant of "incentive stock options" as
permitted under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), as well as for the grant of non-qualified stock options. The 1998
Plan is not subject to any of the provisions of the Employee Retirement Income
Security Act of 1974, as amended.
The 1998 Plan provides for the issuance of up to 100,000 shares of the
Company's Common Stock to directors, officers and key employees of the Company
or any subsidiary of the Company (whether or not they are also directors of the
Company or any subsidiary), subject to adjustment in the event of certain
changes in the capital structure of the Company. No more than 35,000 shares may
be issued to all directors of the Company who are not also officers or key
employees of the Company or any subsidiary. No options have been granted to date
under the 1998 Plan.
Pursuant to the terms of its Listing Agreement with the American Stock
Exchange (the "Exchange"), the Company will list with the Exchange the shares of
Common Stock to be acquired under the Options.
SUMMARY OF THE 1998 PLAN
The following description of the 1998 Plan is intended to highlight and
summarize the principal terms of the 1998 Plan, and is qualified in its entirety
by the text of the 1998 Plan, a copy of which is attached hereto as Exhibit A.
ADMINISTRATION. The 1998 Plan will be administered by a Stock Option
----------------
Committee (the "Committee"), consisting of three or more directors of the
Company, appointed from time to time by the Board of Directors. Nonetheless,
regardless of whether the Committee is appointed, the Board of Directors may act
as the Committee, and any action taken by the Board shall be deemed to be action
taken by the Committee. Options may be granted only to directors, officers and
key employees of the Company and any subsidiary of the Company. Subject to the
express provisions of the 1998 Plan, the Committee is authorized to construe and
interpret the 1998 Plan, and make all the determinations necessary or advisable
for administration of the 1998 Plan.
ELIGIBLE PARTICIPANTS. The 1998 Plan provides that all directors,
----------------------
officers and key employees of the Company and any subsidiary of the Company are
eligible to receive grants of stock options. No more than 35,000 shares may be
issued to all directors of the Company who are not also officers or key
employees of the Company or any subsidiary. The 1998 Plan provides that if
options are granted to directors, officers or key employees who own, directly or
indirectly, 10% or more of the Company's outstanding shares, then the minimum
option price must be at least 110% of the stock's fair market value on the date
of grant, and the term of the option grant may not exceed five years. The number
of shares subject to outstanding stock options held by any single optionee may
not exceed ten percent (10%) of the total outstanding shares of the same class
of the Company unless the option exercise price is at least 110% of fair market
value of the shares as of the date of grant. Subject to the foregoing
limitations, the Committee is empowered to determine which eligible
participants, if any, should receive options, the number of shares subject to
each option, and the terms and provisions of the option agreements.
SHARES SUBJECT TO THE 1998 PLAN. 100,000 shares are covered by the 1998
--------------------------------
Plan, which will constitute approximately 5.7% of the then issued and
outstanding shares if no outstanding options to purchase shares of Common Stock
are exercised. Options will be granted at no less than the fair market value of
the Company's Common Stock as of the date of grant; provided, however, that in
the case of a non-qualified stock option the option exercise price may be not
less than the lesser of eighty-five percent (85%) of the fair market value of
the Company's stock represented by the options on the date of grant or
eighty-five percent (85%) of the fair market value on the date
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an option is exercised. As of March 31, 1998, the closing price of the Common
Stock on the American Stock Exchange was $19-3/8.
INCENTIVE AND NON-QUALIFIED STOCK OPTIONS. The 1998 Plan provides for
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the grant of both incentive stock options and non-qualified options. Incentive
stock options are available only to persons who are employees of the Company or
any subsidiary of the Company, and are subject to limitations imposed by
applicable sections of the Code, including a $100,000 limit on the aggregate
fair market value (determined on the date the options are granted) of shares of
the Company's Common Stock with respect to which incentive stock options are
exercisable for the first time by an optionee during any calendar year (under
the 1998 Plan and all other "incentive stock option" plans of the Company and
its subsidiaries, if any). Any options granted under the 1998 Plan which do not
meet the limitations for incentive stock options, or which are otherwise not
deemed to be incentive stock options, shall be deemed "non-qualified." Subject
to the foregoing and other limitations set forth in the 1998 Plan, the exercise
price, permissible time or times of exercise, and the remaining terms pertaining
to any option are determined by the Committee.
TERMS AND CONDITIONS OF OPTIONS. Subject to the limitations set forth
--------------------------------
in the 1998 Plan, options granted thereunder may be exercised in such
increments, which need not be equal, and upon such contingencies as the
Committee may determine. If an optionee does not exercise an increment of an
option in any period during which such increment becomes exercisable, the
unexercised increment may be exercised at any time prior to expiration of the
option unless the respective stock option agreement provides otherwise.
Subject to earlier termination as may be provided in any optionee's
stock option agreement, options granted under the 1998 Plan will expire on the
date fixed at the time the option is granted but not later than ten (10) years
from the date of grant. Under the terms of the 1998 Plan, the date of grant is
deemed to be either: (i) the date fixed by the Committee to be the date of
grant; or (ii) if no such date is fixed, the date on which the Committee made
its final determination to grant a stock option.
Options granted under the 1998 Plan may not be transferred otherwise
than by will or by the laws of descent and distribution, and during his or her
lifetime, only the optionee or, in the event of the disability of the optionee,
his or her guardian or the conservator of his or her estate may exercise the
option.
EXERCISE OF OPTIONS. Subject to the restrictions set forth in the 1998
--------------------
Plan, an option may be exercised in accordance with the terms of the individual
stock option agreement. Full payment by the optionee for all shares as to which
the option is being exercised is due and payable at the time of exercise of the
option. Payment must be in cash and/or, with the prior written approval of the
Committee, and subject to prior regulatory approval, in shares of Common Stock
of the Company.
An option may be exercised with respect to whole shares only, although
fractional share interests may be accumulated and exercised from time to time as
whole shares during the term of the option. Options may only be exercised with
respect to a minimum of ten (10) whole shares, unless the option agreement
requires that a larger number of shares be exercised at any one time or unless
fewer than ten (10) shares remain subject to the option at the time of exercise.
Any shares subject to an option which expires or terminates without being
exercised become available again for issuance under the 1998 Plan.
Neither an eligible participant nor an optionee has any rights as a
shareholder with respect to the shares of Common Stock covered by any option
which may be or has been granted to such person, and which is thereafter
exercised, until date of issuance of the stock certificate by the Company to
such person.
STOCK OPTION AGREEMENT. The 1998 Plan provides that every grant of an
-----------------------
option will be evidenced by a written stock option agreement executed by the
Company and the optionee. Subject to the terms and conditions of the 1998 Plan,
the stock option agreement will contain the terms and provisions pertaining to
each option so granted, such as exercise price, permissible date or dates of
exercise, termination date, and such other terms and conditions as the Committee
deems desirable and not inconsistent with the 1998 Plan.
TERMINATION OF EMPLOYMENT OR AFFILIATION. In the event an optionee
-----------------------------------------
ceases to be affiliated with the Company or a subsidiary of the Company for any
reason other than disability, death or termination for cause, the
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stock options granted to such optionee shall expire at the earlier of the
expiration dates specified for the options, or three (3) months after the
optionee ceases to be so affiliated. During such period after cessation of
affiliation, the optionee may exercise the option to the extent that it was
exercisable as of the date of such termination, and thereafter the option
expires in its entirety.
If an optionee's stock option agreement so provides, and if an
optionee's status as an eligible participant is terminated for cause, the option
held by such person will expire immediately upon such termination, although the
Committee may, in its sole discretion, within thirty (30) days of such
termination, reinstate the option. If the option is reinstated, the optionee
will be permitted to exercise the option only to the extent, for such time, and
upon such terms and conditions as if the optionee's status as an eligible
participant had been terminated for a reason other than cause, disability or
death, as described above.
The 1998 Plan, and all stock options previously granted under the 1998
Plan, shall terminate upon the dissolution or liquidation of the Company, upon a
consolidation, reorganization, or merger as a result of which the Company is not
the surviving corporation, or upon a sale of all or substantially all of the
assets of the Company. However, all options theretofore granted may, at the
discretion of the Committee, become immediately exercisable in their entirety
upon the occurrence of any of the foregoing, and any options not exercised
immediately upon the occurrence of any of the foregoing events will terminate
unless provision is made for the assumption or substitution thereof. As a result
of this acceleration provision, even if an outstanding option were not fully
vested as to all increments at the time of the event, that option will become
fully vested and exercisable.
AMENDMENT AND TERMINATION OF THE 1998 PLAN. The Board of Directors of
-------------------------------------------
the Company may at any time suspend, amend or terminate the 1998 Plan, and may,
with the consent of the respective optionee, make such modifications to the
terms and conditions of outstanding options as it shall deem advisable. Without
shareholder approval, however, the Board of Directors may not materially
increase the maximum number of shares of Common Stock which may be issued under
the 1998 Plan (except as described under "Adjustments Upon Changes in
Capitalization" below), materially increase the number of shares of Common Stock
which may be issued at any time under the 1998 Plan to all directors whether or
not they are also officers or key employees of the Company or any subsidiary of
the Company, change the minimum exercise price, increase the maximum term of
options provided for in the 1998 Plan, permit the granting of options to anyone
other than eligible participants, materially modify the requirements as to
eligibility for participation in the 1998 Plan, or change any provision of the
1998 Plan which would affect the qualification of options granted thereunder as
"incentive stock options" within the meaning of Section 422 of the Code. The
amendment, suspension or termination of the 1998 Plan will not, without the
consent of the optionee, alter or impair any rights or obligations under any
outstanding option under the 1998 Plan. Unless previously terminated as
described above, the 1998 Plan will terminate ten years from the date the Plan
is approved by shareholders.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The total number of shares
-------------------------------------------
covered by the 1998 Plan and the price, kind and number of shares subject to
outstanding options thereunder, will be appropriately and proportionately
adjusted by the Committee if the outstanding shares of Common Stock of the
Company are increased, decreased, changed into or exchanged for a different
number or kind of shares or securities of the Company through reorganization,
merger, recapitalization, reclassification, stock split, stock dividend, stock
consolidation or otherwise, without consideration to the Company as provided in
the 1998 Plan. Fractional share interests of such adjustments may be
accumulated, although no fractional shares of stock will be issued under the
1998 Plan.
FEDERAL INCOME TAX CONSEQUENCES. Certain stock options to be granted
--------------------------------
under the 1998 Plan are intended to be "incentive stock options" as defined in
Section 422 of the Code. No income will be recognized by the optionee, and no
deduction will be allowed to the Company, by reason of the grant or exercise of
an incentive stock option. However, for purposes of the alternative minimum tax,
an adjustment increasing alternative minimum taxable income by the amount of the
excess of the fair market value of the shares at the time of exercise over the
option exercise price must be made. If the optionee does not dispose of the
shares of Common Stock received upon exercise of an incentive stock option by
payment in cash within two (2) years from the date of the grant of the option or
within one (1) year after the transfer of the shares to the optionee, any gain
realized by the optionee upon disposition of the shares will be long-term
capital gain if the shares constitute a capital asset in the hands of the
optionee. No deduction will be available to the Company upon such disposition by
the optionee. However, if the optionee disposes of such shares within the two
(2) year period from the date of the grant of the option or within the one (1)
year period from
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the transfer of the shares, gain realized by the optionee upon such disposition
will be ordinary income to the extent that the value of the shares received at
the date of exercise of the option exceeds the price paid for such shares by the
optionee. Such ordinary income will be recognized by the optionee for the tax
year in which the optionee disposes of the shares and, under Proposed Treasury
Regulations, the Company will be entitled to a deduction in an amount equal to
the ordinary income recognized by the optionee for the tax year of the Company
in which the optionee recognizes such ordinary income, provided that applicable
income tax withholding requirements are satisfied. Gain realized in excess of
such ordinary income will be capital gain if the shares constitute a capital
asset in the hands of the optionee. Such capital gain will be long-term or
short-term depending upon whether the shares are held for more than 12 months
prior to the date of disposition. If the optionee disposes of the shares within
either the two (2) year period from the date of grant of the option or within
one (1) year after the transfer of the shares, any ordinary income recognized by
the optionee will not exceed the gain realized on such disposition by the
optionee. If the optionee disposes of shares of Common Stock received upon
exercise of an option at a loss, such loss will be a capital loss if the shares
constitute a capital asset in the hands of the optionee, long-term or short-term
depending upon whether the shares are held for more than one (1) year prior to
the date of disposition.
The optionee's basis in shares of Common Stock acquired upon the
exercise of an incentive stock option by the transfer to the Company of Common
Stock already owned by the optionee is determined, under Proposed Treasury
Regulations, by substituting the optionee's basis in the shares of Common Stock
transferred to the Company to exercise the option to an equivalent number of
shares of Common Stock acquired upon the exercise of the option (the
"Substituted Common Stock"). The basis of the remainder, if any, of the shares
of Common Stock received upon exercise of the option (the "Non-Substituted
Common Stock") will be zero. The Substituted Common Stock will have a holding
period which, for purposes of computing whether capital gain or loss is
long-term or short-term, includes the holding period of the shares of previously
owned Common Stock. The NonSubstituted Common Stock will have a holding period
which begins on the date such shares are received. If the optionee does not
dispose of the shares of Common Stock received upon exercise of an incentive
stock option within two (2) years from the date of the grant of the option or
within one (1) year after the transfer of the shares to the optionee, any gain
realized by the optionee upon the disposition of the shares will be long-term
capital gain. No deduction will be available to the Company upon such
disposition by the optionee. However, if the optionee disposes of such shares
within the two (2) year period from the date of the grant of the option or
within the one (1) year period from the transfer of the shares, under Proposed
Treasury Regulations, the optionee will be treated as disposing of the shares
having the lowest basis first. Any gain realized by the optionee upon such
disposition will be ordinary income to the extent that the value of the shares
received at the date of exercise of the option exceeds the amount paid for such
shares. For purposes of determining the optionee's compensation element, the
amount paid for Substituted Common Stock will be its basis. Such ordinary income
will be recognized by the optionee for the tax year in which the optionee
disposes of the shares and, under Proposed Treasury Regulations, the Company
will be entitled to a deduction in an amount equal to the ordinary income
recognized by the optionee for the ax year of the Company in which the optionee
recognizes such ordinary income, provided that applicable income tax withholding
requirements are satisfied. Gain realized in excess of such ordinary income will
generally be capital gain. Such capital gain will be long-term or short-term
depending upon whether the shares disposed of were held for more than 12 months
prior to the date of disposition, taking into account the substituted holding
period of any Substituted Common Stock. If the optionee disposes of the shares
within either the two (2) year period from the date of grant of the option, or
within one (1) year after the transfer of the shares, any ordinary income
recognized by the optionee will not exceed the gain realized on such disposition
by the optionee. If the optionee disposes of shares of Common Stock received
upon exercise of an option at a loss, such loss will be a capital loss if the
shares constitute a capital asset in the hands of the optionee, long-term or
short-term depending upon whether the shares are held for more than one year
prior to the date of disposition, taking into account the substituted holding
period of any Substituted Common Stock.
The Tax Reform Act of 1986 has added a restriction limiting to $100,000
the aggregate fair market value (determined at the time the options are granted)
of the stock with respect to which incentive stock options are exercisable by an
individual for the first time in any calendar year. The 1998 Plan provides that
outstanding options may become fully vested and exercisable in the event of a
merger or consolidation of the Company as a result of which the Company is not
the surviving corporation or upon the sale of all or substantially all of the
property of the Company, unless the 1998 Plan is continued and the outstanding
options are neither assumed nor replaced with new options. If, as a result of
this provision of the 1998 Plan, the amount of options granted which become
exercisable by an optionee for the first time in any year exceeds the new
$100,000 limit, the amount of options exceeding the $100,000 limit will no
longer be treated as incentive stock options.
- 7 -
<PAGE>
If options cease to be treated as incentive stock options for the
reasons described in the preceding paragraph, such options will be treated as
non-qualified stock options. If such options, or any stock options originally
intended to be non-qualified stock options, are exercised, the excess of the
fair market value of the acquired shares at the time of exercise over the option
exercise price will be treated as ordinary income to the optionee in the year of
exercise.
Upon exercise of a stock option other than an incentive stock option by
a cash payment, the optionee's basis in the shares of Common Stock received will
be the sum of the option exercise price and the amount of ordinary income
recognized by the optionee from the exercise of the stock option. The optionee's
holding period in the shares of Common Stock received will begin on the date
received. Upon exercise of such a stock option by transfer of shares of Common
Stock already owned by the optionee, under Internal Revenue Service Revenue
Ruling 80-244, the optionee will be deemed to have received an equivalent number
of shares of Common Stock in a non-taxable exchange (the "Substituted Common
Stock") and the remainder, if any, of the shares of Common Stock will be deemed
to have been received in a taxable transaction (the "Non-Substituted Common
Stock"). The optionee's basis in the Substituted Common Stock will generally be
the same as his basis in the previously owned shares, and his holding period
will include the holding period of the previously owned shares. The optionee's
basis in the NonSubstituted Common Stock will be the same as the amount of
ordinary income recognized by the optionee. The Non-Substituted Common Stock
will have a holding period which begins on the date when it is received.
On the disposition of shares of Common Stock received upon exercise of
a stock option other than an incentive stock option, the difference between the
amount realized and the optionee's basis in the shares will be (if the shares
constitute a capital asset in the hands of the optionee) a long-term or
short-term capital gain (or loss) depending on whether the optionee's holding
period for the shares is more than 12 months prior to their disposition.
The Company will be entitled to claim a deduction at the same time and
in the same amount as income is recognized by the optionee exercising a stock
option other than an incentive stock option provided that applicable income tax
withholding requirements are satisfied. No income will be recognized by the
optionee, and no deduction shall be allowable to the Company, by reason of the
grant of non-qualified stock options.
CERTAIN INFORMATION CONCERNING ALL OPTIONS. In addition to the
-------------------------------------------
foregoing, the Tax Reform Act of 1984 enacted an excise tax of twenty percent
(20%) and the disallowance of a deduction to a corporation for compensation to
its employees, officers, shareholders, and others that results in an "excess
parachute payment" within the meaning of Code Section 280G(b). If such a person
is granted an incentive stock option and there is a change of control, the
incentive stock option may be considered in the determination of whether an
excess parachute payment has been made.
The Tax Reform Act of 1986 repealed the net long-term capital gains
deduction for individuals. Thus, capital gains are now taxable to individuals at
ordinary income rates but not more than 28%. Capital losses, whether long-term
or short-term, are fully deductible against capital gains and up to $3,000 of
ordinary income. Any unused capital losses may be carried forward indefinitely.
The specific state tax consequences to each optionee under the 1998
Plan may vary, depending upon the laws of the various states and the individual
circumstances of each optionee. It is suggested that each optionee consult his
or her personal tax advisor regarding both the federal and state tax
consequences of the grant and exercise of options.
The Board of Directors recommends a vote "FOR" approval of the 1998 Stock Option
Plan.
PROPOSAL 3 - RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------
The firm of KPMG Peat Marwick LLP served as independent public
accountants for the Company and the Bank for the 1997 fiscal year. The Board has
selected KPMG Peat Marwick LLP to continue to serve as the Company's independent
public accountants for 1998 fiscal year.
It is anticipated that representatives of KPMG Peat Marwick LLP will be
present at the Meeting, will have an opportunity to make a statement if so
desired, and will be available to respond to appropriate questions from
shareholders.
- 8 -
<PAGE>
Shareholder ratification of the selection of auditors is not required
by law, however the Board nevertheless decided to ascertain the views of the
shareholders in this regard. If the selection of KPMG Peat Marwick LLP is not
ratified at the Meeting, the Board will consider the selection of other
auditors.
The Board of Directors recommends a vote "FOR" the ratification of KPMG Peat
Marwick LLP as the Company's independent public accountants.
IDENTIFICATION OF EXECUTIVE OFFICERS
The following persons are the executive officers of the Company and/or
the Bank:
<TABLE>
<CAPTION>
NAME AGE BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
---- --- ----------------------------------------------
<S> <C> <C>
Melinda McIntyre-Kolpin 41 Interim President, Chief Executive Officer and a Director, First
Professional Bank, N.A. (since September, 1996); Chief Executive
Officer of Network Health Financial Services, Inc. (since February,
1996); Director, Molina Medical Centers (since 1996); Director,
Pacific EyeNet, Inc.; Director, Pediatric & Family Medical Center
(since 1997); President, First Professional Bank, N.A. (from
January, 1984 until February, 1996).
Melissa Lanfre 46 Senior Vice President and Chief Financial Officer, Professional
Bancorp, Inc. and First Professional Bank, N.A. (since November,
1997); Chief Financial Officer, Harbor Bank (from July, 1987 until
November, 1997).
Eric J. Woodstrom 39 Executive Vice President, First Professional Bank, N.A. (since
January, 1997); Manager, The Secura Group (Bank Consulting)
(from January, 1993 until January, 1997).
Gary W. Mounce 34 Senior Vice President and Senior Loan Officer (since January,
1997), formerly Vice President/Manager of Tarzana Regional Office
(until December, 1996), First Professional Bank, N.A.; Bank
Examiner, Dept. of Treasury, Office of the Comptroller of the
Currency (until August, 1995); Manager, Great Western Bank (until
June, 1993).
Sharon A. Schmidt 40 Senior Vice President, Chief Operations Officer (since February,
9900 Norwalk Blvd. 1998), formerly Vice President, Operations Administration of First
Suite 150 Professional Bank, N.A. (until February, 1998).
Santa Fe Springs, CA 90670
Nancy Ferretti-Foster 38 Senior Vice President, Chief Information Officer (since February,
9900 Norwalk Blvd. 1998), formerly Vice President, Information Systems of First
Suite 150 Professional Bank, N.A. (until February, 1998); Co-Owner, Time
Santa Fe Springs, CA 90670 Traveler Antique Toys (since October, 1996), Vice President and
Secretary, 7-W Investigations, Inc. (since June, 1997).
</TABLE>
The business address of all executive officers, unless otherwise
indicated, is 606 Broadway, Santa Monica, California 90401.
COMPENSATION COMMITTEE REPORT
The Compensation Committee sets policy for compensation, reviews the
recommendations of the Chief Executive Officer for compensation of officers,
establishes the compensation of the executive officers and administers the
Company's various stock option plans. The goal of the Company's and Bank's
compensation program is to
- 9 -
<PAGE>
attract, motivate, reward and retain the management talent required to achieve
corporate objectives and increase shareholder value.
Base salaries of all executives were determined by the Compensation
Committee using executive management's recommendations. Salaries were decided
based on qualifications, individual performance and utilization of independent
compensation surveys.
Julie P. Thompson, Chairman of the Board, has been granted operational
authority for the Company by the Board of Directors during the period while
there is no acting chief executive officer of the Company. Ms. Thompson receives
$125 per hour for the services she performs in this capacity, which the
Compensation Committee believes is consistent with industry standards.
Compensation Committee
Ray T. Oyakawa, M.D. (Chair)
Lynn O. Poulson
Julie P. Thompson
Melinda McIntyre-Kolpin
COMPENSATION TABLES
The following tables list information on compensation received for
services by any person who served as the chief executive officer or functioned
in a similar capacity of the Company, and the four highest compensated executive
officers of the Company and/or the Bank for services in all capacities to the
Company and the Bank, during the year ended December 31, 1997.
- 10 -
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
OTHER
ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- --------------------------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Julie P. Thompson, Chairman of the Board 1997 -0- -0- 26,000(1)
1996 -0- -0- 24,002(1)
1995 -0- -0- -0-
Melinda McIntyre-Kolpin, (3) Interim President and Chief 1997 -0- -0- -0-
Executive Officer of the Bank 1996 31,667 22,500 -0-
1995 140,500 125,000(2) -0-
Melissa Lanfre, Senior Vice President and Chief 1997 27,400 15,000 -0-
Financial Officer of the Company and the Bank 1996 -0- -0- -0-
1995 -0- -0- -0-
Eric J. Woodstrom, Executive Vice President of the 1997 118,903 20,000 -0-
Bank 1996 -0- -0- -0-
1995 -0- -0- -0-
Gary W. Mounce, Senior Vice President and Senior 1997 103,177 25,000(4) -0-
Loan Officer of the Bank 1996 75,000 -0- -0-
1995 11,460 2,500 -0-
Sharon A. Schmidt, Senior Vice President and Chief 1997 77,000 27,500 -0-
Operations Officer of the Bank 1996 67,083 7,855 -0-
1995 57,500 10,000 -0-
Nancy Ferretti-Foster, Senior Vice President and Chief 1997 77,000 27,500 -0-
Information Officer of the Bank 1996 66,090 7,740 -0-
1995 60,420 5,000 -0-
</TABLE>
- -------------------------
(1) Represents an annual fee of $5,000 for serving as Chairman of the
Board, Board committee fees, and a fee of $125 per hour for the time
she exercised operational authority for the Company in 1996 while there
was no acting chief executive officer.
(2) Includes bonuses accrued in 1994 and 1995 and paid in 1995 and 1996,
respectively, except $102,500 of Ms. McIntyre-Kolpin's bonus earned in
1995 was paid in 1995.
(3) Mc. McIntyre-Kolpin resigned as a Director of the Company and as
President and a Director of the Bank effective February 9, 1996, at
which time she was paid $43,115 for accrued vacation time, $37,000 of
which Ms. McIntyre-Kolpin paid back to the Bank to purchase her Bank
vehicle for its then current market value. In September, 1996, Ms.
McIntyre-Kolpin was appointed Interim Chief Executive Officer,
President and a Director of the Bank. Ms. McIntyre-Kolpin is also Chief
Executive Officer and the principal shareholder of Network Health
Financial Services, Inc., a Delaware corporation which receives
consulting fees from the Company and Bank pursuant to the terms of a
Consulting Agreement. Effective March 11, 1997, Bancorp and the Bank
paid NHFS a flat monthly fee of $25,000 for Ms. McIntyre- Kolpin's
full-time services as Interim President and Chief Executive Officer of
the Bank. Prior to March 11, 1997, Bancorp and the Bank paid NHFS a
flat monthly rate of $19,000 for Ms. McIntyre-Kolpin's part-time
services as Interim President and Chief Executive Officer of the Bank.
See also, "Interest of Management and Others in Certain Transaction."
(4) Reflects a bonus accrued in 1996 and paid in 1997.
-11 -
<PAGE>
CORPORATE GOVERNANCE INFORMATION
During 1997, the Board of Directors held 11 meetings. All directors of
the Company who are standing for election at the Annual Meeting attended at
least 75% of the aggregate number of regular and special meetings of the Board
held during 1997 (during the period he or she was a director) and all committees
of the Board on which the director served (during the period he or she was a
committee member) during the 1997 calendar year.
Compensation is paid only to outside directors. The compensation paid
to directors changed effective May 21, 1997. Prior to May 21, 1997, outside
directors were paid a fee of $500 for each Board Meeting attended. After May 21,
1997, each outside director received a fee of $1,000 for each quarterly joint
Company/ Bank Board meeting attended and $500 for each Bank Board meeting
attended. A three-day Strategic Planning Retreat for the directors and officers
of the Company was held in July, 1997. Each outside board member who attended
the Retreat was paid $2,500.
The Company's Board has a joint Audit Committee with the Bank's Board.
The joint Audit Committee oversees the Company's and Bank's outside independent
public accountants. The Audit Committee reviews recommendations on various
matters made by the outside auditors and action taken by management to implement
those recommendations. The Audit Committee also considers the proposals by the
outside auditor for the scope of the audit to be performed for the Company and
the Bank and their proposed fees for this work. The Audit Committee recommends
action to the Boards of Directors of the Company and Bank in connection with all
of the above matters. The Audit Committee consisted of Joel S. Moskowitz
(Chair), Alan S. Borstein and Richard A. Berger from July 16, 1996 until May 21,
1997. The Audit Committee thereafter consisted of Mr. Berger (Chair), Mr.
Markley and Dr. Oyakawa. The Audit Committee met 11 times during 1997. Prior to
May 21, 1997, each joint Audit Committee member received $400 per committee
meeting attended. After May 21, 1997, members of the Joint Audit Committee
received $500 per meeting attended.
The Board of Directors of the Bank has an Executive Loan Committee.
Prior to May 21, 1997, the members of the Loan Committee were Ms. Thompson, Ms.
McIntyre-Kolpin, Dr. Oyakawa and Mr. Poulson and each member, other than Ms.
McIntyre-Kolpin, received $500 per month as committee members. After May 21,
1997, the Executive Loan Committee was comprised of Ms. Thompson, Ms.
McIntyre-Kolpin, Dr. Oyakawa, Mr. Poulson and Senior Loan Officer Gary Mounce
(Chair) and each Board member, other than Ms. McIntyre-Kolpin, received a
monthly fee of $1,000 for attending weekly meetings. Prior to May 21, 1997, Mr.
Berger acted as the Board representative to management's Community Reinvestment
Act Committee and received a fee of $400 for each meeting attended. After May
21, 1997, Mr. Berger received a fee of $500 per meeting attended. Prior to May
21, 1997, the joint Bank/Company Asset Liability Management and Investment
Committee consisted of Ms. Thompson, Mr. Moskowitz and Dr. Katz, and each member
received a fee of $400 per meeting attended. After May 21, 1997, the Committee
was comprised of Ms. Thompson (Chair), Dr. Mullikin and Dr. Katz and each member
received a fee of $500 per meeting attended. The Company does not have a
standing nominating committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The joint Company/Bank Compensation Committee is comprised of Dr.
Oyakawa (Chair), Ms. Thompson, Mr. Poulson and Ms. McIntyre-Kolpin. Joel S.
Moskowitz, Richard A. Berger, Alan S. Borstein and Ronald L. Katz, M.D. served
on the Compensation Committee until May 21, 1997. The Compensation Committee
held 4 meetings in 1997. Effective May 21, 1997, Compensation Committee members
Dr. Oyakawa (Chair), Ms. Thompson and Mr. Poulson received a fee of $500 per
meeting attended. Ms. McIntyre-Kolpin, a Compensation Committee member, is also
the Interim President and Chief Executive Officer of the Bank.
Mr. Berger, Dr. Oyakawa, Dr. Katz, Mr. Poulson, executive officers of
the Company and Bank, and companies with which the foregoing are associated, are
customers of, and have had banking transactions with the Bank, some of which
have included extensions of credit during 1997. In management's opinion, all
loans and commitments to lend included in such transactions were made in the
ordinary course of business and in compliance with applicable laws on
substantially the same terms, including interest rates, collateral and repayment
terms, as those prevailing for comparable transactions with other persons of
similar creditworthiness and did not involve more than the normal risk of
collectibility or present other unfavorable terms. As of March 31, 1998, all
such loans were current.
- 12 -
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Company's Common Stock, to file with the Securities and Exchange
Commission and the American Stock Exchange initial reports of ownership and
reports of changes in ownership of Common Stock of the Company. Officers,
directors and greater than ten percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) reports they
file.
To the Company's knowledge, based solely upon review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the year ended December 31, 1997 all Section 16(a)
filing requirements applicable to its officers, directors and greater than ten
percent beneficial owners were fulfilled in a timely manner.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
EXECUTIVE SALARY CONTINUATION AGREEMENT
In 1992, the Bank entered into an Executive Salary Continuation
Agreement (the "SCA"), dated May 1, 1992, with Joel W. Kovner, who at that time
was the Chairman of the Board and Chief Executive Officer of the Bank. The SCA
is a nonqualified, executive benefit plan pursuant to which the Bank will pay
Mr. Kovner an annual retirement benefit of $150,000 per year for 15 years upon
his reaching age 60. The Plan was amended in December, 1997 to provide that
Virginia Kovner is entitled to receive 40% of the compensation payable to Mr.
Kovner under the Plan. If Mr. Kovner dies while the SCA is in effect, his estate
and Virginia Kovner will receive the payments under the SCA which he was
entitled to receive at the time of his death. Mr. Kovner's right to receive
benefits under the SCA vested on September 1, 1992 representing his completion
of ten years of continuous service since the Bank commenced operations. The SCA
is an unfunded plan; however, as a deferred compensation plan, the Bank is
required to make sufficient accruals so that the present value of the benefit to
be paid to Mr. Kovner at age 60 is reflected as a liability on the Bank's books
by that time. During 1998, the Bank will accrue such liability at an average
rate of approximately $6,400 per month. The SCA is not an employment contract.
In order to fund its obligation under the SCA, the Bank has purchased a single
premium universal life policy under which Mr. Kovner is the insured while the
Bank is the owner and beneficiary thereof. If assumptions as to mortality
experience, policy dividends and other factors are realized, the Bank will
receive earnings under the new policy equal to the expense accruals for the SCA
retirement benefits. There can be no assurance that such assumptions will be
realized. For the year ended December 31, 1997, the Bank received earnings of
$122,820 on the policy.
DANIEL S. RADER AGREEMENT
Mr. Rader held the positions of Chief Financial Officer and Treasurer
of the Company and Executive Vice President, Chief Investment Officer and Chief
Financial Officer of First Professional Bank, N.A. until December 9, 1996. The
Company, the Bank and Mr. Rader entered into a Settlement Agreement and General
Release in April, 1997, pursuant to which the Company and the Bank agreed to
continue to pay Mr. Rader his $140,000 base salary in monthly installments from
December 9, 1996 until December 8, 1997 and continue his medical benefits until
December 8, 1997, in exchange for a complete release of claims.
COMMON STOCK PERFORMANCE GRAPH
The Comparison Stock Performance Graph below shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934, except to the extent the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
The following graph shows a five year comparison of cumulative total
returns for the Company, S&P 500 Index and Peer Group Index. The Peer Group
Index consists of commercial banks listed on the American Stock Exchange (AMSE)
and was provided to the Company by SNL Securities.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
- 13 -
<PAGE>
PROFESSIONAL BANCORP, INC., S&P 500 INDEX AND
SNL AMEX BANK INDEX (1)
[GRAPH OMITTED HERE]
The following graph shows a five year comparison of cumulative total
returns for the Company, S&P 500 Index and Peer Group Index for the period
12/31/92 through 12/31/97.
PERIOD ENDING
-------------
INDEX 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- --------------------------------------------------------------------------------
Professional Bancorp, Inc. 100.00 92.98 54.39 92.11 78.34 120.41
S&P 500 100.00 110.09 111.53 153.44 188.52 251.44
SNL AMSE Banks 100.00 108.09 116.97 171.92 222.28 379.40
- -------------------------
(1) Assumes reinvestment of all dividends.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
CERTAIN BENEFICIAL OWNERS
The following table lists the holdings of the only persons (including
any "group" as that term is used in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended) known by the Company to be the beneficial owners of
more than five percent (5%) of its outstanding Common Stock as of March 31,
1998.
- 14 -
<PAGE>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------- -------------------- --------
Mutual Financial Services Fund 155,616 8.9%
c/o Franklin Mutual Advisers, Inc.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Heartland Advisors, Inc. 112,782(1) 6.1%(2)
790 North Milwaukee Street
Milwaukee, WI 53202
Robert H. Leshner 117,416(3) 6.3 (4)
312 Walnut Street
Suite 2100
Cincinnati, OH 45202
Patricia W. Niehoff 97,571(5) 5.6%
One Hill and Hollow Lane
Cincinnati, OH 45208
Financial Institution Partners II, L.P. 87,900(6) 5.0%
and Hovde Capital LLC
1629 Colonial Parkway
Inverness, Illinois 60067
- -------------------------
(1) As reported in Amendment No. 3 to a Schedule 13G filed with the
Securities and Exchange Commission ("SEC") on February 13, 1998.
112,782 shares may be deemed beneficially owned within the meaning of
Rule 13(d)(3) of the Securities Exchange Act of 1934 by Heartland
Advisors, Inc., including 112,782 shares of common stock resulting from
the assumed conversion of $1,500,000 of 8.5% Convertible Notes due
March 1, 2004.
(2) Convertible Notes convertible into shares of Common Stock which are
exercisable within 60 days after March 31, 1998 are treated as
outstanding for the purpose of computing the percentage of outstanding
Common Stock owned by Heartland Advisors, Inc., but not for the purpose
of computing the percentage of Common Stock owned by any other person.
(3) As reported in Amendment No. 3 to Schedule 13D filed with the SEC on
November 15, 1996. 110,250 of the reported shares are related to a
presently exercisable Warrant.
(4) Warrants convertible into shares of Common Stock held by Mr. Leshner
which are exercisable within 60 days after March 31, 1998, are treated
as outstanding for the purpose of computing the percentage of
outstanding Common Stock owned by Mr. Leshner, but not for the purpose
of computing the percentage of Common Stock owned by any other person.
(5) As reported in a Schedule 13D filed with the SEC on September 3,
1996.
(6) As reported in a Schedule 13D filed with the SEC on September 22,
1997.
- 15 -
<PAGE>
MANAGEMENT
The following table sets forth certain information concerning the
beneficial ownership of the Company's outstanding Common Stock as of March 31,
1998, by each director, executive officer of the Company and the Bank, and by
all directors and executive officers of the Company as a group.
AMOUNT AND NATURE PERCENT
OF BENEFICIAL OF
NAME/TITLE OWNERSHIP(1) CLASS(2)
- ---------- ---------------- ---------
Richard A. Berger, Director 24,571(3) 1.4%
Ronald L. Katz, M.D., Director 18,710(4) 1.1%
Ray T. Oyakawa, M.D., Director 10,624 *
Lynn O. Poulson, Director and Secretary 11,584(5) *
Julie P. Thompson, Chairman of the Board and Director 300 *
Walter T. Mullikin, M.D., Director 600 *
James A. Markley, Jr., Director 1,102 *
Melinda McIntyre-Kolpin, Interim Chief Executive 250 *
Officer and President of the Bank
Melissa Lanfre, Senior Vice President and Chief 0 0%
Financial Officer of the Company and the Bank
Eric J. Woodstrom, Executive Vice 0 0%
President of the Bank
Gary W. Mounce, Senior Vice President and Senior 1,620(6) *
Loan Officer of the Bank
Sharon A. Schmidt, Senior Vice President and Chief 0 0%
Operations Officer of the Bank
Nancy Ferretti-Foster, Senior Vice President and Chief 10 *
Information Officer of the Bank
All Directors and Executive Officers 69,371(7) 4.0%
- -------------------------
* Less than 1% of the shares outstanding.
(1) Unless otherwise indicated, the persons named herein have sole and/or
joint voting power over shares reported.
(2) Convertible Notes and Options and Warrants to purchase shares of Common
Stock held by directors, executive officers and other persons that were
exercisable or convertible within 60 days after March 31, 1998 are
treated as outstanding for the purpose of computing the number and
percentage of outstanding securities of the class owned by such
persons, but not for the purpose of computing the percentage of the
class owned by any other person.
(3) Includes 1,874 exercisable option shares.
(4) Includes 1,874 exercisable option shares.
(5) Includes 1,874 exercisable option shares.
(6) Includes 780 shares of common stock resulting from the assumed
conversion of $10,000 of Convertible Notes due March 1, 2004.
(7) Includes the shares owned by the current directors and named
executive officers (13 in number) as a group, and includes 6,402
exercisable option or Convertible Notes shares.
- 16 -
<PAGE>
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
The Company and the Bank entered into a Consulting Agreement dated
August 12, 1996 with Network Health Financial Services, Inc. ("NHFS"), a
Delaware corporation. Melinda McIntyre-Kolpin is the Chief Executive Officer and
principal shareholder of NHFS. Pursuant to the Consulting Agreement, NHFS
provides consulting services to the Company and the Bank with respect to
personnel matters, operational procedures and client development and retention.
NHFS is paid its actual costs incurred in the performance of its duties under
the Consulting Agreement (including hourly rates for certain specified NHFS
personnel while they are performing consulting services), plus an additional 25%
of such costs. In addition, the Company and Bank pay flat monthly rates for the
services of Ms. McIntyre-Kolpin, in her capacity as Interim Chief Executive
Officer and President of the Bank, and Patti Derry. During 1997, the Company and
the Bank paid NHFS the total amount of $707,991 pursuant to the Consulting
Agreement. Any party may terminate the Consulting Agreement by giving 30 days'
notice to the other parties.
See also "Compensation Committee Interlocks and Insider Participation"
for the discussion about director and officer banking transactions.
SHAREHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Proposals of shareholders intended to be presented at the next Annual
Meeting of Shareholders of the Company (i) must be received by the Company at
its offices at 606 Broadway, Santa Monica, California 90401, no later than
December 23, 1998 and (ii) must satisfy the conditions established by the
Securities and Exchange Commission for shareholder proposals to be included in
the Company's Proxy Statement for that meeting.
OTHER MATTERS
The Company's Board of Directors does not know of any matters to be
presented at the Meeting other than those set forth herein. However, if other
matters come before the Meeting, it is the intention of the persons named in the
accompanying proxy to vote said proxy in accordance with the recommendations of
the Company's Board of Directors on such matters, and discretionary authority to
do so is included in the proxy.
BY ORDER OF THE BOARD OF DIRECTORS
Dated: April 13, 1998 JULIE P. THOMPSON
Chairman of the Board
THE COMPANY WILL SUPPLY WITHOUT COST, UPON WRITTEN REQUEST, A COPY OF THE
COMPANY'S MOST RECENT ANNUAL REPORT ON FORM 10K INCLUDING FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES. SUCH REQUEST SHOULD BE DIRECTED TO MS.
MELISSA LANFRE, CHIEF FINANCIAL OFFICER, PROFESSIONAL BANCORP, INC., 606
BROADWAY, SANTA MONICA, CALIFORNIA 90401.
- 17 -
<PAGE>
PROXY
PROFESSIONAL BANCORP, INC.
ANNUAL MEETING OF SHAREHOLDERS
MAY 13, 1998
The undersigned shareholder of Professional Bancorp, Inc. (the
"Company") hereby nominates, constitutes and appoints Julie P. Thompson and Lynn
O. Poulson, and each of them, the attorney, agent and proxy of the undersigned,
with full powers of substitution, to vote all the stock of the Company which the
undersigned is entitled to vote at the Annual Meeting of Shareholders of the
Company to be held at the Miramar Sheraton Hotel, 101 Wilshire Boulevard, Santa
Monica, CA 90401, on Wednesday, May 13, 1998 at 5:00 p.m. and at any and all
adjournments thereof, as fully and with the same force and effect as the
undersigned might or could do if personally present as follows:
1. ELECTION OF DIRECTORS
To elect the seven persons named below to serve until the 1999 Annual
Meeting of Shareholders and until their successors are elected and have
qualified:
Richard A. Berger, Ronald L. Katz, M.D., James A. Markley, Jr.,
Walter T. Mullikin, M.D., Ray T. Oyakawa, M.D.,
Lynn O. Poulson, Julie P. Thompson
o AUTHORITY GIVEN o AUTHORITY WITHHELD
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR SOME BUT NOT ALL OF THE
NOMINEES NAMED ABOVE, YOU SHOULD CHECK THE BOX MARKED "AUTHORITY GIVEN" AND YOU
SHOULD ENTER THE NAME(S) OF THE NOMINEE(S) WITH RESPECT TO WHOM YOU WISH TO
WITHHOLD AUTHORITY TO VOTE IN THE SPACE PROVIDED BELOW:
- --------------------------------------------------------------------------------
2. APPROVAL OF 1998 STOCK OPTION PLAN. Approving the 1998 Stock Option
Plan for executive officers, key employees and directors.
o FOR o AGAINST O ABSTAIN
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS.
Ratifying the appointment of KPMG Peat Marwick LLP as the independent public
accountants of the Company for the 1998 fiscal year.
o FOR o AGAINST O ABSTAIN
PLEASE SIGN AND DATE ON THE REVERSE SIDE
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE OF "AUTHORITY GIVEN" ON
PROPOSAL 1 AND "FOR" ON PROPOSALS 2 AND 3. THIS PROXY SHALL BE VOTED IN
ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS UNLESS A CONTRARY
INSTRUCTION IS INDICATED, IN WHICH CASE THE PROXY SHALL BE VOTED IN ACCORDANCE
WITH SUCH INSTRUCTIONS. IN ALL OTHER MATTERS PRESENTED AT THE MEETING, IF ANY,
THIS PROXY SHALL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF
DIRECTORS.
___________________ DATED:______________, 1998
______________________________________
(Number of Shares) (Please Print Your Name)
--------------------------------------
(Signature of Shareholder)
--------------------------------------
(Please Print Your Name)
--------------------------------------
(Signature of Shareholder)
(Please date this proxy and sign your
name as it appears on the stock
certificates. Executors,
administrators, trustees, etc.
should give their full titles. All
joint owners should sign.)
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS AND MAY BE
REVOKED PRIOR TO ITS EXERCISE BY FILING WITH THE CORPORATE SECRETARY OF THE
COMPANY AN INSTRUMENT REVOKING THIS PROXY OR A DULY EXECUTED PROXY BEARING A
LATER DATE, OR BY APPEARING IN PERSON AND VOTING AT THE MEETING.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY PROMPTLY.
<PAGE>
PROFESSIONAL BANCORP 1998 STOCK OPTION PLAN
1. PURPOSE
-------
The purpose of the Professional Bancorp 1998 Stock Option Plan
(the "Plan") is to strengthen Professional Bancorp, Inc. (the "Corporation") and
those banks and corporations which are or hereafter become subsidiary
corporations (the "Subsidiary" or "Subsidiaries") by providing additional means
of attracting and retaining qualified directors and competent managerial
personnel and by providing to participating directors, officers and key
employees added incentive for high levels of performance and for special efforts
to increase the earnings of the Corporation and any Subsidiaries. The Plan seeks
to accomplish these purposes and achieve these results by providing a means
whereby such directors, officers and key employees may purchase shares of the
Common Stock of the Corporation pursuant to Stock Options granted in accordance
with this Plan.
Stock Options granted pursuant to this Plan are intended to be
Incentive Stock Options or Non-Qualified Stock Options, as shall be determined
and designated by the Stock Option Committee upon the grant of each Stock Option
hereunder.
2. DEFINITIONS
-----------
For purposes of this Plan, the following terms shall have the
following meanings:
(a) "COMMON STOCK." This term shall mean shares of the
---------------
Corporation's common stock, subject to adjustment pursuant to Section 15
(Adjustment Upon Changes in Capitalization) hereunder.
(b) "CORPORATION." This term shall mean Professional Bancorp,
--------------
Inc. a Pennsylvania corporation.
(c) "ELIGIBLE PARTICIPANTS." This term shall mean: (i) all
------------------------
directors of the Corporation or any Subsidiary; (ii) all officers (whether or
not they are also directors) of the Corporation or any Subsidiary; and (iii) all
key employees (as such persons may be determined by the Stock Option Committee
from time to time) of the Corporation or any Subsidiary, provided that such
officers and key employees have a customary work week of at least forty hours in
the employ of the Corporation or a Subsidiary.
(d) "FAIR MARKET VALUE." This term shall mean the fair market
--------------------
value of the Common Stock as determined in accordance with any reasonable
valuation method selected by the Stock Option Committee, including the valuation
methods described in Treasury Regulations Section 20.2031-2.
(e) "INCENTIVE STOCK OPTION." This term shall mean a Stock Option
-------------------------
which is an "incentive stock option" within the meaning of Section 422A of the
Internal Revenue Code of 1986, as amended.
(f) "NON-QUALIFIED STOCK OPTION." This term shall mean a Stock
-----------------------------
Option which is not an Incentive Stock Option.
(g) "OPTION SHARES." This term shall mean Common Stock covered by
----------------
and subject to any outstanding unexercised Stock Option granted pursuant to this
Plan.
(h) "OPTIONEE." This term shall mean any Eligible Participant to
-----------
whom a Stock Option has been granted pursuant to this Plan, provided that at
least part of the Stock Option is outstanding and unexercised.
(i) "PLAN." This term shall mean the Professional Bancorp 1998
-------
Stock Option Plan as embodied herein and as may be amended from time to time in
accordance with the terms hereof and applicable law.
(j) "STOCK OPTION." This term shall mean the right to purchase
---------------
Common Stock under this Plan in a specified number of shares, at a price and
upon the terms and conditions determined by the Stock Option Committee.
(k) "STOCK OPTION COMMITTEE." The Board of Directors of the
-------------------------
Corporation may select and designate a Stock Option Committee consisting of
three or more directors of the Corporation, having full authority
- 1 -
<PAGE>
to act in connection with this Plan. Regardless of whether a Stock Option
Committee is selected, the Board of Directors of the Corporation may act as the
Stock Option Committee and any action taken by said Board as such shall be
deemed to be action taken by the Stock Option Committee. All references in the
Plan to the "Stock Option Committee" shall be deemed to refer to the Board of
Directors of the Corporation acting as the Stock Option Committee and to a duly
appointed Stock Option Committee, if there be one. In the event of any conflict
between action taken by the Board acting as a Stock Option Committee and action
taken by a duly appointed Stock Option Committee, the action taken by the Board
shall be controlling and the action taken by the duly appointed Stock Option
Committee shall be disregarded.
(1) "SUBSIDIARY." This term shall mean each "subsidiary
-------------
corporation" (treating the Corporation as the employer corporation) as defined
in Section 425(f) of the Internal Revenue Code of 1986, as amended.
3. ADMINISTRATION
--------------
(a) STOCK OPTION COMMITTEE. This Plan shall be administered by
-----------------------
the Stock Option Committee. The Board of Directors of the Corporation shall have
the right, in its sole and absolute discretion, to remove or replace any person
from or on the Stock Option Committee at any time for any reason whatsoever.
(b) ADMINISTRATION OF THE PLAN. Any action of the Stock Option
---------------------------
Committee with respect to the administration of the Plan shall be taken pursuant
to a majority vote, or pursuant to the unanimous written consent, of its
members. Any such action taken by the Stock Option Committee in the
administration of this Plan shall be valid and binding, so long as the same is
not inconsistent with the terms and conditions of this Plan. Subject to
compliance with the terms, conditions and restrictions set forth in this Plan,
the Stock Option Committee shall have the exclusive right, in its sole and
absolute discretion, to establish the terms and conditions of all Stock Options
granted under the Plan, including, without meaning any limitation, the power to:
(i) establish the number of Stock Options, if any, to be granted hereunder, in
the aggregate and with regard to each Eligible Participant; (ii) determine the
time or times when such Stock Options, or parts thereof, may be exercised; (iii)
determine and designate which Stock Options granted under the Plan shall be
Incentive Stock Options and which shall be Non-Qualified Stock Options; (iv)
determine the Eligible Participants, if any, to whom Stock Options are granted;
(v) determine the duration and purposes, if any, of leaves of absence which may
be permitted to holders of unexercised, unexpired Stock Options without such
constituting a termination of employment under the Plan; and (vi) prescribe and
amend the terms, provisions and form of each instrument and agreement setting
forth the terms and conditions of every Stock Option granted hereunder.
(c) DECISIONS AND DETERMINATIONS. Subject to the express
-----------------------------
provisions of the Plan, the Stock Option Committee shall have the authority to
construe and interpret this Plan, to define the terms used herein, to prescribe,
amend, and rescind rules and regulations relating to the administration of the
Plan, and to make all other determinations necessary or advisable for
administration of the Plan. Determinations of the Stock Option Committee on
matters referred to in this Section 3 shall be final and conclusive so long as
the same are not inconsistent with the terms of this Plan.
4. SHARES SUBJECT TO THE PLAN
--------------------------
Subject to adjustments as provided in Section 15 hereof, the
maximum number of shares of Common Stock which may be issued upon exercise of
all Stock Options granted under this Plan is limited to One Hundred Thousand
(100,000) shares, in the aggregate. If any Stock Option shall be canceled,
surrendered, or expire for any reason without having been exercised in full, the
unpurchased Option Shares represented thereby shall again be available for
grants of Stock Options under this Plan.
5. ELIGIBILITY
-----------
Only Eligible Participants shall be eligible to receive grants of
Stock Options under this Plan.
6. GRANTS OF STOCK OPTIONS
-----------------------
- 2 -
<PAGE>
(a) GRANT. Subject to the express provisions of the Plan, the
------
Stock Option Committee, in its sole and absolute discretion, may grant Stock
Options:
(i) In the case of grants to Eligible Participants who are
officers or key employees of the Corporation or any Subsidiary, for a number of
Option Shares, at the price(s) and time(s), on the terms and conditions and to
such Eligible Participants as it deems advisable and specifies in the respective
grants; and
(ii) In the case of grants to Eligible Participants who are
directors and who are not officers or key employees of the Corporation or any
Subsidiary, for a number of Option Shares, at the price(s) and time(s), and on
the terms and conditions as it deems advisable and specifies in the respective
grants; provided, however, that such grants may not exceed a maximum of
Thirty-Five Thousand (35,000) Option Shares to all directors at any time,
exclusive of any Option Shares granted under Section 6(a)(i) hereof. The
foregoing maximum numbers of Option Shares which may be granted to all directors
of the Corporation at any time shall be adjusted in accordance with the
provisions of Section 15 hereof.
The terms upon which and the times at which, or the periods
within which, the Option Shares subject to such Stock Options may become
acquired or such Stock Options may be acquired and exercised shall be as set
forth in the Plan and the related Stock Option Agreements.
Subject to the limitations and restrictions set forth in the
Plan, an Eligible Participant who has been granted a Stock Option may, if
otherwise eligible, be granted additional Stock Options if the Stock Option
Committee shall so determine. The Stock Option Committee shall designate in each
grant of a Stock Option whether the Stock Option is an Incentive Stock Option or
a Non-Qualified Stock Option.
(b) DATE OF GRANT AND RIGHTS OF OPTIONEE. The determination of
-------------------------------------
the Stock Option Committee to grant a Stock Option shall not in any way
constitute or be deemed to constitute an obligation of the Corporation, or a
right of the Eligible Participant who is the proposed subject of the grant, and
shall not constitute or be deemed to constitute the grant of a Stock Option
hereunder unless and until both the Corporation and the Eligible Participant
have executed and delivered to the other a Stock Option Agreement in the form
then required by the Stock Option Committee as evidencing the grant of the Stock
Option, together with such other instrument or instruments as may be required by
the Stock Option Committee pursuant to this Plan; provided, however, that the
Stock Option Committee may fix the date of grant as any date on or after the
date of its final determination to grant the Stock Option (or if no such date is
fixed, then the date of grant shall be the date on which the determination was
finally made by the Stock Option Committee to grant the Stock Option), and such
date shall be set forth in the Stock Option Agreement. The date of grant as so
determined shall be deemed the date of grant of the Stock Option for purposes of
this Plan.
(c) SHAREHOLDER-PARTICIPANTS. A Stock Option may not be granted
-------------------------
hereunder to an Eligible Participant who owns, directly or indirectly, at the
date of the grant of the Stock Option, more than ten percent (10%) of the total
combined voting power of all classes of capital stock of the Corporation or a
Subsidiary unless the purchase price of the Option Shares subject to said Stock
Option is at least one hundred and ten percent (110%) of the Fair Market Value
of the Option Shares, determined as of the date said Stock Option is granted. In
addition, a Stock Option granted hereunder to an Eligible Participant who is
also an officer or key employee of the Corporation or any Subsidiary who owns
directly, or indirectly, at the date of the grant of the Stock Option, more than
ten percent (10%) of the total combined voting power of all classes of capital
stock of the Corporation or a Subsidiary (if permitted in accordance with the
provisions of Section 5 herein) shall not qualify as an Incentive Stock Option
unless the Stock Option by its terms is not exercisable after five (5) years
from the date that it is granted. The attribution rules of Section 425(d) of the
Internal Revenue Code of 1986, as amended, shall apply in the determination of
indirect ownership of stock.
(d) MAXIMUM VALUE OF STOCK OPTIONS. No grant of Incentive Stock
-------------------------------
Options hereunder may be made when the aggregate fair market value of Option
Shares with respect to which Incentive Stock Options (pursuant to this Plan or
any other Incentive Stock Option Plan of the Corporation or any Subsidiary) are
exercisable for the first time by the Eligible Participant during any calendar
year exceeds $100,000.
- 3 -
<PAGE>
(e) SUBSTITUTED STOCK OPTIONS. If all of the outstanding shares
--------------------------
of common stock of another corporation are changed into or exchanged solely for
Common Stock in a transaction to which Section 425(a) of the Internal Revenue
Code of 1986, as amended, applies, then, subject to the approval of the Board of
Directors of the Corporation, Stock Options under the Plan may be substituted
("Substituted Options") in exchange for valid, unexercised and unexpired stock
options of such other corporation. Substituted Options shall qualify as
Incentive Stock Options under the Plan, provided that (and to the extent) the
stock options exchanged for the Substituted Options were "Incentive Stock
Options" within the meaning of Section 422A of the Internal Revenue Code of
1986, as amended.
(f) NON-QUALIFIED STOCK OPTIONS. Stock Options and Substituted
----------------------------
Options granted by the Stock Option Committee shall be deemed Non-Qualified
Stock Options under this Plan if they: (i) are designated at the time of grant
as Incentive Stock Options but do not so qualify under the provisions of Section
422A of the Code or any regulations or rulings issued by the Internal Revenue
Service for any reason; (ii) are in excess of the limitations on the period of
exercise set forth in Section 6(c); (iii) are in excess of the fair market
limitations set forth in Section 6(d); (iv) are granted to an Eligible
Participant who is not an officer or key employee of the Corporation or any
Subsidiary; or (v) are designated at the time of grant as Non-Qualified Stock
Options. Non-Qualified Stock Options granted or substituted hereunder shall be
so designated in the Stock Option Agreement entered into between the Corporation
and the Optionee.
7. STOCK OPTION EXERCISE PRICE
---------------------------
(a) MINIMUM PRICE. The exercise price of any Option Shares shall
--------------
be determined by the Stock Option Committee, in its sole and absolute
discretion, upon the grant of a Stock Option. In the case of a Non-Qualified
Stock Option, said exercise price shall not be less than the lesser of (i) an
amount equal to eighty-five percent (85%) of the Fair Market Value of the Common
Stock represented by the Option Shares; or (ii) an amount which under the terms
of the Stock Option may not be less than eighty-five percent (85%) of the Fair
Market Value of the Common Stock represented by the Option Shares on the date of
the exercise of the related Stock Option. In the case of an Incentive Stock
Option, except as provided elsewhere herein, said exercise price shall not be
less than one hundred percent (100%) of the Fair Market Value of the Common
Stock represented by the Option Shares on the date of grant of the related Stock
Option.
(b) SUBSTITUTED OPTIONS. The exercise price of the Option Shares
--------------------
subject to each Substituted Option may be fixed at a price less than the minimum
amount set forth in Section 7(a) above at the time such Substituted Option is
granted if said exercise price has been computed to be not less than the
exercise price set forth in the stock option of the other corporation for which
it was exchanged, with appropriate adjustment to reflect the exchange ratio of
the shares of stock of the other corporation into the shares of Common Stock.
8. EXERCISE OF STOCK OPTIONS
-------------------------
(a) EXERCISE. Except as otherwise provided elsewhere herein, each
---------
Stock Option shall be exercisable in such increments, which need not be equal,
and upon such contingencies as the Stock Option Committee shall determine at the
time of grant of the Stock Option; provided, however, that if an Optionee shall
not in any given period exercise any part of a Stock Option which has become
exercisable during that period, the Optionee's right to exercise such part of
the Stock Option shall continue until expiration of the Stock Option or any part
thereof as may be provided in the related Stock Option Agreement. No Stock
Option or part thereof shall be exercisable except with respect to whole shares
of Common Stock, and fractional share interests shall be disregarded except that
they may be accumulated.
(b) PRIOR OUTSTANDING INCENTIVE STOCK OPTIONS. Incentive Stock
------------------------------------------
Options granted (or substituted) to an Optionee under the Plan may be
exercisable while such Optionee has outstanding and unexercised any Incentive
Stock Option previously granted (or substituted) to him or her pursuant to this
Plan or any other Incentive Stock Option Plan of the Corporation or any
Subsidiary. An Incentive Stock Option shall be treated as outstanding until it
is exercised in full or expires by reason of lapse of time.
(c) NOTICE AND PAYMENT. Stock Options granted hereunder shall
-------------------
be exercised by written notice delivered to the Corporation specifying the
number of Option Shares with respect to which the Stock Option is being
- 4 -
<PAGE>
exercised, together with concurrent payment in full of the exercise price as
hereinafter provided. If the Stock Option is being exercised by any person or
persons other than the Optionee, said notice shall be accompanied by proof,
satisfactory to the counsel for the Corporation, of the right of such person or
persons to exercise the Stock Option. The Corporation's receipt of a notice of
exercise without concurrent receipt of the full amount of the exercise price
shall not be deemed an exercise of a Stock Option by an Optionee, and the
Corporation shall have no obligation to an Optionee for any Option Shares unless
and until full payment of the exercise price is received by the Corporation and
all of the terms and provisions of the Plan and the related Stock Option
agreement have been fully complied with.
(d) PAYMENT OF EXERCISE PRICE. The exercise price of any Option
--------------------------
Shares purchased upon the proper exercise of a Stock Option shall be paid in
full at the time of each exercise of a Stock Option in cash, (or bank, cashier's
or certified check) and/or, with the prior written approval of the Stock Option
Committee at or before the time of exercise, in Common Stock of the Corporation
which, when added to the cash payment, if any, which has an aggregate Fair
Market Value equal to the full amount of the exercise price of the Stock Option,
or part thereof, then being exercised. Payment by an Optionee as provided herein
shall be made in full concurrently with the Optionee's notification to the
Corporation of his intention to exercise all or part of a Stock Option. If all
or any part of a payment is made in shares of Common Stock as heretofore
provided, such payment shall be deemed to have been made only upon receipt by
the Corporation of all required share certificates, and all stock powers and all
other required transfer documents necessary to transfer the shares of Common
Stock to the Corporation.
(e) MINIMUM EXERCISE. Not less than ten (10) Option Shares may be
-----------------
purchased at any one time upon exercise of a Stock Option unless the number of
shares purchased is the total number which remains to be purchased under the
Stock Option.
(f) COMPLIANCE WITH LAW. No shares of Common Stock shall be
--------------------
issued upon exercise of any Stock Option, and an Optionee shall have no right or
claim to such shares, unless and until: (i) payment in full as provided
hereinabove has been received by the Corporation; (ii) in the opinion of the
counsel for the Corporation, all applicable requirements of law and of
regulatory bodies having jurisdiction over such issuance and delivery have been
fully complied with; and (iii) if required by federal or state law or
regulation, the Optionee shall have paid to the Corporation the amount, if any,
required to be withheld on the amount deemed to be compensation to the Optionee
as a result of the exercise of his or her Stock Option, or made other
arrangements satisfactory to the Corporation, in its sole discretion, to satisfy
applicable income tax withholding requirements.
(g) REORGANIZATION. Notwithstanding any provision in any Stock
---------------
Option Agreement pertaining to the time of exercise of a Stock Option, or part
thereof, upon adoption by the requisite holders of the outstanding shares of
Common Stock of any plan of dissolution, liquidation, reorganization, merger,
consolidation or sale of all or substantially all of the assets of the
Corporation to another corporation which would, upon consummation, result in
termination of a Stock Option in accordance with Section 16 hereof, all Stock
Options previously granted shall become immediately exercisable as to all
unexercised Option Shares for such period of time as may be determined by the
Stock Option Committee, but in any event not less than 30 days, on the condition
that the terminating event described in Section 16 hereof is consummated. If
such terminating event is not consummated, Stock Options granted pursuant to the
Plan shall be exercisable in accordance with the terms of their respective Stock
Option Agreements.
9. NONTRANSFERABILITY OF STOCK OPTIONS
-----------------------------------
Each Incentive Stock Option shall, by its terms, be
nontransferable by the Optionee other than by will or the laws of descent and
distribution and shall be exercisable during the Optionee's lifetime only by the
Optionee. Each Non-Qualified Stock Option shall, by its terms, be
nontransferable by the Optionee other than by will, the laws of descent and
distribution or pursuant to a domestic relations order and shall be exercisable
during the Optionee's lifetime only by the Optionee except pursuant to a
domestic relations order.
10. CONTINUATION OF AFFILIATION
---------------------------
Nothing contained in this Plan (or in any Stock Option Agreement)
shall obligate the Corporation or any Subsidiary to employ or continue to employ
or remain affiliated with any Optionee or any Eligible Participant for any
period of time or interfere in any way with the right of the Corporation or a
Subsidiary to reduce or increase the Optionee's or Eligible Participant's
compensation.
- 5 -
<PAGE>
11. CESSATION OF AFFILIATION
------------------------
Except as provided in Section 12 hereof, if, for any reason other
than disability or death, an Optionee ceases to be affiliated with the
Corporation or a Subsidiary, the Stock Options granted to such Optionee shall
expire on the expiration dates specified for said Stock Options at the time of
their grant, or three (3) months after the Optionee ceases to be so affiliated,
whichever is earlier. During such period after cessation of affiliation, such
Stock Options shall be exercisable only as to those increments, if any, which
had become exercisable as of the date on which such Optionee ceased to be
affiliated with the Corporation or the Subsidiary, and any Stock Options or
increments which had not become exercisable as of such date shall expire
automatically on such date.
12. TERMINATION FOR CAUSE
---------------------
If the Stock Option Agreement so provides and if an Optionee's
employment by or affiliation with the Corporation or a Subsidiary is terminated
for cause, the Stock Options granted to such Optionee shall automatically expire
and terminate in their entirety immediately upon such termination; provided,
however, that the Stock Option Committee may, in its sole discretion, within
thirty (30) days of such termination, reinstate such Stock Options by giving
written notice of such reinstatement to the Optionee. In the event of such
reinstatement, the Optionee may exercise the Stock Options only to such extent,
for such time, and upon such terms and conditions as if the Optionee had ceased
to be employed by or affiliated with the Corporation or a Subsidiary upon the
date of such termination for a reason other than cause, disability or death.
Termination for cause shall include, but shall not be limited to, termination
for malfeasance or gross misfeasance in the performance of duties or conviction
of illegal activity in connection therewith and, in any event, the determination
of the Stock Option Committee with respect thereto shall be final and
conclusive.
13. DEATH OF OPTIONEE
-----------------
If an Optionee dies while employed by or affiliated with the
Corporation or a Subsidiary, or during the three-month period referred to in
Section 11 hereof, the Stock Options granted to such Optionee shall expire on
the expiration dates specified for said Stock Options at the time of their
grant, or one (1) year after the date of such death, whichever is earlier. After
such death, but before such expiration, subject to the terms and provisions of
the Plan and the related Stock Option Agreements, the person or persons to whom
such Optionee's rights under the Stock Options shall have passed by will or by
the applicable laws of descent and distribution, or the executor or
administrator of the Optionee's estate, shall have the right to exercise such
Stock Options to the extent that increments, if any, had become exercisable as
of the date on which the Optionee died.
14. DISABILITY OF OPTIONEE
----------------------
If an Optionee is disabled while employed by or affiliated with
the Corporation or a Subsidiary or during the three-month period referred to in
Section 11 hereof, the Stock Options granted to such Optionee shall expire on
the expiration dates specified for said Stock Options at the time of their
grant, or one (1) year after the date such disability occurred, whichever is
earlier. After such disability occurs, but before such expiration, the Optionee
or the guardian or conservator of the Optionee's estate, as duly appointed by a
court of competent jurisdiction, shall have the right to exercise such Stock
Options to the extent that increments, if any, had become exercisable as of the
date on which the Optionee became disabled or ceased to be employed by or
affiliated with the Corporation or a Subsidiary as a result of the disability.
An Optionee shall be deemed to be "disabled" if it shall appear to the Stock
Option Committee, upon written certification delivered to the Corporation of a
qualified licensed physician, that the Optionee has become permanently and
totally unable to engage in any substantial gainful activity by reason of a
medically determinable physical or mental impairment which can be expected to
result in the Optionee's death, or which has lasted or can be expected to last
for a continuous period of not less than 12 months.
15. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
-----------------------------------------
If the outstanding shares of Common Stock of the Corporation are
increased, decreased, or changed into or exchanged for a different number or
kind of shares or securities of the Corporation, through a reorganization,
merger, recapitalization, reclassification, stock split, stock dividend, stock
consolidation, or otherwise, without consideration to the Corporation, an
appropriate and proportionate adjustment shall be made in the number and kind
- 6 -
<PAGE>
of shares as to which Stock Options may be granted. A corresponding adjustment
changing the number or kind of Option Shares and the exercise prices per share
allocated to unexercised Stock Options, or portions thereof, which shall have
been granted prior to any such change, shall likewise be made. Such adjustments
shall be made without change in the total price applicable to the unexercised
portion of the Stock Option, but with a corresponding adjustment in the price
for each Option Share subject to the Stock Option. Adjustments under this
Section shall be made by the Stock Option Committee, whose determination as to
what adjustments shall be made, and the extent thereof, shall be final and
conclusive. No fractional shares of stock shall be issued or made available
under the Plan on account of such adjustments, and fractional share interests
shall be disregarded, except that they may be accumulated.
16. TERMINATING EVENTS
------------------
Upon consummation of a plan of dissolution or liquidation of the
Corporation, or upon consummation of a plan of reorganization, merger or
consolidation of the Corporation with one or more corporations, as a result of
which the Corporation is not the surviving entity, or upon the sale of all or
substantially all the assets of the Corporation to another corporation, subject
to the provisions of Section 8(g) hereof the Plan shall automatically terminate
and all Stock Options theretofore granted shall be terminated, unless provision
is made in connection with such transaction for assumption of Stock Options
theretofore granted, or substitution for such Stock Options with new stock
options covering stock of a successor employer corporation, or a parent or
subsidiary corporation thereof, solely at the discretion of such successor
corporation, or parent or subsidiary corporation, with appropriate adjustments
as to number and kind of shares and prices.
17. AMENDMENT AND TERMINATION
-------------------------
The Board of Directors of the Corporation may at any time and
from time to time suspend, amend, or terminate the Plan and may, with the
consent of an Optionee, make such modifications of the terms and conditions of
that Optionee's Stock Option as it shall deem advisable; provided that, except
as permitted under the provisions of Section 15 hereof, no amendment or
modification may be adopted without the Corporation having first obtained the
approval of the holders of a majority of the Corporation's outstanding shares of
Common Stock present, or represented, and entitled to vote at a duly held
meeting of shareholders of the Corporation, or by written consent, if the
amendment or modification would:
(a) materially increase the number of securities which may be
issued under the Plan;
(b) materially increase the number of securities which may be
issued at any time under the Plan to all directors who are not also officers or
key employees of the Corporation or any Subsidiary;
(c) materially modify the requirements as to eligibility for
participation in the Plan;
(d) increase or decrease the exercise price of any Stock
Option granted under the Plan;
(e) increase the maximum term of Stock Options provided for
herein;
(f) permit Stock Options to be granted to any person who is
not an Eligible Participant; or
(g) change any provision of the Plan which would affect the
qualification as an Incentive Stock Option under the internal revenue laws then
applicable of any Stock Option granted as an Incentive Stock Option under the
Plan.
No Stock Option may be granted during any suspension of the Plan
or after termination of the Plan. Amendment, suspension, or termination of the
Plan shall not (except as otherwise provided in Section 15 hereof), without the
consent of the Optionee, alter or impair any rights or obligations under any
Stock Option theretofore granted.
18. RIGHTS OF ELIGIBLE PARTICIPANTS AND OPTIONEES
---------------------------------------------
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<PAGE>
No Eligible Participant, Optionee or other person shall have any
claim or right to be granted a Stock Option under this Plan, and neither this
Plan nor any action taken hereunder shall be deemed to give or be construed as
giving any Eligible Participant, Optionee or other person any right to be
retained in the employ of the Corporation or any Subsidiary. Without limiting
the generality of the foregoing, no person shall have any rights as a result of
his or her classification as an Eligible Participant or Optionee, such
classifications being made solely to describe, define and limit those persons
who are eligible for consideration for privileges under the Plan.
19. PRIVILEGES OF STOCK OWNERSHIP; REGULATORY LAW COMPLIANCE; NOTICE
OF SALE
----------------------------------------------------------------
No Optionee shall be entitled to the privileges of stock
ownership as to any Option Shares not actually issued and delivered. No Option
Shares may be purchased upon the exercise of a Stock Option unless and until all
then applicable requirements of all regulatory agencies having jurisdiction and
all applicable requirements of the securities exchanges upon which securities of
the Corporation are listed (if any) shall have been fully complied with. The
Optionee shall, not more than thirty (30) days after each sale or other
disposition of shares of Common Stock acquired pursuant to the exercise of Stock
Options, give the Corporation notice in writing of such sale or other
disposition.
20. EFFECTIVE DATE OF THE PLAN
--------------------------
The Plan shall be deemed adopted as of March 25, 1998, and shall
be effective immediately, subject to approval of the Plan by the holders of at
least a majority of the Corporation's outstanding shares of Common Stock.
21. TERMINATION
-----------
Unless previously terminated as aforesaid, the Plan shall
terminate ten (10) years from the earliest date of: (i) adoption of the Plan by
the Board of Directors of the Corporation; or (ii) approval of the Plan by
holders of at least a majority of the outstanding shares of Common Stock. No
Stock Options shall be granted under the Plan thereafter, but such termination
shall not affect any Stock Option theretofore granted.
22. OPTION AGREEMENT
----------------
Each Stock Option granted under the Plan shall be evidenced by a
written Stock Option Agreement executed by the Corporation and the Optionee, and
shall contain each of the provisions and agreements herein specifically required
to be contained therein, and such other terms and conditions as are deemed
desirable by the Stock Option Committee and are not inconsistent with this Plan.
23. STOCK OPTION PERIOD
-------------------
Each Stock Option and all rights and obligations thereunder shall
expire on such date as the Stock Option Committee may determine, but not later
than ten (10) years from the date such Stock Option is granted, and shall be
subject to earlier termination as provided elsewhere in this Plan.
24. EXCULPATION AND INDEMNIFICATION OF STOCK OPTION COMMITTEE
---------------------------------------------------------
In addition to any applicable coverage under any directors and
officers liability or similar insurance policy, the present, former and future
members of the Stock Option Committee, and each of them, who is or was a
director, officer or employee of the Corporation shall be indemnified by the
Corporation to the extent authorized in and permitted by the Corporation's
Certificate of Incorporation, and/or Bylaws in connection with all actions,
suits and proceedings to which they or any of them may be a party by reason of
any act or omission of any member of the Stock Option Committee under or in
connection with the Plan or any Stock Option granted thereunder.
- 8 -
<PAGE>
25. AGREEMENT AND REPRESENTATIONS OF OPTIONEE
-----------------------------------------
Unless the shares of Common Stock covered by this Plan have been
registered with the Securities and Exchange Commission pursuant to the
registration requirements under the Securities Act of 1933, each Optionee shall:
(i) by and upon accepting a Stock Option, represent and agree in writing, in the
form of the letter attached hereto as Exhibit "A," for himself or herself and
his or her transferees by will or the laws of descent and distribution, that the
Option Shares will be acquired for investment purposes and not for resale or
distribution; and (ii) by and upon the exercise of a Stock Option, or a part
thereof, furnish evidence satisfactory to counsel for the Corporation, including
written and signed representations in the form of the letter attached hereto as
Exhibit "B," to the effect that the Option Shares are being acquired for
investment purposes and not for resale or distribution, and that the Option
Shares being acquired shall not be sold or otherwise transferred by the Optionee
except in compliance with the registration provisions under the Securities Act
of 1933, as amended, or an applicable exemption therefrom. Furthermore, the
Corporation, at its sole discretion, to assure itself that any sale or
distribution by the Optionee complies with this Plan and any applicable federal
or state securities laws, may take all reasonable steps, including placing stop
transfer instructions with the Corporation's transfer agent prohibiting
transfers in violation of the Plan and affixing the following legend (and/or
such other legend or legends as the Stock Option Committee shall require) on
certificates evidencing the shares:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED OR OFFERED
FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT TO THEM UNDER
THE ACT OR A WRITTEN OPINION OF COUNSEL FOR THE
HOLDER THEREOF, WHICH OPINION SHALL BE ACCEPTABLE
TO PROFESSIONAL BANCORP, THAT REGISTRATION IS NOT
REQUIRED."
At any time that an Optionee contemplates the disposition of any of the Option
Shares (whether by sale, exchange, gift or other form of transfer), he or she
shall first notify the Corporation of such proposed disposition and shall
thereafter cooperate with the Corporation in complying with all applicable
requirements of law which, in the opinion of counsel for the Corporation, must
be satisfied prior to the making of such disposition. Before consummating such
disposition, the Optionee shall provide to the Corporation an opinion of
Optionee's counsel, of which both such opinion and such counsel shall be
satisfactory to the Corporation, that such disposition will not result in a
violation of any state or federal securities laws or regulations. The
Corporation shall remove any legend affixed to certificates for Option Shares
pursuant to this Section if and when all of the restrictions on the transfer of
the Option Shares, whether imposed by this Plan or federal or state law, have
terminated.
26. NOTICES
-------
All notices and demands of any kind which the Stock Option
Committee, any Optionee, Eligible Participant, or other person may be required
or desires to give under the terms of this Plan shall be in writing and shall be
delivered in hand to the person or persons to whom addressed (in the case of the
Stock Option Committee, with the Chief Executive Officer, Chief Financial
Officer or Secretary of the Corporation), by leaving a copy of such notice or
demand at the address of such person or persons as may be reflected in the
records of the Corporation, or by mailing a copy thereof, properly addressed as
above, by certified or registered mail, postage prepaid, with return receipt
requested. Delivery by mail shall be deemed made upon receipt by the notifying
party of the return receipt request acknowledging receipt of the notice or
demand.
27. LIMITATION ON OBLIGATIONS OF THE CORPORATION
--------------------------------------------
All obligations of the Corporation arising under or as a result
of this Plan or Stock Options granted hereunder shall constitute the general
unsecured obligations of the Corporation, and not of the Board of Directors of
the Corporation, any member thereof, the Stock Option Committee, any member
thereof, any officer of the
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<PAGE>
Corporation, or any other person or any Subsidiary, and none of the foregoing,
except the Corporation, shall be liable for any debt, obligation, cost or
expense hereunder.
28. LIMITATION OF RIGHTS
--------------------
The Stock Option Committee, in its sole and absolute discretion,
is entitled to determine who, if anyone, is an Eligible Participant under this
Plan, and which, if any, Eligible Participant shall receive any grant of a Stock
Option. No oral or written agreement by any person on behalf of the Corporation
relating to this Plan or any Stock Option granted hereunder is authorized, and
such may not bind the Corporation or the Stock Option Committee to grant any
Stock Option to any person.
29. SEVERABILITY
------------
If any provision of this Plan as applied to any person or to any
circumstance shall be adjudged by a court of competent jurisdiction to be void,
invalid, or unenforceable, the same shall in no way affect any other provision
hereof, the application of any such provision in any other circum- stances, or
the validity or enforceability hereof.
30. CONSTRUCTION
------------
Where the context or construction requires, all words applied in
the plural herein shall be deemed to have been used in the singular and vice
versa, and the masculine gender shall include the feminine and the neuter and
vice versa.
31. HEADINGS
--------
The headings of the several paragraphs herein are inserted solely
for convenience of reference and are not intended to form a part of and are not
intended to govern, limit or aid in the construction of any term or provision
hereof.
32. SUCCESSORS
----------
This Plan shall be binding upon the respective successors,
assigns, heirs, executors, administrators, guardians and personal
representatives of the Corporation and Optionees.
33. GOVERNING LAW
-------------
To the extent not governed by the laws of the United States, this
Plan shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania.
34. CONFLICT
--------
In the event of any conflict between the terms and provisions of
this Plan, and any other document, agreement or instrument, including, without
meaning any limitation, any Stock Option Agreement, the terms and provisions of
this Plan shall control.
* * * * * * * *
- 10 -
<PAGE>
EXHIBIT "A"
------------, 19--
Professional Bancorp
606 Broadway
Santa Monica, California 90401
Gentlemen:
On this day of , 19 , the undersigned has received, pursuant to the
Professional Bancorp 1998 Stock Option Plan (the "Plan") and the Stock Option
Agreement (the "Agreement") by and between Professional Bancorp (the
"Corporation") and the undersigned, dated , 19 an option to purchase shares of
the no par value common stock of Professional Bancorp (the "Stock").
In consideration of the grant of such option by Professional Bancorp:
1. I hereby represent and warrant to you that the Stock to be acquired
pursuant to the option will be acquired by me in good faith and for my own
personal account, and not with a view to distributing the Stock to others or
otherwise reselling the stock in violation of the Securities Act of 1933, as
amended, or the rules and regulations promulgated thereunder.
2. I hereby acknowledge and agree that: (a) the Stock to be acquired by
me pursuant to the Plan has not been registered and that there is no obligation
on the part of Professional Bancorp to register such Stock under the Securities
Act of 1933, as amended, and the rules and regulations thereunder; and (b) the
Stock to be acquired by me will not be freely tradeable unless the Stock is
either registered under the Securities Act of 1933, as amended, or the holder
presents a legal opinion acceptable to Professional Bancorp that the transfer
will not violate the federal securities laws.
3. I understand that the Corporation is relying upon the truth and
accuracy of the representations and agreements contained herein in determining
to grant such options to me and upon subsequently issuing any Stock pursuant to
the Plan without Professional Bancorp first registering the same under the
Securities Act of 1933, as amended.
4. I understand that the certificate evidencing the Stock to be issued
pursuant to the Plan will contain a legend upon the face thereof to the effect
that the Stock is not registered under the Securities Act of 1933 and that stop
transfer orders will be placed against the shares with Professional Bancorp's
transfer agent.
5. In further consideration for the grant of an option to purchase
Stock of Professional Bancorp, the undersigned hereby agrees to indemnify you
and hold you harmless against all liability, cost, or expenses (including
reasonable attorney's fees) arising out of or as a result of any distribution or
resale of shares of Stock issued by the undersigned in violation of the
securities laws. The agreements contained herein shall inure to the benefit of
and be binding upon the respective legal representatives, successors and assigns
of the undersigned and Professional Bancorp.
Very truly yours,
-------------------------------------------
(Signature)
-------------------------------------------
(Type or Print Name)
- 2 -
<PAGE>
EXHIBIT "B"
Professional Bancorp
___________________, 199_
Page 1
-----------, 19--
Professional Bancorp
606 Broadway
Santa Monica, California 90401
Gentlemen:
On this day of ----------, 19--, the undersigned has acquired, pursuant
to the Professional Bancorp 1998 Stock Option Plan (the "Plan") and the Stock
Option Agreement (the "Agreement") by and between Professional Bancorp (the
"Corporation") and the undersigned, dated -----------, 19--, ( ) shares of the
no par value Common Stock of Professional Bancorp (the "Stock"). In
consideration of the issuance by Professional Bancorp to the undersigned of said
shares of its Common Stock:
1. I hereby represent and warrant to you that the Stock is being
acquired by me in good faith for my own personal account, and not with a view to
distributing the Stock to others or otherwise reselling the Stock in violation
of the Securities Act of 1933, as amended, or the rules and regulations
promulgated thereunder.
2. I hereby acknowledge and agree that: (a) the Stock being acquired by
me pursuant to the Plan has not been registered and that there is no obligation
on the part of Professional Bancorp to register such Stock under the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder;
and (b) the Stock being acquired by me is not freely tradeable and must be held
by me for investment purposes unless the Stock is either registered under the
Securities Act of 1933 or transferred pursuant to an exemption from such
registration, as accorded by the Securities Act of 1933 and under the rules and
regulations promulgated thereunder. I further represent and acknowledge that I
have been informed by legal counsel in connection with said Plan of the
restrictions on my ability to transfer the Stock and that I understand the scope
and effect of those restrictions.
3. I understand that the effects of the above representations are the
following: (i) that the undersigned does not presently intend to sell or
otherwise dispose of all or any part of the shares of the Stock to any person or
entity Professional Bancorp except in compliance with the terms described above,
in the Plan and in the Agreement; and (ii) that the Corporation is relying upon
the truth and accuracy of the representations and agreements contained herein in
issuing said shares of the Stock to me without first registering the same under
the Securities Act of 1933, as amended.
4. I hereby agree that the certificate evidencing the Stock may contain
the following legend stamped upon the face thereof to the effect that the Stock
is not registered under the Securities Act of 1933, as amended, and that the
Stock has been acquired pursuant to the representations and restrictions in this
letter, the Plan and in the Agreement:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED OR OFFERED
FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT TO THEM UNDER
THE ACT OR A WRITTEN OPINION OF COUNSEL FOR THE
HOLDER HEREOF, WHICH OPINION SHALL BE ACCEPTABLE
TO PROFESSIONAL BANCORP THAT REGISTRATION IS NOT
REQUIRED."
- 1 -
<PAGE>
5. I hereby agree and understand that the Corporation will place a stop
transfer notice with its stock transfer agent to ensure that the restrictions on
transfer described herein will be observed.
6. In further consideration of the issuance of the Stock, the
undersigned does hereby agree to indemnify you and hold you harmless against all
liability, costs, or expenses (including reasonable attorney's fees) arising out
of or as a result of any distribution or resale by the undersigned of any of the
Stock. The Agreements contained herein shall inure to the benefit of and be
binding upon the respective legal representatives, successors and assigns of the
undersigned and Professional Bancorp.
Very truly yours,
--------------------------------
(Signature)
-------------------------------
(Type or Print Your Name)
- 2 -
