<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
ELDORADO BANCORP
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(Name of Issuer)
COMMON STOCK, NO PAR VALUE
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(Title of Class of Securities)
284697 10 7
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(CUSIP Number)
CURT A. CHRISTIANSSEN
COMMERCE SECURITY BANCORP, INC.
7777 CENTER AVENUE
ONE PACIFIC PLAZA
HUNTINGTON BEACH, CA 92647
(714) 895-2929
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(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
with a copy to:
MICHAEL K. KREBS, ESQ.
NUTTER, MCCLENNEN & FISH, LLP
ONE INTERNATIONAL PLACE
BOSTON, MA 02110-2699
(617) 439-2000
DECEMBER 24, 1996
-------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with the statement.
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SCHEDULE 13D
- ---------------------- -------------------
CUSIP NO. 284697 10 7
- ---------------------- -------------------
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
COMMERCE SECURITY BANCORP, INC.
(I.R.S. ID#: 33-0720548)
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
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3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WORKING CAPITAL (WC)
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) / /
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 468,200
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BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 0
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REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 468,200
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10 SHARED DISPOSITIVE POWER
0
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
468,200
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* / /
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.0%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CORPORATION (CO)
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
ITEM 1. SECURITY AND ISSUER.
Issuer: Eldorado Bancorp (the "Company")
19100 Von Karman, Suite 550
Irvine, CA 92612
Security: Common Stock, no par value ("Eldorado Common Stock")
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(c) and (f) This statement is being filed by Commerce Security
Bancorp, Inc., a Delaware corporation ("CSBI"). The principal executive offices
of CSBI are located at 7777 Center Avenue, One Pacific Plaza, Huntington Beach,
California 92647.
The principal business of CSBI is to provide, through its bank
subsidiaries, comprehensive corporate, commercial, correspondent and individual
banking services.
Information as to each of the executive officers and directors and the
controlling shareholder of CSBI is set forth on Schedule I hereto. Each of such
persons is a citizen of the United States.
(d) During the last five years, neither CSBI nor, to the best of CSBI's
knowledge, any of the individuals named in Schedule I hereto, has been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) During the last five years, neither CSBI nor, to the best of CSBI's
knowledge, any of the individuals named in Schedule I hereto, has been a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
As more fully described in Item 4 below, pursuant to the terms of the Stock
Option Agreement (as defined below), CSBI will have the right, upon the
occurrence of specified events, to purchase up to 468,200 shares of Eldorado
Common Stock from the Company at $22.00 per share. Should CSBI purchase
Eldorado Common Stock pursuant to the Stock Option Agreement, CSBI intends to
finance such purchase from one or more of the following sources: cash on hand;
the liquidation of securities held by CSBI; or dividends from CSBI subsidiaries.
ITEM 4. PURPOSE OF TRANSACTION.
<PAGE>
On December 24, 1996, CSBI and the Company entered into an Agreement and
Plan of Merger (the "Merger Agreement") providing, among other things, for the
merger (the "Merger") of SDN Bancorp, Inc., a Delaware corporation ("SDN") and a
wholly-owned subsidiary of CSBI, with and into the Company, whereby the Company
will be the surviving corporation.
Pursuant to the Merger Agreement, each share of Eldorado Common Stock
outstanding on the date of the Merger will be converted into the right to
receive, in cash, the sum of $23.00. Upon completion of the Merger (i) the
shares of SDN common stock then issued and outstanding shall be converted into a
like number of shares of common stock of the Company, which thereafter shall be
owned entirely by CSBI and shall constitute all of the issued and outstanding
shares of Eldorado Common Stock; (ii) the Articles of Incorporation and the By-
laws of the Company as in effect immediately prior to the Merger shall be
Articles of Incorporation and By-laws of the Company upon consummation of the
Merger, except that, simultaneous with the Merger, the authorized capital stock
of the Company set forth in the Articles of Incorporation shall be amended to
reflect the authorized capital stock of SDN immediately prior to the Merger, and
(iii) Eldorado Common Stock shall cease to be listed on the American Stock
Exchange.
Consummation of the Merger is subject to certain conditions,
including, but not limited to, (i) approval of the Merger Agreement by the
holders of a majority of the outstanding shares of Eldorado Common Stock, (ii)
the receipt of all required regulatory approvals without the imposition of a
condition or restriction which in the reasonable opinion of CSBI will have or
would reasonably be expected to have a material adverse effect on the economic
or business benefits of the Merger to CSBI so as to render the consummation of
the Merger inadvisable to CSBI; (iii) the accuracy of the representations and
warranties of the Company when made and as of the Closing (as defined in the
Merger Agreement) unless waived by CSBI; and (iv) the accuracy of the
representations and warranties of CSBI and SDN when made and as of the Closing
unless waived by the Company.
Upon completion of the Merger, (i) the total number of persons serving on
the Board of Directors of the Company shall be one, and Robert P. Keller will be
the sole Director and (ii) the executive officers of the Company will consist of
Robert P. Keller, President, and Curt A. Christianssen, Executive Vice President
and Treasurer.
Upon completion of the Merger, the Company's general practice of paying
quarterly cash dividends, at the discretion of its Board of Directors, to the
holders of Eldorado Common Stock shall cease, and the Company shall, from time
to time, upon the determination of its Board of Directors, pay cash dividends to
CSBI as the sole shareholder and parent corporation of the Company on an "as
needed" basis, consistent with applicable state and federal corporate and
banking laws and regulations.
The Merger Agreement is attached hereto as Exhibit 1 and incorporated
herein by reference in its entirety. The foregoing summary of the Merger
Agreement does not purport to be complete and is qualified in its entirety by
reference to such exhibit.
<PAGE>
As a condition to the execution and delivery of the Merger Agreement,
on December 24, 1996, the Company and CSBI entered into a Stock Option Agreement
(the "Stock Option Agreement"), a copy of which is attached hereto as Exhibit 2
and is incorporated herein by reference, pursuant to which the Company granted
CSBI an option (the "Option") to purchase up to 468,200 authorized but unissued
shares of Eldorado Common Stock for $22.00 per share. The Option will become
exercisable in whole or in part at any time prior to its expiration if a
Triggering Event (as hereinafter defined) occurs prior to the occurrence of an
Exercise Termination Event (as hereinafter defined).
For purposes of the Stock Option Agreement, the term "Triggering
Event" means an event upon which CSBI becomes entitled to receive payment of the
Termination Fee (as defined in the Merger Agreement) pursuant to the terms of
the Merger Agreement. Pursuant to the Merger Agreement, CSBI shall become
entitled to the Termination Fee (i) upon termination of the Merger Agreement by
the Company following its receipt of a Qualifying Strategic Transaction
Proposal; or (ii) if the Company receives a Qualifying Strategic Transaction
Proposal (as defined herein) and (x) within twenty calendar days, the Company
has not reaffirmed its intent to proceed with the Merger pursuant to Section
5.1.4 of the Merger Agreement, or (y) the Board of Directors of the Company
fails to give its unqualified recommendation that the stockholders of the
Company approve the Merger Agreement and the Merger, or withdraws such
recommendation prior to the affirmative vote of the stockholders.
A "Qualifying Strategic Transaction Proposal" means a bona fide written
Strategic Transaction Proposal (as defined herein) (which proposal may be
conditional) that (x) is delivered to the Board of Directors (whether directly
or through a representative of the Company), (y) identifies a price or range of
values to be paid for the capital stock, assets or liabilities of the Company or
the Company's bank subsidiary that are to be sold or otherwise transferred
pursuant to such Proposal, and (z) in the good faith determination of the Board
of Directors of the Company, based on the advice of the Company's counsel and on
a written opinion of the Company's investment bankers to the effect that such
Proposal is financially more favorable to its stockholders than the terms of the
Merger (including due to a higher price or range of values offered by such
Proposal), requires the Board of Directors to take (or cause the Company to
take) such action in order to comply with the Board of Directors' fiduciary
duties owed to its stockholders, ranging from the disclosure to the stockholders
of information concerning the Proposal to the termination of the Merger
Agreement. A "Strategic Transaction Proposal" means, to the extent relevant for
these purposes, at all times prior to and including the time of any termination
of this Agreement, a proposal concerning (i) any purchase or other acquisition
of 20% or more of the assets, assumption of 20% or more of the liabilities, or
purchase or other acquisition of 20% or more of the equity (on a pro forma
basis) of the Company (including the Company's bank subsidiary), (ii) any merger
or other business combination involving the Company or the Company's bank
subsidiary, (iii) any recapitalization involving the Company or the Company's
bank subsidiary resulting in an extraordinary dividend or distribution to the
Company or its stockholders, or (iv) any self-tender for or redemption of 35% or
more of the Common Stock.
<PAGE>
The term "Exercise Termination Event" means the termination of the
Merger Agreement in accordance with the provisions thereof.
Notwithstanding any other provisions of the Stock Option Agreement,
the Total Profit (as hereinafter defined) from each sale, transfer or other
disposition that is made on or before the termination of the Option pursuant to
the terms of the Merger Agreement (a "Disposition Transaction") may not exceed
the amount by which $1 million exceeds all out-of-pocket expenses or costs
incurred by the Company in performing its respective covenants or duties under
the Stock Option Agreement (such excess amount hereinafter referred to as the
"Aggregate Profit Ceiling"). In the event that, on a date earlier than the
expiration of twelve months following the termination of the Merger Agreement
the Aggregate Profit Ceiling is reached (the "Ceiling Date"), the termination
date of the Option shall be accelerated to the Ceiling Date and without any
action required on the part of any person (including the Company, any successor
to the Company, CSBI, any other holder of such unexercised portion of the Option
or any Substitute Option (as defined in the Stock Option Agreement), or any
owner of any Option Shares or Substitute Securities (each as defined in the
Stock Option Agreement) then-outstanding), the portion of the Option or any
Substitute Option which is then outstanding and unexercised shall automatically
expire and cease to be exercisable. Furthermore, if the aggregate sum of all
Total Profit received by any and all Transferring Persons (as defined herein)
from all of the Disposition Transactions consummated up to the Ceiling Date
exceeded the Aggregate Profit Ceiling, then such Transferring Persons shall be
jointly and severally liable to pay to the Company or its successor, as the case
may be, not later than the tenth day following the termination of the Option (i)
an amount in cash equal to the difference between such aggregate sum of the
Total Profit and the Aggregate Profit Ceiling, (ii) Option Shares (if delivered
to the Company) or Substitute Securities (if delivered to a successor) having a
market value as of that date equal to the difference between such aggregate sum
of the Total Profit and the Aggregate Profit Ceiling, or (iii) any combination
of the foregoing. For these purposes, the term "Total Profit" means the
aggregate amount (before taxes) of the difference between (i) the Gross Sales
Price (as defined in the Stock Option Agreement), and (ii) the gross purchase
price paid, if any, for the Option Securities (as defined in the Stock Option
Agreement) when they were acquired by CSBI or any holder or owner of any or all
Option Securities that engages in a Disposition Transaction (each a
"Transferring Person").
The foregoing summary of the Stock Option Agreement does not purport
to be complete and is qualified in its entirety by reference to the full text of
such agreement which is attached hereto as Exhibit 2.2.
Except as set forth in this Item 4, the Merger Agreement or the Stock
Option Agreement, neither CSBI nor, to the best of CSBI's knowledge, any of the
individuals named in Schedule I hereto, has any plans or proposals which relate
to or which would result in any of the actions specified in Clauses (a) through
(j) of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a)-(b) By reason of its execution of the Stock Option Agreement,
pursuant to Rule 13d-3(d)(1)(i) promulgated under the Exchange Act, CSBI may be
deemed to have sole voting and
<PAGE>
dispositive power with respect to Eldorado Common Stock subject to the Option
and, accordingly, may be deemed to beneficially own 468,200 shares of Eldorado
Common Stock, or approximately 11.0% of the Eldorado Common Stock outstanding on
December 24, 1996, assuming exercise of the Option. However, CSBI expressly
disclaims any beneficial ownership of the 468,200 shares of Eldorado Common
Stock which are obtainable by CSBI upon exercise of the Option because the
Option is exercisable only in the circumstances set forth in Item 4, none of
which has occurred as of the date hereof.
Neither CSBI nor, to the best of CSBI's knowledge, any of the individuals
named in Schedule I hereto owns any Eldorado Common Stock.
(c) Neither CSBI nor, to the best of CSBI's knowledge, any of the
individuals named in Schedule I hereto has effected any transaction in the
Eldorado Common Stock during the past 60 days.
(d) So long as CSBI has not purchased the Eldorado Common Stock subject to
the Option, CSBI does not have the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of, any of the Eldorado
Common Stock.
(e) Inapplicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER.
The Merger Agreement contains certain customary restrictions on the conduct
of the business of the Company pending the Merger, including certain customary
restrictions relating to Eldorado Common Stock. Except as provided in the
Merger Agreement or the Stock Option Agreement or as set forth herein, neither
CSBI nor, to the best of CSBI's knowledge, any of the individuals named in
Schedule I hereto, has any contracts, arrangements, understandings or
relationships (legal or otherwise) with any person having understandings or
relationships (legal or otherwise) with any person with respect to any
securities of the Company, including, but not limited to, transfer or voting of
any securities, finder's fees, joint ventures, loan or option arrangements, puts
or calls, guarantees of profits, division of profits or losses, or the giving or
withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
2.1 Agreement and Plan of Merger dated December 24, 1996 by and
between CSBI and the Company.
2.2 Stock Option Agreement dated December 24, 1996 by and
between CSBI and the Company.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
/s/ CURT A. CHRISTIANSSEN
-------------------------------
Curt A. Christianssen
Executive Vice President and
Chief Financial Officer
Date: February 18, 1997
13D.
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
OF COMMERCE SECURITY BANCORP, INC.
AND ITS CONTROLLING SHAREHOLDER
The name, business address, present principal occupation or employment (if
any), and the name, principal business and address of any corporation or other
organization in which such employment is conducted (if any), of each of the
directors and executive officers of Commerce Security Bancorp, Inc. ("CSBI") and
Dartmouth Capital Group, L.P. (the "Partnership"), the controlling shareholder
of CSBI, and the executive officers and directors of Dartmouth Capital Group,
Inc., the Partnership's general partner ("DCG"), is set forth below.
CSBI
----
Present Principal Occupation or
Name Employment and Address
- ---- --------------------------------
Robert P. Keller Director, President and Chief
Executive Officer of CSBI
Commerce Security Bancorp, Inc.
7777 Center Avenue
One Pacific Plaza
Huntington Beach, CA 92647
K. Thomas Kemp President and Chief Executive Officer
(Director of CSBI) of White Mountain Holdings, Inc.
White Mountain Holdings, Inc.
80 South Main Street
Hanover, NH 03755
Jefferson W. Kirby Vice President of Alleghany Corporation
(Director of CSBI)
Alleghany Corporation
375 Park Avenue, Suite 3201
New York, NY 10152
<PAGE>
Charles E. Hugel Retired
(Director of CSBI)
Commerce Security Bancorp, Inc.
7777 Center Avenue
One Pacific Plaza
Huntington Beach, CA 92647
Edward A. Fox Retired
(Director of CSBI)
Commerce Security Bancorp, Inc.
7777 Center Avenue
One Pacific Plaza
Huntington Beach, CA 92647
Peter H. Paulsen President and Chief Executive Officer
(Director of CSBI) of Commerce Pacific
Commerce Pacific
355 Harris Avenue, Suite 201
Bellingham, WA 98225
Curt A. Christianssen Senior Vice President, Treasurer and
Chief Financial Officer of CSBI
Commerce Security Bancorp, Inc.
7777 Center Avenue
One Pacific Plaza
Huntington Beach, CA 92647
THE PARTNERSHIP
---------------
Present Principal Occupation or
Name Employment and Address
- ---- -------------------------------
Dartmouth Capital Group, L.P. Principal shareholder of CSBI
(a Delaware limited partnership)
c/o Commerce Security Bancorp, Inc.
7777 Center Avenue
One Pacific Plaza
Huntington Beach, CA 92647
<PAGE>
DCG
---
Present Principal Occupation or
Name Employment and Address
- ---- --------------------------------
Ernest J. Boch Chairman and Chief Executive Officer of
(Director) Subaru of New England, Inc.
Subaru of New England, Inc.
90 Morse Street
Norwood, MA 02062
Curt A. Christianssen (see above for further information)
(Senior Vice President and Treasurer)
Edward A. Fox (see above for further information)
(Director)
Charles E. Hugel (see above for further information)
(Director)
Robert P. Keller (see above for further information)
(Director and President)
K. Thomas Kemp (see above for further information)
(Director)
Jefferson W. Kirby (see above for further information)
(Director)
John B. Pettway Manager of Haveford-Valley, L.C.
(Director)
Haveford-Valley, L.C.
700 Bitner Road
Park City, UT 84098
Henry T. Wilson Principal of Northwood Ventures
(Director)
Northwood Ventures
485 Underhill Boulevard, Suite 205
Syosset, NY 11791
13D.
<PAGE>
EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 24, 1996, is by and
among Eldorado Bancorp, a California corporation ("Eldorado"), and Commerce
Security Bancorp, Inc., a Delaware corporation ("CSBI").
WHEREAS, CSBI desires to acquire all of the capital stock of Eldorado and
its operating bank subsidiary, Eldorado Bank (the "Bank"), by means of a merger
of a direct or indirect subsidiary of CSBI ("Merger Sub") with and into Eldorado
on the terms and for the consideration provided herein;
WHEREAS, CSBI has conditioned its acquisition of Eldorado on Eldorado
making certain representations and warranties, and on Eldorado taking certain
actions and refraining from certain other actions prior to the closing of the
Merger, each as provided herein;
WHEREAS, the Board of Directors of Eldorado deems it desirable and in the
best interests of Eldorado's shareholders for Eldorado to be acquired by CSBI
for the consideration and on the other terms provided herein, including by
taking the actions required hereunder and by refraining from the other actions
prohibited hereunder;
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and other agreements set forth herein,
and intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
1.1 DEFINITIONS. Capitalized terms contained in this Agreement and not
defined in the preamble or the recitals above shall have the meanings set forth
in this Section 1.1:
"AGREEMENT" means this Agreement and Plan of Merger, including all
Disclosure Schedules and Exhibits hereto, as the same may be hereafter amended.
"BANK MERGERS" means the mergers and/or consolidations of the Bank, Liberty
National Bank and San Dieguito National Bank contemplated to occur
contemporaneously with or as soon as practicable following the Effective Time.
-1-
<PAGE>
EXECUTION VERSION
"BANK REGULATORS" means Federal or state Governmental Entities charged with
the supervision or regulation of banks or bank holding companies or engaged in
the insurance of bank deposits.
"BOARD OF DIRECTORS" means, except where another entity is expressly
referenced, the Board of Directors of Eldorado, as elected and qualified from
time to time.
"BORROWER GROUP OBLIGATIONS" means all loans from Eldorado and other
obligations to Eldorado of the applicable borrower, of all guarantors of such
borrower, and of all affiliates and associates of such borrower and guarantors;
PROVIDED, HOWEVER, that Borrower Group Obligations do not include any portion of
an SBA Loan that has been sold without recourse to a third party.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday or Friday
that banks in Los Angeles, California are not required or permitted by Law to be
closed.
"CLASSIFIED ASSET" means (a) any loan or lease asset that is classified on
the books and records of Eldorado as "Substandard", "Doubtful" or "Loss" in
accordance with Loan rating standards applied generally by the FDIC or the
Federal Reserve Bank of San Francisco, and (b) any property classified on the
books and records of Eldorado as OREO.
"CLOSING" means the closing of the Merger, to be held on the Closing Date
at a location fixed pursuant to Section 8.1.
"CLOSING DATE" shall mean the date fixed pursuant to Section 8.1.
"COMMON STOCK" means the common stock of Eldorado, no par value.
"CORPORATIONS CODE" means the California Corporations Code, as amended
through the applicable date.
"CRITICIZED ASSET" means any Classified Asset and any other loan or lease
asset of Eldorado with a rating of "5", "6", "7" or "8" on the books and records
of Eldorado in accordance with Eldorado's loan rating policy, consistently
applied in accordance with the FDIC Rules and Guidelines as described in the
rules and regulations promulgated by the FDIC.
"CSBI" means Commerce Security Bancorp, Inc. and, unless the context
clearly indicates to the contrary, together with the following entities
considered on a consolidated basis (with respect only to the stated time
periods, where applicable): SDN; San Dieguito National Bank;
-2-
<PAGE>
EXECUTION VERSION
Liberty National Bank at all times from and after March 31, 1996; and
Commerce Security Bank at all times from and after September 1, 1996,
"CSBI'S KNOWLEDGE" means the actual knowledge of the following executive
officers of CSBI or its subsidiaries: Robert P. Keller, Curt A. Christianssen,
Philip S. Inglee and Paul F. Rodeno.
"CSBI SUBSIDIARY PREDECESSORS" means Liberty National Bank all times
through and including March 30, 1996, and Commerce Security Bank all times
through and including August 31, 1996.
"DEPOSIT" shall have the meaning set forth in Section 2.7.
"DEPOSIT ESCROW AGENT" shall mean First Trust of California, National
Association.
"DEPOSIT ESCROW AGREEMENT" means that certain Deposit Escrow Agreement,
dated as of even date herewith, by and among CSBI, Eldorado and the Deposit
Escrow Agent, which relates to the Deposit.
"DISCLOSURE SCHEDULES" means the several Schedules referenced in Article
III.
"DISCLOSURE SUPPLEMENT" shall have the meaning set forth in Section 5.5.
"DISSENTING SHARES" means all shares of Common Stock whose holders have
perfected dissenters' rights under Chapter 13 of the Corporations Code in the
manner provided therein.
"EFFECTIVE TIME" means the time as of which the Merger is deemed to have
become effective, as agreed upon by the Parties.
"ELDORADO" means Eldorado Bancorp and, unless the context clearly indicates
to the contrary, together with Eldorado Bank considered on a consolidated basis;
PROVIDED, HOWEVER, that the inclusion in certain instances (for increased
clarity) of the parenthetical "(including the Bank)", or a phrase of like
import, following a reference to Eldorado shall not of itself imply that the
Bank is not to be included in any other reference to Eldorado.
"ELDORADO BANCORP" shall mean Eldorado Bancorp, a California corporation.
"ELDORADO BENEFIT PLAN" means any employee benefit plan or arrangement
(including any "employee benefit plan" as defined in Section 3(3) of ERISA)
maintained or contributed to by
-3-
<PAGE>
EXECUTION VERSION
Eldorado (including the Bank) or by any trade or business, whether or not
incorporated (an "ERISA Affiliate"), which together with Eldorado would be
deemed a "single employer" within the meaning of Section 4001 of ERISA.
"ELDORADO'S KNOWLEDGE" means the actual knowledge of the following
executive officers of Eldorado: J. B. Crowell, Raymond E. Dellerba, David R.
Brown, Elaine Crouch and William E. Lewis.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" shall have the meaning set forth in the definition of
Eldorado Benefit Plan.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE AGENT" means a banking institution or corporate trust company
reasonably satisfactory to Eldorado that CSBI shall appoint to act as exchange
agent hereunder.
"EXCLUDED OPTIONS" means Options with respect to which CSBI has entered
into separate cancellation agreements pursuant to the last sentence of Section
2.5,
"EXCLUDED SHARES" means shares of Common Stock owned as of the Effective
Time by Eldorado, CSBI or any direct or indirect subsidiary of CSBI, in each
case other than shares owned in a fiduciary capacity or as a result of debts
previously contracted.
"EXPENSES" means all out-of-pocket legal, accounting, consulting and other
fees and expenses reasonably incurred by the applicable Party (including, in
each case, those of the Party's subsidiaries) in connection with the Merger and
the Bank Mergers, including expenses incurred in connection with the preparation
of this Agreement and all negotiations, due diligence and other activities
conducted prior hereto, and including all broker's, finder's and similar fees
and expenses relating to the Merger, but excluding underwriting fees or
discounts, placement agent fees, and any amount payable pursuant to a so-called
standby subscription agreement.
"FDIC" means the Federal Deposit Insurance Corporation.
"GAAP" means Generally Accepted Accounting Principles as in effect in the
United States, consistently applied.
-4-
<PAGE>
EXECUTION VERSION
"GOVERNMENTAL ENTITY" means any administrative agency, commission, court or
other governmental authority or instrumentality, domestic or foreign, including
any government-sponsored corporation having regulatory authority under law.
"HAZARDOUS MATERIAL" means any pollutant, contaminant, waste or hazardous
or toxic substance regulated by Law as such, and petroleum or petroleum
products.
"IMPARTIAL ARBITER" means a big-six accounting firm other than Price
Waterhouse LLP and KPMG Peat Marwick LLP (or any other firm then engaged as
external auditors by either Party), selected by CSBI with the reasonable
concurrence of Eldorado.
"INDEMNIFICATION AGREEMENTS" shall have the meaning given that term in
Section 5.11.2.
"INDEMNIFIED PERSON" shall have the meaning given that term in Section
5.11.2.
"IRS" means the United States Internal Revenue Service.
"LAW" means any statute, law, ordinance, rule, regulation or administrative
policy of any Governmental Entity that is applicable to the referenced Person.
"MATERIAL ADVERSE EFFECT" means, with respect to any Person, a material
adverse effect on the business, properties, assets (including loan portfolios),
liabilities (whether absolute, contingent or otherwise), operations, liquidity,
income or condition (financial or otherwise) of such Person, considered as a
whole together with its subsidiaries and including such an effect caused
indirectly through any of its subsidiaries, or on the ability of such Person to
consummate the Merger on the terms hereof; PROVIDED, HOWEVER, that a Material
Adverse Effect does not include a change with respect to, or effect on, such
Person resulting from a change in Law, GAAP, or RAP, or a change with respect
to, or effect on, such Person resulting from any other matter affecting
financial institutions or their holding companies generally.
"MERGER" means the merger of Merger Sub with and into Eldorado as more
particularly described in Section 2.1.
"MERGER CONSIDERATION" shall have the meaning given that term in Section
2.3.1.
"MERGER SUB" means SDN or, in the discretion of CSBI, such other direct or
indirect subsidiary of CSBI as it may hereafter designate.
"MONTHLY FINANCIAL STATEMENTS" shall have the meaning given that term in
Section 5.7.
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EXECUTION VERSION
"MOST RECENT FINANCIAL STATEMENTS" means Eldorado's unaudited balance sheet
at the Most Recent Balance Sheet Date, and the related statements of income and
shareholders' equity for the nine month period ended at the Most Recent Balance
Sheet Date.
"MOST RECENT BALANCE SHEET DATE" means September 30, 1996.
"NON-CONTRACT EMPLOYEES" means employees of Eldorado who are not parties to
employment agreements with Eldorado, as listed on SCHEDULE 3.17 or SCHEDULE
3.18.1.
"OPTION" means an option to purchase shares of Common Stock that has been
granted under any of the Eldorado Bancorp 1989 Stock Option Plan, the Eldorado
Bancorp 1992 Stock Option Plan, the Eldorado Bancorp 1995 Stock Option Plan or
the Eldorado Bancorp Amended and Restated Employee Stock Purchase Plan, without
regard to whether such option has yet vested or otherwise become exercisable as
of the applicable date but excluding options that have expired or been exercised
as of the applicable date.
"OPTIONHOLDER" means each Person who is the holder of an Option as of
immediately prior to the Effective Time.
"OPTION CANCELLATION PAYMENT" shall have the meaning given that term in
Section 2.5.
"OREO" means real property (i) acquired by Eldorado in the ordinary course
of its banking business through purchase at a foreclosure sale conducted on a
lien in favor of Eldorado (or a comparable sale by a trustee under a deed of
trust) or by acceptance of a deed in lieu of foreclosure or (ii) any asset of
Eldorado classified as "in-substance foreclosure" on the books and records of
Eldorado.
"PARTIES" means, collectively, Eldorado and CSBI.
"PERMITS" means permits, licenses, variances, exemptions, orders and
approvals of any applicable Governmental Entity.
"PERSON" means any natural person, corporation, limited liability company,
general or limited partnership, limited liability partnership, joint venture,
joint stock company, trust, unincorporated organization, association, sole
proprietorship, governmental body, or agency or political subdivision of any
government.
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EXECUTION VERSION
"PROXY STATEMENT" means the proxy statement by which Eldorado will solicit
proxies from the Shareholders for the approval of the Merger, including any
amendment or supplement thereto.
"QUALIFYING STRATEGIC TRANSACTION PROPOSAL" shall have the meaning given
that term in Section 5.1.3.
"RAP" means Regulatory Accounting Principles, as interpreted by the FDIC.
"RECOMMENDATION OF APPROVAL" means an unqualified recommendation by the
Board of Directors to the Shareholders that such Shareholders approve the Merger
and the principal terms of this Merger Agreement; PROVIDED, HOWEVER, that, in
the event that Alex Sheshunoff & Co. withdraws or adversely modifies the
fairness opinion described in Section 3.23 prior to the Shareholder Meeting, an
explanation in the Proxy Statement of the facts giving rise to such withdrawl or
modification shall not, of itself, cause the Board's recommendation to be deemed
"qualified."
"REDEMPTION" shall have the meaning given that term in Section 2.3.3.
"REGULATORY AGREEMENT" means any regulatory agreement, memorandum of
understanding or similar agreement with, any cease and desist or similar order
or directive entered or issued by, any commitment letter or similar undertaking
to, any extraordinary supervisory letter from, or any board of directors
resolutions adopted at the request of, any Bank Regulator.
"REPRESENTATIVES" means each of the applicable Person's directors,
officers, employees, agents, representatives and advisors.
"SBA LOANS" means loans guaranteed by the U.S. Small Business
Administration.
"SDN" means SDN Bancorp, Inc., a Delaware corporation and a wholly-owned
subsidiary of CSBI.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES FILINGS" mean all reports, schedules, registration statements
and definitive proxy statements required to be filed by Eldorado pursuant to the
Exchange Act with the SEC since January 1, 1994, as such documents have been
amended since the time of their filing.
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EXECUTION VERSION
"SHAREHOLDER MEETING" means a meeting of the Shareholders as described in
Section 5.2.1.
"SHAREHOLDERS" means the holders of the Common Stock as of the applicable
time.
"STRATEGIC TRANSACTION" means (a) at all times prior to and including the
time of any termination of this Agreement, (i) any purchase or other acquisition
of 20% or more of the assets, assumption of 20% or more of the liabilities, or
purchase or other acquisition of 20% or more of the equity (on a pro forma
basis) of Eldorado (including the Bank), (ii) any merger or other business
combination involving Eldorado or the Bank, (iii) any recapitalization involving
Eldorado or the Bank resulting in an extraordinary dividend or distribution to
Eldorado or the Shareholders, or (iv) any self-tender for or redemption of 35%
or more of the Common Stock, and (b) at all times following any termination of
this Agreement, (i) any purchase or other acquisition of 35% or more of the
assets, assumption of 35% or more of the liabilities, or purchase or other
acquisition of 35% or more of the equity (on a pro forma basis) of Eldorado
(including the Bank), (ii) any merger, recapitalization or other transaction
involving Eldorado or the Bank as a result of which the then-existing
Shareholders receive or retain less than 65% of the equity securities of the
resulting entity.
"STRATEGIC TRANSACTION PROPOSAL" means any proposal regarding a Strategic
Transaction.
"SURVIVING CORPORATION" means the corporation that is the survivor of the
Merger.
"TAX" means, except where the context clearly requires otherwise, all
Federal, state, local and foreign income, profits, franchise, gross receipts,
payroll, sales, employment, use, property, withholding, excise, occupancy and
other taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts.
"TERMINATION FEE" shall have the meaning given that term in Section 7.5.1.
"VIOLATION" means a conflict with, violation of, default under, creation of
a right of termination under, cancellation of, acceleration of any obligation
under, loss of a material benefit under, or creation of any lien, pledge,
security interest, charge or other encumbrance on assets under, the referenced
Law, organic document, agreement or other instrument, in each case with or
without notice or lapse of time, or both.
1.2 RULES OF CONSTRUCTION. The following rules of construction shall
apply to the interpretation of this Agreement:
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EXECUTION VERSION
1.2.1 All references to Sections and Articles shall, unless another
agreement is expressly referenced, mean the applicable sections or articles of
this Agreement. All references to Schedules shall mean the applicable
Disclosure Schedule.
1.2.2 The section titles and other headings contained in this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of any provisions of this Agreement.
1.2.3 Whenever used in this Agreement, the word "including" shall be
non-exclusive and shall mean "including without limitation."
1.2.4 The terms "herein", "hereunder", and terms of similar import
refer to this Agreement as a whole and not to the specific Section or Article in
which they are used.
ARTICLE II
THE MERGER
2.1 THE MERGER. Eldorado and Merger Sub shall be the constituent
corporations to the Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, the Merger shall be effected by means of a
merger (hereinafter sometimes referred to as the "Merger") of Merger Sub with
and into Eldorado in accordance with Section 1108 of the Corporations Code and
Section 252 of the Delaware General Corporation Law, to be effected in
California by the filing of an Agreement of Merger substantially in the form
attached hereto as EXHIBIT 2.1 and to be effected in Delaware by the filing of
an appropriate Certificate of Merger. In accordance with each such statute, at
the Effective Time, the corporate existence of Merger Sub shall be merged into
Eldorado, and Eldorado shall be the Surviving Corporation and shall continue its
corporate existence under the laws of the State of California.
2.2 CORPORATE DOCUMENTS, DIRECTORS AND OFFICERS. From and after the
Effective Time and thereafter until amended as provided by law, the Articles of
Incorporation and By-laws of the Surviving Corporation shall be the Articles of
Incorporation and By-laws of Eldorado as in effect immediately prior to the
Effective Time. The directors and officers of the Surviving Corporation
initially shall be comprised of all of the directors and officers of Merger Sub
immediately prior to the Effective Time, and each such director or officer shall
serve until his or her successor has been duly elected or appointed and
qualified or until his or her earlier death, resignation or removal in
accordance with the terms of the Surviving Corporation's Articles of
Incorporation and By-laws.
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EXECUTION VERSION
2.3 TREATMENT OF COMMON STOCK AND MERGER SUB STOCK.
2.3.1 CONVERSION OF COMMON STOCK. At the Effective Time, each share of
Common Stock issued and outstanding immediately prior to the Effective Time,
excluding Dissenting Shares and Excluded Shares, shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into the
right to receive, in cash, the sum of $23.00 (the "Merger Consideration"). All
shares of Common Stock converted into the right to receive the Merger
Consideration pursuant to the preceding sentence shall, as of the Effective
Time, no longer be outstanding and shall automatically be cancelled and shall
cease to exist, and each certificate previously representing any such shares
shall thereafter represent only the right to receive the Merger Consideration
into which the shares of Common Stock represented by such certificate have been
converted. As of the Effective Time, all Excluded Shares shall cease to exist
and the certificates for such shares shall, as promptly as practicable
thereafter, be cancelled and no payments shall be made in consideration
therefor.
2.3.2 DISSENTING SHARES. Notwithstanding anything in this Agreement to
the contrary, Dissenting Shares shall not be converted into the right to
receive, or be exchangeable for, the Merger Consideration provided for in
Section 2.3.1 hereof, but, instead, the holders thereof shall be entitled to
payment for such Dissenting Shares in accordance with the provisions of Chapter
13 of the Corporations Code unless and until a holder of Dissenting Shares shall
have failed to perfect or shall have effectively withdrawn or lost such holder's
rights to appraisal and payment, as the case may be. Eldorado shall (a) give
CSBI prompt written notice of (x) the identities of all Shareholders who have
perfected rights to dissent pursuant to Corporations Code Chapter 13 and (y) the
receipt of any notice from a Shareholder demanding the purchase of his, her or
its shares, (b) not settle or offer to settle any such demands without the prior
written consent of CSBI, and (c) not, without the prior written consent of CSBI,
waive any vote in favor of the Merger or failure of a Shareholder timely to take
any other action required under Corporations Code Chapter 13.
2.3.3 PAYMENT TO EXCHANGE AGENT. Subject to the terms and conditions
hereof, and subject to reduction by (a) the amount of the Deposit and (b) any
amount funded by Eldorado in accordance with the immediately following sentence,
immediately prior to the Closing CSBI shall deliver or cause to be delivered to
the Exchange Agent, for the benefit of the Shareholders, such amount of cash (in
same day funds) as is sufficient to pay the aggregate Merger Consideration that
Shareholders are entitled to receive pursuant to Section 2.3.1. Subject to the
terms and conditions hereof, immediately prior to the Closing Eldorado shall pay
to the Exchange Agent, for inclusion in the Merger Consideration, such amount of
cash (in same day funds) (the "Redemption"), if any, as to which payment (x)
CSBI has obtained all necessary approvals by Bank Regulators and (y) CSBI's
California counsel has reasonably determined, and has so advised the Board of
Directors,
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EXECUTION VERSION
that such payment will not result in a violation of Section ___ ET SEQ. of
the California Financial Code or any other provision of law applicable to
Eldorado or the Bank. The directors and officers of Eldorado shall be
entitled to rely on such determination by CSBI's counsel, without separate
investigation by such directors and/or officers, and CSBI shall indemnify and
hold harmless each director and officer of Eldorado against any liability
arising out of any payment of a Redemption by Eldorado to the full extent
provided under Section 5.11.2.
2.3.4 CONVERSION OF MERGER SUB STOCK. At the Effective Time, the
shares of common stock of Merger Sub then issued and outstanding shall be
converted into a like number of shares of common stock of the Surviving
Corporation, which thereafter shall constitute all of the issued and outstanding
shares of common stock of the Surviving Corporation. From and after the
Effective Time, the authorized capital stock of the Surviving Corporation shall
consist of the authorized capital stock of Merger Sub.
2.4 EXCHANGE OF CERTIFICATES.
2.4.1 COMMON STOCK EXCHANGE PROCEDURES. After the Effective Time, each
holder of a certificate or certificates theretofore representing shares of
issued and outstanding Common Stock (other than the Dissenting Shares and
Excluded Shares) shall, upon the surrender of such certificates to the Exchange
Agent, be entitled to receive in exchange therefor the amount of cash into which
Common Stock theretofore represented by the certificate or certificates so
surrendered shall have been converted as provided in Section 2.3.1, without
interest and subject to any required withholding of Taxes. The holder of a
certificate that prior to the Merger represented issued and outstanding shares
of Common Stock shall have no rights, after the Effective Time, with respect to
such shares except to surrender the certificate in exchange for cash without
interest thereon or, if applicable, to perfect such rights as a holder of
Dissenting Shares as such holder may have pursuant to the applicable provisions
of Chapter 13 of the Corporations Code. Within two (2) Business Days after the
Effective Time, the Surviving Corporation will send, or will cause the Exchange
Agent to send, to each holder of Common Stock at the Effective Time a letter of
transmittal for use in such exchange; PROVIDED, HOWEVER, that, to the extent
permitted by law, CSBI agrees to make appropriate arrangements for the earlier
surrender of share certificates and payment in same-day funds immediately
following the Effective Time with respect to any Shareholder who will receive in
excess of $1,000,000 of Merger Consideration.
2.4.2 CERTAIN TAXES. If any payment for shares of Common Stock is to
be made in a name other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of such payment that
the certificate so surrendered shall be properly endorsed (or accompanied by an
appropriate instrument of transfer) and otherwise in proper form for transfer,
and that the person requesting such exchange shall pay to the Exchange Agent, in
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EXECUTION VERSION
advance, any transfer or other Taxes required by reason of the payment to a
person other than the registered holder of the certificate surrendered, or
required for any other reason, or shall establish to the satisfaction of the
Exchange Agent that such Tax has been paid or is not payable.
2.4.3 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such certificate to be lost,
stolen or destroyed and, if required by the Surviving Corporation, the posting
by such person of a bond in such amount as the Surviving Corporation may direct
as indemnity against any claim that may be made against it with respect to such
certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed certificate the cash deliverable in respect thereof pursuant to
Section 2.4.1.
2.4.4 UNCLAIMED MONIES. Any portion of the cash paid to the Exchange
Agent by or on behalf of CSBI (together with any investment income earned
thereon) that remains unclaimed by the Shareholders pursuant to the provisions
of Section 2.4.1 six months after the Closing Date shall be returned to CSBI,
upon demand, and any Shareholder who has not exchanged his, her or its shares of
Common Stock for the Merger Consideration in accordance with Section 2.4.1 prior
to that time shall thereafter look solely to CSBI for payment in respect of such
shares. Notwithstanding the foregoing, neither CSBI, the Surviving Corporation,
the Bank, the Exchange Agent nor any other Person shall be liable to any
Shareholder for any amount paid to a public official pursuant to applicable
abandoned property laws.
2.5 TREATMENT OF OPTIONS. Immediately prior to the Effective Time, each
holder of a then-outstanding Option shall be entitled (whether or not such
Option is then vested or exercisable) to receive, in cancellation of such
option, a cash payment (an "Option Cancellation Payment") in an amount equal to
the excess of the Merger Consideration over the per-share exercise price of such
Option, multiplied by the number of shares of Common Stock covered by such
Option, subject to any required withholding of Taxes. Nothing in this Section
2.5 shall be construed as preventing a holder from exercising his or her Option
prior to the Effective Time.
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EXECUTION VERSION
Such Option Cancellation Payments shall be paid contemporaneously with the
Closing. Eldorado shall take appropriate steps to obtain from each of the
several Optionholders a cancellation agreement, in form and substance
acceptable to CSBI, cancelling each outstanding Option in consideration of
the applicable Option Cancellation Payment. Notwithstanding the foregoing,
CSBI may enter into agreements with one or more Optionholders, in the sole
discretion of CSBI and such Optionholder, providing for the cancellation of
some or all of such holder's Options for consideration consisting of options
to purchase CSBI common stock or for any other mutually agreeable
consideration, in each case in lieu of an Option Cancellation Payment,
provided only that no such agreement shall provide for a cash payment to the
applicable Optionholder in excess of the Option Cancellation Payment to which
such Optionholder would otherwise be entitled.
2.6 CLOSING OF TRANSFER BOOKS. At the Effective Time, the transfer books
for Common Stock shall be closed, and no transfer of shares of Common Stock
shall thereafter be made on such books. If, after the Effective Time,
certificates representing such shares are presented for transfer to the Exchange
Agent, they shall be cancelled and exchanged for the Merger Consideration as
provided in this Article II.
2.7 DEPOSIT BY CSBI. Concurrently herewith, (a) CSBI is delivering to the
Deposit Escrow Agent the sum of Four Million Five Hundred Thousand Dollars
($4,500,000) (together with all earnings thereon, the "Deposit"), and (b) CSBI,
Eldorado and the Deposit Escrow Agent are entering into the Deposit Escrow
Agreement. Upon the Closing, the Deposit shall be disbursed to the Exchange
Agent. The disposition of the Deposit upon any termination of this Agreement
shall be in accordance with Section 7.5.2. Each of CSBI and Eldorado shall
promptly take such steps as may be necessary to effect this Section, including,
without limitation, issuing such written instructions and taking such other
actions as the Deposit Escrow Agent may request. Except to the extent provided
to the contrary in subsection 7.6.3(c) or in the Deposit Escrow Agreement, the
disposition of the Deposit pursuant to this Section 2.7 shall not prejudice any
rights or remedies that the Parties may otherwise have pursuant to this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ELDORADO
Except where a different date is expressly specified, and subject to the
exceptions stated herein (including those contained in any Disclosure Schedule
applicable to each given Section), Eldorado makes the representations and
warranties set forth below as of the date of this Agreement:
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EXECUTION VERSION
3.1 ORGANIZATION, STANDING AND POWER.
(a) Eldorado is a business corporation duly organized, validly
existing and in good standing under the laws of the State of California.
Eldorado has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business substantially as now being
conducted, and is duly qualified and in good standing to do business in each
jurisdiction in which a failure to be so qualified would have a Material Adverse
Effect on Eldorado. Copies of the Articles of Incorporation and By-Laws of
Eldorado, including all amendments thereto as of the date of this Agreement,
have been delivered to CSBI and are complete and correct. The minute books of
Eldorado accurately reflect in all material respects all corporate actions held
or taken by the Shareholders or the Board of Directors, including all committees
of such Board of Directors.
(b) The Bank is a commercial banking corporation duly organized,
validly existing and in good standing under the laws of the State of
California. The Bank is a wholly-owned subsidiary of Eldorado. The Bank
currently maintains, and at all times prior hereto has maintained, insurance
of its deposits under the Bank Insurance Fund (including, if formed prior to
the Closing Date, the Deposit Insurance Fund) of the FDIC, and all premiums
and assessments required in connection therewith have been paid by the Bank
as the same have become due. The Bank has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business substantially as now being conducted and is duly qualified to do
business in each jurisdiction in which a failure to be so qualified would
have a Material Adverse Effect on it. The minute books of the Bank
accurately reflect in all material respects all corporate actions held or
taken by the Bank's shareholder(s) and Board of Directors, including all
committees of such Board of Directors.
3.2 CAPITAL STRUCTURE.
3.2.1 CAPITAL STOCK OF ELDORADO. The authorized capital stock of
Eldorado consists of 12,500,000 shares of Common Stock, no par value, and
5,000,000 shares of preferred stock, no par value. As of the date hereof,
3,787,734 shares of Common Stock are issued and outstanding, no shares of Common
Stock are held in treasury by Eldorado and no shares of Eldorado preferred stock
are either issued and outstanding or held in treasury by Eldorado. As of the
date hereof, the only shares of Common Stock reserved for future issuance are
314,233 shares of Common Stock reserved for issuance upon the exercise of
outstanding Options. No shares of Eldorado preferred stock are reserved for
future issuance. All outstanding shares of Common Stock have been validly
issued and are fully paid and nonassessable and are not subject to preemptive
rights. All of the issued and outstanding shares of Common Stock have been
offered and sold by Eldorado in compliance with applicable federal and state
securities Laws and
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EXECUTION VERSION
issued in compliance with any preemptive right held by any Person. Except as
set forth on SCHEDULE 3.2.1, as of the date hereof there are no dividends
which have accrued or been declared but are unpaid on the Common Stock.
Eldorado has no contractual obligation to register any shares of Common Stock
under the Securities Act.
3.2.2 CAPITAL STRUCTURE OF BANK. The authorized capital stock of the
Bank consists of 4,000,000 shares of common stock, $1.25 par value, of which
1,031,190 shares are issued and outstanding. All issued and outstanding shares
of the Bank's common stock are held, of record and beneficially, by Eldorado,
have been validly issued and are fully paid and non-assessable (except as
provided under the California Financial Code), and are held free and clear of
any liens, claims or other encumbrances. No shares of the Bank's common stock
are held in treasury by the Bank, and no shares are reserved for future
issuance.
3.2.3 OTHER SECURITIES. Excepting as set forth on SCHEDULE 3.2.3,
there are no options, warrants, calls, rights, commitments or agreements of
any character to which either Eldorado or the Bank is a party or by which
Eldorado or the Bank is bound obligating the applicable entity to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares
of capital stock or other securities of Eldorado or the Bank or obligating
Eldorado or the Bank to grant, extend or enter into any such option, warrant,
call, right, commitment or agreement. The aggregate exercise price of all
Options outstanding as of the date hereof is $3,226,801.10. SCHEDULE 3.2.3
hereto sets forth, with regard to each Option outstanding as of the date
hereof, the name of the holder, the number of shares of Common Stock the
holder is entitled to purchase, the exercise price, the date of grant and the
term of the Option. There are no outstanding contractual obligations of
either Eldorado or the Bank to repurchase, redeem or otherwise acquire any
shares of capital stock of Eldorado. There are no bonds, debentures, notes or
other instruments evidencing indebtedness of either Eldorado or the Bank
issued or outstanding that entitle the holders thereof to vote on any matters
on which Shareholders may vote.
3.3 INTERESTS IN OTHER ENTITIES. Excepting only the Bank and as set forth
on SCHEDULE 3.3, Eldorado does not hold more than 1% of the outstanding equity
securities of any corporation or other entity, and is not a member of any
partnership, joint venture or similar entity or collectivity, or a party to any
partnership agreement or joint venture agreement, however named. Eldorado does
not hold any "Acquisition, Development and Construction" ("ADC") loans, as that
term is used under GAAP.
3.4 AUTHORITY AND RELATED MATTERS. Subject only to the approvals of the
Shareholders as specified in the immediately following sentence, Eldorado (a)
has all requisite corporate power and authority to enter into this Agreement and
to consummate the transactions contemplated hereby (including the Merger), and
(b) has duly authorized the execution and delivery of this
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EXECUTION VERSION
Agreement and the consummation of such transactions (including the Merger) by
all necessary corporate action on the part of Eldorado. The only vote of the
holders of any class or series of Eldorado's securities necessary to approve
this Agreement or the consummation of the Merger is the affirmative vote of
the holders of a majority of the outstanding shares of Common Stock entitled
to vote thereon approving the Merger. No other corporate proceedings on the
part of Eldorado not heretofore taken are necessary to approve this Agreement
or to consummate the Merger. This Agreement has been duly executed and
delivered by Eldorado and (assuming due authorization, execution and delivery
by CSBI) constitutes the valid and binding obligation of Eldorado,
enforceable in accordance with its terms, subject only to Laws regarding
bankruptcy, insolvency, reorganization moratorium or otherwise affecting
creditors' rights generally, and to the application of general principles of
equity (whether considered in a proceeding at law or in equity).
3.5 CONFLICTS. Except as described on SCHEDULE 3.5, the execution and
delivery of this Agreement does not, and the consummation of the Merger will
not, result in any Violation of any provision of the Articles of Incorporation
or By-laws of Eldorado, and subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations and filings
included among Eldorado's Governmental Approvals, the execution and delivery of
this Agreement does not, and the consummation of the Merger will not, result in
any Violation of any Law, any loan or credit agreement, note, mortgage,
indenture, lease, employee benefit plan or other agreement, obligation,
instrument, permit, concession, franchise or license, or any judgment, order or
decree, applicable to Eldorado or its properties or assets which latter
Violation, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect on Eldorado.
3.6 CONSENTS. Except as disclosed on SCHEDULE 3.6 (collectively, the
"Eldorado Governmental Approvals"), no consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity is
required in connection with Eldorado's execution and delivery of this Agreement
or its consummation of the Merger, as to which the failure to obtain the same
would have a Material Adverse Effect on Eldorado or materially interfere with
Eldorado's ability to consummate the Merger.
3.7 SECURITIES FILINGS AND FINANCIAL STATEMENTS.
3.7.1 Eldorado has filed all Securities Filings required to be filed by
it with the SEC since January 1, 1994. As of their respective dates, the
Securities Filings filed by Eldorado complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC applicable to such Securities Filings, and
none of the Securities Filings contained any untrue statement of a material fact
or omitted to
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EXECUTION VERSION
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
3.7.2 The consolidated financial statements of Eldorado included in the
Securities Filings comply as to form in all material respects with applicable
accounting requirements and with the rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP (except as may be
indicated in the notes thereto or, in the case of the unaudited statements, as
permitted by Form 10-Q), are complete and correct in all material respects and
present fairly, in all material respects, the financial position of Eldorado
(consolidated with any subsidiaries then in existence) as of the dates thereof
and the results of its (their) operations and cash flows for the periods then
ended. All material agreements, contracts and other documents required to be
filed as exhibits to any of the Securities Filings have been so filed. The
books and records of Eldorado have been, and are being, maintained in all
material respects in accordance with GAAP and reflect only actual transactions.
3.8 REGULATORY FILINGS AND AGREEMENTS. Eldorado has timely filed all
material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that it was required to file since
December 31, 1993 with any Bank Regulator, and all other material reports and
statements required to be filed by it since December 31, 1993, including any
report or statement required to be filed pursuant to the Laws of the United
States (including those of the Board of Governors of the Federal Reserve and the
FDIC) or the State of California, and has paid all fees and assessments due and
payable in connection therewith. Except for normal examinations conducted by a
Bank Regulator in the regular course of Eldorado's business or as disclosed on
SCHEDULE 3.8, no Bank Regulator has initiated any proceeding or investigation
into the business or operations of Eldorado since December 31, 1993 or, to
Eldorado's Knowledge, is currently contemplating the initiation of any
proceeding or investigation. Except as disclosed on SCHEDULE 3.8, Eldorado is
not a party to or subject to any Regulatory Agreement with or from any Bank
Regulator that restricts the conduct of Eldorado's business or in any manner
relates to its capital adequacy, credit policies, loan origination practices or
management nor has Eldorado been notified that any Bank Regulator is
contemplating issuing or requesting (or considering the appropriateness of
issuing or requesting) any such Regulatory Agreement. Except as disclosed on
SCHEDULE 3.8, there exists no material unresolved violation, criticism or
exception identified by any Bank Regulator with respect to any report or
statement of Eldorado, or relating to any examination of Eldorado.
3.9 UNDISCLOSED LIABILITIES. Except (a) as and to the extent reflected in
the Most Recent Financial Statements, (b) as and to the extent reflected on
SCHEDULE 3.9, (c) obligations (including guarantees and letters of credit) not
required by GAAP to be reflected, reserved against or disclosed in the Most
Recent Financial Statements, all of which obligations are set forth on
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SCHEDULE 3.9 and none of which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, and (d) obligations
incurred in the ordinary course of business consistent with past practice
since the Most Recent Balance Sheet Date, Eldorado does not have any
liabilities, commitments or obligations of any nature, whether absolute,
accrued, contingent or otherwise, and whether due or to become due, which
relate to transactions entered into, or any state of facts existing, on or
before the date hereof and which would be required under GAAP to be shown on
an audited balance sheet as of the date hereof or referenced in notes thereto
if such balance sheet or notes existed.
3.10 CRITICIZED ASSETS, RESERVES AND CERTAIN OTHER ASSETS. As of the date
specified on Part A of SCHEDULE 3.10 (which date is not earlier than three (3)
Business Days prior to the date hereof), and excepting assets with respect to
which the aggregate Borrower Group Obligations are less than $100,000, the only
assets of Eldorado that were (a) Criticized Assets, or (b) over 90 days
delinquent in payment of principal or interest or, to Eldorado's Knowledge,
materially in default of any other material provision of the operative
documents, whether or not the same are Criticized Assets, are those listed on
Part A of SCHEDULE 3.10 hereto (which schedule identifies the loan, the current
book balance, the amount of loan loss reserve, if any, specifically allocated
thereto, and the loan classification). The loan and other asset classification
procedures utilized by Eldorado are in accordance with RAP and prudent banking
practice, and are consistently applied. As of the Most Recent Balance Sheet
Date, Eldorado's specific allowance for loan losses with regard to Classified
Assets was $4,839,000. Part B or SCHEDULE 3.10 hereto sets forth all loans of
Eldorado (whether or not they are Classified Assets or are otherwise in default)
to any director, executive officer or ten percent shareholder of Eldorado, or to
Eldorado's Knowledge, any corporation or enterprise controlling, controlled by
or under common control with any of the foregoing.
3.11 INVESTMENT SECURITIES; DERIVATIVES. Part A of SCHEDULE 3.11 describes
all of the investment securities, mortgage backed securities and securities held
for sale of Eldorado as of the date hereof, including (to the extent applicable
to that type of security) descriptions of such securities, CUSIP numbers, pool
face values, coupon rates, book values and market values (approximated by
Eldorado management in the case of illiquid securities) and, in each case as of
November 30, 1996 (or as of the date of acquisition, if later acquired). Except
as disclosed on Part B of SCHEDULE 3.11, since December 31, 1994, Eldorado has
not engaged in any transaction in or involving forwards, futures, options on
futures, swaps or other derivative instruments except as agent on the order and
for the account of others. To Eldorado's Knowledge, none of the counterparties
to any contract or agreement with respect to any such instrument is in default
with respect to such contract or agreement and no such contract or agreement,
were it to be a loan held by Eldorado, would be a Criticized Asset. The
financial position of Eldorado under or with respect to each instrument set
forth on Part B of SCHEDULE 3.11 has been reflected on the books
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and records of Eldorado in accordance with GAAP, and no open exposure of
Eldorado with respect to any such instrument (or with respect to multiple
instruments with respect to any single counterparty) exceeds $100,000.
3.12 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed on SCHEDULE
3.12, since September 30, 1996, (a) no event or development has occurred that,
individually or in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect on Eldorado, and (b) Eldorado has carried on its
business in the ordinary and usual course consistent with its past practices.
Except (x) as disclosed on SCHEDULE 3.12, (y) increases required by applicable
Law or by an employment contract disclosed on SCHEDULE 3.17 or SCHEDULE 3.18.1,
or (z) normal increases with respect to Non-Contract Employees in the ordinary
course of business consistent with past practice, since September 30, 1996
Eldorado has not increased the wages, salary, compensation, pension, or other
benefits or perquisites payable to any officer, employee or director, granted
any severance or termination pay, entered into any contract to make or grant any
severance or termination pay, or paid any bonus.
3.13 COMPLIANCE WITH APPLICABLE LAWS. Except as disclosed in the
Securities Filings, the business of Eldorado is, and at all times since
December 31, 1992 has been, conducted in compliance with all Laws (including
those relating to equal credit, fair lending, fair housing and community
reinvestment), except where a failure to so comply, individually or in the
aggregate, would not have a Material Adverse Effect on Eldorado. Eldorado
holds all Permits that are material to the operation of its business, and is
in compliance with the terms of each such Permit except where the failure so
to comply, individually or in the aggregate, would not have a Material
Adverse Effect on Eldorado. Except as disclosed on SCHEDULE 3.8 or
SCHEDULE 3.13, no investigation by any Governmental Entity with respect to
Eldorado is pending or, to Eldorado's Knowledge, contemplated.
3.14 LITIGATION AND OTHER DISPUTES. Except as disclosed on SCHEDULE 3.14,
as of the date hereof there is no suit, action, or proceeding pending or, to
Eldorado's Knowledge, threatened, against or affecting Eldorado or any of its
assets, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against Eldorado the
obligations under which have not heretofore been fully performed. Neither
(a) any matter disclosed on SCHEDULE 3.14, nor (b) any suit, action or
proceeding pending or threatened as of the Closing Date, nor (c) any
judgment, decree, injunction, rule or order of any Governmental Entity
outstanding against Eldorado as of the Closing Date (and not fully performed
prior to the date hereof) has had or could reasonably be expected, if
adversely determined, to have a Material Adverse Effect on Eldorado. Except
as disclosed on SCHEDULE 3.14, since December 31, 1993, Eldorado has not been
a defendant, either directly or as defendant-in-counterclaim or cross-claim,
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in any material litigation in which any "lender liability" cause of action was
asserted against Eldorado.
3.15 ADMINISTRATION OF FIDUCIARY ACCOUNTS. Eldorado has properly
administered in all material respects all accounts for which it acts as a
fiduciary, including but not limited to accounts for which it serves as a
trustee, agent, custodian, personal representative, guardian, conservator or
investment advisor, in accordance with the terms of the governing documents and
applicable state and federal law and regulation and common law. Neither
Eldorado nor any of its directors, officers or employees has committed any
breach of trust with respect to any such fiduciary account which, individually
or in the aggregate, has had or could reasonably be expected to have a Material
Adverse Effect on Eldorado, and the accountings for each such fiduciary account
are true and correct in all material respects and accurately reflect the assets
of such fiduciary account.
3.16 TAXES. Eldorado has filed all tax returns it has been required to
file and Eldorado has paid or has set up an adequate reserve for the payment
of all Taxes required to be paid as shown on such returns, and the Most
Recent Financial Statements reflect an adequate reserve for all Taxes payable
by Eldorado accrued through the date of such financial statements. Except as
set forth on SCHEDULE 3.16, no deficiencies for any Taxes have been proposed,
asserted or assessed against Eldorado that are not adequately reserved for.
The Federal income tax returns of Eldorado have been examined by and settled
with the IRS, or the statute of limitations with respect to each such year
has expired (and no waiver extending the statute of limitations has been
requested or granted), for all years through 1992. No audit or review is
pending for any of such years or for any subsequent year and, except as set
forth on SCHEDULE 3.16, to Eldorado's Knowledge no challenge or deficiency is
contemplated by the IRS with regard to any year. Except as set forth on
SCHEDULE 3.16, Eldorado has not [](a) filed any consent to the application of
Section 341(f) of the Internal Revenue Code, (b) filed any election under
Section 338(g) or 338(h)(10) of the Internal Revenue Code or caused or
permitted any deemed election under Section 338(e) of the Internal Revenue
Code,] (c) applied for any revenue ruling, private letter ruling or other
ruling relating to Taxes, (d) entered into any closing agreement with any
Governmental Entity relating to Taxes, or (e) been, at any time, a member of
any affiliated group filing any consolidated tax return other than the
existing group consisting of Eldorado and the Bank.
3.17 CERTAIN AGREEMENTS. Except as disclosed on SCHEDULE 3.17, Eldorado is
not party to (nor are any of its assets bound by) any material oral or written
contract, lease or other agreement in effect as of the date hereof (a) that
would be required to be filed as an exhibit to an annual report on Form 10-K
filed with the SEC, (b) the benefits of which (to either party) will accrue or
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of the Merger or the Bank Mergers (either alone or upon the
occurrence of any
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EXECUTION VERSION
additional acts or events) or the value of any of the benefits of which will
be calculated on the basis of the Merger or the Bank Mergers or any portion
or aspect of either (including any so-called retention or similar bonuses),
(c) relating to employment, salary continuation, severance, consulting
(including data processing, software programming and licensing contracts),
collective bargaining or otherwise relating to the provision of personal
services or payment therefor, (d) which, upon the consummation of the Merger
or the Bank Mergers, will result in any payment (whether of severance pay or
otherwise) becoming due from Surviving Corporation or the Bank to any officer
or employee of the Surviving Corporation or the Bank or formerly of Eldorado,
(e) relating to non-competition or secrecy, (f) that materially restricts the
conduct of any line of business by Eldorado, or (g) that was entered into in
connection with the consummation of a federally assisted acquisition of a
depository institution pursuant to which Eldorado is entitled to receive
financial assistance or indemnification from any Governmental Entity.
Eldorado in not in Violation of any contract, lease or other agreement
described by any of the foregoing clauses (a) through (g) in an manner that
(i) could reasonably be expected to result in a termination of such agreement
or a claim for material damages by the other party thereto or (ii) could
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect on Eldorado, and to Eldorado's Knowledge, no other
party to any such contract, lease or other agreement has committed any such
Violation of the same. Except for agreements filed as part of the Securities
Filings, Eldorado has previously delivered to CSBI true and correct copies of
each agreement described by any of the foregoing clauses (a) through (g) that
is in writing and true and correct summaries of each such agreement that is
not in writing. Except as disclosed on SCHEDULE 3.17, Eldorado is not a
party to, and since December 31, 1993 has not been a party to (nor are any of
its assets bound by), any oral or written contract, lease or other agreement
of any name or nature with a Person who was, as of or within one year prior
to the date of such agreement, a director, officer or holder of 3% or more of
the Common Stock.
3.18 EMPLOYEES AND EMPLOYEE BENEFIT PLANS.
3.18.1 Except as disclosed on SCHEDULE 3.18.1, no employee or
director of Eldorado or consultant retained by Eldorado (in each case including
the Bank) shall have the right to receive from the Surviving Corporation or the
Bank any material payment (including bonuses and including those in the nature
of severance, salary continuation, unemployment compensation, golden parachute
or otherwise) (a) as a consequence of the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, or (b) in
the event his or her employment or service is terminated by the Surviving
Corporation or the Bank at or after the Effective Time, whether such right
arises as a matter of contract, past policy or understanding, pursuant to an
Eldorado Benefit Plan or otherwise. Except as disclosed on SCHEDULE 3.18.1,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (x) materially increase any benefits
otherwise payable under any
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EXECUTION VERSION
Eldorado Benefit Plan or (y) result in any acceleration of the time of
payment or vesting of any such benefits to any material extent.
3.18.2 SCHEDULE 3.18.2 sets forth a true and complete list of each
Eldorado Benefit Plan maintained as of the date hereof. Eldorado has heretofore
delivered to CSBI true and complete copies of each Eldorado Benefit Plan and all
related documents, including but not limited to (a) the actuarial report for
such Benefit Plan (if applicable) for each of the last two years, and (b) the
most recent determination letter from the Internal Revenue Service (if
applicable) for such Eldorado Benefit Plan. Except as disclosed on
SCHEDULE 3.18.2, (i) each of the Eldorado Benefit Plans has been operated and
administered in all material respects with applicable laws, including but not
limited to ERISA and the Internal Revenue Code, (ii) each Eldorado Benefit Plan
intended to be "qualified" within the meaning of Section 401 (a) of the Internal
Revenue Code is so qualified, (iii) no Eldorado Benefit Plan provides benefits,
including without limitation death or medical benefits (whether or not insured),
with respect to current or former employees of Eldorado or any ERISA Affiliate
beyond their retirement or other termination of service, other than (w) coverage
mandated by applicable law, (x) death benefits or retirement benefits under any
"employee pension Benefit Plan," as that term is defined in Section 3(2) of
ERISA, (y) deferred compensation benefits accrued as liabilities on the books of
Eldorado or (z) benefits the full cost of which is borne by the current or
former employee (or his or her beneficiary), (iv) no liability under Title IV of
ERISA has been incurred by Eldorado or any ERISA Affiliate that has not been
satisfied in full and no condition exists that presents a material risk to
Eldorado or any ERISA Affiliate of incurring a material liability thereunder,
(v) no Eldorado Benefit Plan is a "multiemployer pension Benefit Plan," as such
term is defined in Section 3(37) of ERISA, (vi) all material contributions or
other material amounts payable by Eldorado as of the Effective Time with respect
to each Eldorado Benefit Plan in respect of current or prior plan years have
been paid or accrued in accordance with GAAP and Section 412 of the Internal
Revenue Code, (vii) neither Eldorado nor any ERISA Affiliate has engaged in a
transaction in connection with which Eldorado or any ERISA Affiliate could be
subject to either a material civil penalty assessed pursuant to Section 409 or
502(i) of ERISA or a material Tax imposed pursuant to Section 4975 or 4976 of
the Internal Revenue Code, and (viii) to Eldorado's Knowledge, there are no
pending, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any Eldorado Benefit Plan or any trusts
related thereto.
3.18.3 There are no material disputes or employee grievances
pending or, to Eldorado's Knowledge, contemplated by or between any of
Eldorado's employees and Eldorado, and there are not a significant number of
disciplinary actions pending or contemplated with respect to Eldorado's
employees. Eldorado has complied in all respects with all Laws relating to the
employment of labor and, except as disclosed on SCHEDULE 3.18.3, has no
liability for any arrears of wages or employment-related taxes, or penalties for
failure to comply with any such Law, or
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EXECUTION VERSION
for any severance or termination payments of any type. No election or
proceeding relating to Eldorado's labor relations is pending or, to
Eldorado's Knowledge, contemplated. Eldorado has had no union activity or
any material labor trouble (including any strike, work stoppage, slow-down,
or similar disturbance) of any kind, nature or description at any time. True
and correct copies of all personnel policies and manuals of Eldorado have
been provided to CSBI.
3.19 PROPERTIES. Except as disclosed on Part A of SCHEDULE 3.19, Eldorado
does not hold title to or a beneficial interest in any real property other than
OREO. The only real properties leased or otherwise occupied by or in the
possession of Eldorado (excluding OREO and property occupied only as lender in
possession, in each case provided that Eldorado is conducting no business in
such property, and excluding the owned properties disclosed on Part A of
SCHEDULE 3.19), are those properties identified on Part B of SCHEDULE 3.19.
Eldorado has good and valid title to all of the tangible personal property and
assets which are used in the operation of its business and which it owns or
purports to own, and has good and valid title to all of the leasehold interests
in all leases of real or personal property which it leases or purports to lease,
including all personal property, leasehold interests and other assets reflected
as owned or leased, as applicable, by Eldorado in the Most Recent Financial
Statements (except in each case for assets disposed of since the Most Recent
Balance Sheet Date in the ordinary course of business consistent with past
practice), in each case free and clear of any liens, encumbrances or other
imperfections of title other than such liens, encumbrances or imperfections as
(a) are reflected, reserved against or otherwise disclosed in the Most Recent
Financial Statements, (b) arise out of Taxes not yet due or payable, or
(c) relate to immaterial properties or assets or otherwise could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Eldorado enjoys peaceful and undisturbed possession of the
applicable leased asset under all leases of real or personal property under
which it is operating or to which it is a party. All of such leases are
valid, subsisting and in full force and effect and there are no existing
defaults or events which, with the passage of time or the giving of notice,
or both, would constitute defaults by Eldorado or, to Eldorado's knowledge,
by any other party thereto, except for such defaults, if any, which could
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. All items of real or personal property owned or
used by Eldorado and material to its business have been properly maintained
and, to Eldorado's Knowledge, are in good operating order and repair.
3.20 ENVIRONMENTAL. Except as disclosed on SCHEDULE 3.20, Eldorado and all
real property (including OREO) in the possession of Eldorado are, and at all
times while in the possession of Eldorado each such property has been, in
compliance with all applicable Laws relating to pollution or protection of human
health or the environment (including Laws relating to emissions, discharges,
releases or threatened releases of Hazardous Material or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport
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EXECUTION VERSION
or handling of Hazardous Material), except for Violations that, either
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect on Eldorado. To Eldorado's
Knowledge, there has not occurred any release of Hazardous Material on, under or
affecting any real property during the period of Eldorado's ownership,
possession or operation of such property (including its participation in the
management of any business located on such property) or, to Eldorado's
Knowledge, during any prior period. Neither Eldorado nor any property now or
heretofore in its possession is or, while owned or in the possession of
Eldorado, has ever been a defendant in or the subject of any suit, claim,
action, proceeding, investigation or written notice or, to Eldorado's Knowledge,
oral inquiry before or by any Governmental Entity or other forum relating to an
alleged material Violation (including by any predecessor) of any environmental
Law or relating to the release or threatened release into the environment of any
Hazardous Material, whether or not occurring at or on a site owned, leased or
operated by Eldorado.
3.21 INTELLECTUAL PROPERTY. Eldorado either owns or possesses valid and
binding licenses and other rights to use all material trademarks, trade names,
servicemarks, copyrights, trade secrets and patents used in its businesses. The
only such licenses or other rights to use intellectual property that require
payment by Eldorado are licenses for the use of software and similar property
entered into by Eldorado in the ordinary course of business. Eldorado has not
received any written challenge to its ownership of, or other right to use, any
such intellectual property by any Person or any notice of alleged conflict
between the same and the rights of any other Person. Eldorado has, in all
material respects, performed all of its obligations under, and is not in
material Violation of, any contract, agreement, arrangement or commitment
relating to any of the foregoing.
3.22 BROKERS. Eldorado has not employed any broker, finder or similar
Person in connection with the Merger other than Alex Sheshunoff & Co., and has
not incurred and will not incur any broker's, finder's or similar fees,
commissions or expenses in connection with the Merger excepting those of Alex
Sheshunoff & Co., with such fee to be paid at the Closing.
3.23 FAIRNESS OPINION. Eldorado has received an opinion from Alex
Sheshunoff & Co., addressed to the Board of Directors, to the effect that as of
the date hereof the Merger Consideration is fair, from a financial point of
view, to the holders of the Common Stock.
3.24 DISCLOSURE OF ALL MATERIAL MATTERS. Except as disclosed in the
Disclosure Schedules or in a Disclosure Supplement (when delivered), none of (a)
the representations and warranties made by Eldorado in this Agreement (as
qualified by all information in the Disclosure Schedules, Disclosure Supplements
and Exhibits hereto taken as a whole), (b) any of Eldorado's Forms 10-K and 10-Q
filed with the SEC between the date hereof and the Closing Date (when the
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EXECUTION VERSION
same are filed), (c) the Bank's Reports of Condition and Reports of Income
filed with the FDIC between the date hereof and the Closing Date (when the
same are filed), or (d) the Monthly Financial Statements (when the same are
delivered), including in each case the financial statements included therein
and other exhibits thereto, contains (or when filed or delivered, will
contain) any untrue statement of a material fact or omits (or when filed or
delivered, will omit) to state any material fact necessary in order to make
the statements made or information disclosed, in the light of the
circumstances under which they were made or disclosed, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CSBI
Except where a different date is expressly specified, and subject to the
exceptions stated herein (including those contained in any Schedule applicable
to each given Section), CSBI makes the representations and warranties set forth
below as of the date of this Agreement:
4.1 ORGANIZATION, STANDING AND POWER. CSBI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
4.2 CAPITAL STRUCTURE.
4.2.1 CAPITAL STOCK OF CSBI. The authorized capital stock of CSBI
consists of 12,000,000 shares of common stock, par value $.01 per share, and
1,000,000 shares of preferred stock, par value $.01 per share. As of the date
hereof, 9,759,098 shares of Common Stock are issued and outstanding, no shares
of CSBI common stock are held in treasury by CSBI and no shares of CSBI
preferred stock are either issued and outstanding or held in treasury by CSBI.
As of the date hereof, no shares of CSBI common stock or CSBI preferred stock
are reserved for future issuance. All outstanding shares of CSBI common stock
have been validly issued and are fully paid and nonassessable and are not
subject to preemptive rights. All of the issued and outstanding shares of
Common Stock have been offered and sold by CSBI in compliance with applicable
federal and state securities Laws and issued in compliance with any preemptive
right held by any Person. As of the date hereof there are no dividends which
have accrued or been declared but are unpaid on the CSBI common stock.
4.2.2 OWNERSHIP OF OPERATING BANKS. All issued and outstanding shares
of the common stock of Commerce Security Bank are held, of record and
beneficially, by CSBI, have been validly issued and are fully paid and
non-assessable (except as provided under the California Financial Code), and are
held free and clear of any liens, claims or other encumbrances. All issued and
outstanding shares of the common stock of Liberty National Bank and San Dieguito
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EXECUTION VERSION
National Bank are held, of record and beneficially, by SDN, have been validly
issued and are fully paid and non-assessable (except as provided under the
National Bank Act), and are held free and clear of any liens, claims or other
encumbrances. All issued and outstanding shares of the common stock of SDN are
held, of record and beneficially, by CSBI, have been validly issued and are
fully paid and non-assessable, and are held free and clear of any liens, claims
or other encumbrances.
4.3 AUTHORITY AND RELATED MATTERS. CSBI has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the Merger have been duly authorized by all necessary action on
the part of CSBI, including approval by its board of directors. This Agreement
has been duly executed and delivered by CSBI and (assuming due authorization,
execution and delivery by Eldorado) constitutes the valid and binding obligation
of CSBI, enforceable against CSBI in accordance with its terms subject only to
Laws regarding bankruptcy, insolvency, reorganization moratorium or otherwise
affecting creditors' rights generally, and to the application of general
principles of equity (whether considered in a proceeding at law or in equity).
4.4 NO CONFLICTS. Neither the execution and delivery of this Agreement
nor the consummation of the Merger will conflict with or result in any Violation
of any provision of the Certificate of Incorporation or By-laws of CSBI.
Subject to obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in Section 4.5, neither the
execution and delivery of this Agreement nor the consummation of the Merger will
result in any Violation of any Law, any loan or credit agreement, note,
mortgage, indenture, lease, employee benefit plan or other agreement,
obligation, instrument, permit, concession, franchise or license, or any
judgment, order or decree, applicable to CSBI or its properties or assets, which
Violation could reasonably be expected to have a Material Adverse Effect on
CSBI.
4.5 CONSENTS. Except as disclosed on SCHEDULE 4.5 (collectively, the
"CSBI Governmental Approvals"), no consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity is required
in connection with the execution and delivery of this Agreement by CSBI, or the
consummation of the Merger by Merger Sub, as to which the failure to obtain the
same would have a Material Adverse Effect on CSBI or materially interfere with
Merger Sub's ability to consummate the Merger or CSBI's ability to cause Merger
Sub to consummate the Merger.
4.6 SECURITIES FILINGS, FINANCIAL STATEMENTS AND FINANCIAL CONDITION. The
consolidated financial statements of CSBI included in CSBI's Form 10-Q filed
with the SEC for the period ended September 30, 1996 comply as to form in all
material respects with applicable
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EXECUTION VERSION
accounting requirements and with the rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP (except as may be
indicated in the notes thereto or as permitted by Form 10-Q), are complete
and correct in all material respects and present fairly, in all material
respects, the financial position of CSBI (consolidated with all subsidiaries
then in existence) as of the date thereof and the results of its (their)
operations and cash flows for the period then ended. The books and records
of CSBI have been, and are being, maintained in all material respects in
accordance with GAAP and reflect only actual transactions. Each of CSBI,
Commerce Security Bank, Liberty National Bank and San Dieguito National Bank
is "well capitalized" (as that term is defined by the applicable entity's
primary federal Bank Regulator) and, on a pro forma basis giving effect to
the Merger Financing, will be well capitalized as of the Closing.
4.7 REGULATORY FILINGS AND AGREEMENTS. Except as disclosed on
SCHEDULE 4.7, CSBI and, to CSBI's Knowledge, each CSBI Subsidiary Predecessor,
has timely filed all material reports, registrations and statements, together
with any amendments required to be made with respect thereto, that the
applicable entity was required to file since December 31, 1993 with any Bank
Regulator, and all other material reports and statements required to be filed
by it since December 31, 1993, including any report or statement required to
be filed pursuant to the laws, of the United States (including those of the
Board of Governors of the Federal Reserve and the Office of the Comptroller
of the Currency) or the State of California, and has paid all fees and
assessments due and payable in connection therewith. Except for normal
examinations conducted by a Bank Regulator in the regular course of CSBI's
the applicable CSBI Subsidiary Predecessor's business or as disclosed on
SCHEDULE 4.7, no Bank Regulator has initiated any proceeding or investigation
into the business or operations of CSBI or, to CSBI's Knowledge, any CSBI
Subsidiary Predecessor, since December 31, 1993 or, to CSBI's Knowledge, is
currently contemplating the initiation of any proceeding or investigation.
Except as disclosed on SCHEDULE 4.7, CSBI is not a party to or subject to any
Regulatory Agreement with or from any Bank Regulator that restricts the
conduct of CSBI's business or in any manner relates to its capital adequacy,
credit policies, loan origination practices or management nor has CSBI been
notified that any Bank Regulator is contemplating issuing or requesting (or
considering the appropriateness of issuing or requesting) any such Regulatory
Agreement. Except as disclosed on SCHEDULE 4.7, there exists no material
unresolved violation, criticism or exception identified by any Bank Regulator
with respect to any report or statement of CSBI, or relating to any
examination of CSBI.
4.8 ABSENCE OF UNDISCLOSED LIABILITIES, CERTAIN CHANGES OR EVENTS. Except
(a) as and to the extent reflected in CSBI's Form 10-Q filed with the SEC for
the period ended September 30, 1996, (b) obligations (including guarantees and
letters of credit) not required by GAAP to be reflected, reserved against or
disclosed in such Form 10-Q, none of which
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obligations, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect on CSBI, and (c) obligations incurred in
the ordinary course of business consistent with past practice since the Most
Recent Balance Sheet Date, CSBI does not have any liabilities, commitments or
obligations of any nature, whether absolute, accrued, contingent or
otherwise, and whether due or to become due, which relate to transactions
entered into, or any state of facts existing, on or before the date hereof
and which would be required under GAAP to be shown on an audited balance
sheet as of the date hereof or referenced in notes thereto if such balance
sheet or notes existed. Since the Most Recent Balance Sheet Date, no event
or development has occurred that, individually or in the aggregate, has had
or could reasonably be expected to have a Material Adverse Effect on CSBI,
and CSBI has carried on its business in the ordinary and usual course
consistent with its past practices.
4.9 COMPLIANCE WITH APPLICABLE LAWS. Except as disclosed in any report,
schedule, registration statement or definitive proxy statement filed with the
SEC or the Office of the Comptroller of the Currency (as applicable) pursuant to
the Exchange Act since January 1, 1994 by CSBI or, to CSBI's knowledge, any CSBI
Subsidiary Predecessor (as such documents have been amended since the time of
their filing), the business of CSBI is, and at all times since December 31, 1992
the business of CSBI and, to CSBI's knowledge, the business of each CSBI
Subsidiary Predecessor, has been conducted in compliance with all Laws
(including those relating to equal credit, fair lending, fair housing and
community reinvestment), except where a failure to so comply, individually or in
the aggregate, would not have a Material Adverse Effect on CSBI. CSBI holds all
Permits that are material to the operation of its business, and is in compliance
with the terms of each such Permit except where the failure so to comply,
individually or in the aggregate, would not have a Material Adverse Effect on
CSBI. Except as disclosed on SCHEDULE 4.5 or SCHEDULE 4.6, no investigation by
any Governmental Entity with respect to CSBI is pending or, to CSBI's Knowledge,
contemplated.
4.10 BROKERS. CSBI has not employed any broker, finder or similar Person
in connection with the Merger other than Carpenter & Company, and has not
incurred and will not incur any broker's, finder's or similar fees, commissions
or expenses in connection with the Merger other than those of Carpenter &
Company and (to the extent deemed to be in connection with the Merger) those of
any placement agent or similar Person employed in connection with the Merger
Financing, each of whose fees shall be borne entirely by CSBI.
4.11 FINANCIAL CAPACITY. CSBI has delivered to Eldorado true and correct
copies of (a) a commitment letter relating to investments in CSBI in the
aggregate amount of $63,300,000 and (b) certain subscription agreements each
relating to investments in CSBI in the aggregate amount of not less than
$18,000,000. All representations made to CSBI's sources of Merger Financing in
the applicable subscription agreements or securities purchase agreements are (or
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when such agreements are executed, will be) true and correct in all material
respects as of the date of each such representation or warranty.
Notwithstanding the foregoing, the obligations of CSBI hereunder are not
conditioned upon its obtaining financing.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 DISCUSSIONS WITH THIRD PARTIES.
5.1.1 Until the earlier of the Effective Time or the termination of
this Agreement, Eldorado (a) shall not, and shall instruct its Representatives
not to, solicit or encourage, directly or indirectly, inquiries or proposals
with respect to any Strategic Transaction Proposal, and (b) except as expressly
permitted by Section 5.1.2 or Section 5.1.3, shall not, and shall instruct its
Representatives not to, furnish any non-public information relating to or
participate in any negotiations, discussions or other activities concerning, any
Strategic Transaction with any Person other than CSBI and Merger Sub. Eldorado
shall notify CSBI promptly after any Strategic Transaction Proposal is received
by, or any negotiations or discussions regarding a Strategic Transaction
Proposal are sought to be initiated (or continued) with, directly or indirectly,
Eldorado or any of its Representatives, and shall disclose to CSBI the identity
of the third party making or seeking to make such Strategic Transaction
Proposal, the terms and conditions of such Strategic Transaction Proposal and
such other information as CSBI reasonably may request; PROVIDED, HOWEVER, that
if Eldorado receives a Strategic Transaction Proposal and the foregoing
disclosure of such Proposal to CSBI would violate a confidentiality agreement by
which Eldorado is bound, Eldorado (a) shall make the foregoing disclosure only
to the maximum extent permissible under such confidentiality agreement,
(b) shall return such Strategic Transaction Proposal to the initiating party
without substantive response (together with, if so elected by Eldorado, a
copy of this Section 5.1), and (c) to the extent such disclosure has not been
made under clause (a), shall notify CSBI that a Strategic Transaction
Proposal has been received and that the same has been returned to the
initiating party without substantive response. Without limiting the
foregoing, it is understood and agreed that any failure by any of Eldorado's
Representatives to abide by the limitations set forth in this Section 5.1
shall constitute a breach of this Section 5.1 by Eldorado regardless of
whether such Representative's actions were authorized by or purported to be
undertaken on behalf of Eldorado.
5.1.2 Notwithstanding Section 5.1.1 or any other provision of this
Agreement to the contrary, in the event that, on an entirely unsolicited basis,
Eldorado receives a Strategic Transaction Proposal from a third party, and
Eldorado's counsel advises the Board of Directors that the Directors' fiduciary
duties owed to the Shareholders obligate the Board to furnish non-
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public information to the third party having submitted such Proposal, then
Eldorado shall not be prohibited from furnishing to such third party, either
directly or to or through its Representatives, information that was
previously provided or made available to CSBI (or, if not previously
requested by CSBI and therefore not previously provided, that is
contemporaneously provided to CSBI) or from answering questions regarding the
information so furnished (but not about the terms of any possible Strategic
Transaction), provided that the third party shall have entered into a
confidentiality agreement substantially similar to the confidentiality
provisions of Section 5.3 hereof, or from seeking clarifications regarding
(but not conducting negotiations regarding) the terms of such Proposal or the
consideration contemplated therein or information regarding the Person making
such Proposal.
5.1.3 Notwithstanding Section 5.1.1 or any other provision of this
Agreement to the contrary, following receipt of a Qualifying Strategic
Transaction Proposal, neither Eldorado nor any of its Representatives shall be
prohibited from taking, nor shall it be a breach of this Agreement for Eldorado
or any of its Representatives to take, any of the following actions with respect
to a Strategic Transaction Proposal: (a) engaging in discussions or negotiations
with a third party which has made a proposal that satisfies the requirements of
a Qualifying Strategic Transaction Proposal, (b) taking and disclosing to the
Shareholders a position contemplated by Rule 14e-2 under the Exchange Act or
otherwise making disclosure of the Qualifying Strategic Transaction Proposal to
the Shareholders, (c) taking any of the actions described in Section 5.2.2 or
(d) subject to the terms of Article VII, terminating this Agreement. A
"Qualifying Strategic Transaction Proposal" shall mean a bona fide written
Strategic Transaction Proposal (which Proposal may be conditional) that (x) is
delivered to the Board of Directors (whether directly or through a
Representative of Eldorado), (y) identifies a price or range of values to be
paid for the capital stock, assets or liabilities of Eldorado or the Bank that
are to be sold or otherwise transferred pursuant to such Proposal, and (z) in
the good faith determination of the Board of Directors of Eldorado, based on the
advice of Eldorado's counsel and on a written opinion of Eldorado's investment
bankers to the effect that such Proposal is financially more favorable to the
Shareholders than the terms of the Merger (including due to a higher price or
range of values offered by such Proposal), requires the Board of Directors to
take (or cause Eldorado to take) one or more of the actions described in clauses
(b) through (e) of the immediately preceding sentence in order to comply with
the Board of Directors' fiduciary duties owed to the Shareholders.
5.1.4 In the event that Eldorado receives a Qualifying Strategic
Transaction Proposal, it shall not accept or enter into any agreement which
provides for the consummation of the Strategic Transaction described in such
Proposal for a period of at least 72 hours after the delivery to CSBI of a copy
of such Proposal. Upon compliance with the foregoing and termination of this
Agreement pursuant to Section 7.4.2 hereof (including the payment in full to
CSBI of the Termination Fee as provided in Section 7.6.3), Eldorado may enter
into any
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agreement that provides for the consummation of such Qualifying Strategic
Transaction. If, within twenty (20) calendar days following Eldorado's
receipt of a Qualifying Strategic Transaction Proposal, Eldorado has neither
(i) given notice to CSBI reaffirming Eldorado's intent to proceed under this
Agreement and to consummate the Merger, or (ii) terminated this Agreement
pursuant to Section 7.4.2, CSBI may at any time within thirty (30) days after
the close of such period terminate this Agreement pursuant to Section 7.3.2.
5.1.5 Eldorado shall be entitled to provide copies of this Section 5.1
to third parties who, on an entirely unsolicited basis after the date hereof,
contact Eldorado to express their interest in a possible Strategic Transaction
with Eldorado or the Bank, provided that CSBI shall concurrently be notified of
such contact and the delivery of such copy.
5.2 PROXY STATEMENT; SHAREHOLDER MEETING.
5.2.1 Eldorado shall use all reasonable efforts to prepare and
distribute the Proxy Statement to the Shareholders as promptly as practicable,
to duly call, give notice of, convene and hold a meeting of the Shareholders to
be held as soon as is reasonably practicable thereafter for the purpose of
voting upon the approval of the Merger (including any adjournments thereof, the
"Shareholder Meeting"), and at such meeting (including any adjournments thereof)
to obtain the Shareholders' approval of the Merger. Except as expressly
provided in Section 5.2.2, the Proxy Statement shall include a Recommendation of
Approval by the Board of Directors, and shall further include the fairness
opinion referenced in Section 3.23 as an exhibit thereto. Eldorado shall use
all reasonable efforts to prepare and file the preliminary Proxy Statement with
the SEC within twenty-five (25) Business Days after the date of this Agreement.
Eldorado shall deliver to CSBI and afford CSBI an opportunity to comment on
drafts of the Proxy Statement prior to the filing of the preliminary Proxy
Statement with the SEC and prior to the distribution of the definitive Proxy
Statement to Shareholders, provided that (a) the period within which the
preliminary statement must be filed with the SEC shall be extended by a number
of Business Days in excess of five (5) elapse between the date that a
substantially complete draft thereof is forwarded to CSBI and the date that CSBI
furnishes its comments on such draft, and (b) if CSBI has failed to furnish
comments within ten (10) Business Days of its receipt of the applicable
materials, Eldorado shall be free to file the preliminary Proxy Statement or
distribute the definitive Proxy Statement, as applicable. None of the
information included, directly or by incorporation by reference, in the Proxy
Statement will, at the date of mailing to the Shareholders or at any time
through the time of the Shareholder Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; PROVIDED, HOWEVER,
that Eldorado makes no representations regarding any information supplied to
Eldorado by CSBI. The Proxy Statement will comply as to form in all material
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respects with the applicable provisions of the Exchange Act and the rules and
regulations thereunder. CSBI shall cooperate in all reasonable respects with
Eldorado in the preparation of the Proxy Statement, including by making
available to Eldorado all information regarding CSBI that Eldorado reasonably
may request and that is reasonably necessary or appropriate for inclusion in or
for the preparation of the Proxy Statement. CSBI hereby represents and warrants
that no statement of fact relating to CSBI or Merger Sub that is made in writing
by CSBI to Eldorado for inclusion in the Proxy Statement, and that is in fact so
included, will be false or misleading in any material respect or will omit to
state a material fact necessary in order to make the statements made, in the
light of the circumstances under which they were made or disclosed, not
misleading. Eldorado shall use its best efforts to take all action necessary
for the Merger not to be subject to any state anti-takeover statute.
5.2.2 In the event that Eldorado has received a Strategic Transaction
Proposal and the Board of Directors has determined, in accordance with
Section 5.1.3, that such Strategic Transaction Proposal constitutes a Qualifying
Strategic Transaction Proposal, then the Board of Directors shall not be
prohibited from taking, nor shall it be a breach of this Agreement if it takes,
any of the following actions: (a) failing to include a Recommendation of
Approval in the Proxy Statement, (b) retracting or qualifying its Recommendation
of Approval if previously given, or (c) postponing or adjourning the meeting of
Shareholders called for the purpose of approving the Merger.
5.3 ACCESS. Eldorado shall make available to CSBI all information
regarding Eldorado that CSBI reasonably may request and shall authorize all
reasonable visits to Eldorado's premises with such staff, consultants and
experts as CSBI reasonably may request. CSBI agrees to coordinate closely all
such activities with Eldorado's President or Chief Financial Officer and to
conduct any such inquiries with appropriate discretion and sensitivity to
Eldorado's relationships with its employees, customers and suppliers. The
Parties acknowledge that certain of the information made available to one
another pursuant to this Section 5.3 and otherwise in connection with the Merger
may be confidential, proprietary or otherwise nonpublic, and each Party agrees,
for itself and for each of Representatives, that it (i) shall hold in confidence
all confidential information received by it from or with regard to the other
Party ("Confidential Information") subject to the terms of this Section 5.3,
(ii) shall disclose such Confidential Information only to those of its
Representatives and, in the case of CSBI, its current or prospective investors
and other sources of capital, in each case having a need to know the same for
purposes of evaluating, negotiating or implementing the financing of the Merger,
and (iii) shall inform each Representative or current or prospective investor to
whom Confidential Information is disclosed that such information is confidential
and shall obtain from such Representative or investor a confidentiality
agreement in substantially the form previously provided by CSBI to Eldorado.
Each Party shall remain responsible for any disclosure of Confidential
Information by any of its
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Representatives or investors. Each Party further agrees that, upon the
request of the other Party given following any termination of this Agreement,
it and each of its Representatives either shall return to such other Party
all Confidential Information received by it and its Representatives
(including all compilations, analyses or other documents prepared by it that
contain Confidential Information) or shall certify that the same has been
destroyed. As used herein, Confidential Information shall not include
(i) information that is or becomes generally available to the public other than
as a result of a breach of this Agreement, (ii) information that the
receiving Party demonstrates was known to it on a non-confidential basis
prior to receiving such information from the other Party, (iii) information
that the receiving Party develops independently without relying on
Confidential Information, and (iv) information that becomes available to the
receiving Party on a non-confidential basis from another source if the source
was not known to be, and not reasonably believed by the receiving Party to
be, subject to any prohibition against disclosing such information.
5.4 COOPERATION. The Parties shall cooperate with each other and use all
commercially reasonable efforts to prepare and file promptly all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the Merger. The Parties agree that they
will consult with each other with respect to the obtaining of all permits,
consents, approvals and authorizations of all third parties and Governmental
Entities necessary or advisable to consummate the Merger and the Bank Mergers,
and each Party will keep the other apprised of the status of matters relating to
completion of the Merger and the Bank Mergers. Each Party shall, upon request,
furnish the other Party with all information concerning itself as may be
reasonably necessary or advisable in connection with any filing or application
made by or on behalf of such Party to any Governmental Entity in connection with
the Merger or the Bank Mergers. Each Party shall promptly advise the other
Party upon receiving any communication from any Governmental Entity whose
consent or approval is required for consummation of the Merger or the Bank
Mergers which causes such Party to believe that there is a reasonable likelihood
that any required Governmental Approval will not be obtained or that the receipt
of any such Governmental Approval will be materially delayed. Eldorado shall
cooperate with CSBI in all reasonable respects, upon the request of CSBI, in
CSBI's finalization of its financing of the Merger, including by furnishing all
information reasonably requested in connection therewith.
5.5 ADVICE OF CHANGES. Each Party shall promptly advise the other Party
of any change or event having a Material Adverse Effect on it or its ability to
perform its obligations under this Agreement or which it believes would or may
be reasonably likely to cause or constitute a material breach of any of its
representations, warranties or covenants contained herein or to preclude the
satisfaction of one or more of the conditions set forth in Article VI. From
time
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to time prior to the Closing Date, Eldorado will promptly supplement or
amend the Disclosure Schedules to reflect any matter which, if existing,
occurring or known at the date of this Agreement, would have been required to be
set forth or described in such Disclosure Schedules, or which is necessary to
correct any information in such Disclosure Schedules which has been rendered
inaccurate thereby (each notice furnishing such information being called a
"Disclosure Supplement"); PROVIDED, HOWEVER, that any such Disclosure Supplement
which reports events, developments or changes that have occurred subsequent to
the date hereof shall not constitute a breach of any representations and
warranties of Eldorado but also shall not have any effect for the purpose of
determining the accuracy of any representation or warranty when made, for
determining satisfaction of the conditions set forth in Article VI, or for
determining the compliance by Eldorado with any other provision of this
Agreement; PROVIDED FURTHER, that (a) except as provided in the immediately
following sentence, unless CSBI notifies Eldorado that CSBI elects to terminate
this Agreement pursuant to Section 7.3.1 or Section 7.3.3 on the basis of the
events or conditions disclosed in such Disclosure Supplement within twenty (20)
Business Days after the date of CSBI's receipt thereof (the "Notification
Date"), CSBI shall thereafter be deemed to have waived any right of termination
attributable solely to such events or conditions, but (b) for purposes of
determining the satisfaction of the condition set forth in Section 6.2.2, no
such waiver shall exist (i) with respect to the cumulation of such events or
conditions with other events or conditions requiring disclosure under the same
representation or warranty and described in any subsequent Disclosure Supplement
or otherwise discovered by CSBI or (ii) if there is a further material adverse
development in the event or condition so disclosed. Notwithstanding the
foregoing clause (a) if, in the reasonable opinion of CSBI, the information
provided in such Disclosure Supplement is insufficient for CSBI to evaluate
fully whether the identified event or condition constitutes or contributes to a
failure of the condition to closing set forth in section 6.2.1, then with
respect to such event or condition, the Notification Date may be extended, at
the election of CSBI, until such date as CSBI has received from Eldorado
sufficient information to make the evaluation contemplated by this sentence. In
order to so extend the Notification Date, CSBI must provide Eldorado with
written notice of such extension not later than the initial Notification Date,
which notice shall (x) specify each event or condition as to which the extension
is being made, and (y) set forth in reasonable detail the information that CSBI
requires in order to make the evaluation of each such event or condition as
contemplated by the immediately preceding sentence.
5.6 CURRENT INFORMATION. During the period from the date of this
Agreement to the Closing Date, Eldorado will cause one or more of its
designated representatives to confer on a regular and frequent basis (not
less than bi-weekly) with representatives of CSBI and to report the general
status of the ongoing operations of Eldorado. Eldorado will promptly notify
CSBI of (a) any material adverse change in the normal course of business or
in the operation of the properties of Eldorado, (b) any governmental
complaint, investigation or hearing (or communications
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indicating that the same may be contemplated), or (c) the institution or the
threat of material litigation involving Eldorado, and will keep CSBI fully
informed of such events. Eldorado will keep CSBI fully informed of the
status of, and the action proposed to be taken with respect to, Classified
Assets that, in combination with all related Borrower Group Obligations, have
an aggregate carry value of $100,000 or more. Eldorado will provide to CSBI
copies of the minutes (or consents in lieu of meeting) of its loan committee,
its Board of Directors and all committees thereof promptly following each
such meeting; PROVIDED, HOWEVER, that Eldorado may omit therefrom any portion
of such minutes that it determines, with the concurrence of its counsel,
relates to (a) the Parties' compliance or non-compliance with the terms of
this Agreement, or (b) any Strategic Transaction Proposal other than the
Merger or (c) any matter which is subject to an attorney-client privilege.
5.7 INTERIM AND ANNUAL FINANCIAL STATEMENTS. As soon as reasonably
available, but in no event more than 45 days after the end of each fiscal
quarter ending after the date of this Agreement and prior to the Closing Date
(excepting the quarter ending December 31, 1996), Eldorado will deliver to CSBI
its Quarterly Reports on Form 10-Q as filed with the SEC, and as soon as
reasonably available, but in no event later than March 31, 1997 (provided that
the Closing has not yet occurred and the Agreement has not theretofore been
terminated), Eldorado will deliver to CSBI its Annual Report on Form 10-K for
the period ending December 31, 1996, as filed with the SEC. Eldorado will
deliver to CSBI monthly financial statements (the "Monthly Financial
Statements") no later than the time at which such financial statements are
delivered to such Directors but in no event later than the twenty-first calendar
day of the month immediately following the month to which such financial
statements relate. When delivered, the Monthly Financial Statements will
present fairly, in all material respects, the financial condition of Eldorado
and its results of operations as at and for the period then ended, will reflect
in all respects GAAP accounting treatment of the matters contained therein
(except as expressly noted thereon), and will be prepared in the manner and in
the form customarily delivered to the Board of Directors.
5.8 CONDUCT OF BUSINESS BY ELDORADO. Subject to Section 5.1, Eldorado
shall (a) conduct its business in the usual, regular and ordinary course of
business consistent with past practice (except as required by applicable Law or
by this Agreement), (b) use all reasonable efforts to maintain and preserve
intact its business organization, employees and advantageous business
relationships and retain the services of its officers and key employees
(including by causing its current insurance policies not to be cancelled or
terminated or any of the coverage thereunder to lapse prior to or upon the
Closing or closing of the Bank Mergers, unless simultaneously with such event
replacement policies providing substantially similar coverage for substantially
similar (or lesser) premiums are in full force and effect), (c) conduct
relations with its employees, including hiring and terminating practices, only
in the ordinary course of business
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and consistent with past practice, and (d) take no action which would
adversely affect or delay the ability of Eldorado or CSBI or any of their
respective direct or indirect subsidiaries to obtain any necessary approvals
of any Governmental Entity required for the Merger or for the transactions
contemplated in connection therewith, or to perform its covenants and
agreements under this Agreement.
5.9 CERTAIN OPERATING COVENANTS. Without CSBI's prior written consent
(which consent, in the case of Sections 5.9.9 through 5.9.14, shall not be
unreasonably withheld or delayed), Eldorado shall not, and in the case of
Section 5.9.7, the Eldorado officers identified in the definition of "Eldorado's
Knowledge" shall not:
5.9.1 declare or make any payment or distribution with respect to the
capital stock or other securities of Eldorado Bancorp, whether by way of payment
of interest or principal, redemption, dividend or otherwise, excepting regular
quarterly cash dividend payments on the Common Stock, with such record dates and
at such amounts per share as are set forth on SCHEDULE 5.9.1 (provided that the
applicable record date is not later than the date anticipated for the Closing at
the time such dividend would otherwise have been declared) and declared by the
Board of Directors no earlier than the declaration date set forth on
SCHEDULE 5.9.1 opposite the applicable record date; PROVIDED, HOWEVER, that if
any dividend so declared as of to the Closing Date has not been paid prior to
the Closing Date, Eldorado may deliver adequate funds for the payment of the
same to its stock transfer agent prior to the Closing Date, for payment to the
Shareholders entitled thereto on or before the scheduled payment date;
5.9.2 (a) create, authorize, issue, sell or deliver any of its capital
stock, bonds or other of its securities (whether authorized and unissued or held
in treasury) or any instrument convertible into any of them, excepting only by
the issuance of shares of Common Stock upon the exercise of one or more
currently outstanding Options in accordance with the present terms of such
Option; (b) grant or otherwise issue any options, warrants or other rights with
respect thereto; (c) amend the terms of any currently outstanding option
(including any Option), warrant or other right with regard to Eldorado's
securities; or (d) split up, combine or reclassify any of its outstanding stock;
5.9.3 acquire, by merging or consolidating with, by purchasing a
substantial equity interest in or a substantial portion of the assets of, or by
any other manner, any business, including any corporation, partnership,
association or other business organization or division thereof;
5.9.4 excepting those matters identified on SCHEDULE 5.9.4,
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(a) create, renew, amend or terminate, or give notice of a proposed
renewal, amendment or termination of, (i) any material contract, agreement or
lease for goods, services or office space to which Eldorado is (or would thereby
be) a party or by which Eldorado or any of its properties is (or would thereby
be) bound, excepting only contracts, agreements and leases under which the
aggregate payments by either party over the term of the agreement do not exceed
$50,000 (or, if indefinite, are not reasonably expected to exceed $50,000),
(ii) any agreement the benefits of which (to either party) will accrue or be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of the Merger or the Bank Mergers (either alone or upon the
occurrence of any additional acts or events) or the value of any of the benefits
under which will be calculated on the basis of the Merger or the Bank Mergers or
any portion or aspect of either (including any so-called retention or similar
bonuses), (iii) any agreement relating to non-competition or secrecy, or
(iv) any agreement that materially restricts the conduct of any line of business
by Eldorado,
(b) make any single capital expenditure exceeding $25,000 or any
capital expenditures exceeding $100,000 in the aggregate, or
(c) relocate or terminate, or file any application to relocate or
terminate, the operations of any of its banking offices (including loan
production offices);
5.9.5 enter into any new line of business;
5.9.6 change its methods of accounting in effect at December 31, 1995,
except as required by changes in GAAP or RAP as concurred with by Eldorado's
independent auditors;
5.9.7 fail to use all reasonable efforts to prevent Eldorado from
committing a Violation of any Law, Regulatory Agreement or any material contract
or license to which Eldorado is a party or by which it or any of its properties
is bound, which Violation, individually or in the aggregate, has or reasonably
could be expected to have a Material Adverse Effect on Eldorado.
5.9.8 make any equity investment in any real estate or real estate
development project, other than (a) additional investments in existing projects
as set forth on SCHEDULE 5.9.8, or (b) in connection with foreclosures,
settlements in lieu of foreclosure or troubled loan or debt restructurings in
the ordinary course of business consistent with prudent banking practices;
5.9.9 sell, lease, assign, transfer or otherwise dispose of any
property or asset, except for (a) investment portfolio transactions in the
ordinary course of business and substantially consistent with past practice;
(b) sales, in the ordinary course of business, of SBA Loans (or
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portions of such loans) under which the final disbursement was made after the
Most Recent Balance Sheet Date; and (c) sales of assets having a gross book
value not in excess of $25,000 individually or $100,000 in the aggregate;
5.9.10 except as provided on SCHEDULE 5.9.10, (a) enter into, renew
or amend any agreement relating to employment, salary continuation,
severance, consulting, collective bargaining or otherwise relating to the
provision of personal services or payment therefor, (b) institute, amend or
terminate any Eldorado Benefit Plan, (c) enter into, renew or amend any
agreement that, upon the consummation of the Merger or the Bank Mergers, will
result in any payment (whether of severance pay or otherwise) becoming due
from CSBI, the Surviving Corporation or the Bank to any officer or employee
of the Surviving Corporation or the Bank or formerly of Eldorado, (d) pay any
pension or retirement allowance to any Person not required by an existing
plan or agreement, (e) increase in any manner the compensation or fringe
benefits of (including by payment of a bonus in excess of the bonus paid to
such Person in the preceding year), any officer, director or employee except
(i) as set forth on SCHEDULE 3.12, (ii) as required by an employment
agreement identified on SCHEDULE 3.17, or (iii) customary annual (or less
frequent) increases in the wages or salaries of Non-Contract Employees and
customary annual (or less frequent) bonuses to Non-Contract Employees, in
each case consistent with past practice and which on an annualized basis do
not increase the aggregate personnel costs for all Non-Contract Employees by
more than 3% over the levels in effect as of September 30, 1996, or (f)
increase any other direct or indirect compensation or employee benefit for or
to any of its officers, directors or employees;
5.9.11 make, amend or compromise any loan or advance (whether in cash
or other property) to any officer, to any director, or to any holder of
record or beneficial owner of 3% or more of the Common Stock, except advances
made to employees in the usual, regular and ordinary course of business
consistent with past practice;
5.9.12 (a) make, amend or renew, or enter into any commitment to
make, amend or renew, any loan if, as a result of the disbursement of the
proceeds of such loan, the total Borrower Group Obligations (including
accrued and unpaid interest) of the borrower to Eldorado would exceed
$750,000, except that if CSBI does not grant or refuse its consent or
reasonably request additional information regarding such proposed loan within
three Business Days of CSBI's receipt of Eldorado's request for consent, then
CSBI shall be deemed to have granted its consent; or (b) amend or renew, or
enter into any commitment to amend or renew, any Criticized Asset as to which
the aggregate unpaid balance (including accrued and unpaid interest) of such
loan and all related Borrower Group Obligations exceeds $100,000.
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5.9.13 incur any indebtedness for borrowed money, or assume,
guarantee, endorse or otherwise as an accommodation become responsible for
the obligations of any other Person, in each case except in the usual,
regular and ordinary course of business consistent with past practice, it
being understood and agreed that the creation of deposit liabilities,
purchases of federal funds, sales of certificates of deposit and entrance
into repurchase agreements shall be deemed to be in the ordinary course of
business so long as the maturity of such indebtedness does not exceed (a) 36
months in the case of retail certificates of deposit in amounts of less than
$100,000, (b) 24 months in the case of retail certificates of deposit from
the Bank's primary market area in amounts of $100,000 or more, and (c) 12
months in the case of all other such indebtedness;
5.9.14 except as described on SCHEDULE 5.9.14, (a) restructure or
materially change its investment securities portfolio through purchases,
sales or otherwise, or the manner in which the portfolio is classified or
reported, it being understood and agreed that investment portfolio
transactions in the ordinary course of business and substantially consistent
with past practice shall be deemed to constitute a material change in
Eldorado's investment portfolio only if the number and/or nature of such
transactions causes a material change in the makeup of the portfolio taken as
a whole, or (b) classify as "held to maturity" any investment security
acquired after the date hereof (including those acquired in replacement of
existing held-to-maturity securities); or
5.9.15 enter into any agreement or commitment to do any of the
foregoing.
5.10 PROSECUTION OF REGULATORY FILINGS. CSBI shall prepare and file all
applications necessary to obtain the CSBI Governmental Approvals (using all
reasonable efforts to file the same in draft or preliminary form no later
than the thirtieth (30th) Business Day following the date of this Agreement,
and thereafter shall use all reasonable efforts to prosecute such
applications and to obtain the CSBI Governmental Approvals.
[Obligation to seek waiver.]
5.11 COVENANTS REGARDING EMPLOYEES, DIRECTORS AND OFFICERS.
5.11.1 EMPLOYEE BENEFIT PLANS.
(a) From and after the Effective Time, and subject to applicable
law, CSBI shall provide employee benefits, including those under Benefit
Plans, to those of its (including its subsidiaries') employees who formerly
were employees of Eldorado substantially the same as the benefits provided to
similarly situated employees of CSBI. From and after the Effective Time,
employees of CSBI (including its subsidiaries) who were employees of Eldorado
immediately prior to the Effective Time shall receive full credit for all
purposes under such plans for their years of service at Eldorado and (any
predecessors thereto) prior to the Effective Time.
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(b) CSBI shall honor in accordance with their terms (i) all
Eldorado Benefit Plans and (ii) all contracts, arrangements and commitments
described in Section 3.17(c) that are disclosed on SCHEDULE 3.17 and (iii)
all benefits vested thereunder as of the Effective Time; PROVIDED, HOWEVER,
that nothing in this sentence shall be interpreted as preventing CSBI from
amending, modifying or terminating any Eldorado Benefit Plans, contracts,
arrangements or commitments in the manner and to the extent permitted by the
terms thereof.
5.11.2 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative,
including any such claim, action, suit, proceeding or investigation in which
any person who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, a director or officer
or employee of Eldorado (including any of its subsidiaries) (the "Indemnified
Parties") is, or is threatened to be, made a party based in whole or in part
on, or arising in whole or in part out of, or pertaining to (i) the fact that
he or she is or was a director, officer or employee of Eldorado or any of its
predecessors, or (ii) this Agreement or any of the transactions contemplated
hereby, in any case whether asserted or arising before or after the Effective
Time, the Parties hereto agree to cooperate and use their best efforts to
defend against and respond thereto.
(b) After the Effective Time, and for a period of six years
thereafter, CSBI shall indemnify and hold harmless and defend, each such
Indemnified Party against any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorney's fees and expenses in advance of the
final disposition of any claim, suit, proceeding or investigation to each
Indemnified Party to the fullest extent Eldorado's directors are so
indemnified under the Eldorado Indemnification Rights as of the date hereof),
judgments, fines and amounts paid in settlement in connection with any such
threatened or actual claim, action, suit, proceeding or investigation,
whether civil, criminal, administrative or investigative, arising out of or
pertaining to any action or omission that occurred, or has been alleged to
have occurred, at any time prior to the Effective Time or the respective
times they cease be directors or officers of Eldorado or the Bank (as
applicable), whichever is later, or arising out of or pertaining to this
Agreement or the other agreements entered into or approved by the Eldorado
Directors in connection with the transactions contemplated by this Agreement
(specifically including the implementation of any modification, change or
adjustment pursuant to Section 5.13.2) (collectively, the "Indemnified
Liabilities, Expenses and Claims"), in each instance as and to the fullest
extent that the directors of Eldorado, as of the date hereof, would be
entitled to be indemnified by Eldorado or the Bank pursuant to their
respective Articles of Incorporation and under whichever of the respective
Bylaws, or the Indemnification Agreements, as in effect on the date hereof,
would provide such directors with the most extensive indemnification rights
(hereinafter the "Eldorado Indemnification Rights"),
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EXECUTION VERSION
with respect to such Indemnified Liabilities, Expenses and Claims if they had
arisen prior to the Effective Time. In the event of any such threatened or
actual claim, action, suit, proceeding or investigation (whether asserted or
arising before or after the Effective Time), the Indemnified Parties may
retain counsel reasonably satisfactory to them after consultation with CSBI;
PROVIDED, HOWEVER, that (i) except as otherwise provided hereinafter, CSBI
shall have the right to assume the defense thereof with counsel reasonably
acceptable to the Indemnified Parties, and upon such assumption CSBI shall
not be liable to any Indemnified Party for any legal expenses of other
counsel or any other expenses subsequently incurred by any Indemnified Party
in connection with the defense thereof, except that if counsel for the
Indemnified Parties reasonably advises the Indemnified Parties that there are
issues which raise conflicts of interest between CSBI and the Indemnified
Parties or among the Indemnified Parties, the Indemnified Parties may retain
counsel reasonably satisfactory to them after consultation with CSBI, and
CSBI shall pay the reasonable fees and expenses of such counsel for the
Indemnified Parties, (ii) CSBI shall be obligated pursuant to this paragraph
to pay for only one firm of counsel for all Indemnified Parties in the
absence of a conflict of interest (determined as described above) among the
Indemnified Parties in each jurisdiction in which any such claim, actions,
suit, proceeding or investigation is brought, and shall be obligated pursuant
to this paragraph to pay for no more than two firms of counsel among all
Indemnified Parties in each such jurisdiction in the event of a conflict of
interest (determined as described above) among the Indemnified Parties, (iii)
CSBI shall not be liable for any settlement effected without its prior
written consent, which it shall not unreasonably withhold, (iv) CSBI shall
have no obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such determination
shall have become final and nonappealable, that indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by
applicable Law and such Law makes unenforceable the indemnity otherwise
provided hereunder or under the Indemnification Agreements, and (v) CSBI
shall have no obligation hereunder to any Indemnified Party with respect to
any threatened or actual claim, action, suit, proceeding or investigation, or
any loss or expense caused thereby, arising out of any action (or failure to
act) that has been determined by a judgment of a court having competent
jurisdiction and that has been final and non-appealable to have been a
material breach of this Agreement, provided that CSBI proves that such act or
omission was intentionally or recklessly committed by such Indemnified Party.
Unless and until there shall be a final judicial determination that a person
who is otherwise an Indemnified Party is not entitled to indemnification
hereunder with respect to a given claim or proceeding, CSBI shall advance all
expenses with respect to which an Indemnified Party is entitled to indemnity
hereunder by paying the same to the Indemnified Party or to the counsel or
other Person to whom they are owed within twenty (20) days following delivery
of a written request therefor by such Indemnified Party to CSBI. Each
Indemnified Party with respect to whom expenses have been so advanced hereby
undertakes to repay such amount advanced only if, and to the extent that, it
shall ultimately be determined that such Indemnified Party is not entitled to
be indemnified by CSBI pursuant to this
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Section 5.11. Any Indemnified Party wishing to claim indemnification under
this Section 5.11.2, upon learning of any such claim, action, suit,
proceeding or investigation, shall notify CSBI thereof, provided that the
failure to so notify shall not affect the obligations of CSBI under this
Section 5.11.2 except to the extent such failure to notify materially
prejudices CSBI. CSBI's obligations under this Section 5.11.2 continue in
full force and effect for a period of six (6) years from the Effective Time
and, with respect only to any claim asserted or made prior to or within such
period, thereafter until the final disposition of such claim.
(c) CSBI shall use its best efforts to cause the persons serving as
officers and directors of Eldorado or the Bank immediately prior to the
Effective Time, and any former officers or directors thereof who were covered
by directors and officers' liability insurance maintained by Eldorado or the
Bank immediately prior to the Effective Time, to be covered for a period of
six (6) years from the Effective Time by the directors' and officers'
liability insurance policy maintained by Eldorado (provided that CSBI may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are not less advantageous than such
policy) with respect to acts or omissions occurring, or alleged to have
occurred, prior to the Effective Time of such officers and directors in their
capacity as such; PROVIDED, HOWEVER, that in no event shall CSBI be required
to expend more than 200% of the current amount expended by Eldorado to
maintain or procure insurance coverage pursuant hereto and further provided
that if CSBI is unable to maintain or obtain the insurance called for by this
Section 5.11.2(c), CSBI shall obtain as much comparable insurance as
available for an amount equal to 200% of the amount currently expended
therefor by Eldorado.
(d) For a period of six years after the Effective Time, the
Surviving Corporation and CSBI will fulfill and honor in all respects the
obligations of Eldorado or the Bank, as the case may be, pursuant to
indemnification agreements in existence at the date of this Agreement that
Eldorado or the Bank has with its respective directors, officers and certain
other employees (the "Indemnification Agreements"). Such Indemnification
Agreements have been made available to CSBI.
(e) This Section 5.11.2, which shall survive consummation of the
Merger at the Effective Time and shall (i) continue in effect for the
respective periods of time set forth herein, (ii) is intended to benefit each
present and former director and officer of Eldorado or the Bank and any other
person, including any employee of Eldorado or the Bank, who is entitled by
the express terms of this Section to any rights hereunder (and each of whom
shall be entitled to enforce the provisions of this Section), and (iii) shall
be binding on all successors and assigns of each of CSBI, the Surviving
Corporation, Eldorado and the Bank. In the event CSBI or any of its
successors or assigns (i) consolidates with or merges into any other Person
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers or
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conveys all or substantially all of its properties and assets to any Person,
then, and in each such case, to the extent necessary, proper provision shall
be made so that the successors and assigns of CSBI or the continuing or
Surviving Corporation or entity, or the purchaser or transferee of such
properties and assets, as the case may be, assume the obligations set forth
in this section.
5.12 FINANCING MATTERS.
5.12.1 INFORMATION REGARDING FINANCING. Between the date hereof and
the Effective Time, CSBI shall provide to Eldorado, not later than the last
Business Day of each month, updates describing the status of CSBI's financing
for the Merger (the "Merger Financing"), including reports on its progress in
satisfying any conditions precedent thereto (other than the conditions
relating to, or also constituting conditions precedent to, the consummation
of the Merger), and attaching copies of definitive investment documents (or
amendments thereto) entered into during the month then ended. Further, CSBI
shall advise Eldorado, promptly after their occurrence, of any developments,
changes, events or circumstances occurring after the date hereof that will or
could reasonably be expected to have a material and adverse effect on CSBI's
ability to satisfy any material conditions to the Merger Financing or
otherwise to consummate the Merger Financing. As of the Closing Date, CSBI
will have received valid and binding subscription agreements for investments
in CSBI payable on or before the Closing Date, that make available to CSBI
adequate funds such that CSBI can deliver (or cause to be delivered) at the
Closing the aggregate amount of the Merger Consideration.
5.12.2 ADDITIONAL FINANCING TO BE OBTAINED. In addition to the
Merger Financing that CSBI has represented (under Section 4.11) has been
arranged prior to the date hereof, CSBI shall use its best efforts to obtain,
and provide to Eldorado, by December 31, 1996 one or more commitment letters
or subscription agreements (the "Remaining Financing Commitments") for
additional Merger Financing in an amount not less than $8,600,000. To the
extent reasonably requested by Eldorado's financial advisor, CSBI shall also
provide to Eldorado reasonable information substantiating the financial
capacity of the party(ies) to such Remaining Financing Commitments. At any
time on or after January 1, 1996, if CSBI has not provided copies of
Remaining Financing Commitments representing Merger Financing in the amount
required by this Section 5.12.2 prior to the giving of such notice, Eldorado
may give notice to CSBI that significant doubt has arisen regarding CSBI's
ability to close on the Merger Financing and demanding written assurances
regarding the availability of the Merger Financing as contemplated by Section
5.12.3. In the event of such a demand, CSBI shall be obligated to deliver
assurances and other documentation in the manner and by the deadline provided
under Section 5.12.3.
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EXECUTION VERSION
5.12.3 CHANGES IN FINANCING STATUS. In the event that, between the
date hereof and the Effective Time, (a) it is determined that any of CSBI's
representations and warranties contained in this Agreement shall not have
been true and correct as of the dates when made and, as a consequence
thereof, Eldorado reasonably determines that there is significant doubt
regarding CSBI's ability to close on any portion of the Merger Financing
representing 15% or more of the aggregate Merger Consideration, or (b) there
shall occur any other event that causes Eldorado reasonably to determine that
there is significant doubt regarding CSBI's ability to close on any portion
of the Merger Financing representing 15% or more of the aggregate Merger
Consideration, Eldorado may, by notice to CSBI, demand written assurances
regarding the continued availability of the Merger Financing. In the event
of such a demand, CSBI shall, within twenty (20) Business Days after
Eldorado's notice, deliver to Eldorado either (x) written confirmation from
those financing sources as to which such doubt had arisen confirming that
such sources remain prepared to supply their respective portions of the
Merger Financing together with, if applicable (based on the nature of the
foregoing doubt) information reasonably acceptable to Eldorado's financial
advisor substantiating the financial capacity of such sources to supply such
funds, and/or (y) one or more commitment letters or subscription agreements
for substitute Merger Financing in an aggregate amount not less than the
amount of Merger Financing as to which Eldorado reasonably considers such
doubt not to have been alleviated in all material respects pursuant to clause
(x).
5.13 ELDORADO ACCRUALS AND RESERVES.
5.13.1 CLASSIFICATION OF ASSETS AND MAINTENANCE OF RESERVES. Eldorado
agrees that, at all times prior to the Effective Time, Eldorado shall
classify its assets and adjust its loan loss, OREO reserves and tax reserves
in a manner consistent with (a) its policies and practices in effect as of
September 30, 1996, and (b) any requirement of a Bank Regulator, including
those imposed as a consequence of an examination of Eldorado by such
regulator. CSBI may from time to time, in its discretion, conduct a review
of Eldorado's asset classifications and the adequacy of Eldorado's allowance
for loan and lease losses, OREO reserves and tax reserves. If, in the
reasonable judgment of CSBI based the foregoing classification and reserve
standards, any assets should be reclassified or any of such reserves should
be increased, CSBI may propose such reclassification or increase to Eldorado;
PROVIDED, HOWEVER, that any such proposal shall be delivered to Eldorado on
or before the fifth Business Day following the Federal Reserve Bank's
acceptance of CSBI's application filed therewith. If and to the extent that
Eldorado agrees with such proposed reclassification or increase, Eldorado
shall effect the same on its books and records. If and to the extent that
Eldorado refuses to effect one or more proposed reclassifications or
increases, CSBI may, in its discretion, refer such matter for review and
determination by an Impartial Arbiter, the fees and expenses of which shall
be borne equally by the Parties. The Impartial Arbiter's determination shall
be made based on prevailing standards in the commercial
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EXECUTION VERSION
banking industry. The Impartial Arbiter shall not be constrained to adopt
the position of either Party with respect to any matter presented to it and
shall be free to classify any asset at any intermediate classification, and
adjust any reserve at any intermediate amount, in its sole judgment;
PROVIDED, HOWEVER, that the Impartial Arbiter shall not adopt a position on
any matter referred to it outside the range bounded by the positions of the
Parties. The determination by the Impartial Arbiter shall be final and
binding on both Parties. Notwithstanding anything to the contrary contained
herein, Eldorado may, in its discretion, defer any reclassification of an
asset or increase in a reserve determined to be appropriate pursuant to this
Section 5.13.1 until immediately prior to (and conditioned upon the
occurrence of) the Closing, but any such reclassification or increase shall
be considered to be effective for purposes of determining Eldorado's
satisfaction of the provisions of Section 6.2.2 as that section applies to
Section 3.12. Nothing in this Section 5.13.1 shall derogate from CSBI's
right to obtain information from and regarding Eldorado throughout the period
from the date hereof through the Effective Time.
5.13.2 CERTAIN OTHER PRE-CLOSING ADJUSTMENTS.
(a) Subject to subsection (c) of this Section 5.13.2, prior to the
Effective Time, Eldorado and CSBI shall review Eldorado's loan, OREO, accrual
and reserve policies and practices (including loan classifications and levels
of tax, loan and OREO reserves and accruals) and, to the extent determined
necessary or advisable by CSBI in its sole discretion, and consistent in all
events with GAAP and the accounting rules, regulations and interpretations of
the SEC, modify and change such policies and practices to (i) reflect CSBI's
plans with respect to the conduct of Eldorado's business following the
Merger, and (ii) make adequate provision for the costs and expenses relating
thereto so as to be applied consistently on a satisfactory basis with those
of CSBI.
(b) Subject to subsection (c) of this Section 5.13.2, Eldorado
agrees that, prior to the Effective Time, Eldorado shall adjust its loan loss
and OREO reserves as CSBI may determine, consistent with GAAP and the
accounting rules, regulations and interpretations of the SEC but in CSBI's
sole discretion, is appropriate in light of the then-anticipated post-closing
grading, classification or disposition of the relevant Eldorado assets.
(c) Eldorado's obligations to implement the changes described in
this Section 5.13.2 are conditioned upon (i) prior written notice from CSBI
that all conditions to CSBI's obligations to consummate the Merger provided
herein (other than deliveries to be made at the Closing) have been satisfied
or waived, (ii) the reasonable determination by Eldorado that all conditions
to Eldorado's obligations to consummate the Merger provided herein (other
than deliveries to be made at the Closing) have been satisfied or waived,
(iii) receipt of written confirmation from CSBI that CSBI has, either
directly or in one or more escrow accounts, cash
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EXECUTION VERSION
equal to the aggregate Merger Consideration (less any Redemption to be
furnished by Eldorado), and (iv) the absence of any reasonable basis for
Eldorado to expect that the Merger will not be consummated.
(d) No accruals or reserves required solely by this Section 5.13.2
shall be considered in determining Eldorado's satisfaction of the provisions
of Section 6.2.1 as that section applies to Section 3.12.
5.14 STOCK OPTION AGREEMENT. Eldorado agrees that, as a condition of and
as an inducement to CSBI to enter into this Agreement, Eldorado will enter
into a Stock Option Agreement, in the form attached as EXHIBIT 5.14 and dated
of even date herewith, immediately upon the execution and delivery of this
Agreement.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 CONDITIONS TO OBLIGATIONS OF BOTH PARTIES. The obligations of CSBI,
Merger Sub and Eldorado to consummate the Merger are subject to the
satisfaction of each of the following conditions:
6.1.1 APPROVAL BY ELDORADO'S SHAREHOLDERS. The Merger shall have
been approved by the affirmative vote of the holders of a majority of all
shares of Common Stock entitled to vote thereon.
6.1.2 REGULATORY APPROVALS. All approvals of any Governmental Entity
required for the consummation of the Merger (including the Eldorado
Governmental Approvals and the CSBI Governmental Approvals but expressly
excluding any approval required for the Bank to dividend funds to Eldorado
Bancorp for purposes of funding the Redemption) shall have been obtained and
shall remain in full force and effect; all statutory or other required
waiting periods in respect thereof shall have expired; and no approval of any
Governmental Entity shall have imposed any condition or requirement which, in
the reasonable opinion of CSBI, would so materially adversely affect the
economic or business benefits of the Merger to CSBI so as to render
inadvisable the consummation thereof; PROVIDED, HOWEVER, that a failure to
obtain any required approval of a Redemption by Eldorado or of a dividend
from the Bank to Eldorado Bancorp to fund a Redemption shall in no event
constitute a failure of this condition.
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EXECUTION VERSION
6.1.3 NO PENDING OR THREATENED CLAIMS. There shall be no claim,
action, suit, investigation or other proceeding pending or overtly threatened
before any court or other Governmental Entity that presents a substantial
risk of restraint or prohibition of the Merger or the obtaining of material
damages from Eldorado, CSBI or Merger Sub or their respective officers or
directors in connection therewith; and no such restraint or prohibition shall
be effective as of the Closing, whether or not the action in which the same
was entered shall remain pending.
6.2 CONDITIONS TO THE OBLIGATIONS OF CSBI AND MERGER SUB. The
obligations of Merger Sub to consummate the Merger, and of CSBI to cause
Merger Sub to consummate the Merger, are further subject to the satisfaction
of, or CSBI's written waiver of, each of the following conditions:
6.2.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES WHEN MADE.
Eldorado's representations and warranties contained in this Agreement shall
have been true and correct as of the dates when made (except with respect to
events and conditions waived by CSBI pursuant to Section 5.5), except to the
extent that (without giving effect to any qualifications contained therein
relating to "materiality" or the absence of a "Material Adverse Effect") the
event or development rendering such representation or warranty untrue,
individually or in the aggregate with all other events or developments
rendering that or any other representation or warranty untrue, shall not have
resulted in or constitute, and could not reasonably be expected to result in
or constitute, a Material Adverse Effect on Eldorado or on Eldorado's ability
to consummate the Merger.
6.2.2 BRINGDOWN OF REPRESENTATIONS AND WARRANTIES AT CLOSING.
Eldorado's representations and warranties contained in this Agreement shall
remain true and correct as of the Closing as though made at and as of the
Closing (excepting only representations and warranties which speak (other
than in the preamble to Article III) expressly as of an earlier specified
date and except with respect to events and conditions waived by CSBI pursuant
to Section 5.5), except to the extent that (without giving effect to any
qualifications contained therein relating to "materiality" or the absence of
a "Material Adverse Effect") the event or development rendering such
representation or warranty untrue, individually or in the aggregate with all
other events or developments rendering that or any other representation or
warranty untrue, shall not have resulted in or constitute, and could not
reasonably be expected to result in or constitute, a Material Adverse Effect
on Eldorado or on Eldorado's ability to consummate the Merger.
6.2.3 COMPLIANCE WITH COVENANTS. Eldorado shall have performed,
satisfied and complied with, in all material respects, each of its agreements
and covenants contained in Articles II and V and elsewhere in this Agreement,
unless the failure to perform, satisfy or comply relates to an immaterial
obligation that, taken together with all other such failures, does not
constitute a material failure by Eldorado to perform its obligations
hereunder.
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6.2.4 SECURITIES OUTSTANDING. There shall be no shares of Common
Stock or other Eldorado securities issued and outstanding as of the Effective
Time other than (a) the 3,787,734 shares issued and outstanding as of the
date hereof, and (b) any shares issued upon the exercise of Options
subsequent to the date hereof, which exercise has been in accordance with the
terms of the applicable Option as in effect on the date hereof.
6.2.5 CANCELLATION OF OPTIONS. All Options outstanding as of the
date hereof (other than Excluded Options, as to which CSBI's obligations are
not conditioned) shall have been cancelled prior to the Effective Time. The
number of Options for which Eldorado shall have paid (or shall be liable to
pay) consideration to so cancel (whether or not equal to the Option
Cancellation Payment) shall have related to not more than an aggregate of
314,233 shares of Common Stock less the number of shares (if any) issued as
described in clause (b) of Section 6.2.3 and less the number of shares
subject to Excluded Options, and Eldorado shall not have paid (or become
liable to pay) more than the applicable Option Cancellation Payment for the
cancellation of any such Option. As of the Effective Time, there shall be
outstanding or in force and effect no Option (other than Excluded Options, as
to which CSBI's obligations are not conditioned) or other option, warrant,
call, right or agreement that obligates Eldorado to issue, deliver or sell,
or cause to be issued, delivered or sold, any share of capital stock or other
securities of Eldorado, or that obligates Eldorado to grant, extend or enter
into any such option, warrant, call, right or agreement.
6.2.6 DISSENTING SHARES. The aggregate number of shares of Common
Stock owned by Persons who have made a demand for purchase under Section 1301
of the Corporations Code shall constitute less than 15.0% of all shares of
Common Stock outstanding as of the date of the meeting of Shareholders called
for the purpose of voting on the Merger.
6.2.7 THIRD PARTY CONSENTS. The consent, approval or waiver of each
Person (other than the Governmental Entities referred to in Section 6.1.2)
whose consent, approval or waiver shall be required in order to permit the
consummation of the Merger or the preservation of the contractual rights of
Eldorado with respect to its business shall have been obtained, except where
the failure to obtain such consent, approval or waiver would not have a
Material Adverse Effect on the economic or business benefits to CSBI of the
Merger so as to render inadvisable the consummation of the Merger in the
reasonable judgment of CSBI.
6.2.8 RECEIPT OF LEGAL OPINION. CSBI shall have received a legal
opinion from Stradling, Yocca, Carlson & Rauth, counsel for Eldorado,
addressed to CSBI and Merger Sub and dated the Closing Date, in form and
substance reasonably satisfactory to CSBI, opining to the matters set forth
on EXHIBIT 6.2.8, subject to customary assumptions and qualifications.
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6.2.9 AUDITORS' OPINION AND REPORT. KPMG Peat Marwick LLP shall have
(a) rendered an unqualified opinion with respect to Eldorado's financial
statements as at December 31, 1996 and for year then ended following its
audit of such financial statements, and (b) delivered to Eldorado a letter
indicating that such firm has reviewed the books, records and internal
accounting statements and accounting procedures of Eldorado and setting forth
such firm's conclusions regarding the adequacy of Eldorado's internal control
procedures, and Eldorado shall have furnished a copy of such letter to CSBI.
6.2.10 RECEIPT OF OFFICERS' CERTIFICATES. Eldorado shall have
delivered to CSBI and Merger Sub (a) a certificate, executed by the Chief
Executive Officer and Chief Financial Officer of Eldorado and dated as of the
Closing Date, certifying to the fulfillment of the conditions specified in
Section 6.1 (with regard to Eldorado only) and Section 6.2, including a
certification that each representation or warranty contained in Article III
is true and correct as of the Closing Date (or, if such certification cannot
be made, specifying the exceptions thereto), excepting only representations
and warranties which speak expressly as of an earlier specified date and
matters previously disclosed in Disclosure Schedules or Disclosure
Supplements, and (b) a certificate, executed by the Chief Financial Officer
of Eldorado and dated as of not more than three (3) Business Days prior to
the Closing Date, containing, and certifying to the accuracy of, the same
information required to be included on Part A of SCHEDULE 3.10 had such
Schedule been delivered as of the date of such certificate.
6.2.11 DOCUMENTS AND INSTRUMENTS IN SATISFACTORY FORM. All corporate
and other proceedings in connection with this Agreement and with the Merger
and all documents and instruments incidental to the Merger shall be
reasonably satisfactory in substance and form to CSBI and its counsel, and
CSBI and its counsel shall have received all such counterpart originals or
certified or other copies of such documents as they may reasonably request.
6.2.12 RECEIPT OF FUNDS FROM ELDORADO. The Exchange Agent shall have
received from Eldorado the amount, if any, to be funded by Eldorado pursuant
to Section 2.3.3.
6.3 CONDITIONS TO THE OBLIGATIONS OF ELDORADO. The obligations of
Eldorado to consummate the Merger are further subject to the satisfaction of,
or Eldorado's written waiver of, each of the following conditions:
6.3.1 COMPLIANCE WITH COVENANTS. CSBI shall have performed,
satisfied and complied with, in all material respects, each of its agreements
and covenants contained in Articles II and V and elsewhere in this Agreement,
unless the failure to perform, satisfy or comply relates to an immaterial
obligation that, taken together with all other such failures, does not
constitute a material failure by CSBI to perform its obligations hereunder.
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6.3.2 RECEIPT OF LEGAL OPINION. Eldorado shall have received a legal
opinion from Nutter, McClennen & Fish, LLP, counsel for CSBI and Merger Sub,
addressed to Eldorado and dated the Closing Date, in form and substance
reasonably satisfactory to Eldorado, opining to the matters set forth on
EXHIBIT 6.3.2, subject to customary assumptions and qualifications.
6.3.3 RECEIPT OF OFFICERS' CERTIFICATE. Eldorado shall have received
from each of CSBI and Merger Sub a certificate, executed by respectively, the
President and Chief Financial Officer of CSBI and the President and Chief
Financial Officer of Merger Sub and dated as of the Closing Date, certifying
to the fulfillment of the conditions specified in Section 6.1 (with regard to
CSBI and Merger Sub only) and Section 6.3, including a certification that
each representation or warranty contained in Article IV is true and correct
as of the Closing Date (or, if such certification cannot be made, specifying
the exceptions thereto), excepting only representations and warranties which
speak expressly as of an earlier specified date.
6.3.4 DOCUMENTS AND INSTRUMENTS IN SATISFACTORY FORM. All corporate
and other proceedings in connection with this Agreement and with the Merger
and all documents and instruments incidental to the Merger shall be
reasonably satisfactory in substance and form to Eldorado and its counsel,
and Eldorado and its counsel shall have received all such counterpart
originals or certified or other copies of such documents as they may
reasonably request.
6.3.5 RECEIPT OF PURCHASE PRICE. The Exchange Agent shall have
received from CSBI funds adequate to pay the aggregate of all amounts
required to be paid to holders of Common Stock pursuant to Section 2.3.1,
less the amount of the Deposit delivered by the Deposit Escrow Agent and the
amount (if any) to be funded by Eldorado pursuant to Section 2.3.3.
6.3.6 PAYMENT OF OPTION CANCELLATION PAYMENTS. The Option
Cancellation Payments shall have been made prior to the Closing, or
procedures reasonably acceptable to Eldorado shall have been adopted for the
payment of the Option Cancellation Payments promptly following the Effective
Time.
ARTICLE VII
TERMINATION; TERMINATION FEE
This Agreement may be terminated, and the Merger abandoned, prior to the
Closing solely by the following means and with the following effects:
7.1 BY MUTUAL AGREEMENT. Eldorado and CSBI (on behalf of itself and
Merger Sub) may terminate this Agreement by mutual written consent at any
time.
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7.2 REGULATORY IMPEDIMENT. Either CSBI (on behalf of itself and Merger
Sub) or Eldorado may unilaterally terminate this Agreement at any time prior
to the Closing if (a) a Bank Regulator shall have made a final determination
denying an application of either Party the granting of which is essential to
the consummation of the Merger, or (b) the occurrence of the Closing would
violate any final order, decree or judgment of any court having competent
jurisdiction, PROVIDED, that CSBI shall reimburse Eldorado for Eldorado's
reasonable and documented Expenses, not to exceed $400,000, unless the basis
for such termination is (x) a Bank Regulator's denial of an application on
the basis of matters associated predominantly with Eldorado's condition,
regulatory compliance or similar matters, or (y) an order, decree or judgment
entered in an action brought principally (i) against Eldorado, (ii) based on
actions (or failures to act) by Eldorado, or (iii) based on an agreement to
which Eldorado is a party or by which any of Eldorado's assets are bound.
7.3 BY CSBI. CSBI (on behalf of itself and Merger Sub) may unilaterally
terminate this Agreement:
7.3.1 if Eldorado has breached any representation or warranty
contained in this Agreement and such breach is of a nature that would, in the
reasonable determination of CSBI, cause the failure of the condition set
forth in Section 6.2.1, or if Eldorado has failed to perform, satisfy or
comply with any of its agreements and covenants contained in this Agreement
(other than as described in Section 7.3.2) and such failure is of a nature
that would, in the reasonable determination of CSBI, cause the failure of the
condition set forth in Section 6.2.3, in either case such termination to take
effect ten (10) Business Days following notice to Eldorado identifying such
breach or failure if such breach or failure has not been cured prior to the
expiration of such period;
7.3.2 upon notice to Eldorado given within the period provided
therefor in Section 5.1.4 if (a) Eldorado has not reaffirmed its intent to
proceed with the Merger within the time provided therefor in Section 5.1.4
following its receipt of a Qualifying Strategic Transaction Proposal, or (b)
the Board of Directors fails to give its Recommendation of Approval to the
Shareholders, or withdraws its Recommendation of Approval prior to the
affirmative vote of the Shareholders, whether or not such failure or
withdrawl is permitted under Section 5.2.2, PROVIDED that in the case of a
termination under this Section 7.3.2, CSBI shall be entitled to receive from
Eldorado the Termination Fee;
7.3.3 upon notice to Eldorado, if any of the conditions to the
obligations of CSBI contained in Section 6.2 has not been satisfied as of the
Closing Date or if, in the reasonable determination of CSBI, a matter
disclosed by Eldorado pursuant to Section 5.5 (or otherwise
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coming to the attention of CSBI at any time hereafter) will prevent Eldorado
from satisfying the conditions set forth in Section 6.2.1 or Section 6.2.2 as
of the Closing;
7.3.4 upon notice to Eldorado at any time after 12:00 noon (Pacific
time) on August 1, 1997, if the Closing shall not have occurred prior to such
date and time, unless (a) such failure results primarily from CSBI breaching
any of its representations, warranties, covenants or agreements contained in
this Agreement or (b) all affirmative approvals of Governmental Entities that
are necessary to the consummation of the Merger have been obtained and the
Parties are in the so-called "waiting period" relating to Department of
Justice review, PROVIDED, that (x) if the basis for such termination is the
failure of the Shareholders to approve the Merger, Eldorado shall reimburse
CSBI for CSBI's reasonable and documented Expenses, not to exceed $400,000,
and (y) if the basis for such termination is the failure to obtain those
approvals of Governmental Entities required under Section 6.1.2, a condition
to the effectiveness of such termination is CSBI's reimbursement of
Eldorado's reasonable and documented Expenses, not to exceed $400,000.
7.4 BY ELDORADO. Eldorado may unilaterally terminate this Agreement:
7.4.1 if CSBI has failed to perform, satisfy or comply with in any
material respect any of its agreements and covenants contained in this
Agreement (including a failure timely to furnish assurances of continued
availability of the Merger Financing and/or evidence of Merger Financing as
provided in Section 5.12.3, including as such Section incorporates Section
5.12.2 regarding the Remaining Financing Commitments), such termination to
take effect (a) if such failure is with respect to Section 5.12.3, at the end
of the period set forth in such Section, and (b) if such failure is with
respect to any other Section, ten (10) Business Days following notice to CSBI
identifying such breach or failure if such breach or failure has not been
cured prior to the expiration of such period;
7.4.2 upon notice to CSBI if Eldorado has received a Qualifying
Strategic Transaction Proposal; PROVIDED, HOWEVER, that a condition to the
effectiveness of any termination pursuant to this Section 7.4.2 is the
payment of the Termination Fee to CSBI by Eldorado;
7.4.3 upon notice to CSBI if the Shareholders fail to approve the
Merger by the requisite votes required by Law at a Shareholders Meeting;
PROVIDED, HOWEVER, that a condition to the effectiveness of any termination
pursuant to this Section 7.4.3 is Eldorado's payment of CSBI's reasonable and
documented Expenses, not to exceed $400,000, unless CSBI shall have voted any
shares of Common Stock with respect to which CSBI holds proxies or powers of
attorney against the approval of the Merger; and PROVIDED FURTHER that
Eldorado may not terminate
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the Agreement pursuant to this Section 7.4.3 if prior to the meeting of
Shareholders the Board of Directors has not given, or has given but
withdrawn, its Recommendation of Approval;
7.4.4 upon notice to CSBI if any of the conditions to the obligations
of Eldorado contained in Section 6.3 has not been satisfied as of the Closing
Date; or
7.4.5 upon notice to CSBI after 12:00 noon (Pacific time) on August
1, 1997, if the Closing shall not have occurred prior to such date and time,
unless (a) the failure results primarily from Eldorado breaching any of its
representations, warranties, covenants or agreements contained in this
Agreement or (b) all affirmative approvals of Governmental Entities that are
necessary to the consummation of the Merger have been obtained and the
Parties are in the so-called "waiting period" relating to Department of
Justice review; PROVIDED, HOWEVER, that (x) if the basis for such termination
is the failure of the Shareholders to approve the Merger, a condition to the
effectiveness of such termination is Eldorado's payment of CSBI's reasonable
and documented Expenses, not to exceed $400,000, and (y) if the basis for
such termination is the failure to obtain those approvals of Governmental
Entities required under Section 6.1.2, CSBI shall reimburse Eldorado for
Eldorado's reasonable and documented Expenses, not to exceed $400,000.
7.5 TERMINATION FEE; DEPOSIT.
7.5.1 TERMINATION FEE. The "Termination Fee" means Three Million
Five Hundred Thousand Dollars ($3,500,000), in same day funds.
7.5.2 DISPOSITION OF DEPOSIT. In the event this Agreement is
terminated by Eldorado on any basis other than pursuant to Section 7.2,
Section 7.4.2, Section 7.4.3 or Section 7.4.5, the Deposit shall be disbursed
to Eldorado in accordance with the Deposit Escrow Agreement. In the event
this Agreement is terminated and Eldorado is not entitled to receive the
Deposit in accordance with the immediately preceding sentence, CSBI shall be
entitled to the return of the Deposit from the Deposit Escrow Agent.
7.6 EFFECT OF TERMINATION; REMEDIES.
7.6.1 GENERAL. In the event this Agreement is terminated pursuant to
this Article VII, this Agreement shall become void and of no effect and
neither Party shall have any liabilities or other obligations whatsoever
hereunder, except that (a) the provisions of Section 5.3 relating to
Confidential Information, Article VII and Section 8.2 shall survive such
termination, and (b) notwithstanding anything else to the contrary contained
herein, but subject in all events to the immediately following sentence,
neither Party shall be relieved of or released from any liability
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or damages arising out of its breach of any provision of this Agreement prior
to such termination. In the event that either Party has breached this
Agreement by the inaccuracy, as of the date when made, of a representation or
warranty made herein by such Party, such Party shall not be liable to the
other Party for damages unless (i) one or more of the breaching Party's
officers identified in the definition of "Eldorado's Knowledge" or "CSBI's
Knowledge", as applicable, knew or reasonably should have known of such
inaccuracy as of the date of this Agreement, and (ii) the facts causing such
inaccuracy, individually or in the aggregate with all other facts causing
other representations or warranties to be inaccurate, shall not have resulted
in or constitute, and could not reasonably be expected to result in or
constitute, in the case of Eldorado, a Material Adverse Effect on Eldorado,
prior to or after the Merger (and assuming for purposes of this clause that
the Merger Sub has no assets, liabilities or operations), or on Eldorado's
ability to consummate the Merger, and in the case of CSBI, a Material Adverse
Effect on CSBI's ability to consummate the Merger.
7.6.2 REMEDIES CUMULATIVE GENERALLY. Except as provided in Section
7.6.3, no remedy made available by any of the provisions of this Agreement is
intended to be exclusive of any other remedy, and each and every remedy shall
be cumulative and shall be in addition to every other remedy given hereunder
or now or hereafter existing at law or in equity.
7.6.3 CERTAIN REMEDIES EXCLUSIVE.
(a) If this Agreement is properly terminated under Section 7.3.2 or
7.4.2 and Eldorado pays to CSBI the Termination Fee (i) within three Business
Days of the notice of termination, in the case of Section 7.4.2, or (ii)
within ten Business Days of the notice of termination, in the case of Section
7.3.2, then CSBI's receipt and acceptance of the Termination Fee shall
constitute an exclusive remedy, and following such receipt and acceptance
CSBI shall be barred from recovering damages for any breach of any term of
this Agreement or from seeking any other remedy at law or in equity from
Eldorado, the Bank or any of the Indemnified Parties (other than with respect
to such Persons' compliance with the provisions of Section 5.3 relating to
Confidential Information).
(b) If (i) this Agreement is properly terminated under Section
7.4.3, or under Section 7.3.4 or Section 7.4.5 on the basis of the
Shareholders' failure to approve the Merger, (ii) CSBI has not asserted a
breach of this Agreement by Eldorado at or before the time CSBI delivers to
Eldorado its invoice for reimbursement of Expenses pursuant to such Section,
and (iii) Eldorado reimburses CSBI's Expenses (subject to the cap specified
in such Section) within ten (10) Business Days after Eldorado's receipt of
the invoice therefor (which period shall be extended by an additional
reasonable time if Eldorado has reasonably disputed the amount of such
obligations), then CSBI's timely receipt of such reimbursement shall
constitute an exclusive
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remedy except as provided in Section 7.5.2, and following such receipt and
acceptance CSBI shall be barred from recovering damages for any breach of any
term of this Agreement or from seeking any other remedy at law or in equity
from Eldorado, the Bank or any of the Indemnified Parties (other than with
respect to such Persons' compliance with the provisions of Section 5.3
relating to Confidential Information).
(c) If this Agreement is terminated under provisions that entitle
Eldorado to receive and retain the Deposit, and the Deposit is so disbursed
to Eldorado in accordance with the Deposit Escrow Agreement without challenge
to such disbursement by CSBI, then Eldorado's receipt and acceptance of the
Deposit shall constitute an exclusive remedy, and following such receipt and
acceptance Eldorado shall be barred from recovering damages for any breach of
any term of this Agreement or from seeking any other remedy at law or in
equity from CSBI or any of its affiliates or investors (other than with
respect to such Persons' compliance with the provisions of Section 5.3
relating to Confidential Information).
ARTICLE VIII
MISCELLANEOUS
8.1 CLOSING. Unless the Parties shall mutually fix another date, the
Closing Date shall be that date (or the next subsequent Tuesday, Wednesday or
Thursday that is a Business Day) that is five Business Days following the
latest to occur of the conditions set forth in Section 6.1. Subject to the
fulfillment or waiver of those conditions and the other conditions set forth
in Article VI, the Closing of the Merger shall take place at the offices of
Eldorado's counsel in Newport Beach, California, at 10:00 a.m. (local time)
on the Closing Date. Except as otherwise provided herein, all proceedings to
be taken and all documents to be executed at the Closing shall be deemed to
have been taken, delivered and executed simultaneously as of the Effective
Time, and no proceeding shall be deemed taken nor documents deemed executed
or delivered until all have been taken, delivered and executed.
8.2 EXPENSES. Except as expressly provided in Sections 7.3 and 7.4 with
respect to reimbursement of CSBI's Expenses under certain circumstances, each
Party shall be responsible for its own Expenses.
8.3 PUBLICITY. Promptly following the execution and delivery of this
Agreement, Eldorado and CSBI shall issue a joint press release in a form
mutually to be agreed upon. Eldorado and CSBI shall not, and shall instruct
their Representatives not to, issue or cause the publication of any press
release or other public announcement with respect to, or otherwise make any
public statement concerning, this Agreement or the Merger without the consent
of the other
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Party, which consent shall not be unreasonably withheld. Notwithstanding the
foregoing, in the event that any Party determines, based upon the advice of
counsel, that a press release, disclosure in a public filing, or other public
disclosure of or reference to this Agreement, the Merger or the other Party
is required by Law, the former Party shall first notify the latter Party of
the potential disclosure, afford the latter Party a reasonable opportunity to
review and comment on the proposed disclosure, and obtain the latter Party's
approval of such disclosure, which approval shall not be withheld or delayed
in any manner that is unreasonable under the circumstances.
8.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person or by electronic facsimile transmission
(with confirmation) or on the next business day after dispatch by an
overnight courier of national reputation to the respective Parties as follows:
If to CSBI or Merger Sub, to it at:
Commerce Security Bancorp, Inc.
7777 Center Drive
Huntington Beach, CA 92647
Attention: Robert P. Keller, President & CEO
fax: (714) 891-8884
with a copy to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, Massachusetts 02110-2699
Attention: Michael K. Krebs, Esquire
Hugh A. O'Reilly, Esquire
fax: (617) 973-9748
If to Eldorado, to it at:
Eldorado Bancorp
19100 Von Karman Avenue
Suite 550
Irvine, CA 92612
Attention: J.B. Crowell, President & CEO
fax: (714) 798-1123
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EXECUTION VERSION
with a copy to:
Stradling, Yocca, Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660-6422
Attention: C. Craig Carlson, Esquire
fax: 714-725-4100
or to such other address as the Person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
8.5 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the Parties and, supersedes all prior agreements, understandings,
negotiations and discussions, both written and oral, among the Parties with
respect to the subject matter hereof.
8.6 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of
the representations, warranties, covenants and agreements contained herein or
in any instrument delivered pursuant to this Agreement shall survive the
Effective Time except those covenants and agreements that by their express
terms apply in whole or in part to periods after the Effective Time.
8.7 BENEFITS; BINDING EFFECT; ASSIGNMENT AND DESIGNATION. This
Agreement shall be for the benefit of and binding upon the Parties, their
respective successors and, where applicable, assigns. No Party may assign
this Agreement or any of its rights, interests or obligations hereunder
without the prior written consent of the other Party. Notwithstanding any
assignment or delegation of any Party's rights, interests or obligations,
each Party shall nonetheless remain responsible for the performance of all of
its obligations provided hereunder.
8.8 WAIVER. No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other provision hereof (whether
or not similar), nor shall any such waiver constitute a continuing waiver
unless otherwise expressly so provided.
8.9 NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any
Person other than the Parties and their respective successors and permitted
assigns any rights or remedies under or by reason of this Agreement.
8.10 SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses, Sections or Articles contained in this Agreement
shall not affect the enforceability of the
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EXECUTION VERSION
remaining portions of the Agreement or any part hereof, all of which are
inserted conditionally on their being valid in law. In the event any one or
more of the words, phrases, sentences, clauses, sections or subsections
contained in this Agreement shall be declared invalid, this Agreement shall
be construed as if such invalid word(s), phrase(s), sentence(s), clause(s),
section(s), or subsection(s), had not been inserted; PROVIDED, HOWEVER, that
if any provision is declared to be unenforceable because it is determined to
be overbroad, then, to the extent possible, in lieu of deletion such
provision shall be modified to the minimum extent necessary to render such
provision enforceable.
8.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the several Parties in separate counterparts, each of
which shall be deemed to be one and the same instrument.
8.12 APPLICABLE LAW; CONSENT TO JURISDICTION. THIS AGREEMENT AND ALL
RIGHTS OF THE PARTIES RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY SHALL
BE GOVERNED BY THE LAWS OF THE UNITED STATES AND THE INTERNAL LAW OF THE
STATE OF CALIFORNIA (WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS
THEREOF), AND ALL QUESTIONS CONCERNING THE VALIDITY AND CONSTRUCTION THEREOF
SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF SAID STATE. EACH PARTY
HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND
STATE COURTS SITTING IN THE COUNTY OF ORANGE, STATE OF CALIFORNIA IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND HEREBY
IRREVOCABLY AGREES, ON BEHALF OF ITSELF AND ON BEHALF OF SUCH PARTY'S
SUCCESSORS AND PERMITTED ASSIGNS, THAT ALL CLAIMS IN RESPECT OF SUCH ACTION
OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY
WAIVES ANY OBJECTION SUCH PERSON MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH
COURT IS AN INCONVENIENT FORUM.
8.13 WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY
IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED
TO, OR CONNECTED WITH THIS AGREEMENT, THE RELATED DOCUMENTS OR THE
RELATIONSHIP ESTABLISHED HEREUNDER.
[The rest of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the Parties have each executed and delivered this
Agreement as of the day and year first above written.
COMMERCE SECURITY BANCORP, INC.
ATTEST:
/s/ By: /s/ Robert P. Keller
- ----------------------------- ----------------------------
Secretary President & Chief Executive Officer
ELDORADO BANCORP
ATTEST:
/s/ By: /s/ J. B. Crowell
- ----------------------------- ----------------------------
Secretary President & Chief Executive Officer
MERGER.
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STOCK OPTION AGREEMENT
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO CERTAIN PROVISIONS
CONTAINED HEREIN AND TO THE RESALE RESTRICTIONS UNDER THE SECURITIES
ACT OF 1933, AS AMENDED
THIS OPTION GRANTED UNDER THIS AGREEMENT WILL AUTOMATICALLY EXPIRE ON
THE DATE DETERMINED IN ACCORDANCE WITH SECTIONS 2 AND 14 HEREOF, AND
CONTAINS A LIMITATION ON THE AMOUNT WHICH A HOLDER MAY REALIZE ON A
SALE, TRANSFER OR OTHER DISPOSITION OF THE OPTION GRANTED HEREUNDER
OR, IN CERTAIN EVENTS, OF THE SHARES WHICH MAY BE ACQUIRED ON EXERCISE
THEREOF (THE "OPTION SHARES"), PURSUANT TO SECTION 14 OF THIS
AGREEMENT. THE TRANSFERABILITY OF THE OPTION AND THE OPTION SHARES IS
ALSO RESTRICTED PURSUANT TO SECTION 12 HEREOF.
STOCK OPTION AGREEMENT, dated December 24, 1996, between COMMERCE SECURITY
BANCORP, INC., a Delaware corporation ("Grantee"), and ELDORADO BANCORP, a
California corporation ("Issuer").
RECITALS
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger immediately prior to the execution and delivery hereof (the "Merger
Agreement"); and
WHEREAS, as a condition and inducement to Grantee's pursuit of the
transactions contemplated by the Merger Agreement and in consideration therefor,
Issuer has agreed to grant Grantee the Option (as hereinafter defined):
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 468,200
fully paid and nonassessable shares of the common stock, no par value, of Issuer
("Common Stock") at a price of $22.00 per share; PROVIDED, HOWEVER, that in the
event Issuer issues or agrees to issue any shares of Common Stock at a price
less than $22.00 per share (as adjusted pursuant to subsection (b) of Section 5)
other than as permitted by the Merger Agreement, such price shall be equal to
such lesser price (such price, as adjusted if applicable, the "Option Price");
PROVIDED FURTHER that in no event shall the number of shares for which this
Option is exercisable exceed 11.0% of the Issuer's issued and outstanding shares
of Common Stock, calculated on a pro forma basis taking into account the shares
issued upon the exercise of this Option. The number of shares of Common Stock
that may
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EXECUTION VERSION
be received upon the exercise of the Option and the Option Price are subject
to adjustment as herein set forth. Capitalized terms used in this Agreement
and not defined herein shall have the meanings assigned thereto in the Merger
Agreement.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to or permitted by this Agreement and other than pursuant to an event
described in Section 5(a) hereof), the number of shares of Common Stock subject
to the Option shall be increased so that, after such issuance, such number
together with any shares of Common Stock previously issued pursuant hereto,
equals 11.0% of the number of shares of Common Stock issued and outstanding,
calculated on a pro forma basis taking into account the shares issued upon the
exercise of this Option. Nothing contained in this Section 1(b) or elsewhere in
this Agreement shall be deemed to authorize Issuer or Grantee to breach any
provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, prior to the Exercise Termination Event (as
hereinafter defined), the Grantee has become entitled to receive payment of the
Termination Fee pursuant to the terms of the Merger Agreement prior to the
termination of the Merger Agreement (the "Triggering Event") and whether or not
such Termination Fee has in fact been paid to the Grantee. The term "Holder"
shall mean the holder or holders of the Option. The term "Exercise Termination
Event" shall mean termination of the Merger Agreement in accordance with the
provisions thereof.
(b) If the Option has become exercisable by Grantee pursuant to
Section 2(a), the Option shall continue in full force and effect until the
earlier of: (1) the date as of which it has been exercised in full by Grantee in
accordance with Section 2(c) hereof, or (ii) twelve (12) months following the
termination of the Merger Agreement or such earlier date as is determined in
accordance with Section 14(d) (the "Option Termination Date").
(c) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three Business Days nor later than 20 Business Days after the Notice Date
for the closing of such purchase (the "Closing Date"); PROVIDED that if prior
notification to or approval of the Federal Reserve Board or any other Bank
Regulator is required in connection with such purchase, the Holder shall
promptly (but in no event later than five (5) Business Days after the Notice
Date) file the required notice or application for approval, shall promptly
notify the Issuer of such filing, and shall expeditiously process the same and
the period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which any required notification periods have expired or
been terminated or such approvals have been obtained and any requisite waiting
period or periods shall have passed. Any exercise of the Option shall be deemed
to occur on the Notice Date relating thereto.
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EXECUTION VERSION
(d) At the closing referred to in subsection (c) of this Section 2,
the Holder shall (i) pay to Issuer the aggregate purchase price for the shares
of Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
PROVIDED that failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option and (ii) present and
surrender this Agreement to the Issuer at its principal executive offices.
(e) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (d) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased and paid for by the Holder and, if the Option
should be exercised in part only, a new Option evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder.
(f) Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
CERTAIN PROVISIONS OF AN AGREEMENT BETWEEN THE REGISTERED HOLDER HEREOF AND
ISSUER AND TO RESALE RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
ISSUER AND WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON
RECEIPT BY ISSUER OF A WRITTEN REQUEST THEREFOR."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933 (the "1933 Act") in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
Holder shall have delivered to Issuer a copy of a letter from the staff of the
SEC, or an opinion of counsel, in form and substance reasonably satisfactory to
Issuer, to the effect that such legend is not required for purposes of the 1933
Act; (ii) the reference to the provisions of this Agreement in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the shares have been sold or transferred in compliance with the provisions of
this Agreement and under circumstances that do not require the retention of such
reference and the Holder shall have delivered to Issuer an opinion of counsel,
in form and substance reasonably satisfactory to Issuer, that the retention of
such reference on the substitute certificate(s) is not required for purposes of
the 1933 Act; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
Law.
(g) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (c) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
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EXECUTION VERSION
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all Taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock certificates under
this Section 2 in the name of the Holder except that Holder shall pay all
transfer and similar taxes if Holder requests the issuance of the stock
certificate in a name other than its own.
3. Issuer agrees: (i) that it shall at all times during the term of
the Option maintain, free from preemptive rights, sufficient authorized but
unissued or treasury shares of Common Stock so that the Option may be
exercised without additional authorization of Common Stock after giving
effect to all other options, warrants, convertible securities and other
rights to purchase Common Stock; (ii) that it will not, by charter amendment
or through reorganization, consolidation, merger, dissolution or sale of
assets, or by any other voluntary act, avoid or seek to avoid the observance
or performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by Issuer; (iii) promptly to take, at the
sole expense of Holder all action as may from time to time be reasonably
required (including (x) complying with all pre-merger notification, reporting
and waiting period requirements specified in 15 U.S.C. Sec. 18a and
regulations promulgated thereunder and (y) in the event, under the Bank
Holding Company Act of 1956, as amended, or any state or other federal
banking Law, prior approval of or notice to the Federal Reserve Board or to
any other Governmental Entity is necessary before the Option may be
exercised, cooperating fully with the Holder, at its sole expense, in
preparing such applications or notices and providing such information to the
Federal Reserve Board or such other Governmental Entity as they may require)
in order to permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and (iv)
promptly to take all action provided herein to protect the rights of the
Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of the Issuer, for other Agreements
providing for Options of different denominations entitling the holder thereof to
purchase, on the same terms and subject to the same conditions as are set forth
herein, in the aggregate the same number of shares of Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any
Agreements and related Options and, where applicable, Substitute Options for
which this Agreement (and the Option granted hereby) may be exchanged. Upon
receipt by Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will execute and deliver a
new Agreement of like tenor and date. Any such new Agreement executed and
delivered shall constitute an additional contractual obligation on the part of
Issuer, whether or not the Agreement so lost, stolen, destroyed or mutilated
shall at any time be enforceable by anyone, provided that Holder indemnifies the
Issuer from any and all liabilities, losses, costs and expenses, including, but
not limited to reasonably attorneys fees as and when incurred by Issuer, arising
out of any claim by anyone that it is entitled to enforce against Issuer the
Agreement that was lost, stolen, destroyed or mutilated.
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EXECUTION VERSION
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option shall be subject to adjustment from time to time as provided in this
Section 5. In the event of any change in Common Stock by reason of (x) stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares or the like, or (y) distributions on or in
respect of the Common Stock prior to any Exercise Termination Event that would
be prohibited under the terms of the Merger Agreement, the type and number of
shares of Common Stock then purchasable upon exercise hereof and the Option
Price shall be appropriately adjusted in such manner as shall fully preserve the
economic benefits provided hereunder and proper provision shall be made in any
agreement governing any such transaction to provide for such proper adjustment
and the full satisfaction of the Issuer's obligations hereunder.
6. [Reserved]
7. (a) At any time after the occurrence of a
Repurchase Event (as defined below) (i) at the request of the Holder,
delivered prior to the Option Termination Date (or such later period as
provided in Section 10), Issuer shall repurchase the Option from the Holder
at a price (the "Option Repurchase Price") equal to (x) the amount by which
(A) the market/offer price (as defined below) exceeds (B) the Option Price,
multiplied by the number of shares for which this Option may then be
exercised and (ii) at the request of the owner of Option Shares from time to
time (the "Owner"), delivered prior to the Option Termination Date (or such
later period as provided in Section 10), Issuer shall repurchase such number
of the Option Shares from the Owner as the Owner shall designate at a price
(the "Option Share Repurchase Price") equal to (x) the market/offer price
multiplied by (y) the number of Option Shares so designated. The term
"market/offer price" shall mean the highest of (i) the price per share of
Common Stock at which a tender or exchange offer therefor has been made, (ii)
the price per share of Common Stock to be paid by any third party pursuant to
an agreement with Issuer, (iii) the highest closing price for shares of
Common Stock within the six-month period immediately preceding the date the
Holder gives notice of the required repurchase of this Option or the Owner
gives notice of the required repurchase of Option Shares, as the case may be,
or (iv) in the event of a sale of all or substantially all of Issuer's assets
or deposits, the sum of the net price paid in such sale for such assets or
deposits and the current market value of the remaining net assets of Issuer
as determined by a nationally recognized investment banking firm selected by
the Holder or the Owner, as the case may be, and reasonably acceptable to
Issuer, divided by the number of shares of Common Stock of Issuer outstanding
at the time of such sale. In determining the market/offer price, the value of
consideration other than cash shall be determined by a nationally recognized
investment banking firm selected by the Holder or Owner, as the case may be,
and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the
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EXECUTION VERSION
Owner, as the case may be, elects to require Issuer to repurchase this Option
and/or the Option Shares in accordance with the provisions of this Section 7.
As promptly as practicable, and in any event within five Business Days after
the surrender of the Option and/or certificates representing Option Shares
and the receipt of such notice or notices relating thereto, Issuer shall
deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or the portion
thereof that Issuer is not then prohibited under applicable Law from so
delivering.
(c) To the extent that Issuer is prohibited under applicable Law, from
repurchasing the Option and/or the Option Shares in full, Issuer shall
immediately so notify the Holder and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five Business Days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited
under applicable Law, from delivering to the Holder and/or the Owner, as
appropriate, the Option Repurchase Price and the Option Share Repurchase Price,
respectively, in full (and Issuer hereby undertakes to use its reasonable best
efforts to obtain all required regulatory and legal approvals and to file any
required notices as promptly as practicable in order to accomplish such
repurchase), the Holder or Owner may revoke its notice of repurchase of the
Option or the Option Shares whether in whole or to the extent of the
prohibition, whereupon, in the latter case, Issuer shall promptly (i) deliver to
the Holder and/or the Owner, as appropriate, that portion of the Option Purchase
Price or the Option Share Repurchase Price that Issuer is not prohibited from
delivering; and (ii) deliver, as appropriate, either (A) to the Holder, a new
Agreement evidencing the right of the Holder to purchase that number of shares
of Common Stock obtained by multiplying the number of shares of Common Stock for
which the surrendered Agreement was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Option
Repurchase Price less the portion thereof theretofore delivered to the Holder
and the denominator of which is the Option Repurchase Price, or (B) to the
Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing. If an Exercise Termination Event shall have occurred prior to the
date of the notice by Issuer described in the first sentence of this subsection
(c), or shall be scheduled to occur at any time before the expiration of a
period ending on the thirtieth day after such date, the Holder shall nonetheless
have the right to exercise the Option until the expiration of such 30-day
period.
(d) For purposes of this Section 7, a Repurchase Event shall be deemed to
have occurred upon the occurrence of any of the following events or transactions
after the date hereof:
(i) the acquisition by any Person (other than Grantee or any of its
Subsidiaries (each a "Grantee Subsidiary") of beneficial ownership of 50%
or more of the then-outstanding Common Stock; or
(ii) the consummation of any Strategic Transaction (as hereinafter
defined).
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EXECUTION VERSION
For purposes of this Agreement, (a) "Strategic Transaction" shall mean (i) any
purchase or other acquisition of 50% or more of the assets, assumption of 50% or
more of the liabilities, or purchase or other acquisition of 50% or more of the
equity (on a pro forma basis) of Issuer (including any subsidiary of the Issuer
(each an "Issuer Subsidiary")), (ii) any merger or other business combination
involving Issuer or any Issuer Subsidiary, (iii) any recapitalization involving
Issuer or any Issuer Subsidiary resulting in an extraordinary dividend or
distribution to Issuer or the Shareholders, or (iv) any self-tender for or
redemption of 50% or more of the Common Stock, (b) "Subsidiary" shall mean a
"significant subsidiary" of Issuer within the meaning set forth in Rule 1-02 of
Regulation S-X promulgated by the SEC, and (c) "Person" shall have the meaning
set forth in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of
1934 (the "1934 Act") and the rules and regulations promulgated by the SEC
thereunder.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any Person,
other than Grantee or a Grantee Subsidiary, and shall not be the continuing or
surviving corporation of such consolidation or merger, (ii) to permit any
Person, other than Grantee or a Grantee Subsidiary, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then-outstanding shares of Common Stock (x) shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property or (y) after such merger shall represent less than 33% of the
outstanding shares and share equivalents of the merged company, or (iii) to sell
or otherwise transfer all or substantially all of its or any Issuer Subsidiary's
assets or deposits to any Person, other than Grantee or a Grantee Subsidiary,
then, and in each such case, as a part of or in connection with such agreement
provision shall be made so that the Option shall, upon the consummation of such
transaction and upon the terms and conditions set forth herein, be converted
into, and exchanged for, an Option (the "Substitute Option") whereunder the
Holder shall be entitled to receive, upon exercise thereof (but only to the
extent so exercised), the number of shares of stock or other securities
("Substitute Securities") or property of the Acquiring Corporation, to which a
holder of Common Stock (or other securities then deliverable upon the exercise
of this Option) would have been entitled upon the consummation of such
transaction. If property is deliverable upon exercise of the Substitute Option
and such property consists, in whole or in part, of cash in excess of the Option
Price, the Holder may, at the Holder's election, exercise the Substitute Option
without making payment of the Option Price and, in such case, the Issuer or the
Acquiring Corporation shall, upon distribution to the Holder, consider the
Option Price to have been paid in full and, in making settlement to the Holder,
shall deduct an amount equal to the Option Price from the amount payable to the
Holder.
(b) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than Issuer),
(ii) Issuer, in a merger in which Issuer is the continuing or surviving Person,
and (iii) the transferee of all or substantially all of Issuer's assets or
deposits (or the assets or deposits of an Issuer Subsidiary).
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<PAGE>
EXECUTION VERSION
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option
shall also enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this Agreement (after giving
effect for such purpose to the provisions of Section 9), which agreement shall
be applicable to the Substitute Option. The exercise price of the Substitute
Option per share of Substitute Securities shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Securities for
which the Substitute Option is exercisable.
(d) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any Person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder") given prior to the Option Termination Date, the
issuer of the Substitute Option (the "Substitute Option Issuer") shall
repurchase the Substitute Option from the Substitute Option Holder at a price
(the "Substitute Option Repurchase Price") equal to (x) the amount by which (i)
the Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise
price of the Substitute Option, multiplied by the number of shares of Substitute
Securities for which the Substitute Option may then be exercised plus (y) the
Holder's out-of-pocket expenses (to the extent not previously reimbursed), and
at the request of the owner (the "Substitute Share Owner") of shares of
Substitute Securities (the "Substitute Shares") given prior to the Option
Termination Date, the Substitute Option Issuer shall repurchase the Substitute
Shares at a price (the "Substitute Share Repurchase Price") equal to (x) the
Highest Closing Price multiplied by the number of Substitute Shares so
designated plus (y) the Holder's out-of-pocket expenses (to the extent not
previously reimbursed). The term "Highest Closing Price" shall mean the highest
closing price for shares of Substitute Securities within the six-month period
immediately preceding the date the Substitute Option Holder gives notice of the
required repurchase of the Substitute Option or the Substitute Share Owner gives
notice of the required repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable and in any event within five business
days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt
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EXECUTION VERSION
of such notice or notices relating thereto, the Substitute Option Issuer
shall deliver or cause to be delivered to the Substitute Option Holder the
Substitute Option Repurchase Price and/or to the Substitute Share Owner the
Substitute Share Repurchase Price therefor or the portion thereof which the
Substitute Option Issuer is not then prohibited under applicable Law from so
delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable Law, from repurchasing the Substitute Option and/or the Substitute
Shares in part or in full, the Substitute Option Issuer shall immediately so
notify the Substitute Option Holder and/or the Substitute Share Owner and
thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Share Repurchase Price, respectively, which it is no
longer prohibited from delivering, within five Business Days after the date on
which the Substitute Option Issuer is no longer so prohibited; provided,
however, that if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9 prohibited
under applicable Law, from delivering to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the Substitute Option Repurchase Price
and the Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its best efforts to receive all required
regulatory and legal approvals as promptly as practicable in order to accomplish
such repurchase), the Substitute Option Holder or Substitute Share Owner may
revoke its notice of repurchase of the Substitute Option or the Substitute
Shares either in whole or to the extent of prohibition, whereupon, in the latter
case, the Substitute Option Issuer shall promptly (i) deliver to the Substitute
Option Holder or Substitute Share Owner, as appropriate, that portion of the
Substitute Option Repurchase Price or the Substitute Share Repurchase Price that
the Substitute Option Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Securities obtained by
multiplying the number of shares of the Substitute Securities for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, or (B) to the Substitute Share Owner, a certificate for the
Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the notice
by the Substitute Option Issuer described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the expiration
of a period ending on the thirtieth calendar day after such date, the Substitute
Option Holder shall nevertheless have the right to exercise the Substitute
Option until the expiration of such 30-day period.
10. The 30-day, 6-month or 12-month periods for exercise of certain rights
under Sections 2, 6, 7, 9 and 12 shall be extended: (i) to the extent necessary
to obtain all regulatory approvals for the exercise of such rights (for so long
as the Holder is using commercially reasonable efforts to obtain such regulatory
approvals), and for the expiration of all statutory waiting periods; and (ii) to
the extent necessary to avoid liability under Section 16(b) of the 1934 Act by
reason of such exercise.
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EXECUTION VERSION
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary under its Articles of Incorporation and Bylaws and under
the Laws of the State of California to authorize this Agreement or to consummate
the transactions so contemplated. This Agreement has been duly and validly
executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant thereto, will be duly authorized, validly issued, fully-paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
Person, without the express written consent of the other party, except that in
the event a Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder within 12 months
following such Triggering Event (or such later period as provided in Section 10)
to a person or persons not affiliated with Grantee; provided, however, that
until the date 30 calendar days following the date on which the Federal Reserve
Board has approved applications by Grantee to acquire the shares of Common Stock
subject to the Option, Grantee may not assign its rights under the Option except
in (i) a widely dispersed public distribution, (ii) a private placement in which
no one party acquires the right to purchase in excess of 2% of the voting shares
of Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution on
Grantee's behalf, or (iv) any other manner approved by the Federal Reserve
Board. Each Holder of this Option agrees and covenants to Issuer that it will
comply with all applicable federal and state securities laws in effecting any
assignment of this Option, and agrees to indemnify and hold harmless Issuer and
Issuer's officers and directors against any liability arising thereunder in
connection with any such assignment.
13. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation applying to the Federal Reserve
Board under the Bank Holding Company Act of 1954 for approval to acquire the
shares issuable hereunder, but Grantee shall not be obligated to apply to state
banking authorities for approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever,
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<PAGE>
EXECUTION VERSION
as it deems appropriate to do so. After the Option becomes exercisable, all
expenses reasonably incurred by Issuer pursuant hereto shall be reimbursed to
Issuer on its demand by Holder.
14. (a) Notwithstanding any other provision in this Agreement to the
contrary, the aggregate sum of the Total Profit (as defined below) from each
sale, transfer or other disposition that is made on or before the Option
Termination Date, whether made pursuant to Section 7 or Section 9 hereof or
otherwise (a "Disposition Transaction"), of any Option Securities (as
hereinafter defined) by any Transferring Person (as hereinafter defined) shall
not exceed, in any event. the amount by which One Million Dollars ($1,000,000)
exceeds all out-of pocket expenses or costs incurred by the Issuer or any
Substitute Option Issuer in performing its respective covenants or duties under
this Agreement (the "Issuer Expenses"). (Such excess amount shall be referred to
herein as "Aggregate Profit Ceiling.") For purposes of this Section 14:
(i) The Term "Option Securities' means the Option or any portion
thereof, any Option Shares, any Substitute Option or any portion thereof,
and any shares or other securities receivable on exercise of any Substitute
Option ("Substitute Securities");
(ii) The term "Transferring Person" shall mean the Grantee or any
Holder or any Owner of any or all of the Option Securities that engages in
a Disposition Transaction; and
(iii) The term "Total Profit" when used with respect to any
Disposition Transaction shall mean the amount (before taxes and any
commissions, fees or other expenses incurred by the Transferring Person as
a result of or in connection with such Disposition Transaction) of the
difference between (i) the gross amount paid to the Transferring Person for
the Option Securities sold, transferred or otherwise disposed of in such
Disposition Transaction (the "Gross Sales Price"), and (ii) the gross
purchase price paid, if any, for such Option Securities when they were
acquired by such Transferring Person (the Transferring Person's "Basis",
which shall not necessarily be the same as its basis for tax purposes);
PROVIDED, HOWEVER, that (A) if the Disposition Transaction is a disposition
of the Option or a Substitute Option made by the Grantee or any affiliate
thereof, the Transferring Person's Basis for purposes hereof shall be
deemed to be zero; (B) if the Disposition Transaction is a gift or other
transaction without the payment of consideration to the Transferring
Person, then there shall be deemed to have been no Total Profit from such
Disposition Transaction and the purchaser or transferee's Basis shall be
deemed to be the Transferring Person's Basis; (C) if, in any Disposition
Transaction, the Gross Sales Price consists, or the consideration paid by
Transferring Person on its acquisition of the Option Securities being
transferred in the Disposition Transaction (the "Transferred Option
Securities") consists, in whole or in part, of securities or other property
other than cash, then, for purposes of determining the Total Profit for
such Disposition Transaction, any non-cash consideration included in the
Gross Sales Price shall be valued at its fair market value on the date of
the Disposition Transaction and any non-cash consideration paid on the
acquisition of such Option Securities by the Transferring Person shall be
valued at its fair market value on the duty of such acquisition, in either
instance, by a nationally recognized investment banking or property
valuation firm,
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EXECUTION VERSION
as appropriate for the type of property involved; and (D) if the Grantee
or any other Holder of the Option or any portion thereof receives a
Substitute Option pursuant to Section 8 hereof and such Substitute Option
represents a right to receive cash or other property other than shares or
other securities of the Substitute Option Issuer, then the exercise of
such Substitute Option shall be deemed to be a Disposition Transaction to
the extent of the cash or other non-securities property received on
exercise thereof, and the cash and fair market value of any non-cash
assets (other than Substitute Securities) shall be the Gross Sales Price
in such Disposition Transaction and, for purposes thereof, the
Transferring Person's Basis shall be a pro-rata portion of the
Transferring Person's Basis in the Option that was exchanged for the
Substitute Option allocable to the cash and non-cash property (other than
the Substitute Securities) receivable on exercise of the Substitute
Option.
(c) For purposes of determining if and the date as of which the
Aggregate Profit Ceiling has been reached, on consummation of any Disposition
Transaction the Total Profit arising therefrom shall be added to the sum of
Total Profit (including losses, to the extent realized in a Disposition
Transaction entered into with a person unaffiliated with the Transferring
Person) that has been realized from all other Disposition Transactions of any of
the Option Securities consummated by any Transferring Person prior to or
concurrently therewith. In order to enable determinations to be made of the
Total Profit in each Disposition Transaction and if and the date as of which the
Aggregate Profit Ceiling has been reached or exceeded, each Transferring Person
shall be obligated to provide a written notice of the consummation of any
Disposition Transaction (a "Transfer Notice"), within five (5) business days
thereafter, to the Issuer (or the Substitute Issuer in the case of a Disposition
Transaction involving a Substitute Option or Substitute Securities). Each
Transfer Notice shall (i) describe the nature of the Disposition Transaction,
(ii) the nature and amount of the Gross Sales Price paid for, and the
Transferring person's Basis in, the Transferred Option Securities (and the fair
market value of any non-cash consideration received as part of the Gross Sales
Price or that accounted for the Transferring Person's Basis, as the case may be,
and the manner in which such fair market value was determined), and (iii) the
identity of the purchaser or transferee. Such Transfer Notice also shall
contain a certification of the Chief Financial Officer of the Transferring
Person that the information contained therein is accurate and complete.
(d) In the event that the Aggregate Profit Ceiling is reached on a
date earlier than the expiration of twelve (12) months following the termination
of the Merger Agreement, the Option Termination Date shall be accelerated to,
and shall be deemed to be, such earlier date. On the Option Termination Date
(including as so accelerated):
(i) Without any action required on the part of the Issuer or any
Substitute Issuer or on the part of the Grantee or any other Holder of such
unexercised portion of the Option or any Substitute Option or on the part
of any Owner of any Option Shares or Substitute Securities then
outstanding, any portion of the Option or any Substitute Option which is
then outstanding and unexercised shall automatically expire and cease to be
exercisable; and
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EXECUTION VERSION
(ii) If the aggregate sum of all Total Profit received (including the
present value of any amounts to be received under any note or installment
purchase agreement or deferred purchase price arrangement) by any and all
Transferring Persons from all of the Disposition Transactions theretofore
consummated exceeded the Aggregate Profit Ceiling, then such Transferring
Persons shall be jointly and severally liable to pay to the Issuer or the
Substitute Issuer, as the case may be, not later than the tenth (10th) day
following the Option Termination Date (A) an amount in cash equal to the
difference between such aggregate sum of the Total Profit and the Aggregate
Profit Ceiling, (B) Option Shares (if delivered to the Issuer) or
Substitute Securities (if delivered to a Substitute Issuer) having a market
value as of that date equal difference between such aggregate sum of the
Total Profit and the Aggregate Profit Ceiling, or (C) any combination of
the foregoing.
Although not required for any cessation of exerciseability of the remaining
portion of this Option or any Substitute Option to become and be effective on
the Option Termination Date, the Grantee or any other Holder of any unexercised
portion of the Option or Substitute Option then outstanding shall forthwith
return any originally signed copy of this Agreement, or of any other agreement
issued in substitution therefor, that evidences such unexercised portion of the
Option or any Substitute Option that is in its possession to the Issuer or
Substitute Issuer, as the case may be. In order to secure the rights of the
Issuer and any Substitute Issuer hereunder, this Option Agreement or any
agreement issued in substitution or replacement therefor, that evidences any
unexercised portion of the Option or any Substitute Option shall contain the
legend set forth at the beginning of this Stock Option Agreement, and each
certificate evidencing any Option Shares or Substitute Securities shall contain
the legend set forth on Schedule A hereto; PROVIDED, HOWEVER, that the Issuer or
Substitute Issuer, as applicable, shall remove any such legend from any Option
Shares or Substitute Securities promptly following any request made by the Owner
at any time after the Option Termination Date.
(e) Notwithstanding anything to the contrary contained herein, no sale,
transfer or other disposition of any Option Shares or Substitute Securities made
after the Option Termination Date shall be subject to the constraints on Total
Profit contained in this Section 14 or shall otherwise obligate the transferror
of such Option Shares or Substitute Securities to pay back to the Issuer or the
Substitute Issuer any portion of any proceeds received therefor from any
Disposition Transaction, or any other transaction, in either case occurring
after the Option Termination Date.
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or other Governmental Entity of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions and covenants and restrictions contained in this Agreement shall
remain in full force and effect, and shall in no way be affected, impaired or
invalidated. If for any reason such court or Governmental Entity determines
that the Holder
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<PAGE>
EXECUTION VERSION
is not permitted to acquire, or Issuer is not permitted to repurchase
pursuant to Section 7, the full number of shares of Common Stock provided in
Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5 hereof), it is
the express intention of Issuer to allow the Holder to acquire or to require
Issuer to repurchase such lesser number of shares as may be permissible,
without any amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
18. This Agreement shall be governed by and construed in accordance with
the laws of the State of California, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. Subject
to Section 12, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assignees. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors except as assignees, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided herein.
[remainder of page intentionally blank]
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<PAGE>
EXECUTION VERSION
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all of the
date first above written.
COMMERCE SECURITY BANCORP, INC.
By: /s/ Robert P. Keller
-----------------------------------
President & Chief Executive Officer
ELDORADO BANCORP
By: /s/ J.B. Crowell
-----------------------------------
President & Chief Executive Officer
OPTION.
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<PAGE>
EXECUTION VERSION
SCHEDULE A
to Stock Option Agreement
dated as of December 24, 1996
Option Share Certificate Legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER, AND THE MAXIMUM AMOUNTS THAT MAY BE REALIZED
BY THE HOLDER HEREOF IN THE EVENT OF ANY SALE, TRANSFER OR OTHER
DISPOSITION MADE DURING THE PERIOD ENDING 1998, ALL
IN ACCORDANCE WITH THE OPTION AGREEMENT DATED AS OF DECEMBER 24, 1996,
A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER ON WRITTEN REQUEST OF
ITS SECRETARY.
OPTION..16
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