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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 6, 1997
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Commission file number 2-76555
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COMMERCE SECURITY BANCORP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 33-0720548
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(State or other jurisdiction of (I.R.S. Employer or
incorporation or organization) Identification No.)
7777 Center Avenue, Huntington Beach, California 92647-3067
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(Address of principal executive offices) (Zip Code)
(714) 895-2929
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(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
ELDORADO BANCORP ACQUISITION. Effective June 6, 1997, Commerce Security
Bancorp, Inc. (the "Company") completed its acquisition (the "Acquisition") of
Eldorado Bancorp ("Eldorado") of Tustin, California, the holding company of
Eldorado Bank, its wholly owned subsidiary. The Acquisition was effected
pursuant to an Agreement and Plan of Merger entered into between the Company and
Eldorado on December 24, 1996 (the "Acquisition Agreement").
Pursuant to the Acquisition Agreement, the Company acquired 100% of the
outstanding stock of Eldorado for cash consideration of $23.00 per share.
Contemporaneously with the Acquisition, each Eldorado stock option that had not
previously been exercised (collectively, the "Eldorado Options") was cancelled
in return for the payment by Eldorado of the difference between the $23.00 price
per share and the exercise price thereof. The aggregate consideration paid to
holders of Eldorado common stock and Eldorado Options (net of the tax benefit
arising out of the Eldorado Options) was approximately $90.3 million.
Eldorado had total assets of approximately $400 million at March 31, 1997.
Through Eldorado Bank, Eldorado offered a range of loan and deposit products to
businesses, professionals and individuals throughout its market area, conducting
its business from twelve functional offices. The Company intends to use all or
substantially all of the physical property acquired in the Acquisition in the
furtherance of the business of Eldorado Bank.
On a pro forma basis, the Company had total assets of approximately
$900 million as of March 31, 1997, based on the unaudited financial statements
of the Company and Eldorado and on the terms of the Acquisition financing
described below.
Exhibit 99.1 to this report is a copy of the Company's press release, dated
June 13, 1997, announcing the completion of the Acquisition.
BANK MERGERS. In addition to Eldorado Bank, the Company has three other
wholly owned bank subsidiaries -- Liberty National Bank in Huntington Beach,
California, San Dieguito National Bank in Encinitas, California, and Commerce
Security Bank in Sacramento, California. The Company has received regulatory
approval to merge each of those subsidiaries with and into Eldorado Bank. The
Company expects that such mergers will occur on or about June 30, 1997.
ACQUISITION FINANCING. Approximately $94.8 million of cash was necessary
to pay the cash consideration to holders of Eldorado common stock and Eldorado
Options and Acquisition-related expenses incurred by the Company, of which
$14.5 million was funded from Eldorado's excess capital and $80.3 million was
raised through the Company's sale, effective June 6, 1997, of Class B Common
Stock, Special Common Stock, a Junior Subordinated Debenture (and,
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indirectly, Series A Capital Securities), Series B Preferred Stock and common
stock warrants, as described below and summarized on the schedule filed as
Exhibit 99.2 to this report.
CLASS B COMMON STOCK. In conjunction with the Acquisition financing,
the 9,697,430 shares of Company common stock, $.01 par value per share,
outstanding prior to the closing of the Acquisition were redesignated as "Class
B Common Stock," and the Company sold 4,235,615 additional shares of Class B
Common Stock to various accredited investors for consideration, net of a 1%
commitment fee, of $17,899,157.
Dartmouth Capital Group, L.P. ("DCG"), the Company's largest
shareholder, purchased 1,012,244 of those shares of Class B Common Stock for
aggregate consideration, net of a 1% commitment fee, of $4,419,793, of which
$4.3 million initially was made in the form of a loan to the Company in December
1996 to fund an escrow account that would have been forfeited to Eldorado if the
Company were unable to consummate the Acquisition financing. Peter H. Paulsen,
a director of the Company, loaned $200,000 to the Company on the same terms as
DCG. That $4.5 million was converted to shares of Class B Common Stock upon the
consummation of the Acquisition at a purchase price of $4.40 per share less the
1% commitment fee.
SPECIAL COMMON STOCK. The Company sold a total of 4,825,718 shares of
Special Common Stock, $.01 par value per share (the "Special Common"), to DCG,
Madison Dearborn Capital Partners II, L.P., ("MDP"), Olympus Growth Fund II,
L.P., ("Olympus I"), and Olympus Executive Fund, L.P., ("Olympus II" and
collectively with Olympus I, "Olympus") at a gross purchase price of $4.81 per
share, representing an aggregate payment, net of a 1% commitment fee, of
$22,984,570. Neither MDP nor Olympus is an affiliate of the other, and prior to
their investment in the Company, neither was an affiliate of the Company or DCG.
The Special Common will be entitled to a liquidation preference over
the Class B Common if, in the case of a liquidation or a change in control of
the Company, the distribution per share of Common Stock is less than $4.81.
With the exception of 211,425 shares of Non-Voting Special Common issued to each
of MDP and Olympus, the Special Common will have one vote per share and will
vote as a class with the Class B Common Stock. The Voting Special Common and
the Class B Common Stock are hereinafter sometimes referred to as the "voting
Common Stock."
JUNIOR SUBORDINATED DEBENTURE AND SERIES A CAPITAL SECURITIES. CSBI
Capital Trust I (the "Trust"), a special purpose trust formed by the Company,
issued a total of 27,657 shares of Series A Capital Securities, $1,000 initial
liquidation value per share (the "Series A Securities"), to DCG, MDP and Olympus
for an aggregate cash payment, net of a 1% commitment fee, of $27,386,368. The
Trust in turn invested the proceeds of the Series A Securities in a Junior
Subordinated Debenture issued by the Company.
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For regulatory capital purposes, the Series A Securities will be
treated as cumulative preferred stock and qualify as Tier 1 capital of the
Company. The Company, however, will treat the Junior Subordinated Debenture as
indebtedness for federal income tax purposes and, therefore, will deduct for
federal income tax purposes the stated interest and original issue discount, if
any, on the Junior Subordinated Debenture.
SERIES B PREFERRED STOCK. The Company issued a total of 116,593
shares of Series B Preferred Stock, $100 par value per share (the "Series B
Preferred"), to DCG, MDP and Olympus for an aggregate amount of $11,545,210, net
of a 1% commitment fee.
For regulatory capital purposes, the Series B Preferred will be
treated as a noncumulative preferred stock and qualify as Tier 1 capital of the
Company. Dividends on the Series B Preferred will not be deductible by the
Company for federal income tax purposes.
COMMON STOCK WARRANTS. In connection with the purchase of the
Series B Preferred, each of MDP, Olympus and DCG purchased a common stock
warrant (collectively, the "Investor Warrants") that entitles the holder to
purchase shares of Class B Common Stock at an exercise price of $4.81 per share.
An aggregate of 4,000,000 shares of Class B Common Stock are subject to the
Investor Warrants. The Investor Warrants expire on June 6, 2007. The aggregate
purchase price of the Investor Warrants was $40,000.
The Company also issued common stock warrants (collectively, the
"Shattan Warrants") to The Shattan Group, LLC, which acted as the Company's
placement agent for the sale of securities to MDP and Olympus. An aggregate of
459,476 shares of Class B Common Stock are subject to the Shattan Warrants,
which have an exercise price of $4.81 per share and expire on June 6, 2002. The
aggregate purchase price of the Shattan Warrants was $4,595.
SECURITY OWNERSHIP OF DCG, MDP AND OLYMPUS. Immediately following the
closing of the Acquisition, DCG owned 35.1% of the shares of voting Common Stock
then outstanding, and each of MDP and Olympus owned 9.9%. Exhibit 99.3 to this
report sets forth the respective amounts of each tranche of voting securities
owned, as of the closing of the Acquisition, by DCG, MDP, Olympus and each other
holder of more than 5% of the shares of voting Common Stock then outstanding.
DCG, MDP, Olympus and certain other parties, including Robert P. Keller,
the President and Chief Executive of the Company, entered into a Shareholder
Agreement in connection with the Acquisition financing. Pursuant to that
Shareholder Agreement, MDP, Olympus and Mr. Keller have agreed to vote up to a
specified percentage of voting Common Stock in favor of persons nominated by DCG
for a majority of the directors of the Company. The Shareholder Agreement
provides, however, that the shares as to which DCG may direct such votes shall
not,
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when aggregated with voting Common Stock held directly by DCG and Keller,
represent a more than 48% of the shares of voting Common Stock then outstanding.
Certain holders of Class B Common Stock (sometimes referred to as the
"Direct Holders") also are investors in DCG, or affiliates of such investors,
each of whom has the right to designate a director of Dartmouth Capital Group,
Inc., DCG's sole general partner. As of the closing of the Acquisition, the
Direct Holders owned, in the aggregate, 27.6% of the shares of voting Common
Stock then outstanding.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Description Page
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(a) Financial statements of business acquired *
(b) Pro forma financial information *
(c) Exhibits
99.1 Press release dated June 13, 1997 7
99.2 Schedule of Securities Issued to Finance
Eldorado Bancorp Acquisition 9
99.3 Schedule of Principal Shareholders Upon
Closing of Eldorado Bancorp Acquisition 10
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* To be filed by amendment.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
COMMERCE SECURITY BANCORP, INC.
June 25, 1997 By: /s/ Curt A. Christianssen
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Curt A. Christianssen
Senior Vice President
Chief Financial Officer
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
June 13, 1997
CONTACTS:
COMMERCE SECURITY BANCORP, INC. COFFIN- MOTTOLA COMMUNICATIONS
Robert P. Keller, Chairman Christi Mottola, Press Relations
(714) 895-2929 EXT. 145 (714) 851-1109
COMMERCE SECURITY BANCORP, INC.
ACQUIRES ELDORADO BANCORP
CREATES LARGEST ORANGE-COUNTY-BASED BANK HOLDING COMPANY
Irvine, Calif. -- Commerce Security Bancorp, Inc. announced the completion of
the acquisition of Eldorado Bancorp, based in Tustin, Calif. This acquisition
makes Commerce Security the largest bank holding company based in Orange County,
with total banking assets of $902 million. Commerce Security acquired 100
percent of the Eldorado's shares for a cash consideration of $23 per share.
"We are extremely pleased that Eldorado, Orange County's premier independent
commercial bank, has become part of the Commerce Security Bancorp group," said
Robert P. Keller, Chairman and Chief Executive Officer of Commerce Security.
"This combination will result in a stronger statewide financial institution with
a wider range of services, increased lending limits and service enhancements.
Eldorado's outstanding management team and staff and excellent customer
relationships will be a cornerstone for Commerce Security Bancorp's future
growth in Orange County."
(more)
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Eldorado was founded 25 years ago, and since then has expanded to serve many
Orange County communities. Today, it has 12 customer locations. These provide
a wide range of commercial/consumer banking, construction lending and mortgage
banking services. As of March 31, 1997, Eldorado Bancorp had total assets of
approximately $404 million.
Commerce Security Bancorp, founded in 1995, owns three other California banks in
addition to Eldorado: Liberty National Bank, based in Huntington Beach; San
Dieguito National Bank, based in Encinitas; and Commerce Security Bank, of
Sacramento. The combined banks now have 18 branches, eight mortgage banking
offices and three small equipment leasing offices.
Mr. Keller's career has spanned thirty years. Prior to creating Commerce
Security Bancorp, he served as President and Chief Executive Officer of
Independent Bancorp of Arizona, Inc., a publicly held bank holding company with
assets of $1.8 billion. Prior to that post, he was President and Chief
Executive Officer of New Dartmouth Bank, a privately-owned financial institution
based in Manchester, N. H., with $2 billion in assets.
Under the guidance of Mr. Keller, Commerce Security Bancorp is growing rapidly.
The company's initial acquisition, in September 1995, was San Dieguito National
Bank in northern San Diego County. Within 18 months, Commerce Security's
banking assets have increased from $58 million to over $900 million.
####
Note: Eldorado Bank has locations in Huntington Beach, Indio, Laguna Hills,
Monarch Beach, Irvine (also serving Newport Beach), Orange, Palm Desert, San
Bernardino, San Clemente, San Juan Capistrano and Tustin. Also, Liberty
National Bank has offices in the Orange County communities of Huntington Beach
and Dana Point.
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EXHIBIT 99.2
COMMERCE SECURITY BANCORP, INC.
Capitalization Upon Closing of Financing
for Acquisition of Eldorado Bancorp
June 6, 1997
<TABLE>
<CAPTION>
ISSUED FOR OUTSTANDING
ACQUISITION FINANCING AS OF FUNDING
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INVESTOR NON-COMMON COMMON % OF O/S NON-COMMON COMMON % OF O/S
SECURITIES STOCK COMMON SECURITIES STOCK COMMON
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<S> <C> <C> <C> <C> <C> <C>
DARTMOUTH CAPITAL GROUP, L.P.
Series A Capital Securities 4,423 4,423
Series B Preferred Stock 18,647 18,647
Voting Special Common Stock 771,788 4.1% 771,788 4.1%
Non-Voting Special Common Stock 0 0.0% 0 0.0%
Class B Common Stock 1,012,244 5.4% 5,655,164 30.1%
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TOTAL DARTMOUTH CAPITAL GROUP 1,784,032 9.5% 6,426,952 34.3%
MADISON DEARBORN CAPITAL PARTNERS II LP
Series A Capital Securities 11,617 11,617
Series B Preferred Stock 48,973 48,973
Voting Special Common Stock 1,815,540 9.7% 1,815,540 9.7%
Non-Voting Special Common Stock 211,425 1.1% 211,425 1.1%
Class B Common Stock 0 0.0% 0 0.0%
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TOTAL MADISON DEARBORN 2,026,965 10.8% 2,026,965 10.8%
OLYMPUS GROWTH FUND II, L.P.
Series A Capital Securities 11,501 11,501
Series B Preferred Stock 48,483 48,483
Voting Special Common Stock 1,797,385 9.6% 1,797,385 9.6%
Non-Voting Special Common Stock 209,311 1.1% 209,311 1.1%
Class B Common Stock 0 0.0% 0 0.0%
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TOTAL OLYMPUS GROWTH 2,006,696 10.7% 2,006,696 10.7%
OLYMPUS EXECUTIVE FUND, L.P.
Series A Capital Securities 116 116
Series B Preferred Stock 490 490
Voting Special Common Stock 18,155 0.1% 18,155 0.1%
Non-Voting Special Common Stock 2,114 ** 2,114 **
Class B Common Stock 0 0.0% 0 0.0%
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TOTAL OLYMPUS EXECUTIVE 20,269 0.1% 20,269 0.1%
DIRECT HOLDERS*
Class B Common Stock 1,751,242 9.3% 5,058,834 27.0%
OTHER STOCKHOLDERS
Class B Common Stock 1,472,130 7.8% 3,219,047 17.2%
TOTALS:
Series A Capital Securities 27,657 27,657
Series B Preferred Stock 116,593 116,593
Voting Special Common Stock 4,402,868 23.5% 4,402,868 23.5%
Non-Voting Special Common Stock 422,850 2.3% 422,850 2.3%
Class B Common Stock 4,235,616 22.6% 13,933,045 74.3%
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TOTAL COMMON STOCK (ALL CLASSES) 9,061,334 48.3% 18,758,763 100.0%
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</TABLE>
**Less than 0.1%
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EXHIBIT 99.3
COMMERCE SECURITY BANCORP, INC.
VOTING COMMON STOCK UPON CLOSING OF FINANCING
FOR ACQUISITION OF ELDORADO BANCORP
JUNE 6, 1997
<TABLE>
<CAPTION>
VOTING COMMON STOCK
INVESTOR OUTSTANDING AS OF FUNDING
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PERCENT OF TOTAL
SHARES VOTING COMMON
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<S> <C> <C>
DARTMOUTH CAPITAL GROUP, L.P.
7777 Center Avenue
Huntington Beach, CA 92647
Voting Special Common Stock 771,788 4.2%
Class B Common Stock 5,655,164 30.8%
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TOTAL DARTMOUTH CAPITAL GROUP 6,426,952 35.1%
MADISON DEARBORN CAPITAL PARTNERS II LP
Three First National Plaza
Suite 1330
Chicago, IL 60602
Voting Special Common Stock 1,815,540 9.9%
Class B Common Stock 0 0.0%
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TOTAL MADISON DEARBORN 1,815,540 9.9%
OLYMPUS GROWTH FUND II, L.P.
Metro Center
One Station Place
Stamford, CT 06902
Voting Special Common Stock 1,797,385 9.8%
Class B Common Stock 0 0.0%
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TOTAL OLYMPUS GROWTH 1,797,385 9.8%
OLYMPUS EXECUTIVE FUND, L.P.
Metro Center
One Station Place
Stamford, CT 06902
Voting Special Common Stock 18,155 0.1%
Class B Common Stock 0 0.0%
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TOTAL OLYMPUS EXECUTIVE 18,155 0.1%
OTHER PRINCIPAL SHAREHOLDERS
(ALL CLASS B COMMON STOCK)
Ernest J. Boch 2,260,828 12.3%
Subaru New England, Inc.
95 Morse Street
Norwood, MA 02062
Peter H. Paulsen 1,424,184 7.8%
Commerce Pacific, Inc.
355 Harris Avenue, Suite 201
Bellingham, WA 98225
F.M. Kirby 1,027,829 5.6%
c/o S. Dillard Kirby
17 DeHart Street
Morristown, NJ 07963
</TABLE>
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