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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
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.
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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 by the
Company causing SDN Bancorp, Inc., a wholly owned subsidiary of the Company
("SDN"), to merge with and into Eldorado 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 12 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.
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, 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.
The foregoing description of the sale of securities is qualified in its
entirety by reference to the exhibits listed in this report, including without
limitation, the Amended and Restated
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Standby Securities Purchase Agreement, dated June 3, 1997, between the
Company and Dartmouth Capital Group, L.P. ("DCG"), the Company's largest
shareholder, and the Amended and Restated Securities Purchase Agreement,
dated June 5, 1997, among the Company, 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") and filed as Exhibits 10.4 and 10.5, respectively, 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. The foregoing description of the Class B Common
Stock subscription is qualified in its entirety by the forms of agreements filed
as Exhibits 10.3 and 10.4 to this report.
DCG 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. The foregoing description of the loan provided by DCG and
Mr. Paulsen is qualified in its entirety by the form of Subscription Agreement
filed as Exhibit 10.3 to this report.
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
Stock"), to DCG, MDP and 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.
Shares of Special Common Stock will be entitled to a liquidation
preference over shares of Class B Common Stock 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 Stock issued to each of MDP and Olympus, the
Special Common Stock will have one vote per share and will vote as a class
with the Class B Common Stock. The Voting Special Common Stock and the Class
B Common Stock are hereinafter sometimes referred to as the "voting Common
Stock."
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The foregoing description of the Special Common Stock is qualified
in its entirety by reference to the Company's Amended and Restated
Certificate of Incorporation filed as Exhibit 2.1 to this report.
JUNIOR SUBORDINATED DEBENTURE AND SERIES A CAPITAL SECURITIES. CSBI
Capital Trust I (the "Trust"), a special purpose Delware Business trust
formed by the Company, issued a total of 27,657 shares of Subordinated
Capital Income Securities, Series A, having a liquidation value of $1,000
per share (the "Series A Capital 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 Junior
Subordinated Debentures issued by the Company.
For regulatory capital purposes, the Series A Capital 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.
The foregoing description of the Series A Capital Securities is
qualified in its entirety by reference to the Trust's Amended and Restated
Declaration of Trust, the Junior Subordinated Indenture, the form of Junior
Subordinated Debentures, and the Series A Capital Securities Guarantee
Agreement, each of which will be filed as an exhibit to a further amendment
to the Company's Current Report dated June 6, 1997.
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 Stock"), 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 Stock will
be treated as a noncumulative preferred stock and qualify as Tier 1 capital
of the Company. Dividends on the Series B Preferred Stock will not be
deductible by the Company for federal income tax purposes.
The foregoing description of the Series B Preferred Stock is
qualified in its entirety by reference to the Company's Amended and Restated
Certificate of Incorporation filed as Exhibit 2.1 to this report.
COMMON STOCK WARRANTS. In connection with the purchase of the
Series B Preferred Stock, 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
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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.
The foregoing description of the Investor Warrants and the Shattan
Warrants is qualified entirely by reference to the forms of such warrants
filed as Exhibits 4.6 and 4.7, respectively, to this report.
SECURITY OWNERSHIP OF DCG, MDP AND OLYMPUS AND CERTAIN CONTRACTUAL
RELATIONSHIPS. 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.
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.
DCG, MDP, Olympus and certain other parties, including Robert P. Keller,
the President and Chief Executive of the Company and certain other investors
in DCG including substantially all of the Direct Holders, 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, 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. The Shareholder Agreement also provides that
all parties to the Shareholder Agreement who are shareholders of the Company
shall vote for certain designees of MDP and Olympus as members of the Board,
where such a vote would not violate any commitments made to any federal or
state regulator of the Company.
In addition, the Shareholder Agreement grants MDP and Olympus the right to
"put" to DCG certain Eligible Securities. In general, "Eligible Securities"
include securities acquired directly or indirectly in connection with the
financing of the Eldorado Acquisition, including all
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securities issued upon conversion or as a dividend upon such securities, with
the exception of any the Series A Capital Securities or other securities
issued upon the conversion or exchange thereof.
The Shareholder Agreement also grants each of MDP and Olympus the option
to acquire under certain conditions up to 50% of the Series B Preferred
Stock, Special Common Stock and the Investor Warrant that DCG acquired as of
June 6, 1997 as part of the financing for the Acquisition.
The foregoing description of the Shareholder Agreement is qualified in
its entirety by reference to Exhibit 10.7 to this report.
In connection with the Eldorado Acquisition, MDP and Olympus entered into
a registration rights agreement with the Company, and DCG and the Company
amended a pre-existing registration rights agreement. Both registration
rights agreements provide for demand and piggy-back registration rights for
each of the respective party's registrable shares of Common Stock.
The foregoing description of the registration rights agreements is
qualified in its entirety by reference to Exhibits 10.7 and 10.8 to this
report.
INTERCOMPANY REORGANIZATION. In addition to Eldorado Bank, the Company
had three other wholly owned bank subsidiaries as of the date of the Eldorado
Acquisition -- Liberty National Bank in Huntington Beach, California
("Liberty"), San Dieguito National Bank in Encinitas, California ("San
Dieguito"), and Commerce Security Bank in Sacramento, California ("CSB").
Effective June 30, 1997, each of Liberty, San Dieguito and CSB merged with
and into Eldorado Bank.
Also effective June 30, 1997, Eldorado merged with and into the Company,
resulting in Eldorado Bank becoming the Company's sole direct subsidiary. As a
consequence of Eldorado's merger into the Company, the Company became directly
obligated with respect to $537,000 of outstanding indebtedness under mandatorily
convertible subordinated debentures issued by SDN's predecessor in 1986.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
DESCRIPTION PAGE
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(a) Financial statements of business acquired *
(b) Pro forma financial information *
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* To be filed by amendment.
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(c) Exhibits
2.1 Amended and Restated Certificate of Incorporation
of the Company 10
4.2 Amended and Restated Declaration of Trust of
CSBI Capital Trust I *
4.3 Junior Subordinated Indenture *
4.4 Form of Junior Subordinated Debentures *
4.5 Series A Capital Securities Guarantee Agreement *
4.6 Form of Investor Warrant issued as of June 6, 1997
to MDP, Olympus and DCG 46
4.7 Form of warrant issued as of June 6, 1997 to
The Shattan Group, LLC 61
10.1 Form of Subscription Agreement (Bridge Loan/Common Stock),
dated December 20, 1996, between the Company and the
each of DCG and Peter H. Paulsen 74
10.2 Form of Subscription Agreement (Common Stock),
dated December 20, 1996, between the Company and
the various subscribers thereto ("1996 Subscription Agreement")
(filed as Exhibit 10.2 to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1996 and
incorporated by reference herein)
10.3 Form of amendment to 1996 Subscription Agreements
(filed as Exhibit 10.3 to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1996 and
incorporated by reference herein)
10.4 Amended and Restated Standby Securities Purchase
Agreement, dated June 3, 1997, between the Company
and DCG 92
10.5 Amended and Restated Securities Purchase Agreement,
dated June 5, 1997, among the Company, MDP and Olympus 95
10.6 Shareholder Agreement, dated June 6, 1997, among
DCG, MDP, Olympus and the other parties named therein 192
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* To be filed by amendment.
10.7 Registration Rights Agreement, dated June 6, 1997,
among the Company, MDP and Olympus 218
10.8 Amended and Restated Registration Rights Agreement,
dated June 6, 1997, between the Company and DCG 236
99.1 Press release dated June 13, 1997 (1)
99.2 Schedule of Securities Issued to Finance
Eldorado Bancorp Acquisition (1)
99.3 Schedule of Principal Shareholders Upon
Closing of Eldorado Bancorp Acquisition (1)
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(1) Previously filed as an exhibit to the Company's
Current Report on Form 8-K dated June 6, 1997.
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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.
July 11, 1997 By: /s/ Curt A. Christianssen
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Curt A. Christianssen
Senior Vice President
Chief Financial Officer
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EXHIBIT 2.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
COMMERCE SECURITY BANCORP, INC.
The undersigned, Robert P. Keller and Michael K. Krebs, do hereby certify:
A. They are the duly elected and acting President and Secretary,
respectively, of Commerce Security Bancorp, Inc., a Delaware corporation (the
"Corporation").
B. The original Certificate of Incorporation of the Corporation was filed
with the Secretary of State on May 10, 1996, and the name under which the
Corporation was originally incorporated is SC Acquisition Corp.
C. The Certificate of Incorporation, as previously amended, is further
amended and restated to read in full as follows:
FIRST: The name of the Corporation is Commerce Security Bancorp, Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is at Corporation Trust Center, 1209 Orange Street,
Wilmington, County of New Castle, Delaware 19801. The name of its registered
agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "Corporation Law").
FOURTH: The total number of shares of all classes and series of stock that
the Corporation shall have authority to issue is as follows:
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NUMBER
PAR VALUE AUTHORIZED
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Voting Special Common Stock........ $.01 4,825,800
Non-Voting Special Common Stock.... $.01 4,825,800
Class B Common Stock............... $.01 35,000,000
Class C Common Stock............... $.01 15,000,000
Preferred Stock.................... $.01 1,500,000
The Voting Special Common Stock and the Non-Voting Special Common Stock
are collectively referred to as the "Special Common Stock". The Special
Common Stock, the Class B Common Stock and the Class C Common Stock are
collectively referred to as the "Common Stock". The Class B Common Stock and
the Class C Common Stock are collectively referred to as the "Regular Common
Stock". The Voting Special Common Stock and Class B Common Stock are
collectively referred to as the "Voting Common Stock". The following is a
statement of the powers, preferences and rights, and the qualifications,
limitations or restrictions thereof, in respect of each class of capital
stock of the Corporation, and in respect of each series of Preferred Stock of
the Corporation that has been designated as of the date hereof.
A. MATTERS UNIQUE TO SPECIAL COMMON STOCK.
1. GENERAL MATTERS. The voting, dividend and liquidation rights of the
holders of the Special Common Stock are as set forth in this Part A, subject
to and qualified by the rights of the holders of the Preferred Stock of any
series, including as may be designated by the Board of Directors upon any
issuance of the Preferred Stock of any series. The powers, preferences and
rights of, and the qualifications, limitations and restrictions of, the
Non-Voting Special Common Stock shall in all respects be identical to those
of the Voting Special Common Stock except with respect to the restriction on
voting described in Section 2(c) of this Part A. Except as provided in this
Part A, the powers, preferences and rights of, and the qualifications,
limitations and restrictions of, the Special Common Stock shall in all
respects be identical to those of the Class B Common Stock.
2. VOTING.
(a) GENERAL. Except as otherwise provided in Section 2(b) of this
Part A or as otherwise required by applicable law, holders of the Voting Special
Common Stock are entitled, at all meetings of stockholders and with respect to
all written actions in lieu of meetings, to one vote for each share of Voting
Special Common Stock held, voting together with the holders of the Class B
Common Stock (as hereinafter designated) as a single class, all as further set
forth in Section 2 of Part B hereof.
(b) ADDITIONAL VOTING SPECIAL COMMON STOCK VOTING RIGHTS. In
addition to the right to vote with respect to any other matter set forth in the
foregoing Section 2(a), without the
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prior approval of the holders of at least two-thirds of the shares of the
Special Common Stock then outstanding voting as a separate class, the
Corporation may not amend, alter or repeal any provision of the Certificate
of Incorporation of the Corporation or any certificate amendatory thereof or
supplemental thereto so as to affect adversely any power, preference or right
of the Special Common Stock; or create or issue shares of any class or series
of capital stock, or increase the number of shares of any existing, approved
or designated class or series of capital stock that the Corporation is
authorized to issue, in each case other than shares of a class or series of
capital stock (x) junior to the Special Common Stock in liquidation
preference and (y) pari-passu with or junior to the Special Common Stock in
redemption rights.
(c) NON-VOTING COMMON STOCK VOTING RIGHTS. Except as provided in
the foregoing Section 2(b) or as otherwise required by law, the holders of
the outstanding shares of Non-Voting Special Common Stock shall not be
entitled to vote on any matter; PROVIDED, HOWEVER, that without the
affirmative vote of the holders of a majority of the outstanding shares of
the Non-Voting Special Common Stock, no provision of the Certificate of
Incorporation of the Corporation shall be amended, altered or repealed in any
manner that would (i) alter or change the powers, preferences or rights of
the holders of the outstanding shares of Non-Voting Special Common Stock so
as to affect them adversely, or (ii) delete or amend in any manner this
Section 2(c).
3. CONVERSION OF SPECIAL COMMON STOCK.
(a) OPTIONAL CONVERSION INTO REGULAR COMMON STOCK. Any share of
Special Common Stock may be converted, at the election of the holder thereof,
into one share of either class of Regular Common Stock at any time prior to
distribution of the Special Common Liquidation Preference; PROVIDED, HOWEVER,
that no holder may convert shares of Non-Voting Special Common Stock into
Class B Common Stock if and to the extent that such holder would thereby
beneficially own more than 9.9% of the Voting Common Stock unless and until
such holder has delivered to the Secretary of the Corporation an opinion or
memorandum of counsel or other reasonably satisfactory evidence that such
holder may beneficially own more than 9.9% of the Voting Common Stock and may
acquire such shares in accordance with the Bank Holding Company Act of 1956,
as amended. To convert any shares of Special Common Stock into shares of
Regular Common Stock, the holder thereof shall surrender the certificate or
certificates for such shares at the office of the transfer agent for the
Special Common Stock (or at the principal office of the Corporation if the
Corporation serves as its own transfer agent), together with written notice
that such holder elects to convert all or any number of the shares of the
Voting Special Common Stock represented by such certificate or certificates.
Such notice shall specify the class of Regular Common Stock into which the
Special Common Stock is to be converted and shall state such holder's name or
the names of the nominees in which such holder wishes the certificate or
certificates for shares of Regular Common Stock to be issued. If required by
the Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by a written instrument or instruments of transfer in form
satisfactory to the Corporation, duly executed by the registered holder or
his, her or its attorney duly authorized in writing. Such conversion shall
be effective
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on the date (the "Surrender Date") of receipt of such certificates and notice
by the transfer agent (or by the Corporation if the Corporation serves as its
own transfer agent). The Corporation shall, as soon as practicable after the
Surrender Date, issue and deliver at such office to such holder of Special
Common Stock, or to his, her or its nominees, a certificate or certificates
for the number of shares of Regular Common Stock to which such holder shall
be entitled, together with cash in lieu of any fraction of a share. The
Corporation shall, at all times when shares of Special Common Stock shall be
outstanding, reserve and keep available out of its authorized but unissued
stock, for the purpose of effecting the conversion of the Special Common
Stock, such number of its duly authorized shares of each class of Regular
Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding Special Common Stock.
(b) MANDATORY CONVERSION INTO REGULAR COMMON STOCK. Each share of
Special Common Stock shall automatically be converted into one share of Class
B Common Stock, or if and to the extent the extent the holder would not be
permitted to convert such share into Class B Common Stock pursuant to Section
3(a), into Class C Common Stock, in each case without action by the holder,
the Corporation or any other person, immediately upon the consummation of a
Qualified Offering (as hereinafter defined). Upon any conversion of shares
of Special Common Stock into Regular Common Stock pursuant to the preceding
sentence, each certificate previously representing shares of Special Common
Stock shall thereafter represent the Class B Common Stock and/or Class C
Common Stock into which the shares of Special Common Stock represented by
such certificate have been converted. The Corporation may, but is not
required to, adopt procedures following such conversion to permit the holders
of certificates previously representing Special Common Stock to exchange such
certificates for Class B Common Stock certificates and/or Class C Common
Stock certificates, but neither a failure by the Corporation to adopt such
procedures nor a failure of a holder to so exchange such holder's
certificate(s) previously representing Special Common Stock shall derogate
from the effect of the immediately preceding sentence. As used herein, a
"Qualified Offering" means the closing of a firm-commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), covering the offer
and sale of Class B Common Stock to the public at an offering price per share
of at least 200% of the Initial Purchase Price (as hereinafter defined), in
which offering either (x) the aggregate offering price of the shares sold by
the Corporation is not less than $25 million, or (y) the aggregate offering
price of all shares sold in the offering, including those sold by the
Corporation and those sold by other stockholders, is not less than $30
million of which the aggregate offering price of the shares sold by the
Corporation is not less than $20 million. For purposes of this definition,
the "Initial Purchase Price" shall mean $4.81 per share, as adjusted for any
stock split, stock dividend or other similar distribution on the Class B
Common Stock.
(c) CONVERSION OF NON-VOTING SPECIAL COMMON STOCK INTO VOTING SPECIAL
COMMON STOCK. Any share of Non-Voting Special Common Stock may be converted, at
the election of the holder thereof, into one share of Voting Special Common
Stock at any time; PROVIDED, HOWEVER, that no holder of Non-Voting Special
Common Stock may so convert his, her
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or its shares of Non-Voting Special Common Stock if and to the extent that
such holder would thereby beneficially own more than 9.9% of the Voting
Common Stock unless and until such holder has delivered to the Secretary of
the Corporation an opinion or memorandum of counsel or other reasonably
satisfactory evidence that such holder may beneficially own more than 9.9% of
the Voting Common Stock and may acquire such shares in accordance with the
Bank Holding Company Act of 1956, as amended. To convert any shares of
Non-Voting Special Common Stock into shares of Voting Special Common Stock,
the holder thereof shall surrender the certificate or certificates for such
shares at the office of the transfer agent for the Special Common Stock (or
at the principal office of the Corporation if the Corporation serves as its
own transfer agent), together with written notice that such holder elects to
convert all or any number of the shares of the Non-Voting Special Common
Stock represented by such certificate or certificates. Such notice shall
state such holder's name or the names of the nominees in which such holder
wishes the certificate or certificates for shares of Voting Special Common
Stock to be issued. If required by the Corporation, certificates surrendered
for conversion shall be endorsed or accompanied by a written instrument or
instruments of transfer in form satisfactory to the Corporation, duly
executed by the registered holder or his, her or its attorney duly authorized
in writing. Such conversion shall be effective on the date (also the
"Surrender Date") of receipt of such certificates and notice by the transfer
agent (or by the Corporation if the Corporation serves as its own transfer
agent). The Corporation shall, as soon as practicable after the Surrender
Date, issue and deliver at such office to such holder of Non-Voting Special
Common Stock, or to his, her or its nominees, a certificate or certificates
for the number of shares of Voting Special Common Stock to which such holder
shall be entitled, together with cash in lieu of any fraction of a share.
The Corporation shall, at all times when shares of Non-Voting Special Common
Stock shall be outstanding, reserve and keep available out of its authorized
but unissued stock, for the purpose of effecting the conversion of the
Non-Voting Special Common Stock, such number of its duly authorized shares of
Voting Special Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding Non-Voting Special Common Stock.
(d) CONVERSION OF VOTING SPECIAL COMMON STOCK INTO NON-VOTING
SPECIAL COMMON STOCK. Any share of Voting Special Common Stock may be
converted, at the election of the holder thereof, into one share of
Non-Voting Special Common Stock at any time. Any such conversion shall be
conducted pursuant to the same procedures as are specified in Section 3(d)
for the conversion of Non-Voting Special Common Stock into Non-Voting Special
Common Stock; PROVIDED, HOWEVER, those matters relating to the permissible
percentage of Voting Common Stock that a holder may beneficially own shall be
inapplicable to a conversion of shares of Voting Special Common Stock into
shares of Non-Voting Special Common Stock. The Corporation shall, at all
times when shares of Voting Special Common Stock shall be outstanding,
reserve and keep available out of its authorized but unissued stock, for the
purpose of effecting the conversion of the Voting Special Common Stock, such
number of its duly authorized shares of Non-Voting Special Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding Voting Special Common Stock.
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(e) EFFECT OF CONVERSION. All shares of Special Common Stock which
shall have been surrendered for conversion into Regular Common Stock or which
are automatically converted into Regular Common Stock upon consummation of a
Qualified Offering, in either case as herein provided, shall no longer be
deemed to be outstanding and shall automatically be cancelled and cease to
exist, and all rights with respect to such shares (including without
limitation those set forth in Section 2(b) and/or Section 2(c) above) shall
immediately cease and terminate on the Surrender Date or the date of
consummation of the Qualified Offering, as applicable, except only the right
of the holders thereof as holders of the shares of the class of Common Stock
into which such shares of Special Common Stock have been converted and, to
the extent dividends are permitted hereunder with respect to such Special
Common Stock, payment of any declared but unpaid dividends thereon; PROVIDED,
HOWEVER, that the foregoing shall not derogate from the rights of the holders
of such converted shares to exercise their rights as holders of the class of
Common Stock into which the applicable shares of Special Common Stock have
been converted at all times from and after the Surrender Date or the date of
consummation of the Qualified Offering, as applicable, whether or not there
have been issued certificates evidencing the shares of Common Stock into
which such Special Common Stock has been converted. Any shares of Special
Common Stock so converted shall be retired and cancelled and shall not be
reissued, and the Corporation shall from time to time take such appropriate
action as may be necessary to reduce the number of shares of authorized
Voting Special Common Stock or Non-Voting Special Common Stock (as
applicable) accordingly. At such time as there remain no outstanding shares
of Special Common Stock, the Corporation shall amend its Certificate of
Incorporation to remove therefrom those provisions that relate exclusively to
the Special Common Stock, and at such time as there remain no outstanding
shares of Non-Voting Special Common Stock, the Corporation shall amend its
Certificate of Incorporation to remove therefrom those provisions that relate
exclusively to the Non-Voting Special Common Stock.
B. COMMON STOCK GENERALLY, INCLUDING REGULAR COMMON STOCK.
1. GENERAL. The voting, dividend and liquidation rights of the holders
of the Regular Common Stock are subject to and qualified by the rights of the
holders of the Special Common Stock as set forth herein and of the Preferred
Stock of any series, including as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series. The powers,
preferences and rights of, and the qualifications, limitations and
restrictions of, the Class C Common Stock shall in all respects be identical
to those of the Class B Common Stock except with respect to voting rights, as
provided in Section 2(b) of this Part B.
2. VOTING.
(a) GENERAL. Except as otherwise required by applicable law, but
subject in all events to the class voting rights of holders of shares of
Special Common Stock set forth in Part A hereof, holders of the Voting Common
Stock are entitled, at all meetings of stockholders and
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with respect to all written actions in lieu of meetings, to one vote for each
share of Voting Common Stock held, and the holders of Voting Common Stock
shall vote together as a single class. At any meeting held for the purpose
of voting on any matter on which, pursuant to the Corporation Law, the
holders of the Voting Common Stock (or any class of Common Stock voting
separately) shall have a right to vote, the presence in person or by proxy of
the holders of a majority of the shares of Voting Common Stock (or any class
of Common Stock voting separately) then entitled to vote shall constitute a
quorum of the Common Stock.
(b) CLASS C COMMON STOCK VOTING RIGHTS. Except as otherwise
required by law, the holders of the outstanding shares of Class C Common
Stock shall not be entitled to vote on any matter; PROVIDED, HOWEVER, that
without the affirmative vote of the holders of a majority of the outstanding
shares of the Class C Common Stock, no provision of the Certificate of
Incorporation of the Corporation shall be amended, altered or repealed in any
manner that would (i) alter or change the powers, preferences or rights of
the holders of the outstanding shares of Class C Common Stock so as to affect
them adversely, or (ii) delete or amend in any manner this Section 2(c).
3. DIVIDENDS. No dividends may be declared or paid on the Common Stock
(whether Special Common Stock or Regular Common Stock), for so long as any
shares of Series B Preferred Stock or Series E Preferred Stock are
outstanding, unless the requirements of Section 4(c) of Part D hereof and
Section 4(c) of Part E hereof are satisfied. At such time as (i) the
requirements of the foregoing Sections have been satisfied or (ii) the
foregoing Sections do not apply, dividends may be declared on the
then-outstanding Common Stock from funds lawfully available therefor as and
when determined by the Board of Directors, and subject to any preferential
dividend rights of any then-outstanding Preferred Stock. No dividends shall
be declared or paid on any class of Common Stock unless they shall be
declared or paid, as applicable, in equal per-share amounts on all other
classes of Common Stock.
4. STOCK SPLITS AND STOCK DIVIDENDS. The Corporation shall not in any
manner subdivide (by stock split, stock dividend or otherwise) or combine (by
reverse stock split, stock dividend or otherwise) any class of the
outstanding Common Stock (whether Special Common Stock or Regular Common
Stock) unless the outstanding shares of each of the other classes of Common
Stock shall be proportionately subdivided or combined. All such subdivisions
and combinations shall be payable only in Voting Special Common Stock to the
holders of Voting Special Common Stock, in Non-Voting Special Common Stock to
the holders of Non-Voting Special Common Stock, in Class B Common Stock to
the holders of Class B Common Stock, and in Class C Common Stock to the
holders of Class C Common Stock. However, if the Corporation creates an
additional class of Common Stock, it may not issue any such stock, or any
options, warrants or other rights to acquire or that convert into such stock,
to holders of any class of Common Stock unless it also issues an equal amount
per share to holders of all classes of Common Stock.
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5. CONVERSION OF CLASS C COMMON STOCK.
(a) CONVERSION. Any share of Class C Common Stock may be
converted, at the election of the holder thereof, into one share of Class B
Common Stock at any time; PROVIDED, HOWEVER, that no holder of Class C Common
Stock may so convert his, her or its shares of Class C Common Stock if and to
the extent that such holder would thereby beneficially own more than 9.9% of
the Voting Common Stock unless and until such holder has delivered to the
Secretary of the Corporation an opinion or memorandum of counsel or other
reasonably satisfactory evidence that such holder may beneficially own more
than 9.9% of the Voting Common Stock and may acquire such shares in
accordance with the Bank Holding Company Act of 1956, as amended. To convert
any shares of Class C Common Stock into shares of Class B Common Stock, the
holder thereof shall surrender the certificate or certificates for such
shares at the office of the transfer agent for the Class C Common Stock (or
at the principal office of the Corporation if the Corporation serves as its
own transfer agent), together with written notice that such holder elects to
convert all or any number of the shares of the Class C Common Stock
represented by such certificate or certificates. Such notice shall state
such holder's name or the names of the nominees in which such holder wishes
the certificate or certificates for shares of Class B Common Stock to be
issued. If required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by a written instrument or
instruments of transfer in form satisfactory to the Corporation, duly
executed by the registered holder or his, her or its attorney duly authorized
in writing. Such conversion shall be effective on the date (also the
"Surrender Date") of receipt of such certificates and notice by the transfer
agent (or by the Corporation if the Corporation serves as its own transfer
agent). The Corporation shall, as soon as practicable after the Surrender
Date, issue and deliver at such office to such holder of Class C Common
Stock, or to his, her or its nominees, a certificate or certificates for the
number of shares of Class B Common Stock to which such holder shall be
entitled, together with cash in lieu of any fraction of a share. The
Corporation shall, at all times when shares of Class C Common Stock (or
securities convertible into Class B Common Stock) shall be outstanding,
reserve and keep available out of its authorized but unissued stock, for the
purpose of effecting the conversion of the Class C Common Stock, such number
of its duly authorized shares of Class B Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding Class C Common
Stock and securities convertible into Class B Common Stock.
(b) EFFECT OF CONVERSION OF CLASS C COMMON STOCK. All shares of
Class C Common Stock which shall have been surrendered for conversion as
herein provided shall no longer be deemed to be outstanding and shall
automatically be cancelled and cease to exist, and all rights with respect to
such shares shall immediately cease and terminate on the Surrender Date,
except only the right of the holders thereof as holders of the shares of
Class B Common Stock into which such shares of Class C Common Stock have been
converted and, to the extent dividends are permitted hereunder with respect
to such Class C Common Stock, payment of any declared but unpaid dividends
thereon; PROVIDED, HOWEVER, that the foregoing shall not derogate from the
rights of the holders of such converted shares to exercise their rights as
holders of the Class B
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Common Stock into which the applicable shares of Class C Common Stock have
been converted at all times from and after the Surrender Date, whether or not
certificates evidencing such shares of Class B Common Stock have been issued.
Any shares of Class C Common Stock so converted shall be retired and
cancelled and shall not be reissued, and the Corporation shall from time to
time take such appropriate action as may be necessary to reduce the number of
shares of authorized Class C Common Stock accordingly. At such time as there
remain no outstanding shares of Class C Common Stock, the Corporation shall
amend its Certificate of Incorporation to remove therefrom those provisions
that relate exclusively to Class C Common Stock.
6. LIQUIDATION; CERTAIN BUSINESS COMBINATIONS. Upon the dissolution or
liquidation of the Corporation, whether voluntary or involuntary, holders of
the Common Stock shall be entitled to receive all assets of the Corporation
available for distribution to its stockholders, subject to any preferential
rights of any then-outstanding Preferred Stock, in accordance with the
following priorities:
(a) FIRST: the holders of the Special Common Stock (including both
Voting Special Common Stock and Non-Voting Special Common Stock) shall be
entitled to receive all assets available for distribution, until such time as
such holders have received, with respect to each share so held, an amount
equal to $4.81 in cash or equivalent value (determined as set forth below),
adjusted upward or downward to reflect any stock split or reverse stock
split, stock dividend or other distribution of stock, reclassification,
recapitalization or similar event effected with respect to the Special Common
Stock or Regular Common Stock prior to the date of such dissolution or
liquidation (such right being called the "Special Common Liquidation
Preference" and such resulting amount being called the "Special Common
Liquidation Preference Amount");
(b) SECOND: the holders of the Regular Common Stock shall be
entitled to receive all remaining assets available for distribution until
such time as such holders shall have received, with respect to each share so
held, an amount equal to the Special Common Liquidation Preference Amount; and
(c) THIRD: all holders of Common Stock shall be entitled to
receive all remaining assets available for distribution pro rata in
accordance with the number of shares of Common Stock held, without regard to
distinctions between the Special Common Stock and the Regular Common Stock.
In the event that the holders of Common Stock are to receive any cash,
securities or other property on account of their shares of Common Stock as a
consequence of any reorganization, merger, or consolidation of the
Corporation, or sale or other disposition of all or substantially all of the
assets of the Corporation (each, a "Business Combination") which Business
Combination also constitutes a Change in Control (as hereinafter defined) of
the Corporation, the cash, securities or other property so received shall be
allocated among the holders of the Common Stock in every respect as though
there had occurred a dissolution and liquidation of the Corporation, as
provided in the
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foregoing clauses (a), (b) and (c). As used herein, a "Change in Control"
shall be deemed to have occurred in the event that the Corporation
consummates any Business Combination UNLESS immediately following the
consummation of such Business Combination all of the following conditions are
satisfied:
(V) the holders of Common Stock receive only common stock of
the entity (the "Resulting Entity") resulting from such Business Combination
(which term shall include, without limitation, an entity which as a result of
such transaction owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more subsidiaries)
(which common stock of the Resulting Entity shall, in the case of the Special
Common Stock, and except with the prior approval of the holders of two-thirds
of the Special Common Stock then outstanding, have all of the powers,
preferences and rights of the Special Common Stock);
(W) no person (or group acting in concert within the meaning
of Rule 13d-3 promulgated under the Securities Exchange Act of 1934 (a
"Group")) beneficially owns (within the meaning of Rule 13d-3), directly or
indirectly, twenty percent (20%) or more of, respectively, the
then-outstanding shares of common stock of the Resulting Entity or the
combined voting power of the voting securities entitled to vote generally in
the election of directors ("Outstanding Voting Securities") of the Resulting
Entity, other than any person or group that beneficially owned, directly or
indirectly, twenty percent (20%) or more of the Common Stock immediately
before such Business Combination;
(X) no person or Group beneficially owns, directly or
indirectly, forty percent (40%) or more of, respectively, the
then-outstanding shares of the Resulting Entity or the combined voting power
of the then-Outstanding Voting Securities of the Resulting Entity, excluding
only a person (or Group comprised of persons) that beneficially owned,
directly or indirectly, one percent (1%) or more of the Common Stock
immediately following the initial issuance of the Special Common Stock;
(Y) not more than one-half of the members of the board of
directors of the Resulting Entity are affiliates or associates (each as
defined under Rule 12b-2 promulgated under the Securities Exchange Act of
1934 (respectively, "Affiliates" and "Associates")) of any party to the
Business Combination other than the Corporation; and not less than one-half
of the members of the board of directors of the Resulting Entity were members
of the Board of Directors of the Corporation at the time the Corporation's
Board of Directors authorized the Corporation to enter into the definitive
agreement providing for such Business Combination; and
(Z) Robert P. Keller has not ceased to be the Chief Executive
Officer of the Resulting Entity in connection with such Business Combination.
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In the event the assets to be distributed to the holders of the Common Stock
pursuant to this Section 6 consist, in whole or in part, in assets other than
cash ("Non-Cash Assets"), the distributions to all holders of Common Stock
(whether of Special Common Stock or Regular Common Stock) shall be of the
same proportion of cash to Non-Cash Assets (or, in the event that holders
shall be entitled to elect whether to receive cash or Non-Cash Assets, or to
elect among various categories of Non-Cash Assets, the holders of all Common
Stock (whether Special Common Stock or Regular Common Stock) shall have
rights of election proportionate to the amount per share that each is
entitled to receive pursuant to this Section 6. In the event of any
distribution of Non-Cash Assets, the value of such Non-Cash Assets shall be
determined by the Board of Directors, acting in good faith.
C. PREFERRED STOCK.
Preferred Stock may be issued from time to time in one or more series,
each of such series to have such powers, preferences and rights as stated or
expressed herein and in the resolution or resolutions providing for the issue
of such series adopted by the Board of Directors of the Corporation as
hereinafter provided. Any shares of Preferred Stock which may be redeemed,
purchased, acquired or converted into shares of Common Stock by the
Corporation may not be reissued except as otherwise provided herein or by
law. Except as otherwise required by law, different series of Preferred
Stock shall not be construed to constitute different classes of shares for
the purposes of voting by classes unless expressly provided.
Authority is hereby granted to the Board of Directors from time to time
to issue the Preferred Stock in one or more series, and in connection with
the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers,
full or limited, or no voting powers, and such designations, preferences and
relative participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, including without limitation thereof,
dividend rights, conversion rights, redemption privileges and liquidation
preferences, as shall be stated and expressed in such resolutions, all to the
full extent now or hereafter permitted by the Corporation Law. Without
limiting the generality of the foregoing, except as otherwise provided herein
or in the resolutions providing for the issuance of any other series of
Preferred Stock, the resolutions providing for issuance of any series of
Preferred Stock may provide that such series shall be superior or rank
equally or be junior to the Preferred Stock of any other series to the extent
permitted by law. Except as otherwise provided herein or in the resolutions
providing for the issuance of any series of Preferred Stock, no vote of the
holders of the Preferred Stock or Common Stock shall be a prerequisite to the
issuance of any shares of any series of the Preferred Stock authorized by and
complying with the conditions of the Certificate of Incorporation.
D. SERIES B PREFERRED STOCK.
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1. DESIGNATION, AMOUNT AND RESTRICTIONS ON ISSUANCE. One Hundred
Sixteen Thousand Six Hundred (116,600) shares of Preferred Stock, par value
$.01, are hereby constituted as a series thereof having the designation
"Series B Preferred Stock". No shares of Series B Preferred Stock may be
issued except pursuant to (i) that certain Securities Purchase Agreement,
dated as of February 13, 1997 (as amended, the "Securities Purchase
Agreement"), by and among the Corporation, Madison Dearborn Capital Partners
II, L.P., Olympus Growth Fund II, L.P. and certain other persons, or (ii)
that certain Standby Purchase Agreement between the Corporation and Dartmouth
Capital Group, L.P. So long as any shares of Series B Preferred Stock shall
be outstanding, the number of authorized shares of Series B Preferred Stock
may not be increased or decreased without the affirmative vote of the holders
of two-thirds of the shares of Series B Preferred Stock then outstanding.
2. RANK. The Series B Preferred Stock shall, with respect to dividend
rights and rights on liquidation, winding up and dissolution, rank senior to
the Common Stock and to all other classes and series of stock of the
Corporation now or hereafter authorized, issued or outstanding (collectively
with the Common Stock, the "Junior Stock") other than the Series E Preferred
Stock, which shall rank pari passu to the Series B Preferred Stock with
respect to dividend rights and rights on liquidation, winding up and
dissolution as and when shares of Series E Preferred Stock may be issued.
All shares of the Series B Preferred Stock shall be of equal rank with each
other with respect to the right to receive dividends pursuant to Section 4
and other distributions of the Corporation, rights on liquidation, winding up
and dissolution pursuant to Section 5, and rights relating to redemption
pursuant to Section 6.
3. VOTING.
(a) GENERAL. Except as specifically required by law or as
expressly set forth herein, the Series B Preferred Stock shall not have any
voting powers whatsoever, and the holders thereof shall not be entitled to
notice of, or participation in, the meetings of the stockholders of the
Corporation.
(b) VOTING RIGHTS ON EXTRAORDINARY MATTERS. Without the prior
approval of the holders of at least two-thirds of the shares of the Series B
Preferred Stock then outstanding, given in person or by proxy either by
written consent or at a meeting at which the holders of such shares shall be
entitled to vote separately as a class, the Corporation may not (i) amend,
alter or repeal any provision of the Certificate of Incorporation of the
Corporation or any certificate amendatory thereof or supplemental thereto so
as to affect adversely any power, preference or right of the Series B
Preferred Stock, (ii) create or designate any class or series of capital
stock, or increase the number of shares of any existing, approved or
designated class or series of capital stock that the Corporation is
authorized to issue, other than a class or series of capital stock junior to
the Series B Preferred Stock in liquidation preference, voting rights, rights
to dividends and redemptions and otherwise, (iii) issue, directly or
indirectly, to any trust, partnership or other entity affiliated with the
Corporation that is a financing entity of the Corporation, any debt
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securities in connection with the issuance by such financing entity of
securities that are similar to the Series A Preferred Securities issued by
CSBI Capital Trust I, or (iv) create or issue any Indebtedness other than
Indebtedness incurred by the Corporation to its Subsidiaries in the ordinary
course of business and not in excess of 1.0% of the Corporation's
consolidated assets as of the end of its most recent fiscal quarter. As used
herein, "Indebtedness" means, whether recourse as to all or a portion of the
assets of the Corporation and whether or not contingent: (t) every
obligation of the Corporation for money borrowed; (u) every obligation of the
Corporation evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses; (v) every reimbursement
obligation of the Corporation with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of the Corporation;
(w) every obligation of the Corporation issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable
or accrued liabilities arising in the ordinary course of business); (x) every
capital lease obligation of the Corporation; (y) every obligation of the type
referred to in clauses (t) through (x) of another person and all dividends of
another person the payment of which, in either case, the Corporation has
guaranteed or is responsible or liable, directly or indirectly, as obligor or
otherwise; and (z) all indebtedness of the Corporation for claims (as defined
in Section 101(4) of the United States Bankruptcy Code of 1978, as amended)
in respect of derivative products such as interest and foreign exchange rate
contracts, commodity contracts and similar arrangements.
(c) MERGERS, CONSOLIDATIONS, ETC. Without the affirmative vote of
the holders of two-thirds of the then-outstanding shares of Series B
Preferred Stock, the Corporation shall not enter into any consolidation,
merger, combination or other transaction the consummation of which would (x)
cause any then-current holder of the Series B Preferred Stock to cease to be
the beneficial owner of any of such holder's shares of Series B Preferred
Stock except in redemption of their shares pursuant to Section 6 of this Part
D or (y) adversely affect the rights of the holders of the outstanding shares
of Series B Preferred Stock as set forth herein.
4. DIVIDENDS.
(a) DIVIDENDS PAYABLE - GENERALLY. When and as declared by the
Corporation's Board of Directors and to the extent permitted under the
Corporation Law, the Corporation shall pay preferential dividends in cash to
the holders of the Series B Preferred Stock as provided in this Section 4.
Dividends on each share of Series B Preferred Stock shall be payable on the
last business day of March, June, September and December of each year (each,
a "Dividend Payment Date") commencing on June 30, 1997, and shall accrue in
arrears at the rate of 11% per annum on the Series B Liquidation Value (as
defined in Section 5 hereof) of each such share. Dividends on each
outstanding share of Series B Preferred Stock shall begin to accrue from the
date of original issuance thereof, or, if later, from the immediately
preceding Dividend Payment Date, and shall continue to accrue on a daily
basis whether or not the Corporation shall have earnings or surplus at the
time until the date immediately preceding the applicable Dividend Payment
Date or until the earlier redemption of such share by the Corporation or the
earlier payment of the
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Series B Liquidation Value thereof and of all declared and unpaid dividends
thereon to the holder of such share pursuant to Section 5. No dividends
shall be paid in cash on any share of Series B Preferred Stock unless cash
dividends are paid on all shares of Series B Preferred Stock that are
outstanding at the applicable record date. If the Board of Directors shall
not declare a dividend as set forth in this Section 4(a) payable to the
holders of the Series B Preferred Stock with respect to any Dividend Payment
Date, or any portion of such a dividend, then the right of the holders of the
Series B Preferred Stock to receive a dividend (or such undeclared portion of
a dividend) with respect to such Dividend Payment Date and the quarterly
period preceding such date pursuant to this Section 4(a) shall forever cease,
and the Corporation shall have no obligation under this Section 4(a) (except
as set forth in Section 4(c)) to pay the dividend otherwise accrued for such
period or to pay any interest thereon, whether or not dividends on the Series
B Preferred Stock or on any other capital stock of the Corporation (to the
extent permitted hereunder) are declared with respect to any future Divided
Payment Date or for any other future dividend period.
(b) COMMON STOCK DELIVERABLE UPON NON-PAYMENT OF DIVIDENDS. (i)
In the event that the Corporation shall not declare and pay on any Dividend
Payment Date, in full and in cash, the dividend provided in the foregoing
Section 4(a) to the holders of the Series B Preferred Stock outstanding at
the applicable record date, the Corporation shall issue to each holder of
Series B Preferred Stock shares of Regular Common Stock ("PIE Shares")
consisting of Thirty-Two (32) shares of Regular Common Stock for each $100.00
of dividends otherwise payable pursuant to Section 4(a) that the Corporation
has not paid in cash with respect to such Dividend Payment Date. If the
"Market Value" (as defined below) of the Class B Common Stock as of the
Dividend Payment Date with respect to which the PIE Shares are issued is
greater than or less than $4.00 per share, the number of PIE Shares shall be
adjusted by dividing Thirty-Two (32) by a fraction, the numerator of which is
the Market Value of the Class B Common Stock as of the relevant Dividend
Payment Date and the denominator of which is $4.00. Notwithstanding anything
to the contrary contained herein, the Corporation shall not issue more than
an aggregate of Eight Hundred Twenty Thousand Eight Hundred (820,800) PIE
Shares (the "Maximum Series B PIE Shares") on or with respect to any and all
Dividend Payment Dates on which PIE Shares would otherwise be due pursuant to
this Section 4(b), and if and after Corporation has issued such number of PIE
Shares the Corporation shall not thereafter issue PIE Shares regardless of
whether, on any subsequent Dividend Payment Date, the Corporation fails to
pay a dividend on the Series B Preferred Stock pursuant to Section 4(a) in
full in cash.
(ii) The PIE Shares issuable hereunder shall be either shares
of Class B Common Stock or shares of Class C Common Stock, or any combination
thereof, at the sole election of the holder of the Series B Preferred Stock
as to which such PIE Shares are to be issued; PROVIDED, HOWEVER, that the
holder may not elect to receive shares of Class B Common Stock if and to the
extent that the holder's receipt of the same would result in the holder
owning more than 9.9% of the Corporation's pro forma Voting Common Stock
outstanding following such exercise; and PROVIDED, FURTHER, that at any time
that the Holder owns 9.9% or more of the outstanding Voting Common Stock, any
PIE Shares issued hereunder to such holder shall be
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solely Class C Common Stock. Notwithstanding the immediately preceding
sentence, a holder may elect to receive shares of Class B Common Stock that
would result in the holder owning more than 9.9% of the outstanding Voting
Common Stock, provided that at the time of such issuance such holder has
delivered to the Secretary of the Corporation an opinion or memorandum of
counsel, in form and substance reasonably satisfactory to the Corporation, or
other reasonably satisfactory evidence that such person may beneficially own
more than 9.9% of the outstanding Voting Common Stock and will acquire such
shares in accordance with the Bank Holding Company Act of 1956.
(iii) As used herein, "Market Value" shall mean (A) if the Class
B Common Stock is publicly traded, an amount per share of Class B Common
Stock equal to the average closing price for the thirty (30) trading days
immediately preceding the date of exercise as reported (x) on the principal
national securities exchange on which the Class B Common Stock is traded or
(y) if the Class B Common Stock is not traded on a national exchange, on The
Nasdaq National Market System ("Nasdaq"); or (B) if the Class B Common Stock
is not so quoted on Nasdaq or listed on a national securities exchange, an
amount mutually agreed upon by the Corporation and the holders of a majority
of the Series B Preferred Stock then outstanding, or, if the Corporation and
such holders are unable to agree, by a nationally recognized investment
banking firm selected by such holders and consented to by the Corporation,
such consent not to be unreasonably withheld. Any fees or expenses incurred
in connection with the retention of an investment banking firm pursuant to
this subsection shall be paid in full by the Corporation but there shall be
credited against the amount of the unpaid dividends constituting the basis
for the calculation of the number of PIE Shares then due, as a deemed
payment, an amount equal to one-half of the fees and expenses so paid by the
Corporation.
(c) DIVIDENDS PAYABLE - AFTER ISSUANCE OF MAXIMUM PIE SHARES. If
the Corporation shall be prohibited from issuing PIE Shares in lieu of cash
dividends because the Corporation has previously issued an aggregate number
of PIE Shares equal to the Maximum Series B PIE Shares, the Corporation
shall, to the extent permitted under the Corporation Law, pay preferential
dividends in cash to the holders of the Series B Preferred Stock at the rate,
on the dates and in the manner provided in Section 4(a) of this Part D,
excepting only in the event that (and to the extent that) (i) the Corporation
is not then at least "adequately capitalized" (as that term is then defined
by the Corporation's primary federal regulator) or the payment of such
dividend in cash would cause the Corporation to cease to be adequately
capitalized, (ii) the Corporation is prohibited by applicable law or
regulatory order from paying such dividend or the payment of such dividend
would require the affirmative approval of the any of the Corporation's
regulators and after undertaking all commercially reasonable efforts, the
Corporation has been unable to obtain such approval, (iii) the Corporation's
payment of such dividend would require the payment to the Corporation
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of a dividend by a subsidiary bank of the Corporation which subsidiary bank
is not then adequately capitalized (as defined by such bank's primary federal
regulator) or which dividend by the subsidiary bank would cause such bank to
cease to be adequately capitalized, or (iv) the Corporation's payment of such
dividend would require the payment to the Corporation of a dividend by a
subsidiary bank of the Corporation and such subsidiary is prohibited by
applicable law or regulatory order from paying such dividend or the payment
of such dividend would require the affirmative approval of any of the bank
subsidiary's regulators and after undertaking all commercially reasonable
efforts, the Corporation and the bank subsidiary have been unable to obtain
such approval.
(d) RESTRICTION ON PAYMENTS ON JUNIOR STOCK. So long as any shares
of the Series B Preferred Stock shall be outstanding, unless the holders of
the Series B Preferred Stock shall have authorized a payment of a dividend,
distribution or other payment on or with respect to any Junior Stock or a
repurchase or redemption of shares of Junior Stock, in either case by the
affirmative vote of the holders of two-thirds of the Series B Preferred Stock
then outstanding, no such dividend, distribution or other payment on or with
respect to any Junior Stock may be declared or paid or set apart for payment
(other than additional shares of Common Stock in the event of a stock split)
and no repurchase or redemption of shares of Junior Stock may be made (other
than a Permitted Redemption, as defined below), unless the Corporation meets
the following financial criteria, based on the Corporation's audited
financial statements for the fiscal year immediately preceding the year in
which such dividend is proposed to be paid (the "Most Recent Fiscal Year"):
(A) the Corporation had average assets during the Most
Recent Fiscal Year of not less than One Billion Five Hundred Million
Dollars ($1,500,000,000); and
(B) after deducting the amount of the proposed dividend
from the Corporation's after-tax net income for the Most Recent Fiscal Year
and excluding the after-tax amount of any items of extraordinary gain from
such income, the Corporation would have had an after-tax return on average
assets during the Most Recent Fiscal Year of not less than One Percent (1.00%).
As used herein, a "Permitted Redemption" shall mean a redemption or
repurchase of Common Stock from any person that (x) owns less than 1% of the
then-outstanding shares of Class B Common Stock and (y) is not then, and has
not been within the 12 months preceding such date, an officer or director of
the Corporation; provided that a redemption or repurchase of Common Stock
shall not constitute a Permitted Redemption if the cumulative amount of all
Permitted Redemptions (through and including the proposed redemption) exceeds
Two Million Five Hundred Thousand Dollars ($2,500,000) in aggregate payments
to holders of Class B Common Stock.
5. LIQUIDATION. In the event of any complete or partial liquidation,
dissolution or winding up of the affairs of the Corporation, whether
voluntary or involuntary, before any payment or distribution of the assets of
the Corporation shall be made to or set apart for the holders of any Junior
Stock, the holders of each share of Series B Preferred Stock shall be
entitled to receive, pari passu with the holders of each share of Series E
Preferred Stock, out of the assets
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of the Corporation (whether such assets are capital or surplus and whether or
not any dividends as such are declared), the sum of $100 per share, as
adjusted for any stock split, stock dividend or other similar distribution on
or with respect to the Series B Preferred Stock (the "Series B Liquidation
Value"), plus all declared and unpaid dividends with respect to such share,
plus an amount equal to all dividends, if any, accrued thereon and not paid
in cash since the Dividend Payment Date immediately preceding the date of
distribution to such holders; and such holders shall not be entitled to any
further payment. If, upon any liquidation, dissolution or winding up of the
affairs of the Corporation, the assets of the Corporation shall be
insufficient to pay in full the preferential amount aforesaid (including the
preferential amount payable with respect to the Series E Preferred Stock),
then such assets shall be distributed among the holders of Series B Preferred
Stock and Series E Preferred Stock in amounts (rounded to the nearest whole
cent) proportionate to the respective Series B Liquidation Values and Series
E Liquidation Values then in effect with respect to each outstanding share of
Series B Preferred Stock and each outstanding share of Series E Preferred
Stock. For purposes of this Section 5, a consolidation or merger of the
Corporation with one or more corporations shall not be deemed to be a
liquidation, dissolution or winding up. After payment shall have been made in
full to the holders of the Series B Preferred Stock as provided in this
Section 5, all remaining assets of the Corporation shall be paid or
distributed to the holders of other shares of capital stock of the
Corporation in accordance with the respective terms and conditions applicable
thereto, and the holders of Series B Preferred Stock shall not be entitled to
share therein. Nothing contained in this Section 5 shall be deemed to
prevent redemption of shares of the Series B Preferred Stock in the manner
provided in Section 6 hereof.
6. REDEMPTION.
(a) CORPORATION'S RIGHT TO REDEEM. To the extent then permitted
under applicable law (including, without limitation, the Corporation Law and
any requirement that the Corporation obtain the prior approval of any
governmental authority having jurisdiction over the Corporation), and subject
to the immediately following sentence, the Corporation may from time to time,
at its sole election, redeem any or all shares of Series B Preferred Stock
then outstanding at a redemption price per share (the "Redemption Price")
equal to One Hundred Three Percent (103.0%) of the sum of (i) the Series B
Liquidation Value of such share, plus (ii) any dividends on such share
accrued and unpaid since the Dividend Payment Date immediately preceding the
date on which the redemption is paid (the "Redemption Date").
Notwithstanding the immediately preceding sentence, if as of the date on
which the Redemption Notice (as defined below) is given the Series B
Preferred Stock is convertible into Regular Common Stock pursuant to Section
7(a) of this Part D, in any such redemption the Corporation must redeem all
Series B Preferred Stock then outstanding. The Redemption Price shall be
payable only in cash. Notice (a "Redemption Notice") of any redemption to be
made pursuant to this Section 6(a) shall be given to the holders of the
Series B Preferred Stock not less than thirty (30) nor more than one hundred
twenty (120) days prior to the Redemption Date, and each such Redemption
Notice shall state the date fixed for the redemption, the total number of
shares of Series B Preferred Stock to be redeemed and,
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if fewer than all the outstanding shares are to be redeemed, the number of
such shares to be redeemed from each holder, and the place or places where
certificates for such shares to be redeemed are to be surrendered for payment
of the Redemption Price. Any Redemption Notice given at a time when the
Series B Preferred Stock is convertible into Regular Common Stock pursuant to
Section 7(a) of this Part D shall also make specific reference to the
holders' right to convert the Series B Preferred Stock in their discretion in
the manner and to the extent set forth in Section 7(c) of this Part D. The
Corporation shall furnish to each holder of Series B Preferred Stock, with
any Redemption Notice, evidence of the Corporation's financial capacity or
sources of financing sufficient to consummate such redemption. Any
Redemption Notice sent by the Corporation shall be irrevocable. All partial
redemptions shall be made pro rata among the holders of the then-outstanding
shares of Series B Preferred Stock.
(b) MECHANICS AND EFFECT OF REDEMPTION. On or after the Redemption
Date, each holder of shares to be so redeemed shall surrender the certificate
evidencing such shares to the Corporation at the place designated by the
Corporation and shall thereupon be entitled to receive payment of the
Redemption Price for each such share. If less than all the shares evidenced
by any such surrendered certificate are redeemed, a new certificate shall be
issued evidencing the unredeemed shares. Provided only that the Corporation
has given notice as required by Section 6(a), if, on the Redemption Date,
funds necessary for the redemption shall be in one or more accounts for the
benefit of the holders (free of any lien or claim whatsoever) available
therefor and shall have been irrevocably deposited with a bank or trust
company, then, notwithstanding that the certificates evidencing any shares so
called for redemption shall not have been surrendered, (i) dividends with
respect to the shares to be redeemed shall cease to accrue on the Redemption
Date, (ii) such shares shall no longer be deemed to be outstanding and (iii)
all rights whatsoever with respect to the shares so called for redemption
(except the right of the holders to receive the Redemption Price for each
share upon surrender of their certificate therefor) shall terminate. If
funds legally available for such purpose are not sufficient for redemption of
the shares of the Series B Preferred Stock that were to be redeemed, then the
certificates evidencing such shares which cannot be redeemed due to lack of
funds shall be deemed not to be surrendered, such shares shall remain
outstanding and all rights whatsoever with respect to such shares shall be
restored; PROVIDED, HOWEVER, that nothing herein shall derogate from the
rights of the holders of such shares to take any legal action available to
them to require the Corporation to redeem such shares or to obtain any other
relief available at law or in equity.
(c) REACQUIRED SHARES. Any shares of the Series B Preferred Stock
purchased, redeemed or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof, and shall not thereafter be reissued, whether as Series B Preferred
Stock or otherwise. The Corporation shall from time to time take such
appropriate action as may be necessary to reduce the number of shares of
authorized Preferred Stock accordingly.
7. CONVERSION.
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(a) ABSOLUTE RIGHT UPON CERTAIN EVENTS. The holders of the Series
B Preferred Stock shall have the right, in their sole discretion exercised
collectively as provided herein, but subject in all events to the limitations
contained in Section 7(c) of this Part D, to convert all (but not less than
all) of the Series B Preferred Stock then outstanding into Regular Common
Stock at a price of $4.00 per share of Regular Common Stock (as may be
adjusted pursuant to Section 7(g) of this Part D, the "Common Stock
Conversion Price"), and with each share of Series B Preferred Stock being
valued at its then-applicable Redemption Price) upon and at any time after
the earliest to occur of (i) the third (3rd) business day following the
consummation of a Change in Control of the Corporation, (ii) the third (3rd)
business day following the date on which a person or Group (other than a
person, or Group comprised of persons, that beneficially owned, directly or
indirectly, one percent (1%) or more of the Common Stock immediately after
the initial issuance of the Special Common Stock) shall become a beneficial
owner of a majority of the Outstanding Voting Securities of the Corporation
(such event being called a "Majority Purchase"), or (iii) June 6, 2002. In
addition, the holders of the Series B Preferred Stock shall have the right,
in their sole discretion exercised collectively as provided herein, but
subject in all events to the limitations contained in Section 7(c) of this
Part D, to convert all (but not less than all) of the Series B Preferred
Stock then outstanding into Regular Common Stock at the Common Stock
Conversion Price (with each share of Series B Preferred Stock being valued at
its then-applicable Redemption Price) at any time following the sixth (6th)
or any subsequent Dividend Payment Date (whether or not consecutive) with
respect to which the Corporation fails to pay the dividend payable on such
date pursuant to Section 4(a) of this Part D in full in cash. The Regular
Common Stock into which the Series B Preferred Stock may be converted
pursuant to this Section 7 shall be either shares of Class B Common Stock or
shares of Class C Common Stock, or any combination thereof, at the sole
election of each holder of Series B Preferred Stock; PROVIDED, HOWEVER, that
no holder may elect to receive Class B Common Stock in such conversion if and
to the extent that the issuance of the same would result in the holder owning
more than 9.9% of the Corporation's pro forma Outstanding Voting Securities
following such conversion; and PROVIDED, FURTHER, that at any time that a
holder owns more than 9.9% of the Corporation's Outstanding Voting
Securities, any Regular Common Stock delivered to such holder in such
conversion shall be solely Class C Common Stock. Notwithstanding the
immediately preceding sentence, a holder of Series B Preferred Stock may, in
a conversion of Series B Preferred Stock, receive shares of Class B Common
Stock that would result in the holder owning more than 9.9% of the
Corporation's Outstanding Voting Securities if, contemporaneously with the
holder's election of the class of Regular Common Stock to be issued in such
conversion, such holder has delivered to the Secretary of the Corporation an
opinion or memorandum of counsel, in form and substance reasonably
satisfactory to the Corporation, or other reasonably satisfactory evidence
that such holder may beneficially own more than 9.9% of the Outstanding
Voting Securities of the Corporation and will acquire such shares in
accordance with the Bank Holding Company Act of 1956. As used herein, the
number of "Outstanding Voting Securities" shall be determined giving effect
to the proposed conversion of Series B Preferred Stock and all other
exchanges of other securities for Common Stock or conversions of other
securities into Common Stock then proposed by the applicable holder, but not
giving effect to the exercise of any other outstanding Common
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Stock equivalents held by such holder, or to the exercise of Common Stock
equivalents by any other person or other exchanges or conversions of
securities for or into Common Stock by any other person, other than in the
proposed conversion of Series B Preferred Stock.
(b) EXERCISE OF CONVERSION RIGHT; CONVERSION DATE - GENERALLY. The
rights of the holders of Series B Preferred Stock to convert such stock into
Regular Common Stock as set forth in subsection (a) of this Section 7 shall
be exercisable (i) by delivery of written notice (a "Conversion Notice") to
the Secretary of the Corporation signed by the holders of a majority of the
shares of Series B Preferred Stock then outstanding, or (ii) by the
affirmative vote (a "Conversion Vote") of the holders of a majority of the
Series B Preferred Stock then outstanding. In the event the Corporation
shall receive a Conversion Notice or there shall occur a Conversion Vote with
respect to shares of Series B Preferred Stock that are then convertible, the
Corporation (or the entity resulting from any applicable Change in Control)
shall convert all such shares of Series B Preferred Stock into the applicable
number of shares of Regular Common Stock effective (except as provided in
Section 7(c) of this Part D) as of the date (the "Conversion Date") on which
the Corporation receives the Conversion Notice or on which the Conversion
Vote is taken; PROVIDED, HOWEVER, that any such Conversion Notice or
Conversion Vote may be made contingent upon the occurrence of a later event
and shall become effective only upon the occurrence of such event, and
PROVIDED FURTHER that if the event on which the conversion is made contingent
does not occur such Conversion Notice or Conversion Vote shall be deemed
withdrawn. The Series B Preferred Stock so converted shall be deemed
outstanding through the Conversion Date and dividends shall be computed
thereon to (but not including) such date. If some or all holders of the
Series B Preferred Stock then outstanding deliver a Conversion Notice, each
holder that is a signatory to such Conversion Notice shall advise the
Secretary of the Corporation in writing, contemporaneously with the delivery
of the Conversion Notice, of the class of Regular Common Stock that such
holder elects to receive in such conversion. In the event a Conversion
Notice is not signed by the holders of all shares of Series B Preferred Stock
then outstanding, or in the event that a special meeting of the holders of
Series B Preferred Stock is called for purposes of conducting a Conversion
Vote, the Corporation shall adopt procedures in its reasonable discretion to
enable the holders of Series B Preferred Stock (other than those that have
elected a class of Regular Common Stock in accordance with the immediately
preceding sentence) to elect the class of Regular Common Stock that each such
holder will receive in such conversion; PROVIDED, HOWEVER, that in the
absence of an election by a holder of shares of Series B Preferred Stock,
such holder shall be deemed to have elected to receive the maximum number of
shares of Class B Common Stock permitted under Section 7(a), and PROVIDED
FURTHER that, notwithstanding anything to the contrary contained herein, all
such elections are subject to the limitations on ownership of Outstanding
Voting Securities set forth in Section 7(a).
(c) EFFECT OF PENDING REDEMPTION NOTICE. On or after the date on
which the Series B Preferred Stock becomes convertible into Regular Common
Stock pursuant to Section 7(a) of this Part D, if the Company gives a
Redemption Notice to the holders of the Series B Preferred Stock pursuant to
Section 6(a) of this Part D, the holders of the Series B Preferred Stock
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shall have a period of thirty (30) calendar days from the date of such
Redemption Notice during which to deliver a Conversion Notice or conduct a
Conversion Vote. If no Conversion Notice has been given or Conversion Vote
taken within such thirty (30) day period, the Series B Preferred Stock shall
thereafter temporarily cease to be convertible until after the intended
Redemption Date set forth in the Redemption Notice. If a Conversion Notice
is given or a Conversion Vote is taken within such thirty (30) day period
(unless stated to the contrary in such Conversion Notice or Conversion Vote),
the Conversion Date applicable to such conversion shall be the intended
Redemption Date set forth in the Redemption Notice.
(d) NOTICES IN EVENT OF CHANGE IN CONTROL OR MAJORITY PURCHASE.
Promptly upon the Corporation's entering into any definitive agreement that
will result in a Change in Control or a Majority Purchase, the Corporation
shall give written notice to the holders of the Series B Preferred Stock that
a Change in Control or Majority Purchase is anticipated, which notice from
the Corporation shall provide a reasonable summary of the terms on which the
Change in Control will occur, the rights, preferences and protections the
Resulting Entity will provide to the holders of Series B Preferred Stock and
the approximate date on which the consummation of such Change in Control is
anticipated to occur. Promptly upon the Corporation receiving notice that a
Majority Purchase has occurred to which the Corporation was not a party, the
Corporation shall give written notice to the holders of the Series B
Preferred Stock that a Majority Purchase has occurred and identifying the
person effecting such Majority Purchase to the extent known by the
Corporation. Either such notice from the Corporation shall make specific
reference to the Series B Preferred Stock and to the holders' right to
convert the Series B Preferred Stock to Regular Common Stock pursuant to, and
subject to the limitations contained in, this Section 7.
(e) CONVERSION WITH APPROVAL OF CORPORATION. At any time prior to
the date on which the Series B Preferred Stock becomes convertible pursuant
to Section 7(a) of this Part D, the holders of Series B Preferred Stock
acting collectively as provided herein, shall have the right to request, by
delivery of a written notice to the Corporation, that the Corporation convert
all of the Series B Preferred Stock then outstanding, or any portion of the
Series B Preferred Stock then outstanding allocated pro rata among the
holders of the Series B Preferred Stock, into shares of Class B Common Stock
in connection with a registered public offering of Class B Common Stock then
being conducted by the Corporation, but solely if and to the extent that the
resulting shares of Class B Common Stock are being sold, immediately upon
such conversion, in a the public offering or in a public sale conducted under
Rule 144 promulgated under the Securities Exchange Act of 1933. Any notice
requesting such a conversion shall be executed by holders of a majority of
the outstanding shares of Series B Preferred Stock. The Corporation may
grant or deny such request in the Corporation's sole discretion. In the
event shares of Series B Preferred Stock are to be so converted, each share
shall be converted into a number of shares of Class B Common Stock equal to
the quotient of (a) the sum of the Series B Redemption Price per share plus
all declared and unpaid dividends with respect to such share, plus an amount
equal to all dividends, if any, accrued thereon and not paid in cash since
the Dividend Payment Date immediately
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preceding the date of such conversion, divided by (b) the offer price per
share of the Class B Common Stock in the applicable offering less the
underwriters' discount with respect thereto.
(f) PRIOR EVENTS AFFECTING REGULAR COMMON STOCK. Notwithstanding
anything to the contrary contained herein, in each instance in which the
terms of this Section 7 provide for the conversion of Series B Preferred
Stock into shares of Regular Common Stock, if, as a consequence of a Business
Combination, amendment to this Certificate of Incorporation or any other
event having occurred prior to the Conversion Date, the then-outstanding
Regular Common Stock shall have been converted into or exchanged for any
other security or property, any conversion of any shares of Series B
Preferred Stock shall be for that type and quantity of securities or property
as the holder thereof would have received had such Series B Preferred Stock
been converted into Regular Common Stock immediately prior to the conversion
or exchange of the Regular Common Stock into such other security or property.
(g) ADJUSTMENTS TO COMMON STOCK CONVERSION PRICE. The Common
Stock Conversion Price as set forth in subsection (a) of this Section 7 shall
be adjusted upon the events, and in the manner, set forth below if any such
event occurs prior to the applicable Conversion Date:
(i) If the Corporation is recapitalized through the
subdivision or combination of its outstanding shares of Common Stock into a
larger or smaller number of shares, the Common Stock Conversion Price shall
be decreased or increased, as of the record date for such recapitalization,
in the inverse proportion to the increase or decrease in the number of
outstanding shares of Common Stock.
(ii) If the Corporation declares a dividend on the Regular
Common Stock, or makes a distribution to holders of Regular Common Stock, and
such dividend or distribution is payable or made in Regular Common Stock or
securities convertible into or exchangeable for Regular Common Stock, or
rights to purchase Regular Common Stock or securities convertible into or
exchangeable for Regular Common Stock, the Common Stock Conversion Price
shall be decreased, as of the record date for determining which holders of
Regular Common Stock shall be entitled to receive such dividend or
distribution, in inverse proportion to the increase in the number of
outstanding shares (and shares of Regular Common Stock issuable upon
conversion of all such securities convertible into Regular Common Stock) of
all Common Stock as a result of such dividend or distribution.
(iii) If the Corporation declares a dividend on the Regular
Common Stock payable in cash, the Common Stock Conversion Price shall be
reduced by the per share dividend payment.
(iv) If the Corporation declares a dividend on Regular Common
Stock (other than a dividend covered by clause (ii) above, or a dividend
payable in cash covered by
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clause (iii) above) or distributes to holders of its Regular Common Stock,
other than as part of its dissolution or liquidation or the winding up of its
affairs, any shares of its stock, any evidence of indebtedness or any cash or
other of its assets (other than Regular Common Stock or securities
convertible into or exchangeable for Regular Common Stock) (an "Alternative
Distribution"), the Common Stock Conversion Price shall be reduced by an
amount equal to the value of the Alternative Distribution per share of
Regular Common Stock as determined in good faith by the Corporation's Board
of Directors based upon a written opinion from a nationally recognized
investment banking firm selected by the holders of a majority in interest of
the Series B Preferred Stock and the Series E Preferred Stock then
outstanding, and taking into account, among other relevant factors, whether
the holders thereof acquired any Purchase Rights (as defined herein) with
respect to such dividend or distribution pursuant to the terms hereof. The
selection of such investment banking firm shall be consented to by the
Corporation, which consent shall not be unreasonably withheld, and such
investment banking firm's fees and expenses shall be paid by the Corporation.
The Corporation shall provide the holders of the Series B Preferred Stock and
the Series E Preferred Stock with written notice concerning an Alternative
Distribution at least ten (10) business days prior to the record date
therefor.
(v) In case the Corporation shall, at any time or from
time to time following the date hereof, issue or agree to issue by warrants,
convertible securities, stock options or otherwise, any of its Common Stock
or Other Securities (as defined herein), including treasury shares, (other
than any shares issued in contemplation of the Securities Purchase
Agreement), for a consideration per share less than the Common Stock
Conversion Price per share in effect immediately prior to the time of such
issue or sale, then forthwith upon such issue or sale, or agreement to issue
or sell, said Common Stock Conversion Price shall be reduced to a price
(calculated to the nearest cent) determined by dividing (x) an amount equal
to (A) the product obtained by multiplying the number of shares of the Common
Stock outstanding (or then deemed to be outstanding as herein provided)
immediately prior to such issue by the Common Stock Conversion Price in
effect at such time plus (B) the consideration received by the Corporation
upon such issue by (y) the number of shares of the Common Stock outstanding
(or then deemed to be outstanding as herein provided) immediately after such
issue. For the purposes of this clause (v), the number of shares of Common
Stock deemed to be outstanding at any given time shall exclude shares in the
treasury of the Corporation but shall include all shares issuable or to
become issuable under any agreements, warrants, convertible securities, stock
options, similar rights or otherwise (hereinafter in this clause (v) referred
to as "Options"). The Board of Directors of the Corporation shall make a
reasonable determination of the fair value of the amount of consideration
other than money received by the Corporation upon the issue by it of any of
its securities. Such Board shall, in case any Common Stock or Options for
the purchase thereof are issued with other stock, securities or assets of the
Corporation, determine what part of the consideration received therefor is
applicable to the issue of the Common Stock or Options for the purchase
thereof. If, as provided herein, the Common Stock Conversion Price is
adjusted as a consequence of the Corporation's issuance of Options, no
further adjustment of the Common Stock Conversion Price shall be made upon
the subsequent issuance of Common Stock upon the exercise of such Options.
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To the extent that Options expire without having been exercised, the Common
Stock Conversion Price computed upon their issuance, and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed to take
into account only the shares of Common Stock actually issued upon the
exercise of such Options. In any such recomputation, the consideration
applicable to the shares of Common Stock issued shall be the aggregate
consideration which was received by the Corporation upon the issuance of such
Options, whether or not exercised, plus the additional consideration actually
received by the Corporation upon the exercise thereof. No recomputation shall
have the effect of increasing the Common Stock Conversion Price by an amount
in excess of the adjustment thereof made in respect of the issuance of the
expired Options. No adjustment shall be made pursuant to this clause (v) for
the issuance by the Corporation of (x) any securities issued pursuant to
executive compensation arrangements the terms of which are disclosed in
Disclosure Schedule 5.2(m)(18) to the Securities Purchase Agreement, or (y)
any securities that may be issued upon the conversion of the mandatorily
convertible debentures of SDN Bancorp, Inc. disclosed on Disclosure Schedule
5.2(b) to the Securities Purchase Agreement.
(vi) No adjustment in the Common Stock Conversion Price shall
be required unless such adjustment would require an increase or decrease in
the Common Stock Conversion Price of at least one percent; PROVIDED, HOWEVER,
that any adjustments which by reason of this clause (vi) are not required to
be made immediately shall be carried forward and taken into account at the
time of conversion or any subsequent adjustment in the Common Stock
Conversion Price which, singly or in combination with any adjustment carried
forward, is required to be made under this Section 7(g).
(vii) If the event as a result of which an adjustment is
made under clause (i), (ii), (iii), (iv) or (v) above does not occur, then
any adjustment in the Common Stock Conversion Price that was made in
accordance with such clause (i), (ii), (iii), (iv) or (v) shall be rescinded
effective immediately prior to the record date for such event.
(h) PURCHASE RIGHTS. If at any time the Corporation grants, issues
or sells any options, convertible securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of
Regular Common Stock (the "Purchase Rights"), then each holder of Series B
Preferred Stock shall be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such holder could
have acquired if such holder had held the number of shares of Regular Common
Stock acquirable upon complete conversion of its Series B Preferred Stock
immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken, the
date as of which the record holders of Regular Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights; provided
that (a) if the Purchase Rights involve Common Stock that constitutes Voting
Securities, the Corporation shall make available to each holder of Series B
Preferred Stock, at such holder's request, Purchase Rights for Class C Common
Stock, except that, if and to the extent that such holder would not be
permitted to convert its Series B Preferred Stock for Class B Common Stock
pursuant to this Section 7, the Corporation shall grant, issue or
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sell to the holder only Purchase Rights relating to Class C Common Stock; and
(b) if the Purchase Rights involve Voting Securities other than Common Stock,
the Corporation shall use its best efforts to make available to the holder,
at such holder's request, Purchase Rights involving non-voting securities
(except where such securities are entitled to voting rights pursuant to
applicable laws) which are otherwise identical to the Purchase Rights
involving voting securities and which non-voting securities are convertible
or exchangeable into such voting securities on the same terms as Class C
Common Stock is convertible into Class B Common Stock.
E. SERIES E PREFERRED STOCK.
1. DESIGNATION, AMOUNT AND RESTRICTIONS ON ISSUANCE. Forty Thousand
(40,000) shares of Preferred Stock, par value $.01, are hereby constituted as
a series thereof having the designation "Series E Preferred Stock". Shares
of Series E Preferred Stock may be issued only upon an exchange by the
Corporation of Series E Preferred Stock for the Corporation's Junior
Subordinated Debentures due 2027 ("Junior Subordinated Debentures") or a
conversion of Junior Subordinated Debentures into Series E Preferred Stock,
each to the extent permitted under the terms of Junior Subordinated
Debentures, or an exchange by the Corporation of Series E Preferred Stock for
Series A Capital Securities issued by CSBI Capital Trust I pursuant to the
terms of the Securities Purchase Agreement. So long as any shares of Series
E Preferred Stock shall be outstanding, the number of authorized shares of
Series E Preferred Stock may not be increased or decreased without the
affirmative vote of the holders of two-thirds of the shares of Series E
Preferred Stock then-outstanding.
2. RANK. The Series E Preferred Stock shall, with respect to dividend
rights and rights on liquidation, winding up and dissolution, rank pari passu
to the Series B Preferred Stock and senior to the Junior Stock. All shares
of the Series E Preferred Stock shall be of equal rank with each other with
respect to the right to receive dividends pursuant to Section 4 of this Part
E and other distributions of the Corporation, rights on liquidation, winding
up and dissolution pursuant to Section 5 of this Part E, and rights relating
to redemption pursuant to Section 6 of this Part E.
3. VOTING.
(a) GENERAL. Except as specifically required by law or as
expressly set forth herein, the Series E Preferred Stock shall not have any
voting powers whatsoever, and the holders thereof shall not be entitled to
notice of, or participation in, the meetings of the stockholders of the
Corporation.
(b) VOTING RIGHTS ON EXTRAORDINARY MATTERS. Without the prior
approval of the holders of at least two-thirds of the shares of the Series E
Preferred Stock then outstanding, given in person or by proxy either by
written consent or at a meeting at which the holders of such shares
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shall be entitled to vote separately as a class, the Corporation may not (i)
amend, alter or repeal any provision of the Certificate of Incorporation of
the Corporation or any certificate amendatory thereof or supplemental thereto
so as to affect adversely any power, preference or right of the Series E
Preferred Stock, (ii) create or designate any class or series of capital
stock, or increase the number of shares of any existing, approved or
designated class or series of capital stock that the Corporation is
authorized to issue, other than a class or series of capital stock junior to
the Series E Preferred Stock in liquidation preference, voting rights, rights
to dividends and redemptions and otherwise, or (iii) issue, directly or
indirectly, to any trust, partnership or other entity affiliated with the
Corporation that is a financing entity of the Corporation, any debt
securities in connection with the issuance by such financing entity of
securities that are similar to the Series A Preferred Securities issued by
CSBI Capital Trust I, or (iv) create or issue any Indebtedness other than
Indebtedness incurred by the Corporation to its Subsidiaries in the ordinary
course of business and not in excess of 1.0% of the Corporation's
consolidated assets as of the end of its most recent fiscal quarter.
(c) MERGERS, CONSOLIDATIONS, ETC. Without the affirmative vote of
the holders of two-thirds of the then-outstanding shares of Series E
Preferred Stock, the Corporation shall not enter into any consolidation,
merger, combination or other transaction the consummation of which would (x)
cause any then-current holder of the Series E Preferred Stock to cease to be
the beneficial owner of any of such holder's shares of Series E Preferred
Stock except in redemption of their shares pursuant to Section 6 of this Part
E or (y) adversely affect the rights of the holders of the outstanding shares
of Series E Preferred Stock as set forth herein.
4. DIVIDENDS.
(a) DIVIDENDS PAYABLE - GENERALLY. When and as declared by the
Corporation's Board of Directors and to the extent permitted under the
Corporation Law, the Corporation shall pay preferential dividends in cash to
the holders of the then-outstanding Series E Preferred Stock as provided in
this Section 4. Dividends on each share of Series E Preferred Stock shall be
payable on each Dividend Payment Date and shall accrue in arrears at the rate
of 11% per annum on the sum of (i) the Series E Liquidation Value (as defined
in Section 5 hereof) of each such share plus (ii) all accrued and unpaid
dividends with respect to such share as of immediately prior to such Dividend
Payment Date. Dividends on each outstanding share of Series E Preferred Stock
shall begin to accrue from the date of original issuance thereof, and shall
continue to accrue on a daily basis whether or not the Corporation shall have
earnings or surplus at the time and whether or not dividends are actually
declared or paid on any applicable Dividend Payment Date, until such share is
redeemed by the Corporation or until payment of the Series E Liquidation
Value thereof and all accrued and unpaid dividends thereon has been made in
full to the holder of such share pursuant to Section 5 of this Part E. No
dividends shall be paid in cash on any share of Series E Preferred Stock
unless cash dividends are paid on all shares of Series E Preferred Stock that
are outstanding at the applicable record date.
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(b) DIVIDENDS PAYABLE FOLLOWING ACCRUAL OF DIVIDENDS; COMMON STOCK
DELIVERABLE UPON NON-PAYMENT OF DIVIDENDS. (i) In the event that the
Corporation shall fail to declare and pay on any Dividend Payment Date, in
full and in cash, the dividend provided in the foregoing Section 4(a) to the
holders of the Series E Preferred Stock outstanding at the applicable record
date, the dividend on each share of Series E Preferred Stock shall accrue at
the rate specified in Section 4(a) on the sum of (x) the Series E Liquidation
Value of each such share plus (y) all accrued and unpaid dividends with
respect to such share as of immediately prior to such Dividend Payment Date
(with the dividend so accrued rate being called the "Accrued Dividend
Amount"). Upon any and each Dividend Payment Date with respect to which the
Corporation does not pay the dividend provided in Section 4(a) in full in
cash to the holders of the Series E Preferred Stock, the Corporation shall
issue to each holder of Series E Preferred Stock shares of Regular Common
Stock ("PIE Shares") consisting of Seven (7) shares of Regular Common Stock
for each $100.00 of the aggregate Accrued Dividend Amount with respect to
such holder's Series E Preferred Stock accrued on such Dividend Payment Date.
If the Market Value of the Class B Common Stock as of the Dividend Payment
Date with respect to which the PIE Shares are issued is greater than or less
than $4.00 per share, the number of PIE Shares shall be adjusted by dividing
Seven (7) by a fraction, the numerator of which is the Market Value of the
Class B Common Stock as of the relevant Dividend Payment Date and the
denominator of which is $4.00. Notwithstanding anything to the contrary
contained herein, the Corporation shall not issue PIE Shares numbering, in
the aggregate, more than of (x) Four Hundred Sixty-Nine Thousand Two Hundred
Fifty (469,250) shares minus (y) the aggregate number of PIE Shares
theretofore issued in respect of Series A Capital Securities (such difference
being called the "Maximum Series E PIE Shares") on or with respect to any and
all Dividend Payment Dates on which PIE Shares would otherwise be due
pursuant to this Section 4(b), and if and after Corporation has issued such
number of PIE Shares the Corporation shall not thereafter issue PIE Shares
regardless of whether, on any subsequent Dividend Payment Date, the
Corporation fails to pay a dividend on the Series B Preferred Stock pursuant
to Section 4(a) in full in cash.
(ii) The PIE Shares issuable hereunder shall be either shares
of Class B Common Stock or shares of Class C Common Stock, or any combination
thereof, at the sole election of the holder of the Series B Preferred Stock
as to which such PIE Shares are to be issued; PROVIDED, HOWEVER, that the
holder may not elect to receive shares of Class B Common Stock if and to the
extent that the holder's receipt of the same would result in the holder
owning more than 9.9% of the Corporation's pro forma Voting Common Stock
outstanding following such exercise; and PROVIDED, FURTHER, that at any time
that the Holder owns 9.9% or more of the outstanding Voting Common Stock, any
PIE Shares issued hereunder to such holder shall be solely Class C Common
Stock. Notwithstanding the immediately preceding sentence, a holder may
elect to receive shares of Class B Common Stock that would result in the
holder owning more than 9.9% of the outstanding Voting Common Stock, provided
that at the time of such issuance such holder has delivered to the Secretary
of the Corporation an opinion or memorandum of counsel, in form and substance
reasonably satisfactory to the Corporation, or other reasonably satisfactory
evidence that such person may beneficially own more than 9.9% of the
outstanding
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Voting Common Stock and will acquire such shares in accordance with the Bank
Holding Company Act of 1956.
(c) RESTRICTION ON PAYMENTS ON JUNIOR STOCK. So long as any shares
of the Series E Preferred Stock shall be outstanding, unless the holders of
the Series E Preferred Stock shall have authorized a payment of a dividend,
distribution or other payment on or with respect to any Junior Stock or a
repurchase or redemption of shares of Junior Stock, in either case by the
affirmative vote of the holders of two-thirds of the Series E Preferred Stock
then outstanding, no such dividend, distribution or other payment on or with
respect to any Junior Stock may be declared or paid or set apart for payment
(other than additional shares of Common Stock in the event of a stock split)
and no repurchase or redemption of shares of Junior Stock may be made (other
than a Permitted Redemption), unless the Corporation meets the following
financial criteria, based on the Corporation's audited financial statements
for the Most Recent Fiscal Year:
(A) the Corporation had average assets during the Most
Recent Fiscal Year of not less than One Billion Five Hundred Million
Dollars ($1,500,000,000); and
(B) after deducting the amount of the proposed dividend
from the Corporation's after-tax net income for the Most Recent Fiscal Year
and excluding the after-tax amount of any items of extraordinary gain from
such income, the Corporation would have had an after-tax return on average
assets during the Most Recent Fiscal Year of not less than One Percent
(1.00%).
5. LIQUIDATION. In the event of any complete or partial liquidation,
dissolution or winding up of the affairs of the Corporation, whether
voluntary or involuntary, before any payment or distribution of the assets of
the Corporation shall be made to or set apart for the holders of any Junior
Stock, the holders of each share of Series E Preferred Stock shall be
entitled to receive, pari passu with the holders of each share of Series B
Preferred Stock, out of the assets of the Corporation (whether such assets
are capital or surplus and whether or not any dividends as such are
declared), the sum of $1,000 per share, as adjusted for any stock split,
stock dividend or other similar distribution on or with respect to the Series
E Preferred Stock (the "Series E Liquidation Value"), plus all accrued and
unpaid dividends with respect to such share (including all Accrued Dividend
Amounts theretofore accrued and not repaid), plus an amount equal to all
dividends, if any, accrued thereon and not paid in cash since the Dividend
Payment Date immediately preceding the date of distribution to such holders;
and such holders shall not be entitled to any further payment. If, upon any
liquidation, dissolution or winding up of the affairs of the Corporation, the
assets of the Corporation shall be insufficient to pay in full the
preferential amount aforesaid (including the preferential amount payable with
respect to the Series B Preferred Stock), then such assets shall be
distributed among the holders of Series B Preferred Stock and Series E
Preferred Stock in amounts (rounded to the nearest whole cent) proportionate
to the respective Series B Liquidation Values and Series E Liquidation Values
then in effect with respect
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to each outstanding share of Series B Preferred Stock and each outstanding
share of Series E Preferred Stock. For purposes of this Section 5, a
consolidation or merger of the Corporation with one or more corporations
shall not be deemed to be a liquidation, dissolution or winding up. After
payment shall have been made in full to the holders of the Series E Preferred
Stock as provided in this Section 5, all remaining assets of the Corporation
shall be paid or distributed to the holders of other shares of capital stock
of the Corporation in accordance with the respective terms and conditions
applicable thereto, and the holders of Series E Preferred Stock shall not be
entitled to share therein. Nothing herein contained shall be deemed to
prevent redemption of shares of the Series E Preferred Stock in the manner
provided in Section 6 hereof.
6. REDEMPTION.
(a) AT THE CORPORATION'S ELECTION. To the extent then permitted
under applicable law (including, without limitation, the Corporation Law and
any requirement that the Corporation obtain the prior approval of any
governmental authority having jurisdiction over the Corporation), and subject
to the immediately following sentence, the Corporation may from time to time,
at its sole election, redeem any or all shares of Series E Preferred Stock
then outstanding at a redemption price per share (the "Redemption Price")
equal to One Hundred Three Percent (103.0%) of the sum of (i) the Series E
Liquidation Value of such share, plus (ii) all Accrued Dividend Amounts
accrued (and not paid) with respect to such share prior to the date on which
the redemption is paid (the "Redemption Date"), plus (iii) any dividends on
such share accrued and unpaid since the Dividend Payment Date immediately
preceding the Redemption Date. Notwithstanding the immediately preceding
sentence, (x) if as of the date on which the Redemption Notice (as defined
below) is given the Series E Preferred Stock is convertible into Regular
Common Stock pursuant to Section 7(a) of this Part E, in any such redemption
the Corporation must redeem not less than $14,000,000 in aggregate Series E
Liquidation Amount of Series E Preferred Stock (or such lesser amount as then
remains outstanding), and (y) from and after the date on which the Series E
Preferred Stock becomes so convertible, the Corporation may issue no more
than one Redemption Notice during any twelve-month period. The Redemption
Price shall be payable only in cash. Notice (a "Redemption Notice") of any
redemption to be made pursuant to this Section 6(a) shall be given to the
holders of the Series E Preferred Stock not less than thirty (30) nor more
than one hundred twenty (120) days prior to the Redemption Date, and each
such Redemption Notice shall state the date fixed for the redemption, the
total number of shares of Series E Preferred Stock to be redeemed and, if
fewer than all the outstanding shares are to be redeemed, the number of such
shares to be redeemed from each holder, and the place or places where
certificates for such shares to be redeemed are to be surrendered for payment
of the Redemption Price. Any Redemption Notice given at a time when the
Series E Preferred Stock is convertible into Regular Common Stock pursuant to
Section 7(a) of this Part E shall also make specific reference to the
holders' right to convert the Series E Preferred Stock in their discretion in
the manner and to the extent set forth in Section 7(c) of this Part E. The
Corporation shall furnish to each holder of Series E Preferred Stock, with
any Redemption Notice, evidence of the Corporation's financial capacity or
sources of financing sufficient to consummate
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such redemption. Any Redemption Notic sent by the Corporation shall be
irrevocable. All partial redemptions shall be made pro rata among the
holders of the then-outstanding shares of Series E Preferred Stock.
(b) REACQUIRED SHARES. Any shares of the Series E Preferred Stock
purchased, redeemed or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof, and shall not thereafter be reissued, whether as Series E Preferred
Stock or otherwise. The Corporation shall from time to time take such
appropriate action as may be necessary to reduce the number of shares of
authorized Preferred Stock accordingly.
7. CONVERSION.
(a) ABSOLUTE RIGHT UPON CERTAIN EVENTS. The holders of the Series
E Preferred Stock shall have the right, in their sole discretion exercised
collectively as provided herein, but subject in all events to the limitations
contained in Section 7(c) of this Part E, to convert all (but not less than
all) of the Series E Preferred Stock then outstanding into Regular Common
Stock at the Common Stock Conversion Price per share of Regular Common Stock
(with each share of Series E Preferred Stock being valued at its
then-applicable Redemption Price) upon and at any time after the earliest to
occur of (i) the third (3rd) business day following the consummation of a
Change in Control of the Corporation, (ii) the third (3rd) business day
following the occurrence of a Majority Purchase, or (iii) June 6, 2002. The
Regular Common Stock into which the Series E Preferred Stock may be converted
pursuant to this Section 7 shall be either shares of Class B Common Stock or
shares of Class C Common Stock, or any combination thereof, at the sole
election of the holder of such Series E Preferred Stock; PROVIDED, HOWEVER,
that the holder may not elect to receive Class B Common Stock in such
conversion if and to the extent that the issuance of the same would result in
the holder owning more than 9.9% of the Corporation's pro forma Outstanding
Voting Securities following such conversion; and PROVIDED, FURTHER, that at
any time that such holder owns more than 9.9% of the Corporation's
Outstanding Voting Securities, any Regular Common Stock delivered in such
conversion shall be solely Class C Common Stock. Notwithstanding the
immediately preceding sentence, a holder of Series E Preferred Stock may
convert such Series E Preferred Stock into shares of Class B Common Stock
that would result in the holder owning more than 9.9% of the Corporation's
Outstanding Voting Securities if, contemporaneously with the delivery of the
applicable Conversion Notice, such holder has delivered to the Secretary of
the Corporation an opinion or memorandum of counsel, in form and substance
reasonably satisfactory to the Corporation, or other reasonably satisfactory
evidence that such holder may beneficially own more than 9.9% of the
Outstanding Voting Securities of the Corporation and will acquire such shares
in accordance with the Bank Holding Company Act of 1956. As used herein, the
number of "Outstanding Voting Securities" shall be determined giving effect
to the proposed conversion of Series E Preferred Stock and all other
exchanges of other securities for Common Stock or conversions of other
securities into Common Stock then proposed by the applicable holder, but not
giving effect to the exercise of any other outstanding Common
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Stock equivalents held by such holder, or to the exercise of Common Stock
equivalents by any other person or other exchanges or conversions of
securities for or into Common Stock by any other person, other than in the
proposed conversion of Series E Preferred Stock.
(b) EXERCISE OF CONVERSION RIGHT; CONVERSION DATE - GENERALLY. The
rights of the holders of Series E Preferred Stock to convert such stock into
Regular Common Stock as set forth in subsection (a) of this Section 7 shall
be exercisable (i) by delivery of a Conversion Notice to the Secretary of the
Corporation signed by the holders of a majority of the shares of Series E
Preferred Stock then outstanding, or (ii) by the occurrence of a Conversion
Vote. In the event the Corporation shall receive a Conversion Notice or
there shall occur a Conversion Vote with respect to shares of Series E
Preferred Stock that are then convertible, the Corporation (or the entity
resulting from any applicable Change in Control) shall convert all such
shares of Series E Preferred Stock into the applicable number of shares of
Regular Common Stock effective (except as provided in Section 7(c) of this
Part D) as of the date (the "Conversion Date") on which the Corporation
receives the Conversion Notice or on which the Conversion Vote is taken;
PROVIDED, HOWEVER, that such Conversion Notice or Conversion Vote may be made
contingent upon the occurrence of a later event and shall become effective
only upon the occurrence of such event, and PROVIDED FURTHER that if the
event on which the conversion is made contingent does not occur such
Conversion Notice or Conversion Vote shall be deemed withdrawn. The Series E
Preferred Stock so converted shall be deemed outstanding through the
Conversion Date and dividends shall be computed thereon to (but not
including) such date. If some or all holders of the Series E Preferred Stock
then outstanding deliver a Conversion Notice, each holder that is a signatory
to such Conversion Notice shall advise the Secretary of the Corporation in
writing, contemporaneously with the delivery of the Conversion Notice, of the
class of Regular Common Stock that such holder elects to receive in such
conversion. In the event a Conversion Notice is not signed by the holders of
all shares of Series E Preferred Stock then outstanding, of in the event that
a special meeting of the holders of Series E Preferred Stock is called for
purposes of conducting a Conversion Vote, the Corporation shall adopt
procedures in its reasonable discretion to enable the holders of Series E
Preferred Stock (other than those that have elected a class of Regular Common
Stock in accordance with the immediately preceding sentence) to elect the
class of Regular Common Stock that each such holder will receive in such
conversion; PROVIDED, HOWEVER, that in the absence of an election by a holder
of shares of Series E Preferred Stock, such holder shall be deemed to have
elected to receive the maximum number of shares of Class B Common Stock
permitted under Section 7(a), and PROVIDED FURTHER that, notwithstanding
anything to the contrary contained herein, all such elections are subject to
the limitations on ownership of Outstanding Voting Securities set forth in
Section 7(a).
(c) EFFECT OF PENDING REDEMPTION NOTICE. On or after the date on
which the Series E Preferred Stock becomes convertible into Common Stock
pursuant to Section 7(a) of this Part E, if the Company gives a Redemption
Notice to the holders of the Series E Preferred Stock pursuant to Section
6(a) of this Part E, the holders of the Series E Preferred Stock shall have a
period of thirty (30) calendar days from the date of such Redemption Notice
during which to
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deliver a Conversion Notice or conduct a Conversion Vote. If no Conversion
Notice has been given or Conversion Vote taken within such thirty (30) day
period, the Series E Preferred Stock shall thereafter temporarily cease to be
convertible until after the intended Redemption Date set forth in the
Redemption Notice. If a Conversion Notice is given or a Conversion Vote is
taken within such thirty (30) day period (unless stated to the contrary in
such Conversion Notice or Conversion Vote), the Conversion Date applicable to
such conversion shall be the intended Redemption Date set forth in the
Redemption Notice.
(d) NOTICES IN EVENT OF CHANGE IN CONTROL OR MAJORITY PURCHASE.
Promptly upon the Corporation's entering into any definitive agreement that
will result in a Change in Control or a Majority Purchase, the Corporation
shall give written notice to the holders of the Series E Preferred Stock that
a Change in Control or Majority Purchase is anticipated, which notice from
the Corporation shall provide a reasonable summary of the terms on which the
Change of Control will occur, the rights, preferences and protections the
Resulting Entity will provide to the holders of Series E Preferred Stock and
the approximate date on which the consummation of such Change of Control is
anticipated to occur. Promptly upon the Corporation receiving notice that a
Majority Purchase has occurred to which the Corporation was not a party, the
Corporation shall give written notice to the holders of the Series E
Preferred Stock that a Majority Purchase has occurred and identifying the
person effecting such Majority Purchase to the extent known by the
Corporation. Either such notice from the Corporation shall make specific
reference to the Series E Preferred Stock and to the holders' right to
convert the Series E Preferred Stock to Regular Common Stock pursuant to, and
subject to the limitations contained in, this Section 7.
(e) CONVERSION WITH APPROVAL OF CORPORATION. At any time prior to
the date on which the Series E Preferred Stock becomes convertible pursuant
to Section 7(a) of this Part D, the holders of Series E Preferred Stock
acting collectively as provided herein, shall have the right to request, by
delivery of a written notice to the Corporation, that the Corporation convert
all of the Series E Preferred Stock then outstanding, or any portion of the
Series E Preferred Stock then outstanding allocated pro rata among the
holders of the Series E Preferred Stock, into shares of Class B Common Stock
in connection with a registered public offering of Class B Common Stock then
being conducted by the Corporation, but solely if and to the extent that the
resulting shares of Class B Common Stock are being sold, immediately upon
such conversion, in the public offering or in a public sale conducted under
Rule 144 promulgated under the Securities Act of 1933. Any notice requesting
such a conversion shall be executed by holders of a majority of the
outstanding shares of Series E Preferred Stock. The Corporation may grant or
deny such request in the Corporation's sole discretion. In the event shares
of Series E Preferred Stock are to be so converted, each share shall be
converted into a number of shares of Class B Common Stock equal to the
quotient of (a) the sum of the Series B Redemption Price per share plus all
declared and unpaid dividends with respect to such share, plus an amount
equal to all dividends, if any, accrued thereon and not paid in cash since
the Dividend Payment Date immediately preceding the date of
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such conversion, divided by (b) the offer price per share of the Class B
Common Stock in the applicable offering less the underwriters' discount with
respect thereto.
(f) PRIOR EVENTS AFFECTING REGULAR COMMON STOCK. Notwithstanding
anything to the contrary contained herein, in each instance in which the
terms of this Section 7 provide for the conversion of Series E Preferred
Stock into shares of Regular Common Stock, if, as a consequence of a Business
Combination, amendment to this Certificate of Incorporation or any other
event having occurred prior to the Conversion Date, the then-outstanding
Regular Common Stock shall have been converted into or exchanged for any
other security or property, any conversion of any shares of Series E
Preferred Stock shall be for that type and quantity of securities or property
as the holder thereof would have received had such Series E Preferred Stock
been converted into Regular Common Stock immediately prior to the conversion
or exchange of the Regular Common Stock into such other security or property.
(g) ADJUSTMENTS TO COMMON STOCK CONVERSION PRICE. The Common
Stock Conversion Price applicable to the Series E Preferred Stock shall be
adjusted in the same manner provided in Section 7(g) of Part D.
(h) PURCHASE RIGHTS. If at any time the Corporation grants, issues
or sells any options, convertible securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of
Regular Common Stock (the "Purchase Rights"), then each holder of Series E
Preferred Stock shall be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such holder could
have acquired if such holder had held the number of shares of Regular Common
Stock acquirable upon complete conversion of its Series E Preferred Stock
immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken, the
date as of which the record holders of Regular Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights; provided
that (a) if the Purchase Rights involve Common Stock that constitutes Voting
Securities, the Corporation shall make available to each holder of Series E
Preferred Stock, at such holder's request, Purchase Rights for Class C Common
Stock, except that, if and to the extent that such holder would not be
permitted to convert its Series E Preferred Stock for Class B Common Stock
pursuant to this Section 7, the Corporation shall grant, issue or sell to the
holder only Purchase Rights relating to Class C Common Stock; and (b) if the
Purchase Rights involve Voting Securities other than Common Stock, the
Corporation shall use its best efforts to make available to the holder, at
such holder's request, Purchase Rights involving non-voting securities
(except where such securities are entitled to voting rights pursuant to
applicable laws) which are otherwise identical to the Purchase Rights
involving voting securities and which non-voting securities are convertible
or exchangeable into such voting securities on the same terms as Class C
Common Stock is convertible into Class B Common Stock.
* * *
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All shares of Common Stock of the Corporation outstanding immediately
prior to the effectiveness of this Amended and Restated Certificate of
Incorporation are reclassified and redesignated as shares of Class B Common
Stock.
* * *
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The Board of Directors is expressly authorized to exercise all
powers granted to the directors by law, except to the extent such powers are
limited or denied herein or in the By-laws of the Corporation. In
furtherance of such powers, the Board of Directors shall have the right to
make, alter or repeal the By-laws of the Corporation, except that any By-law
adopted by the stockholders may be altered or repealed only by the
stockholders if such By-law so provides.
SEVENTH: Elections of directors need not be by written ballot unless the
By-laws of the Corporation shall so provide.
EIGHTH: No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director, except to the extent that such exculpation from
liability is not permitted under the Corporation Law as the same now exists
or as may be hereafter amended. This provision shall not eliminate the
liability of a director for any act or omission occurring prior to the date
on which this provision becomes effective. No amendment to or repeal of this
Article Eighth shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to any acts
or omissions of such director occurring prior to such amendment or repeal.
NINTH: The Corporation expressly elects not to be governed by Section
203 of the Corporation Law.
TENTH: If any provision (or part thereof) of this Amended and Restated
Certificate of Incorporation is held to be invalid or not legally enforceable
for any reason, such invalidity shall not affect the validity and
enforceability of the remaining provisions (or parts thereof), all of which
are inserted conditionally on their being valid in law. In the event of any
such invalidity or unenforceability, this Amended and Restated Certificate of
Incorporation shall be construed as if such invalid provision (or part
thereof) 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.
ELEVENTH: Except as otherwise provided herein, the Corporation reserves
the right to amend, alter, change or repeal any provision contained in this
Amended and Restated Certificate of Incorporation in the manner now or
hereafter prescribed by statute.
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D. The foregoing Amended and Restated Certificate of Incorporation has
been approved by the Board of Directors of the Corporation.
E. The foregoing Amended and Restated Certificate of Incorporation was
approved by the written consent of the holders of a majority of the
outstanding shares of Common Stock in accordance with Sections 228, 242, and
245 of the Corporation Law.
[remainder of page intentionally blank]
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IN WITNESS WHEREOF, Commerce Security Bancorp, Inc. has caused this
Amended and Restated Certificate of Incorporation to be signed by Robert P.
Keller, its President, and attested by Michael K. Krebs, its Secretary, this
4th day of June, 1997.
COMMERCE SECURITY BANCORP, INC.
By: /s/
----------------------------
Robert P. Keller
President
ATTEST:
By: /s/
------------------------------
Michael K. Krebs
Secretary
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EXHIBIT 4.6
VOID AFTER 5:00 P.M. PACIFIC TIME, ON JUNE 6, 2007
FORM OF SERIES B WARRANT
ISSUED PURSUANT TO JUNE 5, 1997
AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
THE SECURITIES LAWS OF ANY STATE IN RELIANCE ON EXEMPTIONS THEREFROM AND,
THEREFORE, MAY NOT BE RESOLD UNLESS REGISTERED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THIS
WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR SALE
IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE ACT.
COMMERCE SECURITY BANCORP, INC.
Common Stock Purchase Warrant
Expiring June 6, 2007
No. W-
COMMERCE SECURITY BANCORP, INC., a Delaware corporation (the "Company"),
for value received, hereby certifies that , or its
registered assigns (the "Holder"), is entitled to purchase from the Company
duly authorized, validly issued, fully paid and
nonassessable shares ("Warrant Shares") of the Company's Class B Common
Stock, $.01 par value per share (the "Class B Common Stock"), or the
Company's Class C Common Stock, $.01 par value per share (the "Class C
Common Stock"), as determined pursuant to Section 1.2, at the purchase price
per share of $4.81, as such price may be adjusted from time to time pursuant
to Section 7 hereof (the "Exercise Price"), at any time or from time to time
from the date hereof and up to and until 5:00 P.M., Pacific time, on June 6,
2007 or such later date determined in accordance with Section 9 hereof (the
"Expiration Date") all subject to the terms and conditions and adjustments
set forth below in this Warrant.
This Warrant is one of the Series B Warrants originally issued pursuant
to the Securities Purchase Agreement dated February 13, 1997 by and between
the Company and its subsidiaries and Madison Dearborn Capital Partners II,
L.P., Olympus Growth Fund II, L.P. and Olympus Executive Fund, L.P. (as
amended, and together with certain other agreements and instruments
contemplated thereby, the "Securities Purchase Agreement"). Reference is
hereby made to the Securities Purchase Agreement for additional terms and
provisions thereof affecting the Company and the holders of the Warrants.
The Company will provide a copy of the Securities Purchase
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<PAGE>
Agreement to the Holder upon request. As used herein, "Common Stock" shall
refer to all classes of the Company's common stock and the term "Junior
Common Stock" shall refer to the Class B Common Stock and the Class C Common
Stock, collectively.
1. EXERCISE OF WARRANT.
1.1 Subject to the terms and conditions hereof, this Warrant may be
exercised in whole or in part at any time or from time to time from the date
hereof and up to and until the Expiration Date, or, if such date is a day on
which federal or state chartered banking institutions located in the State of
California are authorized by law to close, then on the next succeeding day
which shall not be such a day, by presentation and surrender to the Company
at its principal office, of this Warrant and the purchase form annexed hereto
as EXHIBIT A properly completed and duly executed and accompanied by payment,
in the manner provided herein, of an amount (the "Exercise Payment") equal to
the then-current Exercise Price multiplied by the number of Warrant Shares
specified in such form. The Exercise Payment may be made by (x) delivery to
the Company of shares of Series A Capital Securities having an aggregate
Redemption Value (as defined herein) equal to the Exercise Payment,
accompanied by a stock power endorsed in blank, or (y) delivery to the
Company of shares of Series B Preferred Stock or Series E Preferred Stock
having an aggregate Redemption Value equal to the Exercise Payment,
accompanied by a stock power endorsed in blank, or (z) any combination of the
consideration specified in clauses (x) and (y) of this sentence having an
aggregate value as provided herein equal to the Exercise Payment.
Notwithstanding the immediately preceding sentence, at the option of the
Holder, this Warrant may be exercised by conversion into a number of shares
of Junior Common Stock equal to (x) the number of Warrant Shares minus (y) a
number of shares of Junior Common Stock having a Market Value equal to the
Exercise Payment (a "Cashless Exercise"). The Exercise Payment may not be
made in cash. If the Warrant is exercised for less than the total number of
shares evidenced by the Warrant, the Company shall, promptly after
presentation of the Warrant upon such exercise, execute and deliver a new
warrant, dated the date hereof, evidencing the rights of the Holder to
purchase the balance of the Warrant Shares purchasable hereunder upon the
same terms and conditions herein set forth. Upon and as of receipt by the
Company of a properly completed and duly executed purchase form accompanied
by payment as herein provided, the Holder shall be deemed to be the holder of
record of the shares of Junior Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Junior Common Stock
shall not then actually be delivered to the Holder. Certificates
representing the shares so purchased shall be delivered to the Holder within
ten (10) business days after exercise. The issuance of certificates for
shares of Junior Common Stock upon exercise of this Warrant shall be made
without charge to the Holder for any issuance tax in respect thereof or other
cost incurred by the Company in connection with such exercise and the related
issuance of shares of Warrant Shares.
1.2 The Warrant Shares issuable upon the exercise of this Warrant
shall be either shares of Class B Common Stock or shares of Class C Common
Stock, or any combination thereof, at the sole election of the Holder; PROVIDED,
HOWEVER, that the Holder may not elect to
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exercise the Warrant for shares of Class B Common Stock if and to the extent
that the issuance of the same would result in the Holder owning more than
9.9% of the Company's pro forma Voting Securities (as defined herein)
outstanding following such exercise; and PROVIDED, FURTHER, that at any time
that the Holder owns more than 9.9% of the outstanding Voting Securities, any
exercise of this Warrant, in whole or in part, shall be solely for Class C
Common Stock. Notwithstanding the immediately preceding sentence, this
Warrant may be exercised for shares of Class B Common Stock that would result
in the Holder owning more than 9.9% of the outstanding Voting Securities,
provided that at the time of such exercise, such Holder has delivered to the
Secretary of the Corporation an opinion or memorandum of counsel, in form and
substance reasonably satisfactory to the Company, or other reasonably
satisfactory evidence that such Holder may beneficially own more than 9.9% of
the outstanding Voting Securities of the Company and will acquire such shares
in accordance with the Bank Holding Company Act of 1956. As used herein,
"Voting Securities" shall mean the pro forma number of shares of capital
stock of the Company entitled to vote in an election of the directors of the
Company as of the time of the exercise of the Warrant, giving effect to the
exercise of the Warrant to the extent proposed but not giving effect to the
exercise of any other outstanding common stock equivalents held by the Holder
or by any other person. The Holder shall indicate on the purchase form
delivered to the Company in connection with such exercise the class of Junior
Common Stock that the Holder elects to receive upon such exercise.
2. RESERVATION OF SHARES.
The Company shall, at all times from the date of original issuance of the
Warrant until its expiration, reserve for issuance and delivery upon exercise
of the Warrant the number of Warrant Shares as shall be required for issuance
and delivery upon exercise of the Warrant. All Warrant Shares, upon
issuance, shall be validly authorized, issued and outstanding shares, fully
paid and nonassessable, and free of all liens, encumbrances and (except as
otherwise provided herein) restrictions thereon. The Company shall take all
such actions as may be necessary to assure that all Warrant Shares may be so
issued without violation of any applicable law or governmental regulation or
any requirements of any domestic securities exchange upon which shares of
Warrant Shares may be listed (except for official notice of issuance which
shall be immediately delivered by the Company upon each such issuance). The
Company shall not take any action which would cause the number of authorized
but unissued shares of Warrant Shares to be less than the number of such
shares required to be reserved hereunder for issuance upon exercise of the
Warrant.
3. FRACTIONAL SHARES.
If the exercise of the Warrant would otherwise result in the issuance of
a fraction of a share, the Company shall instead of issuing any fractional
shares or scrip representing fractional shares pay to the Holder an amount in
cash equal to such fraction multiplied by the Market Value (determined in
accordance with Section 4 below) of a share of Junior Common Stock.
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4. MARKET VALUE OF JUNIOR COMMON STOCK; REDEMPTION VALUE OF PREFERRED
STOCK.
(a) For purposes of this Agreement, except as provided in Sections 6.2
and 6.3,
(x) if the Class B Common Stock is publicly traded, the Market Value
of the Junior Common Stock shall equal an amount per share of Class B
Common Stock equal to the average closing price for the thirty (30) trading
days immediately preceding the date of exercise as reported (i) on the
principal national securities exchange on which the Class B Common Stock is
traded or (ii) if the Class B Common Stock is not traded on a national
exchange, on The Nasdaq National Market System ("Nasdaq"); or
(y) if the Class B Common Stock is not so quoted on Nasdaq or listed
on a national securities exchange, the Market Value of the Junior Common
Stock shall be an amount (which shall be equal for the Class B Common Stock
and the Class C Common Stock) mutually agreed upon by the Company and the
Holder, or, if the Company and the Holder are unable to agree, by a
nationally recognized investment banking firm selected by the Holder and
consented to by the Company, such consent not to be unreasonably withheld.
Any fees or expenses incurred in connection with the retention of an
investment banking firm pursuant to this Section 4(a)(y) shall be split
equally between the Holder and the Company.
(b) For purposes of this Agreement, the "Redemption Value" of the Series
A Capital Securities shall equal the Redemption Amount thereof (as defined in
the Declaration of Trust governing such Securities) as of the exercise date,
giving effect to any Principal Adjustment (as so defined) occurring prior to
the exercise date, and the Redemption Value of each of the Series B Preferred
Stock and the Series E Preferred Stock shall equal the Redemption Price (as
defined in the Company's Amended and Restated Certificate of Incorporation)
per share thereof were such share to be redeemed on the exercise date.
5. NO RIGHTS AS STOCKHOLDER.
This Warrant shall not entitle the Holder to any rights as stockholder of
the Company, either at law or in equity. The rights of the Holder are
limited to those expressed in this Warrant or in the Securities Purchase
Agreement or otherwise provided to the Holder by law.
6. EVENTS COMPELLING IMMEDIATE EXERCISE OF WARRANT.
6.1 This Warrant shall be automatically exercised at its then applicable
Exercise Price upon the later of (i) the date of the consummation of any
Qualified Offering (as defined herein) or (ii) the first business day
following the second anniversary of the date of original issuance of the
Warrant on which the Market Value of the Junior Common Stock is at least 200%
of the then applicable Initial Share Price (as defined herein). In the event
the Warrant is exercised pursuant to this Section 6, the Holder may elect a
form of Exercise Payment permitted under Section 1
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hereof; PROVIDED, HOWEVER, that if the Holder does not make such an election
within ten (10) business days following written notice by the Company that
the warrant is being automatically exercised pursuant to this Section 6, the
Company may cause a Cashless Exercise of such Holder's Warrant. A "Qualified
Offering" shall mean a firm-commitment underwritten public offering pursuant
to an effective registration statement under the Securities Act of 1933, as
amended, covering the offer and sale of Class B Common Stock to the public at
an offering price per share (prior to any underwriting discount or
commission) of at least 200% of the then-applicable Initial Share Price (as
defined herein) in which either (x) the aggregate offering price of shares
sold by the Company is not less than $25 million, or (y) the aggregate
offering price of all shares sold in the offering, including those sold by
the Company and those sold by other stockholders is not less than $30 million
of which the aggregate offering price of shares sold by the Company is not
less than $20 million. The "Initial Share Price" shall equal $4.81 per share
(as adjusted for any stock split, stock dividends or other similar
distributions to the holders of Class B Common Stock).
6.2 This Warrant shall be automatically exercised, in a Cashless
Exercise at its then applicable Exercise Price, upon the first business day
on which it is determined that the Market Value of the Junior Common Stock is
equal to or greater than $12.00 per share, as adjusted for any stock splits,
stock dividends or similar distributions to the holders of the Junior Common
Stock having a record date prior to the date of exercise of the Warrant. For
purposes determining the number of shares of Junior Common Stock to be issued
to the holder in the event of a an exercise effected under this Section 6.2,
the Market Value of the Junior Common Stock will be deemed to equal $12.00
per share (adjusted as aforesaid).
6.3 This Warrant shall be automatically exercised, in a Cashless
Exercise at its then applicable Exercise Price, in the event that, at any
time following the fifth anniversary of the date of original issuance of this
Warrant, one or more of the Series A Capital securities, the Series B
Preferred Stock or the Series E Preferred Stock shall be converted into
Common Stock, such automatic exercise of this Warrant to be effective
contemporaneously with such conversion. For purposes of determining the
number of shares of Junior Common Stock to be issued to the holder in the
event of an exercise effected under this Section 6.3, the Market Value of the
Junior Common Stock will be deemed to equal $6.00 per share (adjusted for any
stock splits, stock dividends or similar distributions to the holders of the
Junior Common Stock having a record date prior to the date of exercise of the
Warrant).
7. PRICES OF WARRANT SHARES; EFFECT OF DIVIDENDS ON COMMON STOCK.
7.1 The number of shares of Junior Common Stock for which this
Warrant may be exercised and the Exercise Price therefor shall be subject to
adjustment as follows:
(a) If the Company is recapitalized through the subdivision or
combination of its outstanding shares of Junior Common Stock into a larger
or smaller number of shares, the number of shares of Junior Common Stock
for which this Warrant may be exercised shall be increased or reduced, as
of the record date for such recapitalization, in the same
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proportion as the increase or decrease in the outstanding shares of
Junior Common Stock, and the Exercise Price shall be adjusted so that the
aggregate amount payable for the purchase of all Warrant Shares issuable
hereunder immediately after the record date for such recapitalization
shall equal the aggregate amount so payable immediately before such
record date.
(b) If the Company declares a dividend on Junior Common Stock, or
makes a distribution to holders of Junior Common Stock, and such dividend
or distribution is payable or made in Junior Common Stock or securities
convertible into or exchangeable for Junior Common Stock, or rights to
purchase Junior Common Stock or securities convertible into or exchangeable
for Junior Common Stock, the number of shares of Junior Common Stock for
which this Warrant may be exercised shall be increased, as of the record
date for determining which holders of Junior Common Stock shall be entitled
to receive such dividend or distribution, in proportion to the increase in
the number of outstanding shares (and shares of Junior Common Stock
issuable upon conversion of all such securities convertible into Junior
Common Stock) of Junior Common Stock as a result of such dividend or
distribution, and the Exercise Price shall be adjusted so that the
aggregate amount payable for the purchase of all the Warrant Shares
issuable hereunder immediately after the record date for such dividend or
distribution shall equal the aggregate amount so payable immediately before
such record date.
(c) If the Company declares a dividend on Junior Common Stock (other
than a dividend covered by subsection (b) above, or a dividend or other
distribution payable in cash covered by Section 7.6 below) or distributes
to holders of its Junior Common Stock, other than as part of its
dissolution or liquidation or the winding up of its affairs, any shares of
its stock, any evidence of indebtedness or any cash or other of its assets
(other than Junior Common Stock or securities convertible into or
exchangeable for Junior Common Stock) (an "Alternative Distribution"), the
Exercise Price shall be reduced by an amount equal to the value of the
Alternative Distribution per share of Junior Common Stock as determined in
good faith by the Company's Board of Directors based upon a written opinion
from a nationally recognized investment banking firm, selected by the
Holder, and taking into account, among other relevant factors, whether the
Holder acquired any Purchase Rights (as defined herein) with respect to
such dividend or distribution pursuant to the terms hereof. The selection
of such investment banking firm shall be consented to by the Company, which
consent shall not be unreasonably withheld, and such investment banking
firm's fees and expenses shall be paid by the Company. The Company shall
provide the Holder with written notice concerning an Alternative
Distribution at least ten (10) business days prior to the record date
therefor.
(d) In case the Company shall, at any time or from time to time
following the date hereof, issue or agree to issue by warrants, convertible
securities, stock options or otherwise, any of its Common Stock or Other
Securities (as defined herein), including treasury shares, (other than any
shares issued in contemplation of the Securities Purchase
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Agreement), for a consideration per share less than the Exercise Price
per share in effect immediately prior to the time of such issue or
sale, then forthwith upon such issue or sale, or agreement to issue
or sell, said Exercise Price shall be reduced to a price (calculated
to the nearest cent) determined by dividing (x) an amount equal to
(A) the product obtained by multiplying the number of shares of the
Common Stock outstanding (or then deemed to be outstanding as herein
provided) immediately prior to such issue by the Exercise Price in
effect at such time plus (B) the consideration received by the Company
upon such issue by (y) the number of shares of the Common Stock
outstanding (or then deemed to be outstanding as herein provided)
immediately after such issue. Whenever the Exercise Price is adjusted as
provided in this Section 7(d), the aggregate number of shares of Junior
Common Stock that the holder of this Warrant shall thereafter be entitled
to purchase at such adjusted Exercise Price shall be increased to the
number of shares determined by multiplying the number of shares of Junior
Common Stock issuable upon exercise of this Warrant immediately prior to
such adjustment by the Exercise Price in effect immediately prior to such
adjustment, and dividing the product so obtained by such adjusted Exercise
Price. For the purposes of this Section 7(d), the number of shares of
Common Stock deemed to be outstanding at any given time shall exclude
shares in the treasury of the Company but shall include all shares issuable
or to become issuable under any agreements, warrants (including this
Warrant), convertible securities, stock options, similar rights or
otherwise (hereinafter in this Section 7(d) referred to as "Options"). The
Board of Directors of the Company shall make a reasonable determination of
the fair value of the amount of consideration other than money received by
the Company upon the issue by it of any of its securities. Such Board
shall, in case any Common Stock or Options for the purchase thereof are
issued with other stock, securities or assets of the Company, determine
what part of the consideration received therefor is applicable to the issue
of the Common Stock or Options for the purchase thereof. If, as provided
herein, the Exercise Price is adjusted as a consequence of the Company's
issuance of Options, no further adjustment of the Exercise Price shall be
made upon the subsequent issuance of Common Stock upon the exercise of such
Options. To the extent that Options expire without having been exercised,
the Exercise Price computed upon their issuance, and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed to
take into account only the shares of Common Stock actually issued upon the
exercise of such Options. In any such recomputation, the consideration
applicable to the shares of Common Stock issued shall be the aggregate
consideration which was received by the Company upon the issuance of such
Options, whether or not exercised, plus the additional consideration
actually received by the Company upon the exercise thereof. No
recomputation shall have the effect of increasing the Exercise Price by an
amount in excess of the adjustment thereof made in respect of the issuance
of the expired Options. No adjustment shall be made pursuant to this
Section 7(d) for the issuance by the Company of (x) any securities issued
pursuant to executive compensation arrangements the terms of which are
disclosed in Disclosure Schedule 5.2(m)(18) to the Securities Purchase
Agreement, or (y) any securities that may be issued upon the conversion of
the mandatorily convertible debentures of SDN
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Bancorp, Inc. disclosed on Disclosure Schedule 5.2(b) to the Securities
Purchase Agreement.
(e) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease in the Exercise Price of
at least one percent; provided, however, that any adjustments which by
reason of this Section 7.1(e) are not required to be made immediately shall
be carried forward and taken into account at the time of exercise of this
Warrant or any subsequent adjustment in the Exercise Price which, singly or
in combination with any adjustment carried forward, is required to be made
under this Section 7.
(f) If the event as a result of which an adjustment is made under
paragraph (a), (b), (c) or (d) above does not occur, then any adjustments
in the Exercise Price or number of shares issuable pursuant to this Warrant
that were made in accordance with such paragraphs (a), (b), (c) or (d)
shall be adjusted to the Exercise Price and number of shares as were in
effect immediately prior to the record date for such event.
7.2 If at any time or from time to time there is a capital
reorganization of the Junior Common Stock (other than a recapitalization,
subdivision, combination, reclassification or other change of the Junior
Common Stock provided for in Section 7.1) or merger or consolidation of the
Company with or into another corporation, or the sale of all or substantially
all of the Company's properties and assets to any other person, then, as a
part of such reorganization, merger, consolidation or sale, provision shall
be made so that the Holder shall thereafter be entitled to receive, upon
exercise of the Warrant, the number of shares of stock or other securities or
property of the Company, resulting from such reorganization, merger or
consolidation or sale, to which a holder of Junior Common Stock, or other
securities deliverable upon the exercise of this Warrant, would have been
entitled on such reorganization, merger, consolidation, or sale. In any such
case, appropriate adjustments shall be made in the application of the
provisions of this Section 7 (including adjustment of the Exercise Price then
in effect and number of shares purchasable upon exercise of the Warrant)
which shall be applicable after such events; provided, however, that any such
adjustments shall be made so as to ensure that the provisions of this Section
7 applicable after such events shall be as equivalent as may be practicable
to the provisions of this Section 7 applicable before such events. In the
event of any such reorganization, merger, consolidation or sale, the
corporation formed by such consolidation or merger or the corporation which
shall have acquired the assets of the Company shall execute and deliver a
supplement hereto to the foregoing effect. If, as aforesaid, the Holder
would be entitled to receive property upon exercise of this Warrant and such
property consists, in whole or in part, of cash in excess of the Exercise
Price, the Holder may, at the Holder's option, exercise this Warrant without
making payment of the Exercise Price and, in such case, the Company or its
successor shall, upon distribution to the Holder, consider the Exercise Price
to have been paid in full and, in making settlement to the Holder, shall
deduct an amount equal to the Exercise Price from the amount payable to the
Holder.
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7.3 If the Company shall, at any time before the expiration of this
Warrant, dissolve, liquidate or wind up its affairs, the Holder shall have
the right to exercise this Warrant. Upon such exercise the Holder shall have
the right to receive, in lieu of the shares of Junior Common Stock of the
Company that the Holder otherwise would have been entitled to receive, the
same kind and amount of assets as would have been issued, distributed or paid
to the Holder upon any such dissolution, liquidation or winding up with
respect to such shares of Junior Common Stock of the Company had the Holder
been the holder of record of such shares of Junior Common Stock receivable
upon exercise of this Warrant on the date for determining those entitled to
receive any such distribution. If any such dissolution, liquidation or
winding up will result in any cash distribution in excess of the Exercise
Price, the Holder may, at the Holder's option, exercise this Warrant without
making payment of the Exercise Price and, in such case, the Company shall,
upon distribution to the Holder, consider the Exercise Price to have been
paid in full and, in making settlement to the Holder, shall deduct an amount
equal to the Exercise Price from the amount payable to the Holder per share
of Junior Common Stock. For purposes of this Section 7.3, the sale of all or
substantially all of the assets of the Company and distribution of the
proceeds thereof to the Company's shareholders shall be deemed a liquidation.
7.4 The Company shall retain a firm of independent public
accountants of nationally recognized standing (who may be any such firm
regularly employed by the Company) to make any computation required under
this Section 7, and a certificate signed by such firm shall be conclusive
evidence of the correctness of any computation made under this Section 7.
7.5 Whenever the number of Warrant Shares or the Exercise Price
shall be adjusted as required by the provisions of this Section 7, the
Company promptly shall file in the custody of its Secretary or an Assistant
Secretary, at its principal office, and furnish to each Holder hereof a
certificate prepared in accordance with Section 7.4 hereof, showing the
adjusted number of Warrant Shares and the Exercise Price and setting forth in
reasonable detail the circumstances requiring the adjustment.
7.6 If the Company declares a dividend or other distribution on the
Common Stock payable in cash prior to the earlier of the Expiration Date or
the exercise of this Warrant in full, the Company shall pay to the holder
hereof, in cash and contemporaneously with the payment of such dividend to
the holders of the Common Stock, an amount equal to the amount of such
dividend per share of Common Stock multiplied by the number of Warrant Shares
then covered by this Warrant as though such shares had been issued and
outstanding in the name of the holder as of the record date applicable to
such dividend.
7.7 If an event occurs which is similar in nature to the events
described in this Section 7, but is not expressly covered hereby, the Board
of Directors of the Company shall make or arrange for an equitable adjustment
to the number of Warrant Shares and the Exercise Price.
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8. PURCHASE RIGHTS.
If at any time the Company grants, issues or sells any options,
convertible securities or rights to purchase stock, warrants, securities or
other property pro rata to the record Holders of Junior Common Stock (the
"Purchase Rights"), then the Holder of this Warrant shall be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such Holder could have acquired if such Holder had held
the number of shares of Warrant Shares acquirable upon complete exercise of
this Warrant immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is
taken, the date as of which the record holders of Junior Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights; provided
that (a) if the Purchase Rights involve Common Stock that constitutes Voting
Securities, the Company shall make available to the Holder of this Warrant,
at such Holder's request, Purchase Rights for Class C Common Stock, except
that, if and to the extent that the Holder would not be permitted to exercise
this Warrant for Class B Common Stock pursuant to Section 1.2, the Company
shall grant, issue or sell to the Holder only Purchase Rights relating to
Class C Common Stock; and (b) if the Purchase Rights involve Voting
Securities other than Common Stock, the Company shall use its best efforts to
make available to the Holder of this Warrant, at such Holder's request,
Purchase Rights involving non-voting securities (except where such securities
are entitled to voting rights pursuant to applicable laws) which are
otherwise identical to the Purchase Rights involving voting securities and
which non-voting securities are convertible or exchangeable into such voting
securities on the same terms as the Company's Class C Common Stock is
convertible into the Company's Class B Common Stock.
9. COVENANTS OF THE HOLDER.
The Holder covenants and agrees that, notwithstanding anything to the
contrary contained herein, this Warrant may not be exercised at any time
that, or to the extent that, immediately following such exercise the Holder
would beneficially own equity securities of the Company, of any class(es),
which securities would in the aggregate constitute in excess of 24.9% of the
Fully Diluted Equity (as hereinafter defined) of the Company, unless and
until such Holder has delivered to the Secretary of the Company an opinion or
memorandum of counsel, in form and substance reasonably satisfactory to the
Company, or other reasonably satisfactory evidence that such Holder may
beneficially own more than 24.9% of the Fully Diluted Equity of the Company
and will acquire such shares in accordance with the Bank Holding Company Act
of 1956. The expiration of this Warrant shall be extended by an amount of
time equal to that during which this Warrant may not be exercised pursuant to
this Section 9. As used herein, the "Fully Diluted Equity" of the Company
shall mean the Company's equity immediately following the Acquisition (as
defined in the Securities Purchase Agreement) as calculated by the Federal
Reserve Bank of San Francisco or the staff of the Board of Governors of the
Federal Reserve System.
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10. NOTICES TO HOLDER.
So long as this Warrant shall be outstanding, (a) if the Company shall
propose to pay any dividends or make any distribution upon the Class B Common
Stock or (b) if the Company shall offer generally to the holders of Junior
Common Stock the right to subscribe to or purchase any shares of any class of
Junior Common Stock or securities convertible into Junior Common Stock or any
other similar rights or (c) if there shall be any (or any vote regarding any)
proposed capital reorganization of the Company in which the Company is not
the surviving entity, recapitalization of the capital stock of the company,
consolidation or merger of the Company with or into another corporation,
sale, lease or other transfer of all or substantially all of the property and
assets of the Company, or voluntary or involuntary dissolution, liquidation
or winding up of the Company, then in such event, the Company shall cause to
be deposited with an nationally recognized air courier, addressed to the
Holder hereof at the address appearing on the records of the Company at least
60 days prior to the relevant date described below (or the longest period as
is reasonably possible if 60 days is not reasonably possible, but in no event
less than 30 days), a notice containing a description of the proposed action
and stating the date or expected date on which a record of the Company's
stockholders is to be taken for the purpose of any such dividend,
distribution of rights, or such reclassification, reorganization,
consolidation, merger, conveyance, lease or transfer, dissolution,
liquidation or winding up is to take place and the date or expected date, if
any is to be fixed, as of which the holders of Junior Common Stock of record
shall be entitled to exchange their shares of Junior Common Stock for
securities or other property deliverable upon such event.
11. RESTRICTIONS ON TRANSFER.
This Warrant, the Warrant Shares and any other securities received
pursuant to this Warrant ("Other Securities") may be subject to restrictions
on transferability provided by United States federal securities laws, if
applicable. This Warrant, the Warrant Shares or Other Securities may also be
subject to restrictions on transferability under applicable state or other
jurisdiction's securities or "blue sky" laws. Until and unless this Warrant,
the Warrant Shares or Other Securities have been registered under the
Securities Act, the Holder shall, if requested by the Company prior to a
proposed transfer by the Holder, provide to the Company an opinion of counsel
reasonably satisfactory to the Company, to the effect that (i) the Warrant,
the Warrant Shares or Other Securities may be transferred without such
registration and (ii) the transfer will not violate any applicable state or
other jurisdiction's securities or "blue sky" laws. An opinion delivered
pursuant to this Section by the law firm of Kirkland & Ellis, in form and
substance reasonably satisfactory to the Company, will be acceptable to the
Company. Subject to (i) the transfer conditions described in this Section 11
and (ii) compliance with the terms of Section 3 of the Shareholder Agreement
dated [June 6], 1997, this Warrant and all rights hereunder are freely
transferable, in whole or in part, without restriction by the Company or
charge to the Holder, upon surrender of this Warrant to the Company.
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12. GOVERNING LAW.
This Warrant shall be governed by, and construed in accordance with, the
laws of the State of Delaware without regard to the conflict of laws
provisions thereof.
13. COMPANY BOOKS.
The Company shall not close its books against the transfer of this
Warrant or of any share of Warrant Shares issued or issuable upon the
exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant. The Company shall from time to time as may be
necessary use its best efforts to assure that the par value per share of the
unissued Warrant Shares acquirable upon exercise of this Warrant is at all
times equal to or less than the Exercise Price then in effect.
14. REGULATORY FILINGS.
Upon the Holder's reasonable request from time to time, the Company shall
assist and cooperate with the Holder in connection with any required
governmental filings such Holder is require to make or any governmental
approvals such Holder must obtain prior to or in connection with any exercise
of this Warrant (including, without limitation, making any filings required
to be made by the Company).
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15. CONDITIONAL EXERCISE.
Notwithstanding any other provision hereof, if an exercise of any portion
of this Warrant is to be made in connection with a registered public offering
or the reorganization, merger, consolidation or sale of the Company (as
described in Section 7.2), the exercise of any portion of this Warrant may,
at the election of the Holder, be conditioned upon the consummation of the
public offering or the reorganization, merger, consolidation or sale of the
Company, in which case such exercise shall not be deemed to be effective
until the consummation of such transaction.
IN WITNESS WHEREOF, the Company has executed this Agreement as of the 6th
day of June, 1997.
COMMERCE SECURITY BANCORP, INC.
By:
------------------------------
[CORPORATE
SEAL]
BWARRANT.
D-13
<PAGE>
Exhibit A
To Warrant
ELECTION TO PURCHASE
Subject to the condition set forth in Section 15 of this Warrant, and
consistent with the limitations set forth in Section 1.2 of this Warrant, the
undersigned hereby irrevocably elects to exercise this Warrant and to
purchase shares of Commerce Security Bancorp, Inc. CLASS
B Common Stock and shares of Commerce Security Bancorp,
Inc. CLASS C Common Stock issuable upon the exercise of this Warrant, and
requests that certificates for such shares shall be issued in the name of:
- ------------------------------------------------------------------------------
(Name)
- ------------------------------------------------------------------------------
(Address)
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(United States Social Security or other taxpayer
identifying number, if applicable)
and, if different from above, be delivered to:
- ------------------------------------------------------------------------------
(Name)
- ------------------------------------------------------------------------------
(Address)
and, if the number of Warrant Shares so purchased are not all of the Warrant
Shares issuable upon exercise of this Warrant, that a Warrant to purchase the
balance of such Warrant Shares be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated:
------------------------, ------
Name of Registered Owner:
-----------------------------------------------------
- ------------------------------------------------------------------------------
Address:
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- ------------------------------------------------------------------------------
Signature:
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D-14
<PAGE>
BWARRANT.
D-15
<PAGE>
EXHIBIT 4.7
VOID AFTER 5:00 P.M. PACIFIC TIME, ON JUNE 6, 2007
FORM OF WARRANT
ISSUED TO THE SHATTAN GROUP LLC AND AFFILIATES
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE IN RELIANCE ON EXEMPTIONS THEREFROM AND, THEREFORE,
MAY NOT BE RESOLD UNLESS REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THIS WARRANT
HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR SALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE ACT.
COMMERCE SECURITY BANCORP, INC.
Common Stock Purchase Warrant
Expiring June 6, 2002
No. S-
COMMERCE SECURITY BANCORP, INC., a Delaware corporation (the "Company"),
for value received, hereby certifies that _____________, or its registered
assigns (the "Holder"), is entitled to purchase from the Company ______________
(______) duly authorized, validly issued, fully paid and nonassessable shares
("Warrant Shares") of the Company's Class B Common Stock, $.01 par value per
share (the "Class B Common Stock"), or the Company's Class C Common Stock, $.01
par value per share (the "Class C Common Stock"), as determined pursuant to
Section 1.2, at the purchase price per share of $4.81, as such price may be
adjusted from time to time pursuant to Section 7 hereof (the "Exercise Price"),
at any time or from time to time from the date hereof and up to and until 5:00
P.M., Pacific time, on June 6, 2002 or such later date determined in accordance
with Sections 9 and 10 hereof (the "Expiration Date") all subject to the terms
and conditions and adjustments set forth below in this Warrant. As used herein,
"Common Stock" shall refer to all classes of the Company's common stock and the
term "Junior Common Stock" shall refer to the Class B Common Stock and the Class
C Common Stock, collectively.
Capitalized terms not defined herein are used as defined in that certain
Securities Purchase Agreement dated February 13, 1997 by and between the Company
and its subsidiaries and Madison Dearborn Capital Partners II, L.P., Olympus
Growth Fund II, L.P. and Olympus Executive Fund, L.P. (as amended, the
"Securities Purchase Agreement"), a copy of which will be provided to the Holder
upon request.
<PAGE>
1. EXERCISE OF WARRANT.
1.1 Subject to the terms and conditions hereof, this Warrant may be
exercised in whole or in part at any time or from time to time from the date
hereof and up to and until the Expiration Date, or, if such date is a day on
which federal or state chartered banking institutions located in the State of
California are authorized by law to close, then on the next succeeding day which
shall not be such a day, by presentation and surrender to the Company at its
principal office, of this Warrant and the purchase form annexed hereto as
EXHIBIT A properly completed and duly executed and accompanied by (w) payment,
in cash, by wire transfer in accordance with such wire instructions as are
furnished by the Company to the Holder prior to such exercise, or certified or
bank check, payable to the Company, of an amount (the "Exercise Payment") equal
to the then-current Exercise Price multiplied by the number of Warrant Shares
specified in such form, or (x) delivery to the Company of shares of Series A
Capital Securities having an aggregate Redemption Value (as defined herein)
equal to the Exercise Payment, accompanied by a stock power endorsed in blank,
or (y) delivery to the Company of shares of Series B Preferred Stock or Series E
Preferred Stock having an aggregate Redemption Value equal to the Exercise
Payment, accompanied by a stock power endorsed in blank, or (z) any combination
of the consideration specified in clauses (w), (x) and (y) of this sentence
having an aggregate value as provided herein equal to the Exercise Payment.
Notwithstanding the immediately preceding sentence, at the option of the Holder,
this Warrant may be exercised by conversion into a number of shares of Junior
Common Stock equal to (x) the number of Warrant Shares minus (y) a number of
shares of Junior Common Stock having a Market Value equal to the Exercise
Payment (a "Cashless Exercise"). If the Warrant is exercised for less than the
total number of shares evidenced by the Warrant, the Company shall, promptly
after presentation of the Warrant upon such exercise, execute and deliver a new
warrant, dated the date hereof, evidencing the rights of the Holder to purchase
the balance of the Warrant Shares purchasable hereunder upon the same terms and
conditions herein set forth. Upon and as of receipt by the Company of a
properly completed and duly executed purchase form accompanied by payment as
herein provided, the Holder shall be deemed to be the holder of record of the
shares of Junior Common Stock issuable upon such exercise, notwithstanding that
the stock transfer books of the Company shall then be closed or that
certificates representing such shares of Junior Common Stock shall not then
actually be delivered to the Holder. Certificates representing the shares so
purchased shall be delivered to the Holder within ten (10) business days after
exercise. The issuance of certificates for shares of Junior Common Stock upon
exercise of this Warrant shall be made without charge to the Holder for any
issuance tax in respect thereof or other cost incurred by the Company in
connection with such exercise and the related issuance of shares of Warrant
Shares.
1.2 The Warrant Shares issuable upon the exercise of this Warrant
shall be either shares of Class B Common Stock or shares of Class C Common
Stock, or any combination thereof, at the sole election of the Holder. The
Holder shall indicate on the purchase form delivered to the Company in
connection with such exercise the class of Junior Common Stock that the Holder
elects to receive upon such exercise.
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<PAGE>
2. RESERVATION OF SHARES.
The Company shall, at all times from the date of original issuance of the
Warrant until its expiration, reserve for issuance and delivery upon exercise of
the Warrant the number of Warrant Shares as shall be required for issuance and
delivery upon exercise of the Warrant. All Warrant Shares, upon issuance, shall
be validly authorized, issued and outstanding shares, fully paid and
nonassessable, and free of all liens, encumbrances and (except as otherwise
provided herein) restrictions thereon. The Company shall take all such actions
as may be necessary to assure that all Warrant Shares may be so issued without
violation of any applicable law or governmental regulation or any requirements
of any domestic securities exchange upon which shares of Warrant Shares may be
listed (except for official notice of issuance which shall be immediately
delivered by the Company upon each such issuance). The Company shall not take
any action which would cause the number of authorized but unissued shares of
Warrant Shares to be less than the number of such shares required to be reserved
hereunder for issuance upon exercise of the Warrant.
3. FRACTIONAL SHARES.
If the exercise of the Warrant would otherwise result in the issuance of a
fraction of a share, the Company shall instead of issuing any fractional shares
or scrip representing fractional shares pay to the Holder an amount in cash
equal to such fraction multiplied by the Market Value (determined in accordance
with Section 4 below) of a share of Junior Common Stock.
4. MARKET VALUE OF JUNIOR COMMON STOCK; REDEMPTION VALUE OF PREFERRED
STOCK.
(a) For purposes of this Agreement, except as provided in Section 6.2,
(x) if the Class B Common Stock is publicly traded, the Market Value
of the Junior Common Stock shall equal an amount per share of Class B
Common Stock equal to the average closing price for the thirty (30) trading
days immediately preceding the date of exercise as reported (i) on the
principal national securities exchange on which the Class B Common Stock is
traded or (ii) if the Class B Common Stock is not traded on a national
exchange, on The Nasdaq National Market System ("Nasdaq"); or
(y) if the Class B Common Stock is not so quoted on Nasdaq or listed
on a national securities exchange, the Market Value of the Junior Common
Stock shall be an amount (which shall be equal for the Class B Common Stock
and the Class C Common Stock) mutually agreed upon by the Company and the
Holder, or, if the Company and the Holder are unable to agree, by a
nationally recognized investment banking firm selected by the Holder and
consented to by the Company, such consent not to be unreasonably withheld.
Any fees or expenses incurred in connection with the retention of an
investment banking firm pursuant to this Section 4(a)(y) shall be split
equally between the Holder and the Company.
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<PAGE>
(b) For purposes of this Agreement, the "Redemption Value" of the Series A
Capital Securities shall equal the Redemption Amount thereof (as defined in the
Declaration of Trust governing such Securities) as of the exercise date, giving
effect to any Principal Adjustment (as so defined) occurring prior to the
exercise date, and the Redemption Value of each of the Series B Preferred Stock
and the Series E Preferred Stock shall equal the Redemption Price (as defined in
the Company's Amended and Restated Certificate of Incorporation) per share
thereof were such share to be redeemed on the exercise date.
5. NO RIGHTS AS STOCKHOLDER.
This Warrant shall not entitle the Holder to any rights as stockholder of
the Company, either at law or in equity. The rights of the Holder are limited
to those expressed in this Warrant or in the Securities Purchase Agreement or
otherwise provided to the Holder by law.
6. EVENTS COMPELLING IMMEDIATE EXERCISE OF WARRANT.
6.1 This Warrant shall be automatically exercised at its then applicable
Exercise Price upon the later of (i) the date of the consummation of any
Qualified Offering (as defined herein) or (ii) the first business day following
the second anniversary of the date of original issuance of the Warrant on which
the Market Value of the Junior Common Stock is at least 200% of the then
applicable Initial Share Price (as defined herein). Notwithstanding anything to
the contrary contained in this Section 6.1, the automatic exercise of this
Warrant pursuant to this Section 6.1 shall be suspended during any period in
which, upon a Cashless Exercise of the Warrant, there exist any contractual
restrictions imposed by or at the request of the Company or legal or regulatory
restrictions that prohibit the sale by the Holder of the Warrant Shares
immediately upon the exercise of the Warrant. In the event the Warrant is
exercised pursuant to this Section 6, the Holder may elect a form of Exercise
Payment permitted under Section 1 hereof; PROVIDED, HOWEVER, that if the Holder
does not make such an election within ten (10) business days following written
notice by the Company that the warrant is being automatically exercised pursuant
to this Section 6, the Company may cause a Cashless Exercise of such Holder's
Warrant. A "Qualified Offering" shall mean a firm-commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Class B
Common Stock to the public at an offering price per share (prior to any
underwriting discount or commission) of at least 200% of the then-applicable
Initial Share Price (as defined herein) in which either (x) the aggregate
offering price of shares sold by the Company is not less than $25 million, or
(y) the aggregate offering price of all shares sold in the offering, including
those sold by the Company and those sold by other stockholders is not less than
$30 million of which the aggregate offering price of shares sold by the Company
is not less than $20 million. The "Initial Share Price" shall equal $4.81 per
share (as adjusted for any stock split, stock dividends or other similar
distributions to the holders of Class B Common Stock).
6.2 This Warrant shall be automatically exercised, in a Cashless Exercise,
at its then applicable Exercise Price, upon the first business day on which it
is determined that the Market Value of the Junior Common Stock is equal to or
greater than $12.00 per share, as adjusted for
-4-
<PAGE>
any stock splits, stock dividends or similar distributions to the holders of
the Junior Common Stock having a record date prior to the date of exercise of
the Warrant. For purposes determining the number of shares of Junior Common
Stock to be issued to the holder in the event of a an exercise effected under
this Section 6.2, the Market Value of the Junior Common Stock will be deemed to
equal $12.00 per share (adjusted as aforesaid).
7. PRICES OF WARRANT SHARES; EFFECT OF DIVIDENDS ON COMMON STOCK.
7.1 The number of shares of Junior Common Stock for which this
Warrant may be exercised and the Exercise Price therefor shall be subject to
adjustment as follows:
(a) If the Company is recapitalized through the subdivision or
combination of its outstanding shares of Junior Common Stock into a larger
or smaller number of shares, the number of shares of Junior Common Stock
for which this Warrant may be exercised shall be increased or reduced, as
of the record date for such recapitalization, in the same proportion as the
increase or decrease in the outstanding shares of Junior Common Stock, and
the Exercise Price shall be adjusted so that the aggregate amount payable
for the purchase of all Warrant Shares issuable hereunder immediately after
the record date for such recapitalization shall equal the aggregate amount
so payable immediately before such record date.
(b) If the Company declares a dividend on Junior Common Stock, or
makes a distribution to holders of Junior Common Stock, and such dividend
or distribution is payable or made in Junior Common Stock or securities
convertible into or exchangeable for Junior Common Stock, or rights to
purchase Junior Common Stock or securities convertible into or exchangeable
for Junior Common Stock, the number of shares of Junior Common Stock for
which this Warrant may be exercised shall be increased, as of the record
date for determining which holders of Junior Common Stock shall be entitled
to receive such dividend or distribution, in proportion to the increase in
the number of outstanding shares (and shares of Junior Common Stock
issuable upon conversion of all such securities convertible into Junior
Common Stock) of Junior Common Stock as a result of such dividend or
distribution, and the Exercise Price shall be adjusted so that the
aggregate amount payable for the purchase of all the Warrant Shares
issuable hereunder immediately after the record date for such dividend or
distribution shall equal the aggregate amount so payable immediately before
such record date.
(c) If the Company declares a dividend on Junior Common Stock (other
than a dividend covered by subsection (b) above) or distributes to holders
of its Junior Common Stock, other than as part of its dissolution or
liquidation or the winding up of its affairs, any cash (a "Cash Dividend")
or any shares of its stock, any evidence of indebtedness or any other of
its assets (other than Junior Common Stock or securities convertible into
or exchangeable for Junior Common Stock) (an "Alternative Distribution"),
the Exercise Price shall be reduced by an amount equal to the amount of the
Cash Dividend per share or, if applicable, the value of the Alternative
Distribution per share of Junior Common
-5-
<PAGE>
Stock as determined in good faith by the Company's Board of Directors based
upon a written opinion from a nationally recognized investment banking
firm, selected by the Holder, and taking into account, among other relevant
factors, whether the Holder acquired any Purchase Rights (as defined
herein) with respect to such dividend or distribution pursuant to the terms
hereof. The selection of such investment banking firm shall be consented
to by the Company, which consent shall not be unreasonably withheld, and
such investment banking firm's fees and expenses shall be paid by the
Company. The Company shall provide the Holder with written notice
concerning an Alternative Distribution at least ten (10) business days
prior to the record date therefor.
(d) In case the Company shall, at any time or from time to time
following the date hereof, issue or agree to issue by warrants, convertible
securities, stock options or otherwise, any of its Common Stock or Other
Securities (as defined herein), including treasury shares, (other than any
shares issued in contemplation of the Securities Purchase Agreement), for a
consideration per share less than the Exercise Price per share in effect
immediately prior to the time of such issue or sale, then forthwith upon
such issue or sale, or agreement to issue or sell, said Exercise Price
shall be reduced to a price (calculated to the nearest cent) determined by
dividing (x) an amount equal to (A) the product obtained by multiplying the
number of shares of the Common Stock outstanding (or then deemed to be
outstanding as herein provided) immediately prior to such issue by the
Exercise Price in effect at such time plus (B) the consideration received
by the Company upon such issue by (y) the number of shares of the Common
Stock outstanding (or then deemed to be outstanding as herein provided)
immediately after such issue. Whenever the Exercise Price is adjusted as
provided in this Section 7(d), the aggregate number of shares of Junior
Common Stock that the holder of this Warrant shall thereafter be entitled
to purchase at such adjusted Exercise Price shall be increased to the
number of shares determined by multiplying the number of shares of Junior
Common Stock issuable upon exercise of this Warrant immediately prior to
such adjustment by the Exercise Price in effect immediately prior to such
adjustment, and dividing the product so obtained by such adjusted Exercise
Price. For the purposes of this Section 7(d), the number of shares of
Common Stock deemed to be outstanding at any given time shall exclude
shares in the treasury of the Company but shall include all shares issuable
or to become issuable under any agreements, warrants (including this
Warrant), convertible securities, stock options, similar rights or
otherwise (hereinafter in this Section 7(d) referred to as "Options"). The
Board of Directors of the Company shall make a reasonable determination of
the fair value of the amount of consideration other than money received by
the Company upon the issue by it of any of its securities. Such Board
shall, in case any Common Stock or Options for the purchase thereof are
issued with other stock, securities or assets of the Company, determine
what part of the consideration received therefor is applicable to the issue
of the Common Stock or Options for the purchase thereof. If, as provided
herein, the Exercise Price is adjusted as a consequence of the Company's
issuance of Options, no further adjustment of the Exercise Price shall be
made upon the subsequent issuance of Common Stock upon the exercise of such
Options. To the extent that Options expire without having been exercised,
the Exercise Price computed upon their issuance, and any subsequent
-6-
<PAGE>
adjustments based thereon, shall, upon such expiration, be recomputed to
take into account only the shares of Common Stock actually issued upon the
exercise of such Options. In any such recomputation, the consideration
applicable to the shares of Common Stock issued shall be the aggregate
consideration which was received by the Company upon the issuance of such
Options, whether or not exercised, plus the additional consideration
actually received by the Company upon the exercise thereof. No
recomputation shall have the effect of increasing the Exercise Price by an
amount in excess of the adjustment thereof made in respect of the issuance
of the expired Options. No adjustment shall be made pursuant to this
Section 7(d) for the issuance by the Company of (x) any securities issued
pursuant to executive compensation arrangements the terms of which are
disclosed in Disclosure Schedule 5.2(m)(18) to the Securities Purchase
Agreement, or (y) any securities that may be issued upon the conversion of
the mandatorily convertible debentures of SDN Bancorp, Inc. disclosed on
Disclosure Schedule 5.2(b) to the Securities Purchase Agreement.
(e) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease in the Exercise Price of
at least one percent; provided, however, that any adjustments which by
reason of this Section 7.1(e) are not required to be made immediately shall
be carried forward and taken into account at the time of exercise of this
Warrant or any subsequent adjustment in the Exercise Price which, singly or
in combination with any adjustment carried forward, is required to be made
under this Section 7.
(f) If the event as a result of which an adjustment is made under
paragraph (a), (b), (c) or (d) above does not occur, then any adjustments
in the Exercise Price or number of shares issuable pursuant to this Warrant
that were made in accordance with such paragraphs (a), (b), (c) or (d)
shall be adjusted to the Exercise Price and number of shares as were in
effect immediately prior to the record date for such event.
7.2 If at any time or from time to time there is a capital
reorganization of the Junior Common Stock (other than a recapitalization,
subdivision, combination, reclassification or other change of the Junior Common
Stock provided for in Section 7.1) or merger or consolidation of the Company
with or into another corporation, or the sale of all or substantially all of the
Company's properties and assets to any other person, then, as a part of such
reorganization, merger, consolidation or sale, provision shall be made so that
the Holder shall thereafter be entitled to receive, upon exercise of the
Warrant, the number of shares of stock or other securities or property of the
Company, resulting from such reorganization, merger or consolidation or sale, to
which a holder of Junior Common Stock, or other securities deliverable upon the
exercise of this Warrant, would have been entitled on such reorganization,
merger, consolidation, or sale. In any such case, appropriate adjustments shall
be made in the application of the provisions of this Section 7 (including
adjustment of the Exercise Price then in effect and number of shares purchasable
upon exercise of the Warrant) which shall be applicable after such events;
provided, however, that any such adjustments shall be made so as to ensure that
the provisions of this Section 7 applicable after such events shall be as
equivalent as may be practicable to the
-7-
<PAGE>
provisions of this Section 7 applicable before such events. In the event of any
such reorganization, merger, consolidation or sale, the corporation formed by
such consolidation or merger or the corporation which shall have acquired the
assets of the Company shall execute and deliver a supplement hereto to the
foregoing effect. If, as aforesaid, the Holder would be entitled to receive
property upon exercise of this Warrant and such property consists, in whole or
in part, of cash in excess of the Exercise Price, the Holder may, at the
Holder's option, exercise this Warrant without making payment of the Exercise
Price and, in such case, the Company or its successor shall, upon distribution
to the Holder, consider the Exercise Price to have been paid in full and, in
making settlement to the Holder, shall deduct an amount equal to the Exercise
Price from the amount payable to the Holder.
7.3 If the Company shall, at any time before the expiration of this
Warrant, dissolve, liquidate or wind up its affairs, the Holder shall have the
right to exercise this Warrant. Upon such exercise the Holder shall have the
right to receive, in lieu of the shares of Junior Common Stock of the Company
that the Holder otherwise would have been entitled to receive, the same kind and
amount of assets as would have been issued, distributed or paid to the Holder
upon any such dissolution, liquidation or winding up with respect to such shares
of Junior Common Stock of the Company had the Holder been the holder of record
of such shares of Junior Common Stock receivable upon exercise of this Warrant
on the date for determining those entitled to receive any such distribution. If
any such dissolution, liquidation or winding up will result in any cash
distribution in excess of the Exercise Price, the Holder may, at the Holder's
option, exercise this Warrant without making payment of the Exercise Price and,
in such case, the Company shall, upon distribution to the Holder, consider the
Exercise Price to have been paid in full and, in making settlement to the
Holder, shall deduct an amount equal to the Exercise Price from the amount
payable to the Holder per share of Junior Common Stock. For purposes of this
Section 7.3, the sale of all or substantially all of the assets of the Company
and distribution of the proceeds thereof to the Company's shareholders shall be
deemed a liquidation.
7.4 The Company shall retain a firm of independent public accountants
of nationally recognized standing (who may be any such firm regularly employed
by the Company) to make any computation required under this Section 7, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of any computation made under this Section 7.
7.5 Whenever the number of Warrant Shares or the Exercise Price shall
be adjusted as required by the provisions of this Section 7, the Company
promptly shall file in the custody of its Secretary or an Assistant Secretary,
at its principal office, and furnish to each Holder hereof a certificate
prepared in accordance with Section 7.4 hereof, showing the adjusted number of
Warrant Shares and the Exercise Price and setting forth in reasonable detail the
circumstances requiring the adjustment.
7.6 If an event occurs which is similar in nature to the events
described in this Section 7, but is not expressly covered hereby, the Board of
Directors of the Company shall make or arrange for an equitable adjustment to
the number of Warrant Shares and the Exercise Price.
-8-
<PAGE>
8. PURCHASE RIGHTS.
If at any time the Company grants, issues or sells any options, convertible
securities or rights to purchase stock, warrants, securities or other property
pro rata to the record Holders of Junior Common Stock (the "Purchase Rights"),
then the Holder of this Warrant shall be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
Holder could have acquired if such Holder had held the number of shares of
Warrant Shares acquirable upon complete exercise of this Warrant immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Junior Common Stock are to be determined for the grant, issue
or sale of such Purchase Rights; provided that (a) if the Purchase Rights
involve Common Stock that constitutes Voting Securities, the Company shall make
available to the Holder of this Warrant, at such Holder's request, Purchase
Rights for Class C Common Stock; and (b) if the Purchase Rights involve Voting
Securities other than Common Stock, the Company shall use its best efforts to
make available to the Holder of this Warrant, at such Holder's request, Purchase
Rights involving non-voting securities (except where such securities are
entitled to voting rights pursuant to applicable laws) which are otherwise
identical to the Purchase Rights involving voting securities and which
non-voting securities are convertible or exchangeable into such voting
securities on the same terms as the Company's Class C Common Stock is
convertible into the Company's Class B Common Stock.
9. EXTENSION OF TERM. If, at the date of the expiration of this Warrant,
the Company has entered into a binding agreement to effect a reorganization,
merger or consolidation of the Company with or into another corporation, or the
sale of all or substantially all of the Company's properties and assets to any
other Person, but such contemplated transaction has not yet been effectuated,
the exercise period of the Warrant shall be extended until such time as the
pending transaction is actually consummated; PROVIDED, HOWEVER, that in the
event that such reorganization, merger, consolidation or sale shall fail to be
consummated, the exercise period of the Warrant shall terminate.
10. COVENANTS OF THE HOLDER.
The Holder covenants and agrees that, notwithstanding anything to the
contrary contained herein, this Warrant may not be exercised at any time that,
or to the extent that, immediately following such exercise the Holder would
beneficially own equity securities of the Company, of any class(es), which
securities would in the aggregate constitute in excess of 24.9% of the Fully
Diluted Equity (as hereinafter defined) of the Company, unless and until such
Holder has delivered to the Secretary of the Company an opinion or memorandum of
counsel, in form and substance reasonably satisfactory to the Company, or other
reasonably satisfactory evidence that such Holder may beneficially own more than
24.9% of the Fully Diluted Equity of the Company and will acquire such shares in
accordance with the Bank Holding Company Act of 1956. The expiration of this
Warrant shall be extended by an amount of time equal to that during which this
Warrant may not be exercised pursuant to this Section 10. As used herein, the
"Fully Diluted Equity" of the Company shall mean the Company's equity
immediately following the Acquisition
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<PAGE>
(as defined in the Securities Purchase Agreement) as calculated by the Federal
Reserve Bank of San Francisco or the staff of the Board of Governors of the
Federal Reserve System.
11. NOTICES TO HOLDER.
So long as this Warrant shall be outstanding, (a) if the Company shall
propose to pay any dividends or make any distribution upon the Class B Common
Stock or (b) if the Company shall offer generally to the holders of Junior
Common Stock the right to subscribe to or purchase any shares of any class of
Junior Common Stock or securities convertible into Junior Common Stock or any
other similar rights or (c) if there shall be any (or any vote regarding any)
proposed capital reorganization of the Company in which the Company is not the
surviving entity, recapitalization of the capital stock of the company,
consolidation or merger of the Company with or into another corporation, sale,
lease or other transfer of all or substantially all of the property and assets
of the Company, or voluntary or involuntary dissolution, liquidation or winding
up of the Company, then in such event, the Company shall cause to be deposited
with an nationally recognized air courier, addressed to the Holder hereof at the
address appearing on the records of the Company at least 60 days prior to the
relevant date described below (or the longest period as is reasonably possible
if 60 days is not reasonably possible, but in no event less than 30 days), a
notice containing a description of the proposed action and stating the date or
expected date on which a record of the Company's stockholders is to be taken for
the purpose of any such dividend, distribution of rights, or such
reclassification, reorganization, consolidation, merger, conveyance, lease or
transfer, dissolution, liquidation or winding up is to take place and the date
or expected date, if any is to be fixed, as of which the holders of Junior
Common Stock of record shall be entitled to exchange their shares of Junior
Common Stock for securities or other property deliverable upon such event.
12. RESTRICTIONS ON TRANSFER.
This Warrant, the Warrant Shares and any other securities received pursuant
to this Warrant ("Other Securities") may be subject to restrictions on
transferability provided by United States federal securities laws, if
applicable. This Warrant, the Warrant Shares or Other Securities may also be
subject to restrictions on transferability under applicable state or other
jurisdiction's securities or "blue sky" laws. Until and unless this Warrant,
the Warrant Shares or Other Securities have been registered under the Securities
Act, the Holder shall, if requested by the Company prior to a proposed transfer
by the Holder, provide to the Company an opinion of counsel reasonably
satisfactory to the Company, to the effect that (i) the Warrant, the Warrant
Shares or Other Securities may be transferred without such registration and (ii)
the transfer will not violate any applicable state or other jurisdiction's
securities or "blue sky" laws. An opinion delivered pursuant to this Section by
the law firm reasonably satisfactory to the Company, in form and substance
reasonably satisfactory to the Company, will be acceptable to the Company.
Subject to (i) the transfer conditions described in this Section 12, this
Warrant and all rights hereunder are freely transferable, in whole or in part,
without restriction by the Company or charge to the Holder, upon surrender of
this Warrant to the Company.
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<PAGE>
13. GOVERNING LAW.
This Warrant shall be governed by, and construed in accordance with, the
laws of the State of Delaware without regard to the conflict of laws provisions
thereof.
14. COMPANY BOOKS.
The Company shall not close its books against the transfer of this Warrant
or of any share of Warrant Shares issued or issuable upon the exercise of this
Warrant in any manner which interferes with the timely exercise of this Warrant.
The Company shall from time to time as may be necessary use its best efforts to
assure that the par value per share of the unissued Warrant Shares acquirable
upon exercise of this Warrant is at all times equal to or less than the Exercise
Price then in effect.
15. REGULATORY FILINGS.
Upon the Holder's reasonable request from time to time, the Company shall
assist and cooperate with the Holder in connection with any required
governmental filings such Holder is require to make or any governmental
approvals such Holder must obtain prior to or in connection with any exercise of
this Warrant (including, without limitation, making any filings required to be
made by the Company).
16. CONDITIONAL EXERCISE.
Notwithstanding any other provision hereof, if an exercise of any portion
of this Warrant is to be made in connection with a registered public offering or
the reorganization, merger, consolidation or sale of the Company (as described
in Section 7.2), the exercise of any portion of this Warrant may, at the
election of the Holder, be conditioned upon the consummation of the public
offering or the reorganization, merger, consolidation or sale of the Company, in
which case such exercise shall not be deemed to be effective until the
consummation of such transaction.
-11-
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Agreement as of the 6th
day of June, 1997.
COMMERCE SECURITY BANCORP, INC.
By:/S/
-------------------------------------
[CORPORATE
SEAL]
-12-
<PAGE>
EXECUTIVE VERSION
Exhibit A
To Warrant
ELECTION TO PURCHASE
Subject to the condition set forth in Section 15 of this Warrant, and
consistent with the limitations set forth in Section 1.2 of this Warrant, the
undersigned hereby irrevocably elects to exercise this Warrant and to purchase
shares of Commerce Security Bancorp, Inc. CLASS B Common
Stock and shares of Commerce Security Bancorp, Inc. CLASS C
Common Stock issuable upon the exercise of this Warrant, and requests that
certificates for such shares shall be issued in the name of:
- --------------------------------------------------------------------------------
(Name)
- --------------------------------------------------------------------------------
(Address)
- --------------------------------------------------------------------------------
(United States Social Security or other taxpayer
identifying number, if applicable)
and, if different from above, be delivered to:
- --------------------------------------------------------------------------------
(Name)
- --------------------------------------------------------------------------------
(Address)
and, if the number of Warrant Shares so purchased are not all of the Warrant
Shares issuable upon exercise of this Warrant, that a Warrant to purchase the
balance of such Warrant Shares be registered in the name of, and delivered to,
the undersigned at the address stated below.
Dated: ,
------------------------ -----
Name of Registered Owner:
-------------------------------------------------------
- --------------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature:
----------------------------------------------------------------------
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<PAGE>
EXHIBIT 10.1
SUBSCRIPTION AGREEMENT
(BRIDGE LOAN/COMMON STOCK)
THIS SUBSCRIPTION AGREEMENT (the "Agreement") is made and entered into as
of the 20th day of December, 1996, by and between Commerce Security Bancorp,
Inc., a Delaware corporation with its principal place of business located in
Huntington Beach, California (the "Company"), and Peter H. Paulsen (the
"Subscriber").
WHEREAS, the Company is seeking commitments from several accredited
investors through a private placement (the "Private Placement") of shares of
its common stock, par value $.01 (the "Common Stock"), and certain other
securities in connection with the proposed acquisition (the "Acquisition") by
the Company of the Target Company (as such term is used in the Company's
December 18, 1996 Private Placement Memorandum pertaining to the Private
Placement (together with the December 20, 1996 Supplement and any other
supplement, amendment or annex thereof or any document incorporated by
reference therein, the "Memorandum"));
WHEREAS, the Subscriber desires to commit irrevocably to purchase,
subject only to those certain limited conditions described hereinafter,
specified amounts of the Company's Common Stock and to subscribe for and
purchase such amounts (the "Subscription"), at a per share price of $4.40
(the "Subscription Price"), all as is more particularly set forth herein;
WHEREAS, the Subscriber also wishes to loan the Company a fund a portion
of the Deposit (as defined in the Acquisition Agreement); and
WHEREAS, in connection with the Private Placement, the Subscriber desires
to obtain and the Company is willing to grant to the Subscriber certain
registration rights with respect to the Placement Shares;
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 hereto agree as follows:
1. PURCHASE AND DELIVERY OF PLACEMENT SHARES
(a) Subject to the terms and conditions herein set forth, the Subscriber
hereby irrevocably agrees and commits to purchase from the Company, at the
Subscription Price per share, the number of shares of Common Stock as
determined in accordance with Section 2(b)(i) hereof (the "Placement Shares").
(b) The Subscriber acknowledges and agrees that its Subscription is
hereby conditioned upon acceptance by the Company and may be accepted or
rejected, in whole (but not in part), by
<PAGE>
the Company in its sole discretion (the date on which the Company
accepts this Subscription Agreement being hereinafter called the "Acceptance
Date").
(c) The Company shall pay to the Subscriber at the Funding (as
hereinafter defined) a commitment fee (the "Commitment Fee") equal to one
percent (1%) of the product of the Subscription Price multiplied by the
number of Placement Shares.
2. BRIDGE LOAN
(a) The Subscriber hereby agrees to fund its Subscription initially in
the form of a loan to the Company in an original principal amount equal to
the Subscription Price multiplied by the number of Placement Shares (the
"Bridge Loan"), the proceeds of which the Company shall use to fund a portion
of the Deposit. Interest will accrue on the Bridge Loan at the rate of 8.25%
per annum calculated on the basis of a 360-day year. No payment of principal
or interest will be due until the earlier of the Funding Date (as defined
below) or that date (the "Repayment Date") which is five business days after
the effective date of the termination of the Acquisition Agreement.
(b) Principal and accrued interest on the Bridge Loan shall be payable
as follows:
(i) If the Proposed Acquisition is consummated, the sum of
principal and interest due on the Bridge Loan and the Commitment Fee
(collectively, the Subscription Proceeds), shall be converted, as of the
Funding Date, into an amount of Placement Shares equal to the amount of
the Subscription Proceeds divided by the Subscription Price (rounded to
the nearest Placement Share).
(ii) If the Acquisition Agreement is terminated under
circumstances that result in the Company recovering the Deposit,
principal and interest due on the Bridge Loan shall be payable in cash to
the Subscriber no later than the Repayment Date.
(iii) If the Merger Agreement is terminated under circumstances
that do result in the Company recovering the Deposit, at the Company's
election, the Company shall pay the principal and interest due under the
Bridge Loan either:
(A) in cash, or
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<PAGE>
(B) if and to the extent that payment in cash would cause
the Company to cease to be "well capitalized" for regulatory
purposes on a pro forma basis as of the month end next preceding
the Repayment Date, in Common Stock, using a conversion price
equal to the book value per share of Common Stock as of December
31, 1996, adjusted (if necessary) to take into account the loss
of the Deposit, or
(C) in any combination of (A) and (B).
3. CLOSING; DELIVERY OF PLACEMENT SHARES
(a) If the Proposed Acquisition is consummated, the delivery of the
Placement Shares shall take place at the executive offices of the Company at
One Pacific Plaza, 7777 Center Avenue, Huntington Beach, California, at 9:00
a.m., California time, prior to, but substantially simultaneously with, the
closing of the Proposed Acquisition, such time and date to be not more than
five (5) business days after the foregoing notification and to be specified
therein (such time and date being referred to as the "Funding Time," the date
of the Funding being referred to as the "Funding Date" and the consummation
of the Private Placement being referred to as the "Funding").
(b) At the Funding, the Placement Shares to be sold to the Subscriber
hereunder, registered in the name of the Subscriber or its nominee(s), as the
Subscriber may specify in writing at least three (3) days prior to the
Funding Date, shall be delivered by or on behalf of the Company to the
Subscriber, for the Subscriber's account, against delivery by the Subscriber
of the aggregate Subscription Price therefor, net of the Commitment Fee, in
immediately available funds in the form of one or more federal funds checks
or a wire transfer to an account designated by the Company. If the
Subscriber shall fail to timely provide information regarding the registered
holder of the Placement Shares, such shares shall be delivered to the
Subscriber in the form of one certificate registered in the Subscriber's name.
4. AGREEMENTS AND CONSENTS OF THE SUBSCRIBER
The Subscriber hereby agrees with the Company as follows:
(a) Subject only to the immediately following sentence, the
Subscriber agrees that this Agreement is irrevocable and that the rights and
obligations of any party hereto shall not be terminated or affected by
operation of law, whether by death, incompetence, disability or the
occurrence of any other event affecting a Subscriber. If and only if the
Company has not accepted this Subscription Agreement in accordance with
Section 1(b) on or before the twentieth (20th) calendar day following the
Subscriber's delivery hereof to the Company, then at any time after such date
but before the acceptance hereof by the Company, the Subscriber may withdraw
its
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<PAGE>
Subscription hereunder by notice to the Company. In the event that the
Company has not entered into the Acquisition Agreement on or before January
15, 1997, the Company or the Subscriber may upon five (5) business days'
notice to the other party hereto terminate this Agreement, which termination
shall be without liability to either party. In the event that the Funding
Date does not occur on or before August 15, 1997 or the Acquisition Agreement
is terminated, this Agreement shall terminate without liability to any party
hereto.
(b) Notwithstanding anything to the contrary contained herein, the
Subscriber acknowledges and agrees that the Company may decline to issue any
of the Placement Shares or pay any portion of the Commitment Fee to the
Subscriber hereunder if, in the reasonable opinion of the Company's counsel,
the Subscriber is required to obtain prior clearance or approval of such
transaction from any state or federal bank regulatory authority and if, in
the reasonable opinion of such counsel, the requisite approval or clearance
has not been obtained or satisfactory evidence thereof has not been presented
to the Company by the Funding Date.
(c) The Subscriber hereby acknowledges and understands that
although the Company has retained The Shattan Group LLC ("TSG") to serve as
placement agent in connection with the offering of securities other than
Common Stock in connection with the Private Placement, the Subscriber has not
relied upon any representation made or information provided by TSG in the
Subscriber's decision to enter into a Subscription Agreement or otherwise
invest in the Placement Shares.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Subscriber as
follows:
(a) As of the Acceptance Date, the Company is, and at all times
thereafter through the time of the Funding, the Company will have been, duly
organized and validly existing and in good standing as a corporation
organized under the laws of the State of Delaware, with corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Memorandum and to perform its obligations under
this Agreement.
(b) Each direct or indirect wholly-owned subsidiary of the Company
(each, a "Subsidiary"), and to the Company's knowledge, each direct or
indirect wholly-owned subsidiary of the Target Company (each, a "Target
Subsidiary"), has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction where the failure to so
qualify would have a material adverse effect on the conduct of the business
of, the condition (financial or otherwise) of, or the earnings or business of
(collectively, the "Condition") the Company and its Subsidiaries and the
Target Company and the Target Subsidiaries considered as one enterprise; all
of the issued and outstanding capital stock
-4-
<PAGE>
of each Subsidiary has been duly authorized and validly issued and is fully
paid and (except as provided by law) nonassessable and is owned by the
Company, directly or through Subsidiaries, free and clear of any mortgage,
pledge, lien, encumbrance or claim whatsoever, and to the Company's
knowledge, all of the issued and outstanding capital stock of each Target
Subsidiary has been duly authorized and validly issued and is fully paid and
(except as provided by law) nonassessable and is owned by the Target Company,
directly or through Target Subsidiaries, free and clear of any mortgage,
pledge, lien, encumbrance or claim whatsoever; except for the Subsidiaries
and other than as reflected in the financial statements or except as
otherwise reflected in the Memorandum, the Company does not and, to the
Company's knowledge, the Target Company does not, directly or indirectly, own
any shares of stock or any securities of any corporation or have any equity
interest in any firm, partnership, association or other entity.
(c) The Company and its Subsidiaries and, to the Company's
knowledge, the Target Company and the Target Subsidiaries possess all
material licenses, permits and other governmental authorizations as are
currently required for the conduct of their respective businesses, and all
such licenses, permits and other governmental authorizations are in full
force and effect; the Company and its Subsidiaries and, to the Company's
knowledge, the Target Company and the Target Subsidiaries are in compliance
therewith except to the extent that non-compliance would not, individually or
in the aggregate, have a material adverse effect on the Condition of the
Company and its Subsidiaries and the Target Company and the Target
Subsidiaries considered as one enterprise; and neither the Company nor any of
its Subsidiaries or, to the Company's knowledge, neither the Target Company
nor any of the Target Subsidiaries has received notice of any proceeding or
action relating to the revocation or modification of any such material
license, permit or other governmental authorization.
(d) Neither the Company nor any of the Subsidiaries and, to the
Company's knowledge, neither the Target Company nor any of the Target
Subsidiaries is in violation of its charter or other organizational document
or bylaws or materially in default in the performance or observance of the
obligations, agreements, covenants or conditions contained in any contract,
indenture, mortgage, loan agreement, note, lease or other instrument to which
it is a party or by which it or any of them or any of their properties may be
bound and that is material to the Company and its Subsidiaries and the Target
Company and the Target Subsidiaries considered as one enterprise.
(e) The execution, delivery and performance of this Agreement by
the Company and the consummation by the Company of the transactions
contemplated hereby, including the filing of an amended and restated
Certificate of Incorporation (the "Amended and Restated Charter") which
contemplates the terms of the Placement Shares and the Securities (as defined
in the Memorandum) offered in the Private Placement, have been duly
authorized by all necessary corporate action of the Company, and constitute a
valid and legally binding instrument of the Company enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent
-5-
<PAGE>
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
(f) The execution and delivery of this Agreement, the consummation
by the Company of the transactions herein contemplated and the compliance by
the Company with the terms hereof will not conflict with, or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, the Certificate of Incorporation, assuming the filing, prior
to the Funding, of the Amended and Restated Charter, or Bylaws of the
Company, or any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company is a party or by which any of
its properties or assets are bound, with such exceptions as would not have a
material adverse effect on the Condition of the Company and its Subsidiaries
and the Target Company and the Target Subsidiaries, considered as one
enterprise, or any applicable law, rule, regulation, judgment, order or
decree of any governmental, governmental instrumentality or court having
jurisdiction over the Company or any of its properties or assets; and no
consent, approval, authorization, order, registration or qualification of or
with any such government, governmental instrumentality or court is required
for the valid authorization, execution, delivery and performance by the
Company of this Agreement, the Placement Shares, and the Commitment Fee or
the consummation by the Company of the other transactions contemplated by
this Agreement, except such federal and state regulatory approvals as are
described in the Memorandum and such consents, approvals, authorizations,
registrations or qualification as may be required under state securities or
"blue sky" laws.
(g) When issued and delivered by the Company against payment
therefor, the Placement Shares will be duly authorized, validly issued, fully
paid and non-assessable, and the forms of certificates evidencing the
Placement Shares will be in due and proper form.
(h) Relying in part on the representations and warranties of the
Subscribers set forth in Section 6, the offering of the Placement Shares to
the Subscriber is exempt from registration under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to Section 4(2) thereof.
(i) The Memorandum does not contain an untrue statement of a
material fact or omit to 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 with respect to information
regarding the Company and its Subsidiaries, and as of the date of the
Memorandum and at all times thereafter through the Acceptance Date, the
Memorandum will not contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading with
respect to information regarding the Company and its Subsidiaries.
-6-
<PAGE>
(j) The Company has no reason to believe that the information
concerning the Target Company that is contained in the Memorandum is not true
and correct in all material respects or that the representations and
warranties of the Target Company as set forth in the Acquisition Agreement
(as defined in the Memorandum) are not true and correct in all material
respects.
(k) The accountants who certified the financial statements and
supporting schedules of SDN Bancorp, Inc., Liberty National Bank and Commerce
Security Bank included in the 1996 Information Statement (as defined in the
Memorandum) are independent public accountants within the meaning of the
Securities Act and the rules and regulations promulgated thereunder (the
"Securities Act Regulations").
(l) The financial statements of the Company as at September 30,
1996 and for the three- and nine-month periods then ended included in the
Memorandum and the historical financial statements of SDN Bancorp, Inc.,
Liberty National Bank and Commerce Security Bank included in the 1996
Information Statement (1) comply in all material respects, except as may be
reflected in the notes to the financial statements, as to form with the
accounting requirements of the Securities Act, the Securities Act
Regulations, and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (2) present fairly in all material respects the financial
position of the respective entities as at the dates indicated and the results
of their operations for the periods specified, except as described in the
Offering Materials (as defined in the Memorandum) and (3) have been prepared
in conformity with generally accepted accounting principles applied on a
consistent basis, except as stated therein or, in the case of unaudited
statements, as permitted by SEC Form 10-Q or 10-QSB, as applicable. Except as
set forth in the pro forma financial statements of the Company included in
the Memorandum, such pro forma financial statements comply in all material
respects with the requirements of Regulation S-X and reflect all adjustments
necessary to present fairly the pro forma financial position of the Company
at the dates indicated.
(m) From September 30, 1996 through and including the Acceptance
Date, and except as described in the Memorandum, (1) no event or development
has occurred with respect to the Company or any of its Subsidiaries or, to
the Company's knowledge, the Target Company or any of the Target Subsidiaries
that, individually or in the aggregate, has had or could reasonably be
expected to have, a material adverse effect on the Condition of the Company
and its Subsidiaries and the Target Company and its Subsidiaries, considered
as one enterprise, whether or not arising in the ordinary course of business,
(2) other than the Acquisition Agreement and the agreements relating to the
Private Placement and described in the Memorandum, there have been no
material transactions or agreements entered into by the Company or any of its
Subsidiaries or, to the Company's knowledge, the Target Company or any of the
Target Subsidiaries other than those in the ordinary course of business, (3)
except pursuant to agreements relating to the Private Placement and described
in the Memorandum, neither the Company nor any of its Subsidiaries has issued
or purported to issue any securities or, other than
-7-
<PAGE>
in the ordinary course of business, incurred any material liability or
obligation, direct or contingent, for borrowed money, and (4) neither the
Company nor any of its Subsidiaries and, to the Company's knowledge, neither
the Target Company nor any of the Target Subsidiaries has not entered into or
modified any outstanding, material agreement with, or plan or undertaking
submitted to, any regulatory or supervisory agency or body which would
materially modify the ability of the Company and its Subsidiaries or the
Target Company and the Target Subsidiaries to continue to conduct their
respective businesses as now currently conducted.
(n) The Company's capitalization as of September 30, 1996 and as
adjusted to give effect to the issuance of the Securities are as set forth in
the Memorandum under the heading "USE OF PROCEEDS AND CAPITALIZATION" and the
Securities conform in all material respects to the respective descriptions
thereof in the Memorandum.
(o) Except as disclosed in the Memorandum, the Company and its
Subsidiaries and, to the Company's knowledge, the Target Company and the
Target Subsidiaries have conducted and are conducting their businesses so as
to comply in all material respects with all applicable statutes and
regulations to which a failure to comply could, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
Condition of the Company and its Subsidiaries and the Target Company and its
Subsidiaries, considered as one enterprise. Except as disclosed in the
Memorandum, neither the Company nor any of its Subsidiaries and, to the
Company's knowledge, neither the Target Company nor any of the Target
Subsidiaries is materially in violation of any written directive from any
regulatory or governmental body to make any material change in the method of
conducting its business; there is no charge, investigation, action, suit or
proceeding before or by any court or governmental agency or body (domestic or
foreign) pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries or, to the Company's knowledge, the Target
Company or any of the Target Subsidiaries that is material to the Condition
of the Company and its Subsidiaries and the Target Company and the Target
Subsidiaries, considered as one enterprise, except as may be disclosed in the
Memorandum; all pending or threatened legal or governmental proceedings to
which the Company or any of its Subsidiaries or, to the Company's knowledge,
the Target Company or any of the Target Subsidiaries is a party or of which
any of their respective properties or assets is the subject which are not
described in the Memorandum, including ordinary routine litigation incidental
to their business, considered in the aggregate, could not reasonably be
expected to have a material adverse effect upon the Condition of the Company
and its Subsidiaries and the Target Company and the Target Subsidiaries,
considered as one enterprise.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SUBSCRIBER
The Subscriber hereby represents, warrants and covenants to the
Company as follows:
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<PAGE>
(a) If the Subscriber is a corporation, the Subscriber is duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of organization, with full power and authority (corporate and
other) to perform its obligations under this Agreement.
If the Subscriber is a trust, the Trustee has been duly
appointed as Trustee of the Subscriber with full power and authority to act
on behalf of the Subscriber and to perform the obligations of the Subscriber
under this Agreement.
If the Subscriber is a limited partnership, the Subscriber is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, with full power and authority to perform its
obligations under this Agreement.
If the Subscriber is an individual, the Subscriber has the full
power and authority to perform its obligations under this Agreement.
(b) The execution, delivery and performance of this Agreement by
the Subscriber and the consummation by the Subscriber of the transactions
contemplated hereby have been duly authorized by all necessary corporate or
other action of the Subscriber; and this Agreement, when duly executed and
delivered by the Subscriber and accepted by the Company, will constitute a
valid and legally binding instrument, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles.
(c) The Subscriber is not insolvent and has sufficient cash funds
on hand to purchase the Placement Shares on the terms and conditions
contained in this Agreement and has no reason to believe that it will not
have such funds on or about the Funding Date. Upon a reasonable request by
the Company, the Subscriber will provide the Company with evidence or
substantiation that such Subscriber has the financial means to satisfy its
financial obligations under this Agreement and the foregoing evidence and
substantiation shall be a true and accurate representation of such means.
(d) Except as may be disclosed on Annex B to this Agreement, no
state, federal or foreign regulatory approvals, permits, licenses or consents
or other contractual or legal obligations are required in order for the
Subscriber to enter into this Agreement or to purchase the Placement Shares.
Based upon the advice of Subscriber's counsel, Subscriber has no reason to
believe that the regulatory approvals listed on Annex B, if any, will not be
received within usual and customary time frames and without the imposition of
any terms or conditions that would have an adverse effect on the Company's
operations or strategic plan.
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<PAGE>
(e) The execution and delivery of this Agreement, the consummation
by the Subscriber of the transactions herein contemplated and the compliance
by the Subscriber with the terms hereof do not and will not conflict with, or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, the constituent documents of the Subscriber or
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Subscriber is a party or by which any of the
Subscriber's properties or assets are bound, or any applicable law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction over the
Subscriber or any of the Subscriber's properties or assets; and no consent,
approval, authorization, order, registration or qualification of or with any
such government, governmental instrumentality or court, domestic or foreign,
is required for the valid authorization, execution, delivery and performance
by the Subscriber of this Agreement or the consummation by the Subscriber of
the transactions contemplated by this Agreement except as may be disclosed on
Annex B.
(f) Except as may be disclosed in the Memorandum, the Subscriber
has not entered into any contracts, arrangements, understandings or
relationships (legal or otherwise) with any other person or persons with
respect to the transactions contemplated by this Agreement or any securities
of the Company, including but not limited to transfer or voting of any of the
securities, finder's fees, joint ventures, loan or option arrangements, puts
or calls, guarantees of profits, division of profits or loss, or the giving
or withholding of proxies; and the Subscriber does not own any securities of
the Company which are pledged or otherwise subject to a contingency the
occurrence of which would give another person voting power or investment
power over such securities.
(g) The Subscriber has been advised and understands that the
Placement Shares have not been registered under the Securities Act in
reliance upon the exemption from such registration provided in Section 4(2)
thereof and that the Placement Shares have not been registered under the
securities laws of any state in reliance on exemptions therefrom and,
therefore, the Placement Shares may not be resold unless registered under
applicable state securities laws or an exemption from registration is
available. The Company is and will be under no obligation to register the
Placement Shares under the Securities Act except to the extent provided in
the Registration Rights Agreement (as defined hereinafter), when executed by
the Company.
(h) The Subscriber acknowledges receipt of, and has had a
reasonable opportunity to review, the Memorandum and understands that no
person has been authorized to provide any additional information regarding
the Company, the Target Company or the Proposed Acquisition (other than
information which otherwise is publicly available) or make any
representations that were not contained in such Memorandum, and the
Subscriber has not relied on any such other information or representations in
making a decision to purchase any of the Placement Shares. The Subscriber
understands that an investment in the Placement Shares
-10-
<PAGE>
involves a high degree or risk, including the risks set forth under the
heading "RISK FACTORS" in the Memorandum.
(i) The Subscriber has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of
an investment in the Placement Shares, is able to bear the economic risk of
an investment in the Placement Shares, including at the date hereof, the
ability to afford a complete loss of the investment, and is (i) a
sophisticated institutional or corporate investor as well as an "accredited
investor" as defined in Rule 501(a) under the Securities Act; or (ii) a
sophisticated individual investor as well as an "accredited investor" as
defined in Rule 501(a) under the Securities Act. The Subscriber agrees to
provide promptly such additional information as may be reasonably required by
the Company for compliance with the securities laws of the state in which the
Subscriber is located.
(j) The Subscriber intends to purchase the Placement Shares offered
in the Memorandum for the account of the Subscriber and its affiliates and
not, in whole or in part, for the account of any other person. The
Subscriber represents and warrants to, and covenants and agrees with, the
Company that the Placement Shares to be acquired by it hereunder are being
acquired for its own account for investment and with no intention of
distributing or reselling such Placement Shares or any part thereof or
interest therein in any transaction which would be in violation of the
securities laws of the United States of America or any state.
(k) The Subscriber has been advised that, prior to any registration
of the Placement Shares pursuant to the provisions of the Registration Rights
Agreement, any and all certificates representing the Placement Shares and any
and all certificates issued in replacement thereof or in exchange therefor
shall bear the following legend or one substantially similar thereto:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE IN RELIANCE ON EXEMPTIONS
THEREFROM AND, THEREFORE, MAY NOT BE RESOLD UNLESS
REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE
(INCLUDING, WITHOUT LIMITATION, THE EXEMPTION PROVIDED UNDER
RULE 144A OF THE ACT).
In addition, certificates representing the Placement Shares acquired by
Subscribers located in certain states will bear additional legends as
required by the securities laws of those states.
(l) The Subscriber will not sell or otherwise transfer any of the
Placement Shares, except in compliance with the provisions of the applicable
securities laws and as stated in
-11-
<PAGE>
any legend. The Subscriber has been advised that (i) there are significant
restrictions on the transfer or the Placement Shares, (ii) there is no active
market for the Common Stock, (iii) no trading market for the Placement Shares
is likely to be available in the foreseeable future, and (iv) an investment
in the Placement Shares may be extremely illiquid.
7. FUNDING CONDITIONS.
The respective obligations of the Subscriber and the Company to
consummate the purchase and sale of the Placement Shares and, if applicable,
the payment of the Commitment Fee shall be subject, in the discretion of the
Company or the Subscriber, as the case may be, to the following conditions:
(a) All representations and warranties and other statements of the
other party are, at and as of the Funding Time (except as expressly provided
otherwise), true and correct in all material respects (assuming that the
other party shall have performed in all material respects all of its
obligations hereunder theretofore to be performed).
(b) The Company has complied in all material respects with all
agreements and satisfied in all material respects all conditions on its part
to be performed or satisfied hereunder at or prior to the Funding.
(c) No stop order suspending the Private Placement shall have been
issued, and no proceeding for that purpose shall have been instituted or, to
the knowledge of the Company or the Subscriber, threatened by any regulatory
or governmental body.
(d) The Company shall have entered into an Acquisition Agreement
that is substantially similar in all material respects to the Acquisition
Agreement described in the Memorandum, which Acquisition Agreement shall
provide for Merger Consideration (as defined in the Memorandum) of not more
than $23.00 per share of Target Company common stock; all of the material
conditions to the closing of the Acquisition shall have been satisfied or, if
permitted, duly waived, and the Funding of the sale of the Placement Shares
shall occur prior to, but substantially simultaneous with, the closing of the
Acquisition pursuant to the Acquisition Agreement.
(e) Other than as contemplated by the Memorandum, there shall not
have been any change effected without the Subscriber's prior written consent
(which shall not be unreasonable withheld) after the date of this Agreement
in the charter or other organizational document or bylaws of the Company
adversely affecting the rights of the holders of the Placement Shares;
PROVIDED, HOWEVER, that an increase in the Company's authorized capital
stock, whether or not described in the Memorandum, shall not be deemed to
adversely affect the rights of the holders of the Placement Shares.
-12-
<PAGE>
(f) At the Funding, the Subscriber shall have received a
certificate, dated as of the Funding Date, of the Chief Executive Officer and
the Chief Financial Officer of the Company in which such officers state that,
to their knowledge, the closing conditions specified in paragraphs (a)
through (e) of this Section have been satisfied.
(g) At the Funding, the Company shall have executed and delivered
to the Subscriber a registration rights agreement in the form attached hereto
as Annex C (the "Registration Rights Agreement").
(h) At the Funding, the Company and the Subscriber shall have
received the customary form of opinion, dated as of such date, of Nutter,
McClennen & Fish, LLP, outside counsel for the Company, in form and substance
satisfactory to your counsel, and such other customary closing documentation
as the parties may reasonably request.
8. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation made by any party to this Agreement,
all covenants, agreements, representations and warranties made by the Company
and the Subscriber herein shall survive the execution of this Agreement, the
delivery to the Subscriber of certificates representing the Placement Shares
being purchased and the payment therefor.
9. BROKER'S FEE.
The Subscriber represents to the Company that it has taken no action
which would entitle anyone to a broker's or finder's fee or other
compensation in connection with the transactions contemplated hereby.
10. INDEMNITY.
The Subscriber agrees to indemnify and hold harmless the Company and each
employee, officer and director of the Company from and against any loss,
damage or liability caused by or arising out of a breach of any
representation, warranty or agreement of the Subscriber contained in this
Agreement or in any other document provided by the Subscriber to the Company
in connection with the Subscriber's investment in Placement Shares.
11. TERMINATION.
(a) Either of the parties hereto may terminate this Agreement (i)
if the Funding Date does not occur by August 15, 1997 through no fault of the
Subscriber, (ii) any federal or state regulator shall have made a final
determination denying an application of either party to the Acquisition
Agreement, the granting of which is essential to the consummation of the
Proposed
-13-
<PAGE>
Acquisition, or (iii) the Target Company terminates the Acquisition
Agreement. In addition, this Agreement shall terminate upon mutual consent
of the parties hereto.
(b) The Company and the Subscriber hereby agree that any
termination of this Agreement pursuant to Section 11(a) (other than
termination in the event of a breach of this Agreement by the Subscriber or
misrepresentation of any of the statements made herein by the Subscriber)
shall be without liability of the Company or the Subscriber.
12. NOTICES.
All communications hereunder shall be in writing and, if to the
Company, will be mailed, delivered or telecopied and confirmed to it at One
Pacific Plaza, 7777 Center Avenue, Huntington Beach, California 92647,
Attention: Robert P. Keller, Facsimile: (714) 891-8884; and if to the
Subscriber, will be mailed, delivered or telecopied and confirmed to it at
the address set forth on the signature page hereto;
13. BINDING EFFECT.
This Agreement shall be binding upon, and shall inure solely to the
benefit of, each of the parties hereto, and each of their respective heirs,
executors, administrators, successors and permitted assigns, and no other
person shall acquire or have any right under or by virtue of this Agreement.
14. GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance
with the laws of the State of Delaware without regard to the conflict of law
provisions thereof.
15. ENTIRE AGREEMENT.
This Agreement represents the entire understanding of the parties with
respect to the matters addressed herein and supersedes all prior written and
oral understandings concerning the subject matter herein.
16. ASSIGNMENT.
This Agreement may not be assigned by the Subscriber without the consent
of the Company.
17. SUCCESSORS.
-14-
<PAGE>
This Agreement shall inure to the benefit of and be binding upon the
Company, the Subscriber and their respective successors and permitted
assigns. Nothing expressed herein is intended or shall be construed to give
any person other than the persons referred to in the preceding sentence any
legal or equitable right, remedy or claim under or in respect of this
Agreement.
18. SEVERABILITY OF PROVISIONS.
Any covenant, provision, agreement or term of this Agreement that is
prohibited or is held to be void or unenforceable in any jurisdiction shall
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions thereof.
19. MISCELLANEOUS.
Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against whom enforcement of the change, waiver, discharge or
termination is sought. The headings in this Agreement are for the purposes
of references only and shall not limit or otherwise affect the meaning
hereof.
20. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of the counterparts,
each of which counterparts when so executed and delivered shall be deemed to
be an original, but all such respective counterparts shall together
constitute but one and the same instrument.
* * *
-15-
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound thereby, each of
the Subscriber and Commerce Security Bancorp, Inc. has signed or caused to be
signed its name under seal as of the day and year first above written.
Maximum Number of Shares of INDIVIDUAL INVESTOR:
Common Stock Desired
To Be Purchased
Hereunder:
-----------------------------------
(Print Name)
- ---------------------- -----------------------------------
(Signature)
Mailing
Address:
--------------------------------------
--------------------------------------
Telephone:
-----------------------------------------
Facsimile:
-----------------------------------------
PARTNERSHIP, CORPORATION, TRUST OR
INSTITUTIONAL INVESTOR:
----------------------------------------------
(Print Name of Entity)
By:-------------------------------------------
Name:
Title:
Jurisdiction
of Organization:
-------------------------------
Mailing
Address:
-------------------------------------------
-------------------------------------------
Telephone:
-----------------------------------------
Facsimile:
-----------------------------------------
-16-
<PAGE>
ACCEPTANCE OF SUBSCRIPTION
The Company hereby accepts the above subscription for Placement Shares.
COMMERCE SECURITY BANCORP, INC.
By:
----------------------------
Name: Robert P. Keller
Title: President and Chief Executive Officer
308137_7.WP6
<PAGE>
ANNEX B
DESCRIPTION OF REQUIRED REGULATORY APPROVALS
TO BE OBTAINED BY THE SUBSCRIBER
<PAGE>
EXHIBIT 10.4
DARTMOUTH CAPITAL GROUP, L.P.
June 3, 1997
Commerce Security Bancorp, Inc.
7777 Center Avenue
Huntington Beach, CA 92647
Attention: Robert P. Keller
President and Chief Executive Officer
Ladies and Gentlemen:
On December 31, 1996, Dartmouth Capital Group, L.P. ("DCG") and Commerce
Security Bancorp, Inc. (the "Company") entered into a standby commitment letter
(the "Standby Commitment Letter"), whereby DCG committed to provide up to
$7,600,000 of additional funding for the Company's proposed acquisition (the
"Proposed Acquisition") of Eldorado Bancorp ("Eldorado") if the Company was
unable to obtain regulatory approval for a Target Redemption Amount of at least
$12,000,000. The Standby Commitment Letter was amended and restated effective
January 14, 1997 to clarify certain interpretive issues and further amended and
restated as of March 21, 1997 to alter the basis on which the Company could draw
upon the Standby Commitment (as defined herein) and to alter the types of
securities in which the funds drawn under the Standby Commitment would be
invested. DCG and the Company desire to further amend and restate the
Commitment Letter to increase the amount of Senior Securities that DCG will
purchase as of the Funding Date.
In furtherance of the foregoing, the Standby Commitment Letter is hereby
further amended and restated to read as follows:
1. SECURITIES PURCHASE AGREEMENT. Reference is made to the Securities
Purchase Agreement dated February 13, 1997 (as amended on March 21, 1997, April
11, 1997 and June 3, 1997, the "Securities Purchase Agreement") by and among the
Company, Madison Dearborn Capital Partners II, L.P., Olympus Growth Fund II,
L.P., and the other parties named therein. Capitalized terms used in this
Standby Commitment and not otherwise defined shall have the respective meanings
assigned to such terms in the Securities Purchase Agreement.
2. COMMITMENT. DCG hereby agrees to purchase, and the Company hereby
agrees
<PAGE>
Commerce Security Bancorp, Inc.
June__, 1997
Page 2
to sell, Ten Million Dollars ($10,000,000) of Senior Securities (the "Standby
Commitment") on the terms and conditions set forth in the Securities Purchase
Agreement.
3. FUNDING DATE. The Funding Date under the Securities Purchase
Agreement shall be June 6, 1997 or such later date as the Company may
determine.
4. DCG AS PURCHASER UNDER SECURITIES PURCHASE AGREEMENT. DCG agrees that
it shall be bound as a Purchaser by all of the terms and conditions of, and
shall have all of the rights and benefits under, the Securities Purchase
Agreement as if it were an original signatory thereto, except that DCG shall not
be a party to the Registration Agreement, the form of which is attached to the
Securities Purchase Agreement as Exhibit G. DCG agrees that it shall execute
such instruments as the Company may reasonably request to confirm DCG's
agreement to be bound by the Securities Purchase Agreement.
5. EXPIRATION OF THE STANDBY COMMITMENT. The Standby Commitment will
expire upon the termination of the Securities Purchase Agreement.
6. STANDBY COMMITMENT FEE. In consideration for providing the Standby
Commitment, the Company shall pay to DCG in cash on the Funding Date an amount
equal to the product of (x) $547.95 multiplied by (y) the number of days elapsed
from and including December 31, 1996 to and including the Funding Date.
7. EXPENSES. The Company shall, promptly upon DCG's request therefor,
reimburse DCG for such reasonable legal, accounting and consulting fees as are
incurred by DCG in connection with the Standby Commitment, the purchase of the
Senior Securities or the enforcement of DCG's rights under this Standby
Commitment Letter or the Securities Purchase Agreement.
8. GOVERNING LAW. This Standby Commitment Letter shall be governed by
the internal laws of the State of Delaware.
9. COUNTERPARTS. This Standby Commitment Letter may be executed in
counterparts, each of which shall be deemed to constitute an original but all of
which together shall constitute one and the same instrument.
<PAGE>
Commerce Security Bancorp, Inc.
June__, 1997
Page 3
If the foregoing terms and conditions are acceptable to you, please so
indicate by signing both of the enclosed copies of this letter where indicated
and returning one to the undersigned, whereupon this Standby Commitment Letter
shall be the binding obligation of the Company and DCG.
Very truly yours,
DARTMOUTH CAPITAL GROUP, L.P.
By: DARTMOUTH CAPITAL GROUP, INC.
By: /s/
--------------------
Name: Robert P. Keller
Title: President
Agreed To And Accepted As
Of The Date Above Written
COMMERCE SECURITY BANCORP, INC.
By: /s/
------------------------
Name: Robert P. Keller
Title: President and
Chief Executive Officer
<PAGE>
EXHIBIT 10.5
AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
(TRUST ORIGINATED SERIES A CAPITAL SECURITIES, SERIES B PREFERRED STOCK,
SERIES C PREFERRED STOCK, SERIES D PREFERRED STOCK,
SPECIAL COMMON STOCK AND WARRANTS)
BY AND AMONG
COMMERCE SECURITY BANCORP, INC.
AND ITS SUBSIDIARIES
COMMERCE SECURITY BANK, SDN BANCORP, INC.,
LIBERTY NATIONAL BANK AND SAN DIEGUITO NATIONAL BANK
AND
MADISON DEARBORN CAPITAL PARTNERS II, L.P.,
OLYMPUS GROWTH FUND II, L.P. AND
OLYMPUS EXECUTIVE FUND, L.P.
DATED JUNE 5, 1997
<PAGE>
TABLE OF CONTENTS
Page No.
--------
Section 1. Purchase and Delivery of Senior Securities . . . . . . . . . 2
Section 2. The Funding. . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3. Delivery of Senior Securities. . . . . . . . . . . . . . . . 4
Section 4. Agreements and Consents of the Purchaser. . . . . . . . . . 5
Section 5. Representations and Warranties of the Company. . . . . . . . 5
Section 5.1 Representation and Warranty Regarding Target. 6
Section 5.2 Other Representations and Warranties.. . . . . 6
Section 6. Representations, Warranties and Covenants of the
Purchasers. . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7. Funding Conditions.. . . . . . . . . . . . . . . . . . . . . 34
Section 7.1 Conditions to Purchasers' Obligations. . . . . 34
Section 7.2 Conditions to the Company's Obligations. . . . 38
Section 7.3 Mutual Conditions to Purchasers' and the
Company's Obligations. . . . . . . . . . . . 38
Section 8. Pre-Funding Covenants. . . . . . . . . . . . . . . . . . . . 39
Section 9. Covenants. . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.1 Information Rights with Respect to
Series B Preferred Stock.. . . . . . . . . . 42
Section 9.2 Information Rights with Respect to
Common Stock Acquired by Purchasers. . . . . 42
Section 9.3 Board of Directors of the Company. . . . . . . 43
Section 9.4 Certain Covenants Relating to Special
Common Stock . . . . . . . . . . . . . . . . 45
Section 9.5 [RESERVED].. . . . . . . . . . . . . . . . . . 45
Section 9.6 [RESERVED].. . . . . . . . . . . . . . . . . . 45
Section 9.7 [RESERVED] . . . . . . . . . . . . . . . . . . 46
Section 9.8 Further Action.. . . . . . . . . . . . . . . . 46
Section 9.9 Bank Holding Company . . . . . . . . . . . . . 46
Section 9.10 Changes to Bylaws. . . . . . . . . . . . . . . 46
Section 9.11 Exchange and Other Rights with Respect to
Series A Capital Securities. . . . . . . . . 46
(i)
<PAGE>
Section 9.12 Cooperation in Series A Transfer . . . . . . . 54
Section 10. Survival of Representations, Warranties and Agreements.. . . 54
Section 11. [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12. Indemnity. . . . . . . . . . . . . . . . . . . . . . . . 55
Section 13. Termination; Termination Fee.. . . . . . . . . . . . . . . . 57
Section 14. Notices. . . . . . . . . . . . . . . . . . . . . . . . 58
Section 15. Binding Effect.. . . . . . . . . . . . . . . . . . . . . . . 59
Section 16. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 60
Section 17. Entire Agreement.. . . . . . . . . . . . . . . . . . . . . . 60
Section 18. Assignment. . . . . . . . . . . . . . . . . . . . . . . . 60
Section 19. Successors. . . . . . . . . . . . . . . . . . . . . . . . 61
Section 20. Expenses. . . . . . . . . . . . . . . . . . . . . . . . 61
Section 21. Severability of Provisions.. . . . . . . . . . . . . . . . . 61
Section 22. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . 61
Section 23. Execution in Counterparts. . . . . . . . . . . . . . . . . . 61
Section 24. Press Releases and Public Announcements. . . . . . . . . . . 62
Section 25. No Third Party Beneficiaries.. . . . . . . . . . . . . . . . 62
Section 26. Construction. . . . . . . . . . . . . . . . . . . . . . . . 62
Section 27. Specific Performance.. . . . . . . . . . . . . . . . . . . . 62
Section 28. Submission to Jurisdiction.. . . . . . . . . . . . . . . . . 62
Section 29. Certain Definitions. . . . . . . . . . . . . . . . . . . . . 63
(ii)
<PAGE>
SCHEDULES
SCHEDULE 5.2(f) -- Regulatory Approvals with Respect to the Acquisition
SCHEDULE 5.2(hhh) -- List of Holders of 1% of Common Stock
SCHEDULE 5.2(n) -- Certain Capital Stock Matters
SCHEDULE 12(b) -- Additional Indemnified Matters
DISCLOSURE SCHEDULES*
EXHIBITS
EXHIBIT A** -- Declaration of Trust of CSBI Capital Trust I
EXHIBIT B** -- Junior Subordinated Debenture
EXHIBIT C*** -- Amended and Restated Certificate of Incorporation
EXHIBIT D*** -- Form of Series B Warrant
EXHIBIT E*** -- Standby Securities Purchase Agreement
EXHIBIT F* -- Escrow Agreement
EXHIBIT G*** -- Registration Rights Agreement
EXHIBIT H*** -- Shareholder Agreement
EXHIBIT I** -- Capital Securities Guarantee Agreement
EXHIBIT J -- Confidentiality Statement
* Omitted
** To be filed by amendment
*** Operative version filed separately
(iii)
<PAGE>
AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
(TRUST ORIGINATED SERIES A CAPITAL SECURITIES, SERIES B PREFERRED STOCK,
SERIES C PREFERRED STOCK, SERIES D PREFERRED STOCK,
SPECIAL COMMON STOCK AND WARRANTS)
THIS AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT (the "Agreement")
is made and entered into as of the 5th day of June, 1997, by and among Commerce
Security Bancorp, Inc., a Delaware corporation with its principal place of
business located in Huntington Beach, California (the "Company"), the Company's
subsidiaries (which consist of Commerce Security Bank, SDN Bancorp, Inc.,
Liberty National Bank, and San Dieguito National Bank) (collectively, the
"Subsidiaries"), and Madison Dearborn Capital Partners II, L.P., a Delaware
limited partnership ("MDP"), Olympus Growth Fund II, L.P., a Delaware limited
partnership ("Olympus I"), and Olympus Executive Fund, L.P., a Delaware limited
partnership ("Olympus II" and collectively with Olympus I, "Olympus"). (MDP and
Olympus are called collectively the "Purchasers" and the Company, the
Subsidiaries and the Purchasers are called collectively the "Parties".)
WHEREAS, the Company has obtained commitments from certain institutional
and accredited investors through a private placement of shares of its Class B
common stock, par value $.01 (the "Class B Common Stock"), and previously
entered into that certain Securities Purchase Agreement dated February 13, 1997
with MDP and Olympus (the "Original Agreement") with respect to the purchase and
sale of the Senior Securities (as defined herein and, together with the purchase
and sale of the Common Stock, the "Private Placement"), each in connection with
the proposed acquisition (the "Acquisition") by the Company of Eldorado Bancorp
(the "Target Company") pursuant to the Agreement and Plan of Merger (the
"Acquisition Agreement") dated December 24, 1996 by and between the Company and
the Target Company, which Acquisition is described in the Company's Private
Placement Memorandum pertaining to the Private Placement (as hereinafter more
specifically defined, the "Placement Memorandum");
WHEREAS, the Parties subsequently amended the Original Agreement by
entering into a First Amendment to Securities Purchase Agreement, dated as of
March 21, 1997 (the "First Amendment"), a Second Amendment to Securities
Purchase Agreement, dated as of April 11, 1997 (the "Second Amendment") and a
Third Amendment to Securities Purchase Agreement, dated as of even date herewith
(the "Third Amendment");
WHEREAS, the Parties desire to restate the Original Agreement in order to
incorporate herein each of the First Amendment, the Second Amendment and the
Third Amendment, and to further amend the rights and obligations of the Parties;
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 hereto agree as follows:
<PAGE>
1. PURCHASE AND DELIVERY OF SENIOR SECURITIES.
(a) Subject to the terms and conditions herein set forth,
each Purchaser hereby irrevocably agrees and commits to purchase from
the Company or the Trust (as defined herein), as applicable, and the
Company hereby irrevocably agrees and commits to sell or to cause the
Trust to sell, as applicable, the following Senior Securities:
(i) 11,617 shares of trust originated Subordinated
Capital Income Securities, Series A, initial liquidation value
$1,000 per share (the "Series A Capital Securities"), evidencing
an undivided preferred beneficial interest in the assets of CSBI
Capital Trust I, a Delaware statutory business trust (the
"Trust"), having the rights and preferences set forth in the
Trust Agreement (the "Trust Agreement") attached hereto as
EXHIBIT A. The assets of the Trust shall consist solely of
junior subordinated debentures (the "Junior Subordinated
Debentures"), having the rights and preferences set forth in the
form of Junior Subordinated Debenture attached hereto as EXHIBIT
B, and including any excess payments or interest received on the
Junior Subordinated Debentures and not distributed. The
aggregate purchase price of the Series A Capital Securities shall
be Eleven Million Six Hundred Seventeen Thousand Dollars
($11,617,000).
(ii) 48,973 shares of Series B Preferred Stock, $.01
par value (the "Series B Preferred Stock"), having the rights and
preferences set forth in the Amended and Restated Certificate of
Incorporation attached hereto as EXHIBIT C (the "Amended and
Restated Charter") and a warrant (the "Series B Warrant", or
"Warrant"), in the form attached hereto as EXHIBIT D, entitling
the holder to acquire an aggregate of 1,680,143 Warrant Shares.
The aggregate purchase price of the Series B Preferred Stock and
the Series B Warrant shall be Four Million Eight Hundred
Ninety-Seven Thousand Three Hundred Dollars ($4,897,300), of
which Sixteen Thousand Eight Hundred Dollars ($16,800) shall be
allocated to the purchase of Series B Warrant.
(iii) 2,026,965 shares of Special Common Stock, par
value $.01 per share (the "Special Common Stock"), of which
1,815,540 shares shall consist of Voting Special Common Stock and
211,425 shares shall consist of Non-Voting Special Common Stock,
in each case having the rights and preferences set forth in the
Amended and Restated Charter, for an aggregate purchase price of
Nine Million Seven Hundred Forty-Nine Thousand Seven Hundred Two
Dollars ($9,749,702).
-2-
<PAGE>
The Series A Capital Securities, the Series B Preferred Stock, the
Special Common Stock and the Series B Warrant are sometimes
collectively referred to herein as the "Senior Securities." For
purposes of this Agreement, the term "Subscription Price" shall mean
Twenty-Six Million Two Hundred Sixty Three Thousand Seven Hundred Two
Dollars ($26,264,002), being equal to the sum of the respective
purchase prices for the Series A Capital Securities, the Series B
Preferred Stock, the Special Common Stock and the Warrant. The Senior
Securities to be purchased by Olympus, and the Subscription Price
therefor, shall be allocated ninety-nine percent (99.0%) to Olympus I,
and one percent (1.0%) to Olympus II.
(b) The Parties acknowledge that the Company has entered
into a Standby Securities Purchase Agreement with Dartmouth Capital
Group, L.P. (respectively, the "Standby Agreement" and "DCG"),
substantially in the form attached hereto as EXHIBIT E, for the
purchase of:
(i) 4,423 shares of Series A Capital Securities, for a
purchase price of Four Million Four Hundred Twenty-Three Thousand
One Hundred Dollars ($4,423,000),
(ii) 18,647 shares of Series B Preferred Stock, together
with a Series B Warrant entitling the holder to acquire an
aggregate of 639,714 Warrant Shares, for an aggregate purchase
price (for both such Series B Preferred Stock and such Series B
Warrant) of One Million Eight Hundred Sixty-Four Thousand Seven
Hundred Dollars ($1,864,700), and
(iii) 771,788 shares of Voting Special Common Stock, for a
purchase price of Three Million Seven Hundred Twelve Thousand Two
Hundred Dollars ($3,712,300),
The Parties agree that the Company shall draw upon the Standby
Agreement and shall require DCG to purchase the foregoing amount of
Senior Securities under the Standby Agreement, with the closing under
the Standby Agreement and the issuance of Senior Securities to DCG
thereunder to occur substantially simultaneously with the Funding.
2. THE FUNDING. As soon as practicable after receipt of a written
request by the Company, each Purchaser shall execute and deliver to the Company
the Escrow Agreement in the form attached as EXHIBIT F to this Agreement,
subject only to such changes as the escrow agent may request, which changes
shall not in the reasonable determination of the Purchasers adversely affect the
rights or obligations of Purchasers under the Escrow Agreement (and which in no
event shall limit the Purchasers' right to direct the funds in the escrow
account). Each Purchaser agrees to deliver payment for the Senior Securities at
the Funding, which shall not be held until at least
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<PAGE>
fifteen (15) days following receipt of notice from the Company that the Company
believes all of the material conditions to the closing of the Acquisition have
been satisfied or, if permitted, duly waived by each Purchaser and that the
Acquisition is expected to occur within the next twenty-five (25) days. The
issuance of such notice in accordance with this Section shall in no way
prejudice the right of any Purchaser to assert that a closing condition under
either Section 7.1 or 7.3 has not been satisfied. The delivery of the Senior
Securities and the payment of the Subscription Price shall take place
concurrently at the executive offices of the Company at One Pacific Plaza, 7777
Center Avenue, Huntington Beach, California, prior to but substantially
simultaneously with the closing of the Acquisition (the "Acquisition Closing"),
such time and date to be not less than eighteen (18) nor more than twenty-five
(25) days after the foregoing notification and to be specified therein (such
time and date being referred to as the "Funding Time", the date of the Funding
being referred to as the "Funding Date" and the consummation of the Acquisition
and the Private Placement being referred to as the "Funding"). If the
Acquisition Closing does not occur at or before 3:00 p.m. (Pacific time) on the
date next following the Funding Date, the Purchasers (and the Purchasers alone)
may direct the escrow agent under the Escrow Agreement (the "Escrow Agent") to
return by wire transfer in accordance with instructions provided by the
Purchasers the Subscription Price and any interest earned thereon. The Company
may upon written notice given to the Purchasers via facsimile not less than five
(5) business days prior to the scheduled Funding Date, postpone the Funding Date
by up to ten (10) business days. If the Company has elected to postpone the
Funding Date and the Funding does not occur on such later date, the Company
shall consult in advance with the Purchasers prior to giving notice the
Purchasers notice of a subsequent Funding Date; PROVIDED, HOWEVER, that nothing
contained in the Section shall affect the right of any Party to terminate this
Agreement in accordance with the terms of this Agreement, including, without
limitation, pursuant to Section 4(b).
3. DELIVERY OF SENIOR SECURITIES. At the Funding, the Senior Securities
to be sold to each Purchaser hereunder, registered in the name of such Purchaser
or its nominee(s), as such Purchaser may specify in writing at least three (3)
days prior to the Funding Date, shall be delivered by or on behalf of the
Company or the Trust, as applicable, to each Purchaser, for such Purchaser's
account, against delivery by such Purchaser of the Subscription Price therefor
in immediately available funds in the form of one or more federal funds checks
or a wire transfer to the Escrow Agent, subject to the Acquisition Closing.
4. AGREEMENTS AND CONSENTS OF THE PURCHASER. The Purchasers, the Company
and Subsidiaries hereby agree as follows:
(a) The Purchasers, the Company and Subsidiaries agree that this
Agreement is irrevocable and that the rights and obligations of any party hereto
shall not be terminated or affected by operation of law, whether by death,
incompetence, disability or the occurrence of any other event affecting
Purchasers, the Company or Subsidiaries. In the event that the Funding Date
does not occur on or before August 15, 1997 or the Acquisition Agreement is
terminated, this Agreement shall terminate without liability to any party
hereto, except to the extent the Purchasers
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are entitled to receive such fees as are provided in Section 13 hereof or
except as otherwise provided in this Agreement.
(b) In the event FRB approval is not obtained for the issuance of the
Senior Securities, including without limitation any of the rights or obligations
in this Agreement and in the Ancillary Agreements set forth as exhibits hereto,
then the Company shall, in writing, notify the Purchasers promptly. Upon
receipt of such notice, the Purchasers and the Company shall promptly determine
the nature and extent of adjustment to the Senior Securities or the Ancillary
Agreements that will have to be made in order to obtain FRB approval for the
transactions contemplated herein, and shall negotiate in a commercially
reasonable fashion to amend as soon as practicable the terms of the Senior
Securities in a manner that (i) allows the Company to obtain FRB approval, (ii)
preserves the overall economic and contractual benefits of the Senior
Securities, and (iii) does not cause more than an insignificant increase in the
risk to the Purchasers of an investment in the Company. If, following the
commencement of negotiations contemplated by this Section 4(b), the Purchasers
reasonably determine that the Company and the Purchasers will be unable to agree
on amendments to the terms of the Senior Securities and the Ancillary
Agreements, then the Purchasers may, at their election upon twenty (20) business
days' notice to the Company, terminate this Agreement, which termination shall
be without liability to any Party hereto. The notice in the immediately
preceding sentence (the "Termination Notice") shall set forth with reasonable
specificity the changes to the terms of the Senior Securities and the Ancillary
Agreements that would make the Senior Securities acceptable to the Purchasers.
The Company shall respond in writing to the Termination Notice within ten (10)
business days after the receipt of Termination Notice, which response shall set
forth with reasonable specificity whether any of the changes to the terms of the
Senior Securities and the Ancillary Agreements set forth in the Termination
Notice are acceptable to the Company and what modification to the Purchasers'
proposal would be acceptable to the Company.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company and the
Subsidiaries hereby represent and warrant jointly and severally to the
Purchasers that, subject to the specific exceptions disclosed in the disclosure
schedule delivered by the Company to the Purchasers on the date hereof and
initialed by the Parties (the "Disclosure Schedule"), the statements contained
in this Section 5 are correct and complete as of the date of this Agreement, and
that, subject to the exceptions disclosed in an updated disclosure schedule
delivered by the Company to the Purchasers on or about the fifth Business Day
prior to the Funding Date and initialed by the Parties (the "Updated Disclosure
Schedule"), the statements contained in this Section 5 will be correct and
complete as of the Funding Date (as though made then and as though the Funding
Date were substituted for the date of this Agreement throughout this Section 5).
The Disclosure Schedule and the Updated Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 5. With respect to the representations and warranties to which
they pertain, the Disclosure Schedule is, and when delivered the Updated
Disclosure Schedule will be, complete and accurate, and does not and will
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not contain any untrue statement of fact or omit to state a fact necessary to
make the statement therein not misleading.
5.1 REPRESENTATION AND WARRANTY REGARDING TARGET. Except as disclosed in
the disclosure schedules delivered pursuant to the Acquisition Agreement, as
supplemented by the Disclosure Schedule, each representation and warranty made
by the Target in the Acquisition Agreement (other than those statements made
therein that are made as of a specified date) remains true, correct and complete
as of the date hereof as though made on this date.
5.2 OTHER REPRESENTATIONS AND WARRANTIES.
(a) As of the date hereof, the Company is, and at all times
thereafter through the time of Funding, the Company will have been, duly
organized and validly existing and in good standing as a corporation organized
under the laws of the State of Delaware, with corporate power and authority to
own, lease and operate its properties and to conduct its business as described
in the Placement Memorandum and to perform its obligations under this Agreement,
and is duly qualified as a foreign corporation to transact business and in good
standing in each jurisdiction where the failure to so qualify would have a
adverse effect on the conduct of the business, the condition (financial or
otherwise), or the earnings or business (collectively, the "Condition") of the
Company or (when formed) the Trust. All of the issued and outstanding capital
stock of the Company has been duly authorized and validly issued and is fully
paid and nonassessable.
(b) Each Subsidiary, Target Company and Target Subsidiary is, as of
the date hereof, and at all times thereafter through the time of the Funding
will have been, duly organized and validly existing in good standing under the
laws of the jurisdiction of its organization and duly qualified as a foreign
corporation to transact business and in good standing in each jurisdiction where
the failure to so qualify would have a adverse effect on the Condition of any of
the Company, the Subsidiaries, Target Company, Target Subsidiary or (when
formed) the Trust. All of the issued and outstanding capital stock of each
Subsidiary has been duly authorized and validly issued and is fully paid and
(except as provided by law) nonassessable and is owned by the Company, directly
or through Subsidiaries, free and clear of any mortgage, pledge, lien,
encumbrance or claim whatsoever; and all of the issued and outstanding capital
stock of Target Subsidiary has been duly authorized and validly issued and is
fully paid and (except as provided by law) nonassessable and is owned by Target
Company, free and clear of any mortgage, pledge, lien, encumbrance or claim
whatsoever. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, calls or other
contracts or commitments that could require the Company, its Subsidiaries,
Target Company or Target Subsidiary to sell, transfer, cause to be outstanding,
or otherwise dispose of any capital stock of the Company, its Subsidiaries,
Target or Target Subsidiary (other than those created by or pursuant to this
Agreement), which would dilute Purchasers' equity in the Company, its
Subsidiaries, Target Company or Target Subsidiary. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to the Company,
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its Subsidiaries, Target Company or Target Subsidiary. There are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting of the capital stock of the Company, its Subsidiaries, Target Company or
Target Subsidiary to which the any of such entities, or any holder of 5% or more
of the outstanding capital stock of such entity, is a party. The Company (or
one of its Subsidiaries) holds of record and owns beneficially all of the
outstanding shares of each of its Subsidiaries, free and clear of any
restrictions on transfer (other than restrictions under the Securities Act and
state securities laws), Taxes, Security Interests, options, warrants, purchase
rights, contracts, commitments, equities, claims, and demands. The Target
Company holds of record and owns beneficially all of the outstanding shares of
the Target Subsidiary, free and clear of any restrictions on transfer (other
than restrictions under the Securities Act and state securities laws), Taxes,
Security Interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. At Funding, the Purchasers will hold of record
and own beneficially all of the outstanding preferred shares of the Trust, free
and clear of any restrictions on transfer (other than restrictions under the
Securities Act and state securities laws), Taxes, Security Interests, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands, and the only other shares of the Trust outstanding at the Funding will
be Common Shares held, of record and beneficially, by the Company. None of the
Company, its Subsidiaries, Target Company or Target Subsidiary controls,
directly or indirectly, or has any direct or indirect equity participation in,
any corporation, partnership, trust, or other business association which is not
a Subsidiary of the Company or of the Target Company. Except for the
Subsidiaries and Target Subsidiary and other than as reflected in the Financial
Statements (as hereinafter defined) (including interests reflected on the
Financial Statements in the category of investment securities, all of which
interests are of less than 1% of the applicable entity's outstanding shares),
the Company does not and the Target Company does not, directly or indirectly,
own any shares of stock or any securities of any corporation or have any equity
interest in any firm, partnership, association or other entity.
(c) The Company, its Subsidiaries, Target Company and Target
Subsidiary possess all licenses, permits and other governmental authorizations
as are currently required for the conduct of their respective businesses, except
where the failure to possess such a license, permit or other authorization would
not reasonably be expected to have a adverse effect on the Condition of any of
the Company, its Subsidiaries, Target Company or Target Subsidiary, and all such
licenses, permits and other governmental authorizations are in full force and
effect. The Company, its Subsidiaries, Target Company and Target Subsidiary are
in compliance therewith except to the extent that noncompliance would not have a
adverse effect on the noncomplying entity; and neither the Company, its
Subsidiaries, Target Company nor Target Subsidiary has received notice of any
proceeding or action relating to the revocation or modification of any such
license, permit or other governmental authorization. There exists no Basis
which could be expected to result in the Company, its Subsidiaries, Target
Company or Target Subsidiary not possessing all licenses, permits and other
governmental authorizations necessary for the conduct of their respective
businesses.
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(d) Neither the Company, any of the Subsidiaries, Target Company nor
Target Subsidiary is in violation of its charter or other organizational
document or bylaws, and neither the Company, any of the Subsidiaries, Target
Company nor Target Subsidiary is in default in the performance or observance of
the obligations, agreements, covenants or conditions contained in any contract,
indenture, mortgage, loan agreement, note, lease or other instrument to which it
is a party or by which it or any of them or any of their properties may be
bound.
(e) The Company and its Subsidiaries have full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform their respective obligations hereunder. The execution,
delivery and performance of this Agreement by the Company and its Subsidiaries
and the consummation by the Company and its Subsidiaries of the transactions
contemplated hereby, including the filing of the Amended and Restated Charter
and the execution of the Trust Agreement, have been duly authorized by all
necessary corporate action of the Company and its Subsidiaries, and this
Agreement constitutes a valid and legally binding instrument of the Company and
each of its Subsidiaries, enforceable in accordance with its terms. No other
corporate or other proceedings on the part of the Company or its Subsidiaries
are necessary to consummate the transactions contemplated hereby.
(f) The execution, delivery and performance of this Agreement, the
consummation by the Company of the sale of the Senior Securities and the
compliance by the Company and its Subsidiaries with the terms hereof (A) will
not conflict with, or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, the Certificate of Incorporation,
assuming the filing prior to the Funding of the Amended and Restated Charter, or
the bylaws of the Company or of any of its Subsidiaries, (B) will not conflict
with, result in a breach of, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, note, indenture, bond, mortgage, deed of trust or other arrangement
to which the Company, its Subsidiaries, Target Company or Target Subsidiary is a
party or by which any of them is bound or to which any of their assets are
subject, and (C) will not conflict with, or result in a breach or violation of
any applicable law, rule, regulation, judgment, order or decree of any
government, governmental instrumentality or court having jurisdiction over the
Company, its Subsidiaries, Target Company or Target Subsidiary or any of their
properties or assets. No consent, approval, authorization, order, registration
or qualification of or with any third party, government, governmental
instrumentality or court is required for the valid authorization, execution,
delivery and performance by the Company or its Subsidiaries of this Agreement,
the issuance of the Senior Securities, the payment of the Commitment Fee or the
consummation by the Company, its Subsidiaries, and the Trust of the other
transactions contemplated by this Agreement, except such federal and state
regulatory approvals as are described on SCHEDULE 5(f) attached hereto, such
consents, approvals, authorizations, registrations or qualification as may be
required under state securities or "blue sky" laws.
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(g) Upon the filing of the Amended and Restated Charter, the filing
of the Certificate of Trust of the Trust and the execution of the Declaration of
Trust, the Senior Securities will be duly authorized, and when issued and
delivered by the Company or the Trust, as applicable, against payment therefor,
the Senior Securities will be validly issued, fully paid and non-assessable, and
the forms of certificates or instruments evidencing each of the Senior
Securities and the Junior Subordinated Debentures will be in due and proper
form.
(h) Relying in part on the representations and warranties of the
Purchasers set forth in Section 6, the offering of the Senior Securities to the
Purchasers is exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to Section 4(2) thereof.
(i) The Company's December 18, 1996 Private Placement Memorandum and
the December 20, 1996 Supplement thereto (collectively, the "Placement
Memorandum") did not, as of the respective dates thereof, contain an untrue
statement of a material fact or omit to 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 with respect to
information regarding the Company and its Subsidiaries. Excluding (i) the terms
and conditions of this Agreement and the Ancillary Agreements and (ii)
information which is set forth in the various sections of, respectively, the
Disclosure Schedules or the Updated Disclosure Schedules (as applicable),
nothing has come to the Company's attention that could cause any information
concerning the Company or its Subsidiaries contained in the Placement Memorandum
to be inaccurate in any material respect.
(j) The information concerning the Target Company that is contained
in the Placement Memorandum, as of the date of the Placement Memorandum, was
true and correct and the representations and warranties as set forth in the
Acquisition Agreement, as of the date of the Acquisition Agreement, were true
and correct. Excluding (i) the terms and conditions of this Agreement and the
Ancillary Agreements and (ii) information which is set forth in the various
sections of, respectively, the Disclosure Schedules or the Updated Disclosure
Schedules (as applicable), nothing has come to the Company's attention that
would cause any information concerning the Target Company contained in the
Placement Memorandum to be inaccurate in any material respect.
(k) The accountants who certified the Company's financial statements
and supporting schedules of SDN Bancorp, Inc., Liberty National Bank and
Commerce Security Bank included in the 1996 Information Statement (as defined in
the Placement Memorandum) are independent public accountants within the meaning
of the Securities Act and the regulations promulgated by the Securities and
Exchange Commission (the "SEC") thereunder (the "Securities Act Regulations").
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(l) (i) The audited consolidated and consolidating financial
statements of the Company, the Subsidiaries and Target Company for fiscal years
1994 and 1995, (ii) the unaudited consolidated financial statements of the
Company and of Target Company for the three- and nine-month periods ended
September 30, 1996, and (iii) the internal, unaudited consolidated balance sheet
and profit and loss statement of the Company as at December 31, 1996 and for the
period then ended the "Unaudited 1996 Financials", and collectively with the
items in clauses (i) and (ii), the "Financial Statements"), have been provided
to the Purchasers. The Financial Statements (1) comply, except as may be
reflected in the notes to such Financial Statements, as to form with the
accounting requirements of the Securities Act, the Securities Act Regulations,
and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (2)
present fairly the financial position of the respective entities as at the dates
indicated and the results of their operations for the periods specified, except
as may be described on the Disclosure Schedule, (3) contain accurate accruals
and prepayments for Taxes, (4) are correct and complete, (5) are consistent with
the books and records of the Company and its Subsidiaries (which books and
records are correct and complete, and have been and are being maintained in
accordance with applicable regulations), and (6) have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis, except (with regard to each of clauses (1) through (6)) (x) as stated
therein, (y) in the case of unaudited statements, by the absence of footnotes
and other presentation items, and the absence of normal year-end adjustments
and, (iii) in the case of the Unaudited 1996 Financials, such adjustments as may
be adopted pursuant to the pending audit of such statements, none of which
adjustments will represent (individually or in the aggregate) an adverse change
to the Unaudited 1996 Financials. In addition, the Company has delivered to the
Purchasers pro forma financial statements presenting the Company (with the
Subsidiaries) and the Target (together with the Target Subsidiary) as at
September 30, 1996 and for the three- and nine-month period then ended (the "Pro
Forma Financial Statements"). Such Pro Forma Financial Statements (i)
accurately reflect the combined financial condition of the Company and Target
Company as at the date thereof and for the periods then ended, and (ii) comply
with the requirements of Regulation S-X and reflect all adjustments necessary to
present fairly the pro forma financial position of the Company at the dates
indicated. Except as set forth in the Financial Statements, neither the
Company, its Subsidiaries, Target Company nor Target Subsidiaries has (i) Loss
Contingencies (as defined below) which are not required by GAAP to be accrued
and which could reasonably be expected, if adversely resolved, to have an
adverse effect on the Company, its Subsidiaries, Target Company and Target
Subsidiary; or (ii) any other liabilities or obligations (whether absolute,
accrued, direct or indirect, joint or several, contingent or otherwise, and
whether due or to become due), which are not required by GAAP to be accrued.
(m) From September 30, 1996 through and including the date hereof,
(1) no event or development has occurred with respect to the Company, any of its
Subsidiaries, the Target Company or the Target Subsidiary that, individually or
in the aggregate, has had or could reasonably be expected to have, a material
adverse effect on the Condition, operations, results of operations or future
prospects of the Company and its Subsidiaries or of the Target Company and the
Target Subsidiary, as applicable, with each consolidated group considered as one
enterprise,
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whether or not arising in the ordinary course of business, (2) other than the
Acquisition Agreement (and other agreements related to the Acquisition) and the
agreements relating to the Private Placement, there have been no transactions or
agreements entered into by any of the Company, its Subsidiaries, Target Company
or Target Subsidiary other than those in the Ordinary Course of Business, (3)
except pursuant to agreements relating to the Acquisition or the Private
Placement and described in the Placement Memorandum, or in the case of Target
Company pursuant to the exercise of stock options, neither the Company nor any
of its Subsidiaries nor Target nor Target Subsidiary has issued or purported to
issue any securities or, other than in the Ordinary Course of Business, incurred
any liability or obligation, direct or contingent, for borrowed money, and (4)
neither the Company, any of its Subsidiaries, the Target Company nor the Target
Subsidiary has entered into or modified any outstanding agreement with, or plan
or undertaking submitted to, any regulatory or supervisory agency or body which
would modify the ability of the Company and its Subsidiaries or the Target
Company and the Target Subsidiaries to continue to conduct their respective
businesses as now currently conducted. Without limiting the generality of the
foregoing since September 30, 1996:
(1) none of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries has sold, leased, transferred, or assigned any of its
assets, tangible or intangible, other than for a fair consideration in the
Ordinary Course of Business;
(2) none of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries has entered into any written or oral agreement,
contract, lease, or license (or series of related agreements, contracts,
leases, and licenses) outside the Ordinary Course of Business;
(3) no party (including any of the Company, its Subsidiaries, Target
Company, and Target Subsidiaries) has accelerated, terminated, modified, or
canceled any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) outside the Ordinary Course of
Business, to which any of the Company, its Subsidiaries, Target Company,
and Target Subsidiaries is a party or by which any of them is bound;
(4) none of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries has imposed any Security Interest outside the Ordinary
Course of Business upon any of its assets, tangible or intangible;
(5) none of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries has made any capital expenditure (or series of related
capital expenditures) outside the Ordinary Course of Business;
(6) none of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries has made any capital investment in, any loan to, or any
acquisition of the
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securities or assets of, any other Person (or series of related capital
investments, loans, and acquisitions) outside the Ordinary Course of
Business;
(7) none of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries has issued any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money or capitalized lease obligation either involving more than $100,000
singly or $500,000 in the aggregate;
(8) none of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries has delayed or postponed the payment of accounts
payable and other Liabilities outside the Ordinary Course of Business;
(9) none of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries has canceled, compromised, waived, or released any
right or claim (or series of related rights and claims) outside the
Ordinary Course of Business;
(10) none of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries has granted any license or sublicense of any rights
under or with respect to any Intellectual Property;
(11) there has been no change made or authorized in the charter or
bylaws of any of the Company, its Subsidiaries, Target Company, and Target
Subsidiaries;
(12) none of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries has issued, sold, or otherwise disposed of any of its
capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any
of its capital stock;
(13) none of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries has declared, set aside, or paid any dividend or made
any distribution with respect to its capital stock (whether in cash or in
kind) or redeemed, purchased, or otherwise acquired any of its capital
stock other than dividends paid by the Subsidiaries to the Company or by
Target Subsidiary to Target Company;
(14) none of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries has experienced any damage, destruction, or loss
(whether or not covered by insurance) to its property;
(15) none of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries has made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees outside the
Ordinary Course of Business;
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(16) none of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries has entered into any employment contract or collective
bargaining agreement, written or oral, or materially modified the terms of
any existing such contract or agreement;
(17) none of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries has granted any increase in the base compensation of
any of its directors, officers, and employees outside the Ordinary Course
of Business;
(18) none of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries has adopted, amended, modified, or terminated any
bonus, profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, and employees
(or taken any such action with respect to any other Employee Benefit Plan);
(19) none of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries has made any other change in employment terms for any
of its directors, officers, and employees outside the Ordinary Course of
Business;
(20) none of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries has made or pledged to make any charitable or other
capital contribution outside the Ordinary Course of Business;
(21) neither the Company nor any of its Subsidiaries has made,
guaranteed, assumed or otherwise become liable for any borrowing outside
the Ordinary Course of Business, or has canceled any debt or claim owed it
other than with respect to loans and leases held and serviced by the
Company and its Subsidiaries in the Ordinary Course of Business;
(22) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving the Company, any of its Subsidiaries, Target Company or
Target Subsidiary that has had, or that could reasonably be expected to
have, a material adverse effect on the Company, its Subsidiaries, Target
Company and Target Subsidiary; and
(23) neither the Company, any of its Subsidiaries, Target Company
nor Target Subsidiary has committed to any of the foregoing.
(n) CAPITALIZATION. As of the date of this Agreement, the Company's
capital stock consists of 1,000,000 authorized shares of preferred stock, $.01
par value per share, none of which is issued and outstanding, and 12,000,000
authorized shares of common stock, $.01 par value per share, of which 9,697,430
shares are issued and outstanding. SCHEDULE 5.2(n) attached
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to this Agreement sets forth (i) the number of shares reserved as of the date of
this Agreement for issuance under the Company's stock option plan; (ii) the
number of shares of Common Stock subject to stock options that the Company has
issued or has agreed to issue; (iii) the number of shares of restricted stock
that the Company will be obligated to issue any employee of the Company as a
consequence of the consummation of the Private Placement; (iv) the number of
shares of Class B Common Stock subject to warrants that the Company shall be
obligated to issue to The Shattan Group, LLC as a consequence of the
consummation of the Private Placement, and (v) a summary of the conversion
feature of the mandatorily convertible subordinated debentures of SDN Bancorp,
Inc. Except as set forth on SCHEDULE 5.2(n), neither the Company nor any of its
Subsidiaries has granted or executed any agreement or instrument entitling the
holder to acquire an equity interest in the Company or its Subsidiaries. The
entire authorized capital stock of the Subsidiaries are as follows:
SHARES AUTHORIZED SHARES ISSUED & SHARES IN TREASURY
OUTSTANDING
SDN 3,000 100 0
San Dieguito 725,000 632,500 0
Liberty 1,750,000 125,000 0
Commerce 100 10 0
(o) COMPLIANCE WITH LAW. The Company, its Subsidiaries, the Target
Company and the Target Subsidiaries have conducted, and are presently
conducting, their businesses so as to comply in all respects with all applicable
statutes and regulations as to which a failure to comply could reasonably be
expected to have an adverse effect on the Condition of any of the Company, its
Subsidiaries, the Target Company and the Target Subsidiaries. Neither the
Company nor any of its Subsidiaries and neither the Target Company nor the
Target Subsidiary is in violation of any written directive from any regulatory
or governmental body to make any change in the method of conducting its
business; there is no charge, investigation, action, suit or proceeding before
or by any court or governmental agency or body (domestic or foreign) pending,
threatened in writing or, to the Knowledge of the Company, contemplated against
the Company or any of its Subsidiaries or pending or threatened in writing
against the Target Company or any of the Target Subsidiaries; all pending or
threatened legal or governmental proceedings to which the Company or any of its
Subsidiaries is a party or of which any of their respective properties or assets
is the subject, including ordinary routine litigation incidental to their
business, considered in the aggregate, could not reasonably be expected to have
an adverse effect upon the Condition or prospects of the Company, its
Subsidiaries, the Target Company and the Target Subsidiary taken as a whole.
Neither the Company, its Subsidiaries, Target Company nor Target Subsidiaries is
a party to any agreement or understanding with any regulatory authority charged
with the supervision or regulation of financial institutions or engaged in the
insurance of deposits which
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restricts the conduct of its business or in any manner relates to its capital
adequacy, credit or reserve policies, ability to pay dividends, net worth or
asset maintenance or management. Neither the Company, its Subsidiaries, Target
Company nor Target Subsidiaries requires any material Consent of any Person to
permit it to operate its business in the manner in which it presently is being
conducted (excepting only those Consents of governments and governmental
instrumentalities previously obtained and currently in effect), and each
possesses all permits and other authorizations from all Persons, including,
without limitation, all regulatory authorities, presently required or necessary
to permit it to operate its business in the manner in which it presently is
being conducted and proposed to be conducted in the immediate future.
(p) JUNIOR COMMON FINANCING. The Company has received binding
subscriptions providing for an investment of not less than $19 million in Common
Stock by certain existing shareholders of the Company and other parties (the
"Junior Common Financing"), and the Company has provided to the Purchasers true
and correct copies of the subscription agreements for the Junior Common
Financing.
(q) TRUST ITEMS. The exclusive purpose of the Trust is to issue and
sell (i) Series A Capital Securities with an aggregate par value (and aggregate
purchase price) of $28,000,000 to the Purchasers, and (ii) Common Securities
with an aggregate purchase price of $866,000 to the Company, and to use the
proceeds of the sales referenced in clauses (i) and (ii) to acquire $28,866,000
of the 11% Junior Subordinated Debentures that the Company issues. The Trust
shall not engage in any other activities without the consent of the holders of
two-thirds of the issued and outstanding shares of Series A Preferred Stock.
(r) BROKERS' FEES. None of the Company, its Subsidiaries, Target
Company and Target Subsidiaries has any Liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement or the Acquisition for which the Purchasers could
become liable or obligated.
(s) ABSENCE OF BANKRUPTCY PROCEEDINGS. There are no bankruptcy,
reorganization or arrangement proceedings pending against, being contemplated
by, threatened against the Company, its Subsidiaries, Target Company, or Target
Subsidiaries.
(t) TITLE TO ASSETS. The Company, its Subsidiaries, Target Company,
and Target Subsidiaries have good and marketable title to, or a valid leasehold
interest in, all properties and assets (excluding properties or assets
classified as "Other Real Estate Owned" or otherwise acquired in connection with
the collection of any loan or lease) used by them, located on their premises, or
shown on the Company's and its Subsidiaries' September 30, 1996 financial
statements or on Target Company's and Target Subsidiaries' September 30, 1996
financial statements, or acquired after the date thereof, free and clear of all
Security Interests other than those reflected in such financial statements (or,
in the case of properties or assets acquired after September 30, 1996, Security
Interests granted in the Ordinary Course of Business).
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(u) UNDISCLOSED LIABILITIES. The Company, its Subsidiaries, Target
Company, and Target Subsidiaries do not have Liabilities (and there is no Basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against any of them giving rise to
Liabilities), except for (i) Liabilities specifically (and not by implication)
set forth on the face of one or more of such entities' December 31, 1996 balance
sheets, (ii) Liabilities incurred since such date but solely to the extent that
such Liabilities are routine and are or have been incurred in connection with
the core business of each entity as of the date of this Agreement (i.e.,
accepting deposits, making and servicing loans and leases, and providing related
cash management services and other services for small businesses than are
ancillary to the cash management business), and do not include Liabilities for
any items that are not covered by the foregoing, including but not limited to
extraordinary or non-recurring events, and (iii) Liabilities specifically
disclosed or arising out of facts specifically disclosed (and, in either case,
not otherwise indemnified pursuant to Section 12) on the Disclosure Schedule
pursuant to other provisions of this Section 5.
(v) TAX MATTERS.
1. Each of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries has filed all Tax Returns that it is required to file,
giving effect to any extensions obtained. All such Tax Returns are correct and
complete. All Taxes as to which payment has come due (giving effect to any
extensions obtained) on or before the date hereof by any of the Company, its
Subsidiaries, Target Company, and Target Subsidiaries (whether or not shown on
any Tax Return) have been paid. None of the Company, its Subsidiaries, Target
Company, and Target Subsidiaries currently is the beneficiary of any extension
of time within which to file any Tax Return.
2. The Company has no Knowledge that any authority will assess
any additional Taxes with respect to any of the Company, its Subsidiaries,
Target Company or Target Subsidiary for any period for which Tax Returns have
been filed. There is no dispute or claim with any governmental authority
concerning any Tax Liability of any of the Company, its Subsidiaries, Target
Company, and Target Subsidiaries.
3. None of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency.
4. None of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries has filed a consent under Code Sec. 341(f) concerning
collapsible corporations. None of the Company, its Subsidiaries, Target
Company, and Target Subsidiaries has made any payments, is obligated to make any
payments, or is a party to any agreement that could obligate it to make any
payments that will not be deductible under Code Sec. 280G. None of the Company,
its Subsidiaries, Target Company, and Target Subsidiaries has been a United
States real
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property holding corporation within the meaning of Code Sec. 897(c)(2) during
the applicable period specified in Code Sec. 897(c)(1)(A)(ii). Each of the
Company, its Subsidiaries, Target Company, and Target Subsidiaries has disclosed
on its federal income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the meaning of
Code Sec. 6662. None of the Company, its Subsidiaries, Target Company, and
Target Subsidiaries is a party to any Tax allocation or sharing agreement. None
of the Company, its Subsidiaries, Target Company, and Target Subsidiaries (A)
has been a member of an Affiliated Group filing a consolidated federal income
Tax Return (other than a group the common parent of which was the Company or
another Subsidiary, or the Target Company, as applicable) or (B) has any
Liability for the Taxes of any Person (other than any of the Company, its
Subsidiaries, Target Company and Target Subsidiaries) under Treas. Reg. Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
5. The unpaid Taxes of the Company, its Subsidiaries, Target
Company, and Target Subsidiaries (A) did not, as of September 30, 1996, exceed
the reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the face of the September 30, 1996 Balance Sheet and (B) do not exceed that
reserve as adjusted for the passage of time through the Funding Date in
accordance with the past custom and practice of the Company, its Subsidiaries,
Target Company, and Target Subsidiaries in filing their Tax Returns.
(w) REAL PROPERTY.
1. The Disclosure Schedule lists and describes briefly all real
property (other than Other Real Estate Owned ("OREO")) that any of the Company,
its Subsidiaries, Target Company, and Target Subsidiaries owns. With respect
to each such parcel of owned real property:
(1) the identified owner has good and marketable title to
the parcel of real property, free and clear of any Security Interests
other than those reflected on the Company's or the Target Company's
(as applicable) September 30, 1996 financial statements;
(2) there are no parties (other than the Company, its
Subsidiaries, Target Company, and Target Subsidiaries) in possession
of the parcel of real property;
2. Each real property that the Company, its Subsidiaries,
Target Company or Target Subsidiaries leases or subleases is listed and
described in the Disclosure Schedule. With respect to each lease and sublease
listed in the Disclosure Schedule:
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(1) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(2) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby;
(3) no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of
time, would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(x) INTELLECTUAL PROPERTY.
1. The Company, its Subsidiaries, Target Company and Target
Subsidiaries own or have the right to use pursuant to license, sublicense,
agreement, or permission all Intellectual Property used in the operation of the
businesses of the Company, its Subsidiaries, Target Company and Target
Subsidiaries as presently conducted and as presently proposed to be conducted.
Each item of Intellectual Property owned or used by any of the Company, its
Subsidiaries, Target Company and Target Subsidiaries immediately prior to the
Funding hereunder will be owned or available for use by the Company, its
Subsidiaries, Target Company or Target Subsidiaries on identical terms and
conditions immediately subsequent to the Funding hereunder.
2. None of the Company, its Subsidiaries, Target Company and
Target Subsidiaries have interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of third
parties. No third party has interfered with, infringed upon, misappropriated,
or otherwise come into conflict with any Intellectual Property rights of any of
the Company, its Subsidiaries, Target Company and Target Subsidiaries.
3. The Disclosure Schedule identifies each item of Intellectual
Property owned by any third party that any of the Company, its Subsidiaries,
Target Company and Target Subsidiaries uses pursuant to license, sublicense,
agreement, or permission entered into outside the Ordinary Course of Business.
4. None of the Company, its Subsidiaries, Target Company and
Target Subsidiaries will interfere with, infringe upon, misappropriate, or
otherwise come into conflict with, any Intellectual Property rights of third
parties as a result of the continued operation of its businesses as presently
conducted and as presently proposed to be conducted.
(y) TANGIBLE ASSETS. The Company, its Subsidiaries, Target Company
and Target Subsidiaries own or lease all buildings and all material equipment
and other tangible assets necessary for the conduct of their businesses as
presently conducted and as presently proposed to be conducted through the
Funding Date.
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(z) CONTRACTS AND LEASES. The Disclosure Schedule lists the
following contracts and other agreements to which the Company or any of its
Subsidiaries, or to the Company's Knowledge, Target or Target Subsidiary, is a
party:
1. any agreement concerning a partnership or joint venture;
2. any agreement concerning confidentiality or noncompetition, other
than (i) confidentiality agreements entered into in connection
with possible acquisitions and business combinations and (ii)
agreements with employees or former employees wherein such
employees have agreed not to compete with the applicable entity;
3. any agreement with any Affiliates of the Company or its
Subsidiaries, or of Target or Target Subsidiary, as applicable;
4. any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors,
officers, and employees;
5. any collective bargaining agreement;
6. any agreement under which any of them has advanced or loaned any
amount to any of its directors, officers, and employees outside
the Ordinary Course of Business;
7. any agreement under which the consequences of a default or
termination would have an adverse effect on the business,
financial condition, operations, results of operations, or future
prospects of the Company, its Subsidiaries, Target and Target
Subsidiary;
8. any instrument or agreement whereby the Company, any of its
Subsidiaries, Target or Target Subsidiary indemnifies any other
person against any loss or Liability, to the extent that (i) the
principal purpose of the agreement is such indemnification, (ii)
the agreement involves annual payments by either party of
$100,000 or more, or (iii) if the indemnification obligations are
triggered under such agreement, the Company, Subsidiary, Target
Company or Target Subsidiary may become liable for amounts in
excess of $100,000 that, but for such agreement, would not be a
liability of the Company, Subsidiary, Target Company or Target
Subsidiary;
9. any agreement under which the Company, any of its Subsidiaries,
Target or Target Subsidiary could have liabilities or obligations
in the future
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relating to the acquisition or disposition of material assets, by
way of merger, consolidation, purchase, sale or otherwise, or
granting to any person a right at such person's option to
purchase or acquire any material asset or property, of the Target
or any interest therein (not including acquisitions or
dispositions of inventory in the ordinary course of business);
10. any other agreement (or group of related agreements), other than
loans and leases originated or held by the Company, one of its
Subsidiaries, Target or Target Subsidiary in the Ordinary Course
of Business, and other than employment agreements disclosed
elsewhere in the Disclosure Schedule, the performance of which
obligates either party to pay consideration in excess of $100,000
per year.
The Company has made available to the Purchasers, to the extent requested, a
correct and complete copy of each written agreement listed in the Disclosure
Schedule pursuant to this subsection to which the Company, one of its
Subsidiaries, Target Company or Target Subsidiary is a party, and a written
summary setting forth the terms and conditions of each oral agreement referred
to in the Disclosure Schedule pursuant to this subsection to which the Company,
one of its Subsidiaries, Target Company or Target Subsidiary is a party. With
respect to each agreement listed in the Disclosure Schedule pursuant to this
subsection: (A) the agreement is legal, valid, binding, enforceable, and in
full force and effect; (B) the agreement will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby; (C) neither the
Company, its Subsidiaries, Target Company nor Target Subsidiaries nor any other
party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (D) neither the Company,
its Subsidiaries, Target Company nor Target Subsidiaries nor any other party has
repudiated any provision of the agreement.
(aa) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts
receivable carried as such on the books and records of the Company, its
Subsidiaries, Target Company or Target Subsidiary are reflected properly on
those books and records, are subject to no setoffs or counterclaims that have
been asserted by the borrowers or debtors thereunder, and are current and
performing in accordance with their terms. The loan and asset classifications
utilized by each of the Company, its Subsidiaries, Target Company and Target
Subsidiary are in accordance with applicable Regulatory Accounting Principles
and prudent banking practice, and are consistently applied. As of December 31,
1996, the Company's consolidated allowance for loan and lease losses was
$5,156,000. Based on evaluations of collectibility and prior loss experience in
light of the information in the possession of management of the Company as of
December 31, 1996, the allowance for loan and lease losses of its Subsidiaries
and of Target Subsidiary is adequate to absorb losses inherent in their
respective loans and leases. Neither the Company nor any Subsidiary has any
outstanding loans, discounts or commitments to loan or discount which have
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not been made for good and valuable consideration in the Ordinary Course of
Business. The Disclosure Schedule sets forth an accurate and complete list,
with respect to each Bank, of all extensions of credit to officers, directors,
principal shareholders and their related interests ("Insiders"), as these terms
are defined in Regulation O, 12 C.F.R. Section 215.
(bb) POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of any of the Company, its Subsidiaries, Target Company and
Target Subsidiaries pursuant to which the applicable entity has granted
authority to incur any Liability on behalf of the entity or to compromise any
right of the applicable entity.
(cc) INSURANCE. With respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which any of the Company, its
Subsidiaries, Target Company and Target Subsidiaries have been a party, a named
insured, or otherwise the beneficiary of coverage during the last three years:
(A) the policy, or a substitute policy providing coverage that is not
substantially less than that of the original policy, is legal, valid, binding,
enforceable, and in full force and effect; (B) the policy (or its substitute)
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (C) neither any of the Company, its Subsidiaries, Target
Company and Target Subsidiaries nor any other party to the policy is in breach
or default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification,
or acceleration, under the policy unless a substitute policy has been obtained;
and (D) neither the Company, its Subsidiaries, Target Company nor Target
Subsidiaries, nor any other party to the policy has repudiated any provision
thereof. Each of the Company, its Subsidiaries, Target Company and Target
Subsidiaries have been covered during the past three years by insurance in scope
and amount customary and commercially reasonable for the businesses in which it
has engaged. The Disclosure Schedule describes any self-insurance arrangements
affecting any of the Company, its Subsidiaries, Target Company and Target
Subsidiaries.
(dd) LITIGATION. The Disclosure Schedule sets forth each instance in
which any of the Company, its Subsidiaries, Target Company and Target
Subsidiaries (i) is subject as a defendant (including as a defendant in
counterclaim or cross-claim) to any outstanding injunction, judgment, order,
decree, ruling, or charge or (ii) is or is threatened to be made a defendant
(including as a defendant in counterclaim or cross-claim) to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. None of the actions, suits, proceedings,
hearings, and investigations set forth in the Disclosure Schedule would, if
adversely determined, result in an adverse change in the business, financial
condition, operations, results of operations, or future prospects of any of the
Company, its Subsidiaries, Target Company and Target Subsidiary after taking
into account any reserves or accruals previously taken or made in
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connection therewith, which reserves and accruals are reflected in the Financial
Statements for each entity. The Company has no Knowledge that any such action,
suit, proceeding, hearing, or investigation is likely to be brought or
threatened against any of the Company, its Subsidiaries, Target Company or
Target Subsidiaries.
(ee) EMPLOYEES. The Company has no Knowledge of any plan by any
executive officer, employee who constitutes an Insider (defined on p. 24), or
group of employees to terminate employment with any of the Company, its
Subsidiaries, Target Company and Target Subsidiaries. None of the Company, its
Subsidiaries, Target Company and Target Subsidiaries is a party to or bound by
any collective bargaining agreement, nor has any of them experienced any
strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. None of the Company, its Subsidiaries, Target Company and
Target Subsidiaries has committed any unfair labor practice. No organizational
effort is presently being made or threatened by or on behalf of any labor union
with respect to employees of any of the Company, its Subsidiaries, Target
Company and Target Subsidiaries.
(ff) EMPLOYEE BENEFITS.
1. The Disclosure Schedule lists each Employee Benefit Plan
that any of the Company, its Subsidiaries, Target Company and Target
Subsidiaries maintains or to which any of the Company, its Subsidiaries, Target
Company and Target Subsidiaries contributes.
2. Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation with the
applicable requirements of ERISA, the Code, and other applicable laws.
3. All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan Descriptions)
have been filed or distributed appropriately with respect to each such Employee
Benefit Plan. The requirements of Part 6 of Subtitle B of Title I of ERISA and
of Code Sec. 4980B have been met with respect to each such Employee Benefit Plan
which is an Employee Welfare Benefit Plan.
4. All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid to each
such Employee Benefit Plan which is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Funding Date which are not
yet due have been paid to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of the Company, its Subsidiaries,
Target Company and Target Subsidiaries. All premiums or other payments for all
periods ending on or before the Funding Date have been paid with respect to each
such Employee Benefit Plan which is an Employee Welfare Benefit Plan.
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5. Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan meets the requirements of a "qualified plan" under Code Sec. 401(a)
and has received, within the last two years, a favorable determination letter
from the Internal Revenue Service, and nothing has occurred since the date of
such determination that could adversely affect the qualification of such
Employee Benefit Plan.
6. No Employee Benefit Plan is an Employee Pension Benefit Plan
subject to Title IV of ERISA.
7. With respect to each Employee Benefit Plan that any of the
Company, its Subsidiaries, Target Company and Target Subsidiaries and the
Controlled Group of Corporations which includes the Company, its Subsidiaries,
Target Company and Target Subsidiaries maintains or has maintained at any time
or to which any of them contributes, has contributed at any time, or been
required to contribute at any time:
(1) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan subject to Title IV of ERISA (other than any
Multiemployer Plan) has been completely or partially terminated or
been the subject of a Reportable Event as to which notices would be
required to be filed with the PBGC. No proceeding by the PBGC to
terminate any such Employee Pension Benefit Plan subject to Title IV
of ERISA (other than any Multiemployer Plan) has been instituted or
threatened.
(2) None of the Company, its Subsidiaries, Target Company and
Target Subsidiaries have incurred, and the Company has no Knowledge
giving it reason to expect that any of the Company, its Subsidiaries,
Target Company or Target Subsidiaries will incur, any Liability to the
PBGC (other than PBGC premium payments) or otherwise under Title IV of
ERISA (including any withdrawal Liability) or under the Code with
respect to any such Employee Benefit Plan which is an Employee Pension
Benefit Plan.
8. None of the Company, its Subsidiaries, Target Company and
Target Subsidiaries the other members of the Controlled Group of Corporations
that includes the Company, its Subsidiaries, Target Company and Target
Subsidiaries contributes to, has contributed to at any time, or at any time has
been required to contribute to any Multiemployer Plan or has any Liability
(including withdrawal Liability) under any Multiemployer Plan.
9. None of the Company, its Subsidiaries, Target Company and
Target Subsidiaries maintains or has maintained, or contributes to, has
contributed to or has been required to contribute to any Employee Welfare
Benefit Plan providing medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees, their spouses,
or their dependents (other than in accordance with Code Sec. 4980B).
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10. With respect to each Employee Benefit Plan and each other
commitment to an employee of the Company, one of its Subsidiaries, Target
Company or Target Subsidiary providing for deferred compensation, the Company
has provided the Purchasers with true, complete and correct copies of (to the
extent applicable) (A) all documents pursuant to which the Employee Benefit Plan
or deferred compensation arrangement is maintained, funded and administered, (B)
the most recent annual report (Form 5500 series) filed with the IRS (with
applicable attachments), (C) the most recent financial statement, (D) the most
recent actuarial valuation of benefit obligations, (E) the most recent summary
plan description, and (F) the most recent determination letter received from the
IRS and the most recent application to the IRS for such determination letter.
(gg) GUARANTIES. None of the Company, its Subsidiaries, Target
Company and Target Subsidiary is a guarantor of, or otherwise is liable for, any
Liability or obligation (including indebtedness) of any Person other than
another of the Company, its Subsidiaries, Target Company or Target Subsidiary.
(hh) ENVIRONMENTAL AND SAFETY MATTERS.
1. The Company, its Subsidiaries, Target Company, and Target
Subsidiaries have complied and are in compliance with all Environmental and
Safety Requirements. Without limiting the foregoing, no property or facility
owned or operated by the Company, its Subsidiaries, Target Company, or Target
Subsidiary (in the case of leased properties, being construed to include only
such portion of such property as is actually occupied by the applicable entity),
contains any landfills, surface impoundments, or disposal areas, or any (i)
underground storage tanks (ii) asbestos-containing material, or (iii) materials
or equipment containing polychlorinated biphenyls, in any of cases (i) through
(iii) that is not in compliance with applicable Environmental and Safety
Requirements.
2. The Company, its Subsidiaries, Target Company, and Target
Subsidiary have not treated, stored, disposed of, arranged for or permitted the
disposal of, transported, handled, or released any substance, including without
limitation any hazardous substance, or owned or operated any property or
facility (and no such property or facility is contaminated by any such
substance), in each case in a manner that has given or could give rise to
liabilities for the Company, its Subsidiaries, Target Company, or Target
Subsidiary, as applicable, including any liability for response costs,
corrective action costs, personal injury, property damage, natural resources
damages or attorney fees, or any investigative, corrective or remedial
obligations, pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA") or the Solid Waste Disposal
Act, as amended ("SWDA") or any other Environmental and Safety Requirements.
3. No facts, events or conditions relating to the past or
present facilities, properties or operations of the Company, its Subsidiaries,
Target Company or Target
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Subsidiaries will prevent, hinder or limit continued compliance by the Business
with Environmental and Safety Requirements, give rise to any investigatory,
remedial or corrective obligations pursuant to Environmental and Safety
Requirements, or give rise to any other liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to Environmental and Safety
Requirements, including without limitation any relating to onsite or offsite
releases or threatened releases of hazardous materials, substances or wastes,
personal injury, property damage or natural resources damage.
4. The Company, its Subsidiaries, Target Company, and Target
Subsidiaries have not, either expressly or by operation of law, assumed or
undertaken any liability, including without limitation any obligation for
corrective or remedial action, of any other person relating to Environmental and
Safety Requirements.
(ii) CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY, ITS
SUBSIDIARIES, TARGET COMPANY AND TARGET SUBSIDIARIES. Excepting (i) as an
employee and (ii) loans consistent with the immediately following sentence, none
of the shareholders, officers or directors of the Company, its Subsidiaries,
Target Company or Target Subsidiaries (or the Affiliates of the shareholders)
has been involved in any business arrangement or relationship with any of the
Company, its Subsidiaries, Target Company and Target Subsidiaries within the
past 12 months and no such shareholder, officer or director owns an interest in
any material asset, tangible or intangible, which is used in the business of any
of the Company, its Subsidiaries, Target Company and Target Subsidiaries. No
shareholder, officer or director of the Company, its Subsidiaries, Target
Company or Target Subsidiaries have any loan, credit or other contractual
arrangement outstanding with the Company, its Subsidiaries, Target Company or
Target Subsidiaries which does not conform to applicable rules and regulations
of the OCC, the California Banking Department, the FRB, and the FDIC.
(jj) ORGANIZATION OF BANKS. San Dieguito National Bank and Liberty
National Bank are national banks, duly chartered and validly existing under the
laws the United States, and Commerce Security Bank and Eldorado Bank are
California banks, duly chartered and validly existing under the laws the State
of California. Each Bank's deposit accounts are insured by either the Bank
Insurance Fund or Savings Association Insurance Fund of the Federal Deposit
Insurance Corporation (the "FDIC"). Each Bank has paid all regular premiums and
special assessments and filed all reports required to be filed by the state and
federal regulatory agencies having jurisdiction over it. Each Bank has full
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as it is now being conducted. The Company
has previously made available to the Purchasers, to the extent requested,
complete and correct copies of the charter and bylaws of each Bank, as presently
in effect, and lists all of the directors and officers of each Bank. Each Bank
is duly qualified or licensed to do business as a foreign corporation in good
standing in every jurisdiction in which a failure to so qualify would have an
adverse effect on the conduct of its business. No Bank has paid any dividend
that (i) caused the regulatory net worth of the Bank to be less than the amount
then required by federal or state law, or (ii) exceeded
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any other limitation on the payment of dividends imposed by law, agreement or
published regulatory policy.
(kk) REGULATORY REPORTS.
1. The Company, its Subsidiaries, Target Company and Target
Subsidiaries have filed in a timely manner, and will continue to so file, all
reports, registrations, notices and statements, together with any amendments
required to be made with respect thereto, that were required to be filed with
(a) the State of California, (b) the FDIC, (c) the OCC, (d) the FRB, and (e) all
other regulatory entities with jurisdiction over the their activities. All such
reports, registrations and statements are collectively referred to as the
"Company Regulatory Reports." As of their respective dates, the Company
Regulatory Reports complied with all statutes, rules and regulations enforced or
promulgated by the applicable regulatory authorities with which they were filed.
No Company Regulatory Report contained any untrue statement of material fact or
omitted to state a 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.
2. The Company, its Subsidiaries, Target Company and Target
Subsidiaries has furnished to the Purchasers or made available for inspection,
to the extent requested, true and correct copies of (A) all examination reports
by the State of California, the FDIC, the OCC, and the FRB received during their
1991 through 1996 fiscal years and through the Funding Date, (B) any material
correspondence between the Company, its Subsidiaries, Target Company and Target
Subsidiaries and such agencies relating thereto during such periods, and (C) any
agreements or arrangements between the Company, its Subsidiaries, Target Company
and Target Subsidiaries and such agencies entered into as a result of matters
raised in examination or reports or correspondence (or summaries of all oral
agreements, arrangements or understandings with such agencies) at any time since
January 1, 1993.
(ll) RESERVED
(mm) SECURITIES PORTFOLIO. The Disclosure Schedule sets forth a true
and complete list of all bonds and other investment securities (collectively,
"Investment Securities") held by the Company, its Subsidiaries, Target Company
and Target Subsidiaries, setting forth thereon the cost, coupon rate, maturity
and book value of such Investment Securities. The Company, its Subsidiaries,
Target Company and Target Subsidiaries hold good and marketable title to all of
such Investment Securities, free and clear of any Security Interest. The
Investment Securities comply in all respects with the Regulations.
(nn) SPECIAL ASSETS. The Disclosure Schedule sets forth a true and
complete list of all Special Assets of each Bank as of January 31, 1997. The
Special Assets of each Bank, as of such date, did not exceed (7.0%) of the total
assets of such Bank.
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(oo) REGULATORY APPLICATIONS. The information with respect to the
Company, its Subsidiaries, Target Company and Target Subsidiaries contained in
the regulatory filings to be prepared in accordance with the Acquisition, as of
the date of filing (or as subsequently amended or supplemented), will not
contain any untrue statement of a material fact and will not 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 are made, not
misleading or necessary to correct any such statement which has become false or
misleading.
(pp) BROKERED DEPOSITS. The aggregate brokered deposits of the Banks
do not exceed $70,00,000.
(qq) MORTGAGE LICENSES AND QUALIFICATIONS. Commerce Security Bank
(i) is qualified (A) by FHA as a mortgagee and servicer for FHA Loans, (B) by
the VA as a lender and servicer for VA Loans, (C) by FNMA and FHLMC as a
seller/servicer of first mortgages to FNMA and FHLMC and (D) by GNMA as an
authorized issuer and servicer of GNMA-guaranteed mortgage-backed securities;
and (ii) has all other Licenses, and is in good standing under all applicable
Regulations as mortgage lenders and servicers. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will affect the validity of any License currently possessed by Commerce
Security Bank, and all such Licenses will remain in full force and effect after
the Funding Date.
(rr) MORTGAGE LOAN PORTFOLIO. The Mortgage Loans in the Company's,
its Subsidiaries', Target Company's or Target Subsidiary's Mortgage Servicing
Portfolio were originated and currently exist in compliance with all
requirements of the Regulations.
(ss) TITLE TO CERTAIN MORTGAGE LOANS; MORTGAGE SERVICING AGREEMENTS.
(i) All Mortgage Loans held for the Company's, its Subsidiaries', Target
Company's or Target Subsidiaries' account (whether or not for future sale or
delivery to an Investor) are owned by the Company, its Subsidiaries, Target
Company or Target Subsidiaries free and clear of any Security Interest other
than Security Interests in favor of the Company's, its Subsidiaries', Target
Company's or Target Subsidiaries's sources of credit pursuant to warehouse lines
or other comparable financing arrangements. Such Mortgage Loans have been duly
recorded or submitted for recordation in the appropriate filing office in the
name of the Company, its Subsidiaries, Target Company or Target Subsidiaries as
mortgagee or in the name of a trustee for the benefit of the Company, its
Subsidiaries, Target Company or Target Subsidiaries. The Company, its
Subsidiaries, Target Company and Target Subsidiaries have not, with respect to
any Mortgage Loan subject to a Mortgage Servicing Agreement, released any
security therefor, except upon receipt of reasonable consideration for such
release or of Investor approval, or accepted prepayment of any such Mortgage
Loan which has not been promptly applied to such Mortgage Loan.
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(ii) All of the Mortgage Servicing Agreements and the rights
created thereunder are owned by the Company, its Subsidiaries, Target Company
or Target Subsidiaries free and clear of any Security Interests and, assuming
required notices have been given and required consents obtained, upon the
Funding, will continue to be so owned by the Company, its Subsidiaries, Target
Company and Target Subsidiaries except upon termination by an Investor pursuant
to contract right.
(tt) NO RECOURSE. The Company, its Subsidiaries, Target Company and
Target Subsidiaries are not a party to (i) any agreement or arrangement with (or
otherwise obligated to) any Person, including an Investor or Insurer, to
Repurchase from any such Person any Mortgage Loan, mortgaged property serviced
for others or Servicing Released Loans or Previously Disposed Loans or (ii) any
agreement, arrangement or understanding to reimburse, indemnify or hold harmless
any Person or otherwise assume any Liability with respect to any Adverse
Consequence suffered or incurred as a result of any default under or the
foreclosure or sale of any such Mortgage Loan, mortgaged property serviced for
others, Servicing Released Loans, or Previously Disposed Loans.
(uu) MORTGAGE SERVICING AGREEMENTS. All of the Mortgage Servicing
Agreements are valid and binding obligations of the Company, its Subsidiaries,
Target Company or Target Subsidiaries and the other parties thereto and are in
full force and effect and are enforceable in accordance with their terms, except
as enforcement thereof may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally and by general
principles of equity (whether applied in a proceeding in equity or at law).
(vv) COMPLIANCE. The Company, its Subsidiaries, Target Company and
Target Subsidiaries, and as to bulk purchases of Servicing Rights, all prior
servicers and originators, have been and are in compliance with all federal
state and other applicable laws, rules and Regulations relating to the
origination and servicing of Mortgage Loans.
(ww) INVESTOR COMMITMENTS. Each Investor Commitment constitutes a
valid and binding obligation of the Company, its Subsidiaries, Target Company
and Target Subsidiaries, and all of the other parties thereto, enforceable in
accordance with its terms, subject to bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally and by general
principles of equity (whether applied in a proceeding in equity or at law).
Each Mortgage Loan which is subject to an Investor Commitment is a Conforming
Loan or is otherwise readily saleable in the secondary market.
(xx) CUSTODIAL ACCOUNTS. Such of the Company, its Subsidiaries,
Target Company and Target Subsidiaries as are engaged in the servicing of
Mortgage Loans have full power and authority to maintain Custodial Accounts.
Such Custodial Accounts comply with (i)
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all applicable Regulations and the payment of interest on escrows and (ii) any
terms of the Mortgage Loans (and Mortgage Servicing Agreements) relating
thereto.
(yy) ADVANCES. There are no pooling, participation, servicing or
other agreements to which the Company, its Subsidiaries, Target Company or
Target Subsidiaries are a party which obligate them to make servicing advances
with respect to defaulted or delinquent Mortgage Loans other than as provided in
GNMA, FNMA or FHLMC pooling and servicing agreements. The Advances are valid
and subsisting amounts owing to the Company, its Subsidiaries, Target Company
and Target Subsidiaries, subject to the terms of the applicable Mortgage
Servicing Agreement. The Advances are not subject to setoffs or claims arising
from acts or omissions of the Company, its Subsidiaries, Target Company or
Target Subsidiaries other than as provided in GNMA, FNMA or FHLMC pooling and
servicing agreements.
(zz) PHYSICAL DAMAGE. There exists no physical damage to any
Collateral, which physical damage is not insured against in compliance with the
Regulations and would cause any Mortgage Loan to become delinquent or adversely
affect the value or marketability of any Mortgage Loan, Servicing Rights or
Collateral.
(aaa) APPLICATION OF FUNDS. All monies received with respect to each
Mortgage Loan have been properly accounted for and applied.
(bbb) POOL CERTIFICATION. All Pools have been finally certified or
are in the process of being finally certified. All Pools that have not yet been
finally certified will be finally certified (either in their current composition
or with permissible substitutions of loans) within the time periods specified in
the Regulations. No event has occurred or failed to occur which would require
the Company, its Subsidiaries, Target Company or Target Subsidiaries to
Repurchase any Mortgage Loan from any Pool.
(ccc) ADJUSTABLE RATE LOANS. With respect to each Mortgage Loan
where the interest rate is not fixed for the term of the loan, the Company, its
Subsidiaries, Target Company or Target Subsidiaries have, and all prior
servicers have (i) properly and accurately entered into its system all data
required to service the Mortgage Loan in accordance with all Regulations, (ii)
properly and accurately adjusted the mortgage interest rate on each interest
adjustment date, (iii) properly and accurately adjusted the monthly payment on
each payment adjustment date, (iv) properly and accurately calculated the
amortization of principal and interest on each payment adjustment date, in each
case in compliance with all applicable laws, rules and Regulations and the
related Loan Documents, and (v) executed and delivered any and all necessary
notices required under, and in a form that complies with, all applicable laws,
rules and Regulations and the terms of the related Loan Documents regarding the
interest rate and payment adjustments.
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(ddd) REAL ESTATE OWNED.
1. Except for such Security Interests as have been
appropriately reserved for in the Financial Statements or are not material to
the Company's interest in such property and are in the process of being cleared,
title to the OREO of the Company is good and marketable, and there are no
adverse claims or Security Interests on the OREO not reflected in the carry
value of the same.
2. All title, hazard and other insurance claims and mortgage
guaranty claims with respect to the OREO have been timely filed, and the
Company, its Subsidiaries, Target Company and Target Subsidiaries have not
received any notice of denial of any such claim with respect to any property now
constituting OREO.
3. The Company, its Subsidiaries, Target Company and Target
Subsidiaries are in possession of all of the OREO or, if any of such OREO
remains occupied by the mortgagor, eviction or summary proceedings have been
commenced and the Company, its Subsidiaries, Target Company and Target
Subsidiaries are diligently pursuing such eviction or summary proceedings.
4. No legal proceeding or quasi-legal proceeding is pending or
threatened concerning any OREO or any servicing activity or omission to provide
a servicing activity with respect to any of the OREO.
(eee) NO REPURCHASE AGREEMENTS. Since January 1, 1996, the Company,
its Subsidiaries, Target Company and Target Subsidiaries have not purchased
securities subject to an agreement to resell other than in the Ordinary Course
of Business.
(fff) FORBEARANCE. No Mortgage Loans are subject to any oral
agreement with the borrower or guarantor of any Mortgage Loan to waive or
forgive in any material respect any portion of the accrued interest of the
Mortgage Loan.
(ggg) ACCURACY OF CERTIFICATES. No certificate furnished by or on
behalf of the Company or its Subsidiaries in connection with the transactions
contemplated hereby contains or will contain any untrue statement of fact or
omits or will omit to state a fact necessary to make the statements contained
herein or therein not misleading.
(hhh) SIGNIFICANT STOCKHOLDERS OF THE COMPANY. The Disclosure
Schedule sets forth those persons who, on a pro forma basis for the Funding, are
expected to hold, directly or indirectly, 1.0% or more of the outstanding Common
Stock as of the Funding Date. As of the Funding Date, the Updated Disclosure
Schedule will set forth those persons who, on a pro forma basis for the Funding,
hold, directly or indirectly, 1.0% or more of the outstanding Common Stock as of
the Funding Date.
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(iii) the Company does not expect that it will seek to redeem
shares of Common Stock in the foreseeable future, other than a redemption that
qualifies as a Permitted Redemption as defined in the Amended and Restated
Charter.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS. Each
Purchaser hereby represents, warrants and covenants to the Company, severally
and not jointly, as of the date of this Agreement and as of the Funding Date, as
follows:
(a) The Purchaser is a limited partnership duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, with the power and authority to perform its obligations under this
Agreement.
(b) The execution, delivery and performance of this Agreement by the
Purchaser and the consummation by the Purchaser of the transactions contemplated
hereby have been duly authorized by all necessary actions of the Purchaser; and
this Agreement, when duly executed and delivered by the Purchaser and accepted
by the Company, will constitute a valid and legally binding instrument,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(c) The Purchaser is not insolvent and has legally binding
commitments from parties, known to the Purchaser to have the financial ability
to perform under such commitments, that will provide the Purchaser with
sufficient cash funds on hand to purchase the Senior Securities on the terms and
conditions contained in this Agreement on or before the Funding Date. Upon the
Company's reasonable request from time to time the Purchaser will provide the
Company with evidence or substantiation that such Purchaser has the financial
means to satisfy its financial obligations under this Agreement, and any such
evidence or substantiation shall be true and accurate in all material respects.
(d) Except for the approvals being obtained by the Company in
connection with the Acquisition (which approvals will be based in part on the
terms of the Senior Securities and the Ancillary Agreements and information
about the Purchasers), no state, federal or foreign regulatory approvals,
permits, licenses or consents or other contractual or legal obligations are
required in order for the Purchaser to enter into this Agreement or purchase the
Senior Securities. The Purchaser shall use all commercially reasonable efforts
to cooperate with the Company and to provide such assistance, as the Company may
reasonably request, with the preparation and filing of all necessary
documentation, to effect all applications, notices, petitions and filings, and
to assist in obtaining, as promptly as practicable, all permits, consents,
approvals and authorizations of all third parties and regulatory authorities
which are necessary to consummate the Acquisition or the contemplated merger or
consolidation of the Banks (the "Bank Merger"). The Purchaser shall, upon a
reasonable request therefor, furnish the Company with all information concerning
itself as may be reasonably necessary or advisable in connection with any filing
or
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application made by or on behalf of the Company or the Target Company to any
regulatory authority in connection with the Acquisition or the Bank Merger.
(e) The execution and delivery of this Agreement, the consummation by
the Purchaser of the transactions herein contemplated and the compliance by the
Purchaser with the terms hereof do not and will not materially conflict with, or
result in a material breach or violation of any of the terms or provisions of,
or constitute a material default under, the constituent documents of the
Purchaser or any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Purchaser is a party or by which any of the
Purchaser's properties or assets are bound, or any applicable law, rule,
regulation, judgment, order or decree of any government,
governmental-instrumentality or court, domestic or foreign, having jurisdiction
over the Purchaser or any of the Purchaser's properties or assets.
(f) The Purchaser has not entered into any contracts, arrangements,
understandings or relationships (legal or otherwise) with any other person or
persons, other than its Affiliates or Associates (and other than as required by
its organizational documents or contractual commitments to its partners that are
applicable generally to investments made by the Purchaser), with respect to the
transactions contemplated by this Agreement or any securities of the Company,
including but not limited to transfer or voting of any of the securities,
finder's fees, joint ventures, loan or option arrangements, puts or calls,
guarantees of profits, division of profits or loss, or the giving or withholding
of proxies.
(g) The Purchaser has been advised and understands that the Senior
Securities have not been registered under the Securities Act in reliance upon
the exemption from such registration provided in Section 4(2) thereof and that
the Senior Securities have not been registered under the securities laws of any
state in reliance on exemptions therefrom and, therefore, the Senior Securities
may not be resold unless registered under applicable state securities laws or an
exemption from registration is available. The Company is and will be under no
obligation to register the Senior Securities under the Securities Act except to
the extent provided in the Registration Agreement (as defined herein), when
executed by the Company.
(h) The Purchaser acknowledges receipt of, and has had a reasonable
opportunity to review, the Private Placement Memorandum, but further
acknowledges that the information and representations contained in the Placement
Memorandum speak as of December 20, 1996 and the Placement Memorandum has not
been supplemented subsequent to such date. To the extent that information
contained in this Agreement (including the Disclosure Schedule or the other
Schedules hereto) is inconsistent with the Placement Memorandum, the information
contained this Agreement and such Schedules supersede that set forth the
Placement Memorandum. The Purchaser also acknowledges receipt of, and has had a
reasonable opportunity to review, the Company's Unaudited 1996 Financials.
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(i) The Purchaser has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Senior Securities, is able to bear the economic risk of an
investment in the Senior Securities, including at the date hereof, the ability
to afford a complete loss of the investment, and is (i) a sophisticated
institutional or corporate investor as well as an "accredited investor" as
defined in Rule 501(a) under the Securities Act; or (ii) a sophisticated
individual investor as well as an "accredited investor" as defined in Rule
501(a) under the Securities Act. The Purchaser agrees to provide promptly such
additional information as may be reasonably required by the Company for
compliance with the securities laws of the state in which the Purchaser is
located.
(j) The Purchaser intends to purchase the Senior Securities for the
account of the Purchaser and not, in whole or in part, for the account of any
other person. The Purchaser represents and warrants to, and covenants and
agrees with, the Company that the Senior Securities to be acquired by it
hereunder are being acquired for its own account for investment and with no
intention of distributing or reselling such Senior Securities or any part
thereof or interest therein in any transaction which would be in violation of
the securities laws of the United States of America or any state.
(k) The Purchaser has been advised that, prior to any registration of
the Senior Securities pursuant to the provisions of the Registration Agreement,
any and all certificates or other instruments representing the Senior Securities
and any and all certificates issued in replacement thereof or in exchange
therefor shall bear the following legend or one substantially similar thereto:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE IN
RELIANCE ON EXEMPTIONS THEREFROM AND, THEREFORE, MAY NOT BE RESOLD
UNLESS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS
OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
In addition, certificates or other instruments representing the Senior
Securities acquired by the Purchaser will bear additional legends as required by
the securities laws of those states.
(l) The Purchaser will not sell or otherwise transfer any of the
Senior Securities, except in compliance with the provisions of the applicable
securities laws and as stated in any legend. The Purchaser has been advised
that (i) there are significant restrictions on the transfer of the Senior
Securities, (ii) there is no active market for the Common Stock, (iii) no
trading market for the Common Stock or any class of the Senior Securities is
likely to be available in the foreseeable future, and (iv) as a result, an
investment in the Senior Securities may be extremely illiquid.
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(m) The Purchaser has taken no action which would entitle anyone to a
broker's or finder's fee or other compensation in connection with the
transactions contemplated hereby, other than the compensation payable by the
Company to The Shattan Group, LLC pursuant to the terms of its December 1996
engagement agreement with the Company.
7. FUNDING CONDITIONS. The respective obligations of the Purchasers and
the Company to consummate the purchase and sale of the Senior Securities and,
if applicable, the payment of the Commitment Fee (as defined herein) shall be
subject, in the discretion of the Company or the Purchasers, as the case may be,
to certain conditions set forth in this Section 7.
7.1 CONDITIONS TO PURCHASERS' OBLIGATIONS. The Purchasers'
respective obligations to purchase the Senior Securities are subject to the
following conditions:
(a) No representation or warranty made as of the date of this
Agreement with respect to the Company or its Subsidiaries (as specifically
modified by the Disclosure Schedule) shall have been inaccurate as of the date
hereof as a result of facts that, individually or in aggregation with all other
facts resulting in other such inaccuracies, represent a material adverse change
in the business, properties, assets, Liabilities, operations, earnings and
condition of the Company, its Subsidiaries, Target Company and the Target
Subsidiary considered on a consolidated basis, as the same were depicted by the
representations and warranties in light of the Disclosure Schedule as actually
delivered to the Purchasers as of the date hereof.
(b) Between the date hereof and the Funding Date, there shall have
occurred no event or development relating to the Company or its Subsidiaries
that would constitute or has resulted in a material adverse change, individually
or in aggregation with all other such events and developments, in the business,
properties, assets, Liabilities, operations, earnings and condition of the
Company, its Subsidiaries, Target Company and Target Subsidiary considered on a
consolidated basis.
(c) The closing conditions set forth in Sections 6.1 and 6.2 of the
Acquisition Agreement shall have been satisfied in the reasonable determination
of the Purchasers in accordance with such Sections' respective terms.
(d) The Company and its Subsidiaries shall have complied in all
material respects with all covenants and agreements and satisfied in all
material respects all conditions on its part to be performed or satisfied
hereunder at or prior to the Funding.
(e) The Amended and Restated Charter (in the form set forth as
EXHIBIT C) shall have been filed and become effective with the Secretary of
State of the State of Delaware. Other than the filing of the Amended and
Restated Charter, there shall not have been any change effected without the
Purchasers' prior written consent after the date of this Agreement in the
charter or other organizational document or bylaws of the Company adversely
affecting (in any
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manner) the rights of the holders of the Senior Securities; PROVIDED, HOWEVER,
that an increase in the Company's authorized capital stock shall not be deemed
to adversely affect the rights of the holders of the Senior Securities.
(f) If the Target Redemption Amount is $12,000,000, the Company shall
have issued on the Funding Date $18,200,000 of Class B Common Stock, of which
not more than $4,500,000 shall have been issued at a price per share of $4.40
and $13,700,000 of which shall be issued at a price of not less than $4.81 per
share. If the Target Redemption Amount is greater than or less than
$12,000,000, the Company shall have issued on the Funding Date such lesser or
greater number of shares of Class B Common Stock determined in accordance
Section 1 hereof, of which not more than $4,500,000 shall have been issued at a
price per share of $4.40 and the balance shall have been issued at a price per
share of not less than $4.81.
(g) The Trust (i) shall have been formed and, as of the Funding,
shall be duly organized, validly existing and in good standing as a business
trust organized under the laws of the State of Delaware, with power and
authority to conduct its business as contemplated by this Agreement; (ii) shall
have no assets other than the proceeds of the Common Security Certificates sold
to the Company, (iii) shall have no liabilities or obligations other than those
contemplated under the Declaration of Trust, (iv) shall not have conducted any
business other than ministerial preparations to purchase the Junior Subordinated
Debenture and to issue the Preferred Security Certificates and the Common
Security Certificates and (v) the documents reflecting the actions set forth in
subsections (i)-(iv) above shall have been executed, and the instruments
thereunder shall have been issued.
(h) At the Funding, the Purchasers shall have received a certificate,
dated as of the Funding Date, of the Chief Executive Officer and the Chief
Financial Officer of the Company in which such officers state that the closing
conditions specified in paragraphs (a) through (g) of this Section 7.1 have been
satisfied.
(i) At the Funding, the Company or the Trust (as applicable) shall
have executed and delivered to the Purchasers certificates evidencing the Series
A Capital Securities, the Series B Preferred Stock and the Special Common Stock,
respectively, in due and proper form.
(j) At the Funding, the Company shall have executed and delivered to
the Purchasers the Series B Warrants in the form attached hereto as EXHIBIT D.
(k) At the Funding, the Company shall have executed and delivered to
the Purchasers a registration rights agreement in the form attached hereto as
EXHIBIT G (the "Registration Agreement"). The Company and DCG shall have
amended that certain registration rights agreement dated September 30, 1995, as
amended, between the Company and DCG (the "DCG Registration Agreement") to
provide that the Purchasers shall be entitled to so-called
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piggyback registration rights with respect to any demand registration initiated
by DCG to the same extent that the Purchaser may include shares of Class B
Common Stock pursuant to Section 4 of the Registration Agreement in a
registration statement initiated by the Company.
(l) The Purchasers, the Company, DCG, Robert P. Keller, and certain
other shareholders of Dartmouth Capital Group, Inc. shall have entered into a
shareholder agreement in the form attached hereto as EXHIBIT H.
(m) At the Funding, the Company shall have executed and delivered to
the Purchasers a guarantee agreement in the form attached hereto as EXHIBIT I
(the "Guarantee"), the purpose of which shall be to fully and unconditionally
guarantee all of the Trust's obligations under the Series A Capital Securities.
(n) Wilmington Trust Company shall have accepted its appointment as
Delaware Trustee (as defined in the Trust Agreement), or if Wilmington Trust
Company is unable or unwilling to serve as Delaware Trustee, the Purchasers
shall have selected another institutional trustee to whom the Company has no
reasonable objection, and such party shall have formally accepted its
appointment under the Trust.
(o) The Purchasers shall have reasonably determined, based upon,
among other things, the advice of counsel and discussions with representatives
of the Federal Reserve Bank of San Francisco and the FRB, that the purchase of
the Senior Securities and the other transactions specifically contemplated by
this Agreement and the Ancillary Agreements shall not cause a Purchaser to be
deemed (i) a bank holding company within the meaning of the Bank Holding Company
Act of 1956, as amended (the "BHC Act") or (ii) subject to any other federal or
state banking laws which would restrict or prohibit a Purchaser's business.
(p) On a pro forma basis as of the calendar month-end prior to the
Closing: (x) each of the Company and the Target Company will be "well
capitalized" within the meaning of the applicable regulations of the Board of
Governors of the Federal Reserve System (the "FRB") and (y) each of the Company
and the Consolidated Bank (as defined in the Placement Memorandum) will be "well
capitalized" within the meaning of the applicable FRB regulations on a pro forma
basis as of the calendar month-end prior to the Closing, giving effect to (i)
the Acquisition and (ii) the financing therefor, including the sale of the
Senior Securities, the Junior Common Financing (as defined in the Placement
Memorandum) and the Target Redemption Amount.
(q) No action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement to
be rescinded
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following consummation, or (C) materially and adversely affect the rights of the
Purchasers hereunder (and no such injunction, order, decree, ruling or charge
shall be in effect).
(r) At the Funding, the Purchasers shall have received the favorable
opinion, dated as of such date, of Nutter, McClennen & Fish, LLP, outside
counsel for the Company, in form and substance reasonably satisfactory to the
Purchasers, and such other customary closing documentation as the Purchasers may
reasonably request.
(s) The Company shall have provided the Purchasers with notice of the
intended date of Funding at least eighteen (18) days prior to such date.
(t) All actions to be taken by the Company in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Purchasers.
(u) The Company shall have paid to each Purchaser, contemporaneously
with the Funding, a commitment fee (the "Commitment Fee") equal to 1.0% of the
aggregate Subscription Price paid by such Purchaser.
(v) The Company shall have certified as of a date not more than five
(5) days prior to the Funding Date that the Special Assets of the Banks, in the
aggregate, do not exceed by more than twenty percent (20.0%) the aggregate
amount of Special Assets of the Banks as of January 31, 1997.
(w) DCG shall purchase, contemporaneously with the Funding, the
Senior Securities described in Section 1(b) on the terms contained in the
Standby Agreement and for the consideration set forth in such Section 1(b).
7.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS. The Company's
obligations to consummate the sale of the Senior Securities and deliver payment
of the Commitment Fee are subject to the following conditions:
(a) All representations and warranties and other statements of the
Purchasers are true and correct in all material respects as of the date of this
Agreement, and shall be true and correct in all material respects as if made as
of the Funding (assuming that the Company shall have performed in all material
respects all of its obligations hereunder theretofore to be performed).
(b) Each Purchaser shall have complied in all material respects with
all agreements and satisfied in all material respects all conditions on its part
to be performed or satisfied hereunder at or prior to the Funding.
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(c) At the Funding, the Company shall have received a certificate,
dated as of the Funding Date, of the officers of the General Partner of each
Purchaser in which such officers state that, to their Knowledge, the closing
conditions specified in paragraphs (a) and (b) of this Section 7.2 have been
satisfied.
7.3 MUTUAL CONDITIONS TO PURCHASERS' AND THE COMPANY'S OBLIGATIONS.
The respective obligations of the Purchasers and the Company to consummate the
purchase and sale of the Senior Securities and, if applicable, the payment of
the Commitment Fee shall be subject, in the discretion of the Company or the
Purchasers to the following conditions:
(a) No order suspending the Private Placement or Acquisition shall
have been issued, and no proceeding for that purpose shall have been instituted
or, to the knowledge of the Company or the Purchasers, threatened by any
regulatory or governmental body.
(b) All of the conditions to the closing of the Acquisition set forth
in the Acquisition Agreement shall have been satisfied or, if permitted, duly
waived with the consent of the holders of two-thirds (in terms of Subscription
Price) of the Senior Securities, and the Funding of the sale of the Senior
Securities shall occur prior to but substantially simultaneously with the
closing of the Acquisition pursuant to the Acquisition Agreement.
(c) No regulatory approval necessary to the consummation of the
transactions contemplated by this Agreement (including the Acquisition) shall
have been conditioned upon any matter that could reasonably be expected to
result in any significant adverse effect on (i) the business, operations,
condition, earnings or prospects of the Company, its Subsidiaries, Target
Company and Target Subsidiary considered on a consolidated basis, or (ii) on the
ability of the Company to pursue its business plan as the same has been
described to the Purchasers; PROVIDED, HOWEVER, that no condition relating to
the size of Target Redemption Amount will be considered for purposes of
determining if this closing condition has been satisfied.
(d) If the FRB or any other federal or state agency requires that an
adjustment be made to one or more of the terms of the Senior Securities, this
Agreement, or the Ancillary Agreements, the Company and the Purchasers shall
have negotiated and agreed to mutually acceptable changes to such terms which
allow the Company to obtain regulatory approval of the Acquisition and satisfies
the conditions set forth in clauses (ii) and (iii) of Section 4(b).
8. PRE-FUNDING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Funding.
(a) GENERAL. The Parties will use their best efforts to take all
action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Section 7).
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(b) NOTICES AND CONSENTS. The Company and its Subsidiaries will give
any notices to third parties, will use their best efforts to obtain any third
party consents, and will give any notices and make any filings, that the
Purchasers may request in connection with the matters referred to in
Section 5.2(f) above. Each of the Parties will give any notices to, make any
filings with, and use its best efforts to obtain any authorizations, consents,
and approvals of governments and governmental agencies in connection with the
transactions contemplated by this Agreement and the Acquisition Agreement.
(c) OPERATION OF BUSINESS. The Company and its Subsidiaries will not
engage in any practice, take any action, or enter into any transaction outside
the Ordinary Course of Business. The Company will enforce, and will not waive
without the consent of the Purchasers, pre-closing covenants of the Target
Company (including the Target Subsidiary) contained in the Acquisition Agreement
other than those matters as to which the Company may not unreasonably withhold
its consent, as to which the Company shall consult in advance with the
Purchasers to the extent practicable. Notwithstanding the immediately preceding
sentence, the Company may grant routine consents to the Target Company
(including the Target Subsidiary) permitting Target Company to take actions and
enter into transactions not outside the Ordinary Course of Business for Target
Company, as contemplated by the Acquisition Agreement, without consultation with
or obtaining the consent of the Purchasers. Without limiting the generality of
the foregoing, the Company shall not, and to the extent provided in the
Acquisition Agreement shall cause the Target Company not to (i) declare, set
aside, or pay any dividend or make any distribution with respect to its capital
stock or redeem, purchase, or otherwise acquire any of its capital stock except,
in the case of Target, as provided in Section 5.9.1 of the Acquisition
Agreement, (ii) pay any bonus outside the Ordinary Course of Business except as
contemplated pursuant to any employment agreement to which The Company, a
Subsidiary, Target Company or Target Subsidiary is a party, or (iii) otherwise
engage in any practice, take any action or enter into any transaction of the
sort described in Section 5.2(m) hereof without the prior written consent of the
Purchasers.
(d) FULL ACCESS.
(1) The Company and its Subsidiaries will permit representatives
of the Purchasers to have full access to all of their premises,
properties, personnel, books, records (including Tax records),
contracts, documents, representatives, officers, employees and
counsel, and will use commercially reasonable efforts to afford
representatives of the Purchasers access to such matters respecting
the Target Company and Target Subsidiary.
(2) The Company and its Subsidiaries will permit Purchasers'
representative to attend all regular and special board of directors
meetings (whether held in person or by telephone conference) of the
Company and its Subsidiaries, excepting only meetings limited to
matters relating to the Parties performance under, and rights or
remedies under, this Agreement.
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(e) NOTICE OF DEVELOPMENTS. Each Party will give prompt written
notice to the others of any adverse development causing a material breach of any
of its representations and warranties. In addition, the Company will (i) give
prompt notice (a "Disclosure Supplement") of any developments regarding the
Company, the Target Company or the Acquisition that reasonably could be expected
to result in a failure of any of the conditions set forth in Section 7.1 or
Section 7.3, which Disclosure Supplement shall specify in reasonable detail the
relevant facts and the provision(s) of this Agreement implicated. No disclosure
by any Party pursuant to this Section, however, shall be deemed to cure any
then-existing misrepresentation, breach of warranty, or breach of covenant;
PROVIDED, HOWEVER, that (x) except as provided in the immediately following
sentence, unless the Purchasers notify the Company that the Purchasers elect to
terminate this Agreement pursuant to Section 7.1 or Section 7.3 on the basis of
the events or conditions disclosed in such Disclosure Supplement within twenty
(20) calendar days after the date of the Purchasers' receipt thereof (the
"Notification Date"), the Purchasers shall thereafter be deemed to have waived
any right of termination (but not indemnification) arising from the failure of a
condition contained in any of Section 7.1 or Section 7.3 attributable solely to
such events or conditions, but (y) for purposes of determining the satisfaction
of the conditions set forth in Section 7.1 or Section 7.3, 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 the Purchasers or (ii) if there is a further material adverse
development in the event or condition so disclosed. Notwithstanding the
foregoing clause (x) if, in the reasonable opinion of the Purchasers, the
information provided in such Disclosure Supplement is insufficient for the
Purchasers to evaluate fully whether the identified event or condition
constitutes or contributes to a failure of the conditions to closing set forth
in Section 7.1 or Section 7.3, then with respect to such event or condition, the
Notification Date may be extended, at the election of the Purchasers, until such
date (not beyond the Funding Date) as the Purchasers have received from the
Company sufficient information to make the evaluation contemplated by this
sentence. In order to so extend the Notification Date, the Purchasers must
provide the Company with written notice of such extension not later than the
initial Notification Date, which notice shall specify each event or condition as
to which the extension is being made and set forth in reasonable detail the
information that the Purchasers require in order to make the evaluation of each
such event or condition as contemplated by the immediately preceding sentence.
(f) DELIVERY OF CERTAIN INFORMATION. The Company, its Subsidiaries,
Target Company and Target Subsidiaries shall deliver, or cause to be delivered,
to the Purchasers all of the items described in Sections 9.1 and 9.2, within the
timeframes and subject to the other limitations and conditions described in
Sections 9.1 and 9.2.
(g) ACQUISITION AGREEMENT. The Company agrees not to amend the
Acquisition Agreement without the consent of the Purchasers, which consent shall
not be unreasonably withheld in the case of amendments that do not materially
alter the Company's obligations to consummate the Acquisition or the economic
benefits of the Acquisition to the Company. For the
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purpose of this Section 8(g), neither any waiver by the Company of an immaterial
covenant contained in the Acquisition Agreement nor any consent granted to
Target Company or Target Subsidiary as contemplated by the Acquisition Agreement
shall be deemed to constitute an amendment to the Acquisition Agreement.
(h) COOPERATION. Subject to the terms and conditions hereof, the
Company, its Subsidiaries and the Purchasers will not knowingly and
intentionally take (or refrain from taking) any action which such Party
reasonably should expect will render any representation or warranty or covenant
contained in this Agreement untrue or incorrect in any material respect (except
to the extent a representation or warranty or covenant is qualified by
materiality, in which case the Parties will so refrain from taking any action
that they reasonably should expect will render such representation or warranty
or covenant untrue or incorrect in any respect) as of Funding.
(i) TARGET REDEMPTION AMOUNT. The Company shall use its best efforts
to cause the Target Redemption Amount to equal or exceed $12.0 million but shall
not cause the Target Redemption Amount to exceed $15.0 million.
(j) CERTAIN FILINGS. Prior to the Funding Time, the Company will
cause the Amended and Restated Charter and the Certificate of Trust of the Trust
to become effective with the Secretary of State of the State of Delaware.
(k) REGULATORY FILINGS. The Company shall promptly furnish to
counsel for the Purchasers copies of all (x) applications or other materials
filed with or submitted to the any regulatory authorities in connection with the
Acquisition and (y) correspondence with the regulators relating to the
Acquisition.
9. COVENANTS. The Parties agree as follows:
9.1 INFORMATION RIGHTS WITH RESPECT TO SERIES B PREFERRED STOCK. So long
as any Person owns Series B Preferred Stock having an aggregate liquidation
preference that, when added to the aggregate liquidation preference of any
Series A Capital Securities owned by such Person, is equal to or greater than
$1.0 million, the Company shall furnish to that Person (unless that Person is a
financial institution that directly competes with the Company or its
Subsidiaries) (i) a management letter (a "Management Letter") quarterly
discussing the operations of the Company and the summary information for each
such period within 45 days after the end of each quarter, (ii) a Management
Letter and yearly financials audited by a "Big Six" accounting firm, within 90
days of year-end, (iii) copies of all publicly available filings made with the
Securities and Exchange Commission and other regulatory bodies (to the extent
permissible), and (iv) any other information that is delivered to the holders of
the Common Stock. If the Company is filing periodic reports with the SEC under
the Exchange Act, the Company may satisfy its obligations under clauses (i) and
(ii) of the immediately preceding sentence by providing such Person with a copy
of the relevant Form 10-Q or Form 10-K (together with its annual report if not
included
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therein in the case of the Form 10-K) within three (3) business days after the
Company files such report with the SEC. Such Person shall keep all information
obtained pursuant to this Section confidential in accordance with the terms of
EXHIBIT J attached hereto.
9.2 INFORMATION RIGHTS WITH RESPECT TO COMMON STOCK ACQUIRED BY
PURCHASERS. So long as a Purchaser owns Common Stock (whether Special Common
Stock or Special Common Stock equivalents) having an aggregate value of $1.0
million or more (valued at original cost), the Company shall furnish to such
Purchaser: (i) monthly financial and operating statements (with comparisons to
budgets and to corresponding periods of the preceding year) within 30 days after
the end of each month; (ii) within 90 days after the end of each fiscal year, an
unqualified certified audit report (except for contingent liabilities and any
other matter outside the control of management of the Company at that time)
consisting of long-form consolidated and consolidating financial statements
prepared by a nationally recognized certified public accounting firm; (iii)
prior to the fiscal year-end, a detailed operating budget (prepared on a monthly
basis) for the subsequent fiscal year; this budget should be prepared on a
long-form, consolidated and consolidating basis; the budgets should also include
detailed balance sheets, profit and loss statements and cash flow statements;
(iv) notice of any event which reasonably could be expected to have a material
effect on the Company's business prospects or financial condition; (v) within 10
days after submission, all call reports, quarterly reports, and any and all
other documents and material correspondence filed with or received from the
Office of the Comptroller of the Currency ("OCC"), the Board of Governors of the
Federal Reserve System, and all other applicable state and federal banking
regulators, subject, however, to banking regulations governing the release of
examination data. So long as the Company is obligated to provide information to
a Purchaser pursuant to the immediately preceding sentence, such Purchaser may
inspect the Company's properties, books and other records (and make copies
thereof and take extracts therefrom) and may interview the Company's directors,
officers, employees and independent accountants regarding the Company's affairs
in a manner and at such times as reasonably requested in accordance with the
applicable banking regulations. The Purchasers shall keep all information
obtained pursuant to this Section confidential in accordance with the terms of
EXHIBIT J attached hereto.
9.3 BOARD OF DIRECTORS OF THE COMPANY.
(a) At such time as, and for so long as, a Purchaser meets the
criteria set forth in Section 9.3(d), each Purchaser shall have the right to
designate one individual (a "Director Designee") to be nominated to serve on the
Company's Board of Directors, and (subject to the immediately following
sentence) the Company shall so nominate such Director Designee and shall use all
reasonable efforts to cause such Director Designee to be elected to the Board of
Directors; PROVIDED, HOWEVER, that no transfer or series of transfers of Common
Stock by a Purchaser shall entitle such Purchaser and/or its direct or indirect
transferees to designate more than one Director Designee, and PROVIDED FURTHER
that Olympus I and Olympus II shall be construed as a single Purchaser for
purposes of this Section 9.3. A condition to the qualification of a Purchaser's
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Director Designee to serve as a director of the Company pursuant to this Section
shall be the Director Designee's agreement to resign if the Purchaser who
designated such person owns less than the number of shares of Common Stock and
Common Stock equivalents required by this Section. Any vacancy in the Board of
Directors caused by the death, disability, resignation or removal of a director
who was a Director Designee shall be filled by another Director Designee
designated by such Purchaser, subject only to such Purchaser's continued
compliance with the criteria set forth in Section 9.3(d). For so long as a
Purchaser is entitled to designate a Director Designee hereunder, the
Corporation shall not form an Executive Committee, or any committee to which the
power of the Board of Directors is delegated between meetings of the Board of
Directors (to the extent permitted by law), unless either the Director Designee
of such Purchaser or the Director Designee of another Purchaser shall be a
member of such committee of the Board of Directors. For so long as (i) a
Purchaser is entitled to designate a Director Designee hereunder and (ii) such
Purchaser beneficially owns an amount of Senior Securities and/or Regular Common
Stock (inclusive of shares purchasable under Series B Warrants), such that the
sum of (x) the original purchase price (under this Agreement) of the Senior
Securities so held divided by $4.81 plus (y) the number of shares of Regular
Common Stock so held (inclusive of shares such Purchaser would receive upon
exercise of any Series B Warrant then held by it), is not less than 1,040,000,
the Company shall not, without the consent of a majority in interest of those
Purchasers entitled to designate a Director Designee (determined in accordance
with the foregoing sum), appoint either an Audit Committee or a Compensation
Committee of the Board of Directors unless either the Director Designee of such
Purchaser or the Director Designee of another Purchaser shall be a member of
such committee of the Board of Directors. The Company will use its best efforts
to maintain directors' and officers' liability insurance covering the Director
Designee of a Purchaser. The Company shall reimburse such Director Designee for
any reasonable out-of-pocket expenses incurred in connection with his or her
position on the Board of Directors.
(b) If Section 9.3(a) is not applicable because the Purchaser owns
less than the minimum number of shares of Common Stock or Common Stock
equivalents required under Section 9.3(d)(iv), the Purchaser shall have the
right to designate one advisory director or observer to the Company's Board of
Directors if the sum of the amounts set forth in clauses (i), (ii) and (iii) of
this sentence is not less than 1,040,000: (i) an amount equal to the product
obtained by multiplying 20.8 by the aggregate number of shares of Series A
Capital Securities and Series B Preferred Stock then owned by the Purchaser,
(ii) an amount equal to the aggregate number of shares of one or more classes of
Common Stock then owned by the Purchaser, and (iii) an amount equal to the
aggregate number of shares of Common Stock that would be received upon the
exercise of any Warrant then owned by the Purchaser. The advisory director or
observer shall have the right to attend all meetings of the Company's Board of
Directors and receive copies of all resolutions enacted by the Company's Board
of Directors or any Executive Committee thereof, and (unless the Director
Designee of a Purchaser already sits on such committee) one of the advisory
directors designated by the Purchasers shall have the right to attend all
meetings of any
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Executive Committee of the Board of Directors (or other committee to which the
power of the Board of Directors is delegated between meetings of the Board of
Directors).
(c) For so long as any Purchaser is entitled to designate a Director
Designee, (i) the Company shall not, without the consent of all Purchasers then
having such right, expand its Board of Directors to consist of more than twelve
(12) directors, and (ii) the Company shall use all reasonable efforts to have at
least two directors who neither were investors (or Affiliates of investors) in
DCG as of November 30, 1996 nor are affiliated at such time with any Purchaser
that is then entitled to designate a Director Designee.
(d) A Purchaser shall be eligible to designate a Director Designee in
accordance with Section 9.3(a) if, at such time as the Purchaser first seeks to
designate a director, the Purchaser provides the Company with reasonable
evidence satisfactory to the Company and its counsel (which evidence may include
discussions with the FRB, if the Purchaser or the Company reasonably deems such
discussions to be necessary to clarify then-existing statutes, regulations or
published policy guidelines) that such Purchaser:
(i) owns less than 10.0% of the Common Stock of the
Company then outstanding and entitled to vote in elections of
directors;
(ii) owns equity securities of the Company
constituting less than 15.0% of the Company's shareholders' equity as
of the most recent month end preceding such date, allocating to any
series of Preferred Securities held by such Purchaser the Liquidation
Value thereof (as defined in the Amended and Restated Charter or Trust
Agreement, as applicable) and allocating to the Common Stock held by
such Purchaser its pro rata share of the Company's equity available
for the holders of Common Stock;
(iii) does not then own or have a potential ability,
under the express terms of Common Stock or other Company securities
that the Purchaser then owns, to acquire Common Stock or other Company
securities that, currently or upon the occurrence of any subsequent
event, are or may become convertible into or exchangeable or
exercisable for Common Stock, which in the aggregate could represent
25.0% or more of the Common Stock outstanding on a pro forma basis;
and
(iv) (x) in the case of MDP or Olympus, owns NOT less
than 520,000 shares of one or more classes of Common Stock, and (y) in
the case of any permitted assignee of MDP or Olympus, owns NOT less
than 1,040,000 shares of one or more classes of Common Stock,
including for purposes of this Section 9.3(d) shares of Common Stock
that would be received upon the exercise of any Warrant then owned by
the Purchaser.
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9.4 CERTAIN COVENANTS RELATING TO SPECIAL COMMON STOCK. The approval of
the holders of Special Common Stock who hold a number of shares of Special
Common Stock equal to at least two-thirds of the fully diluted shares of Special
Common Stock (assuming exercise of any and all warrants and options convertible
into Special Common Stock) will be required to approve the creation or issuance
of capital stock of the Company ranking senior or pari-passu with the Special
Common Stock. Upon a Qualified Offering, this Section 9.4 shall terminate
immediately.
9.5 [RESERVED]
9.6 [RESERVED]
9.7 [RESERVED]
9.8 FURTHER ACTION. In case at any time after the Funding any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request.
9.9 BANK HOLDING COMPANY. Notwithstanding anything to the contrary
contained in this Agreement, the Company shall not take any action either prior
to or after the Funding that would cause either Purchaser to be deemed to become
a "bank holding company" within the meaning of the BHC Act, or otherwise be
deemed to be in "control" of the Company under any federal or state law
applicable to banks or bank holding companies. In addition, in the event that
the Company or any of its Affiliates takes any action that would cause a
Purchaser to become a bank holding company (or to be in control of any Bank
under federal or state law), the Company shall indemnify the Purchaser from any
Adverse Consequences with respect thereto.
9.10 CHANGES TO BYLAWS. After the Funding, the Company shall not effect
any change to the bylaws of the Company that adversely affects (in any manner)
the rights of the holders of any class of Senior Securities without the consent
of the holders of two-thirds (valued at original purchase price) of each type of
Senior Security so effected.
9.11 EXCHANGE AND OTHER RIGHTS WITH RESPECT TO SERIES A CAPITAL
SECURITIES.
(a) Subject to subsection (g) of this Section 9.11, the holders
of the Series A Capital Securities shall have the right, in their sole
discretion exercised collectively as provided herein, to exchange all (but not
less than all) Series A Capital Securities that are then outstanding and that
remain subject to this Section 9.11 ("Exchangeable Series A Securities") for
shares of Series E Preferred Stock (a "Series E Exchange") upon and at any time
after the second (2nd) Interest Payment Date under (and as defined in) the
Junior Subordinated Debenture, whether or not consecutive, on which the Company
does not pay the interest then due thereon fully in cash (whether or not the
Company properly records a Principal Adjustment on the Junior Subordinated
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Debenture in lieu of cash as of such Interest Payment Date). In the event of
any such Series E Exchange, the Series A Capital Securities so exchanged shall
be exchanged at the rate of one (1) share of Series E Preferred Stock for each
$1,000 of Liquidation Amount of the Series A Capital Securities being so
exchanged; PROVIDED, HOWEVER, that the Company's obligation to so exchange all
or any portion of such Series A Capital Securities is subject in all events to
the Company's ability to conduct such exchange in compliance with applicable law
(including, without limitation, any requirement that the Company obtain the
prior approval of the Federal Reserve or any other governmental authority having
jurisdiction over the Company). Any such Series E Exchange shall be effected
only upon the affirmative vote of a majority in Liquidation Amount of all
Exchangeable Series A Securities then outstanding, conducted in accordance with
the procedures set forth in Section 12.1 of the Trust, excepting that, for
purposes of applying such Section 12.1, the class of securities shall be
construed to consist solely of the Exchangeable Series A Securities. If such a
Series E Exchange is approved by such a vote, such Series E Exchange shall be
effected with respect to all Exchangeable Series A Securities at the time
provided in Section 9.11(h).
(b) Subject to subsection (g) of this Section 9.11, the holders
of the Series A Capital Securities shall have the right, in their sole
discretion exercised collectively as provided herein, to exchange all (but not
less than all) Exchangeable Series A Securities then outstanding for shares of
Series E Preferred Stock (also a "Series E Exchange") upon and at any time after
the earlier of (i) if the Company closes an underwritten public offering, for
cash, of the Common Stock, the later of (x) the date on which such offering is
closed and (y) the third anniversary of the Funding Date, and (ii) the fifth
anniversary of the Funding Date. In the event of any such Series E Exchange,
Series A Capital Securities so exchanged shall be exchanged at the rate of one
(1) share of Series E Preferred Stock for each $1,000 of Liquidation Amount of
the Series A Capital Securities being so exchanged; PROVIDED, HOWEVER, that the
Company's obligation to so exchange all or any portion of the Series A Capital
Securities is subject in all events to the Company's ability to conduct such
exchange in compliance with applicable law (including, without limitation, any
requirement that the Company obtain the prior approval of the Federal Reserve or
any other governmental authority having jurisdiction over the Company). Any
such Series E Exchange shall be effected only upon the affirmative vote of a
majority in Liquidation Amount of all Exchangeable Series A Securities then
outstanding, conducted in accordance with the procedures set forth in Section
12.1 of the Trust, excepting that, for purposes of applying such Section 12.1,
the class of securities shall be construed to consist solely of the Exchangeable
Series A Securities. If such a Series E Exchange is approved by such a vote,
such Series E Exchange shall be effected with respect to all Exchangeable Series
A Securities at the time provided in Section 9.11(h).
(c) Subject to subsection (g) of this Section 9.11, the holders
of the Series A Capital Securities shall have the right, in their sole
discretion exercised collectively as provided herein, to exchange all (but not
less than all) Exchangeable Series A Securities then outstanding for shares of
Class B Common Stock or Class C Common Stock (a "Common Stock Exchange") upon
and at any time after the earlier of (x) the third (3rd) Business Day following
the
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consummation of a Change in Control, or (y) the fifth anniversary of the Funding
Date, as follows:
(i) Any such Common Stock Exchange shall be at a price
(the "Common Stock Exchange Price") of $4.00 per share of Common Stock
(as may be adjusted pursuant to subsection (d) hereof), with each
Exchangeable Series A Security being valued at its then-applicable
Redemption Amount.
(ii) The Common Stock deliverable in any Common Stock
Exchange shall be either shares of Class B Common Stock or shares of
Class C Common Stock, or any combination thereof, at the sole election
of each holder of Exchangeable Series A Securities; PROVIDED, HOWEVER,
that a holder may not elect to receive Class B Common Stock in
exchange for its Series A Capital Securities if and to the extent that
the issuance of the same would result in the holder owning more than
9.9% of the Company's pro forma Voting Securities (as defined herein)
outstanding following such exchange; and PROVIDED, FURTHER, that at
any time that a holder of Exchangeable Series A Securities owns more
than 9.9% of the outstanding Voting Securities, any Common Stock
Exchange by such holder shall be solely for Class C Common Stock.
Notwithstanding the immediately preceding sentence, a Common Stock
Exchange may be for shares of Class B Common Stock that would result
in a holder owning more than 9.9% of the outstanding Voting Securities
if, prior to the effectiveness of the Common Stock Exchange, such
holder has delivered to the Secretary of the Company an opinion or
memorandum of counsel, in form and substance reasonably satisfactory
to the Company, or other reasonably satisfactory evidence that such
holder may beneficially own more than 9.9% of the outstanding Voting
Securities of the Company and will acquire such shares in accordance
with the Bank Holding Company Act of 1956. As used herein, "Voting
Securities" shall mean the pro forma number of shares of capital stock
of the Company entitled to vote in an election of the directors of the
Company as of the time of the Common Stock Exchange, giving effect to
the proposed Common Stock Exchange and all other exchanges of other
securities for or conversions of other securities into Common Stock
then proposed by the applicable holder of Exchangeable Series A
Securities, but not giving effect to the exercise of any other
outstanding common stock equivalents held by such holder, or the
exercise of common stock equivalents or other exchanges or conversions
of securities for or into Common Stock by any other person. The
Company shall implement procedures prior to the effectiveness of such
Common Stock Exchange to enable each holder of Exchangeable Series A
Securities to indicate the class of Common Stock that such holder
elects to receive upon such exchange.
(iii) A Common Stock Exchange shall be effected only upon
the affirmative vote of a majority in Liquidation Amount of all
Exchangeable Series
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A Securities then outstanding, conducted in accordance with the procedures
set forth in Section 12.1 of the Trust, excepting that, for purposes of
applying such Section 12.1, the class of securities shall be construed to
consist solely of the Exchangeable Series A Securities. If a Common Stock
Exchange is approved by such a vote, such Common Stock Exchange shall be
effected with respect to all Exchangeable Series A Securities at the time
provided in Section 9.11(h).
(d) The Common Stock Exchange Price as set forth in subsection (c) of
this Section 9.11 shall be adjusted upon the events, and in the manner, set
forth below:
(i) If the Company is recapitalized through the subdivision
or combination of its outstanding shares of Common Stock into a
larger or smaller number of shares, the Common Stock Exchange Price
shall be decreased or increased, as of the record date for such
recapitalization, in the inverse proportion to the increase or
decrease in the number of outstanding shares of Common Stock.
(ii) If the Company declares a dividend on the Regular Common
Stock, or makes a distribution to holders of Regular Common Stock,
and such dividend or distribution is payable or made in Regular
Common Stock or securities convertible into or exchangeable for
Regular Common Stock, or rights to purchase Regular Common Stock or
securities convertible into or exchangeable for Regular Common
Stock, the Common Stock Exchange Price shall be decreased, as of the
record date for determining which holders of Regular Common Stock
shall be entitled to receive such dividend or distribution, in
inverse proportion to the increase in the number of outstanding
shares (and shares of Regular Common Stock issuable upon conversion
of all such securities convertible into Regular Common Stock) of all
Common Stock as a result of such dividend or distribution.
(iii) If the Company declares a dividend on the Regular Common
Stock payable in cash, the Common Stock Exchange Price shall be
reduced by the per share dividend payment.
(iv) If the Company declares a dividend on Regular Common
Stock (other than a dividend covered by clause (ii) above, or a
dividend payable in cash covered by clause (iii) above) or
distributes to holders of its Regular Common Stock, other than as
part of its dissolution or liquidation or the winding up of its
affairs, any shares of its stock, any evidence of indebtedness or
any cash or other of its assets (other than Regular Common Stock or
securities convertible into or exchangeable for Regular Common
Stock) (an "Alternative Distribution"), the Common Stock Exchange
Price shall be reduced by an amount equal to the value of the
Alternative Distribution per share of Regular Common Stock as
determined in good faith by the Company's Board of Directors based
upon a written opinion
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from a nationally recognized investment banking firm selected by the
holders of a majority in interest of the Series A Capital Securities
then outstanding and subject to the rights granted in this Section
9.11, and taking into account, among other relevant factors, whether
the Purchaser, as holder of Series A Capital Securities, acquired
any Purchase Rights (as defined herein) with respect to such
dividend or distribution pursuant to the terms hereof. The
selection of such investment banking firm shall be consented to by
the Company, which consent shall not be unreasonably withheld, and
such investment banking firm's fees and expenses shall be paid by
the Company. The Company shall provide the Purchaser with written
notice concerning an Alternative Distribution at least ten (10)
business days prior to the record date therefor.
(v) In case the Company shall, at any time or from time to
time following the date hereof, issue or agree to issue by warrants,
convertible securities, stock options or otherwise, any of its
Common Stock or Other Securities (as defined herein), including
treasury shares, (other than any shares issued in contemplation of
the Securities Purchase Agreement), for a consideration per share
less than the Common Stock Exchange Price per share in effect
immediately prior to the time of such issue or sale, then forthwith
upon such issue or sale, or agreement to issue or sell, said Common
Stock Exchange Price shall be reduced to a price (calculated to the
nearest cent) determined by dividing (x) an amount equal to (A) the
product obtained by multiplying the number of shares of the Common
Stock outstanding (or then deemed to be outstanding as herein
provided) immediately prior to such issue by the Common Stock
Exchange Price in effect at such time plus (B) the consideration
received by the Company upon such issue by (y) the number of shares
of the Common Stock outstanding (or then deemed to be outstanding as
herein provided) immediately after such issue. For the purposes of
this clause (v), the number of shares of Common Stock deemed to be
outstanding at any given time shall exclude shares in the treasury
of the Company but shall include all shares issuable or to become
issuable under any agreements, warrants, convertible securities,
stock options, similar rights or otherwise (hereinafter in this
clause (v) referred to as "Options"). The Board of Directors of the
Company shall make a reasonable determination of the fair value of
the amount of consideration other than money received by the Company
upon the issue by it of any of its securities. Such Board shall, in
case any Common Stock or Options for the purchase thereof are issued
with other stock, securities or assets of the Company, determine
what part of the consideration received therefor is applicable to
the issue of the Common Stock or Options for the purchase thereof.
If, as provided herein, the Common Stock Exchange Price is adjusted
as a consequence of the Company's issuance of Options, no further
adjustment of the Common Stock Exchange Price shall be made upon the
subsequent issuance of Common Stock upon the exercise of such
Options. To the extent that Options expire without having been
exercised,
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the Common Stock Exchange Price computed upon their issuance, and
any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed to take into account only the shares of
Common Stock actually issued upon the exercise of such Options. In
any such recomputation, the consideration applicable to the shares
of Common Stock issued shall be the aggregate consideration which
was received by the Company upon the issuance of such Options,
whether or not exercised, plus the additional consideration actually
received by the Company upon the exercise thereof. No recomputation
shall have the effect of increasing the Common Stock Exchange Price
by an amount in excess of the adjustment thereof made in respect of
the issuance of the expired Options. No adjustment shall be made
pursuant to this clause (v) for the issuance by the Company of (x)
any securities issued pursuant to executive compensation
arrangements the terms of which are disclosed in Disclosure Schedule
5.2(m)(18) to the Securities Purchase Agreement, or (y) any
securities that may be issued upon the conversion of the mandatorily
convertible debentures of SDN Bancorp, Inc. disclosed on Disclosure
Schedule 5.2(b) to the Securities Purchase Agreement.
(vi) No adjustment in the Common Stock Exchange Price shall be
required unless such adjustment would require an increase or
decrease in the Common Stock Exchange Price of at least one percent;
provided, however, that any adjustments which by reason of this
clause (vi) are not required to be made immediately shall be carried
forward and taken into account at the time of exchange of the Series
A Capital Securities or any subsequent adjustment in the Common
Stock Exchange Price which, singly or in combination with any
adjustment carried forward, is required to be made under this
Section 9.11(d).
(vii) If the event as a result of which an adjustment is made
under clause (i), (ii), (iii), (iv) or (v) above does not occur,
then any adjustment in the Common Stock Exchange Price that was made
in accordance with such clause (i), (ii), (iii), (iv) or (v) shall
be rescinded effective immediately prior to the record date for such
event.
(e) Subject to subsection (g) of this Section 9.11, the holders
of the Series A Capital Securities shall have the additional rights set forth in
this Section 9.11(e). Capitalized terms used in this Section 9.11(e) and not
defined in this Agreement have the meaning assigned such terms in the Trust.
(i) Subject to the last sentence of this subsection, upon any
and each Interest Payment Date (as defined in the Debenture) on
which the Company elects not to pay the interest payment then due
fully in cash to the holder of the Debenture, the Company shall, in
addition to adding a Principal Adjustment to the principal sum of
the Debenture, issue to each holder of Series A Capital Securities,
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for no additional consideration, shares ("PIE Shares") of Class B
Common Stock or Class C Common Stock (such class to be determined in
accordance with subsection (ii) hereof) equal to, unless adjusted as
provided herein, Seven (7) shares of Common Stock for each $100.00
of the Principal Adjustment required to be added to the Liquidation
Amount of all of such holder's Series A Capital Securities as of
such Interest Payment Date. If the Market Value of the Class B
Common Stock as of the Interest Payment Date with respect to which
the PIE Shares are issued is greater than or less than $4.00 per
share, the number of PIE Shares so issued shall be adjusted by
dividing 7 by a fraction, the numerator of which is the Market Value
of the Class B Common Stock as of the relevant Interest Payment Date
and the denominator of which is $4.00. Notwithstanding anything to
the contrary contained herein, the Company shall not issue PIE
Shares pursuant to this Section 9.11(e) numbering, in the aggregate,
more than of (x) Four Hundred Sixty-Nine Thousand Two Hundred Fifty
(469,250) shares minus (y) the aggregate number of PIE Shares
theretofore issued in respect of Series E Preferred Stock, on or
with respect to any and all Interest Payment Dates on which PIE
Shares would otherwise be due, and if and after Company has issued
such number of PIE Shares the Company shall not thereafter issue PIE
Shares regardless of whether, on or with respect to any subsequent
Interest Payment Date, the Company fails to pay interest on the
Debenture in full in cash.
(ii) The PIE Shares issuable under this Section 9.11(e) shall
be either shares of Class B Common Stock or shares of Class C Common
Stock, or any combination thereof, at the sole election of the
Holder (or, for so long as the Holder is the Trust, at the sole
election of the respective holders of the Series A Capital
Securities then outstanding ("Series A Holders"); PROVIDED, HOWEVER,
that the Holder (or, if applicable, a Series A Holder) may not elect
to receive shares of Class B Common Stock if and to the extent that
the Holder or, if the Holder is the Trust, the applicable Series A
Holder, would not then be permitted to convert Class C Common Stock
into Class B Common Stock pursuant to the restrictions contained in
Article Fourth, Part B, Section 5(a) of the Amended and Restated
Charter.
(f) If at any time the Company grants, issues or sells any options,
convertible securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of Regular Common Stock (the
"Purchase Rights"), then each Purchaser shall be entitled, if and to the extent
it then is beneficial owner of Series A Capital Securities, to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which
such Purchaser could have acquired if such Purchaser had held the number of
shares of Regular Common Stock acquirable upon complete exchange of its Series A
Capital Securities immediately before the date on which a record is taken for
the grant, issuance or sale of such Purchase Rights, or, if no such
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record is taken, the date as of which the record holders of Regular Common Stock
are to be determined for the grant, issue or sale of such Purchase Rights;
provided that (a) if the Purchase Rights involve Common Stock that constitutes
Voting Securities, the Company shall make available to each Purchaser, at such
Purchaser's request, Purchase Rights for Class C Common Stock, except that, if
and to the extent that the Purchaser would not be permitted to exchange its
Series A Capital Securities for Class B Common Stock pursuant to this Section
9.11, the Company shall grant, issue or sell to the Purchaser only Purchase
Rights relating to Class C Common Stock; and (b) if the Purchase Rights involve
Voting Securities other than Common Stock, the Company shall use its best
efforts to make available to the Purchaser, at such Purchaser's request,
Purchase Rights involving non-voting securities (except where such securities
are entitled to voting rights pursuant to applicable laws) which are otherwise
identical to the Purchase Rights involving voting securities and which
non-voting securities are convertible or exchangeable into such voting
securities on the same terms as the Company's Class C Common Stock is
convertible into the Company's Class B Common Stock.
(g) Upon a Series A Transfer (as defined in Section 18) of any Series
A Capital Security, whether or not the Purchaser thereof thereafter reacquires
such Series A Capital Security, (i) such Series A Capital Security may not
thereafter be exchanged for Series E Preferred Stock in a Series E Exchange or
for Common Stock in a Common Stock Exchange, (ii) no holder of such Series A
Capital Security shall be entitled to vote thereafter with respect to any
proposed Series E Exchange or Common Stock Exchange, and (iii) the holder of
such Series A Capital Security shall not be entitled thereafter to receive
PIE Shares pursuant to Section 9.11(e). Upon the occurrence of a Series A Bulk
Transfer, (i) no outstanding Series A Capital Security may thereafter be
exchanged for Series E Preferred Stock in a Series E Exchange or for Common
Stock in a Common Stock Exchange and no vote in respect of a Series E Exchange
or Common Stock Exchange shall thereafter be taken, and (ii) no holder of any
outstanding Series A Capital Security shall be entitled to receive PIE Shares
pursuant to Section 9.11(e).
(h) Following receipt by the Company of a certificate of the Trustees
of the Trust that the holders of the Exchangeable Series A Securities have voted
to effect a Series E Exchange or Common Stock Exchange in accordance with any of
subsections (a), (b) or (c) of this Section 9.11 (and subject in all events to
the provisos contained in such subsections (a) and (b)), the Company shall
effect the Series E Exchange or Common Stock Exchange (as applicable) not later
than sixty (60) days after the Company's receipt of such certificate. The
Series A Capital Securities so exchanged shall be deemed outstanding through the
date on which such exchange is actually effected and Notional Dividends shall be
computed thereon to (but not including) such date.
(i) In furtherance of the Parties' rights and obligations under the
terms of the Debenture in connection with a Series A Bulk Transfer, each
Purchaser (including its transferees) agrees (x) that it shall give the Company
notice of any proposed transfer of Series A Capital Securities reasonably
adequate for the Company to determine whether such transfer (together with
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prior transfers) shall constitute a Series A Bulk Transfer and, if so required,
to effect the change in the Base Rate of the Debenture upon the effectiveness of
such Series A Bulk Transfer, (y) to interpose no objection to the Company's
restatement of the Debenture immediately prior to the effectiveness of such
Series A Bulk Transfer to remove provisions that will not thereafter be
operative, in accordance with the terms of the Debenture, and (z) to take all
other action reasonable necessary to enable the Company and the Trust to make
such changes as are required upon the effectiveness of a Series A Bulk Transfer,
including by advising the Company of the interest rate that will constitute the
Base Rate under the Debenture from and after the Series A Bulk Transfer.
9.12 COOPERATION IN SERIES A TRANSFER. The Company agrees to use all
commercially reasonable efforts to assist the Purchasers in effecting a Series A
Transfer, including by making available to the Purchasers, their financial and
legal advisors, their placement agent(s) and prospective transferees of the
Series A Capital Securities such information regarding the Company and members
of management of the Company as the Purchasers may reasonably request, subject
to the receipt of customary confidentiality agreements from such persons to the
extent reasonably requested by the Company. Notwithstanding the right of the
Company, as issuer of the Debenture, to require an opinion of counsel in
connection with a transfer of either a Debenture or a Series A Capital Security
as specified in the legend to each such instrument, the Company agrees that it
shall not require such an opinion from any of the initial Purchasers hereunder
in the case of any Series A Transfer to a "qualified institutional buyer", as
that term is defined in Rule 144A promulgated under the Securities Act.
10. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) Notwithstanding any investigation made by any party to this
Agreement, all covenants, agreements, representations and warranties made by the
Company, its Subsidiaries and the Purchasers herein shall survive the execution
of this Agreement, the delivery to the Purchasers of certificates representing
the Senior Securities being purchased and the payment therefor, for the
following periods: (1) all covenants and agreements contained in this Agreement,
and those representations and warranties set forth in subsections 5(a), 5(b),
5(e), 5(f), 5(g), 5(h), 5(n), 5(r) and 5(jj), shall survive indefinitely; (2)
those representations and warranties set forth in subsections 5(v), 5(ff) and
5(hh) shall survive for a period equal to the duration of the statute of
limitations under California or Federal law with respect to the type of matter
addressed in such representation or warranty; and (3) the representations and
warranties set forth in all other subsections of Section 5 shall survive until
the date (the "Primary Expiration Date") that is six (6) months following the
delivery to the Purchasers of the Company's audited financial statements as at
December 31, 1997 and for the period then ended.
(b) The representations set forth in Subsections 6(c), 6(d),
6(e) and 6(f) shall survive until the Primary Expiration Date. All other
representations and warranties in Section 6 shall survive indefinitely.
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11. [RESERVED]
12. INDEMNITY.
(a) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE COMPANY. Each
Purchaser agrees, severally and not jointly, to indemnify and hold harmless the
Company from and in respect of any and all Adverse Consequences that the Company
may suffer through and after the date of the claim for indemnification arising
out of or due to a breach of any representation, warranty or agreement of such
Purchaser contained in this Agreement or in any other document provided by the
Purchasers to the Company in connection with the Purchasers' investment in the
Senior Securities.
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE PURCHASERS.
Subject to the limits set forth in this Section and solely with respect to
matters asserted (even though not resolved) within the period specified in
Section 10, the Company and all of its Subsidiaries (and/or successors thereto)
jointly and severally agree to indemnify, defend and hold each Purchaser
harmless from and in respect of any and all Adverse Consequences that such
Purchaser may suffer through and after the date of the claim for indemnification
arising out of or due to any of the below-listed items. The items for which the
Purchasers shall be entitled to indemnification are:
1. the inaccuracy of any representation contained herein or the
breach of any warranty contained herein in each case made as of the date of
this Agreement by the Company or any of its Subsidiaries, including any
inaccuracy in the Disclosure Statement or omission of a fact from the
Disclosure Schedule that would be necessary to make the Disclosure Schedule
not misleading;
2. the inaccuracy of any representation contained herein or the
breach of any warranty contained herein in each case made as of the Funding
Date by the Company or any of its Subsidiaries, including any inaccuracy in
the Disclosure Statement or omission of a fact from the Updated Disclosure
Schedule that would be necessary to make the Updated Disclosure Schedule
not misleading, if the facts underlying such inaccuracy or breach (had they
been disclosed) would been sufficient, individually or in the aggregate
with the facts underlying all other such breaches, inaccuracies or
omissions, to cause a failure of a closing condition set forth in any of
subsections 7.1(a), (b) or (c);
3. the breach of any covenant, undertaking or agreement of the
Company or its Subsidiaries contained in this Agreement, which breach has
not been cured within fifteen (15) days after the Company's receipt of
written notice thereof from the Purchaser (or, if such breach is not
reasonably capable of cure within fifteen days, within a reasonable time
under the circumstances (not to exceed forty-five (45) days, provided that
the Company is making diligent efforts to effect such cure);
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4. unpaid Taxes of any Person (other than any of the Company, its
Subsidiaries, Target Company and Target Subsidiaries) under Treas. Reg.
Section 1.1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise; and
5. those matters set forth on SCHEDULE 12(b) hereto;
PROVIDED, HOWEVER, that the Company and the Subsidiaries shall have no
obligation to indemnify a Purchaser from, against or in respect of any Adverse
Consequences until such Purchaser has suffered Adverse Consequences by reason of
all breaches and other indemnified matters aggregating in excess of $750,000
(the "Threshold Amount"), but if and at all times after a Purchaser has suffered
Adverse Consequences aggregating in excess of the Threshold Amount, the Company
and the Subsidiaries shall indemnify the Purchaser for the full amount of such
Adverse Consequences, including those Adverse Consequences comprising the
Threshold Amount.
(c) A Party seeking indemnification pursuant to this Section 12
(the "Indemnified Party") shall give notice to the Party from whom such
indemnification is sought (the "Indemnifying Party") specifying in reasonable
detail the basis for and the indemnification sought and the amount of Adverse
Consequences suffered by the Indemnified Party. Not less than twenty (20)
business days after receipt of such demand from the Indemnified Party, the
Indemnifying Party shall notify the Indemnified Party in writing whether it
agrees that indemnification is required pursuant to this Section 12 and whether
it agrees with the Indemnified Party's calculation of its Adverse Consequences.
If following the receipt of such response the Parties continue to disagree, each
Party shall be free to seek any remedy available to it at law or in equity. If
the Parties contest a claim for indemnification in any adjudicatory proceeding,
all Expenses of the prevailing Party or Parties shall be borne by the other
Party or Parties.
(d) If and to the extent that a Purchaser is an owner of Common
Stock (or Common Stock equivalents) or other securities of the Company at the
time it becomes reasonably probable that the Company will be obligated to
indemnify the Purchaser pursuant to this Section 12, then in determining the
amount payable to a Purchaser on account of any Adverse Consequences to the
Purchaser for which indemnification is required to be provided hereunder, there
shall be a gross-up of the indemnification amount to reflect the extent to which
the Company's payment of the indemnification amount will result in a diminution
in the value of the one or more classes or series of securities (including
common stock equivalents and other securities) of the Company that such classes
and common stock equivalents of the Company that a Purchaser owns, giving due
regard to among other relevant factors the Purchaser's percentage ownership of
such Common Stock and all other securities (considered on a fully diluted basis
including all Common Stock equivalents then outstanding).
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(e) A Party's knowledge prior to Funding of any inaccuracy or
breach of any representation, warranty or covenant made or to be performed by
another Party shall not limit the first Party's rights to indemnification under
this Agreement if the Funding occurs.
(f) The items or matters set forth on each section of the
Disclosure Schedule, or excepted by the text of a given representation or
warranty, shall qualify or be excepted from only the representations and
warranties contained in the Section of this Agreement to which such Disclosure
Schedule section specifically applies or in which such exception is written, and
such disclosure or exception of said item or matter shall not constitute a
disclosure or exception for purposes of any other Section of this Agreement
unless specifically referenced in such other Section.
(g) Any indemnity payment shall be treated as an adjustment to
the purchase price hereunder.
13. TERMINATION; TERMINATION FEE.
(a) Either of the parties hereto may terminate this Agreement (i) if the
transactions contemplated hereby are not consummated by August 15, 1997 through
no fault of the terminating party (for purposes hereof, a termination of the
Acquisition Agreement pursuant to Section 7.2, Section 7.3, Section 7.4.2,
Section 7.4.3 or Section 7.4.5 thereof being deemed not to be the fault of the
Company or any of its Subsidiaries), (ii) any federal or state regulator shall
have made a final determination denying an application of either party to the
Acquisition Agreement, the granting of which is essential to the consummation of
the Acquisition or (iii) the Target Company terminates the Acquisition
Agreement. In addition, this Agreement shall terminate upon mutual consent of
the parties hereto. If the Acquisition Agreement is terminated and the Company
receives the Termination Fee (as defined in the Acquisition Agreement), the
Company shall pay to each Purchaser, within five (5) business days after the
receipt of the Termination Fee, the sum of Three Hundred Sixteen Thousand Five
Hundred Twenty Dollars ($316,520), being equal to 1.0% of the Subscription
Price. The Purchasers may terminate this Agreement by giving written notice to
the Company at any time prior to the Funding in the event the Company has
breached any representation, warranty, or covenant contained in this Agreement,
if such breach would prevent the Company from satisfying any of the conditions
set forth in Section 7.1 and if the breach has continued without cure for a
period of fifteen (15) days after the Company's receipt of written notice from
the Purchasers regarding such breach.
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 13(a), all rights and obligations of the Parties hereunder
shall terminate without any Liability of any Party to any other Party (except
for any Liability of any Party then in breach to the other Party for the breach
of representations, warranties, and covenants). Notwithstanding the foregoing,
the obligation of the Company to reimburse the expenses of each Purchaser as set
forth in Section 20 shall not terminate (and the Company shall pay the Expenses
of the Purchaser)
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except in the event this Agreement shall be terminated on account of a breach of
a representation, warranty or covenant by such Purchaser.
14. NOTICES. All notices provided for in this Agreement shall be in
writing, duly signed by the party giving such notice, and shall be delivered in
hand, by nationally-recognized courier service, telecopied (with copy by other
permitted means) or mailed by first class mail, as follows:
(a) if given to the Company (including its Subsidiaries):
Commerce Security Bancorp, Inc.
7777 Center Avenue
Huntington Beach, CA 92647
Attention: Robert P. Keller, Chief Executive Officer
Telephone: (714) 895-2929
Telecopy: (714) 891-8884
WITH A COPY TO:
Nutter, McClennen & Fish, LLP
One International Place
Boston, MA 02110
Attention: Michael K. Krebs, Esquire
Telephone: (617) 439-2000
Telecopy: (617) 973-9748
(b) if given to MDP:
Madison Dearborn Capital Partners II, L.P.
Three First National Plaza
Suite 1330
Chicago, IL 60602
Attention: Paul Wood
Telephone: (312) 732-5400
Telecopy: (312) 732-4098
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WITH A COPY TO:
Kirkland & Ellis
200 E. Randolph Street
Chicago, IL 60601
Attention: John Fitzgerald, Esq.
Telephone: (312) 861-2000
Telecopy: (312) 861-2200
(c) if given to Olympus:
Olympus Growth Fund II, L.P.
Olympus Executive Fund, L.P.
Metro Center
One Station Place
Stamford, CT 06902
Attention: James A. Conroy
Telephone: (203) 353-5900
Telecopy: (203) 353-5910
WITH A COPY TO:
Kirkland & Ellis
200 E. Randolph Street
Chicago, IL 60601
Attention: John Fitzgerald, Esq.
Telephone: (312) 861-2000
Telecopy: (312) 861-2200
Notices so dispatched shall be deemed delivered (i) upon delivery, if delivered
in hand; (ii) upon receipt of electronic confirmation, if sent by telecopier;
(iii) the next Business Day following dispatch, if sent by overnight courier;
and (iv) the third Business Day following dispatch, if sent by first class mail.
Any Party may change its address for purposes of this Section by delivery of a
notice in accordance with this Section.
15. BINDING EFFECT. This Agreement shall be binding upon, and shall
inure solely to the benefit of, each of the Parties hereto, and each of their
respective heirs, executors, administrators, successors and permitted assigns,
and no other person shall acquire or have any right under or by virtue of this
Agreement.
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16. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with the laws of the State of Delaware without regard to the
conflict of law provisions thereof.
17. ENTIRE AGREEMENT. This Agreement represents the entire
understanding of the parties with respect to the matters addressed herein and
supersedes all prior written and oral understandings concerning the subject
matter herein.
18. ASSIGNMENT.
(a) Except as expressly provided in Section 18(b) or Section
18(c) hereof, all of the terms, covenants and undertakings contained in this
Agreement, and the securities purchased hereunder, will be binding upon and
inure to the benefit of a Purchaser's successors and assigns and may be assigned
at a Purchaser's discretion to any financial institution and/or any corporation,
trust or individual. In the event of any assignment, the transferred shares
will contain all applicable legends necessary to comply with federal and state
securities laws or regulations. The Purchaser shall, if requested by the
Company prior to a proposed transfer by the Purchaser, provide to the Company an
opinion of counsel reasonably satisfactory to the Company, to the effect that
(i) the securities may be transferred without such registration and (ii) the
transfer will not violate any applicable state or other jurisdiction's
securities or "blue sky" laws. An opinion delivered pursuant to this Section by
the law firm of Kirkland & Ellis, in form and substance reasonably satisfactory
to the Company, will be acceptable to the Company.
(b) If the holder of the Special Common Stock is a Competitor
(as defined herein) of the Company (x) at any time prior to the third
anniversary of the Funding Date, the holder shall not be entitled to the benefit
of the covenants set forth in Section 9.4 hereof and (y) at all times, such
holder shall not be entitled to the benefit of the covenants set forth in
Section 9.2(i) and (iv) and Section 9.3. The Purchasers shall not be entitled
to transfer Series C Preferred Stock or Series D Preferred Stock to a
Competitor.
(c) Except as provided in the immediately following sentence,
the rights of the Purchasers under Section 9.11 are unique to the several
Purchasers (including their respective Affiliates) and are not assignable to any
other Person other than to an Affiliate of the transferring Purchaser.
Notwithstanding the foregoing, the rights of the Purchasers under Section 9.11
are assignable to any direct transferee of Series A Capital Securities from a
Purchaser other than in a Series A Transfer. A Series A Transfer means a
transfer of beneficial ownership of Series A Capital Securities prior to the
third anniversary of the Funding Date, provided that the transferee does not
acquire from one or more Purchasers beneficial ownership of any other Senior
Securities or Warrants in connection with such transfer.
19. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the Company, the Purchasers and their respective successors and
permitted assigns. Nothing
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expressed herein is intended or shall be construed to give any person other than
the persons referred to in the preceding sentence any legal or equitable right,
remedy or claim under or in respect of this Agreement.
20. EXPENSES. The Company will pay its own expenses and the reasonable
fees and expenses incurred by service providers to the Purchasers, including
counsel, accountants and consultants. The Company shall, promptly upon request
therefor, reimburse the Purchasers for such reasonable fees and expenses of
their service providers (including, without limitation, legal, accounting, and
consulting fees) incurred in connection with the transactions contemplated by
this Agreement and the enforcement of this provision. Legal expenses shall
include expenses incurred in connection with the preparation, negotiation and
closing of this Agreement and legal expenses in connection with any amendment or
waiver of rights pursuant to this Agreement (whether or not effected) or in
connection with the enforcement of any of its rights under this Agreement. In
addition, the Company shall reimburse a portion of the investment banking fees
and expenses (including such investment bankers' legal fees and expenses to the
extent paid by the Purchasers) incurred by the Purchasers in the event that the
Purchasers sell the Series A Capital Securities in a Series A Transfer (the
"Series A Transfer Expenses"), such portion to equal, in the aggregate for all
Purchasers, $350,000, but in no event more than one-half of the Series A
Transfer Expenses. Such reimbursement shall be made promptly following the
Purchasers' delivery to the Company of copies of the invoice(s) for the Series A
Transfer Expenses, together with evidence of their payment of the same.
21. SEVERABILITY OF PROVISIONS. Any covenant, provision, agreement or
term of this Agreement that is prohibited or is held to be void or unenforceable
in any jurisdiction shall as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions thereof.
22. MISCELLANEOUS. Neither this Agreement nor any term hereof may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the holders of at least two-thirds of the affected class of
Senior Securities. The headings in this Agreement are for the purposes of
references only and shall not limit or otherwise affect the meaning hereof.
23. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of the counterparts, each of which counterparts when so executed and
delivered shall be deemed to be an original, but all such respective
counterparts shall together constitute but one and the same instrument.
24. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Parties hereto,
which approval shall not be unreasonably withheld; PROVIDED, HOWEVER, that any
Party may make any public disclosure it believes in good
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faith is required by applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which case the disclosing Party
will use its best efforts to advise the other Parties prior to making the
disclosure).
25. NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns. Any entity to which Purchasers may transfer
any Senior Securities shall have the Purchasers' rights under this Agreement,
except as otherwise provided in this Agreement.
26. CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
27. SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter (subject to the provisions set forth in Section 28
below), in addition to any other remedy to which they may be entitled, at law or
in equity.
28. SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any federal court (or, if federal jurisdiction is unavailable, a
state court) sitting in Los Angeles, California or Chicago, Illinois in any
action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each Party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court.
Each of the Parties waives any defense of inconvenient forum to the maintenance
of any action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other Party with respect thereto. Any
Party may make service on any other Party by sending or delivering a copy of the
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process to the Party to be served at the address and in the manner provided for
the giving of notices in Section 14 above. Nothing in this Section 28, however,
shall affect the right of any Party to serve legal process in any other manner
permitted by law or at equity. Each Party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law or at equity.
29. CERTAIN DEFINITIONS.
"ADVANCES" means amounts that, as of the Funding Date, have been
advanced by the Company in connection with servicing the Mortgage Loans
(including, without limitation, principal, interest, taxes and insurance
premiums) and which are required or permitted to be paid by the Company as the
servicer of the Mortgage Loans pursuant to applicable Investor requirements and
the terms of the applicable Mortgage Servicing Agreements.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses, and including costs of environmental investigations and/or cleanups
ordered by federal, state, local, or foreign governments (or any agencies
thereof), PROVIDED, HOWEVER, that only if the Funding has not occurred, Adverse
Consequences shall not include any consequential damage incurred by the
Purchasers.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the meaning of
Code Sec. 1504 or any similar group defined under a similar provision of state,
local, or foreign law.
"AGENCY" means FHA, VA, GNMA, FNMA, FHLMC or a State Agency, as
applicable.
"ANCILLARY AGREEMENTS" means the Trust Agreement, the Junior
Subordinated Debenture, the Charter, the Series B Warrant, the Terminal
Adjustment Warrant, the Escrow Agreement, the Registration Agreement, the
Shareholder Agreement and the Guarantee.
"ASSOCIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"BANK" means San Dieguito National Bank, Liberty National Bank,
Commerce Security Bank and Eldorado Bank.
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"BASIS" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could reasonably be
expected to form the basis for any specified consequence.
"CHANGE IN CONTROL" shall be deemed to have occurred in the event
that the Company consummates a liquidation or reorganization (other than a
liquidation or reorganization conducted in connection with any insolvency or
bankruptcy proceeding of the Company), or a merger or consolidation of the
Company, or sale or other disposition of all or substantially all of the assets
of the Company (each, a "Business Combination") UNLESS immediately following the
consummation of such Business Combination all of the following conditions are
satisfied: (V) the holders of the Common Stock receive only common stock of the
entity (the "Resulting Entity") resulting from such Business Combination
(including, without limitation, an entity which as a result of such transaction
owns the Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) (which common stock of the
Resulting Entity shall, in the case of the Special Common Stock, and except with
the prior approval of the holders of two-thirds of the Special Common Stock then
outstanding, have all of the powers, preferences and rights of the Special
Common Stock); (W) no person (or group acting in concert within the meaning of
Rule 13d-3 promulgated under the Securities Exchange Act (a "Group"))
beneficially owns (within the meaning of Rule 13d-3), directly or indirectly,
twenty percent (20.0%) or more of, respectively, the then outstanding shares of
common stock of the Resulting Entity or the combined voting power of the voting
securities entitled to vote generally in the election of directors ("Outstanding
Voting Securities") of the Resulting Entity, other than any person or group that
beneficially owned, directly or indirectly, twenty percent (20%) or more of the
Common Stock immediately before such Business Combination; (X) no person or
Group beneficially owns, directly or indirectly, forty percent (40%) or more of,
respectively, the then outstanding shares of the Resulting Entity or the
combined voting power of the then-Outstanding Voting Securities of the Resulting
Entity, excluding only a person (or Group comprised of persons) that
beneficially owned, directly or indirectly, one percent (1%) or more of the
Common Stock immediately following the initial issuance of the Company's Special
Common Stock; (Y) not more than one-half of the members of the board of
directors of the Resulting Entity are Affiliates or associates (within the
meaning of Rule 12b-2 of the Securities Exchange Act) of any party to the
Business Combination other than the Company, and not less than one-half of the
members of the board of directors of the Resulting Entity were members of the
Board of Directors of the Company at the time the Company's Board of Directors
authorized the Company to enter into the definitive agreement providing for such
Business Combination; and (Z) Robert P. Keller has not ceased to be the Chief
Executive Officer of the Resulting Entity as a consequence of such Business
Combination. A Change in Control shall also be deemed to occur if any Person or
Group (other than a person (or Group comprised of persons) that beneficially
owned, directly or indirectly, one percent (1%) or more of the Common Stock
immediately following the Funding Date shall become a beneficial owner of a
majority of Outstanding Voting Securities of the Company.
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"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means the property securing a Mortgage Loan.
"COMMON STOCK" means in such circumstances (i) where the context
indicates that such reference is prior to the Funding, the Regular Common Stock
of the Company, or (ii) where the context indicates that such reference is as of
or subsequent to the Funding, the Special Common Stock, the Class B Common Stock
and the Class C Common Stock, collectively.
"THE COMPANY" has the meaning set forth in the preface to this
Agreement.
"COMPETITOR" means (i) any depository institution holding company
which is not owned by a depository institution holding company or (ii) any
depository institution which is not owned by a depository institution holding
company, in either case the corporate headquarters of which is located in San
Diego County or Orange County, California, or in any county immediately
contiguous to either or both.
"CONFORMING LOAN" means a Mortgage Loan which is or is eligible to
be an FHA Loan or a VA Loan or which is a loan eligible to be sold to FNMA or
FHLMC.
"CONSENT" means any consent, approval, order, authorization, form,
registration, notification, declaration or filing.
"CUSTODIAL ACCOUNTS" means escrow accounts for serviced loans.
"CONTROLLED GROUP OF CORPORATIONS" has the meaning set forth in Code
Sec. 1563.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 5.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Sec. 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Sec. 3(1).
"ENVIRONMENTAL AND SAFETY REQUIREMENTS" shall mean all federal,
state, local and foreign statutes, regulations, ordinances and similar
provisions having the force or effect of law,
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all judicial and administrative orders and determinations, all contractual
obligations and all common law concerning public health and safety, worker
health and safety, and pollution or protection of the environment, including
without limitation all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"FAIR MARKET VALUE" means an amount per share of Class B Common
Stock equal to the average closing price for the thirty (30) trading days
immediately preceding the date of exercise as reported (i) on the principal
national securities exchange on which the Class B Common Stock is traded or (ii)
if the Class B Common Stock is not traded on a national exchange, on the Nasdaq
National Market System. If the Class B Common Stock is not listed on an
exchange or traded on the Nasdaq National Market System, then Fair Market Value
shall be an amount per share as the Company and holder of the Class B Common
Stock shall mutually agree.
"FHA" means Federal Housing Administration or any successor thereto.
"FHA LOANS" means Mortgage Loans which are insured by FHA.
"FHLMC" means Federal Home Loan Mortgage Corporation or any
successor thereto.
"FINANCIAL STATEMENT" has the meaning set forth in Section 5.(l).
"FNMA" means Federal National Mortgage Association or any successor
thereto.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time applied on a consistent basis.
"GNMA" means Government National Mortgage Association or any
successor thereto.
"HUD" means United States Department of Housing and Urban
Development or any successor thereto.
"INDEBTEDNESS" means, whether recourse as to all or a portion of the
assets of the Company and whether or not contingent: (i) every obligation of
the Company for money
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borrowed; (ii) every obligation of the Company evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses; (iii) every
reimbursement obligation of the Company with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of the
Company; (iv) every obligation of the Company issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business); (v) every
capital lease obligation of the Company; (vi) any indebtedness issued to any
trust, or a trustee of such trust, partnership or other entity affiliated with
the Company that is a financing entity of the Company (a "financing entity") in
connection with the issuance by such financing entity of securities that are
similar to the Series A Capital Securities of the Trust; (vii) every obligation
of the type referred to in clauses (i) through (vi) of another person and all
dividends of another person the payment of which, in either case, the Company
has guaranteed or is responsible or liable, directly or indirectly, as obligor
or otherwise; and (viii) all indebtedness of the Company for claims (as defined
in Section 101(4) of the United States Bankruptcy Code of 1978, as amended) in
respect of derivative products such as interest and foreign exchange rate
contracts, commodity contracts and similar arrangements.
"INDEMNIFIED PARTY" has the meaning set forth in Section 12(c).
"INDEMNIFYING PARTY" has the meaning set forth in Section 12(c).
"INSURANCE PROCEEDS" means insurance or guarantee proceeds paid or
payable with respect to a Mortgage Loan from an Insurer to the Company, the
Purchasers or any of their beneficiaries, successors or assigns, or to any
Investor.
"INSURER" means a Person who insures or guarantees all or any
portion of the risk of loss upon borrower default on any of the Mortgage Loans,
including, without limitation, the FHA, the VA and any private mortgage insurer,
and providers of life, hazard, flood, disability, title or other insurance with
respect to any of the Mortgage Loans or the Collateral.
"INVESTOR" means any Person (including any Agency) who (i) owns
Mortgage Loans or Previously Disposed Loans or servicing rights to Mortgage
Loans or Previously Disposed Loans, serviced or master serviced by the Company
pursuant to a Mortgage Servicing Agreement or (ii) is a party (other than the
Company) to an Investor Commitment.
"INVESTOR COMMITMENT" means the commitment of a Person to purchase a
Mortgage Loan owned by the Company.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof, (b) all trademarks, service marks, trade
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dress, logos, trade names, and corporate names, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and renewals in
connection therewith, (c) all copyrightable works, all copyrights, and all
applications, registrations, and renewals in connection therewith, (d) all mask
works and all applications, registrations, and renewals in connection therewith,
(e) all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals), (f) all computer software
(including data and related documentation), (g) all other proprietary rights,
and (h) all copies and tangible embodiments thereof (in whatever form or
medium).
"KNOWLEDGE" means the actual knowledge of one or more of Robert
Keller, Curt Christianssen, Philip Inglee, Richard Ganulin or Paul Rodeno, or
any person not named above who constitutes an "Executive Officer" of the Company
for purposes of Regulation O, 123 C.F.R. Section 215, following a commercially
reasonable level of inquiry, which shall include, without limitation, (i)
causing Target Company to reconfirm, as of January 31, 1997 (or later), the
representations and warranties made by it in the Acquisition Agreement
(including, as necessary, through updated disclosure schedules under the
Acquisition Agreement), (ii) reviewing the representations and warranties
hereunder that relate to Target Company or Target Subsidiary with the President
and Chief Financial Officer of Target Subsidiary, and (iii) reviewing the
litigation letters provided by Target Company's and Target Subsidiary's counsel
to Target Company's auditors in connection with the latters' audit of Target
Company's financial statements as at December 31, 1996.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"LICENSES" means certifications, authorizations, licenses, permits
and other approvals necessary for the Company to conduct its current mortgage
banking business.
"LOAN DOCUMENTS" means all files, records and documents necessary to
originate and/or service the Mortgage Loans in accordance with Investor
requirements or Regulations.
"LOSS CONTINGENCY" shall mean an existing condition, situation, or
set of circumstances involving uncertainty as to possible loss to an enterprise
that will ultimately be resolved when one or more future events occur or fail to
occur.
"MARKET VALUE" means (a) if the Class B Common Stock is publicly
traded, an amount per share of Class B Common Stock equal to the average closing
price for the thirty (30) trading days immediately preceding the date of
valuation as reported (i) on the principal national
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securities exchange on which the Class B Common Stock is traded or (ii) if the
Class B Common Stock is not traded on a national exchange, on The Nasdaq
National Market System ("Nasdaq"); or (b) if the Class B Common Stock is not so
quoted on Nasdaq or listed on a national securities exchange, an amount mutually
agreed upon by the Company and the Holder of this Debenture, or, if the Company
and the Holder are unable to agree, by a nationally recognized investment
banking firm selected by the Holder and consented to by the Company, such
consent not to be unreasonably withheld.
"MORTGAGE LOAN" means any closed mortgage loan, whether or not such
mortgage is included in a securitized portfolio (and whether or not such loan is
in (i) bankruptcy, (ii) foreclosure, (iii) forbearance, (iv) related to
sub-servicing agreements, or (v) classified as a real estate owned loan), in the
Mortgage Servicing Portfolio, as evidenced by notes or other evidences of
indebtedness secured by mortgages or deeds of trust.
"MORTGAGE SERVICING AGREEMENTS" means all contracts or arrangements
between the Company and an Investor pursuant to which the Company services
Mortgage Loans for such Investor.
"MORTGAGE SERVICING PORTFOLIO" means the portfolio of Mortgage Loans
serviced by the Company pursuant to Mortgage Servicing Agreements, including all
Warehouse Loans.
"MULTIFAMILY LOAN" means a Mortgage Loan with Collateral in excess
of four dwelling units.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Sec. 3(37).
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PARTY" means any and all of the Purchasers, the Company, and its
Subsidiaries.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMITTED ENCUMBRANCES" means:
(i) Encumbrances for taxes, assessments, charges or other
governmental levies not yet due or as to which the period of grace (not to
exceed 60 days), if any, related thereto has not expired;
(ii) carriers', warehousemen's, landlords', materialmen's,
repairmen's or other like encumbrances arising in the ordinary course of
business which are not overdue;
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(iii) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security legislation,
or to secure the performance of statutory obligations, appeal or similar
bonds, leases and trade contracts (exclusive of obligations for the payment
of borrowed money); and
(iv) Encumbrances in favor of existing warehouse lenders
pursuant to the terms of such warehouse loans.
"PERSON" means an individual, a partnership, a corporation, a firm,
an association, a joint stock the Company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof), or any other legally recognized
entity.
"PIPELINE LOANS" means those pending loans to be secured by a first
priority mortgage lien on a one-to-four family residence with respect to which,
as of the Funding Date, the Company has taken an application or has agreed in
writing with an originator to purchase, including those loans which are pending
with a correspondent originator as of the Funding Date and which meet the
Company's acquisition criteria for such loans, and which have not yet closed or
been purchased from the correspondent originator on the Funding Date.
"POOL" means an aggregate of one or more Mortgage Loans that have
been pledged or granted to secure mortgage-backed securities or participation
certificates.
"PREVIOUSLY DISPOSED LOAN" means any closed mortgage loan and/or the
Servicing Rights related thereto which is not a Warehouse Loan, a Pipeline Loan
or in the Mortgage Servicing Portfolio, but which formerly was a Warehouse Loan,
a Pipeline Loan or in the Mortgage Servicing Portfolio.
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA Sec. 406
and Code Sec. 4975.
"QUALIFIED OFFERING" means the closing of a firm-commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Class B Common Stock to the public at an aggregate offering price of not less
than (i) $25 million, if the offered shares consist solely of primary shares, or
(ii) $30 million, of which $20 million consist of primary shares, if the offered
shares include shares offered by Persons other than the Company, and in either
case an offering price per share of at least 200% of the Initial Purchase Price
(as defined herein) (as adjusted for any stock split, stock dividend or other
similar distribution on the Common Stock). For purposes of this subsection (b),
the "Initial Purchase Price" shall mean $4.81 per share.
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"REGULATIONS" means (i) Federal, state and local laws, rules and
regulations with respect to the origination, insuring, purchase, sale, servicing
or filing of claims in connection with a Mortgage Loan, Pipeline Loan or
Previously disposed Loan, (ii) the responsibilities and obligations set forth in
any agreement between the Company and an Investor or Insurer (including without
limitation Mortgage Servicing Agreements, Investor Commitments and selling and
servicing guides), and (iii) the laws, rules, Regulations, guidelines, handbooks
and other published requirements of an Investor, Agency, Insurer, public housing
program or Investor program, with respect to the origination, insuring,
purchase, sale, servicing or filing of claims in connection with a Mortgage
Loan, Pipeline Loan or Previously Disposed Loan.
"REPORTABLE EVENT" has the meaning set forth in ERISA Sec. 4043.
"REPURCHASE" means the purchase of a Mortgage Loan out of a Pool or
an Investor's portfolio by the Company at the direction of the Investor based
upon a breach by the Company of a representation, warranty or undertaking
contained in the related agreement with such Investor.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, claim, easement, restriction, or other security interest, OTHER THAN
Permitted Encumbrances.
"SEPTEMBER 30, 1996 BALANCE SHEET" means the balance sheet contained
within the Most Recent Financial Statements.
"SERIES A BULK TRANSFER" means one or more transfers of beneficial
ownership of Series A Capital Securities to persons other than the initial
Purchasers hereunder or DCG (or their respective Affiliates) which transferees
do not also acquire beneficial ownership of any other Senior Securities or
Warrants in connection with such transfer, collectively resulting in a transfer
of more than one-half of the Series A Preferred Securities then outstanding to
transferees as described above on or before June 6, 2000; PROVIDED, HOWEVER,
that a Series A Bulk Transfer may occur no more than once during the term of the
Junior Subordinated Debentures, regardless of whether subsequent transfers of
Series A Capital Securities would otherwise (but for this proviso) also qualify
as a Series A Bulk Transfer.
"SERVICING RELEASED LOANS" means Mortgage Loans sold by the Company
with servicing released.
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"SERVICING RIGHTS" means the right to receive the servicing fees and
any other income the servicer is entitled to receive arising from or connected
to any Mortgage Loans and the related obligations to (i) administer and collect
payments for the reduction of principal and interest, (ii) pay taxes and
insurance premiums, (iii) remit all amounts in accordance with any Mortgage
Servicing Agreements, (iv) provide foreclosure services and full escrow
administration and (v) perform such other obligations as may, from time to time,
be imposed under any Mortgage Servicing Agreement.
"SINGLE FAMILY LOAN" means a Mortgage Loan secured by Collateral of
one to four dwelling units.
"SPECIAL ASSETS" shall mean: (1) any loans classified as
"substandard," "doubtful," or "loss" by the OCC, the California Banking
Department, the Bank's management, or pursuant to any periodic independent loan
review conducted by the applicable Bank; (2) any loans, not covered by clause
(1) above, of which principal or interest payments are past due by ninety (90)
days or more; (3) any loans, not covered by clauses (1) and (2) above, placed on
a non-accrual basis by a Bank's management; and (4) assets categorized as other
real estate owned.
"STATE AGENCY" means any state agency with authority to regulate the
business of the Company, determine the investment or servicing requirements with
regard to loans originated, purchased or serviced by the Company, or otherwise
participate in or promote mortgage lending.
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"TARGET REDEMPTION AMOUNT" means the amount, if any, of cash that
the Target Company provides to the Exchange Agent (as defined in the Acquisition
Agreement) to fund a portion of the aggregate amount to be distributed to the
holders of the Target Company Common Stock in connection with the Acquisition.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Sec. 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
-71-
<PAGE>
"VA" means Department of Veteran's Affairs or any successors
thereto.
"VA LOANS" means Mortgage Loans guaranteed by VA.
"WAREHOUSE LOANS" means Mortgage Loans owned by the Company and held
for sale.
[remainder of page intentionally blank]
-72-
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound thereby, each of
Parties hereto has signed or caused to be signed its name under seal as of the
day and year first above written.
COMMERCE SECURITY BANCORP, INC.
By: /S/
---------------------------------------
Name: Robert P. Keller
Title: President and Chief Executive Officer
SDN BANCORP, INC.
By: /S/
---------------------------------------
Name: Robert P. Keller
Title: President and Chief Executive Officer
LIBERTY NATIONAL BANK
By: /S/
---------------------------------------
Name: Robert P. Keller
Title: Chairman and Chief Executive Officer
COMMERCE SECURITY BANK
By: /S/
---------------------------------------
Name: Robert P. Keller
Title: President and Chief Executive Officer
SAN DIEGUITO NATIONAL BANK
By: /S/
---------------------------------------
Name: Robert P. Keller
Title: President and Chief Executive Officer
<PAGE>
(SIGNATURE PAGE CON'T):
MADISON DEARBORN CAPITAL PARTNERS II, L.P.
By: Madison Dearborn Partners II, L.P., its General Partner
By: Madison Dearborn Partners, Inc., its General Partner
By: /S/
---------------------------------------
Name: Paul R. Wood
Title: Vice President
OLYMPUS GROWTH FUND II, L.P.
By: OGP II, L.P., its general partner
By: Conroy, L.L.C., its general partner
By: /S/
---------------------------------------
Name: James A. Conroy
Title: Member
OLYMPUS EXECUTIVE FUND, L.P.
By: OEF, L.P., its general partner
By: Conroy, L.L.C., its general partner
By: /S/
---------------------------------------
Name: James A. Conroy
Title: Member
<PAGE>
SCHEDULE 5.2(F)
TO
SECURITIES PURCHASE AGREEMENT
REQUIRED REGULATORY APPROVALS
FEDERAL. The Acquisition requires prior approval under Sections 3(a)(3)
and 3(a)(5) of the Bank Holding Company Act of 1956, as amended (the "Act"), and
Section 225.11 of Regulation Y (12 C.F.R. Section 225.11).
STATE. The indirect acquisition of Eldorado Bank requires the prior
approval of the Superintendent of Banks of the State of California (the
"Superintendent") under Section 700 ET SEQ. of the California Financial Code.
In addition, the Company must submit an application, nominally on behalf of
Eldorado Bank, to the Superintendent under Section 640 ET SEQ. of the California
Financial Code for approval for Eldorado Bank to pay a special dividend to
Eldorado of up to $14.0 million that will be used to fund some or all of the
Target Redemption Amount.
<PAGE>
SCHEDULE 5.2(n)
TO
SECURITIES PURCHASE AGREEMENT
1. The Compensation Committee of the Board of Directors of Commerce
Security Bancorp, Inc. on February 4, 1997 approved a stock option plan (the
"Option Plan"), a summary of which is provided under DISCLOSURE SCHEDULE
5.2(m)(18) to the Securities Purchase Agreement. Under the Option Plan, the
number of shares of common stock (Class B Common Stock as of the filing of the
Charter) that is available under the Option Plan will increase pursuant to the
formula set forth in the Option Plan if the Company issues additional shares of
Common Stock or Common Stock equivalents after the effective date of the Option
Plan.
Specifically, the number of shares subject to the Option Plan ("Option
Shares") will be equal to 6.0% of the shares of Company Common Stock outstanding
on a fully diluted basis (i.e., after giving effect to the issuance of such
option shares and any other common stock equivalents) until such time as the
Company has Tier 1 capital of at least $125 million. Accordingly, if the
Company issues additional shares of common stock or common stock equivalents
(other than shares issued upon the exercise of the options), the number of
Option Shares available under the Option Plan will increase automatically in
proportion to the increase in the shares outstanding until the Company's Tier 1
capital is equal to the $125 million threshold.
Accordingly, for example, if the Target Redemption Amount is $12 million
and the Company has 9,697,430 shares of common stock outstanding immediately
prior to the consummation of the Private Placement, immediately after the
consummation of the Private Placement there will be 1,491,364 Option Shares
available for issuance pursuant to the Option Plan.
2. Pursuant to Robert P. Keller's Employment Agreement with the Company,
the Company has agreed to issue to Mr. Keller one or more options which in the
aggregate would entitle Mr. Keller to purchase one-half of the Option Shares
subject to the Option Plan. Accordingly, for example, if there are 1,491,364
Option Shares immediately after the Funding, Mr. Keller will be entitled to
acquire pursuant to the Option Plan 745,682 shares of Class B Common Stock, and
745,682 shares will be available for grant to other members of management based
upon the number of shares of Class B Common Stock then outstanding.
3. Mr. Keller's Employment Agreement with the Company provides for the
issuance to him of Common Stock (the ownership of which is subject to
restrictions contained in such agreement) (the "Restricted Stock") upon the
issuance by the Company of additional Common Stock and Common Stock equivalents,
and provides for limited registration rights with respect to such stock.
Mr. Keller will not be entitled to receive any Restricted Stock as a consequence
of the sale of Common Stock or a Common Stock equivalent to Dartmouth Capital
Group, L.P. or director qualifying shares to any director of a subsidiary of the
Company or the award of employee stock options or the issuance of Common Stock
upon the exercise thereof.
<PAGE>
Specifically, Mr. Keller's Employment Agreement obligates the Company to
issue shares of Restricted Stock to Mr. Keller whenever, during the term of the
Employment Agreement, the Company issues Common Stock or a Common Stock
equivalent, including shares of Common Stock issued in connection with the
Private Placement. The number of shares of Restricted Stock that will be issued
to Mr. Keller will be equal to 3.0% of the sum of (x) the number of shares of
Common Stock then issued by the Company or, in the case of the issuance of a
common stock equivalent, the number of shares of Common Stock which such Common
Stock equivalent may be converted into or exchanged for, and (y) the number of
shares of Restricted Stock to be issued to Mr. Keller at that time.
Accordingly, for example, if the Target Redemption Amount is $12 million and the
Company has 9,697,430 shares of Common Stock outstanding immediately prior to
the consummation of the Private Placement, as a consequence of the consummation
of the Private Placement Mr. Keller shall be entitled to receive 380,700 shares
of Restricted Stock.
4. The Company engaged the investment banking services of The Shattan
Group LLC ("Shattan") to assist the Company in placing the Senior Securities.
If the Target Redemption Amount is $12 million, Shattan will receive a fee of
approximately $2,530,000 and a warrant to purchase approximately 530,000 shares
of Class B Common Stock at an exercise price of $4.81. In addition, if the
Funding occurs and thereafter the Company privately places its securities to any
investor referred to on the Investor Contact List (as defined in the Shattan
engagement agreement), Shattan has taken the position that the Company shall be
obligated to pay Shattan a cash transaction fee equal to equal 2% of that
portion of the Aggregate Consideration (as defined in the Shattan agreement)
paid for the securities purchased in that transaction by persons listed on the
Investor Contact List and a warrant to purchase a number of shares of Class B
Common Stock equal to 2% of the aggregate number of fully diluted and/or
converted shares of Common Stock as are purchased in that transaction by persons
listed on the Investor Contact List.
5. There are outstanding approximately $540,000 in principal amount of
Mandatory Convertible Debentures issued by SDN Bancorp, Inc. (a Subsidiary of
the Company), due May 1998, which are convertible into common stock of SDN. The
Company can redeem the Debentures at any time prior to the maturity date,
subject to certain notice provisions.
<PAGE>
SCHEDULE 5.2 (hhh)
Persons Beneficially Owning, Directly or Indirectly,
1.0% or more of CSBI Common Stock
(PRO FORMA at Funding)
NAME
----
Dartmouth Capital Group, L.P.
DCG INVESTORS(1)
----------------
Ernest Boch
Farm Bureau Life Ins. Co.
Jefferson Kirby
Edward Fox
Byrne & sons, l.p.
Robert Keller
Northwood Ventures
Charles Hugel
John Sherrerd
MFA Masters Ltd. Partnership
OTHERS
------
Peter Paulson
F.M. Kirby
PURCHASERS
----------
MDP
Olympus
- -------------------------------------------------------
(1)Ownership includes shares held indirectly through Dartmouth
Capital Group, L.P. and Dartmouth Capital Group, Inc.
<PAGE>
SCHEDULE 12(b)
TO
SECURITIES PURCHASE AGREEMENT
DATED AS OF FEBRUARY 13, 1997
ADDITIONAL ITEMS SUBJECT TO INDEMNIFICATION
(i) MORTGAGE LOAN REPURCHASE REQUESTS.
Adverse Consequence incurred as to Mortgage Loans originated or serviced
by (or in the pipeline of) the Company, its Subsidiaries, Target Company
or Target Subsidiary as of prior to or as of the date hereof (a
"Pre-Existing Loan") in connection with repurchase claims or requests or
indemnification requests relating thereto, solely to the extent that such
repurchase claims or requests or indemnification requests exceed, over a
one-year period, 150% of historical claims (such historical claims being
determined as the per-year average for the collective mortgage banking
business of the Company, its Subsidiaries, Target Company and Target
Subsidiary, during the period January 1, 1995 through December 31, 1996).
If Purchasers or the Company (or one of their respective Subsidiaries or
Affiliates) receives a repurchase claim or request for indemnification
relating to a Pre-Existing Loan, then the amount of any Adverse
Consequences (and the resulting amount of the Company's indemnification
of the Purchaser (provided the aggregate of this and all other Adverse
Consequences have exceeded the Threshold Amount) arising therefrom, or
from a breach of the representations contained in Section 5.2 (qq)
through (eee), shall be determined at the time when the Company (or one
of its Subsidiaries or Affiliates) prepares a loss estimate following and
in connection with its receipt of such repurchase request or
indemnification request, which loss estimate shall be prepared promptly.
(ii) FDIC EXAMINATION OF LOAN TRANSFERS SUBJECT TO RECOURSE
Adverse Consequences arising from the effect on the Company's and its
Subsidiaries' capital, and from the resulting effect on the Company's and
its Subsidiaries' operations, activities, business and prospects, arising
from Commerce Security Bank's failure to properly reflect in its
financial statements and regulatory reports (x) certain off-balance sheet
liabilities, (y) certain delays in the recognition of premium income, in
each case arising from the sale of Pre-Existing Mortgage Loans with
recourse, and (z) any other action taken or required by the FDIC in
connection with the foregoing. This indemnification shall include
Adverse Consequences arising from, without limitation, any action that
may be required to increase the Company's or its Subsidiaries' regulatory
capital ratios on account of the foregoing off-balance sheet liabilities
or delays in income recognition and expenses incurred by the Company in
connection with a transfer of all or part of such off-balance sheet
liability to a third-party. Expressly excluded from this paragraph (ii)
are any Adverse Consequences resulting from payments in satisfaction of
the aforesaid off-balance sheet liabilities themselves; PROVIDED,
HOWEVER, that such actions or payments (A) shall not be excluded for
purposes of paragraph (i) above, and (B) the foregoing exclusion shall
not operate to exclude
<PAGE>
any such action or payment from indemnification if the same results in a
breach of any other representation or warranty contained in this
Agreement.
(iii) TILA AND FAIR LENDING ISSUES RELATING TO TARGET SUBSIDIARY
Adverse Consequences arising from any violation by Target Subsidiary of
(x) the Truth-in-Lending Act or Regulation Z of the FRB, or (y) the Fair
Lending Act or regulations implementing the same, in each case with
respect to Mortgage Loans originated or serviced by (or in the pipeline
of) the Target Subsidiary as of prior to or as of the date hereof.
The indemnification provided pursuant to Section 12(b)(5) with respect to the
matters set forth on this Schedule 12(b) shall not be diminished or otherwise
affected in any manner by the disclosure of any such matter on the Disclosure
Schedule.
<PAGE>
EXHIBIT J
CONFIDENTIALITY STATEMENT
Each Person or Purchaser (each a "Recipient") agrees for itself and each of
its respective directors, officers, employees, agents, representatives and
advisors (collectively, "Representatives"), that it shall (i) hold in confidence
all Confidential Information received by it subject to the terms of this
Agreement, (ii) disclose such Confidential Information only to those of its
Representatives having a need to know the same, and (iii) inform each
Representative to whom Confidential Information is disclosed that such
information is confidential and direct such Representative not to disclose the
same. Each Recipient shall remain responsible for any disclosure of
Confidential Information by any of its Representatives. Each Recipient further
agrees that if such party ceases to be an investor in the Company, upon the
request of the Company after a reasonable period of time following the delivery
of such Confidential Information, the Recipient and each of its Representatives
either shall return to the Company 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 (except for such Confidential Information that Recipient
reasonably deems necessary to retain for internal record keeping purposes, or
for preparing reports and filings such as tax returns). 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
EXHIBIT J, (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 hereto, (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 or not reasonably believed by the
receiving party to be subject to any prohibition against disclosing such
information. The restrictions set forth in this EXHIBIT J shall not preclude a
Recipient or its Representatives from any disclosure of Confidential Information
required by law, court process, administrative order or other legal or regulator
process reasonably believed by the Recipient or its Representatives to compel
such disclosure; PROVIDED, HOWEVER, that the Recipient or its Representatives
agree to (x) promptly notify the Company of the existence, terms and
circumstances surrounding such a request, so the Company may seek an appropriate
protective order and/or waive the Recipient's or its Representative's compliance
with the provisions of this Agreement (and, if the Company seeks such an order,
to provide such cooperation as the Company shall reasonably request), and (y) if
disclosure of such information is required in the reasonable determination of
the Recipient based upon the advice of counsel, make commercially reasonable
efforts, the costs of which shall be borne in full by the Company in advance, to
obtain an order or other reliable assurance that confidential treatment will be
accorded to such of the Confidential Information which the Company designates.
<PAGE>
EXHIBIT 10.6
SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT (the "Agreement") is made as of the 6th day of
June, 1997 by and among Commerce Security Bancorp, Inc., a Delaware corporation
(the "Company"), Madison Dearborn Capital Partners II, L.P., a Delaware limited
partnership ("MDP"), Olympus Growth Fund II, L.P., a Delaware limited
partnership ("Olympus I"), and Olympus Executive Fund, L.P., a Delaware limited
partnership ("Olympus II" and collectively with Olympus I, "Olympus"), Dartmouth
Capital Group, L.P., a Delaware limited partnership ("DCG"), Dartmouth Capital
Group, Inc., a Delaware corporation and the sole general partner of DCG (the
"General Partner"), Robert P. Keller ("Keller") and certain shareholders of the
General Partner and other investor in DCG listed on SCHEDULE 1 hereto
(collectively with Keller, the "DCG Shareholders"). MDP and Olympus are
collectively referred to herein as the "Purchasers." The Purchasers, Keller and
the Purchaser Shareholders (as defined herein) and each other Person (as defined
herein) that is or becomes a party to this Agreement are collectively referred
to herein as the "Shareholders."
WHEREAS, the Purchasers have agreed to purchase as of the Funding Date
certain securities of the Company and CSBI Capital Trust I, including Series A
Capital Securities, Series B Preferred Stock (each as defined herein), Voting
and Non-voting Special Common Stock, $.01 par value per share (collectively, the
"Special Common Stock" and, together with the Series A Capital Securities and
Series B Preferred Stock, the "Senior Securities") and certain warrants
(collectively, the "Series B Warrants") to purchase shares of Class B Common
Stock and Class C Common Stock (each as defined herein) pursuant to the
Securities Purchase Agreement dated February 13, 1997, by and among the Company
and its subsidiaries and each of the Purchasers (as amended by the First
Amendment dated March 21, 1997, the Second Amendment dated April 11, 1997 and
the Third Amendment dated June 5, 1997, the "Securities Purchase Agreement");
WHEREAS, DCG has agreed to purchase as of the Funding Date Senior
Securities and Warrants pursuant to that certain Standby Agreement (as defined
in the Securities Purchase Agreement);
WHEREAS, upon consummation of the sale of the Senior Securities, DCG and
Keller will own shares of Class B Common Stock, $.01 par value per share, of the
Company (the "Class B Common Stock"), representing a majority of the shares of
Class B Common Stock then outstanding;
WHEREAS, as a condition to the purchase and sale of the Senior Securities,
the Purchasers, DCG and Keller have agreed that the CSBI Securities held by them
and their successors be subject to certain transfer restrictions;
<PAGE>
WHEREAS, as a condition to the purchase of the Senior Securities, the
Purchasers and DCG have agreed that the holders of Eligible Securities (as
defined herein) have a Put Option (as defined herein) to put Eligible Securities
to DCG under the circumstances specified in this agreement;
WHEREAS, in consideration of the restrictions on the transfer of the CSBI
Securities owned by DCG and the Put Option, the Purchasers and Keller have
agreed to vote for the election of persons nominated by DCG to serve as
directors of the Company;
WHEREAS, as a condition to the purchase of the Senior Securities by the
Purchasers, DCG and the DCG Shareholders have agreed to vote for the election of
one person nominated by each Purchaser to serve as directors of the Company,
subject to the satisfaction of the conditions precedent set forth in the
Securities Purchase Agreement; and
WHEREAS, the execution of this Agreement by the parties hereto is a
material inducement to the purchase of Senior Securities by the Purchasers and
DCG;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. CERTAIN DEFINITIONS. Capitalized terms contained in this Agreement
and not otherwise defined herein shall have the meanings set forth in this
Section 1.
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as
amended.
"Amended and Restated Charter" shall mean the Amended and Restated
Certificate of Incorporation of the Company.
"Associate" shall have the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as
amended.
"BHC Act" means the Bank Holding Company Act of 1956, as amended,
or any successor statute.
"Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday or
Friday that banks in Los Angeles, California are not required or permitted
by law to be closed.
"Business Combination" shall mean any liquidation or reorganization
(other than a liquidation or reorganization conducted in connection with
any insolvency or bankruptcy
H-2
<PAGE>
proceeding of the Company), or a merger or consolidation of the Company, or
sale or other disposition of all or substantially all of the assets of the
Company.
"Call Securities" means the Senior Securities and the Series B Warrant
that DCG purchased as of the Funding Date pursuant to Section 1(b) of the
Securities Purchase Agreement and the Standby Agreement.
"CSBI Securities" means any or all of the Common Stock, the Preferred
Securities, the Series B Warrants and any other capital stock or equity or
debt interest issued by the Company, which is or by its terms may be
convertible into Common Stock.
"Change in Control" shall mean the consummation of a Business
Combination UNLESS immediately thereafter all of the following conditions
are satisfied: (V) the holders of the Common Stock receive only common
stock of the Resulting Company (which common stock of the Resulting Company
shall, in the case of the Special Common Stock, and except with the prior
approval of the holders of two-thirds of the Special Common Stock then
outstanding, have all of the powers, preferences and rights of the Special
Common Stock); (W) no Person (or group acting in concert within the meaning
of Rule 13d-3 promulgated under the Securities Exchange Act (a "Group"))
beneficially owns (within the meaning of Rule 13d-3), directly or
indirectly, twenty percent (20.0%) or more of, respectively, the then
outstanding shares of common stock of the Resulting Company or the combined
voting power of the voting securities entitled to vote generally in the
election of directors ("Outstanding Voting Securities") of the Resulting
Company, other than any Person or group that beneficially owned, directly
or indirectly, twenty percent (20%) or more of the Common Stock immediately
before such Business Combination; (X) no Person or Group beneficially owns,
directly or indirectly, forty percent (40%) or more of, respectively, the
then outstanding shares of the Resulting Company or the combined voting
power of the then-Outstanding Voting Securities of the Resulting Company,
excluding only a Person (or Group comprised of Persons) that beneficially
owned, directly or indirectly, one percent (1%) or more of the Common Stock
immediately following the initial issuance of the Company's Special Common
Stock; (Y) not more than one-half of the members of the board of directors
of the Resulting Company are Affiliates or Associates of any party to the
Business Combination other than the Company, and not less than one-half of
the members of the board of directors of the Resulting Company were members
of the Board of Directors of the Company at the time the Company's Board of
Directors authorized the Company to enter into the definitive agreement
providing for such Business Combination; and (Z) Robert P. Keller has not
ceased to be the Chief Executive Officer of the Resulting Company as a
consequence of such Business Combination.
"Common Stock" means any or all of the Special Common Stock, the Class
B Common Stock, and the Class C Common Stock, or any other equity security
of the
H-3
<PAGE>
Company or any Resulting Company that may be issued in exchange for any or
all of such Common Stock.
"Common Stock Equivalent" means a security that is characterized as a
Common Stock Equivalent for purposes of generally accepted accounting
principles then prevailing in the United States.
"Company" shall mean Commerce Security Bancorp, Inc. and any Resulting
Company.
"DCG Shareholders" shall mean the holders of common stock of the
General Partner and the other investor in DCG that are listed on SCHEDULE 1
to this Agreement.
"Eligible Securities" shall mean the following securities held by a
Purchaser Shareholder: (i) shares of any class of Common Stock acquired
under the Securities Purchase Agreement or pursuant to Section 11 of this
Agreement or upon exercise of a Series B Warrant, (ii) a Series B Warrant,
(iii) Series B Preferred Stock that is acquired as of the Funding Date or
pursuant to Section 11 of this Agreement or Common Stock acquired upon
conversion of the Series B Preferred Stock, (iv) PIE Shares distributed
with respect to any of the Preferred Securities, (v) any securities
received in a Business Combination in exchange for any of the securities
described in clauses (i), (ii), (iii) or (iv) of this sentence, or (vi) any
securities issued upon the conversion, exchange, division, recombination or
reclassification of any of the securities described in clauses (i), (ii),
(iii), (iv) or (v) of this sentence. Neither the Series A Capital
Securities nor any share of Series E Preferred Stock nor any Common Stock
acquired upon the conversion or exchange of the Series A Capital Securities
or Series E Preferred shall be Eligible Securities.
"Employment Agreement" shall mean the Employment Agreement dated
October 1, 1995 by and between the Company and Keller.
"Exit Value" shall mean the per share value that would be received by
a holder of Class B Common Stock if the Company were sold as a going
concern to a single acquiror as of the date on which the Company receives
the Put Exercise Notice. Without limiting the scope of the immediately
preceding sentence, the Exit Value shall not reflect any discount as a
consequence of the Eligible Securities representing a minority interest in
the Company.
"Family Member" shall mean any spouse, child, grandchild, parent or
sibling of an individual Shareholder.
H-4
<PAGE>
"FRB" means the Federal Reserve Bank of San Francisco, the staff of
the Board of Governors of the Federal Reserve System, or the Board of
Governors of the Federal Reserve System, as applicable.
"Funding Date" shall mean the date of the initial issuance of the
Senior Securities pursuant to the Securities Purchase Agreement.
"General Partner" shall have the meaning set forth in the preamble to
this Agreement.
"Liquidation Value" means, with respect to a Preferred Security, the
Liquidation Value specified in the Amended and Restated Charter or, in the
case of the Series A Capital Securities, the Declaration of Trust of
CSBI Capital Trust I.
"Permitted Assignee" shall mean (i) any Family Member, (ii) any
guardian, conservator, executor or administrator of a Shareholder's estate,
(iii) the trustees of any trust for the benefit of any Shareholder or such
Shareholder's Family Member, (iv) any trust, partnership or other similar
entity wholly-owned or solely controlled by such Shareholder to the extent,
in each case, that such Person becomes a signatory hereof by executing the
Affirmation Agreement attached hereto as EXHIBIT A.
"Person" means an individual, bank, corporation, partnership, company,
limited liability company, trust, association, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization or any such
individual or entity acting directly or indirectly, or through or in
concert with, one or more such individuals or entities;
"Preferred Securities" means any or all of the Series A Capital
Securities, the Series B Preferred Stock and the Series E Preferred Stock.
"Purchaser Assignee" means any direct or indirect transferee of
Eligible Securities from any Purchaser Shareholder, if such transferee has
become a signatory to this Agreement by executing the Affirmation Agreement
attached hereto as EXHIBIT A.
"Put Exercise Notice" shall have the meaning set forth in Section 7 of
this Agreement.
"Put Option" shall have the meaning set forth in Section 7 of this
Agreement.
"Purchaser Registration Agreement" shall mean the Registration Rights
Agreement of even date herewith by and between the Company and MDP and
Olympus.
H-5
<PAGE>
"Purchaser Shareholder" shall mean either Purchaser and any Purchaser
Assignee.
"Purchaser Shares" shall mean the Senior Securities and the shares
issuable to the holders upon exercise of the Series B Warrants.
"Qualified Holder" shall mean a Purchaser Shareholder that has
delivered to the Secretary of the Company an opinion or memorandum of
counsel, in form and substance reasonably satisfactory to the Company, or
other reasonably satisfactory evidence, to the effect that such Purchaser
Shareholder may beneficially own more than 14.9% of the outstanding Voting
Securities of the Company and will acquire such shares in accordance with
the BHC Act.
"Qualified Offering" shall have the meaning set forth in the Amended
and Restated Charter.
"Resulting Company" shall mean the entity resulting from a Business
Combination involving the Company (including, without limitation, an entity
which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or
more subsidiaries).
"Sale of the Company" shall mean the consummation of a Business
Combination constituting a Change in Control, if the holders of Common
Stock on a fully-diluted basis immediately prior to the consummation of
such transaction own less than one-third of the Common Stock of the
Resulting Company on a fully-diluted basis immediately after the
consummation of such transaction.
"Section 4 Transfer" shall have the meaning set forth in Section 4 of
this Agreement.
"Section 5 Transfer" shall have the meaning set forth in Section 5 of
this Agreement.
"Senior Securities" shall have the meaning set forth in the recitals
to this Agreement and shall include, to the extent then outstanding, Series
E Preferred Stock.
"Series A Capital Securities" shall have the meaning set forth the
Securities Purchase Agreement.
"Series A Transfer" shall have the meaning set forth the Securities
Purchase Agreement.
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"Series B Preferred Stock" shall have the meaning set forth the
Amended and Restated Charter.
"Series B Warrants" shall have the meaning set forth in the recitals
to this Agreement.
"Series E Preferred Stock" shall have the meaning set forth the
Amended and Restated Charter.
"Settlement Date" means the date on which DCG is obligated to deliver
payment for the Eligible Securities as to which the Put Option has been
exercised, which date shall be the 180th day after DCG receives the Put
Exercise Notice, unless extended in accordance with the terms of Section 7
of this Agreement; PROVIDED, HOWEVER, that if the Settlement Date would not
otherwise occur on a Business Day, the Settlement Day shall be the
immediately preceding Business Day.
"Special Common Stock" shall have the meaning set forth in the
recitals to this Agreement.
"Special Common Liquidation Preference Amount" shall have the meaning
set forth the Amended and Restated Charter.
"Transfer" shall mean any sale, transfer, assignment, pledge or
distribution, directly or indirectly, of or the grant of any lien on or
other interest in the relevant securities.
"Voting Securities" shall mean the shares of capital stock of the
Company entitled to vote in an election of the directors of the Company,
without giving effect to the exercise of any outstanding Common Stock
Equivalents.
2. RESTRICTIONS ON TRANSFER OF ASSETS BY OR INTERESTS IN DCG.
(a) Without the prior consent of the holders of at least two-thirds in
value of the Eligible Securities (determined in the manner specified in
Section 2(b) of this Agreement) then held by, collectively, the Purchasers, any
Affiliates or Associates thereof, or any Purchaser Assignee, until the later of
such time as (x) the respective obligations of the parties under Section 7 and
Section 10 of this Agreement no longer are in effect and (y) no Purchaser
Shareholder holds any shares of Series A Capital Securities or Series E
Preferred Stock:
(i) DCG shall remain in existence and may not, directly or
indirectly, Transfer any CSBI Securities or any other equity or debt
instrument of the Company that it owns,
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now or in the future, except pursuant to a Series A Transfer or upon the
exercise by one or both Purchasers of the right to purchase the Call
Securities pursuant to Section 11 hereof or in accordance with a Section 4
Transfer to a Person that is not a partner of DCG or an Affiliate of such a
partner; PROVIDED, HOWEVER, that in the case of a Section 4 Transfer, prior
to the completion of such Transfer the Board of Directors of the Company
shall have determined in good faith, after consultation with one or more
investment banking firms, that the price to be paid to DCG for the CSBI
Securities to be sold in such Section 4 Transfer is not less than ninety
percent (90%) of the then fair market value of such CSBI Securities; and
PROVIDED FURTHER, that nothing contained in this agreement, including,
without limitation, this Section and Section 4, shall restrict DCG's
ability to Transfer one or more shares of Preferred Securities to the
Company upon a redemption thereof;
(ii) the General Partner shall remain the sole general partner of DCG;
(iii) the General Partner shall not issue any additional shares of its
capital stock; and
(iv) each of the DCG Shareholders agrees, severally but not jointly,
that such Person shall not Transfer, directly or indirectly, any limited
partnership interest (or any rights therein, or any other equity or debt
instrument that such DCG Shareholder may own now or in the future) in DCG,
except in each case to another DCG Shareholder or to a Permitted Assignee.
(b) Without the prior consent of the holders of at least two-thirds in
value of the CSBI Securities held by the DCG Shareholders and the Purchaser
Shareholders (determined in the manner specified in the immediately following
sentence), no DCG Shareholder may Transfer, directly or indirectly, any shares
of the capital stock (or any rights therein, or any other equity or debt
instrument that such DCG Shareholder may own now or in the future) of the
General Partner. In calculating the value of CSBI Securities or other Senior
Securities for purposes of determining whether the requisite number of
Shareholders have consented to an action for purposes of this Agreement,
(x) Common Stock shall be valued at $4.81 per share, (y) Preferred Securities
shall be valued at the Liquidation Value per share thereof, and (z) each Series
B Warrant shall be valued by multiplying the maximum number of shares of Common
Stock which may be acquired upon the exercise thereof by $4.81. In determining
the value of the CSBI Securities or other Senior Securities held by the DCG
Shareholders for purposes of the immediately preceding sentence, each DCG
Shareholder shall be deemed to own the amount of CSBI Securities that such
Person would own assuming DCG and the General Partner were liquidated as of that
date. Nothing contained in this Agreement shall affect the rights and
obligations of the DCG Shareholders under that certain Amended and Restated
Shareholder Agreement dated as of February 20, 1996 to which the General
Partner, DCG and the
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Shareholders of the General Partner are parties, including without limitation
the right of first refusal contained therein.
(c) Notwithstanding anything else contained in this Agreement and except
as provided in the immediately following sentence, until such time as the
respective obligations of the parties under Section 7 and Section 10 of this
Agreement no longer are in effect, no distribution of proceeds of any Transfer
of CSBI Securities or any other equity or debt instrument of the Company that it
owns, now or in the future, may cause the net assets of the Partnership to be
less than the lesser of (x) $15,000,000 or (y) 150% of the "Aggregate Purchase
Price" of all Eligible Securities then outstanding (were the Put Option
exercised at the time of such Transfer), valuing the Common Stock that DCG
continues to hold at the price per share paid in the most recent Transfer by
DCG. Nothing contained in this Agreement shall be construed to restrict the
DCG's ability to transfer to its partners the proceeds received by DCG upon one
or more Series A Transfers or upon an exercise by one or both Purchasers of the
right to purchase the Call Securities pursuant to Section 11 hereof.
(d) Notwithstanding the termination of Section 2(a) hereof, DCG shall
remain in existence and, except in accordance with Section 4 hereof, may not,
directly or indirectly, Transfer any Common Stock (or any interest therein)
without the prior consent of the holders of at least two-thirds in value of the
Eligible Securities and the shares of any other Senior Securities (determined in
the manner specified in Section 2(b) hereof) then held by the Purchaser
Shareholders if, as a result of such Transfer by DCG, (x) any Purchaser
Shareholder that is not a Qualified Holder would own ten percent (10%) or more
of the Voting Securities or twenty-five percent (25%) or more of the Company's
shareholders' equity and (y) on a pro forma basis giving effect to such proposed
Transfer by DCG, a holder described in clause (x) would own a greater percentage
of Voting Securities than any other holder of Voting Securities.
3. RESTRICTIONS ON TRANSFER OF SECURITIES BY PURCHASERS.
(a) Each of MDP and Olympus agrees, severally but not jointly, that
without the prior consent of the FRB it will not Transfer any CSBI Securities,
except pursuant to one of the following exceptions:
(i) Transfers to the Company or DCG, provided that, in the case of a
Transfer to DCG, at the time of such Transfer DCG is a registered bank
holding company and a controlling shareholder of the Company within the
meaning of Regulation Y, promulgated under the BHC Act, as then in effect
or any successor regulation,
(ii) Transfers in a widely dispersed public offering,
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(iii) Transfers in a private sale in which each transferee will hold
less than two percent (2%) of the Common Stock on a fully diluted basis,
(iv) Transfers to a transferee who is acquiring more than fifty percent
(50%) of the Common Stock without taking into account securities
transferred by the applicable Purchaser, or
(v) Transfers that comply with the volume and manner of sale
limitations contained in Rule 144, promulgated by the U.S. Securities and
Exchange Commission, as then in effect or any successor rule,
(vi) Transfers pursuant to the co-sale provisions of Section 4 hereof,
(vii) Transfers of any non-Common Stock security if, following such
Transfer, such security will no longer be convertible into or exchangeable
for Common Stock, and
(viii) Transfers as part of a pro rata distribution to the limited
partners of the applicable Purchaser, provided that no such limited partner
will thereby hold five percent (5%) or more of the Common Stock and Common
Stock Equivalents then outstanding.
(b) This Section 3 shall no longer be applicable to a Purchaser if such
Purchaser provides the Company with evidence reasonably satisfactory to the
Company and its counsel (which evidence may include discussions with the FRB, if
the Purchaser or the Company reasonably deems such discussions to be necessary
to clarify then existing statutes, regulations or published policy guidelines)
that (i) such Purchaser does not then own, or have the potential ability to
acquire (under the express terms of Common Stock or other CSBI Securities that
the Purchaser then owns), Common Stock or other CSBI Securities that, currently
or upon the occurrence of any subsequent event, are or may become convertible
into or exchangeable or exercisable for Common Stock, which in the aggregate
could represent fifteen percent (15%) or more of the Common Stock outstanding on
a pro forma basis, and (ii) DCG or another shareholder owns a greater percentage
of Common Stock and Common Stock Equivalents.
4. PURCHASER SHAREHOLDER CO-SALE RIGHTS -- DCG.
(a) Until the later of such time as (x) the respective obligations of the
parties under Section 7 and Section 10 of this Agreement no longer are in effect
and (y) no Purchaser Shareholder holds any shares of Series A Capital Securities
or Series E Preferred Stock, whenever DCG desires to Transfer all or any CSBI
Securities owned by it to any Person that is not a partner of DCG or an
Affiliate of such a partner (excluding CSBI for this purpose), each Purchaser
Shareholder shall have the right to sell to DCG's proposed transferee, as a
condition to such
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Transfer by DCG, at the same price per share and on the same terms and
conditions as involved in such Transfer, an Equivalent Amount (as defined
herein) of CSBI Securities.
(b) The "Equivalent Amount" of CSBI Securities which a Purchaser
Shareholder shall be entitled to sell to the proposed DCG transferee shall be
determined as follows: each Purchaser and all of its Permitted Assignees shall
have the right to sell, in the aggregate, the same number of shares of each
series or class of CSBI Securities that DCG proposes to Transfer. As among a
Purchaser and its Purchaser Assignees, the right to sell CSBI Securities to the
proposed DCG transferee will be allocated pro rata based upon the relative
ownership of that class of security, treating all classes of Common Stock as a
single class for such purposes. For example, if MDP were to Transfer
one-quarter of the Common Stock acquired by it to several Purchaser Assignees
and subsequently DCG were to propose to Transfer 100 shares of Common Stock, the
Purchaser Shareholders' right to sell shares of Common Stock to the DCG
transferee would be allocated as follows: (x) MDP -- 75 shares of Common Stock,
(y) Purchaser Assignees, in the aggregate -- 25 shares of Common Stock, and
(z) Olympus -- 100 shares.
(c) If DCG wishes to make a Transfer which is subject to co-sale rights
set forth in this Section 4 (a "Section 4 Transfer"), DCG shall give to each
Purchaser Shareholder notice of such proposed Section 4 Transfer (including
price, name of the transferee and other material terms) (a "Co-Sale Notice").
Such Co-Sale Notice shall be given at least sixty (60) days prior to the date of
the proposed Section 4 Transfer. If a Purchaser Shareholder desires to
participate in such Section 4 Transfer, such Purchaser Shareholder shall notify
DCG in writing of such intention within thirty (30) days after the delivery of
Co-Sale Notice to the Purchaser Shareholder (the "Co-sale Notice Period").
(d) DCG and each participating Purchaser Shareholder (each a
"Participant") shall sell to the proposed DCG transferee all, but not less than
all, of the CSBI Securities proposed to be sold by them, which sale shall be at
the price and upon the other terms and conditions, if any, specified in the
Co-Sale Notice.
(e) Each Participant shall effect its participation in the Section 4
Transfer by promptly delivering to the proposed transferee one or more
certificates, accompanied by one or more duly executed stock powers (which stock
powers shall be guaranteed within the meaning of Section 8-312(1) of the Uniform
Commercial Code), which certificates shall represent in the aggregate the number
of shares of CSBI Securities which such Participant has elected to sell in such
Section 4 Transfer.
(f) The stock certificate or certificates that the Participant delivers
pursuant to Section 4(e) shall be transferred to the proposed purchaser in
consummation of the Section 4 Transfer pursuant to the terms and conditions
specified in the Co-Sale Notice, and the purchaser shall concurrently therewith
remit to DCG and each such Participant that portion of the sale
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proceeds to which DCG and each such Participant is entitled by reason of its
participation in such Section 4 Transfer. To the extent that any prospective
purchaser, or purchasers, prohibit such assignment or otherwise refuse to
purchase shares or other securities from a Participant exercising its right of
co-sale in a Section 4 Transfer, DCG shall not sell to such prospective
purchaser or purchasers any CSBI Securities unless and until, simultaneously
with such sale, DCG shall purchase from each such Participant the amount of CSBI
Securities that the Participant elected to sell in such Section 4 Transfer in
accordance with subsection (c).
(g) The exercise or non-exercise of the rights of the Purchaser
Shareholders to participate in one or more Section 4 Transfers shall not
adversely affect their rights to participate in subsequent Section 4 Transfers.
(h) If none of the Purchaser Shareholders elects to exercise its right of
co-sale pursuant to this Section 4, DCG shall be free for a period of sixty
(60) days after the expiration of the Co-sale Notice Period to sell the CSBI
Securities proposed to be sold on the terms and conditions described in the
Co-Sale Notice to the Purchaser Shareholders. If such Section 4 Transfer is not
consummated within such sixty (60) day period, DCG shall not be free to sell any
of shares of CSBI Securities without again complying with the provisions of this
Section 4.
5. RESTRICTION ON KELLER SHARES.
(a) Until the earlier of (x) the termination of the transfer restrictions
set forth in Section 2(a) of this Agreement or (y) Keller's death or disability
(as defined in the Employment Agreement), neither Keller nor any Permitted
Assignee of Keller shall Transfer any Common Stock (or any interest therein)
held by Keller on the date hereof or hereafter acquired, except pursuant to (i)
a Change in Control, (ii) a Qualified Offering, (iii) a transfer to any
Permitted Assignee or (iv) a Transfer pursuant to the co-sale right set forth in
Section 5(b) hereof (a "Section 5 Transfer"); PROVIDED, HOWEVER, that in the
case of a Section 5 Transfer, prior to the completion of such Transfer the Board
of Directors of the Company shall have determined in good faith, after
consultation with one or more investment banking firms, that the price to be
paid to Keller for the Common Stock to be sold in such Section 5 Transfer is not
less than ninety percent (90%) of the then fair market value of the Common
Stock; and PROVIDED, FURTHER, that if the Company terminates, with or without
cause, the Keller Employment Agreement, Keller and any Permitted Assignee of
Keller collectively may sell up to an aggregate of 60,000 shares of Common Stock
(as adjusted for any stock split, stock dividends or other similar distributions
to the holders of Common Stock).
(b) Keller may Transfer Common Stock (or any interest therein) to any
Person that is not a partner of DCG or an Affiliate of such a partner (excluding
CSBI for this purpose) if, as a condition to such Transfer, each Purchaser
Shareholder shall have the right to sell to Keller's proposed transferee, at the
same price per share and on the same terms and conditions as involved
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in such Transfer, up to the Proportionate Amount (as defined herein) of Common
Stock. The "Proportionate Amount" of Common Stock which a Purchaser Shareholder
shall be entitled to sell to the proposed Keller transferee shall be equal to
that number of shares of Common Stock as bears the same ratio to the amount of
shares to be transferred by Keller as the value of Keller's direct and indirect
investment in CSBI immediately prior to such Transfer bears to the value of the
CSBI Securities and other Senior Securities then held by such Purchaser
Shareholder, such value being determined in accordance with Section 2(b) of this
Agreement but excluding (x) any shares of Restricted Stock within the meaning of
the Keller Employment Agreement and (y) the value of any unexercised stock
options the Company has granted to Keller. For example, if the value of
Keller's direct and indirect investment in CSBI is $1,000 and the value of CSBI
Securities and other Senior Securities held by each Purchaser Shareholder is
$20,000, if Keller should propose to Transfer $100 of Common Stock, each
Purchaser Shareholder would have the right to Transfer up to $2,000 of Common
Stock to the Keller transferee. The notice and other provisions applicable to a
Section 4 Transfer shall apply to a Section 5 Transfer.
6. MARKET STAND-OFF. DCG and Keller respectively agree that for so long
as this Agreement remains in effect, such Person shall not effect any public
sale or distribution of CSBI Securities, during the seven days prior to and
during the 120-day period beginning on the effective date of any underwritten
registration demanded by one or more Purchaser Shareholders pursuant to Section
2(a) of the Purchaser Registration Agreement, unless the underwriters managing
the registered public offering that is the subject of Purchaser Registration
Agreement otherwise agree.
7. PUT OPTION.
(a) At any time after the fifth (5th) anniversary of the Funding Date, one
or more Purchaser Shareholders holding twenty percent (20%) or more, in the
aggregate, of the value of the then outstanding Eligible Securities (determined
in accordance with Section 2(b) of this Agreement) shall have the right to sell
all of such Purchaser Shareholders' Eligible Securities to DCG on the terms and
conditions set forth in this Section 7, which right is sometimes referred to
herein as the "Put Option."
(b) Notice of an exercise of the Put Option (a "Put Exercise Notice")
shall be in writing, specifying the number and type of Eligible Securities
covered by such Put Exercise Notice, and sent concurrently to DCG and the
Company in the manner specified in this Agreement for notices generally. Within
five (5) Business Days after the receipt of a Put Exercise Notice, the Company
shall send a copy of the Put Exercise Notice and this Agreement to each other
Purchaser Shareholder. Each such other Purchaser Shareholder shall have the
right to include Eligible Securities in the put that is subject to the Put
Exercise Notice, provided that the Purchaser Shareholder gives written notice to
DCG and the Company within twenty (20) Business Days after the Company
distributes the copy of the Put Exercise Notice. The notification provided by
such Purchaser Shareholder shall specify the number and type of Eligible
Securities beneficially owned
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by such Purchaser Shareholder. Each Purchaser Shareholder that avails itself of
the Put Option (collectively, the "Participating Shareholders") must put to DCG
all Eligible Securities that it beneficially owns. The Put Option may not be
exercised more than once in any one hundred twenty (120)-day period. By written
notice to DCG and the Company delivered not later than ninety (90) days after
DCG's receipt of a Put Exercise Notice, any Participating Shareholder may
unilaterally withdraw all of such Participating Shareholder's Eligible
Securities from the put covered by such Put Exercise Notice, and such withdrawal
shall in no way prejudice such Purchaser Shareholder's right to thereafter put
Eligible Securities to DCG in accordance with this Section 7.
(c) The purchase price payable by DCG for the Eligible Securities shall be
as follows: (i) for the Special Common, the purchase price shall be the greater
of the Special Common Liquidation Preference Amount or the per share Exit Value
of the Class B Common Stock; (ii) for other Common Stock and any Series B
Warrant, the Common Stock shall be valued at the Exit Value per share, PROVIDED,
HOWEVER, that with respect to any exercise of the Put Option after a Sale of the
Company, the Exit Value of the Common Stock shall be equal to the "Market Value"
of the Common Stock as defined in the Series B Warrants; and (iii) for the
Series B Preferred Stock, the purchase price shall be the Redemption Price of
the Series B Preferred Stock as specified in the Amended and Restated Charter.
(d) The Exit Value shall be determined by a nationally recognized
investment banking firm selected by DCG from among three firms designated by the
Purchaser Shareholder that delivers the relevant Put Exercise Notice. The
Company shall pay the reasonable fees and expenses of such investment banking
firm.
(e) The aggregate purchase price payable upon an exercise of the Put
Option is referred to as the "Aggregate Purchase Price." Not later than the
Settlement Date, DCG shall pay the Aggregate Purchase Price in immediately
available funds to a paying agent mutually acceptable to DCG and the Purchaser
Shareholder that delivered the relevant Put Exercise Notice. Upon the paying
agent's receipt of the certificates representing a Participating Shareholder's
Eligible Securities accompanied by one or more duly executed stock powers (which
stock powers shall be guaranteed within the meaning of Section 8-312(1) of the
Uniform Commercial Code), the paying agent shall release the purchase price for
such Eligible Securities to the Participating Shareholder. All rights under and
with respect to all Eligible Securities put to DCG by Participating
Shareholders, including, without limitation, dividend and voting rights, shall
transfer from the applicable Participating Shareholder to DCG as of the
Settlement Date, provided only that DCG shall have placed in escrow with the
paying agent the full amount of the Aggregate Purchase Price on or before such
date, and a Participating Shareholder shall thereafter have no rights with
respect to such Eligible Securities other than to receive the applicable
purchase price therefor from the paying agent; PROVIDED, HOWEVER, that this
sentence shall in no way affect any right a Participating
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Shareholder may have against the Company or any other Person arising out of
facts or circumstances occurring prior to DCG's receipt of the Put Exercise
Notice.
(f) If, prior to the Settlement Date, (i) the Company enters into a
definitive agreement for a Business Combination, (ii) DCG has entered into a
binding agreement to vote in favor of such Business Combination, and (iii) the
only material conditions to such Business Combination are regulatory approval
and shareholder approval (for the Company and, if applicable, the acquiror),
then the Settlement Date shall be extended until the earlier of (x) the three
hundred sixtieth (360th) day after DCG receives the Put Exercise Notice or (y)
the tenth (10th) Business Day after termination of such definitive agreement.
In no event, shall the Settlement Date be extended beyond the three hundred
sixtieth (360th) day after the DCG receives the Put Exercise Notice.
(g) If DCG fails to deliver the Aggregate Purchase Price to the paying
agent on or before the Settlement Date, DCG shall deliver, as liquidated
damages, a ratable portion of the "Liquidated Damages Settlement" (as defined
herein) to the Participating Shareholders. The Liquidated Damages Settlement
means cash or Common Stock, as determined by the Participating Shareholders
entitled to a majority of the Aggregate Purchase Price, which Liquidated Damages
Settlement shall have an aggregate value equal to the percentage of $10 million
that the Aggregate Purchase Price represents to the Aggregate Purchase Price
that DCG would have been obligated to pay if all Eligible Securities outstanding
on the Settlement Date were then put to DCG at that time. For purposes of the
Liquidated Damages Settlement, the Class B Common Stock shall be valued at
"Market Value" as defined in the Series B Warrants. Notice of the Participating
Shareholders' election to receive the Liquidated Damages Settlement in cash or
stock (the "Settlement Notice") shall be in writing and, subject to the next
following sentence, may be delivered by the Participating Shareholder at any
time, whether prior to, on or after the applicable Settlement Date. The
Settlement Notice shall be given not later than twenty (20) Business Days after
DCG notifies the Participating Shareholders in writing that it will not deliver
the Aggregate Purchase Price to the paying agent on or before the Settlement
Date. On or before the later of (x) three (3) Business Days after receipt of
the Settlement Notice or (y) the Settlement Date, DCG shall deliver the
Liquidated Damages Settlement to a paying agent reasonably acceptable to DCG and
the Participating Shareholder that delivered the Put Exercise Notice. If DCG
satisfies its obligations under the immediately preceding sentence, the
Liquidated Damages Settlement shall be the Participating Shareholders' sole and
exclusive remedy for DCG's breach of its obligations under this Section 7, and
in all other circumstances involving DCG's failure to deliver the Aggregate
Purchase Price to the paying agent on or before the Settlement Date, DCG shall
be liable to the Participating Shareholders for all reasonable fees and expenses
of the Participating Shareholders (including, without limitation, legal,
accounting and consulting fees) incurred in connection with the enforcement of
this provision of this Section 7(g), as well as any damages incurred by the
Participating Shareholders as a consequence of DCG's failure to deliver the
Liquidated Damages Settlement on a timely basis.
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(h) The Company agrees that, at the request of any Participating
Shareholder, the Company shall exchange shares of non-voting Class C Common
Stock for Class B Common Stock contemporaneously with the Settlement Date.
(i) Each DCG Shareholder agrees, severally but not jointly, that such
Person shall not take any action, whether in such Person's capacity as a
director or shareholder of the General Partner, a limited partner of the
Partnership or a shareholder of the Company, that reasonably could be expected
to adversely affect or delay any matter approved by a majority of the directors
of the General Partner in connection with any exercise of the Put Option,
including, without limitation, any matter pertaining to the Liquidated Damages
Settlement.
(j) The Put Option shall terminate under the following circumstances,
whether occurring prior to or after DCG's receipt of a Put Exercise Notice:
(A) upon the completion of a Qualified Offering prior to the
Settlement Date, or
(B) following a Sale of the Company, with respect to any
Purchaser Shareholder upon the later of
(I) such date as the Purchaser Shareholder shall have
Transferred, in the aggregate, in one or more Transfers, fifty
percent (50.0%) or more of the Eligible Securities that such
Purchaser Shareholder (together with its predecessors in
interest) owned immediately following the Sale of the Company,
(II) the Eligible Securities received as a consequence of
the Sale of the Company have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), unless
the issuance of such Eligible Securities was exempt from the
registration requirements of the Securities Act by virtue of
Section 3(a)(10) thereof (or any successor provision), and
(III) the Eligible Securities received as a consequence of
the Sale of the Company are freely transferable and not subject
to any lock-up or other legal or contractual restrictions that
the Purchaser Shareholder has entered into at the request of the
Company or that have been imposed by any governmental authority
in connection with the Business Combination constituting the Sale
of the Company or otherwise; PROVIDED, HOWEVER, that a
requirement that the Eligible Securities be sold in accordance
with the terms of Rule 145 under the Securities Act shall not be
deemed to be a restriction for purposes of this clause (III) as
to any Purchaser Shareholder
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that would be permitted under Rule 145 to sell all of such
Purchaser Shareholder's Eligible Securities in a single
transaction without an effective registration statement under the
Securities Act; or
(C) with respect to any Purchaser Shareholder, if such Purchaser
Shareholder Transfers, other than in a Section 4 Transfer or a
Section 5 Transfer, Voting Securities constituting Eligible Securities
to a transferee that does not become a Purchaser Shareholder within
the meaning of this Agreement, the Put Option shall terminate
immediately as to that Purchaser Shareholder and such transferee.
Notwithstanding any other provision of this Agreement, a distribution of
Eligible Securities by a Purchaser Shareholder to any of its partners shall
be a Transfer within the meaning of clause (B)(I) of this subsection,
whether or not such partner is a Purchaser Assignee.
(k) So long as the Put Option remains in effect, each Purchaser
Shareholder shall give DCG notice of any Transfer of Eligible Securities, which
notice shall specify each type and number of Eligible Securities transferred,
the name of the transferee, the effective date of the Transfer and whether such
transferee is a Purchaser Assignee.
8. SUCCESSOR PURCHASER SHAREHOLDERS.
(a) A transferee of Eligible Securities from a Purchaser, or from a prior
Purchaser Shareholder, may (but shall not be required to) become a party to this
Agreement, and thereby become entitled to enforce the rights accorded under this
Agreement (subject in all events to the burdens on Purchaser Shareholders as set
forth herein) by the execution and delivery to each of the Company, Keller, DCG,
the General Partner and the DCG Shareholders of a counterpart Affirmation
Agreement (the "Affirmation Agreement") in the form attached hereto as
EXHIBIT A, whereupon the transferee shall be deemed to be a Purchaser
Shareholder for all purposes of this Agreement, with full power to enforce the
obligations of DCG, the General Partner and the DCG Shareholders hereunder.
Upon the receipt of an executed Affirmation Agreement, the Company shall update
SCHEDULE 13 to reflect the addition of such Purchaser Shareholder and shall
distribute such updated SCHEDULE 13 to each of the Shareholders.
(b) The Company shall not close its books against the transfer of any of
its capital stock in any manner which prejudices the rights of the any Purchaser
Shareholder under the Securities Purchase Agreement or any of the documents
executed by the Purchasers and the Company in connection therewith.
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9. RESTRICTIVE LEGENDS.
(a) So long as DCG or Keller, as applicable, are subject to the
restrictions on transfer set forth in Sections 2, 4, 5, 6 or 11 of this
Agreement, all certificates representing the CSBI Securities held by DCG or
Keller, as applicable shall have affixed thereto a legend in substantially the
following form, in addition to any other legends that may be required under this
Agreement or federal or state securities laws:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE RESTRICTIONS ON TRANSFER SET FORTH IN A CERTAIN
SHAREHOLDER AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDERS NAMED THEREIN DATED JUNE [ ], 1997 (THE
"SHAREHOLDER AGREEMENT"). A COPY OF SUCH AGREEMENT IS
AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO THE
COMPANY."
(b) So long a Purchaser Shareholder is subject to the restrictions on
transfer set forth in Section 3 of this Agreement, all certificates representing
the CSBI Securities held by such Purchaser Shareholder shall have affixed
thereto a legend in substantially the following form, in addition to any other
legends that may be required under this Agreement or federal or state securities
laws:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE RESTRICTIONS ON TRANSFER SET FORTH IN A CERTAIN
SHAREHOLDER AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDERS NAMED THEREIN DATED JUNE [ ], 1997 (THE
"SHAREHOLDER AGREEMENT"). A COPY OF SUCH AGREEMENT IS
AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO THE
COMPANY."
(c) So long as the respective obligations of the parties under Section 7
and Section 10 of this Agreement remain in effect, all certificates representing
Common Stock shall have affixed thereto a legend in substantially the following
form, in addition to any other legends that may be required under this Agreement
or federal or state securities laws:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE VOTING PROVISIONS SET FORTH IN A CERTAIN SHAREHOLDER
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDERS NAMED
THEREIN
H-18
<PAGE>
DATED JUNE [ ], 1997 (THE "SHAREHOLDER AGREEMENT"). A COPY OF SUCH
AGREEMENT IS AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO THE
COMPANY."
10. ELECTION OF DIRECTORS.
(a) Each Purchaser Shareholder agrees, severally but not jointly, as
follows:
(i) Until the later of such time as (x) the respective
obligations of the parties under Section 7 and this Section 10 of this
Agreement no longer are in effect and (y) no Purchaser Shareholder holds
any shares of Series A Capital Securities or Series E Preferred Stock, at
each annual meeting of the shareholders of the Company, and at each special
meeting of the shareholders of the Company called for the purpose of
electing directors of the Company and at any time at which shareholders of
the Company shall have the right to, or shall, vote, at a meeting or by
written consent, for directors of the Company, then, and in each event,
each Purchaser Shareholder and Keller shall vote (unless expressly
prohibited from doing so by the FRB), by written consent or in person or by
proxy, that portion of such Person's Voting Securities that constitute
Delegated Shares (as hereinafter defined) in favor of the director nominees
specified by DCG as provided below (the "Specified Nominees") constituting
up to a majority of the members of the Company's Board of Directors (for
example, five of nine directors or six of eleven directors). As used
herein, a party's "Delegated Shares" shall mean all Voting Securities then
owned by such party and entitled to vote in the election of directors or
such lesser number of Voting Securities as is equal to (x) the fraction
consisting of all of such party's Voting Securities then entitled to vote
in the election of directors divided by the sum of the Voting Securities
entitled to vote that are then held by Purchaser Shareholders and those
held by Keller, multiplied by (y) a number of shares equal to the
arithmetic difference between forty-eight percent (48.0%) of all Voting
Securities then outstanding and entitled to vote in the election of
directors minus the sum of the Voting Securities then held by DCG and the
Voting Securities then held by Keller. Consistent with the foregoing, each
Purchaser Shareholder and Keller may vote any of such party's Voting
Securities that do not constitute Delegated Shares for any nominee for
director, whether or not a Specified Nominee, in such party's discretion.
(ii) DCG shall give all other Shareholders who are parties to
this Agreement notice specifying the individuals who shall be the Specified
Nominees. In the absence of such notice, each Purchaser Shareholder and
Keller shall vote to reelect the Specified Nominees then serving and
previously specified by DCG. The Purchaser Shareholders and Keller shall
not vote to remove any member of the Board of Directors who was a Specified
Nominee unless DCG shall likewise so vote. Any vacancy on the
H-19
<PAGE>
Board of Directors created by the resignation, removal, incapacity or death
of any Specified Nominee shall be filled by another Person specified by
DCG. The parties hereto shall vote their respective Delegated Shares in
accordance with such new specification, and any such vacancy shall not be
filled in the absence of new specification by the applicable designating
party or parties.
(b) Each of the Purchasers, DCG and the DCG Shareholders agree,
severally but not jointly, as follows:
(i) Whenever a Purchaser Shareholder is entitled pursuant to
Section 9.3 of the Securities Purchase Agreement to designate a Director
Designee (as defined in the Securities Purchase Agreement) and the election
of such a Director Designee would not violate any commitment made to any
federal or state regulator of the Company, and until the later of such time
as (x) the respective obligations of the parties under Section 7 and this
Section 10 of this Agreement no longer are in effect and (y) no Purchaser
Shareholder holds any shares of Series A Capital Securities or Series E
Preferred Stock, at each annual meeting of the shareholders of the Company,
and at each special meeting of the shareholders of the Company called for
the purpose of electing directors of the Company and at any time at which
shareholders of the Company shall have the right to, or shall, vote, at a
meeting or by written consent, for directors of the Company, then, and in
each event, each of DCG, Keller, the DCG Shareholders and the other
Purchaser Shareholders shall vote (unless expressly prohibited from doing
so by the FRB), by written consent or in person or by proxy, all of such
Person's Voting Securities in favor of the Director Designee specified by
such Purchaser Shareholder as provided below.
(ii) Each Purchaser Shareholder that is entitled pursuant to
Section 9.3 of the Securities Purchase Agreement to designate a Director
Designee shall give all other Shareholders who are parties to this
Agreement notice specifying the individual who shall be the Director
Designee of such Purchaser Shareholder. In the absence of such notice,
each other Purchaser Shareholder, DCG and the DCG Shareholders shall vote
to reelect the Director Designee then serving and previously specified by
such Purchaser Shareholder. Each other Purchaser Shareholder, DCG and the
DCG Shareholders shall not vote to remove a Purchaser Shareholder's
Director Designee unless such Purchaser Shareholder shall likewise so vote.
Any vacancy on the Board of Directors created by the resignation, removal,
incapacity or death of a Purchaser Shareholder's Director Designee shall be
filled by another Person specified by such Purchaser Shareholder. The
parties hereto shall vote their respective Voting Securities in accordance
with such new specification, and any such vacancy shall not be filled in
the absence of new specification by the applicable Purchaser Shareholder.
11. CALL OPTION AND RECIPROCAL RIGHTS FOR SERIES A CAPITAL SECURITIES.
H-20
<PAGE>
(a) Subject to compliance with subsections (b) and (d) of this Section,
each Purchaser shall have the right, exercisable from time to time, to purchase
up to fifty percent (50%) of each tranche of Call Securities then held by DCG at
the purchase price per share specified in subsection (b) of this Section. For
purposes of this Section, the Series B Warrant purchased by DCG as of the
Funding Date shall be allocated among the Purchasers based upon the number of
shares of Common Stock purchasable upon the full exercise thereof. Upon the
exercise of the right to purchase less than all of the remaining Call Securities
that a Purchaser is entitled to purchase, such Purchaser must acquire a
proportionate share of each tranche of Call Securities then held by DCG. A
Purchaser must give DCG notice of the exercise of the right to purchase the Call
Securities not later than ten (10) days prior to the proposed settlement date.
No settlement date for the purchase of Call Securities shall be later than the
earlier of (x) [June [ ], 1999] [Add: the second anniversary of the Funding
Date] or (y) thirty (30) days after the completion of a Series A Transfer, or
(z) the consummation of a Sale of the Company.
(b) The purchase price for the Call Securities shall be as follows: (i)
for the Series A Capital Securities or Series E Preferred Stock, an amount per
share equal to the net Subscription Price (as defined in the Securities Purchase
Agreement) paid by DCG for the Series A Capital Securities (i.e., giving effect
to the 1% Commitment Fee, as defined in the Securities Purchase Agreement) plus
any accrued but unpaid interest or dividends on such Preferred Securities,
(ii) for the Series B Preferred Stock and a pro rata portion of the Series B
Warrant, an amount per share equal to the net Subscription Price paid for the
Series B Preferred Stock and the Series B Warrants, plus any accrued but unpaid
dividends on the Series B Preferred Stock, and (iii) for the Special Common
Stock, an amount per share equal to $4.7619 (i.e., the net Subscription Price
paid for the Special Common Stock) plus, if applicable, the Interest Adjustment
(as defined herein). If the settlement date for the purchase of the Call
Securities is on or before [October [ ], 1997] [Add: the 120th day after the
Funding Date], the Interest Adjustment shall be zero; if the settlement date for
the purchase of the Call Securities is after [October [ ], 1997] [Add: the
120th day after the Funding Date], the price per share for the Special Common
Stock will be increased by an amount (the "Interest Adjustment") equal to
$.0008936 multiplied the number of days elapsed from [October [ ], 1997] [Add:
the 121st day after the Funding Date] through the settlement date, inclusive.
The purchase price for the Call Securities shall be payable in immediately
available funds against receipt of the certificates representing the portion of
the Call Securities being purchased, accompanied by one or more duly executed
stock powers (which stock powers shall be guaranteed within the meaning of
Section 8-312(1) of the Uniform Commercial Code).
(c) Notwithstanding any other provision of this Agreement, for so long as
the right to purchase the Call Securities is exercisable, DCG shall not, without
the prior consent of the Purchasers, exercise the Series B Warrant, convert any
of the Preferred Securities (other than as part of a mandatory conversion
initiated by other holders of the relevant class of Preferred Securities), waive
any right applicable to the Call Securities or Transfer any of the Call
Securities,
H-21
<PAGE>
other than a Transfer of one or more shares of Preferred Securities to the
Company upon a redemption thereof.
(d) No Purchaser shall be entitled to purchase Call Securities unless such
Purchaser provides the Company with evidence reasonably satisfactory to the
Company and its counsel (which evidence may include discussions with the FRB, if
the Purchaser or the Company reasonably deems such discussions to be necessary
to clarify then existing statutes, regulations or published policy guidelines)
that such purchase of Call Securities would not cause (x) the Purchaser's
investment in the Company to equal fifteen percent (15%) or more of the
Company's shareholders' equity as of the most recent month end preceding such
purchase, allocating to any series of Preferred Securities held by such
Purchaser the Liquidation Value thereof and allocating to the Common Stock held
by such Purchaser its pro rata share of the Company's equity available for the
holders of Common Stock or (y) the Purchaser to then own, or have the potential
ability to acquire (under the express terms of Common Stock or other CSBI
Securities that the Purchaser then owns), Common Stock or other CSBI Securities
that, currently or upon the occurrence of any subsequent event, are or may
become convertible into or exchangeable or exercisable for Common Stock, which
in the aggregate could represent twenty-five percent (25%) or more of the Common
Stock outstanding on a pro forma basis.
(e) DCG and each of the Purchaser Shareholders agree that (x) if any
of such parties proposes to effect a Series A Transfer, each other holder of
Series A Capital Securities shall have the right to sell a pro rata portion of
Series A Capital Securities in such a Series A Transfer and (y) if either MDP or
Olympus or both proposes to effect a Series A Transfer in which either or both
parties will sell, on or before [June [ ], 1999] [Add: the second anniversary
of the Funding Date], all of the Series A Capital Securities purchased by them
as of the Funding Date, such Purchaser Shareholders shall have the right to
cause DCG to sell all of the Series A Capital Securities purchased by DCG as of
the Funding Date, PROVIDED the purchase price per share of Series A Capital
Securities to be received by DCG is not less than the net per share Subscription
Price (as such term is used in Section 11(a) of this Agreement) of the Series A
Capital Securities plus any accrued but unpaid interest or dividends thereon.
12. AMENDMENT TO CERTIFICATE OF INCORPORATION. (a) Following any
Series A Transfer, at a request of Purchaser Shareholders that own a majority in
value (determined in the manner specified in Section 2(b) of this Agreement) of
the aggregate amount of Preferred Securities then held by the Purchaser
Shareholders, the Company shall cause to be approved by its Board of Directors
and submitted to its shareholders an amendment to the Company's Certificate of
Incorporation that would increase the maximum number of PIE Shares (as defined
in the Amended and Restated Charter) that may be distributed in the aggregate to
holders of Series B Preferred Stock, Series E Preferred Stock or both to such
greater number(s) as may be specified in the request delivered by the Purchaser
Shareholders, provided that the Purchaser Shareholders deliver to the Company
evidence reasonably satisfactory to the Company and its counsel (which evidence
H-22
<PAGE>
may include discussions with the FRB, if the Purchaser or the Company reasonably
deems such discussions to be necessary to clarify then existing statutes,
regulations or published policy guidelines) that such increase in the maximum
number of PIE Shares would not cause any Purchaser Shareholder to then own, or
have the potential ability to acquire (under the express terms of Common Stock
or other CSBI Securities that the Purchaser then owns), Common Stock or other
CSBI Securities that, currently or upon the occurrence of any subsequent event,
are or may become convertible into or exchangeable or exercisable for Common
Stock, which in the aggregate could represent twenty-five percent (25%) or more
of the Common Stock outstanding on a pro forma basis.
(b) As soon as practicable after the approval by the Board of Directors of
the Company of the amendment to the Company's Certificate of Incorporation
referred to in subsection (a) of this Section, the Company shall use all
commercially reasonable efforts to solicit shareholder approval of such
amendment. Each of the Purchasers, DCG and the DCG Shareholders agree,
severally but not jointly, to vote, by written consent or in person or by
proxy, all of such Person's Voting Securities in favor of such amendment. Upon
shareholder approval of such amendment, the Company shall file and cause the
same to become effective as soon as practicable thereafter in accordance with
then applicable law.
13. REPRESENTATIONS AND WARRANTIES. Each Shareholder represents and
warrants that (i) such Shareholder is the record owner of the number of shares
of capital stock of the Company as set forth opposite its name on SCHEDULE 13.1
attached hereto (as amended from time to time to reflect any addition of a
Purchaser Shareholder in accordance with the terms of Section 8 hereof), (ii)
this Agreement has been duly authorized, executed and delivered by such
Shareholder and constitutes the valid and binding obligation of such
Shareholder, enforceable in accordance with its terms and does not conflict with
any other agreement to which such Shareholder is a party, and (iii) such
Shareholder has not granted and is not a party to any proxy, voting trust or
other agreement which is inconsistent with, conflicts with or violates any
provision of this Agreement. No Shareholder shall grant any proxy or become
party to any voting trust or other agreement which is inconsistent with,
conflicts with or violates any provision of this Agreement.
14. TERMINATION.
(a) The respective obligations of DCG, the General Partner and the DCG
Shareholders under Sections 2(a) and (b), 4, 5, 6, 7, and 10 hereof, as
applicable, shall terminate if (x) the holders of a majority in value of the
Purchaser Shares (determined in the manner specified in Section 2(b) hereof)
cease to comply with the voting obligations under Section 10 hereof, or (y) the
Purchaser Shareholders transfer a majority in value of the Eligible Securities
(determined in the manner specified in Section 2(b) hereof) to one or more
transferees who do not enter into an Affirmation Agreement, or (z) the later of
(I) the date the Put Option has terminated in accordance with Section 7 of this
Agreement or there are no Eligible Securities as to which the Put Option
H-23
<PAGE>
has not been exercised and DCG has satisfied in full its obligations under
Section 7 of this Agreement by delivering to the paying agent the Aggregate
Purchase Price for the Eligible Securities and/or delivering the Liquidated
Damages Settlement to the holders of the Eligible Securities and (II) the date
on which no Purchaser Shareholder holds any shares of Series A Capital
Securities or Series E Preferred Stock.
(b) The obligations of the Purchaser Shareholders under Section 10 shall
terminate if (x) DCG, Keller or the holders of a majority in value (determined
in the manner specified in Section 2(b) hereof) of the shares of CSBI Securities
held by the DCG Shareholders, as applicable, cease to comply with Sections 2(a)
and (b), 4, 5, 6, 7, or 10 hereof or (y) each of the conditions set forth in
clauses (z) (I) and (II) of Section 14(a) has been satisfied.
(c) The obligations of DCG under Section 6 hereof shall terminate 120 days
after the effective date of the second Permitted Registration (as defined in the
Purchaser Registration Agreement) demanded by one or more of the Purchaser
Shareholders pursuant to Section 2(a) of the Purchaser Registration Agreement.
(d) Termination of this Agreement by the Purchaser Shareholders pursuant
to this Section 14 shall not be the exclusive remedy for a breach of this
Agreement by DCG, the General Partner, any DCG Shareholder or Keller, and shall
in no way prejudice or undercut such Shareholder's right to a remedy pursuant to
Section 15.
15. REMEDIES. The Purchaser Shareholders having rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically, to recover damages caused by reason of any breach of any provision
of this Agreement and to exercise all other rights available at law or in
equity. The parties hereto agree and acknowledge that money damages would not
be an adequate remedy for any breach of the provisions of this Agreement (other
than Section 7, to the extent such Section provides that the Liquidated Damages
Settlement shall be the sole and exclusive remedy for any breach thereof) and
that any party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or other security) for specific
performance and for other injunctive relief in order to enforce or prevent
violation of such provisions of this Agreement. Without limiting the scope of
this Section, if, following a Series A Transfer, the amendment of the Company's
Certificate of Incorporation referenced in Section 12 of this Agreement is not
adopted on a timely basis as a result of the breach of such Section by the
Company, DCG or any DCG Shareholder, the Company shall be obligated to pay an
aggregate amount of $500,000 pro rata to the Purchaser Shareholders, which
payment shall be in addition to any other rights available to the Purchaser
Shareholders at law or in equity on account of such breach.
H-24
<PAGE>
16. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon, and inure to the benefit of, the respective successors, assigns,
heirs, executors and administrators of the parties hereto to the extent provided
in this Agreement.
17. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing, shall be addressed to the receiving party's
address set forth below or to such other address as a party may designate by
notice hereunder, and shall be either (i) delivered by hand, (ii) made by
telecopy or facsimile transmission with a confirmatory copy by regular mail,
(iii) sent by recognized overnight courier or (iv) sent by registered or
certified mail, return receipt requested, postage prepaid. All notices,
requests, consents and other communications hereunder shall be deemed to have
been properly given (i) if by hand, at the time of the delivery thereof to the
receiving party at the address of such party set forth above, (ii) if made by
telex, telecopy or facsimile transmission, at the time that receipt thereof has
been acknowledged by electronic confirmation or otherwise, (iii) if sent by
overnight courier, on the next Business Day following the day such notice is
delivered to the courier service or (iv) if sent by registered or certified
mail, on the fifth Business Day following the day such mailing is made.
18. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
the understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings related to such
subject matter. Prior to the date hereof, each of DCG and the DCG Shareholders
have been granted certain registration rights by the Company; however,
notwithstanding such prior grant of registration rights, each of DCG, the
General Partner and the DCG Shareholders acknowledge that the transfer
restrictions set forth in Sections 2, 4, 5 and 6 hereof shall control, as
applicable, each Person's right to Transfer any Common Stock, regardless of
whether such Person has any registration rights with respect thereto.
19. AMENDMENTS AND WAIVERS. This Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of (i) the Company, (ii) the holders of at least two-thirds in
value of the Eligible Securities and the shares of any other Senior Securities
held by the Purchaser Shareholders (determined in the manner specified in
Section 2(b) of this Agreement) then held by the Purchaser Shareholders, (iii)
DCG and the General Partner, and (iv) Keller (or his Permitted Assignees, if
applicable); PROVIDED, HOWEVER, that no amendment shall impose any additional or
different obligations on a DCG Shareholder without such Person's consent. No
waivers of or exceptions to any term, condition or provision of this Agreement,
in any one or more instances, shall be deemed to be, or construed as, a further
or continuing waiver of any such term, condition or provision.
20. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
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<PAGE>
21. HEADINGS. The headings of the sections, subsections, and paragraphs
of this Agreement have been added for convenience only and shall not be deemed
to be a part of this Agreement.
22. SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
23. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware without regard for
its principles of conflicts or laws.
H-26
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hands under
seal as of the day and year first above written.
COMMERCE SECURITY BANCORP, INC.
By:
-------------------------------
Name: Robert P. Keller
Title: President and Chief Executive Officer
Jurisdiction
of Organization: Delaware
---------------------------------------
Mailing Address:
---------------------------------------
---------------------------------------
Telephone Number:
--------------------------------------
Facsimile Number:
--------------------------------------
MADISON DEARBORN CAPITAL PARTNERS II, L.P.
By: Madison Dearborn Partners II, L.P., its General Partner
By: Madison Dearborn Partners, Inc., its General Partner
By:
----------------------------
Name: Paul R. Wood
Title: Vice President
Jurisdiction
of Organization:
--------------------------------
Mailing Address:
--------------------------------
--------------------------------
Telephone Number:
-------------------------------
Facsimile Number:
-------------------------------
H-27
<PAGE>
SIGNATURE PAGE
(con't)
OLYMPUS GROWTH FUND II, L.P.
By: OGP II, L.P., its general partner
By: Conroy, L.L.C., its general partner
By:
------------------------------------------
Name: James A. Conroy
Title: Member
Jurisdiction
of Organization:
----------------------------------
Mailing Address:
----------------------------------
----------------------------------
Telephone Number:
---------------------------------
Facsimile Number:
---------------------------------
OLYMPUS EXECUTIVE FUND, L.P.
By: OEF, L.P., its general partner
By: Conroy, L.L.C., its general partner
By:
------------------------------------------
Name: James A. Conroy
Title: Member
Jurisdiction
of Organization:
----------------------------------
Mailing Address:
----------------------------------
----------------------------------
Telephone Number:
---------------------------------
Facsimile Number:
---------------------------------
H-28
<PAGE>
SIGNATURE PAGE (con't)
DARTMOUTH CAPITAL GROUP, L.P.
By: Dartmouth Capital Group, Inc., its general partner
By:
--------------------------------
Name: Robert P. Keller
------------------------------
Title: President
-----------------------------
Jurisdiction
of Organization: Delaware
----------------------------------
Mailing Address:
----------------------------------
----------------------------------
Telephone Number:
---------------------------------
Facsimile Number:
---------------------------------
DARTMOUTH CAPITAL GROUP, INC.
By:
--------------------------------
Name: Robert P. Keller
------------------------------
Title: President
-----------------------------
Jurisdiction
of Organization: Delaware
----------------------------------
Mailing Address:
----------------------------------
----------------------------------
Telephone Number:
---------------------------------
Facsimile Number:
---------------------------------
------------------------------
ROBERT P. KELLER
Mailing Address: 945 Promontory Point Drive, West
-----------------------------------------
Newport Beach, CA 92660
-----------------------------------------
Telephone Number: (714) 673-4751
----------------------------------------
Facsimile Number: (714) 673-4751
----------------------------------------
H-29
<PAGE>
SIGNATURE PAGE (con't)
-----------------------------------
ERNEST J. BOCH
Mailing Address:
----------------------------------
----------------------------------
Telephone Number:
---------------------------------
Facsimile Number:
---------------------------------
-----------------------------------
JOHN J. BYRNE
Mailing Address:
----------------------------------
----------------------------------
Telephone Number:
---------------------------------
Facsimile Number:
---------------------------------
-----------------------------------
EDWARD A. FOX
Mailing Address:
----------------------------------
----------------------------------
Telephone Number:
---------------------------------
Facsimile Number:
---------------------------------
-----------------------------------
CHARLES E. HUGEL
Mailing Address:
----------------------------------
----------------------------------
Telephone Number:
---------------------------------
Facsimile Number:
---------------------------------
H-30
<PAGE>
SIGNATURE PAGE (con't)
--------------------
K. THOMAS KEMP
Mailing Address:
----------------------------------
----------------------------------
Telephone Number:
---------------------------------
Facsimile Number:
---------------------------------
--------------------
JEFFERSON W. KIRBY
Mailing Address:
----------------------------------
----------------------------------
Telephone Number:
---------------------------------
Facsimile Number:
---------------------------------
NORTHWOOD VENTURES
By:
---------------------------
Name:
----------------------
Title:
---------------------
Jurisdiction
of Organization:
----------------------------------
Mailing Address:
----------------------------------
----------------------------------
Telephone Number:
---------------------------------
Facsimile Number:
---------------------------------
H-31
<PAGE>
SIGNATURE PAGE (con't)
NORTHWOOD CAPITAL PARTNERS, LLC
By:
---------------------------
Name:
----------------------
Title:
---------------------
Jurisdiction
of Organization:
----------------------------------
Mailing Address:
----------------------------------
----------------------------------
Telephone Number:
---------------------------------
Facsimile Number:
---------------------------------
--------------------
JOHN J. F. SHERRERD
Mailing Address:
----------------------------------
----------------------------------
Telephone Number:
---------------------------------
Facsimile Number:
---------------------------------
BYRNE & SONS, L.P.
By:
---------------------------
Name:
----------------------
Title:
---------------------
Jurisdiction
of Organization:
----------------------------------
Mailing Address:
----------------------------------
----------------------------------
Telephone Number:
---------------------------------
Facsimile Number:
---------------------------------
H-32
<PAGE>
EXHIBIT A
AFFIRMATION AGREEMENT
THIS AFFIRMATION AGREEMENT, dated as of ____________________ , is entered
into by and among Commerce Security Bancorp, Inc., a Delaware corporation (the
"Company"), and ____________________________________ ("Transferee").
WHEREAS, Transferee is (or is proposed to be) the transferee of certain
shares of capital stock of the Company (the "Shares");
WHEREAS, the Shares were initially issued by the Company to a Shareholder
subject to that certain Shareholder Agreement (the "Shareholder Agreement")
dated June [___], 1997 by and among the Company, Madison Dearborn Capital
Partners II, L.P., a Delaware limited partnership, Olympus Growth Fund II, L.P.,
a Delaware limited partnership, Olympus Executive Fund, L.P., a Delaware limited
partnership, Dartmouth Capital Group, L.P., a Delaware limited partnership,
Dartmouth Capital Group, Inc., a Delaware corporation, Robert P. Keller and
certain shareholders of Dartmouth Capital Group, Inc. and other investors in
Dartmouth Capital Group, L.P.; and
WHEREAS, pursuant to the terms of the Shareholder Agreement, any transfer
of the Shares (including the transfer to Transferee) is subject the terms of the
Shareholder Agreement and, subject to certain conditions, conveys to the
transferee of the Shares certain of the rights attendant to the Shares.
NOW, THEREFORE, in consideration of Transferee's acquisition of the Shares,
and for other good and valuable consideration, the receipt and sufficiency of
each of which are hereby acknowledged, the Company and Transferee hereby agree
as follows:
1. Capitalized terms used herein and not otherwise defined are used with
the meanings set forth in the Shareholder Agreement.
2. Transferee hereby makes, as of the date hereof, each of the
representations, warranties and covenants of a Shareholder contained in the
Shareholder Agreement as though the same were restated herein in their entirety.
3. Transferee agrees to be bound by and comply with all provisions of the
Shareholder Agreement constituting restrictions on or relating to the Shares or
the holder of the Shares, or with respect to the further Transfer of the Shares,
and agrees to be bound by and comply with all provisions of the Shareholder
Agreement granting rights to any other Person with regard to the Shares thereby
becoming a party to the Shareholder Agreement.
H-33
<PAGE>
4. Transferee hereby acknowledges that he or she has received and
reviewed a copy of the Shareholder Agreement, the Securities Purchase Agreement
and the exhibits thereto, is familiar with the contents thereof, and has been
afforded the opportunity to consult with counsel regarding the same prior to
executing this Affirmation Agreement.
5. This Affirmation Agreement shall be governed by the internal laws of
the State of Delaware without regard to the conflict of laws provisions thereof.
IN WITNESS WHEREOF, the parties have caused this Affirmation Agreement to
be duly executed as of the day and year first recited above.
COMMERCE SECURITY BANCORP, INC.
By:
-------------------------------------
Its:
TRANSFEREE:
----------------------------------------
H-34
<PAGE>
SCHEDULE 1
TO
SHAREHOLDER AGREEMENT
DATED JUNE 6, 1997
SHARES OF GENERAL PARTNER
DCG SHAREHOLDERS COMMON STOCK
Ernest J. Boch 300
John J. Byrne 400
Bryne & sons, l.p. 0
Edward A. Fox 195
Charles E. Hugel 125
Robert P. Keller 50
K. Thomas Kemp 100
Jefferson W. Kirby 400
Northwood Capital Partners LLC 30
Northwood Ventures 120
John J.F. Sherrerd 125
TOTAL SHARES OUTSTANDING 1,945
H-35
<PAGE>
SCHEDULE 13.1
TO
SHAREHOLDER AGREEMENT
DATED JUNE 6, 1997
CSBI COMMON STOCK
DCG SHAREHOLDERS HELD DIRECTLY
- ---------------- -----------------
Ernest J. Boch 2,260,828
John J. Byrne 0
Byrne & sons, l.p. 409,794
Edward A. Fox 437,096
Charles E. Hugel 318,425
Robert P. Keller 461,852
K. Thomas Kemp 40,460
Jefferson W. Kirby 386,000
Northwood Capital Partners LLC 75,528
Northwood Ventures 302,112
John J.F. Sherrerd 318,739
H-36
<PAGE>
EXHIBIT 10.7
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of this 6th day of
June, 1997, among Commerce Security Bancorp, Inc., a Delaware corporation (the
"Company"), Madison Dearborn Capital Partners II, L.P., a Delaware limited
partnership ("MDP"), Olympus Growth Fund II, L.P., a Delaware limited
partnership ("Olympus I"), and Olympus Executive Fund, L.P., a Delaware limited
partnership ("Olympus II" and collectively with Olympus I, "Olympus"). MDP and
Olympus are collectively referred to herein as the "Purchasers."
WHEREAS, the Purchasers have agreed to purchase certain securities of the
Company and CSBI Capital Trust I, a trust organized under the Delaware Business
Trust Act ("CSBI Trust"), including Series A Capital Securities of CSBI Trust
and Series B Preferred Stock, Special Common Stock and certain warrants issued
in connection therewith to purchase shares of Class B Common Stock or Class C
Common Stock of the Company (collectively, the "Senior Securities") pursuant to
the Securities Purchase Agreement dated February 11, 1997 by and among the
Company, the Purchasers and certain others (the "Securities Purchase
Agreement");
WHEREAS, as a condition to such purchase, the Purchasers have requested
certain rights to require the Company to register, for public distribution, the
Registrable Shares (as defined herein) as hereafter described;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties hereto agree as
follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, in addition to the
terms defined in the preamble, the following terms shall have the following
respective meanings:
"CLASS B COMMON STOCK" means the Class B Common Stock of the Company,
par value $.01 per share.
"CLASS C COMMON STOCK" means the Class C Common Stock of the Company,
par value $.01 per share.
"COMMISSION" means the Securities and Exchange Commission, or any
other Federal agency at the time administering the Securities Act.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and any similar Federal statute successor thereto, and the rules and regulations
of the Commission issued under such Act, as they each may be in effect from time
to time.
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<PAGE>
"HOLDERS" means the Purchasers and any subsequent transferee of the
Registrable Shares pursuant to Section 11 hereof effected on the books of the
Company.
"OTHER STOCKHOLDERS" means all holders of Class B Common Stock or
Class B Common Stock equivalents issued by the Company, other than the Holders,
who, by virtue of agreements entered into either prior to, contemporaneously
with or after the date of this Agreement, are entitled to registration rights,
including, without limitation, the right to include Secondary Shares in certain
registrations hereunder.
"PIE SHARES" means the Class B Common Stock and the Class Common Stock
issued or issuable in respect of the Series B Preferred Stock, the Series E
Preferred Stock and (in the case of certain holders of Series A Capital
Securities) the Series A Capital Securities.
"SERIES B WARRANTS" means the warrants to purchase Class B Common
Stock or Class C Common Stock.
"REGISTRATION STATEMENT" means a registration statement filed by the
Company with the Commission for a public offering and sale of securities of the
Company (other than a registration statement on Form S-8 or Form S-4, or any
successor form, or any other form for a limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"REGISTRABLE SHARES" means (i) any shares of Class B Common Stock
issued or issuable to a Holder upon conversion, directly or indirectly, of any
of the Series A Capital Securities, Series B Preferred Stock, Series E Preferred
Stock, Special Common Stock or Class C Common Stock, (ii) any shares of Class B
Common Stock issued to the Holder by the Company as PIE Shares, (iii) any shares
of Class B Common Stock issued or issuable to a Holder upon exercise of the
Series B Warrants issued to a Holder by the Company, and (iv) any other shares
of Class B Common Stock of the Company now owned or hereafter acquired,
including shares issued or issuable to a Holder in respect of the shares
described in the foregoing clauses (i), (ii) or (iii); PROVIDED, HOWEVER, that
shares of Class B Common Stock which are Registrable Shares shall cease to be
Registrable Shares upon any sale pursuant to a Registration Statement or Rule
144 or Rule 145(d), or any sale in any manner to a person or entity not
conducted in compliance with Section 11 hereof. Registrable Shares shall not
include shares of Class B Common Stock which may be sold by a Holder to the
public immediately without registration, including shares of Class B Common
Stock which may be sold within a period of 90 days under Rule 144, unless at the
time of the proposed sale such Holder, after the use of reasonable efforts, is
unable to arrange for an unregistered managed block distribution of such shares
by a recognized investment banking firm which specializes in such block
distributions at a reasonable discount to the then-current market price thereof.
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<PAGE>
"RULE 144" means Rule 144 as promulgated by the Commission under the
Securities Act, as such Rule may be amended from time to time, or any similar
successor rule that may be promulgated by the Commission.
"RULE 145(d)" means Rule 145(d) as promulgated by the Commission under
the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
"SECONDARY SHARES" means such shares of Class B Common Stock held by
Other Stockholders; PROVIDED, HOWEVER, that shares of Class B Common Stock which
are Secondary Shares shall cease to be Secondary Shares upon any sale pursuant
to a Registration Statement or Rule 144 or Rule 145(d) under the Securities Act,
or any sale in any manner to a person or entity not conducted in compliance with
Section 11 hereof. Secondary Shares shall not include shares of Class B Common
Stock which may be sold by Other Stockholders to the public immediately without
registration, including shares of Class B Common Stock which may be sold within
a period of 90 days under Rule 144 promulgated under the Securities Act, unless
at the time of the proposed sale such Other Stockholder, after the use of his
best efforts, is unable to arrange for an unregistered managed block
distribution of such shares by a recognized investment banking firm which
specializes in such block distributions at a reasonable discount to the
then-current market price thereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and any
similar Federal statute successor thereto, and the rules and regulations of the
Commission issued under such Act, as they each may, from time to time, be in
effect.
"SERIES A CAPITAL SECURITIES" means the Subordinated Capital Income
Securities, Series A, issued by CSBI Trust, certain holders of which may become
entitled to receive PIE Shares as provided in the Securities Purchase Agreement.
"SERIES B PREFERRED STOCK" means the Series B Preferred Stock of the
Company, par value $.01.
"SERIES E PREFERRED STOCK" means the Series B Preferred Stock of the
Company, par value $.01.
"SHAREHOLDER AGREEMENT" means the Shareholder Agreement dated as of
the date hereof by and among the Company, the Purchasers, Dartmouth Capital
Group, L.P., Dartmouth Capital Group, Inc., Robert P. Keller and the other
parties named therein and their respective transferees.
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<PAGE>
"SPECIAL COMMON STOCK" means, together, the Voting Special Common
Stock of the Company, par Value $.01, and the Non-Voting Special Common
Stock of the Company, par value $.01 per share.
Other capitalized terms not defined herein shall have the meanings assigned
those terms in the Securities Purchase Agreement.
2. DEMAND REGISTRATIONS.
(a) Commencing upon the earlier of (x) one year after the completion
of an underwritten public offering of Class B Common Stock or (y) the second
anniversary of the date hereof, and until such time as the Company becomes
eligible to file a Registration Statement on Form S-3 (or any successor form
relating to secondary offerings), the Holders of 40% of the Registrable Shares
then outstanding may request, in writing, that the Company effect the
registration on Form S-1 or Form S-2 (or any successor form) of Registrable
Shares owned by the Holders; PROVIDED, HOWEVER, that the minimum aggregate
offering price of the Class B Common Stock to be registered by such Holders
equals $10,000,000 (prior to deductions for underwriting discounts and
commissions). Any such request pursuant to Section 2(a) shall be in writing and
shall state the number of shares of Registrable Shares to be disposed of and the
intended method of disposition of such shares by such Holder. If a Holder
elects to distribute its Registrable Shares by means of an underwriting, it
shall so advise the Company in its request. Thereupon, the Company shall, as
expeditiously as possible, use its best efforts to effect the registration, on
Form S-1 or Form S-2 (or any successor form), of all Registrable Shares which
the Company has been requested so to register. The Company shall not be
required to effect more than two (2) registrations pursuant to this Section 2(a)
(each, a "Permitted Registration"). A registration shall not count as one of
the Permitted Registrations under this Section 2(a) until it has become
effective, and any registration pursuant to Section 2(a) shall not count as one
of the Permitted Registrations unless the Holders of Registrable Shares are able
to register and sell 75% or more of the Registrable Shares requested to be
included in such registration. The Company shall not be required to effect any
registration pursuant to this Section 2(a) within six months after the effective
date of any other Registration Statement of the Company for an underwritten
offering of Class B Common Stock.
(b) If the Company is eligible to use Form S-3, or any similar
short-form registration statement, the Holders of Registrable Shares shall have
the right to request an unlimited number of registrations on Form S-3, or any
similar short-form registration statement, (such requests shall be in writing
and shall state the number of shares of Registrable Shares to be disposed of and
the intended methods of disposition of such shares by such Holder), PROVIDED,
HOWEVER, that the Company shall not be obligated to effect any such registration
if (i) the Holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration, propose to sell Registrable
Shares and such other securities (if any) on Form S-3 at
4
<PAGE>
an aggregate price to the public of less than $2,500,000 (prior to deductions
for underwriting discounts and commissions), or (ii) in a given twelve-month
period, after the Company has effected three (3) registrations pursuant to
Sections 2(a) and/or 2(b) in any such period. If a Holder elects to distribute
its Registrable Shares by means of an underwriting, it shall so advise the
Company in its request. Thereupon, the Company shall, as expeditiously as
possible, use its best efforts to effect the registration, on Form S-3 (or any
successor form), of all Registrable Shares which the Company has been requested
so to register.
(c) In connection with any registration pursuant to Section 2, the
Company shall keep such registration effective for a period of ninety (90) days
or until the Holder has completed its distribution described in the Registration
Statement relating thereto, whichever first occurs; PROVIDED, HOWEVER, that (i)
such 90-day period shall be extended for a period of time equal to the period
the Holder refrains from selling any securities included in such registration at
the request of the Company or of an underwriter of common stock (or other
securities) of the Company, provided, however, that in no event shall such
extension be more than 180 days, and (ii) in the case of any registration of
Registrable Shares on Form S-3 (or any other applicable form) which are intended
to be offered on a continuous or delayed basis, such 90-day period shall be
extended, if necessary, to keep the Registration Statement effective until all
such Registrable Shares are sold, provided that Rule 415, or any successor rule
under the Securities Act, permits an offering on a continuous or delayed basis,
and provided further that applicable rules under the Securities Act governing
the obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment that (I) includes any prospectus required by Section
10(a)(3) of the Securities Act or (II) reflects facts or events representing a
material or fundamental change in the information set forth in the Registration
Statement, the incorporation by reference of information required to be included
in (I) and (II) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Exchange Act in the Registration Statement.
(d) Upon receipt of any such request, the Company shall promptly give
written notice of such proposed registration to all Holders. Each Holder shall
have the right, by giving written notice to the Company within 30 days after the
Company provides its notice, to elect to have included in such registration such
of the Holder's Registrable Shares as such Holder may request in such notice of
election. Thereupon, the Company shall, as expeditiously as possible, use its
best efforts to effect the registration of all Registrable Shares which the
Company has been requested to register.
(e) If at the time of any request to register Registrable Shares
pursuant to this Section 2, the Company is engaged or has fixed plans to engage
within 60 days of the time of the request in a registered public offering as to
which the Holders may include Registrable Shares pursuant to Section 4 or is
engaged in any other activity which, in the good faith determination of the
Company's Board of Directors, would be adversely affected by the requested
registration to the material detriment of the Company, then the Company may at
its option direct that such request be delayed for a period not in excess of six
months from the date the Company received
5
<PAGE>
the request to register such Registrable Shares, such right to delay a request
to be exercised by the Company not more than once in any 18-month period.
(f) If, after a Registration Statement becomes effective pursuant to
Section 2, the Company advises the Holders of any Registrable Shares registered
pursuant to such Registration Statement that the Company, on the basis of a
written opinion of outside counsel, considers it appropriate for the
Registration Statement to be amended, the Holders of such shares shall suspend
any further sales of their registered shares until the Company advises them that
the applicable amendment to the Registration Statement has been filed and is
then effective; provided that the Company shall use its best efforts to promptly
file any such amendment. The 90-day time period referred to herein during which
the Registration Statement must be kept current after its effective date shall
be extended for an additional number of business days equal to the number of
business days during which the rights to sell shares was suspended pursuant to
the preceding sentence.
(g) In the event that Registrable Shares are sold pursuant to a
Registration Statement in an underwritten offering pursuant to this Section 2,
the Company agrees to enter into an underwriting agreement containing customary
representations and warranties with respect to the business and operations of an
issuer of the securities being registered and customary covenants and agreements
to be performed by such issuer, including without limitation customary
provisions with respect to indemnification by the Company of the underwriters of
such offering.
(h) In the case of any registration effected pursuant to this Section
2, the Holders of a majority of the Registrable Shares being offered in the
registration shall have the right to designate the managing underwriter in any
underwritten offering, subject to the approval of the Company, which approval
may not be unreasonably withheld or delayed.
3. "PIGGYBACK" REGISTRATION -- ON REGISTRATION DEMANDED BY HOLDERS. Upon
receipt of any request by the Holders for registration of its Registrable Shares
pursuant to Section 2, the Company shall promptly give written notice of such
proposed registration to all Other Stockholders, including those that are, at
such time, permitted to transfer all or any portion of their common stock
pursuant to the Shareholder Agreement. In the event registration of the
Holder's Registrable Shares is proposed to be underwritten, the right of Other
Stockholders to participate shall be conditioned on such Other Stockholders'
acceptance of the terms of the underwriting as agreed upon between the Company,
the Holders of the Registrable Shares included in the Registration Statement,
and the underwriters selected by the Holders. Such Other Stockholders shall
have the right, by giving written notice to the Company within 30 days after the
Company provides its notice, to elect to have included in such registration such
of their Secondary Shares as such Other Stockholders may request in such notice
of election, subject (in the case of an underwritten offering) to the approval
of the underwriter managing the offering. If in the opinion of the managing
underwriter, the registration of all, or part of, the Secondary Shares that the
Other Stockholders have requested to be included pursuant to this Section 3
would
6
<PAGE>
materially and adversely affect such public offering, then notwithstanding the
foregoing, the Holders shall be required to include in the underwriting only
that number of Secondary Shares, if any, which the managing underwriter believes
may be sold without causing such adverse effect. If the number of Secondary
Shares to be included in the underwriting in accordance with the foregoing is
less than the total number of shares that Other Stockholders of Secondary Shares
have requested to be included, then the Other Stockholders who have requested
registration shall participate in the underwriting PRO RATA based upon their
total ownership of the aggregate number of all Secondary Shares requested to be
included in such registration by the Other Stockholders (or in any other
proportion as agreed upon by such Other Stockholders).
4. "PIGGYBACK" REGISTRATION.
(a) If at any time the Company proposes to file a Registration
Statement, whether at its own election or pursuant to a request made by one or
more Other Stockholders, it will, prior to such filing, give written notice to
all Holders of its intention to do so and, upon the written request of a Holder
given within 30 days after the Company provides such notice (which request shall
state the intended method of disposition of such Registrable Shares), the
Company shall use its best efforts to cause all (or the requested portion) of
such Holder's Registrable Shares to be registered under the Securities Act to
the extent necessary to permit their sale or other disposition in accordance
with the intended methods of distribution specified in the request of such
Holder; PROVIDED, HOWEVER, that the Company shall have the right to postpone or
withdraw any registration effected pursuant to this Section 4 without obligation
to any Holder.
(b) In connection with any offering under this Section 4 involving an
underwriting, the Company shall not be required to include any Registrable
Shares in such underwriting unless the requesting Holder accepts the terms of
the underwriting as agreed upon between the Company and the underwriters
selected by it.
(c) If in the opinion of the managing underwriter the registration of
all, or part of, the Registrable Shares which the Holders have requested to be
included pursuant to this Section 4 would materially and adversely affect such
public offering, then notwithstanding subsection 4(a) hereof the Company shall
be required to include in the underwriting only that number of the Holders'
Registrable Shares, if any, which the managing underwriter believes may be sold
without causing such adverse effect. If the number of Registrable Shares to be
included in the underwriting in accordance with the foregoing is less than the
total number of shares that Holders of Registrable Shares have requested to be
included, then the Holders of Registrable Shares who have requested
registration, and all Other Stockholders who have made a similar request, shall
participate in the underwriting PRO RATA based upon their total ownership of the
aggregate number of all Registrable Shares and Secondary Shares requested to be
included in such registration by the Holders and such Other Stockholders (or in
any other proportion as agreed upon by all Holders and Other Stockholders
entitled to such rights).
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<PAGE>
5. REGISTRATION PROCEDURES. If and whenever the Company is required by
the provisions of this Agreement to use its best efforts to effect the
registration of any of the Registrable Shares under the Securities Act,
including, without limitation under Sections 2 and 4 hereof, the Company shall
as expeditiously as possible:
(a) prepare and file with the Commission a Registration Statement
with respect to such Registrable Shares and use its best efforts to cause that
Registration Statement to become and remain effective (provided that before
filing a registration statement or prospectus or any amendments or supplements
thereto, the Company shall furnish to the counsel selected by the Holders of a
majority of the Registrable Shares covered by such Registration Statement copies
of all such documents proposed to be filed, which documents shall be subject to
the reasonable review and comment of such counsel) and, in connection therewith,
use its best efforts to comply with all applicable rules and regulations of the
Commission;
(b) furnish to each selling Holder such reasonable number of copies
of the registration statement, each amendment and supplement thereto,
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as the selling
Holder may reasonably request in order to facilitate the public sale or other
disposition of the Registrable Shares owned by the selling Holder;
(c) use its best efforts to register or qualify the Registrable
Shares covered by the Registration Statement under the securities or Blue Sky
laws of such states as the selling Holders shall reasonably request, and do any
and all other acts and things that may be necessary or desirable to enable the
selling Holders to consummate the public sale or other disposition in such
jurisdictions of the Registrable Shares owned by the selling Holders; PROVIDED,
HOWEVER, that the Company shall not be required in connection with this
paragraph (d) to qualify as a foreign corporation, execute a general consent to
service of process or subject itself to taxation in any jurisdiction;
(d) notify each Holder of Registrable Shares of the effectiveness of
each Registration Statement filed hereunder;
(e) cause all Registrable Shares covered by the Registration
Statement to be listed on each securities exchange on which the Class B Common
Stock is then listed and, if not so listed, to be listed on the NASD automated
quotation system and, if listed on the NASD automated quotation system, use all
commercially reasonable efforts to secure designation of all such Registrable
Shares covered by such Registration Statement as a NASDAQ "national market
system security" within the meaning of Rule 11Aa2-1 of the Commission or,
failing that, to secure NASDAQ authorization for such Registrable Shares and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register as such with respect to such Registrable Shares with
the NASD;
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<PAGE>
(f) provide a transfer agent and registrar for all such Registrable
Shares not later than the effective date of such Registration Statement;
(g) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other customary actions as the
Holders of a majority of the Registrable Shares being sold or the underwriters,
if any, reasonably request in order to expedite or facilitate the disposition of
such Registrable Shares, which actions are not inconsistent with the fiduciary
duties of the Company's directors or which reasonably could be expected to be
materially detrimental to some or all of the holders of Class B Common Stock;
(h) make available for inspection by any underwriter participating in
any disposition pursuant to a Registration Statement under Section 2 and any
attorney, accountant or other agent retained by any such underwriter, or the
attorney representing the Holders of Registrable Shares covered by such
Registration Statement, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such party in connection with such Registration
Statement, subject to the terms of such customary confidentiality agreement as
the Company may reasonably request considering the circumstances under which,
and the purposes for which, such information is requested;
(i) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission and to make available to the holders of
Class B Common Stock and any of its other security holders, as soon as
reasonably practicable, an earnings statement covering the period of at least
twelve months beginning with the first day of the Company's first full calendar
quarter after the effective date of the Registration Statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder;
(j) permit any Holder of Registrable Shares which Holder, in its sole
and exclusive judgment, might be deemed to be an underwriter or a controlling
person of the Company, to participate in the preparation of such registration or
comparable statement and to require the insertion therein of material, furnished
to the Company in writing, which in the reasonable judgment of such Holder and
its counsel should be included and as to which the Company has no reasonable
objection;
(k) in the event of the issuance of any stop order suspending the
effectiveness of a Registration Statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such Registration Statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order; and
(l) with respect to any underwritten sale of Registrable Shares, or
any sale of Registrable Shares as to which the Holder reasonably determines,
after consultation with its
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counsel, that such Holder may have liability under Section 11 of the Securities
Act as an underwriter or a control person, at the request of such underwriter or
Holder (or the Holders of the majority of the Registrable Shares covered by such
Registration Statement), the Company shall use all commercially reasonable
efforts to obtain a so-called cold comfort letter from the Company's independent
public accountants to such underwriter or Holder in customary form and covering
such matters of the type customarily covered by cold comfort letters as the
Holders of a majority of the Registrable Shares being sold reasonably request.
If the Company has delivered preliminary or final prospectuses to the
selling Holders and after having done so the prospectus is amended to comply
with the requirements of the Securities Act, the Company shall promptly notify
the selling Holders and, if requested, the selling Holders shall immediately
cease making offers of Registrable Shares and return all prospectuses then in
their possession to the Company. The Company shall promptly provide the selling
Holders with revised prospectuses and, following receipt of the revised
prospectuses, the selling Holders shall be free to resume making offers of the
Registrable Shares.
6. ALLOCATION OF EXPENSES.
(a) The Company will pay all Registration Expenses of all
registrations under this Agreement whether or not the registrations have become
effective and whether or not such registrations have counted as one of the
Permitted Registrations. For purposes of this Section, the term "Registration
Expenses" shall mean all expenses incurred by the Company or the Holders in
complying with the terms hereof, including, without limitation, all registration
and filing fees, exchange listing fees, printing expenses, accounting fees, fees
and expenses for listing the securities to be registered on each securities
exchange on which similar securities issued by the Company are then-listed or on
the NASD automated quotation system, fees and disbursements of counsel for the
Company and the reasonable fees and disbursements of one counsel for the selling
Holders, but excluding underwriting discounts and selling commissions relating
to the Registrable Shares, which expenses will be borne by the selling Holders.
(b) Notwithstanding the foregoing, the Company shall, in any event,
pay its internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit or quarterly review and the expense of any
liability insurance.
(c) In connection with each registration for which the Company is
required to pay all of the Holder's Registration Expenses pursuant to Section
6(a), the Company shall reimburse the Holders of Registrable Shares included in
such registration for the reasonable fees and disbursements of one counsel
chosen by the Holders of a majority of the Registrable Shares included in such
registration and for the reasonable fees and disbursements of each additional
counsel retained by any Holder of Registrable Shares for the purpose of
rendering a legal opinion on behalf of such Holder in connection with any
underwritten registration pursuant to Section 2,
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3 or 4. Notwithstanding any other provision of this Agreement, in no event
shall the Company's liability for any fees or expenses incurred by legal counsel
retained by the Holders in connection with the preparation of a Registration
Statement and matters customarily incident thereto under this Agreement exceed
the sum of (i) $75,000, plus (ii) 30% of the amount by which such fees exceed
$75,000, plus (iii) expenses incurred by such counsel; provided, however, that
such limit shall be reasonably adjusted from time to time to reflect any
increase in the cost of such legal services, generally, or any material change
in the scope of legal work customarily performed by such counsel.
7. INDEMNIFICATION.
(a) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, the Company will indemnify
and hold harmless the seller of such Registrable Shares, each underwriter of
such Registrable Shares, and each other person, if any, who controls such seller
or underwriter within the meaning of the Securities Act or the Exchange Act
against any losses, claims, damages or liabilities, joint or several, to which
such seller, underwriter or controlling person may become subject under the
Securities Act, the Exchange Act, state securities laws or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any Registration Statement under which such
Registrable Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained in the Registration Statement, or any
amendment or supplement to such Registration Statement, or arise out of or are
based upon the omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading;
and the Company will reimburse such seller, underwriter and each such
controlling person for any legal or any other expenses reasonably incurred by
such seller, underwriter or controlling person in connection with investigating
or defending any such loss, claim, damage, liability or action; PROVIDED,
HOWEVER, that the Company will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon any
untrue statement or omission made in such Registration Statement, preliminary
prospectus or prospectus, or any such amendment or supplement, made in reliance
upon and in conformity with information furnished to the Company, in writing, by
or on behalf of such seller, underwriter or controlling person specifically for
use in the preparation thereof.
(b) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of Registrable
Shares, severally and not jointly, will indemnify and hold harmless the Company,
each of its directors and officers and each underwriter, if any, and each
person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages or liabilities, joint or several, to which the Company, such directors
and officers, underwriter or controlling person may become subject under the
Securities Act, Exchange Act, state securities laws or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
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thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of such seller, specifically for use in connection with the preparation
of such Registration Statement, prospectus, amendment or supplement; PROVIDED,
HOWEVER, that the obligation to indemnify shall be individual, not joint and
several, for each Holder and the obligations of such Holders hereunder shall be
limited to an amount equal to the proceeds to each Holder of the Registrable
Shares of such Holder sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and, provided, further, that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 7. The Indemnified Party may participate in such
defense at such party's expense; PROVIDED, HOWEVER, that the Indemnifying Party
shall pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential differing interests between the Indemnified Party and any other
party represented by such counsel in such proceeding; PROVIDED, HOWEVER, that
under no circumstances will the Indemnifying Party be required under this
Section 7 to pay the expenses of more than one counsel for the Indemnified
Parties unless counsel has advised that there exists an actual or potential
conflict of interest among two or more Indemnified Parties with respect to the
matter as to which indemnification is sought, and then only the minimum number
of counsel as are necessary to avoid such conflict. No Indemnifying Party, in
the defense of any such claim or litigation shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of such claim or litigation, and no Indemnified Party shall
consent to entry of any judgment or settle such claim or litigation without the
prior written consent of the Indemnifying Party.
(d) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an Indemnified Party under this
Section 7 in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to herein, then each Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party as
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a result of such losses, claims, damages or liabilities (or actions in respect
thereof) in the same proportion that the net proceeds from the offering (before
deducting expenses) received by such Indemnifying Party bear to the total net
proceeds from the offering (before deducting expenses), less the amount of any
damages which such Indemnifying Party has otherwise been required to pay by
reason of its indemnification obligations under this Section 7. No person
guilty of fraudulent misrepresentation within the meaning of Section 11 of the
Securities Act shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. The contribution obligations of
each Indemnifying Party under this Section 7 are several and not joint.
(e) The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling person
of such indemnified party and shall survive the transfer of securities.
8. INFORMATION BY HOLDERS. Each Holder of Registrable Shares included in
any registration shall furnish to the Company such information regarding such
Holder and the distribution proposed by such Holder as the Company may
reasonably request in writing.
9. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. After the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of two-thirds of the Registrable Shares (which consent shall not
withheld unreasonably), enter into any agreement (other than this Agreement)
with any holder or prospective holder of any securities of the Company which
would allow such holder or prospective holder to include securities of the
Company in any registration filed under Section 2 hereof. The Company hereby
represents that, as of the date hereof, the only agreements pursuant to which
the Company has granted registration rights with respect to any of its capital
stock are (i) the Registration Agreement, dated September 30, 1995, as amended,
by and between the Company and Dartmouth Capital Group, L.P. and (ii) the
Employment Agreement, dated October 1, 1995, by and between the Company and
Robert P. Keller. After the date of this Agreement, without the consent of the
Holders of two-thirds of the Registrable Shares then outstanding, which consent
shall not be unreasonably withheld, the Company shall not enter into any
agreement granting registration rights to any Other Stockholders that does not
permit the Holders of Registrable Shares to exercise the rights granted to them
pursuant to Section 4 hereof.
10. RULE 144 REQUIREMENTS. The Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Exchange Act; and
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(c) furnish to any holder of Registrable Shares upon request a
written statement by the Company as to its compliance with the information
requirements of Rule 144, and of the reporting requirements of the Exchange Act,
a copy of the most recent annual or quarterly report of the Company, and such
other reports and documents of the Company as such holder may reasonably request
to avail itself of any similar rule or regulation of the Commission allowing it
to sell any such securities without registration.
11. TRANSFERS OF CERTAIN RIGHTS. The rights granted to the Holders
hereunder may be transferred by such Holder to any transferee who acquires not
less than 50,000 Registrable Shares (which threshold shall be appropriately
adjusted in the event of any future stock split, reverse split or similar
reclassification of the Class B Common Stock); PROVIDED, HOWEVER, that (a) the
Company is given written notice by the transferee at the time of such transfer
stating the name and address of the transferee and identifying the securities
with respect to which such rights are being assigned, and (b) as a condition to
the transfer of the rights hereunder, the transferee shall deliver to the
Company a written instrument by which such transferee agrees to be bound by the
obligations imposed upon the Holders under this Agreement to the same extent as
if such transferee were a Purchaser.
12. NOTICES. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be delivered by hand or
mailed by first class certified or registered mail, return receipt requested,
postage prepaid, to the Company at its executive offices, to the attention of
the Chief Executive Officer, and to each Holder at its address shown in the
Company's stock register.
13. CONSTRUCTION OF AGREEMENT. This Agreement embodies the entire
agreement and understanding between the Parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision. The headings of the sections, subsections, and paragraphs
of this Agreement have been added for convenience only and shall not be deemed
to be a part of this Agreement. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which to
ether shall constitute one and the same instrument.
14. AMENDMENTS AND WAIVERS. Except as otherwise expressly set forth in
this Agreement, any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), with the written consent of
the Company and the Holders of two-thirds of the Registrable Shares then
outstanding. Any amendment or waiver effected in accordance with this Section
14 shall be binding upon each holder of any Registrable Shares, each future
holder of all such securities and the Company. No waivers of or exceptions to
any term, condition or provision of this Agreement, in any one or more
instances, shall be seemed to be, or construed as, a further or continuing
waiver of any such term, condition or provision.
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15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
16. MISCELLANEOUS.
(a) Market Stand-off.
(i) The Company shall not effect any public sale or
distribution of its Class B Common Stock, or any securities convertible into or
exchangeable or exercisable for Class B Common Stock, during the seven days
prior to and during the 120-day period beginning on the effective date of any
underwritten registration pursuant to Section 2(a) (except as part of such
underwritten registration or pursuant to registrations on Form S-4 or Form S-8
or any successor form or as part of any other issuance of Class B Common Stock
in exchange for securities or assets of another corporation), unless the
underwriters managing the registered public offering otherwise agree; PROVIDED,
HOWEVER, that the restrictions pursuant to this Section 16(a) shall expire
120-days from the effective date of the second Permitted Registration demanded
by the Holder pursuant to Section 2(a).
(ii) The Holder shall not effect any public sale or
distribution of its Registrable Shares, or any securities convertible into or
exchangeable or exercisable for Registrable Shares, during the seven days prior
to and during the 90-day period beginning on the effective date of any
underwritten registration by the Company of Class B Common Stock, other than
pursuant to Section 2 of this Agreement, unless the underwriters managing the
registered public offering otherwise agree.
(b) SELECTION OF INVESTMENT BANKERS. The Company will consult with the
Holder in advance of any underwritten registration effected pursuant to this
Agreement regarding the selection of investment banker(s) and manager(s) for any
public offering or private sale by the Company of Class B Common Stock.
(c) NO INCONSISTENT AGREEMENTS. The Company shall not enter into any
agreement with respect to its securities which is inconsistent with or violates
the rights granted to the Holders of Registrable Shares in this Agreement.
(d) ADJUSTMENTS AFFECTING REGISTRABLE SHARES. The Company shall not take
any action and shall use all commercially reasonably efforts not to permit any
change to occur, with respect to the terms of the Class B Common Stock set forth
in the Company's Amended and Restated Certificate of Incorporation, as the same
may be amended from time to time in a manner consistent herewith, which
reasonably could be expected to adversely affect in any material respect (i) the
ability of the Holders of Registrable Shares to include such Registrable Shares
in a registration undertaken pursuant to this Agreement, or (ii) the
marketability of such Registrable Shares in any such registration.
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<PAGE>
(e) REMEDIES. Any person having rights under any provision of this
Agreement shall be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law or equity. The parties hereto agree
and acknowledge that money damages would not be an adequate remedy for any
breach of the provisions of this Agreement and that any party may in its sole
discretion apply to any court of law or equity of competent jurisdiction
(without posting any bond or other security) for specific performance and for
other injunctive relief in order to enforce or prevent violation of the
provisions of this Agreement.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the
day and year first above written.
COMMERCE SECURITY BANCORP, INC.
By: /s/
------------------------------------------------
Name: Robert P. Keller
Title: President
MADISON DEARBORN CAPITAL PARTNERS II, L.P.
By: MADISON DEARBORN PARTNERS, II, L.P.,
its general partner
By: MADISON DEARBORN PARTNERS, INC.,
its general partner
By: /s/
------------------------------------------------
Name: Paul R. Wood
Title: Vice President
OLYMPUS GROWTH FUND II, L.P.
By: OGP II, L.P., its general partner
By: Conroy, L.L.C., its general partner
By: /s/
------------------------------------------------
Name: James A. Conroy
Title: Member
OLYMPUS EXECUTIVE FUND, L.P.
By: OEF, L.P., its general partner
By: Conroy, L.L.C., its general partner
By: /s/
------------------------------------------------
Name: James A. Conroy
17
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Title: Member
18
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EXHIBIT 10.8
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT is made as of this
6th day of June, 1997, among Commerce Security Bancorp, Inc., a Delaware
corporation (the "Company"), and Dartmouth Capital Group, L.P., a Delaware
limited partnership (the "Partnership") (collectively, the "Parties").
WHEREAS, the Partnership and SDN Bancorp, Inc., a subsidiary of the Company
("SDN"), were parties to that certain Registration Rights Agreement dated as of
September 30, 1995 (the "Registration Rights Agreement") pursuant to which SDN
granted to the Partnership certain rights to require SDN to register for public
distribution certain shares held by the Partnership and certain other shares of
SDN common stock;
WHEREAS, effective August 28, 1996, SDN completed a reorganization in
connection with which SDN became a wholly-owned subsidiary of the Company, each
outstanding share of SDN common stock was exchanged for shares of Company common
stock, par value $.01 per share, and the Company became a party to the
Registration Rights Agreement;
WHEREAS, effective on June 5, 1997 the Company amended and restated its
Certificate of Incorporation, whereupon all shares of Company common stock were
converted into shares of Class B Common Stock, $.01 par value per share (the
"Class B Common Stock");
WHEREAS, the Company, Madison Dearborn Capital Partners II, L.P., a
Delaware limited partnership ("MDP"), Olympus Growth Fund II, L.P., a Delaware
limited partnership ("Olympus I"), and Olympus Executive Fund, L.P., a Delaware
limited partnership ("Olympus II" and collectively with Olympus I, "Olympus")
are parties to that certain Securities Purchase Agreement dated February 13,
1997 (the "Securities Purchase Agreement") pursuant to which MDP and Olympus
will acquire securities that or may be convertible, directly or indirectly, into
Class B Common Stock;
WHEREAS, it is a condition to the obligations of MDP and Olympus to
purchase the securities pursuant to the Securities Purchase Agreement that the
Partnership agree to amend the Registration Rights Agreement to provide that
each of MDP and Olympus shall be entitled to so-called piggyback registration
rights with respect to any demand registration initiated by Partnership to the
same extent that MDP and Olympus may include shares of Class B Common Stock
pursuant to Section 4 of that certain Registration Agreement, dated June 6,
1997, among the Company, MDP and Olympus (the "MDP/Olympus Registration
Agreement");
WHEREAS, The Shattan Group, LLC, a New York limited liability company
("Shattan") acted as placement agent for the Company in connection with the sale
of the securities to MDP and Olympus and as partial compensation for such
services has received a warrant to purchase shares of Class B Common Stock; and
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WHEREAS, the Parties now desire to amend and restate the Registration
Rights Agreement;
NOW THEREFORE, in consideration of the foregoing and the respective
covenants and other agreements set forth herein, and intending to be legally
bound hereby, the parties hereto agree to amend and restate the Registration
Rights Agreement as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, in addition to the
terms defined in the preamble, the following terms shall have the following
respective meanings:
"COMMISSION" means the Securities and Exchange Commission, or any
other Federal agency at the time administering the Securities Act.
"COMMON STOCK" means the Class B Common Stock of the Company, par
value $.01 per share.
"DESIGNATED SHAREHOLDER" means the Partnership, so long as it holds 2
million or more Registrable Shares, and any transferee of the Partnership
of 2 million or more Registrable Shares.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and any similar Federal statute successor thereto, and the rules and
regulations of the Commission issued under such Act, as they each may be in
effect from time to time.
"EXCHANGE SHARES" means shares of Common Stock issued in partial
consideration for the exchange of one or more of the Company's
Subordinated Convertible Debentures, to the extent such shares are not
subject to a Registration Statement that has been declared effective by the
Commission.
"OTHER SHAREHOLDERS" means MDP, Olympus, Shattan, each Shareholder of
the Company listed on SCHEDULE 1 to this Agreement, the Partnership, if it
holds less than 2 million Registrable Shares, any transferee of the
Partnership of less than 2 million shares and any persons or entities to
whom the rights granted under this Agreement are transferred as permitted
by Section 11 hereof.
"REGISTRATION STATEMENT" means a registration statement filed by the
Company with the Commission for a public offering and sale of securities of
the Company (other than a registration statement on Form S-8 or Form S-4,
or any successor form, or any other form for a limited purpose, or any
registration statement covering only securities proposed to be issued in
exchange for securities or assets of another corporation).
"REGISTRABLE SHARES" means any Shares of Common Stock now owned or
hereafter acquired by any Shareholder; PROVIDED, HOWEVER, that shares of
Common Stock which are Registrable Shares shall cease to be Registrable
Shares upon any sale pursuant to a
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Registration Statement, Section 4(1) of the Securities Act or Rule 144
under the Securities Act, or any sale in any manner to a person or entity
not conducted in compliance with Section 11 hereof. Registrable Shares
shall not include shares of Common Stock which may be sold by a Stockholder
to the public immediately without registration, including shares of Common
Stock which may be sold within a period of 90 days under Rule 144 (or any
successor regulation thereto) promulgated under the Securities Act, unless
at the time of the proposed sale such Stockholder, after the use of his
best efforts, is unable to arrange for an unregistered managed block
distribution of such shares by a recognized investment banking firm which
specializes in such block distributions.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and any
similar Federal statute successor thereto, and the rules and regulations of
the Commission issued under such Act, as they each may, from time to time,
be in effect.
"SHAREHOLDERS" means all Designated Shareholders and all Other
Shareholders.
2. DEMAND REGISTRATIONS.
(a) Any Designated Shareholder may request that the Company effect
the registration on Form S-1 or Form S-2 (or any successor form) of Registrable
Shares owned by such Designated Shareholder. If such Designated Shareholder
elects to distribute its Registrable Shares by means of an underwriting, it
shall so advise the Company in its request. Thereupon, the Company shall, as
expeditiously as possible, use its best efforts to effect the registration, on
Form S-1 or Form S-2 (or any successor form), of all Registrable Shares (whether
owned by a Designated Shareholder or owned by Other Shareholders requesting
registration pursuant to Section 3 hereof) which the Company has been requested
so to register.
(b) The Company shall not be required to effect more than 2
registrations pursuant to paragraph (a) above; PROVIDED, HOWEVER, that a
registration effected under paragraph (a) above shall not be counted for the
purpose of this limitation unless the Designated Shareholder and any Other
Shareholders who have requested registration pursuant to Section 3 hereof shall
have succeeded in selling at least 80% of the Registrable Shares requested to be
included in such registration. In addition, the Company shall not be required
to effect any registration (other than on Form S-3 or any successor form
relating to secondary offerings) within six months after the effective date of
any other Registration Statement of the Company.
(c) At any time after the Company becomes eligible to file a
Registration Statement on Form S-3 (or any successor form relating to secondary
offerings), a Designated Shareholder may request the Company, in writing, to
effect the registration on Form S-3 (or such successor form), of Registrable
Shares owned by a Designated Shareholder. Upon receipt of any such request, the
Company shall promptly give written notice of such proposed registration to all
Other Shareholders. Each such Other Shareholders shall have the right, by
giving written notice to the Company within 30 days after the Company provides
its notice, to elect to have included in such
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registration such of its Registrable Shares as such Other Shareholder may
request in its notice of election. Thereupon, the Company shall, as
expeditiously as possible, use its best efforts to effect the registration on
Form S-3, or such successor form, of all Registrable Shares which the Company
has been requested to register.
(d) If at the time of any request to register Registrable Shares
pursuant to this Section 2, the Company is engaged or has fixed plans to engage
within 60 days of the time of the request in a registered public offering as to
which the Shareholders may include Registrable Shares pursuant to Section 4 or
is engaged in any other activity which, in the good faith determination of the
Company's Board of Directors, would be adversely affected by the requested
registration to the material detriment of the Company, then the Company may at
its option direct that such request be delayed for a period not in excess of six
months from the effective date of such offering or the date of commencement of
such other material activity, as the case may be, such right to delay a request
to be exercised by the Company not more than once in any 18-month period.
(e) In the event that Registrable Shares are sold pursuant to a
Registration Statement in an underwritten offering pursuant to this Section 2,
the Company agrees to enter into an underwriting agreement containing customary
representations and warranties with respect to the business and operations of an
issuer of the securities being registered and customary covenants and agreements
to be performed by such issuer, including without limitation customary
provisions with respect to indemnification by the Company of the underwriters of
such offering.
(f) In the case of any registration effected pursuant to this Section
2, the Designated Shareholder shall have the right to designate the managing
underwriter in any underwritten offering, subject to the approval of the
Company, which approval may not be unreasonably withheld or delayed.
3. "PIGGYBACK" REGISTRATION -- ON REGISTRATION DEMANDED BY PARTNERSHIP.
(a) Upon receipt of any request by a Designated Shareholder for
registration of its Registrable Shares pursuant to subsection 2(a) or subsection
2(c) hereof, the Company shall promptly give written notice of such proposed
registration to all Other Shareholders. In the event registration of a
Designated Shareholder's Registrable Shares is proposed to be underwritten, the
right of each Other Shareholder to participate shall be conditioned on such
Other Shareholder's participation in such underwriting and such Other
Shareholder's acceptance of the terms of the underwriting as agreed upon between
the Designated Shareholder and the underwriters selected by it. Each such Other
Shareholders shall have the right, by giving written notice to the Company
within 30 days after the Company provides its notice, to elect to have included
in such registration such of its Registrable Shares as such Other Shareholder
may request in such notice of election, subject (in the case of an underwritten
offering) to the approval of the underwriter managing the offering.
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(b) If in the opinion of the managing underwriter the registration of
all, or part of, the Registrable Shares which the Shareholders have requested to
be included pursuant to this Section 3 would materially and adversely affect
such public offering, then the Designated Shareholder shall be required to
include in the underwriting only that number of Registrable Shares which the
managing underwriter believes may be sold without causing such adverse effect.
If the number of Registrable Shares to be included in the underwriting in
accordance with the foregoing is less than the total number of shares which
Shareholders have requested to be included, then the holders of Registrable
Shares who have requested registration shall participate in the underwriting PRO
RATA based upon their total ownership of the aggregate number of Registrable
Shares requested to be included in such registration.
4. "PIGGYBACK" REGISTRATION -- ON REGISTRATION AT COMPANY'S ELECTION.
(a) If at any time the Company proposes to file a Registration
Statement, on its own initiative and not pursuant to a demand made pursuant to
Section 2 hereof or under any other registration rights agreement, it will,
prior to such filing, give written notice to all Shareholders of its intention
to do so and, upon the written request of a Shareholder given within 30 days
after the Company provides such notice (which request shall state the intended
method of disposition of such Registrable Shares), the Company shall use its
best efforts to cause all (or the requested portion) of such Shareholder's
Registrable Shares to be registered under the Securities Act to the extent
necessary to permit their sale or other disposition in accordance with the
intended methods of distribution specified in the request of such Shareholder;
PROVIDED, HOWEVER, that the Company shall have the right to postpone or withdraw
any registration effected pursuant to this Section 4 without obligation to any
Shareholder.
(b) In connection with any offering under this Section 4 involving an
underwriting, the Company shall not be required to include any Registrable
Shares in such underwriting unless the requesting Shareholder accepts the terms
of the underwriting as agreed upon between the Company and the underwriters
selected by it.
(c) If in the opinion of the managing underwriter the registration of
all, or part of, the Registrable Shares which the holders have requested to be
included pursuant to this Section 4 would materially and adversely affect such
public offering, then the Company shall be required to include in the
underwriting only that number of Registrable Shares, if any, which the managing
underwriter believes may be sold without causing such adverse effect, but in no
event shall the amount of Registrable Shares included in the offering be reduced
below 10% of the total amount of securities included in the offering without the
consent of the Designated Shareholder. If the number of Registrable Shares to
be included in the underwriting in accordance with the foregoing is less than
the total number of shares which holders of Registrable Shares have requested to
be included, then the holders of Registrable Shares who have requested
registration shall participate in the underwriting PRO RATA based upon their
total ownership of the aggregate number of shares requested to be included in
such registration by Shareholders and by holders granted registration
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rights in accordance with Section 9 (or in any other proportion as agreed upon
by all holders entitled to such rights).
5. REGISTRATION PROCEDURES. If and whenever the Company is required by
the provisions of this Agreement to use its best efforts to effect the
registration of any of the Registrable Shares under the Securities Act, the
Company shall as expeditiously as possible:
(a) prepare and file with the Commission a Registration Statement
with respect to such Registrable Shares and use its best efforts to cause that
Registration Statement to become and remain effective;
(b) prepare and file with the Commission any amendments and
supplements to the Registration Statement and the prospectus included in the
Registration Statement as may be necessary to keep the Registration Statement
effective for a period of not less than 120 days from the effective date;
(c) furnish to each selling Shareholder such reasonable numbers of
copies of the prospectus, including a preliminary prospectus, in conformity with
the requirements of the Securities Act, and such other documents as the selling
Shareholder may reasonably request in order to facilitate the public sale or
other disposition of the Registrable Shares owned by the selling Shareholder;
and
(d) use its best efforts to register or qualify the Registrable
Shares covered by the Registration Statement under the securities or Blue Sky
laws of such states as the selling Shareholders shall reasonably request, and do
any and all other acts and things that may be necessary or desirable to enable
the selling Shareholders to consummate the public sale or other disposition in
such jurisdictions of the Registrable Shares owned by the selling Shareholders;
PROVIDED, HOWEVER, that the Company shall not be required in connection with
this paragraph (d) to qualify as a foreign corporation, execute a general
consent to service of process or subject itself to taxation in any jurisdiction.
If the Company has delivered preliminary or final prospectuses to the
selling Shareholders and after having done so the prospectus is amended to
comply with the requirements of the Securities Act, the Company shall promptly
notify the selling Shareholders and, if requested, the selling Shareholders
shall immediately cease making offers of Registrable Shares and return all
prospectuses to the Company. The Company shall promptly provide the selling
Shareholders with revised prospectuses and, following receipt of the revised
prospectuses, the selling Shareholders shall be free to resume making offers of
the Registrable Shares.
6. ALLOCATION OF EXPENSES. The Company will pay all Registration
Expenses of all registrations under this Agreement PROVIDED, HOWEVER, that if a
registration is withdrawn at the request of a Designated Shareholder (other than
as a result of material adverse information concerning the business or financial
condition of the Company which is made known to such
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Designated Shareholder after the date on which such registration was requested),
the Designated Shareholder which has requested the registration shall pay the
Registration Expenses of such registration incurred to date, allocable to the
Shareholder's shares on a PRO RATA basis. For purposes of this Section, the term
"Registration Expenses" shall mean all expenses incurred by the Company in
complying with Section 5, including, without limitation, all registration and
filing fees, exchange listing fees, printing expenses, accounting fees, fees and
disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for the selling Shareholders, but excluding
underwriting discounts and selling commissions relating to the Registrable
Shares.
7. INDEMNIFICATION.
(a) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, the Company will indemnify
and hold harmless the seller of such Registrable Shares, each underwriter of
such Registrable Shares, and each other person, if any, who controls such seller
or underwriter within the meaning of the Securities Act or the Exchange Act
against any losses, claims, damages or liabilities, joint or several, to which
such seller, underwriter or controlling person may become subject under the
Securities Act, the Exchange Act, state securities laws or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any Registration Statement under which such
Registrable Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained in the Registration Statement, or any
amendment or supplement to such Registration Statement, or arise out of or are
based upon the omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading;
and the Company will reimburse such seller, underwriter and each such
controlling person for any legal or any other expenses reasonably incurred by
such seller, underwriter or controlling person in connection with investigating
or defending any such loss, claim, damage, liability or action; PROVIDED,
HOWEVER, that the Company will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon any
untrue statement or omission made in such Registration Statement, preliminary
prospectus or prospectus, or any such amendment or supplement, in reliance upon
and in conformity with information furnished to the Company, in writing, by or
on behalf of such seller, underwriter or controlling person specifically for use
in the preparation thereof
(b) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of Registrable
Shares, severally and not jointly, will indemnify and hold harmless the Company,
each of its directors and officers and each underwriter, if any, and each
person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages or liabilities, joint or several, to which the Company, such directors
and officers, underwriter or controlling person may become subject under the
Securities Act, Exchange Act, state securities laws or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
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thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of such seller, specifically for use in connection with the preparation
of such Registration Statement, prospectus, amendment or supplement; PROVIDED,
HOWEVER, that the obligations of such Shareholders hereunder shall be limited to
an amount equal to the proceeds to each Shareholder of the Registrable Shares of
such Shareholder sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and, provided, further, that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 7. The Indemnified Party may participate in such
defense at such party's expense; PROVIDED, HOWEVER, that the Indemnifying Party
shall pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential differing interests between the Indemnified Party and any other
party represented by such counsel in such proceeding; PROVIDED, HOWEVER, that
under no circumstances will the Indemnifying Party be required under this
Section 7 to pay the expenses of more than one counsel for the Indemnified
Parties. No Indemnifying Party, in the defense of any such claim or litigation
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation, and no Indemnified Party shall consent to entry of any judgment or
settle such claim or litigation without the prior written consent of the
Indemnifying Party.
(d) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an Indemnified Party under this
Section 7 in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to herein, then each Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in the same proportion that the net proceeds from the offering (before deducting
expenses) received by such Indemnifying Party bear to the total net proceeds
from the offering (before deducting expenses), less the amount of any damages
which such Indemnifying Party has otherwise been required to pay by reason of
its
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indemnification obligations under this Section 7. No person guilty of
fraudulent misrepresentation within the meaning of Section 11 of the Securities
Act shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. The contribution obligations of each Indemnifying
Party under this Section 7 are several and not joint.
8. INFORMATION BY SHAREHOLDERS. Each Shareholder included in any
registration shall furnish to the Company such information regarding such
Shareholder and the distribution proposed by such holder as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in Section 4.
9. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. The Company shall not,
without the prior written consent of the Designated Shareholders, if any, (which
consent shall not withheld unreasonably), enter into any agreement (other than
this Agreement or the MDP/Olympus Registration Agreement) with any holder or
prospective holder of any securities of the Company which would allow such
holder or prospective holder to include securities of the Company in any
registration filed under Section 2, 3 or 4.
10. RULE 144 REQUIREMENTS. The Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Exchange Act; and
(c) furnish to any holder of Registrable Shares upon request a
written statement by the Company as to its compliance with the information
requirements of said Rule 144, and of the reporting requirements of the Exchange
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents of the Company as such holder may reasonably
request to avail itself of any similar rule or regulation of the Commission
allowing it to sell any such securities without registration.
11. TRANSFERS OF CERTAIN RIGHTS. The rights granted to the Designated
Shareholders hereunder may be transferred by such Designated Shareholder to any
transferee who acquires not less than 2 million Registrable Shares (which
threshold shall be appropriately adjusted in the event of any future stock
split, reverse split or similar reclassification of the Registrable Shares).
The rights granted to the Shareholders hereunder may be transferred by such
Shareholder to any transferee who acquires any of the Registrable Shares;
PROVIDED, HOWEVER, that (a) the Company is given written notice by the
transferee at the time of such transfer stating the name and address of the
transferee and identifying the securities with respect to which such rights are
being assigned, and (b) as a condition to the transfer of the rights hereunder,
the transferee shall deliver to the Company a written instrument by which such
transferee agrees to be bound by the
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obligations imposed upon the Shareholders under this Agreement to the same
extent as if such transferee were an initial Shareholder.
12. NOTICES. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be delivered by hand or
mailed by first class certified or registered mail, return receipt requested,
postage prepaid, to the Company at its executive offices, to the attention of
the Chief Executive Officer, and to each Shareholder at its address shown in the
Company's stock register.
13. CONSTRUCTION OF AGREEMENT. Except as set forth in this Section 13,
this Agreement embodies the entire agreement and understanding between the
Parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings relating to such subject matter. The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision. The headings of
the sections, subsections, and paragraphs of this Agreement have been added for
convenience only and shall not be deemed to be a part of this Agreement. This
Agreement may be executed in several counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument. Notwithstanding the foregoing, the Partnership acknowledges that
the transfer restrictions set forth in Sections 2, 4, 5 and 6 of the Shareholder
Agreement of even date herewith between the Partnership, the Company, MDP,
Olympus and certain other parties named therein, shall control the Partnership's
right to transfer any Registrable Shares, regardless of whether the Partnership
has any registration rights with respect thereto.
14. AMENDMENTS AND WAIVERS. Except as otherwise expressly set forth in
this Agreement, any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), with the written consent of
the Company and the Designated Shareholders, if any. Any amendment or waiver
effected in accordance with this Section 14 shall be binding upon each holder of
any Registrable Shares, each future holder of all such securities and the
Company. No waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be seemed to be, or construed as,
a further or continuing waiver of any such term, condition or provision.
15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
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IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the
day and year first above written.
COMMERCE SECURITY BANCORP, INC.
By: /s/
--------------------------------------
Robert P. Keller, President and Chief
Executive Officer
DARTMOUTH CAPITAL GROUP, L.P.
By: DARTMOUTH CAPITAL GROUP, INC.
By: /s/
----------------------------------
Robert P. Keller, President
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