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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997 Commission File Number 2-76555
COMMERCE SECURITY BANCORP, INC.
(Exact name of small business issuer in its charter)
Delaware 33-0720548
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
24012 Calle de la Plata, Suite 150, Laguna Hills, CA 92653
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (714) 699-4344
Securities registered pursuant to Section 12 (b) of the Exchange Act:
None
Securities registered pursuant to Section 12 (g) of the Exchange Act:
None
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K contained in this form, and no disclosure will be contained, to
the best of issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
There were 18,347,397 shares of Common Stock outstanding at March 14, 1998. The
aggregate market value of Common Stock held by non-affiliates at March 14, 1997
was approximately $4,224,000 based upon the last known trade of $6.00 per share
on October 23, 1997.
Documents incorporated by reference: None
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ITEM 14. EXHIBITS AND REPORTS ON 8-K
(a) Exhibit Index
3.1 Amended and Restated Certificate of Incorporation of the Company
3.2 Bylaws of the Company (filed as Exhibit 10.2 to the Company's
Quarterly Report on Form 10-QSB for the quarter ended September 30,
1996 and incorporated by reference herein)
4.1 Indenture with respect to Mandatory Convertible Debentures of SDN
Bancorp, Inc. ("SDN") due 1998 (filed as Exhibit 4 to SDN's
Registration Statement on Form S-1, File No. 33-4045 filed March 17,
1986 and incorporated by reference herein)
4.2 Amended and Restated Declaration of Trust of CSBI Capital Trust I
dated as of July 15, 1997, by and among the Company, the Regular
Trustees, the Property Trustee and the Delaware Trustee named
therein (filed as Exhibit 4.1 to the Company's Current Report on
Form 8-K filed August 7, 1998 and incorporated by reference herein)
4.3 Indenture between the Company and Wilmington Trust Company, dated as
of July 15, 1997 (filed as Exhibit 4.2 to the Company's Current
Report on Form 8-K filed August 7, 1998 and incorporated by
reference herein)
4.4 Form of Junior Subordinated Debentures (filed as Exhibit 4.3 to the
Company's Current Report on Form 8-K filed August 7, 1998 and
incorporated by reference herein)
4.5 Amended and Restated Series A Capital Securities Guarantee
Agreement, dated July 15, 1997 (filed as Exhibit 4.4 to the
Company's Current Report on Form 8-K filed August 7, 1998 and
incorporated by reference herein)
4.6 Form of Investor Warrant issued as of June 6, 1997 to MDP, Olympus
and DGG (filed as Exhibit 4.6 to the Company's Current Report on
Form 8-K filed July 11, 1997 and incorporated by reference herein)
4.7 Form of warrant issued as of June 6, 1997 to The Shattan Group, LLC
(filed as Exhibit 4.7 to the Company's Current Report on Form 8-K
filed July 11, 1997 and incorporated by reference herein)
4.8 Form of warrant issued as of July 15, 1997 to The Shattan Group, LLC
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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 (filed as Exhibit 10.1 to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1996 and incorporated by
reference herein)
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 (filed as Exhibit 10.4 to
the Company's Current Report on Form 8-K filed July 11, 1997 and
incorporated by reference herein)
10.5 Amended and Restated Securities Purchase Agreement, dated June 5,
1997, among the Company, MDP and Olympus (filed as Exhibit 10.5 to
the Company's Current Report on Form 8-K filed July 11, 1997 and
incorporated by reference herein)
10.6 Shareholder Agreement, dated June 6, 1997, among DCG, MDP, Olympus
and the other parties named therein (filed as Exhibit 10.6 to the
Company's Current Report on Form 8-K filed July 11, 1997 and
incorporated by reference herein)
10.7 Registration Rights Agreement, dated June 6, 1997, among the
Company, MDP and Olympus (filed as Exhibit 10.7 to the Company's
Current Report on Form 8-K filed July 11, 1997 and incorporated by
reference herein)
10.8 Amended and Restated Registration Rights Agreement, dated June 6,
1997, between the Company and DCG (filed as Exhibit 10.8 to the
Company's Current Report on Form 8-K filed July 11, 1997 and
incorporated by reference herein)
10.9 Purchase Agreement dated July 10, 1997, by and among MDP, DCG,
Olympus, the Trust, the Company and the Initial Purchaser named
therein (filed as Exhibit 10.1 to the Company's Current Report on
Form 8-K filed August 7, 1998 and incorporated by reference herein)
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10.10 Letter Agreement among CSBI, DCG, MDP and Olympus, dated July 10,
1997 (filed as Exhibit 10.2 to the Company's Current Report on Form
8-K filed August 7, 1998 and incorporated by reference herein)
10.11 Registration Rights Agreement dated July 10, 1997 by and among the
Company, the Trust and the Initial Purchaser (filed as Exhibit 10.3
to the Company's Current Report on Form 8-K filed August 7, 1998 and
incorporated by reference herein)
10.12 Call Exercise Agreement, dated July 15, 1997, by and among the
Company, the Trust, DCG, MDP and Olympus (filed as Exhibit 10.5 to
the Company's Current Report on Form 8-K filed August 7, 1998 and
incorporated by reference herein)
10.13 Lease for 135 Saxony Road, Encinitas, California (filed as Exhibit
10.4 to SDN's Registration Statement on Form S-14, File No. 2-76555
filed March 18, 1982 and incorporated by reference herein)
10.14 Lease for 6354 Corte del Abeto, Carlsbad, California (filed as
Exhibit 10.10 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1984 and incorporated by reference herein)
10.15 Lease Agreement between Sheryl L. Bullock as Trustee, as Landlord,
and San Dieguito National Bank, as tenant, dated July 27, 1990
(filed as Exhibit 10.1 to SDN's Form 10-Q for the quarter ended June
30, 1990 and incorporated by reference herein)
10.16 Lease Agreement for 7777 Center Avenue, Huntington Beach, California
between Alvamij Huntington Beach, Inc. as Landlord, and Liberty
National Bank, as Tenant, dated August 20, 1981 and amended February
14, 1986 (filed as Exhibit 10.3 to SDN's report on Form 10-Q for the
quarter ended March 31, 1996 and incorporated by reference herein)
10.17 Lease Agreement for 17011 Beach Boulevard, Huntington Beach,
California between Liu Corp., as Landlord, and Liberty National
Bank, as Tenant, dated December 15, 1995 (filed as Exhibit 10.4 to
SDN's report on Form 10-Q for the quarter ended March 31, 1996 and
incorporated by reference herein)
10.18 Employment Agreement dated October 1, 1995 between Robert P. Keller
and the Company* (filed as Exhibit 10.1 to the Company's Form 10-Q
for the quarter ended September 30, 1996 and incorporated by
reference herein)
10.19 Employment Agreement dated August 18, 1997 between Lawrence A Johnes
and Eldorado Bank *
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10.20 Employment Agreement dated October 20, 1995 between Richard
Korsgaard and Eldorado Bank *
10.21 Employment Agreement dated December 20, 1995 between William J.
Lewis and Eldorado Bank *
10.23 Form of Severance Agreement entered into by the Company with certain
executive officers*
21. Subsidiaries of the Registrant (filed as Exhibit 22 to SDN's
Registration Statement on Form S-1, File No. 33-4045 filed March 17,
1986 and incorporated by reference herein)
(b) Reports on Form 8-K.
1) None.
- ----------
* Denotes Executive Compensation Plan or Arrangement
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the issuer has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
COMMERCE SECURITY BANCAORP, INC.
By Robert P. Keller /s/
- ----------------------------------
Robert P. Keller
President, Chief Executive Officer
Date: April 13, 1998
By Curt A. Christianssen /s/
- ----------------------------------
Curt A. Christianssen
Senior Vice President
Chief Financial Officer
Date: April 13, 1998
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SIGNATURES (Continued)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the issuer
and in the capacities and on the dates indicated.
Signature Title Date
---------- ----- ----
Robert P. Keller /s/ Director, President April 13, 1998
- ------------------------ and Chief Executive
Robert P. Keller Officer
Ernest J. Boch /s/ Director
- ------------------------
Ernest J. Boch
James Conroy /s/ Director
- ------------------------
James Conroy
Edward A. Fox /s/ Director April 13, 1998
- ------------------------
Edward A. Fox
Charles E. Hugel /s/ Director April 13, 1998
- ------------------------
Charles E. Hugel
K. Thomas Kemp /s/ Director April 13, 1998
- ------------------------
K. Thomas Kemp
Jefferson W. Kirby /s/ Director April 13, 1998
- ------------------------
Jefferson W. Kirby
John B. Pettway /s/ Director
- ------------------------
John B. Pettway
Mitchell A. Johnson /s/ Director
- ------------------------
Mitchell A. Johnson
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EXHIBIT INDEX
NUMBER DESCRIPTION
- ------ -----------
10.19 Employment Agreement dated August 18, 1997 between Lawrence A. Johnes
and Eldorado Bank
10.20 Employment Agreement dated October 20, 1995 between Richard Korsgaard
and Eldorado Bank
10.21 Employment Agreement dated December 20, 1995 between William J. Lewis
and Eldorado Bank
10.23 Form of Severance Agreement entered into by the Company with certain
executive officers
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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:
<TABLE>
<CAPTION>
Par Value Number Authorized
--------- -----------------
<S> <C> <C>
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
</TABLE>
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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 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
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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 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
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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 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
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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.
(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
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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 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
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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 are outstanding, unless the requirements of
Section 4(c) of Part D hereof are satisfied. At such time as (i) the
requirements of the foregoing Section have been satisfied or (ii) the foregoing
Section does 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.
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
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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 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:
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(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 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
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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.
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,
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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.
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"). 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
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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 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.
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(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 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
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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 One Million Two Hundred Fifty Thousand
(1,250,000) 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 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
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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 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
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(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 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 $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, then such assets shall be
distributed among the holders of Series B Preferred Stock in amounts (rounded to
the nearest whole cent) proportionate to the respective Series B Liquidation
Values then in effect with respect to each outstanding share of Series B
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
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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, 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
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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.
(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
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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 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
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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 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
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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 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
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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 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 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 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
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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. 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
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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 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.
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
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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.
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 1st day of
October, 1997.
COMMERCE SECURITY BANCORP, INC.
By: /s/ Robert P. Keller
----------------------------
Robert P. Keller
President
ATTEST:
By: /s/ Michael K. Krebs
---------------------------
Michael K. Krebs
Secretary
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EXECUTION VERSION
VOID AFTER 5:00 P.M. PACIFIC TIME, ON JULY 15, 2007
WARRANT
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 July 15, 2002
No. S-_
COMMERCE SECURITY BANCORP, INC., a Delaware corporation (the "Company"),
for value received, hereby certifies that Thomas S. Shattan, or his 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 July 15, 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.
-2-
<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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(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
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<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
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<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
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<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, or (z) any issuance of Common
Stock upon the exercise of any Initial Adjustment Warrant or any
issuance of a Series A Quarterly Warrant, Series B Quarterly Warrant or
Series E Quarterly Warrant, or of Common Stock upon the exercise thereof.
(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,
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<PAGE>
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.
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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; 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 (as defined
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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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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.
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IN WITNESS WHEREOF, the Company has executed this Agreement as of the 15th
day of July, 1997.
COMMERCE SECURITY BANCORP, INC.
By:
----------------------------
Its: President
[CORPORATE
SEAL]
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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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ELDORADO BANK
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made effective August 18, 1997 between
ELDORADO BANK ("Bank"), having a principal place of business at 19100 VonKarman,
Suite 550, Irvine, California 92612 and LAWRENCE JOHNES, ("Employee"), whose
residence is 514 Willis Street, Bristol, Connecticut 06010.
WITNESSETH
WHEREAS, Bank is an organization duly organized, validly existing, and in
good standing under the laws of the United States of America, with power to own
property and carry on its business as it is now being conducted;
WHEREAS, Bank desires to avail itself of the skill, knowledge and
experience of Employee in order to insure the successful management of its
business; and
WHEREAS, the parties hereto desire to specify the terms of Employee's
employment by Bank:
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, it is agreed that from and after August 18, 1997 (the Effective Date"),
the following terms and conditions shall apply to Employee's employment.
AGREEMENT
A. TERM OF EMPLOYMENT
1. TERM. The term of Employee's employment by Bank pursuant to this
Agreement shall be for a period commencing on the date of this Agreement and
terminating as follows:
The term of this Agreement (the "Term") shall be for a period
commencing on the date hereof and ending August 17, 1999. Unless either party
shall notify the other in writing thirty (30) days prior to the first
anniversary date of this Agreement, or the first anniversary date of this
agreement as extended from time to time, of his or its intention not to extend
this Agreement, this Agreement shall be deemed extended for one year beyond the
initial term or for one year beyond the extended term, as the case may be. It is
the intention of the parties hereto that unless such notice be given, this
Agreement is intended to be an "evergreen" two (2) year agreement. If such
notice is given in a timely manner, this Agreement shall terminate on the second
anniversary date of the original or extended Agreement, as the case may be,
following the
1
<PAGE>
giving of such notice.
B. DUTIES OF EMPLOYEE
1. DUTIES. Subject to the powers by law vested in the Board of Directors of
Bank, Employee shall perform the duties of Executive Vice President of Commerce
Security Leasing. In that capacity, Employee is primarily responsible for
managing all facets of the Leasing Division. Employee is also responsible for
Leasing Division marketing, underwriting, documentation, disbursements,
servicing and collecting. Employee's duties include, but are not limited to,
those duties specified on Bank's Job Description for the position of Executive
Vice President/Leasing Division a copy of which is attached as Exhibit "A"
hereto.
The duties and position of Employee may be changed from time to time by the
Chief Executive Officer of Bank, any such changes being substantially similar
with those held or performed by Employee as of the date of this Agreement and
maintaining then current compensation, without resulting in a rescission of this
Agreement. Notwithstanding any such change from the duties originally assigned
and specified above, or hereafter assigned, the employment of Employee shall be
construed as continuing under this Agreement as modified. During the Term,
Employee shall perform exclusively the services herein contemplated to be
performed by Employee faithfully, diligently and to the best of Employee's
ability, consistent with leasing industry standards and in compliance with all
applicable laws, Bank's Articles of Association and Bylaws and Bank's policies,
as modified from time to time.
2. CONFLICTS OF INTERESTS. Except as permitted by the prior written consent
of the Board of Directors of Bank, Employee shall devote Employee's entire
productive time, ability and attention to the business of the Leasing Division
during the term and Employee shall not directly or indirectly render any
services of a business, commercial or professional nature to any other person,
firm or corporation whether for compensation or otherwise, which are in conflict
with Bank's interest.
C. COMPENSATION
1. BASE SALARY. For Employee's services hereunder, Bank shall pay or cause
to be paid as base salary to Employee the amount of Ten Thousand Eight Hundred
Thirty-Three and Thirty-Four Cents ($10,833.34) per month during the Term,
beginning with the Effective Date. Said salary shall be paid in equal pro rata,
semi-monthly installments in conformity with Bank's normal payroll period.
Employee's base salary shall be subject to review annually with any adjustments
to be at sole discretion of the Chief Executive Officer.
2. VARIABLE COMPENSATION. Employee shall be eligible for variable
compensation calculated and paid quarterly and tiered according to the schedule
below. Variable compensation
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is based on calendar year pre-tax earnings of the Leasing Division, less
charge-offs, less any operational losses and plus any operational or charge-off
recoveries.
Tiers: 3% up to $1,000,000
3.5% of $1,000,001 to $1,750,000
4.0% of $1,750,001 or more
D. BENEFITS
1. VACATION AND SICK PAY. Employee shall be entitled to vacation during
the Term, in accordance with Bank's Personnel Policy; provided, however, that at
least two (2) weeks of said vacation (the "Mandatory Vacation"), shall be taken
consecutively. Employee shall also be entitled to sick pay in accordance with
Bank's Personnel Policy.
2. GROUP MEDICAL INSURANCE, LIFE INSURANCE BENEFITS AND 401k PLAN. During
the Term, Bank shall provide for medical, dental, vision, life, accident and
disability insurance benefits to Employee in accordance with Bank's standard
employee benefits. Employee shall also be entitled to participate in the Bank's
existing 401k Plan, subject to plan procedures, guidelines and restrictions as
dictated by the 401k Plan Document, Adoption Agreement and Summary Plan
Description.
E. TERMINATION
1. TERMINATION BY THE BOARD OF DIRECTORS. Employee is an officer of Bank,
appointed by the Board of Directors. Under this Agreement, Employee serves at
the pleasure of the Board of Directors and is subject to dismissal by the Board
at any time, without further obligation or liability to Employee. In the event
Bank elects to dismiss Employee without cause and terminate this Agreement, upon
Employee's execution and delivery to Bank of an original Waiver and Release
Agreement (attached as exhibit "B") and after seven (7) day waiting period,
Employee shall be entitled to severance in the amount of twelve (12) months pay.
In the event the Bank elects to dismiss Employee for cause, Bank, by vote
or written approval of the Board of Directors duly taken in accordance with the
law and Bank's Bylaws, may terminate this Agreement immediately, at which time
all obligations and liability of Bank under this Agreement shall cease (except
as to benefits then accrued), upon determination in good faith that Employee:
(a) has been adjudged guilty of a felony or a misdemeanor involving moral
turpitude by a court of competent jurisdiction; (b) was involved in criminal
misfeasance or willful misconduct in the performance of Employee's duties; or
(c) breached Employer's Code of Conduct.
2. ACTION BY SUPERVISORY AUTHORITY. This Agreement shall terminate
immediately without further liability or obligation to Employee or Bank:
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(a) If Bank is closed or taken over by the State Banking Department or
other supervisory authority, including the Federal Reserve Bank; or
(b) If such supervisory authority should exercise its cease and desist
powers to remove Employee from office.
3. MERGER OR TRANSFER OF ASSETS. This Agreement shall not be terminated due
to: (a) a merger where Bank is not the surviving corporation; (b) a
consolidation; or (c) a transfer of all or substantially all of the assets of
Bank. In the case of dissolution, this Agreement shall be terminated.
4. TERMINATION BY EMPLOYEE. Employee may terminate his employment with
Bank, and this Agreement, upon sixty (60) days written notice of termination to
Bank.
5. EFFECT OF TERMINATION. In the event of the termination of Employee or
this Agreement prior to the completion of the Term for any of the reasons
specified in this Paragraph E, Employee shall be entitled to the salary earned
by Employee prior to the Effective Date of Termination, as determined by the
Chief Executive Officer, computed pro rata up to and including that date, and
accrued but unused vacation time (to the extent accumulated in accordance with
Paragraph D. 1).
F. GENERAL PROVISION
1. TRADE SECRETS. During the Term, Employee will have access to and become
acquainted with what Employee and Bank acknowledge are trade secrets, to wit,
knowledge or data concerning Bank, including its operations and business, and
its customers' financial condition, their financial needs, and methods of doing
business. Employee shall not disclose any of the aforesaid trade secrets,
directly or indirectly, or use them in any way, except as required in the course
of Employee's employment with Bank.
2. COVENANT NOT TO INTERFERE. Employee hereby covenants and agrees that he
will not now, or for a period of one (1) year after termination, disrupt,
damage, impair or interfere with the business of Bank, whether by way of
interfering with or raiding its employees, disrupting its relationships with
customers, loan packages, representatives, vendors, or otherwise. Employee
furthers covenants and agrees that he will not now, or for a period of one (1)
year after termination, disrupt, damage, impair or interfere with the business
of Bank by way of disrupting its relationships with brokers. After termination
of employment, Employee is not, however, restricted from being employed by or
engaged in a competing business.
3. RETURN OF DOCUMENTS. Employee expressly agrees that all manuals,
documents, files, reports, studies, instruments or other materials used and/or
developed by Employee during his employment with Bank are solely the property of
Bank, and that Employee has no right, title or interest therein. Upon
termination of Employee's employment, Employee or Employee's
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representative shall promptly deliver possession of all of said property to Bank
in good condition.
4. NOTICES. Any notice, request, demand or other communication required or
permitted hereunder shall be deemed to be properly given when personally served
in writing, when deposited in the United States mail, postage prepaid, or when
communicated to a public telegraph company for transmittal, addressed to the
party at the address appearing at the beginning of this Agreement. Either party
may change its/his address by written notice in accordance with this paragraph.
5. BENEFIT OF AGREEMENT. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective executors,
administrators, successors and assigns.
6. APPLICABLE LAW. Except to the extent governed by the laws of the United
States, this Agreement is to be governed by and construed under the laws of the
State of California.
7. CAPTIONS AND PARAGRAPH HEADINGS. Captions and paragraph headings used
herein are for convenience only and are not a part of this Agreement and shall
not be used in construing it.
8. INVALID PROVISIONS. Should any provision of this Agreement for any
reason be declared invalid, void, or unenforceable by a court of competent
jurisdiction, the validity and binding effect of any remaining portion should
not be affected, and the remaining portions of this Agreement shall remain in
full force and effect as if this Agreement had been executed with said provision
eliminated.
9. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties. It supersedes any and all other agreements, either oral or in writing,
between the parties hereto with respect to the employment of Employee by Bank.
Each party to this Agreement acknowledges that no representations, inducements,
promises, or agreements, oral or otherwise, have been made by any party, or
anyone acting on behalf of any party, which are not embodied herein, and that no
other agreement, statement or promise not contained in this Agreement shall be
valid or binding. This Agreement may not be modified or amended by oral
agreement, but only by an agreement in writing signed by the Chief Executive
Officer and Employee.
10. ARBITRATION. If any dispute, controversy or claim arises out of or
relates to this contract, the parties agree first to try to settle the dispute
by mediation under the Rules of Judicial Arbitration & Mediation Services (JAMS)
before resorting to arbitration. Thereafter, any dispute, controversy or claim
not resolved by mediation shall be settled by binding arbitration in accordance
with the Rules of JAMS, and judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.
(a) The arbitrator shall determine which is the prevailing party and
shall include in the award that party's actual attorneys' fees and
costs.
(b) As soon as practicable after selection of the arbitrator, the
arbitrator or his or
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her designated representatives shall determine a reasonable estimate
of anticipated fees and costs of the arbitrator, and render a
statement to each party setting forth that party's pro rata share of
said fees and costs. Thereafter, each party shall, within ten (10)
days of receipt of said statement, deposit said sum with the
arbitrator. Failure of any party to make such a deposit shall result
in a forfeiture by the non-depositing party of the right to prosecute
or defend the claim which is the subject of the arbitration, but shall
not otherwise serve to abate, stay or suspend the arbitration
proceedings.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ELDORADO BANK LAWRENCE JOHNES
By: /s/ Robert P. Keller By: /s/ Lawrence Johnes
-------------------------- ---------------------------
Date: 7/30/97 Date: 7/31/97
------------- --------------
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EXHIBIT A
JOB DESCRIPTION
Corporate Title: President and Chief Operating Officer for a
Small Equipment Leasing Subsidiary of a Bank Holding Company
or Executive Vice President/Leasing Division of Bank
Reports To: Chairman and Chief Executive Officer
Job Summary:
- - Responsible for day to day management of a small equipment leasing company
including the direct management of marketing, lease structuring and
national sales efforts.
- - Ten (10) to fifteen (15) years of equipment marketing experience,
preferably in small ticket leasing,
- - Excellent oral and written communication skills.
Essential duties and responsibilities:
(This job description may not be all inclusive. Employees are expected to
perform other duties as assigned and directed by management. Job descriptions
and duties may be modified when deemed appropriate by management).
- - Manages and directs the activities of all sales, production and servicing
staff.
- - Establishes guidelines for subordinates to ensure compliance with company
objectives, policies and procedures.
- - Directs and controls company business development activities as well as
personally calling on brokers and vendors.
- - Develops and maintains relationships with the secondary market.
- - Establishes measurable, reasonable production goals for staff and self.
- - Provides detailed information for preparing annual company budget.
- - Reviews management control reports to ensure successful operation within
budget.
- - Keeps abreast of local and national economic, financial, political and
legislative events and climates which could have an impact on leasing
activities.
- - Develops and implements nationwide marketing and advertising strategy.
- - Understands competition and establishes marketing programs accordingly.
Physical Requirements and Working Conditions:
Employee accommodations for physical or mental disabilities will be considered
on a case by case basis. Positions in this class normally:
- - Require vision (which may be corrected) to read small print.
- - Require mobility to stand, stoop, reach and bend.
- - Perform work which is primarily sedentary.
- - Is subject to inside and outside environmental conditions.
- - May be required to use personal vehicle in the course of employment.
- - May be required to attend periodic evening meetings and/or extensive
travel.
<PAGE>
EXHIBIT B
WAIVER AND RELEASE AGREEMENT
This Waiver and Release Agreement (the "Waiver Agreement") is entered into
by and among Lawrence Johnes ("Employee"), Eldorado Bank, Commerce Security
Bancorp, Inc., a Delaware corporation, and their officers, directors, employees,
agents, affiliates and subsidiaries (collectively, the "Company"). Terms not
otherwise defined herein shall have the meanings ascribed to such terms in the
Agreement (as hereafter defined).
RECITALS
A. Employee and Company have entered into an Employment Agreement
effective August 18, 1997 (the "Agreement").
B. A condition precedent to certain of Company's obligations under the
Agreement is the execution of this Waiver Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
convenants herein contained, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties, intending to
be legally bound, agree and convenant as follows:
RELEASE
In consideration for the execution of the Agreement, and the agreements set
forth therein, Employee agrees unconditionally and forever to release and
discharge the Company and its affiliated business entities, their respective
officers, directors, employees, representatives, attorneys, agents and assigns
from any and all claims, actions, causes of action, demands, rights or damages
of any kind or nature which Employee may now have, or ever have, whether known
or unknown, including any claims, causes of action or demands of any nature
arising out of or in any way relating to Employee's employment with, or
separation from, the Company on or before the date of execution of this Waiver
Agreement.
This release specifically includes, but is not limited to, any claims for
discrimination and/or violation of any statutes, rules, regulations or
ordinances, whether federal, state or local, including, but not limited to,
Title VII of the Civil Rights Act of 1964, as amended, age claims under the Age
Discrimination in Employment Act of 1967, as amended by the Older Workers
Benefits Protection Act of 1990, Section 1981 of Title 42 of the United State
Code, and the California Fair Employment and Housing Act.
Employee further agrees knowingly to waive the provisions and protections
of Section 1542 of the California Civil Code, which reads:
A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which, if known by him, must have materially affected his
settlement with the debtor.
REPRESENTATIONS OF EMPLOYEE
Employee represents and agrees that, prior to the execution of this Waiver
Agreement, Employee has had the opportunity to discuss the terms of this Waiver
Agreement with legal counsel of Employee's choosing.
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Employee affirms that no promise or inducement was made to cause Employee
to enter into this Waiver Agreement other than the execution of the Agreement
and the inducements provided therein. Employee further confirms that Employee
has not relied upon any other statement or representation by anyone other than
what is in this Waiver Agreement as a basis for Employee's agreement.
MISCELLANEOUS
Except for the Agreement, this Waiver Agreement sets forth the entire
agreement between Employee and the Company, and shall be binding upon both
party's heirs, representatives and successors. This Waiver Agreement shall be
construed under the laws of the State of California, both procedurally and
substantively. Any and all disputes or claims arising out of, or in any way
related to, Employee's employment with, or separation from, the Company, as well
as any and all disputes or claims arising out of, or in any related to, this
Waiver Agreement, including, without limitation, fraud in the inducement of this
Waiver Agreement, or relating to the general validity or enforceability of this
Waiver Agreement, shall be submitted to final and binding arbitration before an
arbitrator of the American Arbitration Association in Orange County, in
accordance with the rules of that body, and the prevailing party shall be
entitled to reasonable costs and attorneys' fees. Judgment on the award rendered
by the arbitrator may be entered in any court having jurisdiction thereof. If
any portion of this Waiver Agreement is found to be illegal or unenforceable,
such action shall not affect the validity or enforceability of the remaining
paragraphs or subparagraphs of this Waiver Agreement.
Employee acknowledges that Employee has been advised that Employee has
twenty-one (21) days to consider this settlement, and that Employee was informed
that Employee has the right to consult with counsel regarding this Waiver
Agreement. To the extent Employee has taken less than twenty-one (21) days to
consider this Waiver Agreement, Employee acknowledges that Employee has had
sufficient time to consider the Waiver Agreement and to consult with counsel,
and that Employee does not desire additional time.
This Waiver Agreement is revocable by Employee for a period of seven (7)
days following Employee's execution of this Waiver Agreement. The revocation by
Employee of this Waiver Agreement must be in writing, must specifically revoke
this Waiver Agreement and must be received by the Company prior to the eighth
(8th) day following the execution of this Waiver Agreement by Employee. This
Waiver Agreement becomes effective, enforceable and irrevocable on the eighth
(8th) day following Employee's execution of the Waiver Agreement.
The undersigned agrees to the terms of this Waiver Agreement and
voluntarily enters into it with the intent to be bound hereby.
Dated:________________, 199__
-----------------------------------
LAWRENCE JOHNES
Dated:________________, 199__ ELDORADO BANK
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
Dated:________________, 199__ COMMERCE SECURITY BANCORP, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
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<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 20th day of October, 1995, between Eldorado Bank
(hereinafter referred to as the "Employer"), and Richard Korsgaard, (hereinafter
referred to as the "Executive").
WITNESSETH:
WHEREAS, Employer on this date has consummated the acquisition of Mariners
Bancorp and Mariners Bank pursuant to an Agreement and Plan of Reorganization
dated May 22, 1995;
WHEREAS, Executive was President and Chief Executive Officer of Mariners
Bancorp and Mariners Bank and had an Employment Agreement dated July 1, 1991;
WHEREAS Employer and Executive desire to terminate the Employment Agreement
dated July 1, 1991 and replace such Employment Agreement with this Agreement;
WHEREAS, Employer is desirous of employing Executive in the capacity
hereinafter stated, and Executive is desirous of entering into the employ of
Employer in such capacity, for the period and on the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and conditions herein contained, the parties hereto, intending to be
legally bound, do hereby agree as follows:
1. EMPLOYMENT
Employer hereby employs Executive as an Executive Vice President with the
responsibilities set forth in the job description attached hereto, and Executive
accepts the duties that are set forth in the job description attached and
accepts all other duties described herein, and agrees to discharge the same
faithfully and to the best of his ability and consistent with the highest and
best standards of the banking industry, in accordance with the policies of the
Board as established, and in compliance with all laws and the Employer's
Articles, Bylaws, Policies and Procedures. Executive shall devote his full
business time and
<PAGE>
attention to the business and affairs of Employer to which he may be elected or
appointed and shall perform the duties thereof to the best of his ability.
Except as permitted by the prior written consent of the Chief Executive Officer
or the Board of Directors, Executive shall not directly or indirectly render any
services of a business, commercial or professional nature to any other person,
firm or corporation, whether for compensation or otherwise, which are in
conflict with Employer's interests. Executive shall perform such other duties as
shall be from time to time prescribed by the Chief Executive Officer, President
or the Board of Directors of Employer.
2. TERM
Employer hereby employs Executive and Executive hereby accepts employment
with Employer for the period of three (3) years (the "Term"), commencing with
the date of this Agreement, subject, however, to prior termination of this
Agreement as hereinafter provided. Where used herein, "Term" shall refer to the
entire period of employment of Executive by Employer, whether for the period
provided above, or whether terminated earlier as hereinafter provided, or
extended by mutual agreement in writing by the Employer and Executive.
3. COMPENSATION
In consideration for all services to be rendered by Executive to Employer,
Employer agrees to pay Executive a starting base salary of one hundred
twenty-five thousand dollars ($125,000) per year, commencing at the date of this
Agreement. The Board of Directors may increase the base salary based on
Executive's performance and Employer's performance and profitability. Such
salary increases shall be within the sole discretion of the Board of Directors.
In addition, Executive may receive incentive compensation as the Chief Executive
Officer or the Board of Directors, in its sole discretion, shall determine.
Executive's salary shall be paid monthly or semi-monthly, depending on the
policy of Employer. Employer shall deduct therefrom all taxes which may be
required to be deducted or withheld under any provision of the law (including,
but not limited to, social
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<PAGE>
security payments and income tax withholding) now in effect or which may become
effective anytime during the term of this Agreement.
Executive shall be entitled to participate in any and all other employee
benefits and plans that may be developed and adopted by the Employer and in
which all or substantially all of the employees of Employer are eligible to
participate.
4. REIMBURSEMENT
Employer agrees to provide Executive a monthly car allowance of six hundred
($600) dollars. All costs of such automobile, including operation, maintenance,
and insurance, shall be borne by Executive.
Employer further agrees to reimburse Executive for all ordinary and
necessary expenses incurred by Executive on behalf of Employer, including
entertainment, meals and travel expenses. Executive shall provide to Employer
records substantiating the business purpose of such expenses. Any costs incurred
by Executive for conventions, meetings and seminars will be reimbursed as well
as special social entertainment expenses, provided the Chief Executive Officer
or President of Employer approves such.
Employer agrees to pay the monthly member dues for Executive's membership
at the Pacific Golf and Country Club.
5. INSURANCE
Employer agrees to provide Executive with Employer's standard health and
life insurance benefits which is now or may hereinafter be in effect for those
persons who are Executive Vice Presidents of Employer.
6. VACATION
Executive shall be entitled to accrue up to four (4) weeks vacation during
each year of the Term with at least two (2) weeks to be taken in a consecutive
period. Vacation benefits shall not accrue above four weeks at any time. The
Board of Directors at its discretion may waive the provision with respect to
unused vacation time.
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<PAGE>
7. TERMINATION
Employer shall have the right to terminate this Agreement for any of the
following reasons by serving written notice upon Executive:
(a) Willful misconduct or criminal misfeasance in the performance of
Executive's duties and obligations as Executive Vice President;
(b) Illegal conduct, constituting a crime involving moral turpitude,
illegal conduct, or conviction of a felony, or any conduct detrimental
to the interest of Employer;
(c) Physical or mental disability rendering Executive incapable of
performing his duties for a consecutive period of 360 days, or by
death;
(d) Determination by Employer's Board of Directors that the continued
employment of Executive is detrimental to the best interest of
Employer, or for any reason whatsoever as determined by Employer's
Board of Directors and in the sole and absolute discretion of
Employer's Board of Directors.
In the event this Agreement is terminated for any of the reasons specified in
the paragraphs (a), (b), or (c) above, Executive will be paid one month's salary
calculated as of the date of Executive's termination, plus any pay in lieu of
vacation accrued to, but not taken as of the date of termination. Such
termination pay shall be considered to be in full and complete satisfaction of
any and all rights which Executive may enjoy under the terms of this Agreement
other than rights, if any, to exercise any of the stock options vested prior to
such termination. The insurance benefits provided herein shall be extended at
Employer's sole cost for thirty (30) days following the date of termination.
In the event this Agreement is terminated for any reasons specified in
paragraph (d), above, Executive shall be entitled to termination pay in the
amount of the greater of the balance payable under this Agreement or twelve (12)
months of the Executive's then current base salary per year at the date of
termination. Such termination pay shall be paid in a lump sum and shall be
considered to be in full and complete satisfaction of any and all rights which
Executive may enjoy under the terms of this Agreement.
4
<PAGE>
Where termination is pursuant to paragraph (d), above, any pay in lieu of
vacation accrued to, but not taken as of the date of termination, will be deemed
included in the termination pay. In such case, the insurance benefits provided
herein shall be extended at Employer's sole cost for six (6) months following
the date of termination.
Executive shall give sixty (60) days prior notice, in writing, to Employer
in the event Executive resigns or voluntarily terminates employment.
8. ACQUISITION OR DISSOLUTION OF EMPLOYER
This Agreement shall not be terminated by the voluntary or involuntary
dissolution of Employer. Notwithstanding the foregoing, in the event
proceedings for liquidation of Employer are commenced by regulatory authorities,
this Agreement and all rights and benefits hereunder shall terminate.
9. INDEMNIFICATION
To the extent permitted by law, Employer shall indemnify Executive who was
or is a party or is threatened to be made a party in any action brought by a
third party against the Executive (whether or not Employer is joined as a party
defendant) against expenses, judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with said action if Executive
acted in good faith and in a manner Executive reasonably believed to be in the
best interest of the Employer (and with respect to a criminal proceeding if
Executive had no reasonable cause to believe his conduct was unlawful), provided
that the alleged conduct of Executive arose out of and was within the course and
scope of his employment as an officer or employee of Employer.
10. RETURN OF DOCUMENTS
Executive expressly agrees that all manuals, documents, files, reports,
studies, instruments or other materials used or developed by Executive during
the Term are solely the property of Employer, and Executive has no right, title
or interest therein. Upon termination of this Agreement, Executive or
Executive's
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representatives shall promptly deliver possession of all of said property to
Employer in good condition.
11. NOTICES
Any notice, request, or demand, or other communication required or
permitted hereunder shall be deemed to be properly given when personally served
in writing, when deposited in the U.S. mail, postage prepaid, or when
communicated to a public telegraph company for transmittal, addressed to the
party at the address given at the beginning of this Agreement or at any other
address as Employer or Executive may designate to the other in writing.
12. BENEFIT OF AGREEMENT
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective executors, administrators, successors and
assigns.
13. APPLICABLE LAW
This Agreement is to be governed by and construed under the laws of the
State of California.
14. CAPTIONS AND PARAGRAPH HEADINGS
Captions and paragraph headings used herein are for convenience only and
are not a part of this Agreement and shall not be used in construing it.
15. INVALID PROVISIONS
Should any provisions of this Agreement for any reason be declared invalid,
void, or unenforceable by a court of competent jurisdiction, the validity and
binding effect of any remaining portion shall not be affected and the remaining
portions of this Agreement shall remain in full force and effect as if this
Agreement had been executed with said provisions eliminated.
16. ENTIRE AGREEMENT
This Agreement with the exception of the Executive Salary Continuation
Agreement dated as of even date herewith contains the entire agreement of the
parties and it supersedes any and all other
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<PAGE>
agreements, either oral or in writing, between the parties hereto with respect
to the employment of Executive by Employer. Each party to this Agreement
acknowledges that no representations, inducements, promises, or agreements, oral
or otherwise, have been made by any party, or anyone acting on behalf of any
party, which are not embodied herein, and that no other agreement, statement, or
promise not contained in this Agreement shall be valid or binding with the
exception of the Executive Salary Continuation Agreement. This Agreement may not
be modified or amended by oral agreement, but only by an agreement in writing
signed by Employer and Executive. Upon the execution of this Agreement, all
other agreements regarding the employment of Executive with Mariners Bancorp and
Mariners Bank, with the exception of the Executive Salary Continuation Agreement
dated as of even date herewith, shall terminate and Employer shall have no
liability.
17. CONFIDENTIALITY
This Agreement is to be held confidential. Breach of such confidentiality
by Executive will be subject to termination under the provisions of 7(a) of this
Agreement.
18. ARBITRATION
All claims, disputes and other matters in question arising out of or
relating to this Agreement or the breach or interpretation thereof, other than
those matters which are to be determined by the Employer in its sole and
absolute discretion, shall be resolved by binding arbitration before a
representative member, selected by the mutual agreement of the parties, of the
Judicial Arbitration and Mediation Services, Inc. ("JAMS"), presently located in
Santa Ana, California. In the event JAMS is unable or unwilling to conduct the
arbitration provided for under the terms of this Paragraph, or has discontinued
its business, the parties agree that a representative member, selected by the
mutual agreement of the parties, of the American Arbitration Association
("AAA"), presently located in Orange County, California, shall conduct the
binding arbitration referred to in this Paragraph. Notice of the demand for
arbitration shall be filed in writing with the other party to this Agreement and
with JAMS (or AAA, if necessary). In no event shall
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<PAGE>
the demand for arbitration be made after the date when institution of legal or
equitable proceedings based on such claim, dispute or other matter in question
would be barred by the applicable statute of limitations. The arbitration shall
be subject to such rules of procedure used or established by JAMS, or if there
are none, the rules of procedure used or established by AAA. Any award rendered
by JAMS or AAA shall be final and binding upon the parties, and as applicable,
their respective heirs, beneficiaries, legal representatives, agents, successors
and assigns, and may be entered in any court having jurisdiction thereof. The
obligation of the parties to arbitrate pursuant to this clause shall be
specifically enforceable in accordance with, and shall be conducted consistently
with, the provisions of Title 9 of Part 3 of the California Code of Civil
Procedure. Any arbitration hereunder shall be conducted in Orange County,
California, unless otherwise agreed to by the parties.
19. LEGAL COSTS
If either party commences an action against the other party arising out of
or in connection with this Agreement, the prevailing party shall be entitled to
have and recover from the losing party reasonable attorney's fees and costs of
suit.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ELDORADO BANK
By /s/ David R. Brown
-----------------------
By /s/ Richard Korsgaard
-----------------------
Richard Korsgaard
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ELDORADO BANK
JOB DESCRIPTION
<TABLE>
<S><C>
Name: Richard Korsgaard Department: Real Estate
Job Title: Executive Vice President/Real Estate Dept. Job Status: Exempt
Date: May, 1995 Job Code:
Reports to: Ray Dellerba, President & COO Supervises: 2 - VP/Loan Officers
1 - Loan Processor
- --------------------------------------------------------------------------------------------------
</TABLE>
JOB SUMMARY: Directs, plans, manages, monitors, controls, staffs and supervises
the activities and operations of Eldorado Bank's Real Estate Department (interim
construction and non-relationship mini-perms). Ensures profitability and
productivity in the department while maintaining highest quality assets,
developing new business and providing quality customer service. Works in
conjunction with Retail Managers at San Clemente, San Juan Capistrano and
Monarch Beach offices to develop new business, retain customer relationships and
ensure the highest level of customer service.
NATURE AND SCOPE: The position oversees the activities of the Real Estate
Department; interim construction and mini-perms. Develops and implements sales
strategies and programs geared toward the enhancement of the department's loan
portfolio and development of long-lasting customer relationships. Provides
guidance and assistance to the department by developing and interpreting
policies and procedures, establishing goals and objectives in conjunction with
Executive Management, setting performance standards and ensuring attainment of
these performance goals.
1. Management of Real Estate Department
2. Quality and Profitability of RE Loan Portfolio
3. Development and Implementation of Sales Strategies
4. Business Development
5. Staffing, Training and Communications
6. Compliance/CRA
7. Control of Non-Interest Expense
8. Membership in Bank Committees and Outside Organizations/Groups
DUTIES AND RESPONSIBILITIES:
1. Management of Real Estate Department
*Directly supervises the activities of the department to ensure
current level of business is maintained and, through sales efforts,
loan portfolio is expanded.
*Delivers highest level of customer service to customers and branches.
*Ensures Bank's underwriting standards are met and credits are
prepared and documented in accordance with bank policies and
procedures.
*Participates in the presentation of loan packages to Loan Committee.
*Utilizes central credit department to prepare preliminary analyses of
customer's financial statements and for new and renewal credit
write-ups. RE Loan Officers may assist in preparation of credit
write-ups for more complex credits or if there are significant changes
in the financial condition on a renewal.
*Maintains support relationship with Retail Managers in San Clemente,
San Juan Capistrano and Monarch Beach offices assisting in their
efforts to maintain existing and generate new deposit and consumer
loan relationships.
2. Quality and Profitability of Real Estate Loan Portfolio
*Regularly reviews real estate loan portfolio and identifies problem
credits.
*Reviews delinquency list and assists in efforts to ensure
delinquencies are controlled through sustained follow-up efforts.
*Approves and rejects loans within lending authority and recommends
approval of loans over lending authority.
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3. Development and Implementation of Sales Strategies
*Establishes and implements Sales Strategies to increase the real
estate loan portfolio while ensuring the highest level of asset
quality.
*Ensures the Bank's real estate products and services are competitive
and meet the customer's needs.
*With Executive Management, sets sales goals for Real Estate
Department and Loan Officers.
*Reviews, monitors sales performance and trends to ensure the
achievement of established goals.
4. Business Development
*Develops new business by calling on prospective customers in targeted
businesses. Monitors business development efforts of the department
and the loan officers to ensure that targeted markets are being
penetrated by sales efforts.
*Identifies core business relationships with established customer
groups and creates business development programs to expand Real Estate
Department activities.
*Develops and maintains relationships with the community, customers
and coordinates with loan officers in making business development
calls.
*Uses ACT software to follow leads and organize business development
efforts.
5. Staffing, Training and Communication
*Formally reviews and evaluates performance of direct reports at least
annually and conducts counseling, as necessary.
*Establishes department goals and performance standards; ensures they
are communicated to staff and are attained.
*Ensures accurate job descriptions are established and reviewed with
staff.
*Ensures the development of staff through cross training and
developmental seminars and classes.
*Conducts employment interviews and staffs department with top
performers.
6. Compliance/CRA
*Ensures that Real Estate Department is in compliance with all
federal/state laws and regulations, and bank policies and procedures.
*Works with regulatory agencies, auditors and examiners and responds
to exceptions.
*Participates in civic and community activities to enhance the Bank's
visibility and image in the community and reinforce the Bank's
commitment to CRA.
7. Control of Non-Interest Expense
*Makes concerted effort to control and ultimately reduce department's
operating expenses.
*Promotes greater productivity and efficiency by continually
evaluating how the department operates.
*Coordinates with executive management in strategic planning and
budgeting process of department and bank.
7. Memberships in Bank Committees and Outside Organizations/Groups
*Member of bank's Board of Directors.
*Attends monthly Executive Committee and Board of Director meetings.
*Member of the bank's Executive & Bankwide Management groups.
*
*
*
ACCOUNTABILITIES/GOALS:
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ESTIMATE OF ALLOCATION OF TIME: Weekly Monthly
Management of Real Estate Department
Quality and Profitability of RE Loan Portfolio
Development and Implementation of Sales Strategies
Business Development
Staffing, Training and Communications
Compliance/CRA
Control of Non-Interest Expense
Membership in Bank Committees and Outside
Organizations/Groups
Total
JOB SPECIFICATIONS:
EDUCATION, KNOWLEDGE AND SKILLS REQUIRED:
1. Bachelors degree in Management/Finance or related experience, plus
10-15 years extensive experience in management and/or supervisory
capacity.
2. Extensive experience in all areas of lending with specific expertise
in real estate lending, including interim construction and mini-perms.
3. Strong management, organizational, sales/marketing, interpersonal,
communication, analytical, problem-solving, negotiation skills.
Flexible, results-oriented with a strong sense of urgency.
4. Proven track record of managing a high quality real estate loan
portfolio.
5. Computer literate with knowledge of Excel, Word and financial analysis
softwares.
I acknowledge receipt of this job description. I understand that the nature and
scope of my duties and responsibilities, as well as Eldorado Bank's
expectations, are more comprehensive than what is incorporated in this document.
- ----------------------------------- ---------------
Signature of Employee Date
- ----------------------------------- ---------------
Human Resources Date
Job Description Next Review Date:
-----------------
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EXECUTIVE SALARY CONTINUATION AGREEMENT
This Agreement is made and entered into this 20th day of October, 1995, by and
between Eldorado Bank, a California banking corporation (the "Employer"), and
Richard Korsgaard, an individual residing in the State of California
(hereinafter referred to as the "Executive").
RECITALS
WHEREAS, Employer on this date has consummated the acquisition of Mariners Bank
pursuant to an Agreement and Plan of Reorganization dated May 22, 1995;
WHEREAS, Executive was President and Chief Executive Officer of Mariners Bank
and had entered into an Executive Salary Continuation Agreement with Mariners
Bank dated January 3, 1989;
WHEREAS, Employer has assumed the liabilities and contracts of Mariners Bank
pursuant to the Agreement and Plan of Reorganization including the Executive
Salary Continuation Agreement dated January 3, 1989;
WHEREAS, Employer and Executive desire to amend the Executive Salary
Continuation Agreement dated January 3, 1989 in its entirety with this
Agreement;
WHEREAS, it is deemed to be in the best interests of the Employer to continue to
provide the Executive with certain salary continuation benefits, on the terms
and conditions set forth herein, in order to reasonably induce the Executive to
remain in the Employer's employment;
NOW, THEREFORE, in consideration of the services to be performed in the future,
as well as the mutual promises and covenants contained herein, the Executive and
the Employer agree as follows:
AGREEMENT
1. TERMS AND DEFINITIONS.
1.1. ADMINISTRATOR. The Employer shall be the "Administrator" and, solely
for the purposes of ERISA, the "fiduciary" of this Agreement where a fiduciary
is required by ERISA.
1.2. ANNUAL BENEFIT. The term "Annual Benefit" shall mean an annual sum of
Sixty-Five Thousand Dollars ($65,000) only reduced to the extent required: (i)
under the other provisions of this Agreement; (ii) by reason of the lawful order
of any regulatory agency or body having jurisdiction over the Employer; and
(iii) in order for the Employer to properly comply with any and all applicable
state and federal laws, including, but not limited to,
<PAGE>
income, employment and disability income tax laws (e.g., FICA, FUTA, SDI).
1.3. BENEFICIARY. The term "beneficiary" or "designated beneficiary" shall
mean the person or persons whom the Executive shall designate in a valid
Beneficiary Designation, a copy of which is attached hereto as Exhibit "A", to
receive the benefits provided hereunder. A Beneficiary Designation shall be
valid only if it is in the form attached hereto and made a part hereof and is
received by the Administrator prior to the Executive's death.
1.4. THE CODE. The "Code" shall mean the Internal Revenue Code of 1986, as
amended (the "Code").
1.5. DISABILITY/DISABLED. The term "Disability" or "Disabled" shall have
the same meaning given such term in the principal disability insurance policy
covering the Executive, which is incorporated herein by reference. In the event
the Executive is not covered by a disability policy containing a definition of
"Disability" or "Disabled," these terms shall mean an illness or incapacity
which, having continued for a period of one hundred and eighty (180) consecutive
days, prevents the Executive from adequately performing the Executive's regular
employment duties. The determination of whether the Executive is Disabled shall
be made by an independent physician selected by mutual agreement of the parties.
1.6. EFFECTIVE DATE. The term "Effective Date" shall mean January 3, 1989.
1.7. ERISA. The term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
1.8. PLAN YEAR. The term "Plan Year" shall mean the Employer's calendar
year.
1.9. RETIREMENT. The term "Retirement" or "Retires" shall refer to the
date which the Executive attains the age of at least 65 and acknowledges in
writing to Employer to be the last day he will provide any significant personal
services, whether as an employee, director or independent consultant or
contractor, to Employer. For purposes of this Agreement, the phrase "significant
personal services" shall mean more than ten (10) hours of personal services
rendered to one or more individuals or entities in any thirty (30) day period.
1.10. SURVIVING SPOUSE. The term "Surviving Spouse" shall mean the person,
if any, who shall be legally married to the Executive on the date of the
Executive's death.
2. SCOPE, PURPOSE AND EFFECT.
2.1. CONTRACT OF EMPLOYMENT. Although this Agreement is intended to
provide the Executive with an additional incentive to remain in the employ of
the Employer, this Agreement shall not be deemed to constitute a contract of
employment between the Executive
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and the Employer nor shall any provision of this Agreement restrict or expand
the right of the Employer to terminate the Executive's employment. This
Agreement shall have no impact or effect upon any separate written Employment
Agreement which the Executive may have with the Employer, it being the parties'
intention and agreement that unless this Agreement is specifically referenced in
said Employment Agreement (or any modification thereto), this Agreement (and the
Employer's obligations hereunder) shall stand separate and apart and shall have
no effect upon, nor be affected by, the terms and provisions of said Employment
Agreement.
2.2. FRINGE BENEFIT. The benefits provided by this Agreement are granted
by the Employer as a fringe benefit to the Executive and are not a part of any
salary reduction plan or any arrangement deferring a bonus or a salary increase.
The Executive has no option to take any current payments or bonus in lieu of the
benefits provided by this Agreement.
3. PAYMENTS UPON OR AFTER RETIREMENT.
3.1. PAYMENTS UPON RETIREMENT. If the Executive shall remain in the
continuous employment of the Employer until attaining sixty-five (65) years of
age, the Executive shall be entitled to be paid the Annual Benefit in One
Hundred Fifty-Six (156) equal monthly installments, with each installment to be
paid on the first day of each month, beginning with the month following the
month in which the Executive Retires or upon such later date as may be mutually
agreed upon by the Executive and the Employer in advance of said Retirement
date.
3.2. PAYMENTS IN THE EVENT OF DEATH AFTER RETIREMENT. The Employer agrees
that if the Executive Retires, but shall die before receiving all of the One
Hundred Fifty-Six (156) monthly payments described in paragraph 3.1 above, the
Employer will make the remaining monthly payments, undiminished and on the same
schedule as if the Executive had not died, to the Executive's designated
beneficiary. If a valid Beneficiary Designation is not in effect, then the
remaining amounts due to the Executive under the term of this Agreement shall be
paid to the Executive's Surviving Spouse. If the Executive leaves no Surviving
Spouse, the remaining amounts due to the Executive under the terms of this
Agreement shall be paid to the duly qualified personal representative, executor
or administrator of the Executive's estate.
4. PAYMENTS IN THE EVENT DEATH OR DISABILITY OCCURS PRIOR TO RETIREMENT.
4.1. PAYMENTS IN THE EVENT OF DEATH PRIOR TO RETIREMENT. In the event the
Executive should die while actively employed by the Employer at any time after
the Effective Date of this Agreement, but prior to attaining sixty-five (65)
years of age or if the Executive chooses to work after attaining sixty-five (65)
years of age, but dies before Retirement, the Employer agrees to pay the Annual
Benefit with the Applicable Percentage equal to 100% for a
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period of thirteen (13) years in One Hundred Fifty-Six (156) equal monthly
installments, with each installment to be paid on the first of each month
beginning with the month following Executive's death, to the Executive's
designated beneficiary. If a valid Beneficiary Designation is not in effect,
then the amounts due to the Executive under the terms of this Agreement shall be
paid to the Executive's Surviving Spouse. If the Executive leaves no Surviving
Spouse, the amounts due to the Executive under the terms of this Agreement shall
be paid to the duly qualified personal representative, executor or administrator
of the Executive's estate.
4.2. PAYMENTS IN THE EVENT OF DISABILITY PRIOR TO RETIREMENT. In the event
the Executive becomes Disabled while actively employed by the Employer at any
time after the date of this Agreement but prior to Retirement, the Executive
shall: (i) continue to be treated during such period of Disability as being
gainfully employed by the Employer; and (ii) be entitled to be paid the Annual
Benefit in One Hundred Fifty-Six (156) equal monthly installments, with each
installment to be paid on the first day of each month, beginning with the month
following the earlier of (1) the month in which the Executive attains sixty-five
(65) years of age; or (2) the date upon which the Executive is no longer
entitled to receive Disability benefits under the Executive's principal
Disability insurance policy and does not, at such time, return to and thereafter
fulfill the responsibilities associated with the employment position held with
the Employer prior to becoming Disabled by reason of such Disability continuing.
Notwithstanding the foregoing, in the event Executive should die while actively
or gainfully employed by the Employer at any time after the Effective Date of
this Agreement and prior to Retirement, the payments provided in Paragraph 4.1
shall be paid in lieu of the payments provided in this Paragraph 4.2, provided
that Executive or his legal representative shall have not elected to take the
benefits provided by Paragraph 5 and payments provided in Paragraph 4.2 have not
commenced.
5. PAYMENTS IN THE EVENT EMPLOYMENT IS TERMINATED OTHER THAN BY DEATH,
DISABILITY, OR RETIREMENT.
As indicated in Paragraph 2 above, the Employer reserves the right to terminate
the Executive's employment, with or without cause but subject to any written
employment agreement which may then exist, at any time prior to the Executive's
Retirement. In the event that the employment of the Executive shall be
terminated, for any reason, including voluntary termination by the Executive,
but other than by reason of (i) Disability except as provided in Paragraph 4.2,
(ii) death, (iii) termination for cause as defined in Executive's current or
most recent employment agreement or (iv) Retirement, the Executive or his legal
representative shall be entitled to be paid the Annual Benefit, for a period of
thirteen (13) years in One Hundred Fifty-Six (156) equal monthly installments,
with each installment to be paid on the first day of each month, beginning with
the month Following the month in which the Executive terminates employment and
attains sixty-five (65) years of age or, if earlier, beginning with the month
following the Executive's death.
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6. TERMINATION FOR CAUSE.
Notwithstanding anything to the contrary, in the event Executive is terminated
for cause as defined in Executive's current employment agreement (or most recent
employment agreement if Executive does not have a current employment agreement
at the time of such termination) but not to include death or disability,
Executive shall not be entitled to any benefits pursuant to this agreement.
7. NO OWNERSHIP RIGHTS TO EMPLOYER'S ASSETS.
The Employer reserves the right to determine, in its sole and absolute
discretion, whether, to what extent and by what method, if any, to provide for
the payment of the amounts which may be payable to the Executive, the
Executive's spouse or the Executive's beneficiaries under the terms of this
Agreement ("Benefits"). The rights of the Executive or any beneficiary of the
Executive under this Agreement shall be solely those of an unsecured creditor of
the Employer.
In the event that the Employer, in its sole and absolute discretion, elects to
acquire an insurance policy, an annuity or any other asset to recoup the costs
or any portion thereof of the Benefits, then such insurance policy, annuity or
other asset shall not be deemed to be held under any trust, for the benefit of
the Executive or his or her beneficiaries or to be security for the performance
of the obligations of the Employer under this Agreement, but shall be, and
remain, a general unpledged, unrestricted asset of the Employer. The Executive
and his or her beneficiaries shall have no rights whatsoever with respect to, or
any claim against, any such insurance policy, annuity or other asset. In
connection with Employer electing to acquire any such insurance policy or
annuity, the Executive agrees to cooperate to facilitate such acquisition, and
pursuant thereto shall execute such documents and undergo such medical
examinations or tests as Employer may reasonably request.
8. CLAIMS PROCEDURE.
The Employer shall, but only to the extent necessary to comply with ERISA, be
designated as the named fiduciary under this Agreement and shall have authority
to control and manage the operation and administration of this Agreement.
Consistent therewith, the Employer shall make all determinations as to the
rights to benefits under this Agreement. Any decision by the Employer denying a
claim by the Executive, the Executive's spouse, or the Executive's beneficiary
for benefits under this Agreement shall be stated in writing and delivered or
mailed, via registered or certified mail, to the Executive, the Executive's
spouse or the Executive's beneficiary, as the case may be. Such decision shall
set forth the specific reasons for the denial of a claim. In addition, the
Employer shall provide the Executive, the Executive's spouse or the Executive's
beneficiary with a reasonable opportunity for a full and fair review of the
decision denying such claim.
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9. STATUS OF AN UNSECURED GENERAL CREDITOR.
Notwithstanding anything contained herein to the contrary: (i) neither the
Executive, the Executive's spouse or the Executive's beneficiary shall have any
legal or equitable rights, interests or claims in or to any specific property or
assets of the Employer; (ii) none of the Employer's assets shall be held in or
under any trust for the benefit of the Executive, the Executive's spouse or the
Executive's beneficiary or held in any way as security for the fulfillment of
the obligations of the Employer under this Agreement; (iii) all of the
Employer's assets shall be and remain the general unpledged and unrestricted
assets of the Employer; (iv) the Employer's obligation under this Agreement
shall be that of an unfunded and unsecured promise by the Employer to pay money
in the future; and (v) the Executive, the Executive's spouse and the Executive's
beneficiary shall be unsecured general creditors with respect to any benefits
which may be payable under the terms of this Agreement.
10. COVENANT NOT TO INTERFERE.
The Executive agrees not to take any action which prevents the Employer from
collecting the proceeds of any life insurance policy which the Employer may
happen to own at the time of the Executive's death and of which the Employer is
the designated beneficiary.
11. MISCELLANEOUS.
11.1. EARLY TERMINATION OF BENEFITS. Notwithstanding any other provisions
of this Agreement, Bank may at any time terminate its obligation to pay any
Benefits or the unpaid portion of any Benefits, by paying to Executive or
Executive's representative the present value of the unpaid portion of such
Benefit. The present value shall be computed using a discount rate equal to two
percent per annum over the Federal Reserve Discount Rate in effect on the date
the Employer chooses to terminate its obligation to pay Benefits pursuant to
this Section. Any benefit which is prepared pursuant to this provision shall be
deemed to be 100% vested for purposes of calculating the amount of such
prepayment.
11.2. OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL. The Executive
acknowledges that he has been afforded the opportunity to consult with
independent counsel of his choosing regarding both the benefits granted to him
under the terms of this Agreement and the terms and conditions which may affect
the Executive's right to these benefits. The Executive further acknowledges that
he has read, understands and consents to all of the terms and conditions of this
Agreement, and that he enters into this Agreement with a full understanding of
its terms and conditions.
11.3. ARBITRATION OF DISPUTES. All claims, disputes and other matters in
question arising out of or relating to this Agreement or the breach or
interpretation thereof, other than those matters which are to be determined by
the Employer in its sole and absolute discretion, shall be resolved by binding
arbitration before a representative member, selected by the mutual agreement of
6
<PAGE>
the parties, of the Judicial Arbitration and Mediation Services, Inc. ("JAMS"),
presently located in Santa Ana, California. In the event JAMS is unable or
unwilling to conduct the arbitration provided for under the terms of this
Paragraph, or has discontinued its business, the parties agree that a
representative member, selected by the mutual agreement of the parties, of the
American Arbitration Association ("AAA"), presently located in Orange County,
California, shall conduct the binding arbitration referred to in this Paragraph.
Notice of the demand for arbitration shall be filed in writing with the other
party to this Agreement and with JAMS (or AAA, if necessary). In no event shall
the demand for arbitration be made after the date when institution of legal or
equitable proceedings based on such claim, dispute or other matter in question
would be barred by the applicable statute of limitations. The arbitration shall
be subject to such rules of procedure used or established by JAMS, or if there
are none, the rules of procedure used or established by AAA. Any award rendered
by JAMS or AAA shall be final and binding upon the parties, and as applicable,
their respective heirs, beneficiaries, legal representatives, agents, successors
and assigns, and may be entered in any court having jurisdiction thereof. The
obligation of the parties to arbitrate pursuant to this clause shall be
specifically enforceable in accordance with, and shall be conducted consistently
with, the provisions of Title 9 of Part 3 of the California Code of Civil
Procedure. Any arbitration hereunder shall be conducted in Orange County,
California, unless otherwise agreed to by the parties.
11.4. ATTORNEYS' FEES. In the event of any arbitration or litigation
concerning any controversy, claim or dispute between the parties hereto, arising
out of or relating to this Agreement or the breach hereof, or the interpretation
hereof, the prevailing party shall be entitled to recover from the losing party
reasonable expenses, attorneys' fees and costs incurred in connection therewith
or in the enforcement or collection of any judgment or award rendered therein.
The "prevailing party" means the party determined by the arbitrator(s) or court,
as the case may be, to have most nearly prevailed, even if such party did not
prevail in all matters, not necessarily the one in whose favor a judgment is
rendered.
11.5. NOTICE. Any notice required or permitted of either the Executive or
the Employer under this Agreement shall be deemed to have been duly given, if by
personal delivery, upon the date received by the party or its authorized
representative; if by facsimile, upon transmission to a telephone number
previously provided by the party to whom the facsimile is transmitted as
reflected in the records of the party transmitting the facsimile and upon
reasonable confirmation of such transmission; and if by mail, on the third day
after mailing via U.S. first class mail, registered or certified, postage
prepaid and return receipt requested, and addressed to the party at the address
given below for the receipt of notices, or such changed address as may be
requested in writing by a party.
If to the Employer:
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ELDORADO BANK
19100 VON KARMAN AVENUE, SUITE 550
IRVINE, CALIFORNIA 92713
ATTENTION: J. B. CROWELL
IF TO THE EXECUTIVE:
RICHARD KORSGAARD
330 AVENIDA COSTANSO
SAN CLEMENTE, CALIFORNIA 92672
11.6. ASSIGNMENT. Neither the Executive, the Executive's spouse, nor any
other beneficiary under this Agreement shall have any power or right to
transfer, assign, hypothecate, modify or otherwise encumber any part or all of
the amounts payable hereunder, nor, prior to payment in accordance with the
terms of this Agreement, shall any portion of such amounts be: (i) subject to
seizure by any creditor of any such beneficiary, by a proceeding at law or in
equity, for the payment of any debts, judgments, alimony or separate maintenance
obligations which may be owed by the Executive, the Executive's spouse, or any
designated beneficiary; or (ii) transferable by operation of law in the event of
bankruptcy, insolvency or otherwise. Any such attempted assignment or transfer
shall be void and shall terminate this Agreement, and the Employer shall
thereupon have no further liability hereunder.
11.7. BINDING EFFECT/MERGER OR REORGANIZATION. This Agreement shall be
binding upon and inure to the benefit of the Executive and the Employer and, as
applicable, their respective heirs, beneficiaries, legal representatives,
agents, successors and assigns. Accordingly, the Employer shall not merge or
consolidate into or with another corporation, or reorganize or sell
substantially all of its assets to another corporation, firm or person, unless
and until such succeeding or continuing corporation, firm or person agrees to
assume and discharge the obligations of the Employer under this Agreement. Upon
the occurrence of such event, the term "Employer" as used in this Agreement
shall be deemed to refer to such surviving or successor firm, person, entity or
corporation.
11.8. NONWAIVER. The failure of either party to enforce at any time or for
any period of time any one or more of the terms or conditions of this Agreement
shall not be a waiver of such term(s) or condition(s) or of that party's right
thereafter to enforce each and every term and condition of this Agreement.
11.9. PARTIAL INVALIDITY. If any term, provision, covenant or condition of
this Agreement is determined by an arbitrator or a court, as the case may be, to
be invalid, void, or unenforceable, such determination shall not render any
other term, provision, covenant or condition invalid, void or unenforceable, and
the Agreement shall remain in full force and effect notwithstanding such partial
invalidity.
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11.10. ENTIRE AGREEMENT. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties with respect to the
subject matter of this Agreement and contains all of the covenants and
agreements between the parties with respect thereto. Each party to this
Agreement acknowledges that no other representations, inducements, promises or
agreements, oral or otherwise, have been made by any party, or anyone acting on
behalf of any party, which are not set forth herein, and that no other
agreement, statement or promise not contained in this Agreement shall be valid
or binding on either party.
11.11. MODIFICATIONS. Any modification of this Agreement shall be
effective only if it is in writing and signed by each party or such party's
authorized representative.
11.12. PARAGRAPH HEADINGS. The paragraph headings used in this Agreement
are included solely for the convenience of the parties and shall not affect or
be used in connection with the interpretation of this Agreement.
11.13. NO STRICT CONSTRUCTION. The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
person.
11.14. GOVERNING LAW. The laws of the State of California, other than
those laws denominated choice of law rules, and, where applicable, the rules and
regulations of any regulatory agency or governmental authority having
jurisdiction over the Employer, shall govern the validity, interpretation,
construction and effect of this Agreement.
IN WITNESS WHEREOF, the Employer and the Executive have executed this Agreement
on the date first above-written in the City of Irvine, Orange County,
California.
ELDORADO BANK
"EMPLOYER" "EXECUTIVE"
/s/ David R. Brown /s/ Richard Korsgaard
- ------------------------------ -----------------------------
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SCHEDULE A
BENEFICIARY DESIGNATION
TO: THE ADMINISTRATOR OF
ELDORADO BANK
EXECUTIVE SALARY CONTINUATION AGREEMENT
Pursuant to the provisions of my Executive Salary Continuation Agreement with
Eldorado Bank permitting the designation of a beneficiary or beneficiaries by a
participant, I hereby designate the following persons and entities as primary
and secondary beneficiaries of any benefit under said Agreement payable by
reason of my death:
NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE TRUSTEE
AND THE EXACT DATE OF THE TRUST AGREEMENT.
In the event the primary beneficiary is not the spouse of the Executive, the
spouse of the Executive will need to sign the Spousal Consent below and such
signature must be notarized.
PRIMARY BENEFICIARY:
- -------------------- ----------------- --------------------
Name Address Relationship
SECONDARY (CONTINGENT) BENEFICIARY:
- -------------------- ----------------- --------------------
Name Address Relationship
THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION IS HEREBY RESERVED.
ANY PRIOR DESIGNATION OF PRIMARY BENEFICIARIES AND SECONDARY BENEFICIARIES IS
HEREBY REVOKED.
The Administrator shall pay all sums payable under the Agreement by reason of my
death to the Primary Beneficiary, if he or she survives me, and if no Primary
Beneficiary shall survive me, then to the Secondary Beneficiary, and if no named
beneficiary survives me, then the Administrator shall pay all amounts in
accordance with the terms of my Executive Salary Continuation Agreement. In the
event that a named beneficiary survives me and dies prior to receiving the
entire benefit payable under said Agreement then and in that event, the
remaining unpaid benefit payable according to the terms of my Executive Salary
Continuation Agreement shall be payable to the personal representatives of the
estate of said beneficiary who survived me but died prior to receiving the total
benefit provided by my Executive Salary Continuation Agreement.
"EXECUTIVE"
Dated:___________________ ____________________________
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CONSENT OF THE EXECUTIVE'S SPOUSE
TO THE ABOVE BENEFICIARY DESIGNATION:
I, ________________, being the spouse of Richard Korsgaard, after being afforded
the opportunity to consult with independent counsel of my choosing, do hereby
acknowledge that I have read, agree and consent to the foregoing Beneficiary
Designation which relates to the Executive Salary Continuation Agreement entered
into by my spouse on _______________, 1995. I understand that the above
Beneficiary Designation adversely affects my community property interest in the
benefits provided for under the terms of the Executive Salary Continuation
Agreement. I understand that I have been advised to consult with an attorney of
my choice prior to executing this consent, so that such attorney can explain the
effects of this consent.
Dated:______________, 1995 ____________________________
_________________, Spouse
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<PAGE>
CERTIFICATE OF ACKNOWLEDGMENT
OF NOTARY PUBLIC
State of California )
)ss.
County of ___________)
On ____________, 1995, before me, ________________, Notary Public, State of
California, personally appeared __________________
[ ] personally known to me - OR
[ ] proved to me on the basis of satisfactory evidence
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
_______________________________
Notary Public
State of California
(Seal)
CAPACITY CLAIMED BY SIGNER:
[ ] Individual(s) Signing for Oneself/Themselves
[ ] Corporate Officer(s) ___________________ _________________
Title Company
____________________ _________________
Title Company
[ ] Partner(s) ________________________________________________________
Partnership
[ ] Trustee(s) _______________________________________________________
Trust
[ ] Attorney-in-Fact ________________________ ________________________
Principal Principal
[ ] Other _______________________________ ____________________________
Entity(ies) Represented Entity(ies) Represented
- ------------------------------------------------------------------------
Title or Type of Document:_______________________________________________
Date of Document:______________________ Number of Pages:________________
Signer(s) Other Than Named Above:________________________________________
12
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of December
20, 1995 between ELDORADO BANK ("Employer") and WILLIAM J. LEWIS ("Employee").
R E C I T A L S
A. Employer desires to retain Employee in the full-time employ of
Employer on the terms of this Agreement.
B. Employee has advised Employer of Employee's willingness to remain in
the full-time employ of Employer on the terms of this Agreement.
NOW, THEREFORE, in consideration of the foregoing Recitals, and the terms,
conditions and covenants contained herein, it is agreed as follows:
1. EMPLOYMENT. Employer hereby employs Employee and Employee hereby
accepts this employment and agrees to exercise and perform faithfully,
exclusively and to the best of Employee's ability on behalf of Employer the
powers and duties customarily exercised and performed by its Executive Vice
President and Chief Credit Officer on the terms and conditions set forth herein.
Employee acknowledges and agrees that Employee is hereby also making a moral
commitment to honor this Agreement and to further the Employer's best interests
during the full term of this Agreement.
2. EMPLOYEE'S SERVICES AND DUTIES.
2.1 During the term hereof, Employee shall:
(a) Observe and conform to the policies and directions
promulgated by Employer's Board of Directors from time to time;
(b) Assume and perform those duties customarily performed by the
Chief Credit Officer of a bank, including general executive duties and
other powers and duties pertaining by law, regulations or practice to the
office of Chief Credit Officer, or otherwise imposed by the Bylaws of
Employer; and
(c) Serve as a full-time employee, and devote Employee's ability
and attention to the business of Employer during the term of this
Agreement, and neither directly nor indirectly render any services of a
business, commercial or professional nature, whether as employee, partner,
officer, director or shareholder, to any other person, firm, corporation or
organization which in any manner competes with Employer, whether for
compensation or otherwise, nor engage in any activity which is adverse to
the Employers' business or welfare, without the prior written consent of
Employer.
The precise services to be performed by Employee may be
extended or curtailed, from time to time, at the discretion of the Board of
Directors of
<PAGE>
Employer, provided such services shall at all times be of the nature
customarily performed by the Chief Credit Officer or an Executive Vice
President of a bank.
2.2 Nothing contained herein shall be construed to prevent Employee
from investing Employee's assets in any form or manner, or supervising these
investments, provided that such investment-related activities do not, in any
manner nor for any significant amount of time, interfere with Employee's
performance of services on behalf of Employer, and provided further the Employee
shall not acquire any direct or indirect ownership interest in any bank or
financial institution, other than Employer, where such ownership interest
exceeds one percent (1%) of the total ownership interests in such financial
institution. However, employee ownership restrictions in any bank or financial
institution other than Employer shall only apply to banks or financial
institutions that are located within the service areas of any of Employer's
offices and are in direct competition with Employer.
3. TERM. The term of Employee's employment by Employer pursuant to this
Agreement shall be for a period commencing on the date of this Agreement and
terminating as follows:
(a) During the period November 1 through December 31 of each
calendar year hereafter, commencing with calendar year 1996, either party may
give written notice to the other party that this Agreement shall terminate on
December 31 of the second calendar year following the calendar year in which
such written notice is given; or
(b) As provided in Sections 7 or 8 below.
4. COMPENSATION AND OTHER BENEFITS. As compensation, in full, for the
services to be rendered by Employee hereunder, Employer shall pay, and the
Employee shall accept, the following compensation:
(a) Employer shall pay to Employee an annual base salary of
$110,000 until March 1, 1996, at which time the annual base salary shall
increase to $118,000, payable in equal semi-monthly installments, less usual
withholding deductions, during the term hereof. Employer shall evaluate
Employee's base salary each calendar year, but any increase to such base salary
shall be at the sole discretion of Employer.
(b) Employer shall provide Employee with an automobile allowance
of $700 per month for the term of this Agreement.
(c) As additional compensation, Employee shall be entitled to
participate in the Eldorado Bank Executive Officer Bonus and Incentive Plan, the
Eldorado Bank Ten-Year Long-Term Deferred Compensation Plan and the Eldorado
Bank Two-Year Short-Term Deferred Compensation Plan as long as Employer
maintains such Plans, which Plans may be altered from time to time or terminated
by Employer at its sole discretion.
(d) During the term of Employee's employment under this
Agreement, Employee shall be entitled to receive all other benefits of
employment made available to other employees of Employer, including
participation in profit-sharing plans (specifically the Employee Stock Ownership
Plan and 401(k) Plan), and life, health and accident insurance benefits
2
<PAGE>
(including executive officers' insurance coverage) in the form, kind and amount
made available under group insurance coverage to employees (or executive
officers in the case of the executive officers' insurance) of Employer. Employee
shall be entitled to term life insurance coverage in the amount of $400,000 for
the term of this Agreement.
5. EXPENSES. Employee is authorized to incur reasonable expenses for
promoting the business of Employer as is customary for a Chief Credit Officer of
similar employers. Employee shall provide Employer with adequate records of all
expenses incurred by Employee under this Section.
6. VACATIONS. Employee shall be entitled to vacation benefits of four (4)
weeks for each calendar year of this Agreement.
7. TERMINATION PRIOR TO EXPIRATION OF TERM.
7.1 TERMINATION BY EMPLOYER FOR CAUSE. Employer, by vote or written
approval of the Board of Directors duly taken in accordance with the law and
Employer's Bylaws, may terminate this Agreement immediately, at which time all
obligations and liability of Employer under this Agreement shall cease (except
as to benefits then accrued), upon determination in good faith that Employee:
(i) has been adjudged guilty of a felony or a misdemeanor involving moral
turpitude by a court of competent jurisdiction; (ii) has committed any act which
would cause termination of coverage under the Employer's Bankers' Blanket Bond
as to Employee (as distinguished from termination of coverage as to the Employer
as a whole); (iii) was involved in criminal misfeasance or willful misconduct in
the performance of Employee's duties; or (iv) breached this Agreement or
Employer's Code of Conduct.
7.2 TERMINATION BY EMPLOYER WITHOUT CAUSE. Employer, by vote or
written approval of the Board of Directors duly taken in accordance with the law
and Employer's Bylaws, may terminate this Agreement and rights hereunder,
without cause or any reason whatsoever, upon a lump sum cash payment to Employee
in an amount equal to (i) six (6) months of Employee's then base salary being
paid pursuant to Section 4(a) above if such termination occurs prior to a
"Change in Control" (as defined in Section 7.6 below), and (ii) 12 months of
Employee's then base salary being paid pursuant to Section 4(a) above if such
termination occurs after a "Change in Control". Upon such payment, all
obligations and liability of Employer under this Agreement shall cease, except
as to Employee's accrued benefits to the date of termination.
7.3 ACQUISITION OR DISSOLUTION OF EMPLOYER. This Agreement shall not
be terminated by the voluntary or involuntary dissolution of Employer or by any
merger or consolidation where Employer is not the surviving or resulting
corporation, or upon any transfer of all or substantially all of the assets of
Employer. In the event of any such dissolution, merger, consolidation or
transfer of assets, the provisions of this Agreement shall be binding upon and
inure to the benefit of the surviving or resulting corporation or the
corporation to which such assets shall be transferred.
Notwithstanding the foregoing, in the event proceedings for
liquidation of Employer are commenced by regulatory authorities, this Agreement
and all rights and benefits hereunder shall terminate. However, Employee will
have the sole option to demand and receive
3
<PAGE>
the lesser of (i) six (6) months salary based upon the salary being paid to
Employee at the time of such termination, or (ii) the balance payable under this
Agreement.
7.4 DISABILITY OF EMPLOYEE. If Employee becomes disabled during the
term of this Agreement and such disability continues for a period of six (6)
months out of any six (6) month period, Employer may, at its option, after the
expiration of such six month period, terminate this Agreement by giving written
notice to Employee. While Employee is disabled, Employer shall pay to Employee
the monthly salary installments as provided in Section 4(a), but such
installments shall be reduced by all amounts paid to Employee on account of
disability insurance, worker's compensation or social security payments made to
Employee arising out of Employee's disability other than medical, hospital or
similar health insurance; provided, however, that such payments by Employer
shall cease upon the earlier of (a) the expiration of the term of this
Agreement, (b) the earlier termination of this Agreement pursuant to its
provisions, or (c) the continuation of Employee's disability for a period of six
(6) months. For the purpose of this Agreement, the term "disabled" shall be
defined as Employee's inability, through physical or mental illness or other
cause, to perform normal and customary duties which Employee is required to
perform under this Agreement. In determining whether Employee is disabled,
Employer may rely upon the written statement provided by a licensed physician
acceptable to Employer. Employee shall allow examination from time to time by
any licensed physician selected by Employer and agreed to by Employee. All such
examinations will be conducted within a reasonable time period.
7.5 RESIGNATION BY EMPLOYEE TO TAKE A POSITION ELSEWHERE. Upon the
receipt by Employer of a written resignation of Employee, this Agreement and the
rights hereunder shall terminate and the obligations and liability of Employer
under this Agreement shall cease except as to Employee's benefits accrued to the
date of resignation. Employee agrees to provide Employer at least thirty (30)
days' prior written notification of such resignation, which period can be
shortened at the sole right of Employer.
7.6 CHANGE IN CONTROL: TERMINATION BY EMPLOYEE FOR GOOD REASON. In
the event of a "Change in Control" (as defined below), Employee may, at any time
thereafter during the term of this Agreement, terminate Employee's employment
with Employer for "Good Reason" (as defined below), in which event Employee
shall be paid on the date on which the Waiver and Release Agreement referred to
below becomes effective, pursuant to paragraph 3(c) thereof, a cash lump sum
equal to the monthly amount being paid to Employee pursuant to Section 4(a)
above at the time of such termination, multiplied by twelve. For purposes
hereof:
(a) "Change in Control" shall mean:
(i) Any transaction or series of related transactions as a
result of which Eldorado Bancorp does not immediately thereafter own at
least fifty percent of the combined voting power of the outstanding
securities of Employer;
(ii) A sale of all or substantially all of the assets of
Employer to an entity of which less than fifty percent of the combined
voting power of the outstanding securities owned by Eldorado Bancorp;
4
<PAGE>
(iii) Any consolidation or merger of Eldorado Bancorp, as a
result of which consolidation or merger the shareholders of Eldorado
Bancorp immediately prior thereto own less than fifty percent of the
combined voting power of the outstanding securities of the surviving or
resulting entity immediately thereafter; or
(iv) A sale by shareholders of fifty percent or more of the
combined voting power of the outstanding securities of Eldorado Bancorp
pursuant to a tender offer or a series of related tender offers; and
(b) "Good Reason" shall mean:
(i) Employee being delegated or assigned duties by the Board of
Directors of Employer or the Chief Executive Officer by a communication in
writing which are wholly and clearly inconsistent with the position and
status of Executive Vice President;
(ii) Employee having had removed by the Board of Directors of
Employer or the Chief Executive Officer by a communication in writing
the authority or responsibility necessary to carry out the duties of
Executive Vice President;
(iii) Employee having a substantial alteration in the nature,
status or prestige of Employee's responsibilities due to the action of
the Board of Directors of Employer or the Chief Executive Officer,
which is verifiable by tangible evidence; or
(iv) Employee being relocated to an office more than twenty-five
(25) miles from Employer's executive offices.
Notice of any termination pursuant to this Section 7.6 shall be given
in writing by Employee to Employer within ninety (90) days of the occurrence of
the "Good Reason" upon which the termination is based, and such termination
shall be effective upon the delivery thereof. If Employee elects to terminate
this Agreement pursuant to this Section 7.6, and Employer tenders payment as
provided in this Section 7.6, Employer shall have no further obligation to
Employee by reason of Employee's employment (including this Agreement) or the
termination thereof, other than those obligations which had accrued pursuant to
Sections 4, 5 and 6 above as of the date of such termination in accordance with
the terms thereof, and Employee agrees that receipt of such payment shall
constitute a full and final release thereof and that, as a condition to such
payment, Employee will execute and deliver to Employer a Waiver and Release
Agreement, dated the date of termination, in the form attached hereto as Exhibit
A. Notwithstanding anything in this Agreement to the contrary, if any portion of
the payment pursuant to this Section 7.6, combined with any other payments or
benefits, is either nondeductible or subject to an excise tax under Internal
Revenue Code Sections 280G or 4999, respectively, the payment shall be reduced
to the extent necessary to make such sections inapplicable.
5
<PAGE>
7.7 MISCELLANEOUS PROVISIONS REGARDING TERMINATION.
(a) If this Agreement is terminated before the end of its term in
accordance with this Agreement, Employee shall be entitled to the compensation
earned by Employee up to the date of termination, and Employer and Employee
shall have no further obligation to each other. All other benefits specifically
provided for in this Agreement to which Employee is entitled shall cease as of
the date of termination, except for obligations which have accrued as of such
date.
(b) The Sections in this Agreement providing for Employer's right to
terminate this Agreement shall be interpreted wholly independent from and
without reference to one another, and shall not be construed to impair or in any
manner limit Employer's right to otherwise terminate this Agreement for valid
cause pursuant to the laws of the State of California.
(c) Any written notice to be given to Employee by Employer may be
given either by personal delivery to Employee, or by mail, registered or
certified, postage prepaid with return receipt requested, addressed to Employee
at Employee's then current residence. All notices so mailed shall be deemed
delivered on the third business day after being placed in the mail.
(d) Employee may exercise Employee's rights to exercise any stock
options vested prior to termination or resignation, if any, and as provided in a
Stock Option Plan and Stock Option Agreement to which Employee is a party.
8. DEATH DURING EMPLOYMENT. If Employee dies during the term of this
employment, Employer shall pay to the estate of Employee the compensation and
other rights hereunder which would otherwise be payable to Employee up to the
end of the following month in which death occurs, and Employer shall have no
further obligations or liability under this Agreement (except as to benefits
then accrued).
9. CONFIDENTIAL INFORMATION. Employee covenants and agrees that Employee
shall not use or disclose to others any information of Employer which is either
confidential or proprietary to Employer. Employee's obligations hereunder shall
survive the termination of this Agreement. For purposes hereof, information
shall no longer be confidential when it is generally known to the public.
10. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of Employer, its successors and assigns. Employee may not assign all or
any part of Employee's interest under this Agreement without the prior written
consent of Employer.
11. RECEIPT OF AGREEMENT. The parties hereto acknowledge that they have
each read this Agreement in its entirety and each hereby acknowledges receipt of
a fully executed copy thereof. A fully executed copy shall be an original for
all purposes and is a duplicate original.
12. CALIFORNIA LAW. This Agreement is to be governed by and construed
under the laws of the State of California, except to the extent that any federal
law regulating banks may apply.
6
<PAGE>
13. CAPTIONS AND SECTION HEADINGS. Captions and Section headings used
herein are for convenience only and are not a part of this Agreement and shall
not be used in construing it.
14. INVALID PROVISIONS. Should any part of this Agreement for any reason
be declared invalid, the validity and binding effect of any remaining portion
shall not be affected, and the remaining portion of this Agreement shall remain
in force and effect as if this Agreement had been executed with the invalid
provisions eliminated.
15. ENTIRE AGREEMENT. This Agreement contains the entire Agreement between
the parties with respect to the employment of Employee by Employer and
supersedes all prior and contemporaneous agreements, representations and
understandings of the parties. No modification, amendment or waiver of any of
the provisions of this Agreement shall be effective unless in writing
specifically referring hereto and signed by both parties.
16. WAIVER OF BREACH. The failure to enforce at any time any of the
provisions of this Agreement, or to require at any time performance by the other
party of any of the provisions hereof, shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Agreement or
any part hereof or the right of either party thereafter to enforce each and
every provision in accordance with the terms of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective on the day and year hereinabove set forth.
/s/ William J. Lewis
---------------------------------------
WILLIAM J. LEWIS
ELDORADO BANK
By: /s/ Raymond E. Dellerba
-------------------------------------
Its: President & COO
-----------------------------------
7
<PAGE>
EXHIBIT A
WAIVER AND RELEASE AGREEMENT
This Waiver and Release Agreement (the "Waiver Agreement") is entered into
by and among William J. Lewis ("Employee"), Eldorado Bank ("Bank"), and Eldorado
Bancorp, a California corporation ("Bancorp"), their officers, directors,
employees, agents, affiliates and subsidiaries (collectively, the "Company").
Terms not otherwise defined herein shall have the meanings ascribed to such
terms in the Agreement (as hereafter defined).
RECITALS
A. Employee and Bank have entered into an Employment Agreement effective
December 20, 1995 (the "Agreement").
B. A condition precedent to certain of Bank's obligations under the
Agreement is the execution of this Waiver Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties, intending to
be legally bound, agree and covenant as follows:
17. RELEASE.
17.1 In consideration for the execution of the Agreement, and the
agreements set forth therein, Employee agrees unconditionally and forever to
release and discharge the Company and its affiliated business entities, their
respective officers, directors, employees, representatives, attorneys, agents
and assigns from any and all claims, actions, causes of action, demands, rights
or damages of any kind or nature which Employee may now have, or ever have,
whether known or unknown, including any claims, causes of action or demands of
any nature arising out of or in any way relating to Employee's employment with,
or separation from, the Company on or before the date of execution of this
Waiver Agreement.
17.2 This release specifically includes, but is not limited to, any
claims for discrimination and/or violation of any statutes, rules, regulations
or ordinances, whether federal, state or local, including, but not limited to,
Title VII of the Civil Rights Act of 1964, as amended, age claims under the Age
Discrimination in Employment Act of 1967, as amended by the Older Workers
Benefits Protection Act of 1990, Section 1981 of Title 42 of the United States
Code, and the California Fair Employment and Housing Act.
17.3 Employee further agrees knowingly to waive the provisions and
protections of Section 1542 of the California Civil Code, which reads:
<PAGE>
A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which, if known by him, must have
materially affected his settlement with the debtor.
18. REPRESENTATIONS OF EMPLOYEE.
18.1 Employee represents and agrees that, prior to the execution of
this Waiver Agreement, Employee has had the opportunity to discuss the terms of
this Waiver Agreement with legal counsel of Employee's choosing.
18.2 Employee affirms that no promise or inducement was made to cause
Employee to enter into this Waiver Agreement other than the execution of the
Agreement and the inducements provided therein. Employee further confirms that
Employee has not relied upon any other statement or representation by anyone
other than what is in this Waiver Agreement as a basis for Employee's agreement.
19. MISCELLANEOUS.
19.1 Except for the Agreement, this Waiver Agreement sets forth the
entire agreement between Employee and the Company, and shall be binding upon
both party's heirs, representatives and successors. This Waiver Agreement shall
be construed under the laws of the State of California, both procedurally and
substantively. Any and all disputes or claims arising out of, or in any way
related to, Employee's employment with, or separation from, the Company, as well
as any and all disputes or claims arising out of, or in any way related to, this
Waiver Agreement, including, without limitation, fraud in the inducement of this
Waiver Agreement, or relating to the general validity or enforceability of this
Waiver Agreement, shall be submitted to final and binding arbitration before an
arbitrator of the American Arbitration Association in Orange County, in
accordance with the rules of that body, and the prevailing party shall be
entitled to reasonable costs and attorneys' fees. Judgment on the award rendered
by the arbitrator may be entered in any court having jurisdiction thereof. If
any portion of this Waiver Agreement is found to be illegal or unenforceable,
such action shall not affect the validity or enforceability of the remaining
paragraphs or subparagraphs of this Waiver Agreement.
19.2 Employee acknowledges that Employee has been advised that
Employee has twenty-one (21) days to consider this settlement, and that Employee
was informed that Employee has the right to consult with counsel regarding this
Waiver Agreement. To the extent Employee has taken less than twenty-one (21)
days to consider this Waiver Agreement, Employee acknowledges that Employee has
had sufficient time to consider the Waiver Agreement and to consult with
counsel, and that Employee does not desire additional time.
19.3 This Waiver Agreement is revocable by Employee for a period of
seven (7) days following Employee's execution of this Waiver Agreement. The
revocation by Employee of this Waiver Agreement must be in writing, must
specifically revoke this Waiver Agreement and must be received by the Company
prior to the eighth (8th) day following the execution of this Waiver Agreement
by Employee. This Waiver Agreement becomes effective, enforceable and
irrevocable on the eighth (8th) day following Employee's execution of the Waiver
Agreement.
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The undersigned agree to the terms of this Waiver Agreement and voluntarily
enter into it with the intent to be bound thereby.
Dated: _____________________, 199_ ______________________________
WILLIAM J. LEWIS
Dated: _____________________, 199_ ELDORADO BANK
By:___________________________
Name:_________________________
Title:________________________
ELDORADO BANCORP
By:___________________________
Name:_________________________
Title:________________________
A-3
