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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 1998 COMMISSION FILE NUMBER 2-76555
------------------------
ELDORADO BANCSHARES, INC.
(Exact name of issuer in its charter)
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<S> <C>
DELAWARE 33-0720548
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
24012 CALLE DE LA PLATA, SUITE 340, LAGUNA 92653
HILLS, CA (Zip Code)
(Address of principal executive offices)
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Issuer's telephone number, including area code: (949) 699-4344
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Securities registered pursuant to Section 12 (b) of the Exchange Act:
None
Securities registered pursuant to Section 12 (g) of the Exchange Act:
Common Stock, par value $.01 per share
------------------------
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 14,095,969 shares of Common Stock outstanding at April 26, 1999.
The aggregate market value of Common Stock held by non-affiliates at April 26,
1998 was approximately $5,371,000 based upon the closing price of $9.875 per
share on April 26, 1999.
Certain documents incorporated by reference: None
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TABLE OF CONTENTS
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PAGE
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PART III
Item 10. Directors and Executive Officers of the Registrant........................................... 2
Item 11. Executive Compensation....................................................................... 7
Item 12. Security Ownership of Certain Beneficial Owners and Management............................... 15
Item 13. Certain Relationships and Related Transactions............................................... 18
PART IV
Item 14. Exhibits and Reports on 8-K.................................................................. 19
Signatures................................................................................................. 21
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the directors of the Company and the
executive officers of the Company and Eldorado Bank.
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NAME AGE POSITION
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<S> <C> <C>
Robert P. Keller.................... 60 President, Chief Executive Officer and Director
John L. Gordon...................... 48 Executive Vice President, Treasurer and Chief Financial Officer
Catherine C. Clampitt............... 37 Executive Vice President--SBA Lending
Gary A. Green....................... 40 Executive Vice President--Commercial Lending
Richard Korsgaard................... 57 Executive Vice President--Construction Loan Division and CRA
Officer
Henry T. McCaffrey.................. 46 Executive Vice President and Chief Credit Officer
William D. Rast..................... 51 Executive Vice President--Mortgage Banking Division
Paul F. Rodeno...................... 43 Executive Vice President--Operations
Ronald L. Wagner.................... 52 Executive Vice President--Equipment Leasing Division
Curt A. Christianssen............... 38 Senior Vice President
Ernest J. Boch...................... 71 Director
James A. Conroy..................... 38 Director
Edward A. Fox....................... 62 Chairman of the Board of Directors
Charles E. Hugel.................... 70 Director
Mitchell A. Johnson................. 56 Director
K. Thomas Kemp...................... 57 Director
Jefferson W. Kirby.................. 36 Director
John B. Pettway..................... 36 Director
Henry T. Wilson..................... 38 Director
Paul R. Wood........................ 45 Director
</TABLE>
ROBERT P. KELLER has served as President and Chief Executive Officer of the
Company and its predecessor since September 1995. Mr. Keller also has served as
Chairman, President and Chief Executive Officer of Eldorado Bank since June
1997, when Commerce Security Bank, Liberty National Bank, San Dieguito National
Bank and Eldorado Bank were consolidated via mergers into Eldorado Bank, and Mr.
Keller served in those same capacities at each of those institutions during the
period between their acquisition by the Company and their consolidation into
Eldorado Bank. Mr. Keller has served as Chairman and Chief Executive Officer of
Antelope Valley Bank since its acquisition by the Company on January 22, 1999.
From 1994 to 1995, Mr. Keller was President and Chief Executive Officer of
Independent Bancorp of Arizona, Inc., a Nasdaq-listed bank holding company with
assets of $1.8 billion, which was acquired by Norwest Corporation in February
1995. From October 1991 to June 1994, Mr. Keller served as President and Chief
Executive Officer of New Dartmouth Bank, a privately-owned financial institution
with assets of $1.7 billion, located in Manchester, New Hampshire, which was
acquired by Shawmut National Corporation in 1994. From 1989 to 1991, he served
as Chief Operating Officer of Dartmouth Bancorp, Inc., also located in
Manchester, New Hampshire. During 1988 and 1989, Mr. Keller served as Executive
Vice President and Chief Operating Officer of American Federal Bank in Dallas,
Texas, which was created through the merger of 12 independent thrifts under the
Southwest Plan. Prior to 1988, he served for 13 years as an officer of Indian
Head Banks Inc. of New Hampshire (acquired by the Fleet/ Norstar Group Inc. in
1988), most recently as Executive Vice President and Chief
Financial/Administrative Officer. Mr. Keller also serves on the boards of
directors of Haverford Industries, LLC, Pennichuck Corporation and White
Mountains Holdings, Inc. Mr. Keller serves as the President, Chief Executive
2
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Officer and a director of Dartmouth Capital Group, Inc. ("DCG General Partner"),
the sole general partner of DCG.
JOHN L. GORDON has served, since August 3, 1998, as Executive Vice
President, Chief Financial Officer and Treasurer of Eldorado Bank and Senior
Vice President, Chief Financial Officer and Treasurer of the Company. Mr. Gordon
has served as Chief Financial Officer and Treasurer of Antelope Valley Bank
since its acquisition by the Company on January 22, 1999. From 1993 to 1998, Mr.
Gordon served as Senior Vice President and Director of Finance and Accounting
for Citizens Business Bank, a $1.4 billion financial institution, and its
holding company, CVB Financial Corporation of Ontario, California. From 1985 to
1993, he served as Senior Vice President and Chief Financial Officer of Mid City
Bank, N.A. Mr. Gordon has also served as the Treasurer of the DCG General
Partner since August 3, 1998.
CATHERINE C. CLAMPITT is the Executive Vice President of Eldorado Bank
responsible for its SBA lending programs. Ms. Clampitt has been responsible for
the Company's SBA lending since March 1997, when the Company's predecessor
acquired Liberty National Bank ("Liberty"). For four years prior to that
acquisition, Ms. Clampitt was responsible for Liberty's SBA lending programs.
Ms. Clampitt is a member of Board of Directors of the National Association of
Government Guaranteed Lenders, Inc., an SBA lending trade association.
GARY A. GREEN is Eldorado Bank's Executive Vice President responsible for
its non-SBA commercial lending fucntion. Mr. Green joined Eldorado Bank in 1989
as a commercial loan officer. From 1994 to 1997, Mr. Green served as a Regional
Vice President, and in 1998, was named head of Eldorado Bank's non-SBA
commercial lending function.
RICHARD KORSGAARD is Eldorado Bank's Executive Vice President responsible
for its Construction Loan Division. Mr. Korsgaard also serves as Eldorado Bank's
CRA Officer. Mr. Korsgaard served as Executive Vice President/Construction
Lending Division and Director of Eldorado Bank and as a director of Eldorado
Bancorp from October 1995 until June 1997 when Eldorado was acquired by the
Company. From June 1982 to October 1995, Mr. Korsgaard served as President,
Chief Executive Officer and Director of Mariners Bank, a $75 million community
bank headquartered in San Clemente, California. Mariners Bank was acquired by
Eldorado Bancorp in October 1995.
HENRY T. MCCAFFREY has served as Executive Vice President and Chief Credit
Officer of Eldorado Bank since October 1998. From 1982 to 1998, Mr. McCaffrey
served as Senior Vice President of Union Bank of California. There he acted as
manager of the centralized underwriting group for Union Bank's Commercial
Banking Units in Los Angeles, Orange County and San Diego.
WILLIAM D. RAST is the Bank's Executive Vice President responsible for its
Mortgage Division. Mr. Rast was hired by Eldorado Bank in February 1998. From
February 1996 to February 1998, Mr. Rast served as the Chief Executive Officer
of Case Compactors, a small waste management company and was also the Managing
Director of Hamilton Pacific, a firm that specializes in relocating businesses
to China. From May 1992 to May 1996, Mr. Rast served as President and Chief
Operating Officer of Hamilton Financial Services Corp., a financial services
company primarily focused in mortgage banking. Prior to 1992, Mr. Rast was
employed for 10 years by First California Mortgage, a 33 office mortgage company
closing $2.5 billion in loans annually, with his last position being Senior Vice
President responsible for retail and wholesale production.
PAUL F. RODENO is Eldorado Bank's Executive Vice President in charge of its
retail branch system, retail product departments and Eldorado Bank's marketing
programs. From October 1995 to June 1997, when San Dieguito National Bank was
merged into Eldorado Bank, Mr. Rodeno served as its Executive Vice President and
Chief Operating Officer. Mr. Rodeno served as Executive Vice President/Loan
Administration of San Dieguito National Bank from July 1986 until September
1995, when San Dieguito was acquired by the Company's predecessor. Prior to
joining San Dieguito, Mr. Rodeno was a commercial loan officer for First
Interstate Bank.
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RONALD L. WAGNER has served as the Executive Vice President of Eldorado
Bank's Leasing Division since January 1999. From November 1995 to January 1999,
Mr. Wagner served as a Senior Vice President of Imperial Business Credit, Inc.,
where he was responsible for sales and marketing leases to small to medium size
businesses until March 1998. Thereafter, he assumed responsibility for four of
the company's loan production offices. From April 1985 to November 1997, Mr.
Wagner was President of Business Credit Services Group, Inc., an independent
lessor specializing in the lower middle market on a lessee direct basis.
CURT A. CHRISTIANSSEN has served as an executive officer of the Company
since March 1996. Mr. Christianssen is currently responsible for the Company's
Corporate Development function, which includes evaluating and helping to plan
acquisitions and other strategic transactions. From March 1996 to July 1998, Mr.
Christiansen served as Treasurer and Chief Financial Officer of the Company and
Eldorado Bank. He served as Chief Financial Officer of Liberty from October 1993
until its acquisition in March 1996 by the Company's predecessor. From October
1991 to April 1993, Mr. Christianssen served as an Executive Vice President and
Chief Financial/Administrative Officer of Olympic National Bank. Previously, Mr.
Christianssen was with the Resolution Trust Company as a Vice President
responsible for general accounting and data processing for Gibraltar Savings and
Loan Association, a $15 billion institution, and as the Chief Financial Officer
for the receiver for Unity Savings and Loan Association.
ERNEST J. BOCH has been Chairman and Chief Executive Officer of Subaru of
New England, Inc. since 1970. He is also the majority owner of Boch Oldsmobile,
Toyota and Mitsubishi of Norwood as well as founder of Boch Broadcasting
Corporation. Mr. Boch is also a director of the DCG General Partner.
JAMES A. CONROY has been associated since 1990 with Olympus Partners, a
private equity firm, and since December 1993, Mr. Conroy has acted as a general
partner of Olympus Growth Fund II, L.P., which is a principal shareholder of the
Company, Olympus Executive Fund, L.P. and other funds affiliated with Olympus
Partners. Prior to 1990, Mr. Conroy was a management consultant with Bain &
Company. Mr. Conroy serves on the board of directors of Frontier Vision
Partners, L.P.
EDWARD A. FOX was elected the non-executive Chairman of the Board of
Directors of the Company on September 1, 1998. He is also currently the
non-executive Chairman of SLM Holding Corp. in Reston, Virginia, the parent of
Sallie Mae. From 1990 to his retirement in 1994, Mr. Fox served as Dean of the
Amos Tuck School of Business at Dartmouth College in Hanover, New Hampshire.
Prior to 1990, Mr. Fox was founding President and Chief Executive Officer of the
Student Loan Marketing Association (Sallie Mae). Mr. Fox currently serves as a
director of Delphi Financial Corp., Greenwich Capital Management Corp. and New
England Life Insurance Company. Mr. Fox is also a director of the DCG General
Partner.
CHARLES E. HUGEL served as Chairman and Chief Executive Officer of
Combustion Engineering, Inc. in Stamford, Connecticut from 1982 to 1990. Prior
to joining Combustion Engineering, Inc., he spent 30 years with AT&T, most
recently as an Executive Vice President. Mr. Hugel also served as a director of
Nabisco, Inc. and its corporate successor, RJR/Nabisco, Inc., from 1978 to 1986.
Mr. Hugel presently serves on the board of directors of Pitney-Bowes, Inc. Mr.
Hugel is also a director of the DCG General Partner.
MITCHELL A. JOHNSON is the President of MAJ Capital Management, Inc., which
he organized in August 1994 after retiring from Sallie Mae in June 1994. Mr.
Johnson joined Sallie Mae in 1973 and served as its Senior Vice President,
Corporate Finance from 1987 until his retirement. Mr. Johnson was the first
President and a founding member of the Washington Association of Money Managers.
In addition, Mr. Johnson was a trustee of the District of Columbia Retirement
Board. Currently, Mr. Johnson serves as trustee of the Citizen Investment Trust,
a mutual fund company, and as a director of the Federal Agricultural Mortgage
Corporation (Farmer Mac) and Whitestone Capital Group, Inc.
K. THOMAS KEMP has served as President and Chief Executive Officer of Fund
American Enterprises Holdings, Inc. (formerly Fireman's Fund Corporation) since
October 1997. From January 1991 to
4
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October 1997, Mr. Kemp served as Executive Vice President of Fund American. Mr.
Kemp also has served as Chairman and Chief Executive Officer of White Mountains
Holdings, Inc. since March 1997. From October 1994 to March 1997, Mr. Kemp
served as President and Chief Executive Officer of White Mountains. Mr. Kemp
serves on the boards of directors of Fund American, White Mountains, Financial
Security Assurance, Ltd., Main Street America Holdings Inc., Murray Lawrence
(Bermuda), Ltd. and Haverford Industries, LLC. Mr. Kemp is also a director of
the DCG General Partner.
JEFFERSON W. KIRBY has been employed by Alleghany Corporation since 1992 and
was appointed Vice President in 1994. From 1987 to 1990, he was employed by
Bankers Trust Company, and from 1990 to 1992, he was employed by BT Securities
Corp., each an affiliate of Bankers Trust New York Corporation. Mr. Kirby also
is a director of Alleghany Asset Management, Inc., Connecticut Surety
Corporation, The Covenant Group, Inc. and The F.M. Kirby Foundation, Inc., a
charitable organization, and a trustee of Lafayette College and the Peck School.
Mr. Kirby is also a director of the DCG General Partner.
JOHN B. PETTWAY is the Manager of The Haverford Group, LLC, an investment
company located in Park City, Utah, and has also served as the Chief Financial
Officer for High Plains Investments, LLC since October 1998. Mr. Pettway served
as the Chief Financial Officer for both Haverford Industries, LLC and Byrne &
sons, l.p., from July 1995 to October 1998. From June 1993 to June 1995, Mr.
Pettway served as the Chief Financial Officer of Cirque Properties, LC. Prior to
June 1993, Mr. Pettway was a practicing attorney at the firm of Adams &
Associates in Alexandria, Virginia. Mr. Pettway serves as director of Haverford
Industries, LLC and American Direct Business Insurance Agency, Inc. Mr. Pettway
is also a director of the DCG General Partner.
HENRY T. WILSON is the Managing Director of Northwood Ventures LLC and
Northwood Capital Partners LLC, private equity investment firms based in
Syosset, New York, with whom he has been associated since 1991. From 1989 to
1991, Mr. Wilson was a Vice President in the investment banking division of
Merrill Lynch & Co. He serves on the boards of directors of Alliance National,
Inc. and the Lion Brewery, Inc. Mr. Wilson is also a director of the DCG General
Partner.
PAUL R. WOOD has served since January 1993 as Vice President of Madison
Dearborn Partners, Inc., a venture capital firm and the general partner of
Madison Dearborn Capital Partners II, L.P., a principal shareholder of the
Company. Mr. Wood was employed by First Chicago Venture Capital from August 1983
to January 1993, and the venture capital unit of Continental Illinois Bank from
January 1978 to August 1983. Mr. Wood serves on the boards of directors of Hines
Horticulture, Inc., Intercontinental Art, Inc. and Woods Equipment Company.
Each of the members of the Board of Directors is generally elected at the
Company's Annual Meeting of Shareholders to serve until the next Annual Meeting
or until his successor is duly qualified and elected. Pursuant to the agreement
providing for the Madison Dearborn and Olympus investments in connection with
the acquisition of Eldorado Bancorp, the Company generally is obligated to
nominate designees of Madison Dearborn and Olympus for election to the Company's
Board of Directors. Nominees of each of Madison Dearborn (Paul R. Wood) and
Olympus (James A Conroy) have been nominated and elected, and currently serve on
the Company's Board of Directors. See "Directors and Executive Officers of the
Registrant" and "Security Ownership of Certain Beneficial Owners and
Management--Principal Shareholders."
COMMITTEES OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE. The members of the Company's Audit Committee are Jefferson
W. Kirby (Chairman), Edward A. Fox and K. Thomas Kemp. The Audit Committee
functions include reviewing the financial statements of the Company and its
subsidiaries and the scope of the annual audit by the Company's independent
certified public accountant and appointing the independent certified public
accountant on an annual basis. The Committee also monitors the Company's
internal financial and accounting controls.
5
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COMPENSATION COMMITTEE. The members of the Company's Compensation Committee
are K. Thomas Kemp (Chairman), Edward A. Fox and Charles E. Hugel. The
Compensation Committee reviews and makes recommendations to the Board of
Directors on matters concerning the salaries and other employee benefits for the
Company's officers.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Kemp is the Chairman and Chief Executive Officer of White Mountain
Holdings, Inc., of which Mr. Keller is a member of the Board of Directors.
DIRECTOR COMPENSATION
The directors of the Company have not received any compensation for serving
on the Board of Directors or any committee or attending meetings thereof. The
Board of Directors expects to approve the payment of compensation to
non-executive directors beginning July 1, 1999. The Company is currently
reviewing the director compensation levels of banks and bank holding companies
in its peer group. All directors receive reimbursement of reasonable expenses
incurred in attending Board and committee meetings and otherwise carrying out
their duties.
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ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation
received for the three fiscal years ended December 31, 1998 by the Chief
Executive Officer and the five other most highly compensated executive officers
of the Company (the "named executive officers"). All cash compensation was paid
to the named executive officers by the Company.
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LONG-TERM COMPENSATION
ANNUAL AWARDS
COMPENSATION -----------------------
--------------------------------- RESTRICTED SECURITIES
NAME AND BASE STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($) OPTIONS COMPENSATION($)
- ----------------------------------- --------- --------- ----------- ---------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Robert P. Keller................... 1998 300,000 -- -- -- 5,000(1)
President and Chief 1997 275,000 -- 1,654,241(2) 364,300 4,750
Executive Officer 1996 185,240 -- 203,788(3) -- 1,316
John L. Gordon..................... 1998(4) 54,167 -- -- 15,000 --
Executive Vice President, 1997 -- -- -- -- --
Eldorado Bank 1996 -- -- -- -- --
Chief Financial Officer
Catherine C. Clampitt.............. 1998(5) 420,278 -- -- 5,000 5,000(1)
Executive Vice President 1997(6) 216,370 -- -- -- 12,250
Eldorado Bank 1996(7) 89,699 -- -- -- 9,694
SBA Lending
Richard Korsgaard.................. 1998 126,200 -- -- -- 9,966(8)
Executive Vice President 1997(9) 124,417 7,212 -- -- 9,908
Eldorado Bank 1996 -- -- -- -- --
Construction Lending
William D. Rast.................... 1998 10) 155,823 -- -- 5,000 2,028(11)
Executive Vice President 1997 -- -- -- -- --
Eldorado Bank 1996 -- -- -- -- --
Mortgage Division
Curt A. Christianssen.............. 1998 130,000 -- -- 5,000 3,900(1)
Senior Vice President 1997 114,167 -- -- 25,000 4,750
Director Corporate 1996 12) 76,875 -- -- 2,316
Development
</TABLE>
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(1) Consists of an award under the Company's 401(k) retirement plan.
(2) Based upon 187,982 shares issued at an estimated market value of $8.80 per
share. See "Price Range of common stock and Dividend Policy." If dividends
are paid on the common stock, Mr. Keller will receive dividends on his
restricted stock. See "--Keller Employment Agreement--Restricted Stock
Awards" for a discussion of both vesting and transferability restrictions.
(3) Based upon 25,796 shares issued at an estimated market value of $7.90 per
share. See "Price Range of common stock and Dividend Policy." If dividends
are paid on the common stock, Mr. Keller will receive dividends on his
restricted stock. See "--Keller Employment Agreement--Restricted Stock
Awards" for a discussion of both vesting and transferability restrictions.
(4) For the period August 3, 1998 to December 31, 1998. Mr. Gordon's current
base salary is $130,000.
(5) Includes base pay of $59,000 and commissions of $361,278.
(6) Includes base pay of $51,501 and commissions of $164,869.
(7) For the period April 1, 1996 to December 31, 1996.
(8) Includes an award under the Company's 401(k) retirement plan of $3,966 and
an auto allowance of $6,000.
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(9) For the period June 6, 1997 to December 31, 1997. Includes base pay of
$72,917 and commissions of $51,500.
(10) For the period February 10, 1998 to December 31, 1998. Mr. Rast's current
base salary is $175,000, in addition to which he receives incentive
compensation based upon the performance of the Mortgage Division.
(11) Consists of reimbursement for a payment for temporary housing.
(12) For the period April 1, 1996 to December 31, 1996.
KELLER EMPLOYMENT AGREEMENT
CAPACITY AND TERM. In July 1996, the Company entered into an employment
agreement with Mr. Keller that was effective retroactive to October 1, 1995. The
Company has agreed to employ Mr. Keller as the Company's senior most executive
officer, to nominate Mr. Keller to serve as a director of the Company and to
cause Mr. Keller to be elected as a director of each of the Company's
subsidiaries that is a depository institution or otherwise a "significant
subsidiary," as defined under SEC regulations. Mr. Keller's employment agreement
has a three-year term, ending on September 30, 2000, and will be renewed
automatically for successive one-year periods unless either the Company or Mr.
Keller gives the other notice at least one year prior to the end of the term or
any extension thereof.
BASE SALARY. Mr. Keller's base salary currently is $350,000. Mr. Keller's
base salary under the employment agreement depends upon the Company's
consolidated assets. For purposes of Mr. Keller's employment agreement, the
Company's consolidated assets are calculated as of the end of each of the
Company's fiscal quarters and are equal to the Company's average consolidated
assets for the six month period then ended calculated on a daily basis in
accordance with GAAP ("Average Consolidated Assets"), except that if the
Company's consolidated assets as of the end of a fiscal quarter vary by more
than 20 percent from the Average Consolidated Assets for the two consecutive
quarters ended as of that date, the Company's consolidated assets as of that
date are used for purposes of determining any adjustment to Mr. Keller's salary.
If, subsequent to an increase in Mr. Keller's base salary, the amount of Average
Consolidated Assets as of the end of any fiscal quarter is less than the most
recently applied asset threshold for determining Mr. Keller's salary, Mr.
Keller's base salary will be decreased, effective as of the beginning of the
quarter next following the measurement date, in accordance with the salary
schedule described above. If the Company's Average Consolidated Assets exceed
$1.8 billion, Mr. Keller may request that the Compensation Committee of the
Company's Board of Directors (the "Committee") consider and make a
recommendation to the Company's Board of Directors whether it is appropriate to
increase his annual salary. Mr. Keller's base salary, as so determined, is
hereinafter referred to as his "Base Salary."
RESTRICTED STOCK AWARDS. Mr. Keller's employment agreement generally
obligates the Company to issue shares of restricted common stock (the
"Restricted Stock") to Mr. Keller whenever, during the term of the agreement,
the Company issues common stock or a Common Stock Equivalent (as defined in the
employment agreement), including shares of common stock issued in the CSB and
Eldorado Bancorp acquisitions. Pursuant to his employment agreement, Mr. Keller
will no longer be eligible to receive additional shares of Restricted Stock at
such time as the Company has Tier 1 capital in excess of $125.0 million. See
"Supervision and Regulation" in Item 1 for a definition of of Tier 1 capital.
The Company had Tier 1 capital of $81.1 million at March 31, 1999. In addition,
Mr. Keller will not be entitled to receive any Restricted Stock as a consequence
of the sale of common stock or a Common Stock Equivalent to DCG or director
qualifying shares to any director of a subsidiary of the Company or the award of
employee stock options or the issuance of common stock upon the exercise
thereof.
For so long as he is eligible, the number of shares of Restricted Stock that
will be issued to Mr. Keller will be equal to 3% of the sum of (x) the number of
shares of common stock then to be issued by the Company or, in the case of the
issuance of a Common Stock Equivalent, the number of shares of common stock that
such Common Stock Equivalent may be converted into or exchanged for, and (y) the
number of
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shares of Restricted Stock to be issued to Mr. Keller at that time. As of April
29, 1999, Mr. Keller has been issued 359,386 shares of Restricted Stock.
Subject only to restrictions on transferability and forfeiture conditions
described below, Mr. Keller will have all the rights of a shareholder with
respect to the Restricted Stock, including, without limitation, the right to
vote the Restricted Stock and to receive any dividend or other distribution with
respect thereto. Prior to the end of Restricted Period (described below), Mr.
Keller may not sell, assign, transfer, pledge, hypothecate or otherwise encumber
or transfer the Restricted Stock, except as permitted by the Compensation
Committee. If Mr. Keller's employment under the employment agreement is
terminated for cause (as defined in the employment agreement) prior to the end
of the Restricted Period, or if Mr. Keller resigns from the Company during the
Restricted Period without the consent of the Board of Directors of the Company,
any Restricted Stock then outstanding will be forfeited to the Company without
any payment to Mr. Keller.
In general, the "Restricted Period" will expire upon the earliest to occur
of the following events: (a) a Change in Control (as defined in Mr. Keller's
employment agreement) of the Company; (b) Mr. Keller's retirement from the
Company after attaining age 62; (c) the effective date of Mr. Keller's
resignation from the Company with the consent of the Board of Directors; (d) the
effective date of the expiration of Mr. Keller's employment agreement pursuant
to notice of non-renewal given by the Company; (e) the effective date of Mr.
Keller's termination of his employment agreement for cause (as defined in the
agreement); (f) the effective date of the termination of Mr. Keller's employment
by the Company due to a "disability" (as defined in the employment agreement);
or (g) Mr. Keller's death. In the case of Restricted Stock that is issued to Mr.
Keller as a consequence of the Company's issuance of a Common Stock Equivalent,
the Restricted Period will terminate on the later of (x) the date on which such
Common Stock Equivalent first becomes convertible into or exchangeable for
shares of common stock and (y) the earliest to occur of the events specified in
the immediately preceding sentence. If any Common Stock Equivalent is redeemed
in whole or in part by the Company prior to the date such Common Stock
Equivalent is convertible into or exchangeable for shares of common stock, upon
such redemption there shall be forfeited to the Company, without any payment to
Mr. Keller, a PRO RATA portion of the shares of Restricted Stock issued as a
consequence of the Company's sale of such Common Stock Equivalent.
STOCK OPTION AWARDS. As provided in Mr. Keller's employment agreement, the
Company's Board of Directors has adopted the 1997 Stock Option Plan (the "Option
Plan") pursuant to which the Board of Directors or the Committee has granted
stock options to Mr. Keller and others.
Pursuant to Mr. Keller's employment agreement, promptly following the
adoption of the Option Plan, the Company granted to Mr. Keller an option
exercisable for a number of shares of common stock equal to 50.0% of the shares
in the Option Pool (as defined herein). Mr. Keller's employment agreement
further provides that if the Company increases the number of shares in the
Option Pool, the Company will promptly grant to Mr. Keller an option exercisable
for a number of shares of common stock equal to 50.0% of the amount such
increase. See "--1997 Stock Option Plan" for a discussion of the extent to which
the number of shares of common stock in the Options Pool will increase
automatically. As of April 29, 1999, Mr. Keller has been issued options to
purchase an aggregate of approximately 521,500 shares of common stock.
Mr. Keller's employment agreement also specifies that the exercise price,
vesting schedule and other terms of any stock option granted to him under the
Option Plan will be substantially similar to the terms of any other
contemporaneously granted stock option under the Option Plan, except that any
stock option granted to Mr. Keller will (a) not have an exercise price less than
the fair market value of the common stock at the time of grant; (b) to the
extent the stock option has an escalating exercise price or a fixed exercise
price with a premium over the then fair market value of the common stock,
reflect an annual percentage increase of not greater than the then current yield
to maturity of the most recently auctioned 5-year U.S. Treasury Notes; (c) vest
over a period of not more than four years from the date of grant;
9
<PAGE>
(d) provide that if Mr. Keller's employment is terminated by the Company other
than for cause (as defined Mr. Keller's employment agreement), the stock option
will continue to be exercisable until such date as it would have expired if Mr.
Keller had continued to be employed by the Company; and (e) provide that upon a
Change in Control of the Company (as defined in Mr. Keller's employment
agreement), any stock option then outstanding will become fully exercisable. See
"--1997 Stock Option Plan" for a discussion of the exercise price and vesting
schedule structure of Mr. Keller's options.
SUPPLEMENTAL RETIREMENT PROGRAM. Mr. Keller's employment agreement
obligates the Company to provide supplemental retirement benefits through a
nonqualified, unfunded arrangement equal up to 35% of Mr. Keller's average base
salary after seven years of service. The supplemental retirement benefit accrues
and vests annually at the rate of 5% per year. The supplemental retirement
benefit will be paid monthly for ten years commencing upon (a) the later of Mr.
Keller's retirement date or age 65 or (b) Mr. Keller's death, whichever occurs
first. Any retirement benefits remaining unpaid at Mr. Keller's death will be
paid to his designated beneficiary.
BENEFITS UPON TERMINATION. Mr. Keller's employment agreement provides that
if his employment is terminated by the Company without cause or by him due to a
material change in the nature or scope of his responsibilities or duties, or a
material breach by the Company of the employment agreement, the Company
generally will be obligated to pay Mr. Keller his Base Salary for the remainder
of the term of his employment agreement or 18 months, whichever is greater.
During such period, the Company also would be obligated to continue certain
employee benefits, such as life, health, accident and disability insurance
coverage, which Mr. Keller was receiving immediately preceding his termination.
In addition, upon the events described above, Mr. Keller's supplemental
retirement benefits would become fully vested, and all options granted to Mr.
Keller to purchase common stock will become fully vested and exercisable.
If Mr. Keller's employment is terminated by the Company because Mr. Keller
becomes disabled (as defined in the employment agreement), Mr. Keller will be
entitled to receive not less than 50% of his then Base Salary until age 65. In
addition, all of his options to purchase common stock will immediately become
fully vested and exercisable.
If Mr. Keller's employment agreement expires following a notice of
non-renewal given by the Company, Mr. Keller would be entitled to the
continuance for a period of six months of his Base Salary and the employee
benefits that Mr. Keller was receiving immediately prior to such termination.
Payments to which Mr. Keller would be entitled upon termination will be
reduced by amounts earned by Mr. Keller for services provided to another party
after such termination. Mr. Keller would have no duty, however, to mitigate such
payments by seeking to provide services to another party. Mr. Keller's
employment agreement also provides that under certain circumstances involving a
change in control, the amount of benefits provided under his employment
agreement would be reduced if, after applying the excise tax provisions to the
payments under the Internal Revenue Code of 1986, as amended, the net economic
benefit to Mr. Keller would be increased by effecting such a reduction.
Mr. Keller's employment agreement provides that a "change in control" will
include the authorization of certain business combinations by the Company's
Board of Directors. In general, a business combination involving the Company
will not be deemed to be a change in control if the Company's shareholders own
at least one-third of the resulting entity and at least half of the directors of
the resulting entity are persons who were directors of the Company at the time
the parties entered into the definitive agreement providing for the business
combination.
OTHER EXECUTIVE EMPLOYMENT AGREEMENTS
The Company also has entered into employment agreements with Catherine C.
Clampitt, Executive Vice President, Richard Korsgaard, Executive Vice President
and William D. Rast, Executive Vice President.
10
<PAGE>
Ms. Clampitt is employed by Eldorado Bank as Executive Vice President
pursuant to a one year employment agreement, renewable annually (the "Clampitt
Agreement"), entered into in July 1997. The Clampitt Agreement establishes a
monthly base salary of approximately $5,000 per month, plus commissions based
upon the volume of SBA 7(a) loan originations and fees generated by the sale of
portions of SBA 504 loans. In the event Ms. Clampitt either is terminated by
Eldorado Bank without cause or terminates the Clampitt Agreement for good reason
(as defined in the Clampitt Agreement) following a change in control of the
Company or Eldorado Bank, she will be entitled to receive a termination payment
in an amount equal to 12 months pay, inclusive of commissions, for the prior 12
months of her employment. The Clampitt Agreement may not be terminated by an
acquisition or dissolution of Eldorado Bank or the Company except in the event
that proceedings for the liquidation of the Company or Eldorado Bank are
commenced by regulatory authorities, in which case the Clampitt Agreement, and
all rights and benefits thereunder, would be terminated.
Mr. Korsgaard is employed by Eldorado Bank as Executive Vice President
pursuant to a three-year employment agreement that expires October 19, 2001 (the
"Korsgaard Agreement") and that will be renewed automatically for successive
one-year periods unless either Eldorado Bank or Mr. Korsgaard gives the other
notice at least one year prior to the end of the term or any extension thereof.
The Korsgaard Agreement establishes a minimum base salary of $132,200. In the
event Mr. Korsgaard is terminated by Eldorado Bank or any successor to Eldorado
Bank without cause, he is entitled to receive a termination payment in an amount
equal to the greater of the balance payable under the Korsgaard Agreement or
twelve months of his then current base salary. The Korsgaard Agreement may not
be terminated by an acquisition or dissolution of Eldorado Bank or the Company
except in the event that proceedings for the liquidation of the Company or
Eldorado Bank are commenced by regulatory authorities, in which case the
Korsgaard Agreement, and all rights and benefits thereunder, would be
terminated. A salary continuation program has been established for Mr.
Korsgaard, under which Mr. Korsgaard (or, in the event of his death, his heirs)
will receive $65,000 per year from Eldorado Bank for 15 years commencing upon
his reaching age 65 or his death or disability, whichever first occurs.
Mr. Rast's employment agreement with Eldorado Bank provides for an annual
salary of $175,000 and bonus payments if the Mortgage Banking Division's income
is greater than $1.0 million. The bonus payment will be $50,000 if the
Division's net income is greater than $1.0 million but not greater than $2.0
million, $125,000 if the Division's net income is greater than $2.0 million but
not greater than $3.0 million and the bonus will increase by $50,000 for each $1
million by which the Division's income exceeds $2.0 million up to a maximum
bonus of $325,000.
The Company or the Bank has entered into Severance Agreements (each a
"Severance Agreement") with Messrs. Gordon, Rast and Christianssen concerning
the ramifications of a change in control of the Company on the continued
employment of each such officer. As used in the Severance Agreement, the term
"change in control" has the same definition as in the Option Plan. Pursuant to
and as detailed further in each Severance Agreement, if the terms of an
officer's employment are significantly altered to the detriment of that officer
within two years following a change in control, and the officer provides the
requisite notice to Eldorado Bank or alternatively, if Eldorado Bank terminates
the officer without cause within two years following a change in control, then
the officer is entitled to a lump sum payment equal to one year's salary, less
applicable taxes and withholdings. A precondition to such payment is the
execution by the officer of a general release and confidentiality agreement.
1997 STOCK OPTION PLAN
GENERAL. Pursuant to the Option Plan, the Company's Board of Directors or
the Compensation Committee (the "Committee") may grant stock options to Mr.
Keller and other officers of the Company or any of its subsidiaries, as well as
to any director of any subidiary. The Option Plan provides only for the issuance
of so-called "nonqualified" stock options (as compared to incentive stock
options).
11
<PAGE>
OPTION POOL. The maximum number of shares as to which options may be
granted is referred to as the "Option Pool." The Option Pool consists of
approximately 1,043,000 shares of common stock. Until such time as the Company
has Tier 1 Capital of $125.0 million or more, if the Company issues any
additional common stock or common stock equivalents, the number of shares in the
Option Pool automatically increases such that the number of shares in the Option
Pool will be equal to 6% of the sum of (i) the shares of common stock (and
common stock equivalents) issued and outstanding immediately following such
issuance and (ii) the number of shares in the Option Pool. The Company had Tier
1 Capital of $81.1 million at March 31, 1999.
EXERCISE PRICE STRUCTURE. The Option Plan authorizes the Committee to set
the exercise price for each option grant. In the case of option grants to Mr.
Keller, each portion of his award will have a separate, fixed exercise price as
such portion vests over time. The exercise price for each separate tranche will
increase progressively based upon a semi-annual compounding of a "base rate"
using the five-year U. S. Treasury rate in effect at the date of grant. See, for
example, "--Option Grants in Last Fiscal Year."
VESTING SCHEDULE AND DURATION. The options granted to date, and any future
grants, unless the Committee otherwise decides, will vest over four years, in
half-year increments, with the first portion vesting on the 18-month anniversary
of the date of grant. The Option Plan provides that unless the Committee
otherwise determines, the options will have a six-year term, expiring on the
sixth anniversary of the date of grant.
ACCELERATION EVENT--EFFECT ON VESTING.
MR. KELLER. Mr. Keller's options will become fully vested in connection
with a change in control, which is defined in the Option Plan consistent with
the definition of a change in control contained in Mr. Keller's employment
agreement. In addition, Mr. Keller's options become fully-vested if the Company
terminates his employment agreement without cause or if he terminates the
agreement for cause. Mr. Keller's options also become fully-vested if he dies or
becomes permanently disabled.
OTHER OPTION HOLDERS. For all other option holders, the Option Plan
provides for a "double trigger," unless the Committee otherwise specifies at the
time it awards the option. Under the double trigger approach, the option would
become fully vested if the option holder is actually or constructively
terminated without cause during a two-year period following a change in control.
12
<PAGE>
AGGREGATED FISCAL YEAR-END OPTION VALUES
The following table shows certain information concerning the aggregate
number of unexercised options to purchase common stock held by the named
executive officers as of December 31, 1998. No options were exercised by the
named executive officers during 1998.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT
OPTIONS AT DECEMBER 31, 1998
DECEMBER 31, 1998 ------------------------
--------------------- EXERCISABLE/
EXERCISABLE/ UNEXERCISABLE
UNEXERCISABLE
<S> <C> <C>
Robert P. Keller.............................................. 25,792/338,508(1) 60,874/$329,402(2)
President and Chief
Executive Officer
John L. Gordon................................................ 0/15,000(1) 0/$0(2)
Executive Vice President, Eldorado Bank
Catherine C. Clampitt......................................... 0/5,000(1) 0/$0(2)
Executive Vice President, Eldorado Bank
William Rast.................................................. 0/5,000(1) 0/$0(2)
Executive Vice President, Eldorado Bank
Curt A. Christianssen......................................... 4,167/25,833(1) 6,172/$10,940(2)
Senior Vice President
</TABLE>
- ------------------------
(1) For information on the vesting schedule and exercise price per share see
"--Option Grants in Last Fiscal Year."
(2) Because of the lack of an active trading market in the common stock, such
calculation assumes a common stock value of $12.00 per share.
13
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains a summary of the grants of stock options made
during the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED
RATE OF
% OF TOTAL STOCK PRICE
NUMBER OF OPTIONS APPRECIATION
SECURITIES GRANTED TO FOR OPTION
UNDERLYING EMPLOYEES EXERCISE TERM (1)
OPTIONS IN FISCAL PRICE EXPIRATION -----------
NAME GRANTED YEAR ($/SH) (2) DATE 5% ($)
- --------------------------------------------------- ----------- --------------- ------------- ----------- -----------
John L. Gordon..................................... 15,000 9.7% 13.36 /2,500 8/01/04 7,942
Executive Vice President, Eldorado Bank 13.72 /2,500 7,042
14.10 /2,500 6,092
14.46 /2,500 5,192
14.86 /2,500 4,192
15.24 /2,500 3,242
Catherine C. Clampitt.............................. 5,000 3.2% 13.04 /833 12/31/03 2,533
Executive Vice President, Eldorado Bank 13.38 /833 2,250
13.76 /833 1,934
14.14 /833 1,617
14.54 /833 1,284
14.94 /835 953
William Rast....................................... 5,000 3.2% 13.36 /833 6/28/04 2,646
Executive Vice President, Eldorado Bank 13.72 /833 2,346
14.10 /833 2,030
14.46 /833 1,730
14.86 /833 1,397
15.24 /835 1,083
Curt A. Christianssen.............................. 5,000 3.2% 13.04 /833 12/31/03 2,533
Senior Vice President 13.38 /833 2,250
13.76 /833 1,934
14.14 /833 1,617
14.54 /833 1,284
14.94 /835 953
<CAPTION>
<S> <C>
NAME 10% ($)
- --------------------------------------------------- ---------
John L. Gordon..................................... 21,253
Executive Vice President, Eldorado Bank 20,353
19,403
18,503
17,503
16,553
Catherine C. Clampitt.............................. 6,846
Executive Vice President, Eldorado Bank 6,563
6,246
5,930
5,597
5,276
William Rast....................................... 7,081
Executive Vice President, Eldorado Bank 6,782
6,465
6,165
5,832
5,529
Curt A. Christianssen.............................. 6,846
Senior Vice President 6,563
6,246
5,930
5,597
5,276
</TABLE>
- ------------------------
(1) The potential realizable value of options granted to the named executive
officers is based upon the market value of the common stock on the date of
grant as determined by the Compensation Committee of the Company's Board of
Directors on the various dates of grant.
(2) Absent a change in control of the Company, as defined in the Option Plan,
each tranche of option shares will vest over four years, in half-year
increments, with the first portion vesting on the 18-month anniversary of
the date of grant. Upon a change in control, the exercisability of the
option is accelerated to such date. Following a change in control, the
exercise price with respect to any option shares exercised prior to their
original vesting date shall equal the exercise price for those option shares
that had a scheduled vesting date that was on or next preceding such
exercise date.
OTHER BENEFIT PLANS
The Company's executive officers are also entitled to short-term disability,
life, medical and dental insurance and to participate in the Company's 401(k)
retirement plan.
14
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
GENERAL.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of April 29, 1999
regarding (i) persons who are beneficial owners of more than 5% of the
outstanding equity securities of the Company, (ii) each director and each named
executive officer of the Company, (iii) all of the directors and executive
officers as a group and (iv) the selling shareholders.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
---------------------------
COMMON
STOCK PERCENTAGE(1)
---------- ---------------
<S> <C> <C>
PRINCIPAL SHAREHOLDERS, DIRECTORS AND NAMED EXECUTIVE OFFICERS
Dartmouth Capital Group, L.P.
Dartmouth Capital Group, Inc.(2)..................................................... 1,978,536 14.0%
Ernest J. Boch(2)(3)................................................................... 1,574,014 11.2%
Director
Madison Dearborn Capital
Partners II, L.P.(4)................................................................. 1,416,429 10.0%
Olympus Growth Fund II, L.P.
Olympus Executive Fund, L.P.(5)...................................................... 1,416,429 10.0%
Robert P. Keller(2)(6)................................................................. 521,796 3.7%
Director, President and Chief
Executive Officer
John J. Byrne(2)(7).................................................................... 290,597 2.1%
James A. Conroy(8)..................................................................... 1,416,429 10.0%
Director
Mitchell A. Johnson(9)................................................................. 69,491 *
Director
Edward A. Fox(2)(10)................................................................... 318,748 2.3%
Chairman
Jefferson W. Kirby(2)(11).............................................................. 299,500 2.1%
Director
Charles E. Hugel(2)(12)................................................................ 224,662 1.6%
Director
K. Thomas Kemp(2)(13).................................................................. 32,130 *
Director
John B. Pettway(2)..................................................................... -- *
Director
Henry T. Wilson(2)(14)................................................................. 277,870 2.0%
Director
Paul R. Wood(15)....................................................................... 1,416,429 10.0%
Director
John L. Gordon......................................................................... 1,025 *
Executive Vice President
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
---------------------------
COMMON
STOCK PERCENTAGE(1)
---------- ---------------
<S> <C> <C>
Catherine C. Clampitt.................................................................. 1,300 *
Executive Vice President
SBA Lending Division
William D. Rast........................................................................ -- *
Executive Vice President
Mortgage Division
Richard Korsgaard...................................................................... -- *
Executive Vice President
Construction Loan Division and
CRA Officer
Curt A. Christianssen(16).............................................................. 5,166 *
Senior Vice President
All directors and executive officers as a group (19 persons). See notes (2), (6), (7)
(8), (9), (10), (11), (12), (13), (14), (15), (16) and (17).......................... 6,158,488 43.2%
</TABLE>
- ------------------------
* Less than 1%
(1) Based on an aggregate of 14,095,969 shares of common stock outstanding as
of April 29, 1999.
(2) Each of Messrs. Boch, Byrne, Fox, Hugel, Keller, Kemp, Kirby, and Wilson is
a principal beneficial owner of the DCG General Partner or an affiliate of
such an owner. Pursuant to the terms of a shareholder agreement, each is
entitled to designate a director of the DCG General Partner. With the
exception of Mr. Byrne, who has designated Mr. Pettway, each of the
aforementioned principal beneficial owners of the DCG General Partner
serves as a director thereof. As the sole general partner of DCG, the DCG
General Partner exercises sole control over the voting and disposition of
1,900,636 shares of common stock held of record by DCG. The DCG General
Partner also holds 9,000 shares directly. DCG and the DCG General Partner
each have a business address c/o Eldorado Bancshares, Inc., 24012 Calle de
la Plata, Suite 340, Laguna Hills, CA 92653.
(3) Such number of shares does not include 674,582 shares of common stock owned
indirectly by Mr. Boch as an investor in DCG, with respect to which he
disclaims beneficial ownership. Mr. Boch's address is Subaru of New
England, Inc., 95 Morse Street, Norwood, MA 02062.
(4) Includes (i) 1,378,429 shares of common stock, stock and (ii) 38,000 shares
issuable upon the exercise of a common stock warrant (assuming the fair
market value of the common stock on the date of exercise equals $10.00 per
share). The maximum number of shares for which the foregoing warrant could
be exercised, if the market value of the common stock increased to (or
above) $24.00 per share, is 599,167. The shares of common stock issuable
upon exercise of the warrant may only be exercisable into shares of voting
common stock if the percentage ownership of Madison Dearborn Capital
Partners II, L.P. ("Madison Dearborn") of all outstanding voting securities
of the Company would not exceed 9.9%. Otherwise, such warrant is
exercisable for shares of non-voting common stock. Shares of non-voting
common stock are convertible into shares of voting common stock at the
election of the holder provided that following such conversion, the holder
will beneficially own no more than 9.9% of the total shares of voting
common stock outstanding. See "Description of Capital Stock" and "Certain
Transactions." Madison Dearborn's sole general partner is Madison Dearborn
Partners II, L.P., whose sole general partner is Madison Dearborn Partners,
Inc. Several individuals, including Paul R. Wood, a director of the
Company, may be deemed to be the beneficial owner of all of the securities
owned by Madison Dearborn. Madison Dearborn's address is Three First
National Plaza, Suite 3900, Chicago, IL 60602.
(5) Includes (i) 1,378,429 shares of voting common stock, and (ii) 38,000
shares issuable upon the exercise of a common stock warrant (assuming the
fair market value of the common stock on the date of exercise equals $10.00
per share). The maximum number of shares for which the foregoing warrant
could be exercised, if the market value of the common stock increased to
(or above) $24.00
16
<PAGE>
per share, is 599,167. The shares of common stock issuable upon exercise of
the warrant may only be exercisable into shares of voting common stock if
Olympus' percentage ownership of all outstanding voting securities of the
Company would not exceed 9.9%. Otherwise, such warrant is exercisable for
shares of non-voting common stock. See "Description of Capital Stock" and
"Certain Transactions." Shares of non-voting common stock are convertible
into shares of voting common stock at the election of the holder provided
that following such conversion, the holder will beneficially own no more
than 9.9% of the total shares of voting common stock outstanding.
Presentation has been combined for Olympus Growth Fund II, L.P. and Olympus
Executive Fund, L.P. (collectively, "Olympus"), as the general partners of
the limited partnerships (OGF II, L.P. and OEF, L.P., respectively) are
under common control. Several individuals, including James A. Conroy, a
director of the Company, may be deemed to be the beneficial owner of all of
the securities owned by Olympus. Olympus's address is Metro Center, One
Station Place, Stamford, CT 06902.
(6) Includes (i) 75,903 shares of common stock, (ii) 359,386 shares of
restricted stock issued to Mr. Keller pursuant to the terms of his
employment agreement, and (iii) 86,507 shares of common stock subject to
employee stock options exercisable within 60 days. Such number of shares
does not include 93,833 shares of common stock owned indirectly by Mr.
Keller as an investor in DCG, with respect to which he disclaims beneficial
ownership.
(7) Such number of shares does not include 135,911 shares of common stock owned
indirectly by Mr. Byrne as an investor in DCG, with respect to which he
disclaims beneficial ownership. Mr. Byrne's business address is 700 Bitner
Street, Park City, UT 84098.
(8) Consists entirely of securities held by Olympus. See Note 5 of this table,
above. Mr. Conroy, indirectly through one or more companies, exercises
joint voting and dispositive control over the shares of common stock owned
of record by Olympus; however, he disclaims beneficial ownership of such
shares.
(9) Mr. Johnson is an investor in DCG and such number of shares does not
include 29,061 shares of common stock owned indirectly by Mr. Johnson as an
investor in DCG, with respect to which he disclaims beneficial ownership.
(10) Such number of shares does not include 119,451 shares of common stock
owned indirectly by Mr. Fox as an investor in DCG, with respect to which
he disclaims beneficial ownership.
(11) Such number of shares does not include 138,682 shares of common stock
owned indirectly by Mr. Kirby as an investor in DCG, with respect to which
he disclaims beneficial ownership.
(12) Shares beneficially owned by Mr. Hugel are held of record by the Hugel
Family Limited Partnership. Mr. Hugel has sole voting and dispositive
power with respect to the shares. Such number of shares does not include
83,650 shares of common stock owned indirectly by the Hugel Family Limited
Partnership as an investor in DCG, with respect to which it disclaims
beneficial ownership.
(13) Such number of shares does not include 16,069 shares of common stock owned
indirectly by Mr. Kemp as an investor in DCG, with respect to which he
disclaims beneficial ownership.
(14) Includes (i) 225,406 shares and 51,564 shares of common stock held by
Northwood Ventures LLC ("Northwood Ventures") and Northwood Capital
Partners LLC ("Northwood Capital"), respectively, of which Mr. Wilson is a
Managing Director and (ii) 900 shares held by Mr. Wilson directly. Mr.
Wilson disclaims beneficial ownership of common stock held by Northwood
Ventures and Northwood Capital. Such number of shares does not include (i)
84,316 shares and 21,130 shares of common stock owned indirectly by
Northwood Ventures and Northwood Capital, respectively, and (ii) 1,823
shares held by Mr. Wilson in directly, as investors in DCG, with respect
to which Northwood Ventures, Northwood Capital and Mr. Wilson disclaim
beneficial ownership.
(15) Consists entirely of securities held by Madison Dearborn. See Note 4 of
this table, above. Madison Dearborn's sole general partner is Madison
Dearborn Capital Partners II, whose sole general partner is Madison
Dearborn Partners, Inc. Mr. Wood is an executive officer of Madison
Dearborn Partners, Inc., however, he disclaims beneficial ownership of all
such shares.
(16) Includes (i) 1,000 shares of common stock and (ii) 4,166 shares of common
stock subject to employee stock options exercisable within 60 days.
(17) Includes 166,223 shares of common stock purchasable upon the exercise of
warrants or options that are currently exercisable or may be exercisable
within 60 days.
17
<PAGE>
ITEM 13. CERTAIN TRANSACTIONS AND RELATED TRANSACTIONS
TRANSACTIONS WITH CERTAIN SHAREHOLDERS
LOAN FROM DCG TO THE COMPANY. On March 27, 1998, DCG loaned to the Company
$540,000, substantially all of which was used by the Company for the redemption
on that date of certain subordinated debentures originally issued by the
Company's predecessor, SDN. The promissory note evidencing the loan (the "DCG
Note") was repayable in eight quarterly installments commencing June 30, 1998
and bearing interest at a fixed rate of 10.5%, which was equal to Eldorado
Bank's prime rate plus 2.0% at the time of the DCG Note. The DCG Note was
prepayable at any time without penalty. The Company repaid the DCG Note in full
on April 12, 1999, using proceeds from the Company's public offering of Common
Stock on the same date (the 'Offering')
REDEMPTION OF SERIES B PREFERRED STOCK. On June 6, 1997, as part of the
financing for the acquisition of Eldorado Bancorp, the Company issued shares of
11% Series B Preferred Stock, $100 liquidation value per share (the "Series B
Preferred Stock"), having an aggregate liquidation amount of $11,659,300. All of
the outstanding Series B Preferred Stock was held by two of the Company's
principal shareholders (Madison Dearborn and Olympus) in substantially equal
proportions. See "Principal Shareholders." The Series B Preferred Stock is
redeemable pursuant to its terms at the Company's option, at a redemption price
of 103% of its liquidation amount, plus accrued and unpaid dividends, or a total
of $12,009,079 plus accrued and unpaid dividends. The Company redeemed all of
the outstanding Series B Preferred Stock on April 12, 1999, contemporaneously
with the closing of the Offering.
CONVERSION OF SPECIAL COMMON STOCK. Most of the common stock held by
Madison Dearborn and Olympus prior to the Offering was designated as "Special
Common Stock" under the Company's Certificate of Incorporation and is currently
entitled to a liquidation preference of $9.62 per share over the other common
stock. Madison Dearborn and Olympus converted all of their Special Common Stock
into common stock prior to the closing of the Offering which occurred on April
12, 1999.
AMENDMENT OF SHAREHOLDER AGREEMENT. The Company is a party to a Shareholder
Agreement, dated June 6, 1997 (the "Shareholder Agreement"), among itself,
Madison Dearborn, Olympus, DCG and certain shareholders of the DCG General
Partner. The Shareholder Agreement creates various rights in favor of, and
obligations on, its parties with respect to their direct and indirect
investments in the Company.
Immediately prior to completion of the Offering, the parties to the
Shareholder Agreement amended the Shareholder Agreement, eliminating most of its
operative provisions. The material provisions that will remain in effect will
provide as follows: (i) unless and until both Madison Dearborn and Olympus hold
9.9% or less of the common stock (treating any common stock equivalents that
they hold as fully exercised), DCG may not transfer any common stock or
distribute any common stock to DCG's partners if, as a result of that transfer
or distribution, DCG would hold fewer shares of common stock than either Madison
Dearborn or Olympus; (ii) neither Madison Dearborn nor Olympus will transfer any
of its common stock (or warrants exercisable for common stock) without the prior
approval of the Federal Reserve unless certain exceptions apply (which generally
are intended to ensure that the transferee is not acquiring a substantial
ownership interest in the Company without the approval of the Federal Reserve);
and (iii) DCG will not sell any of its shares of common stock during a limited
period before or after certain registered offerings of the shares of common
stock held by Madison Dearborn and Olympus.
NOMINATION OF DIRECTORS UNDER SECURITIES AGREEMENT. Pursuant to the
agreement providing for the Madison Dearborn and Olympus investments in
connection with the acquisition of Eldorado Bancorp, the Company generally is
obligated to nominate designees of Madison Dearborn and Olympus for election to
the Company's Board of Directors. Nominees of each of Madison Dearborn (Paul R.
Wood) and Olympus (James A Conroy) have been nominated and elected, and
currently serve on the Company's Board of
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Directors. See "Principal Shareholders." The Company's obligation will terminate
when the amount of Company securities held by the applicable shareholder falls
below certain pre-designated levels.
OTHER MATTERS
Some of the executive officers of the Banks and their immediate families, as
well as the companies with which such directors and executive officers are
associated, are customers of, and have had banking transactions with one or both
of the Banks in the ordinary course of the Banks' business, and the Banks expect
to have such ordinary banking transactions with such persons in the future. In
the Company's opinion, all loans and commitments to lend included in such
transactions were made in compliance with applicable laws on substantially the
same terms, including interest rates and collateral, as those prevailing for
comparable transactions with other persons of similar creditworthiness and did
not involve more than a normal risk of collectibility or present other
unfavorable features. Although the Banks do not have any limits on the aggregate
amount it would be willing to lend to directors and officers as a group, loans
to individual directors and officers must comply with the Bank's lending
policies and statutory lending limits. There were no loans to executive officers
or directors of the Company at December 31, 1998.
PART IV
ITEM 14. EXHIBITS AND REPORTS ON 8-K
(a) Exhibit Index
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2.1 Agreement and Plan of Merger dated December 24, 1996 between Commerce Security
Bancorp, Inc. (the "Company") and Eldorado Bancorp ("Eldorado") (filed as Exhibit
2.1 to the Company's Current Report on Form 8-K dated December 24, 1996 and
incorporated by reference herein)
2.2 Stock Option Agreement dated December 24, 1996 between the Company and Eldorado
(filed as Exhibit 2.2 to the Company's Current Report on Form 8-K dated December 24,
1996 and incorporated by reference herein)
3.1 Certificate of Incorporation (filed as Exhibit 10.3 to the Company's Quarterly
Report on Form 10-QSB for the quarter ended September 30, 1996 and incorporated by
reference herein)
3.2 Certificate of Amendment to Certificate of Incorporation (incorporated by reference
to the Company's Registration Statement in Form S-4 (File no. 333-65683))
3.5 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 Form of Specimen Stock Certificate (incorporated by reference to the Company's Form
8-A filed with the Commission on January 29, 1999)
10.3 Indenture between the Company and Wilmington Trust Company, dated as of July 15,
1997 (incorporated by reference to the Company's Current Report on Form 8-K filed
with the Commission on August 7, 1997)
10.4 Form of Junior Subordinated Debenture (incorporated by reference to the Company's
Registration Statement on Form S-4 (File no. 333-51179))
10.5 Form of Series A Capital Securities Guarantee (incorporated by reference to the
Company's Registration Statement on Form S-4 (File no. 333-51179))
10.6 Form of Subordinated Capital Income Security, Series A (incorporated by reference to
the Company's Registration Statement on Form S-4 (File no. 333-51179))
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10.7 Employment Agreement by and between the Company and Robert P. Keller (incorporated
by reference to the Company's Quarterly Report on Form 10-Q for the Quarter Ended
September 30, 1996)
10.8 Employment Agreement by and between Eldorado Bank and Catherine C. Clampitt
(incorporated by reference to the Company's Registration Statement on Form S-1 (File
no. 333-61589))
10.9 Employment Agreement by and between Eldorado Bank and Richard Korsgaard
(incorporated by reference to the Company's Registration Statement on Form S-1 (File
no. 333-61589))
10.10 Amendment Number One to Employment Agreement by and between Eldorado Bank and
Richard Korsgaard (incorporated by reference to the Company's Registration Statement
on Form S-1 (File no. 333-61589))
10.11 Employment Agreement by and between Eldorado Bank and William Rast (incorporated by
reference to the Company's Registration Statement on Form S-1 (File no. 333-61589))
10.12 Form of Severance Agreement between the Company and certain executive officers
(incorporated by reference to the Company's Registration Statement on Form S-1 (File
no. 333-61589))
10.13 Form of Amended and Restated Series B Warrant held by Madison Dearborn and Olympus
(incorporated by reference to the Company's Registration Statement on Form S-1 (File
no. 333-61589))
10.14 Amendment Number One to Employment Agreement by and between Eldorado Bank and
William Rast (filed herewith)
21. Subsidiaries of the Registrant (filed as Exhibit 21 to the Company's Registration
Statement on Form S-1 (File no. 333-61589))
23.1 Consent of PricewaterhouseCoopers LLP (filed herewith)
27 Financial Data Schedule (previously filed)
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* Denotes Executive Compensation Plan or Arrangement
(b) Reports on Form 8-K.
1) None.
20
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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.
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ELDORADO BANCSHARES, INC.
Date: April 29, 1999 By /s/ CURT A. CHRISTIANSSEN
-----------------------------------------
Curt A. Christianssen
SENIOR VICE PRESIDENT
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March 15, 1999
Mr. William D. Rast
45 Verissimo Drive
Novato, California 94947
Dear Bill:
Pursuant to our discussion, the bonus eligibility portion of your agreement
dated February 9, 1998 with Eldorado Bank was amended, retroactive to January 1,
1999.
Bonus Eligibility: Payable based on 1999 annual (calendar year) net income of
Mortgage Banking Division:
Net Income * Bonus Payments
---------------------------------------
Under $1,000,000 0
Over $1,000,000 $ 50,000
Over $2,000,000 $125,000
Over $3,000,000 $175,000
Over $4,000,000 $225,000
Over $5,000,000 $275,000
Over $6,000,000 $325,000
If earned, payable after completion of Bank's annual audited
financial statements. No bonus is earned or is payable
unless you are actively employed as of the bonus payment
date. Therefore, should your employment terminate for the
reasons of (1) voluntary resignation or (2) for cause, you
have not earned any bonus for the calendar year covered by
this bonus plan. If the Mortgage Division is sold and as a
result of that sale your employment is terminated within 90
days of the date of sale, you will be eligible for a bonus
payment pro-rated from January 1, 1999, through the date
your employment terminates.
Any bonus payment will be pro-rated between net income
levels and bonus payment amounts are based on actual net
income performance, adjusted as outlined below. Your bonus
eligibility may be changed in the future at the discretion
of the Bank.
* Net Income Adjustments:
" plus legal costs associated with Ruemmler, et
al cases;
" cost of funds will be equal to Eldorado
Bank's cost to fund warehouse line - now fed
funds rate plus 1%;
" inter-company charges, i.e., Human Resources,
Accounting, MIS, etc. will be charged to the
division in accordance with Eldorado Bank's
1999 approved budget as of January 27, 1999,
and
" taxes will be calculated at actual rates.
In addition, the Committee granted you an option to purchase an additional
5,000 shares of Eldorado Bancshares, Inc. Class B Common Stock pursuant to terms
similar to that previously granted to you. This brings the total options
granted to you to 10,000 shares. A separate Option Agreement will be forwarded
under separate cover.
Sincerely,
/s/ Robert P. Keller Approved by: /s/ William D. Rast Date: 3/18/99
Robert P. Keller
President and Chief Executive Officer
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EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-50835) of Eldorado Bancshares, Inc. (formerly
Commerce Security Bancorp, Inc.) of our report dated March 1, 1999 appearing
on page F-1 of this Form 10-K/A.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Los Angeles, California
April 29, 1999
