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CALL EXERCISE AGREEMENT
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THIS CALL EXERCISE AGREEMENT (this "Agreement") is made and entered
into this 15th day of July, 1997 (the "Effective Date") by and among Dartmouth
Capital Group, L.P. ("DCG"), Commerce Security Bancorp, Inc. ("Company") (with
respect to Sections 6 and 7 only), Madison Dearborn Capital Partners II, L.P., a
Delaware limited partnership ("MDP"), Olympus Growth Fund II, L.P., a Delaware
limited partnership ("OGF"), and Olympus Executive Fund, L.P., a Delaware
limited partnership ("OEF" and collectively with OGF, "Olympus"). (MDP and
Olympus are called collectively the "Purchasers" and individually called
"Purchaser"; Purchasers and DCG are called collectively the "Parties.")
RECITALS
A. DCG and Purchasers are parties to that certain Shareholder
Agreement dated as of June 6, 1997 by and among Company, Purchasers, DCG, Xxxxxx
X. Xxxxxx, and certain other persons (the "Shareholder Agreement"). Terms not
otherwise defined in this Agreement shall have the meaning ascribed to them in
the Shareholder Agreement.
B. Section 11 of the Shareholder Agreement gives each Purchaser the
option to purchase the Call Securities (as defined below) held by DCG.
C. Purchasers are hereby exercising their option to purchase all of
the Call Securities held by DCG, and DCG hereby sells all of the Call Securities
to Purchasers.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties hereto
covenant and agree as follows:
1. DEFINITIONS.
"CALL SECURITIES" shall mean the following securities, which are owned
by DCG:
(i) 18,647 shares of Series B Preferred Stock (as defined in the
Shareholders Agreement), and
(ii) 771,788 shares of Special Common Stock (as defined in the Shareholders
Agreement), and
(iii) 639,714 Series B Warrants (as defined in the Shareholders
Agreement).
"EXERCISE PRICE" shall mean $5,529,659.75, which is the aggregate
purchase price for all Call Securities, as established pursuant to the formula
contained in Section 11(b) of the Shareholder Agreement. Of the Exercise Price,
$1,864,700.00 represents the purchase price for the Series B Preferred and the
Series B Warrant ($6,397.14 of this amount is allocated to the Series B
Warrant), $8,429.47 represents accrued dividends on the Series B Preferred Stock
for the period of June 30, 1997 to July 14, 1997, inclusive, $3,712,300.28
represents the purchase price for the Special Common Stock, and $55,770
represents a 1% commitment fee to be credited to the Purchasers.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
2. EXERCISE OF CALL. Purchasers hereby exercise their right to purchase
all of the Call Securities, effective as of the Effective Date. Each of MDP,
OGF and OEF hereby purchases the Call Securities, in exchange for their
respective share of the Exercise Price as set forth in Schedule 1 to this
Agreement.
3. ACKNOWLEDGMENT OF RECEIPT OF EXERCISE PRICE. DCG hereby acknowledges
having received the full Exercise Price in immediately available funds (actual
payment to DCG being made by Xxxxxx Brothers Inc. ("Xxxxxx Brothers"), as
partial satisfaction of amounts owed to Purchasers by Xxxxxx Brothers in
connection with the purchase by Xxxxxx Brothers of all of Series A Capital
Securities owned by the Purchasers).
4. ACKNOWLEDGMENT OF RECEIPT OF CALL SECURITIES. Each of MDP, OGF and
OEF hereby acknowledges receipt of the Call Securities, registered in their name
as set forth in Schedule 1 to this Agreement.
5. WAIVER OF NOTICE AND SIGNATURE GUARANTEES. DCG hereby waives the
requirement contained in Section 11(a) of the Shareholder Agreement, which
requires Purchaser to give DCG 10 days prior notice of the exercise of its right
to purchase the Call Securities. The Purchasers hereby waive the requirement in
Section 11(b) of the Shareholder Agreement, which requires DCG to deliver stock
powers on which the signatures have been guaranteed.
6. RIGHT TO DESIGNATE DIRECTOR. The Company hereby acknowledges that,
upon consummation of the purchase of the Call Securities by the Purchasers and
the contemporaneous sale by the Purchasers of the Series A Capital Securities,
pursuant to Section 9.3(d) of the Securities Purchase Agreement each of MDP and
Olympus has the right to designate a director under Section 9.3 of the
Securities Purchase Agreement and Section 10 of the Shareholder Agreement.
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7. AGREEMENT TO INCREASE NUMBER OF PIE SHARES. Pursuant to Section 12 of
the Shareholder Agreement, the Purchasers hereby request, and the Company hereby
agrees, to cause the Company's Board of Directors to approve, and to submit to a
vote of the Company's shareholders, an amendment to the Company's Certificate of
Incorporation that will increase the maximum number of PIE Shares that may be
distributed in the aggregate to holders of Series B Preferred Stock to One
Million Two Hundred Fifty Thousand (1,250,000) PIE Shares. The Company hereby
acknowledges that it has reviewed evidence reasonably satisfactory to the
Company and its counsel (within the meaning of Section 12(a) of the Shareholder
Agreement) that such increase in the maximum number of PIE Shares would not
cause either Purchaser to own as of close of business on the Effective Date (as
defined herein), or have the potential ability to acquire (under the express
terms of Common Stock or other CSBI Securities that the Purchaser owns as of
close of business on the Effective Date), Common Stock or other CSBI Securities
that, currently or upon the occurrence of any subsequent event, are or may
become convertible into or exchangeable or exercisable for Common Stock, which
in the aggregate could represent twenty-five percent (25%) or more of the Common
Stock outstanding on a pro forma basis. Notwithstanding the foregoing or the
terms of Section 12 of the Shareholder Agreement, the Company agrees that at any
time and from time to time at a request of one or more Purchaser Shareholders
that own, in the aggregate, a majority in value (determined in the manner
specified in Section 2(b) of this Agreement) of the aggregate amount of Series B
Preferred Stock then held by the Purchaser Shareholders, the Company shall cause
to be approved by its Board of Directors and submitted to its shareholders an
additional amendment to the Company's Certificate of Incorporation that would
further increase the maximum number of PIE Shares that may be distributed in the
aggregate to holders of Series B Preferred Stock to such greater number as may
be specified in the request delivered by the Purchaser Shareholders, provided
that the Purchaser Shareholders deliver to the Company evidence reasonably
satisfactory to the Company and its counsel (which evidence may include
discussions with the FRB, if the Purchaser or the Company reasonably deems such
discussions to be necessary to clarify then existing statutes, regulations or
published policy guidelines) that such increase in the maximum number of PIE
Shares would not cause any Purchaser Shareholder to then own, or have the
potential ability to acquire (under the express terms of Common Stock or other
CSBI Securities that the Purchaser then owns), Common Stock or other CSBI
Securities that, currently or upon the occurrence of any subsequent event, are
or may become convertible into or exchangeable or exercisable for Common Stock,
which in the aggregate could represent twenty-five percent (25%) or more of the
Common Stock outstanding on a pro forma basis. DCG hereby acknowledges and
confirms its intent to adhere to its obligation under Section 12(b) of the
Shareholder Agreement to vote in favor of any such amendment all of the Voting
Securities held by DCG as of the applicable record date.
8. CERTAIN REPRESENTATIONS BY DCG. DCG hereby represents and warrants to
Purchasers as follows:
a. ORGANIZATION OF DCG. DCG is duly organized, validly existing, in
good standing under the laws of the jurisdiction of its formation.
b. AUTHORIZATION OF TRANSACTION. DCG has full power and authority
to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and
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delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite action on
the part of DCG and no other proceedings on the part of DCG are necessary
to consummate the transactions contemplated hereby. This Agreement
constitutes the valid and legally binding obligation of DCG, enforceable
in accordance with its terms and conditions. DCG need not give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to consummate
the transactions contemplated by this Agreement.
c. NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which DCG is subject or any
provision of its partnership agreement, or, (B) conflict with, result in a
breach of, constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, note, bond, mortgage, deed of trust, or other
arrangement to which DCG is a party or by which he or it is bound or to
which any of its assets is subject.
d. BROKERS' FEES. DCG has no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Purchasers could
become liable or obligated. The Purchasers acknowledge that the Company is
obligated to pay a commission to The Shattan Group, LLC as a consequence of
the sale of the Call Securities to the Purchasers.
e. TITLE TO CALL SECURITIES. DCG holds of record and owns
beneficially all of the Call Securities, free and clear of any restrictions
on transfer (other than any restrictions under the Securities Act and state
securities laws), any taxes, security interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands.
With the exception of this Agreement, DCG is not a party to any option,
warrant, purchase right, call, or other contract or commitment that could
require DCG to sell, transfer, or otherwise dispose of any Call Securities.
f. NO PROHIBITED ACTIONS. DCG has not taken any of the actions
prohibited by Section 11(c) of the Shareholder Agreement (i.e., converted
any of the Call Securities, waived any right applicable to Call Securities,
Transferred any Call Securities).
9. CERTAIN REPRESENTATIONS BY MDP AND OLYMPUS. Each of MDP and Olympus
hereby represents and warrants to DCG as follows:
a. ORGANIZATION OF MDP AND OLYMPUS. The Purchaser is duly
organized, validly existing, in good standing under the laws of the
jurisdiction of their formation.
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b. AUTHORIZATION OF TRANSACTION. The Purchaser has full power and
authority to execute and deliver this Agreement and to perform their
obligations hereunder. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all requisite action on the part of the Purchasers and no
other proceedings on the part of the Purchasers is necessary to consummate
the transactions contemplated hereby. This Agreement constitutes the valid
and legally binding obligation of the Purchaser, enforceable in accordance
with its terms and conditions. The Purchaser need not give any notice to,
make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
c. NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Purchaser is subject
or any provision of its partnership agreements, or, (B) conflict with,
result in a breach of, constitute a default (or an event which, with notice
or lapse of time, or both, would constitute a default) under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, note, bond, mortgage, deed of trust, or other
arrangement to which the Purchaser is a party or by which it is bound or to
which any of its assets are subject.
d. BROKERS' FEES. The Purchaser has no liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which DCG could become
liable or obligated.
e. NO SIDE AGREEMENTS. With respect to the sale of the Series A
Capital Securities, the Purchase Agreement, dated July 10, 1997, by and
among Purchasers and Xxxxxx Brothers, is the only agreement between the
Purchaser and Xxxxxx. Without limiting the foregoing, the Purchaser has
not entered into any other agreement or understanding with Xxxxxx Brothers
regarding the purchase price of the Series A Capital Securities or the
pricing of the Series A Capital Securities. In addition, the Purchaser has
not entered into any other agreement or understanding regarding Xxxxxx
Brother's fees for the sale of the Series A Capital Securities.
f. PRIVATE PLACEMENT SECURITIES. The Purchaser intends to purchase
the Call Securities for its own account and not, in whole or in part, for
the account of any other person. The Purchaser represents and warrants to,
and covenants and agrees with, the Company and DCG that the Call Securities
to be acquired by it hereunder are being acquired for its own account for
investment and with no intention of distributing or reselling such Call
Securities or any part thereof or interest therein in any transaction which
would be in violation of the securities laws of the United States of
America or any state.
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10. MISCELLANEOUS.
a. COUNTERPARTS. This Agreement may be executed in any number of
the counterparts, each of which counterparts when so executed and delivered
shall be deemed to be an original, but all such respective counterparts
shall together constitute but one and the same instrument.
b. LEGAL, VALID AND BINDING OBLIGATION. The execution and delivery
of this Agreement and all documents, instruments and agreements required to
be executed in connection herewith, and the consummation of the
transactions contemplated hereby and thereby have each been duly and
validly authorized by the Parties to this Agreement.
c. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the Parties hereto and their respective
successors and permitted assigns. Nothing expressed herein is intended or
shall be construed to give any person other than the persons referred to in
the preceding sentence any legal or equitable right, remedy or claim under
or in respect of this Agreement.
d. ASSIGNABILITY. This Agreement shall not be assignable by any
Party without the written consent of the other Parties.
e. NOTICES. Except as otherwise provided herein, all notices,
consents, requests, instructions, approvals and other communications
provided for herein shall be given in the manner, and to the address set
forth for in the Shareholder Agreement.
f. SEVERABILITY. Any covenant, provision, agreement or term of this
Agreement that is prohibited or is held to be void or unenforceable in any
jurisdiction shall as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions thereof.
g. WAIVER; HEADINGS. Neither this Agreement nor any term hereof may
be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the Parties hereto. The headings in this
Agreement are for the purposes of references only and shall not limit or
otherwise affect the meaning hereof.
h. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement shall
be governed by, and construed in accordance with the laws of the State of
Delaware without regard to the conflict of law provisions thereof. Each of
the Parties submits to the jurisdiction of any federal court (or, if
federal jurisdiction is unavailable, a state court) sitting in Los Angeles,
California or Chicago, Illinois in any action or proceeding arising out of
or relating to this Agreement and agrees that all claims in respect of the
action or proceeding may be heard and determined in any such court. Each
Party also agrees not to bring any action or proceeding arising out of or
relating to this Agreement in any other court. Each of the Parties waives
any defense of inconvenient forum to the maintenance of any action or
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proceeding so brought and waives any bond, surety, or other security that
might be required of any other Party with respect thereto. Any Party may
make service on any other Party by sending or delivering a copy of the
process to the Party to be served at the address and in the manner provided
for the giving of notices in Section 10(e). Nothing in this Section 10(h),
however, shall affect the right of any Party to serve legal process in any
other manner permitted by law or at equity. Each Party agrees that a final
judgment in any action or proceeding so brought shall be conclusive and may
be enforced by suit on the judgment or in any other manner provided by law
or at equity.
i. AMENDMENT. This Agreement cannot be altered or amended, except
pursuant to an instrument in writing signed by the Parties hereto.
j. GENERAL DISCLAIMER. The Parties agree that any actions taken
under this Agreement are subject to and will be superseded by any law,
rule, regulation or requirement established by governmental agencies.
k. ENTIRE AGREEMENT. This Agreement represents the entire
understanding of the Parties with respect to the matters addressed herein
and supersedes all prior written and oral understandings concerning the
subject matter herein.
l. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue
any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the other
Parties hereto, which approval shall not be unreasonably withheld;
PROVIDED, HOWEVER, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities (in which case
the disclosing Party will use its best efforts to advise the other Parties
prior to making the disclosure). The Purchasers acknowledge having been
advised by the Company that the Company intends to file with the Securities
and Exchange Commission a Current Report on Form 8-K disclosing the resale
by the Purchasers and DCG of the Series A Capital Securities and the
purchase by the Purchasers of the Call Securities.
m. NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any person other than the Parties hereto and
their respective successors and permitted assigns. Any entity to which
Purchasers may transfer any Call Securities shall have the Purchasers'
rights under this Agreement, except as otherwise provided in this
Agreement.
n. FURTHER ASSURANCES. After the execution of this Agreement, the
Parties will execute and deliver all such powers of attorney, documents,
instruments, and do all such other acts and things as may be necessary to
carry out the provisions of this Agreement.
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IN WITNESS WHEREOF, each of the Parties to this Agreement has caused
this Agreement to be duly executed as of the date first above written.
DARTMOUTH CAPITAL PARTNERS, L.P.
By: Dartmouth Capital Group, Inc., its general partner
By:
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Name: Xxxxxxx X. Xxxxx
Title: Secretary
COMMERCE SECURITY BANCORP, INC.
By:
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Name: Xxxxxxx X. Xxxxx
Title: Secretary
MADISON DEARBORN CAPITAL PARTNERS II, L.P.
By: Madison Dearborn Partners II, L.P., its General
Partner
By: Madison Dearborn Partners, Inc., its General Partner
By: Xxxx X. Xxxx, its Vice President
By:
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Name: Xxxx Xxxxxxxxxx, its attorney
duly authorized
OLYMPUS GROWTH FUND II, L.P.
By: OGP II, L.P., its general partner
By: Xxxxxx, L.L.C., its general partner
By:
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Name: Xxxxx X. Xxxxxx
Title: Member
OLYMPUS EXECUTIVE FUND, L.P.
By: OEF, L.P., its general partner
By: Xxxxxx, L.L.C., its general partner
By:
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Name: Xxxxx X. Xxxxxx
Title: Member
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SCHEDULE 1
to
Call Exercise Agreement
CALL SECURITIES
MDP OGF OEF TOTAL
--- --- --- -----
Series B Preferred Stock 9,324 9,230 93 18,647
Special Common Stock 385,894 382,035 3,859 771,788
Series B Warrant 319,857 316,666 3,191 639,714
(in number of Warrant Shares)
EXERCISE PRICE
MDP OGF OEF TOTAL
--- --- --- -----
Series B Preferred and
Warrant $ 932,400.00 $ 923,000.00 $ 9,300.00 $1,864,700.00
Accrued dividend on
Series B 4,214.96 4,172.47 42.04 8,429.47
Special Common Stock 1,856,150.14 1,837,588.35 18,561.79 3,712,300.28
Commitment fee credit (27,885.50) (27,605.88) (278.62) (55,770.00)
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TOTAL $2,764,879.60 $2,737,154.94 $27,625.21 $5,529,659.75
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