EXECUTION VERSION
VOID AFTER 5:00 P.M. PACIFIC TIME, ON JULY 15, 2007
WARRANT
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE IN RELIANCE ON EXEMPTIONS THEREFROM AND, THEREFORE,
MAY NOT BE RESOLD UNLESS REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THIS WARRANT
HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR SALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE ACT.
COMMERCE SECURITY BANCORP, INC.
Common Stock Purchase Warrant
Expiring July 15, 2002
No. S-_
COMMERCE SECURITY BANCORP, INC., a Delaware corporation (the "Company"),
for value received, hereby certifies that Xxxxxx X. Xxxxxxx, or his registered
assigns (the "Holder"), is entitled to purchase from the Company ____________
(_____) duly authorized, validly issued, fully paid and nonassessable shares
("Warrant Shares") of the Company's Class B Common Stock, $.01 par value per
share (the "Class B Common Stock"), or the Company's Class C Common Stock, $.01
par value per share (the "Class C Common Stock"), as determined pursuant to
Section 1.2, at the purchase price per share of $4.81, as such price may be
adjusted from time to time pursuant to Section 7 hereof (the "Exercise Price"),
at any time or from time to time from the date hereof and up to and until 5:00
P.M., Pacific time, on July 15, 2002 or such later date determined in accordance
with Sections 9 and 10 hereof (the "Expiration Date") all subject to the terms
and conditions and adjustments set forth below in this Warrant. As used herein,
"Common Stock" shall refer to all classes of the Company's common stock and the
term "Junior Common Stock" shall refer to the Class B Common Stock and the Class
C Common Stock, collectively.
Capitalized terms not defined herein are used as defined in that certain
Securities Purchase Agreement dated February 13, 1997 by and between the Company
and its subsidiaries and Madison Dearborn Capital Partners II, L.P., Olympus
Growth Fund II, L.P. and Olympus Executive Fund, L.P. (as amended, the
"Securities Purchase Agreement"), a copy of which will be provided to the Holder
upon request.
1. EXERCISE OF WARRANT.
1.1 Subject to the terms and conditions hereof, this Warrant may be
exercised in whole or in part at any time or from time to time from the date
hereof and up to and until the Expiration Date, or, if such date is a day on
which federal or state chartered banking institutions located in the State of
California are authorized by law to close, then on the next succeeding day which
shall not be such a day, by presentation and surrender to the Company at its
principal office, of this Warrant and the purchase form annexed hereto as
EXHIBIT A properly completed and duly executed and accompanied by (w) payment,
in cash, by wire transfer in accordance with such wire instructions as are
furnished by the Company to the Holder prior to such exercise, or certified or
bank check, payable to the Company, of an amount (the "Exercise Payment") equal
to the then-current Exercise Price multiplied by the number of Warrant Shares
specified in such form, or (x) delivery to the Company of shares of Series A
Capital Securities having an aggregate Redemption Value (as defined herein)
equal to the Exercise Payment, accompanied by a stock power endorsed in blank,
or (y) delivery to the Company of shares of Series B Preferred Stock or Series E
Preferred Stock having an aggregate Redemption Value equal to the Exercise
Payment, accompanied by a stock power endorsed in blank, or (z) any combination
of the consideration specified in clauses (w), (x) and (y) of this sentence
having an aggregate value as provided herein equal to the Exercise Payment.
Notwithstanding the immediately preceding sentence, at the option of the Holder,
this Warrant may be exercised by conversion into a number of shares of Junior
Common Stock equal to (x) the number of Warrant Shares minus (y) a number of
shares of Junior Common Stock having a Market Value equal to the Exercise
Payment (a "Cashless Exercise"). If the Warrant is exercised for less than the
total number of shares evidenced by the Warrant, the Company shall, promptly
after presentation of the Warrant upon such exercise, execute and deliver a new
warrant, dated the date hereof, evidencing the rights of the Holder to purchase
the balance of the Warrant Shares purchasable hereunder upon the same terms and
conditions herein set forth. Upon and as of receipt by the Company of a
properly completed and duly executed purchase form accompanied by payment as
herein provided, the Holder shall be deemed to be the holder of record of the
shares of Junior Common Stock issuable upon such exercise, notwithstanding that
the stock transfer books of the Company shall then be closed or that
certificates representing such shares of Junior Common Stock shall not then
actually be delivered to the Holder. Certificates representing the shares so
purchased shall be delivered to the Holder within ten (10) business days after
exercise. The issuance of certificates for shares of Junior Common Stock upon
exercise of this Warrant shall be made without charge to the Holder for any
issuance tax in respect thereof or other cost incurred by the Company in
connection with such exercise and the related issuance of shares of Warrant
Shares.
1.2 The Warrant Shares issuable upon the exercise of this Warrant
shall be either shares of Class B Common Stock or shares of Class C Common
Stock, or any combination thereof, at the sole election of the Holder. The
Holder shall indicate on the purchase form delivered to the Company in
connection with such exercise the class of Junior Common Stock that the Holder
elects to receive upon such exercise.
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2. RESERVATION OF SHARES.
The Company shall, at all times from the date of original issuance of the
Warrant until its expiration, reserve for issuance and delivery upon exercise of
the Warrant the number of Warrant Shares as shall be required for issuance and
delivery upon exercise of the Warrant. All Warrant Shares, upon issuance, shall
be validly authorized, issued and outstanding shares, fully paid and
nonassessable, and free of all liens, encumbrances and (except as otherwise
provided herein) restrictions thereon. The Company shall take all such actions
as may be necessary to assure that all Warrant Shares may be so issued without
violation of any applicable law or governmental regulation or any requirements
of any domestic securities exchange upon which shares of Warrant Shares may be
listed (except for official notice of issuance which shall be immediately
delivered by the Company upon each such issuance). The Company shall not take
any action which would cause the number of authorized but unissued shares of
Warrant Shares to be less than the number of such shares required to be reserved
hereunder for issuance upon exercise of the Warrant.
3. FRACTIONAL SHARES.
If the exercise of the Warrant would otherwise result in the issuance of a
fraction of a share, the Company shall instead of issuing any fractional shares
or scrip representing fractional shares pay to the Holder an amount in cash
equal to such fraction multiplied by the Market Value (determined in accordance
with Section 4 below) of a share of Junior Common Stock.
4. MARKET VALUE OF JUNIOR COMMON STOCK; REDEMPTION VALUE OF PREFERRED
STOCK.
(a) For purposes of this Agreement, except as provided in Section 6.2,
(x) if the Class B Common Stock is publicly traded, the Market Value
of the Junior Common Stock shall equal an amount per share of Class B
Common Stock equal to the average closing price for the thirty (30) trading
days immediately preceding the date of exercise as reported (i) on the
principal national securities exchange on which the Class B Common Stock is
traded or (ii) if the Class B Common Stock is not traded on a national
exchange, on The Nasdaq National Market System ("Nasdaq"); or
(y) if the Class B Common Stock is not so quoted on Nasdaq or listed
on a national securities exchange, the Market Value of the Junior Common
Stock shall be an amount (which shall be equal for the Class B Common Stock
and the Class C Common Stock) mutually agreed upon by the Company and the
Holder, or, if the Company and the Holder are unable to agree, by a
nationally recognized investment banking firm selected by the Holder and
consented to by the Company, such consent not to be unreasonably withheld.
Any fees or expenses incurred in connection with the retention of an
investment banking firm pursuant to this Section 4(a)(y) shall be split
equally between the Holder and the Company.
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(b) For purposes of this Agreement, the "Redemption Value" of the Series A
Capital Securities shall equal the Redemption Amount thereof (as defined in the
Declaration of Trust governing such Securities) as of the exercise date, giving
effect to any Principal Adjustment (as so defined) occurring prior to the
exercise date, and the Redemption Value of each of the Series B Preferred Stock
and the Series E Preferred Stock shall equal the Redemption Price (as defined in
the Company's Amended and Restated Certificate of Incorporation) per share
thereof were such share to be redeemed on the exercise date.
5. NO RIGHTS AS STOCKHOLDER.
This Warrant shall not entitle the Holder to any rights as stockholder of
the Company, either at law or in equity. The rights of the Holder are limited
to those expressed in this Warrant or in the Securities Purchase Agreement or
otherwise provided to the Holder by law.
6. EVENTS COMPELLING IMMEDIATE EXERCISE OF WARRANT.
6.1 This Warrant shall be automatically exercised at its then applicable
Exercise Price upon the later of (i) the date of the consummation of any
Qualified Offering (as defined herein) or (ii) the first business day following
the second anniversary of the date of original issuance of the Warrant on which
the Market Value of the Junior Common Stock is at least 200% of the then
applicable Initial Share Price (as defined herein). Notwithstanding anything to
the contrary contained in this Section 6.1, the automatic exercise of this
Warrant pursuant to this Section 6.1 shall be suspended during any period in
which, upon a Cashless Exercise of the Warrant, there exist any contractual
restrictions imposed by or at the request of the Company or legal or regulatory
restrictions that prohibit the sale by the Holder of the Warrant Shares
immediately upon the exercise of the Warrant. In the event the Warrant is
exercised pursuant to this Section 6, the Holder may elect a form of Exercise
Payment permitted under Section 1 hereof; PROVIDED, HOWEVER, that if the Holder
does not make such an election within ten (10) business days following written
notice by the Company that the warrant is being automatically exercised pursuant
to this Section 6, the Company may cause a Cashless Exercise of such Holder's
Warrant. A "Qualified Offering" shall mean a firm-commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Class B
Common Stock to the public at an offering price per share (prior to any
underwriting discount or commission) of at least 200% of the then-applicable
Initial Share Price (as defined herein) in which either (x) the aggregate
offering price of shares sold by the Company is not less than $25 million, or
(y) the aggregate offering price of all shares sold in the offering, including
those sold by the Company and those sold by other stockholders is not less than
$30 million of which the aggregate offering price of shares sold by the Company
is not less than $20 million. The "Initial Share Price" shall equal $4.81 per
share (as adjusted for any stock split, stock dividends or other similar
distributions to the holders of Class B Common Stock).
6.2 This Warrant shall be automatically exercised, in a Cashless Exercise,
at its then applicable Exercise Price, upon the first business day on which it
is determined that the Market Value of the Junior Common Stock is equal to or
greater than $12.00 per share, as adjusted for
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any stock splits, stock dividends or similar distributions to the holders of the
Junior Common Stock having a record date prior to the date of exercise of the
Warrant. For purposes determining the number of shares of Junior Common Stock
to be issued to the holder in the event of a an exercise effected under this
Section 6.2, the Market Value of the Junior Common Stock will be deemed to equal
$12.00 per share (adjusted as aforesaid).
7. PRICES OF WARRANT SHARES; EFFECT OF DIVIDENDS ON COMMON STOCK.
7.1 The number of shares of Junior Common Stock for which this
Warrant may be exercised and the Exercise Price therefor shall be subject to
adjustment as follows:
(a) If the Company is recapitalized through the subdivision or
combination of its outstanding shares of Junior Common Stock into a larger
or smaller number of shares, the number of shares of Junior Common Stock
for which this Warrant may be exercised shall be increased or reduced, as
of the record date for such recapitalization, in the same proportion as the
increase or decrease in the outstanding shares of Junior Common Stock, and
the Exercise Price shall be adjusted so that the aggregate amount payable
for the purchase of all Warrant Shares issuable hereunder immediately after
the record date for such recapitalization shall equal the aggregate amount
so payable immediately before such record date.
(b) If the Company declares a dividend on Junior Common Stock, or
makes a distribution to holders of Junior Common Stock, and such dividend
or distribution is payable or made in Junior Common Stock or securities
convertible into or exchangeable for Junior Common Stock, or rights to
purchase Junior Common Stock or securities convertible into or exchangeable
for Junior Common Stock, the number of shares of Junior Common Stock for
which this Warrant may be exercised shall be increased, as of the record
date for determining which holders of Junior Common Stock shall be entitled
to receive such dividend or distribution, in proportion to the increase in
the number of outstanding shares (and shares of Junior Common Stock
issuable upon conversion of all such securities convertible into Junior
Common Stock) of Junior Common Stock as a result of such dividend or
distribution, and the Exercise Price shall be adjusted so that the
aggregate amount payable for the purchase of all the Warrant Shares
issuable hereunder immediately after the record date for such dividend or
distribution shall equal the aggregate amount so payable immediately before
such record date.
(c) If the Company declares a dividend on Junior Common Stock (other
than a dividend covered by subsection (b) above) or distributes to holders
of its Junior Common Stock, other than as part of its dissolution or
liquidation or the winding up of its affairs, any cash (a "Cash Dividend")
or any shares of its stock, any evidence of indebtedness or any other of
its assets (other than Junior Common Stock or securities convertible into
or exchangeable for Junior Common Stock) (an "Alternative Distribution"),
the Exercise Price shall be reduced by an amount equal to the amount of the
Cash Dividend per share or, if applicable, the value of the Alternative
Distribution per share of Junior Common
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Stock as determined in good faith by the Company's Board of Directors based
upon a written opinion from a nationally recognized investment banking
firm, selected by the Holder, and taking into account, among other relevant
factors, whether the Holder acquired any Purchase Rights (as defined
herein) with respect to such dividend or distribution pursuant to the terms
hereof. The selection of such investment banking firm shall be consented
to by the Company, which consent shall not be unreasonably withheld, and
such investment banking firm's fees and expenses shall be paid by the
Company. The Company shall provide the Holder with written notice
concerning an Alternative Distribution at least ten (10) business days
prior to the record date therefor.
(d) In case the Company shall, at any time or from time to time
following the date hereof, issue or agree to issue by warrants, convertible
securities, stock options or otherwise, any of its Common Stock or Other
Securities (as defined herein), including treasury shares, (other than any
shares issued in contemplation of the Securities Purchase Agreement), for a
consideration per share less than the Exercise Price per share in effect
immediately prior to the time of such issue or sale, then forthwith upon
such issue or sale, or agreement to issue or sell, said Exercise Price
shall be reduced to a price (calculated to the nearest cent) determined by
dividing (x) an amount equal to (A) the product obtained by multiplying the
number of shares of the Common Stock outstanding (or then deemed to be
outstanding as herein provided) immediately prior to such issue by the
Exercise Price in effect at such time plus (B) the consideration received
by the Company upon such issue by (y) the number of shares of the Common
Stock outstanding (or then deemed to be outstanding as herein provided)
immediately after such issue. Whenever the Exercise Price is adjusted as
provided in this Section 7(d), the aggregate number of shares of Junior
Common Stock that the holder of this Warrant shall thereafter be entitled
to purchase at such adjusted Exercise Price shall be increased to the
number of shares determined by multiplying the number of shares of Junior
Common Stock issuable upon exercise of this Warrant immediately prior to
such adjustment by the Exercise Price in effect immediately prior to such
adjustment, and dividing the product so obtained by such adjusted Exercise
Price. For the purposes of this Section 7(d), the number of shares of
Common Stock deemed to be outstanding at any given time shall exclude
shares in the treasury of the Company but shall include all shares issuable
or to become issuable under any agreements, warrants (including this
Warrant), convertible securities, stock options, similar rights or
otherwise (hereinafter in this Section 7(d) referred to as "Options"). The
Board of Directors of the Company shall make a reasonable determination of
the fair value of the amount of consideration other than money received by
the Company upon the issue by it of any of its securities. Such Board
shall, in case any Common Stock or Options for the purchase thereof are
issued with other stock, securities or assets of the Company, determine
what part of the consideration received therefor is applicable to the issue
of the Common Stock or Options for the purchase thereof. If, as provided
herein, the Exercise Price is adjusted as a consequence of the Company's
issuance of Options, no further adjustment of the Exercise Price shall be
made upon the subsequent issuance of Common Stock upon the exercise of such
Options. To the extent that Options expire without having been exercised,
the Exercise Price computed upon their issuance, and any subsequent
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adjustments based thereon, shall, upon such expiration, be recomputed to
take into account only the shares of Common Stock actually issued upon
the exercise of such Options. In any such recomputation, the
consideration applicable to the shares of Common Stock issued shall be
the aggregate consideration which was received by the Company upon the
issuance of such Options, whether or not exercised, plus the additional
consideration actually received by the Company upon the exercise
thereof. No recomputation shall have the effect of increasing the
Exercise Price by an amount in excess of the adjustment thereof made in
respect of the issuance of the expired Options. No adjustment shall be
made pursuant to this Section 7(d) for the issuance by the Company of
(x) any securities issued pursuant to executive compensation
arrangements the terms of which are disclosed in Disclosure Schedule
5.2(m)(18) to the Securities Purchase Agreement, or (y) any securities
that may be issued upon the conversion of the mandatorily convertible
debentures of SDN Bancorp, Inc. disclosed on Disclosure Schedule 5.2(b)
to the Securities Purchase Agreement, or (z) any issuance of Common
Stock upon the exercise of any Initial Adjustment Warrant or any
issuance of a Series A Quarterly Warrant, Series B Quarterly Warrant or
Series E Quarterly Warrant, or of Common Stock upon the exercise thereof.
(e) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease in the Exercise Price of
at least one percent; provided, however, that any adjustments which by
reason of this Section 7.1(e) are not required to be made immediately shall
be carried forward and taken into account at the time of exercise of this
Warrant or any subsequent adjustment in the Exercise Price which, singly or
in combination with any adjustment carried forward, is required to be made
under this Section 7.
(f) If the event as a result of which an adjustment is made under
paragraph (a), (b), (c) or (d) above does not occur, then any adjustments
in the Exercise Price or number of shares issuable pursuant to this Warrant
that were made in accordance with such paragraphs (a), (b), (c) or (d)
shall be adjusted to the Exercise Price and number of shares as were in
effect immediately prior to the record date for such event.
7.2 If at any time or from time to time there is a capital
reorganization of the Junior Common Stock (other than a recapitalization,
subdivision, combination, reclassification or other change of the Junior
Common Stock provided for in Section 7.1) or merger or consolidation of the
Company with or into another corporation, or the sale of all or substantially
all of the Company's properties and assets to any other person, then, as a
part of such reorganization, merger, consolidation or sale, provision shall
be made so that the Holder shall thereafter be entitled to receive, upon
exercise of the Warrant, the number of shares of stock or other securities or
property of the Company, resulting from such reorganization, merger or
consolidation or sale, to which a holder of Junior Common Stock, or other
securities deliverable upon the exercise of this Warrant, would have been
entitled on such reorganization, merger, consolidation, or sale. In any such
case, appropriate adjustments shall be made in the application of the
provisions of this Section 7 (including adjustment of the Exercise Price then
in effect and number of shares purchasable upon exercise of the Warrant)
which shall be applicable after such events; provided, however, that any such
adjustments shall be made so as to ensure that the provisions of this Section
7 applicable after such events shall be as equivalent as may be practicable
to the provisions of this Section 7 applicable before such events. In the
event of any such reorganization, merger,
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consolidation or sale, the corporation formed by such consolidation or merger
or the corporation which shall have acquired the assets of the Company shall
execute and deliver a supplement hereto to the foregoing effect. If, as
aforesaid, the Holder would be entitled to receive property upon exercise of
this Warrant and such property consists, in whole or in part, of cash in
excess of the Exercise Price, the Holder may, at the Holder's option,
exercise this Warrant without making payment of the Exercise Price and, in
such case, the Company or its successor shall, upon distribution to the
Holder, consider the Exercise Price to have been paid in full and, in making
settlement to the Holder, shall deduct an amount equal to the Exercise Price
from the amount payable to the Holder.
7.3 If the Company shall, at any time before the expiration of this
Warrant, dissolve, liquidate or wind up its affairs, the Holder shall have the
right to exercise this Warrant. Upon such exercise the Holder shall have the
right to receive, in lieu of the shares of Junior Common Stock of the Company
that the Holder otherwise would have been entitled to receive, the same kind and
amount of assets as would have been issued, distributed or paid to the Holder
upon any such dissolution, liquidation or winding up with respect to such shares
of Junior Common Stock of the Company had the Holder been the holder of record
of such shares of Junior Common Stock receivable upon exercise of this Warrant
on the date for determining those entitled to receive any such distribution. If
any such dissolution, liquidation or winding up will result in any cash
distribution in excess of the Exercise Price, the Holder may, at the Holder's
option, exercise this Warrant without making payment of the Exercise Price and,
in such case, the Company shall, upon distribution to the Holder, consider the
Exercise Price to have been paid in full and, in making settlement to the
Holder, shall deduct an amount equal to the Exercise Price from the amount
payable to the Holder per share of Junior Common Stock. For purposes of this
Section 7.3, the sale of all or substantially all of the assets of the Company
and distribution of the proceeds thereof to the Company's shareholders shall be
deemed a liquidation.
7.4 The Company shall retain a firm of independent public accountants
of nationally recognized standing (who may be any such firm regularly employed
by the Company) to make any computation required under this Section 7, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of any computation made under this Section 7.
7.5 Whenever the number of Warrant Shares or the Exercise Price shall
be adjusted as required by the provisions of this Section 7, the Company
promptly shall file in the custody of its Secretary or an Assistant Secretary,
at its principal office, and furnish to each Holder hereof a certificate
prepared in accordance with Section 7.4 hereof, showing the adjusted number of
Warrant Shares and the Exercise Price and setting forth in reasonable detail the
circumstances requiring the adjustment.
7.6 If an event occurs which is similar in nature to the events
described in this Section 7, but is not expressly covered hereby, the Board of
Directors of the Company shall make or arrange for an equitable adjustment to
the number of Warrant Shares and the Exercise Price.
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8. PURCHASE RIGHTS.
If at any time the Company grants, issues or sells any options, convertible
securities or rights to purchase stock, warrants, securities or other property
pro rata to the record Holders of Junior Common Stock (the "Purchase Rights"),
then the Holder of this Warrant shall be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
Holder could have acquired if such Holder had held the number of shares of
Warrant Shares acquirable upon complete exercise of this Warrant immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Junior Common Stock are to be determined for the grant, issue
or sale of such Purchase Rights; provided that (a) if the Purchase Rights
involve Common Stock that constitutes Voting Securities, the Company shall make
available to the Holder of this Warrant, at such Holder's request, Purchase
Rights for Class C Common Stock; and (b) if the Purchase Rights involve Voting
Securities other than Common Stock, the Company shall use its best efforts to
make available to the Holder of this Warrant, at such Holder's request, Purchase
Rights involving non-voting securities (except where such securities are
entitled to voting rights pursuant to applicable laws) which are otherwise
identical to the Purchase Rights involving voting securities and which
non-voting securities are convertible or exchangeable into such voting
securities on the same terms as the Company's Class C Common Stock is
convertible into the Company's Class B Common Stock.
9. EXTENSION OF TERM. If, at the date of the expiration of this Warrant,
the Company has entered into a binding agreement to effect a reorganization,
merger or consolidation of the Company with or into another corporation, or the
sale of all or substantially all of the Company's properties and assets to any
other Person, but such contemplated transaction has not yet been effectuated,
the exercise period of the Warrant shall be extended until such time as the
pending transaction is actually consummated; PROVIDED, HOWEVER, that in the
event that such reorganization, merger, consolidation or sale shall fail to be
consummated, the exercise period of the Warrant shall terminate.
10. COVENANTS OF THE HOLDER.
The Holder covenants and agrees that, notwithstanding anything to the
contrary contained herein, this Warrant may not be exercised at any time that,
or to the extent that, immediately following such exercise the Holder would
beneficially own equity securities of the Company, of any class(es), which
securities would in the aggregate constitute in excess of 24.9% of the Fully
Diluted Equity (as hereinafter defined) of the Company, unless and until such
Holder has delivered to the Secretary of the Company an opinion or memorandum of
counsel, in form and substance reasonably satisfactory to the Company, or other
reasonably satisfactory evidence that such Holder may beneficially own more than
24.9% of the Fully Diluted Equity of the Company and will acquire such shares in
accordance with the Bank Holding Company Act of 1956. The expiration of this
Warrant shall be extended by an amount of time equal to that during which this
Warrant may not be exercised pursuant to this Section 10. As used herein, the
"Fully Diluted Equity" of the Company shall mean the Company's equity
immediately following the Acquisition (as defined
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in the Securities Purchase Agreement) as calculated by the Federal Reserve Bank
of San Francisco or the staff of the Board of Governors of the Federal Reserve
System.
11. NOTICES TO HOLDER.
So long as this Warrant shall be outstanding, (a) if the Company shall
propose to pay any dividends or make any distribution upon the Class B Common
Stock or (b) if the Company shall offer generally to the holders of Junior
Common Stock the right to subscribe to or purchase any shares of any class of
Junior Common Stock or securities convertible into Junior Common Stock or any
other similar rights or (c) if there shall be any (or any vote regarding any)
proposed capital reorganization of the Company in which the Company is not the
surviving entity, recapitalization of the capital stock of the company,
consolidation or merger of the Company with or into another corporation, sale,
lease or other transfer of all or substantially all of the property and assets
of the Company, or voluntary or involuntary dissolution, liquidation or winding
up of the Company, then in such event, the Company shall cause to be deposited
with an nationally recognized air courier, addressed to the Holder hereof at the
address appearing on the records of the Company at least 60 days prior to the
relevant date described below (or the longest period as is reasonably possible
if 60 days is not reasonably possible, but in no event less than 30 days), a
notice containing a description of the proposed action and stating the date or
expected date on which a record of the Company's stockholders is to be taken for
the purpose of any such dividend, distribution of rights, or such
reclassification, reorganization, consolidation, merger, conveyance, lease or
transfer, dissolution, liquidation or winding up is to take place and the date
or expected date, if any is to be fixed, as of which the holders of Junior
Common Stock of record shall be entitled to exchange their shares of Junior
Common Stock for securities or other property deliverable upon such event.
12. RESTRICTIONS ON TRANSFER.
This Warrant, the Warrant Shares and any other securities received pursuant
to this Warrant ("Other Securities") may be subject to restrictions on
transferability provided by United States federal securities laws, if
applicable. This Warrant, the Warrant Shares or Other Securities may also be
subject to restrictions on transferability under applicable state or other
jurisdiction's securities or "blue sky" laws. Until and unless this Warrant,
the Warrant Shares or Other Securities have been registered under the Securities
Act, the Holder shall, if requested by the Company prior to a proposed transfer
by the Holder, provide to the Company an opinion of counsel reasonably
satisfactory to the Company, to the effect that (i) the Warrant, the Warrant
Shares or Other Securities may be transferred without such registration and (ii)
the transfer will not violate any applicable state or other jurisdiction's
securities or "blue sky" laws. An opinion delivered pursuant to this Section by
the law firm reasonably satisfactory to the Company, in form and substance
reasonably satisfactory to the Company, will be acceptable to the Company.
Subject to (i) the transfer conditions described in this Section 12, this
Warrant and all rights hereunder are freely transferable, in whole or in part,
without restriction by the Company or charge to the Holder, upon surrender of
this Warrant to the Company.
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13. GOVERNING LAW.
This Warrant shall be governed by, and construed in accordance with, the
laws of the State of Delaware without regard to the conflict of laws provisions
thereof.
14. COMPANY BOOKS.
The Company shall not close its books against the transfer of this Warrant
or of any share of Warrant Shares issued or issuable upon the exercise of this
Warrant in any manner which interferes with the timely exercise of this Warrant.
The Company shall from time to time as may be necessary use its best efforts to
assure that the par value per share of the unissued Warrant Shares acquirable
upon exercise of this Warrant is at all times equal to or less than the Exercise
Price then in effect.
15. REGULATORY FILINGS.
Upon the Holder's reasonable request from time to time, the Company shall
assist and cooperate with the Holder in connection with any required
governmental filings such Holder is require to make or any governmental
approvals such Holder must obtain prior to or in connection with any exercise of
this Warrant (including, without limitation, making any filings required to be
made by the Company).
16. CONDITIONAL EXERCISE.
Notwithstanding any other provision hereof, if an exercise of any portion
of this Warrant is to be made in connection with a registered public offering or
the reorganization, merger, consolidation or sale of the Company (as described
in Section 7.2), the exercise of any portion of this Warrant may, at the
election of the Holder, be conditioned upon the consummation of the public
offering or the reorganization, merger, consolidation or sale of the Company, in
which case such exercise shall not be deemed to be effective until the
consummation of such transaction.
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IN WITNESS WHEREOF, the Company has executed this Agreement as of the 15th
day of July, 1997.
COMMERCE SECURITY BANCORP, INC.
By:
----------------------------
Its: President
[CORPORATE
SEAL]
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Exhibit A
To Warrant
ELECTION TO PURCHASE
Subject to the condition set forth in Section 15 of this Warrant, and
consistent with the limitations set forth in Section 1.2 of this Warrant, the
undersigned hereby irrevocably elects to exercise this Warrant and to purchase
________ shares of Commerce Security Bancorp, Inc. CLASS B Common Stock and
________ shares of Commerce Security Bancorp, Inc. CLASS C Common Stock issuable
upon the exercise of this Warrant, and requests that certificates for such
shares shall be issued in the name of:
--------------------------------------------------------------------------------
(Name)
--------------------------------------------------------------------------------
(Address)
--------------------------------------------------------------------------------
(United States Social Security or other taxpayer
identifying number, if applicable)
and, if different from above, be delivered to:
--------------------------------------------------------------------------------
(Name)
--------------------------------------------------------------------------------
(Address)
and, if the number of Warrant Shares so purchased are not all of the Warrant
Shares issuable upon exercise of this Warrant, that a Warrant to purchase the
balance of such Warrant Shares be registered in the name of, and delivered to,
the undersigned at the address stated below.
Dated:
-------------, -----
Name of Registered Owner:
-------------------------------------------------------
--------------------------------------------------------------------------------
Address:
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--------------------------------------------------------------------------------
Signature:
----------------------------------------------------------------------
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