S-4 1 ny20009876x1_s4.htm S-4

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As filed with the Securities and Exchange Commission on August 28, 2023
Registration No. 333- 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BANC OF CALIFORNIA, INC.
(Exact Name of Registrant as Specified in Its Charter)
MARYLAND
6021
04-3639825
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
3 MacArthur Place
Santa Ana, California 92707-7704
(855) 361-2262
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Ido Dotan
Executive Vice President, General Counsel and Corporate Secretary
Banc of California, Inc.
3 MacArthur Place
Santa Ana, California 92707-7704
(855) 361-2262
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Sven G. Mickisch
Matthew H. Nemeroff
Skadden, Arps, Slate, Meagher & Flom LLP
One Manhattan West
New York, New York 10001
(212) 735-3000
Paul W. Taylor
President and Chief Executive
Officer
PacWest Bancorp
9701 Wilshire Boulevard, Suite 700
Beverly Hills, California 90212-2007
(310) 887-8500
Patrick S. Brown
Sullivan & Cromwell LLP
1888 Century Park East
Los Angeles, California 90067-1725
(202) 956-7500
H. Rodgin Cohen
Mark J. Menting
Sullivan & Cromwell LLP
125 Broad Street
New York, New York 10004
(212) 558-4000
Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement is declared effective and upon completion of the mergers described herein.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer
Non-accelerated filer
 
Smaller reporting company
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a) MAY DETERMINE.

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The information in the accompanying joint proxy statement/prospectus is not complete and may be changed. A registration statement relating to the securities described in the accompanying joint proxy statement/prospectus has been filed with the U.S. Securities and Exchange Commission. These securities may not be issued until the registration statement filed with the U.S. Securities and Exchange Commission is effective. The accompanying joint proxy statement/prospectus does not constitute an offer to sell or the solicitation of offers to buy these securities in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY—SUBJECT TO COMPLETION— DATED AUGUST 28, 2023


To the Stockholders of Banc of California, Inc. and the Stockholders of PacWest Bancorp
MERGER AND ISSUANCE PROPOSED—YOUR VOTE IS VERY IMPORTANT
On behalf of the boards of directors of Banc of California, Inc., a Maryland corporation (“BANC”), and PacWest Bancorp, a Delaware corporation (“PACW”), we are pleased to enclose the accompanying joint proxy statement/prospectus relating to the proposed combination of BANC and PACW. We are requesting that you take certain actions as a holder of BANC common stock (a “BANC stockholder”) or as a holder of PACW common stock (a “PACW stockholder”).
On July 25, 2023, BANC, PACW and Cal Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of BANC (“Merger Sub”), entered into an Agreement and Plan of Merger (as it may be amended, modified or supplemented from time to time in accordance with its terms, the “merger agreement”), pursuant to which, on the terms and subject to the conditions set forth in the merger agreement, BANC and PACW have agreed to combine their respective businesses through a series of mergers. The transaction will create the premier relationship-focused business bank in California with approximately $36.1 billion in assets, $25.3 billion in total loans, $30.5 billion in total deposits and more than 70 branches in California.
On the terms and subject to the conditions set forth in the merger agreement, at the closing, Merger Sub will merge with and into PACW (the “first merger”), with PACW as the surviving entity. Immediately following the first merger, PACW will merge with and into BANC (the “second merger” and together with the first merger, the “mergers”), with BANC as the surviving corporation (the “combined company” and certain references to “BANC” herein refer to the combined company following the second merger, as the context requires). Promptly following the second merger, Pacific Western Bank, a California-chartered non-member bank (“PACW Bank”) and, as of immediately prior to the second merger, a wholly-owned subsidiary of PACW, will become a member bank of the Federal Reserve System (the “FRS Membership”). Promptly following the effectiveness of the FRS Membership, Banc of California, National Association, a national banking association and a wholly-owned subsidiary of BANC (“BANC N.A.”), will merge with and into PACW Bank (the “bank merger” and together with the mergers, the “combination”), with PACW Bank continuing as the surviving bank (the “surviving bank”). Following the bank merger, the surviving bank will operate under the “Banc of California” name and brand.
In the first merger, the PACW stockholders will be entitled to receive 0.6569 of a share of BANC common stock for each share of PACW common stock (the “exchange ratio”) they own, subject to certain exceptions. Although the number of shares of BANC common stock that PACW stockholders will be entitled to receive per share of PACW common stock is fixed, the market value of the merger consideration will fluctuate with the market price of BANC common stock and will not be known at the time PACW stockholders vote on the merger agreement. Based on the closing price of BANC common stock on the New York Stock Exchange (the “NYSE”) on July 24, 2023, the last trading day before the public announcement of the mergers, the exchange ratio represented an implied value of approximately $8.64 for each share of PACW common stock. Based on the closing price of BANC common stock on the NYSE on [ ], 2023, the last practicable trading day before the date of the accompanying joint proxy statement/prospectus, of $[ ], the exchange ratio represented an implied value of approximately $[ ] for each share of PACW common stock. The value of the BANC common stock at the time of completion of the mergers could be greater than, less than or the same as the value of BANC common stock on the date of the accompanying joint proxy statement/prospectus or the date of the special meeting of BANC or PACW. We urge you to obtain current market quotations of BANC common stock (NYSE trading symbol “BANC”) and PACW common stock (Nasdaq Global Select Market (“Nasdaq”) trading symbol “PACW”).
In the second merger, each outstanding share of 7.75% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, of PACW (the “PACW preferred stock” and such holders the “PACW preferred stockholders”) will be converted into the right to receive one share of a newly created series of preferred stock of BANC (the “new BANC preferred stock”) having such powers, preferences and rights, and such qualifications, limitations and restrictions, taken as a whole, that are not materially less favorable to the PACW preferred stockholders than the existing powers, preferences, rights, qualifications and limitations of

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the PACW preferred stock. Likewise, following the completion of the mergers, each outstanding PACW depositary share representing a 1/40th interest in a share of PACW preferred stock will become a BANC depositary share representing a 1/40th interest in a share of new BANC preferred stock. The PACW depositary shares are currently listed on Nasdaq under the symbol “PACWP.” The BANC depositary shares representing a 1/40th interest in a share of new BANC preferred stock are expected to be listed on the NYSE upon completion of the mergers.
Immediately following completion of the mergers, BANC stockholders will continue to own the shares of BANC common stock held by the BANC stockholders immediately prior to the completion of the mergers.
Concurrently with its entry into the merger agreement, BANC entered into separate investment agreements (the “investment agreements”), each dated as of July 25, 2023, with (x) affiliates of funds managed by Warburg Pincus LLC (the “Warburg Investors”) and (y) certain investment vehicles sponsored, managed or advised by Centerbridge Partners, L.P. and its affiliates (the “Centerbridge Investor” and, together with the Warburg Investors, the “Investors”). On the terms and subject to the conditions set forth in the investment agreements, at the closing of the investments (as defined below), the Investors will invest an aggregate of $400 million in exchange for the sale and issuance by BANC of approximately (a) 21.8 million shares of BANC common stock and (b) 10.8 million shares of a new class of non-voting, common-equivalent stock of BANC (“BANC NVCE stock”), in each case, at a purchase price of $12.30 per share. In addition, the Warburg Investors will receive warrants to purchase approximately 15.9 million shares of BANC NVCE stock, and the Centerbridge Investor will receive warrants to purchase approximately 3.0 million shares of BANC common stock, each with an exercise price of $15.375 per share, a 25% premium to the price paid by the Investors for BANC common stock and BANC NVCE stock (collectively, the “warrants” and together with the BANC common stock and the BANC NVCE stock to be issued pursuant to the investment agreements, the “investments”). The warrants carry a term of seven years but are subject to mandatory exercise when the market price of BANC common stock reaches or exceeds $24.60 for 20 or more trading days during any 30-consecutive trading day period, a 100% premium to the price paid by the Investors for BANC common stock and BANC NVCE stock.
We expect that the mergers, taken together, will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). Accordingly, PACW stockholders generally will not recognize any gain or loss for U.S. federal income tax purposes on the exchange of shares of PACW common stock for BANC common stock in the first merger, except with respect to any cash received by PACW stockholders in lieu of fractional shares of BANC common stock.
Based on the number of shares of PACW common stock outstanding or reserved for issuance as of August 23, 2023, BANC expects to issue approximately 77.9 million shares of BANC common stock to PACW stockholders and approximately 1 million shares of BANC common stock to the holders of PACW restricted stock awards in the aggregate in the first merger. Upon completion of the proposed transaction, (a) the shares issued to PACW stockholders in the first merger are expected to represent approximately 47% of the outstanding shares of the combined company, (b) the shares issued to the Investors in the investments are expected to represent approximately 19% of the outstanding shares of the combined company and (c) the shares of BANC common stock that are outstanding immediately prior to completion of the first merger are expected to represent approximately 34% of the outstanding shares of the combined company.
BANC and PACW will each hold a special meeting of its respective stockholders in connection with the mergers. At its special meeting, in addition to other business, BANC will ask its stockholders to approve the issuance of shares of BANC common stock to PACW stockholders pursuant to the merger agreement and BANC common stock, shares of BANC NVCE stock and warrants pursuant to the investment agreements (collectively, the “BANC issuance”). At its special meeting, in addition to other business, PACW will ask its stockholders to adopt the merger agreement. Information about these meetings, the mergers and the investments is contained in this document. We urge you to read this document carefully and in its entirety.
The special meeting of BANC stockholders will be held on [ ], 2023 at [ ], Pacific Time at 3 MacArthur Place, Santa Ana, CA 92707. The special meeting of PACW stockholders will be held on [ ], 2023 at [ ], Mountain Time at Denver Marriott Tech Center, 4900 S. Syracuse St, Denver, CO 80237.
Each of our boards of directors unanimously recommends that holders of BANC common stock and PACW common stock vote “FOR” each of the proposals to be considered at the respective special meetings.
The accompanying joint proxy statement/prospectus provides you with detailed information about the merger agreement and the investment agreements and the transactions contemplated thereby. It also contains or references information about BANC and PACW and certain related matters. You are encouraged to read the accompanying joint proxy statement/prospectus carefully and in its entirety. In

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particular, you should read the section entitled “Risk Factors” beginning on page 34 for a discussion of the risks you should consider in evaluating the proposed transaction and how it will affect you. You can also obtain information about BANC and PACW from documents that have been filed with the Securities and Exchange Commission that are either incorporated by reference into or attached to the accompanying joint proxy statement/prospectus.
On behalf of BANC and PACW, thank you for your prompt attention to this important matter.
Sincerely,
 
 
Jared M. Wolff
Paul W. Taylor
Chairman, President and Chief Executive Officer
Banc of California, Inc.
President and Chief Executive Officer
PacWest Bancorp
Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in connection with the first merger or determined if this document is accurate or complete. Any representation to the contrary is a criminal offense.
The securities to be issued in the first merger are not savings or deposit accounts or other obligations of any bank or non-bank subsidiary of either BANC or PACW, and they are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.
The accompanying joint proxy statement/prospectus is dated [ ], 2023, and is first being mailed to BANC stockholders and PACW stockholders on or about [ ], 2023.

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ADDITIONAL INFORMATION
The accompanying joint proxy statement/prospectus includes important business and financial information about (a) PACW from documents previously filed with the U.S. Securities and Exchange Commission (the “SEC”) that have been attached as annexes to the accompanying joint proxy statement/prospectus and (b) BANC from documents previously filed with the SEC that are incorporated by reference into the accompanying joint proxy statement/prospectus. This information is available to you without charge upon your written or oral request. You can obtain the documents, including the documents regarding BANC that are incorporated by reference in such document through (i) the SEC website at http://www.sec.gov, (ii) BANC’s website at https://investors.bancofcal.com, under the heading “Financials and Filings” or (iii) PACW’s website at www.pacwestbancorp.com, under the heading “SEC Filings,” or by requesting them in writing, by email or by telephone, at the appropriate address below. Except for the documents regarding PACW attached as annexes to the accompanying joint proxy statement/prospectus and the documents regarding BANC incorporated by reference in such document, the information contained on, or that may be accessed through, the respective websites of the SEC, PACW and BANC is not incorporated by reference into, and is not a part of, the accompanying joint proxy statement/prospectus.
if you are a BANC stockholder:
Banc of California, Inc.
3 MacArthur Place
Santa Ana, CA 92707
Attention: Investor Relations
IR@bancofcal.com
(855) 361-2262
if you are a PACW stockholder:
PacWest Bancorp
9701 Wilshire Boulevard, Suite 700
Beverly Hills, CA 90212
Attention: Investor Relations
investor-relations@pacwest.com
You will not be charged for any of these documents that you request. To obtain timely delivery of these documents, you must request them no later than five business days before the date of the applicable special meeting. This means that holders of BANC common stock requesting documents must do so by [ ], 2023, in order to receive them before the BANC special meeting, and holders of PACW common stock requesting documents must do so by [ ], 2023, in order to receive them before the PACW special meeting.
The accompanying joint proxy statement/prospectus attaches as annexes documents that PACW previously filed with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as set forth below. Any statement contained in such a document shall be deemed to be modified or superseded for purposes of the accompanying joint proxy statement/prospectus to the extent that a statement contained in the accompanying joint proxy statement/prospectus or in an annex hereto consisting of a document filed with the SEC subsequent to such document modifies or replaces such statement.
PACW Filings:
PACW’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 27, 2023;
PACW’s Definitive Proxy Statement on Schedule 14A filed with the SEC on March 23, 2023;
PACW’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, filed with the SEC on May 11, 2023;
PACW’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed with the SEC on August 9, 2023; and
PACW’s Current Reports on Form 8-K, filed with the SEC on May 5, 2023, May 22, 2023, June 26, 2023, July 25, 2023 and July 31, 2023.
You should rely only on the information contained in, attached to or incorporated by reference into the accompanying joint proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, attached to or incorporated by reference into, such document. The accompanying joint proxy statement/prospectus is dated [ ], 2023, and you should assume that the information in this document is accurate only as of such date. You should assume that the information incorporated by reference into such document or attached as an annex to such document is accurate as of the date of such

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document. Neither the mailing of the accompanying joint proxy statement/prospectus to holders of BANC common stock or holders of PACW common stock, nor the issuance by BANC of shares of BANC common stock or other securities pursuant to the merger agreement or investment agreements, will create any implication to the contrary.
The accompanying joint proxy statement/prospectus document does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Except where the context otherwise indicates, information contained in, or incorporated by reference into, the accompanying joint proxy statement/prospectus regarding PACW has been provided by PACW and information contained in, or incorporated by reference into, the accompanying joint proxy statement/prospectus regarding BANC has been provided by BANC.
See the section entitled “Where You Can Find More Information” beginning on page 201 of the accompanying joint proxy statement/prospectus for further information.

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Banc of California, Inc.
3 MacArthur Place
Santa Ana, CA 92707
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To BANC Stockholders:
On July 25, 2023, Banc of California, Inc., a Maryland corporation (“BANC”), Cal Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of BANC (“Merger Sub”), and PacWest Bancorp, a Delaware corporation (“PACW”), entered into an Agreement and Plan of Merger (as it may be amended, modified or supplemented from time to time in accordance with its terms, the “merger agreement”). A copy of the merger agreement is attached as Annex A to the accompanying joint proxy statement/prospectus.
Concurrently with its entry into the merger agreement, BANC entered into separate investment agreements (the “investment agreements”), each dated as of July 25, 2023, with (a) affiliates of funds managed by Warburg Pincus LLC (the “Warburg Investors”) and (b) certain investment vehicles sponsored, managed or advised by Centerbridge Partners, L.P. and its affiliates (the “Centerbridge Investor” and, together with the Warburg Investors, the “Investors”). Copies of the investment agreements are attached as Annex B and Annex C to the accompanying joint proxy statement/prospectus.
NOTICE IS HEREBY GIVEN that a special meeting of holders of BANC common stock (such holders the “BANC stockholders” and such meeting the “BANC special meeting”) will be held on [ ], 2023 at [ ], Pacific Time at 3 MacArthur Place, Santa Ana, CA 92707.
At the BANC special meeting, you will be asked to vote on the following matters:
A proposal to approve the issuance of BANC common stock to holders of PACW common stock (the “PACW stockholders”) pursuant to the merger agreement and the issuance of BANC common stock, BANC NVCE stock and warrants to the Investors pursuant to the investment agreements (the “BANC issuance proposal”);
A proposal to amend and restate BANC’s existing 2018 omnibus stock incentive plan, to be renamed the Amended and Restated Banc of California, Inc. 2018 Omnibus Stock Incentive Plan, or “A&R 2018 Plan”, pursuant to which the combined company will be able to make grants of equity-based awards to employees, officers, directors and consultants of the combined company following the closing of the transactions contemplated by the merger agreement (the “BANC incentive plan proposal”);
A proposal to amend (the “BANC charter amendment”) Section F of Article 6 of the Second Articles of Restatement of BANC (the “BANC charter”) in a manner to exempt the Warburg Investors and their affiliates (but not any other stockholder of BANC) from the application of Section F of Article 6 (other than paragraph 4 thereof, which deals mainly with the quorum requirement for meetings of BANC stockholders) of the BANC charter (the “BANC exemption amendment proposal”); and
A proposal to adjourn the BANC special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes at the time of the BANC special meeting to approve the BANC issuance proposal (the “BANC adjournment proposal”).
The board of directors of BANC (the “BANC board of directors”) has fixed the close of business on [ ], 2023 as the record date for the BANC special meeting. Only holders of record of BANC common stock as of the close of business on the BANC record date are entitled to notice of the BANC special meeting or any adjournment or postponement thereof. Only holders of record of BANC common stock will be entitled to vote at the BANC special meeting or any adjournment or postponement thereof.
BANC stockholders are not entitled to dissenters’ rights in connection with the mergers under the Maryland General Corporation Law.

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The BANC board of directors unanimously recommends that BANC stockholders vote “FOR” the BANC issuance proposal, “FOR” the BANC incentive plan proposal, “FOR” the BANC exemption amendment proposal and “FOR” the BANC adjournment proposal.
Your vote is important. We cannot complete the transactions contemplated by the merger agreement and the investment agreements unless BANC stockholders approve the BANC issuance proposal. However, the consummation of the mergers and the closing of the transactions contemplated by the investment agreements is not conditioned upon approval of the BANC incentive plan proposal, the BANC exemption amendment proposal or the BANC adjournment proposal. The affirmative vote of a majority of votes cast by holders of shares of BANC common stock at the BANC special meeting is required to approve the BANC issuance proposal, the BANC incentive plan proposal and the BANC adjournment proposal. The affirmative vote of the holders of a majority of the outstanding shares of BANC common stock entitled to vote on the proposal is required to approve the BANC exemption amendment proposal.
Whether or not you plan to attend the BANC special meeting, we urge you to please promptly complete, sign, date and return the accompanying proxy card in the enclosed postage-paid envelope. You may also vote by telephone or through the internet as described in the instructions included with the accompanying proxy card. If your shares are held in the name of a bank, broker, trustee or other nominee, please follow the instructions on the voting instruction card furnished by such bank, broker, trustee or other nominee.
 
By Order of the Board of Directors
 
 
 
Ido Dotan
Executive Vice President, General Counsel and
Corporate Secretary
Banc of California, Inc.
[ ], 2023

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PacWest Bancorp
9701 Wilshire Blvd., Suite 700
Beverly Hills, CA 90212
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To be held on [  ], 2023
NOTICE IS HEREBY GIVEN that PacWest Bancorp, a Delaware corporation (“PACW”), will hold a special meeting of holders of common stock, par value $0.01 per share, of PACW (“PACW common stock” and such holders “PACW stockholders”) on [  ], 2023 at [  ], Mountain Time, at Denver Marriott Tech Center, 4900 S. Syracuse St, Denver, CO 80237 (the “PACW special meeting”) to consider and vote upon the following matters:
A proposal to adopt the Agreement and Plan of Merger, dated as of July 25, 2023, by and among PACW, Banc of California, Inc. (“BANC”) and Cal Merger Sub, Inc., as such agreement may be amended from time to time (the “merger agreement”), a copy of which is attached as Annex A to the accompanying joint proxy statement/prospectus, which provides that, on the terms and subject to the conditions set forth in the merger agreement, PACW will merge with and into Cal Merger Sub, Inc. (the “first merger”), with PACW surviving the first merger, and, immediately following the first merger, PACW will merge with and into BANC (the “second merger,” and together with the first merger, the “mergers”), with BANC surviving the second merger. Upon consummation of the first merger, each share of PACW common stock issued and outstanding immediately prior to the effective time of the first merger, subject to certain exceptions, will be converted into the right to receive 0.6569 of a share of common stock, par value $0.01 per share, of BANC (“BANC common stock”), as well as cash in lieu of fractional shares of BANC common stock (the “PACW merger proposal”);
A proposal to approve, on a non-binding, advisory basis, the compensation that PACW’s named executive officers may receive in connection with the mergers pursuant to agreements or arrangements with PACW (the “PACW compensation proposal”); and
A proposal to approve one or more adjournments of the PACW special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies in favor of the PACW merger proposal (the “PACW adjournment proposal”).
In addition, upon consummation of the second merger, each share of 7.75% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share, of PACW (“PACW preferred stock” and such holders the “PACW preferred stockholders”) issued and outstanding immediately prior to the effective time of the second merger, will be converted into the right to receive one share of a newly created series of preferred stock of BANC (the “new BANC preferred stock”) having such powers, preferences and rights, and such qualifications, limitations and restrictions, taken as a whole, that are not materially less favorable to the PACW preferred stockholders immediately prior to the effective time of the second merger. A form of the Articles Supplementary relating to the new BANC preferred stock is attached hereto as Annex I.
The board of directors of PACW has fixed the close of business on [  ], 2023 as the record date for the PACW special meeting. Only PACW stockholders of record at that time are entitled to notice of, and to vote at, the PACW special meeting or any adjournment or postponement thereof. PACW preferred stockholders and holders of PACW depositary shares are not entitled to vote at the PACW special meeting in such capacity. Adoption of the PACW merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of PACW common stock entitled to vote on the merger agreement. Approval of each of the PACW compensation proposal and the PACW adjournment proposal requires the affirmative vote of the holders of at least a majority of the shares of PACW common stock present or represented by proxy at the PACW special meeting.

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The board of directors of PACW has unanimously approved the merger agreement, has determined that the mergers, on the terms and conditions set forth in the merger agreement, are fair to, advisable and in the best interests of PACW and its stockholders and unanimously recommends that PACW stockholders vote “FOR” the PACW merger proposal, “FOR” the PACW compensation proposal and “FOR” the PACW adjournment proposal.
Your vote is very important. We cannot complete the transactions contemplated by the merger agreement without the affirmative vote of holders of a majority of the outstanding shares of PACW common stock entitled to vote on the merger agreement to approve the PACW merger proposal. However, the consummation of the mergers and the closing of the transactions contemplated by the investment agreements are not conditioned upon approval of the PACW compensation proposal or the PACW adjournment proposal. The affirmative vote of a majority of the shares of PACW common stock present or represented by proxy at the PACW special meeting is required to approve the PACW compensation proposal and the PACW adjournment proposal.
Each copy of the joint proxy statement/prospectus mailed to PACW stockholders is accompanied by a form of proxy card with instructions for voting. Regardless of whether you plan to attend the PACW special meeting, please vote as soon as possible by accessing the Internet site listed on the proxy card, voting telephonically using the phone number listed on the proxy card or submitting your proxy card by mail. If you hold stock in your name as a stockholder of record and are voting by mail, please complete, sign, date and return the accompanying proxy card in the enclosed postage-paid return envelope. This will not prevent you from voting in person, but it will help to secure a quorum and avoid added solicitation costs. Any holder of record of PACW common stock who is present at the PACW special meeting may vote in person instead of by proxy, thereby canceling any previous proxy. In any event, a proxy may be revoked at any time before the PACW special meeting in the manner described in the accompanying joint proxy statement/prospectus. Information and applicable deadlines for voting through the Internet or by telephone are set forth in the enclosed proxy card instructions. If you hold your stock in “street name” through a bank, broker or other holder of record, please follow the instructions on the voting instruction card furnished by the record holder.
The enclosed joint proxy statement/prospectus provides a detailed description of the PACW special meeting, the mergers, the merger agreement, the documents related to the mergers and other related matters. We urge you to read the joint proxy statement/prospectus, including any documents attached as annexes and incorporated in the joint proxy statement/prospectus by reference and in their entirety.
 
BY ORDER OF THE BOARD OF DIRECTORS
 
 
 
Angela M.W. Kelley
 
Executive Vice President, General
 
Counsel and Corporate Secretary
 
PacWest Bancorp
Date: [  ], 2023

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QUESTIONS AND ANSWERS
The following are some questions that you may have about the mergers, the investments, the BANC special meeting or the PACW special meeting (each as defined below), and brief answers to those questions. We urge you to read carefully the remainder of this joint proxy statement/prospectus because the information in this section does not provide all of the information that might be important to you with respect to the mergers, the investments, the BANC special meeting or the PACW special meeting. Additional important information is also contained in the documents incorporated by reference into this joint proxy statement/prospectus and in the annexes to this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 201.
In this joint proxy statement/prospectus, unless the context otherwise requires:
“BANC” refers to Banc of California, Inc., a Maryland corporation;
“BANC board of directors” refers to the board of directors of BANC;
“BANC bylaws” refers to the Sixth Amended and Restated Bylaws of BANC;
“BANC charter” refers to the Second Articles of Restatement of BANC, as amended;
“BANC common stock” refers to the common stock of BANC, par value $0.01 per share;
“BANC N.A.” refers to Banc of California, National Association, a national banking association and a wholly-owned subsidiary of BANC;
“BANC NVCE stock” refers to a new class of non-voting, common-equivalent stock of BANC;
“BANC stockholders” refers to holders of shares of BANC common stock both prior to and following the completion of the mergers;
“business day” refers to any day other than a Saturday, a Sunday or a day on which banks in Los Angeles, California are authorized by law or executive order to be closed;
“Centerbridge Investor” refers to CB Laker Buyer L.P., a Delaware limited partnership, an investment vehicle sponsored, managed or advised by Centerbridge Partners, L.P. and its affiliates;
“Investors” refers to the Centerbridge Investor and the Warburg Investors;
“JPM” refers to J.P. Morgan Securities LLC, financial advisor to BANC;
“Merger Sub” refers to Cal Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of BANC;
“PACW” refers to PacWest Bancorp, a Delaware corporation;
“PACW Bank” refers to Pacific Western Bank, a California-chartered non-member bank and, as of immediately prior to the second merger, a wholly-owned subsidiary of PACW;
“PACW board of directors” refers to the board of directors of PACW;
“PACW bylaws” refers to the Second Amended and Restated Bylaws of PACW;
“PACW charter” refers to the Restated Certificate of Incorporation of PACW;
“PACW common stock” refers to the common stock of PACW, par value $0.01 per share;
“PACW preferred stockholders” refers to holders of shares of PACW preferred stock;
“PACW stockholders” refers to holders of shares of PACW common stock;
“PSC” refers to Piper Sandler & Co., financial advisor to PACW;
“Sullivan & Cromwell” refers to Sullivan & Cromwell LLP, legal counsel to PACW;
“Skadden” refers to Skadden, Arps, Slate, Meagher & Flom LLP, legal counsel to BANC; and
“Warburg Investors” refers to WP Clipper GG 14 L.P., an exempted limited partnership registered in the Cayman Islands and WP Clipper FS II L.P., an exempted limited partnership registered in the Cayman Islands, which are affiliates of funds managed by Warburg Pincus LLC.
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Q:
Why am I receiving this joint proxy statement/prospectus?
A:
Each of BANC and PACW is sending these materials to its respective stockholders to help them decide how to vote their BANC common stock or PACW common stock with respect to the matters to be considered at the respective special meetings.
In order to complete the mergers (as hereinafter defined) and the investments (as hereinafter defined), among other things:
PACW stockholders must adopt the merger agreement (the “PACW merger proposal” and, such adoption, the “requisite PACW stockholder approval”); and
BANC stockholders must approve (such approval, the “requisite BANC stockholder approval”) the issuance of BANC common stock pursuant to the merger agreement and the issuance of BANC common stock, BANC NVCE stock and warrants to the Investors pursuant to the investment agreements (the “BANC issuance proposal”).
BANC stockholders will also be asked to: (a) approve a proposal to adopt the A&R 2018 Plan, pursuant to which the combined company will be able to make grants of equity-based awards to employees, officers, directors and consultants of the combined company following the closing of the transactions contemplated by the merger agreement (the “BANC incentive plan proposal”); (b) approve a proposal to amend Section F of Article 6 of the BANC charter in a manner to exempt the Warburg Investors and their affiliates (but not any other stockholder of BANC) from the application of Section F of Article 6 (other than paragraph 4 thereof, which deals mainly with the quorum requirement for meetings of BANC stockholders) of the BANC charter (the “BANC exemption amendment proposal”); and (c) approve a proposal to adjourn the special meeting of BANC stockholders (the “BANC special meeting”), if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the BANC special meeting to approve the BANC issuance proposal (the “BANC adjournment proposal”). Approval of the BANC incentive plan proposal, the BANC exemption amendment proposal or the BANC adjournment proposal is not a condition to the completion of the mergers or the investments.
PACW stockholders will also be asked (i) to approve, on an advisory (non-binding) basis, the merger-related compensation payments that will or may be paid to PACW’s named executive officers in connection with the transactions contemplated by the merger agreement (the “PACW compensation proposal”), and (ii) to approve a proposal to adjourn the special meeting of PACW stockholders (the “PACW special meeting”), if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the PACW special meeting to approve the PACW merger proposal (the “PACW adjournment proposal”). Approval of the PACW compensation proposal or the PACW adjournment proposal is not a condition to the completion of the mergers or the investments.
This document is also a prospectus that is being delivered to PACW stockholders because, pursuant to the merger agreement, BANC is (i) offering shares of BANC common stock to PACW stockholders and (ii) issuing shares of new BANC preferred stock to the PACW preferred stockholders.
This joint proxy statement/prospectus contains important information about the mergers, the investments and the other proposals being voted on at the BANC special meeting and PACW special meeting. You should read it carefully and in its entirety. The enclosed materials allow you to have your shares of common stock voted by proxy without attending your special meeting. Your vote is important, and we encourage you to submit your proxy as soon as possible.
Q:
What will happen in the mergers?
A:
On the terms and subject to the conditions set forth in the Agreement and Plan of Merger, dated July 25, 2023, by and among PACW, BANC and Merger Sub (as it may be amended, modified or supplemented from time to time in accordance with its terms, the “merger agreement”), Merger Sub will merge with and into PACW, with PACW as the surviving entity, which we refer to as the “first merger.” Immediately following the first merger, PACW will merge with and into BANC, with BANC as the surviving corporation, which we refer to as the “second merger.” We refer to the first merger and the second merger together as the “mergers.” Promptly following the second merger, PACW Bank will become a member bank of the Federal Reserve System (the “FRS Membership”). Promptly following the effectiveness of the FRS Membership, BANC N.A. will merge with and into PACW Bank (the “bank merger” and together with the
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mergers, the “combination”), with PACW Bank continuing as the surviving bank (the “surviving bank”). Following the bank merger, the surviving bank will operate under the “Banc of California” name and brand.
At the effective time of the first merger (the “effective time”), holders of PACW common stock issued and outstanding immediately prior to the effective time (except for shares of PACW common stock owned by PACW as treasury stock or owned by PACW, BANC or Merger Sub (subject to certain exceptions)) will be entitled to receive 0.6569 of a share (the “exchange ratio”) of BANC common stock and cash in lieu of any fractional shares (the “merger consideration”).
At the effective time of the second merger (the “second effective time”), each outstanding share of 7.75% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, of PACW (the “PACW preferred stock”) will be converted into the right to receive one share of a newly created series of preferred stock of BANC (the “new BANC preferred stock”) having such powers, preferences and rights, and such qualifications, limitations and restrictions, taken as a whole, that are not materially less favorable to the PACW preferred stockholders than the existing powers, preferences, rights, qualifications and limitations of the PACW preferred stock. Likewise, following the completion of the mergers, each outstanding PACW depositary share representing a 1/40th interest in a share of PACW preferred stock will become a BANC depositary share representing a 1/40th interest in a share of new BANC preferred stock (“BANC depositary share”). A form of the Articles Supplementary relating to the new BANC preferred stock is attached hereto as Annex I.
In this joint proxy statement/prospectus, we refer to the closing of the (a) first merger as the “merger closing” and the date on which the merger closing occurs as the “merger closing date” and (b) second merger as the “closing of the mergers”.
After the effective time, (i) PACW will no longer be a public company, (ii) PACW common stock will be delisted from Nasdaq and will cease to be publicly traded, and (iii) PACW common stock and PACW depositary shares will be deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Immediately after the second effective time, BANC stockholders will continue to own their existing shares of BANC common stock and PACW will cease to exist. See the information provided in the section entitled “The Merger Agreement—Structure of the Mergers” beginning on page 118 and the merger agreement attached as Annex A for more information about the mergers.
Q:
What will happen in the investments?
Concurrently with its entry into the merger agreement, BANC entered into separate investment agreements, each dated as of July 25, 2023, with the Warburg Investors (the “Warburg investment agreement”) and the Centerbridge Investor (the “Centerbridge investment agreement” and, together with the Warburg investment agreement, the “investment agreements”). On the terms and subject to the conditions set forth in the investment agreements, the Investors will invest an aggregate of $400 million in exchange for the sale and issuance by BANC of approximately (a) 21.8 million shares of BANC common stock and (b) 10.8 million shares of a new class of non-voting, common-equivalent stock of BANC (“BANC NVCE stock”), in each case, at a purchase price of $12.30 per share. In addition, the Warburg Investors will receive warrants to purchase approximately 15.9 million shares of BANC NVCE stock, and the Centerbridge Investor will receive warrants to purchase approximately 3.0 million shares of BANC common stock, each with an exercise price of $15.375 per share, a 25% premium to the price paid by the Investors for BANC common stock and BANC NVCE stock (collectively, the “warrants” and together with the BANC common stock and the BANC NVCE stock to be issued pursuant to the investment agreements, the “investments”). The warrants carry a term of seven years but are subject to mandatory exercise when the market price of BANC common stock reaches or exceeds $24.60 for 20 or more trading days during any 30-consecutive trading day period, a 100% premium to the price paid by the Investors for BANC common stock and BANC NVCE stock. In this joint proxy statement/prospectus, we refer to the closing of the investments as the “investment closing.”
The investments are contingent upon the merger closing in accordance with the terms of the merger agreement and are subject to the satisfaction or waiver of certain other closing conditions. See the information provided in the section entitled “The Investment Agreements” beginning on page 138 and the investment agreements attached as Annex B and Annex C for more information about the investments.
Q:
When and where will each of the special meetings take place?
A:
The BANC special meeting will be held on [   ], 2023 at [   ], Pacific Time at 3 MacArthur Place,
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Santa Ana, CA 92707. If you are a holder of record of BANC common stock as of the BANC record date, vote by completing, signing, dating and returning the accompanying proxy card in the enclosed postage-paid envelope. You may also vote by telephone or through the internet as described in the instructions included with the accompanying proxy card. If your shares are held in the name of a bank, broker, trustee or other nominee, please follow the instructions on the voting instruction card furnished by such bank, broker, trustee or other nominee.
The PACW special meeting will be held at [   ] on [   ], 2023 at [   ], Mountain Time at Denver Marriott Tech Center, 4900 S. Syracuse St, Denver, CO 80237.
Even if you plan to attend your respective company’s special meeting, BANC and PACW recommend that you vote your shares in advance as described below so that your vote will be counted if you later decide not to attend or become unable to attend the applicable special meeting. See the section entitled “—Q: How can I vote my shares without attending my respective special meeting?” beginning on page 9.
Q:
What matters will be considered at each of the special meetings?
A:
At the BANC special meeting, BANC stockholders will be asked to consider and vote on the following proposals:
BANC Proposal 1: The BANC issuance proposal;
BANC Proposal 2: The BANC incentive plan proposal;
BANC Proposal 3: The BANC exemption amendment proposal; and
BANC Proposal 4: The BANC adjournment proposal.
At the PACW special meeting, PACW stockholders will be asked to consider and vote on the following proposals:
PACW Proposal 1: The PACW merger proposal;
PACW Proposal 2: The PACW compensation proposal; and
PACW Proposal 3: The PACW adjournment proposal.
In order to complete the mergers and the investments, among other things, BANC stockholders must approve the BANC issuance proposal, and PACW stockholders must approve the PACW merger proposal. None of the approvals of the BANC incentive plan proposal, BANC exemption amendment proposal, BANC adjournment proposal, PACW compensation proposal or PACW adjournment proposal is a condition to the obligations of BANC or PACW to complete the mergers or of BANC or the Investors to complete the investments.
Q:
What will PACW stockholders receive in the mergers?
A:
Upon consummation of the first merger, holders of PACW common stock issued and outstanding immediately prior to the effective time, except for shares of PACW common stock owned by PACW as treasury stock or owned by PACW, BANC or Merger Sub (with certain exceptions) will be entitled to receive 0.6569 of a share of BANC common stock. BANC will not issue any fractional shares of BANC common stock in the first merger. PACW stockholders who would otherwise be entitled to a fractional share of BANC common stock in the first merger will instead receive an amount in cash (rounded to the nearest cent) determined by multiplying the average closing-sale price per share of BANC common stock on the NYSE as reported by The Wall Street Journal for the consecutive period of five full trading days ending on the trading day preceding the closing date (the “BANC closing share value”) by the fraction of a share (after taking into account all shares of PACW common stock held by such holder immediately prior to the completion of the first merger and rounded to the nearest thousandth when expressed in decimal form) of BANC common stock that such PACW stockholder would otherwise be entitled to receive.
In the second merger, each outstanding share of PACW preferred stock will be converted into the right to receive one share of new BANC preferred stock and each outstanding PACW depositary share will become a BANC depositary share. Upon completion of the second merger, BANC will assume the obligations of PACW under the deposit agreement. For more information, see the sections entitled “Description of New BANC Preferred Stock” beginning on page 174 and “Description of the BANC Depositary Shares” beginning on page 185.
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Q:
What will BANC stockholders receive in the mergers?
A:
In the mergers, BANC stockholders will not receive any consideration for their shares of BANC common stock, and their shares of BANC common stock will remain outstanding and will constitute shares of the combined company following the mergers. Immediately following the mergers, shares of BANC common stock will continue to be traded on the NYSE.
Q:
Will the value of the merger consideration change between the date of this joint proxy statement/prospectus and the time the mergers are completed?
A:
Yes. Although the number of shares of BANC common stock that PACW stockholders will be entitled to receive is fixed, the value of the merger consideration will fluctuate between the date of this joint proxy statement/prospectus and the effective time based upon the market value for BANC common stock. Any fluctuation in the market price of BANC common stock after the date of this joint proxy statement/prospectus will change the value of the shares of BANC common stock that PACW stockholders will receive.
Q:
How will the mergers affect PACW equity awards?
A:
At the effective time, each restricted stock award granted under the Amended and Restated PacWest Bancorp 2017 Stock Incentive Plan (the “PACW stock plan”) will convert into the right to receive the merger consideration, subject to the same terms and conditions applicable to such awards immediately prior to the effective time, including with respect to vesting conditions; provided that such awards granted to non-employee members of the PACW board of directors will vest at the effective time. The merger agreement further provides that each outstanding performance-based restricted stock unit award granted under the PACW stock plan (a “PACW PSU award”) will, at the effective time, convert into a time-based restricted stock unit award of BANC (a “Converted RSU award”), subject to the same terms and conditions applicable to such awards immediately prior to the effective time, including with respect to vesting conditions (excluding performance-based vesting conditions). The number of shares of BANC common stock subject to each Converted RSU award will equal the product of (i) the number of shares subject to the PACW PSU award immediately prior to the effective time (based on actual performance measured through the latest practicable date prior to the effective time), multiplied by (ii) the exchange ratio.
Q:
How will the mergers affect BANC equity awards?
A:
At the effective time, each time-based restricted stock unit award (a “BANC RSU award”) and each stock option granted under the Banc of California 2018 Omnibus Stock Incentive Plan and the Banc of California 2013 Omnibus Stock Incentive Plan (the “BANC stock plans”) that is outstanding immediately prior to the effective time will be deemed replaced under the applicable BANC stock plan and will remain outstanding subject to the same terms and conditions applicable to such awards immediately prior to the effective time, including with respect to vesting conditions; provided, that any restricted stock unit award granted under a BANC stock plan to a non-employee member of the BANC board of directors will vest and will be settled within five business days after the effective time. The merger agreement further provides that, at the effective time, each outstanding performance-based restricted stock unit award granted under a BANC stock plan (a “BANC PSU award”), other than BANC stock-price PSU awards, will vest and be settled within five business days after the effective time, with performance deemed achieved at the target level of performance. On August 25, 2023, the BANC board of directors approved the cancellation of BANC PSU awards with stock price targets (“BANC stock-price PSU awards”) at and subject to the occurrence of the effective time and the consent of the holder.
Q:
How does the BANC board of directors recommend that I vote at the BANC special meeting?
A:
The BANC board of directors unanimously recommends that you vote “FOR” the BANC issuance proposal, “FOR” the BANC incentive plan proposal, “FOR” the BANC exemption amendment proposal and “FOR” the BANC adjournment proposal.
In considering the recommendations of the BANC board of directors, BANC stockholders should be aware that BANC directors and executive officers may have interests in the mergers that are different from, or in
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addition to, the interests of BANC stockholders generally. For a more complete description of these interests, see the information provided in the section entitled “The Transactions—Interests of Certain BANC Directors and Executive Officers in the Mergers” beginning on page 105.
Q:
How does the PACW board of directors recommend that I vote at the PACW special meeting?
A:
The PACW board of directors unanimously recommends that you vote “FOR” the PACW merger proposal, “FOR” the PACW compensation proposal and “FOR” the PACW adjournment proposal.
In considering the recommendations of the PACW board of directors, PACW stockholders should be aware that PACW directors and executive officers may have interests in the mergers that are different from, or in addition to, the interests of PACW stockholders generally. For a more complete description of these interests, see the information provided in the section entitled “The Transactions—Interests of Certain PACW Directors and Executive Officers in the Mergers” beginning on page 108.
Q:
Who is entitled to vote at the BANC special meeting?
A:
The record date for the BANC special meeting is [   ], 2023, which we refer to as the “BANC record date.” All BANC stockholders of record who held shares of BANC common stock at the close of business on the BANC record date are entitled to receive notice of, and to vote at, the BANC special meeting.
Each holder of record of BANC common stock as of the BANC record date is entitled to cast one vote on each matter properly brought before the BANC special meeting for each share of BANC common stock that such holder owned of record as of the BANC record date; provided, however, that under Section F of Article 6 of the BANC charter, no BANC stockholder who beneficially owns more than ten percent (10%) of the shares of BANC common stock outstanding as of the BANC record date may vote shares held in excess of such amount. As of the close of business on the BANC record date, there were [   ] outstanding shares of BANC common stock held by [   ] holders of record.
Attendance at the BANC special meeting is not required to vote. See below and the section entitled “The BANC Special Meeting—Proxies” beginning on page 47 for instructions on how to vote your shares of BANC common stock without attending the BANC special meeting.
Q:
Who is entitled to vote at the PACW special meeting?
A:
The record date for the PACW special meeting is [   ], 2023, which we refer to as the “PACW record date.” All PACW stockholders of record who held shares of PACW common stock at the close of business on the PACW record date are entitled to receive notice of, and to vote at, the PACW special meeting.
Each holder of record of PACW common stock as of the PACW record date is entitled to cast one vote on each matter properly brought before the PACW special meeting for each share of PACW common stock that such holder owned of record as of the PACW record date. As of the close of business on the PACW record date, there were [   ] outstanding shares of PACW common stock held by [   ] holders of record.
See below and the section entitled “The PACW Special Meeting—Proxies” beginning on page 63 for instructions on how to vote your shares of PACW common stock without attending the PACW special meeting.
Q:
What constitutes a quorum for the BANC special meeting?
A:
The presence at the BANC special meeting, in person or by proxy, of holders entitled to cast one-third of all the votes entitled to be cast at the meeting will constitute a quorum for the transaction of business at the BANC special meeting. Abstentions will be included in determining the number of shares present at the meeting for the purpose of determining the presence of a quorum. As it is expected that all proposals to be voted on at the BANC special meeting will be “non-routine” matters, as discussed in the section entitled, “The BANC Special Meeting—Broker Non-Votes,” BANC does not expect any broker non-votes to occur at the BANC special meeting.
Q:
What constitutes a quorum for the PACW special meeting?
A:
Holders of a majority of the shares of PACW common stock entitled to vote on a matter at the PACW special meeting, present in person or represented by proxy, will constitute a quorum for the transaction of
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business at the PACW special meeting. All shares of PACW common stock present in person or represented by proxy, including abstentions, will be treated as present for purposes of determining the presence or absence of a quorum for all matters voted on at the PACW special meeting. As it is expected that all proposals to be voted on at the PACW special meeting will be “non-routine” matters, as discussed in the section entitled, “The PACW Special Meeting—Broker Non-Votes,” PACW does not expect any broker non-votes to occur at the PACW special meeting.
Q:
What vote is required for the approval of each proposal at the BANC special meeting?
A:
BANC Proposal 1: BANC issuance proposal. Approval of the BANC issuance proposal requires the affirmative vote of a majority of votes cast by holders of shares of BANC common stock at the BANC special meeting.
BANC Proposal 2: BANC incentive plan proposal. Approval of the BANC incentive plan proposal requires the affirmative vote of a majority of the votes cast by holders of shares of BANC common stock at the BANC special meeting.
BANC Proposal 3: BANC exemption amendment proposal. Approval of the BANC exemption amendment proposal requires the affirmative vote of the holders of a majority of the outstanding shares of BANC common stock entitled to vote on such proposal.
BANC Proposal 4: BANC adjournment proposal. Whether or not a quorum will be present at the meeting, approval of the BANC adjournment proposal requires the affirmative vote of a majority of votes cast by holders of shares of BANC common stock at the BANC special meeting.
Q:
What vote is required for the approval of each proposal at the PACW special meeting?
A:
PACW Proposal 1: PACW merger proposal. Adoption of the PACW merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of PACW common stock entitled to vote on the merger agreement.
PACW Proposal 2: PACW compensation proposal. Approval of the PACW compensation proposal requires the affirmative vote of the holders of at least a majority of the shares of PACW common stock present or represented by proxy at the PACW special meeting.
PACW Proposal 3: PACW adjournment proposal. Approval of PACW adjournment proposal requires the affirmative vote of the holders of at least a majority of the shares of PACW common stock present or represented by proxy at the PACW special meeting.
Q:
Are there any voting agreements with existing stockholders?
A:
Yes. Each member of the PACW board of directors has entered into a voting agreement with BANC in which such director has agreed to vote all PACW common stock that such director owns and has the power to vote in favor of the PACW merger proposal and any other matter that is reasonably necessary to be approved by the PACW stockholders to facilitate the consummation of the transactions contemplated by the merger agreement. Each member of the PACW board of directors has also agreed to vote against any proposal made in opposition to the approval of the adoption of the merger agreement or that is otherwise in competition or inconsistent with the transactions contemplated by the merger agreement, against any acquisition proposal and against any proposal, transaction, agreement or amendment to PACW’s organizational documents or other action that is intended to or could reasonably be expected to prevent, impede, interfere with, materially delay, postpone, adversely affect or discourage the consummation of the first merger. As of the close of business on the PACW record date, such persons beneficially owned, in the aggregate, [   ] shares of PACW common stock, allowing them to exercise approximately [   ]% of the voting power of PACW common stock (which does not include shares issuable upon the exercise, vesting or settlement of PACW equity-based awards that were not outstanding as of the close of business on the PACW record date).
In addition, each member of the BANC board of directors has entered into a voting agreement with PACW in which such director has agreed to vote all BANC common stock that such director owns and has the power to vote in favor of the BANC issuance proposal and any other matter that is reasonably necessary to
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be approved by the BANC stockholders to facilitate the consummation of the transactions contemplated by the merger agreement. Each member of the BANC board of directors has also agreed to vote against any proposal made in opposition to the approval of the adoption of the merger agreement or that is otherwise in competition or inconsistent with the transactions contemplated by the merger agreement, against any acquisition proposal and against any proposal, transaction, agreement or amendment to BANC’s organizational documents or other action that is intended to or could reasonably be expected to prevent, impede, interfere with, materially delay, postpone, adversely affect or discourage the consummation of the first merger. As of the close of business on the BANC record date, such persons beneficially owned, in the aggregate, [   ] shares of BANC common stock, allowing them to exercise approximately [   ]% of the voting power of BANC common stock (which does not include shares issuable upon the exercise, vesting or settlement of BANC equity-based awards that were not outstanding as of the close of business on the BANC record date).
Q:
What happens if BANC stockholders do not approve the BANC exemption amendment proposal?
A:
Under the Warburg investment agreement, if the BANC exemption amendment proposal is not approved, but the Warburg investment is nevertheless consummated, BANC will be required to, at each annual meeting of the BANC stockholders following the closing of the Warburg investment until such time as the BANC exemption amendment proposal is duly approved, use reasonable best efforts (including recommending the BANC exemption amendment proposal to the BANC stockholders) to (i) submit to the BANC stockholders the BANC exemption amendment proposal and (ii) obtain the requisite approval of the BANC stockholders of the BANC exemption amendment proposal at any such meeting of the BANC stockholders; provided that following the first anniversary of the closing of the Warburg investment, BANC’s foregoing obligations described in this paragraph will be subject to receipt of a written request from the Warburg Investors no later than 30 business days prior to the anniversary of the date on which BANC first filed its proxy materials for the preceding annual BANC stockholder meeting. Following the receipt of the requisite approval of the BANC stockholders of the BANC exemption amendment proposal, BANC will be required under the Warburg investment agreement to file the BANC exemption amendment with the Maryland Department of Assessments and Taxation, Business Services Division (the “Maryland Department of State”).
Q:
Why am I being asked to consider and vote on a proposal to approve, by non-binding, advisory vote, merger-related compensation arrangements for the PACW named executive officers (i.e., the PACW compensation proposal)?
A:
Under SEC rules, PACW is required to seek a non-binding, advisory vote with respect to the compensation that may be paid or become payable to PACW’s named executive officers that is based on or otherwise relates to the mergers, or “golden parachute” compensation.
Q:
What happens if PACW stockholders do not approve, by non-binding, advisory vote, the PACW compensation proposal?
A:
The vote on the proposal to approve the merger-related compensation arrangements for each of PACW’s named executive officers is separate and apart from the votes to approve the other proposals being presented at the PACW special meeting. Because the vote on the proposal to approve the merger-related executive compensation is advisory in nature only, it will not be binding upon PACW, BANC or the combined company. Accordingly, the merger-related compensation will be paid to PACW’s named executive officers to the extent payable in accordance with the terms of their compensation agreements and other contractual arrangements even if PACW stockholders do not approve the proposal to approve the merger-related executive compensation.
Q:
What if I hold shares in both BANC and PACW?
A:
If you hold shares of both BANC common stock and PACW common stock, you will receive separate packages of proxy materials for each. A vote cast as a BANC stockholder will not count as a vote cast as a PACW stockholder, and a vote cast as a PACW stockholder will not count as a vote cast as a BANC stockholder. Therefore, please submit separate proxies for your shares of BANC common stock and your shares of PACW common stock.
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Q:
How can I attend, vote and ask questions at the BANC special meeting or PACW special meeting?
A:
Record Holders. If, as of the applicable record date, you hold shares of BANC common stock or PACW common stock directly in your name as the holder of record, you are a “record holder” and your shares may be voted prior to or at the BANC special meeting or the PACW special meeting by you, as applicable.
Beneficial Owners. If you hold shares in the name of a bank, broker, trustee or other nominee (e.g., in a brokerage or other account in “street name”), then you are a “beneficial owner” of such shares. Please follow the instructions on the voting instruction card furnished by such bank, broker, trustee or other nominee in order to vote such shares.
BANC special meeting. If you are a holder of record of BANC common stock on the BANC record date, you will be able to attend the BANC special meeting, ask questions and vote during the meeting. Each person attending must present a valid, government issued form of identification in order to be admitted to the BANC special meeting. Each stockholder attending also must provide proof of ownership of shares of BANC common stock as of the BANC record date. If you are a record holder, proof of ownership will be established by BANC’s verification of your name against BANC’s list of record holders as of the BANC record date. If you hold your shares through a bank, broker, trustee or other nominee, you must provide one of the following as proof of ownership: (a) account statement showing share ownership as of the BANC record date, (b) a copy of an email that you received with instructions containing a link to the website where the BANC’s proxy materials are available and a valid control number, (c) a valid legal proxy containing a valid control number or a letter from a record holder naming you as proxy, or (d) a letter from the bank, broker, trustee or other nominee through which you hold your shares confirming your ownership as of the BANC record date.
PACW special meeting. All PACW stockholders, including stockholders of record of PACW common stock and PACW stockholders who hold their shares through banks, brokers, trustees or other nominees, are invited to attend the PACW special meeting. PACW stockholders of record on the PACW record date can vote in person at the PACW special meeting. If you are not a PACW stockholder of record on the PACW record date, you must obtain a legal proxy executed in your favor from the record holder of your shares to be able to vote in person at the PACW special meeting. If you plan to attend the PACW special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership. In addition, you must bring a form of personal photo identification with you in order to be admitted to the meeting. PACW reserves the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification.
Even if you plan to attend the BANC special meeting or the PACW special meeting, as applicable, BANC and PACW recommend that you vote your shares in advance as described below so that your vote will be counted if you later decide not to or become unable to attend the respective special meeting.
Additional information on attending the special meetings can be found under the section entitled “The BANC Special Meeting—Attending the Special Meeting” on page 46 and under the section entitled “The PACW Special Meeting—Attending the Special Meeting” on page 63.
Q:
How can I vote my shares without attending my respective special meeting?
A:
If, as of the applicable record date, you hold shares of BANC common stock or PACW common stock directly in your name as the holder of record, then you can vote by completing, signing, dating and returning the accompanying proxy card in the enclosed postage-paid envelope. You may also vote by telephone or through the internet as described in the instructions included with the accompanying proxy card. If you hold shares in the name of a bank, broker, trustee or other nominee (e.g., in a brokerage or other account in “street name”), please follow the instructions on the voting instruction card furnished by such bank, broker, trustee or other nominee in order to vote such shares.
If you intend to submit your proxy by telephone or via the internet, you must do so by [   ], local time, on the day before your respective company’s special meeting. If you intend to submit your proxy by mail, your completed proxy card must be received prior to your respective company’s special meeting.
Additional information on voting procedures can be found under the section entitled “The BANC Special Meeting—Attending the Special Meeting” on page 46 and under the section entitled “The PACW Special Meeting—Attending the Special Meeting” on page 63.
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Q:
How do I vote shares of PACW common stock that I hold in an account under the PACW 401(k) Plan?
A:
If you hold shares of PACW common stock pursuant to the PACW 401(k) Plan, then you will receive a proxy card for the shares held in your 401(k) plan account and you can vote by following the instructions included with the proxy card.
Q:
Is there a limit on voting shares of BANC common stock or PACW common stock?
A:
Only holders of record of BANC common stock on the BANC record date are entitled to notice of and to vote at the BANC special meeting, and only holders of record of PACW common stock on the PACW record date are entitled to notice of and to vote at the PACW special meeting. Each such BANC stockholder is entitled to one vote for each share of BANC common stock held as of the BANC record date; provided, however, that under Section F of Article 6 of the BANC charter, no BANC stockholder who beneficially owns more than ten percent (10%) of the shares of BANC common stock outstanding as of that date may vote shares held in excess of such amount. At the close of business on the BANC record date, there were [   ] outstanding shares of BANC common stock.
Each such PACW stockholder is entitled to one vote for each share of PACW common stock held as of the PACW record date. The PACW charter does not contain a limit on voting shares of PACW common stock.
Q:
What do I need to do now?
A:
After carefully reading and considering the information contained in this document, the documents that are attached as annexes to this document and the documents that are incorporated by reference in this document, please vote as soon as possible. If you hold shares of BANC common stock or PACW common stock, please respond by completing, signing and dating the accompanying proxy card and returning it in the enclosed postage-paid envelope, or by submitting your proxy by telephone or through the internet, as soon as possible so that your shares may be represented at your meeting. Please note that if you are a beneficial owner with shares held in “street name,” you should follow the voting instructions provided by your bank, broker, trustee or other nominee.
Q:
If I am a beneficial owner with my shares held in “street name” by a bank, broker, trustee or other nominee, will my bank, broker, trustee or other nominee vote my shares for me at the BANC special meeting or PACW special meeting?
A:
No. Your bank, broker, trustee or other nominee cannot vote your shares without instructions from you. You should instruct your bank, broker, trustee or other nominee how to vote your shares in accordance with the voting instruction form provided to you by your bank, broker, trustee or other nominee.
Q:
What is a “broker non-vote”?
A:
Banks, brokers, trustees and other nominees who hold shares in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokers, trustees and other nominees are not allowed to exercise their voting discretion with respect to the approval of matters determined to be “non-routine” without specific instructions from the beneficial owner.
A broker non-vote occurs when (a) a bank, broker, trustee or other nominee has discretionary authority to vote on one or more proposals to be voted on at a meeting of stockholders but is not permitted to vote on other proposals without instructions from the beneficial owner of the shares and (b) the beneficial owner fails to provide the bank, broker, trustee or other nominee with such instructions. Under applicable stock exchange rules, banks, brokers, trustees and other nominees holding shares in “street name” do not have discretionary voting authority with respect to any of the proposals described in this joint proxy statement/prospectus to be voted at the BANC special meeting or the PACW special meeting. It is expected that all proposals to be voted on at each of the BANC special meeting and the PACW special meeting will be “non-routine” matters, and, as such, if a beneficial owner of shares of BANC common stock or PACW common stock held in “street name” does not give voting instructions to the bank, broker, trustee or other nominee, then those shares will not be counted as present in person or by proxy at the BANC special meeting or PACW special meeting.
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Broker non-votes only count toward a quorum if at least one proposal is presented with respect to which the bank, broker, trustee or other nominee has discretionary authority. Since it is expected that all proposals to be voted on at each of the BANC special meeting and the PACW special meeting will be “non-routine” matters, as discussed in the sections entitled, “The BANC Special Meeting—Broker Non-Votes” and “The PACW Special Meeting—Broker Non-Votes,” no broker non-votes are expected to occur at the BANC special meeting or the PACW special meeting.
If you are a beneficial owner of BANC common stock and you do not instruct your bank, broker, trustee or other nominee on how to vote your shares of BANC common stock, your bank, broker, trustee or other nominee will not have authority to vote your shares on the BANC issuance proposal, the BANC incentive plan proposal, the BANC exemption amendment proposal or the BANC adjournment proposal and therefore such shares of BANC common stock will not be counted for purposes of establishing a quorum. Assuming a quorum is present, this will not have any effect on the BANC issuance proposal, the BANC incentive plan proposal or the BANC adjournment proposal and will have the same effect as a vote “AGAINST” the BANC exemption amendment proposal.
If you are a beneficial owner of PACW common stock and you do not instruct your bank, broker, trustee or other nominee on how to vote your shares of PACW common stock, your bank, broker, trustee or other nominee will not have authority to vote your shares of PACW common stock on the PACW merger proposal, the PACW compensation proposal or the PACW adjournment proposal, and therefore such shares of PACW common stock will not be counted for purposes of establishing a quorum. In the case of the PACW merger proposal, this will have the same effect as a vote “AGAINST” the PACW merger proposal. In the case of the PACW compensation proposal and the PACW adjournment proposal, this will have no effect on the outcome of such proposals.
Q:
What if I abstain or fail to vote?
A:
For purposes of the BANC special meeting, an abstention occurs when a BANC stockholder attends the BANC special meeting and does not vote or returns a proxy with an “abstain” instruction. Abstentions will be included in determining the number of shares present at the meeting for the purpose of determining the presence of a quorum.
BANC issuance proposal, BANC incentive plan proposal and BANC adjournment proposal: In accordance with guidance from the NYSE and the BANC bylaws, an abstention by a BANC stockholder who is present (either in person or by proxy) at the BANC special meeting (or a BANC stockholder who is not present at the BANC special meeting and does not respond by proxy) will have no effect on the BANC issuance proposal, BANC incentive plan proposal or BANC adjournment proposal.
BANC exemption amendment proposal: An abstention by a BANC stockholder who is present (either in person or by proxy) at the BANC special meeting (or a BANC stockholder who is not present at the BANC special meeting and does not respond by proxy) will have the same effect as a vote “AGAINST” the BANC exemption amendment proposal.
PACW merger proposal: An abstention by a PACW stockholder who is present (either in person or by proxy) at the PACW special meeting (or a PACW stockholder who is not present at the PACW special meeting and does not respond by proxy) will have the same effect as a vote “AGAINST” the PACW merger proposal. Your bank, broker, trustee or other nominee may not vote your shares on the PACW merger proposal, which failure to vote will have the same effect as a vote “AGAINST” the PACW merger proposal.
PACW compensation proposal: An abstention by a PACW stockholder who is present (either in person or by proxy) at the PACW special meeting will have the same effect as a vote “AGAINST” the PACW compensation proposal. An abstention by a PACW stockholder who is not present at the PACW special or does not respond by proxy will have no effect on the outcome of the PACW compensation proposal. Your bank, broker, trustee or other nominee may not vote your shares on the PACW compensation proposal, which failure to vote will have no effect on the outcome of such PACW compensation proposal.
PACW adjournment proposal: An abstention by a PACW stockholder who is present (either in person or by proxy) at the PACW special meeting will have the same effect as a vote “AGAINST” the
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PACW adjournment proposal. An abstention by a PACW stockholder who is not present at the PACW special or does not respond by proxy will have no effect on the outcome of the PACW adjournment proposal. Your bank, broker, trustee or other nominee may not vote your shares on the PACW adjournment proposal, which failure to vote will have no effect on the outcome of such PACW adjournment proposal.
Q:
Why is my vote important?
A:
If you do not vote, it will be more difficult for BANC or PACW to obtain the necessary quorum to hold its special meeting and to obtain the stockholder approval that its respective board of directors is recommending and seeking. In addition, your failure to submit a proxy or vote at the applicable special meeting, or an abstention from voting, will have the same effect as a vote “AGAINST” the BANC exemption amendment proposal and “AGAINST” the PACW merger proposal.
Q:
What will happen if I return my proxy card without indicating how to vote?
A:
If you sign and return your proxy card without indicating how to vote on any particular proposal, the shares of BANC common stock represented by your proxy will be voted as recommended by the BANC board of directors with respect to such proposals, or the shares of PACW common stock represented by your proxy will be voted as recommended by the PACW board of directors with respect to such proposals, as the case may be.
Q:
Can I revoke my proxy or change my vote after I have delivered my proxy or voting instruction card?
A:
If you directly hold shares of BANC common stock or PACW common stock in your name as a record holder, you can change your vote by:
submitting a written notice that you would like to revoke your proxy to the corporate secretary of BANC or PACW, as applicable;
signing and returning a proxy card with a later date;
voting by telephone or the internet at a later time; or
attending the applicable special meeting and voting at such special meeting.
If you intend to submit your proxy by telephone or via the internet, you must do so by [   ], local time, on the day before your respective company’s special meeting. If you intend to submit your proxy by mail, your completed proxy card must be received prior to your respective company’s special meeting.
If you are a beneficial owner and you have instructed a bank, broker, trustee or other nominee to vote your shares, you must follow the directions you receive from your bank, broker, trustee or other nominee in order to change or revoke your vote.
Q:
Will BANC be required to submit the BANC issuance proposal to the BANC stockholders even if the BANC board of directors has withdrawn, modified or qualified its recommendation?
A:
Yes. Unless the merger agreement is terminated before the BANC special meeting, BANC is required to submit the BANC issuance proposal to its stockholders even if the BANC board of directors has withdrawn, modified or qualified its recommendation in favor of approving such proposal.
Q:
Will PACW be required to submit the PACW merger proposal to the PACW stockholders even if the PACW board of directors has withdrawn, modified or qualified its recommendation?
A:
Yes. Unless the merger agreement is terminated before the PACW special meeting, PACW is required to submit the PACW merger proposal to its stockholders even if the PACW board of directors has withdrawn, modified or qualified its recommendation in favor of approving such proposal.
Q:
Are BANC stockholders entitled to dissenters’ rights?
A:
No. BANC stockholders are not entitled to dissenters’ rights under the Maryland General Corporation Law (the “MGCL”). For more information, see the section entitled “The Transactions—Appraisal or Dissenters’ Rights in Connection with the Mergers” beginning on page 116.
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Q:
Are PACW stockholders entitled to dissenters’ rights?
A:
No. PACW stockholders are not entitled to dissenters’ rights under the Delaware General Corporation Law (the “DGCL”). For more information, see the section entitled “The Transactions—Appraisal or Dissenters’ Rights in Connection with the Mergers” beginning on page 116.
Q:
Are there any risks that I should consider in deciding whether to vote for the approval of the BANC issuance proposal, the PACW merger proposal or the other proposals to be considered at the BANC special meeting and the PACW special meeting, respectively?
A:
Yes. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors” beginning on page 34. You also should read and carefully consider the risk factors of BANC and PACW contained in the documents that are incorporated by reference into or attached as an annex to this joint proxy statement/prospectus.
Q:
What are the material U.S. federal income tax considerations of the mergers with respect to PACW stockholders?
A:
The mergers, taken together, are intended to qualify as a “reorganization” for U.S. federal income tax purposes, and it is a condition to our respective obligations to complete the first merger that each of PACW and BANC receives a legal opinion to the effect that the mergers, taken together, will so qualify. Accordingly, PACW stockholders generally will not recognize any gain or loss for U.S. federal income tax purposes on the exchange of PACW common stock for BANC common stock in the first merger, except for any gain or loss that may result from the receipt of cash instead of a fractional share of BANC common stock. You should be aware that the tax consequences to you of the mergers may depend upon your own situation. In addition, you may be subject to state, local or foreign tax laws that are not discussed in this joint proxy statement/prospectus. You should therefore consult with your own tax advisor for a full understanding of the tax consequences to you of the mergers. For a more complete discussion of the material U.S. federal income tax considerations of the mergers, see the section entitled “Material U.S. Federal Income Tax Considerations” beginning on page 153.
Q:
When are the mergers expected to be completed?
A:
BANC and PACW expect the closing of the mergers to occur in late 2023 or early 2024, subject to satisfaction of closing conditions, including receipt of required regulatory approvals and requisite approval by the stockholders of each company, and the substantially concurrent closing of the equity financing. Neither BANC nor PACW can predict the actual date on which the first merger will be completed, or if the mergers will be completed at all, because completion is subject to conditions and factors outside the control of both companies. BANC and PACW expect the mergers to be completed promptly once BANC and PACW have obtained their respective stockholders’ approvals, have obtained necessary regulatory approvals, and have satisfied other closing conditions.
Q:
What are the conditions to complete the first merger?
A:
The obligations of BANC and PACW to complete the first merger are subject to the satisfaction or waiver of the applicable closing conditions contained in the merger agreement, including (a) the receipt of requisite regulatory approvals, (b) no governmental entity having imposed, and no requisite regulatory approval containing, a materially burdensome regulatory condition (as defined below), (c) the receipt of certain tax opinions, (d) the receipt of the requisite BANC stockholder approval, (e) the receipt of the requisite PACW stockholder approval and (f) the consummation of the equity financing occurring substantially concurrently with the merger closing. For more information, see the section entitled “The Merger Agreement—Conditions to Complete the First Merger” beginning on page 132.
Q:
What happens if the first merger is not completed?
A:
If the first merger is not completed, PACW stockholders will not receive any consideration for their shares of PACW common stock in connection with the mergers and the mergers will not cause PACW to cease being an independent public company or to have its stock delisted from Nasdaq, and BANC will not complete the issuance of shares of BANC common stock pursuant to the merger agreement or the
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investment agreements. In addition, if the merger agreement is terminated in certain circumstances, a termination fee of $39.5 million will be payable by either BANC or PACW to the other party, as applicable. Additionally, following the termination of the merger agreement, BANC and PACW may be required to reimburse the other for some or all of such party’s costs associated with the balance sheet repositioning. See the section entitled “The Merger Agreement—Termination Fee and Expense Reimbursement” beginning on page 134 for a more detailed discussion of the circumstances under which a termination fee may be required to be paid and the amount of any balance sheet repositioning costs each party is required to bear.
In the event that the merger agreement is terminated and BANC receives all or any portion of the termination fee, BANC may be required to pay (i) the Warburg Investors an amount equal to 16.3% and (ii) the Centerbridge Investor an amount equal to 3.7%, in each case, of the amount of the termination fee net of certain out-of-pocket fees, costs and expenses of BANC. See the section entitled “The Investment Agreement—Commitment Compensation and Transaction Expenses” beginning on page 149 for a more detailed discussion of the circumstances under which BANC is required to pay the Investors a percentage of the termination fee.
In addition, if the merger agreement is terminated, the investment agreements will automatically terminate and BANC will not issue the shares of BANC common stock, shares of BANC NVCE stock or warrants pursuant to the investment agreements. Also, the amendment and restatement of the BANC existing omnibus stock incentive plan, to be renamed the Amended and Restated Banc of California, Inc. 2018 Omnibus Stock Incentive Plan, and the BANC charter amendment will not become effective.
Q:
What happens if I sell my shares after the applicable record date but before my company’s special meeting?
A:
The record date for the BANC and PACW special meetings is earlier than the date of the BANC special meeting and the PACW special meeting, and earlier than the date that the first merger is expected to be completed. If you sell or otherwise transfer your shares of BANC common stock or PACW common stock after the applicable record date but before the date of the applicable special meeting, you will retain your right to vote at such special meeting (provided that such shares remain outstanding on the date of such special meeting), but, with respect to the PACW common stock, you will not have the right to receive the merger consideration to be received by PACW stockholders in connection with the first merger. In order to receive the merger consideration, you must hold your shares of PACW common stock through the completion of the first merger.
Q:
If I am a PACW stockholder, should I send in my certificates of shares of PACW common stock?
A:
No. If you are a PACW stockholder, please do not send in your stock certificates with your proxy. After the mergers are completed, an exchange agent mutually agreed upon by BANC and PACW (the “exchange agent”) will send you instructions for exchanging PACW stock certificates for the consideration to be received in the first merger. See the section entitled “The Merger Agreement—Exchange of Shares” beginning on page 120.
Q:
What should I do if I receive more than one set of voting materials for the same special meeting?
A:
If you are a beneficial owner and hold shares of BANC common stock or PACW common stock in “street name” and also are a record holder and hold shares directly in your name or otherwise or if you hold shares of BANC common stock or PACW common stock in more than one brokerage account, you may receive more than one set of voting materials relating to the same special meeting.
Record Holders. For shares held directly, please complete, sign, date and return each proxy card (or cast your vote by telephone or internet as provided on each proxy card) or otherwise follow the voting instructions provided in this joint proxy statement/prospectus in order to ensure that all of your shares of BANC common stock or PACW common stock are voted.
Beneficial Owners. For shares held in “street name” through a bank, broker, trustee or other nominee, you should follow the procedures provided by your bank, broker, trustee or other nominee in order to vote your shares.
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Q:
Who can help answer my questions?
A:
BANC Stockholders: If you have any questions about the mergers or how to submit your proxy or voting instruction card, or if you need additional copies of this document or the enclosed proxy card or voting instruction card, you should contact BANC’s proxy solicitor, Okapi Partners LLC, by emailing info@okapipartners.com or by calling toll-free at 888-785-6673, or for banks, brokers, trustees and other nominees, collect at 212-297-0720.
PACW Stockholders: If you have any questions about the mergers or how to submit your proxy or voting instruction card, or if you need additional copies of this document or the enclosed proxy card or voting instruction card, you should contact PACW’s proxy solicitor, Okapi Partners LLC, by emailing info@okapipartners.com or by calling toll-free at 888-785-6709, or for banks, brokers, trustees and other nominees, collect at 212-297-0720.
Q:
Where can I find more information about BANC and PACW?
A:
You can find more information about BANC and PACW from the various sources described under the section entitled “Where You Can Find More Information” beginning on page 201.
Q:
What is householding and how does it affect me?
A:
SEC rules permit BANC, PACW and intermediaries, such as brokers, to satisfy the delivery requirements for proxy materials by delivering a single set of proxy materials to an address shared by two or more of BANC stockholders or PACW stockholders, unless contrary instructions have been received in advance according to certain procedures. In cases of such contrary instructions, each stockholder continues to receive a separate notice of the meeting and proxy card.
Certain brokerage firms may have instituted householding for beneficial owners of BANC common stock and PACW common stock, as applicable, held through such brokerage firms. If your family has multiple accounts holding BANC common stock or PACW common stock, as applicable, you may have already received a householding notification from your broker. Please contact your broker directly if you have any questions or require additional copies of this joint proxy statement/prospectus. The broker will arrange for delivery of a separate copy of this joint proxy statement/prospectus promptly upon your written or oral request. You may decide at any time to revoke your decision to household, and thereby receive multiple copies.
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SUMMARY
This summary highlights selected information in this joint proxy statement/prospectus and may not contain all of the information that is important to you. You should carefully read this entire joint proxy statement/prospectus, including the documents attached as annexes to this joint proxy statement/prospectus and the other documents we refer you to, for a more complete understanding of the matters being considered at the special meetings. In addition, we (i) include important business and financial information about PACW in the annexes to this joint proxy statement/prospectus and (ii) incorporate by reference important business and financial information about BANC into this joint proxy statement/prospectus. You may obtain the information regarding BANC incorporated by reference into this joint proxy statement/prospectus without charge by following the instructions in the section entitled “Where You Can Find More Information” beginning on page 201 of this joint proxy statement/prospectus.
Information about the Companies (page 69)
Banc of California, Inc.
3 MacArthur Place
Santa Ana, California 92707-7704
(855) 361-2262
BANC, a Maryland corporation, was incorporated in March 2002 and serves as the holding company for its wholly-owned subsidiary, BANC N.A., a California-based bank. BANC has 32 offices, including 26 full-service branches located throughout Southern California. BANC has served California markets since 1941 through BANC N.A. and its predecessors. As of June 30, 2023, BANC, together with its subsidiaries, had total assets of $9.37 billion, loans and leases, net of deferred fees, of $7.08 billion, total deposits of $6.87 billion and total stockholders’ equity of $0.957 billion.
Through its dedicated professionals, BANC provides customized and innovative banking and lending solutions to businesses, entrepreneurs and individuals throughout California, and full stack payment processing solutions through its subsidiary Deepstack Technologies. BANC helps to improve the communities where it lives and works by supporting organizations that provide financial literacy and job training, small business support and affordable housing. With a commitment to service and to building enduring relationships, BANC provides a higher standard of banking.
BANC’s principal source of income is dividends from BANC N.A. BANC N.A., a national banking association regulated by the Office of the Comptroller of the Currency (the “OCC”), is a relationship-focused, full-service business banking organization. It offers an array of commercial loan and deposit products and services, including demand, savings and money market accounts, certificates of deposit, commercial and industrial loans, commercial real estate and multifamily loans, Small Business Administration loans and construction loans, and other business-oriented products.
Shares of BANC common stock are traded on the NYSE under the trading symbol “BANC.”
For more information about BANC, please visit BANC’s website at www.bancofcal.com. The information provided on BANC’s website (other than the documents incorporated by reference herein) is not part of this joint proxy statement/prospectus and is not incorporated herein by reference. Additional information about BANC is included in documents incorporated by reference in this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information” on page 201.
Cal Merger Sub, Inc.
3 MacArthur Place
Santa Ana, California 92707-7704
(855) 361-2262
Merger Sub is a Delaware corporation and a wholly-owned subsidiary of BANC. Merger Sub was incorporated for the sole purpose of effecting the first merger. Merger Sub will not conduct any activities other than those incidental to its formation, the execution of the merger agreement and the transactions contemplated by the merger agreement. Following the first merger, the separate corporate existence of Merger Sub will cease.
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PacWest Bancorp
9701 Wilshire Boulevard, Suite 700
Beverly Hills, California 90212-2007
(310) 887-8500
PACW is a bank holding company headquartered in Los Angeles, California, with an executive office in Denver, Colorado, with one wholly-owned banking subsidiary, PACW Bank. PACW Bank is a relationship-based community bank focused on providing business banking and treasury management services to small, middle-market, and venture-backed businesses. PACW Bank offers a broad range of loan and lease and deposit products and services through full-service branches throughout California and in Durham, North Carolina and Denver, Colorado, and loan production offices around the country. As of June 30, 2023, PACW, together with its subsidiaries, had total assets of $38.3 billion, loans and leases, net of deferred fees, of $22.3 billion, total deposits of $27.9 billion and total stockholders’ equity of $2.5 billion.
PACW’s principal source of income is dividends from PACW Bank. PACW Bank is a state-chartered non-member bank and, as such, is regulated by the Federal Deposit Insurance Corporation (the “FDIC”) as its primary federal regulator and the California Department of Financial Protection and Innovation. In addition, PACW Bank is regulated by the Consumer Financial Protection Bureau with respect to compliance with certain consumer financial laws. Subject to the completion of the mergers and prior to the completion of the bank merger, PACW Bank intends to become a member of the Federal Reserve System. PACW Bank becoming a member of the Federal Reserve System is subject to approval of the Board of Governors of the Federal Reserve System or Federal Reserve Bank of San Francisco (together, the “Federal Reserve”). As a state member bank, PACW Bank’s primary federal bank regulator would become the Federal Reserve.
PACW common stock is traded on Nasdaq under the symbol “PACW.” The PACW depositary shares are currently listed on Nasdaq under the symbol “PACWP.” Additional information about PACW and its subsidiaries is included in the annexes to this joint proxy statement/prospectus. For additional information about PACW and its subsidiaries, please visit PACW’s website at www.pacwestbancorp.com. The information provided on PACW’s website is not part of this joint proxy statement/prospectus and is not incorporated herein by reference. See the section entitled “Where You Can Find More Information” on page 201.
The Mergers and the Merger Agreement (pages 71 and 138)
The terms and conditions of the mergers are contained in the merger agreement, a copy of which is attached as Annex A to this joint proxy statement/prospectus. You are encouraged to read the merger agreement carefully and in its entirety, as it is the primary legal document that governs the mergers.
On the terms and subject to the conditions set forth in the merger agreement, at the effective time, Merger Sub will merge with and into PACW, with PACW continuing as the surviving entity in the first merger. Immediately following the first merger, PACW will merge with and into BANC, with BANC as the surviving corporation in the second merger. Promptly following the second merger, PACW Bank, which will then be a wholly-owned subsidiary of BANC, will become a member bank of the Federal Reserve System. Promptly following the effectiveness of the FRS Membership, BANC N.A., a wholly-owned subsidiary of BANC, will merge with and into PACW Bank, with PACW Bank as the surviving bank in the bank merger. The combined company and the surviving bank will operate under the “Banc of California” name and brand following the closing of the transaction. After the effective time, (i) PACW will no longer be a public company, (ii) PACW common stock and PACW depositary shares will be delisted from Nasdaq and will cease to be publicly traded, and (iii) PACW common stock and PACW depositary shares will be deregistered under the Exchange Act. Immediately after the second effective time, BANC stockholders will continue to own their existing shares of BANC common stock and PACW will cease to exist.
Merger Consideration (page 118)
In the first merger, the PACW stockholders will be entitled to receive 0.6569 of a share of BANC common stock for each share of PACW common stock they own, subject to certain exceptions. PACW stockholders who would otherwise be entitled to a fraction of a share of BANC common stock will be entitled to receive an amount in cash (rounded to the nearest cent) based on the BANC closing share value.
BANC common stock is listed on the NYSE under the symbol “BANC,” and PACW common stock is listed on Nasdaq under the symbol “PACW.” The following table shows the closing sale prices of BANC common stock
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and PACW common stock as reported on the NYSE and Nasdaq, as applicable, on July 24, 2023, the last trading day before the public announcement of the merger agreement, and on [ ], 2023, the last practicable trading day before the date of this joint proxy statement/prospectus. This table also shows the implied value of the merger consideration to be issued in exchange for each share of PACW common stock, which was calculated by multiplying the closing price of BANC common stock on those dates by the exchange ratio of 0.6569 rounded to the nearest cent.
 
BANC
Common
Stock
PACW
Common
Stock
Implied Value of
One Share of
PACW
Common Stock
July 24, 2023
$13.15
$10.54
$8.64
[ ], 2023
$[ ]
$[ ]
$[ ]
For more information on the exchange ratio, see the section entitled “The Transactions—Terms of the Mergers” beginning on page 71 and the section entitled “The Merger Agreement—Merger Consideration” beginning on page 118.
In the second merger, each outstanding share of the PACW preferred stock will be converted into the right to receive one share of a newly created series of preferred stock of BANC having such powers, preferences and rights, and such qualifications, limitations and restrictions, taken as a whole, that are not materially less favorable to the PACW preferred stockholders than the existing powers, preferences, rights, qualifications and limitations of the PACW preferred stock.
Additionally in the second merger, each outstanding PACW depositary share representing a 1/40th interest in a share of PACW preferred stock will become a BANC depositary share and will represent a 1/40th interest in a share of new BANC preferred stock.
Treatment of BANC Equity Awards (page 119)
At the effective time, each BANC RSU award and each stock option granted under the BANC stock plans that is outstanding immediately prior to the effective time will be deemed replaced under the applicable BANC stock plan and will remain outstanding subject to the same terms and conditions applicable to such awards immediately prior to the effective time, including with respect to vesting conditions; provided, that any restricted stock unit award granted under a BANC stock plan to a non-employee member of the BANC board of directors will vest and will be settled within five business days after the effective time. The merger agreement further provides that, at the effective time, each outstanding BANC PSU award, other than BANC stock-price PSU awards, will vest and be settled within five business days after effective time, with performance deemed achieved at the target level of performance. On August 25, 2023, the compensation, nominating and corporate governance committee of the BANC board of directors approved the cancellation of BANC stock-price PSU awards at and subject to the occurrence of the effective time and the consent of the holder.
Treatment of PACW Equity Awards (page 119)
At the effective time, each restricted stock award granted under the PACW stock plan will convert into the right to receive the merger consideration, subject to the same terms and conditions applicable to such awards immediately prior to the effective time, including with respect to vesting conditions; provided that such awards granted to non-employee members of the board of directors of PACW will vest at the effective time. The merger agreement further provides that each PACW PSU award will, at the effective time, convert into a Converted RSU award, subject to the same terms and conditions applicable to such awards immediately prior to the effective time, including with respect to vesting conditions (excluding performance-based vesting conditions). The number of shares of BANC common stock subject to each Converted RSU award will equal the product of (i) the number of shares subject to the PACW PSU award immediately prior to the effective time (based on actual performance measured through the latest practicable date prior to the effective time), multiplied by (ii) the exchange ratio.
Material U.S. Federal Income Tax Considerations of the Mergers (page 153)
The mergers, taken together, are intended to qualify as a “reorganization” for U.S. federal income tax purposes, and it is a condition to our respective obligations to complete the first merger that each of BANC and PACW receives a legal opinion to the effect that the mergers, taken together, will so qualify. Accordingly, PACW
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stockholders generally will not recognize any gain or loss for U.S. federal income tax purposes on the exchange of PACW common stock for BANC common stock in the first merger, except for any gain or loss that may result from the receipt of cash instead of a fractional share of BANC common stock. You should be aware that the tax consequences of the mergers may depend upon your own situation. In addition, you may be subject to state, local or foreign tax laws that are not discussed in this joint proxy statement/prospectus. You should therefore consult with your own tax advisor for a full understanding of the tax consequences to you of the mergers.
For more detailed information, please refer to the section entitled “Material U.S. Federal Income Tax Considerations” beginning on page 153.
The U.S. federal income tax considerations described above may not apply to all PACW stockholders. Your tax consequences will depend on your individual situation. Accordingly, you should consult your tax advisor for a full understanding of the particular tax consequences of the mergers to you.
Recommendation of the BANC Board of Directors (page 44)
After careful consideration, the BANC board of directors, at a special meeting held on July 24, 2023, unanimously (a) determined that the merger agreement and the transactions contemplated thereby, including the mergers, and the BANC issuance, are advisable and in the best interests of BANC and its stockholders and (b) approved the execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated thereby, including the mergers and the BANC issuance. Accordingly, the BANC board of directors unanimously recommends that BANC stockholders vote “FOR” the BANC issuance proposal, “FOR” the BANC incentive plan proposal, “FOR” the BANC exemption amendment proposal and “FOR” the BANC adjournment proposal. For a more detailed discussion of the BANC board of directors’ recommendation, see the section entitled “The Transactions—BANC’s Reasons for the Mergers; Recommendation of the BANC Board of Directors” beginning on page 77.
Opinion of BANC’s Financial Advisor (page 82)
In connection with the mergers, BANC’s financial advisor, J.P. Morgan Securities LLC, which we refer to as JPM, delivered a written opinion, dated July 25, 2023, to the BANC board of directors to the effect that, as of such date and based upon and subject to the factors and assumptions set forth therein, the exchange ratio in the first merger was fair, from a financial point of view, to BANC. The full text of the written opinion of JPM, dated July 25, 2023, which sets forth, among other things, the assumptions made, matters considered and limits on the review undertaken, is attached as Annex O to this joint proxy statement/prospectus and is incorporated herein by reference. JPM’s written opinion was addressed to the BANC board of directors in connection with and for the purposes of its evaluation of the mergers, was directed only to the exchange ratio in the first merger and did not address any other aspect of the mergers. The summary of the opinion of JPM set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion. The opinion of JPM does not constitute a recommendation to any BANC stockholder as to how such stockholder should vote with respect to the mergers or any other matter.
Recommendation of the PACW Board of Directors (page 61)
After careful consideration, the PACW board of directors, at a meeting held on July 25, 2023, unanimously determined that the first merger was fair to, advisable and in the best interests of PACW and its stockholders and unanimously approved the merger agreement and the transactions contemplated thereby, including the mergers and the bank merger and entry into the merger agreement by PACW. Accordingly, the PACW board of directors unanimously recommends that the PACW stockholders vote “FOR” the PACW merger proposal, “FOR” the PACW compensation proposal and “FOR” the PACW adjournment proposal. For a more detailed discussion of the PACW board of directors’ recommendation, see the section entitled “The Transactions—PACW’s Reasons for the Merger; Recommendation of the PACW Board of Directors” beginning on page 80.
Opinion of PACW’s Financial Advisor (page 90)
In connection with the mergers, PACW’s financial advisor, Piper Sandler & Co., which we refer to as PSC, delivered a written opinion, dated July 25, 2023, to the PACW board of directors to the effect that, as of such date, the exchange ratio in the first merger was fair to the holders of PACW’s common stock from a financial
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point of view. PSC’s opinion was directed to the PACW board of directors in connection with its consideration of the mergers and the merger agreement and does not constitute a recommendation to any PACW stockholder as to how any such stockholder should vote at any meeting of stockholders called to consider and vote upon the approval of the first merger and the merger agreement. The full text of PSC’s opinion is attached as Annex P to this joint proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by PSC in rendering its opinion. The description of the opinion set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of the opinion. Holders of PACW common stock are urged to read the entire opinion carefully in connection with their consideration of the PACW merger proposal.
Interests of Certain BANC Directors and Executive Officers in the Mergers (page 105)
In considering the recommendation of the BANC board of directors with respect to the BANC issuance proposal, BANC stockholders should be aware that, aside from their interests as BANC stockholders, the directors and executive officers of BANC have certain interests in the merger that may be different from, or in addition to, the interests of BANC stockholders generally. These interests include, among others, the following:
BANC RSU Awards: Each of BANC’s executive officers hold outstanding BANC RSU awards that will be deemed replaced upon the effective time and, in accordance with the terms and conditions generally applicable to such awards prior to the effective time, will remain outstanding and continue to be subject to the applicable vesting conditions. Such awards will be eligible for “double-trigger” vesting upon a qualifying termination within the 24-month period following a change in control (including the mergers).
BANC PSU Awards: Each of BANC’s executive officers hold outstanding BANC PSU awards that, other than BANC stock-price PSU awards which will be cancelled at the effective time subject to applicable consents, will vest upon the effective time with performance deemed achieved at the target level of performance.
BANC Director Awards: Outstanding BANC RSU awards held by each of BANC’s non-employee directors will vest at the effective time in accordance with their terms. Two members of the BANC board of directors hold fully vested stock options which, upon a qualifying termination of the director’s service occurring on or within two years following the effective time, will be exercisable for the remainder of their respective terms.
BANC Executive Severance Plan: Certain of BANC’s executive officers are participants in the BANC Executive Change in Control Severance Plan (the “BANC executive severance plan”), which, upon a qualifying termination of employment in connection with a change in control (including the mergers), provides for, amongst other benefits, severance payments equal to 1.0 times (1.5 times for Messrs. Dotan, Dyck and Sotoodeh) the sum of the executive officer’s annual base salary and target annual bonus. As described below, certain of BANC's executive officers are expected to continue to serve as executive officers of the combined company and the surviving bank following the effective time, and accordingly, no severance payments are expected for such executive officers at the effective time.
Change in Control/Employment Agreements with Severance: Messrs. Wolff and Kauder are party to employment agreements (the “executive employment agreements”), which, upon a qualifying termination of employment in connection with a change in control (including the mergers), provide for, amongst other benefits, severance payments equal to two times for Mr. Kauder (three times for Mr. Wolff) the sum of Messrs. Wolff and Kauder’s annual base salary and target annual bonus and accelerated vesting of any outstanding equity awards. As described below, Messrs. Wolff and Kauder are expected to continue to serve as executive officers of the combined company and the surviving bank, and accordingly, no severance payments are expected for such executive officers at the effective time.
Change in Control: The effective time will result in a change in control under the BANC stock plans, the BANC executive severance plan and the BANC employment agreements described above.
Retention Programs: In connection with the mergers, BANC intends to establish retention programs to promote retention and to incentivize efforts to consummate the mergers and BANC’s executive officers may be eligible to receive retention benefits under these programs.
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Directors & Executive Officers: Certain of BANC’s directors and executive officers are expected to continue to serve as directors or executive officers, as applicable, of the combined company and the surviving bank following the effective time.
The BANC board of directors was aware of these interests and considered them, among other matters, in making its recommendation that the BANC stockholders vote to approve the BANC issuance proposal. For more information, see the sections entitled “The Transactions—Background of the Mergers and the Investments” beginning on page 71 and “The Transactions—BANC’s Reasons for the Mergers; Recommendation of the BANC Board of Directors” beginning on page 77. These interests are described in more detail below, and certain of them are quantified in the narrative and in the section entitled “The Transactions—Interests of Certain BANC Directors and Executive Officers in the Mergers” beginning on page 105.
Interests of Certain PACW Directors and Executive Officers in the Mergers (page 108)
In considering the recommendation of the PACW board of directors with respect to the PACW merger proposal, PACW stockholders should be aware that, aside from their interests as PACW stockholders, PACW’s directors and executive officers have interests in the mergers that may be different from, or in addition to, those of PACW stockholders generally. These interests include, among others, the following:
PACW Restricted Stock Awards: Under the merger agreement, at the effective time, each award in respect of a share of PACW common stock subject to vesting, repurchase or other lapse restriction granted under the Amended and Restated PacWest Bancorp 2017 Stock Incentive Plan (the “PACW equity plan”) that is outstanding immediately prior to the effective time (a “PACW restricted stock award”), other than PACW restricted stock awards held by PACW non-employee directors, will be converted into the right to receive (without interest) the merger consideration in respect of each share of PACW common stock subject to such PACW restricted stock award prior to the effective time with the same terms and conditions as were applicable prior to the effective time (including vesting terms).
PACW PSU Awards: Under the merger agreement, at the effective time, each performance-based restricted stock unit award in respect of shares of PACW common stock granted under the PACW equity plan that is outstanding immediately prior to the effective time (a “PACW PSU”) will be converted, based on the exchange ratio, into a time-based restricted stock unit award of BANC (a “BANC RSU”) with the same terms and conditions as were applicable prior to the effective time (including vesting terms, but excluding performance-based vesting conditions), and for purposes of determining the number of shares of PACW common stock subject to the PACW PSUs immediately prior to the effective time, performance will be deemed to be achieved based on the actual level of performance through the latest practicable date prior to the effective time as reasonably determined by the PACW compensation and human capital committee (the “PACW compensation committee”) accordance with the PACW equity plan and the applicable award agreement and in consultation with BANC.
PACW Director Awards: Under the merger agreement, at the effective time, each PACW restricted stock award held by a non-employee member of the PACW board of directors (a “PACW director restricted stock award”), will fully vest and be converted automatically into the right to receive (without interest) the merger consideration.
PACW CIC Severance Plan: Each executive officer of PACW is a participant in the PacWest Bancorp Change in Control Severance Plan (the “CIC severance plan”) pursuant to which such executive officer is eligible to receive certain severance payments and benefits upon a termination of employment for “good reason” or by PACW other than for “cause” on or within two years after a “change in control,” including, amongst other benefits, (i) a lump sum cash payment equal to a designated severance multiple (three times for each of Messrs. Taylor and Wagner and two times for the other executive officers) times the sum of their annual base salary and the greater of the executive officer’s annual target bonus or average bonus and (ii) a lump sum cash payment equal to the executive officer’s pro-rata target bonus for the year in which the qualifying termination occurs.
Change in Control: The effective time will result in a change in control under the PACW equity plan and the CIC severance plan.
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Directors & Executive Officers: Certain of PACW’s directors and executive officers are expected to continue to serve as directors or executive officers, as applicable, of the combined company and the surviving bank following the effective time.
Indemnification: PACW’s directors and officers will be entitled to certain ongoing indemnification and advancement of expenses as incurred in accordance with the merger agreement (as described in the section entitled “The Merger Agreement—Director and Officer Indemnification” beginning on page 128).
The PACW board of directors was aware of these interests and considered them, among other matters, in making its recommendation that the PACW stockholders vote to approve the PACW merger proposal. For more information, see the sections entitled “The Transactions—Background of the Mergers and the Investments” beginning on page 71 and “The Transactions—PACW’s Reasons for the Mergers; Recommendation of the PACW Board of Directors” beginning on page 80. These interests are described in more detail below, and certain of them are quantified in the narrative and in the section entitled “The Transactions—Interests of Certain PACW Directors and Executive Officers in the Mergers” beginning on page 108.
Governance of the Combined Company after the Mergers (page 112)
Boards of Directors of the Combined Company and the Surviving Bank
At the effective time, on the terms and subject to the conditions set forth in the merger agreement, the board of directors of the combined company and the board of directors of the surviving bank will each consist of 12 directors, of which (a) eight will be former members of the BANC board of directors immediately prior to the closing and designated by BANC (the “legacy BANC directors”), including Jared M. Wolff, who will serve as Chairman of the board of directors of the surviving bank, (b) three will be former members of the PACW board of directors immediately prior to the merger closing and designated by PACW (the “legacy PACW directors”), including John M. Eggemeyer, III, who will serve as Chairman of the board of directors of the combined company (subject to the receipt of any necessary consent or non-objection of any governmental entity) and (c) one will be an individual designated by the Warburg Investors.
Under the merger agreement, if each legacy PACW director continues to meet the standards for directors of the combined company, including continuing to satisfy BANC’s corporate governance guidelines and qualify as an “independent” director of BANC under the applicable rules of the NYSE, the combined company will be required to nominate each legacy PACW director for reelection to the board of directors of the combined company at each of the first and second annual meetings of the stockholders of the combined company following the closing, and the combined company’s proxy materials with respect to each such annual meeting will be required to include the recommendation of the board of directors of the combined company that its stockholders vote to reelect each legacy PACW director to the same extent as recommendations are made with respect to other directors on the board of directors of the combined company.
So long as the Warburg Investors, together with their affiliates, beneficially own in the aggregate at least the lesser of (a) 5.0% of the outstanding shares of BANC common stock (on an As-Converted Basis (as defined in the Warburg investment agreement)) and (b) 50% of the BANC common stock (on an As-Converted Basis and after giving effect to any Permitted Transfers (as defined in the Warburg investment agreement)) that the Warburg Investors beneficially own immediately following the closing of the Warburg investment (the “Warburg investment closing”), as adjusted from time to time for any reorganization, recapitalization, stock dividend, stock split, reverse stock split or other like changes in BANC’s capitalization, BANC agreed to (i) include a person nominated by the Warburg Investors to be appointed to the BANC board of directors (the “Warburg director”) in BANC’s slate of director nominees and recommend to BANC stockholders that BANC stockholders vote in favor of electing the Warburg director to the BANC board of directors at BANC’s annual meeting and (ii) use reasonable best efforts to have the Warburg director elected as a director of BANC, including soliciting proxies to the same extent as it does for any other nominee of the BANC board of directors.
Management of the Combined Company after the Mergers
The merger agreement provides that the Chief Executive Officer of BANC immediately prior to the second effective time will be the Chief Executive Officer of the combined company immediately following the second effective time and will continue as such until his resignation, removal or death.
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Name and Headquarters (page 113)
The merger agreement provides that (a) the names of the combined company and the surviving bank will be Banc of California, Inc. and Banc of California, respectively, and (b) the headquarters of the combined company and the surviving bank will be located in Los Angeles, California or as otherwise mutually agreed in writing by BANC and PACW.
Regulatory Approvals (page 113)
Subject to the terms of the merger agreement, BANC and PACW have agreed to cooperate with each other and use their reasonable best efforts to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and filings, to obtain as promptly as practicable all permits, consents, approvals and authorizations of all third parties and governmental entities which are necessary or advisable to consummate the transactions contemplated by the merger agreement (including the mergers, FRS Membership, and the bank merger), and to comply with the terms and conditions of all such permits, consents, approvals and authorizations of all such governmental entities. These approvals include, among others, the approval of the Federal Reserve in respect of the first merger, the bank merger and the FRS membership, and the California Department of Financial Protection and Innovation (the “DFPI”) under applicable state law. The applications to the Federal Reserve and the DFPI were submitted by BANC and PACW Bank on August 17, 2023. Additional notifications and/or applications requesting approval may be submitted to various other federal, state and non-U.S. regulatory authorities and self-regulatory organizations. Under the investment agreements, before the investments by the Investors may be completed, the Warburg Investors and the Centerbridge Investor each must have received reasonably satisfactory oral confirmation from staff of the legal division of the Federal Reserve that the consummation of the applicable investment will not result in such Investor being deemed to have, or to have acquired, “control” of BANC for purposes of the Bank Holding Company Act of 1956 (the “BHC Act”) or the Change in Bank Control Act of 1978, as amended (the “CIBC Act”). See “Regulatory Approvals—Additional Regulatory Approvals and Notices.”
Although neither BANC nor PACW knows of any reason why it cannot obtain these regulatory approvals or confirmations in a timely manner, BANC and PACW cannot be certain when or if they will be obtained, or that the granting of the regulatory approvals or confirmations will not involve the imposition of conditions on the completion of the transactions contemplated by the merger agreement or the investment agreements that will have the effect of delaying or jeopardizing the completion of any of such transactions, imposing additional material costs on or materially limiting the revenues of the combined company following the mergers or otherwise reducing the anticipated benefits of the mergers (including the investments).
Expected Timing of the Mergers
Neither BANC nor PACW can predict the actual date on which the mergers will be completed, or if the mergers will be completed at all, because completion is subject to conditions and factors outside the control of both companies. PACW must first obtain the requisite approval of PACW stockholders for the PACW merger proposal, and BANC must first obtain the requisite approval of BANC stockholders for the BANC issuance proposal. Receiving the approval by BANC stockholders of the BANC incentive plan proposal and BANC exemption amendment proposal is not a condition to the completion of the mergers or the investments. BANC and PACW must also obtain necessary regulatory approvals and satisfy certain other closing conditions. BANC and PACW expect the mergers to be completed promptly once BANC and PACW have obtained their respective requisite stockholders’ approvals noted above, have obtained necessary regulatory approvals, and have satisfied the other closing conditions to the first merger, including the substantially concurrent closing of the equity financing. BANC and PACW expect the closing of the mergers to occur in late 2023 or early 2024, subject to satisfaction or waiver of closing conditions.
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Conditions to Complete the First Merger (page 132)
As more fully described elsewhere in this joint proxy statement/prospectus and in the merger agreement, the completion of the first merger depends on a number of conditions being satisfied or waived. These conditions include:
the requisite BANC stockholder approval and the requisite PACW stockholder approval having been obtained. See the section entitled “The Merger Agreement—Stockholder Meetings and Recommendations of BANC’s and PACW’s Boards of Directors” beginning on page 130 for additional information regarding the requisite BANC stockholder approval and the requisite PACW stockholder approval;
BANC having filed a supplemental listing application in respect of the BANC common stock and the new BANC preferred stock to be issued in connection with the mergers in accordance with the NYSE’s rules, and no further action being required to authorize such additional shares for listing, subject to official notice of issuance (this condition will be satisfied upon the authorization for listing of the BANC depositary shares; see the section entitled “The Transactions—Stock Exchange Listings” beginning on page 116 of this joint proxy statement/prospectus);
(a) all requisite regulatory approvals having been obtained and remaining in full force and effect, and all statutory waiting periods in respect thereof having expired or been terminated and (b) no governmental entity having imposed, and no requisite regulatory approval containing, any materially burdensome regulatory condition;
the effectiveness of the registration statement of which this joint proxy statement/prospectus is a part, the absence of any stop order suspending the effectiveness of such registration statement having been issued, and no proceedings for such purpose having been initiated or threatened by the SEC and not withdrawn;
no order, injunction or decree issued by any court or governmental entity of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the mergers, the BANC issuance, the bank merger or any of the other transactions contemplated by the merger agreement being in effect, and no law, statute, rule, regulation, order, injunction or decree having been enacted, entered, promulgated or enforced by any governmental entity which prohibits or makes illegal the consummation of the mergers, the bank merger, the BANC issuance or any of the other transactions contemplated by the merger agreement;
the consummation of the purchase and sale of BANC common stock and BANC NVCE stock, for an aggregate investment amount that is greater than or equal to $400 million, pursuant to (i) the investment agreements and/or (ii) any other contract or agreement entered into after the execution of the merger agreement providing for the issuance of shares of BANC common stock and/or BANC NVCE stock on terms and conditions that are equivalent to the terms and conditions applicable to the issuance of shares of BANC common stock and BANC NVCE stock provided for in the investment agreements, in each case qualifying as common equity tier 1 capital of the combined company for purposes of 12 C.F.R. 217.20(b) (collectively, the “equity financing”) occurring substantially concurrently with the merger closing;
the accuracy of the representations and warranties of the other party contained in the merger agreement, generally as of the date on which the merger agreement was entered into and as of the closing date, subject to the materiality standards provided in the merger agreement, including the representation regarding the absence of any effect, change, event, circumstance, condition, occurrence or development that has had or would reasonably be expected to have, either individually or in the aggregate, a material adverse effect with respect to such other party (and the receipt by each party of a certificate dated as of the closing date signed on behalf of such other party by the chief executive officer or the chief financial officer to the foregoing effect);
the performance by the other party in all material respects of the obligations, covenants and agreements required to be performed by it under the merger agreement at or prior to the effective time (and the receipt by each party of a certificate signed on behalf of the other party by the chief executive officer or the chief financial officer to the foregoing effect); and
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receipt by each party of an opinion of its legal counsel, in form and substance reasonably satisfactory to such party, dated as of the closing date, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, the mergers, taken together, will qualify as a “reorganization” within the meaning of Section 368(a) of the Code.
Neither BANC nor PACW can provide assurance as to when or if all of the conditions to the first merger can or will be satisfied or waived by the appropriate party.
Termination of the Merger Agreement (page 0)
The merger agreement can be terminated at any time prior to the effective time, whether before or after receipt of the requisite PACW stockholder approval or the requisite BANC stockholder approval, in the following circumstances:
by mutual written consent of BANC and PACW;
by either BANC or PACW if any governmental entity that must grant a requisite regulatory approval has denied approval of the mergers or the bank merger and such denial has become final and nonappealable or any governmental entity of competent jurisdiction has issued a final and nonappealable order, injunction, decree or other legal restraint or prohibition permanently enjoining or otherwise prohibiting or making illegal the completion of the mergers, the bank merger or the other transactions contemplated by the merger agreement, unless the failure to obtain a requisite regulatory approval is due to the failure of the party seeking to terminate the merger agreement to perform or observe its obligations, covenants and agreements under the merger agreement;
by either BANC or PACW if the first merger has not been completed on or before April 25, 2024 (which may be automatically extended to July 25, 2024 if any requisite regulatory approval is the sole outstanding condition to the obligations of either party to the consummation of the first merger (other than those conditions that by their nature can only be satisfied or waived at the merger closing, so long as such conditions are reasonably capable of being satisfied) (the “termination date”), unless the failure of the first merger to be completed by such date is due to the failure of the party seeking to terminate the merger agreement to perform or observe its obligations, covenants and agreements under the merger agreement;
by either BANC or PACW (provided that the terminating party is not then in material breach of any representation, warranty, obligation, covenant or other agreement contained in the merger agreement) if there has been a breach of any of the obligations, covenants or agreements or any of the representations or warranties (or any such representation or warranty ceases to be true or correct) set forth in the merger agreement on the part of PACW, in the case of a termination by BANC, or on the part of BANC or Merger Sub, in the case of a termination by PACW, which breach or failure to be true or correct, either individually or in the aggregate with other breaches by such party (or failures of such party’s representations or warranties to be true and correct) would constitute, if occurring or continuing on the closing date, the failure of a closing condition of the terminating party and which is not cured within 45 days following written notice to the party committing such breach, or by its nature or timing cannot be cured during such period (or such fewer days as remain prior to the termination date);
by PACW prior to such time as the requisite BANC stockholder approval is obtained, if (i) BANC or the BANC board of directors (or a committee thereof) has made a recommendation change or (ii) BANC or the BANC board of directors breaches in any material respect its obligations relating to non-solicitation of acquisition proposals or its obligations related to stockholder approval and the BANC board of directors’ recommendation. See the section entitled “The Merger Agreement—Stockholder Meetings and Recommendations of BANC’s and PACW’s Boards of Directors” beginning on page 130 for additional information regarding the meaning of a “recommendation change”;
by BANC prior to such time as the requisite PACW stockholder approval is obtained, if (i) PACW or the PACW board of directors (or a committee thereof) has made a recommendation change or (ii) PACW or the PACW board of directors breaches in any material respect its obligations relating to non-solicitation of acquisition proposals or its obligations related to stockholder approval and the
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PACW board recommendation. See the section entitled “The Merger Agreement—Stockholder Meetings and Recommendations of BANC’s and PACW’s Boards of Directors” beginning on page 130 for additional information regarding the meaning of a “recommendation change”;
by BANC, if there is a material adverse effect on PACW under clause (y) of the definition of “material adverse effect” (which definition is set forth in whole on page 122 of this joint proxy statement/prospectus); or
by PACW, if there is a material adverse effect on BANC under clause (y) of the definition of “material adverse effect” in this joint proxy statement/prospectus.
Termination Fee and Expense Reimbursement under the Merger Agreement (page 134)
If the merger agreement is terminated by either BANC or PACW under certain circumstances, including certain circumstances involving alternative acquisition proposals and changes in the recommendation of the BANC board of directors or the PACW board of directors, respectively, BANC or PACW may be required to pay a termination fee to the other party equal to $39.5 million.
If the merger agreement is terminated and the termination fee is payable to BANC by PACW, so long as the investment agreements (as applicable) have not been terminated by BANC due to certain breaches by the Investors (as applicable), BANC will be required to pay (x) the Warburg Investors an amount equal to 16.3% and (y) the Centerbridge Investor an amount equal to 3.7%, in each case, of the termination fee received by BANC, net of BANC’s reasonable and documented out-of-pocket fees, costs and expenses incurred in connection with the investment agreements and the merger agreement, the transactions contemplated thereby or the recovery of any such termination fee.
Reimbursement for Balance Sheet Restructuring Costs (page 134)
In general, if the merger agreement is terminated, then PACW has agreed to be responsible for 80.36% of the out-of-pocket fees, costs and expenses incurred by PACW and BANC and associated with or arising out of the negotiation, execution or delivery of, or termination of, any contract, agreement or arrangement relating to its portion of the balance sheet repositioning (such agreement, the “BSR agreement” and such costs, the “BSR costs”) and BANC has agreed to be responsible for the remaining 19.64% of the BSR costs. However, if the merger agreement is terminated by BANC under certain circumstances associated with certain breaches of the merger agreement by PACW or a material adverse effect applicable to PACW under clause (y) of the definition of material adverse effect (as discussed in the section entitled “The Merger Agreement—Termination of the Merger Agreement” beginning on page 133), then PACW has agreed to be responsible for 100% of the BSR Costs. Similarly, if the merger agreement is terminated by PACW under certain circumstances associated with certain breaches of the merger agreement by BANC or a material adverse effect applicable to BANC under clause (y) of the definition of material adverse effect (as discussed above in “Summary—Termination of the Merger Agreement”), then BANC has agreed to be responsible for 100% of the BSR costs. BANC and PACW have further agreed in the merger agreement that the foregoing allocation of the BSR costs may be achieved though reimbursement by one party to the other party.
The Investments (page 138)
Concurrently with its entry into the merger agreement, BANC entered into the investment agreements, each dated as of July 25, 2023, with the Investors. On the terms and subject to the conditions set forth in the investment agreements, at the investment closing, the Investors will invest an aggregate of $400 million in exchange for the sale and issuance by BANC of approximately (a) 21.8 million shares of BANC common stock and (b) 10.8 million shares of BANC NVCE stock, in each case, at a purchase price of $12.30 per share. In addition, the Warburg Investors will receive warrants to purchase approximately 15.9 million shares of BANC NVCE stock, and the Centerbridge Investor will receive warrants to purchase approximately 3.0 million shares of BANC common stock, each with an exercise price of $15.375 per share, a 25% premium to the price paid by the Investors for BANC common stock and BANC NVCE stock. The warrants carry a term of seven years but are subject to mandatory exercise when the market price of BANC common stock reaches or exceeds $24.60 for 20 or more trading days during any 30-consecutive trading day period, a 100% premium to the price paid by the Investors for BANC common stock and BANC NVCE stock.
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The investments are contingent upon the merger closing in accordance with the merger agreement and are subject to the satisfaction or waiver of certain other closing conditions. The investment agreements will terminate following the occurrence of certain events, including: (i) automatically upon the valid termination of the merger agreement in accordance with its terms, (ii) with the mutual written consent of BANC and the applicable Investors, (iii) following written notice from either BANC or the applicable Investors following either (x) the applicable investment closing having not occurred on or prior to April 25, 2024 (which will be automatically extended to July 25, 2024 in certain circumstances set forth in the investment agreements) or (y) upon certain breaches of the investment agreements by the other party (subject to certain exceptions and following applicable cure periods) and (iv) by either BANC or the applicable Investors if any governmental entity that must grant a Requisite Regulatory Approval (as defined in the investment agreements) to consummate the applicable investment closing has denied approval of the transactions contemplated by the applicable investment agreement (subject to certain exceptions). For more information on the terms of the investment agreements, see the section entitled “—The Investment Agreements” below.
Voting Agreements (page 136)
Each member of the PACW board of directors has entered into a voting agreement with BANC in which such director has agreed (in such director’s capacity as a stockholder only) to vote all PACW common stock that such director owns and has the power to vote in favor of the PACW merger proposal and any other matter that is reasonably necessary to be approved by the PACW stockholders to facilitate the consummation of the transactions contemplated by the merger agreement. Each member of the PACW board of directors also agreed to vote against any proposal made in opposition to the approval of the adoption of the merger agreement or that is otherwise in competition or inconsistent with the transactions contemplated by the merger agreement, against any acquisition proposal and against any proposal, transaction, agreement or amendment to PACW’s organizational documents or other action that is intended to or could reasonably be expected to prevent, impede, interfere with, materially delay, postpone, adversely affect or discourage the consummation of the first merger. Under the voting agreement, each member of the PACW board of directors agrees to not, directly or indirectly, assign, sell, transfer or otherwise dispose of their shares of PACW common stock, subject to certain exceptions. As of the close of business on the PACW record date, such persons beneficially owned, in the aggregate, [ ] shares of PACW common stock, allowing them to exercise approximately [ ]% of the voting power of PACW common stock (which does not include shares issuable upon the exercise, vesting or settlement of PACW equity-based awards that were not outstanding as of the close of business on the PACW record date).
In addition, each member of the BANC board of directors has entered into a voting agreement with PACW in which such director has agreed (in such director’s capacity as a stockholder only) to vote all BANC common stock that such director owns and has the power to vote in favor of the BANC issuance proposal and any other matter that is reasonably necessary to be approved by the BANC stockholders to facilitate the consummation of the transactions contemplated by the merger agreement. Each member of the BANC board of directors has also agreed to vote against any proposal made in opposition to the approval of the adoption of the merger agreement or that is otherwise in competition or inconsistent with the transactions contemplated by the merger agreement, against any acquisition proposal and against any proposal, transaction, agreement or amendment to BANC’s organizational documents or other action that is intended to or could reasonably be expected to prevent, impede, interfere with, materially delay, postpone, adversely affect or discourage the consummation of the first merger. Under the voting agreement, each member of the BANC board of directors agrees to not, directly or indirectly, assign, sell, transfer or otherwise dispose of their shares of BANC common stock, subject to certain exceptions. As of the close of business on the BANC record date, such persons beneficially owned, in the aggregate, [ ] shares of BANC common stock, allowing them to exercise approximately [ ]% of the voting power of BANC common stock (which does not include shares issuable upon the exercise, vesting or settlement of BANC equity-based awards that were not outstanding as of the close of business on the BANC record date).
The voting agreements terminate in certain circumstances, including in the event that the merger agreement is terminated in accordance with its terms. For more information, please see the section entitled “The Merger Agreement—Voting Agreements.”
Accounting Treatment of the Mergers (page 115)
The mergers will be accounted for as a reverse acquisition of BANC by PACW under the reverse acquisition method of accounting in accordance with the U.S. generally accepted accounting principles (“GAAP”), and PACW will be treated as the acquirer for accounting purposes.
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The Rights of PACW Stockholders Will Change as a Result of the Mergers (page 42)
Upon completion of the first merger, the rights of former PACW stockholders who receive shares of BANC common stock in the first merger will be governed by the BANC charter and the BANC bylaws. The rights associated with PACW common stock are different from the rights associated with BANC common stock. In addition, the rights of stockholders under Maryland law, where BANC is incorporated, may differ from the rights of stockholders under Delaware law, where PACW is incorporated. See the section entitled “Comparison of the Rights of BANC Stockholders and PACW Stockholders” on page 188 for a discussion of the different rights associated with PACW common stock and BANC common stock.
Listing of BANC Common Stock and BANC Depositary Shares; Delisting and Deregistration of PACW Common Stock and PACW Depositary Shares (page 187)
The shares of (a) BANC common stock to be issued in the first merger and (b) BANC depositary shares to be issued in the second merger, in each case, will be listed for trading on the NYSE. Following the mergers, shares of BANC common stock will continue to be traded on the NYSE. In addition, following the (i) first merger, PACW common stock and (ii) second merger, PACW depositary shares will be delisted from Nasdaq and deregistered under the Exchange Act.
The BANC Special Meeting (page 44)
The BANC special meeting will be held at [ ] on [ ], 2023 at [ ], Pacific Time, at 3 MacArthur Place, Santa Ana, CA 92707, or at any postponement or adjournment thereof. At the BANC special meeting, BANC stockholders will be asked to consider and vote on the following matters:
the BANC issuance proposal;
the BANC incentive plan proposal;
the BANC exemption amendment proposal; and
the BANC adjournment proposal.
The BANC board of directors has fixed the close of business on [ ], 2023 as the BANC record date for the determination of BANC stockholders entitled to notice of, and to vote at, the BANC special meeting. As of the close of business on the BANC record date, there were [ ] shares of BANC common stock outstanding held by [ ] holders of record. Each holder of record of BANC common stock is entitled to cast one vote on each matter properly brought before the BANC special meeting for each share of BANC common stock that such holder owned of record as of the BANC record date; provided, however, that under Section F of Article 6 of the BANC charter, no BANC stockholder who beneficially owns more than ten percent (10%) of the shares of BANC common stock outstanding as of the BANC record date may vote shares held in excess of such amount.
Approval of the BANC issuance proposal requires the affirmative vote of a majority of votes cast by holders of shares of BANC common stock at the BANC special meeting. An abstention by a BANC stockholder who is present (in person or by proxy) at the BANC special meeting (or a BANC stockholder who is not present at the BANC special meeting and does not respond by proxy) will have no effect on the BANC issuance proposal. If you are a beneficial owner of BANC common stock and you do not instruct your bank, broker, trustee or other nominee on how to vote your shares of BANC common stock, your bank, broker, trustee or other nominee will not be able to vote your shares on the BANC issuance proposal or any other proposal being considered by the BANC stockholders as described in this joint proxy statement/prospectus and therefore such shares of BANC common stock will not be counted for purposes of establishing a quorum. Assuming a quorum is present, the failure to vote on the BANC issuance proposal will not have any effect on the BANC issuance proposal.
Approval of the BANC incentive plan proposal requires the affirmative vote of a majority of votes cast by holders of shares of BANC common stock at the BANC special meeting. An abstention by a BANC stockholder who is present (in person or by proxy) at the BANC special meeting (or a BANC stockholder who is not present at the BANC special meeting and does not respond by proxy) will have no effect on the BANC incentive plan proposal. If you are a beneficial owner of BANC common stock and you do not instruct your bank, broker, trustee or other nominee on how to vote your shares of BANC common stock, your bank, broker, trustee or other
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nominee may not vote your shares on the BANC incentive plan proposal and therefore such shares of BANC common stock will not be counted for purposes of establishing a quorum. Assuming a quorum is present, the failure to vote on the BANC incentive plan proposal will not have any effect on the BANC incentive plan proposal.
Approval of the BANC exemption amendment proposal requires the affirmative vote of the holders of a majority of the outstanding shares of BANC common stock entitled to vote on the proposal. An abstention by a BANC stockholder who is present (in person or by proxy) at the BANC special meeting (or a BANC stockholder who is not present at the BANC special meeting and does not respond by proxy) will have the same effect as a vote “AGAINST” the BANC exemption amendment proposal. If you are a beneficial owner of BANC common stock and you do not instruct your bank, broker, trustee or other nominee on how to vote your shares of BANC common stock, your bank, broker, trustee or other nominee may not vote your shares on the BANC exemption amendment proposal and therefore such shares of BANC common stock will not be counted for purposes of establishing a quorum. The failure to vote on the BANC exemption amendment proposal will have the same effect as a vote “AGAINST” the BANC exemption amendment proposal.
Whether or not a quorum will be present at the meeting, approval of the BANC adjournment proposal requires the affirmative vote of a majority of votes cast by holders of shares of BANC common stock at the BANC special meeting. An abstention by a BANC stockholder who is present (in person or by proxy) at the BANC special meeting (or a BANC stockholder who is not present at the BANC special meeting and does not respond by proxy) will have no effect on the BANC adjournment proposal. If you are a beneficial owner of BANC common stock and you do not instruct your bank, broker, trustee or other nominee on how to vote your shares of BANC common stock, your bank, broker, trustee or other nominee may not vote your shares on the BANC adjournment proposal and therefore such shares of BANC common stock will not be counted for purposes of establishing a quorum. Assuming a quorum is present, the failure to vote on the BANC adjournment proposal will not have any effect on the BANC adjournment proposal.
The PACW Special Meeting (page 61)
The PACW special meeting will be held on [ ], 2023, at [ ], Mountain Time, at Denver Marriott Tech Center, 4900 S. Syracuse St, Denver, CO 80237, or at any postponement or adjournment thereof. At the PACW special meeting, PACW stockholders will be asked to consider and vote upon the following matters:
The PACW merger proposal;
The PACW compensation proposal; and
The PACW adjournment proposal.
The PACW board of directors has fixed the close of business on [ ], 2023 as the PACW record date for the determination of PACW stockholders entitled to notice of, and to vote at, the PACW special meeting. As of the close of business on the PACW record date, there were [ ] shares of PACW common stock outstanding held by [ ] holders of record. Each holder of record of PACW common stock is entitled to cast one vote on each matter properly brought before the PACW special meeting for each share of PACW common stock that such holder owned of record as of the PACW record date.
Holders of a majority of the shares of PACW common stock entitled to vote on a matter at the PACW special meeting, present in person or represented by proxy, will constitute a quorum for the transaction of business at the PACW special meeting. All shares of PACW common stock present in person or represented by proxy, including abstentions, will be treated as present for purposes of determining the presence or absence of a quorum for all matters voted on at the PACW special meeting. Because, under applicable rules, banks, brokers and other holders of record holding shares in “street name” do not have discretionary voting authority with respect to any of the three proposals described in this joint proxy statement/prospectus to be voted on by PACW stockholders, if a beneficial owner of PACW common stock held in “street name” does not give voting instructions to the record holder of its, his or her shares, then those shares will not be counted as present in person or by proxy at the PACW special meeting if no other proposals are brought before the PACW special meeting.
Approval of the PACW merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of PACW common stock entitled to vote on the merger agreement. If you fail to vote, mark “ABSTAIN” on your proxy or fail to instruct your bank or broker with respect to the PACW merger proposal, it will have the same effect as a vote “AGAINST” the proposal.
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Approval of the PACW compensation proposal requires the affirmative vote of the holders of at least a majority of the shares of PACW common stock present or represented by proxy at the PACW special meeting. Approval of the PACW compensation proposal is not a condition to the completion of the mergers. If you mark “ABSTAIN” on your proxy card, it will have the same effect as a vote “AGAINST” the proposal. If you fail to submit a proxy card or vote in person at the PACW special meeting, or fail to instruct your bank or broker how to vote with respect to the PACW adjournment proposal, it will have no effect on the proposal.
Whether or not a quorum is present, approval of the PACW adjournment proposal requires the affirmative vote of the holders of at least a majority of the shares of PACW common stock present or represented by proxy at the PACW special meeting. If you mark “ABSTAIN” on your proxy card, it will have the same effect as a vote “AGAINST” the proposal. If you fail to submit a proxy card or vote in person at the PACW special meeting, or fail to instruct your bank or broker how to vote with respect to the PACW adjournment proposal, it will have no effect on the proposal.
BANC Charter Exemption Amendment
In connection with the Warburg investment, if the approval by BANC stockholders of the BANC exemption amendment proposal is obtained, contingent upon the closing of the transactions contemplated by the merger agreement, the BANC charter will be amended to exempt the Warburg Investors and their affiliates (but not any other stockholder of BANC) from the application of Section F of Article 6 (other than paragraph 4 thereof, which deals mainly with the quorum requirement for meetings of BANC stockholders) of the BANC charter (the “BANC charter amendment”). A copy of the proposed BANC charter amendment is attached to this joint proxy statement/prospectus as Annex D. This BANC charter amendment is not a closing condition to the investments.
Under the Warburg investment agreement, if the BANC exemption amendment proposal is not approved by BANC stockholders at the BANC special meeting, but the Warburg investment is nevertheless consummated, BANC will be required to, at each annual meeting of the BANC stockholders following the Warburg investment closing until such time as the BANC exemption amendment proposal is duly approved, use reasonable best efforts (including recommending the BANC exemption amendment proposal to the BANC stockholders) to (i) submit to the BANC stockholders the BANC exemption amendment proposal and (ii) obtain the requisite approval of the BANC stockholders of the BANC exemption amendment proposal at any such meeting of the BANC stockholders; provided that following the first anniversary of the Warburg investment closing, BANC’s foregoing obligations described in this paragraph will be subject to receipt of a written request from the Warburg Investors no later than 30 business days prior to the anniversary of the date on which BANC first filed its proxy materials for the preceding annual BANC stockholder meeting. Following the receipt of the requisite approval of the BANC stockholders of the BANC exemption amendment proposal and contingent upon the closing of the transactions contemplated by the merger agreement, BANC will be required under the Warburg investment agreement to file the BANC exemption amendment with the Maryland Department of State.
After the second effective time, the BANC charter, as in effect immediately prior to the effective time, will be the charter of the combined company until thereafter amended in accordance with applicable law.
Appraisal or Dissenters’ Rights in Connection with the Mergers (page 116)
BANC stockholders are not entitled to dissenters’ rights under the MGCL, and PACW stockholders are not entitled to appraisal rights under the DGCL. For more information, see the section entitled “The Transactions—Appraisal or Dissenters’ Rights in Connection with the Mergers” beginning on page 116.
Risk Factors (page 34)
In evaluating the merger agreement, the mergers or the issuance of shares of BANC common stock, BANC NVCE stock or the warrants, you should carefully read this joint proxy statement/prospectus and give special consideration to the factors discussed in the section entitled “Risk Factors” beginning on page 34.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this joint proxy statement/prospectus, or in documents incorporated by reference or attached as annexes to this joint proxy statement/prospectus, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act. Any statement that does not describe historical or current facts is a forward-looking statement.
Forward-looking statements may be identified by the use of the words such as “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “strategy,” “future,” “opportunity,” “may,” “could,” “target,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” or similar expressions that predict or indicate future events or trends or that are not statements of historical matters, although not all forward-looking statements contain such identifying words. Forward-looking statements are based on current expectations, estimates and projections about PACW’s and BANC’s businesses, beliefs of PACW’s and BANC’s managements and assumptions made by PACW’s and BANC’s managements. These statements are not guarantees of future performance and are subject to numerous risks, uncertainties and assumptions (“future factors”) which are difficult to predict, change over time, and are often beyond the control of BANC, PACW and the combined company. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements.
While there is no assurance that any list of future factors is complete, in addition to the factors relating to the mergers discussed under the section entitled “Risk Factors” and the risk factors previously discussed in BANC’s and PACW’s reports filed with the SEC, which could cause actual results to differ materially from those contained or implied in the forward-looking statements, below are certain future factors, among others:
the risk that the proposed transaction may not be completed in a timely manner or at all;
the failure to satisfy the conditions to the consummation of the proposed transaction, including obtaining the requisite approval of the BANC stockholders and PACW stockholders and the requisite regulatory approvals and without any materially burdensome regulatory condition within the time periods provided in the merger agreement;
the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement or the investment agreements;
the inability to obtain alternative capital to the investments in the event it becomes necessary to complete the equity financing, which is a condition to the consummation of the proposed transaction;
the effect of the announcement or pendency of the proposed transaction on BANC’s and PACW’s business relationships, operating results and business generally;
risks that the proposed transaction disrupts current plans and operations of BANC and PACW;
potential difficulties in retaining BANC and PACW customers and employees as a result of the proposed transaction;
BANC’s and PACW’s estimates of their respective financial performance and the financial performance of the combined company;
changes in general economic conditions;
changes in the interest rate environment, including the recent increases in the Federal Reserve benchmark rate and duration at which such increased interest rate levels are maintained, which could adversely affect BANC’s and PACW’s revenue and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity;
the impacts of continuing inflation;
the credit risks of lending activities, which may be affected by deterioration in the financial condition of borrowers, and the operational risk of lending activities, including the effectiveness of BANC’s and PACW’s underwriting practices and the risk of fraud;
fluctuations in the demand for loans and other banking products offered by BANC and PACW;
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the ability to develop and maintain a strong core deposit base or other low-cost funding sources necessary to fund BANC’s and PACW’s activities particularly in a rising or high interest rate environment;
the rapid withdrawal of a significant amount of deposits over a short period of time;
results of examinations by regulatory authorities of BANC or PACW and the possibility that any such regulatory authority may, among other things, limit BANC’s or PACW’s business activities, restrict BANC’s or PACW’s ability to invest in certain assets, refrain from issuing an approval or non-objection to certain capital or other actions, increase BANC’s or PACW’s allowance for credit losses, result in write-downs of asset values, restrict BANC’s or PACW’s ability or that of BANC’s or PACW’s bank subsidiary to pay dividends, or impose fines, penalties or sanctions;
the impact of bank failures or other adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks;
changes in the markets in which BANC and PACW compete, including with respect to the competitive landscape, technology evolution or regulatory changes;
changes in consumer spending, borrowing and saving habits;
slowdowns in securities trading or shifting demand for security trading products;
the impact of natural disasters or health epidemics;
legislative or regulatory changes;
impact of operating in a highly competitive industry;
reliance on third party service providers;
competition in retaining key employees;
risks related to data security and privacy, including the impact of any data security breaches, cyberattacks, employee or other internal misconduct, malware, phishing or ransomware, physical security breaches, natural disasters, or similar disruptions;
changes to accounting principles and guidelines;
the impact of purchase accounting with respect to the mergers, or any change in the assumptions used regarding the assets purchased and liabilities assumed to determine their fair value;
potential litigation relating to the proposed transaction that could be instituted against BANC, PACW or their respective directors and officers, including the effects of any outcomes related thereto;
volatility in the trading price of BANC’s or PACW’s securities, including due to the impacts of short selling of the securities of BANC and/or PACW;
the effectiveness of the hedging positions of BANC and PACW, including in respect of the balance sheet repositioning;
the effects of the balance sheet repositioning, including potential losses associated with the balance sheet repositioning;
the ability to implement business plans, forecasts, and other expectations after the completion of the proposed transaction, and identify and realize additional opportunities; and
unexpected costs, charges or expenses resulting from the proposed transaction.
For any forward-looking statements made in this joint proxy statement/prospectus or in any documents incorporated by reference into or attached as annexes to this joint proxy statement/prospectus, BANC and PACW claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this joint proxy statement/prospectus or the dates of the documents incorporated by reference in or attached as annexes to this joint proxy statement/prospectus. Annualized, pro forma, projected and estimated numbers are
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used for illustrative purposes only, are not forecasts and may not reflect actual results. Except as required by applicable law, neither BANC nor PACW undertakes to update these forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made.
For additional information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please see the reports that BANC and PACW have filed with the SEC as described under the section entitled “Where You Can Find More Information” beginning on page 201.
BANC and PACW expressly qualify in their entirety all forward-looking statements attributable to either of them or any person acting on their behalf by the cautionary statements contained in, referred to, attached to or incorporated by reference into this joint proxy statement/prospectus.
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RISK FACTORS
An investment by PACW stockholders in BANC common stock as a result of the exchange of shares of PACW common stock for shares of BANC common stock in the first merger involves certain risks. Similarly, a decision on the part of BANC stockholders to approve the BANC issuance also involves risks for BANC stockholders, who will continue to hold their shares of BANC common stock after the mergers. Certain material risks and uncertainties connected with the merger agreement and the investment agreements and transactions contemplated thereby and ownership of BANC common stock are discussed below. In addition, BANC and PACW have discussed certain other material risks connected with the ownership of BANC common stock and with BANC’s business, and with the ownership of PACW common stock and PACW’s business, respectively, under the caption “Risk Factors” appearing in their Annual Reports on Form 10-K most recently filed with the SEC, and may include additional or updated disclosures of such material risks in their subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that each has filed with the SEC or may file with the SEC after the date of this joint proxy statement/prospectus.
PACW stockholders and BANC stockholders should carefully read and consider all of these risks and all other information contained in this joint proxy statement/prospectus, including the discussions of risk factors included in the documents incorporated by reference into or attached hereto as annexes to this joint proxy statement/prospectus, in deciding whether to vote for approval of the various proposals for which they may be entitled to vote at the PACW special meeting or the BANC special meeting. The risks described in this joint proxy statement/prospectus and in those documents incorporated by reference herein or attached as annexes hereto may adversely affect the value of BANC common stock that you, as an existing BANC stockholder, currently hold or that you, as an existing PACW stockholder, will hold upon consummation of the first merger, and could result in a significant decline in the value of BANC common stock and cause BANC stockholders and/or PACW stockholders to lose all or part of the value of their respective investments in BANC common stock.
Risks Relating to the Consummation of the Mergers and BANC Following the Mergers
Because the market price of BANC common stock may fluctuate prior to the effective time, including as a result of BANC’s and PACW’s financial performance prior to the effective time, stockholders cannot be certain of the market value of the merger consideration to be received by PACW stockholders.
In the first merger, the PACW stockholders will be entitled to receive 0.6569 of a share of BANC common stock for each share of PACW common stock they own, subject to certain exceptions. Although the number of shares of BANC common stock that PACW stockholders will be entitled to receive per share of PACW common stock is fixed, the market value of the merger consideration will fluctuate with the market price of BANC common stock and will not be known at the time of the BANC and PACW special meetings. Neither BANC nor PACW is permitted to terminate the merger agreement as a result of any increase or decrease in the market price of BANC common stock or PACW common stock.
Stock price changes may result from a variety of factors, including general market and economic conditions, changes in BANC’s and PACW’s businesses, operations and prospects, the performance of peer companies and other financial companies, volatility in the prices of securities in global financial markets, including market prices of BANC common stock, PACW common stock and the other public traded banking institutions as well as changes in applicable laws and regulations, many of which are beyond BANC’s and PACW’s control. Therefore, at the time of the BANC special meeting and the PACW special meeting, BANC stockholders and PACW stockholders will not know the market value of the merger consideration that PACW stockholders will receive at the effective time. You should obtain current market quotations for shares of BANC common stock (NYSE: BANC) and for shares of PACW common stock (NASDAQ: PACW).
The market price of BANC common stock after the mergers may be affected by factors different from those currently affecting the shares of BANC common stock or PACW common stock. Similarly, the market price of BANC depositary shares after the mergers may be affected by factors different from those currently affecting the market price of PACW depositary shares.
As a result of the first merger, PACW stockholders will become BANC stockholders, and certain adjustments may be made to the combined company’s business as a result of the mergers. Accordingly, the results of operations of the combined company and the market price of BANC common stock and BANC depositary shares after the completion of the mergers may be affected by factors different from those currently affecting the
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independent results of operations of each of BANC and PACW. For a discussion of the businesses of BANC and PACW and of certain factors to consider in connection with those businesses, see the documents incorporated by reference in, or attached as annexes to, this joint proxy statement/prospectus.
The opinion delivered by JPM to the BANC board of directors and the opinion delivered by PSC to the PACW board of directors, respectively, prior to the entry into the merger agreement will not reflect changes in circumstances that may have occurred since the date of the opinions.
The opinion of JPM, BANC’s financial advisor, to the BANC board of directors, was delivered on and dated July 25, 2023 and the opinion of PSC, PACW’s financial advisor, to the PACW board of directors was delivered on and dated July 25, 2023. Changes in the operations and prospects of BANC or PACW, general market and economic conditions and other factors which may be beyond the control of BANC and PACW, including the ongoing effects of the COVID-19 pandemic on such market and economic conditions, and the market prices of BANC common stock and PACW common stock, may have altered the value of BANC or PACW or the prices of shares of BANC common stock and PACW common stock as of the date of this joint proxy statement/prospectus, or may alter such values and prices by the effective time. The opinions do not speak as of the date of this joint proxy statement/prospectus or as of any other date subsequent to the dates of those opinions.
Regulatory approvals may not be received, may take longer than expected, or may impose conditions that are not presently anticipated or that could have an adverse effect on the combined company following the mergers.
Before the mergers and the bank merger may be completed, the requisite approvals, consents and non-objections must be obtained from the Federal Reserve and the DFPI. Under the investment agreements, before the investments by the Investors may be completed, the Warburg Investors and the Centerbridge Investor each must have received reasonably satisfactory oral confirmation from staff of the legal division of the Federal Reserve that the consummation of the applicable investment will not result in such Investor being deemed to have, or to have acquired, “control” of BANC or any of its subsidiaries for purposes of the BHC Act or the CIBC Act and the related regulations, either individually or as part of an association or group “acting in concert”. Other approvals, waivers or consents from regulators may also be required, both for the mergers and for the investments.
In determining whether to grant these approvals and confirmations, such regulatory authorities consider a variety of factors. These approvals or confirmations could be delayed or not obtained at all, including due to (i) a party’s regulatory standing (or adverse development in respect thereof), (ii) any other factors considered by regulators when granting such approvals or confirmations, including governmental, political or community group inquiries, investigations or opposition, or (iii) changes in legislation or the political environment generally.
The approvals that are granted may impose terms and conditions, limitations, obligations or costs, or place restrictions on the conduct of the combined company’s business or require changes to the terms of the transactions contemplated by the merger agreement or the investment agreements. There can be no assurance that regulators will not impose any such conditions, limitations, obligations or restrictions and that such conditions, limitations, obligations or restrictions will not have the effect of delaying or jeopardizing the completion of any of the transactions contemplated by the merger agreement or the investment agreements, imposing additional material costs on or materially limiting the revenues of the combined company following the mergers or otherwise reducing the anticipated benefits of the mergers (including the investments and their inclusion as common equity tier 1 capital, assuming the mergers and the investments are consummated successfully and within the expected timeframe). In addition, there can be no assurance that any such conditions, limitations, obligations or restrictions will not result in abandonment of the mergers and the investments. Additionally, the completion of the mergers and the investments is conditioned on the absence of certain orders, injunctions or decrees by any governmental entity of competent jurisdiction that would prevent, prohibit or make illegal the completion of any of the transactions contemplated by the merger agreement or the investment agreements, as applicable.
BANC and PACW have agreed in the merger agreement to use reasonable best efforts to consummate the transactions contemplated by the merger agreement on the terms and conditions set forth therein, including using reasonable best efforts to satisfy all conditions and covenants under their control in the merger agreement. However, under the terms of the merger agreement, neither BANC nor PACW, nor any of their respective subsidiaries, is required or permitted (without the written consent of the other party), to take any action, or commit to take or refrain from taking any action, or agree to any condition or restriction, in connection with obtaining the required permits, authorizations, consents, orders or approvals of governmental entities that would
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(i) reasonably be expected to require the combined company or any other person to issue equity securities or otherwise raise capital in excess of the amount contemplated by the investments under the merger agreement; or (ii) (A) not apply to a similarly sized financial holding company and state member bank that are well-capitalized and well-managed and (B) be materially more burdensome, individually or in the aggregate, on the operations, business or profitability of the combined company and its subsidiaries than those imposed on BANC or BANC N.A. as of the date of the merger agreement (a “materially burdensome regulatory condition”).
BANC and the Investors have agreed in the investment agreements to use reasonable best efforts to promptly prepare and file for all permits, consents, approvals, confirmations and authorizations of all third parties and governmental entities that are necessary or advisable to consummate the investments as promptly as reasonably practicable, and to respond to any request for information from any government authority related to the foregoing, so as to enable the parties to consummate the transactions contemplated by the investment agreements. However, under the terms of the investment agreements, neither BANC nor any of its subsidiaries is permitted (without the written consent of the other party), and none of the Investors or any of their affiliates is required, to take any action, or commit to take or refrain from taking any action, or accept or agree to any condition or restriction, that would reasonably be expected to cause any Investor, any of their respective affiliates or any of their partners or principals to (A) “control” BANC or be required to become a bank holding company, in each case, pursuant to the BHC Act; (B) “control” BANC or be required to provide prior notice pursuant to the CIBC Act; (C) serve as a source of financial strength to BANC pursuant to the BHC Act; or (D) enter into any capital or liquidity maintenance agreement or any similar agreement with any governmental entity, provide capital support to BANC, PACW or any of their respective subsidiaries or otherwise commit to or contribute any additional capital to, provide other funds to, or make any other investment in, BANC, PACW or any of their respective subsidiaries.
Consummation of the mergers and each Investor’s investment is conditioned upon the substantially concurrent closing of an aggregate $400 million investment.
As a condition to the consummation of the mergers, BANC must substantially concurrently therewith consummate the purchase and sale of BANC common stock and BANC NVCE stock for an aggregate investment amount that is greater than or equal to $400 million pursuant to (i) the investment agreements and/or (ii) any other contract or agreement entered into after the execution of the merger agreement providing for the issuance of shares of BANC common stock and/or BANC NVCE stock on equivalent terms and conditions as set forth in the investment agreements, in each case qualifying as common equity tier 1 capital (“qualifying equity securities”). As a condition to the consummation of each Investor’s investment, BANC must have substantially concurrently received an investment which, together with the Investor’s investment, constitutes an investment of $400 million or greater in BANC’s qualifying equity securities. Although BANC has legally binding agreements with each of the Warburg Investors and the Centerbridge Investor pursuant to which the Investors (in the aggregate) have agreed to invest $400 million in BANC’s qualifying equity securities substantially concurrently with the consummation of the mergers, the obligation of each Investor to make such investment is subject to various conditions. If any Investor fails to consummate its portion of the investments, BANC may be required to seek a new investment in BANC’s qualifying equity securities from other third parties, which may or may not be available (and may or may not be available on the same terms as the investment agreements). Failure to consummate (or a delay in consummating) the investments may cause the failure or delay in the ability of the parties to consummate the mergers.
Failure to consummate the mergers and investments could negatively impact BANC and PACW.
The consummation of the mergers is subject to the receipt of requisite regulatory and stockholder approvals and the satisfaction of other closing conditions, including the substantially concurrent consummation of the investments, as noted above. If the mergers are not completed for any reason, including as a result of BANC stockholders or PACW stockholders failing to grant the applicable requisite stockholder approval at the applicable company’s special stockholders meeting or the imposition of a materially burdensome regulatory condition resulting in either BANC or PACW refusing to consummate the mergers, there may be various adverse consequences and BANC and PACW may experience negative reactions from the financial markets and from their customers and employees. For example, BANC’s business and PACW’s business may each be impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the mergers, without realizing any of the anticipated benefits of consummating the mergers.
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Additionally, if the merger agreement is terminated, the market price of the BANC common stock and/or the PACW common stock could decline to the extent that current market prices reflect a market assumption that the mergers and/or, in the case of BANC, the investments will be beneficial and will be consummated. BANC or PACW also could be subject to litigation related to any failure to complete the mergers or, in the case of BANC, the investments or to proceedings commenced against BANC or PACW to perform its obligations under the merger agreement or, in the case of BANC, the investment agreements. If the merger agreement is terminated under certain circumstances, one party may be required to pay a termination fee of $39.5 million to the other party. If BANC receives a termination fee, it may be required to remit a portion of that fee to the Investors.
Additionally, BANC and PACW have incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement and, in the case of BANC, the investment agreements (including the investments and the balance sheet repositioning (as defined below)), as well as the costs and expenses of preparing, filing, printing and mailing of a joint proxy statement/prospectus in connection with the mergers, and all filing and other fees paid in connection with the mergers. If the mergers and/or the investments are not completed, BANC and PACW would have to pay these expenses without realizing the expected benefits of the mergers and/or the investments, as applicable. Although BANC or PACW may be entitled to receive a termination fee of $39.5 million from the other party and/or expense reimbursement with respect to certain costs and expenses associated with the balance sheet repositioning if the merger agreement is terminated under certain circumstances, (i) such payments may not be sufficient to fully compensate BANC or PACW for the losses it may incur in connection with a failure of the mergers to be consummated and (ii) BANC may be required to remit a portion of the termination fee it receives to the Investors.
Combining BANC and PACW may be more difficult, costly or time-consuming than expected, and the combined company may fail to realize the anticipated benefits of the mergers.
The success of the mergers will depend, in part, on the ability of BANC and PACW to dispose certain assets in the planned balance sheet repositioning (the “balance sheet repositioning”) along with anticipated cost savings from combining the businesses of BANC and PACW. To realize the anticipated benefits and cost savings from the mergers, BANC and PACW must successfully dispose of assets at closing, which is inherently subject to market conditions and the risk that such conditions will be less favorable than what the parties expected when entering into the merger agreement, and successfully integrate and combine their businesses in a manner that permits those benefits and cost savings to be realized without adversely affecting current revenues and future growth. If BANC and PACW are not able to successfully achieve these objectives, the anticipated benefits of the mergers may not be realized fully or at all or may take longer to realize than expected. In addition, the actual cost savings of the mergers could be less than anticipated, and integration may result in additional and unforeseen expenses.
An inability to realize the full extent of the anticipated benefits of, the mergers and the other transactions contemplated by the merger agreement (including the balance sheet repositioning), as well as any delays encountered in the integration process, could have an adverse effect upon the capital position, revenues, levels of expenses and operating results of the combined company following the completion of the mergers, which may adversely affect the value of the common stock of the combined company following the completion of the mergers.
BANC and PACW have operated and, until the completion of the mergers, must continue to operate independently.
It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the companies’ ability to maintain relationships with their stakeholders or to achieve the anticipated benefits and cost savings of the mergers. Integration efforts between the companies may also divert management attention and resources. These integration matters could have an adverse effect on BANC or PACW during this pre-closing period and for an undetermined period after consummation of the mergers on the combined company.
Furthermore, the board of directors and executive leadership of the combined company and the surviving bank will consist of former directors and executive officers from each of BANC and PACW, as well as a director designated by the Warburg Investors. Combining the boards of directors and management teams of each company into a single board of directors and a single management team could require the reconciliation of differing priorities and philosophies.
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The combined company may be unable to retain BANC and/or PACW personnel successfully after the mergers are completed.
The success of the mergers will depend, in part, on the combined company’s ability to retain the talent and dedication of key employees currently employed by BANC and PACW. It is possible that these employees may decide not to remain with BANC or PACW, as applicable, while the mergers are pending or with the combined company after the mergers are consummated. If BANC and PACW are unable to retain key employees, including management, who are critical to the successful integration and future operations of the companies, BANC and PACW could face disruptions in their operations, loss of existing customers, loss of key information, expertise or know-how and unanticipated additional recruitment costs. In addition, following the mergers, if key employees terminate their employment, the combined company’s business activities may be adversely affected, and management’s attention may be diverted from successfully hiring suitable replacements, all of which may cause the combined company’s business to suffer. BANC and PACW also may not be able to locate or retain suitable replacements for any key employees who leave either company.
BANC and PACW will be subject to business uncertainties and contractual restrictions while the mergers are pending.
Uncertainty about the effect of the mergers on employees and customers may have an adverse effect on BANC or PACW. These uncertainties may impair BANC’s or PACW’s ability to retain and motivate key personnel until the mergers are completed and could cause customers and others that deal with BANC or PACW to seek to change existing business relationships with BANC or PACW. In addition, subject to certain exceptions, each of BANC and PACW has agreed to operate its business in the ordinary course in all material respects and to refrain from taking certain actions that may adversely affect its ability to (i) consummate the transactions contemplated by the merger agreement on a timely basis without the consent of the other party and (ii) in the case of BANC, obtain any necessary approvals of any governmental entity in connection with the investments without the consent of the Investors. These restrictions may prevent BANC or PACW from pursuing attractive business opportunities that may arise prior to the completion of the mergers.
BANC and PACW have incurred and the combined company is expected to incur substantial costs related to the mergers and integration.
BANC and PACW have incurred and expect to incur a number of non-recurring costs associated with the mergers and, in the case of BANC, the investments. These costs include legal, financial, accounting, consulting and other advisory fees, retention, severance and employee benefit-related costs, public company filing fees and other regulatory fees, financial printing and other printing costs, closing, integration and other related costs. Some of these costs are payable by BANC and/or PACW regardless of whether the mergers are completed.
In addition, the combined company will incur integration costs following the completion of the mergers as BANC and PACW integrate their businesses, including facilities and systems consolidation costs and employment-related costs. BANC and PACW may also incur additional costs to maintain employee morale and to retain key employees. There are a large number of processes, policies, procedures, operations, technologies and systems that may need to be integrated, including purchasing, accounting and finance, payroll, compliance, treasury management, branch operations, vendor management, risk management, lines of business, pricing and benefits. While BANC and PACW have assumed that a certain level of costs will be incurred, there are many factors beyond their control that could affect the total amount or the timing of the integration costs. Moreover, many of the costs that will be incurred are, by their nature, difficult to estimate accurately. These integration costs may result in the combined company taking charges against earnings following the completion of the mergers, and the amount and timing of such charges are uncertain at present. There can be no assurances that the expected benefits and efficiencies related to the integration of the businesses will be realized to offset these transaction and integration costs over time.
Stockholder litigation related to the mergers and/or the investments could prevent or delay the completion of the mergers and/or the investments, result in the payment of damages or otherwise negatively impact the business and operations of BANC or PACW.
Stockholders may bring claims in connection with the mergers and/or the investments and, among other remedies, may seek damages or an injunction preventing the mergers and/or the investments from closing. If any plaintiff were successful in obtaining an injunction prohibiting BANC or PACW from completing the mergers or
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any other transactions contemplated by the merger agreement or BANC and the Investors from consummating the investments (or any portion thereof), then such injunction may delay or prevent the effectiveness of the mergers and the investments and could result in costs to BANC or PACW, including costs in connection with the defense or settlement of any stockholder lawsuits filed in connection with the mergers and/or the investments. Further, such lawsuits and the defense or settlement of any such lawsuits may have an adverse effect on the financial condition and results of operations of BANC, PACW or the combined company.
The merger agreement may be terminated in accordance with its terms, and the mergers may not be consummated.
The obligation of the merger agreement parties to consummate the first merger is subject to a number of conditions that must be satisfied or waived in order to consummate the mergers. Those conditions include, among other things: (i) receiving the requisite approval by each of the BANC stockholders and the PACW stockholders of certain matters relating to the mergers at each company’s respective special stockholders meeting; (ii) the receipt of the requisite regulatory approvals from the Federal Reserve and the DFPI and that no requisite regulatory approval contains any materially burdensome regulatory condition; (iii) the absence of any order, injunction, decree or other legal restraint preventing the consummation of the mergers, the bank merger or any of the other transactions contemplated by the merger agreement or making the completion of the merger, the bank merger or any of the other transactions contemplated by the merger agreement illegal; (iv) the registration statement of which this joint proxy statement/prospectus is a part being declared effective by the SEC under the Securities Act; and (v) the consummation of a total of $400 million or greater investment in BANC’s qualifying equity securities substantially concurrently with the closing of the mergers. Each party’s obligation to consummate the mergers is also subject to certain additional conditions, including: (a) subject to applicable materiality standards, the accuracy of the representations and warranties of the other party (including the absence of any material adverse effect, as defined in the merger agreement); (b) the performance in all material respects by the other party of its obligations under the merger agreement; and (c) the receipt by each party of an opinion from its counsel to the effect that the mergers will qualify as a reorganization within the meaning of Section 368(a) of the Code.
These conditions to the consummation of the first merger may not be satisfied or waived in a timely manner or at all, and, accordingly, the mergers may not be consummated. In addition, the parties can mutually decide to terminate the merger agreement at any time, before or after the requisite stockholder approvals, or PACW or BANC may elect to terminate the merger agreement in certain other circumstances, including by BANC upon the occurrence of a material adverse effect under certain circumstances with respect to PACW or by PACW upon the occurrence of a material adverse effect under certain circumstances with respect to BANC.
The investment agreements may be terminated in accordance with their respective terms and the investments may not be consummated.
The obligation of the parties to each investment agreement to consummate the investments is subject to a number of conditions which must be satisfied or waived in order to consummate the investments. Those conditions include, among other things: (i) the substantially concurrent consummation of the mergers and the satisfaction of the conditions to the mergers under the merger agreement; (ii) the Warburg Investors and the Centerbridge Investor each must have received reasonably satisfactory oral confirmation from staff of the legal division of the Federal Reserve that the consummation of the applicable investments will not result in such Investor being deemed to have, or to have acquired, “control” of BANC or any of its subsidiaries for purposes of the BHC Act or CIBC Act; (iii) the absence of any order, injunction, decree or other legal restraint preventing the completion of the investments or making the completion of the investments or any of the other transactions contemplated by the investment agreements illegal; and (iv) the consummation, or substantially concurrent consummation, of a total of $400 million or greater investment in BANC’s qualifying equity securities. Each party’s obligation to consummate the investments is also subject to certain additional customary conditions, including (a) subject to applicable materiality standards, the accuracy of the representations and warranties of the other party, and (b) the performance in all material respects by the other party of its obligations under the applicable investment agreement.
These conditions to the consummation of the investments may not be satisfied or waived in a timely manner or at all, and, accordingly, the investments may not be consummated. In addition, the parties to each investment agreement can mutually decide to terminate the applicable investment agreement at any time, before or after the requisite stockholder approvals, or the parties may elect to terminate the applicable investment agreement in certain other circumstances.
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Failure to complete the balance sheet repositioning could delay or hinder regulatory approvals.
Although neither BANC’s nor PACW’s balance sheet repositioning is a condition to consummate the first merger under the merger agreement, the regulators may not approve the mergers or the bank merger until the balance sheet repositioning can be completed to minimize capital and liquidity risk of the combined company. Therefore, if either BANC or PACW is unable to complete its balance sheet repositioning to the extent of any actions required to be undertaken prior to the merger closing, regulatory approval may be delayed or denied.
BANC and PACW may suffer significant losses from the balance sheet repositioning.
Under the merger agreement, BANC and PACW commit to use reasonable best efforts to enter into agreements to complete the balance sheet repositioning at the best commercially reasonably available price. Therefore, depending on the existence of various potential buyers and competitive prices, BANC or PACW may sell its assets at a significant loss, which could affect the financial condition and results of operations of BANC, PACW or the combined company.
The ability of BANC or PACW to use net operating loss carryforwards and other tax attributes may be limited in connection with the mergers or other ownership changes.
Both BANC and PACW are expected to incur taxable losses in connection with the balance sheet repositioning. To the extent these taxable losses exceed BANC’s or PACW’s taxable income, as applicable, unused losses will carry forward to offset a portion of future taxable income, if any, until such unused losses expire, if at all.
Under Sections 382 and 383 of Code, these federal net operating loss carryforwards, certain losses incurred following the mergers, and other tax attributes may become subject to an annual limitation in the event of certain cumulative changes in BANC’s or PACW’s ownership. An “ownership change” pursuant to Section 382 of the Code generally occurs if one or more stockholders or groups of stockholders who own at least 5% of a company’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Each of BANC’s and PACW’s ability to utilize net operating loss carryforwards, certain losses incurred following the mergers, and other tax attributes to offset future taxable income or tax liabilities may be limited as a result of ownership changes, including potential changes in connection with the mergers or other transactions. Similar rules may apply under state tax laws. Neither BANC nor PACW has determined the amount of the cumulative change in BANC’s or PACW’s ownership resulting from the mergers or other transactions, or any resulting limitations on BANC’s or PACW’s ability to utilize BANC’s or PACW’s net operating loss carryforwards, certain losses incurred following the mergers, and other tax attributes. Such limitations could result in increased future income tax liability to BANC or PACW and BANC’s or PACW’s future cash flows could be adversely affected. The effect of such limitations could also adversely affect BANC’s and PACW’s regulatory capital ratios.
In certain circumstances, to preserve BANC’s or PACW’s ability to utilize BANC’s or PACW’s tax attributes without limitation, BANC, PACW or the combined company may take actions to attempt to prevent an “ownership change” from occurring, including by adopting provisions that would limit or discourage stockholders from acquiring 5% or more of BANC or PACW or in the case of stockholders that already own 5% or more of BANC or PACW, from increasing their ownership. There can be no assurances that such actions will be available, or if such actions are available, whether BANC, PACW or the combined company will decide to undertake any such actions and if such actions are undertaken, whether such actions would be effective in preventing an “ownership change” pursuant to Section 382 of the Code.
The unaudited pro forma condensed combined financial information included in this joint proxy statement/prospectus is preliminary and the actual consideration to be issued in the first merger as well as the actual financial condition and results of operations of the combined company after the mergers may differ materially.
The unaudited pro forma condensed combined financial information in this joint proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what the combined company’s actual financial condition or results of operations would have been had the mergers and the investments been completed on the dates indicated. The unaudited pro forma condensed combined financial information reflects adjustments, which are based upon preliminary estimates, to record BANC’s identifiable assets acquired and liabilities assumed at fair value and the resulting goodwill recognized. The merger consideration value allocation reflected
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in this joint proxy statement/prospectus is preliminary, and the final allocation thereof will be based upon the value of the actual merger consideration and the fair value of the assets and liabilities of BANC as of the closing date. Accordingly, the actual value of the merger consideration may vary significantly from the value used in preparing the unaudited pro forma combined consolidated financial information in this joint proxy statement/prospectus. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this document.
Certain of BANC’s and PACW’s directors and executive officers may have interests in the mergers that may differ from, or are in addition to, the interests of BANC stockholders and PACW stockholders.
BANC stockholders and PACW stockholders should be aware that some of BANC’s and PACW’s directors and executive officers may have interests in the mergers and have arrangements that are different from, or in addition to, those of BANC stockholders and PACW stockholders. These interests and arrangements may create potential conflicts of interest. The BANC board of directors and the PACW board of directors were aware of these respective interests and considered these interests, among other matters, when making their decisions to approve the merger agreement, and in recommending that BANC stockholders vote to approve the BANC issuance proposal, the BANC incentive plan proposal, the BANC exemption amendment proposal and the BANC adjournment proposal and that PACW stockholders vote to approve the PACW merger proposal, the PACW compensation proposal and the PACW adjournment proposal.
In connection with the mergers, BANC will assume PACW’s outstanding debt obligations, and the combined company’s level of indebtedness following the completion of the mergers could adversely affect the combined company’s ability to raise additional capital and to meet its obligations under BANC’s existing indebtedness.
Upon the closing of the subsequent merger, BANC will assume PACW’s outstanding indebtedness. BANC’s existing debt (including PACW’s assumed indebtedness), together with any future incurrence of additional indebtedness, could have important consequences for the combined company’s creditors and stockholders. For example, it could:
limit the combined company’s ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes;
restrict the combined company from making strategic acquisitions or cause the combined company to make non-strategic divestitures;
restrict the combined company from paying dividends to its stockholders;
increase the combined company’s vulnerability to general economic and industry conditions; and
require a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on the combined company’s indebtedness, thereby reducing the combined company’s ability to use cash flows to fund its operations, capital expenditures and future business opportunities.
The announcement of the mergers could disrupt BANC’s and PACW’s relationships with their employees, customers, suppliers, business partners and others, as well as their operating results and business generally.
Whether or not the mergers are ultimately consummated, as a result of uncertainty related to the proposed transactions, risks relating to the impact of the announcement of the mergers on BANC’s and PACW’s business include the following:
their employees may experience uncertainty about their future roles, which might adversely affect BANC’s and PACW’s ability to retain and hire key personnel and other employees;
customers, suppliers, business partners and other parties with which BANC and PACW maintain business relationships may experience uncertainty about their future and seek alternative relationships with third parties, seek to alter their business relationships with BANC and PACW or fail to extend existing relationships with BANC and PACW; and
BANC and PACW have each expended and will continue to expend significant costs, fees and expenses for professional services and transaction costs in connection with the mergers.
If any of the aforementioned risks were to materialize, they could lead to significant costs which may impact each party’s results of operations and financial condition.
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The merger agreement limits BANC’s and PACW’s respective abilities to pursue alternatives to the mergers and may discourage other companies from trying to acquire BANC or PACW.
The merger agreement contains customary “no shop” covenants that restrict each of BANC’s and PACW’s ability to, directly or indirectly, among other things, initiate, solicit, knowingly encourage or knowingly facilitate inquiries or proposals with respect to, or, subject to certain exceptions generally related to the exercise of fiduciary duties by each respective board of directors, engage or participate in any negotiations concerning, or provide any confidential or nonpublic information or data relating to, any alternative acquisition proposals, subject to certain exceptions. These provisions, which could result in a $39.5 million termination fee payable under certain circumstances, may discourage a potential third-party acquirer that might have an interest in acquiring all or a significant part of BANC or PACW from considering or making that acquisition proposal.
The shares of BANC common stock to be received by PACW stockholders as a result of the first merger will have different rights from the shares of PACW common stock.
Upon completion of the first merger, the rights of former PACW stockholders who receive shares of BANC common stock in the first merger and thereby become BANC stockholders will be governed by the BANC charter and the BANC bylaws. The rights associated with PACW common stock are different from the rights associated with BANC common stock. In addition, the rights of stockholders under Maryland law, where BANC is incorporated, may differ from the rights of stockholders under Delaware law, where PACW is incorporated. See the section entitled “Comparison of the Rights of BANC stockholders and PACW stockholders.”
Each BANC stockholder or PACW stockholder will have a reduced ownership and voting interest in the combined company after the consummation of the mergers than the holder’s interest in BANC or PACW individually, as applicable, prior to the consummation of the mergers and may exercise less influence over management.
BANC stockholders and PACW stockholders currently have the right to vote in the election of the board of directors and on other matters affecting BANC and PACW, respectively. Each BANC stockholder and each PACW stockholder before the mergers will be a BANC stockholder upon completion of the mergers, with a percentage ownership of the shares of common stock of the combined company that is smaller than the holder’s percentage ownership of either shares of BANC common stock or shares of PACW common stock individually, as applicable, prior to the consummation of the mergers. Based on the number of shares of BANC common stock and PACW common stock outstanding as of the close of business on the respective record dates, and based on the number of shares of BANC common stock expected to be issued in the first merger and the investments, the former PACW stockholders, as a group, are estimated to receive approximately 47% of the outstanding shares of the combined company immediately after the first merger and the investments, and the shares of BANC common stock currently held by BANC stockholders as a group are estimated to represent approximately 34% of the outstanding shares of the combined company immediately after the first merger and the investments. Because of this, PACW stockholders may have less influence on the management and policies of the combined company than they now have on the management and policies of PACW, and BANC stockholders may have less influence on the management and policies of the combined company after the closing of the mergers than they now have on the management and policies of BANC.
Issuance of shares of BANC common stock in connection with the mergers may adversely affect the market price of BANC common stock.
In connection with the payment of the merger consideration, BANC expects to issue approximately 77.9 million shares of BANC common stock to PACW stockholders and approximately 1 million shares of BANC common stock to the holders of PACW restricted stock awards. The issuance of these new shares of BANC common stock may result in fluctuations in the market price of BANC common stock, including a stock price decrease.
Risks Relating to BANC’s Business
You should read and consider risk factors specific to BANC’s business that will also affect the combined company after the mergers. These risks are described in the “Risk Factors” section of BANC’s Annual Report on Form 10-K for the year ended December 31, 2022, and in any updates to those risk factors set forth in BANC’s Quarterly Reports on Form 10-Q and in other documents incorporated by reference into this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” beginning on page 201 of this joint proxy statement/prospectus for the location of information incorporated by reference into this joint proxy statement/prospectus.
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Risks Relating to PACW’s Business
You should read and consider risk factors specific to PACW’s business that will also affect the combined company after the mergers. These risks are described in the “Risk Factors” section of PACW’s Annual Report on Form 10-K for the year ended December 31, 2022, and in any updates to those risk factors set forth in PACW’s Quarterly Reports on Form 10-Q and in other documents attached as annexes to this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” beginning on page 201 of this joint proxy statement/prospectus for the location of information that is attached as annexes to this joint proxy statement/prospectus.
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THE BANC SPECIAL MEETING
This section contains information for BANC stockholders about the special meeting that BANC has called to allow BANC stockholders to consider and vote on the BANC issuance proposal, the BANC incentive plan proposal, the BANC exemption amendment proposal and the BANC adjournment proposal. This joint proxy statement/prospectus is accompanied by a notice of the BANC special meeting, and a form of proxy card that the BANC board of directors is soliciting for use by BANC stockholders at the BANC special meeting and at any adjournments or postponements of the BANC special meeting.
Date, Time and Place of the BANC Special Meeting
The BANC special meeting will be held on [  ], 2023 at [  ], Pacific Time at 3 MacArthur Place, Santa Ana, CA 92707, or at any postponement or adjournment thereof.
Matters to Be Considered
At the BANC special meeting, BANC stockholders will be asked to consider and vote on the following proposals:
the BANC issuance proposal;
the BANC incentive plan proposal;
the BANC exemption amendment proposal; and
the BANC adjournment proposal.
Recommendation of the BANC Board of Directors
The BANC board of directors unanimously recommends that the BANC stockholders vote “FOR” the BANC issuance proposal, “FOR” the BANC incentive plan proposal, “FOR” the BANC exemption amendment proposal and “FOR” the BANC adjournment proposal. See the section entitled “The Transactions—BANC’s Reasons for the Mergers; Recommendation of the BANC Board of Directors” for a more detailed discussion of the BANC board of directors’ recommendation.
Record Date and Quorum
The BANC board of directors has fixed the close of business on [  ], 2023 as the BANC record date for the determination of BANC stockholders entitled to notice of, and to vote at, the BANC special meeting. As of the close of business on the BANC record date, there were [  ] shares of BANC common stock outstanding held by [  ] holders of record.
The presence at the BANC special meeting, in person or by proxy, of holders entitled to cast one-third of all the votes entitled to be cast at the meeting will constitute a quorum for the transaction of business at the BANC special meeting. Abstentions will be included in determining the number of shares present at the meeting for the purpose of determining the presence of a quorum. As it is expected that all proposals to be voted on at the BANC special meeting will be “non-routine” matters, as discussed in the section entitled “—Broker Non-Votes,” BANC does not expect any broker non-votes to occur at the BANC special meeting.
Under the BANC bylaws, even if less than a quorum, the chair of the meeting or the holders of a majority of the shares of BANC common stock entitled to vote who are present, in person or by proxy, may adjourn the meeting from time to time without further notice.
At the BANC special meeting, each share of BANC common stock is entitled to one vote on all matters properly submitted to BANC stockholders; provided, however, that under Section F of Article 6 of the BANC charter, no BANC stockholder who beneficially owns more than ten percent (10%) of BANC common stock outstanding as of the BANC record date may vote shares held in excess of that amount.
Each of the members of the BANC board of directors has entered into a voting agreement with PACW in which such director has agreed to vote all BANC common stock that such director owns and has the power to vote in favor of the BANC issuance proposal and any other matter that is reasonably necessary to be approved by the BANC stockholders to facilitate the consummation of the transactions contemplated by the merger agreement.
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Such persons also agreed to vote against any proposal made in opposition to the approval of the adoption of the merger agreement or that is otherwise in competition or inconsistent with the transactions contemplated by the merger agreement, against any acquisition proposal and against any proposal, transaction, agreement or amendment to BANC’s organizational documents or other action that is intended to or could reasonably be expected to prevent, impede, interfere with, materially delay, postpone, adversely affect or discourage the consummation of the first merger. As of the close of business on the BANC record date, such persons beneficially owned and were entitled to vote, in the aggregate, [  ] shares of BANC common stock, allowing them to exercise approximately [ ]% of the voting power of BANC common stock (which does not include shares issuable upon the exercise, vesting or settlement of BANC equity-based awards that were not outstanding as of the close of business on the BANC record date).
Broker Non-Votes
A broker non-vote occurs when (a) a bank, broker, trustee or other nominee has discretionary authority to vote on one or more proposals to be voted on at a meeting of stockholders but is not permitted to vote on other proposals without instructions from the beneficial owner of the shares and (b) the beneficial owner fails to provide the bank, broker, trustee or other nominee with such instructions. Under stock exchange rules, banks, brokers, trustees and other nominees holding shares in “street name” do not have discretionary voting authority with respect to any of the proposals described in this joint proxy statement/prospectus to be voted at the BANC special meeting. It is expected that all proposals to be voted on the BANC special meeting will be “non-routine” matters, and, as such, if a beneficial owner of shares of BANC common stock held in “street name” does not give voting instructions to the bank, broker, trustee or other nominee, then those shares will not be counted as present in person or by proxy at the BANC special meeting and will not be counted for purposes of establishing a quorum.
Broker non-votes only count toward a quorum if at least one proposal is presented with respect to which the bank, broker, trustee or other nominee has discretionary authority. Since it is expected that all proposals to be voted on at the BANC special meeting will be “non-routine” matters, BANC does not expect any broker non-votes to occur at the BANC special meeting.
Assuming a quorum is present, if you hold shares of BANC common stock in “street name” and fail to issue voting instructions to your bank, broker, trustee or other nominee, it will not have any effect on the BANC issuance proposal, the BANC incentive plan proposal or the BANC adjournment proposal, but will have the effect of a vote “AGAINST” the BANC exemption amendment proposal.
Vote Required; Treatment of Abstentions and Failure to Vote
BANC issuance proposal:
Vote required: Approval of the BANC issuance proposal requires the affirmative vote of a majority of votes cast by holders of shares of BANC common stock at the BANC special meeting. Approval of the BANC issuance proposal is a condition to the completion of the first merger and the investments.
Effect of abstentions and failure to vote: An abstention by a BANC stockholder who is present (in person or by proxy) at the BANC special meeting (or a BANC stockholder who is not present at the BANC special meeting and does not respond by proxy) will have no effect on the BANC issuance proposal. If you are a beneficial owner of BANC common stock and you do not instruct your bank, broker, trustee or other nominee on how to vote your shares of BANC common stock, your bank, broker, trustee or other nominee will not be able to vote your shares on the BANC issuance proposal or any other proposal being considered by the BANC stockholders as described in this joint proxy statement/prospectus and therefore such shares of BANC common stock will not be counted for purposes of establishing a quorum. Assuming a quorum is present, the failure to vote on the BANC issuance proposal will not have any effect on the BANC issuance proposal.
BANC incentive plan proposal:
Vote required: Approval of the BANC incentive plan proposal requires the affirmative vote of a majority of votes cast by holders of shares of BANC common stock at the BANC special meeting. Approval of the BANC incentive plan proposal is not a condition to the completion of the mergers or the investments. In addition, if the mergers are not consummated, then the amendment and restatement of the BANC existing omnibus stock incentive plan will not occur.
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Effect of abstentions and failure to vote: An abstention by a BANC stockholder who is present (in person or by proxy) at the BANC special meeting (or a BANC stockholder who is not present at the BANC special meeting and does not respond by proxy) will have no effect on the BANC incentive plan proposal. If you are a beneficial owner of BANC common stock and you do not instruct your bank, broker, trustee or other nominee on how to vote your shares of BANC common stock, your bank, broker, trustee or other nominee may not vote your shares on the BANC incentive plan proposal and therefore such shares of BANC common stock will not be counted for purposes of establishing a quorum. Assuming a quorum is present, the failure to vote on the BANC incentive plan proposal will not have any effect on the BANC incentive plan proposal.
BANC exemption amendment proposal:
Vote required: Approval of the BANC exemption amendment proposal requires the affirmative vote of the holders of a majority of the outstanding shares of BANC common stock entitled to vote on the proposal. Approval of the BANC exemption amendment proposal is not a condition to the completion of the mergers or the investments. In addition, if the mergers are not consummated, then the BANC charter exemption amendment will not become effective.
Effect of abstentions and failure to vote: An abstention by a BANC stockholder who is present (in person or by proxy) at the BANC special meeting (or a BANC stockholder who is not present at the BANC special meeting and does not respond by proxy) will have the same effect as a vote “AGAINST” the BANC exemption amendment proposal. If you are a beneficial owner of BANC common stock and you do not instruct your bank, broker, trustee or other nominee on how to vote your shares of BANC common stock, your bank, broker, trustee or other nominee may not vote your shares on the BANC exemption amendment proposal and therefore such shares of BANC common stock will not be counted for purposes of establishing a quorum. The failure to vote on the BANC exemption amendment proposal will have the same effect as a vote “AGAINST” the BANC exemption amendment proposal.
BANC adjournment proposal:
Vote required: Whether or not a quorum will be present at the meeting, approval of the BANC adjournment proposal requires the affirmative vote of a majority of votes cast by holders of shares of BANC common stock at the BANC special meeting. Approval of the BANC adjournment proposal is not a condition to the completion of the mergers or the investments.
Effect of abstentions and failure to vote: An abstention by a BANC stockholder who is present (in person or by proxy) at the BANC special meeting (or a BANC stockholder who is not present at the BANC special meeting and does not respond by proxy) will have no effect on the BANC adjournment proposal. If you are a beneficial owner of BANC common stock and you do not instruct your bank, broker, trustee or other nominee on how to vote your shares of BANC common stock, your bank, broker, trustee or other nominee may not vote your shares on the BANC adjournment proposal and therefore such shares of BANC common stock will not be counted for purposes of establishing a quorum. Assuming a quorum is present, the failure to vote on the BANC adjournment proposal will not have any effect on the BANC adjournment proposal.
Attending the BANC Special Meeting
If you are a holder of record of BANC common stock on the BANC record date, you will be able to attend the BANC special meeting, ask questions and vote during the meeting. Each person attending the BANC special meeting must present a valid, government issued form of identification in order to be admitted to the BANC special meeting. Each stockholder attending also must provide proof of ownership of shares of BANC common stock as of the BANC record date. If you are a record holder, proof of ownership will be established by BANC’s verification of your name against BANC’s list of record holders as of the BANC record date.
If you hold your shares of BANC common stock through a bank, broker, trustee or other nominee and you would like to attend and vote in person at the BANC special meeting, you will need to obtain a legal proxy from the holder of record of your BANC common stock indicating that you were the beneficial owner of those shares on the BANC record date and that you are authorized to vote such shares. Please contact your bank, broker, trustee or other nominee for further instructions. Additionally, you must provide one of the following as proof of ownership: (a) account statement showing share ownership as of the BANC record date, (b) a copy of an email that you received with instructions containing a link to the website where the BANC’s proxy materials are
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available and a valid control number, (c) a valid legal proxy containing a valid control number or a letter from a record holder naming you as proxy, or (d) a letter from the bank, broker, trustee or other nominee through which you hold your shares confirming your ownership as of the BANC record date. See the section entitled “—Shares Held in Street Name” below for further information. If you hold your shares through a bank, broker, trustee or other nominee and you do not want to attend the BANC special meeting, please contact the respective entity for instructions on how to vote your shares of BANC common stock at the BANC special meeting.
Even if you plan to attend the BANC special meeting, BANC recommends that you vote your shares in advance by proxy as described below so that your vote will be counted if you later decide not to or become unable to attend the BANC special meeting.
Proxies
A BANC stockholder may vote by proxy or at the BANC special meeting. If you hold your shares of BANC common stock in your name as a record holder, to submit a proxy, you, as a BANC stockholder, may use one of the following methods:
by telephone: by calling the toll-free number indicated on the accompanying proxy card and following the recorded instructions;
through the internet: by visiting the website indicated on the accompanying proxy card and following the instructions; or
by completing, signing, dating and returning the accompanying proxy card in the enclosed postage-paid envelope.
If you intend to submit your proxy by telephone or via the internet, you must do so by [  ], Pacific Time, on the day before the BANC special meeting. If you intend to submit your proxy by mail, your completed proxy card must be received prior to the BANC special meeting.
BANC requests that BANC stockholders vote by telephone, over the internet or by completing, signing, dating and returning the accompanying proxy card and returning it to BANC as soon as possible in the enclosed postage-paid envelope. When the accompanying proxy card is returned properly executed, the shares of BANC common stock represented by it will be voted at the BANC special meeting in accordance with the instructions contained on the proxy card. If you make no specification on your proxy card as to how you want your shares voted before signing and returning it, your proxy will be voted “FOR” the BANC issuance proposal, “FOR” the BANC incentive plan proposal, “FOR” the BANC exemption amendment proposal and “FOR” the BANC adjournment proposal.
If you hold your shares through a bank, broker, trustee or other nominee, you should check the voting instruction card provided by your bank, broker, trustee or other nominee to determine whether you may vote by telephone or the internet.
Every vote is important. Accordingly, you should sign, date and return the enclosed proxy card, or vote via the internet or by telephone, whether or not you plan to attend the BANC special meeting. Sending in your proxy card or voting by telephone or on the internet will not prevent you from voting your shares personally at the BANC special meeting because you may revoke your proxy at any time before it is voted. See “—Revocability of Proxies” below for further information.
Shares Held in Street Name
If you hold shares in the name of a bank, broker, trustee or other nominee (e.g., in a brokerage or other account in “street name”), then you are a “beneficial owner” of such shares. Please follow the instructions on the voting instruction card furnished by such bank, broker, trustee or other nominee in order to vote such shares.
If your shares are held in the name of a bank, broker, trustee or other nominee, you must instruct the bank, broker, trustee or other nominee on how to vote your shares. You may not vote shares held in “street name” by returning a proxy card directly to BANC unless you have obtained a legal proxy from your bank, broker, trustee or other nominee.
Further, banks, brokers, trustees or other nominees who hold shares of BANC common stock on behalf of their customers may not give a proxy to BANC to vote those shares with respect to any of the proposals without
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specific instructions from their customers, as brokers, banks, trustees and other nominees do not have discretionary voting power on the proposals that will be voted upon at the BANC special meeting, including the BANC issuance proposal, BANC incentive plan proposal, BANC exemption amendment proposal and BANC adjournment proposal.
Revocability of Proxies
If you directly hold shares of BANC common stock in your name as a record holder, you can change your vote at any time before your proxy is voted at your meeting. You can do this by:
submitting a written notice that you would like to revoke your proxy to the corporate secretary of BANC;
signing and returning a proxy card with a later date;
voting by telephone or the internet at a later time; or
attending the BANC special meeting and voting at the BANC special meeting.
If you are a beneficial owner and your shares are held by a bank, broker, trustee or other nominee, you may change your vote by:
contacting your bank, broker, trustee or other nominee; or
attending the BANC special meeting and voting your shares at the BANC special meeting; however, you will need to obtain a legal proxy from the holder of record of your shares of BANC common stock indicating that you were the beneficial owner of those shares on the BANC record date and that you are authorized to vote such shares and will also need to follow the other applicable procedures discussed above. Please contact your bank, broker, trustee or other nominee for further instructions.
Attendance at the BANC special meeting will not in and of itself constitute revocation of a proxy. A revocation or later-dated proxy received by BANC after the vote will not affect the vote. If you intend to submit your proxy by telephone or via the internet, you must do so by [ ], Pacific Time, on the day before the BANC special meeting. If you intend to submit your proxy by mail, your completed proxy card must be received prior to the BANC special meeting.
Adjournments and Postponements
Although it is not currently expected, the BANC special meeting may be adjourned or postponed for the purpose of soliciting additional proxies. In the event that there is present, in person or by proxy, sufficient favorable voting power to secure the vote of BANC stockholders necessary to approve the BANC issuance proposal, BANC does not anticipate that it will adjourn or postpone the BANC special meeting, unless it is advised by counsel that such adjournment or postponement is necessary under applicable law to allow additional time for any disclosure. Any adjournment or postponement of the BANC special meeting for the purpose of soliciting additional proxies will allow BANC stockholders who have already sent in their proxies to revoke them at any time prior to their use at the BANC special meeting as adjourned or postponed.
Delivery of Proxy Materials
As permitted by applicable law, only one copy of this joint proxy statement/prospectus is being delivered to BANC stockholders residing at the same address, unless such BANC stockholders have notified BANC of their desire to receive multiple copies of the joint proxy statement/prospectus.
BANC will promptly deliver, upon oral or written request, a separate copy of the joint proxy statement/prospectus to any BANC stockholder residing at an address to which only one copy of such document was mailed. Requests for additional copies should be directed to BANC’s proxy solicitor, Okapi Partners LLC, by emailing info@okapipartners.com or by calling toll-free at 888-785-6673, or for banks, brokers, trustees and other nominees, collect at 212-297-0720.
Solicitation of Proxies
BANC and PACW will share equally the expenses incurred in connection with the printing and mailing of this joint proxy statement/prospectus. To assist in the solicitation of proxies, BANC has retained Okapi Partners LLC to assist it in soliciting proxies and has agreed to pay Okapi Partners LLC a fee of $[ ] plus the reimbursement
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of certain costs and expenses incurred in connection with the solicitation. BANC and its proxy solicitor may also request banks, brokers, trustees and other nominees holding shares of BANC common stock beneficially owned by others to send this document to, and obtain proxies from, the beneficial owners and may reimburse such record holders for their reasonable out-of-pocket expenses in so doing. Solicitation of proxies by mail may be supplemented by telephone and other electronic means, advertisements and personal solicitation by the directors, officers or employees of BANC. No additional compensation will be paid to our directors, officers or employees for solicitation.
Other Matters to Come Before the BANC Special Meeting
BANC management knows of no other business to be presented at the BANC special meeting, but if any other matters are properly presented at the meeting or any adjournments or postponements thereof, the persons named in the proxies will vote upon them in accordance with the recommendation of the BANC board of directors.
Assistance
If you need assistance in completing your proxy card, have questions regarding the BANC special meeting or would like additional copies of this joint proxy statement/prospectus, please contact Investor Relations, Banc of California, 3 MacArthur Place, Santa Ana, CA 92707, email IR@bancofcal.com or telephone: (855) 361-2262 or BANC’s proxy solicitor, Okapi Partners LLC, by emailing info@okapipartners.com or by calling toll-free at 888-785-6673, or for banks, brokers, trustees and other nominees, collect at 212-297-0720.
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BANC PROPOSALS
PROPOSAL 1: BANC ISSUANCE PROPOSAL
BANC is asking the BANC stockholders to approve the issuance of BANC common stock to PACW stockholders pursuant to the merger agreement and the issuance of BANC common stock, BANC NVCE stock and warrants to the Investors pursuant to the investment agreements.
Pursuant to the merger agreement, BANC expects to issue approximately 77.9 million shares of BANC common stock and approximately 1 million shares of BANC common stock to the holders of PACW restricted stock awards in connection with the consummation of the first merger. Pursuant to the investment agreements, BANC will issue (a) approximately (i) 21.8 million shares of BANC common stock and (ii) 10.8 million shares of BANC NVCE stock and (b) warrants to purchase approximately (i) 15.9 million shares of BANC NVCE stock and (ii) 3.0 million shares of BANC common stock, in each case, in connection with the consummation of the investments.
Under the NYSE Listed Company Manual, a company listed on the NYSE is required to obtain stockholder approval prior to the issuance of common stock, or of securities convertible into or exercisable for common stock, in any transaction or series of related transactions if (a) the common stock has, or will have upon issuance, voting power equal to or in excess of 20% of the voting power outstanding before the issuance of such stock or securities convertible into or exercisable for common stock, or (b) the number of shares of common stock to be issued is, or will be upon issuance, equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the common stock or of securities convertible into or exercisable for common stock.
If the first merger and the investments are completed, the number of shares of BANC common stock issued, and securities convertible into or exercisable for BANC common stock, will exceed 20% of the BANC common stock outstanding before such issuance. In this proposal, BANC is asking BANC stockholders to authorize the issuance of BANC common stock, BANC NVCE stock and warrants in connection with the first merger and the investments.
Approval of the BANC issuance proposal requires the affirmative vote of a majority of votes cast by holders of shares of BANC common stock at the BANC special meeting. The approval of the BANC issuance proposal is a condition to the completion of the first merger and the investments.
The BANC board of directors unanimously recommends a vote “FOR” the BANC issuance proposal.
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PROPOSAL 2: BANC INCENTIVE PLAN PROPOSAL
APPROVAL OF THE AMENDED AND RESTATED BANC OF CALIFORNIA, INC. 2018 OMNIBUS STOCK INCENTIVE PLAN
On August 25, 2023, on the recommendation of its Joint Compensation, Nominating and Corporate Governance Committee, the BANC board of directors has determined that it is necessary and appropriate to amend and restate BANC’s existing 2018 omnibus stock incentive plan, to be renamed the Amended and Restated Banc of California, Inc., 2018 Omnibus Stock Incentive Plan, or the “A&R 2018 Plan”, pursuant to which the combined company will be able to make grants of equity-based awards to employees, officers, directors and consultants of the combined company following the closing of the transactions contemplated by the merger agreement. The combined company will have a substantially larger number of employees who are eligible to receive equity-based awards, and the BANC board of directors believes that the A&R 2018 Plan is needed to ensure that the combined company has a sufficient number of shares available to make these grants following the closing of the transactions contemplated by the merger agreement. The existing BANC 2018 Omnibus Stock Incentive Plan (the “Current Plan”) was adopted more than five years ago and the remaining share reserve is unlikely to be sufficient to make these grants. As described in more detail below, the terms of the A&R 2018 Plan are substantially similar to the terms contained in the Current Plan, except that the A&R 2018 Plan:
increases the number of shares of common stock that may be issued under the Current Plan by [  ] shares;
provides BANC with the right to withhold from payments under the A&R 2018 Plan in an amount up to the maximum statutory tax rate in the applicable jurisdictions;
resets the term of the plan to be 10 years from the effective date of the A&R 2018 Plan; and
permits the grant of cash-based awards under the A&R 2018 Plan.
If approved by BANC stockholders at the BANC special meeting, contingent upon the closing of the transactions contemplated by the merger agreement, the A&R 2018 Plan will replace the Current Plan and the Amended and Restated PacWest 2017 Stock Incentive Plan with respect to any future equity-based awards effective as of the closing of the transactions contemplated by the merger agreement. In the event the BANC stockholders do not approve the A&R 2018 Plan at the BANC special meeting, the A&R 2018 Plan will not become effective. Upon the closing of the transactions contemplated by the merger agreement, awards that are then outstanding under the Current Plan and the Amended and Restated PacWest 2017 Stock Incentive Plan will continue to remain outstanding under those plans as adjusted for the effects of the transaction. For more information on the treatment of these awards in connection with the transactions, please see the section entitled “The Merger Agreement—Treatment of PACW Equity Awards” and the section entitled “The Merger Agreement—Treatment of BANC Equity Awards”.
Purpose of the A&R 2018 Plan
The A&R 2018 Plan design will allow the combined company to:
• Align employee and stockholder interests to create stockholder value.
• Attract, retain and motivate highly qualified officers, employees, directors and/or consultants to ensure the success of the combined company.
• Permits the grant of substitute awards in connection with future corporate transactions.
• Drive long-term financial and operational performance
• Adapt to evolving best practices in compensation.
Highlights of the A&R 2018 Plan
The terms and conditions of the A&R 2018 Plan are substantially similar to those that are currently included in the Current Plan, except as noted above, which BANC has determined are still appropriate from a corporate governance and general market standard perspective. An overview of the key corporate governance provisions is provided below.
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The A&R 2018 Plan does:
✔ Provide for a minimum one-year vesting period subject to a 5% carve-out.
✔ Provide for “double-trigger vesting” of awards, so that a change in control does not, by itself, trigger full vesting of an award.
✔ Provide for an annual limit on director awards.
✔ Provide for administration by the Joint Compensation, Nominating and Corporate Governance Committee of the board of directors of the combined company, which committee will consist entirely of independent directors, or such other committee or subcommittee as may be appointed by the board of directors of the combined company.
The A&R 2018 Plan does not:
✘ Contain any “evergreen” provision that automatically adds additional shares to the plan pool.
✘ Permit direct or indirect repricing of underwater options or stock appreciation rights without stockholder approval.
✘ Permit the grant of options with below-market exercise prices other than in connection with substitute awards.
✘ Permit re-issuance, or recycling, of shares tendered or withheld to pay the exercise price of an option or shares used to satisfy withholding obligations with respect to outstanding awards.
✘ Permit BANC to pay and deliver dividends or dividend equivalents on any awards prior to vesting or permit BANC to pay dividends or dividend equivalents on stock options or stock appreciation rights.
Shares Available for Issuance under the A&R 2018 Plan
The total number of shares of BANC common stock that will be available for issuance under the A&R 2018 Plan effective as of the closing of the transactions contemplated by the merger agreement will be equal to [  ], plus a number of shares that are reserved for awards under the Current Plan but are unissued as of the effective date of the A&R 2018 Plan, subject in each case to equitable adjustment in the event of certain corporate transactions or similar events. In addition, shares underlying awards that are outstanding under the Current Plan that become forfeited, terminated, expired, lapsed or settled for cash will become available for issuance pursuant to awards issued under the A&R 2018 Plan. As of August 15, 2023, a total of 1,901,322 shares of BANC common stock were available for issuance pursuant to new awards under the Current Plan, and 1,343,303 shares were available for issuance pursuant to outstanding awards under the Current Plan, assuming BANC PSU Awards were achieved at target performance. In reaching the conclusion as to the appropriateness of the number of shares of BANC common stock requested to be reserved for equity-based awards under the A&R 2018 Plan, the BANC board of directors reviewed key metrics that are typically used to evaluate such recommendations, including burn rate and dilution. Since the A&R 2018 Plan will be used for grants of equity-based awards to employees and other applicable service providers of the combined company following the closing of the transactions contemplated by the merger agreement, the BANC board of directors reviewed these key metrics both for BANC and PACW to ensure that it had the most comprehensive set of information in making its determinations.
The table below illustrates BANC’s historical grant practices.
 
BANC Grant Details for Prior Three Years
Year
Stock
Options
Time-Based
Restricted
Stock Units
Performance-
Based
Restricted
Stock Units
Total
Granted
Common
Shares
Outstanding
Burn Rate(1) = Total
Granted/Common
Shares Outstanding
2020
279,822
78,711
358,593
49,767,489
0.72%
2021
231,120
66,472
297,592
62,188,206
0.48%
2022
291,437
782,451(2)
1,073,888
58,544,534
1.83%(2)
3-Year Average
267,460
309,231
576,691
56,833,410
1.01%
(1)
Burn rate measures how rapidly the share pool under an incentive plan is being used before taking into account any shares that may been returned to the share pool. For purposes of this calculation, the number of shares of common stock outstanding was based on the amount reported on BANC’s balance sheet as of the end of each respective fiscal year.
(2)
2022 performance-based restricted stock units include grants of BANC stock-price PSU awards that are expected to be canceled at the effective time subject to applicable consents.
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The table below illustrates PACW’s historical grant practices.
 
PACW Grant Details for Prior Three Years
Year
Immediately
Vested Shares
(Directors)
Restricted
Stock Awards
Performance-
Based
Restricted
Stock Units
Total
Granted
Common
Shares
Outstanding
Burn Rate(1) = Total
Granted/Common
Shares Outstanding
2020
37,357
822,211
143,543
1,003,111
120,736,834
0.83%
2021
20,173
1,433,698
324,351
1,778,222
122,105,853
1.46%
2022
28,439
994,185
150,007
1,172,631
123,000,557
0.95%
3-Year Average
28,656
1,083,365
205,967
1,317,988
121,947,748
1.08%
(1)
Burn rate measures how rapidly the share pool under an incentive plan is being used before taking into account any shares that may been returned to the share pool. For purposes of this calculation, the number of shares of common stock outstanding was based on the amount reported on PACW’s balance sheet as of the end of each respective fiscal year.
The information included in this joint proxy statement/prospectus and BANC’s 2022 Annual Report on Form 10-K is updated by the following information regarding all existing BANC equity compensation plans as of June 30, 2023 (except as noted otherwise):
Total number of stock options outstanding(1)
14,904
Weighted-average exercise price of stock options outstanding
$13.05
Weighted-average remaining term of stock options outstanding
1.78 years
Total number of full value awards outstanding (includes restricted stock, restricted stock units and performance stock units)(2)
1,350,210
Total number of shares remaining available for future grant under the Current Plan(3)
1,901,039
Total number of shares of common stock outstanding (presented on a fully-diluted, post-transaction basis)(4)
169,474,585
(1)
No stock appreciation rights were outstanding as of June 30, 2023.
(2)
The number of RSUs with performance-based vesting conditions (PSUs) assumes performance at the target performance level.
(3)
The Current Plan is BANC’s only active employee equity incentive plan. Previously granted stock options awarded under BANC’s 2013 Omnibus Stock Incentive Plan (“2013 Plan”) remain exercisable under the terms of such awards; however, upon approval of the Current Plan, no future awards were or could be made under the 2013 Plan.
(4)
Represents fully-diluted shares of common stock of each of BANC and PACW as of June 30, 2023, including outstanding equity awards at the target level of performance, plus a number of shares of common stock to be issued to the Issuers at the investment closing.
Overhang provides a measure of potential dilution. The total number of shares of BANC common stock subject to outstanding awards, plus the total number of shares of BANC common stock available for future grants under the Current Plan, represents a current overhang percentage of 1.9%, calculated on a fully-diluted basis using the post-transaction shares of BANC common stock outstanding. If the BANC stockholders approve the A&R 2018 Plan, the issuance of an additional [ ] shares of BANC common stock would increase BANC’s overhang by [ ], calculated using the same methodology, which would result in total potential dilution of [ ].
Summary of the A&R 2018 Plan
This section summarizes the material terms of the A&R 2018 Plan and is qualified in its entirety by the full text of the A&R 2018 Plan, which is included as Annex J to this joint proxy statement/prospectus. Capitalized terms used below and not defined in this proposal are as defined in the A&R 2018 Plan.
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General:
Awards granted under the A&R 2018 Plan may be in the form of stock options, stock appreciation rights (SARs), restricted stock, restricted stock units (RSUs), performance units or other stock-based awards. Awards may be made under the A&R 2018 Plan for ten years following the closing of the transactions contemplated by the merger agreement.
 
 
Administration:
The A&R 2018 Plan will be administered by the Joint Compensation, Nominating and Corporate Governance Committee of the board of directors of the combined company, or by such other committee or subcommittee as may be appointed by the board of directors of the combined company.
 
 
Shares Available:
The A&R 2018 Plan Share Limit will be [  ], plus a number of shares that are reserved for awards under the Current Plan but are unissued as of the effective date of the A&R 2018 Plan, subject to adjustment as described below under “Adjustments.”
 
 
Share Recycling:
Shares underlying awards that expire or are forfeited, terminated, expired, or lapsed without being exercised or settled for cash will again be available for future grants. However, shares used to pay the exercise price of an option and shares used to satisfy tax withholding obligations with respect to any award will not be available for future awards under the A&R 2018 Plan. To the extent shares are delivered pursuant to the exercise of a stock appreciation right, the number of underlying shares as to which the exercise related will be counted against the shares available for issuance under the A&R 2018 Plan, as opposed to only counting the net shares issued.
 
 
Adjustments:
Shares available for future and outstanding awards may be adjusted to reflect certain corporate transactions, and will be adjusted in the event of a stock dividend, stock split, reverse stock split, reorganization, share combination, or recapitalization or similar event affecting the combined company’s capital structure or certain other events affecting the shares of BANC common stock, in each case to the extent the board of directors or Joint Compensation, Nominating and Corporate Governance Committee of the combined company deems such an adjustment to be appropriate and equitable.
 
 
Eligibility:
Directors, officers, employees and consultants of the combined company and affiliates and prospective employees and consultants who have accepted offers of employment or consultancy will be eligible to receive awards under the A&R 2018 Plan following the closing of the transactions contemplated by the merger agreement. As of August 15, 2023, there were approximately 663 BANC employees (including all officers), five BANC consultants and 1,796 PACW employees who would be eligible to participate in the A&R 2018 Plan assuming that all such employees and consultants remain in employment or service through the closing of the transactions contemplated by the merger agreement, along with 11 non-employee directors who will serve on the board of directors of the combined company following the closing. The Joint Compensation, Nominating and Corporate Governance Committee of the board of directors of the combined company (or such other committee or subcommittee as may be appointed by the board of directors of the combined company to administer the A&R 2018 Plan) has the authority to select the eligible individuals to whom awards may from time to time be granted under the A&R 2018 Plan.
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Annual Award Limits:
The A&R 2018 Plan provides that a non-employee member of the board of directors of the combined company may not receive awards covering in excess of 25,000 shares during any calendar year, subject to adjustment as described above under “Adjustments.”
 
 
Minimum Vesting Condition:
All awards granted pursuant to the A&R 2018 Plan must have at the time of grant a minimum vesting period of at least one-year from the date of grant, provided that awards for up to 5% of the shares of common stock authorized for issuance under the A&R 2018 Plan may provide for a shorter vesting period at the time of grant.
 
 
Stock Options:
Options may be granted as incentive stock options, which are intended to qualify for favorable treatment to the recipient under U.S. federal income tax law, or as non-qualified stock options, which do not qualify for this favorable tax treatment. The Joint Compensation, Nominating and Corporate Governance Committee of the board of directors of the combined company determines the exercise price and other terms for each option granted, except that the per share exercise price of an option may not be less than the fair market value of a share on the date of grant (not less than 110% of the fair market value of a share on the date of grant in the case of an incentive stock option granted to an owner of more than ten percent (10%) of the outstanding shares of the BANC’s voting common stock) and the term may be no longer than ten years from the date of grant (no longer than five years from the date of grant in the case of an incentive stock option granted to an owner of more than ten percent (10%) of the outstanding shares of the BANC’s voting common stock).
 
 
Stock Appreciation Rights:
The A&R 2018 Plan provides for the award of SARs, which entitle the holder to receive upon exercise an amount equal to the excess, if any, of the aggregate fair market value of a specified number of shares of common stock over the aggregate exercise price for the underlying shares. SARs may be “tandem SARs,” which are granted in conjunction with an option, or “free-standing SARs,” which are not granted in conjunction with an option. The Joint Compensation, Nominating and Corporate Governance Committee of the board of directors of the combined company determines the exercise price and other terms for each SAR granted, except that the per share exercise price of a SAR may not be less than the fair market value of a share on the date of grant and the term may be no longer than 10 years from the date of grant.
 
 
Restricted Stock:
The A&R 2018 Plan provides for the award of shares of common stock that are subject to forfeiture and restrictions on transferability. Restricted shares granted under the A&R 2018 Plan may or may not be subject to performance conditions. Except for these restrictions, and as may otherwise be set forth in the agreement between BANC and the award recipient evidencing the award upon the grant of restricted stock, the recipient will have rights of a stockholder, including the right to vote and to receive dividends; provided, however, that if dividends are to be paid or credited with respect to an award of restricted stock, such dividends will be accumulated and deferred and remain subject to vesting requirement(s) to the same extent as the applicable award and will only be paid at the time or times such vesting requirement(s) are satisfied. Alternatively, if so provided in the award agreement between BANC and the award recipient, cash dividends paid with respect to an award of restricted stock may be reinvested in additional restricted stock held subject to the vesting of the underlying restricted stock.
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Restricted Stock Units:
The A&R 2018 Plan provides for the award of RSUs and deferred share rights that are subject to forfeiture and restrictions on transferability. RSUs and deferred share rights granted under the A&R 2018 Plan may or may not be subject to performance conditions. RSUs and deferred share rights are not shares of common stock and do not entitle the recipients to the rights of a stockholder. RSUs will be settled in cash, shares of common stock or both, based on the fair market value of a specified number of shares of common stock.
 
 
Performance Units:
The A&R 2018 Plan provides for the award of performance units that are valued by reference to a designated amount of cash, shares of common stock or other property. The payment of the value of a performance unit is conditioned upon the achievement of performance goals and may be paid in cash, shares of common stock, other property or a combination thereof. The performance period for a performance unit must be at least a fiscal quarter.
 
 
Other Stock-Based Awards:
The A&R 2018 Plan also provides for the award of shares of common stock and other awards that are valued by reference to common stock.
 
 
Performance Goals:
The A&R 2018 Plan provides that performance goals may be established by the Joint Compensation, Nominating and Corporate Governance Committee of board of directors of the combined company in connection with the grant of awards under the A&R 2018 Plan.
 
 
Dividends and Dividend Equivalents:
With respect to any award that provides for or includes a right to dividends or dividend equivalents, the A&R 2018 Plan provides that if dividends are declared during the period that the award is outstanding and unvested then such dividends (or dividend equivalents) shall be treated as the Joint Compensation, Nominating and Corporate Governance Committee of board of directors of the combined company designates. Specifically, the Joint Compensation, Nominating and Corporate Governance Committee of board of directors of the combined company may either (i) determine that no dividends or dividend equivalents shall be paid or credited with respect to the unvested award, (ii) allow for the accumulation and deferral of dividends or dividend equivalents with respect to the unvested award and provide for payment of the accumulated and deferred dividends or dividend equivalents at the time or times the applicable vesting requirement(s) are satisfied, or (iii) in the case of a restricted stock award, provide that cash dividends paid with respect to such award will be reinvested in additional restricted stock held subject to the vesting of the underlying restricted stock.
 
 
 
The A&R 2018 Plan prohibits the payment of dividends or dividend equivalents on stock options or stock appreciation rights.
 
 
Change in Control:
Awards generally will not vest upon a change in control unless the participant is not provided with a replacement award. If a participant’s employment terminates upon or within two-years following a change in control (other than by the combined company for cause or by the participant without good reason), replacement awards will generally vest in full and any stock option or SAR held by the participant as of the change in control that remains outstanding as of such termination may be exercised until the later of (i) in the case of an incentive stock option, the last date on which such option would otherwise be exercisable, and (ii) in the case of a non-qualified stock option or SAR, the later of (A) the last date on which such option or SAR would otherwise be exercisable and (B) the earlier of (1) the third anniversary of the change in control and (2) the expiration of the term of the non-qualified stock option or SAR.
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Amendment and Termination:
The board of directors or Joint Compensation, Nominating and Corporate Governance Committee of the combined company may amend, alter or discontinue the A&R 2018 Plan, but no amendment, alteration or discontinuation may be made that would materially impair the rights of the participant with respect to a previously granted award, except such an amendment made to comply with applicable law, the listing standards of the applicable exchange or accounting rules. In addition, no amendment may be made without the approval of stockholders to the extent such approval is required by applicable law or the listing standards of the applicable stock exchange.
 
 
 
If approved by BANC stockholders at the BANC special meeting, the A&R 2018 Plan will expire ten years from the closing of the transactions contemplated by the merger agreement.
U.S. Federal Income Tax Consequences
The following is a summary of certain U.S. federal income tax consequences of awards made under the A&R 2018 Plan based upon the laws in effect on the date hereof. The discussion is general in nature and does not take into account a number of considerations that may apply in light of the circumstances of a particular participant under the A&R 2018 Plan. The income tax consequences under applicable state and local tax laws may not be the same as under U.S. federal income tax laws.
Non-Qualified Stock Options. A participant will not recognize taxable income at the time of grant of a non-qualified stock option, and BANC will not be entitled to a tax deduction at such time. A participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) upon exercise of a non-qualified stock option equal to the excess of the fair market value of the shares purchased at the time of exercise over their exercise price. BANC will be entitled to a deduction in the amount of ordinary income recognized by the participant, subject to the deduction limitations of Section 162(m) of the Code.
Incentive Stock Options. A participant will not recognize taxable income at the time of grant of an incentive stock option. A participant will not recognize taxable income (except for purposes of the alternative minimum tax) upon exercise of an incentive stock option. If the shares acquired by exercise of an incentive stock option are held for the longer of two years from the date the option was granted and one year from the date of exercise, any gain or loss arising from a subsequent disposition of such shares will be taxed as long-term capital gain or loss, and BANC will not be entitled to any deduction. If, however, such shares are disposed of within such two- or one-year periods, then in the year of such disposition the participant will recognize compensation taxable as ordinary income equal to the excess of the lesser of the amount realized upon such disposition and the fair market value of such shares on the date of exercise over the exercise price. BANC will be entitled to a deduction in the amount of any ordinary income recognized by the participant, subject to the deduction limitations of Section 162(m) of the Code. The excess of the amount realized through the disposition date over the fair market value of the stock on the exercise date will be treated as capital gain.
Stock Appreciation Rights. A participant will not recognize taxable income at the time of grant of a stock appreciation right, and BANC will not be entitled to a tax deduction at such time. Upon exercise, a participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) equal to the fair market value of any shares delivered and the amount of cash paid by us. BANC will be entitled to a deduction in the amount of ordinary income recognized by the participant, subject to the deduction limitations of Section 162(m) of the Code.
Restricted Stock. A participant will not recognize taxable income at the time of grant of shares of restricted stock, and BANC will not be entitled to a tax deduction at such time, unless the participant makes an election under Section 83(b) of the Code to be taxed at such time. If such election is made, the participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) at the time of the grant equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for such shares. If such election is not made, the participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) at the time the restrictions lapse in an amount equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for such shares. BANC will be entitled to a deduction in the amount of ordinary income recognized by the participant, subject to the deduction limitations of Section 162(m) of the Code.
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Restricted Stock Units. A participant will not recognize taxable income at the time of grant of a restricted stock unit, and BANC will not be entitled to a tax deduction at such time. A participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) at the time of settlement of the award equal to the fair market value of any shares delivered and the amount of cash paid by us. BANC will be entitled to a deduction in the amount of ordinary income recognized by the participant, subject to the deduction limitations of Section 162(m) of the Code.
Performance Units. A participant will not recognize taxable income at the time of grant of performance units, and BANC will not be entitled to a tax deduction at such time. A participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) at the time of settlement of the award equal to the fair market value of any shares or property delivered and the amount of cash paid by us. BANC will be entitled to a deduction in the amount of ordinary income recognized by the participant, subject to the deduction limitations of Section 162(m) of the Code.
The foregoing general tax discussion is intended for the information of BANC stockholders considering how to vote with respect to this proposal and not as tax guidance to participants in the A&R 2018 Plan. Participants are strongly urged to consult their own tax advisors regarding the federal, state, local, foreign and other tax consequences to them of participating in the A&R 2018 Plan.
New Plan Benefits
The benefits that will be awarded or paid under the A&R 2018 Plan are not currently determinable. Awards granted under the A&R 2018 Plan will be within the discretion of the Joint Compensation, Nominating and Corporate Governance Committee of board of directors of the combined company, and no determinations have been made about future awards or who might receive them.
Equity Compensation Plan Information
The following table sets forth information as of December 31, 2022 with respect to compensation plans under which shares of BANC common stock may be issued:
Plan Category
Number of
securities
to be
issued upon
exercise of
outstanding
options
warrants
and rights
Weighted-average
exercise price of
outstanding
options warrants
and rights
Number of
Securities
remaining
available
for future
issuance
under equity
compensation
plans
Equity compensation plans approved by security holders
14,904(1)
$13.05
2,131,185(2)
Equity compensation plans not approved by security holders
(1)
In addition, as of December 31, 2022, 458,863 restricted stock units and 910,664 performance stock units were outstanding at the target level of performance. Restricted stock units and performance stock units do not have an exercise price.
(2)
The Current Plan, which is the only equity compensation plan approved by the BANC stockholders under which awards could be made as of December 31, 2022, provides that the maximum number of shares that are available for awards is 4,417,882.
Effectiveness of A&R 2018 Plan
If approved by stockholders at the BANC special meeting, the A&R 2018 Plan will become effective as of the closing of the transactions contemplated by the merger agreement. By approving the A&R 2018 Plan, the BANC stockholders will also satisfy the NYSE requirements for stockholder approval of equity compensation plans.
As noted above, if BANC stockholders do not approve the A&R 2018 Plan at the BANC special meeting, the A&R 2018 Plan will not become effective.
Vote Required
The affirmative vote of a majority of the votes cast on the proposal is required to approve this proposal.
The BANC board of directors unanimously recommends a vote “FOR” the BANC incentive plan proposal.
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PROPOSAL 3: BANC EXEMPTION AMENDMENT PROPOSAL
BANC is asking the BANC stockholders to approve the amendment of Section F of Article 6 of the BANC charter in a manner to exempt the Warburg Investors and their affiliates (but not any other stockholder of BANC) from the application of Section F of Article 6 (other than paragraph 4 thereof, which deals mainly with the quorum requirement for meetings of BANC stockholders) of the BANC charter. Under Section F of Article 6 of the BANC charter, no person who beneficially owns, directly or indirectly, more than 10% of the then-outstanding shares of BANC common stock is entitled to vote any shares held in excess of the 10% threshold. A copy of the proposed BANC charter amendment is attached to this joint proxy statement/prospectus as Annex D. BANC stockholders should read the BANC charter amendment in its entirety.
Pursuant to the Warburg investment agreement, BANC has agreed to, among other things, use reasonable best efforts to submit to the BANC stockholders the proposed BANC charter amendment for the requisite approval of the BANC stockholders at the BANC special meeting. A copy of the Warburg investment agreement is attached to this joint proxy statement/prospectus as Annex B. BANC stockholders should read the Warburg investment agreement in its entirety.
Approval of the BANC exemption amendment proposal requires the affirmative vote of the holders of a majority of the outstanding shares of BANC common stock entitled to vote on the proposal. The approval of the BANC exemption amendment proposal by BANC stockholders is not a condition to the completion of the mergers or the investments. If approved by stockholders at the BANC special meeting, contingent upon the closing of the transactions contemplated by the merger agreement, the BANC charter will be amended by the BANC charter amendment, which form is attached to this joint proxy statement/prospectus as Annex D.
Under the Warburg investment agreement, if the BANC exemption amendment proposal is not approved by BANC stockholders at the BANC special meeting, but the Warburg investment is nevertheless consummated, BANC will be required to, at each annual meeting of the BANC stockholders following the Warburg investment closing until such time as the BANC exemption amendment proposal is duly approved, use reasonable best efforts (including recommending the BANC exemption amendment proposal to the BANC stockholders) to (i) submit to the BANC stockholders the BANC exemption amendment proposal and (ii) obtain the requisite approval of the BANC stockholders of the BANC exemption amendment proposal at any such meeting of the BANC stockholders; provided that following the first anniversary of the Warburg investment closing, BANC’s foregoing obligations described in this paragraph will be subject to receipt of a written request from the Warburg Investors no later than 30 business days prior to the anniversary of the date on which BANC first filed its proxy materials for the preceding annual BANC stockholder meeting.
Following the receipt of the requisite approval of the BANC stockholders of the BANC exemption amendment proposal, BANC will be required under the Warburg investment agreement to file the BANC exemption amendment with the Maryland Department of State. This filing will be made in connection with the Warburg investment closing if the BANC exemption amendment proposal is approved at the BANC special meeting.
The BANC board of directors unanimously recommends a vote “FOR” the BANC exemption amendment proposal.
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PROPOSAL 4: BANC ADJOURNMENT PROPOSAL
The BANC special meeting may be adjourned to another time or place, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the BANC special meeting to approve the BANC issuance proposal. If, at the BANC special meeting, the number of shares of BANC common stock present or represented and voting in favor of the BANC issuance proposal is insufficient to approve the BANC issuance proposal, BANC intends to move to adjourn the BANC special meeting in order to enable the BANC board of directors to solicit additional proxies for approval of the BANC issuance proposal. In that event, BANC will ask BANC stockholders to vote upon the BANC adjournment proposal, but not the BANC issuance proposal.
In this proposal, BANC is asking BANC stockholders to authorize the holder of any proxy solicited by the BANC board of directors, on a discretionary basis, to vote in favor of adjourning the BANC special meeting to another time and place for the purpose of soliciting additional proxies, including the solicitation of proxies from BANC stockholders who have previously voted, if a quorum is not present or if there are not sufficient votes at the time of the BANC special meeting to approve the BANC issuance proposal. Pursuant to the BANC bylaws, the BANC special meeting may be adjourned without further notice being given.
Whether or not a quorum will be present at the meeting, approval of the BANC adjournment proposal requires the affirmative vote of a majority of votes cast by holders of shares of BANC common stock at the BANC special meeting.
The approval of the BANC adjournment proposal by BANC stockholders is not a condition to the completion of the mergers or the investments.
The BANC board of directors unanimously recommends a vote “FOR” the BANC adjournment proposal.
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THE PACW SPECIAL MEETING
This section contains information for PACW stockholders about the special meeting of PACW stockholders that PACW has called to allow PACW stockholders to consider and vote on the PACW merger proposal, the PACW compensation proposal and the PACW adjournment proposal. This joint proxy statement/prospectus is accompanied by a notice of the PACW special meeting, and a form of proxy card that the PACW board of directors is soliciting for use by PACW stockholders at the PACW special meeting and at any adjournments or postponements of the PACW special meeting.
Date, Time and Place of the PACW Special Meeting
The PACW special meeting will be held on [ ], 2023, at [ ], Mountain Time, at Denver Marriott Tech Center, 4900 S. Syracuse St, Denver, CO 80237, or at any postponement or adjournment thereof.
Matters to Be Considered
At the PACW special meeting, PACW stockholders will be asked to consider and vote on the following matters:
The PACW merger proposal;
The PACW compensation proposal; and
The PACW adjournment proposal.
Recommendation of the PACW Board of Directors
The PACW board of directors has determined that the mergers are fair to, advisable and in the best interests of PACW and PACW stockholders and has unanimously approved the merger agreement. The PACW board of directors unanimously recommends that PACW stockholders vote “FOR” the PACW merger proposal, “FOR” the PACW compensation proposal and “FOR” the PACW adjournment proposal. See the section entitled “The Transactions—PACW’s Reasons for the Mergers; Recommendation of the PACW Board of Directors” for a more detailed discussion of the PACW board of directors’ recommendation.
Record Date and Quorum
The PACW board of directors has fixed the close of business on [ ], 2023 as the PACW record date for the determination of PACW stockholders entitled to notice of, and to vote at, the PACW special meeting. As of the close of business on the PACW record date, there were [ ] shares of PACW common stock outstanding held by [ ] holders of record. Each holder of record of PACW common stock is entitled to cast one vote on each matter properly brought before the PACW special meeting for each share of PACW common stock that such holder owned of record as of the PACW record date.
Holders of a majority of the shares of PACW common stock entitled to vote on a matter at the PACW special meeting, present in person or represented by proxy, will constitute a quorum for the transaction of business at the PACW special meeting. All shares of PACW common stock present in person or represented by proxy, including abstentions, will be treated as present for purposes of determining the presence or absence of a quorum for all matters voted on at the PACW special meeting. Because, under applicable rules, banks, brokers, trustees and other nominees do not have discretionary voting authority with respect to any of the three proposals described in this joint proxy statement/prospectus to be voted on by PACW stockholders, if a beneficial owner of PACW common stock held in “street name” does not give voting instructions to the record holder of its, his or her shares, then those shares will not be counted as present in person or by proxy at the PACW special meeting if no other proposals are brought before the PACW special meeting.
Each of the directors of PACW has entered into a voting agreement with BANC in which such director has agreed to vote all PACW common stock that such director owns and has the power to vote in favor of the PACW merger proposal and any other matter that is reasonably necessary to be approved by the PACW stockholders to facilitate the consummation of the transactions contemplated by the merger agreement. Such persons also agreed to vote against any proposal made in opposition to the approval of the adoption of the merger agreement or that is otherwise in competition or inconsistent with the transactions contemplated by the merger agreement, against any acquisition proposal and against any proposal, transaction, agreement or amendment to PACW’s organizational documents or other action that is intended to or could reasonably be
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expected to prevent, impede, interfere with, materially delay, postpone, adversely affect or discourage the consummation of the first merger. As of the close of business on the PACW record date, such persons beneficially owned and were entitled to vote, in the aggregate, [ ] shares of PACW common stock, allowing them to exercise approximately [ ]% of the voting power of PACW common stock (which does not include shares issuable upon the exercise, vesting or settlement of PACW equity-based awards that were not outstanding as of the close of business on the PACW record date).
Broker Non-Votes
A broker non-vote occurs when (a) a bank, broker, trustee or other nominee has discretionary authority to vote on one or more proposals to be voted on at a meeting of stockholders but is not permitted to vote on other proposals without instructions from the beneficial owner of the shares and (b) the beneficial owner fails to provide the bank, broker, trustee or other nominee with such instructions. Under stock exchange rules, banks, brokers, trustees and other nominees holding shares in “street name” do not have discretionary voting authority with respect to any of the proposals described in this joint proxy statement/prospectus to be voted at the PACW special meeting. It is expected that all proposals to be voted on the PACW special meeting will be “non-routine” matters, and, as such, if a beneficial owner of shares of PACW common stock held in “street name” does not give voting instructions to the bank, broker, trustee or other nominee, then those shares will not be counted as present in person or by proxy at the PACW special meeting and will not be counted for purposes of establishing a quorum.
Broker non-votes only count toward a quorum if at least one proposal is presented with respect to which the bank, broker, trustee or other nominee has discretionary authority. Since it is expected that all proposals to be voted on at the PACW special meeting will be “non-routine” matters, PACW does not expect any broker non-votes to occur at the PACW special meeting.
As the vote to approve the PACW merger proposal is based on the total number of shares of PACW common stock outstanding at the close of business on the record date, if you are a PACW stockholder and fail to issue voting instructions to your bank, broker, trustee or other nominee, it will have the same effect as a vote “AGAINST” the PACW merger proposal. Assuming a quorum is present, the failure to vote will not have any effect on the PACW compensation proposal or the PACW adjournment proposal. Although PACW does not expect to bring any matters before the PACW special meeting other than the three PACW proposals described in this joint proxy statement/prospectus, if an additional matter is brought before the PACW special meeting and is one on which brokers have discretionary voting authority and you fail to provide instructions to your broker with respect to the PACW compensation proposal or the PACW adjournment proposal, such broker non-votes will be counted for purposes of determining a quorum and have the same effect as a vote “AGAINST” such proposal.
Vote Required; Treatment of Abstentions and Failure to Vote
PACW Merger Proposal
Vote required: Approval of the PACW merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of PACW common stock entitled to vote on the merger agreement. Approval of the PACW merger proposal is a condition to the completion of the first merger and the investments.
Effect of abstentions and failure to vote: If you fail to vote, mark “ABSTAIN” on your proxy or fail to instruct your bank or broker with respect to the PACW merger proposal, it will have the same effect as a vote “AGAINST” the proposal.
PACW Compensation Proposal
Vote required: Approval of the PACW compensation proposal requires the affirmative vote of the holders of at least a majority of the shares of PACW common stock present or represented by proxy at the PACW special meeting. Approval of the PACW compensation proposal is not a condition to the completion of the first merger or the investments.
Effect of abstentions and failure to vote: If you mark “ABSTAIN” on your proxy card, it will have the same effect as a vote “AGAINST” the proposal. If you fail to submit a proxy card or vote in person at the PACW special meeting, or fail to instruct your bank or broker with respect to the PACW compensation proposal, it will have no effect on the proposal.
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PACW Adjournment Proposal
Vote required: Whether or not a quorum is present, approval of the PACW adjournment proposal requires the affirmative vote of the holders of at least a majority of the shares of PACW common stock present or represented by proxy at the PACW special meeting. Approval of the PACW adjournment proposal is not a condition to the completion of the first merger or the investments.
Effect of abstentions and failure to vote: If you mark “ABSTAIN” on your proxy card, it will have the same effect as a vote “AGAINST” the proposal. If you fail to submit a proxy card or vote in person at the PACW special meeting, or fail to instruct your bank or broker how to vote with respect to the PACW adjournment proposal, it will have no effect on the proposal.
Attending the PACW Special Meeting
All PACW stockholders, including stockholders of record of PACW common stock and PACW stockholders who hold their shares through banks, brokers, trustees or other nominees, are invited to attend the PACW special meeting. PACW stockholders of record can vote in person at the PACW special meeting. If you are not a PACW stockholder of record, you must obtain a legal proxy executed in your favor from the record holder of your shares to be able to vote in person at the PACW special meeting. If you plan to attend the PACW special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership. In addition, you must bring a form of personal photo identification with you in order to be admitted to the meeting. PACW reserves the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification.
Proxies
If you are a stockholder of record of PACW common stock, you may have your shares of PACW common stock voted on matters presented at the PACW special meeting in any of the following ways:
by proxy—stockholders of record of PACW common stock have a choice of submitting a proxy:
by telephone or over the Internet, by accessing the telephone number or website specified on the enclosed proxy card. The control number provided on your proxy card is designed to verify your identity when voting by telephone or by Internet. Please be aware that, if you vote by telephone or over the Internet, you may incur costs such as telephone and Internet access charges for which you will be responsible;
by signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope; or
in person—you may attend the PACW special meeting and cast your vote there.
Shares Held in Street Name
If you are a beneficial owner of shares of PACW common stock held in “street name,” you should receive instructions from your bank, broker, trustee or other nominee of record that you must follow in order to have your shares of PACW common stock voted. Those instructions will identify which of the above choices are available to you in order to have your shares of PACW common stock voted. If you have not received such voting instructions or require further information regarding such voting instructions, contact your broker. If your bank, broker, trustee or other nominee holds your shares of PACW common stock in “street name,” such record holder will vote your shares of PACW common stock only if you provide instructions on how to vote by filling out the voter instruction form sent to you by such record holder with this joint proxy statement/prospectus. Please note that, if you are a beneficial owner of shares of PACW common stock held in “street name” and wish to vote in person at the PACW special meeting, you must provide a legal proxy executed in your favor from your bank, broker or other holder of record at the PACW special meeting.
Voting of Proxies; Incomplete Proxies
If you submit a proxy, regardless of the method you choose to submit such proxy, the individuals named on the enclosed proxy card, and each of them, with full power of substitution, will vote your shares of PACW common stock in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you
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may specify whether your shares of PACW common stock should be voted for or against, or may choose to abstain from voting, on all, some or none of the specific items of business to come before the PACW special meeting.
All shares represented by valid proxies that PACW receives through this solicitation, and that are not revoked, will be voted in accordance with your instructions on the proxy card. If you properly sign your proxy card but do not mark the boxes showing how your shares of PACW common stock should be voted on a matter, the shares of PACW common stock represented by your properly signed proxy will be voted in accordance with the recommendation of the PACW board of directors, which, as of the date of this joint proxy statement/prospectus, are “FOR” the PACW merger proposal, “FOR” the PACW compensation proposal and “FOR” the PACW adjournment proposal.
Deadline to Vote by Proxy
Please refer to the instructions on your proxy or voting instruction card to determine the deadlines for submitting your proxy over the Internet or by telephone. If you choose to submit a proxy by mailing a proxy card, your proxy card should be mailed in the accompanying prepaid reply envelope and must be received by PACW’s Corporate Secretary by the time the PACW special meeting begins.
Revocability of Proxies
If you are the stockholder of record of your shares of PACW common stock, you have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is exercised, by submitting a later-dated proxy through any of the methods available to you, by giving written notice of revocation to PACW’s Corporate Secretary, which must be received by the Corporate Secretary by 5:00 p.m. Mountain Time on the business day immediately prior to the date of the PACW special meeting, or by attending the PACW special meeting and voting in person. Attending the PACW special meeting alone, without voting at the PACW special meeting, will not be sufficient to revoke your proxy. Written notice of revocation should be mailed to: 9701 Wilshire Blvd., Suite 700, Beverly Hills, CA 90212.
If you are a “street name” holder of PACW common stock, you may change your vote by submitting new voting instructions to your bank, broker or other holder of record. You must contact the record holder of your shares to obtain instructions as to how to change your proxy vote.
Adjournments and Postponements
Although it is not currently expected, the PACW special meeting may be adjourned or postponed for the purpose of soliciting additional proxies. In the event that there is present, in person or by proxy, sufficient favorable voting power to secure the vote of PACW stockholders necessary to approve the PACW merger proposal, PACW does not anticipate that it will adjourn or postpone the PACW special meeting, unless it is advised by counsel that such adjournment or postponement is necessary under applicable law to allow additional time for any disclosure. Any adjournment or postponement of the PACW special meeting for the purpose of soliciting additional proxies will allow PACW stockholders who have already sent in their proxies to revoke them at any time prior to their use at the PACW special meeting as adjourned or postponed.
Delivery of Proxy Materials to Stockholders Sharing an Address
As permitted by the Exchange Act, only one copy of this joint proxy statement/prospectus is being delivered to multiple PACW stockholders sharing an address, unless PACW has previously received contrary instructions from one or more such stockholders. This is referred to as “householding.” Stockholders who hold their shares in “street name” can request further information on householding through their banks, brokers or other holders of record. On written or oral request to PACW’s proxy solicitor, Okapi Partners LLC, by emailing info@okapipartners.com or by calling toll-free at 888-785-6709, or for banks, brokers, trustees and other nominees, collect at 212-297-0720, PACW will deliver promptly a separate copy of this document to a stockholder at a shared address to which a single copy of the document was delivered.
Solicitation of Proxies
PACW is soliciting the proxies of PACW stockholders in conjunction with the mergers. PACW will bear the cost of soliciting proxies from PACW stockholders. In addition to solicitation of proxies by mail, PACW will request that banks, brokers, trustees and other nominees send proxies and proxy material to the beneficial owners of
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PACW common stock and secure their voting instructions. PACW has also made arrangements with Okapi Partners LLC to assist it in soliciting proxies and has agreed to pay Okapi Partners LLC a fee of $25,000 plus the reimbursement of certain costs and expenses incurred in connection with the solicitation.
Other Matters to Come Before the PACW Special Meeting
PACW management knows of no other business to be presented at the PACW special meeting, but if any other matters are properly presented at the meeting or any adjournments or postponements thereof, the persons named in the proxies will vote upon them in accordance with the recommendation of the PACW board of directors.
Assistance
If you are a PACW stockholder and have questions about the mergers or how to submit your proxy, or if you need additional copies of this joint proxy statement/prospectus, the enclosed proxy card or voting instructions, please contact PacWest Bancorp, Investor Relations, 9701 Wilshire Blvd., Suite 700, Beverly Hills, CA 90212, or Okapi Partners LLC, by emailing info@okapipartners.com or by calling toll-free at 888-785-6709, or for banks, brokers, trustees and other nominees, collect at 212-297-0720.
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PACW PROPOSALS
PROPOSAL 1: PACW MERGER PROPOSAL
Pursuant to the merger agreement, PACW is asking PACW stockholders to adopt the merger agreement. PACW stockholders should read this joint proxy statement/prospectus carefully and in its entirety, including the annexes, for more detailed information concerning the merger agreement and the mergers. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Annex A. After careful consideration, the PACW board of directors, by a unanimous vote, (i) determined that the merger agreement and the transactions contemplated thereby are fair to, advisable and in the best interests of PACW and PACW stockholders and (ii) adopted and approved the merger agreement and the transactions contemplated thereby.
The approval of the PACW merger proposal by PACW stockholders is a condition to the completion of the first merger and the investments.
The PACW board of directors unanimously recommends a vote “FOR” the PACW merger proposal.
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PROPOSAL 2: PACW COMPENSATION PROPOSAL
Pursuant to Section 14A of the Exchange Act and Rule 14a-21(c) thereunder, PACW is seeking a non-binding, advisory stockholder approval of the compensation of PACW’s named executive officers that is based on or otherwise relates to the mergers as disclosed in the section entitled “The Transactions—Interests of Certain PACW Directors and Executive Officers in the Mergers—Quantification of Potential Payments and Benefits to PACW’s Named Executive Officers” beginning on page 107. The proposal gives PACW stockholders the opportunity to vote, on a non-binding, advisory basis, on the merger-related compensation that may be paid or become payable to PACW’s named executive officers.
The PACW board of directors encourages you to review carefully the named executive officer merger-related compensation information disclosed in this joint proxy statement/prospectus, and, accordingly, is asking PACW stockholders to vote “FOR” the adoption of the following resolution, on a non-binding advisory basis:
“RESOLVED, that the compensation that will or may be paid or become payable to the PACW named executive officers, in connection with the mergers, and the agreements or understandings pursuant to which such compensation will or may be paid or become payable, in each case as disclosed pursuant to Item 402(t) of Regulation S-K in “The Transactions—Interests of Certain PACW Directors and Executive Officers in the Mergers—Quantification of Potential Payments and Benefits to PACW’s Named Executive Officers” is hereby APPROVED.”
The vote on the PACW compensation proposal is a vote separate and apart from the votes on the PACW merger proposal and the PACW adjournment proposal. Accordingly, if you are a PACW stockholder, you may vote to approve the PACW merger proposal and/or the PACW adjournment proposal and vote not to approve the PACW compensation proposal, and vice versa. The approval of the PACW compensation proposal by PACW stockholders is not a condition to the completion of the first merger and the investments. Because the vote on the PACW compensation proposal is advisory only, it will not affect the obligation of PACW or BANC to pay or provide the compensation contemplated by the compensation agreements and arrangements. Accordingly, if the mergers are completed, the merger-related compensation will be paid to PACW’s named executive officers to the extent payable in accordance with the terms of the compensation agreements and arrangements even if PACW stockholders fail to approve the advisory vote regarding merger-related compensation.
The PACW board of directors unanimously recommends a vote “FOR” the PACW compensation proposal.
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PROPOSAL 3: PACW ADJOURNMENT PROPOSAL
The PACW special meeting may be adjourned to another time or place, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the PACW special meeting to approve the PACW merger proposal. If, at the PACW special meeting, the number of shares of PACW common stock present or represented and voting in favor of the PACW merger proposal is insufficient to approve the PACW merger proposal, PACW intends to move to adjourn the PACW special meeting in order to enable the PACW board of directors to solicit additional proxies for approval of the PACW merger proposal. In that event, PACW will ask PACW stockholders to vote upon the PACW adjournment proposal, but not the PACW merger proposal.
In this proposal, PACW is asking PACW stockholders to authorize the holder of any proxy solicited by the PACW board of directors, on a discretionary basis, to vote in favor of adjourning the PACW special meeting to another time and place for the purpose of soliciting additional proxies, including the solicitation of proxies from PACW stockholders who have previously voted, if a quorum is not present or if there are not sufficient votes at the time of the PACW special meeting to approve the PACW merger proposal. Pursuant to the PACW bylaws, the PACW special meeting may be adjourned without further notice being given if the new time and place is announced at the meeting prior to adjournment and the date is set 30 days or less from the date of the original PACW special meeting.
The approval of the PACW adjournment proposal by PACW stockholders is not a condition to the completion of the first merger and the investments.
The PACW board of directors unanimously recommends a vote “FOR” the PACW adjournment proposal.
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INFORMATION ABOUT THE COMPANIES
Banc of California, Inc.
3 MacArthur Place
Santa Ana, California 92707-7704
(855) 361-2262
BANC, a Maryland corporation, was incorporated in March 2002 and serves as the holding company for its wholly-owned subsidiary, BANC N.A., a California-based bank. BANC has 32 offices, including 26 full-service branches located throughout Southern California. BANC has served California markets since 1941 through BANC N.A. and its predecessors. As of June 30, 2023, BANC, together with its subsidiaries, had total assets of $9.37 billion, loans and leases, net of deferred fees, of $7.08 billion, total deposits of $6.87 billion and total stockholders’ equity of $0.957 billion.
Through its dedicated professionals, BANC provides customized and innovative banking and lending solutions to businesses, entrepreneurs and individuals throughout California, and full stack payment processing solutions through its subsidiary Deepstack Technologies. BANC helps to improve the communities where it lives and works, by supporting organizations that provide financial literacy and job training, small business support and affordable housing. With a commitment to service and to building enduring relationships, BANC provides a higher standard of banking.
BANC’s principal source of income is dividends from BANC N.A. BANC N.A., a national banking association regulated by the OCC, is a relationship-focused, full-service business banking organization. It offers an array of commercial loan and deposit products and services, including demand, savings and money market accounts, certificates of deposit, commercial and industrial loans, commercial real estate and multifamily loans, Small Business Administration loans and construction loans, and other business-oriented products.
Shares of BANC common stock are traded on the NYSE under the trading symbol “BANC.”
For more information about BANC, please visit BANC’s website at www.bancofcal.com. The information provided on BANC’s website (other than the documents incorporated by reference herein) is not part of this joint proxy statement/prospectus and is not incorporated herein by reference. Additional information about BANC is included in documents incorporated by reference in this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information” on page 201.
Cal Merger Sub, Inc.
3 MacArthur Place
Santa Ana, California 92707-7704
(855) 361-2262
Merger Sub is a Delaware corporation and a wholly-owned subsidiary of BANC. Merger Sub was incorporated for the sole purpose of effecting the first merger. Merger Sub will not conduct any activities other than those incidental to its formation, the execution of the merger agreement and the transactions contemplated by the merger agreement. Following the first merger, the separate corporate existence of Merger Sub will cease.
PacWest Bancorp
9701 Wilshire Boulevard, Suite 700
Beverly Hills, California 90212-2007
(310) 887-8500
PACW is a bank holding company headquartered in Los Angeles, California, with an executive office in Denver, Colorado, with one wholly-owned banking subsidiary, PACW Bank. PACW Bank is a relationship-based community bank focused on providing business banking and treasury management services to small, middle-market, and venture-backed businesses. PACW Bank offers a broad range of loan and lease and deposit products and services through full-service branches throughout California and in Durham, North Carolina and Denver, Colorado, and loan production offices around the country. As of June 30, 2023, PACW, together with its subsidiaries, had total assets of $38.3 billion, loans and leases, net of deferred fees, of $22.3 billion, total deposits of $27.9 billion and total stockholders’ equity of $2.5 billion.
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PACW’s principal source of income is dividends from PACW Bank. PACW Bank is a state-chartered non-member bank and, as such, is regulated by the FDIC as its primary federal regulator and the California Department of Financial Protection and Innovation. In addition, PACW Bank is regulated by the Consumer Financial Protection Bureau with respect to compliance with certain consumer financial laws.
PACW Bank is currently a California state-chartered non-member bank. Subject to the completion of the mergers and prior to the completion of the bank merger, PACW Bank intends to become a member of the Federal Reserve System. PACW Bank becoming a member of the Federal Reserve System is subject to approval of the Federal Reserve. As a state member bank, PACW Bank’s primary federal bank regulator would become the Federal Reserve.
PACW common stock is traded on Nasdaq under the symbol “PACW.” The PACW depositary shares are currently listed on Nasdaq under the symbol “PACWP.” Additional information about PACW and its subsidiaries is included in the annexes to this joint proxy statement/prospectus. For additional information about PACW and its subsidiaries, please visit PACW’s website www.pacwestbancorp.com. The information provided on PACW’s website is not part of this joint proxy statement/prospectus and is not incorporated herein by reference. See the section entitled “Where You Can Find More Information” on page 201.
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THE TRANSACTIONS
This section of the joint proxy statement/prospectus describes material aspects of the mergers and the investments. This summary may not contain all of the information that is important to you. You should carefully read this entire joint proxy statement/prospectus and the other documents we refer you to for a more complete understanding of the mergers and the investments. In addition, we incorporate important business and financial information about BANC into this document by reference and include important business and financial information about PACW in the annexes to this document. See the section entitled “Where You Can Find More Information” beginning on page 201.
Terms of the Mergers and the Investments
Each of BANC’s and PACW’s respective board of directors has unanimously approved the merger agreement and the transactions contemplated thereby, including the combination and, in the case of the BANC board of directors, the investment agreements and the transactions contemplated thereby. The merger agreement provides that, on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into PACW, with PACW as the surviving entity, which we refer to as the “first merger.” Immediately following the first merger, PACW will merge with and into BANC, with BANC as the surviving corporation, which we refer to as the “second merger.” We refer to the first merger and the second merger collectively as the “mergers.” Promptly following the second merger, PACW Bank will become a member bank of the Federal Reserve System, which we refer to as the “FRS Membership.” Promptly following the effectiveness of the FRS Membership, BANC N.A. will merge with and into PACW Bank, with PACW Bank continuing as the surviving bank, which we refer to as the “bank merger.” Following the bank merger, the surviving bank will operate under the “Banc of California” name and brand.
On the terms and subject to the conditions set forth in the merger agreement, at the effective time of the first merger, each holder of PACW common stock issued and outstanding immediately prior to the effective time of the first merger, except for shares of PACW common stock owned by PACW as treasury stock or owned by PACW, BANC or Merger Sub (subject to certain exceptions) will be entitled to receive 0.6569 of a share of BANC common stock for each share of PACW common stock held by such holder.
On the terms and subject to the conditions set forth in the merger agreement, at the second effective time, each share of the PACW preferred stock issued and outstanding immediately prior to the second effective time will be converted into the right to receive one share of the new BANC preferred stock and, upon such conversion, the PACW preferred stock will no longer be outstanding and will automatically be cancelled and will cease to exist as of the second effective time. Additionally, following the mergers, each outstanding PACW depositary share representing a 1/40th interest in a share of PACW preferred stock will become a BANC depositary share and will represent a 1/40th interest in a share of new BANC preferred stock.
On the terms and subject to the conditions set forth in the investment agreements, at the investment closing, the Investors will invest an aggregate of $400 million in exchange for the sale and issuance by BANC of approximately (a) 21.8 million shares of BANC common stock and (b) 10.8 million shares of BANC NVCE stock, in each case, at a purchase price of $12.30 per share. In addition, the Warburg Investors will receive warrants to purchase approximately 15.9 million shares of BANC NVCE stock, and the Centerbridge Investor will receive warrants to purchase approximately 3.0 million shares of BANC common stock, each with an exercise price of $15.375 per share, a 25% premium to the price paid by the Investors for BANC common stock and BANC NVCE stock. The warrants carry a term of seven years but are subject to mandatory exercise when the market price of BANC common stock reaches or exceeds $24.60 for 20 or more trading days during any 30-consecutive trading day period, a 100% premium to the price paid by the Investors for BANC common stock and BANC NVCE stock.
See the sections entitled “The Merger Agreement” and “The Investment Agreements” for additional and more detailed information regarding the legal documents that govern the mergers and the investments, including information about the conditions to the completion of the mergers and the investments and the provisions for terminating or amending the merger agreement and the investment agreements.
Background of the Mergers and the Investments
The management of each of BANC and PACW and each of the BANC board of directors and the PACW board of directors frequently review their respective business strategies and objectives, including strategic opportunities
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and challenges. From time to time, the management teams and boards of directors of each of BANC and PACW have considered various strategic options potentially available to them, in each case with the goal of enhancing value for their respective stockholders and delivering the best possible services to their respective customers and communities. These strategic discussions have focused on, among other things, the business and regulatory environments facing financial institutions generally, as well as conditions and trends in the banking industry and financial markets, including for regional banks.
In January 2023, PACW announced a new strategic plan designed to maximize stockholder value and improve its liquidity position and capital ratios by strengthening its community bank business, exiting non-core products and services, improving capital and liquidity, and enhancing operational efficiency. Specifically, PACW made the decision to wind down operations in its premium finance and multi-family lending groups in the fourth quarter of 2022. In addition, PACW began planning for a restructuring of its Civic subsidiary in January 2023. Further, PACW sold $1.0 billion of available-for-sale securities at a loss in the fourth quarter of 2022 and used the proceeds to pay down borrowings from the Federal Home Loan Bank of San Francisco (“FHLB”). As part of its strategic plan, PACW also announced that it was slowing loan growth to preserve capital and strengthen its balance sheet. Around the time PACW announced this strategic plan, a combination of factors, including in particular the onset of higher interest rates, began to increase deposit funding costs and drove a general trend toward deposit outflows, particularly at regional banks.
While PACW intended to execute on this strategic plan throughout the course of 2023 and beyond, in early March 2023, the failures of Silicon Valley Bank and Signature Bank drew a significant degree of customer, market and regulatory focus to the state of the banking industry generally. A number of banks, including PACW, experienced further elevated deposit outflows in the days immediately following the failure of Silicon Valley Bank. In the days and weeks that followed the failures of Silicon Valley Bank and Signature Bank, PACW took a number of steps to ensure available liquidity for uninsured deposits by drawing on available federal facilities, including borrowings from the FHLB, the Federal Reserve Discount Window, and the Federal Reserve’s Bank Term Funding Program following its implementation by the Federal Reserve, and utilizing reciprocal deposit products. On March 17, 2023, PACW Bank entered into a $1.4 billion repurchase agreement facility, which was collateralized by loans in order to secure additional liquidity. In the two weeks following the failure of Silicon Valley Bank, PACW provided frequent updates to the market with respect to its financial position. Senior PACW management remained in regular communication with applicable federal and state regulators during this time.
Concurrently, the PACW board of directors and PACW management began evaluating various strategic alternatives for PACW and PACW Bank, including the potential of raising additional equity capital through a private placement or a registered public offering. With the assistance of representatives of PSC and a separate capital markets advisor, PACW engaged in discussions with prospective investors. Investors affiliated with the Warburg Investors were among these prospective investors. Investors affiliated with the Centerbridge Investor were also among these prospective investors. Various potential investors conducted due diligence, and indicative terms and documentation were discussed. These discussions and negotiations progressed for approximately two weeks amidst the height of the volatility in the regional banking sector in March 2023.
PACW management frequently updated the PACW board of directors on the status of its operations and the potential equity capital alternatives. On March 20, 2023 and March 21, 2023, the PACW board of directors met to review these potential equity capital alternatives and consider various proposals that had emerged from the discussions referenced above. Following further discussions with PSC and a separate capital markets advisor, and considering the volatility in the market and depressed market prices for regional bank stocks, as well as the availability of other options to enhance capital and liquidity through potential asset sales, the PACW board of directors determined on March 21, 2023 that it would not be prudent to move forward with any equity capital raising transaction at such time. PACW publicly announced this decision on March 22, 2023, along with providing an update on certain key deposit and liquidity metrics.
Following the announcement on March 22, 2023, the PACW board of directors and PACW management continued work to execute on the previously announced strategic plan to focus on its community bank business, in particular by pursuing strategic asset sales, while also evaluating potential broader strategic alternatives. In the weeks that followed, PACW, with the assistance of PSC, held discussions with a small number of parties it had contacted, or that had contacted it, with respect to potential acquisition or business combination transactions, including a party in which affiliates of the Warburg Investors have an interest.
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On May 3, 2023, the PACW board of directors met to consider, among other matters, the status of these strategic discussions. In light of these discussions, the PACW board of directors determined that it would be in the best interests of PACW stockholders to approach and initiate discussions with a larger number of prospective strategic partners and instructed the representatives of PSC in attendance to do so. Representatives of Sullivan & Cromwell were also in attendance and advised members of the PACW board of directors with respect to their fiduciary duties. Later that day, there were media reports that the PACW board of directors was reviewing strategic alternatives relating to the sale of some or all of the assets of PACW and PACW Bank. Following these reports, PACW Bank experienced additional deposit losses of approximately $1.7 billion on May 4 and May 5, 2023.
Over the next three weeks, the PACW board of directors met four times, and PACW management provided updates on discussions with potential strategic partners as well as on the status of PACW’s operations.
Through the months of May and June, representatives of PSC, acting at the direction of the PACW board of directors and PACW management, contacted 13 potential acquirers and business combination partners, with nine of such parties entering into confidentiality agreements and conducting preliminary due diligence, including BANC who entered into a confidentiality agreement with PACW on May 4, 2023 (the “NDA”). Of the nine parties who conducted initial due diligence, two (which did not include BANC) indicated an interest in pursuing a potential all cash transaction. From May 5, 2023 to about June 16, 2023, BANC and PACW did not have further discussions as PACW indicated to BANC that its discussions with other parties were in more advanced stages.
As noted above, PACW concurrently continued to execute on its strategic plan and on May 22, 2023, consistent with the objective to pursue strategic asset sales set out in such plan, PACW announced the sale of 74 real estate construction loans, with an aggregate commitment amount of approximately $5.3 billion, including an aggregate outstanding principal balance of $2.6 billion at the time of the announcement, to a wholly-owned subsidiary of Kennedy-Wilson Holdings, Inc.
On June 12, 2023, the PACW board of directors met, and PACW management provided an update on discussions with potential strategic partners. PACW management summarized the discussions it had with various parties that had entered into confidentiality agreements and that two parties had expressed interest in an all cash acquisition of PACW. These two parties in particular had conducted the largest amount of due diligence to date and had preliminary discussions with PACW management about a potential transaction. Each was also provided with draft forms of definitive documentation to consider. However, by the time of the June 12, 2023 meeting, PACW management indicated to the PACW board of directors that discussions with these two parties had concluded due to each party’s inability to commit or procure the required capital to support the contemplated all cash acquisition transaction. At the time of the June 12, 2023 meeting, PACW was no longer in active discussions with any party regarding a potential strategic transaction and continued its focus on executing on its strategic plan. Subsequently, and in connection with such strategic plan, on June 22, 2023, PACW announced that PACW Bank had entered into a purchase agreement to sell a portfolio of lender finance loans with an aggregate commitment amount of $3.54 billion, including an aggregate outstanding principal balance of $2.21 billion as of the date of the announcement, to certain alternative credit strategy funds managed by Ares Management Corporation.
On June 16, 2023, Jared Wolff, Chairman, President and Chief Executive Officer of BANC, reached out to Paul Taylor, President and Chief Executive Officer of PACW, to further discuss a potential transaction and in order to determine whether it was advisable to proceed with further analysis and discussions. Thereafter, on or about June 16, 2023, BANC management recommenced further due diligence on PACW. Mr. Wolff and Mr. Taylor remained in contact, discussing at a high level the possibility of a potential business combination transaction and exchanging ideas on certain aspects of such a transaction, including as to the potential commercial and strategic benefits of a combination of their two businesses. In each of those conversations, they discussed that any potential transaction would reflect an “at market” exchange ratio.
In mid-June 2023, Mr. Wolff had various discussions with representatives of PACW, JPM and PSC regarding restarting negotiations for a potential transaction. In these discussions, the parties began to discuss in further detail the potential combined company’s business lines, markets of operation, potential synergies and efficiencies as well as the pro forma balance sheet, capital ratios, liquidity and deposit funding profile. The parties also
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provided updates with respect to the prospective transaction to federal and state regulatory authorities and continued to do so on a regular basis throughout the negotiation process. BANC management had also determined that, in order to proceed with a transaction with PACW, the potential combined company would require an infusion of equity capital.
From mid-June until the signing of the definitive transaction agreements, Mr. Wolff and Mr. Taylor discussed various topics related to the proposed transaction, including the exchange ratio, closing conditions, regulatory matters, governance matters, employment matters and interim operating covenants. At one such meeting, Mr. Wolff and Mr. Taylor discussed a proposal that the combined company’s board of directors would include eight currently serving directors of the BANC board of directors and three currently serving directors of the PACW board of directors (which board composition would be subject to the ongoing negotiations with prospective investors, though it was expected that likely one additional director representative would be selected by one of the prospective investors). Mr. Wolff and Mr. Taylor agreed to propose this construct to their respective boards of directors and that Mr. John Eggemeyer, the current Lead Director of the PACW board of directors, would be an advisable candidate to propose as the Chairman of the combined company’s board of directors.
On June 17, 2023, PACW made available to BANC, and on July 3, 2023, BANC made available to PACW, virtual data rooms to permit expanded mutual due diligence review. BANC and PACW, and their respective legal, financial and other advisors, engaged in mutual due diligence, including with respect to business, credit, operational, legal and compliance matters, among others. From approximately June 24 through July 11, 2023, BANC also negotiated and entered into confidentiality agreements with multiple potential investors and certain potential investors entered into joinders to the NDA to facilitate their due diligence review for purposes of evaluating participation in the proposed equity financing. The Warburg Investors and the Centerbridge Investor entered into confidentiality agreements with BANC on June 23, 2023 and July 6, 2023, respectively, and began to independently engage in due diligence with respect to PACW and BANC, including several meetings between the Warburg Investors, on the one hand, and BANC management or JPM, on the other hand, and several meetings between the Centerbridge Investor, on the one hand, and BANC management or JPM, on the other hand.
In the days leading up to the June 26, 2023 meeting of the BANC board of directors, as described below, Mr. Wolff connected regularly with members of the BANC board of directors to provide updates on a potential strategic opportunity to engage in a business combination transaction with PACW.
On June 26, 2023, BANC held a special meeting of the BANC board of directors with JPM and Skadden in attendance to discuss the proposed transaction rationale, receive a financial, legal and regulatory overview of the proposed transaction, review the proposed non-binding indication of interest (the “LOI”) for a potential strategic combination between BANC and PACW to be submitted to PACW and appoint a transaction committee of the BANC board of directors, which we refer to as the “BANC transaction committee.” The BANC board of directors approved the LOI, and BANC submitted the LOI to PACW. The BANC board of directors also approved the formation of the BANC transaction committee and appointed members of the BANC transaction committee. The LOI proposed an all-stock merger based on an “at-market” fixed exchange ratio. It proposed a transaction structure in which BANC would be the legal acquirer at the holding company level, and PACW Bank would be the surviving bank. The LOI proposed that BANC would procure equity financing in connection with the proposed transaction of $350 million (which amount was subsequently increased to the $400 million committed by the Investors following further discussions among the parties) and that Mr. Wolff would lead the combined company as Chief Executive Officer. The LOI also provided for a 45-day period in which PACW agreed to negotiate with BANC exclusively with respect to the potential transaction, with a potential for a 15-day extension of such period if the parties were negotiating in good faith regarding the proposed transaction.
On June 28, 2023, the PACW board of directors met to review the results of the process, including to review the terms of the LOI. Representatives of PSC were also in attendance and presented on the business and financial aspects of the proposed transaction with BANC. The PACW board of directors then discussed with PACW management and PSC the strategic rationale, risks, financial metrics presented by a potential transaction with BANC and the potential value to the PACW stockholders resulting from such transaction. The PACW board of directors and PACW management also discussed the risks and regulatory considerations of the potential transaction with BANC relative to alternative strategic transactions, as well as potentially electing not to pursue any strategic transaction. Following these discussions, the PACW board of directors was of the view that a
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potential transaction with BANC had a compelling strategic rationale and potential to provide meaningful benefits to PACW stockholders relative to other strategic alternatives and indicated its support for PACW proceeding with negotiations of the potential transaction with BANC.
On June 29, 2023, BANC and PACW executed the LOI and instructed their respective financial and legal advisors to begin work toward the potential transaction. Shortly thereafter, at the direction of BANC’s management, JPM initiated or reinitiated discussions with various prospective investors in connection with the proposed equity financing, including the Warburg Investors and the Centerbridge Investor.
BANC and PACW then, with the assistance of their respective advisors, discussed a variety of matters with respect to the potential transaction, including, without limitation, a framework for establishing the “at market” fixed exchange ratio, additional details regarding the governance and management of the combined company, the framework that the parties would use for the disposition of certain assets in connection with the planned repositioning of the combined company’s balance sheet and certain relevant regulatory considerations. In addition, each party, with the assistance of their respective advisors, advanced their respective diligence reviews of the other party, and the Investors, with the assistance of their respective advisors, advanced their respective diligence reviews of BANC and PACW.
From July 11, 2023 until July 25, 2023, Sullivan & Cromwell and Skadden exchanged multiple drafts of the merger agreement. During this period, Skadden and Sullivan & Cromwell, on behalf of BANC and PACW, respectively, negotiated the terms and conditions of the merger agreement, including with respect to regulatory matters, closing conditions, the definition of “material adverse effect”, governance matters, employment matters, interim operating covenants, representations and warranties of BANC and PACW and termination rights.
During July 2023, BANC, JPM and Skadden also discussed certain structural matters pertaining to the proposed equity financing with the Warburg Investors, along with Wachtell Lipton Rosen & Katz LLP (“Wachtell”), counsel to the Warburg Investors, and the Centerbridge Investor, along with Simpson Thacher & Bartlett LLP (“Simpson”), counsel to the Centerbridge Investor.
On July 13, 2023, the in-house and outside counsels of BANC and PACW had a conference call to discuss the merger agreement, including discussions on closing conditions, regulatory matters and termination rights.
The parties also continued their discussions around a method for measuring an “at market” fixed exchange ratio as set forth in the LOI. At the direction of BANC’s management, JPM communicated to PSC a proposal that the “at market” exchange ratio be based on the volume-weighted average price of BANC common stock and PACW common stock in the five trading days up to, and including, June 29, 2023, the date on which the LOI was executed by PACW and BANC. This was calculated to be 0.6569 shares of BANC common stock for each share of PACW common stock. PSC communicated this proposal to PACW, and it was agreed that this measurement adequately reflected the parties’ intention that the transaction would not involve any established premium or discount to any particular party’s stock price, and avoided the risk that any potential future market volatility (in light of recent market conditions) would lead to any unwanted distortions in the pricing of the transaction.
On July 14, 2023, BANC held a meeting of the BANC board of directors with JPM and Skadden in attendance, to discuss the status and timing of the proposed transaction, review such transaction and their vision for the combined company, review financial models for the proposed transaction, discuss legal structure and definitive agreements, discuss the capital raising process and legal components thereof, and receive updates on regulatory and key open issues.
On July 17, 2023, BANC held a meeting of the BANC board of directors where Mr. Wolff provided an update on the status and various aspects of the proposed transaction and the BANC board of directors asked questions and discussed the proposed transaction.
From July 17, 2023 until July 25, 2023, Skadden, Wachtell and Simpson exchanged multiple drafts of the Warburg investment agreement and the Centerbridge investment agreement, as applicable, and various ancillary documents.
On July 18, 2023, Mr. Wolff spoke with Mr. Eggemeyer to discuss the proposal for Mr. Eggemeyer to serve in the role of Chairman of the combined company’s board of directors.
On July 19, 2023, BANC held a meeting of the BANC transaction committee to discuss the terms of the proposed investments by the Warburg Investors and the Centerbridge Investor, respectively.
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On July 20, 2023, the PACW board of directors met with representatives of PSC and Sullivan & Cromwell present. PACW management provided an update on the status of the negotiations and discussed with the PACW board of directors the due diligence conducted to that point. Certain compensation matters relevant to the transaction were discussed as well.
On July 22, 2023, BANC reached an agreement in principle with the Warburg Investors to invest a total of $325 million for common and/or common equivalent equity securities of BANC in the proposed equity financing and with the Centerbridge Investor to invest a total of $75 million for common securities of BANC in the proposed equity financing and that, in each case, certain warrants would be included with the investments. Based on the outcome of these discussions and the fixing of the exchange ratio, ownership of the common equity in the combined company at closing (excluding warrants or other equity awards) would be PACW stockholders with approximately 47% of the common shares outstanding in the combined company, BANC stockholders with approximately 34% of the common shares outstanding in the combined company and the Investors with approximately 19% of the common shares outstanding in the combined company (before the exercise of any of the warrants).
On July 24, 2023, the PACW board of directors held a meeting to consider the proposed terms of the transaction between PACW and BANC and the entry into the merger agreement by PACW, and representatives of Sullivan & Cromwell and PSC were in attendance. At the meeting, members of PACW management provided an update on the results of the negotiations since the July 20, 2023 meeting of the PACW board of directors, reviewed the proposed terms of the transaction and advised of the remaining negotiation points that would need to be resolved prior to entering into a definitive agreement. Representatives of Sullivan & Cromwell provided members of the PACW board of directors with a summary of the proposed terms of the merger agreement, including certain negotiated terms of the merger agreement concerning the transaction’s closing conditions, and discussed the relationship between the closing conditions of the merger agreement and those in the investment agreements as well as certain executive compensation and benefits and employment-related matters.
On July 24, 2023, BANC held a meeting of the BANC board of directors to consider the proposed terms of the proposed transactions. During the meeting, the BANC board of directors discussed the major issues of the proposed transactions and terms of the definitive agreements, including the merger agreement and the investment agreements, treatment of employees and social issues. Members of BANC management provided an update on the final negotiation points and presented its view that from a documentation perspective the negotiations were effectively complete. JPM then reviewed the financial aspects of the mergers with the BANC board of directors and rendered its oral opinion to the BANC board of directors, which was confirmed by a written opinion, dated July 25, 2023, to the effect that, as of such date and based upon and subject to the factors and assumptions made, procedures followed, matters considered, and limitations and qualifications set forth in its opinion, the exchange ratio in the first merger was fair, from a financial point of view, to BANC. See the section entitled “The Transactions—Opinion of BANC’s Financial Advisor.” At the conclusion of the meeting, after further review and discussion by the BANC board of directors, including consideration of the factors described below under the section entitled “The Transactions—BANC’s Reasons for the Mergers; Recommendation of the BANC Board of Directors”, the BANC board of directors unanimously determined that the first merger was fair to, advisable and in the best interests of BANC and its stockholders and unanimously (a) determined that the merger agreement and the investment agreements, and the transactions contemplated thereby, were advisable and in the best interests of BANC and its stockholders and (b) approved the execution, delivery and performance of the merger agreement and the investment agreements, and the consummation of the transactions contemplated thereby (and the bank merger was also approved by the board of directors of BANC N.A. at a joint meeting with the BANC board of directors).
On July 25, 2023, the PACW board of directors held an additional meeting to consider the proposed transaction, and representatives of PSC and Sullivan & Cromwell were in attendance. Members of PACW management provided an update on the final negotiation points and presented its view that from a documentation perspective the negotiations were effectively complete. PSC then reviewed the financial aspects of the mergers with the PACW board of directors and rendered its opinion to the PACW board of directors, which was initially rendered verbally and confirmed by a written opinion, dated July 25, 2023, to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by PSC as set forth in its opinion, the exchange ratio in the first merger was fair, from a financial point of view, to holders of PACW common stock. For more information, see the section entitled “The
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Transactions—Opinion of PACW’s Financial Advisor.” At the conclusion of the meeting, after further review and discussion by the PACW board of directors, including consideration of the factors described below under the section entitled “The Transactions—PACW’s Reasons for the Mergers; Recommendation of the PACW Board of Directors”, the PACW board of directors unanimously determined that the first merger was fair to, advisable and in the best interests of PACW and its stockholders and unanimously approved the merger agreement and the transactions contemplated thereby, including the mergers and the bank merger (and the bank merger was also approved by the board of directors of PACW Bank in a joint board capacity with the PACW board of directors) and entry into the merger agreement by PACW.
BANC and PACW executed the merger agreement, and BANC concurrently executed the applicable investment agreement with the Warburg Investors and the Centerbridge Investor, respectively, in the afternoon of July 25, 2023. The transactions were announced thereafter in a press release jointly issued by BANC and PACW on July 25, 2023.
BANC’s Reasons for the Mergers; Recommendation of the BANC Board of Directors
After careful consideration, the BANC board of directors, at a special meeting held on July 24, 2023, unanimously (a) determined that the merger agreement and the investment agreements, and the transactions contemplated thereby, are advisable and in the best interests of BANC and its stockholders and (b) approved the execution, delivery and performance of the merger agreement and the investment agreements, and the consummation of the transactions contemplated thereby (and the bank merger was also approved by the board of directors of BANC N.A. at a joint meeting with the BANC board of directors).
In reaching this decision, the BANC board of directors evaluated the merger agreement, the mergers and the other matters contemplated by the merger agreement, as well as the investment agreements, in consultation with BANC’s senior management, as well as with BANC’s legal counsel and financial advisor, and considered a number of factors, including the following principal factors:
each of BANC’s, PACW’s and the combined company’s business, operations, financial condition, asset quality, earnings, markets and prospects, particularly in light of recent market events in the banking sector, especially those affecting regional banks;
the strategic rationale for the mergers, including the fact that the combined company will be strategically positioned to capitalize on market opportunities in California;
the expectation that the combined company will have access to additional liquidity through a targeted balance sheet repositioning after closing, supported by committed capital of $400 million from the Investors, resulting in robust capital levels and a strong liquidity profile with improved earnings capability;
the fact that the combined company will have operational and financial scale to increase investment in the franchise, including its technology platform, in order to elevate the client experience, improve efficiencies, attract the highest quality talent, and enhance new business development efforts;
the fact that the combined company would have a more diverse overall deposit mix by combining complementary deposit specialties and the fact that such unique deposit mix enhances the pro forma funding profile of the combined company;
the complementary nature of BANC’s and PACW’s mutual strengths in core community banking, with differing niche expertise;
the complementary footprints of BANC and PACW;
the current and prospective environment in the financial services industry, including recent banking turmoil and industry-wide volatility;
the expanded possibilities for growth that would be available to BANC, given the expanded suite of product offerings that PACW provides;
the deep familiarity of BANC and PACW with each other;
the anticipated pro forma financial impact of the mergers on BANC, including potential and immediate tangible book value accretion, as well as positive impact on earnings, return on equity and liquidity;
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the expectation of cost synergies resulting from the mergers;
its review and discussions with BANC’s senior management concerning BANC’s due diligence examination of, among other areas, the operations, financial condition and regulatory compliance programs and prospects of PACW;
the fact that the shares of BANC common stock that are outstanding immediately prior to completion of the first merger are expected to represent approximately 34% of the outstanding shares of the combined company;
its understanding that the mergers will be accounted for as a reverse acquisition of BANC by PACW under the reverse acquisition method of accounting in accordance with GAAP, and that PACW will be treated as the acquirer for accounting purposes;
the fact that the exchange ratio is fixed, with no adjustment in the merger consideration to be received by PACW stockholders as a result of possible increases or decreases in the trading price of PACW or BANC stock following the announcement of the mergers, which the BANC board of directors believed was consistent with market practice for transactions of this type and with the strategic purpose of the transaction;
JPM’s financial analyses and oral opinion rendered to the BANC board of directors, which was subsequently confirmed by delivery of a written opinion dated July 25, 2023, to the effect that, as of such date, and based upon and subject to the factors and assumptions set forth therein, the exchange ratio in the first merger was fair, from a financial point of view, to BANC, as more fully described below under the section entitled “The Transactions—Opinion of BANC’s Financial Advisor”;
its review with BANC’s outside legal counsel of the material terms of the merger agreement and the investment agreements, including the representations, covenants, closing conditions, deal protection and termination provisions;
the expectation that the requisite regulatory approvals could be obtained in a timely fashion;
the fact that BANC stockholders will have the opportunity to vote to approve the BANC issuance proposal;
the fact that 8 of 12 total directors of the combined company would be current members of the BANC board of directors;
the fact that Mr. Wolff will serve as the President and Chief Executive Officer of the combined company and that the management team will be comprised of a mix of BANC executives and PACW executives, each of which the BANC board of directors believes enhances the likelihood that the strategic benefits that BANC expects to achieve as a result of the mergers will be realized;
the fact that the PACW and BANC management teams have many years of integration experience through various acquisitions and the familiarity of Mr. Wolff and other members of the BANC executive team with PACW given their prior tenures with PACW and PACW Bank, which could be highly beneficial to the integration process; and
BANC’s and PACW’s past records of integrating acquisitions and of realizing expected financial and other benefits of such acquisitions and the strength of BANC’s management and infrastructure to successfully complete the integration process.
The BANC board of directors also considered potential risks related to the transaction. The BANC board of directors concluded that the anticipated benefits of combining with PACW and consummating the investments were likely to outweigh these risks. These potential risks include:
the possibility that the anticipated benefits of the transaction will not be realized when expected or at all, including as a result of the impact of, or difficulties arising from, the integration of the two companies or as a result of the strength of the economy, general market conditions and competitive factors in the areas where BANC and PACW operate businesses;
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the regulatory and other approvals required in connection with the mergers and the bank merger, and the risk that such regulatory approvals may not be received in a timely manner or at all or may impose materially burdensome conditions that would lead to the termination or abandonment of the merger agreement or the investment agreements;
the risk that the mergers may not be completed despite the efforts of PACW and BANC or that completion of the mergers may be unduly delayed, including as a result of factors outside either party’s control;
the costs to be incurred in connection with the mergers and the integration of PACW’s business into BANC and the possibility that the transaction and the integration may be more expensive to complete than anticipated, including as a result of unexpected factors or events;
the Investors will beneficially own a significant equity interest in the combined company and the Warburg Investors will have the ability to appoint one member to the combined company board of directors, and circumstances may occur in which the interests of the Warburg Investors could diverge from the interests of the combined company’s other stockholders;
the possibility of encountering difficulties in achieving anticipated cost savings and synergies in the amounts currently estimated or within the time frame currently contemplated;
the possibility of encountering difficulties in successfully integrating the businesses, operations and workforces of BANC and PACW;
the fact that the merger agreement places restrictions on the conduct of BANC’s business prior to the completion of the mergers, which could potentially delay or prevent BANC from undertaking business opportunities that might arise or certain other actions it might otherwise take with respect to its operations absent the pendency of the mergers;
the potential effect of the mergers on BANC’s overall business, including its relationships with customers, employees, suppliers and regulators;
the risk of losing key BANC or PACW employees during the pendency of the mergers and following completion of the mergers;
the possible diversion of management focus and resources from the operation of BANC’s business while working to consummate the transaction and integrate the two companies;
the risk that, because the exchange ratio under the merger agreement would not be adjusted for changes in the market price of BANC common stock or PACW common stock, the value of the shares of BANC common stock to be issued to PACW stockholders at the effective time could be significantly more than the value of such shares immediately prior to the announcement of the parties’ entry into the merger agreement;
the dilution caused by BANC’s issuance of additional shares of its capital stock in connection with the first merger and investments;
the potential for legal claims challenging the mergers; and
the other risks described under the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”
The foregoing discussion of the information and factors considered by the BANC board of directors is not intended to be exhaustive but includes the material factors considered by the BANC board of directors. In reaching its decision to approve the merger agreement and the investment agreements and the transactions contemplated thereby, the BANC board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The BANC board of directors considered all these factors as a whole, and overall considered the factors to support its determination.
For the reasons set forth above, the BANC board of directors determined that the merger agreement and the investment agreements, and the transactions contemplated thereby, are advisable and in the best interests of
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BANC and its stockholders. The BANC board of directors recommends that BANC stockholders vote “FOR” the BANC issuance proposal, “FOR” the BANC incentive plan proposal, “FOR” the BANC exemption amendment proposal and “FOR” the BANC adjournment proposal.
Certain of BANC’s directors and executive officers have other interests in the mergers that are different from, or in addition to, those of BANC stockholders generally, as discussed under the caption “The Transactions—Interests of Certain BANC Directors and Executive Officers in the Mergers” below. The BANC board of directors was aware of and considered these potential interests, among other matters, in evaluating the mergers and in making its recommendation to BANC stockholders.
It should be noted that this explanation of the reasoning of the BANC board of directors and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the future factors discussed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements.”
PACW’s Reasons for the Mergers; Recommendation of the PACW Board of Directors
In reaching its decision to approve the merger agreement and the transactions contemplated thereby, including the mergers, and to recommend that PACW stockholders adopt the merger agreement, the PACW board of directors reviewed and discussed with PACW’s management and with PACW’s financial and legal advisors the terms of the merger agreement and the transactions contemplated thereby, and considered a number of factors, including the following:
each of PACW’s, BANC’s and the combined company’s business, operations, financial condition, asset quality, earnings, markets and prospects, particularly in light of recent market events in the banking sector, especially those affecting regional banks and PACW specifically;
the anticipated pro forma financial impact of the mergers, the investments and various other transactions associated therewith on the combined company;
the strategic rationale for the mergers and the benefits of the mergers relative to various strategic alternatives that were considered by PACW prior to entering into the merger agreement;
the complementary nature of the two companies, including business footprints, corporate purpose, strategic focus, target markets, client service and community development;
the expectation of the cost savings and synergies resulting from the mergers;
the expectation that the combined company will have access to additional liquidity through a targeted balance sheet repositioning after closing, supported by committed capital of $400 million from the Investors, resulting in robust capital levels and a strong liquidity profile with improved earnings capability;
the expectation that in connection with the mergers and the investments, the combined company will have significantly reduced wholesale borrowings;
the fact that the shares of PACW common stock that are outstanding immediately prior to completion of the first merger are expected to represent approximately 47% of the outstanding shares of the combined company;
the pro forma financial results of the combined company, assuming that the mergers will be accounted for as a reverse acquisition of BANC by PACW under the reverse acquisition method of accounting in accordance with GAAP, and that PACW will be treated as the acquirer for accounting purposes;
the diversification of the combined company’s deposit base and loan portfolio leveraging PACW’s and BANC’s core community banking strengths, PACW’s expertise in homeowners’ association banking services, portfolio lending, equipment lending and leasing and small business association lending and BANC’s strengths in healthcare, education, entertainment and warehouse lending;
the terms of the merger agreement, in particular the exchange ratio and the fact that the exchange ratio is fixed;
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the fact that (i) Mr. Eggemeyer would serve as the Chairman of the combined company’s board of directors and (ii) Mr. Wolff would serve as the President and Chief Executive Officer of the combined company, and the provisions of the merger agreement setting forth the corporate governance of the combined company;
the understanding of the current and prospective environment in which PACW and BANC operate, including national, regional and local economic conditions, the interest rate environment, the accelerating pace of technological change in the banking industry, and other economic factors, the competitive environment for financial institutions generally, and the likely effect of these factors on PACW both with and without the mergers;
the expectation that the required regulatory approvals could be obtained in a timely fashion;
the expected treatment of the mergers as a “reorganization” for U.S. federal income tax purposes;
the anticipation that the combined company will have greater scale in California that may enable it to attract additional customers and employees and spread increasing costs more effectively in technology, risk management and compliance;
PSC’s financial analyses and oral opinion rendered to the PACW board of directors, which was subsequently confirmed in writing on July 25, 2023, to the effect that, as of such date, and based upon and subject to the factors and various assumptions made, procedures followed, matters considered, and limitations and qualifications set forth in its opinion, the exchange ratio in the first merger was fair, from a financial point of view, to the holders of PACW common stock, as more fully described below in the section “The Transactions—Opinion of PACW’s Financial Advisor”;
the review with PACW’s outside legal advisor, Sullivan & Cromwell, of the terms of the merger agreement and the related transaction documents, including the representations and warranties, covenants, deal protection and termination provisions, tax treatment and closing conditions; and
the fact that the PACW and BANC management teams have many years of integration experience through various acquisitions and the familiarity of Mr. Wolff and other members of the BANC executive team with PACW given their prior tenures with PACW and PACW Bank, which could be highly beneficial to the integration process.
The PACW board of directors also considered potential risks related to the mergers but concluded that the anticipated benefits of the mergers were likely to outweigh these risks. These potential risks include:
the Investors will beneficially own a significant equity interest in the combined company and the Warburg Investors will have the ability to appoint one member to the combined company board of directors with interests that may diverge from the combined company’s other stockholders;
the regulatory and other approvals required in connection with the mergers and the bank merger, and the risk that such regulatory approvals may not be received in a timely manner or at all or may impose materially burdensome conditions that would lead to the termination or abandonment of the merger agreement or the investment agreements;
the risk that the mergers may not be completed despite the efforts of PACW and BANC or that completion of the mergers may be unduly delayed, including as a result of factors outside either party’s control;
the possibility that the anticipated benefits of the transaction will not be realized when expected or at all, including as a result of the impact of, or difficulties arising from, the integration of the two companies or as a result of the strength of the economy, general market conditions and competitive factors in the areas where PACW and BANC operate businesses;
the possibility of encountering difficulties in achieving anticipated cost savings and synergies in the amounts currently estimated or within the time frame currently contemplated;
the potential effect of the mergers on PACW’s overall business, including its relationships with customers, employees, suppliers and regulators;
the risk of losing key PACW or BANC employees during the pendency of the mergers and thereafter;
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the fixed exchange ratio component of the merger consideration, which will not adjust to compensate for potential declines in the stock price of BANC prior to completion of the mergers or potential increases in the stock price of PACW prior to completion of the mergers;
the risk of anticipated merger-related costs being higher than expected, including as a result of unexpected factors or events;
the possible diversion of management focus and resources from the operation of PACW’s business while working to consummate the transaction and integrate the two companies;
the fact that the merger agreement places certain restrictions on the conduct of PACW’s business prior to the completion of the mergers, which could potentially delay or prevent PACW from undertaking business opportunities that might arise or certain other actions it might otherwise take with respect to its operations absent the pendency of the mergers;
the potential for legal claims challenging the mergers; and
the other risks described under the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”
The foregoing discussion of the information and factors considered by the PACW board of directors is not intended to be exhaustive but includes the material factors considered by the PACW board of directors. In reaching its decision to approve the merger agreement and the transactions contemplated thereby, including the mergers, the PACW board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The PACW board of directors considered all these factors as a whole, including through its discussions with PACW’s management and financial and legal advisors, in evaluating the merger agreement and the transactions contemplated thereby, including the mergers.
The PACW board of directors realized that there can be no assurance about future results, including results expected or considered in the factors listed above. It should be noted that this explanation of the reasoning of the PACW board of directors and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the future factors discussed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements.” The PACW board of directors concluded, however, that the potential positive factors outweighed the potential risks of completing the mergers.
In considering the recommendation of the PACW board of directors, you should be aware that certain directors and executive officers of PACW may have interests in the mergers that are different from, or in addition to, interests of PACW stockholders generally and may create potential conflicts of interest. The PACW board of directors was aware of these interests and considered them when evaluating and negotiating the merger agreement, the mergers and the other transactions contemplated by the merger agreement, and in recommending to PACW stockholders that they vote in favor of the PACW merger proposal. See the section entitled “The Transactions—Interests of Certain BANC Directors and Executive Officers in the Mergers” for more information.
For the reasons set forth above, the PACW board of directors unanimously determined that the first merger was fair to, advisable and in the best interests of PACW and its stockholders and unanimously approved the merger agreement and the transactions contemplated thereby, including the mergers and the bank merger (which was also approved by the board of directors of PACW Bank in a joint board capacity with the PACW board of directors) and entry into the merger agreement by PACW. The PACW board of directors recommends that PACW stockholders vote “FOR” the PACW merger proposal, “FOR” the PACW compensation proposal and “FOR” the PACW adjournment proposal.
Opinion of BANC’s Financial Advisor
Pursuant to an engagement letter, BANC retained JPM to act as its financial advisor in connection with the mergers. At the meeting of the BANC board of directors on July 24, 2023, JPM rendered its oral opinion to the BANC board of directors that, as of such date and based upon and subject to the factors and assumptions made, procedures followed, matters considered, and limitations and qualifications set forth in its opinion, the exchange ratio in the first merger was fair, from a financial point of view, to BANC. JPM has confirmed its July 24, 2023, oral opinion by delivering its written opinion to the BANC board of directors, dated July 25, 2023, that, as of such date, the exchange ratio in the first merger was fair, from a financial point of view, to BANC.
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The full text of the written opinion of JPM, dated July 25, 2023, which sets forth, among other things, the assumptions made, matters considered and limits on the review undertaken, is attached as Annex O to this joint proxy statement/prospectus and is incorporated herein by reference. The summary of the opinion of JPM set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion. BANC stockholders are urged to read the opinion in its entirety. JPM’s written opinion was addressed to the BANC board of directors in connection with and for the purposes of its evaluation of the mergers, was directed only to the exchange ratio in the first merger and did not address any other aspect of the mergers. JPM expressed no opinion as to the fairness of the exchange ratio to the holders of any class of securities, creditors or other constituencies of BANC or as to the underlying decision by BANC to engage in the mergers. The issuance of JPM’s opinion was approved by a fairness committee of JPM. The summary of the opinion of JPM set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion. The opinion of JPM does not constitute a recommendation to any BANC stockholder as to how such stockholder should vote with respect to the mergers or any other matter.
In arriving at its opinion, JPM, among other things:
reviewed a draft dated, July 21, 2023, of the merger agreement;
reviewed certain publicly available business and financial information concerning BANC and PACW and the industries in which they operate;
compared the financial and operating performance of PACW and BANC with publicly available information concerning certain other companies JPM deemed relevant and reviewed the current and historical market prices of the PACW common stock and the BANC common stock and certain publicly traded securities of such other companies;
at BANC’s direction, reviewed and relied upon for JPM’s opinion and analysis: (A) certain publicly available financial forecasts relating to the business and financial prospects of BANC, derived from a consensus of selected research analysts that were identified by BANC’s management and, with the guidance and assistance of BANC’s management, extrapolated such forecasts for certain fiscal years (such forecasts and extrapolations being reviewed and endorsed by BANC’s management as reasonable for use in JPM’s opinion and analysis) (such extrapolated BANC forecasts being referred to herein as the “BANC projections”), (B) certain internal financial forecasts relating to the business and financial prospects of PACW prepared by PACW, and, with the guidance and assistance of BANC’s management, extrapolated such forecasts for certain fiscal years (such forecasts and extrapolations being reviewed and endorsed by BANC’s management as reasonable for use in JPM’s opinion and analysis) (such extrapolated PACW forecasts being referred to herein as the “PACW projections” and, together with the BANC projections, the “Financial Projections”) and (C) the estimated amount and timing of the cost savings and related expenses and synergies expected to result from the mergers provided to JPM by the management of BANC (the “Synergies”); and
performed such other financial studies and analyses and considered such other information as JPM deemed appropriate for the purposes of its opinion.
In addition, JPM held discussions with certain members of the management of PACW and BANC with respect to certain aspects of the mergers, and the past and current business operations of PACW and BANC, the financial condition and future prospects and operations of PACW and BANC, the effects of the mergers on the financial condition and future prospects of BANC, and certain other matters JPM believed necessary or appropriate to its inquiry.
In giving its opinion, JPM relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with JPM by PACW and BANC or otherwise reviewed by or for JPM. JPM did not independently verify any such information or its accuracy or completeness and, pursuant to its engagement letter with BANC, JPM did not assume any obligation to undertake any such independent verification. JPM did not conduct and was not provided with any valuation or appraisal of any assets or liabilities, nor did JPM evaluate the solvency of PACW or BANC under any state or federal laws relating to bankruptcy, insolvency or similar matters. JPM is not an expert in evaluating the adequacy of allowances for loan and lease losses of BANC or PACW with respect to their loan and lease portfolios and, accordingly, JPM did not make an independent evaluation of the adequacy of the allowance for loan and lease losses of BANC or PACW and JPM assumed, with BANC’s consent, that the respective allowances for loan and lease losses for
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both BANC and PACW, respectively, are adequate to cover such losses and will be adequate on a pro forma basis for the combined entity. In relying on the Financial Projections and the Synergies, JPM assumed with BANC’s consent that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management of BANC as to the expected future results of operations and financial condition of PACW and BANC to which such analyses or forecasts relate or, in the case of the BANC projections, that they represent a reasonable basis upon which to evaluate the expected future results of operations and financial condition of BANC. JPM expressed no view as to such analyses or forecasts (including the Synergies) or the assumptions on which they were based. In addition, JPM assumed that the proposed equity financing from the Warburg Investors and the Centerbridge Investor or certain other investors, balance sheet repositioning and sale of non-core businesses will occur on the terms and in the time frame described by management of BANC. JPM also assumed that the mergers and the other transactions contemplated by the merger agreement will qualify as a tax-free reorganization for U.S. federal income tax purposes and will be consummated as described in the merger agreement, and that the definitive merger agreement would not differ in any material respects from the draft thereof furnished to JPM. JPM also assumed that the representations and warranties made by BANC and PACW in the merger agreement and the related agreements were and will be true and correct in all respects material to its analysis. JPM is not a legal, regulatory or tax expert and relied on the assessments made by advisors to BANC with respect to such issues. JPM further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the mergers will be obtained without any adverse effect on PACW or BANC or on the contemplated benefits of the mergers.
The BANC projections reviewed and relied upon by JPM were derived from a consensus of selected Wall Street research analysts that were identified by BANC’s management and, with the guidance and assistance of BANC’s management, extrapolated for the fiscal years ended 2025-2028, and the PACW projections reviewed and relied upon by JPM were prepared by PACW’s management. PACW does not publicly disclose internal management projections of the type provided to JPM in connection with JPM’s analysis of the mergers, and such projections were not prepared with a view toward public disclosure. The Synergies reviewed and relied upon by JPM were provided by BANC management and reflected BANC management’s go-forward operating plan for the pro forma company, including certain merger adjustments. The Financial Projections were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of BANC’s and PACW’s respective managements, including factors related to general economic and competitive conditions and prevailing interest rates. Accordingly, actual results could vary significantly from those set forth in such projections. For more information and certain other important disclosures, limitations and qualifications regarding the use of projections and other forward-looking statements, please refer to the section entitled “Certain Unaudited Prospective Financial Information” of this joint proxy statement/prospectus.
JPM’s opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available to JPM as of, the date of such opinion. JPM’s opinion noted that subsequent developments may affect JPM’s opinion and that JPM does not have any obligation to update, revise, or reaffirm such opinion. Furthermore, JPM expressed no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the mergers, or any class of such persons relative to the exchange ratio in the first merger or with respect to the fairness of any such compensation. JPM expressed no opinion as to the price at which the PACW common stock or BANC common stock will trade at any future time.
The terms of the merger agreement, including the exchange ratio, were determined through arm’s length negotiations between BANC and PACW, and the decision to enter into the merger agreement was solely that of the BANC board of directors and the PACW board of directors. JPM’s opinion and financial analyses were only one of the many factors considered by the BANC board of directors in its evaluation of the mergers and should not be viewed as determinative of the views of the BANC board of directors or management with respect to the mergers or the exchange ratio.
In accordance with customary investment banking practice, JPM employed generally accepted valuation methodology in rendering its written opinion to the BANC board of directors on July 25, 2023, and contained in the presentation delivered to the BANC board of directors on July 24, 2023 in connection with the rendering of such opinion and does not purport to be a complete description of the analyses or data presented by JPM. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by JPM, the tables
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