Exhibit 10.3
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 30, 2024
Southern California Bancorp
(Exact name of Registrant as specified in its charter)
| California | 001-41684 | 84-3288397 | ||
| (State or other jurisdiction of incorporation) | (Commission File Number) |
(IRS Employer Identification No.) |
12265 El Camino Real, Suite 210 San Diego, CA |
92310 | |
| (Address of principal executive office) | (Zip Code) |
Registrant’s telephone number, including area code: (844) 265-7622
Not Applicable
(Former name or former address, if changes since last report)
Check the appropriate box below if the Form 8-K filing is to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☒ | Written communications pursuant to Rule 425 under the Securities Act (17CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c)) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| Common stock | BCAL | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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 13(a) of the Exchange Act. ☒
Section 1 - Registrant’s Business and Operations
| Item 1.01 | Entry Into a Material Definitive Agreement |
On January 30, 2024, Southern California Bancorp, (“SCB”) (Nasdaq: BCAL), parent company of Bank of Southern California, N.A. (“SCB Bank”), and California BanCorp, (“CBC”) (Nasdaq: CALB), parent company of California Bank of Commerce (“CBC Bank”), entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) pursuant to which CBC will merge with and into SCB (the “Merger”) with SCB surviving, followed immediately thereafter by the merger of CBC Bank with and into SCB Bank, with SCB Bank surviving (the “Bank Merger”). The Merger is expected to be completed in the third quarter of 2024, subject to approval of the Merger by shareholders of SCB and CBC, receipt of required regulatory and other approvals and satisfaction of customary closing conditions.
Merger Consideration
At the effective time of the Merger (the “Effective Time”), each outstanding share of CBC common stock, excluding certain specified shares, will be converted into the right to receive 1.590 shares of SCB common stock (the “Exchange Ratio”). The Merger is expected to qualify as a tax-free reorganization for shareholders of CBC who receive SCB common stock.
At the Effective Time of the Merger, each unvested CBC restricted stock unit award outstanding held by a non-continuing CBC board member will vest and will be converted to the right to receive a number of shares of SCB common stock based on the Exchange Ratio, and all other unvested restricted stock units held by continuing employees and directors will be assumed by SCB. In addition, each CBC stock option, whether or not then exercisable, that is outstanding immediately prior to the Effective Time will be canceled and exchanged for the right to receive an amount of cash equal to the product of (x) the total number of shares of CBC common stock subject to such option and (y) the excess, if any, of (A) the product of (1) the volume weighted average price of SCB common stock on each of the last ten trading days ending on the fifth trading day immediately prior to the Effective Time, and (2) the Exchange Ratio, over (B) the exercise price per share under such option, less applicable taxes required to be withheld with respect to such payment.
Governance Matters
The Merger Agreement also provides, among other things, that effective as of the Effective Time (i), Mr. David I. Rainer, the current Chief Executive Officer and Chairman of SCB, will serve as Executive Chairman of the surviving corporation, surviving bank, and of their boards of directors, (ii) Mr. Steven E. Shelton, the current Chief Executive Officer of CBC, will serve as the Chief Executive Officer, as well as a member of the board of directors, of the surviving corporation and surviving bank, (iii) Mr. Thomas A. Sa, the current President, Chief Financial Officer and Chief Operating Officer of CBC, shall serve as the Chief Operating Officer of the surviving corporation and of the surviving bank, (iv) Mr. Richard Hernandez, the current President of SCB, shall serve as the President of the surviving corporation and of the surviving bank, and (v) Mr. Thomas G. Dolan, the current Chief Financial Officer of SCB, shall serve as the Chief Financial Officer of the surviving corporation and Chief Strategy Officer of the surviving bank. In the Merger Agreement, SCB and CBC have agreed that the boards of directors of SCB and SCB Bank after the Merger will consist of twelve (12) members, with six (6) each from the current SCB and CBC (and their subsidiary banks’) boards of directors, with a needed amendment to SCB’s bylaws made to provide for the increased board size. SCB and CBC also have agreed to evaluate rebranding the names of the surviving corporation and surviving bank.
Other Terms; Closing Conditions; Termination
The Merger Agreement contains various customary representations, warranties and covenants by SCB and CBC. Both CBC and SCB agreed to conduct their respective businesses in the ordinary course and forbear from taking certain actions while the acquisition is pending. In addition, both SCB and CBC agreed that neither company will initiate, solicit or encourage proposals for an alternative business combination transaction or, subject to certain exceptions, enter into discussions or furnish information in connection with any proposals for alternative business combination transactions.
Completion of the Merger is subject to certain customary conditions, including (i) approval by CBC’s shareholders, (ii) approval by SCB’s shareholders, (iii) receipt of required regulatory approvals, (iv) the absence of any governmental order or law prohibiting the consummation of the Merger or the Bank Merger, (v) effectiveness of the registration statement for the SCB common stock to be issued as consideration in the Merger, (vi) subject to certain materiality thresholds, the accuracy of the representations and warranties of the other party, including the absence of Material Adverse Effect (as defined in the Merger Agreement), (vii) performance in all material respects by the other party of its obligations under the Merger Agreement, and (viii) each party’s receipt of a tax opinion to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
The Merger Agreement contains certain termination rights for both SCB and CBC, including if (i) the Merger is not consummated by January 30, 2025, (ii) the required regulatory approvals are not obtained, (iii) the approval of SCB’s shareholders or CBC’s shareholders is not obtained, or (iv) there has been a breach by the other party that is not cured such that the applicable closing conditions are not satisfied.
The Merger Agreement provides certain additional termination rights for each company related to competing acquisition proposals for both SCB and CBC and further provides that a termination fee of $9,300,000 will be payable by either SCB or CBC, as applicable, in the event of a termination of the Merger Agreement under certain circumstances.
Voting Agreements
In connection with the Merger Agreement, each of the directors of CBC and SCB entered into a voting agreement in which they agreed, among other things, to vote their shares of CBC or SCB common stock, as the case may be, in favor of the Merger.
The foregoing summary of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Agreement and Plan of Merger and Reorganization, which is attached hereto as Exhibit 2.1, and is incorporated herein by reference.
The representations, warranties and covenants of each party set forth in the Merger Agreement have been made only for purposes of, were and are solely for the benefit of the parties to, the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. In addition, the representations and warranties in the Merger Agreement (i) will not survive consummation of the Merger, and cannot be the basis for any claims under the Merger Agreement by the other party after termination of the Merger Agreement, except as the result of a willful breach, and (ii) were made only as of the date of the Merger Agreement or such other date as is specified in the Merger Agreement. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the parties’ public disclosures. Accordingly, the Merger Agreement is included with this filing only to provide investors with information regarding the terms of the Merger Agreement, and not to provide investors with any other factual information regarding SCB or CBC or their respective businesses. The Merger Agreement should not be read alone, but should instead be read in conjunction with the other information regarding SCB, CBC, and their respective businesses, the Merger Agreement and the Merger that will be contained in, or incorporated by reference into, the registration statement on Form S-4 of SCB that will include a joint proxy statement of SCB and CBC and a prospectus of SCB, as well as in the Forms 10-K, Forms 10-Q and other filings that SCB and CBC make with the Securities and Exchange Commission (the “SEC”).
| Item 5.02 | Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers |
On January 30, 2024, SCB and SCB Bank entered into an Employment Agreement with David I. Rainer, which will become effective as of and subject to the Effective Time, pursuant to which he will serve as Executive Chairman of SCB and SCB Bank (the “Post-Merger Employment Agreement”). The Post-Merger Employment Agreement provides for a term of employment for four years in the role of Executive Chairman with an initial base salary of $55,000 per month, subject to review and adjustment, but not reduction, at the discretion of SCB’s board of directors, and Mr. Rainer’s participation in SCB’s management incentive plan, with Mr. Rainer’s specific acknowledgement that he is subject to SCB’s incentive compensation clawback policy. After the initial four years, Mr. Rainer’s employment will continue for one additional year as an Executive Director with a base salary of the greater of $8,333.33 per month or the then current fees for SCB and SCB Bank board members, and Mr. Rainer will remain a director of SCB and SCB Bank. Upon the Post-Merger Employment Agreement becoming effective, Mr. Rainer will be granted a restricted share unit award equivalent to $750,000 of SCB common stock, subject to vesting ratably over five years. Mr. Rainer will participate in SCB Bank’s vacation and time off policy and will be eligible to participate in all group medical and life insurance benefits in accordance with SCB Bank’s employee benefits policy. An automobile allowance of $1,500 will be provided to Mr. Rainer, and he will also be entitled to SCB Bank’s general benefit plans. The Post-Merger Employment Agreement provides that Mr. Rainer will be entitled to certain severance benefits in the event of certain terminations of his employment or his resignation for “good reason” as defined in the Post-Merger Employment Agreement. Generally, if Mr. Rainer is terminated without cause or he resigns for good reason he will be entitled to 12 months’ then current base salary and health insurance premiums for 12 months for himself and his dependents. In the context of a change in control transaction during his employment term, if Mr. Rainer is terminated or resigns for good reason while serving as Executive Chairman, or if a change in control is announced while he serves as an Executive Director and the change in control consummates, he will be entitled to 36 months’ of his then current base salary (or during his tenure as an Executive Director, his final salary as Executive Chairman), plus three times the average of his aggregate annual bonus paid or payable in the three prior calendar years (or during his tenure as an Executive Director, the final three years as Executive Chairman), plus six months’ health insurance premiums for himself and his dependents. The foregoing summary of the Post-Merger Employment Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Post-Merger Employment Agreement, which is attached hereto as Exhibit 10.1, and is incorporated herein by reference.
| Item 7.01 | Regulation FD Disclosure |
On January 30, 2024, SCB and CBC issued a joint press release announcing the execution of the Merger Agreement. A copy of the press release is attached to this report as Exhibit 99.1 and is incorporated herein by reference. In addition, SCB and CBC have prepared an investor presentation regarding the transactions contemplated by the Merger Agreement, which it expects to use in connection with presentations to analysts and investors. The presentation is attached to this report as Exhibit 99.2 and is incorporated herein by reference.
The information in this Item 7.01 and Exhibits 99.1 and 99.2 are furnished and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor will it be deemed incorporated by reference in any filing under the Securities Act, except as may be expressly set forth by specific reference in such document or filing.
| Item 8.01 | Other Events |
On January 30, 2024, SCB and SCB Bank entered into an Employment Agreement with Steven Shelton, which will become effective as of and subject to the Effective Time, pursuant to which he will serve as Chief Executive Officer of SCB and SCB Bank (the “Shelton Employment Agreement”). The Shelton Employment Agreement provides for a term of employment for four years and automatically renews for a single one-year term absent notice of termination given by either Mr. Shelton or SCB or SCB Bank, base salary of $50,833.33 per month, subject to review and adjustment, but not reduction, at the discretion of SCB’s board of directors, and Mr. Shelton’s participation in SCB’s management incentive plan, with Mr. Shelton’s specific acknowledgement that he is subject to SCB’s incentive compensation clawback policy. Upon the Shelton Employment Agreement becoming effective, Mr. Shelton will be granted a restricted share unit award equivalent to $500,000 of SCB common stock, subject to vesting ratably over four years. Mr. Shelton’s supplemental executive retirement plan that he currently enjoys will be assumed by SCB and SCB Bank, but his maximum “Targeted Benefit Amount” (as defined is such current agreement) will be increased to 30%, and if he is terminated without “cause” (as defined in such current agreement) he will become immediately and fully vested. Mr. Shelton will participate in SCB Bank’s vacation and time off policy and will be eligible to participate in all group medical and life insurance benefits in accordance with SCB Bank’s employee benefits policy. An automobile allowance of $1,500 will be provided to Mr. Shelton, and he will also be entitled to SCB Bank’s general benefit plans. The Shelton Employment Agreement provides that Mr. Shelton will be entitled to certain severance benefits in the event of certain terminations of his employment or his resignation for “good reason” as defined in the Shelton Employment Agreement. Generally, if Mr. Shelton is terminated without cause or he resigns for good reason he will be entitled to twelve months’ then current base salary and health insurance premiums for twelve months for himself and his dependents. However, if Mr. Shelton is terminated without cause within the first three years of his employment with SCB and SCB Bank, he will be entitled to the change in control benefit under his current employment agreement In the context of a change in control transaction, if Mr. Shelton is terminated or resigns for good reason, or if the initial term of the Shelton Employment Agreement expires as a result of non-renewal by SCB Bank, he will be entitled to 24 months’ of his then current base salary, plus two times the average of his aggregate annual bonus paid or payable in the three prior calendar years, plus six months’ health insurance premiums for himself and his dependents. The foregoing summary of the Shelton Employment Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Shelton Employment Agreement, which is attached hereto as Exhibit 10.2, and is incorporated herein by reference.
On January 30, 2024, SCB and SCB Bank entered into a Termination and Waiver Agreement with Thomas A. Sa, which terminates his existing employment agreement with CBC and CBC Bank effective as of the Effective Time, waives certain rights to severance compensation Mr. Sa has under his current employment agreement with CBC and CBC Bank in the event of a change in control, provides for terms of employment for Mr. Sa with SCB and SCB Bank after the Effective Time, and includes a change in control agreement for Mr. Sa based on SCB’s general form of such agreement(the “CIC Agreement”), with such employment terms and change in control agreement becoming effective as of and subject to the Effective Time (the employment terms, CIC Agreement and Termination and Waiver Agreement collectively referred to as the “Termination and Waiver Agreement”). Under the Termination and Waiver Agreement, Mr. Sa will serve as SCB and SCB Bank’s EVP Chief Operating Officer at a base salary of $35,416.66 per month, and will participate in SCB’s management incentive plan. Upon the Effective Time, Mr. Sa will be granted a restricted share unit award equivalent to $300,000 of SCB common stock, subject to vesting ratably over three years. Mr. Sa’s supplemental executive retirement plan that he currently enjoys will be assumed by SCB and SCB Bank. Mr. Sa will participate in SCB Bank’s vacation and time off policy and will be eligible to participate in all group medical and life insurance benefits in accordance with SCB Bank’s employee benefits policy. An automobile allowance of $900 will be provided to Mr. Sa, and he will also be entitled to SCB Bank’s general benefit plans. The Termination and Waiver Agreement provides that Mr. Sa will be entitled to certain severance benefits in the event of certain terminations of his employment or his resignation for “good reason” as defined in the CIC Agreement. Generally, if Mr. Sa is terminated without cause during the first two years of his employment with SCB and SCB Bank, he will be entitled to the change in control benefit under his current employment agreement. Under the CIC Agreement, in the context of a change in control transaction, if Mr. Sa is terminated or resigns for good reason, he will be entitled to two times his then current annual base salary, plus two times the average of his aggregate annual bonus paid or payable in the three prior calendar years. The foregoing summary of the Termination and Waiver Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Termination and Waiver Agreement, which is attached hereto as Exhibit 10.3, and is incorporated herein by reference.
FORWARD-LOOKING STATEMENTS
This communication may contain certain forward-looking statements, including but not limited to certain plans, expectations, projections and statements about the benefits of the proposed Merger, the timing of completion of the Merger, and other statements that are not historical facts. Such statements are subject to numerous assumptions, risks, and uncertainties. All statements other than statements of historical fact, including statements about beliefs and expectations, are forward-looking statements. Forward-looking statements may be identified by words such as “expect,” “anticipate,” “believe,” “intend,” “estimate,” “plan,” “target,” “goal,” or similar expressions, or future or conditional verbs such as “will,” “may,” “might,” “should,” “would,” “could,” or similar variations. The forward-looking statements are intended to be subject to the safe harbor provided by the Private Securities Litigation Reform Act of 1995.
Factors that could cause or contribute to results differing from those in or implied in the forward-looking statements include but are not limited to the occurrence of any event, change or other circumstances that could give rise to the right of SCB or CBC to terminate their agreement with respect to the Merger; the outcome of any legal proceedings that may be instituted against SCB or CBC; delays in completing the Merger; the failure to obtain necessary regulatory approvals (and the risk that such approvals impose conditions that could adversely affect the combined company or the expected benefits of the Merger); the failure to obtain shareholder approvals or to satisfy any of the other conditions to the Merger on a timely basis or at all; the ability to complete the Merger and integration of SCB and CBC successfully; costs being greater than anticipated; cost savings being less than anticipated; changes in economic conditions; the risk that the Merger disrupts the business of SCB, CBC or both; difficulties in retaining senior management, employees or customers; the impact of bank failures or other adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks; and other factors that may affect the future results of SCB and CBC. Additional factors that could cause results to differ materially from those described above can be found in SCB’s amended Registration Statement on Form 10 filed on April 24, 2023, which is on file with the Securities and Exchange Commission (the “SEC”) and is available in the “Investor Relations” section of SCB’s website, www.banksocal.com, in CBC’s Annual Report on Form 10-K for the year ended December 31, 2022 which is on file with the SEC and is available in the “Investor Relations” section of CBC’s website, www.californiabankofcommerce.com, and in other documents that SCB and CBC file with the SEC. Investors may obtain free copies of these documents and other documents filed with the SEC on its website at www.sec.gov.
All forward-looking statements speak only as of the date they are made and are based on information available at that time. Neither SCB nor CBC assumes any obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with the Merger, SCB will file with the SEC a Registration Statement on Form S-4 that will include a joint proxy statement of SCB and CBC and a prospectus of SCB, as well as other relevant documents concerning the proposed transaction. Certain matters in respect of the Merger will be submitted to SCB’s and CBC’s shareholders for their consideration. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
Investors and shareholders are urged to read the registration statement and the joint proxy statement/prospectus regarding the Merger when they become available and any other relevant documents filed with the SEC in connection with the Merger because they will contain important information.
Investors will be able to obtain a free copy of the definitive joint proxy statement/prospectus, as well as other filings containing information about SCB and CBC, without charge, at the SEC’s website, www.sec.gov. Copies of the joint proxy statement/prospectus and the filings with the SEC that will be incorporated by reference in the joint proxy statement/prospectus can also be obtained, without charge, in the “Investor Relations” section of SCB’s website at www.banksocal.com (for SCB’s filings) and in the “Investor Relations” section of CBC’s website, www.californiabankofcommerce.com (for CBC’s filings).
PARTICIPANTS IN THE SOLICITATION
SCB, CBC and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of SCB and CBC in connection with the Merger. Information regarding SCB’s directors and executive officers and their ownership of SCB common stock is available in SCB’s definitive proxy statement for its 2023 annual meeting of shareholders filed with the SEC on June 13, 2023 and other documents filed by SCB with the SEC. Information regarding CBC’s directors and executive officers and their ownership of CBC common stock is available in CBC’s definitive proxy statement for its 2023 annual meeting of shareholders filed with the SEC on April 20, 2023 and other documents filed by CBC with the SEC. Other information regarding the participants in the proxy solicitation and their ownership of common stock will be contained in the joint proxy statement/prospectus relating to the Merger. Free copies of these documents may be obtained as described in the preceding paragraph.
Section 9 - Financial Statements and Exhibits
| Item 9.01 | Financial Statements and Exhibits |
* Certain schedules and exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K promulgated by the SEC. SCB agrees to furnish a copy of any omitted schedule or exhibit to the SEC upon request.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: | January 30, 2024 | SOUTHERN CALIFORNIA BANCORP | ||
| By: | /s/ David I. Rainer | |||
| David I. Rainer | ||||
| Chief Executive Officer | ||||
Exhibit 2.1
EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
DATED AS OF JANUARY 30, 2024
BY AND BETWEEN
SOUTHERN CALIFORNIA BANCORP
AND
CALIFORNIA BANCORP
TABLE OF CONTENTS
| Page | |||
| ARTICLE I CERTAIN DEFINITIONS | 2 | ||
| 1.01 | Certain Definitions | 2 | |
| ARTICLE II THE MERGER | 10 | ||
| 2.01 | The Merger | 10 | |
| 2.02 | Closing; Effective Time | 11 | |
| 2.03 | Bank Merger | 11 | |
| ARTICLE III CONSIDERATION AND EXCHANGE PROCEDURES | 12 | ||
| 3.01 | Effect on Capital Stock | 12 | |
| 3.02 | Exchange Procedures | 12 | |
| 3.03 | Rights as Shareholders | 15 | |
| 3.04 | No Fractional Shares | 15 | |
| 3.05 | Anti-Dilution Provisions | 15 | |
| 3.06 | Withholding Rights | 15 | |
| 3.07 | CBC Equity Awards. | 15 | |
| ARTICLE IV ACTIONS PENDING ACQUISITION | 17 | ||
| 4.01 | Conduct of Businesses Prior to the Effective Time | 17 | |
| 4.02 | Forbearances | 17 | |
| ARTICLE V REPRESENTATIONS AND WARRANTIES OF CBC | 20 | ||
| 5.01 | Corporate Organization | 20 | |
| 5.02 | Capitalization | 21 | |
| 5.03 | Authority; No Violation. | 22 | |
| 5.04 | Consents and Approvals | 23 | |
| 5.05 | Reports. | 24 | |
| 5.06 | Financial Statements. | 25 | |
| 5.07 | Broker’s Fees | 26 | |
| 5.08 | Absence of Certain Changes or Events. | 26 | |
| 5.09 | Legal Proceedings. | 26 | |
| 5.10 | Taxes and Tax Returns | 27 | |
| 5.11 | Employees and Employee Benefit Plans. | 28 | |
| 5.12 | Compliance with Applicable Law | 31 | |
| 5.13 | Certain Contracts. | 32 | |
| 5.14 | Agreements with Regulatory Agencies | 33 | |
| 5.15 | Risk Management Instruments | 33 | |
| 5.16 | Environmental Matters | 34 | |
| 5.17 | Investment Securities and Commodities. | 34 | |
| 5.18 | Real Property | 34 | |
| 5.19 | Intellectual Property | 35 | |
| 5.20 | Related Party Transactions | 35 | |
| 5.21 | Takeover Laws | 35 | |
| 5.22 | Reorganization | 35 | |
| 5.23 | Opinion of Financial Advisor | 36 | |
| 5.24 | CBC Information | 36 | |
| 5.25 | Loan Portfolio. | 36 | |
| 5.26 | Insurance | 37 | |
| 5.27 | Information Security | 37 | |
| 5.28 | No Other Representations or Warranties. | 37 | |
| -i- |
| ARTICLE VI REPRESENTATIONS AND WARRANTIES OF SCB | 38 | ||
| 6.01 | Corporate Organization | 38 | |
| 6.02 | Capitalization. | 39 | |
| 6.03 | Authority; No Violation. | 40 | |
| 6.04 | Consents and Approvals | 41 | |
| 6.05 | Reports. | 41 | |
| 6.06 | Financial Statements. | 42 | |
| 6.07 | Broker’s Fees | 44 | |
| 6.08 | Absence of Certain Changes or Events. | 44 | |
| 6.09 | Legal Proceedings. | 44 | |
| 6.10 | Taxes and Tax Returns | 45 | |
| 6.11 | Employees and Employee Benefit Plans. | 45 | |
| 6.12 | Compliance with Applicable Law | 49 | |
| 6.13 | Certain Contracts. | 50 | |
| 6.14 | Agreements with Regulatory Agencies | 51 | |
| 6.15 | Risk Management Instruments | 52 | |
| 6.16 | Environmental Matters | 52 | |
| 6.17 | Investment Securities and Commodities. | 52 | |
| 6.18 | Real Property | 53 | |
| 6.19 | Intellectual Property | 53 | |
| 6.20 | Related Party Transactions | 53 | |
| 6.21 | Takeover Laws | 53 | |
| 6.22 | Reorganization | 54 | |
| 6.23 | Opinion of Financial Advisor | 54 | |
| 6.24 | SCB Information | 54 | |
| 6.25 | Loan Portfolio. | 54 | |
| 6.26 | Insurance | 55 | |
| 6.27 | Information Security | 55 | |
| 6.28 | No Other Representations or Warranties. | 55 | |
| ARTICLE VII COVENANTS | 56 | ||
| 7.01 | Shareholder Approvals | 56 | |
| 7.02 | Preparation of the Proxy Statement/Prospectus and Registration Statement | 58 | |
| 7.03 | Regulatory Matters | 59 | |
| 7.04 | Legal Conditions to Merger | 60 | |
| 7.05 | Public Announcements | 60 | |
| 7.06 | Access; Information. | 61 | |
| 7.07 | Acquisition Proposals | 62 | |
| 7.08 | Nasdaq Listing | 63 | |
| 7.09 | Indemnification. | 63 | |
| 7.10 | Benefit Plans | 64 | |
| 7.11 | Corporate Governance | 67 | |
| -ii- |
| 7.12 | Notification of Certain Matters | 67 | |
| 7.13 | Antitakeover Statutes | 68 | |
| 7.14 | Consents | 68 | |
| 7.15 | Exemption from Liability Under Section 16(b) | 68 | |
| 7.16 | Shareholder Litigation and Protests | 68 | |
| 7.17 | Change of Method. | 69 | |
| 7.18 | Tax Treatment | 69 | |
| ARTICLE VIII CONDITIONS TO CONSUMMATION OF THE MERGER | 69 | ||
| 8.01 | Conditions to Each Party’s Obligation to Effect the Merger | 69 | |
| 8.02 | Conditions to Obligation of CBC | 70 | |
| 8.03 | Conditions to Obligation of SCB | 71 | |
| ARTICLE IX TERMINATION | 72 | ||
| 9.01 | Termination | 72 | |
| 9.02 | Effect of Termination. | 73 | |
| ARTICLE X MISCELLANEOUS | 75 | ||
| 10.01 | Survival | 75 | |
| 10.02 | Waiver; Amendment | 75 | |
| 10.03 | Counterparts | 75 | |
| 10.04 | Governing Law and Venue | 75 | |
| 10.05 | Waiver of Jury Trial | 76 | |
| 10.06 | Expenses | 76 | |
| 10.07 | Notices | 76 | |
| 10.08 | Entire Understanding; Limited Third Party Beneficiaries | 77 | |
| 10.09 | Severability | 77 | |
| 10.10 | Enforcement of the Agreement | 77 | |
| 10.11 | Interpretation | 78 | |
| 10.12 | Assignment | 78 | |
| 10.13 | Confidential Supervisory Information | 78 | |
| 10.14 | Delivery by Electronic Transmission. | 78 | |
| -iii- |
| EXHIBIT A | Form of CBC Voting Agreement |
| EXHIBIT B | Form of SCB Voting Agreement |
| EXHIBIT C | Form of SCB Bylaw Amendment |
| EXHIBIT D | Form of Agreement of Merger |
| EXHIBIT E | Form of Bank Merger Agreement |
| -iv- |
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of January 30, 2024 (this “Agreement”), by and between Southern California Bancorp, a California corporation (“SCB”), and California BanCorp, a California corporation (“CBC”).
RECITALS
WHEREAS, upon the terms and subject to the conditions of this Agreement and in accordance with the California General Corporation Law (the “CGCL”), CBC will merge with and into SCB (the “Merger”), with SCB as the surviving corporation in the Merger (sometimes referred to in such capacity as the “Surviving Corporation”).
WHEREAS, immediately following the Merger, California Bank of Commerce, a California state-chartered bank and wholly-owned subsidiary of CBC (“CBC Bank”), will merge with and into Bank of Southern California, N.A., a national banking association and wholly-owned subsidiary of SCB (“BSC Bank”), with BSC Bank as the surviving bank (the “Bank Merger”).
WHEREAS, the respective boards of directors of each of SCB and CBC have determined that this Agreement and the transactions contemplated hereby are fair to and in the best interests of their respective companies and their respective shareholders, and have approved, adopted and declared advisable this Agreement and the transactions contemplated hereby, including the Merger, all upon the terms and subject to the conditions set forth herein.
WHEREAS, for federal income tax purposes, it is the intention of the parties to this Agreement that the Merger be treated as a “reorganization” under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and that this Agreement constitute a “plan of reorganization” within the meaning of Sections 354 and 361 of the Code and Treasury Regulation Section 1.368-2(g).
WHEREAS, as a material inducement to SCB to enter into this Agreement, and simultaneously with the execution of this Agreement, each member of the board of directors of CBC has entered into a Voting Agreement, substantially in the form attached hereto as Exhibit A (collectively, the “CBC Voting Agreements”), pursuant to which each such Person has agreed, among other things, to vote all shares of CBC Common Stock owned by such Person in favor of approval of this Agreement and the transactions contemplated hereby.
WHEREAS, as a material inducement to CBC to enter into this Agreement, and simultaneously with the execution of this Agreement, each member of the board of directors of SCB has entered into a Voting Agreement, substantially in the form attached hereto as Exhibit B (collectively, the “SCB Voting Agreements”), pursuant to which each such Person has agreed, among other things, to vote all shares of SCB Common Stock owned by such Person in favor of (A) approval of this Agreement and the transactions contemplated hereby, including the issuance of shares of SCB Common Stock in connection with the Merger as contemplated by this Agreement, and (B) the SCB Bylaw Amendment.
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NOW, THEREFORE, in consideration of the premises and of the mutual covenants, representations, warranties and agreements contained herein the parties to this Agreement agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 Certain Definitions. The following terms are used in this Agreement with the meanings set forth below:
“Acquisition Proposal” means, with respect to SCB or CBC, as applicable, (A) any proposal, offer or inquiry with respect to a merger, joint venture, partnership, consolidation, dissolution, liquidation, tender offer, recapitalization, reorganization, share exchange, business combination or similar transaction involving such party or any of its Subsidiaries (whose assets, individually, or in the aggregate, constitute 25% or more of the consolidated assets of the party) that if consummated, would result in any Person (or the shareholders of any Person) owning 25% or more of the total voting power of such party or the surviving entity in a merger involving such party or the resulting parent company of such surviving entity and (B) any proposal or offer to acquire in any manner, directly or indirectly, 25% or more of the total voting power of any class of equity securities of such party or those of any of its Subsidiaries (whose assets, individually, or in the aggregate, constitute 25% or more of the consolidated assets of the party) or 25% or more of such party’s consolidated total assets (including equity securities of its Subsidiaries), in each case other than the transactions contemplated by this Agreement.
“Adjusted Shareholder’s Equity” means the relevant party’s shareholders’ equity as of the month end prior to the Closing Date, excluding documented transaction expenses related to this Agreement and the transactions contemplated hereby (including, without limitation, all fees and expenses of all attorneys, accountants, investment bankers and other advisors and agents for such party for services rendered solely in connection with the transactions contemplated by this Agreement paid or accrued by such party prior to the Effective Time, and all amounts paid or accrued in connection with any litigation related to the transactions contemplated in this Agreement, including any amounts paid in settlement thereof), and without giving effect to potential purchase accounting marks, and excluding changes in the accumulated other comprehensive income of the securities portfolio from the amount reported as of December 31, 2023.
“Affiliate” means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by or is under common control with such Person. For purposes of this definition, “control” of a Person shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
“Agreement” means this Agreement, as amended or modified from time to time in accordance with Section 10.02.
“Agreement of Merger” has the meaning set forth in Section 2.02.
“Assumed Award” has the meaning set forth in Section 3.07(c).
“Bank Merger” has the meaning set forth in the recitals.
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“Bank Merger Agreement” has the meaning set forth in Section 2.03.
“Bankruptcy and Equity Exception” has the meaning set forth in Section 5.03(a).
“BHC Act” means the Bank Holding Company Act of 1956, as amended.
“BSC Articles” means the Articles of Association of BSC, as amended.
“Book-Entry Shares” means shares of CBC Common Stock held in book-entry form immediately prior to the Effective Time.
“BSC Bank” has the meaning set forth in the recitals.
“BSC Bank Board” means the Board of Directors of BSC Bank.
“Business Day” means Monday through Friday of each week, except a legal holiday recognized as such by the U. S. Government or any day on which banking institutions in the State of California are authorized or obligated to close.
“CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act, as amended.
“CBC” has the meaning set forth in the preamble to this Agreement.
“CBC 401(k) Plan” has the meaning set forth in Section 7.10(c).
“CBC Articles” means the Articles of Incorporation of CBC, as amended.
“CBC Bank” has the meaning set forth in the recitals.
“CBC Bank Board” means the Board of Directors of CBC Bank.
“CBC Benefit Plans” has the meaning set forth in Section 5.11(a).
“CBC Board” means the Board of Directors of CBC.
“CBC Board Recommendation” has the meaning set forth in Section 7.01(b).
“CBC Bylaws” means the Bylaws of CBC, as amended.
“CBC Common Stock” means the common stock, no par value per share, of CBC.
“CBC Contract” has the meaning set forth in Section 5.13(a).
“CBC Disclosure Schedule” has the meaning set forth in Article V.
“CBC Equity Awards” means the CBC RSUs and CBC Options.
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“CBC Equity Plans” means the California Bank of Commerce 2007 Equity Incentive Plan, the California Bank of Commerce 2014 Equity Incentive Plan, and the California BanCorp 2017 Equity Incentive Plan, each as amended.
“CBC Insiders” has the meaning set forth in Section 7.15.
“CBC Meeting” has the meaning set forth in Section 7.01(a).
“CBC Options” means options to purchase shares of CBC Common Stock granted under a CBC Equity Plan.
“CBC Owned Properties” has the meaning set forth in Section 5.18.
“CBC Preferred Stock” means the preferred stock, no par value per share, of CBC.
“CBC Qualified Plans” has the meaning set forth in Section 5.11(d).
“CBC Real Property” has the meaning set forth in Section 5.18.
“CBC Regulatory Agreement” has the meaning set forth in Section 5.14.
“CBC Reports” has the meaning set forth in Section 5.05(b).
“CBC RSUs” means restricted stock units issued under a CBC Equity Plan.
“CBC Shareholder Approval” means the approval of the principal terms of this Agreement by the affirmative vote or requisite consent of a majority of the outstanding shares of CBC Common Stock entitled to vote thereon at the CBC Meeting or any adjournment or postponement thereof.
“CBC Voting Agreements” has the meaning set forth in the recitals.
“Certificate” means any certificate which immediately prior to the Effective Time represented shares of CBC Common Stock.
“CFC” means the California Financial Code, as amended.
“CGCL” has the meaning set forth in the recitals.
“CIBC Act” means the Change in Bank Control Act of 1978, as amended.
“Closing” and “Closing Date” have the meanings set forth in Section 2.02.
“Code” has the meaning set forth in the recitals.
“Confidentiality Agreement” has the meaning set forth in Section 7.06(c).
“Continuing 401(k) Plan” has the meaning set forth in Section 7.10(c).
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“Continuing Employees” has the meaning set forth in Section 7.10(a).
“Controlled Group Liability” means any and all liabilities (1) under Title IV of ERISA, (2) under Section 302 of ERISA, (3) under Sections 412 and 4971 of the Code, and (4) as a result of a failure to comply with the group health plan continuation coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the Code.
“DFPI” means the California Department of Financial Protection and Innovation.
“Effective Time” has the meaning set forth in Section 2.02.
“End Date” has the meaning set forth in Section 9.01(c).
“Environmental Laws” has the meaning set forth in Section 5.16.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations and formal guidance issued thereunder.
“ERISA Affiliate” means, with respect to any entity, trade or business, any other entity, trade or business that is, or was at the relevant time, a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes or included the first entity, trade or business, or that is, or was at the relevant time, a member of the same “controlled group” as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
“Exchange Agent” has the meaning set forth in Section 3.02(a).
“Exchange Ratio” has the meaning set forth in Section 3.01(b).
“Excluded Shares” has the meaning set forth in Section 3.01(c).
“FDIC” means the Federal Deposit Insurance Corporation.
“FRB” means the Board of Governors of the Federal Reserve System.
“GAAP” means accounting principles generally accepted in the United States of America.
“Governmental Entity” means any court, administrative agency or commission or other governmental authority or instrumentality or self-regulatory organization.
“Indemnified Parties” and “Indemnifying Party” have the meanings set forth in Section 7.09(a).
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“Intellectual Property” means trademarks, service marks, brand names, internet domain names, logos, symbols, certification marks, trade dress and other indications of origin, the goodwill associated with the foregoing and registrations in any jurisdiction of, and applications in any jurisdiction to register, the foregoing, including any extension, modification or renewal of any such registration or application; patents, applications for patents (including divisions, continuations, continuations in part and renewal applications), all improvements thereto, and any renewals, extensions or reissues thereof, in any jurisdiction; trade secrets; and copyright registrations or applications for registration of copyrights in any jurisdiction, and any renewals or extensions thereof.
“Law” means any applicable federal, state, local or foreign statute, law, code, regulation, ordinance, rule, judgment, injunction, order, decree or policy, agency requirement, license, permit, or guideline of any Governmental Entity.
“Liens” has the meaning set forth in Section 5.02(b).
“Loans” has the meaning set forth in Section 5.25(a).
“Material Adverse Effect” means, with respect to SCB, CBC or the Surviving Corporation, as the case may be, any effect, change, event, circumstance, condition, occurrence or development that, either individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on (i) the business, properties, assets, liabilities, results of operations or financial condition of such party and its Subsidiaries taken as a whole (provided, that, with respect to this clause (i), Material Adverse Effect shall be deemed to include a decrease in Adjusted Shareholder’s Equity from that reported for December 31, 2023, by 5% or more, but shall not be deemed to include the impact of (A) changes, after the date hereof, in GAAP or applicable regulatory accounting requirements, (B) changes, after the date hereof, in laws, rules or regulations of general applicability to companies in the industries in which such party and its Subsidiaries operate, or interpretations thereof by courts or Governmental Entities, (C) changes, after the date hereof, in global, national or regional political conditions (including the outbreak of war or acts of terrorism) or in economic or market (including equity, credit and debt markets, as well as changes in interest rates) conditions affecting the financial services industry generally and not specifically relating to such party or its Subsidiaries, (D) changes, after the date hereof, resulting from hurricanes, earthquakes, tornados, floods or other natural disasters or from any outbreak of any disease or other public health event, (E) public disclosure of the execution of this Agreement, public disclosure or consummation of the transactions contemplated hereby (including any effect on a party’s relationships with its customers or employees), (F) any shareholder litigation arising out of, related to, or in connection with this Agreement, the Merger or the Bank Merger that is brought or threatened against a party or any members of a party’s Board of Directors from and following the date of this Agreement and prior to the Effective Time (it being understood and agreed that the foregoing shall not apply for purposes of the representations and warranties in Sections 5.03(b), 5.04, 5.11(j), 6.03(b), 6.04 or 6.11(j)) or actions expressly required by this Agreement or that are taken with the prior written consent of the other party in contemplation of the transactions contemplated hereby, (G) a decline in the trading price of a party’s common stock or the failure, in and of itself, to meet earnings projections or internal financial forecasts (it being understood that the underlying causes of such decline or failure may be taken into account in determining whether a Material Adverse Effect has occurred, except to the extent otherwise excepted by this proviso) or (H) the expenses incurred by SCB or CBC in negotiating, documenting, effecting and consummating the transactions contemplated by this Agreement; except, with respect to subclauses (A), (B), (C) or (D) to the extent that the effects of such change are materially disproportionately adverse to the business, properties, assets, liabilities, results of operations or financial condition of such party and its Subsidiaries, taken as a whole, as compared to other companies in the industry in which such party and its Subsidiaries operate) or (ii) the ability of such party to timely consummate the transactions contemplated hereby.
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“Materially Burdensome Regulatory Condition” has the meaning set forth in Section 7.03(b).
“Maximum Insurance Amount” has the meaning set forth in Section 7.09(c).
“Merger” has the meaning set forth in the recitals.
“Merger Consideration” means the aggregate number of whole shares of SCB Common Stock, plus cash in lieu of any fractional share interest, payable to the holders of CBC Common Stock in connection with the Transaction.
“Multiemployer Plan” has the meaning set forth in Section 5.11(f).
“Multiple Employer Plan” has the meaning set forth in Section 5.11(f).
“Nasdaq” means the Nasdaq Capital Market or such other securities exchange on which the SCB Common Stock may be listed.
“New Benefit Plans” has the meaning set forth in Section 7.10(a).
“OCC” means the Office of the Comptroller of the Currency.
“Option Cashout Price” has the meaning set forth in Section 3.07(a).
“Option Consideration” has the meaning set forth in Section 3.07(a).
“OREO” means other real estate owned.
“Payroll Processor” has the meaning set forth in Section 3.07(a).
“Pension Plan” has the meaning set forth in Section 5.11(f).
“Permitted Encumbrance” has the meaning set forth in Section 5.18.
“Person” means any individual, bank, corporation, partnership, association, joint-stock company, business trust, limited liability company or unincorporated organization.
“Personal Data” has the meaning set forth in Section 5.12.
“Proxy Statement/Prospectus” has the meaning set forth in Section 7.02(a).
“Recommendation Change” has the meaning set forth in Section 7.01(b).
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“Registration Statement” has the meaning set forth in Section 7.02(a).
“Regulatory Agency” means any state regulatory authority, the FRB, the FDIC, the OCC, any foreign regulatory authority, the SEC and any self-regulatory organization.
“Representatives” has the meaning set forth in Section 7.07(a).
“Requisite Regulatory Approvals” means all regulatory authorizations, consents, orders, approvals or waivers (and the expiration or termination of all statutory waiting periods in respect thereof) (x) from the FRB and the OCC, as may be required, and (y) set forth in Section 5.04 and Section 6.04 that are necessary to consummate the Transaction, or those the failure of which to be obtained would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Surviving Corporation.
“Retiree Welfare Plan” means any “employee welfare plan” within the meaning of Section 3(1) of ERISA providing for retiree health and life benefits, other than group health plan continuation coverage as may be required under Section 4980B of the Code or Part 6 of Subtitle B of Title I of ERISA, or under any analogous continuation of coverage provisions of the Laws of any state or locality.
“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002.
“SCB” has the meaning set forth in the preamble to this Agreement.
“SCB 401(k) Plan” has the meaning set forth in Section 7.10(c).
“SCB Articles” means the Articles of Incorporation of SCB, as amended.
“SCB Average Closing Price” means the volume weighted average closing price of shares of SCB Common Stock quoted on the Nasdaq on each of the last ten (10) trading days ending on the day which is the fifth trading date immediately preceding the date that the Effective Time occurs.
“SCB Benefit Plans” has the meaning set forth in Section 6.11(a).
“SCB Board” means the Board of Directors of SCB.
“SCB Board Recommendation” has the meaning set forth in Section 7.01(b).
“SCB Bylaw Amendment” means an amendment to the SCB Bylaws to increase the range of authorized directors of SCB from the current range of not less than six (6) nor more than eleven (11), to a new range of not less than seven (7) nor more than thirteen (13), in substantially the form attached hereto as Exhibit C.
“SCB Bylaws” means the Bylaws of SCB, as amended.
“SCB Common Stock” means the common stock, no par value per share, of SCB.
“SCB Contract” has the meaning set forth in Section 6.13(a).
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“SCB Disclosure Schedule” has the meaning set forth in Article VI.
“SCB Equity Awards” mean the SCB RSUs and SCB Options.
“SCB Equity Plan” means the Southern California Bancorp 2019 Omnibus Equity Incentive Plan, as amended.
“SCB Meeting” has the meaning set forth in Section 7.01(a).
“SCB Options” means options to purchase shares of SCB Common Stock granted under a SCB Equity Plan.
“SCB Owned Properties” has the meaning set forth in Section 6.18.
“SCB Preferred Stock” means the preferred stock, no par value per share, of SCB.
“SCB Qualified Plans” has the meaning set forth in Section 6.11(d).
“SCB Real Property” has the meaning set forth in Section 6.18.
“SCB Regulatory Agreement” has the meaning set forth in Section 6.14.
“SCB Reports” has the meaning set forth in Section 6.05(b).
“SCB RSUs” means restricted stock units issued under an SCB Equity Plan.
“SCB Shareholder Approval” means the (i) approval of the principal terms of this Agreement by the affirmative vote or requisite consent of a majority of the outstanding shares of SCB Common Stock entitled to vote thereon at the SCB Meeting or any adjournment or postponement thereof, and (ii) approval of the SCB Bylaw Amendment by the affirmative vote or requisite consent of a majority of the outstanding shares of SCB Common Stock entitled to vote thereon at the SCB Meeting or any adjournment or postponement thereof.
“SCB Voting Agreements” has the meaning set forth in the recitals.
“SEC” means the U.S. Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
“Security Breach” has the meaning set forth in Section 5.12.
“SRO” has the meaning set forth in Section 5.05(a).
“Subsidiary,” when used with respect to any Person, means any subsidiary of such Person within the meaning ascribed to such term in either Rule 1-02 of Regulation S-X promulgated by the SEC or the BHC Act.
“Surviving Bank” has the meaning set forth in Section 2.03.
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“Surviving Corporation” has the meaning set forth in the recitals.
“Tax” and “Taxes” mean all federal, state, local or foreign income, gross income, gains, gross receipts, sales, use, ad valorem, goods and services, capital, production, transfer, franchise, windfall profits, license, withholding, payroll, employment, disability, employer health, excise, estimated, severance, stamp, occupation, property (real or personal), real property gains, escheat, abandoned or unclaimed property, registration, alternative minimum, add-on minimum, value added, natural resources, social security, environmental, custom duties, unemployment or other taxes of any kind whatsoever, together with any interest, additions or penalties thereto and any interest in respect of such interest and penalties.
“Tax Returns” means any return (including any amended return), declaration or other report (including elections, declarations, claims for refunds, schedules, estimates and information returns) with respect to any Taxes (including estimated taxes).
“Terminated 401(k) Plan” has the meaning set forth in Section 7.10(c).
“Termination Fee” has the meaning set forth in Section 9.02(b)(i).
“Transaction” means the Merger, the Bank Merger and any other transactions contemplated by this Agreement.
“Treasury Regulations” means the final and temporary regulations promulgated under the Code by the United States Department of the Treasury.
ARTICLE II
THE MERGER
2.01 The Merger.
(a) The Merger. Subject to the terms and conditions of this Agreement, at the Effective Time, CBC shall merge with and into SCB in accordance with the applicable provisions of the CGCL, and the separate corporate existence of CBC shall cease. SCB shall be the Surviving Corporation and shall survive and continue to exist as a corporation incorporated under the Laws of the State of California.
(b) Articles of Incorporation and Bylaws. The articles of incorporation and bylaws of the Surviving Corporation immediately after the Merger shall be the SCB Articles and the SCB Bylaws as in effect immediately prior to the Merger, except that the SCB Articles as in effect immediately prior to the Merger shall be amended to provide that, effective as of the Effective Time, the name of the Surviving Corporation shall be changed to a name mutually acceptable to SCB and CBC as determined pursuant to Section 7.11(b).
(c) Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in accordance with the CGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of CBC shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of CBC shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation.
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(d) Additional Actions. If, at any time after the Effective Time, the Surviving Corporation shall consider that any further assignments or assurances in law or any other acts are necessary or desirable to (i) vest, perfect, record or otherwise confirm the Surviving Corporation’s right, title or interest in, to or under any of the rights, properties or assets of CBC acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger, or (ii) otherwise carry out the purposes of this Agreement, CBC, and its proper officers and directors, acting in such corporate capacity and not individually, shall be deemed to have granted to the Surviving Corporation an irrevocable power of attorney to execute and deliver all such proper deeds, assignments and assurances in law and to do all acts necessary or proper to vest, perfect or confirm title to and possession of such rights, properties or assets in the Surviving Corporation and otherwise to carry out the purposes of this Agreement, and the proper officers and directors of the Surviving Corporation are fully authorized in the name of the Surviving Corporation or otherwise to take any and all such action.
2.02 Closing; Effective Time. The closing of the Merger (the “Closing”) shall take place remotely by mutual exchange of documents and signatures (or their electronic counterparts) at such time as CBC and SCB shall agree, on the date when the Effective Time is to occur (the “Closing Date”). Subject to the terms and conditions of this Agreement, the parties shall cause an agreement of merger, substantially in the form attached hereto as Exhibit D (the “Agreement of Merger”), to be filed with the Secretary of State of the State of California. Subject to the satisfaction or waiver of the conditions set forth in Article VIII (other than those conditions that by their nature are to be satisfied at the consummation of the Merger, but subject to the fulfillment or waiver of those conditions), the parties shall cause the Effective Time to occur no later than the fifth (5th) Business Day after such satisfaction or waiver (except as the parties may otherwise agree to in writing). The Merger provided for herein shall become effective at such time the Agreement of Merger is filed with the Secretary of State of the State of California in accordance with the CGCL, or such later time as may be agreed to by the parties and specified therein (the time the Merger becomes effective being the “Effective Time”).
2.03 Bank Merger. As soon as practicable after the Merger, CBC Bank shall be merged with and into BSC Bank. BSC Bank shall be the surviving entity in the Bank Merger (the “Surviving Bank”) and shall survive and continue to exist as a national banking association under the National Bank Act, as amended, and, following the Bank Merger, the separate corporate existence of CBC Bank shall cease. The BSC Articles as in effect immediately prior to the Bank Merger shall be amended to provide that, effective as of the Bank Merger, the name of the Surviving Bank shall be changed to a name mutually acceptable to SCB and CBC as determined pursuant to Section 7.11(b). The Bank Merger shall be implemented pursuant to an agreement and plan of merger, substantially in the form attached hereto as Exhibit E (the “Bank Merger Agreement”). Prior to the Effective Time, CBC shall cause CBC Bank, and SCB shall cause BSC Bank, to duly authorize, execute and deliver the Bank Merger Agreement and such other documents and certificates as are necessary to consummate the Bank Merger as soon as practicable following the Effective Time.
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ARTICLE III
CONSIDERATION AND EXCHANGE PROCEDURES
3.01 Effect on Capital Stock. At the Effective Time, by virtue of the Merger and without any action on the part of SCB, CBC or the holder of any securities of SCB or CBC:
(a) SCB Common Stock. Each share of SCB Common Stock that is issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding and shall be unchanged by the Merger.
(b) CBC Common Stock. Subject to Section 3.04 of this Agreement, each share of CBC Common Stock (other than Excluded Shares) issued and outstanding immediately prior to the Effective Time shall be converted into, and shall be cancelled in exchange for, the right to receive 1.590 shares of SCB Common Stock (the “Exchange Ratio”).
(c) Cancellation of Excluded Shares. Any shares of CBC Common Stock owned by CBC as treasury stock or owned by CBC, SCB or any of SCB’s Subsidiaries (in each case, other than shares of CBC Common Stock (i) held in trust accounts, managed accounts, mutual funds and the like, or otherwise held in a fiduciary or agency capacity, that are beneficially owned by third parties, or (ii) held, directly or indirectly, by CBC or SCB in respect of debts previously contracted) (“Excluded Shares”) shall automatically be cancelled and shall cease to exist at the Effective Time of the Merger and no consideration shall be issued in exchange therefor.
3.02 Exchange Procedures.
(a) Mailing of Transmittal Material. Provided that CBC has delivered, or caused to be delivered, to an independent exchange agent selected by SCB and reasonably acceptable to CBC (the “Exchange Agent”) all information which is reasonably necessary for the Exchange Agent to perform its obligations as specified herein, the Exchange Agent shall, promptly following the Closing Date (but in no event more than five (5) Business Days after the Closing Date), mail and otherwise make available to each holder of record of shares of CBC Common Stock immediately prior to the Effective Time, a notice and a form of letter of transmittal, in a form reasonably acceptable to, and approved in writing by, CBC (which shall specify that delivery shall be effected, and risk of loss and title to any Certificate(s) theretofore representing shares of CBC Common Stock shall pass, only upon proper delivery of such Certificate(s) to the Exchange Agent or surrender of Book-Entry Shares to the Exchange Agent), advising such holder of the effectiveness of the Merger and the procedure and instructions for surrendering to the Exchange Agent such Certificate(s) or Book-Entry Shares in exchange for a portion of the Merger Consideration to which such holder may be entitled pursuant to Section 3.01(b) hereof and any cash in lieu of any fractional shares to be paid pursuant to Section 3.04. A letter of transmittal will be properly completed only if accompanied by a Certificate or Certificates, if any, or instructions to surrender Book-Entry Shares representing all shares of CBC Common Stock covered thereby, subject to the provisions of Section 3.02(d).
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(b) SCB Deliveries. At or prior to the Effective Time, for the benefit of the holders of Certificates and/or Book-Entry Shares, SCB shall (i) deliver to the Exchange Agent evidence of shares in book entry form representing the number of shares of SCB Common Stock issuable to the holders of CBC Common Stock as the Merger Consideration, to be issued to such holders of CBC Common Stock in exchange for the surrender of their Certificates and Book-Entry Shares as provided for in this Article III, and (ii) deposit, or cause to be deposited, with the Exchange Agent cash in lieu of any fractional shares to be paid pursuant to Section 3.04. The Exchange Agent shall not be entitled to vote or exercise any rights of ownership with respect to the shares of SCB Common Stock held by it from time to time hereunder, except that it shall receive and hold all dividends or other distributions paid or distributed with respect to such shares for the account of the holders of shares of CBC Common Stock immediately prior the Effective Time entitled thereto.
(c) Exchange Agent Deliveries.
(i) Each holder of a Certificate or Certificates or Book-Entry Shares who has properly surrendered such Certificate or Certificates or Book-Entry Shares to the Exchange Agent will be entitled to (i) evidence of issuance in book entry form of the number of whole shares of SCB Common Stock into which the aggregate number of shares of CBC Common Stock previously represented by such Certificate or Certificates or Book-Entry Shares surrendered shall have been converted pursuant to this Agreement, and (ii) a check representing the amount of (A) any cash in lieu of fractional shares which such holder has the right to receive in respect of the surrendered Certificate or Certificates or Book-Entry Shares as of immediately prior to the Effective Time pursuant to the provisions of this Article III and (B) any dividends or other distributions which the holder thereof has the right to receive pursuant to Section 3.02(c)(ii) with respect to SCB Common Stock issuable in the Merger, in each case, without interest. The Exchange Agent shall accept such Certificates or Book-Entry Shares upon compliance with such reasonable terms and conditions as the Exchange Agent may impose consistent with the notice and form of letter of transmittal to effect an orderly exchange thereof in accordance with normal exchange practices.
(ii) Each outstanding Certificate or Book-Entry Share which is not surrendered to the Exchange Agent in accordance with the procedures provided for herein shall, except as otherwise herein provided, until duly surrendered to the Exchange Agent, be deemed to represent only the right to receive, upon surrender, the number of shares of SCB Common Stock into which such CBC Common Stock shall have been converted pursuant to the Merger, together with the right to receive any dividends or other distributions paid or distributed thereon on or after the Effective Time and prior to the surrender of such Certificate or Book-Entry Shares and cash in lieu of any fractional shares in accordance with Section 3.04. After the Effective Time, there shall be no further transfer on the records of CBC of shares of CBC Common Stock represented by Certificates or Book-Entry Shares and, if such Certificates or Book-Entry Shares are presented to the Exchange Agent for transfer, they shall be cancelled against delivery of SCB Common Stock as hereinabove provided (together with any dividends or other distributions thereon and cash in lieu of fractional shares owed in accordance with this Agreement). No dividends or other distributions which have been declared will be remitted to any holder of shares of CBC Common Stock immediately prior to the Effective Time in respect of the shares of SCB Common Stock into which such shares converted pursuant to Section 3.01 until such Person surrenders the Certificate or Certificates or Book-Entry Shares representing such shares of CBC Common Stock, at which time such dividends or other distributions shall be remitted to such Person, without interest.
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(d) Lost or Destroyed Certificates; Issuances of SCB Common Stock in New Names. In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by SCB or the Exchange Agent, the posting by such Person of a bond in such amount as SCB or the Exchange Agent may determine is reasonably necessary as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the shares of SCB Common Stock and any cash in lieu of fractional shares deliverable in respect thereof pursuant to this Agreement. Prior to the Merger, SCB will consult with CBC regarding its, or the Exchange Agent’s, policies related to the posting of bonds. If any shares of SCB Common Stock are to be issued in a name other than that in which the Certificate evidencing CBC Common Stock surrendered in exchange therefore is registered, it shall be a condition of the issuance thereof that the Certificate so surrendered shall be properly endorsed (or accompanied by an appropriate instrument of transfer) and otherwise in proper form for transfer and that the Person requesting such exchange pay to the Exchange Agent any transfer or other Tax required by reason of the issuance of a certificate for shares of SCB Common Stock in any name other than that of the registered holder of the Certificate surrendered or otherwise establish to the satisfaction of the Exchange Agent that such Tax has been paid or is not payable.
(e) Unclaimed Merger Consideration. Any portion of the Merger Consideration delivered to the Exchange Agent by SCB pursuant to Section 3.02(b) that remains unclaimed by the former shareholders of CBC for twelve (12) months after the Effective Time (as well as any proceeds from any investment thereof) shall be delivered by the Exchange Agent to the Surviving Corporation. Any former shareholders of CBC who have not theretofore complied with Section 3.02(c) shall thereafter look only to Surviving Corporation for the consideration deliverable in respect of each share of CBC Common Stock such shareholder holds immediately prior the Effective Time as determined pursuant to this Agreement without any interest thereon. If outstanding Certificates or Book-Entry Shares are not surrendered or the payment for them is not claimed prior to the date on which such shares of SCB Common Stock would otherwise escheat to any Governmental Entity, the unclaimed items shall, to the extent permitted by abandoned property and any other applicable Law, become the property of the Surviving Corporation (and to the extent not in its possession shall be delivered to it), free and clear of all claims or interest of any Person previously entitled to such property. Neither the Exchange Agent nor any party to this Agreement shall be liable to any holder of stock represented by any Certificate or Book-Entry Share for any consideration paid to a public official or Governmental Entity pursuant to applicable abandoned property, escheat or similar Laws. SCB and the Exchange Agent shall be entitled to rely upon the stock transfer books of CBC to establish the identity of those Persons entitled to receive the consideration specified in this Agreement, which books shall be conclusive (absent manifest error) with respect thereto. In the event of a dispute with respect to ownership of shares of stock represented by any Certificate or Book-Entry Share, SCB and the Exchange Agent shall be entitled to deposit any consideration represented thereby in escrow with an independent third party and thereafter be relieved with respect to any claims thereto.
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3.03 Rights as Shareholders. At the Effective Time, holders of CBC Common Stock shall cease to be, and shall have no rights as, shareholders of CBC other than to receive the Merger Consideration provided for under this Article III.
3.04 No Fractional Shares. Notwithstanding any other provision of this Agreement, neither certificates nor scrip for fractional shares of SCB Common Stock shall be issued in the Merger. Each holder of shares of CBC Common Stock as of immediately prior to the Effective Time who otherwise would have been entitled to a fraction of a share of SCB Common Stock (after taking into account all Certificates or Book-Entry Shares surrendered by such holder) shall receive in lieu thereof cash (without interest) in an amount determined by multiplying (i) the fraction of a share of SCB Common Stock to which such holder would otherwise be entitled to receive in the Merger (after taking into account all shares of CBC Common Stock held by such holder immediately prior to the Effective Time and rounded to the nearest one-thousandth when expressed in decimal form) by (ii) the SCB Average Closing Price, rounded to the nearest whole cent. No such holder shall be entitled to dividends, voting rights or any other rights in respect of any fractional share.
3.05 Anti-Dilution Provisions. If, between the date hereof and the Effective Time, the shares of SCB Common Stock shall be changed into a different number or class or series of shares by reason of any reclassification, recapitalization, split-up, stock-split, reverse stock-split, combination, subdivision, exchange of shares or readjustment, or similar transaction or change in capitalization, or a stock dividend thereon shall be declared with a record date within said period, the Merger Consideration and Exchange Ratio shall be adjusted accordingly to give SCB and the holders of CBC Common Stock the same economic effect as contemplated by this Agreement prior to such event; provided, that nothing contained in this sentence shall be construed to permit CBC or SCB to take any action with respect to its securities or otherwise that is prohibited by the terms of this Agreement.
3.06 Withholding Rights. SCB (through the Exchange Agent, if applicable) shall be entitled to deduct and withhold from any amounts otherwise payable pursuant to this Agreement to any holder of shares of CBC Common Stock as of immediately prior to the Effective Time such amounts as SCB is required under the Code or any state, local or foreign Tax law or regulation thereunder to deduct and withhold with respect to the making of such payment. Any amounts so withheld shall be timely remitted to the applicable Governmental Entity and shall be treated for all purposes of this Agreement as having been paid to the former holder of CBC Common Stock in respect of which such deduction and withholding was made by SCB.
3.07 CBC Equity Awards.
(a) CBC Options. At the Effective Time, each CBC Option outstanding immediately prior to the Effective Time, whether vested or unvested, shall be cancelled and shall only entitle the holder of such CBC Option to receive, as soon as administratively practicable after the Effective Time, an amount in cash, rounded down to the nearest whole cent, equal to the product of (i) the total number of shares of CBC Common Stock subject to such CBC Option and (ii) the excess, if any, of (A) the Option Cashout Price over (B) the exercise price per share under such CBC Option, less any applicable Taxes required to be withheld with respect to such payment (such amount, the “Option Consideration”); provided that to the extent reasonably practicable, SCB shall fund the Option Consideration to be paid with respect to CBC Options by funding the necessary amounts to the payroll processor of CBC or SCB or any of their respective Affiliates (the “Payroll Processor”) for payment by the Payroll Processor of the Option Consideration to the applicable holders of such CBC Options. For the avoidance of doubt, any CBC Option which has an exercise price per share of CBC Common Stock that is greater than or equal to the Option Cashout Price shall be cancelled at the Effective Time for no consideration or payment. For purposes of this Agreement, the “Option Cashout Price” shall mean an amount equal to the product of (x) the SCB Average Closing Price and (y) the Exchange Ratio.
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(b) CBC RSUs. Notwithstanding anything herein to the contrary, at the Effective Time, each CBC RSU that is outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any required action on the part of the holder thereof, (i) if granted to a non-employee member of the CBC Board who will not be serving on the Board of Directors of the Surviving Corporation, fully vest and be cancelled and converted automatically into the right to receive (without interest) that number of shares of SCB Common Stock (rounded down to the nearest whole share) equal to the product of (A) the total number of shares of CBC Common Stock subject to such CBC RSU immediately prior to the Effective Time, multiplied by (B) the Exchange Ratio, which shall be delivered as soon as reasonably practicable following the Closing Date and in no event later than five (5) Business Days following the Closing Date (or on such later date if required to comply with Section 409A of the Code) and (ii) if not granted to an individual described in clause (i), be assumed and converted into a restricted stock unit in respect of SCB Common Stock with the same terms and conditions as were applicable under such CBC RSU immediately prior to the Effective Time, and relating to the number of shares of SCB Common Stock (rounded down to the nearest whole share) equal to the product of (A) the total number of shares of CBC Common Stock subject to such CBC RSU immediately prior to the Effective Time, multiplied by (B) the Exchange Ratio.
(c) Applicable Plans. Each CBC Equity Award that is assumed and converted into an award with respect to SCB Common Stock pursuant to this Section 3.07 (an “Assumed Award”) may be assumed and/or issued as a substitute award under the Southern California Bancorp 2019 Omnibus Equity Incentive Plan Incentive Plan (or another equity incentive plan of SCB), if so determined by the SCB Board, instead of remaining subject to the applicable CBC Equity Plan pursuant to which it was issued.
(d) Registration. If not already included in the Registration Statement, promptly following the Effective Time, SCB shall file a post-effective amendment to the Registration Statement or an effective registration statement on Form S-8 with respect to the SCB Common Stock subject to the Assumed Awards.
(e) Further Actions. Prior to the Effective Time, the CBC Board and SCB Board, as applicable, shall adopt any necessary resolutions and take any actions necessary to effectuate the provisions of this Section 3.07.
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ARTICLE IV
ACTIONS PENDING ACQUISITION
4.01 Conduct of Businesses Prior to the Effective Time. During the period from the date of this Agreement to the Effective Time or earlier termination of this Agreement, except as expressly contemplated or permitted by this Agreement (including as set forth in the CBC Disclosure Schedule or the SCB Disclosure Schedule), required by Law or as consented to in writing by the other party (such consent not to be unreasonably withheld, conditioned or delayed), each of CBC and SCB shall, and shall cause each of its respective Subsidiaries to, (a) conduct its business in the ordinary course in all material respects, (b) use reasonable best efforts to maintain and preserve intact its business organization, employees and advantageous business relationships, and (c) take no action that would reasonably be expected to adversely affect or materially delay the ability of either CBC or SCB to obtain any necessary approvals of any Regulatory Agency or other Governmental Entity required for the transactions contemplated hereby or to perform its respective covenants and agreements under this Agreement or to consummate the transactions contemplated hereby on a timely basis.
4.02 Forbearances. During the period from the date of this Agreement to the Effective Time or earlier termination of this Agreement, except as set forth in the CBC Disclosure Schedule or the SCB Disclosure Schedule, as expressly contemplated or permitted by this Agreement or as required by Law, neither CBC nor SCB shall, and neither CBC nor SCB shall permit any of their respective Subsidiaries to, without the prior written consent of the other party to this Agreement (such consent not to be unreasonably withheld, conditioned or delayed):
(a) other than (i) federal funds borrowings and Federal Home Loan Bank borrowings, in each case with a maturity not in excess of six (6) months, (ii) deposits, (iii) issuances of letters of credit, (iv) purchases of federal funds, (v) sales of certificates of deposit and (vi) entry into repurchase agreements, in each case in the ordinary course of business, incur any indebtedness for borrowed money (other than indebtedness of CBC or any of its wholly-owned Subsidiaries to CBC or any of its wholly-owned Subsidiaries, on the one hand, or of SCB or any of its wholly-owned Subsidiaries to SCB or any of its wholly-owned Subsidiaries, on the other hand), or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other individual, corporation or other entity;
(b)
(i) adjust, split, combine or reclassify any shares of capital stock;
(ii) make, declare, pay or set a record date for any dividend, or any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its capital stock or other equity or voting securities or any securities or obligations convertible (whether currently convertible or convertible only after the passage of time or the occurrence of certain events) or exchangeable into or exercisable for any shares of its capital stock or other equity or voting securities, except, in each case, (A) dividends paid by any of the Subsidiaries of each of CBC and SCB to CBC or SCB or any of their wholly-owned Subsidiaries, respectively, and (B) the acceptance of shares of CBC Common Stock or SCB Common Stock, as the case may be, as payment for the exercise price of stock options or for withholding Taxes incurred in connection with the exercise of stock options or the vesting or settlement of equity compensation awards, in each case, in accordance with past practice and the terms of the applicable award agreements;
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(iii) grant any stock options, stock appreciation rights, performance shares, restricted stock units, performance stock units, phantom stock units, restricted shares or other equity-based awards or interests, or grant any Person any right to acquire any shares of capital stock or other equity or voting securities of CBC or SCB or any of their respective Subsidiaries;
(iv) issue, sell, transfer, encumber or otherwise permit to become outstanding any shares of capital stock or voting securities or equity interests or securities convertible (whether currently convertible or convertible only after the passage of time of the occurrence of certain events) or exchangeable into, or exercisable for, any shares of its capital stock or other equity or voting securities, including any securities of CBC or SCB or their respective Subsidiaries, or any options, warrants, or other rights of any kind to acquire any shares of capital stock or other equity or voting securities, including any securities of CBC or SCB or their respective Subsidiaries, except pursuant to the exercise of stock options or the vesting or settlement of equity compensation awards outstanding as of the date hereof or granted after the date hereof to the extent authorized under this Agreement, in each case accordance with their terms;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of its material properties or assets to any individual, corporation or other entity other than a wholly-owned Subsidiary, or cancel, release or assign any indebtedness to any such Person or any claims held by any such Person, in each case other than in the ordinary course of business, or pursuant to contracts or agreements in force at the date of this Agreement;
(d) except for foreclosure or acquisitions of control in a fiduciary or similar capacity or in satisfaction of debts previously contracted in good faith in the ordinary course of business, make any material investment in or acquisition of (whether by purchase of stock or securities, contributions to capital, property transfers, merger or consolidation, or formation of a joint venture or otherwise) any other Person or the property or assets of any other Person, in each case, other than a wholly-owned Subsidiary of CBC or SCB, as applicable;
(e) in each case except for transactions in the ordinary course of business, terminate, materially amend, or waive any material provision of, any CBC Contract or SCB Contract, as the case may be, or make any change in any instrument or agreement governing the terms of any of its securities, other than normal renewals of contracts without material adverse changes of terms with respect to CBC or SCB, or enter into any contract that would constitute a CBC Contract or SCB Contract, if it were in effect on the date of this Agreement;
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(f) except as required under applicable Law or the terms of any CBC Benefit Plan or SCB Benefit Plan existing as of the date hereof, as applicable, (i) enter into, establish, adopt, amend or terminate any CBC Benefit Plan or SCB Benefit Plan, or any arrangement that would be a CBC Benefit Plan or a SCB Benefit Plan if in effect on the date hereof, other than with respect to broad-based welfare benefit plans (other than severance) in the ordinary course of business consistent with past practice and as would not reasonably be expected to materially increase the cost of benefits under any such CBC Benefit Plan or SCB Benefit Plan, as the case may be, (ii) increase the compensation or benefits payable to any current or former employee, director or individual consultant, other than increases for current employees with an annual base salary below $150,000 in connection with a promotion (permitted hereunder) or change in responsibilities, in each case, in the ordinary course of business consistent with past practice and to a level consistent with similarly situated peer employees, (iii) accelerate the vesting of any equity-based awards or other compensation or benefits, (iv) enter into any new, or amend any existing, employment, severance, change in control, retention, collective bargaining agreement or similar agreement or arrangement; provided, however, that the parties may enter into offer letters with new hires in the ordinary course of business consistent with past practice that do not provide for enhanced or change in control severance, (v) fund any rabbi trust or similar arrangement, or in any other way secure the payment of compensation or benefits under any CBC Benefit Plan or SCB Benefit Plan, as the case may be, or (vi) hire or promote any employee with an annual base salary equal to or in excess of $150,000, or significantly change the responsibilities assigned to any such employee;
(g) settle any material claim, suit, action or proceeding, except involving solely monetary remedies in an amount and for consideration not in excess of $25,000 individually or $50,000 in the aggregate and that would not impose any material restriction on, or create any adverse precedent that would be material to, the business of it or its Subsidiaries or the Surviving Corporation or its Subsidiaries;
(h) take any action or knowingly fail to take any action where such action or failure to act could reasonably be expected to prevent the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code;
(i) amend its articles of incorporation, its bylaws or comparable governing documents of its Significant Subsidiaries;
(j) materially restructure or materially change its investment securities, derivatives, wholesale funding of bank owned life insurance portfolio or its interest rate exposure, through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported;
(k) implement or adopt any change in its accounting principles, practices or methods, other than as may be required by GAAP;
(l) enter into any new line of business or, other than in the ordinary course of business consistent with past practice, change in any material respect its lending, investment, underwriting, risk and asset liability management and other banking and operating, hedging, securitization and servicing policies (including any change in the maximum ratio or similar limits as a percentage of its capital exposure applicable with respect to its loan portfolio or any segment thereof), except as required by applicable Law, regulation or policies imposed by, or recommendation of, any Governmental Entity;
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(m) merge or consolidate itself or any of its Significant Subsidiaries with any other Person, or restructure, reorganize or completely or partially liquidate or dissolve it or any of its Significant Subsidiaries;
(n) make, change or revoke any material Tax election, change an annual Tax accounting period, adopt or change any material Tax accounting method, file any material amended Tax Return, enter into any closing agreement with respect to a material amount of Taxes, or settle any material Tax claim, audit, assessment or dispute or surrender any material right to claim a refund of Taxes;
(o) other than in prior consultation with the other party to this Agreement, except for loans or extensions of credit approved and/or committed as of the date of this Agreement, (i) make any loan greater than $7,500,000, make any sponsored finance loan greater than $3,000,000, purchase a participation in any loan or pool of loans, or renew any loan greater than $7,500,000, or (ii) renew for more than 12 months any loans greater than $1,000,000 rated “special mention” or worse; or
(p) agree to take, make any commitment to take, or adopt any resolutions of its board of directors or similar governing body in support of, any of the actions prohibited by this Section 4.02.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CBC
Except (a) as disclosed in the disclosure schedule delivered by CBC to SCB concurrently herewith (the “CBC Disclosure Schedule”); provided, that (i) no such item is required to be set forth as an exception to a representation or warranty if its absence would not result in the related representation or warranty being deemed untrue or incorrect, (ii) the mere inclusion of an item in the CBC Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission by CBC that such item represents a material exception or fact, event or circumstance or that such item would reasonably be expected to result in a Material Adverse Effect, and (iii) any disclosures made with respect to a section of this Article V shall be deemed to qualify (1) any other section of this Article V specifically referenced or cross-referenced and (2) other sections of this Article V to the extent it is reasonably apparent on its face (notwithstanding the absence of a specific cross-reference) from a reading of the disclosure that such disclosure applies to such other sections or (b) as disclosed in any CBC Reports filed by CBC after January 1, 2022 and prior to the date hereof (but disregarding risk factor disclosures contained under the heading “Risk Factors,” or disclosures of risks set forth in any “forward-looking statements” disclaimer or any other statements that are similarly nonspecific or cautionary, predictive or forward-looking in nature), CBC hereby represents and warrants to SCB as follows:
5.01 Corporate Organization.
(a) CBC is a corporation duly organized, validly existing and in good standing under the laws of the State of California and is a bank holding company duly registered under the BHC Act. CBC has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted. CBC is duly licensed or qualified to do business and in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing, qualification or standing necessary, except where the failure to be so licensed or qualified or to be in good standing would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on CBC. True and complete copies of the CBC Articles and the CBC Bylaws, as in effect as of the date of this Agreement, have previously been made available by CBC to SCB.
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(b) Each Subsidiary of CBC (i) is duly organized and validly existing under the laws of its jurisdiction of organization, (ii) is duly qualified to do business and, where such concept is recognized under applicable Law, in good standing in all jurisdictions (whether federal, state, local or foreign) where its ownership or leasing of property or the conduct of its business requires it to be so qualified and in which the failure to be so qualified would reasonably be expected to have a Material Adverse Effect on CBC and (iii) has all requisite corporate power and authority to own or lease its properties and assets and to carry on its business as now conducted. There are no restrictions on the ability of CBC or any Subsidiary of CBC to pay dividends or distributions except those provided by applicable Law and, in the case of a Subsidiary of CBC that is a regulated entity, for restrictions on dividends or distributions generally applicable to all such regulated entities. The deposit accounts of each Subsidiary of CBC that is an insured depository institution are insured by the FDIC through the Deposit Insurance Fund to the fullest extent permitted by Law, all premiums and assessments required to be paid in connection therewith have been paid when due, and no proceedings for the termination of such insurance are pending or threatened. There are no Subsidiaries of CBC other than CBC Bank that have or are required to have deposit insurance. Section 5.01(b) of the CBC Disclosure Schedule sets forth a true and complete list of all Subsidiaries of CBC and their jurisdictions of organization as of the date hereof. True and complete copies of the organizational documents of each Subsidiary of CBC as in effect as of the date of this Agreement have previously been made available by CBC to SCB.
5.02 Capitalization.
(a) As of the date of this Agreement, the authorized capital stock of CBC consists of 40,000,000 shares of CBC Common Stock and 10,000,000 shares of CBC Preferred Stock. As of January 25, 2024, there are (i) 8,402,478 shares of CBC Common Stock outstanding, (ii) no shares of CBC Common Stock held in treasury, (iii) 476,911 shares of CBC Common Stock reserved for issuance upon the exercise of outstanding CBC Options, (iv) 260,756 shares of CBC Common Stock reserved for issuance upon settlement of outstanding CBC RSUs, (v) no shares of CBC Preferred Stock outstanding, and (vi) 616,442 shares of CBC Common Stock reserved for issuance upon future grants under the CBC Equity Plans. As of the date of this Agreement, except as set forth in the immediately preceding sentence and for changes since January 25, 2024 resulting from the exercise, vesting or settlement of any CBC Equity Awards described in the immediately preceding sentence, there are no other shares of capital stock or other equity or voting securities of CBC issued, reserved for issuance or outstanding. All of the issued and outstanding shares of CBC Common Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. There are no bonds, debentures, notes or other indebtedness that have the right to vote on any matters on which shareholders of CBC are entitled to vote. Except as set forth on Section 5.02(a) of the CBC Disclosure Schedule, no trust preferred or subordinated debt securities of CBC are issued or outstanding. Other than CBC Equity Awards issued prior to the date of this Agreement as described in this Section 5.02(a), as of the date of this Agreement there are no outstanding subscriptions, options, warrants, restricted stock awards, restricted stock units, stock appreciation rights, phantom units, scrip, rights to subscribe to, preemptive rights, anti-dilutive rights, rights of first refusal or similar rights, puts, calls, commitments or agreements of any character relating to, or securities or rights convertible or exchangeable into or exercisable for, or valued by reference to, shares of capital stock or other equity or voting securities of or ownership interest in CBC, or contracts, commitments, understandings or arrangements by which CBC may become bound to issue additional shares of its capital stock or other equity or voting securities of or ownership interests in CBC, or that otherwise obligate CBC to issue, transfer, sell, purchase, redeem or otherwise acquire, any of the foregoing. There are no voting trusts, shareholder agreements, proxies or other agreements in effect to which CBC is a party or is bound with respect to the voting or transfer of CBC Common Stock or other equity interests of CBC.
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(b) CBC owns, directly or indirectly, all of the issued and outstanding shares of capital stock or other equity ownership interests of each of its Subsidiaries, free and clear of any liens, pledges, charges, encumbrances and security interests whatsoever (“Liens”), and all of such shares or equity ownership interests are duly authorized and validly issued and are fully paid, nonassessable (except, with respect to bank Subsidiaries, as provided under 12 U.S.C. § 55 or any comparable provision of applicable state law) and free of preemptive rights, with no personal liability attaching to the ownership thereof. No Subsidiary of CBC has or is bound by any outstanding subscriptions, options, warrants, calls, rights, commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity security of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of such Subsidiary.
5.03 Authority; No Violation.
(a) CBC has full corporate power and authority to execute and deliver this Agreement and, subject to the shareholder and other actions described below, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby (including the Merger and the Bank Merger) have been duly and validly approved by the CBC Board. The CBC Board has (i) determined that the Merger, on the terms and conditions set forth in this Agreement, is in the best interests of CBC and its shareholders, (ii) resolved to recommend that CBC’s shareholders approve the principal terms of this Agreement, (iii) has directed that this Agreement and the transactions contemplated hereby be submitted to CBC’s shareholders for approval at a meeting of such shareholders, and (iv) has adopted resolutions to the foregoing effect. Except for (x) the CBC Shareholder Approval and (y) the adoption and approval of the Bank Merger Agreement by the CBC Bank Board and CBC as CBC Bank’s sole shareholder, no other corporate proceedings on the part of CBC are necessary to approve this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by CBC and (assuming due authorization, execution and delivery by SCB) constitutes a valid and binding obligation of CBC, enforceable against CBC in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar Laws of general applicability relating to or affecting creditors’ rights or to general equity principles (the “Bankruptcy and Equity Exception”).
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(b) Neither the execution and delivery of this Agreement by CBC nor the consummation by CBC of the transactions contemplated hereby, including the Bank Merger, nor compliance by CBC with any of the terms or provisions hereof, will (i) violate any provision of the CBC Articles or the CBC Bylaws, or (ii) assuming that the consents and approvals referred to in Section 5.04 are duly obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to CBC or any of its Subsidiaries or any of their respective properties or assets or (y) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of CBC or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which CBC or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound, except (in the case of clauses (x) and (y) above) for such violations, conflicts, breaches or defaults which, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on CBC.
5.04 Consents and Approvals. Except for (a) the filing of any required applications, filings and notices, as applicable, with Nasdaq, (b) the filing of any required applications, filings and notices, as applicable, with the FRB under the BHC Act and the CIBC Act, and approval of such applications, filings and notices, (c) the filing of any required applications, filings and notices, as applicable, with the OCC, and approval of such applications, filings and notices, (d) the filing with the SEC of the Registration Statement and Proxy Statement/Prospectus, and the declaration of effectiveness of the Registration Statement, (e) the filing of the Agreement of Merger with the Secretary of State of the State of California pursuant to the CGCL and the filing of the Bank Merger Agreement with the Secretary of State of the State of California and the DFPI pursuant to the CGCL and CFC, and (f) such filings and approvals as are required to be made or obtained under the securities or “Blue Sky” laws of various states in connection with the issuance of the shares of SCB Common Stock pursuant to this Agreement and the approval of the listing of such SCB Common Stock on Nasdaq, no consents or approvals of or filings or registrations with any Governmental Entity are necessary in connection with (i) the execution and delivery by CBC of this Agreement or (ii) the consummation by CBC of the Merger and the other transactions contemplated hereby (including the Bank Merger). As of the date hereof, CBC has no knowledge of any reason why the necessary regulatory approvals and consents will not be received in order to permit consummation of the Merger and Bank Merger on a timely basis.
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5.05 Reports.
(a) CBC and each of its Subsidiaries have timely filed (or furnished) all reports, registrations and statements, together with any amendments required to be made with respect thereto, that they were required to file (or furnish, as applicable) since January 1, 2021 with any Regulatory Agencies, including, without limitation, any report, registration or statement required to be filed (or furnished, as applicable) pursuant to the laws, rules or regulations of the United States, any state, any foreign entity, self-regulatory organization (an “SRO”) or any Regulatory Agency, and have paid all fees and assessments due and payable in connection therewith, except where the failure to file (or furnish, as applicable) such report, registration or statement or to pay such fees and assessments, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on CBC. Subject to Section 10.13, except as set forth on Section 5.05(a) of the CBC Disclosure Schedule and for normal examinations conducted by a Regulatory Agency in the ordinary course of business of CBC and its Subsidiaries, (i) no Regulatory Agency or governmental agency or authority has initiated or has pending any proceeding or, to the knowledge of CBC, investigation into the business or operations of CBC or any of its Subsidiaries since January 1, 2021, (ii) there is no unresolved violation, criticism, or exception by any Regulatory Agency with respect to any report or statement relating to any examinations or inspections of CBC or any of its Subsidiaries, and (iii) there has been no formal or informal inquiries by, or disagreements or disputes with, any Regulatory Agency with respect to the business, operations, policies or procedures of CBC or any of its Subsidiaries since January 1, 2021; in the case of each of clauses (i) through (iii), which would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on CBC.
(b) An accurate copy of each final registration statement, prospectus, report, schedule and definitive proxy statement filed with or furnished by CBC to the SEC since January 1, 2021 pursuant to the Securities Act or the Exchange Act (the “CBC Reports”) is publicly available. No such CBC Report, as of the date thereof (and, in the case of registration statements and proxy statements, on the dates of effectiveness and the dates of the relevant meetings, respectively), contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading, except that information filed or furnished as of a later date (but before the date of this Agreement) shall be deemed to modify information as of an earlier date. As of their respective dates, all CBC Reports filed under the Securities Act and the Exchange Act complied in all material respects with the published rules and regulations of the SEC with respect thereto. As of the date of this Agreement, no executive officer of CBC has failed in any respect to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act. As of the date of this Agreement, there are no outstanding comments from or unresolved issues raised by the SEC with respect to any of the CBC Reports.
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5.06 Financial Statements.
(a) The financial statements of CBC and its Subsidiaries included (or incorporated by reference) in the CBC Reports (including the related notes, where applicable) (i) have been prepared from, and are in accordance with, the books and records of CBC and its Subsidiaries, (ii) fairly present in all material respects the balance sheet, the consolidated statements of income, consolidated statements of comprehensive income, consolidated results of operations, cash flows, changes in shareholders’ equity and consolidated financial position of CBC and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth (subject in the case of unaudited statements to year-end audit adjustments normal in nature and amount), (iii) complied, as of their respective dates of filing with the SEC, in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, and (iv) have been prepared in accordance with GAAP consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes thereto. The books and records of CBC and its Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. Since January 1, 2020, no independent public accounting firm of CBC has resigned (or informed CBC that it intends to resign) or been dismissed as independent public accountants of CBC as a result of, or in connection with, any disagreements with CBC on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure. The financial statements of CBC Bank included in the consolidated reports of condition and income (call reports) of CBC Bank complied, as of their respective dates of filing with the FDIC, in all material respects with applicable accounting requirement and with the published instructions of the Federal Financial Institutions Examination Council with respect thereto.
(b) Except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on CBC, neither CBC nor any of its Subsidiaries has any liability (whether absolute, accrued, contingent or otherwise and whether due or to become due), except for those liabilities that are reflected or reserved against on the consolidated balance sheet of CBC included in its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2023 (including any notes thereto) and for liabilities incurred in the ordinary course of business since September 30, 2023, or in connection with this Agreement and the transactions contemplated hereby.
(c) The records, systems, controls, data and information of CBC and its Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of CBC or its Subsidiaries or accountants (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control that would not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect on CBC. CBC (x) has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that material information relating to CBC, including its Subsidiaries, is made known to the chief executive officer and the chief financial officer of CBC by others within those entities as appropriate to allow timely decisions regarding required disclosures and to make the certifications required by the Exchange Act and Sections 302 and 906 of the Sarbanes-Oxley Act, and (y) has disclosed, based on its most recent evaluation prior to the date hereof, to CBC’s outside auditors and the audit committee of the CBC Board (i) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which would reasonably be expected to adversely affect CBC’s ability to record, process, summarize and report financial information, and (ii) to the knowledge of CBC, any fraud, whether or not material, that involves management or other employees who have a significant role in CBC’s internal controls over financial reporting. To the knowledge of CBC, there is no reason to believe that CBC’s outside auditors and its chief executive officer and chief financial officer will not be able to give the certifications and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act, without qualification, when next due.
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(d) Since January 1, 2021, (i) neither CBC nor any of its Subsidiaries, nor, to the knowledge of CBC, any director, officer, auditor, accountant or representative of CBC or any of its Subsidiaries, has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of CBC or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that CBC or any of its Subsidiaries has engaged in questionable accounting or auditing practices, and (ii) no attorney representing CBC or any of its Subsidiaries, whether or not employed by CBC or any of its Subsidiaries, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by CBC or any of its officers, directors, employees or agents to the CBC Board or any committee thereof or, to the knowledge of CBC, to any director or officer of CBC.
5.07 Broker’s Fees. With the exception of the engagement of Keefe, Bruyette & Woods, Inc., neither CBC nor any of its Subsidiaries nor any of their respective officers or directors has employed any broker, finder or financial advisor or incurred any liability for any broker’s fees, commissions or finder’s fees in connection with the Merger or related transactions contemplated by this Agreement. CBC has disclosed to SCB as of the date hereof the aggregate fees provided for in connection with the engagement by CBC of Keefe, Bruyette & Woods, Inc. related to the Merger and the other transactions contemplated hereby.
5.08 Absence of Certain Changes or Events.
(a) Since December 31, 2022, no event or events have occurred that have had or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on CBC.
(b) Except as set forth on Section 5.08(b) of the CBC Disclosure Schedule and in connection with the transactions contemplated by this Agreement, since December 31, 2022, CBC and its Subsidiaries have carried on their respective businesses in all material respects in the ordinary course.
5.09 Legal Proceedings.
(a) Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on CBC, neither CBC nor any of its Subsidiaries is a party to any, and there are no pending or, to CBC’s knowledge, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against CBC or any of its Subsidiaries or any of their current or former directors or executive officers or challenging the validity or propriety of the transactions contemplated by this Agreement.
(b) There is no injunction, order, judgment, decree, or regulatory restriction imposed upon CBC, any of its Subsidiaries or the assets of CBC or any of its Subsidiaries (or that, upon consummation of the Merger and/or the Bank Merger, would apply to the Surviving Corporation or any of its Affiliates) that would reasonably be expected to be material to CBC and its Subsidiaries, taken as a whole.
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5.10 Taxes and Tax Returns. Each of CBC and its Subsidiaries has duly and timely filed (including all applicable extensions) all material Tax Returns in all jurisdictions in which Tax Returns are required to be filed by it, and all such Tax Returns are true, correct, and complete in all material respects. Neither CBC nor any of its Subsidiaries is the beneficiary of any extension of time within which to file any material Tax Return (other than extensions to file Tax Returns obtained in the ordinary course). All material Taxes of CBC and its Subsidiaries (whether or not shown on any Tax Returns) that are due have been fully and timely paid. Each of CBC and its Subsidiaries has withheld and paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, creditor, shareholder, independent contractor or other third party. There are no Liens on any of CBC’s assets or on any assets of any of CBC’s Subsidiaries that arose either in connection with any failure (or alleged failure) to pay any Tax or, to the knowledge of CBC, is any taxing authority in the process of imposing a Lien for Taxes upon such assets. Neither CBC nor any of its Subsidiaries has granted any extension or waiver of the limitation period applicable to any material Tax that remains in effect. Neither CBC nor any of its Subsidiaries has received written notice of assessment or proposed assessment in connection with any material amount of Taxes, and there are no threatened in writing or pending disputes, claims, audits, examinations or other proceedings regarding any material Tax of CBC and its Subsidiaries or the assets of CBC and its Subsidiaries. CBC has made available to SCB true and complete copies of any private letter ruling requests, closing agreements or gain recognition agreements with respect to Taxes requested or executed in the last six (6) years. Neither CBC nor any of its Subsidiaries is a party to or is bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than such an agreement or arrangement exclusively between or among CBC and its Subsidiaries). Neither CBC nor any of its Subsidiaries (a) has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was CBC) or (b) has any liability for the Taxes of any Person (other than CBC or any of its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Law), as a transferee or successor, by contract or otherwise. Neither CBC nor any of its Subsidiaries has been, within the past two (2) years or otherwise as part of a “plan (or series of related transactions)” within the meaning of Section 355(e) of the Code of which the Merger is also a part, a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock intending to qualify for tax-free treatment under Section 355 of the Code. Neither CBC nor any of its Subsidiaries has participated in a “reportable transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(1). At no time during the past five (5) years has CBC been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code. Neither CBC nor any of CBC’s Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, any Tax period (or portion thereof) beginning after the Effective Time as a result of (A) a change in accounting method for a Tax period beginning on or before the Effective Time, (B) any “closing agreement” as described in Section 7121 of the Code (or any similar provision of state, local or foreign tax law), (C) any intercompany transaction or any excess loss account, within the meaning of Treas. Reg. 1.1502-13 and 1.1502-19, respectively, (or any corresponding or similar provision or administrative rule of federal, state, local, or non-U.S. income Tax law) or (D) any prepaid amount received on or prior to the Effective Time. As of the date hereof, neither CBC nor any of its Subsidiaries has any reason to believe that any conditions exist that could reasonably be expected to prevent or impede the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. Neither CBC nor any of CBC’s Subsidiaries has (i) deferred the employer’s share of any “applicable employment taxes” under Section 2302 of the CARES Act (or any similar provision of state or local law), (ii) deferred any payroll tax obligations (including those imposed by Sections 3101(a) and 3201 of the Code) pursuant to or in connection with the Memorandum on Deferring Payroll Tax Obligation in Light of the Ongoing COVID-19 Disaster, dated August 8, 2020 or (iii) claimed any employee retention credits under the CARES Act.
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5.11 Employees and Employee Benefit Plans.
(a) Section 5.11(a) of the CBC Disclosure Schedule lists all material CBC Benefit Plans. For purposes of this Agreement, “CBC Benefit Plans” means all employee benefit plans (as defined in Section 3(3) of ERISA), whether or not subject to ERISA, all nonqualified deferred compensation arrangements (as defined in Section 409A of the Code), and all equity-based compensation, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements, retention, bonus, employment, change in control, fringe benefit, termination or severance plans, programs, agreements or arrangements that are contributed to or sponsored or maintained by, or required to be contributed to by, CBC or any of its Subsidiaries for the benefit of any current or former employee, officer or director of CBC or any of its Subsidiaries, or any family member or beneficiary thereof.
(b) CBC has heretofore made available to SCB true and complete copies of (i) each material CBC Benefit Plan, including any amendments thereto and all related trust documents, insurance contracts or other funding vehicles (and if such CBC Benefit Plan is not subject to such written documentation, a written summary of the material terms and conditions of such CBC Benefit Plan), and (ii) to the extent applicable, (A) the most recent summary plan description, if any, required under ERISA with respect to such CBC Benefit Plan, together with summaries of any material modifications thereto, (B) the most recent annual reports (Form 5500 and all schedules thereto), if any, filed with the Internal Revenue Service, (C) the most recently received Internal Revenue Service determination or opinion letter, if any, relating to such CBC Benefit Plan, (D) all coverage, discrimination and qualification tests for the three (3) most recent plan years; (E) the most recently prepared actuarial report for each CBC Benefit Plan (if applicable), and (F) all material non-routine correspondence to or from any Governmental Entity received in the last three (3) years with respect to such CBC Benefit Plan.
(c) Each CBC Benefit Plan has been established, operated and administered in all material respects in accordance with its terms and the requirements of all applicable Laws, including ERISA and the Code.
(d) Section 5.11(d) of the CBC Disclosure Schedule identifies each CBC Benefit Plan that is intended to be qualified under Section 401(a) of the Code (the “CBC Qualified Plans”). Each CBC Qualified Plan is either the subject of a favorable determination letter with respect to its tax-qualified status or is based on a pre-approved plan document that is the subject of a favorable advisory or opinion letter issued to the pre-approved plan document provider upon which CBC may rely, and, to the knowledge of CBC, there are no existing circumstances and no events have occurred that would reasonably be expected to adversely affect the qualified status of each such CBC Qualified Plan or its related trust.
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(e) No Controlled Group Liability has been incurred by CBC or its ERISA Affiliates that has not been satisfied in full, and, to the knowledge of CBC, no condition exists that presents a material risk to CBC or its ERISA Affiliates of incurring any such liability, except as, either individually or in the aggregate, would not reasonably be expected to result in any material liability to CBC and its Subsidiaries.
(f) None of CBC, any of its Subsidiaries or any of their respective ERISA Affiliates has, at any time, contributed to or been obligated to contribute to any plan that is: (i) a “pension plan” within the meaning of Section 3(2) of ERISA that is subject to Section 412, 430 or 4971 of the Code or Title IV or Section 302 of ERISA (a “Pension Plan”); (ii) a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA (a “Multiemployer Plan”); or (iii) a plan that has two or more contributing sponsors, at least two of whom are not under common control, within the meaning of Section 4063 of ERISA (a “Multiple Employer Plan”). None of CBC, any of its Subsidiaries or any of their respective ERISA Affiliates has incurred any material liability to a Multiemployer Plan or a Multiple Employer Plan as a result of a complete or partial withdrawal (as those terms are defined in Part I of Subtitle E of Title IV of ERISA) from a Multiemployer Plan or a Multiple Employer Plan that has not been satisfied in full.
(g) Except as set forth on Section 5.11(g) of the CBC Disclosure Schedule, neither CBC nor any of its Subsidiaries sponsors, has sponsored or has any obligation with respect to any employee benefit plan that provides for any post-employment or post-retirement health or medical or life insurance benefits for retired or former employees or their dependents, expect as required by Section 4980B of the Code, other than benefits provided under short-term or long-term disability plans.
(h) All contributions required to be made to any CBC Benefit Plan by applicable Law or by any plan document, and all premiums due or payable with respect to insurance policies funding any CBC Benefit Plan, for any period through the date hereof, have been timely made or paid in full or, to the extent not required to be made or paid on or before the date hereof, have been fully reflected on the books and records of CBC, except as, either individually or in the aggregate, would not reasonably be expected to result in any material liability to CBC and its Subsidiaries.
(i) There are no pending or threatened claims (other than claims for benefits in the ordinary course), lawsuits or arbitrations that have been asserted or instituted, and, to CBC’s knowledge, no set of circumstances exists that may reasonably be expected to give rise to a claim or lawsuit, against the CBC Benefit Plans, any fiduciaries thereof with respect to their duties to the CBC Benefit Plans or the assets of any of the trusts under any of the CBC Benefit Plans.
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(j) Except as set forth on Section 5.11(j) of the CBC Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in conjunction with any other event) (i) entitle any employee, officer, director or individual service provider of CBC or any of its Subsidiaries to any payment or benefit, (ii) result in, accelerate, cause the vesting, exercisability, lapse of applicable restrictions, funding, payment or delivery of, or increase in the amount or value of, any payment, right or other benefit to any employee, officer, director or independent contractor of CBC or any of its Subsidiaries, (iii) accelerate the timing of or cause CBC or any of its Subsidiaries to transfer or set aside any assets to fund any material benefits under any CBC Benefit Plan, or (iv) result in any limitation on the right of CBC or any of its Subsidiaries to amend, merge, terminate or receive a reversion of assets from any CBC Benefit Plan or related trust. Without limiting the generality of the foregoing, no amount paid or payable (whether in cash, in property, or in the form of benefits) by CBC or any of its Subsidiaries in connection with the transactions contemplated hereby (either solely as a result thereof or as a result of such transactions in conjunction with any other event) will be an “excess parachute payment” within the meaning of Section 280G of the Code.
(k) Neither CBC nor any of its Subsidiaries is a party to any plan, program, agreement or arrangement that provides for the gross-up or reimbursement of Taxes imposed under Section 409A or 4999 of the Code (or any corresponding provisions of state or local law relating to Tax). Except as would not reasonably be expected to result in material liability to CBC or any of its Subsidiaries, each CBC Benefit Plan required to comply with Section 409A of the Code complies in both form and operation therewith.
(l) No CBC Benefit Plan is maintained outside the jurisdiction of the United States or covers any employees or other service providers of CBC or any of its Subsidiaries who reside or work outside the United States.
(m) There are no pending or, to the knowledge of CBC, threatened material labor grievances or material unfair labor practice claims or charges against CBC or any of its Subsidiaries, or any strikes or other material labor disputes against CBC or any of its Subsidiaries. Neither CBC nor any of its Subsidiaries is party to or bound by any collective bargaining or similar agreement with any labor organization, or work rules or practices agreed to with any labor organization or employee association applicable to employees of CBC or any of its Subsidiaries and, to the knowledge of CBC, there are no organizing efforts by any union or other group seeking to represent any employees of CBC and its Subsidiaries.
(n) CBC and its Subsidiaries are in compliance in all material respects with, and since December 31, 2021 have complied in all material respects with, all Laws regarding employment and employment practices, terms and conditions of employment, wages and hours, paid sick leave, classification of employees and independent contractors, equitable pay practices, privacy rights, labor disputes, employment discrimination, sexual or racial harassment or discrimination, workers’ compensation or long-term disability policies, retaliation, immigration, family and medical leave, occupational safety and health and other Laws in respect of any reduction in force (including notice, information and consultation requirements).
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(o) (i) To the knowledge of CBC, no written allegations of sexual or racial harassment or sexual or race-based misconduct have been made since December 31, 2021 against any director or officer of CBC, (ii) since December 31, 2021, neither CBC nor any of its Subsidiaries has entered into any settlement agreement related to allegations of sexual or racial harassment or sexual or race-based misconduct by any director or officer of CBC, and (iii) there are no proceedings currently pending or, to the knowledge of CBC, threatened related to any allegations of sexual or racial harassment or sexual or race-based misconduct by any director or officer of CBC.
5.12 Compliance with Applicable Law. CBC and each of its Subsidiaries hold, and have at all times since December 31, 2021, held, all licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses and ownership of their respective properties, rights and assets under and pursuant to each (and have paid all fees and assessments due and payable in connection therewith), except where neither the cost of failure to hold nor the cost of obtaining and holding such license, franchise, permit or authorization (nor the failure to pay any fees or assessments) would, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on CBC, and, to the knowledge of CBC, no suspension or cancellation of any such necessary license, franchise, permit or authorization is threatened. CBC and each of its Subsidiaries have complied in all material respects with and are not in material default or violation under any applicable Law, statute, order, rule, regulation, policy and/or guideline of any Governmental Entity relating to CBC or any of its Subsidiaries, including all Laws relating to the privacy and security of data or information that constitutes personal data or personal information under applicable Law (“Personal Data”), the USA PATRIOT Act, the Bank Secrecy Act, the Equal Credit Opportunity Act and Regulation B, the Fair Housing Act, the Community Reinvestment Act, the Fair Credit Reporting Act, the Truth in Lending Act and Regulation Z, the Home Mortgage Disclosure Act, the Fair Debt Collection Practices Act, the Electronic Fund Transfer Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, any regulations promulgated by the Consumer Financial Protection Bureau, the Interagency Policy Statement on Retail Sales of Nondeposit Investment Products, the SAFE Mortgage Licensing Act of 2008, the Real Estate Settlement Procedures Act and Regulation X, Title V of the Gramm-Leach Bliley Act, any and all sanctions or regulations enforced by the Office of Foreign Assets Control or the United States Department of Treasury and any other law, policy or guideline relating to bank secrecy, discriminatory lending, financing or leasing practices, consumer protection, money laundering prevention, foreign assets control, U.S. sanctions laws and regulations, Sections 23A and 23B of the Federal Reserve Act, the Sarbanes-Oxley Act, and all agency requirements relating to the origination, sale and servicing of mortgage and consumer loans. CBC and its Subsidiaries have established and maintain a system of internal controls designed to ensure compliance in all material respects by CBC and its Subsidiaries with applicable financial recordkeeping and reporting requirements of applicable money laundering prevention laws in jurisdictions where CBC and its Subsidiaries conduct business. The most recent regulatory rating given to CBC Bank as to compliance with the Community Reinvestment Act is “satisfactory.” To the knowledge of CBC and except as set forth in Section 5.12 of the CBC Disclosure Schedule, since the last regulatory examination of CBC Bank to Community Reinvestment Act compliance, CBC Bank has not received any complaints from consumers, community groups or similar organizations as to Community Reinvestment Act compliance. Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on CBC, none of CBC, or any of its Subsidiaries or, to the knowledge of CBC, any director, officer, employee, agent or other Person acting on behalf of CBC or any of its Subsidiaries has, directly or indirectly, (a) used any funds of CBC or any of its Subsidiaries for unlawful contributions, unlawful gifts, unlawful entertainment or other expenses relating to political activity, (b) made any unlawful payment to foreign or domestic governmental officials or employees or to foreign or domestic political parties or campaigns from funds of CBC or any of its Subsidiaries, (c) violated any provision that would result in the violation of the Foreign Corrupt Practices Act of 1977, as amended, or any similar Law, (d) established or maintained any unlawful fund of monies or other assets of CBC or any of its Subsidiaries, (e) made any fraudulent entry on the books or records of CBC or any of its Subsidiaries, or (f) made any unlawful bribe, unlawful rebate, unlawful payoff, unlawful influence payment, unlawful kickback or other unlawful payment to any Person, private or public, regardless of form, whether in money, property or services, to obtain favorable treatment in securing business to obtain special concessions for CBC or any of its Subsidiaries, to pay for favorable treatment for business secured or to pay for special concessions already obtained for CBC or any of its Subsidiaries, or is currently subject to any United States sanctions administered by the Office of Foreign Assets Control of the United States Treasury Department. CBC maintains a written information privacy and security program that maintains reasonable measures to protect the privacy, confidentiality and security of all Personal Data against any (i) loss or misuse of Personal Data, (ii) unauthorized or unlawful operations performed upon Personal Data or (iii) other act or omission that compromises the security or confidentiality of Personal Data (clauses (i) through (iii), a “Security Breach”). To the knowledge of CBC, CBC has not experienced any Security Breach that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on CBC. To the knowledge of CBC, there are no data security or other technological vulnerabilities with respect to CBC’s information technology systems or networks that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on CBC. Except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on CBC: (i) CBC Bank has complied in all material respects with all requirements of the CARES Act and the Paycheck Protection Program, including applicable guidance, in connection with its participation in the Paycheck Protection Program; (ii) CBC Bank is not the subject of any pending or, to the knowledge of CBC, threatened investigations related to fraud in connection with participation in the Paycheck Protection Program or Paycheck Protection Program loans; (iii) CBC and each of its Subsidiaries have properly administered all accounts for which it acts as a fiduciary, including accounts for which it serves as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in accordance with the terms of the governing documents and applicable state, federal and foreign Law; and (iv) none of CBC, any of its Subsidiaries, or any of its or its Subsidiaries’ directors, officers or employees, has committed any breach of trust or fiduciary duty with respect to any such fiduciary account, and the accountings for each such fiduciary account are true, correct and complete and accurately reflect the assets and results of such fiduciary account.
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5.13 Certain Contracts.
(a) Except as set forth in Section 5.13(a) of the CBC Disclosure Schedule or as filed with or incorporated into any CBC Report filed prior to the date hereof, as of the date hereof, neither CBC nor any of its Subsidiaries is a party to or bound by any contract, arrangement, commitment or understanding (whether written or oral, but excluding any CBC Benefit Plan): (i) which is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC); (ii) which contains a provision that materially restricts the conduct on any line of business by CBC or any of its Subsidiaries or upon consummation of the transactions contemplated by this Agreement will materially restrict the ability of the Surviving Corporation or any of its Affiliates to engage in any line of business or in any geographic region (including any exclusivity or exclusive dealing provisions with such an effect); (iii) which is a collective bargaining agreement or similar agreement with any labor organization; (iv) any of the benefits of or obligations under which will arise or be increased or accelerated by the occurrence of the execution and delivery of this Agreement, receipt of the CBC Shareholder Approval or the announcement or consummation of any of the transactions contemplated by this Agreement, or under which a right of cancellation or termination will arise as a result thereof, or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement, where such increase or acceleration of benefits or obligations, right of cancellation or termination, or change in calculation of value of benefits would, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on CBC; (v) (A) that relates to the incurrence of indebtedness by CBC or any of its Subsidiaries, including any sale and leaseback transactions, capitalized leases and other similar financing arrangements (other than deposit liabilities, trade payables, federal funds purchased, advances and loans from the Federal Home Loan Bank and securities sold under agreements to repurchase, in each case incurred in the ordinary course of business), (B) that provides for the guarantee, support, assumption or endorsement by CBC or any of its Subsidiaries of, or any similar commitment by CBC or any of its Subsidiaries with respect to, the obligations, liabilities or indebtedness of any other Person, in the case of each of clauses (A) and (B), in the principal amount of $100,000 or more, or (C) that provides for any material indemnification or similar obligations on the part of CBC or any of its Subsidiaries; (vi) that grants any right of first refusal, right of first offer or similar right with respect to any material assets, rights or properties of CBC or its Subsidiaries, taken as a whole; (vii) which creates future payment obligations in excess of $100,000 per annum other than any such contracts which are terminable by CBC or any of its Subsidiaries on sixty (60) days or less notice without any required payment or other conditions, other than extensions of credit, other customary banking products offered by CBC or its Subsidiaries, or derivatives issued or entered into in the ordinary course of business; (viii) that is a settlement, consent or similar agreement and contains any material continuing obligations of CBC or any of its Subsidiaries; or (ix) that relates to the acquisition or disposition of any Person, business or asset and under which CBC or its Subsidiaries have or may have a material obligation or liability. Each contract, arrangement, commitment or understanding of the type described in this Section 5.13(a) (excluding any CBC Benefit Plan), whether or not set forth in the CBC Disclosure Schedule, is referred to herein as a “CBC Contract.” CBC has made available to SCB true, correct and complete copies of each CBC Contract in effect as of the date hereof.
(b) In each case, except as, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on CBC, (i) each CBC Contract is valid and binding on CBC or one of its Subsidiaries, as applicable, and in full force and effect, (ii) CBC and each of its Subsidiaries has in all material respects complied with and performed all obligations required to be performed by it to date under each CBC Contract, (iii) to the knowledge of CBC, each third-party counterparty to each CBC Contract has in all material respects complied with and performed all obligations required to be performed by it to date under such CBC Contract, (iv) CBC does not have knowledge of, and has not received notice of, any violation of any CBC Contract by any of the other parties thereto, and (v) no event or condition exists which constitutes or, after notice or lapse of time or both, will constitute, a material breach or default on the part of CBC or any of its Subsidiaries, or to the knowledge of CBC, any other party thereto, of or under any such CBC Contract.
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5.14 Agreements with Regulatory Agencies. Subject to Section 10.13, neither CBC nor any of its Subsidiaries is subject to any cease-and-desist or other order or enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or has been ordered to pay any civil money penalty by, or has been since January 1, 2022, a recipient of any supervisory letter from, or since January 1, 2022, has adopted any policies, procedures or board resolutions at the request or suggestion of, any Regulatory Agency or other Governmental Entity that currently restricts in any material respect or would reasonably be expected to restrict in any material respect the conduct of its business or that in any material manner relates to its capital adequacy, its ability to pay dividends, its credit or risk management policies, its management or its business (each, whether or not set forth in the CBC Disclosure Schedule, a “CBC Regulatory Agreement”), nor has CBC or any of its Subsidiaries been advised in writing, or to CBC’s knowledge, orally, since January 1, 2022, by any Regulatory Agency or other Governmental Entity that it is considering issuing, initiating, ordering, or requesting any such CBC Regulatory Agreement, nor does CBC believe that such CBC Regulatory Agreement is likely to be initiated, ordered or requested.
5.15 Risk Management Instruments. Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on CBC, (a) all interest rate swaps, caps, floors, option agreements, futures and forward contracts and other similar derivative transactions and risk management arrangements, whether entered into for the account of CBC, any of its Subsidiaries or for the account of a customer of CBC or one of its Subsidiaries, were entered into in the ordinary course of business and in accordance with applicable rules, regulations and policies of any Regulatory Agency and with counterparties believed to be financially responsible at the time and are legal, valid and binding obligations of CBC or one of its Subsidiaries enforceable in accordance with their terms (except as may be limited by the Bankruptcy and Equity Exception), and are in full force and effect; and (b) CBC and each of its Subsidiaries have duly performed in all material respects all of their material obligations thereunder to the extent that such obligations to perform have accrued, and, to CBC’s knowledge, there are no material breaches, violations or defaults or allegations or assertions of such by any party thereunder.
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5.16 Environmental Matters. Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on CBC, CBC and its Subsidiaries are in compliance, and have complied since January 1, 2022, with each federal, state or local Law, regulation, order, decree, permit, authorization, common law or agency requirement relating to: (a) the protection or restoration of the environment, health and safety as it relates to hazardous substance exposure or natural resource damages, (b) the handling, use, presence, disposal, release or threatened release of, or exposure to, any hazardous substance, or (c) noise, odor, wetlands, indoor air, pollution, contamination or any injury to Persons or property from exposure to any hazardous substance (collectively, “Environmental Laws”). There are no legal, administrative, arbitral or other proceedings, claims or actions or, to the knowledge of CBC, any private environmental investigations or remediation activities or governmental investigations of any nature seeking to impose, or that could reasonably be expected to result in the imposition, on CBC or any of its Subsidiaries of any liability or obligation arising under any Environmental Law, pending or threatened against CBC, which liability or obligation would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on CBC. To the knowledge of CBC, there is no reasonable basis for any such proceeding, claim, action or governmental investigation that would impose any liability or obligation that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on CBC. CBC is not subject to any agreement, order, judgment, decree, letter agreement or memorandum of agreement by or with any court, Governmental Entity, Regulatory Agency or other third party imposing any liability or obligation with respect to the foregoing that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on CBC.
5.17 Investment Securities and Commodities.
(a) Each of CBC and its Subsidiaries has good title in all material respects to all securities and commodities owned by it (except those sold under repurchase agreements), free and clear of any Liens, except as set forth in the financial statements included in the CBC Reports or to the extent such securities or commodities are pledged in the ordinary course of business to secure obligations of CBC or its Subsidiaries. Such securities and commodities are valued on the books of CBC in accordance with GAAP in all material respects.
(b) CBC and its Subsidiaries and their respective businesses employ investment, securities, commodities, risk management and other policies, practices and procedures that CBC believes are prudent and reasonable in the context of such businesses, and CBC and its Subsidiaries have, since January 1, 2021, been in compliance with such policies, practices and procedures in all material respects. Prior to the date of this Agreement, CBC has made available to SCB the material terms of such policies, practices and procedures.
5.18 Real Property. Except as would not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect on CBC, (a) CBC or a Subsidiary of CBC has good and marketable title to all the real property reflected in the latest audited balance sheet included in the CBC Reports as being owned by CBC or a Subsidiary of CBC or acquired after the date thereof (except properties sold or otherwise disposed of since the date thereof in the ordinary course of business) (the “CBC Owned Properties”), free and clear of all Liens, except (i) statutory Liens securing payments not yet due, (ii) Liens for real property Taxes not yet due and payable, (iii) easements, rights of way, and other similar encumbrances that do not materially affect the value or use of the properties or assets subject thereto or affected thereby or otherwise materially impair business operations at such properties and (iv) such imperfections or irregularities of title or Liens as do not materially affect the value or use of the properties or assets subject thereto or affected thereby or otherwise materially impair business operations at such properties (clauses (i) through (iv), collectively, “Permitted Encumbrances”), and (b) is the lessee of all leasehold estates reflected in the latest audited financial statements included in such CBC Reports or acquired after the date thereof (except for leases that have expired by their terms since the date thereof) (collectively with CBC Owned Properties, the “CBC Real Property”), free and clear of all Liens of any nature whatsoever, except for Permitted Encumbrances, and is in possession of the properties purported to be leased thereunder, and each such lease is valid without default thereunder by the lessee or, to the knowledge of CBC, the lessor. There are no pending or, to the knowledge of CBC, threatened condemnation proceedings against CBC Real Property.
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5.19 Intellectual Property. CBC and each of its Subsidiaries owns, or is licensed to use (in each case, free and clear of any material Liens), all Intellectual Property necessary for the conduct of its business as currently conducted. Except as would not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect on CBC, (a) (i) to the knowledge of CBC, the use of any Intellectual Property by CBC and its Subsidiaries does not infringe, misappropriate or otherwise violate the rights of any Person and is in accordance with any applicable license pursuant to which CBC or any of its Subsidiaries acquired the right to use any Intellectual Property, and (ii) to the knowledge of CBC, no Person has asserted in writing to CBC that CBC or any of its Subsidiaries has infringed, misappropriated or otherwise violated the Intellectual Property rights of such Person, (b) no Person is challenging or, to the knowledge of CBC, infringing on or otherwise violating, any right of CBC or any of its Subsidiaries with respect to any Intellectual Property owned by CBC or its Subsidiaries, and (c) neither CBC nor any Subsidiary of CBC has received any written notice of any pending claim with respect to any Intellectual Property owned by CBC or any of its Subsidiaries, and CBC and its Subsidiaries have taken commercially reasonable actions to avoid the abandonment, cancellation or unenforceability of all Intellectual Property owned or licensed, respectively, by CBC and its Subsidiaries.
5.20 Related Party Transactions. Except as set forth in Section 5.20 of the CBC Disclosure Schedule, there are no transactions or series of related transactions, agreements, arrangements or understandings, nor are there any currently proposed transactions or series of related transactions, between CBC or any of its Subsidiaries, on the one hand, and any current or former director or “executive officer” (as defined in Rule 3b-7 under the Exchange Act) of CBC or any of its Subsidiaries or any Person who beneficially owns (as defined in Rules 13d-3 and 13d-5 of the Exchange Act) 5% or more of the outstanding shares of CBC Common Stock (or any of such Person’s immediate family members or Affiliates) (other than Subsidiaries of CBC) on the other hand, of the type required to be reported in any CBC Report pursuant to Item 404 of Regulation S-K promulgated under the Exchange Act that have not been so reported on a timely basis.
5.21 Takeover Laws. No “fair price,” “moratorium,” “control share acquisition” or other similar anti-takeover statute or regulation or any anti-takeover provision in the CBC Articles or CBC Bylaws is applicable to this Agreement or the transactions contemplated hereby, including the Merger, with respect to CBC. CBC does not have any shareholder rights plan, “poison pill” or similar plan or arrangement in effect.
5.22 Reorganization. CBC has not taken any action and is not aware of any fact or circumstance that could reasonably be expected to prevent the Merger and Bank Merger, taken together, from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code.
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5.23 Opinion of Financial Advisor. Prior to the execution of this Agreement, the CBC Board has received an opinion (which, if initially rendered verbally, has been or will be confirmed by a written opinion, dated the same date) of Keefe, Bruyette & Woods, Inc. to the effect that, as of the date of such opinion, and based upon and subject to the factors, assumptions, and limitations set forth therein, the Exchange Ratio in the Merger is fair from a financial point of view to the holders of CBC Common Stock. Such opinion has not been amended or rescinded as of the date of this Agreement.
5.24 CBC Information. The information relating to CBC and its Subsidiaries to be contained in the Proxy Statement/Prospectus and the Registration Statement, and the information relating to CBC and its Subsidiaries that is provided by CBC or its representatives for inclusion in any other document filed with any other Regulatory Agency in connection herewith, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading. The Proxy Statement/Prospectus (except for such portions thereof that relate only to SCB or any of its Subsidiaries) will comply in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. The Registration Statement (except for such portions thereof that relate only to SCB or any of its Subsidiaries) will comply in all material respects with the provisions of the Securities Act and the rules and regulations thereunder.
5.25 Loan Portfolio.
(a) As of the date hereof, except as set forth in Section 5.25(a) of the CBC Disclosure Schedule, neither CBC nor any of its Subsidiaries is a party to any written or oral loan, loan agreement, note or borrowing arrangement (including leases, credit enhancements, commitments, guarantees and interest-bearing assets) (collectively, “Loans”) in which CBC or any Subsidiary of CBC is a creditor which as of December 31, 2023, had an outstanding balance of $1,000,000 or more and under the terms of which the obligor was, as of December 31, 2023, over ninety (90) days or more delinquent in payment of principal or interest. Set forth in Section 5.25(a) of the CBC Disclosure Schedule is a true, correct and complete list of (A) all of the Loans of CBC and its Subsidiaries that, as of December 31, 2023, had an outstanding balance of $500,000 or more and were classified by CBC as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import, together with the principal amount and accrued and unpaid interest on each such Loan and the identity of the borrower thereunder, together with the aggregate principal amount and accrued and unpaid interest on such Loans, by category of Loan (e.g., commercial, consumer, etc.), together with the aggregate principal amount of such Loans by category and (B) each asset of CBC or any of its Subsidiaries that, as of December 31, 2023, is classified as OREO and the book value thereof.
(b) Except as would not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect on CBC, each Loan of CBC and its Subsidiaries (i) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (ii) to the extent carried on the books and records of CBC and its Subsidiaries as secured Loans, has been secured by valid Liens, as applicable, which have been perfected and (iii) is the legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to the Bankruptcy and Equity Exception.
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(c) Except as would not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect on CBC, each outstanding Loan of CBC or any of its Subsidiaries (including Loans held for resale to investors) was solicited and originated, and is and has been administered and, where applicable, serviced, and the relevant Loan files are being maintained, in all material respects in accordance with the relevant notes or other credit or security documents, the written underwriting standards of CBC and its Subsidiaries (and, in the case of Loans held for resale to investors, the underwriting standards, if any, of the applicable investors) and with all applicable federal, state and local laws, regulations and rules.
5.26 Insurance. Except as would not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect on CBC, CBC and its Subsidiaries are insured with reputable insurers against such risks and in such amounts as the management of CBC reasonably has determined to be prudent and consistent with industry practice, and CBC and its Subsidiaries are in compliance in all material respects with their insurance policies and are not in default under any of the terms thereof, each such policy is outstanding and in full force and effect and, except for policies insuring against potential liabilities of officers, directors and employees of CBC and its Subsidiaries, CBC or the relevant Subsidiary thereof is the sole beneficiary of such policies, and all premiums and other payments due under any such policy have been paid, and all claims thereunder have been filed in due and timely fashion.
5.27 Information Security. Except as would not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect on CBC, to the knowledge of CBC, since January 1, 2022, no third party has gained unauthorized access to any information technology networks controlled by and material to the operation of the business of CBC and its Subsidiaries.
5.28 No Other Representations or Warranties.
(a) Except for the representations and warranties made by CBC in this Article V, neither CBC nor any other Person makes any express or implied representation or warranty with respect to CBC, its Subsidiaries, or their respective businesses, operations, assets, liabilities, conditions (financial or otherwise) or prospects, and CBC hereby disclaims any such other representations or warranties. In particular, without limiting the foregoing disclaimer, neither CBC nor any other Person makes or has made any representation or warranty to SCB or any of its Affiliates or representatives with respect to (i) any financial projection, forecast, estimate, budget or prospective information relating to CBC, any of its Subsidiaries or their respective businesses, or (ii) except for the representations and warranties made by CBC in this Article V, any oral or written information presented to SCB or any of its Affiliates or representatives in the course of their due diligence investigation of CBC, the negotiation of this Agreement or in the course of the transactions contemplated hereby.
(b) CBC acknowledges and agrees that neither SCB nor any other Person has made or is making, and CBC has not relied upon, any express or implied representation or warranty other than those contained in Article VI.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SCB
Except (a) as disclosed in the disclosure schedule delivered by SCB to CBC concurrently herewith (the “SCB Disclosure Schedule”); provided, that (i) no such item is required to be set forth as an exception to a representation or warranty if its absence would not result in the related representation or warranty being deemed untrue or incorrect, (ii) the mere inclusion of an item in the SCB Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission by SCB that such item represents a material exception or fact, event or circumstance or that such item would reasonably be expected to result in a Material Adverse Effect, and (iii) any disclosures made with respect to a section of this Article VI shall be deemed to qualify (1) any other section of this Article VI specifically referenced or cross-referenced and (2) other sections of this Article VI to the extent it is reasonably apparent on its face (notwithstanding the absence of a specific cross-reference) from a reading of the disclosure that such disclosure applies to such other sections or (b) as disclosed in any SCB Reports filed by SCB after January 1, 2022 and prior to the date hereof (but disregarding risk factor disclosures contained under the heading “Risk Factors,” or disclosures of risks set forth in any “forward-looking statements” disclaimer or any other statements that are similarly nonspecific or cautionary, predictive or forward-looking in nature), SCB hereby represents and warrants to CBC as follows:
6.01 Corporate Organization.
(a) SCB is a corporation duly organized, validly existing and in good standing under the laws of the State of California and is a bank holding company duly registered under the BHC Act. SCB has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted. SCB is duly licensed or qualified to do business and in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing, qualification or standing necessary, except where the failure to be so licensed or qualified or to be in good standing would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on SCB. True and complete copies of the SCB Articles and SCB Bylaws, as in effect as of the date of this Agreement, have previously been made available by SCB to CBC.
(b) Each Subsidiary of SCB (i) is duly organized and validly existing under the laws of its jurisdiction of organization, (ii) is duly qualified to do business and, where such concept is recognized under applicable Law, in good standing in all jurisdictions (whether federal, state, local or foreign) where its ownership or leasing of property or the conduct of its business requires it to be so qualified and in which the failure to be so qualified would reasonably be expected to have a Material Adverse Effect on SCB, and (iii) has all requisite corporate power and authority to own or lease its properties and assets and to carry on its business as now conducted. There are no restrictions on the ability of SCB or any Subsidiary of SCB to pay dividends or distributions except those provided by applicable Law and, in the case of a Subsidiary of SCB that is a regulated entity, for restrictions on dividends or distributions generally applicable to all such regulated entities. The deposit accounts of each Subsidiary of SCB that is an insured depository institution are insured by the FDIC through the Deposit Insurance Fund to the fullest extent permitted by Law, all premiums and assessments required to be paid in connection therewith have been paid when due, and no proceedings for the termination of such insurance are pending or threatened. There are no Subsidiaries of SCB other than BSC Bank that have or are required to have deposit insurance. Section 6.01(b) of the SCB Disclosure Schedule sets forth a true and complete list of all Subsidiaries of SCB and their jurisdictions of organization as of the date hereof. True and complete copies of the organizational documents of each Subsidiary of SCB as in effect as of the date of this Agreement have previously been made available by SCB to CBC.
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6.02 Capitalization.
(a) As of the date of this Agreement, the authorized capital stock of SCB consists of 50,000,000 shares of SCB Common Stock and 50,000,000 shares of SCB Preferred Stock. As of January 25, 2024, there are (i) 18,384,779 shares of SCB Common Stock outstanding, (ii) no shares of SCB Common Stock held in treasury, (iii) 265,313 shares of SCB Common Stock reserved for issuance upon the exercise of outstanding SCB Options, (iv) 628,504 shares of SCB Common Stock reserved for issuance upon settlement of outstanding SCB RSUs, (v) no shares of SCB Preferred Stock outstanding, and (vi) 1,266,568 shares of SCB Common Stock reserved for issuance upon future grants under the SCB Equity Plan. As of the date of this Agreement, except as set forth in the immediately preceding sentence and for changes since January 25, 2024 resulting from the exercise, vesting or settlement of any SCB Equity Awards described in the immediately preceding sentence, there are no other shares of capital stock or other equity or voting securities of SCB issued, reserved for issuance or outstanding. All of the issued and outstanding shares of SCB Common Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. There are no bonds, debentures, notes or other indebtedness that have the right to vote on any matters on which shareholders of SCB are entitled to vote. Except as set forth on Section 6.02(a) of the SCB Disclosure Schedule, no trust preferred or subordinated debt securities of SCB are issued or outstanding. Other than SCB Equity Awards issued prior to the date of this Agreement as described in this Section 6.02(a), as of the date of this Agreement there are no outstanding subscriptions, options, warrants, restricted stock awards, restricted stock units, stock appreciation rights, phantom units, scrip, rights to subscribe to, preemptive rights, anti-dilutive rights, rights of first refusal or similar rights, puts, calls, commitments or agreements of any character relating to, or securities or rights convertible or exchangeable into or exercisable for, or valued by reference to, shares of capital stock or other equity or voting securities of or ownership interest in SCB, or contracts, commitments, understandings or arrangements by which SCB may become bound to issue additional shares of its capital stock or other equity or voting securities of or ownership interests in SCB, or that otherwise obligate SCB to issue, transfer, sell, purchase, redeem or otherwise acquire, any of the foregoing. There are no voting trusts, shareholder agreements, proxies or other agreements in effect to which SCB is a party or is bound with respect to the voting or transfer of SCB Common Stock or other equity interests of SCB.
(b) SCB owns, directly or indirectly, all of the issued and outstanding shares of capital stock or other equity ownership interests of each of its Subsidiaries, free and clear of any Liens, and all of such shares or equity ownership interests are duly authorized and validly issued and are fully paid, nonassessable (except, with respect to bank Subsidiaries, as provided under 12 U.S.C. § 55 or any comparable provision of applicable state law) and free of preemptive rights, with no personal liability attaching to the ownership thereof. No Subsidiary of SCB has or is bound by any outstanding subscriptions, options, warrants, calls, rights, commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity security of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of such Subsidiary.
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6.03 Authority; No Violation.
(a) SCB has full corporate power and authority to execute and deliver this Agreement and, subject to the shareholder and other actions described below, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby (including the Merger, the Bank Merger, and the SCB Bylaw Amendment) have been duly and validly approved by the SCB Board. The SCB Board has (i) determined that the Merger, on the terms and conditions set forth in this Agreement, is in the best interests of SCB and its shareholders, (ii) resolved to recommend that SBC’s shareholders approve the principal terms of this Agreement and the SCB Bylaw Amendment, (iii) has directed that this Agreement and the transactions contemplated hereby be submitted to SCB’s shareholders for approval at a meeting of such shareholders, and (iv) has adopted resolutions to the foregoing effect. Except for (x) the SCB Shareholder Approval, (y) the adoption and approval of the Bank Merger Agreement by the BSC Bank Board and SCB as BSC Bank’s sole shareholder and (z) the adoption of resolutions to give effect to the provisions of Section 7.11 in connection with the Closing, no other corporate proceedings on the part of SCB are necessary to approve this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by SCB and (assuming due authorization, execution and delivery by CBC) constitutes a valid and binding obligation of SCB, enforceable against SCB in accordance with its terms, subject to the Bankruptcy and Equity Exception. The shares of SCB Common Stock to be issued in the Merger have been validly authorized (subject to receipt of the SCB Shareholder Approval), when issued, will be validly issued, fully paid and nonassessable, and no current or past shareholder of SCB or any other Person will have any preemptive right or similar rights in respect thereof.
(b) Neither the execution and delivery of this Agreement by SCB, nor the consummation by SCB of the transactions contemplated hereby, including the Bank Merger, nor compliance by SCB with any of the terms or provisions hereof, will (i) violate any provision of the SCB Articles or the SCB Bylaws, or (ii) assuming that the consents and approvals referred to in Section 6.04 are duly obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to SCB or any of its Subsidiaries or any of their respective properties or assets or (y) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of SCB or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which SCB or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound, except (in the case of clauses (x) and (y) above) for such violations, conflicts, breaches or defaults which, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on SCB.
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6.04 Consents and Approvals. Except for (a) the filing of any required applications, filings and notices, as applicable, with Nasdaq, (b) the filing of any required applications, filings and notices, as applicable, with the FRB under the BHC Act and the CIBC Act, and approval of such applications, filings and notices, (c) the filing of any required applications, filings and notices, as applicable, with the OCC, and approval of such applications, filings and notices, (d) the filing with the SEC of the Registration Statement and Proxy Statement/Prospectus, and the declaration of effectiveness of the Registration Statement, (e) the filing of the Agreement of Merger with the Secretary of State of the State of California pursuant to the CGCL and the filing of the Bank Merger Agreement with the Secretary of State of the State of California and the DFPI pursuant to the CGCL and CFC, and (f) such filings and approvals as are required to be made or obtained under the securities or “Blue Sky” laws of various states in connection with the issuance of the shares of SCB Common Stock pursuant to this Agreement and the approval of the listing of such SCB Common Stock on Nasdaq, no consents or approvals of or filings or registrations with any Governmental Entity are necessary in connection with (i) the execution and delivery by SCB of this Agreement or (ii) the consummation by SCB of the Merger and the other transactions contemplated hereby (including the Bank Merger). As of the date hereof, SCB has no knowledge of any reason why the necessary regulatory approvals and consents will not be received in order to permit consummation of the Merger and Bank Merger on a timely basis.
6.05 Reports.
(a) SCB and each of its Subsidiaries have timely filed (or furnished) all reports, registrations and statements, together with any amendments required to be made with respect thereto, that they were required to file (or furnish, as applicable) since January 1, 2021 with any Regulatory Agencies, including, without limitation, any report, registration or statement required to be filed (or furnished, as applicable) pursuant to the laws, rules or regulations of the United States, any state, any foreign entity, SRO or any Regulatory Agency, and have paid all fees and assessments due and payable in connection therewith, except where the failure to file (or furnish, as applicable) such report, registration or statement or to pay such fees and assessments, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on SCB. Subject to Section 10.13, except as set forth on Section 6.05(a) of the SCB Disclosure Schedule and for normal examinations conducted by a Regulatory Agency in the ordinary course of business of SCB and its Subsidiaries, (i) no Regulatory Agency or governmental agency or authority has initiated or has pending any proceeding or, to the knowledge of SCB, investigation into the business or operations of SCB or any of its Subsidiaries since January 1, 2021, (ii) there is no unresolved violation, criticism, or exception by any Regulatory Agency with respect to any report or statement relating to any examinations or inspections of SCB or any of its Subsidiaries, and (iii) there has been no formal or informal inquiries by, or disagreements or disputes with, any Regulatory Agency with respect to the business, operations, policies or procedures of SCB or any of its Subsidiaries since January 1, 2021; in the case of each of clauses (i) through (iii), which would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on SCB.
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(b) An accurate copy of each final registration statement, prospectus, report, schedule and definitive proxy statement filed with or furnished by SCB to the SEC since January 1, 2021 pursuant to the Securities Act or the Exchange Act (the “SCB Reports”) is publicly available. No such SCB Report, as of the date thereof (and, in the case of registration statements and proxy statements, on the dates of effectiveness and the dates of the relevant meetings, respectively), contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading, except that information filed or furnished as of a later date (but before the date of this Agreement) shall be deemed to modify information as of an earlier date. As of their respective dates, all SCB Reports filed under the Securities Act and the Exchange Act complied in all material respects with the published rules and regulations of the SEC with respect thereto. As of the date of this Agreement, no executive officer of SCB has failed in any respect to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act. As of the date of this Agreement, there are no outstanding comments from or unresolved issues raised by the SEC with respect to any of the SCB Reports.
6.06 Financial Statements.
(a) The financial statements of SCB and its Subsidiaries included (or incorporated by reference) in the SCB Reports (including the related notes, where applicable) (i) have been prepared from, and are in accordance with, the books and records of SCB and its Subsidiaries, (ii) fairly present in all material respects the consolidated balance sheet, the consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of cash flows, and consolidated changes in shareholders’ equity of SCB and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth (subject in the case of unaudited statements to year-end audit adjustments normal in nature and amount), (iii) complied, as of their respective dates of filing with the SEC, in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, and (iv) have been prepared in accordance with GAAP consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes thereto. The books and records of SCB and its Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. Since January 1, 2020, no independent public accounting firm of SCB has resigned (or informed SCB that it intends to resign) or been dismissed as independent public accountants of SCB as a result of, or in connection with, any disagreements with SCB on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure. The financial statements of BSC Bank included in the consolidated reports of condition and income (call reports) of BSC Bank complied, as of their respective dates of filing with the FDIC, in all material respects with applicable accounting requirement and with the published instructions of the Federal Financial Institutions Examination Council with respect thereto.
(b) Except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on SCB, neither SCB nor any of its Subsidiaries has any liability (whether absolute, accrued, contingent or otherwise and whether due or to become due), except for those liabilities that are reflected or reserved against on the consolidated balance sheet of SCB included in its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2023 (including any notes thereto) and for liabilities incurred in the ordinary course of business since September 30, 2023, or in connection with this Agreement and the transactions contemplated hereby.
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(c) The records, systems, controls, data and information of SCB and its Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of SCB or its Subsidiaries or accountants (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control that would not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect on SCB. SCB (x) has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that material information relating to SCB, including its Subsidiaries, is made known to the chief executive officer and the chief financial officer of SCB by others within those entities as appropriate to allow timely decisions regarding required disclosures and to make the certifications required by the Exchange Act and Sections 302 and 906 of the Sarbanes-Oxley Act, and (y) has disclosed, based on its most recent evaluation prior to the date hereof, to SCB’s outside auditors and the audit committee of the SCB Board (i) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which would reasonably be expected to adversely affect SCB’s ability to record, process, summarize and report financial information, and (ii) to the knowledge of SCB, any fraud, whether or not material, that involves management or other employees who have a significant role in SCB’s internal controls over financial reporting. To the knowledge of SCB, there is no reason to believe that SCB’s outside auditors and its chief executive officer and chief financial officer will not be able to give the certifications and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act, without qualification, when next due.
(d) Since January 1, 2021, (i) neither SCB nor any of its Subsidiaries, nor, to the knowledge of SCB, any director, officer, auditor, accountant or representative of SCB or any of its Subsidiaries, has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of SCB or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that SCB or any of its Subsidiaries has engaged in questionable accounting or auditing practices, and (ii) no attorney representing SCB or any of its Subsidiaries, whether or not employed by SCB or any of its Subsidiaries, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by SCB or any of its officers, directors, employees or agents to the SCB Board or any committee thereof or, to the knowledge of SCB, to any director or officer of SCB.
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6.07 Broker’s Fees. With the exception of the engagement of MJC Partners, LLC, neither SCB nor any of its Subsidiaries nor any of their respective officers or directors has employed any broker, finder or financial advisor or incurred any liability for any broker’s fees, commissions or finder’s fees in connection with the Merger or related transactions contemplated by this Agreement. SCB has disclosed to CBC as of the date hereof the aggregate fees provided for in connection with the engagement by SCB of MJC Partners, LLC related to the Merger and the other transactions contemplated hereby.
6.08 Absence of Certain Changes or Events.
(a) Since December 31, 2022, no event or events have occurred that have had or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on SCB.
(b) Except as set forth on Section 6.08(b) of the SCB Disclosure Schedule and in connection with the transactions contemplated by this Agreement, since December 31, 2022, SCB and its Subsidiaries have carried on their respective businesses in all material respects in the ordinary course.
6.09 Legal Proceedings.
(a) Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on SCB, neither SCB nor any of its Subsidiaries is a party to any, and there are no pending or, to SCB’s knowledge, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against SCB or any of its Subsidiaries or any of their current or former directors or executive officers or challenging the validity or propriety of the transactions contemplated by this Agreement.
(b) There is no injunction, order, judgment, decree, or regulatory restriction imposed upon SCB, any of its Subsidiaries or the assets of SCB or any of its Subsidiaries (or that, upon consummation of the Merger and/or the Bank Merger, would apply to the Surviving Corporation or any of its Affiliates) that would reasonably be expected to be material to SCB and its Subsidiaries, taken as a whole.
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6.10 Taxes and Tax Returns. Each of SCB and its Subsidiaries has duly and timely filed (including all applicable extensions) all material Tax Returns in all jurisdictions in which Tax Returns are required to be filed by it, and all such Tax Returns are true, correct, and complete in all material respects. Neither SCB nor any of its Subsidiaries is the beneficiary of any extension of time within which to file any material Tax Return (other than extensions to file Tax Returns obtained in the ordinary course). All material Taxes of SCB and its Subsidiaries (whether or not shown on any Tax Returns) that are due have been fully and timely paid. Each of SCB and its Subsidiaries has withheld and paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, creditor, shareholder, independent contractor or other third party. There are no Liens on any of SCB’s assets or on any assets of any of SCB’s Subsidiaries that arose either in connection with any failure (or alleged failure) to pay any Tax or, to the knowledge of SCB, is any taxing authority in the process of imposing a Lien for Taxes upon such assets. Neither SCB nor any of its Subsidiaries has granted any extension or waiver of the limitation period applicable to any material Tax that remains in effect. Neither SCB nor any of its Subsidiaries has received written notice of assessment or proposed assessment in connection with any material amount of Taxes, and there are no threatened in writing or pending disputes, claims, audits, examinations or other proceedings regarding any material Tax of SCB and its Subsidiaries or the assets of SCB and its Subsidiaries. SCB has made available to CBC true and complete copies of any private letter ruling requests, closing agreements or gain recognition agreements with respect to Taxes requested or executed in the last six (6) years. Neither SCB nor any of its Subsidiaries is a party to or is bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than such an agreement or arrangement exclusively between or among SCB and its Subsidiaries). Neither SCB nor any of its Subsidiaries (a) has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was SCB) or (b) has any liability for the Taxes of any Person (other than SCB or any of its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Law), as a transferee or successor, by contract or otherwise. Neither SCB nor any of its Subsidiaries has been, within the past two (2) years or otherwise as part of a “plan (or series of related transactions)” within the meaning of Section 355(e) of the Code of which the Merger is also a part, a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock intending to qualify for tax-free treatment under Section 355 of the Code. Neither SCB nor any of its Subsidiaries has participated in a “reportable transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(1). At no time during the past five (5) years has SCB been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code. Neither SCB nor any of SCB’s Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, any Tax period (or portion thereof) beginning after the Effective Time as a result of (A) a change in accounting method for a Tax period beginning on or before the Effective Time, (B) any “closing agreement” as described in Section 7121 of the Code (or any similar provision of state, local or foreign tax law), (C) any intercompany transaction or any excess loss account, within the meaning of Treas. Reg. 1.1502-13 and 1.1502-19, respectively, (or any corresponding or similar provision or administrative rule of federal, state, local, or non-U.S. income Tax law) or (D) any prepaid amount received on or prior to the Effective Time. As of the date hereof, neither SCB nor any of its Subsidiaries has any reason to believe that any conditions exist that could reasonably be expected to prevent or impede the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. Neither SCB nor any of SCB’s Subsidiaries has (i) deferred the employer’s share of any “applicable employment taxes” under Section 2302 of the CARES Act (or any similar provision of state or local law), (ii) deferred any payroll tax obligations (including those imposed by Sections 3101(a) and 3201 of the Code) pursuant to or in connection with the Memorandum on Deferring Payroll Tax Obligation in Light of the Ongoing COVID-19 Disaster, dated August 8, 2020 or (iii) claimed any employee retention credits under the CARES Act.
6.11 Employees and Employee Benefit Plans.
(a) Section 6.11(a) of the SCB Disclosure Schedule lists all material SCB Benefit Plans. For purposes of this Agreement, “SCB Benefit Plans” means all employee benefit plans (as defined in Section 3(3) of ERISA), whether or not subject to ERISA, all nonqualified deferred compensation arrangements (as defined in Section 409A of the Code) and all equity-based compensation, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements, retention, bonus, employment, change in control, fringe benefit, termination or severance plans, programs, agreements or arrangements that are contributed to or sponsored or maintained by, or required to be contributed to by, SCB or any of its Subsidiaries for the benefit of any current or former employee, officer or director of SCB or any of its Subsidiaries, or any family member or beneficiary thereof.
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(b) SCB has heretofore made available to CBC true and complete copies of (i) each material SCB Benefit Plan, including any amendments thereto and all related trust documents, insurance contracts or other funding vehicles (and if such SCB Benefit Plan is not subject to such written documentation, a written summary of the material terms and conditions of such SCB Benefit Plan), and (ii) to the extent applicable, (A) the most recent summary plan description, if any, required under ERISA with respect to such SCB Benefit Plan, together with summaries of any material modifications thereto, (B) the most recent annual reports (Form 5500 and all schedules thereto), if any, filed with the Internal Revenue Service, (C) the most recently received Internal Revenue Service determination or opinion letter, if any, relating to such SCB Benefit Plan, (D) all coverage, discrimination and qualification tests for the three (3) most recent plan years; (E) the most recently prepared actuarial report for each SCB Benefit Plan (if applicable), and (F) all material non-routine correspondence to or from any Governmental Entity received in the last three (3) years with respect to such SCB Benefit Plan.
(c) Each SCB Benefit Plan has been established, operated and administered in all material respects in accordance with its terms and the requirements of all applicable Laws, including ERISA and the Code.
(d) Section 6.11(d) of the SCB Disclosure Schedule identifies each SCB Benefit Plan that is intended to be qualified under Section 401(a) of the Code (the “SCB Qualified Plans”). Each SCB Qualified Plan is either the subject of a favorable determination letter with respect to its tax-qualified status or is based on a pre-approved plan document that is the subject of a favorable advisory or opinion letter issued to the pre-approved plan document provider upon which SCB may rely, and, to the knowledge of SCB, there are no existing circumstances and no events have occurred that would reasonably be expected to adversely affect the qualified status of each such SCB Qualified Plan or its related trust.
(e) No Controlled Group Liability has been incurred by SCB or its ERISA Affiliates that has not been satisfied in full, and, to the knowledge of SCB, no condition exists that presents a material risk to SCB or its ERISA Affiliates of incurring any such liability, except as, either individually or in the aggregate, would not reasonably be expected to result in any material liability to SCB and its Subsidiaries.
(f) None of the SCB, any of its Subsidiaries or any of their respective ERISA Affiliates has, at any time, contributed to or been obligated to contribute to any plan that is: (i) a Pension Plan; (ii) a Multiemployer Plan; or (iii) a Multiple Employer Plan. None of SCB, any of its Subsidiaries or any of their respective ERISA Affiliates has incurred any material liability to a Multiemployer Plan or a Multiple Employer Plan as a result of a complete or partial withdrawal (as those terms are defined in Part I of Subtitle E of Title IV of ERISA) from a Multiemployer Plan or a Multiple Employer Plan that has not been satisfied in full.
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(g) Except as set forth on Section 6.11(g) of the SCB Disclosure Schedule, neither SCB nor any of its Subsidiaries sponsors, has sponsored or has any obligation with respect to any employee benefit plan that provides for any post-employment or post-retirement health or medical or life insurance benefits for retired or former employees or their dependents, expect as required by Section 4980B of the Code, other than benefits provided under short-term or long-term disability plans.
(h) All contributions required to be made to any SCB Benefit Plan by applicable Law or by any plan document, and all premiums due or payable with respect to insurance policies funding any SCB Benefit Plan, for any period through the date hereof, have been timely made or paid in full or, to the extent not required to be made or paid on or before the date hereof, have been fully reflected on the books and records of SCB, except as, either individually or in the aggregate, would not reasonably be expected to result in any material liability to SCB and its Subsidiaries.
(i) There are no pending or threatened claims (other than claims for benefits in the ordinary course), lawsuits or arbitrations that have been asserted or instituted, and, to SCB’s knowledge, no set of circumstances exists that may reasonably be expected to give rise to a claim or lawsuit, against the SCB Benefit Plans, any fiduciaries thereof with respect to their duties to the SCB Benefit Plans or the assets of any of the trusts under any of the SCB Benefit Plans.
(j) Except as set forth on Section 6.11(j) of the SCB Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in conjunction with any other event) (i) entitle any employee, officer, director or individual service provider of SCB or any of its Subsidiaries to any payment or benefit, (ii) result in, accelerate, cause the vesting, exercisability, lapse of applicable restrictions, funding, payment or delivery of, or increase in the amount or value of, any payment, right or other benefit to any employee, officer, director or independent contractor of SCB or any of its Subsidiaries, (iii) accelerate the timing of or cause SCB or any of its Subsidiaries to transfer or set aside any assets to fund any material benefits under any SCB Benefit Plan, or (iv) result in any limitation on the right of SCB or any of its Subsidiaries to amend, merge, terminate or receive a reversion of assets from any SCB Benefit Plan or related trust. Without limiting the generality of the foregoing, no amount paid or payable (whether in cash, in property, or in the form of benefits) by SCB or any of its Subsidiaries in connection with the transactions contemplated hereby (either solely as a result thereof or as a result of such transactions in conjunction with any other event) will be an “excess parachute payment” within the meaning of Section 280G of the Code.
(k) Neither SCB nor any of its Subsidiaries is a party to any plan, program, agreement or arrangement that provides for the gross-up or reimbursement of Taxes imposed under Section 409A or 4999 of the Code (or any corresponding provisions of state or local law relating to Tax). Except as would not reasonably be expected to result in material liability to SCB or any of its Subsidiaries, each SCB Benefit Plan required to comply with Section 409A of the Code complies in both form and operation therewith.
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(l) No SCB Benefit Plan is maintained outside the jurisdiction of the United States or covers any employees or other service providers of SCB or any of its Subsidiaries who reside or work outside the United States.
(m) There are no pending or, to the knowledge of SCB, threatened material labor grievances or material unfair labor practice claims or charges against SCB or any of its Subsidiaries, or any strikes or other material labor disputes against SCB or any of its Subsidiaries. Neither SCB nor any of its Subsidiaries is party to or bound by any collective bargaining or similar agreement with any labor organization, or work rules or practices agreed to with any labor organization or employee association applicable to employees of SCB or any of its Subsidiaries and, to the knowledge of SCB, there are no organizing efforts by any union or other group seeking to represent any employees of SCB and its Subsidiaries.
(n) SCB and its Subsidiaries are in compliance in all material respects with, and since December 31, 2021 have complied in all material respects with, all Laws regarding employment and employment practices, terms and conditions of employment, wages and hours, paid sick leave, classification of employees and independent contractors, equitable pay practices, privacy rights, labor disputes, employment discrimination, sexual or racial harassment or discrimination, workers’ compensation or long-term disability policies, retaliation, immigration, family and medical leave, occupational safety and health and other Laws in respect of any reduction in force (including notice, information and consultation requirements).
(o) Other than as disclosed in Section 6.11(o) of the SCB Disclosure Schedule, (i) to the knowledge of SCB, no written allegations of sexual or racial harassment or sexual or race-based misconduct have been made since December 31, 2021 against any director or officer of SCB, (ii) since December 31, 2021, neither SCB nor any of its Subsidiaries has entered into any settlement agreement related to allegations of sexual or racial harassment or sexual or race-based misconduct by any director or officer of SCB, and (iii) there are no proceedings currently pending or, to the knowledge of SCB, threatened related to any allegations of sexual or racial harassment or sexual or race-based misconduct by any director or officer of SCB.
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6.12 Compliance with Applicable Law. SCB and each of its Subsidiaries hold, and have at all times since December 31, 2021, held, all licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses and ownership of their respective properties, rights and assets under and pursuant to each (and have paid all fees and assessments due and payable in connection therewith), except where neither the cost of failure to hold nor the cost of obtaining and holding such license, franchise, permit or authorization (nor the failure to pay any fees or assessments) would, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on SCB, and, to the knowledge of SCB, no suspension or cancellation of any such necessary license, franchise, permit or authorization is threatened. SCB and each of its Subsidiaries have complied in all material respects with and are not in material default or violation under any, applicable Law, statute, order, rule, regulation, policy and/or guideline of any Governmental Entity relating to SCB or any of its Subsidiaries, including all laws relating to Personal Data, the USA PATRIOT Act, the Bank Secrecy Act, the Equal Credit Opportunity Act and Regulation B, the Fair Housing Act, the Community Reinvestment Act, the Fair Credit Reporting Act, the Truth in Lending Act and Regulation Z, the Home Mortgage Disclosure Act, the Fair Debt Collection Practices Act, the Electronic Fund Transfer Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, any regulations promulgated by the Consumer Financial Protection Bureau, the Interagency Policy Statement on Retail Sales of Nondeposit Investment Products, the SAFE Mortgage Licensing Act of 2008, the Real Estate Settlement Procedures Act and Regulation X, Title V of the Gramm-Leach Bliley Act, any and all sanctions or regulations enforced by the Office of Foreign Assets Control or the United States Department of Treasury and any other law, policy or guideline relating to bank secrecy, discriminatory lending, financing or leasing practices, consumer protection, money laundering prevention, foreign assets control, U.S. sanctions laws and regulations, Sections 23A and 23B of the Federal Reserve Act, the Sarbanes-Oxley Act, and all agency requirements relating to the origination, sale and servicing of mortgage and consumer loans. SCB and its Subsidiaries have established and maintain a system of internal controls designed to ensure compliance in all material respects by SCB and its Subsidiaries with applicable financial recordkeeping and reporting requirements of applicable money laundering prevention laws in jurisdictions where SCB and its Subsidiaries conduct business. The most recent regulatory rating given to SCB Bank as to compliance with the Community Reinvestment Act is “satisfactory.” To the knowledge of SCB and except as set forth in Section 6.12 of the SCB Disclosure Schedule, since the last regulatory examination of SCB Bank to Community Reinvestment Act compliance, SCB Bank has not received any complaints from consumers, community groups or similar organizations as to Community Reinvestment Act compliance. Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on SCB, none of SCB, or any of its Subsidiaries or, to the knowledge of SCB, any director, officer, employee, agent or other Person acting on behalf of SCB or any of its Subsidiaries has, directly or indirectly, (a) used any funds of SCB or any of its Subsidiaries for unlawful contributions, unlawful gifts, unlawful entertainment or other expenses relating to political activity, (b) made any unlawful payment to foreign or domestic governmental officials or employees or to foreign or domestic political parties or campaigns from funds of SCB or any of its Subsidiaries, (c) violated any provision that would result in the violation of the Foreign Corrupt Practices Act of 1977, as amended, or any similar Law, (d) established or maintained any unlawful fund of monies or other assets of SCB or any of its Subsidiaries, (e) made any fraudulent entry on the books or records of SCB or any of its Subsidiaries, or (f) made any unlawful bribe, unlawful rebate, unlawful payoff, unlawful influence payment, unlawful kickback or other unlawful payment to any Person, private or public, regardless of form, whether in money, property or services, to obtain favorable treatment in securing business to obtain special concessions for SCB or any of its Subsidiaries, to pay for favorable treatment for business secured or to pay for special concessions already obtained for SCB or any of its Subsidiaries, or is currently subject to any United States sanctions administered by the Office of Foreign Assets Control of the United States Treasury Department. SCB maintains a written information privacy and security program that maintains reasonable measures to protect the privacy, confidentiality and security of all Personal Data against any Security Breach. To the knowledge of SCB, SCB has not experienced any Security Breach that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on SCB. To the knowledge of SCB, there are no data security or other technological vulnerabilities with respect to SCB’s information technology systems or networks that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on SCB. Except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on SCB: (i) BSC Bank has complied in all material respects with all requirements of the CARES Act and the Paycheck Protection Program, including applicable guidance, in connection with its participation in the Paycheck Protection Program; (ii) BSC Bank is not the subject of any pending or, to the knowledge of SCB, threatened investigations related to fraud in connection with participation in the Paycheck Protection Program or Paycheck Protection Program loans; (iii) SCB and each of its Subsidiaries have properly administered all accounts for which it acts as a fiduciary, including accounts for which it serves as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in accordance with the terms of the governing documents and applicable state, federal and foreign Law; and (iv) none of SCB, any of its Subsidiaries, or any of its or its Subsidiaries’ directors, officers or employees, has committed any breach of trust or fiduciary duty with respect to any such fiduciary account, and the accountings for each such fiduciary account are true, correct and complete and accurately reflect the assets and results of such fiduciary account.
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6.13 Certain Contracts.
(a) Except as set forth in Section 6.13(a) of the SCB Disclosure Schedule or as filed with or incorporated into any SCB Report filed prior to the date hereof, as of the date hereof, neither SCB nor any of its Subsidiaries is a party to or bound by any contract, arrangement, commitment or understanding (whether written or oral but excluding any SCB Benefit Plan): (i) which is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC); (ii) which contains a provision that materially restricts the conduct on any line of business by SCB or any of its Subsidiaries or upon consummation of the transactions contemplated by this Agreement will materially restrict the ability of the Surviving Corporation or any of its Affiliates to engage in any line of business or in any geographic region (including any exclusivity or exclusive dealing provisions with such an effect); (iii) which is a collective bargaining agreement or similar agreement with any labor organization; (iv) any of the benefits of or obligations under which will arise or be increased or accelerated by the occurrence of the execution and delivery of this Agreement, receipt of the SCB Shareholder Approval or the announcement or consummation of any of the transactions contemplated by this Agreement, or under which a right of cancellation or termination will arise as a result thereof, or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement, where such increase or acceleration of benefits or obligations, right of cancellation or termination, or change in calculation of value of benefits would, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on SCB; (v) (A) that relates to the incurrence of indebtedness by SCB or any of its Subsidiaries, including any sale and leaseback transactions, capitalized leases and other similar financing arrangements (other than deposit liabilities, trade payables, federal funds purchased, advances and loans from the Federal Home Loan Bank and securities sold under agreements to repurchase, in each case incurred in the ordinary course of business), (B) that provides for the guarantee, support, assumption or endorsement by SCB or any of its Subsidiaries of, or any similar commitment by SCB or any of its Subsidiaries with respect to, the obligations, liabilities or indebtedness of any other Person, in the case of each of clauses (A) and (B), in the principal amount of $100,000 or more, or (C) that provides for any material indemnification or similar obligations on the part of SCB or any of its Subsidiaries; (vi) that grants any right of first refusal, right of first offer or similar right with respect to any material assets, rights or properties of SCB or its Subsidiaries, taken as a whole; (vii) which creates future payment obligations in excess of $100,000 per annum other than any such contracts which are terminable by SCB or any of its Subsidiaries on sixty (60) days or less notice without any required payment or other conditions, other than extensions of credit, other customary banking products offered by SCB or its Subsidiaries, or derivatives issued or entered into in the ordinary course of business; (viii) that is a settlement, consent or similar agreement and contains any material continuing obligations of SCB or any of its Subsidiaries; or (ix) that relates to the acquisition or disposition of any Person, business or asset and under which SCB or its Subsidiaries have or may have a material obligation or liability. Each contract, arrangement, commitment or understanding of the type described in this Section 6.13(a) (excluding any SCB Benefit Plan), whether or not set forth in the SCB Disclosure Schedule, is referred to herein as a “SCB Contract”. SCB has made available to CBC true, correct and complete copies of each SCB Contract in effect as of the date hereof.
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(b) In each case, except as, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on SCB, (i) each SCB Contract is valid and binding on SCB or one of its Subsidiaries, as applicable, and in full force and effect, (ii) SCB and each of its Subsidiaries has in all material respects complied with and performed all obligations required to be performed by it to date under each SCB Contract, (iii) to the knowledge of SCB, each third-party counterparty to each SCB Contract has in all material respects complied with and performed all obligations required to be performed by it to date under such SCB Contract, (iv) SCB does not have knowledge of, and has not received notice of, any violation of any SCB Contract by any of the other parties thereto, and (v) no event or condition exists which constitutes or, after notice or lapse of time or both, will constitute, a material breach or default on the part of SCB or any of its Subsidiaries, or to the knowledge of SCB, any other party thereto, of or under any such SCB Contract.
6.14 Agreements with Regulatory Agencies. Subject to Section 10.13, neither SCB nor any of its Subsidiaries is subject to any cease-and-desist or other order or enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or has been ordered to pay any civil money penalty by, or has been since January 1, 2022, a recipient of any supervisory letter from, or since January 1, 2022, has adopted any policies, procedures or board resolutions at the request or suggestion of, any Regulatory Agency or other Governmental Entity that currently restricts in any material respect or would reasonably be expected to restrict in any material respect the conduct of its business or that in any material manner relates to its capital adequacy, its ability to pay dividends, its credit or risk management policies, its management or its business (each, whether or not set forth in the SCB Disclosure Schedule, a “SCB Regulatory Agreement”), nor has SCB or any of its Subsidiaries been advised in writing, or to SCB’s knowledge, orally, since January 1, 2022, by any Regulatory Agency or other Governmental Entity that it is considering issuing, initiating, ordering or requesting any such SCB Regulatory Agreement, nor does SCB believe that such SCB Regulatory Agreement is likely to be initiated, ordered or requested.
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6.15 Risk Management Instruments. Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on SCB, (a) all interest rate swaps, caps, floors, option agreements, futures and forward contracts and other similar derivative transactions and risk management arrangements, whether entered into for the account of SCB, any of its Subsidiaries or for the account of a customer of SCB or one of its Subsidiaries, were entered into in the ordinary course of business and in accordance with applicable rules, regulations and policies of any Regulatory Agency and with counterparties believed to be financially responsible at the time and are legal, valid and binding obligations of SCB or one of its Subsidiaries enforceable in accordance with their terms (except as may be limited by the Bankruptcy and Equity Exception), and are in full force and effect; and (b) SCB and each of its Subsidiaries have duly performed in all material respects all of their material obligations thereunder to the extent that such obligations to perform have accrued, and, to SCB’s knowledge, there are no material breaches, violations or defaults or allegations or assertions of such by any party thereunder.
6.16 Environmental Matters. Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on SCB, SCB and its Subsidiaries are in compliance, and have complied since January 1, 2022, with all Environmental Laws. There are no legal, administrative, arbitral or other proceedings, claims or actions or, to the knowledge of SCB any private environmental investigations or remediation activities or governmental investigations of any nature seeking to impose, or that could reasonably be expected to result in the imposition, on SCB or any of its Subsidiaries of any liability or obligation arising under any Environmental Law, pending or threatened against SCB, which liability or obligation would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on SCB. To the knowledge of SCB, there is no reasonable basis for any such proceeding, claim, action or governmental investigation that would impose any liability or obligation that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on SCB. SCB is not subject to any agreement, order, judgment, decree , letter agreement or memorandum of agreement by or with any court, Governmental Entity, Regulatory Agency or other third party imposing any liability or obligation with respect to the foregoing that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on SCB.
6.17 Investment Securities and Commodities.
(a) Each of SCB and its Subsidiaries has good title in all material respects to all securities and commodities owned by it (except those sold under repurchase agreements), free and clear of any Liens, except as set forth in the financial statements included in the SCB Reports or to the extent such securities or commodities are pledged in the ordinary course of business to secure obligations of SCB or its Subsidiaries. Such securities and commodities are valued on the books of SCB in accordance with GAAP in all material respects.
(b) SCB and its Subsidiaries and their respective businesses employ investment, securities, commodities, risk management and other policies, practices and procedures that SCB believes are prudent and reasonable in the context of such businesses, and SCB and its Subsidiaries have, since January 1, 2021, been in compliance with such policies, practices and procedures in all material respects. Prior to the date of this Agreement, SCB has made available to CBC the material terms of such policies, practices and procedures.
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6.18 Real Property. Except as would not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect on SCB, (a) SCB or a Subsidiary of SCB has good and marketable title to all the real property reflected in the latest audited balance sheet included in the SCB Reports as being owned by SCB or a Subsidiary of SCB or acquired after the date thereof (except properties sold or otherwise disposed of since the date thereof in the ordinary course of business) (the “SCB Owned Properties”), free and clear of all Liens, except for Permitted Encumbrances, and (b) is the lessee of all leasehold estates reflected in the latest audited financial statements included in such SCB Reports or acquired after the date thereof (except for leases that have expired by their terms since the date thereof) (collectively with SCB Owned Properties, the “SCB Real Property”), free and clear of all Liens of any nature whatsoever, except for Permitted Encumbrances, and is in possession of the properties purported to be leased thereunder, and each such lease is valid without default thereunder by the lessee or, to the knowledge of SCB, the lessor. There are no pending or, to the knowledge of SCB, threatened condemnation proceedings against SCB Real Property.
6.19 Intellectual Property. SCB and each of its Subsidiaries owns, or is licensed to use (in each case, free and clear of any material Liens), all Intellectual Property necessary for the conduct of its business as currently conducted. Except as would not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect on SCB, (a) (i) to the knowledge of SCB, the use of any Intellectual Property by SCB and its Subsidiaries does not infringe, misappropriate or otherwise violate the rights of any Person and is in accordance with any applicable license pursuant to which SCB or any of its Subsidiaries acquired the right to use any Intellectual Property, and (ii) to the knowledge of SCB, no Person has asserted in writing to SCB that SCB or any of its Subsidiaries has infringed, misappropriated or otherwise violated the Intellectual Property rights of such Person, (b) no Person is challenging or, to the knowledge of SCB, infringing on or otherwise violating, any right of SCB or any of its Subsidiaries with respect to any Intellectual Property owned by SCB or its Subsidiaries, and (c) neither SCB nor any Subsidiary of SCB has received any written notice of any pending claim with respect to any Intellectual Property owned by SCB or any of its Subsidiaries, and SCB and its Subsidiaries have taken commercially reasonable actions to avoid the abandonment, cancellation or unenforceability of all Intellectual Property owned or licensed, respectively, by SCB and its Subsidiaries.
6.20 Related Party Transactions. Except as set forth in Section 6.20 of the SCB Disclosure Schedule, there are no transactions or series of related transactions, agreements, arrangements or understandings, nor are there any currently proposed transactions or series of related transactions, between SCB or any of its Subsidiaries, on the one hand, and any current or former director or “executive officer” (as defined in Rule 3b-7 under the Exchange Act) of SCB or any of its Subsidiaries or any Person who beneficially owns (as defined in Rules 13d-3 and 13d-5 of the Exchange Act) 5% or more of the outstanding SCB Common Stock (or any of such Person’s immediate family members or Affiliates) (other than Subsidiaries of SCB) on the other hand, of the type required to be reported in any SCB Report pursuant to Item 404 of Regulation S-K promulgated under the Exchange Act that have not been so reported on a timely basis.
6.21 Takeover Laws. No “fair price,” “moratorium,” “control share acquisition” or other similar anti-takeover statute or regulation or any anti-takeover provision in the SCB Articles or SCB Bylaws is applicable to this Agreement or the transactions contemplated hereby, including the Merger, with respect to SCB. SCB does not have any shareholder rights plan, “poison pill” or similar plan or arrangement in effect.
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6.22 Reorganization. SCB has not taken any action and is not aware of any fact or circumstance that could reasonably be expected to prevent the Merger and Bank Merger, taken together, from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code.
6.23 Opinion of Financial Advisor. Prior to the execution of this Agreement, the SCB Board has received an opinion (which, if initially rendered verbally, has been or will be confirmed by a written opinion, dated the same date) of MJC Partners, LLC to the effect that, as of the date of such opinion, and based upon and subject to the factors, assumptions, and limitations set forth therein, the Exchange Ratio in the Merger is fair from a financial point of view to SCB. Such opinion has not been amended or rescinded as of the date of this Agreement.
6.24 SCB Information. The information relating to SCB and its Subsidiaries to be contained in the Proxy Statement/Prospectus and the Registration Statement, and the information relating to SCB and its Subsidiaries that is provided by SCB or its representatives for inclusion in any other document filed with any other Regulatory Agency in connection herewith, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading. The Proxy Statement/Prospectus (except for such portions thereof that relate only to CBC or any of its Subsidiaries) will comply in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. The Registration Statement (except for such portions thereof that relate only to CBC or any of its Subsidiaries) will comply in all material respects with the provisions of the Securities Act and the rules and regulations thereunder.
6.25 Loan Portfolio.
(a) As of the date hereof, except as set forth in Section 6.25(a) of the SCB Disclosure Schedule, neither SCB nor any of its Subsidiaries is a party to any Loan in which SCB or any Subsidiary of SCB is a creditor which as of December 31, 2023, had an outstanding balance of $1,000,000 or more and under the terms of which the obligor was, as of December 31, 2023, over ninety (90) days or more delinquent in payment of principal or interest. Set forth in Section 6.25(a) of the SCB Disclosure Schedule is a true, correct and complete list of (A) all of the Loans of SCB and its Subsidiaries that, as of December 31, 2023, had an outstanding balance of $500,000 or more and were classified by SCB as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import, together with the principal amount and accrued and unpaid interest on each such Loan and the identity of the borrower thereunder, together with the aggregate principal amount and accrued and unpaid interest on such Loans, by category of Loan (e.g., commercial, consumer, etc.), together with the aggregate principal amount of such Loans by category and (B) each asset of SCB or any of its Subsidiaries that, as of December 31, 2023, is classified as OREO and the book value thereof.
(b) Except as would not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect on SCB, each Loan of SCB and its Subsidiaries (i) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (ii) to the extent carried on the books and records of SCB and its Subsidiaries as secured Loans, has been secured by valid Liens, as applicable, which have been perfected and (iii) is the legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to the Bankruptcy and Equity Exception.
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(c) Except as would not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect on SCB, each outstanding Loan of SCB or any of its Subsidiaries (including Loans held for resale to investors) was solicited and originated, and is and has been administered and, where applicable, serviced, and the relevant Loan files are being maintained, in all material respects in accordance with the relevant notes or other credit or security documents, the written underwriting standards of SCB and its Subsidiaries (and, in the case of Loans held for resale to investors, the underwriting standards, if any, of the applicable investors) and with all applicable federal, state and local laws, regulations and rules.
6.26 Insurance. Except as would not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect on SCB, SCB and its Subsidiaries are insured with reputable insurers against such risks and in such amounts as the management of SCB reasonably has determined to be prudent and consistent with industry practice, and SCB and its Subsidiaries are in compliance in all material respects with their insurance policies and are not in default under any of the terms thereof, each such policy is outstanding and in full force and effect and, except for policies insuring against potential liabilities of officers, directors and employees of SCB and its Subsidiaries, SCB or the relevant Subsidiary thereof is the sole beneficiary of such policies, and all premiums and other payments due under any such policy have been paid, and all claims thereunder have been filed in due and timely fashion.
6.27 Information Security. Except as would not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect on SCB, to the knowledge of SCB, since January 1, 2022, no third party has gained unauthorized access to any information technology networks controlled by and material to the operation of the business of SCB and its Subsidiaries.
6.28 No Other Representations or Warranties.
(a) Except for the representations and warranties made by SCB in this Article VI, neither SCB nor any other Person makes any express or implied representation or warranty with respect to SCB, its Subsidiaries, or their respective businesses, operations, assets, liabilities, conditions (financial or otherwise) or prospects, and SCB hereby disclaims any such other representations or warranties. In particular, without limiting the foregoing disclaimer, neither SCB nor any other Person makes or has made any representation or warranty to CBC or any of its Affiliates or representatives with respect to (i) any financial projection, forecast, estimate, budget or prospective information relating to SCB, any of its Subsidiaries or their respective businesses, or (ii) except for the representations and warranties made by SCB in this Article VI, any oral or written information presented to CBC or any of its Affiliates or representatives in the course of their due diligence investigation of SCB, the negotiation of this Agreement or in the course of the transactions contemplated hereby.
(b) SCB acknowledges and agrees that neither CBC nor any other Person has made or is making, and SCB has not relied upon, any express or implied representation or warranty other than those contained in Article V.
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ARTICLE VII
COVENANTS
7.01 Shareholder Approvals.
(a) Each of CBC and SCB shall call, give notice of, convene and hold a meeting of its shareholders (the “CBC Meeting” and the “SCB Meeting,” respectively) to be held as soon as reasonably practicable after the Registration Statement is declared effective, for the purpose of obtaining (a) in the case of CBC, the CBC Shareholder Approval and, in the case of SCB, the SCB Shareholder Approval required in connection with this Agreement and the Merger and (b) if so desired and mutually agreed, a vote upon other matters of the type customarily brought before a meeting of shareholders in connection with the approval of a merger agreement or the transactions contemplated thereby. Each of CBC and SCB shall coordinate with the other regarding the record date and meeting date for the CBC Meeting and the SCB Meeting, and each of CBC and SCB shall use its reasonable best efforts to cause such meetings to occur as soon as reasonably practicable and on the same date. Such meetings may be held virtually, subject to applicable Law and the organizational documents of CBC and SCB, as applicable.
(b) Each of CBC and SCB and their respective Boards of Directors shall, unless a Recommendation Change has been made by such party and its Board of Directors in accordance with Section 7.01(c), use its reasonable best efforts to obtain from the shareholders of CBC and SCB, respectively, the CBC Shareholder Approval and the SCB Shareholder Approval, respectively, including by communicating to the respective shareholders of CBC and SCB its recommendation (and including such recommendation in the Proxy Statement/Prospectus) that the shareholders of CBC approve the principal terms of this Agreement, in the case of CBC, and that the shareholders of SCB approve the principal terms of this Agreement and the SCB Bylaw Amendment, in the case of SCB (the “CBC Board Recommendation” and the “SCB Board Recommendation,” respectively). Except as provided in Section 7.01(c), each of CBC and SCB and their respective Boards of Directors shall not (i) withhold, withdraw, modify or qualify in a manner adverse to the other party the CBC Board Recommendation, in the case of CBC, or the SCB Board Recommendation, in the case of SCB, (ii) fail to make the CBC Board Recommendation, in the case of CBC, or the SCB Board Recommendation, in the case of SCB, in the Proxy Statement/Prospectus, (iii) adopt, approve, recommend or endorse an Acquisition Proposal or publicly announce an intention to adopt, approve, recommend or endorse an Acquisition Proposal, (iv) fail to publicly and without qualification (A) recommend against any Acquisition Proposal, or (B) reaffirm the CBC Board Recommendation, in the case of CBC, or the SCB Board Recommendation, in the case of SCB, in each case, within ten (10) Business Days (or such fewer number of days as remains prior to the CBC Meeting or the SCB Meeting, as applicable) after an Acquisition Proposal is made public or any request by the other party to do so, or (v) publicly propose to do any of the foregoing (any of the foregoing, a “Recommendation Change”).
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(c) Subject to Section 9.01 and Section 9.02, if the Board of Directors of CBC or SCB, after receiving the advice of its outside counsel and, with respect to financial matters, its financial advisors, determines in good faith that it would more likely than not result in a violation of its fiduciary duties under applicable Law to make or continue to make the CBC Board Recommendation or the SCB Board Recommendation, as applicable, such Board of Directors may, in the case of CBC, prior to the receipt of the CBC Shareholder Approval, and in the case of SCB, prior to the receipt of the SCB Shareholder Approval, submit this Agreement to its shareholders without recommendation (although the resolutions approving this Agreement as of the date hereof may not be rescinded or amended), in which event such Board of Directors may communicate the basis for its lack of a recommendation to its shareholders in the Proxy Statement/Prospectus or an appropriate amendment or supplement thereto to the extent required by Law; provided, that such Board of Directors may not take any actions under this sentence unless it (A) gives the other party at least three (3) Business Days’ prior written notice of its intention to effect such Recommendation Change and a reasonable description of the event or circumstances giving rise to its determination to take such action (including, in the event such action is taken in response to an Acquisition Proposal, the latest material terms and conditions of, and the identity of the third party making, any such Acquisition Proposal, or any amendment or modification thereof, or describe in reasonable detail such other event or circumstances), and (B) at the end of such notice period, takes into account any amendment or modification to this Agreement proposed by the other party and, after receiving the advice of its outside counsel and, with respect to financial matters, its financial advisors, determines in good faith that it would nevertheless more likely than not result in a violation of its fiduciary duties under applicable Law to make or continue to make the CBC Board Recommendation or SCB Board Recommendation, as the case may be. Any material amendment to any Acquisition Proposal will be deemed to be a new Acquisition Proposal for purposes of this Section 7.01 and will require a new notice period as referred to in this Section 7.01. CBC or SCB shall adjourn or postpone the CBC Meeting or the SCB Meeting, as the case may be, if, as of the time for which such meeting is originally scheduled there are insufficient shares of CBC Common Stock or SCB Common Stock, as the case may be, represented (either in Person or by proxy) to constitute a quorum necessary to conduct the business of such meeting, or if on the date of such meeting CBC or SCB, as applicable, has not received proxies representing a sufficient number of shares necessary to obtain the CBC Shareholder Approval or the SCB Shareholder Approval. Notwithstanding anything to the contrary herein, unless this Agreement has been terminated in accordance with its terms, (x) the CBC Meeting shall be convened and this Agreement shall be submitted to the shareholders of CBC at the CBC Meeting and (y) the SCB Meeting shall be convened and this Agreement shall be submitted to the shareholders of SCB at the SCB Meeting, and nothing contained herein shall be deemed to relieve either CBC or SCB of such obligation.
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7.02 Preparation of the Proxy Statement/Prospectus and Registration Statement.
(a) As soon as practicable after the date of this Agreement, SCB and CBC shall use reasonable best efforts to: (i) jointly prepare and cause to be filed with the SEC a joint proxy statement/prospectus to be sent to the SCB shareholders and the CBC shareholders relating to the SCB Meeting and the CBC Meeting (together with any amendments or supplements thereto, the “Proxy Statement/Prospectus”); and (ii) jointly prepare, and SCB shall cause to be filed with the SEC a registration statement on Form S-4 or other applicable form (together with any amendments or supplements thereto, the “Registration Statement”), which shall contain the Proxy Statement/Prospectus, in connection with the issuance of the shares of SCB Common Stock to CBC shareholders as the Merger Consideration in the Merger. Each of the parties shall prepare and furnish such information relating to it, its Subsidiaries and their respective directors, officers and shareholders as may be reasonably required in connection with the above referenced documents based on its knowledge of and access to the information required for said documents, and each party, and its respective legal, financial and accounting advisors, shall have the right to review in advance and comment on such Proxy Statement/Prospectus and Registration Statement prior to their filing and on any amendments or supplements thereto and any written communications with the SEC in connection therewith. Each of the parties agrees to cooperate with the other party and their counsel and accountants in requesting and obtaining appropriate opinions, consents and letters from their respective financial advisors and independent auditors in connection with the Registration Statement and the Proxy Statement/Prospectus. Each of CBC and SCB agrees to use its reasonable best efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as reasonably practicable after the filing thereof and use all reasonable best efforts to keep the Registration Statement effective as long as reasonably necessary to consummate the Merger. SCB also agrees to use its reasonable best efforts to obtain all necessary state securities law or “Blue Sky” permits and approvals required to carry out the transactions contemplated by this Agreement. After the Registration Statement is declared effective under the Securities Act, CBC and SCB shall promptly mail at each party’s own expense the Proxy Statement/Prospectus to all of their respective shareholders entitled thereto.
(b) Each of CBC and SCB agrees that none of the information supplied or to be supplied by it for inclusion or incorporation by reference in (i) the Registration Statement shall, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and (ii) the Proxy Statement/Prospectus and any amendment or supplement thereto shall, at the date(s) of mailing to CBC’s and SCB’s respective shareholders and at the time(s) of the CBC Meeting and the SCB Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. Each of CBC and SCB further agrees that if such party shall become aware prior to or subsequent to the date of effectiveness of the Registration Statement of any information furnished by such party that would cause any of the statements in the Registration Statement or the Proxy Statement/Prospectus to be false or misleading with respect to any material fact, or to omit to state any material fact necessary to make the statements therein not false or misleading, to promptly inform the other parties thereof and to take the necessary steps to correct the Registration Statement or the Proxy Statement/Prospectus.
(c) SCB agrees to advise CBC promptly in writing after SCB receives notice thereof, of the time when the Registration Statement has become effective or any supplement or amendment has been filed, of the issuance of any stop order or the suspension of the qualification of SCB Common Stock for offering or sale in any jurisdiction, of the initiation or, to the extent SCB is aware thereof, threat of any proceeding for any such purpose, or of any request by the SEC for the amendment or supplement of the Registration Statement or for additional information.
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7.03 Regulatory Matters.
(a) Each of SCB and CBC shall 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 (and in the case of applications, notices, petitions and filings in respect of the Requisite Regulatory Approvals, use their reasonable best efforts to make such filings within forty-five (45) days of the date of this Agreement), 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 Transaction, and to comply with the terms and conditions of all such permits, consents, approvals and authorizations of all such Governmental Entities. SCB and CBC shall have the right to review in advance, and each will consult the other on, in each case subject to applicable Laws relating to the exchange of information, all the information relating to SCB or CBC, as the case may be, and any of their respective Subsidiaries, which appears in any filing made with, or written materials submitted to, any third party or any Governmental Entity in connection with the Transaction. In exercising the foregoing right, each of the parties hereto shall act reasonably and as promptly as practicable. The parties hereto agree that they will consult with each other with respect to the obtaining of all permits, consents, approvals and authorizations of all third parties and Governmental Entities necessary or advisable to consummate the Transaction and each party will keep the other apprised of the status of matters relating to completion of the Transaction. Each party shall consult with the other in advance of any meeting or conference with any Governmental Entity in connection with the Transaction and to the extent permitted by such Governmental Entity, give the other party and/or its counsel the opportunity to attend and participate in such meetings and conferences, in each case subject to applicable Law.
(b) Each party shall use its reasonable best efforts to respond to any request for information and resolve any objection that may be asserted by any Governmental Entity with respect to this Agreement or the Transaction. Notwithstanding the foregoing, nothing contained in this Agreement shall be deemed to require SCB or CBC or any of their respective Subsidiaries, and neither SCB nor CBC nor any of their respective Subsidiaries shall be permitted (without the written consent of the other party), to take any action, or commit to take any action, or agree to any condition or restriction, in connection with obtaining the foregoing permits, consents, approvals and authorizations of Governmental Entities or Regulatory Agencies that would reasonably be expected to have a Material Adverse Effect on the Surviving Corporation and its Subsidiaries, taken as a whole, after giving effect to the Merger and the Bank Merger (a “Materially Burdensome Regulatory Condition”).
(c) To the extent permitted by applicable Law, each party agrees, upon request, to furnish the other party with all information concerning itself, its Subsidiaries, directors, officers and shareholders and such other matters as may be reasonably necessary or advisable in connection with any filing, notice or application made by or on behalf of such other party or any of their respective Subsidiaries to any Governmental Entity in connection with the Transaction (including, without limitation the Registration Statement).
(d) To the extent permitted by applicable Law, SCB and CBC shall promptly advise each other upon receiving any communication from any Governmental Entity whose consent or approval is required for consummation of the Transaction that causes such party to believe that there is a reasonable likelihood that any Requisite Regulatory Approval will not be obtained or that the receipt of any such approval will be materially delayed.
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7.04 Legal Conditions to Merger. Subject in all respects to Section 7.01(c), Section 7.02, Section 7.03 and Section 7.07(a) of this Agreement, each of SCB and CBC shall, and shall cause its Subsidiaries to, use their reasonable best efforts (a) to take, or cause to be taken, all actions necessary, proper or advisable to comply promptly with all legal and regulatory requirements that may be imposed on such party or its Subsidiaries with respect to the Merger and the Bank Merger and, subject to the conditions set forth in Article VIII hereof, to consummate the transactions contemplated by this Agreement, including the Merger and the Bank Merger, (b) to obtain (and to cooperate with the other party to obtain) any material consent, authorization, order or approval of, or any exemption by, any Governmental Entity and any other third party that is required to be obtained by SCB or CBC or any of their respective Subsidiaries in connection with the Merger, the Bank Merger and the other transactions contemplated by this Agreement, and (c) to obtain the tax opinions referenced in Section 8.02(c) and Section 8.03(d), including by executing and delivering representations contained in certificates of officers of SCB and CBC reasonably satisfactory in form and substance to SCB’s and CBC’s respective counsel.
7.05 Public Announcements. SCB and CBC agree that the initial press release with respect to the execution and delivery of this Agreement shall be a release mutually agreed to by the parties. In addition, SCB and CBC agree to hold a joint conference call to announce the execution and delivery of this Agreement with representatives from each party participating and presentation materials mutually agreed to by the parties. Thereafter, each of the parties agrees that no public release or announcement or statement concerning this Agreement or the transactions contemplated hereby shall be issued by any party without the prior written consent of the other party (which consent shall not be unreasonably withheld, conditioned or delayed), except (a) as required by applicable Law or the rules or regulations of any applicable Governmental Entity or stock exchange to which the relevant party is subject, in which case the party required to make the release or announcement shall consult with the other party about, and allow the other party reasonable time to comment on, such release or announcement in advance of such issuance, (b) for such releases, announcements or statements that are consistent with other such releases, announcement or statements made after the date of this Agreement in compliance with this Section 7.05 or (c) to the extent made from and after the time any Recommendation Change is made in accordance with Section 7.01(c).
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7.06 Access; Information.
(a) Upon reasonable notice and subject to applicable Laws, each of SCB and CBC, for the purposes of verifying the representations and warranties of the other and preparing for the Merger, the related integration and systems conversion or consolidation, and the other matters contemplated by this Agreement, shall, and shall cause each of their respective Subsidiaries to, afford to the officers, employees, accountants, counsel, advisors and other representatives of the other party, access, during normal business hours during the period prior to the Effective Time, to all its properties, books, contracts, commitments, personnel, information technology systems, and records, and each shall cooperate with the other party in preparing to execute after the Effective Time conversion or consolidation of systems and business operations generally, and, during the period prior to the Effective Time, each of SCB and CBC shall, and shall cause its respective Subsidiaries to, make available to the other party (i) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal securities laws or federal or state banking laws (other than reports or documents that SCB or CBC, as the case may be, is not permitted to disclose under applicable Law), and (ii) all other information concerning its business, properties and personnel as such party may reasonably request. Notwithstanding anything herein to the contrary, neither SCB nor CBC nor any of their respective Subsidiaries shall be required to provide access to or to disclose information where such access or disclosure would violate or prejudice the rights of SCB’s or CBC’s, as the case may be, customers, jeopardize the attorney-client privilege (or protection under the work product doctrine or similar protection) of the institution in possession or control of such information (after giving due consideration to the existence of any common interest, joint defense or similar agreement between the parties) or contravene any Law, rule, regulation, order, judgment, decree, fiduciary duty or binding agreement entered into prior to the date of this Agreement. The parties hereto will make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply.
(b) Within seven (7) calendar days of each month end after the date of this Agreement, each party shall provide the other party with a report to include unaudited balance sheet and income statement for the prior month and a problem loan report, each as of the last day or for the prior calendar month, and such other information as the parties may reasonably agree upon.
(c) All information furnished by CBC or SCB to the other pursuant to this Section 7.06 shall be subject to the provisions of the Mutual Confidentiality Agreement, dated as of October 11, 2023, by and between SCB and CBC (the “Confidentiality Agreement”).
(d) No investigation by either of the parties or their respective representatives shall affect or be deemed to modify or waive the representations and warranties of the other set forth herein. Nothing contained in this Agreement shall give either party, directly or indirectly, the right to control or direct the operations of the other party prior to the Effective Time. Prior to the Effective Time, each party shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its and its Subsidiaries’ respective operations.
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7.07 Acquisition Proposals.
(a) Except as expressly permitted by this Section 7.07, each party agrees that it will not, and will cause each of its Subsidiaries and its and their respective officers, directors, employees, agents, advisors and representatives (collectively, “Representatives”) not to, directly or indirectly, (i) initiate, solicit, knowingly encourage or knowingly facilitate inquiries or proposals with respect to any Acquisition Proposal, (ii) engage or participate in any negotiations with any Person concerning any Acquisition Proposal, (iii) provide any confidential or nonpublic information or data to, or have or participate in any discussions with, any Person relating to any Acquisition Proposal (except to notify a Person that has made, or to the knowledge of such party, is making any inquiries with respect to, or is considering making, an Acquisition Proposal, of the existence of the provisions of this Section 7.07), or (iv) unless this Agreement has been terminated in accordance with its terms, approve or enter into any term sheet, letter of intent, commitment, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement or other similar agreement (whether written or oral, binding or nonbinding) (other than a confidentiality agreement referred to and entered into in accordance with this Section 7.07) in connection with or relating to any Acquisition Proposal. Notwithstanding the foregoing, in the event that after the date of this Agreement and prior to the receipt of the CBC Shareholder Approval, in the case of CBC, or the SCB Shareholder Approval, in the case of SCB, such party receives an unsolicited bona fide written Acquisition Proposal, such party may, and may permit its Subsidiaries and its and its Subsidiaries’ Representatives to, furnish or cause to be furnished confidential or nonpublic information or data and participate in such negotiations or discussions with the Person making the Acquisition Proposal if the Board of Directors of such party determines in good faith (after receiving the advice of its outside counsel, and with respect to financial matters, its financial advisors) that failure to take such actions would be more likely than not to result in a violation of its fiduciary duties under applicable Law; provided, that, prior to furnishing any confidential or nonpublic information permitted to be provided pursuant to this sentence, such party shall have entered into a confidentiality agreement with the Person making such Acquisition Proposal on terms no less favorable to it than the Confidentiality Agreement, which confidentiality agreement shall not provide such Person with any exclusive right to negotiate with such party. Each party will, and will cause its Subsidiaries and Representatives to, immediately cease and cause to be terminated any activities, discussions or negotiations conducted before the date of this Agreement with any Person other than CBC or SCB, as applicable, with respect to any Acquisition Proposal. Each party will promptly (within forty-eight (48) hours) advise the other party following receipt of any Acquisition Proposal or any inquiry which could reasonably be expected to lead to an Acquisition Proposal, and the substance thereof (including the terms and conditions of and the identity of the Person making such inquiry or Acquisition Proposal), will provide the other party with an unredacted copy of any such Acquisition Proposal and any draft agreements, proposals or other materials received from or on behalf of the Person making such inquiry or Acquisition Proposal in connection with such inquiry or Acquisition Proposal, and will keep the other party apprised of any related developments, discussions and negotiations on a current basis, including any amendments to or revisions of the terms of such inquiry or Acquisition Proposal. Each party shall use its reasonable best efforts to enforce any existing confidentiality or standstill agreements to which it or any of its Subsidiaries is a party in accordance with the terms thereof; provided, that notwithstanding anything to the contrary herein, CBC or SCB may, prior to the receipt of the CBC Shareholder Approval, in the case of CBC, or the SCB Shareholder Approval, in the case of SCB, grant a waiver, amendment or release under any confidentiality or standstill agreement to the extent necessary to allow for a confidential Acquisition Proposal to be made to such party or its Board of Directors so long as such party promptly notifies the other party thereof (including the identity of such counterparty) after granting any such waiver, amendment or release and the Board of Directors of such party determines prior to the grant of such waiver, amendment or release in good faith, after receiving the advice of its outside counsel and, with respect to financial matters, its financial advisors, that the failure to take such action would be reasonably expected to result in a violation of its fiduciary duties under applicable law.
(b) Nothing contained in this Agreement shall prevent a party or its Board of Directors from complying with Rules 14d-9 and 14e-2 under the Exchange Act or Item 1012(a) of Regulation M-A with respect to an Acquisition Proposal or from making any legally required disclosure to such party’s shareholders; provided, that such rules will in no way eliminate or modify the effect that any action pursuant to such rules would otherwise have under this Agreement.
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7.08 Nasdaq Listing. SCB shall cause the shares of SCB Common Stock to be issued in the Merger to be approved for listing on Nasdaq prior to the Effective Time.
7.09 Indemnification.
(a) From and after the Effective Time, SCB and the Surviving Corporation (each an “Indemnifying Party”) shall defend, indemnify and hold harmless each Person who is a present or former director, officer and employee of CBC, CBC Bank or their Subsidiaries, as applicable, as of the Effective Time (the “Indemnified Parties”) against and pay any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of matters existing or occurring at or prior to the Effective Time, whether asserted, completed, threatened or claimed prior to, at or after the Effective Time, arising in whole or in part out of, pertaining to or by reason of the fact that he or she was a director, officer, employee, fiduciary or agent of CBC or any of its Subsidiaries or is or was serving at the request of CBC or any of its Subsidiaries as a director, officer, employee, fiduciary or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, including, without limitation, matters related to the negotiation, execution and performance of this Agreement or the Transaction, to the fullest extent to which such Indemnified Parties would be entitled under applicable Law, the CBC Articles and the CBC Bylaws or, as applicable, the CBC Bank Articles and the CBC Bank Bylaws or any agreement, arrangement or understanding which has been set forth in Section 7.09 of the CBC Disclosure Schedule, in each case as in effect on the date hereof. SCB shall also cause the Surviving Corporation to advance expenses as incurred by each such Indemnified Party in connection with any claim, action, suit, proceeding or investigation referenced in the immediately preceding sentence. Without limiting the indemnification and other rights provided in this clause (a), all rights to indemnification, advancement and all limitations on liability existing in favor of the Indemnified Parties as provided by applicable Law, the CBC Articles and the CBC Bylaws or, as applicable, the CBC Bank Articles and the CBC Bank Bylaws or in any indemnification agreement, in existence on the date of this Agreement shall survive the Merger and shall continue in full force and effect to the fullest extent permitted by Law, and shall be honored by the Surviving Corporation and its Subsidiaries or their respective successors as if they were the indemnifying party thereunder, without any amendment thereto.
(b) The Surviving Corporation shall reasonably cooperate with the Indemnified Parties, and the Indemnified Parties shall reasonably cooperate with the Surviving Corporation, in the defense of any such claim, action, suit, proceeding or investigation.
(c) Prior to the Effective Time, CBC shall, and if CBC is unable to, SCB (and the Surviving Bank) shall as of the Effective Time obtain and fully pay for a “tail” liability insurance policy (or provide a policy providing comparable coverage and amounts on terms no less favorable to the Persons currently covered by CBC’s existing policy from insurance carriers with comparable credit ratings, which may include, SCB’s existing policy if it meets the foregoing standard) covering Persons who are currently covered by such insurance for a period of six (6) years after the Effective Time; provided, however, that in no event shall CBC be permitted nor shall SCB be obligated to expend, in order to maintain or provide insurance coverage pursuant to this Section 7.09(c), annualized premiums in excess of 250% of the annual premiums paid by CBC as of the date hereof for such insurance (“Maximum Insurance Amount”); provided further, that if the amount of the annual premiums necessary to maintain or procure such insurance coverage exceeds the Maximum Insurance Amount, SCB shall obtain the most advantageous coverage obtainable for an annual premium equal to the Maximum Insurance Amount.
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(d) If the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other Person and is not the continuing or surviving entity of such consolidation or merger, or (ii) transfers all or substantially all of its assets or deposits to any other Person, consummates any division transaction or engages in any similar transaction, then in each such case, the Surviving Corporation and any successors or assigns thereof will cause proper provision to be made so that the successors and assigns of the Surviving Corporation will expressly assume the obligations set forth in this Section 7.09.
(e) The provisions of this Section 7.09 are intended to survive the Merger and, following the Effective Time, are intended to be for the benefit of and shall be enforceable by each Indemnified Party and his or her heirs and representatives.
7.10 Benefit Plans.
(a) Unless otherwise mutually agreed by SCB and CBC prior to the Effective Time, SCB, as the Surviving Corporation, shall provide the employees of SCB, CBC and their Subsidiaries as of the Effective Time who continue to remain employed with the Surviving Corporation and its Subsidiaries (the “Continuing Employees”), during the period commencing at the Effective Time and ending on December 31 of the calendar year in which the Effective Time occurs with the following: (i) annual base salary or wages, as applicable, that are no less than the annual base salary or wages in effect for each such Continuing Employee immediately prior to the Effective Time; (ii) target cash incentive opportunities that are, in each case, no less favorable than those in effect for each such Continuing Employee immediately prior to the Effective Time; and (iii) employee benefits (other than severance which will be provided as set forth in the last sentence of this Section 7.10(a)) that are no less favorable in the aggregate than those provided to such Continuing Employees immediately prior to the Effective Time; provided, that, with respect to clause (iii), if the Surviving Corporation determines to integrate the Continuing Employees into the SCB Benefit Plans or the CBC Benefit Plans, which may be done on a plan by plan basis, or to modify any existing plans or adopt new benefit plans with respect to the Continuing Employees (which plans will, among other things, (A) treat similarly situated employees on a substantially equivalent basis, taking into account all relevant factors, including duties, geographic location, tenure, qualifications and abilities, and (B) not discriminate between employees who were covered by SCB Benefit Plans, on the one hand, and those covered by CBC Benefit Plans on the other, at the Effective Time) (the “New Benefit Plans”), participation in such plans (other than severance) shall be deemed to satisfy the foregoing standards, it being understood that the Continuing Employees may commence participating in the SCB Benefit Plans, the CBC Benefit Plans or the New Benefit Plans on different dates following the Effective Time with respect to different plans. In addition, during the period commencing at the Effective Time and ending on the first anniversary thereof, each Continuing Employee who is not party to an individual agreement providing for severance or termination benefits and is terminated under severance qualifying circumstances shall be provided severance benefits in accordance with Section 7.10(a) of the SCB Disclosure Schedule, subject to such employee’s execution (and non-revocation) of a release of claims. If CBC, SCB, or any of their Subsidiaries has any other severance pay plan or arrangement, then any amounts paid to an employee pursuant to that plan or arrangement shall reduce the amount that the employee will receive under this Section 7.10(a) and in no event shall there be any duplication of severance pay. Nothing contained in this Section 7.10(a) shall be construed or interpreted to limit or modify in any way CBC’s or SCB’s or their respect Subsidiaries’ at will employment policy or provide any third party beneficiary rights to employees of CBC, SCB or any of their respective Subsidiaries. In no event shall severance pay be taken into account in determining the amount of any other benefit (including but not limited to, an individual’s benefit under any retirement plan or policy).
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(b) With respect to any SCB Benefit Plan, CBC Benefit Plan or New Benefit Plan in which any Continuing Employees become eligible to participate on or after the Effective Time, SCB, as the Surviving Corporation, and its Subsidiaries shall (i) use best efforts to waive all pre-existing conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to such employees and their eligible dependents under any such SCB Benefit Plan, CBC Benefit Plan or New Benefit Plan, except to the extent such pre-existing conditions, exclusions or waiting periods would apply under the analogous prior SCB Benefit Plan or CBC Benefit Plan, (ii) take commercially reasonable efforts to provide each such employee and their eligible dependents with credit for any co-payments or coinsurance and deductibles paid prior to the Effective Time under the analogous prior SCB Benefit Plan or CBC Benefit Plan that provides health care benefits, to the same extent that such credit was given under such analogous prior SCB Benefit Plan or CBC Benefit Plan prior to the Effective Time, in satisfying any applicable deductible, co-payment, coinsurance or maximum out-of-pocket requirements under such SCB Benefit Plan, CBC Benefit Plan or New Benefit Plan, subject to any insurance carrier approvals (which SCB shall use commercially reasonable efforts to obtain), and (iii) use best efforts to recognize all prior service of such employees recognized by SCB, CBC and their Subsidiaries as of the Effective Time for all purposes in any SCB Benefit Plan, CBC Benefit Plan or New Benefit Plan to the same extent that such service was taken into account under the analogous SCB Benefit Plan or CBC Benefit Plan prior to the Effective Time; provided, that the foregoing service recognition shall not apply (A) to the extent it would result in duplication of benefits for the same period of service, (B) for purposes of accrual of benefits under any tax-qualified defined benefit pension plan, (C) for purposes of any benefit plan that is a Retiree Welfare Plan, a frozen plan or provides grandfathered benefits, or (D) any long-term equity or cash incentive plans.
(c) Prior to Closing, SCB and CBC shall cooperate in reviewing, evaluating and analyzing the SCB 401(k) Plan (the “SCB 401(k) Plan”) and the CBC 401(k) Plan (the “CBC 401(k) Plan”) and make a mutual determination as to which of the SCB 401(k) Plan and the CBC 401(k) Plan will continue to be maintained by the Surviving Corporation following the Effective Time (the “Continuing 401(k) Plan”) and which one will be terminated prior to Effective Time (such plan, the “Terminated 401(k) Plan”). The Board of Directors (or an appropriate committee thereof) of SCB or CBC, as applicable, shall adopt resolutions and take such corporate action as is necessary or appropriate to terminate the Terminated 401(k) Plan, effective as of the day prior to the Closing Date and contingent upon the occurrence of the Effective Time. SCB or CBC, as applicable, shall provide the other party with evidence that the Terminated 401(k) Plan has been terminated (the form and substance of which shall be subject to reasonable review and comment by the other party) not later than two (2) days immediately preceding the Closing Date and the Continuing Employees who participated in the Terminated 401(k) Plan prior to the Effective Time shall be eligible to participate, effective as of the Effective Time, in the Continuing 401(k) Plan. SCB and CBC shall take any and all actions as may be required, including amendments to the SCB 401(k) Plan and/or the CBC 401(k) Plan, to avoid any default of outstanding participant loans that may be triggered solely by the termination of the Terminated 401(k) Plan and to permit the Continuing Employees to make rollover contributions from the Terminated 401(k) Plan to the Continuing 401(k) Plan of “eligible rollover distributions” (within the meaning of Section 401(a)(31) of the Code) in the form of cash, notes (in the case of loans), or a combination thereof in an amount equal to the full account balance distributed to such employee from the Terminated 401(k) Plan.
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(d) Prior to making any material written communications relating to the Merger or the other transactions contemplated by this Agreement to any employee of SCB or CBC or their respective Subsidiaries, each party will, and will cause its Subsidiaries to, provide the other party with a reasonable opportunity to review and comment on any such communications, which comments shall be considered in good faith. Neither party nor their respective Subsidiaries shall make any written communications to any individual employee of SCB or CBC or their respective Subsidiaries regarding the terms and conditions of employment following the Closing without the consent of the other party.
(e) Nothing in this Agreement shall confer upon any employee (including any Continuing Employee), officer, director or consultant of SCB, CBC or any of their respective Subsidiaries or Affiliates any right to continue in the employ or service of the Surviving Corporation, SCB, CBC or any Subsidiary or Affiliate thereof, or shall interfere with or restrict in any way the rights of the Surviving Corporation, SCB, CBC or any Subsidiary or Affiliate thereof to discharge or terminate the services of any employee (including any Continuing Employee), officer, director or consultant of the Surviving Corporation, SCB, CBC or any of their respective Subsidiaries or Affiliates at any time for any reason whatsoever, with or without cause. Nothing in this Agreement shall be deemed to (i) establish, amend, or modify any SCB Benefit Plan, CBC Benefit Plan, New Benefit Plan or any other benefit or employment plan, program, agreement or arrangement, or (ii) alter or limit the ability of the Surviving Corporation or any of its Subsidiaries or Affiliates to amend, modify or terminate any particular SCB Benefit Plan, CBC Benefit Plan, New Benefit Plan or any other benefit or employment plan, program, agreement or arrangement after the Effective Time. Without limiting the generality of Section 10.08, and for the avoidance of doubt, except as provided in Section 7.09 and Section 10.08, nothing in this Agreement, express or implied, is intended to or shall confer upon any Person, including, any current or former employee, officer, director or consultant of SCB, CBC or any of their respective Subsidiaries or Affiliates or any beneficiary or dependent thereof, any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
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7.11 Corporate Governance.
(a) SCB Bylaw Amendment; Board of Directors; Officers.
(i) Prior to the Effective Time, and subject to the receipt of the SCB Shareholder Approval, SCB shall amend the SCB Bylaws in accordance with the SCB Bylaw Amendment.
(ii) Effective as of the Effective Time, (A) the number of directors that will comprise the full Board of Directors of each of the Surviving Corporation and BSC Bank (and, as of the effective time of the Bank Merger, that will comprise the full Board of Directors of the Surviving Bank), shall each be twelve (12), and (B) of the members of each such board of directors, six (6) shall be members of the SCB Board or senior management of SCB as of immediately prior to the Effective Time, designated by SCB (which shall include Mr. David I. Rainer), and six (6) shall be members of the CBC Board or senior management of CBC as of immediately prior to the Effective Time, designated by CBC (which shall include Mr. Steven E. Shelton).
(iii) Effective as of the Effective Time, (A) Mr. David I. Rainer shall serve as the Executive Chairman of the Board of Directors of the Surviving Corporation and of the Surviving Bank, (B) Mr. Steven E. Shelton shall serve as the Chief Executive Officer of the Surviving Corporation and of the Surviving Bank, (C) Mr. Thomas A. Sa shall serve as the Chief Operating Officer of the Surviving Corporation and of the Surviving Bank, (D) Mr. Richard Hernandez shall serve as the President of the Surviving Corporation and of the Surviving Bank, and (E) Mr. Thomas G. Dolan shall serve as the Chief Financial Officer of the Surviving Corporation and Chief Strategy Officer of the Surviving Bank.
(b) Name Change. SCB and CBC agree to select a name for the Surviving Corporation and the Surviving Bank mutually acceptable to SCB and CBC as soon as reasonably practicable after the date of this Agreement and by no later than the fifth (5th) Business Day next preceding the date the Proxy Statement/Prospectus is first mailed in definitive form to the parties’ respective shareholders. Once the names have been selected pursuant to this Section 7.11(b), SCB shall, and shall cause BSC Bank to, take all actions necessary, including by adopting, and causing SCB Bank to adopt, an amendment to the Articles of Incorporation of SCB and BSC Bank, respectively, to provide that, effective as of the Effective Time, each of the names of the Surviving Corporation and Surviving Bank shall be changed to a name mutually acceptable to SCB and CBC.
7.12 Notification of Certain Matters. SCB and CBC shall each promptly advise the other party of any effect, change, event, circumstance, condition, occurrence or development (i) that has had or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on it or (ii) that it believes would or would reasonably be expected to cause or constitute a breach of any of its representations, warranties, obligations, covenants or agreements contained herein in any material respect that reasonably could be expected to give rise, individually or in the aggregate, to the failure of a condition in Article VIII; provided, that any failure to give notice in accordance with the foregoing with respect to any breach shall not be deemed to constitute a violation of this Section 7.12 or the failure of any condition set forth in Section 8.02 or Section 8.03 to be satisfied, or otherwise constitute a breach of this Agreement by the party failing to give such notice, in each case unless the underlying breach would independently result in a failure of the conditions set forth in Section 8.02 or Section 8.03 to be satisfied; and provided, further, that the delivery of any notice pursuant to this Section 7.12 shall not cure any breach of, or noncompliance with, any other provision of this Agreement or limit the remedies available to the party receiving such notice.
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7.13 Antitakeover Statutes. Each of SCB and CBC and their respective Boards of Directors shall, if any state antitakeover statute or similar statute becomes applicable to this Agreement and the Transaction, take all action reasonably necessary to ensure that the Transaction may be consummated as promptly as practicable on the terms contemplated hereby and otherwise to minimize the effect of such statute or regulation on this Agreement and the Transaction.
7.14 Consents. CBC shall, and shall cause its Subsidiaries to, use their reasonable best efforts to obtain all consents, approvals, waivers, non-objections and to deliver any notices required pursuant to the terms of the CBC Contracts as a result of the Transaction.
7.15 Exemption from Liability Under Section 16(b). Each of the CBC Board and the SCB Board shall, prior to the Effective Time, take all such actions as may be necessary or appropriate pursuant to Rule 16b-3(d) and Rule 16b-3(e) under the Exchange Act to exempt the conversion of shares of CBC Common Stock and CBC Equity Awards into shares of SCB Common Stock and SCB Equity Awards pursuant to the terms of this Agreement by officers and directors of CBC subject to the reporting requirements of Section 16(a) of the Exchange Act or by employees of CBC who may become an officer or director of SCB subject to the reporting requirements of Section 16(a) of the Exchange Act. CBC shall deliver to SCB in a reasonably timely fashion prior to the Effective Time accurate information regarding those officers and directors of CBC subject to the reporting requirements of Section 16(a) of the Exchange Act (the “CBC Insiders”), and the Board of Directors of SCB and of CBC, or a committee of non-employee directors thereof (as such term is defined for purposes of Rule 16b-3(d) under the Exchange Act), shall reasonably promptly thereafter, and in any event prior to the Effective Time, take all such steps as may be required to cause (in the case of CBC) any dispositions of CBC Common Stock or CBC Equity Awards by the CBC Insiders, and (in the case of SCB) any acquisitions of SCB Common Stock or SCB Equity Awards by any CBC Insiders who, immediately following the Merger, will be officers or directors of the Surviving Corporation subject to the reporting requirements of Section 16(a) of the Exchange Act, in each case pursuant to the transactions contemplated by this Agreement, to be exempt from liability pursuant to Rule 16b-3 under the Exchange Act to the fullest extent permitted by applicable law.
7.16 Shareholder Litigation and Protests. Each party shall give the other party prompt notice of any shareholder litigation or community-based protests against such party or its directors or officers relating to this Agreement, the Merger, the Bank Merger or any of the other transactions contemplated hereby and shall keep the other party fully informed regarding any such shareholder litigation or protests, including providing non-privileged and reasonably requested documentation. Each party shall give the other party the opportunity to participate (at such other’s party’s expense) in the defense or settlement of any such litigation or protests. Each party shall give the other the right to review and comment on all filings or responses to be made by such party in connection with any such litigation or protests, and will in good faith take such comments into account. No party shall agree to settle any such litigation or protests without the other party’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, that the other party shall not be obligated to consent to any settlement which does not include a full release of such other party and its Affiliates or which imposes an injunction or other equitable relief after the Effective Time upon the Surviving Corporation or any of its Affiliates.
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7.17 Change of Method. CBC and SCB shall be empowered, upon their mutual agreement, at any time prior to the Effective Time, to change the method or structure of effecting the combination of CBC and SCB (including the provisions of Article I), if and to the extent they both deem such change to be necessary, appropriate or desirable; provided, however, that no such change shall (i) alter or change the Exchange Ratio or, subject to any adjustment thereto made pursuant to the provisions of this Agreement, the number of shares of SCB Common Stock received by holders of CBC Common Stock in exchange for each share of CBC Common Stock, (ii) adversely affect the Tax treatment of CBC’s shareholders or SCB’s shareholders pursuant to this Agreement, (iii) adversely affect the Tax treatment of CBC or SCB pursuant to this Agreement, or (iv) materially impede or delay the consummation of the transactions contemplated by this Agreement in a timely manner. The parties agree to reflect any such change in an appropriate amendment to this Agreement executed by both parties in accordance with Section 10.02.
7.18 Tax Treatment. The Merger contemplated by this Agreement is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code and this Agreement is hereby adopted as a “plan of reorganization” within the meaning of the Treasury Regulations promulgated under Section 368(a) of the Code. Until the Closing, each party to this Agreement shall use its reasonable best efforts to cause the Merger to so qualify, and will not knowingly take any action, cause any action to be taken, fail to take any action or cause any action not to be taken, which action or failure to act could prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. Each of CBC and SCB agrees to prepare and file all U.S. federal income Tax Returns in accordance with this Section 7.18 and shall not take any position inconsistent herewith in the course of any audit, litigation, or other proceeding with respect to U.S. federal income Taxes; provided that nothing contained herein shall prevent CBC or SCB from settling any proposed deficiency or adjustment by any Governmental Entity based upon or arising out of such treatment, and neither CBC nor SCB shall be required to litigate before any court any proposed deficiency or adjustment by any Governmental Entity challenging such treatment.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
8.01 Conditions to Each Party’s Obligation to Effect the Merger. The respective obligation of each of the parties hereto to consummate the Merger is subject to the fulfillment or, to the extent permitted by applicable Law, written waiver by the parties hereto prior to the Closing of each of the following conditions:
(a) Shareholder Approvals. (i) SCB shall have obtained the SCB Shareholder Approval, and (ii) CBC shall have obtained the CBC Shareholder Approval.
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(b) Regulatory Approvals. (i) All Requisite Regulatory Approvals shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired or been terminated, and (ii) no such Requisite Regulatory Approvals shall have resulted in the imposition of any Materially Burdensome Regulatory Condition.
(c) No Injunction. No Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order which is in effect and prohibits or makes illegal the consummation of the Transaction.
(d) Registration Statement. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated by the SEC and not withdrawn.
(e) Listing. The shares of SCB Common Stock to be issued to the CBC shareholders as the Merger Consideration shall have been approved for listing on Nasdaq.
8.02 Conditions to Obligation of CBC. The obligation of CBC to consummate the Merger is also subject to the fulfillment or written waiver by CBC prior to the Closing of each of the following conditions:
(a) Representations and Warranties. The representations and warranties of SCB set forth in Section 6.02(a) and Section 6.08(a) (in each case, after giving effect to the lead-in to Article VI) shall be true and correct (other than, in the case of Section 6.02(a), such failures to be true and correct as are de minimis) in each case as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except to the extent such representations and warranties are expressly made as of another date, in which case as of such date), and the representations and warranties of SCB set forth in Section 6.01(a), Section 6.01(b) (with respect to Significant Subsidiaries only), Section 6.02(b) (with respect to Significant Subsidiaries only), Section 6.03(a) and Section 6.07 (in each case, read without giving effect to any qualification as to materiality or Material Adverse Effect set forth in such representations or warranties but, in each case, after giving effect to the lead-in to Article VI) shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except to the extent such representations and warranties are expressly made as of another date, in which case as of such date). All other representations and warranties of SCB set forth in this Agreement (read without giving effect to any qualification as to materiality or Material Adverse Effect set forth in such representations or warranties but, in each case, after giving effect to the lead-in to Article VI) shall be true and correct in all respects as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except to the extent such representations and warranties are expressly made as of another date, in which case as of such date), provided, that for purposes of this sentence, such representations and warranties shall be deemed to be true and correct unless the failure or failures of such representations and warranties to be so true and correct, either individually or in the aggregate, and without giving effect to any qualification as to materiality or Material Adverse Effect set forth in such representations or warranties, has had or would reasonably be expected to have a Material Adverse Effect on SCB. CBC shall have received a certificate dated as of the Closing Date signed on behalf of SCB by the Chief Executive Officer and the Chief Financial Officer of SCB to the foregoing effect.
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(b) Performance of Obligations of SCB. SCB shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Effective Time, and CBC shall have received a certificate, dated as of the Closing Date, signed on behalf of SCB by the Chief Executive Officer and the Chief Financial Officer of SCB to such effect.
(c) Tax Opinion. CBC shall have received the opinion of Sheppard, Mullin, Richter & Hampton LLP, counsel to CBC, 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 Merger will qualify for United States federal income Tax purposes as a reorganization within the meaning of Section 368(a) of the Code. In rendering its opinion, counsel may require and rely upon representations contained in letters from each of CBC and SCB.
8.03 Conditions to Obligation of SCB. The obligation of SCB to consummate the Merger is also subject to the fulfillment or written waiver by SCB prior to the Closing of each of the following conditions:
(a) Representations and Warranties. The representations and warranties of CBC set forth in Section 5.02(a) and Section 5.08(a) (in each case after giving effect to the lead-in to Article V) shall be true and correct (other than, in the case of Section 5.02(a), such failures to be true and correct as are de minimis) in each case as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except to the extent such representations and warranties are expressly made as of another date, in which case as of such date), and the representations and warranties of CBC set forth in Section 5.01(a), Section 5.01(b) (with respect to Significant Subsidiaries only), Section 5.02(b) (with respect to Significant Subsidiaries only), Section 5.03(a) and Section 5.07 (in each case, read without giving effect to any qualification as to materiality or Material Adverse Effect set forth in such representations or warranties but, in each case, after giving effect to the lead-in to Article V) shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except to the extent such representations and warranties are expressly made as of another date, in which case as of such date). All other representations and warranties of CBC set forth in this Agreement (read without giving effect to any qualification as to materiality or Material Adverse Effect set forth in such representations or warranties but, in each case, after giving effect to the lead-in to Article V) shall be true and correct in all respects as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except to the extent such representations and warranties are expressly made as of another date, in which case as of such date); provided, that for purposes of this sentence, such representations and warranties shall be deemed to be true and correct unless the failure or failures of such representations and warranties to be so true and correct, either individually or in the aggregate, and without giving effect to any qualification as to materiality or Material Adverse Effect set forth in such representations or warranties, has had or would reasonably be expected to have a Material Adverse Effect on CBC or the Surviving Corporation. SCB shall have received a certificate dated as of the Closing Date signed on behalf of CBC by the Chief Executive Officer and the Chief Financial Officer of CBC to the foregoing effect.
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(b) Performance of Obligations of CBC. CBC shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Effective Time, and SCB shall have received a certificate, dated as of the Closing Date, signed on behalf of CBC by the Chief Executive Officer and the Chief Financial Officer of CBC to such effect.
(c) Tax Opinion. SCB shall have received the opinion of Katten Muchin Rosenman LLP, counsel to SCB, 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 Merger will qualify for United States federal income Tax purposes as a reorganization within the meaning of Section 368(a) of the Code. In rendering its opinion, counsel may require and rely upon representations contained in letters from each of CBC and SCB.
ARTICLE IX
TERMINATION
9.01 Termination. This Agreement may be terminated, and the Transaction may be abandoned, at any time prior to the Effective Time:
(a) Mutual Consent. By the mutual written consent of SCB and CBC.
(b) Breach. Provided that the terminating party is not then in material breach of any representation, warranty, covenant or agreement contained herein, by SCB or CBC in the event of a breach by the other party of any representation, warranty, covenant or agreement contained herein, which breach (i) cannot be or has not been cured within thirty (30) days after the giving of written notice to the breaching party of such breach (or such shorter period as remaining prior to the End Date) and (ii) would entitle the non-breaching party not to consummate the Transaction contemplated hereby under Section 8.02(a) or Section 8.02(b) or Section 8.03(a) or Section 8.03(b), as the case may be.
(c) Delay. By SCB or CBC in the event the Merger is not consummated on or before the one year anniversary of the date of this Agreement (the “End Date”), except to the extent that the failure of the Merger to be consummated by such date shall be due to the failure of the party seeking to terminate pursuant to this Section 9.01(c) to perform or observe the obligations, covenants and agreements of such party set forth in this Agreement.
(d) No Regulatory Approval. By SCB or CBC if any Governmental Entity that must grant a Requisite Regulatory Approval has denied approval of the Merger or the Bank Merger and such denial has become final and nonappealable or any Governmental Entity of competent jurisdiction shall have issued a final and nonappealable order, injunction, decree or other legal restraint or prohibition permanently enjoining or otherwise prohibiting or making illegal the consummation of the Merger or the Bank Merger, provided, however, that no party shall have the right to terminate this Agreement pursuant to this Section 9.01(d) if such failure to obtain a Requisite Regulatory Approval shall be due to the failure of the party seeking to terminate this Agreement to perform or observe the obligations, covenants and agreements of such party under this Agreement.
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(e) SCB Recommendation Change. By CBC prior to such time as the SCB Shareholder Approval is obtained, if (i) SCB or the SCB Board shall have made a Recommendation Change or (ii) SCB or the SCB Board shall have breached its obligations under Section 7.01 or Section 7.07 in any material respect.
(f) CBC Recommendation Change. By SCB prior to such time as the CBC Shareholder Approval is obtained, if (i) CBC or the CBC Board shall have made a Recommendation Change or (ii) CBC or the CBC Board shall have breached its obligations under Section 7.01 or Section 7.07 in any material respect.
9.02 Effect of Termination.
(a) In the event of termination of this Agreement by either SCB or CBC as provided in Section 9.01, this Agreement shall forthwith become void and have no effect, and none of SCB, CBC, any of their respective Subsidiaries or any of the officers or directors of any of them shall have any liability of any nature whatsoever hereunder, or in connection with the transactions contemplated hereby, except that (i) this Section 9.02, Section 7.05, Section 7.06(b), and Article X shall survive any termination of this Agreement and (ii) notwithstanding anything to the contrary, neither SCB nor CBC shall be relieved or released from any liabilities or damages arising out of its fraud or its willful and material breach of any provision of this Agreement. The term “willful and material breach” shall mean a material breach of, or material failure to perform any of the covenants or other agreements contained in, this Agreement that is a consequence of an act or failure to act by the breaching or non-performing party with actual knowledge that such party’s act or failure to act would, or would reasonably be expected to, result in or constitute such breach of or such failure of performance under this Agreement.
(b)
(i) In the event that after the date of this Agreement and prior to the termination of this Agreement, a bona fide Acquisition Proposal shall have been communicated to or otherwise made known to the Board of Directors or senior management of CBC or shall have been made directly to the shareholders of CBC generally or any person shall have publicly announced (and not withdrawn at least two (2) Business Days prior to the CBC Meeting) an Acquisition Proposal, in each case with respect to CBC and (A) (x) thereafter this Agreement is terminated by either SCB or CBC pursuant to Section 9.01(c) without the CBC Shareholder Approval having been obtained (and all other conditions set forth in Section 8.01 and Section 8.02 were satisfied or were capable of being satisfied prior to such termination), or (y) thereafter this Agreement is terminated by SCB pursuant to Section 9.01(b) as a result of a willful and material breach by CBC, and (B) prior to the date that is twelve (12) months after the date of such termination, CBC enters into a definitive agreement or consummates a transaction with respect to an Acquisition Proposal (whether or not the same Acquisition Proposal as that referred to above), then CBC shall, on the earlier of the date it enters into such definitive agreement and the date of consummation of such transaction, pay SCB, by wire transfer of same day funds, a fee equal to $9,300,000 (the “Termination Fee”); provided, that for purposes of this Section 9.02(b)(i), all references in the definition of Acquisition Proposal to “25%” shall instead refer to “50%”.
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(ii) In the event that this Agreement is terminated by SCB pursuant to Section 9.01(f), then CBC shall pay SCB, by wire transfer of same day funds, the Termination Fee within two (2) Business Days of the date of termination.
(c)
(i) In the event that after the date of this Agreement and prior to the termination of this Agreement, a bona fide Acquisition Proposal shall have been communicated to or otherwise made known to the Board of Directors or senior management of SCB or shall have been made directly to the shareholders of SCB generally or any Person shall have publicly announced (and not withdrawn at least two (2) Business Days prior to the SCB Meeting) an Acquisition Proposal, in each case with respect to SCB, and (A) (x) thereafter this Agreement is terminated by either SCB or CBC pursuant to Section 9.01(c) without the SCB Shareholder Approval having been obtained (and all other conditions set forth in Section 8.01 and Section 8.03 were satisfied or were capable of being satisfied prior to such termination), or (y) thereafter this Agreement is terminated by CBC pursuant to Section 9.01(b) as a result of a willful and material breach by SCB, and (B) prior to the date that is twelve (12) months after the date of such termination, SCB enters into a definitive agreement or consummates a transaction with respect to an Acquisition Proposal (whether or not the same Acquisition Proposal as that referred to above), then SCB shall, on the earlier of the date it enters into such definitive agreement and the date of consummation of such transaction, pay CBC, by wire transfer of same day funds, the Termination Fee, provided, that for purposes of this Section 9.02(c)(i), all references in the definition of Acquisition Proposal to “25%” shall instead refer to “50%”.
(ii) In the event that this Agreement is terminated by CBC pursuant to Section 9.01(e), then SCB shall pay CBC, by wire transfer of same day funds, the Termination Fee within two (2) Business Days of the date of termination.
(d) Notwithstanding anything to the contrary herein, but without limiting the right of any party to recover liabilities or damages to the extent permitted herein, in no event shall either party be required to pay the Termination Fee more than once.
(e) Each of SCB and CBC acknowledges that the agreements contained in this Section 9.02 are an integral part of the Transaction contemplated by this Agreement, and that, without these agreements, the other party would not enter into this Agreement; accordingly, if SCB or CBC, as the case may be, fails promptly to pay the amount due pursuant to this Section 9.02, and, in order to obtain such payment, the other party commences a suit which results in a judgment against the non-paying party for the Termination Fee or any portion thereof, such non-paying party shall pay the costs and expenses of the other party (including attorneys’ fees and expenses) in connection with such suit. In addition, if SCB or CBC, as the case may be, fails to pay the amounts payable pursuant to this Section 9.02, then such party shall pay interest on such overdue amounts (for the period commencing as of the date that such overdue amount was originally required to be paid and ending on the date that such overdue amount is actually paid in full) at a rate per annum equal to the “prime rate” published in the Wall Street Journal on the date on which such payment was required to be made for the period commencing as of the date that such overdue amount was originally required to be paid and ending on the date that such overdue amount is actually paid in full.
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ARTICLE X
MISCELLANEOUS
10.01 Survival. No representations, warranties, agreements and covenants contained in this Agreement shall survive the Effective Time (other than agreements or covenants contained herein that by their express terms are to be performed after the Effective Time) or the termination of this Agreement if this Agreement is terminated prior to the Effective Time (other than Section 7.05, Section 7.06(b), Section 9.02 and this Article X, which shall survive any such termination). Notwithstanding anything in the foregoing to the contrary, no representations, warranties, agreements and covenants contained in this Agreement shall be deemed to be terminated or extinguished so as to deprive a party hereto or any of its Affiliates of any defense at Law or in equity which otherwise would be available against the claims of any Person, including without limitation any shareholder or former shareholder.
10.02 Waiver; Amendment. Prior to the Effective Time, any provision of this Agreement may be (i) waived, by the party benefited by the provision or (ii) amended or modified at any time, by an agreement in writing among the parties hereto executed in the same manner as this Agreement, provided that after the approval of the principal terms of this Agreement by the CBC shareholders, no amendment shall be made which by law requires further approval by the shareholders of CBC without obtaining such approval, provided further that after the approval of the principal terms of this Agreement by the SCB shareholders, no amendment shall be made which by law requires further approval by the shareholders of SCB without obtaining such approval. For purposes of clarification, an amendment of any date in Section 9.01(c) shall not require further approval by any shareholders and if such amendment were deemed by law to require further approval by the shareholders of CBC or SCB, the approval of the principal terms of this Agreement by such shareholders will be deemed to have granted CBC or SCB, as the case may be, the authority to amend such dates without such further approval. For the avoidance of doubt, at or prior to the Effective Time, each of the parties hereto may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other party, (b) waive any inaccuracies in the representations and warranties of the other party contained in this Agreement or in any document delivered by such other party pursuant hereto, and (c) waive compliance with any of the agreements or satisfaction of any conditions for its benefit contained in this Agreement.
10.03 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be deemed to constitute one and the same original agreement.
10.04 Governing Law and Venue. This Agreement shall be deemed to be made in and in all respects shall be interpreted, construed and governed by and in accordance with the Laws of the State of California, without regard to the conflict of law principles thereof. Each party agrees that it will bring any action or proceeding in respect of any claim arising out of or related to this Agreement or the transactions contemplated hereby exclusively in the courts of the State of California and the federal courts of the United States of America located in the State of California, and, solely in connection with claims arising under this Agreement or the transactions that are the subject of this Agreement, (i) irrevocably submits to the exclusive jurisdiction of such courts, (ii) waives any objection to laying venue in any such action or proceeding in such courts, (iii) waives any objection that such courts are an inconvenient forum or do not have jurisdiction over any party and (iv) agrees that service of process upon such party in any such action or proceeding will be effective if notice is given in accordance with Section 10.07 or in such other manner as may be permitted by Law.
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10.05 Waiver of Jury Trial. The parties acknowledge and agree that any controversy which may arise under this Agreement and the other documents referred to in this Agreement, and in respect of the transactions contemplated hereby and thereby, is likely to involve complicated and difficult issues and, therefore, to the extent permitted under applicable Law, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Agreement and the other documents referred to in this Agreement, and in respect of the transactions contemplated hereby and thereby. The parties certify and acknowledge that (a) no representative of any other party has represented, expressly or otherwise, that such other party would not seek to enforce the foregoing waiver in the event of a legal action, (b) such party has considered the implications of this waiver, (c) such party makes this waiver voluntarily and (d) such party has been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 10.05.
10.06 Expenses. Except as provided in Section 9.02(e), each party hereto will bear all expenses incurred by it in connection with this Agreement and the transactions contemplated hereby, including fees and expenses of its own financial consultants, accountants and counsel; provided that nothing contained herein shall limit either party’s rights to recover any liabilities or damages arising out of the other party’s fraud or willful breach of any provision of this Agreement.
10.07 Notices. All notices, requests and other communications hereunder to a party shall be in writing and shall be deemed given if personally delivered, telecopied (with confirmation) or mailed by registered or certified mail (return receipt requested) or delivered by an overnight courier (with confirmation) to such party at its address set forth below or such other address as such party may specify by notice to the parties hereto.
If to CBC to:
California BanCorp
1300 Clay Street, Suite 500
Oakland, CA 94612
Attention: Steven E. Shelton
Email: seshelton@bankcbc.com
With a copy to:
Sheppard, Mullin, Richter & Hampton LLP
650 Town Center Drive, 10th Floor
Costa Mesa, CA 92626
Attention: Joshua A. Dean
Email: jdean@sheppardmullin.com
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If to SCB to:
Southern California Bancorp
355 S. Grand Avenue, Suite 1200
Los Angeles, CA 90071
Attention: Manisha Merchant, General Counsel
Email: mmerchant@banksocal.com
With a copy to:
Stuart | Moore | Staub
641 Higuera Street, Suite 302
San Luis Obispo, CA 93401
Attention: Kenneth E. Moore
Email: ken@stuartmoorelaw.com
10.08 Entire Understanding; Limited Third Party Beneficiaries. This Agreement, the Bank Merger Agreement, the Voting Agreements and the Confidentiality Agreement represent the entire understanding of the parties hereto and thereto with reference to the Transaction, and this Agreement, the Agreement of Merger, the Bank Merger Agreement, the Voting Agreements and the Confidentiality Agreement supersede any and all other oral or written agreements heretofore made. Except (a) for the Indemnified Parties’ rights with respect to Section 7.09, which are expressly intended to be for benefit of each Indemnified Party, and (b) the right of holders of CBC Common Stock to receive the Merger Consideration and the right of the holders of the CBC Equity Awards to receive the consideration to be provided in exchange therefor under Section 3.07 if the Merger is consummated, nothing in this Agreement, expressed or implied, is intended to confer upon any Person, other than the parties hereto or their respective successors, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
10.09 Severability. Except to the extent that application of this Section 10.09 would have a Material Adverse Effect on CBC or SCB, any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. In all such cases, the parties shall use their reasonable best efforts to substitute a valid, legal and enforceable provision which, insofar as practicable, implements the original purposes and intents of this Agreement.
10.10 Enforcement of the Agreement. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, the parties shall be entitled to specific performance of the terms hereof, including an injunction or injunctions to prevent breaches or threatened breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof (including the parties’ obligation to consummate the Merger), in addition to any other remedy to which they are entitled at law or in equity. Each of the parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any Law to post security or a bond as a prerequisite to obtaining equitable relief.
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10.11 Interpretation. The parties have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement. When a reference is made in this Agreement to Articles, Sections, Exhibits or Schedules, such reference shall be to an Article or Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The word “or” shall not be exclusive. References to “the date hereof” shall be deemed to mean the day and year first above written. As used in this Agreement, the “knowledge” of CBC means the actual knowledge of any of the officers of CBC listed on Section 10.11 of the CBC Disclosure Schedule, and the “knowledge” of SCB means the actual knowledge of any of the officers of SCB listed on Section 10.11 of the SCB Disclosure Schedule. As used in this Agreement, the term “made available” means any document or other information that was (a) provided by one party or its representatives to the other party and its representatives by 5:00 p.m., Pacific time, on the date hereof, (b) included in the virtual data room of a party by 5:00 p.m., Pacific time, on the date hereof, or (c) filed or furnished by a party with the SEC and publicly available on EDGAR at least one (1) day prior to the date hereof, and (ii) the “transactions contemplated hereby” and “transactions contemplated by this Agreement” shall include the Merger and the Bank Merger. The CBC Disclosure Schedule and the SCB Disclosure Schedule, as well as all other schedules and all exhibits hereto, shall be deemed part of this Agreement and included in any reference to this Agreement. Nothing contained in this Agreement shall require any party or person to take any action in violation of applicable law.
10.12 Assignment. No party may assign either this Agreement or any of its rights, interests or obligations hereunder without the prior written approval of the other parties. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.
10.13 Confidential Supervisory Information. Notwithstanding any other provision of this Agreement, no disclosure, representation or warranty shall be made (or other action taken) pursuant to this Agreement that would involve the disclosure of confidential supervisory information (including confidential supervisory information as defined in 12 C.F.R. § 261.2(c) and as identified in 12 C.F.R. § 309.5(g)(8)) of a Governmental Entity by any party to this Agreement to the extent prohibited by applicable Law. To the extent legally permissible, appropriate substitute disclosures or actions shall be made or taken under circumstances in which the limitations of the preceding sentences apply.
10.14 Delivery by Electronic Transmission. This Agreement and any signed agreement or instrument entered into in connection with this Agreement, and any amendments or waivers hereto or thereto, to the extent signed and delivered by e-mail delivery of a “.pdf” format data file or other electronic means, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. No party hereto or to any such agreement or instrument shall raise the use of e-mail delivery of a “.pdf” format data file or other electronic means to deliver a signature to this Agreement or any amendment hereto or the fact that any signature or agreement or instrument was transmitted or communicated through the use of e-mail delivery of a “.pdf” format data file or other electronic means as a defense to the formation of a contract and each party hereto forever waives any such defense.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in counterparts by their duly authorized officers, all as of the day and year first above written.
| SOUTHERN CALIFORNIA BANCORP | ||
| By: | /s/ David I. Rainer | |
| Name: | David I. Rainer | |
| Title: | Chief Executive Officer | |
| CALIFORNIA BANCORP | ||
| By: | /s/ Steven E. Shelton | |
| Name: | Steven E. Shelton | |
| Title: | Chief Executive Officer | |
[Signature Page to Agreement and Plan of Merger and Reorganization]
EXHIBIT A
Form of CBC Voting Agreement
VOTING AGREEMENT, dated as of January 30, 2024 (this “Agreement”), by and among Southern California Bancorp, a California corporation (“SCB”), California BanCorp, a California corporation (“CBC”), and the undersigned shareholder of CBC (“Shareholder”).
WHEREAS, SCB and CBC are entering into an Agreement and Plan of Merger and Reorganization, dated as of the date hereof (including all annexes, exhibits and schedules thereto, and as it may be amended, the “Merger Agreement”), pursuant to which CBC will merge with and into SCB on the terms and conditions set forth therein (the “Merger”) and, in connection therewith, each share of CBC Common Stock (other than Excluded Shares) issued and outstanding shall be converted into, and shall be cancelled in exchange for the right to receive shares of SCB Common Stock in the manner set forth therein. Unless otherwise indicated, capitalized terms used and not defined herein shall have the meanings set forth in the Merger Agreement.
WHEREAS, immediately following the Merger, California Bank of Commerce, a California state-chartered bank and wholly-owned subsidiary of CBC, will merge with and into Bank of Southern California, N.A., a national banking association and wholly-owned subsidiary of SCB.
WHEREAS, Shareholder owns the shares of CBC Common Stock identified on the signature page hereto (such shares, together with all shares of capital stock, if any, subsequently acquired by Shareholder during the term of this Agreement, being referred to as the “Shares”).
WHEREAS, in order to induce CBC and SCB to enter into the Merger Agreement and consummate the Merger, Shareholder has agreed to enter into and perform this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:
1. Agreement to Vote Shares. At every meeting of the shareholders of CBC called, and at every postponement, recess, adjournment or continuation thereof, and on every action, consent or approval (including by written consent) of the shareholders of CBC, Shareholder agrees to vote, or cause to be voted, or give consent with respect to, all of the Shares (a) in favor of (i) approval of the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, and (ii) any other matter that is required to be approved by the shareholders of CBC to facilitate the transactions contemplated by the Merger Agreement; (b) against (i) any proposal made in opposition to approval of the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, or in competition with the Merger or the transactions contemplated by the Merger Agreement, (ii) any action, proposal, transaction or agreement which could reasonably be expected to result in a breach of any covenant, representation or warranty or other obligation or agreement of CBC under the Merger Agreement or Shareholder under this Agreement, (iii) any Acquisition Proposal, and (iv) any proposal, transaction, agreement, amendment of the CBC Articles or CBC Bylaws or other action, in each case which could reasonably be expected to prevent, impede, interfere with, delay, postpone, discourage, frustrate the purposes of or adversely affect the consummation of the Merger or the other transactions contemplated by the Merger Agreement or the fulfillment of the conditions under the Merger Agreement; and (c) as reasonably directed by SCB with respect to any postponement, recess, adjournment, continuation or other procedural matter at any meeting of the shareholders of CBC relating to any of the matters set forth in the foregoing clauses (a) or (b). Any such vote shall be cast (or consent shall be given) by Shareholder in accordance with such procedures relating thereto so as to ensure that it is duly counted, including for purposes of determining that a quorum is present and for purposes of recording the results of such vote (or consent).
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2. Transfer of Shares.
(a) Prohibition on Transfers of Shares; Other Actions. Shareholder hereby agrees that while this Agreement is in effect, Shareholder shall not, except with the prior written approval of CBC and SCB, (i) sell, transfer, pledge, encumber, distribute by gift or donation, or otherwise dispose of any of the Shares (or any securities convertible into or exercisable or exchangeable for Shares) or any interest therein, over which Shareholder has sole dispositive power (or any interest therein), and Shareholder will use reasonable best efforts to not permit the transfer, pledge, encumbrance, distribution by gift or donation, or disposal of any of the Shares pursuant to which Shareholder has shared dispositive power (or any interest therein), whether by actual disposition, physical settlement or effective economic disposition through hedging transactions, derivative instruments or other means, except for charitable gifts or donations where the recipient enters into a voting agreement binding the recipient to vote its shares in the manner provided in Section 1 hereof, (ii) enter into any agreement, arrangement or understanding with any Person, or take any other action, that violates or conflicts with or could reasonably be expected to violate or conflict with Shareholder’s representations, warranties, covenants and obligations under this Agreement, or (iii) take any other action that could reasonably be expected to impair or otherwise adversely affect, in any material respect, Shareholder’s power, authority and ability to comply with and perform Shareholder’s covenants and obligations under this Agreement, provided however, that this Agreement shall not prohibit Shareholder from (x) disposing of or surrendering to CBC shares underlying any equity award issued by CBC in connection with the vesting or exercise of such equity award for the payment of taxes thereon, if any, or (y) transferring and delivering Shares to any member of Shareholder’s immediate family, to a trust for the benefit of Shareholder, to Shareholder’s spouse, ancestors or descendants or other transfers solely for estate planning purposes, or upon the death of Shareholder; provided that such a transfer shall only be permitted if, as a precondition to such transfer, the transferee enters into a voting agreement binding the recipient to vote its shares in the manner provided in Section 1 hereof. Once the CBC Shareholder Approval has been obtained, the prohibitions provided for in this Section 2 shall no longer apply to Shareholder.
(b) Transfer of Voting Rights. Shareholder hereby agrees that while this Agreement is in effect, Shareholder shall not deposit any Shares in a voting trust or, other than this Agreement, grant any proxy or enter into any voting agreement or similar agreement or arrangement with respect to any of the Shares.
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3. Representations and Warranties of Shareholder. Shareholder represents and warrants to CBC and SCB that the following statements are true and correct and not misleading:
(a) Capacity. Shareholder has all requisite capacity and authority to enter into and perform Shareholder’s obligations under this Agreement.
(b) Binding Agreement. This Agreement has been duly executed and delivered by Shareholder and constitutes the valid and legally binding obligation of Shareholder, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.
(c) Non-Contravention. The execution and delivery of this Agreement by Shareholder does not, and the performance by Shareholder of Shareholder’s obligations hereunder and the consummation by Shareholder of the transactions contemplated hereby will not, violate or conflict with, or constitute a default under, any agreement, instrument, contract or other obligation or any order, arbitration award, judgment or decree to which Shareholder is a party or by which Shareholder is bound, or any statute, rule or regulation to which Shareholder is subject.
(d) Ownership. Except as otherwise described in Appendix A or in connection with a charitable gift or donation or other transaction permitted under Section 2(a) hereof, the Shares are, and through the term of this Agreement will be, owned beneficially and of record solely by Shareholder. Shareholder has good and marketable title to the Shares, free and clear of any lien, pledge, mortgage, security interest or other encumbrance. As of the date hereof, Shareholder is the beneficial and record owner of the number of shares of CBC Common Stock set forth on the signature page hereto. Except as otherwise described in Appendix A, Shareholder has and will have at all times during the term of this Agreement (i) sole voting power and sole power to issue instructions with respect to the matters set forth in Section 1 hereof, (ii) sole power of disposition, and (iii) sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Shares owned by Shareholder on the date of this Agreement and all of the Shares hereafter acquired by Shareholder and owned beneficially or of record by Shareholder during the term of this Agreement. For purposes of this Agreement, the term “beneficial ownership” shall be interpreted in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended, provided that a Person shall be deemed to beneficially own any securities which may be acquired by such Person pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise (irrespective of whether the right to acquire such securities is exercisable immediately or only after the passage of time, including the passage of time within 60 days, the satisfaction of any conditions, the occurrence of any event or any combination of the foregoing).
(e) Consents and Approvals. Shareholder has taken all actions necessary to approve the actions contemplated by this Agreement. The execution and delivery of this Agreement by Shareholder does not, and the performance by Shareholder of Shareholder’s obligations under this Agreement and the consummation by Shareholder of the transactions contemplated hereby will not, require Shareholder to obtain any consent, approval, authorization or permit of, or to make any filing with or notification to, any Governmental Entity, other than with respect to any consent, approval, authorization or permit of, or to make any filing with or notification to, any Governmental Entity expressly contemplated in the Merger Agreement.
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(f) Absence of Litigation. There is no suit, action, investigation or proceeding pending or, to the knowledge of Shareholder, threatened against or affecting Shareholder or any of Shareholder’s affiliates before or by any Governmental Entity that could reasonably be expected to materially impair the ability of Shareholder to perform Shareholder’s obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.
4. No Solicitation. Shareholder agrees not to, directly or indirectly, (a) initiate, solicit, induce or knowingly encourage, or take any action to facilitate the making of, any inquiry, offer or proposal which constitutes, or could reasonably be expected to lead to, an Acquisition Proposal, (b) participate in discussions or negotiations regarding any Acquisition Proposal or furnish, or otherwise afford access, to any Person (other than SCB) any information or data with respect to CBC or any of its Subsidiaries or otherwise in furtherance of an Acquisition Proposal, or (c) enter into any agreement, agreement in principle or letter of intent with respect to any Acquisition Proposal or approve or resolve to approve any Acquisition Proposal or any agreement, agreement in principle or letter of intent relating to an Acquisition Proposal.
5. Specific Performance and Remedies. Shareholder acknowledges that it will be impossible to measure in money the damage to CBC and SCB if Shareholder fails to comply with the obligations imposed by this Agreement and that, in the event of any such failure, CBC and SCB will not have an adequate remedy at law. Accordingly, Shareholder agrees that injunctive relief or other equitable remedy, in addition to remedies at law or in damages, is the appropriate remedy of CBC and SCB for any such failure and will not oppose the granting of such relief on the basis that CBC and SCB may have an adequate remedy at law. Shareholder agrees that Shareholder will not seek, and agrees to waive any requirement for, the securing or posting of a bond in connection with CBC or SCB seeking or obtaining such equitable relief.
6. Term of Agreement; Termination. The term of this Agreement shall commence on the date hereof and terminate at the Effective Time. In the event the Merger is not consummated and the Merger Agreement is terminated in accordance with its terms (other than as a result of a breach of this Agreement), this Agreement shall be null and void.
7. Stop Transfer Order. In furtherance of this Agreement, Shareholder hereby authorizes and instructs CBC to enter a stop transfer order with respect to all of the Shares for the period from the date hereof through the date this Agreement is terminated in accordance with Section 6 hereof.
8. Irrevocable Proxy. Shareholder hereby appoints CBC and any designee of CBC, and each of them individually, until termination of this Agreement pursuant to Section 6 hereof, Shareholder’s proxies and attorneys-in-fact, with full power of substitution and resubstitution, to vote or act by written consent during the term of this Agreement with respect to the Shares in accordance with Section 1 hereof. This proxy and power of attorney is given solely to secure the performance of the duties of Shareholder under this Agreement. Shareholder shall take such further action or execute such other instruments as may be necessary to effectuate the intent of this proxy. This proxy and power of attorney granted by Shareholder shall be irrevocable during the term of this Agreement, shall be deemed to be coupled with an interest sufficient in Law to support an irrevocable proxy and shall revoke any and all prior proxies granted by Shareholder with respect to the Shares. The power of attorney granted by Shareholder herein is a durable power of attorney and shall survive the dissolution, bankruptcy, death or incapacity of Shareholder. The proxy and power of attorney granted hereunder shall terminate upon the termination of this Agreement.
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9. Confidentiality. Shareholder agrees to hold any and all material non-public information regarding this Agreement, the Merger and the Merger Agreement in strict confidence, and not to divulge any material non-public information regarding this Agreement, the Merger or the Merger Agreement to any third person, until such time as the Merger has been publicly announced by CBC and SCB, at which time Shareholder may only divulge such information as has been publicly disclosed by CBC and SCB. Shareholder hereby authorizes CBC and SCB to publish and disclose in any announcement or disclosure in connection with the Merger Shareholder’s identity and ownership of the Shares and the nature of Shareholder’s obligations under this Agreement.
10. Capacity as Shareholder. Shareholder is entering into this Agreement in Shareholder’s capacity as the record or beneficial owner of the Shares, and not in Shareholder’s capacity as a director or officer, as applicable, of CBC or any of its Subsidiaries. Nothing in this Agreement (a) will limit or affect any actions or omissions taken by Shareholder in Shareholder’s capacity as a director or officer, including in exercising rights under the Merger Agreement, and no such actions or omissions shall be deemed a breach of this Agreement, or (b) will be construed to prohibit, limit or restrict Shareholder from exercising fiduciary duties as an officer or director to CBC or its shareholders.
11. Entire Agreement. This Agreement contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements, written or oral, among the parties hereto with respect to the subject matter hereof. This Agreement may not be amended, supplemented or modified, and no provisions hereof may be modified or waived, except by an instrument in writing signed by each party hereto. No waiver of any provisions hereof by any party shall be deemed a waiver of any other provisions hereof by any such party, nor shall any such waiver be deemed a continuing waiver of any provision hereof by such party.
12. Attorneys’ Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements, in addition to any other relief to which the prevailing party is entitled.
13. Severability. If any provision of this Agreement or the application of such provision to any person or circumstances shall be held invalid or unenforceable by a court of competent jurisdiction, such provision or application shall be unenforceable only to the extent of such invalidity or unenforceability, and the remainder of the provision held invalid or unenforceable and the application of such provision to persons or circumstances, other than the party as to which it is held invalid, and the remainder of this Agreement, shall not be affected.
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14. Notices. All notices, requests, claims, demands or other communications hereunder shall be in writing and shall be deemed given when delivered personally, upon receipt of a transmission confirmation if sent by electronic mail and on the next Business Day when sent by a reputable overnight courier service to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
If to SCB:
Southern
California Bancorp
12265 El Camino Real, Suite 210
San Diego, CA 92130
Attention: Manisha Merchant, General Counsel
Email: mmerchant@banksocal.com
With a copy to:
Stuart
| Moore | Staub
641 Higuera Street, Suite 302
San Luis Obispo, CA 93401
Attention: Kenneth E. Moore
Email: ken@stuartmoorelaw.com
If to CBC:
California
BanCorp
1300 Clay Street, Suite 500
Oakland, CA 94612
Attention: Steven E. Shelton
Email: seshelton@bankcbc.com
With a copy to:
Sheppard,
Mullin, Richter & Hampton LLP
650 Town Center Drive, 10th Floor
Costa Mesa, CA 92626
Attention: Joshua A. Dean
Email: jdean@sheppardmullin.com
If to Shareholder, at the address of Shareholder appearing on the signature page of this Agreement.
15. Assignment; Binding Effect. No party may assign either this Agreement or any of its rights, interests or obligations hereunder without the prior written approval of the other parties. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.
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16. Governing Law; Jurisdiction. This Agreement shall be governed by, and interpreted in accordance with, the laws of the State of California applicable to contracts made and entirely to be performed within such state, without regard to any applicable conflicts of law principles that would require the application of the laws of any other jurisdiction. Any dispute arising under or relating to this Agreement will be litigated in the state or federal courts located in California and the parties hereby consent to the exclusive jurisdiction of such courts.
17. Independent Review and Advice. Shareholder represents and warrants that Shareholder has carefully read this Agreement; that Shareholder executes this Agreement with full knowledge of the contents of this Agreement, the legal consequences thereof, and any and all rights which any party may have with respect to the other parties; that Shareholder has had the opportunity to receive independent legal advice with respect to the matters set forth in this Agreement and with respect to the rights and asserted rights arising out of such matters, and that Shareholder is entering into this Agreement of Shareholder’s own free will. Shareholder expressly agrees that there are no expectations contrary to this Agreement and no usage of trade or regular practice in the industry shall be used to modify this Agreement. The parties agree that this Agreement shall not be construed for or against either party in any interpretation thereof.
18. Headings. The descriptive headings of the sections of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
19. Execution and Counterparts. This Agreement may be signed in counterparts, each of which will be considered an original and all such counterparts will be considered and constitute one and the same Agreement. This Agreement, as executed, may be delivered by facsimile transmission, by electronic mail, or by other electronic transmission, and may be transmitted in portable document format (.pdf) or other electronic or facsimile format. Each such executed facsimile, .pdf, or other electronic record shall be considered an original executed counterpart for purposes of this Agreement. Each party to this Agreement (i) agrees that it will be bound by its own Electronic Signature (as such term is defined immediately below), (ii) accepts the Electronic Signature of each other party to this Agreement, and (iii) agrees that such Electronic Signatures shall be the legal equivalent of manual signatures. The term “Electronic Signature” means (a) the signing party’s manual signature on a signature page, converted by the signing party to facsimile or digital form (such as a .pdf file) and received from the signing party’s customary email address, customary facsimile number, or other mutually agreed-upon authenticated source; or (b) the signing party’s digital signature executed using a mutually agreed-upon digital signature service provider and digital signature process.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first written above.
| SOUTHERN CALIFORNIA BANCORP | ||
| By: | ||
| Name: | David I. Rainer | |
| Title: | Chief Executive Officer | |
| CALIFORNIA BANCORP | ||
| By: | ||
| Name: | Steven E. Shelton | |
| Title: | Chief Executive Officer | |
| SHAREHOLDER | |||
| Name: | Number of Shares Owned | ||
| Address: | |||
Signature Page to Voting Agreement
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Appendix A
Exceptions to Representations:
☐ Check the box if the following statement is applicable: Shareholder is the joint beneficial owner of the Shares, together with Shareholder’s spouse.
☐ Check the box if the following statement is applicable: Shareholder has joint voting power over the Shares, together with Shareholder’s spouse.
Other exceptions:
EXHIBIT B
Form of SCB Voting Agreement
VOTING AGREEMENT, dated as of January 30, 2024 (this “Agreement”), by and among Southern California Bancorp, a California corporation (“SCB”), California BanCorp, a California corporation (“CBC”), and the undersigned shareholder of SCB (“Shareholder”).
WHEREAS, SCB and CBC are entering into an Agreement and Plan of Merger and Reorganization, dated as of the date hereof (including all annexes, exhibits and schedules thereto, and as it may be amended, the “Merger Agreement”), pursuant to which CBC will merge with and into SCB on the terms and conditions set forth therein (the “Merger”) and, in connection therewith, each share of CBC Common Stock (other than Excluded Shares) issued and outstanding shall be converted into, and shall be cancelled in exchange for the right to receive shares of SCB Common Stock in the manner set forth therein. Unless otherwise indicated, capitalized terms used and not defined herein shall have the meanings set forth in the Merger Agreement.
WHEREAS, immediately following the Merger, California Bank of Commerce, a California state-chartered bank and wholly-owned subsidiary of CBC, will merge with and into Bank of Southern California, N.A., a national banking association and wholly-owned subsidiary of SCB.
WHEREAS, Shareholder owns the shares of SCB Common Stock identified on the signature page hereto (such shares, together with all shares of capital stock, if any, subsequently acquired by Shareholder during the term of this Agreement, being referred to as the “Shares”).
WHEREAS, in order to induce CBC and SCB to enter into the Merger Agreement and consummate the Merger, Shareholder has agreed to enter into and perform this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:
1. Agreement to Vote Shares. At every meeting of the shareholders of SCB called, and at every postponement, recess, adjournment or continuation thereof, and on every action, consent or approval (including by written consent) of the shareholders of SCB, Shareholder agrees to vote, or cause to be voted, or give consent with respect to, all of the Shares (a) in favor of (i) approval of the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, (ii) approval of the issuance of shares of SCB Common Stock in connection with the Merger, (iii) approval of the SCB Bylaw Amendment, and (iv) any other matter that is required to be approved by the shareholders of SCB to facilitate the transactions contemplated by the Merger Agreement; (b) against (i) any proposal made in opposition to approval of the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, or in competition with the Merger or the transactions contemplated by the Merger Agreement, (ii) any action, proposal, transaction or agreement which could reasonably be expected to result in a breach of any covenant, representation or warranty or other obligation or agreement of SCB under the Merger Agreement or Shareholder under this Agreement, (iii) any Acquisition Proposal, and (iv) any proposal, transaction, agreement, amendment of the SCB Articles or SCB Bylaws or other action, in each case which could reasonably be expected to prevent, impede, interfere with, delay, postpone, discourage, frustrate the purposes of or adversely affect the consummation of the Merger or the other transactions contemplated by the Merger Agreement or the fulfillment of the conditions under the Merger Agreement; and (c) as reasonably directed by SCB with respect to any postponement, recess, adjournment, continuation or other procedural matter at any meeting of the shareholders of SCB relating to any of the matters set forth in the foregoing clauses (a) or (b). Any such vote shall be cast (or consent shall be given) by Shareholder in accordance with such procedures relating thereto so as to ensure that it is duly counted, including for purposes of determining that a quorum is present and for purposes of recording the results of such vote (or consent).
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2. Transfer of Shares.
(a) Prohibition on Transfers of Shares; Other Actions. Shareholder hereby agrees that while this Agreement is in effect, Shareholder shall not, except with the prior written approval of CBC and SCB, (i) sell, transfer, pledge, encumber, distribute by gift or donation, or otherwise dispose of any of the Shares (or any securities convertible into or exercisable or exchangeable for Shares) or any interest therein, over which Shareholder has sole dispositive power (or any interest therein), and Shareholder will use reasonable best efforts to not permit the transfer, pledge, encumbrance, distribution by gift or donation, or disposal of any of the Shares pursuant to which Shareholder has shared dispositive power (or any interest therein), whether by actual disposition, physical settlement or effective economic disposition through hedging transactions, derivative instruments or other means, except for charitable gifts or donations where the recipient enters into a voting agreement binding the recipient to vote its shares in the manner provided in Section 1 hereof, (ii) enter into any agreement, arrangement or understanding with any Person, or take any other action, that violates or conflicts with or could reasonably be expected to violate or conflict with Shareholder’s representations, warranties, covenants and obligations under this Agreement, or (iii) take any other action that could reasonably be expected to impair or otherwise adversely affect, in any material respect, Shareholder’s power, authority and ability to comply with and perform Shareholder’s covenants and obligations under this Agreement, provided however, that this Agreement shall not prohibit Shareholder from (x) disposing of or surrendering to SCB shares underlying any equity award issued by SCB in connection with the vesting or exercise of such equity award for the payment of taxes thereon, if any, or (y) transferring and delivering Shares to any member of Shareholder’s immediate family, to a trust for the benefit of Shareholder, to Shareholder’s spouse, ancestors or descendants or other transfers solely for estate planning purposes, or upon the death of Shareholder; provided that such a transfer shall only be permitted if, as a precondition to such transfer, the transferee enters into a voting agreement binding the recipient to vote its shares in the manner provided in Section 1 hereof. Once the SCB Shareholder Approval has been obtained, the prohibitions provided for in this Section 2 shall no longer apply to Shareholder.
(b) Transfer of Voting Rights. Shareholder hereby agrees that while this Agreement is in effect, Shareholder shall not deposit any Shares in a voting trust or, other than this Agreement, grant any proxy or enter into any voting agreement or similar agreement or arrangement with respect to any of the Shares.
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3. Representations and Warranties of Shareholder. Shareholder represents and warrants to CBC and SCB that the following statements are true and correct and not misleading:
(a) Capacity. Shareholder has all requisite capacity and authority to enter into and perform Shareholder’s obligations under this Agreement.
(b) Binding Agreement. This Agreement has been duly executed and delivered by Shareholder and constitutes the valid and legally binding obligation of Shareholder, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.
(c) Non-Contravention. The execution and delivery of this Agreement by Shareholder does not, and the performance by Shareholder of Shareholder’s obligations hereunder and the consummation by Shareholder of the transactions contemplated hereby will not, violate or conflict with, or constitute a default under, any agreement, instrument, contract or other obligation or any order, arbitration award, judgment or decree to which Shareholder is a party or by which Shareholder is bound, or any statute, rule or regulation to which Shareholder is subject.
(d) Ownership. Except as otherwise described in Appendix A or in connection with a charitable gift or donation or other transaction permitted under Section 2(a) hereof, the Shares are, and through the term of this Agreement will be, owned beneficially and of record solely by Shareholder. Shareholder has good and marketable title to the Shares, free and clear of any lien, pledge, mortgage, security interest or other encumbrance. As of the date hereof, Shareholder is the beneficial and record owner of the number of shares of SCB Common Stock set forth on the signature page hereto. Except as otherwise described in Appendix A, Shareholder has and will have at all times during the term of this Agreement (i) sole voting power and sole power to issue instructions with respect to the matters set forth in Section 1 hereof, (ii) sole power of disposition, and (iii) sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Shares owned by Shareholder on the date of this Agreement and all of the Shares hereafter acquired by Shareholder and owned beneficially or of record by Shareholder during the term of this Agreement. For purposes of this Agreement, the term “beneficial ownership” shall be interpreted in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended, provided that a Person shall be deemed to beneficially own any securities which may be acquired by such Person pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise (irrespective of whether the right to acquire such securities is exercisable immediately or only after the passage of time, including the passage of time within 60 days, the satisfaction of any conditions, the occurrence of any event or any combination of the foregoing).
(e) Consents and Approvals. Shareholder has taken all actions necessary to approve the actions contemplated by this Agreement. The execution and delivery of this Agreement by Shareholder does not, and the performance by Shareholder of Shareholder’s obligations under this Agreement and the consummation by Shareholder of the transactions contemplated hereby will not, require Shareholder to obtain any consent, approval, authorization or permit of, or to make any filing with or notification to, any Governmental Entity, other than with respect to any consent, approval, authorization or permit of, or to make any filing with or notification to, any Governmental Entity expressly contemplated in the Merger Agreement.
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(f) Absence of Litigation. There is no suit, action, investigation or proceeding pending or, to the knowledge of Shareholder, threatened against or affecting Shareholder or any of Shareholder’s affiliates before or by any Governmental Entity that could reasonably be expected to materially impair the ability of Shareholder to perform Shareholder’s obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.
4. No Solicitation. Shareholder agrees not to, directly or indirectly, (a) initiate, solicit, induce or knowingly encourage, or take any action to facilitate the making of, any inquiry, offer or proposal which constitutes, or could reasonably be expected to lead to, an Acquisition Proposal, (b) participate in discussions or negotiations regarding any Acquisition Proposal or furnish, or otherwise afford access, to any Person (other than CBC) any information or data with respect to SCB or any of its Subsidiaries or otherwise in furtherance of an Acquisition Proposal, or (c) enter into any agreement, agreement in principle or letter of intent with respect to any Acquisition Proposal or approve or resolve to approve any Acquisition Proposal or any agreement, agreement in principle or letter of intent relating to an Acquisition Proposal.
5. Specific Performance and Remedies. Shareholder acknowledges that it will be impossible to measure in money the damage to CBC and SCB if Shareholder fails to comply with the obligations imposed by this Agreement and that, in the event of any such failure, CBC and SCB will not have an adequate remedy at law. Accordingly, Shareholder agrees that injunctive relief or other equitable remedy, in addition to remedies at law or in damages, is the appropriate remedy of CBC and SCB for any such failure and will not oppose the granting of such relief on the basis that CBC and SCB may have an adequate remedy at law. Shareholder agrees that Shareholder will not seek, and agrees to waive any requirement for, the securing or posting of a bond in connection with CBC or SCB seeking or obtaining such equitable relief.
6. Term of Agreement; Termination. The term of this Agreement shall commence on the date hereof and terminate at the Effective Time. In the event the Merger is not consummated and the Merger Agreement is terminated in accordance with its terms (other than as a result of a breach of this Agreement), this Agreement shall be null and void.
7. Stop Transfer Order. In furtherance of this Agreement, Shareholder hereby authorizes and instructs SCB to enter a stop transfer order with respect to all of the Shares for the period from the date hereof through the date this Agreement is terminated in accordance with Section 6 hereof.
8. Irrevocable Proxy. Shareholder hereby appoints SCB and any designee of SCB, and each of them individually, until termination of this Agreement pursuant to Section 6 hereof, Shareholder’s proxies and attorneys-in-fact, with full power of substitution and resubstitution, to vote or act by written consent during the term of this Agreement with respect to the Shares in accordance with Section 1 hereof. This proxy and power of attorney is given solely to secure the performance of the duties of Shareholder under this Agreement. Shareholder shall take such further action or execute such other instruments as may be necessary to effectuate the intent of this proxy. This proxy and power of attorney granted by Shareholder shall be irrevocable during the term of this Agreement, shall be deemed to be coupled with an interest sufficient in Law to support an irrevocable proxy and shall revoke any and all prior proxies granted by Shareholder with respect to the Shares. The power of attorney granted by Shareholder herein is a durable power of attorney and shall survive the dissolution, bankruptcy, death or incapacity of Shareholder. The proxy and power of attorney granted hereunder shall terminate upon the termination of this Agreement.
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9. Confidentiality. Shareholder agrees to hold any and all material non-public information regarding this Agreement, the Merger and the Merger Agreement in strict confidence, and not to divulge any material non-public information regarding this Agreement, the Merger or the Merger Agreement to any third person, until such time as the Merger has been publicly announced by CBC and SCB, at which time Shareholder may only divulge such information as has been publicly disclosed by CBC and SCB. Shareholder hereby authorizes CBC and SCB to publish and disclose in any announcement or disclosure in connection with the Merger Shareholder’s identity and ownership of the Shares and the nature of Shareholder’s obligations under this Agreement.
10. Capacity as Shareholder. Shareholder is entering into this Agreement in Shareholder’s capacity as the record or beneficial owner of the Shares, and not in Shareholder’s capacity as a director or officer, as applicable, of SCB or any of its Subsidiaries. Nothing in this Agreement (a) will limit or affect any actions or omissions taken by Shareholder in Shareholder’s capacity as a director or officer, including in exercising rights under the Merger Agreement, and no such actions or omissions shall be deemed a breach of this Agreement, or (b) will be construed to prohibit, limit or restrict Shareholder from exercising fiduciary duties as an officer or director to SCB or its shareholders.
11. Entire Agreement. This Agreement contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements, written or oral, among the parties hereto with respect to the subject matter hereof. This Agreement may not be amended, supplemented or modified, and no provisions hereof may be modified or waived, except by an instrument in writing signed by each party hereto. No waiver of any provisions hereof by any party shall be deemed a waiver of any other provisions hereof by any such party, nor shall any such waiver be deemed a continuing waiver of any provision hereof by such party.
12. Attorneys’ Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements, in addition to any other relief to which the prevailing party is entitled.
13. Severability. If any provision of this Agreement or the application of such provision to any person or circumstances shall be held invalid or unenforceable by a court of competent jurisdiction, such provision or application shall be unenforceable only to the extent of such invalidity or unenforceability, and the remainder of the provision held invalid or unenforceable and the application of such provision to persons or circumstances, other than the party as to which it is held invalid, and the remainder of this Agreement, shall not be affected.
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14. Notices. All notices, requests, claims, demands or other communications hereunder shall be in writing and shall be deemed given when delivered personally, upon receipt of a transmission confirmation if sent by electronic mail and on the next Business Day when sent by a reputable overnight courier service to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
If to SCB:
Southern
California Bancorp
12265 El Camino Real, Suite 210
San Diego, CA 92130
Attention: Manisha Merchant, General Counsel
Email: mmerchant@banksocal.com
With a copy to:
Stuart
| Moore | Staub
641 Higuera Street, Suite 302
San Luis Obispo, CA 93401
Attention: Kenneth E. Moore
Email: ken@stuartmoorelaw.com
If to CBC:
California
BanCorp
1300 Clay Street, Suite 500
Oakland, CA 94612
Attention: Steven E. Shelton
Email: seshelton@bankcbc.com
With a copy to:
Sheppard,
Mullin, Richter & Hampton LLP
650 Town Center Drive, 10th Floor
Costa Mesa, CA 92626
Attention: Joshua A. Dean
Email: jdean@sheppardmullin.com
If to Shareholder, at the address of Shareholder appearing on the signature page of this Agreement.
15. Assignment; Binding Effect. No party may assign either this Agreement or any of its rights, interests or obligations hereunder without the prior written approval of the other parties. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.
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16. Governing Law; Jurisdiction. This Agreement shall be governed by, and interpreted in accordance with, the laws of the State of California applicable to contracts made and entirely to be performed within such state, without regard to any applicable conflicts of law principles that would require the application of the laws of any other jurisdiction. Any dispute arising under or relating to this Agreement will be litigated in the state or federal courts located in California and the parties hereby consent to the exclusive jurisdiction of such courts.
17. Independent Review and Advice. Shareholder represents and warrants that Shareholder has carefully read this Agreement; that Shareholder executes this Agreement with full knowledge of the contents of this Agreement, the legal consequences thereof, and any and all rights which any party may have with respect to the other parties; that Shareholder has had the opportunity to receive independent legal advice with respect to the matters set forth in this Agreement and with respect to the rights and asserted rights arising out of such matters, and that Shareholder is entering into this Agreement of Shareholder’s own free will. Shareholder expressly agrees that there are no expectations contrary to this Agreement and no usage of trade or regular practice in the industry shall be used to modify this Agreement. The parties agree that this Agreement shall not be construed for or against either party in any interpretation thereof.
18. Headings. The descriptive headings of the sections of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
19. Execution and Counterparts. This Agreement may be signed in counterparts, each of which will be considered an original and all such counterparts will be considered and constitute one and the same Agreement. This Agreement, as executed, may be delivered by facsimile transmission, by electronic mail, or by other electronic transmission, and may be transmitted in portable document format (.pdf) or other electronic or facsimile format. Each such executed facsimile, .pdf, or other electronic record shall be considered an original executed counterpart for purposes of this Agreement. Each party to this Agreement (i) agrees that it will be bound by its own Electronic Signature (as such term is defined immediately below), (ii) accepts the Electronic Signature of each other party to this Agreement, and (iii) agrees that such Electronic Signatures shall be the legal equivalent of manual signatures. The term “Electronic Signature” means (a) the signing party’s manual signature on a signature page, converted by the signing party to facsimile or digital form (such as a .pdf file) and received from the signing party’s customary email address, customary facsimile number, or other mutually agreed-upon authenticated source; or (b) the signing party’s digital signature executed using a mutually agreed-upon digital signature service provider and digital signature process.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first written above.
| SOUTHERN CALIFORNIA BANCORP | ||
| By: | ||
| Name: | David I. Rainer | |
| Title: | Chief Executive Officer | |
| CALIFORNIA BANCORP | ||
| By: | ||
| Name: | Steven E. Shelton | |
| Title: | Chief Executive Officer | |
| SHAREHOLDER | |||
| Name: | Number of Shares Owned | ||
| Address: | |||
Signature Page to Voting Agreement
| -8- |
Appendix A
Exceptions to Representations:
☐ Check the box if the following statement is applicable: Shareholder is the joint beneficial owner of the Shares, together with Shareholder’s spouse.
☐ Check the box if the following statement is applicable: Shareholder has joint voting power over the Shares, together with Shareholder’s spouse.
Other exceptions:
EXHIBIT C
CERTIFICATE OF AMENDMENT
OF
BYLAWS
OF
SOUTHERN CALIFORNIA BANCORP
Manisha K. Merchant certifies that:
| 1. | She is the Secretary of Southern California Bancorp (the “Company”). |
| 2. | Article III, Section 2 of the Bylaws of the Company, Number of Directors, is amended and restated in its entirety to read as follows: |
“Section 2. Number of Directors. The authorized number of directors shall be not less than seven (7) nor more than thirteen (13). The exact number of authorized directors shall be fixed, within the limits specified above, by a resolution amending such exact number, duly adopted by the board of directors or by the shareholders. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.”
3. The foregoing amendment of the Company’s Bylaws has been duly approved by the Board of Directors of the Company at a meeting held on [●], 2024.
4. The foregoing amendment of the Company’s Bylaws has been duly approved by the outstanding shares of the Company’s common stock at a meeting held on [●], 2024.
The undersigned declares under penalty of perjury that the matters set forth in the foregoing Certificate are true and correct of her own knowledge and that this declaration was executed on [●], 2024 at Los Angeles, California.
| Manisha K. Merchant, Secretary |
EXHIBIT D
AGREEMENT OF MERGER
This Agreement of Merger, dated as of [●], 2024 (“Agreement”), is made by and between Southern California Bancorp (“SCB”) and California BanCorp (“CBC”).
WITNESSETH:
WHEREAS, SCB is a California corporation, California Entity Number 4321159, which has its principal place of business in San Diego, California;
WHEREAS, CBC is a California corporation, California Entity Number 4007339, which has its principal place of business in Oakland, California;
WHEREAS, SCB and CBC have entered into an Agreement and Plan of Merger and Reorganization, dated as of January 30, 2024 (the “Reorganization Agreement”), pursuant to which CBC will merge with and into SCB (the “Merger”), with SCB as the surviving corporation; and
WHEREAS, the respective Boards of Directors of CBC and SCB have approved and deemed it advisable to consummate the Merger and the respective shareholders of CBC and SCB have adopted and approved the principal terms of the Reorganization Agreement and this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the parties hereto, intending to be legally bound hereby, agree as follows:
1. The Merger. Subject to the terms and conditions of this Agreement, at the Effective Time (as defined in Section 14 below), CBC shall merge with and into SCB in accordance with the relevant provisions of the California General Corporation Law (“CGCL”). SCB shall be the surviving corporation of the Merger (the “Surviving Corporation”) and will continue its corporate existence under the CGCL. At the Effective Time, the separate existence of CBC will cease.
2. Effects of the Merger. At the Effective Time, the effects of the Merger shall be as provided in the CGCL.
3. Name; Articles of Incorporation. The name of the Surviving Corporation shall be “[●].” The Articles of Incorporation of SCB in effect immediately prior to the Effective Time shall be the Articles of Incorporation of the Surviving Corporation, until altered, amended or repealed in accordance with their terms and applicable law, provided however, that as of the Effective Time, Article One of the Articles of Incorporation of SCB shall be amended and restated in its entirety as follows:
ARTICLE ONE – NAME. The name of this Corporation is:
[●]
4. Bylaws. The Bylaws of SCB in effect immediately prior to the Effective Time shall be the governing documents of the Surviving Corporation, until altered, amended or repealed in accordance with their terms and applicable law.
5. Main Office. The main office of the Surviving Corporation shall be the main office of SCB immediately prior to the Effective Time.
6. Directors and Executive Officers. The directors and executive officers of the Surviving Corporation at the Effective Time shall be the directors and executive officers of SCB immediately prior to the Merger, until they are remove, they resign or their successors are elected and qualified.
7. Effect on Shares of Stock.
(a) Shares of SCB. Each share of SCB Common Stock issued and outstanding immediately prior to the Effective Time shall be unchanged and shall remain issued and outstanding after the Merger.
(b) Shares of CBC. As of the Effective Time and subject to the provisions of this Agreement, each share of CBC Common Stock issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be entitled to receive 1.590 shares of SCB Common Stock. Any shares of CBC Common Stock held in the treasury of CBC or by SCB immediately prior to the Effective Time shall be retired and cancelled with no consideration.
(c) Fractional Shares. Notwithstanding any other provision of this Agreement, no fractional shares of SCB Common Stock will be issued and any holder of shares of CBC Common Stock entitled to receive a fractional share of SCB Common Stock but for this Section 6(c) shall be entitled to receive a cash payment equal to the product (calculated to the nearest hundredth) obtained by multiplying (i) the fraction of a share of SCB Common Stock to which such holder would otherwise be entitled to receive in the Merger (after taking into account all shares of CBC Common Stock held by such holder immediately prior to the Effective Time and rounded to the nearest one-thousandth when expressed in decimal form) by (ii) the volume weighted average closing price of shares of SCB Common Stock quoted on the Nasdaq on each of the last ten (10) trading days ending on the day which is the fifth trading date immediately preceding the date that the Effective Time occurs, rounded to the nearest whole cent.
8. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one agreement.
9. Governing Law. This Agreement shall be governed in all respects, including, but not limited to, validity, interpretation, effect and performance, by the laws of the State of California.
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10. Amendment. Subject to applicable law, this Agreement may be amended, modified or supplemented only by written agreement of SCB and CBC at any time prior to the Effective Time.
11. Waiver. To the fullest extent provided by law, any of the terms or conditions of this Agreement may be waived prior to the effective time by whichever of the parties hereto is, or the shareholders of which are, entitled to the benefit thereof by action taken by the Board of Directors of such waiving party.
12. Termination. This Agreement shall terminate upon the termination of the Reorganization Agreement prior to the Effective Time in accordance with its terms. The Agreement may also be terminated at any time prior to the Effective Time by an instrument executed by CBC and SCB.
13. Conditions Precedent. Completion of the Merger as provided herein is conditioned upon the satisfaction of the conditions set forth in the Reorganization Agreement, any and all of which may be waived in accordance with the terms and provisions of the Reorganization Agreement.
14. Effectiveness of Merger. The Merger shall become effective on the date and at the time that this Agreement and the appropriate Officers’ Certificates (the “Merger Filing”) are duly filed with the California Secretary of State, or at such subsequent date or time as SCB and CBC agree and specify in the Merger Filing (the “Effective Time”).
15. Entire Agreement. Except as otherwise set forth in this Agreement and the Reorganization Agreement, the Reorganization Agreement and this Agreement (including the documents and the instruments referred to herein) constitute the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. To the extent of a conflict between the terms of the Reorganization Agreement and the terms of this Agreement, the terms of the Reorganization Agreement shall control.
[Signature page to follow]
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IN WITNESS WHEREOF, each of SCB and CBC has caused this Agreement to be executed on its behalf by its duly authorized officers.
| SOUTHERN CALIFORNIA BANCORP | ||
| By: | ||
| Name: | David I. Rainer | |
| Title: | President and Chief Executive Officer | |
| By: | ||
| Name: | Manisha Merchant | |
| Title: | Corporate Secretary | |
| CALIFORNIA BANCORP | ||
| By: | ||
| Name: | Thomas A. Sa | |
| Title: | President | |
| By: | ||
| Name: | Tommiette Rey | |
| Title: | Corporate Secretary | |
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Certificate of Approval
of
Agreement of Merger
Pursuant to Section 1103 of the California Corporations Code, the undersigned, David I. Rainer and Manisha Merchant certify that:
| 1. | They are the President and Corporate Secretary, respectively, of Southern California Bancorp, a California corporation (“SCB”). |
| 2. | This certificate is attached to the Agreement of Merger, dated [●], 2024 (the “Agreement”), by and between California BanCorp, a California corporation (“CBC”), and SCB, which provides for the merger of CBC with and into SCB (the “Merger”). |
| 3. | The Agreement in the form attached was duly approved by the Board of Directors of SCB. |
| 4. | SCB has two classes of stock authorized consisting of shares of Common Stock and Preferred Stock. SCB has [●] shares of Common Stock outstanding which were entitled to vote on the Merger and no shares of Preferred Stock outstanding. |
| 5. | The principal terms of the Agreement in the form attached were approved by the vote of the shareholders of Southern California Bancorp which equaled or exceeded the vote required. |
| 6. | The percentage vote required was more than 50% of the outstanding shares of Common Stock which were entitled to vote on the Merger. |
We certify under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge.
Executed in Los Angeles, California on [●], 2024.
| David I. Rainer, President and CEO | |
| Manisha Merchant, Corporate Secretary |
Certificate of Approval
of
Agreement of Merger
Pursuant to Section 1103 of the California Corporations Code, the undersigned, Thomas A. Sa and Tommiette Rey certify that:
| 1. | They are the President and Corporate Secretary, respectively, of California BanCorp, a California corporation (“CBC”). |
| 2. | This certificate is attached to the Agreement of Merger, dated [●], 2024 (the “Agreement”), by and between Southern California Bancorp, a California corporation (“SCB”), and CBC, which provides for the merger of CBC with and into SCB (the “Merger”). |
| 3. | The Agreement in the form attached was duly approved by the Board of Directors of CBC. |
| 4. | CBC has two classes of stock authorized consisting of shares of Common Stock and Preferred Stock. CBC has [●] shares of Common Stock outstanding which were entitled to vote on the Merger and no shares of Preferred Stock outstanding. |
| 5. | The principal terms of the Agreement in the form attached were approved by the vote of the shareholders of California Bancorp which equaled or exceeded the vote required. |
| 6. | The percentage vote required was more than 50% of the outstanding shares of Common Stock which were entitled to vote on the Merger. |
We certify under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge.
Executed in Oakland, California on [●], 2024.
| Thomas A. Sa, President | |
| Tommiette Rey, Corporate Secretary |
EXHIBIT E
AGREEMENT TO MERGE
This Agreement to Merge (this “Agreement”), dated as of [●], 2024, is adopted and made by and between BANK OF SOUTHERN CALIFORNIA, NATIONAL ASSOCIATION, a national banking association, having its main office at [●] (“SCB Bank”), and CALIFORNIA BANK OF COMMERCE, a California state-chartered bank, having its main office at [●] (“CBC Bank”).
WITNESSETH:
WHEREAS, SCB Bank is a national banking association with capital of $[●], divided into [●] authorized shares of common stock, each with a par value of $5.00, surplus of $[●], and undivided profits, including capital reserves, of $[●], as of [●], 2024, all the issued and outstanding capital stock of which is owned as of the date hereof directly by Southern California Bancorp, a California corporation (“SCB”);
WHEREAS, CBC Bank is a California state-chartered bank with capital of $[●], divided into [●] authorized shares of common stock without par value, surplus of $[●], and undivided profits, including capital reserves, of $[●], as of [●], 2024, all the issued and outstanding capital stock of which is owned as of the date hereof directly by California BanCorp, a California corporation (“CBC”);
WHEREAS, SCB and CBC have entered into an Agreement and Plan of Merger and Reorganization, dated as of January 30, 2024 (the “Holding Company Merger Agreement”), providing for the merger of CBC with and into SCB, with SCB as the surviving corporation, pursuant to the provisions of the California General Corporation Law (the “Holding Company Merger”); and
WHEREAS, contingent upon the Holding Company Merger and promptly following the time at which the Holding Company Merger becomes effective, the parties to this Agreement intend to effect the merger of CBC Bank with and into SCB Bank, with SCB Bank as the surviving institution (the “Bank Merger”), on the terms and subject to the conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and subject to the terms and conditions of the Holding Company Merger Agreement, the parties hereto agree as follows:
Article I
Bank Merger
1.1 Bank Merger. Subject to the terms and conditions of this Agreement, effective as of the Effective Time (as defined below), CBC Bank shall be merged with and into SCB Bank under the charter of SCB Bank in accordance with 12 U.S.C. § 215a, and with the effect provided in 12 U.S.C. § 215a and 12 U.S.C. § 1828(c). At the Effective Time (as defined below), the separate existence of CBC Bank shall cease, and SCB Bank, as the surviving institution (sometimes hereinafter referred to as the “Surviving Association”), shall continue its corporate existence as a national banking association. The name of the Surviving Association shall be “[●]”. The parties hereto intend that the Bank Merger qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”) and this Agreement shall be, and is hereby adopted as, a “plan of reorganization” for purposes of Sections 354 and 361 of the Code.
1.2 Effective Time. The Bank Merger shall become effective promptly following the effective time of the Holding Company Merger at the time specified in the approval of the Bank Merger to be issued by the Comptroller of the Currency of the United States (such date and time being herein referred to as the “Effective Time”).
Article II
Governance Matters
2.1 Articles of Association. At the Effective Time, the articles of association of SCB Bank in effect immediately prior to the Effective Time shall continue to be the articles of incorporation of the Surviving Association until thereafter amended in accordance with the applicable law, provided however, such articles of association shall be amended as of the Effective Time by adoption of an amendment in the form of Exhibit A hereto, such that the name of the Surviving Association shall be “[●]”.
2.2 Bylaws. At the Effective Time, the bylaws of SCB Bank in effect immediately prior to the Effective Time shall continue to be the bylaws of the Surviving Association until thereafter amended in accordance with the applicable law.
2.3 Directors. At the Effective Time, the directors of SCB Bank prior to the Effective Time will continue as the directors of the Surviving Association, until such time as their successors shall be duly elected and qualified.
Article III
Capital Stock
3.1 Effect on CBC Bank Capital Stock. By virtue of the Bank Merger and without any action on the part of the holder of any capital stock of CBC Bank, at the Effective Time, all shares of CBC Bank capital stock issued and outstanding shall be automatically cancelled and retired and shall cease to exist, and no cash, new shares of common stock, or other property shall be delivered in exchange therefor.
3.2 Effect on SCB Bank Capital Stock. Each share of SCB Bank capital stock issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding and unaffected by the Bank Merger, and such shares shall be the only capital stock of the Surviving Association as of the Effective Time
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3.3 Capital of Surviving Association.
(a) The Surviving Association will have total capital of approximately $[●], a surplus of approximately $[●] and undivided profits, including capital reserves, of $[●], which when combined with the capital and surplus will be equal to the combined capital structures of the merging banks as stated above adjusted, however, for normal earnings and expenses (and, if applicable, purchase accounting adjustments) between [●], 2024 and the Effective Time of the Bank Merger.
(b) The Surviving Association’s authorized capital stock will consist of [●] shares of common stock, par value $5.00 per share.
Article IV
Effect of Bank Merger; Branches
4.1 Effect. The effect of the Bank Merger is as prescribed by law. From and after the Effective Time, and in addition to the effects under applicable law, including, without limitation 12 U.S.C. § 215a: (i) all assets and all rights, franchises, and interests of CBC Bank in and to every type of property (including intellectual, real, personal, and mixed), tangible and intangible, and choses in action shall be transferred to and vested in the Surviving Association by virtue of the Bank Merger without any deed or other transfer; (ii) the Surviving Association, without any order or other action on the part of any court or otherwise, shall hold and enjoy all rights of property, franchises, and interests, including appointments, designations, and nominations, and all other rights and interests as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, and receiver, and in every other fiduciary capacity, in the same manner and to the same extent as such rights, franchises, and interests were held or enjoyed by CBC Bank immediately prior to the Effective Time; and (iii) the Surviving Association shall be responsible for all of the liabilities of every kind and description of CBC Bank existing as of the Effective Time.
4.2
Main/Branch Offices. The main office and branch
offices of SCB Bank existing immediately prior to the Effective Time shall continue to be the main office and branch offices, respectively,
of the Surviving Association. The main office of CBC Bank and all branch offices of SCB Bank and CBC Bank that are in lawful operation
immediately prior to the Effective Time shall be the branch offices of the Surviving Association upon consummation of the Bank Merger.
Article V
Representations and Warranties
Each of SCB Bank and CBC Bank hereto represents and warrants to the other that this Agreement (i) has been approved by at least a majority of its board of directors; (ii) has been approved by the affirmative vote of its shareholders owning at least two-thirds of its capital stock; and (iii) has been duly authorized, executed and delivered by such party and constitutes the legal, valid and binding obligation of such party, enforceable against it in accordance with the terms hereof.
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Article VI
Further Documents
If at any time the Surviving Association shall consider or be advised that any further deeds, assignments, conveyances or assurances in law are necessary or desirable to vest, perfect or confirm of record in the Surviving Association the title to any property or rights of the constituent entities, or otherwise to carry out the provisions hereof, the persons who were the proper officers and directors of the constituent entities immediately prior to the Effective Time (or their successors in office) shall execute and deliver any and all proper deeds, assignments, conveyances and assurances in law, and do all things necessary or desirable, to vest, perfect or confirm title to such property or rights in the Surviving Association and otherwise to carry out the provisions hereof.
Article VII
Termination
In the event that the Holding Company Merger Agreement is terminated pursuant to Section 9.01 thereof, this Agreement shall be terminated and the Bank Merger provided for herein shall be abandoned automatically and without any further act or deed by the parties hereto. This Agreement also may be terminated at any time prior to the Effective Time by an instrument executed by each of the parties hereto.
Article VIII
Miscellaneous
8.1 Entire Agreement. This Agreement (including the documents and instruments referred to herein and attached hereto) constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.
8.2 Counterparts. This Agreement may be executed in counterparts (including by facsimile or other electronic means), each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement.
8.3 Governing Law. This Agreement shall be governed by and construed in accordance with the federal laws of the United States, without regard to choice of law principles, except to the extent that the laws of the State of California shall be applicable hereto.
8.4 Assignment. This Agreement shall not be assignable by operation of law or otherwise.
8.5 Amendment. This Agreement may not be amended, except by an instrument in writing signed on behalf of each of the parties hereto.
[Signature follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on their behalf by their respective officers thereunto duly authorized as of the day and year first written above.
BANK OF SOUTHERN CALIFORNIA, NATIONAL ASSOCIATION | ||
| By: | ||
| Name: | ||
| Title: | ||
| CALIFORNIA BANK OF COMMERCE | ||
| By: | ||
| Name: | ||
| Title: | ||
[Signature Page to the Agreement to Merge]
EXHIBIT A to Agreement to Merge
AMENDMENT TO ARTICLES OF association
OF
BANK OF SOUTHERN CALIFORNIA, NATIONAL ASSOCIATION
The Articles of Association of Bank of Southern California, National Association are hereby amended by deleting the Article Frist in its entirety and substituting the following therefor:
“FIRST. The title of this Association shall be [●].”
***
The foregoing amendment was declared advisable and adopted by the Board of Directors of Bank of Southern California, National Association by resolutions duly adopted on [●], 2024, and was subsequently adopted by the Bank’s sole stockholder on [●], 2024. The foregoing amendment was duly adopted in accordance with the applicable provisions of 12 U.S.C. § 21a.
The undersigned hereby executes this Amendment to Articles of Association of Bank of Southern California, National Association, declaring and certifying that the facts stated herein are true, and accordingly have hereunto set my hand this [●] day of [●], 2024
| BANK OF SOUTHERN CALIFORNIA | ||
| By: | ||
| Title: | ||
Exhibit 10.1
Execution Version
EMPLOYMENT AGREEMENT
This Employment Agreement (this “Agreement”) is entered into by and among Southern California Bancorp, a California corporation (“Bancorp”), Bank of Southern California, N.A., a national banking association (the “Bank”, and together with Bancorp, the “Company”), and David I. Rainer (the “Executive”), with reference to the following:
RECITALS
A. WHEREAS, Employee is party to an amended and restated employment agreement with Company dated as of January 18th, 2023 (the “Employment Agreement”);
B. WHEREAS, contemporaneous with, and conditioned upon, the execution of this Agreement, California BanCorp and Southern California Bancorp are entering into an Agreement and Plan of Merger and Reorganization providing for, among other things, the merger of California BanCorp with and into Southern California Bancorp to be immediately followed by California Bank of Commerce being merged with and into Bank of Southern California (collectively, the “Merger”);
C. WHEREAS contingent upon and simultaneous with closing of the Merger (the “Effective Date”), Bank of Southern California (“Employer”) has agreed to extend an offer of employment to Executive pursuant to the terms herein;
NOW, THEREFORE, for and in consideration of the foregoing Recitals, and the mutual covenants, agreements and considerations set forth below, the sufficiency of which are hereby agreed, the parties, intending to be legally bound, agree as follows:
AGREEMENT
A. Term of Employment
The Company hereby agrees to employ Executive and Executive hereby accepts employment with the Company for the period commencing with the Effective Date and terminating on the fourth anniversary of the Effective Date (the “Employment Term”) plus an additional one year period during which Executive shall be employed and serve as “Executive Director” (the “Director Renewal Term” and together with the Employment Term, the “Term”); subject, however, to prior termination of this Agreement and Executive’s employment as provided herein. If the Merger is not consummated for any reason, this Agreement shall be void ab initio and the Company shall have no obligations to Executive hereunder. Notwithstanding the fact that this Agreement is not effective prior to the Effective Date, from and after the date hereof until the closing of the Merger, Executive agrees that he will not resign for any reason and agrees that he shall assist with and support the consummation of the Merger.
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B. Duties of Executive
1. Duties. Subject to the terms and conditions of this Agreement, during the Employment Term, Executive shall serve as Executive Chairman and Chair of the Board of Directors of Bancorp and of the Bank, and shall report directly and exclusively to the Board. References herein to the “Board” are the boards of directors of both the Bancorp and the Bank, as applicable. As Executive Chairman, Executive shall exercise such authority, perform such executive duties and functions, and discharge such responsibilities as are reasonably associated with such position, subject to the powers by law vested in the Board and shareholders of Bancorp. Executive shall be responsible for providing strategic and financial leadership for the Company and may meet with management of the Company on a periodic basis; provided however, that the Chief Executive Officer of the Company shall continue to exercise authority, supervision, and control and shall be responsible for the management of the business of the Company’s day-to-day operations.
Subject to the terms and conditions of this Agreement, during the Director Renewal Term, Executive shall serve as Executive Director, and shall report directly and exclusively to the Board. As Executive Director, Executive duties shall include maintaining and expanding the existing relationships of Bank’s customers and attracting new relationships and prospective customers to the Bank for such services as the Bank may offer from time to time, and providing the Bank with Executive’s skill, knowledge, and experience in the management, operation, and business development in the service areas of the Bank as they are established from time to time.
The duties of Executive may be changed from time to time by the Board without resulting in a rescission of this Agreement; provided, however, that any material change in the duties of Executive shall require the consent of Executive.
2. Faithful Performance. During the Term, Executive shall perform exclusively the services herein contemplated to be performed by Executive faithfully, diligently and to the best of Executive’s ability, consistent with the highest and best standards of the banking industry and in compliance with all applicable laws and Bancorp’s Articles of Incorporation and Bylaws and the Bank’s Articles of Association and Bylaws, as applicable.
3. Code of Ethics. Executive shall conduct himself at all times with due regard to the Company’s Principles of Business Conduct and Ethics Policy (receipt of a copy of which Executive hereby acknowledges) (“Code of Ethics”), and other written employment policies of the Company, as amended by them from time to time.
4. Conflicts of Interests. Executive shall devote substantially all of Executive’s full business time, ability and attention to the business of the Company during the Employment Term. Notwithstanding the foregoing, however, and subject to the Code of Ethics, Executive may pursue other appropriate civic, charitable or religious activities so long as such activities do not interfere with Executive’s performance of his duties hereunder. In addition, subject to the Code of Ethics, Executive shall be permitted to make passive investments in other business ventures provided such investments are not in businesses that compete with the Company and which are fully disclosed to the Board prior to the time of such investment (other than investments representing less than five percent (5.0%) of the securities of publicly-traded companies). Executive shall also be permitted to serve on the board of directors (but not as an officer) of any non-profit entity, subject to prior full disclosure to and approval by the Board. Executive may not serve on the board of directors (or as an officer) of any for-profit entity without the express prior approval of the Board, as determined in its sole discretion.
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5. Board Appointment. At any meeting of shareholders of Bancorp or the sole shareholder of the Bank during the Employment Term at which Executive is subject to election as a member of the Board, the Board shall, to the extent consistent with its fiduciary duties, nominate and recommend for election Executive as a director and shall use its reasonable best efforts to cause Executive to be elected to serve as a director. In addition, during the Director Renewal Term after the Employment Term, Executive shall continue to be a member of the Board of Bancorp and Bank. A failure to nominate, appoint or elect Executive as a member of and as the Executive Chairman of the Board, at any time during the Employment Term and as a member of the Board during the Director Renewal Term under this Agreement, shall constitute a termination without cause under Paragraph F.1. Executive shall fulfill all duties required of a member of the respective Board and any committees without any additional compensation during the Employment Term of this Agreement, with compensation for board and committee service for any remaining periods at the end of the Employment Term established by the Board in the usual course.
C. Compensation
1. Base Salary. For Executive’s services hereunder, during the Employment Term the Bank shall pay or cause to be paid as base salary to Executive the amount of Fifty Five Thousand ($55,000.00) per month, prorated for any partial months of service. Said base salary shall be payable in conformity with the Bank’s normal payroll periods. The Board from time to time may review Executive’s base salary, at its discretion, and Executive shall receive such base salary increases, if any, as the Board in its sole and absolute discretion (or as may be recommended by the Compensation, Nominating, and Governance Committee of the Board (“CNG Committee”), shall determine. Said base salary shall in no event be decreased (unless agreed to by Executive) from the level set forth above or from its then-existing level during the Employment Term. During the Director Renewal Term, Executive’s base salary shall be the greater of $8,333.33 per month or the then current board fees for Bank and Company board members.
2. Discretionary Bonus.
(a) During the Employment Term, Executive may receive such discretionary bonuses, if any, as the Bank’s Board of Directors or the CNG Committee, in its sole and absolute discretion, shall determine, which discretionary bonus may include Executive’s participation in any management incentive plan as may be adopted and implemented by the Board during the Employment Term. Any such discretionary bonus may be payable in cash and/or in the form of an equity grant with or without vesting conditions, in each case as determined by the Bank’s Board of Directors or the CNG Committee in its sole and absolute discretion.
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(b) Subject to any restrictions which may be imposed by any regulatory banking agency with authority over Bancorp or the Bank, Executive (or his heirs) shall be entitled to receive payment of any discretionary bonus if and when approved by the Board or the CNG Committee for the fiscal year in which Executive’s employment is terminated, if terminated pursuant to: (i) Paragraph F.1 by the Company without “Cause” or by Executive for “Good Reason,” as defined is Subparagraph F.5(f); (ii) Paragraph F.3 upon death or disability of Executive; or (iii) Paragraph F.5 upon a “CIC Termination,” as defined in Subparagraph F.5(c), in which case Executive (or his heirs) shall be entitled to receive such discretionary bonus that would be due and payable for such year if the date of determination of such bonus was deemed the date of termination of Executive’s employment and this Agreement; provided the amount of such discretionary bonus shall be prorated for the period of such year actually worked. Any such discretionary bonus shall be paid to Executive (or his heirs), in the form of a lump sum cash payment, on or before the day that is sixty (60) days following the date of Executive’s termination of employment.
3. Equity Compensation Award. Executive shall be entitled to and shall participate in Bancorp’s 2019 Omnibus Equity Plan (the “Plan”). In connection with and as consideration for entering into this Agreement, Executive shall be granted, on or so soon as practicable after the Effective Date, a restricted stock award (the “Award”) for the equivalent of seven hundred fifty thousand dollars ($750,000) of Bancorp common stock. The Award shall be subject to the terms and conditions of the Plan and a separate Restricted Shares Award Agreement by and between the Executive and Bancorp (the “Award Agreement”). The Award will vest in equal shares over a five (5) year period (e.g. 20% vesting each year).
4. Executive’s Reimbursement to the Bank. Executive agrees to be bound the Bancorp’s Clawback Policy dated as of January 23, 2024, as such policy may be amended and/or restated from time to time, and any other clawback or similar policy adopted by the Bancorp or the Bank.
D. Executive Benefits
1. Vacation; Sick Leave. Executive shall be entitled to receive vacation and sick leave as provided under the Company’s or an Affiliate’s vacation or time off policy in effect from time to time.
2. Group Medical and Life Insurance Benefits. The Bank shall provide for Executive’s participation in the Bank’s group medical and life insurance benefits, in accordance with the Bank’s Employee Benefits Policy.
3. Club Membership. During the Term, the Bank shall pay for all monthly dues and reimburse Executive for all reasonable business-related expenses at the Jonathan Club and the El Caballero Country Club.
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4. Automobile Allowance. During the Term, the Bank shall provide Executive with a monthly allowance for automobile ownership or leasing expenses of One Thousand Five Hundred Dollars ($1,500), whether or not used for such expenses. Executive shall acquire or otherwise make available for Executive’s business and personal use an automobile suitable to Executive’s position and maintain it in good condition and repair it at Executive’s expense. Executive shall obtain and maintain an appropriate automobile insurance policy, including personal injury and property damage coverage, with an insurer(s) acceptable to the Company and with coverage in such amounts as may be acceptable to Company from time to time. Such insurance policy shall, if and when requested by the Company, but without any obligation to so request, name the Company as additional insureds, subject to the requirement that the automobile allowance described above shall be increased in an amount equal to the additional premium expense, if any, resulting from the Company being named as additional insureds. The Company may maintain such additional insurance on the automobile including, without limitation, liability for personal injury and property damage, as the Company shall from time to time reasonably require to protect itself against any loss which may arise from Executive’s use of the automobile while working for the Company.
5. Office Space. During the Term, Company shall own or lease office space for Executive within five miles of the Executive’s primary residence. Such Office Space shall be approximately 1,000 square feet.
6. Additional Benefits. Executive shall be entitled to participate in all programs, rights, and benefits for which Executive is otherwise entitled under any bonus plan, incentive plan, participation plan, deferred or extra compensation plan, pension plan, profit sharing plan, savings plan, 401(k) plan, life, medical, dental, other health care, disability, or other insurance plan or policy or other plan or benefit the Bank or its Affiliates may provide for senior executives or for employees of the Bank generally, from time to time, in effect during the Term.
E. Business Expenses and Reimbursement
1. Business Expenses. Executive shall be entitled to reimbursement by the Company for any ordinary and necessary business expenses incurred by Executive in the performance of Executive’s duties and in acting for the Company during the Term, which types of expenditures shall be determined by the Board of Directors of the Company, in their respective capacities, provided that:
(a) Each such expenditure is of a nature qualifying it as a proper deduction on the federal and state income tax returns of the Company as a business expense and not as deductible compensation to Executive;
(b) Executive furnishes to the Company adequate records, including receipts for any expenditures and other documentary evidence required by federal and state statutes and regulations issued by the appropriate taxing authority for the substantiation of such expenditures as deductible business expenses of the Company and not as deductible compensation to Executive; and
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(c) Executive agrees to submit his expense reimbursement requests to the Chief Financial Officer for approval. Executive will be entitled to business expense reimbursement in accordance with the Company’s policies.
2. Reimbursement. Notwithstanding anything contained in Paragraph E.1 to the contrary, Bancorp or the Bank shall reimburse Executive for the fees and expenses in an amount not to exceed five thousand dollars ($5,000) in connection with the negotiation of this Agreement. Payment will be made to Executive within fifteen (15) days of Executive’s submission of applicable invoices.
F. Termination
1. Termination by the Company Without Cause or by Executive. The Company and Executive acknowledge that the Company may terminate Executive’s employment at any time without “Cause” upon thirty (30) days’ written notice of termination to Executive. Similarly, Executive may terminate his employment with the Company at any time, for any reason, upon thirty (30) days’ written notice of termination to the Company, except that termination by Executive for “Good Reason” shall be effected in accordance with Subparagraph F.5(f) below. Except as expressly set forth in this Agreement or required by applicable law, upon termination of Executive’s employment with the Company for any reason, the Company’s obligations to Executive (and/or Executive’s estate) shall terminate.
2. Termination for Cause. The Company may terminate this Agreement and Executive’s employment at any time without further obligation or liability to Executive, by action of the Board, for “Cause” provided that the following notice and opportunity to cure periods have been exhausted. It shall be a condition precedent to the Company’s right to terminate Executive’s employment for Cause that: (1) the Company first give Executive written notice stating with specificity the circumstances constituting Cause (“Breach”), and (2) if such Breach is susceptible of cure or remedy, a period of thirty (30) days from and after the giving of such written notice to cure the Breach. “Cause” is defined as one of the following below. No cure period will be required for the Cause reasons contained in subparts (a)(iii) or (a)(iv) below.
(a) (i) the material breach of duty by Executive in the course of his employment; (ii) Executive’s willful and material violation of any applicable statutes, rules or regulations of any appropriate state or Federal banking agency, as defined in Section 3 of the Federal Deposit Insurance Act (“FDI Act”) (12 USC § 1813); (iii) Executive’s removal and/or permanent prohibition from participating in the conduct of Bancorp or the Bank’s affairs by an order issued under Section 8(e)(3) or 8(g)(1) of the FDI Act (12 U.S.C. § 1818(e)(3) or (g)(1)); (iv) Executive’s conviction of any felony or a crime involving moral turpitude or commission of a fraudulent or dishonest act, including a breach of trust or misappropriation, or if Executive has entered a plea of nolo contendere to such an act or offense; (v) Executive’s willful misfeasance or gross negligence in the performance of his material employment duties; (vi) the repeated non-prescription use of any controlled substance or the repeated use of alcohol or any other non-controlled substance that the Company reasonably determines renders the Executive unfit to serve as an employee of the Company or its Affiliates; or (vii) Executive’s engagement in an activity that could materially and adversely affect the Company’s reputation in the community, which evidences personal dishonesty, immoral behavior, or the lack of Executive’s fitness or ability to perform Executive’s duties, as determined by the Board, in good faith.
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(b) For purposes of this provision, no act or failure to act on the part of Executive shall be considered “willful” unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive’s action or omission was in the best interests of the Company as determined by the Board, in the exercise of its business judgement. Any act, or failure to act, based upon direction given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company. Such termination shall not prejudice any remedy that the Company may have at law, in equity, or under this Agreement. Termination pursuant to this Paragraph F.2 shall become effective after the delivery of the required written notice period and the expiration of the cure period described above, where applicable.
3. Termination upon Death or Disability.
(a) This Agreement shall terminate upon Executive’s death.
(b) The Company may terminate this Agreement and Executive’s employment at any time, if Executive is determined by the Board, in good faith and consistent with applicable law, to be physically or mentally incapable of performing Executive’s material duties under this Agreement, with or without reasonable accommodation, for a period of at least one hundred twenty (120) consecutive days or one hundred eighty (180) days within any twelve (12) month period.
4. Action by Supervisory Authority. This Agreement and Executive’s employment shall terminate immediately without further liability or obligation to Executive:
(a) If the Bank is closed or taken over by the Office of the Comptroller of the Currency or other supervisory authority, including the Board of Governors of the Federal Reserve System; or
(b) If any such supervisory authority should exercise its statutory cease and desist powers to remove Executive from office.
5. Effect of Termination.
(a) In the event of termination of this Agreement and Executive’s employment prior to the completion of the Term for any of the reasons specified in Paragraphs F.1 through F.4, Executive shall be entitled to the salary and other benefits earned by Executive prior to the date of termination as provided for in this Agreement, computed pro rata up to and including that date, Executive’s discretionary bonus, if any, subject to the provisions of Subparagraph C.2(b), and accrued but unused vacation; but Executive shall be entitled to no further salary after the date of termination.
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(b) In the event the Company elects to terminate this Agreement and Executive’s employment without Cause, or in the event Executive elects to terminate this Agreement for Good Reason, in each case pursuant to the provisions of Paragraph F.1, then in addition to the items in Subparagraph F.5(a), Executive shall be entitled to:
(i) severance compensation equal to twelve (12) months’ then current base salary, payable in a lump sum on the sixtieth (60th) day after the date of Executive’s termination of employment; and
(ii) for the period beginning on the date of Executive’s termination of employment and ending on the date which is twelve (12) full months following the date of Executive’s termination of employment (or, if earlier, (1) the date on which the applicable continuation period under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) expires or (2) the date Executive becomes eligible to receive the equivalent or increased healthcare coverage from a subsequent employer) (such period, the “COBRA Coverage Period”), the Bank, at Bank’s cost, shall provide Executive and/or his covered dependents who were covered under the Bank’s health plans as of the date of Executive’s termination of employment, as applicable, with continuation coverage under the Bank’s health plans (including, if applicable, pursuant to COBRA) for Executive and/or such eligible dependents. If any of the Bank’s health benefits are self-funded as of the date of Executive’s termination of employment, or if the Bank cannot provide the foregoing benefits in a manner that is exempt from Section 409A (as defined below) or that is otherwise compliant with applicable law (including, without limitation, Section 2716 of the Public Health Service Act), instead of providing the continuation of coverage as set forth above, the Bank shall instead pay to Executive the monthly COBRA premium payable by Executive as a taxable monthly payment for the COBRA Coverage Period (or any remaining portion thereof) (calculated by reference to the premium in effect as of the date of termination). After the expiration of the COBRA Coverage Period, Executive will be entitled to self-pay COBRA continuation benefits for as long as legally available.
(c) Notwithstanding anything to the contrary contained in Subparagraph F.5(b) above, in the event of a CIC Termination (as defined below), then in addition to the items in Subparagraph F.5(a), and in lieu of any further salary and bonus payments or severance or other payments that would otherwise be due to Executive under this Agreement or otherwise for periods subsequent to the Vesting Date (as defined below), Executive shall be entitled to:
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(i) severance compensation equal to the sum of (x) thirty-six (36) months’ then current base salary, plus (y) three (3) times the average of the aggregate annual bonus, if any, paid or payable to Executive for each of the three (3) full calendar years preceding the calendar year in which Executive’s termination of employment occurs (or such fewer number of fiscal years for which Executive was eligible to receive a bonus and/or incentive award); provided, however, that if any portion of the aggregate annual bonus is received by Executive in the form of an equity grant, the amount of such bonus shall be determined using the fair market value of such equity grant as of the grant date, with such amount payable in a lump sum on the sixtieth (60th) day after the Vesting Date, provided that if such termination occurs prior to the date of consummation of Change in Control, the portion of such payments which would have been payable under Section F.5(b) if such termination was not a CIC Termination, instead be paid at the same time as it would have been paid under Section F.5(b) and the remainder shall be paid on the sixtieth (60th) day after the Vesting Date; provided, however, during the Director Renewal Term the salary and bonus used for the calculations shall refer to base salary for the last year of the Employment Term and bonus paid during the last three (3) years of the Employment Term;
(ii) (A) an amount equal to the COBRA premium payable by Executive for himself and/or his covered dependents (calculated by reference to the premium as in effect on the date of termination) for a period of six (6) months, payable in a lump sum on the sixtieth (60th) day after the date of Executive’s termination of employment; and (B) the COBRA Coverage Period shall be increased to the earlier of: (x) eighteen (18) months following the date of termination or (y) as long as legally available (but in no event shall Bancorp or the Bank be obligated to pay any insurance premiums for the COBRA or other health insurance coverage for Executive and/or his covered dependents from and after the date of termination); and.
(iii) Unless such equity awards by their terms expire upon consummation of a Change in Control (e.g., because performance with respect to such equity awards is measured on the date of the Change in Control and was not met), all outstanding equity incentive awards granted to the Executive prior to the Change in Control will vest (with performance-vesting awards vesting at target) (provided, that this provision should not apply to any equity awards that are issuable under any annual bonus plan or agreement to the extent such termination occurs prior to the determination of the amount of the applicable annual performance under such bonus plan or agreement).
For purposes of this Agreement, a “CIC Termination” means (i) the termination of Executive’s employment, due to either termination by the Company without Cause or by Executive for Good Reason and (ii) Executive’s last day of employment occurs on or after the initial public announcement by the Company of an intended or anticipated Change in Control (provided that such Change in Control actually is consummated) and before the first anniversary of the Change in Control; provided, however, during the Director Renewal Term a CIC Termination will be deemed to occur upon the consummation of a Change in Control provided the initial public announcement by the Company of an intended or anticipated Change in Control occurs during such Director Renewal Term and regardless of whether Executive’s employment is terminated or not; and “Vesting Date” means the later to occur of the CIC Termination or the Change in Control.
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(d) In the event Executive elects to terminate this Agreement and Executive’s employment other than for Good Reason or the Company terminates this Agreement and Executive’s employment for Cause, Executive shall not be entitled to any severance compensation, or continuation of Executive’s group medical insurance or any other benefits except as required by law. For purposes of this Agreement, “Affiliate” shall mean any partnership, firm, corporation, association, joint-stock company, unincorporated association, or other entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Company, including any member of an affiliated group of which the Company is a common parent corporation as provided in Section 1504 of the Internal Code of 1986, as amended (the “Code”).
(e) For purposes of this Agreement, a “Change in Control” shall mean the occurrence of any of the following events with respect to Bancorp or the Bank: (i) a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); (ii) any merger, consolidation or reorganization of Bancorp or the Bank in which Bancorp or the Bank does not survive; except for purposes of this clause (ii) the following shall not constitute a change in control: a merger, consolidation or reorganization where the beneficial owners, directly or indirectly, of securities of Bancorp or the Bank, representing more than fifty percent (50.0%) of the combined voting power of Bancorp’s or the Bank’s then outstanding securities, remain as the beneficial owners, directly or indirectly, of at least fifty percent (50.0%) of the combined voting power of the surviving corporation; (iii) any sale, lease, exchange, mortgage, pledge, transfer, or other disposition (in one transaction or a series of transactions) of any assets of Bancorp or the Bank having an aggregate fair market value of fifty percent (50.0%) or more of the total value of assets of Bancorp or the Bank, reflected in the most recent month end balance sheet; (iv) an acquisition whereby any “person” (as such term is used in the Exchange Act or any individual, corporation, partnership, trust, or any other entity, except for Executive) is or becomes the beneficial owner, directly or indirectly, of securities of Bancorp or the Bank representing more than fifty percent (50.0%) of the combined voting power of the then outstanding securities; except for purposes of this clause (iv) the following acquisition shall not constitute a change in control: (1) any acquisition directly from Bancorp; (2) any acquisition by Bancorp; or (3) any acquisition by any employee benefit plan sponsored or maintained by Bancorp or the Bank; (v) if in any one year period, individuals who at the beginning of such period constitute the Board of Directors of Bancorp cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by Bancorp’s shareholders, of each new director is approved by a vote of at least three-quarters of the directors then still in office who were directors at the beginning of the period; or (vi) a majority of the members of the Board of Directors of Bancorp in office prior to the happening of any event determines in its sole discretion that as a result of such event there has been a change in control. Notwithstanding the foregoing, to the extent required by Section 409A of the Code, if a Change in Control would give rise to a payment or settlement event with respect to any payment or benefit hereunder that constitutes “nonqualified deferred compensation,” the transaction or event constituting the Change in Control must also constitute a “change in control event” (as defined in Treasury Regulation §1.409A-3(i)(5)) in order to give rise to the payment or benefit, to the extent required by Section 409A.
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(f) For purposes of this Agreement, “Good Reason” shall mean that, without Executive’s consent, there occurs: (i) a loss of Executive’s title or material diminution in Executive’s authority, duties, or responsibilities; (ii) a material diminution in Executive’s base compensation (for this purpose, a reduction of five percent (5.0%) or more shall constitute a material diminution); (iii) a material diminution in the authority, duties or responsibilities of the supervisor to whom Executive is required to report (i.e., other than to the Board; (iv) a material change in the geographic location at which Executive must perform services, it being acknowledged and agreed by Executive, and the Company, that in the performance of Executive’s duties for the Company, Executive will be working out of offices located in California as well as the branch and/or loan production offices of the Company wherever located and that all such activity shall not be deemed a material change in the geographic location at which Executive must perform services; or (v) any other action or inaction that constitutes a material breach by the Company of the terms of this Agreement. Notwithstanding the foregoing, “Good Reason” shall only exist if Executive shall have provided the Board with written notice within ninety (90) days of the initial occurrence of any of the foregoing events or conditions which specifically identifies the circumstances constituting Good Reason (provided such circumstances are capable of correction), and the Company, fails to eliminate the conditions constituting Good Reason within thirty (30) days after receipt of written notice of such event or condition from Executive. Executive’s resignation from employment with the Company must occur within thirty (30) days following the expiration of the foregoing cure period, upon Executive’s notice of resignation.
(g) Section 280G Excess Parachute Payments.
(i) If all or any amount paid to Executive by the Bank (or any subsidiary or Affiliate thereof), whether under this Agreement or otherwise (all such payments and benefits being hereinafter referred to as the “Total Payments”), otherwise would be subject to any tax under Section 4999 of the Code, or any similar federal or state law (an “Excise Tax”), then the Total Payments shall be reduced to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (A) the net amount of such Total Payments, as so reduced (after subtracting the amount of federal, state and local income taxes on such reduced Total Payments) is greater than or equal to (B) the net amount of such Total Payments without such reduction (after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Executive would be subject in respect of such unreduced Total Payments). The Total Payments shall be reduced in the following order: (1) reduction of any cash severance payments otherwise payable to Executive that are exempt from Section 409A of the Code, (2) reduction of any other cash payments or benefits otherwise payable to Executive that are exempt from Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting or payment with respect to any equity award with respect to Bancorp’s common stock that is exempt from Section 409A of the Code, (3) reduction of any other payments or benefits otherwise payable to Executive on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting and payment with respect to any equity award with respect to Bancorp’s common stock that is exempt from Section 409A of the Code, and (4) reduction of any payments attributable to the acceleration of vesting or payment with respect to any equity award with respect to Bancorp’s common stock that is exempt from Section 409A of the Code. The foregoing reductions shall be made in a manner that results in the maximum economic benefit to Executive and, to the extent economically equivalent, in a pro rata manner.
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(ii) For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the written opinion of an accounting firm or compensation consulting firm with nationally recognized standing and substantial expertise and experience on Section 280G matters (the “280G Firm”) selected by the Bank, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of the 280G Firm, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the Base Amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the 280G Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
(iii) The 280G Firm will be directed to submit its determination and detailed supporting calculations to both Executive and the Bank within fifteen (15) days after notification from either the Company on the one hand or Executive on the other hand that Executive may receive payments which may be “parachute payments.” Executive and the Company will each provide the 280G Firm access to and copies of any books, records, and documents in their possession as may be reasonably requested by the 280G Firm, and otherwise cooperate with the 280G Firm in connection with the preparation and issuance of the determinations and calculations contemplated by this letter agreement. The fees and expenses of the 280G Firm for its services in connection with the determinations and calculations contemplated by this letter agreement will be borne by the Company. Upon request of Executive, the Company will provide Executive with sufficient tax and compensation data to enable Executive or his tax advisor to independently make the calculations described in Subparagraph F.5(g)(i) above, and the Company, will reimburse Executive for reasonable fees and expenses incurred for any such verification.
(iv) If Executive provides written notice to the Company of any objection to the results of the 280G Firm’s calculations within sixty (60) days after Executive’s receipt of written notice thereof, the Company will refer that dispute for determination to tax counsel selected by the independent auditors of Bancorp or the Bank, and Bancorp or the Bank, as applicable, will pay all fees and expenses of that tax counsel.
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6. Restriction on Timing of Distributions. In the event that Code Section 409A applies to any compensation with respect to Executive’s “separation from service,” as defined in Treasury Regulation Section 1.409A-1(h) (“Separation from Service”), payment of that compensation shall be delayed if Executive is a “specified employee,” as defined in Section 409A(a)(2)(B)(i), and such delayed payment is required by Section 409A. Such delay shall last six (6) months from the date of Separation from Service (or as required by Section 409A). On the day following the end of such six (6)-month period, the Bank shall make a catch-up payment to Executive equal to the total amount of such payments that would have been made during the six (6)-month period but for this Paragraph F.6.
7. Mitigation. Executive shall not be required to mitigate severance compensation due to Executive pursuant to the provisions of Subparagraph F.5(b) or (c), as applicable, by seeking employment or otherwise.
8. Resignation from Board of Directors. In the event Executive’s employment is terminated in accordance with this Agreement or Executive resigns as Executive Chairman of the Company or otherwise becomes unaffiliated with the Company, Executive shall, and does hereby agree to, tender his written resignation from the Board effective on the date of termination, resignation or non-affiliation.
9. Release of All Claims. As a condition for receiving any severance payments or benefits under Paragraph F.5 of this Agreement, Executive hereby agrees to execute a full and complete release of any and all claims against the Company and its officers, agents, directors, attorneys, insurers, employees and successors in interest arising from or in any way related to Executive’s employment with the Company or the termination thereof, in a form reasonably acceptable to the Bank substantially similar to Exhibit A attached hereto (the “Release Agreement”). In the event the Release Agreement does not become effective within the fifty-five (55) day period following the date of Executive’s termination of employment, Executive shall not be entitled to the aforesaid severance payments and benefits. To the extent any severance payments or benefits are deferred compensation under Section 409A of the Code, and are not otherwise exempt from the application of Section 409A of the Code, then, if the period during which Executive may consider and sign the Release Agreement spans two calendar years, the payment of severance or benefits will not be made or begin until the later calendar year.
G. General Provisions
1. Trade Secrets.
(a) Executive agrees that, during the Term, Executive will have access to, and become acquainted with, confidential, trade secret, and proprietary information concerning the Company, which may include information on its operations and business, the identity of its customers, including knowledge of their financial condition and financial needs, as well as such customers’ methods of doing business. Executive will not use or disclose any of such trade secrets, proprietary, or confidential information during the Term or for a period of two (2) years thereafter, without the Company’s prior written consent; provided, however, that non-public information about the customers, whether characterized as consumer information or customer information, as all such terms are defined in the Interagency Guidelines Establishing Information Security Standards implementing Section 501(b) of the Gramm-Leach-Bliley Act and Section 628 of the Fair Credit Reporting Act, as amended, shall be kept confidential for an unlimited period of time. This limitation shall not apply to information, which is or becomes public, or in the public domain, without the fault of Executive, is or becomes available to Executive or his representatives on a non-confidential basis from a person other than the Company.
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(b) In accordance with 18 U.S.C. § 1833, the Bank hereby notifies Executive that, notwithstanding anything to the contrary herein:
(i) Executive shall not be in breach of this Agreement, and shall not be held criminally or civilly liable under any Federal or State trade secret law (A) for the disclosure of a trade secret that is made in confidence to a Federal, State, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (B) for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
(ii) If Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Executive may disclose the trade secret to Executive’s attorney, and may use the trade secret information in the court proceeding, if Executive files any document containing the trade secret under seal, and does not disclose the trade secret, except pursuant to court order.
2. Employee Proprietary and Confidential Information. In consideration of the Company entering into this Agreement and in accordance with its policies and procedures, Executive, as of the Effective Date, is acknowledging receipt of and is agreeing to comply with and be bound by the terms and conditions of that certain Employee Proprietary and Confidential Information and Assignment of Employee Inventions Agreement, as it may be amended, modified or revised by Bank from time to time.
3. Return of Documents. Executive expressly agrees that all manuals, documents, files, reports, studies, instruments or other materials used and/or developed by Executive during Executive’s employment with the Company, are solely the property of the Company, as applicable, and that Executive has no right, title or interest therein. Upon termination of Executive’s employment, Executive or Executive’s representative shall promptly deliver possession of all said property to the Bank in good condition without retaining any copies thereof.
4. Notices. Any notice, request, demand or other communication required or permitted hereunder shall be in writing and shall be deemed to be properly given when personally delivered or sent by facsimile, provided that the facsimile contains a notation of the date and time of transmission, or when delivered by overnight courier, with a receipt obtained therefor, or three (3) business days after mailed by United States certified or registered mail, return receipt requested and postage prepaid, addressed to the Company at the address appearing at the beginning of this Agreement or to Executive at his most recent address in the Bank’s personnel records. Any party may change his or its address by written notice in accordance with this Paragraph G.4.
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5. Benefit of Agreement. This Agreement may be assigned or transferred to and shall be binding upon and shall inure to the benefit of, any successor, subsidiary, or Affiliate the Company, and any such successor, subsidiary, or Affiliate of Bancorp or the Bank shall be deemed substituted for all purposes for “Bancorp” or “the Bank” under the terms of this Agreement. As used in this Agreement, the term “successor” shall mean any person, firm, corporation, or business entity which at any time, whether by merger, purchase, or otherwise, acquires all or substantially all the assets, stock, or business of Bancorp and/or the Bank. Executive acknowledges that Bancorp and/or the Bank has/have the right to sell, assign, or otherwise transfer any portion or substantially all or all of the capital stock, assets, or business of Bancorp or the Bank and that any such sale, assignment, or transfer shall not be deemed to be a termination of the employment of Executive. Executive shall not assign or transfer this Agreement or any rights or obligations pursuant to this Agreement, wholly or partially, without the consent of Bancorp and the Bank, other than by will or the laws of descent and distribution.
6. Governing Law and Venue. The laws of the State of California, other than those laws denominated as choice of law rules, shall govern the validity, construction, and effect of this Agreement. Any action which may be brought under this Agreement shall be brought in the Courts of the State of California in the County in which Executive then resides.
7. Captions and Paragraph Headings. Captions and paragraph headings used herein are for convenience only and are not a part of this Agreement and shall not be used in construing it.
8. Invalid Provisions. Should any provisions of this Agreement for any reason be declared invalid, void, or unenforceable by a court of competent jurisdiction, the validity and binding effect of any remaining portion shall not be affected, and the remaining portions of this Agreement shall remain in full force and effect as if this Agreement had been executed with said provision eliminated.
9. Arbitration. Any dispute, controversy or claim arising out of or relating to this Agreement (or its validity, interpretation or enforcement), the employment relationship or the subject matter hereof shall, at the request of either party, be settled by binding arbitration by JAMS in the county in which Executive is residing at the time of the dispute, in accordance with the then existing JAMS Arbitration Rules and Procedures for Employment Disputes (the “Rules”). The Rules can be found online at www.jamsadr.org. In the event of such an arbitration proceeding, Executive on the one hand and Bancorp and the Bank on the other hand shall select a mutually acceptable neutral arbitrator from among JAMS panel of arbitrators. In the event Executive, Bancorp and the Bank cannot agree on an arbitrator, the Administrator of JAMS’ will appoint an arbitrator. None of Executive, Bancorp, the Bank or the arbitrator shall disclose the existence, content, or results of any arbitration hereunder without the prior written consent of all parties. The arbitration of such issues, including the determination of any amounts of damages suffered, shall be final and binding upon the parties to the maximum extent permitted by law. Any such judgement shall be subject to full appellate review by a court of law. The parties shall have rights to discovery as provided in Section 1283.05 of the California Code of Civil Procedure, including without limitation Section 1283.1 thereof. The arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the State of California, or federal law, or both, as applicable, and the arbitrator is without jurisdiction to apply any different substantive law. The arbitrator shall render an award and a written, reasoned opinion in support thereof. Judgment upon the award may be entered in any court having jurisdiction thereof. The parties shall each bear their own costs and attorneys’ fees incurred in conducting the arbitration and, except with respect to disputes where Executive asserts a claim under a state or federal statute prohibiting discrimination, harassment or retaliation in employment, a violation of public policy, the failure to pay wages or unless required otherwise by applicable law (collectively referred to as a “Statutory Claim”), shall split equally the fees and administrative costs charged by the arbitrator and the applicable arbitration service. In disputes where Executive asserts a Statutory Claim against Bancorp or the Bank, or where otherwise required by law, Executive shall be required to pay only the applicable arbitration service filing fee to the extent such filing fee does not exceed the fee to file a complaint in state or federal court. Bancorp and the Bank shall pay the balance of the arbitrator’s fees and administrative costs. To the extent permissible under applicable law, however, and following the arbitrator’s ruling on the matter, the arbitrator may rule that the arbitrator’s fees and costs be distributed in an alternative manner, which in the case of a Statutory Claim shall be permitted only to the extent that such fee or cost award is permitted by the underlying statute upon which the Statutory Claim is based. In any arbitration brought under this Section, and only to the extent permissible under applicable law, including the law upon which the claim is based, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and costs. The arbitrator shall apply the same standard with respect to the awarding of fees and costs, including whether such award is permitted, and against which party, as would be awarded if such claim had been asserted in state or federal court. This Paragraph G.9 is intended to be the exclusive method for resolving any and all claims by the parties against each other related to any disagreement, dispute, controversy or claim arising out of or relating to this Agreement or the interpretation of this Agreement or any arrangements relating to this Agreement or contemplated in this Agreement or the breach, termination or invalidity thereof; provided, however, that Executive shall retain the right to file administrative charges with or seek relief through any government agency of competent jurisdiction, and to participate in any government investigation, including but not limited to (a) claims for workers’ compensation, state disability insurance or unemployment insurance; (b) claims for unpaid wages or waiting time penalties brought before the California Division of Labor Standards Enforcement; provided, however, that any appeal from an award or from denial of an award of wages and/or waiting time penalties shall be arbitrated pursuant to the terms of this Paragraph G.9; and (c) claims for administrative relief from the United States Equal Employment Opportunity Commission and/or the California Department of Fair Employment and Housing (or any similar agency in any applicable jurisdiction other than California). Notwithstanding the foregoing, this Paragraph G.9 shall not limit any party’s right to obtain any provisional remedy, including, without limitation, injunctive or similar relief, from any court of competent jurisdiction as may be necessary to protect their rights and interests pending the outcome of arbitration, including without limitation injunctive relief, in any court of competent jurisdiction pursuant to California Code of Civil Procedure § 1281.8 or any similar statute of an applicable jurisdiction, including, without limitation, Bancorp’s and the Bank’s rights to enforce Executive’s obligations under this Agreement to the extent the Bancorp and the Bank is entitled to seek specific performance thereunder. Seeking any such relief shall not be deemed to be a waiver of such party’s right to compel arbitration. Each of Executive and the Bank hereby expressly waive their right to a jury trial.
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10. Entire Agreement. Except for stock option agreements, restricted stock agreements, and participation in other compensation, bonus, supplemental executive retirement agreement, salary continuation or severance plans and agreements or benefit arrangements which may be entered into by and between Bancorp, the Bank and Executive, employment and operating policies of Bancorp and/ the Bank and the Employee Proprietary and Confidential Information and Assignment or Employee Invention Agreement as it may be amended, modified or revised from time to time, this Agreement contains the entire agreement of the parties and supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to the employment of Executive by Bancorp and the Bank. Each party to this Agreement acknowledges that no representations, inducements, promises, or agreements, oral or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied herein, and that no other agreement, statement, or promise not contained in this Agreement, or in any stock option agreement or other compensation, bonus, supplemental executive retirement agreement, salary continuation or severance agreement or benefit arrangement, shall be valid or binding.
11. Amendments and Waivers. This Agreement may not be modified or amended by oral agreement, but only by an agreement in writing signed by Bancorp, the Bank and Executive. Any waiver of any provision of this Agreement shall be effective only if in writing and signed by the parties hereto. Any waiver of a breach of any provision hereof shall not operate as or be construed as a waiver of any subsequent breach of the same provision or any other provision hereof.
12. Interpretation. If any claim is made by any party hereto relating to any conflict, omission or ambiguity of this Agreement, no presumption or burden of proof or persuasion shall be implied by reason of the fact that this Agreement was prepared by or at the request of any particular party hereto or such party’s counsel.
13. Executive Acknowledgment. Executive acknowledges that he has had the opportunity to consult legal counsel in regard to this Agreement, that he has read and understands this Agreement, that he is fully aware of its legal effect, and that he has entered into it freely and voluntarily and based on his own judgment and not on any representations or promises other than those contained in this Agreement.
14. Counterparts. This Agreement may be executed in one or more counterparts, any of which may be executed and transmitted by facsimile or electronic transmission or other electronic method, and each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
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15. Section 409A of the Code. Notwithstanding anything contained in this Agreement to the contrary, to the maximum extent permitted by applicable law, amounts payable to Executive pursuant to this Agreement shall be made in reliance upon Treas. Reg. Section 1.409A-1(b)(9) (Separation Pay Plans) or Treas. Reg. Section 1.409A-1(b)(4) (Short-Term Deferrals). This Agreement is intended to be written, administered, interpreted and construed in a manner such that no payment or benefits provided under the Agreement become subject to (a) the gross income inclusion set forth within Code Section 409A(a)(1)(A) or (b) the interest and additional tax set forth within Code Section 409A(a)(1)(B) (together, referred to herein as the “Section 409A Penalties”), including, where appropriate, the construction of defined terms to have meanings that would not cause the imposition of Section 409A Penalties. To the extent that any amount payable to Executive pursuant to this Agreement is subject to Section 409A of the Code, and Executive or the Bank reasonably believes, at any time, that such amount payable does not comply with Section 409A of the Code, it will promptly advise the other and each party hereby agrees to negotiate reasonably and in good faith to amend the terms of this Agreement such that it so complies. For purposes of this Agreement, all references to Executive’s “termination of employment” shall mean Executive’s Separation from Service. For purposes of Section 409A of the Code (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), each payment that Executive may be eligible to receive under this Agreement shall be treated as a separate and distinct payment. Notwithstanding anything to the contrary in this Agreement, in-kind benefits and reimbursements provided under this Agreement during any tax year of Executive shall not affect in-kind benefits or reimbursements to be provided in any other tax year of Executive and are not subject to liquidation or exchange for another benefit. Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by Executive and, if timely submitted, reimbursement payments shall be made to Executive as soon as administratively practicable following such submission, but in no event later than the last day of Executive’s taxable year following the taxable year in which the expense was incurred. In no event shall Executive be entitled to any reimbursement payments after the last day of Executive’s taxable year following the taxable year in which the expense was incurred. This section shall only apply to in-kind benefits and reimbursements that would result in taxable compensation income to Executive.
Signature page immediately follows
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In Witness Whereof, the parties hereto have executed this Agreement as of the day and year first above written.
| DAVID I. RAINER | SOUTHERN CALIFORNIA BANCORP | ||
| By: | /s/ Irwin Golds | ||
| /s/ David I. Rainer | Name: | Irwin Golds | |
| Title: | Lead Director | ||
| BANK OF SOUTHERN CALIFORNIA, N.A. | |||
| By: | /s/ Irwin Golds | ||
| Name: | Irwin Golds | ||
| Title: | Lead Director | ||
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EXHIBIT A
RELEASE AGREEMENT
This RELEASE AGREEMENT (the “Agreement”), is entered into and effective by and among Southern California Bancorp, a California corporation (“Bancorp”), Bank of Southern California, N.A., a national banking association (the “Bank”) and ____________________, an individual resident of the state of California (the “Executive”), with reference to the following:
RECITALS
WHEREAS, Executive, Bancorp and the Bank entered into an Employment Agreement effective as of ______________________ (the “Employment Agreement”); and
WHEREAS, the Executive acknowledges that Executive will receive a [Payment or Severance Payment] as defined in the Employment Agreement under certain conditions;
NOW, THEREFORE, in consideration of these Recitals and the mutual promises, agreements, and covenants contained herein, and for good and valuable consideration, the receipt and sufficiency of which are expressly acknowledged, Executive, Bancorp and the Bank agree as follows:
AGREEMENT
1. Release and Waiver
a. In full consideration for the [Payment or Severance Payment] (as that term is defined in the Employment Agreement), Executive hereby knowingly and voluntarily, fully and finally releases, acquits, and forever discharges Bancorp and the Bank and their respective parent, subsidiaries and affiliated corporations, and each of their respective present and future officers, directors, members, shareholders, employees, agents, consultants, insurance companies, and attorneys, and the successors or assigns of said persons and entities (the “Released Parties”), from any and all claims, charges, complaints, causes of action, obligations, promises, agreements, controversies, liens, demands, attorneys’ fees, damages and liabilities of any nature, whatsoever, known or unknown, suspected or unsuspected, which Executive or Executive’s executors, administrators, successors or assigns ever had, now have, or may hereafter claim to have against any of the Released Parties from the beginning of time through the date the Executive executes this Agreement (the “Claims”) including, without limitation, any Claims associated with Executive’s employment with Bancorp and the Bank, and to the fullest extent permitted by law.
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b. Executive’s general release specifically extends to, without limitation, Claims for wrongful termination, discrimination, retaliation, impairment of ability to compete in the open labor market, breach of an express or implied contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, fraud, misrepresentation, defamation, slander, infliction of emotional distress, disputed wages and related penalties, loss of future earnings, and any Claims under the California constitution, the United States Constitution, or applicable state and federal fair employment laws, federal equal employment opportunity laws, and federal and state labor statutes and regulations, including, without limitation, the Age Discrimination in Employment Act (42 U.S.C. § 621-634) (age discrimination), as amended, the Civil Rights Act of 1964, as amended, , the Americans With Disabilities Act of 1990, as amended, the Rehabilitation Act of 1973, as amended, the Family Medical Leave Act of 1993, as amended, the Executive Retirement Income Security Act of 1967, as amended, the California Fair Employment and Housing Act, as amended, the California Family Rights Act, as amended, the California Whistleblower Protection Act, as amended, California Labor Code section 6310 et seq., and Claims pursuant to any other local, state and federal laws and regulations relating to employment to the fullest extent permitted by law.
c. The only Claims that are not being released by Executive are: (i) Executive’s right, if any, to COBRA health benefits; (ii) vested rights Executive has with respect to any benefit or equity or stock plan or agreement, including, without limitation, the Bank’s 401(k) Plan; (iii) Executive’s rights to indemnification for work for Bancorp and the Bank; (iv) Executive’s coverage under the Bank’s insurance policies, including, without limitation, Directors and Officers Insurance; (v) social security, unemployment, and/or state disability insurance benefits pursuant to the terms of applicable law; (vi) rights Executive may have under the Age Discrimination in Employment Act which arise after the date Executive signs and dates this Agreement; (vii) Claims for events/acts after this Agreement is executed; (viii) workers’ compensation insurance benefits under the terms of any workers’ compensation insurance policy of the Bank; or (ix) any other rights or Claims which are not subject to waiver or are not subject to an unsupervised waiver as a matter of law. Moreover, this Agreement does not limit any party’s right, where applicable, to file a complaint or charge with or participate in any investigative proceeding of any federal, state, or local governmental agency. Notwithstanding the foregoing, Executive agrees and hereby waives Executive’s right to recover monetary damages in such proceeding and in no event shall Executive be entitled to receive a payment as a result of any proceeding initiated by or on Executive’s behalf with respect to the Claims released herein. Additionally, this Agreement does not limit any party from instituting legal action for the purpose of enforcing this Agreement. Finally, this Agreement shall not preclude Executive from bringing a charge or suit to challenge the validity or enforceability of this Agreement under the Age Discrimination in Employment Act as amended by the Older Workers Benefit Protection Act.
d. Executive expressly waives all rights afforded by Section 1542 of the Civil Code of the State of California (“Section 1542”) with respect to the Released Parties. Section 1542 states as follows:
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.”
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e. Notwithstanding the provisions of Section 1542, and for the purpose of implementing a full and complete release, Executive understands and agrees that this Agreement is intended to include and does include all Claims if any, which Executive may have and which Executive does not now know or suspect to exist in Executive’s favor against the Released Parties, and this Agreement extinguishes those Claims.
f. Executive acknowledges and agrees that, except for any legal action to determine the validity of the Age Discrimination in Employment Act release provisions of this Agreement, this Agreement may be pled as a complete bar to any action or suit before any court or adjudicative body or tribunal with respect to any of the released Claims. Executive further represents and agrees that Executive has not commenced or joined in any litigation, claim, charge, action, demand, grievance, administrative proceeding, arbitration or other legal proceeding against the Released Parties arising out of or relating in any way to the Claims released by this Agreement.
g. To the extent that Executive is identified as a putative or actual member of a class action or a representative, collective, or multi-party action seeking recovery based on one or more released Claims, Executive must opt-out of the class action lawsuit when first given an opportunity to do so and/or must otherwise decline to participate in a representative, collective, or multi-party action.
h. Executive acknowledges that before signing this Agreement, Executive is advised to and has been encouraged by Bancorp and the Bank to consult with an attorney about this Agreement’s terms, and Executive understands that whether or not to do so is Executive’s sole decision. If Executive does consult an attorney, Executive agrees to pay attorneys’ fees and costs, if any, arising out of or in connection with this Agreement or its subject matter.
i. By signing this Agreement, Executive is knowingly and voluntarily releasing and waiving any rights or Claims Executive has or may have of discrimination under the Age Discrimination in Employment Act in exchange for the Payment or Severance Payments described above, to which Executive would not otherwise be entitled.
2. Review Period
Executive has twenty-one (21) days from receipt of this Agreement to consider the waiver of any Claims Executive has or may have under law, including any rights under the Age Discrimination in Employment Act. Although the deadline for signing and dating this Agreement is twenty-one (21) days from the date of receipt, Executive may sign, date, and return the Agreement sooner. The Executive has seven (7) days from the date this Agreement is signed to revoke Executive’s signature. Any payment which is due will not be made until after the seven (7) day period has expired without revocation by Executive and then only in accordance with the terms of the Employment Agreement.
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3. Non-Admission of Liability
Nothing in this Agreement shall be construed as an admission of liability by any party; rather, Bancorp, the Bank and Executive are resolving all outstanding matters between them and Bancorp and the Bank specifically deny any wrongdoing in connection with Executive’s employment.
4. Governing Law
This Agreement shall be governed by and construed and enforced pursuant to the laws of the State of California, without regard to its conflict of laws rules.
5. Counterparts, Electronic Signatures, and Use of Copies in Lieu of Originals
This Agreement may be executed in two or more counterparts, either by original signature or electronic signature, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. The parties also agree that, so long as all of the parties execute this Agreement, copies of this Agreement, including photocopies or facsimile copies (including copies generated by scanning this Agreement to a portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document), including signed counterparts, shall be deemed to constitute an original and may be used in lieu of an original for any purpose, and shall be fully enforceable against a signing party.
6. Voluntary Agreement; No Inducements
Executive represents that Executive: (a) has fully and carefully read this Agreement prior to signing it; (b) has been, or has had the opportunity to be, advised by independent legal counsel of Executive’s own choice as to the legal effect and meaning of each of the terms and conditions of this Agreement; and (c) is signing and entering into this Agreement as a free and voluntary act without duress or undue pressure or influence of any kind or nature whatsoever and has not relied on any promises, representations or warranties regarding the subject matter hereof other than as set forth in this Agreement.
7. Attorney Fees for Enforcement
Except for any legal action to determine the validity of the Age Discrimination in Employment Act release provisions of this Agreement, for which no attorney fees will be awarded, if Executive, Bancorp, the Bank, or any of the Released Parties, bring any claim, action, or suit or initiate any arbitration relating to or arising out of this Agreement or any alleged breach of this Agreement (including one seeking to recover based on any released Claim), the prevailing party shall be entitled to reimbursement from the non-prevailing party for his, her, or its costs, expenses, and reasonable attorneys’ fees incurred in such claim, suit, action, or arbitration, as well as all other remedies.
| A-4 |
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the dates indicated below.
| Southern California Bancorp | Executive | |||
| By: | ||||
| Name: | ||||
| Title: | ||||
| Date | Date: | |||
| Bank of Southern California, N.A. | ||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| Date | ||||
| A-5 |
Exhibit 10.2
Execution Version
EMPLOYMENT AGREEMENT
This Employment Agreement (this “Agreement”) is entered into by and among Southern California Bancorp, a California corporation (“Bancorp”), Bank of Southern California, N.A., a national banking association (the “Bank”, and together with Bancorp, the “Company”), and Steven E. Shelton (the “Executive”), with reference to the following:
RECITALS
A. Employee is party to an employment agreement with California Bank of Commerce dated as of May 7th, 2018, as amended April 28, 2022 (the “Employment Agreement”), a copy of which is attached hereto for reference purposes as Exhibit A;
B. Contemporaneous with, and conditioned upon, the execution of this Agreement, California BanCorp and Southern California Bancorp are entering into an Agreement and Plan of Merger and Reorganization providing for, among other things, the merger of California BanCorp with and into Southern California Bancorp to be immediately followed by California Bank of
Commerce being merged with and into Bank of Southern California (collectively, the “Merger”);
C. Contingent upon and simultaneous with closing of the Merger (the “Effective Date”), Bank of Southern California (“Employer”) has agreed to extend an offer of employment to Executive pursuant to the terms herein.
NOW, THEREFORE, for and in consideration of the foregoing Recitals, and the mutual covenants, agreements and considerations set forth below, the sufficiency of which are hereby agreed, the parties, intending to be legally bound, agree as follows:
AGREEMENT
A. Term of Employment
The Company hereby agrees to employ Executive and Executive hereby accepts employment with the Company for the period commencing with the Effective Date and terminating on the fourth anniversary of the Effective Date (the “Initial Employment Term”); subject, however, to prior termination of this Agreement and Executive’s employment as provided herein. Unless this Agreement is terminated earlier, commencing on the fourth anniversary of the Effective Date, (the “Renewal Date”), the Initial Employment Term shall be extended for one (1) additional year (a “Renewal Term”), unless either party notifies the other party at least ninety (90) days prior to the applicable Renewal Date that the Employment Term shall not be so extended. Where used herein, “Employment Term” shall refer to the entire period of employment of Executive by the Company hereunder, whether for the period provided above, or whether terminated earlier as hereinafter provided. If the Merger is not consummated for any reason, this Agreement shall be void ab initio and the Company shall have no obligations to Executive hereunder. Notwithstanding the fact that this Agreement is not effective prior to the Effective Date, from and after the date hereof until the closing of the Merger, Executive agrees that he will not resign for any reason and agrees that he shall assist with and support the consummation of the Merger.
B. Duties of Executive
1. Duties. Subject to the terms and conditions of this Agreement, during the Employment Term, Executive shall serve as the Chief Executive Officer (“CEO”) of Bancorp and of the Bank, and shall report directly and exclusively to the Executive Chairman of the Boards. References herein to the “Board” are the boards of directors of both the Bancorp and the Bank, as applicable. As CEO, Executive shall exercise such authority, perform such executive duties and functions, and discharge such responsibilities as are reasonably associated with such position, subject to the powers by law vested in the Board and shareholders of Bancorp. Executive shall be responsible for providing strategic and financial leadership for the Company and shall be responsible for the management of the business of the Company’s day-to-day operations. The duties of Executive may be changed from time to time by the Executive Chairman, within reason, without resulting in a rescission of this Agreement; provided, however, that any material change in the duties of Executive shall require the consent of Executive.
2. Faithful Performance. During the Term, Executive shall perform exclusively the services herein contemplated to be performed by Executive faithfully, diligently and to the best of Executive’s ability, consistent with the highest and best standards of the banking industry and in compliance with all applicable laws and Bancorp’s Articles of Incorporation and Bylaws and the Bank’s Articles of Association and Bylaws, as applicable.
3. Code of Ethics. Executive shall conduct himself at all times with due regard to the Company’s Principles of Business Conduct and Ethics Policy (receipt of a copy of which Executive hereby acknowledges) (“Code of Ethics”), and other written employment policies of the Company, as amended by them from time to time.
4. Conflicts of Interests. Executive shall devote substantially all of Executive’s full business time, ability and attention to the business of the Company during the Employment Term. Notwithstanding the foregoing, however, and subject to the Code of Ethics, Executive may pursue other appropriate civic, charitable or religious activities so long as such activities do not interfere with Executive’s performance of his duties hereunder. In addition, subject to the Code of Ethics, Executive shall be permitted to make passive investments in other business ventures provided such investments are not in businesses that compete with the Company and which are fully disclosed to the Board prior to the time of such investment (other than investments representing less than five percent (5.0%) of the securities of publicly-traded companies). Executive shall also be permitted to serve on the board of directors (but not as an officer) of any non-profit entity, subject to prior full disclosure to and approval by the Board. Executive may not serve on the board of directors (or as an officer) of any for-profit entity without the express prior approval of the Board, as determined in its sole discretion.
5. Board Appointment. At any meeting of shareholders of Bancorp or the sole shareholder of the Bank during the Employment Term at which Executive is subject to election as a member of the Board, the Board shall, to the extent consistent with its fiduciary duties, nominate and recommend for election Executive as a director and shall use its reasonable best efforts to cause Executive to be elected to serve as a director. Executive shall fulfill all duties required of a member of the respective Board and any committees without any additional compensation during the Employment Term of this Agreement, with compensation for board and committee service for any remaining periods at the end of the Employment Term established by the Board in the usual course.
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C. Compensation
1. Base Salary. For Executive’s services hereunder, during the Employment Term the Bank shall pay or cause to be paid as base salary to Executive the amount of Fifty Thousand, Eight Hundred and Thirty-Three Dollars and Thirty-Three Cents ($50,833.33) per month, prorated for any partial months of service. Said base salary shall be payable in conformity with the Bank’s normal payroll periods. The Board from time to time may review Executive’s base salary, at its discretion, and Executive shall receive such base salary increases, if any, as the Board in its sole and absolute discretion (or as may be recommended by the Compensation, Nominating, and Governance Committee of the Board (“CNG Committee”), shall determine. Said base salary shall in no event be decreased (unless agreed to by Executive) from the level set forth above or from its then-existing level during the Employment Term.
2. Discretionary Bonus.
(a) During the Employment Term, Executive may receive such discretionary bonuses, if any, as the Bank’s Board of Directors or the CNG Committee, in its sole and absolute discretion, shall determine, which discretionary bonus may include Executive’s participation in any management incentive plan as may be adopted and implemented by the Board during the Employment Term. Any such discretionary bonus may be payable in cash and/or in the form of an equity grant with or without vesting conditions, in each case as determined by the Bank’s Board of Directors or the CNG Committee in its sole and absolute discretion.
(b) Subject to any restrictions which may be imposed by any regulatory banking agency with authority over Bancorp or the Bank, Executive (or his heirs) shall be entitled to receive payment of any discretionary bonus if and when approved by the Board or the CNG Committee for the fiscal year in which Executive’s employment is terminated, if terminated pursuant to: (i) Paragraph F.1 by the Company without “Cause” or by Executive for “Good Reason,” as defined is Subparagraph F.5(f); (ii) Paragraph F.3 upon death or disability of Executive; or (iii) Paragraph F.5 upon a “CIC Termination,” as defined in Subparagraph F.5(c), in which case Executive (or his heirs) shall be entitled to receive such discretionary bonus that would be due and payable for such year if the date of determination of such bonus was deemed the date of termination of Executive’s employment and this Agreement; provided the amount of such discretionary bonus shall be prorated for the period of such year actually worked. Any such discretionary bonus shall be paid to Executive (or his heirs), in the form of a lump sum cash payment, on or before the day that is sixty (60) days following the date of Executive’s termination of employment.
3. Equity Compensation Award. Executive shall be entitled to and shall participate in Bancorp’s 2019 Omnibus Equity Plan (the “Plan”). In connection with and as consideration for entering into this Agreement, Executive shall be granted, on or so soon as practicable after the Effective Date, a restricted stock award (the “Award”) for the equivalent of five hundred thousand dollars ($500,000) of Bancorp common stock. The Award shall be subject to the terms and conditions of the Plan and a separate Restricted Shares Award Agreement by and between the Executive and Bancorp (the “Award Agreement”). The Award will vest in equal shares over a four (4) year period (e.g. 25% vesting each year).
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4. Existing Supplemental Executive Retirement Plan. Executive is currently a participant in a Supplemental Executive Retirement Plan by and between Executive and California Bank of Commerce dated May 7, 2018 (the “SERP”) and the corresponding Second Amended and Restated California Bank of Commerce Split Dollar Agreement effective January 13, 2019 (the “Split Dollar Agreement”) that each will be assumed by Bank and/or Bancorp upon the closing of the Merger, and the terms of which shall continue as presently set forth therein; provided, however, that the percentage referenced in the defined term “Target Benefit Amount” (as defined in the SERP) will be increased to thirty percent (30%) and if Executive is terminated without “cause” (as defined in the SERP), then he shall be immediately fully vested in the SERP. If deemed necessary by the parties, after the SERP is assumed by Bank and/or Bancorp, the parties will enter into an appropriate amendment of the SERP to confirm the acceleration of vesting in the proviso of the immediately prior sentence.
5. Executive’s Reimbursement to the Bank. Executive agrees to be bound the Bancorp’s Clawback Policy dated as of January 23, 2024, as such policy may be amended and/or restated from time to time, and any other clawback or similar policy adopted by the Bancorp or the Bank.
D. Executive Benefits
1. Vacation; Sick Leave. Executive shall be entitled to receive vacation and sick leave as provided under the Company’s or an Affiliate’s vacation or time off policy in effect from time to time.
2. Group Medical and Life Insurance Benefits. The Bank shall provide for Executive’s participation in the Bank’s group medical and life insurance benefits, in accordance with the Bank’s Employee Benefits Policy.
3. Automobile Allowance. During the Employment Term, the Bank shall provide Executive with a monthly allowance for automobile ownership or leasing expenses of One Thousand Five Hundred Dollars ($1,500), whether or not used for such expenses. Executive shall acquire or otherwise make available for Executive’s business and personal use an automobile suitable to Executive’s position and maintain it in good condition and repair it at Executive’s expense. Executive shall obtain and maintain an appropriate automobile insurance policy, including personal injury and property damage coverage, with an insurer(s) acceptable to the Company and with coverage in such amounts as may be acceptable to Company from time to time. Such insurance policy shall, if and when requested by the Company, but without any obligation to so request, name the Company as additional insureds, subject to the requirement that the automobile allowance described above shall be increased in an amount equal to the additional premium expense, if any, resulting from the Company being named as additional insureds. The Company may maintain such additional insurance on the automobile including, without limitation, liability for personal injury and property damage, as the Company shall from time to time reasonably require to protect itself against any loss which may arise from Executive’s use of the automobile while working for the Company.
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4. Additional Benefits. Executive shall be entitled to participate in all programs, rights, and benefits for which Executive is otherwise entitled under any bonus plan, incentive plan, participation plan, deferred or extra compensation plan, pension plan, profit sharing plan, savings plan, 401(k) plan, life, medical, dental, other health care, disability, or other insurance plan or policy or other plan or benefit the Bank or its Affiliates may provide for senior executives or for employees of the Bank generally, from time to time, in effect during the Term.
Bank will provide you with cell phone expense reimbursement and reimbursement of health club membership fees, in each case, that are no less favorable then was provided to you immediately prior to the closing of the Merger.
E. Business Expenses and Reimbursement
1. Business Expenses. Executive shall be entitled to reimbursement by the Company for any ordinary and necessary business expenses incurred by Executive in the performance of Executive’s duties and in acting for the Company during the Term, which types of expenditures shall be determined by the Board of Directors of the Company, in their respective capacities, provided that:
(a) Each such expenditure is of a nature qualifying it as a proper deduction on the federal and state income tax returns of the Company as a business expense and not as deductible compensation to Executive;
(b) Executive furnishes to the Company adequate records, including receipts for any expenditures and other documentary evidence required by federal and state statutes and regulations issued by the appropriate taxing authority for the substantiation of such expenditures as deductible business expenses of the Company and not as deductible compensation to Executive; and
(c) Executive agrees to submit his expense reimbursement requests to the Chief Financial Officer for approval. Executive will be entitled to business expense reimbursement in accordance with the Company’s policies.
2. Reimbursement. Notwithstanding anything contained in Paragraph E.1 to the contrary, Bancorp or the Bank shall reimburse Executive for the fees and expenses in an amount not to exceed five thousand dollars ($5,000) in connection with the negotiation of this Agreement. Payment will be made to Executive within fifteen (15) days of Executive’s submission of applicable invoices.
F. Termination
1. Termination by the Company Without Cause or by Executive. The Company and Executive acknowledge that the Company may terminate Executive’s employment at any time without “Cause” upon thirty (30) days’ written notice of termination to Executive. Similarly, Executive may terminate his employment with the Company at any time, for any reason, upon thirty (30) days’ written notice of termination to the Company, except that termination by Executive for “Good Reason” shall be effected in accordance with Subparagraph F.5(f) below. Except as expressly set forth in this Agreement or required by applicable law, upon termination of Executive’s employment with the Company for any reason, the Company’s obligations to Executive (and/or Executive’s estate) shall terminate.
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2. Termination for Cause. The Company may terminate this Agreement and Executive’s employment at any time without further obligation or liability to Executive, by action of the Board, for “Cause” provided that the following notice and opportunity to cure periods have been exhausted. It shall be a condition precedent to the Company’s right to terminate Executive’s employment for Cause that: (1) the Company first give Executive written notice stating with specificity the circumstances constituting Cause (“Breach”), and (2) if such Breach is susceptible of cure or remedy, a period of thirty (30) days from and after the giving of such written notice to cure the Breach. “Cause” is defined as one of the following below. No cure period will be required for the Cause reasons contained in subparts (a)(iii) or (a)(iv) below.
(a) (i) the material breach of duty by Executive in the course of his employment; (ii) Executive’s willful and material violation of any applicable statutes, rules or regulations of any appropriate state or Federal banking agency, as defined in Section 3 of the Federal Deposit Insurance Act (“FDI Act”) (12 USC § 1813); (iii) Executive’s removal and/or permanent prohibition from participating in the conduct of Bancorp or the Bank’s affairs by an order issued under Section 8(e)(3) or 8(g)(1) of the FDI Act (12 U.S.C. § 1818(e)(3) or (g)(1)); (iv) Executive’s conviction of any felony or a crime involving moral turpitude or commission of a fraudulent or dishonest act, including a breach of trust or misappropriation, or if Executive has entered a plea of nolo contendere to such an act or offense; (v) Executive’s willful misfeasance or gross negligence in the performance of his material employment duties; (vi) the repeated non-prescription use of any controlled substance or the repeated use of alcohol or any other non-controlled substance that the Company reasonably determines renders the Executive unfit to serve as an employee of the Company or its Affiliates; or (vii) Executive’s engagement in an activity that could materially and adversely affect the Company’s reputation in the community, which evidences personal dishonesty, immoral behavior, or the lack of Executive’s fitness or ability to perform Executive’s duties, as determined by the Board, in good faith.
(b) For purposes of this provision, no act or failure to act on the part of Executive shall be considered “willful” unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive’s action or omission was in the best interests of the Company as determined by the Board, in the exercise of its business judgement. Any act, or failure to act, based upon direction given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company. Such termination shall not prejudice any remedy that the Company may have at law, in equity, or under this Agreement. Termination pursuant to this Paragraph F.2 shall become effective after the delivery of the required written notice period and the expiration of the cure period described above, where applicable.
3. Termination upon Death or Disability.
(a) This Agreement shall terminate upon Executive’s death.
(b) The Company may terminate this Agreement and Executive’s employment at any time, if Executive is determined by the Board, in good faith and consistent with applicable law, to be physically or mentally incapable of performing Executive’s material duties under this Agreement, with or without reasonable accommodation, for a period of at least one hundred twenty (120) consecutive days or one hundred eighty (180) days within any twelve (12) month period.
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4. Action by Supervisory Authority. This Agreement and Executive’s employment shall terminate immediately without further liability or obligation to Executive:
(a) If the Bank is closed or taken over by the Office of the Comptroller of the Currency or other supervisory authority, including the Board of Governors of the Federal Reserve System; or
(b) If any such supervisory authority should exercise its statutory cease and desist powers to remove Executive from office.
5. Effect of Termination.
(a) In the event of termination of this Agreement and Executive’s employment prior to the completion of the Employment Term for any of the reasons specified in Paragraphs F.1 through F.4, Executive shall be entitled to the salary and other benefits earned by Executive prior to the date of termination as provided for in this Agreement, computed pro rata up to and including that date, Executive’s discretionary bonus, if any, subject to the provisions of Subparagraph C.2(b), and accrued but unused vacation; but Executive shall be entitled to no further salary after the date of termination.
(b) In the event the Company elects to terminate this Agreement and Executive’s employment without Cause, or in the event Executive elects to terminate this Agreement for Good Reason, in each case pursuant to the provisions of Paragraph F.1, then in addition to the items in Subparagraph F.5(a), Executive shall be entitled to:
(i) severance compensation equal to twelve (12) months’ then current base salary, payable in a lump sum on the sixtieth (60th) day after the date of Executive’s termination of employment; and
(ii) for the period beginning on the date of Executive’s termination of employment and ending on the date which is twelve (12) full months following the date of Executive’s termination of employment (or, if earlier, (1) the date on which the applicable continuation period under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) expires or (2) the date Executive becomes eligible to receive the equivalent or increased healthcare coverage from a subsequent employer) (such period, the “COBRA Coverage Period”), the Bank, at Bank’s cost, shall provide Executive and/or his covered dependents who were covered under the Bank’s health plans as of the date of Executive’s termination of employment, as applicable, with continuation coverage under the Bank’s health plans (including, if applicable, pursuant to COBRA) for Executive and/or such eligible dependents. If any of the Bank’s health benefits are self-funded as of the date of Executive’s termination of employment, or if the Bank cannot provide the foregoing benefits in a manner that is exempt from Section 409A (as defined below) or that is otherwise compliant with applicable law (including, without limitation, Section 2716 of the Public Health Service Act), instead of providing the continuation of coverage as set forth above, the Bank shall instead pay to Executive the monthly COBRA premium payable by Executive as a taxable monthly payment for the COBRA Coverage Period (or any remaining portion thereof) (calculated by reference to the premium in effect as of the date of termination). After the expiration of the COBRA Coverage Period, Executive will be entitled to self-pay COBRA continuation benefits for as long as legally available.
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Notwithstanding anything to the contrary herein, until the third anniversary of the closing of the Merger, in lieu of the benefits described above in this subsection (b) in the event of a termination without Cause by Employer, Section 18(a) of the Employment Agreement shall survive for such 36 month period, with the reference in the first line therein to “…and within one year following” revised to “… and within 36 months following”, and provided that during such period Executive shall not be entitled to any payments and benefits under such Section 18(a) of the Employment Agreement if Executive terminates Executive’s employment for Good Reason, as defined in the Employment Agreement, and if Executive is entitled to payments and benefits under such Section 18(a) of the Employment Agreement, Executive will not be entitled to any other severance payments or benefits payable under any other severance plan or policy of the Employer. For the avoidance of doubt, any acceleration of equity awards provided by Section 18(a) that Executive may be entitled to will be limited to equity awards held by Executive at the closing of the Merger.
(c) Notwithstanding anything to the contrary contained in Subparagraph F.5(b) above, in the event of a CIC Termination (as defined below), then in addition to the items in Subparagraph F.5(a), and in lieu of any further salary and bonus payments or severance or other payments that would otherwise be due to Executive under this Agreement or otherwise for periods subsequent to the Vesting Date (as defined below), Executive shall be entitled to:
(i) severance compensation equal to the sum of (x) twenty-four (24) months’ then current base salary, plus (y) two (2) times the average of the aggregate annual bonus, if any, paid or payable to Executive for each of the three (3) full calendar years preceding the calendar year in which Executive’s termination of employment occurs (or such fewer number of fiscal years for which Executive was eligible to receive a bonus and/or incentive award); provided, however, that if any portion of the aggregate annual bonus is received by Executive in the form of an equity grant, the amount of such bonus shall be determined using the fair market value of such equity grant as of the grant date, with such amount payable in a lump sum on the sixtieth (60th) day after the Vesting Date, provided that if such termination occurs prior to the date of consummation of Change in Control, the portion of such payments which would have been payable under Section F.5(b) if such termination was not a CIC Termination, instead be paid at the same time as it would have been paid under Section F.5(b) and the remainder shall be paid on the sixtieth (60th) day after the Vesting Date;
(ii) (A) an amount equal to the COBRA premium payable by Executive for himself and/or his covered dependents (calculated by reference to the premium as in effect on the date of termination) for a period of six (6) months, payable in a lump sum on the sixtieth (60th) day after the date of Executive’s termination of employment; and (B) the COBRA Coverage Period shall be increased to the earlier of: (x) eighteen (18) months following the date of termination or (y) as long as legally available (but in no event shall Bancorp or the Bank be obligated to pay any insurance premiums for the COBRA or other health insurance coverage for Executive and/or his covered dependents from and after the date of termination); and
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(iii) Unless such equity awards by their terms expire upon consummation of a Change in Control (e.g., because performance with respect to such equity awards is measured on the date of the Change in Control and was not met), all outstanding equity incentive awards granted to the Executive prior to the Change in Control will vest (with performance-vesting awards vesting at target) (provided, that this provision should not apply to any equity awards that are issuable under any annual bonus plan or agreement to the extent such termination occurs prior to the determination of the amount of the applicable annual performance under such bonus plan or agreement).
For purposes of this Agreement, a “CIC Termination” means (i) the termination of Executive’s employment due to termination by the Company without Cause, by Executive for Good Reason, or as a result of the expiration of this Agreement following an election by the Company not to extend the Initial Employment Term for the Renewal Term, and (ii) Executive’s last day of employment occurs on or after the initial public announcement by the Company of an intended or anticipated Change in Control (provided that such Change in Control actually is consummated) and before the first anniversary of the Change in Control; and “Vesting Date” means the later to occur of the CIC Termination or the Change in Control.
(d) In the event Executive elects to terminate this Agreement and Executive’s employment other than for Good Reason or the Company terminates this Agreement and Executive’s employment for Cause, Executive shall not be entitled to any severance compensation, or continuation of Executive’s group medical insurance or any other benefits except as required by law. For purposes of this Agreement, “Affiliate” shall mean any partnership, firm, corporation, association, joint-stock company, unincorporated association, or other entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Company, including any member of an affiliated group of which the Company is a common parent corporation as provided in Section 1504 of the Internal Code of 1986, as amended (the “Code”).
(e) For purposes of this Agreement, a “Change in Control” shall mean the occurrence of any of the following events with respect to Bancorp or the Bank: (i) a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); (ii) any merger, consolidation or reorganization of Bancorp or the Bank in which Bancorp or the Bank does not survive; except for purposes of this clause (ii) the following shall not constitute a change in control: a merger, consolidation or reorganization where the beneficial owners, directly or indirectly, of securities of Bancorp or the Bank, representing more than fifty percent (50.0%) of the combined voting power of Bancorp’s or the Bank’s then outstanding securities, remain as the beneficial owners, directly or indirectly, of at least fifty percent (50.0%) of the combined voting power of the surviving corporation; (iii) any sale, lease, exchange, mortgage, pledge, transfer, or other disposition (in one transaction or a series of transactions) of any assets of Bancorp or the Bank having an aggregate fair market value of fifty percent (50.0%) or more of the total value of assets of Bancorp or the Bank, reflected in the most recent month end balance sheet; (iv) an acquisition whereby any “person” (as such term is used in the Exchange Act or any individual, corporation, partnership, trust, or any other entity, except for Executive) is or becomes the beneficial owner, directly or indirectly, of securities of Bancorp or the Bank representing more than fifty percent (50.0%) of the combined voting power of the then outstanding securities; except for purposes of this clause (iv) the following acquisition shall not constitute a change in control: (1) any acquisition directly from Bancorp; (2) any acquisition by Bancorp; or (3) any acquisition by any employee benefit plan sponsored or maintained by Bancorp or the Bank; (v) if in any one year period, individuals who at the beginning of such period constitute the Board of Directors of Bancorp cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by Bancorp’s shareholders, of each new director is approved by a vote of at least three-quarters of the directors then still in office who were directors at the beginning of the period; or (vi) a majority of the members of the Board of Directors of Bancorp in office prior to the happening of any event determines in its sole discretion that as a result of such event there has been a change in control. Notwithstanding the foregoing, to the extent required by Section 409A of the Code, if a Change in Control would give rise to a payment or settlement event with respect to any payment or benefit hereunder that constitutes “nonqualified deferred compensation,” the transaction or event constituting the Change in Control must also constitute a “change in control event” (as defined in Treasury Regulation §1.409A-3(i)(5)) in order to give rise to the payment or benefit, to the extent required by Section 409A.
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(f) For purposes of this Agreement, “Good Reason” shall mean that, without Executive’s consent, there occurs: (i) a loss of Executive’s title or material diminution in Executive’s authority, duties, or responsibilities; (ii) a material diminution in Executive’s base compensation (for this purpose, a reduction of five percent (5.0%) or more shall constitute a material diminution); (iii) a material diminution in the authority, duties or responsibilities of the supervisor to whom Executive is required to report (i.e., other than to the Board; (iv) Executive’s required re-location to a worksite location which is more than 25 miles from Executive’s then current principal worksite without Executive’s consent or (v) any other action or inaction that constitutes a material breach by the Company of the terms of this Agreement. Notwithstanding the foregoing, “Good Reason” shall only exist if Executive shall have provided the Board with written notice within ninety (90) days of the initial occurrence of any of the foregoing events or conditions which specifically identifies the circumstances constituting Good Reason (provided such circumstances are capable of correction), and the Company, fails to eliminate the conditions constituting Good Reason within thirty (30) days after receipt of written notice of such event or condition from Executive. Executive’s resignation from employment with the Company must occur within thirty (30) days following the expiration of the foregoing cure period, upon Executive’s notice of resignation.
(g) Section 280G Excess Parachute Payments.
(i) If all or any amount paid to Executive by the Bank (or any subsidiary or Affiliate thereof), whether under this Agreement or otherwise (all such payments and benefits being hereinafter referred to as the “Total Payments”), otherwise would be subject to any tax under Section 4999 of the Code, or any similar federal or state law (an “Excise Tax”), then the Total Payments shall be reduced to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (A) the net amount of such Total Payments, as so reduced (after subtracting the amount of federal, state and local income taxes on such reduced Total Payments) is greater than or equal to (B) the net amount of such Total Payments without such reduction (after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Executive would be subject in respect of such unreduced Total Payments). The Total Payments shall be reduced in the following order: (1) reduction of any cash severance payments otherwise payable to Executive that are exempt from Section 409A of the Code, (2) reduction of any other cash payments or benefits otherwise payable to Executive that are exempt from Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting or payment with respect to any equity award with respect to Bancorp’s common stock that is exempt from Section 409A of the Code, (3) reduction of any other payments or benefits otherwise payable to Executive on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting and payment with respect to any equity award with respect to Bancorp’s common stock that is exempt from Section 409A of the Code, and (4) reduction of any payments attributable to the acceleration of vesting or payment with respect to any equity award with respect to Bancorp’s common stock that is exempt from Section 409A of the Code. The foregoing reductions shall be made in a manner that results in the maximum economic benefit to Executive and, to the extent economically equivalent, in a pro rata manner.
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(ii) For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the written opinion of an accounting firm or compensation consulting firm with nationally recognized standing and substantial expertise and experience on Section 280G matters (the “280G Firm”) selected by the Bank, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of the 280G Firm, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the Base Amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the 280G Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
(iii) The 280G Firm will be directed to submit its determination and detailed supporting calculations to both Executive and the Bank within fifteen (15) days after notification from either the Company on the one hand or Executive on the other hand that Executive may receive payments which may be “parachute payments.” Executive and the Company will each provide the 280G Firm access to and copies of any books, records, and documents in their possession as may be reasonably requested by the 280G Firm, and otherwise cooperate with the 280G Firm in connection with the preparation and issuance of the determinations and calculations contemplated by this letter agreement. The fees and expenses of the 280G Firm for its services in connection with the determinations and calculations contemplated by this letter agreement will be borne by the Company. Upon request of Executive, the Company will provide Executive with sufficient tax and compensation data to enable Executive or his tax advisor to independently make the calculations described in Subparagraph F.5(g)(i) above, and the Company, will reimburse Executive for reasonable fees and expenses incurred for any such verification.
(iv) If Executive provides written notice to the Company of any objection to the results of the 280G Firm’s calculations within sixty (60) days after Executive’s receipt of written notice thereof, the Company will refer that dispute for determination to tax counsel selected by the independent auditors of Bancorp or the Bank, and Bancorp or the Bank, as applicable, will pay all fees and expenses of that tax counsel.
6. Restriction on Timing of Distributions. In the event that Code Section 409A applies to any compensation with respect to Executive’s “separation from service,” as defined in Treasury Regulation Section 1.409A-1(h) (“Separation from Service”), payment of that compensation shall be delayed if Executive is a “specified employee,” as defined in Section 409A(a)(2)(B)(i), and such delayed payment is required by Section 409A. Such delay shall last six (6) months from the date of Separation from Service (or as required by Section 409A). On the day following the end of such six (6)-month period, the Bank shall make a catch-up payment to Executive equal to the total amount of such payments that would have been made during the six (6)-month period but for this Paragraph F.6.
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7. Mitigation. Executive shall not be required to mitigate severance compensation due to Executive pursuant to the provisions of Subparagraph F.5(b) or (c), as applicable, by seeking employment or otherwise.
8. Resignation from Board of Directors. In the event Executive’s employment is terminated in accordance with this Agreement or Executive resigns as Chief Executive Officer of the Company or otherwise becomes unaffiliated with the Company, Executive shall, and does hereby agree to, tender his written resignation from the Board effective on the date of termination, resignation or non-affiliation.
9. Release of All Claims. As a condition for receiving any severance payments or benefits under Paragraph F.5 of this Agreement, Executive hereby agrees to execute a full and complete release of any and all claims against the Company and its officers, agents, directors, attorneys, insurers, employees and successors in interest arising from or in any way related to Executive’s employment with the Company or the termination thereof, in a form reasonably acceptable to the Bank substantially similar to Exhibit B attached hereto (the “Release Agreement”). In the event the Release Agreement does not become effective within the fifty-five (55) day period following the date of Executive’s termination of employment, Executive shall not be entitled to the aforesaid severance payments and benefits. To the extent any severance payments or benefits are deferred compensation under Section 409A of the Code, and are not otherwise exempt from the application of Section 409A of the Code, then, if the period during which Executive may consider and sign the Release Agreement spans two calendar years, the payment of severance or benefits will not be made or begin until the later calendar year.
G. General Provisions
1. Trade Secrets.
(a) Executive agrees that, during the Term, Executive will have access to, and become acquainted with, confidential, trade secret, and proprietary information concerning the Company, which may include information on its operations and business, the identity of its customers, including knowledge of their financial condition and financial needs, as well as such customers’ methods of doing business. Executive will not use or disclose any of such trade secrets, proprietary, or confidential information during the Term or for a period of two (2) years thereafter, without the Company’s prior written consent; provided, however, that non-public information about the customers, whether characterized as consumer information or customer information, as all such terms are defined in the Interagency Guidelines Establishing Information Security Standards implementing Section 501(b) of the Gramm-Leach-Bliley Act and Section 628 of the Fair Credit Reporting Act, as amended, shall be kept confidential for an unlimited period of time. This limitation shall not apply to information, which is or becomes public, or in the public domain, without the fault of Executive, is or becomes available to Executive or his representatives on a non-confidential basis from a person other than the Company.
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(b) In accordance with 18 U.S.C. § 1833, the Bank hereby notifies Executive that, notwithstanding anything to the contrary herein:
(i) Executive shall not be in breach of this Agreement, and shall not be held criminally or civilly liable under any Federal or State trade secret law (A) for the disclosure of a trade secret that is made in confidence to a Federal, State, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (B) for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
(ii) If Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Executive may disclose the trade secret to Executive’s attorney, and may use the trade secret information in the court proceeding, if Executive files any document containing the trade secret under seal, and does not disclose the trade secret, except pursuant to court order.
2. Employee Proprietary and Confidential Information. In consideration of the Company entering into this Agreement and in accordance with its policies and procedures, Executive, as of the Effective Date, is acknowledging receipt of and is agreeing to comply with and be bound by the terms and conditions of that certain Employee Proprietary and Confidential Information and Assignment of Employee Inventions Agreement, as it may be amended, modified or revised by Bank from time to time.
3. Return of Documents. Executive expressly agrees that all manuals, documents, files, reports, studies, instruments or other materials used and/or developed by Executive during Executive’s employment with the Company, are solely the property of the Company, as applicable, and that Executive has no right, title or interest therein. Upon termination of Executive’s employment, Executive or Executive’s representative shall promptly deliver possession of all said property to the Bank in good condition without retaining any copies thereof.
4. Notices. Any notice, request, demand or other communication required or permitted hereunder shall be in writing and shall be deemed to be properly given when personally delivered or sent by facsimile, provided that the facsimile contains a notation of the date and time of transmission, or when delivered by overnight courier, with a receipt obtained therefor, or three (3) business days after mailed by United States certified or registered mail, return receipt requested and postage prepaid, addressed to the Company at the address appearing at the beginning of this Agreement or to Executive at his most recent address in the Bank’s personnel records. Any party may change his or its address by written notice in accordance with this Paragraph G.4.
5. Benefit of Agreement. This Agreement may be assigned or transferred to and shall be binding upon and shall inure to the benefit of, any successor, subsidiary, or Affiliate the Company, and any such successor, subsidiary, or Affiliate of Bancorp or the Bank shall be deemed substituted for all purposes for “Bancorp” or “the Bank” under the terms of this Agreement. As used in this Agreement, the term “successor” shall mean any person, firm, corporation, or business entity which at any time, whether by merger, purchase, or otherwise, acquires all or substantially all the assets, stock, or business of Bancorp and/or the Bank. Executive acknowledges that Bancorp and/or the Bank has/have the right to sell, assign, or otherwise transfer any portion or substantially all or all of the capital stock, assets, or business of Bancorp or the Bank and that any such sale, assignment, or transfer shall not be deemed to be a termination of the employment of Executive. Executive shall not assign or transfer this Agreement or any rights or obligations pursuant to this Agreement, wholly or partially, without the consent of Bancorp and the Bank, other than by will or the laws of descent and distribution.
6. Governing Law and Venue. The laws of the State of California, other than those laws denominated as choice of law rules, shall govern the validity, construction, and effect of this Agreement. Any action which may be brought under this Agreement shall be brought in the Courts of the State of California in the County in which Executive then resides.
7. Captions and Paragraph Headings. Captions and paragraph headings used herein are for convenience only and are not a part of this Agreement and shall not be used in construing it.
8. Invalid Provisions. Should any provisions of this Agreement for any reason be declared invalid, void, or unenforceable by a court of competent jurisdiction, the validity and binding effect of any remaining portion shall not be affected, and the remaining portions of this Agreement shall remain in full force and effect as if this Agreement had been executed with said provision eliminated.
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9. Arbitration. Any dispute, controversy or claim arising out of or relating to this Agreement (or its validity, interpretation or enforcement), the employment relationship or the subject matter hereof shall, at the request of either party, be settled by binding arbitration by JAMS in the county in which Executive is residing at the time of the dispute, in accordance with the then existing JAMS Arbitration Rules and Procedures for Employment Disputes (the “Rules”). The Rules can be found online at www.jamsadr.org. In the event of such an arbitration proceeding, Executive on the one hand and Bancorp and the Bank on the other hand shall select a mutually acceptable neutral arbitrator from among JAMS panel of arbitrators. In the event Executive, Bancorp and the Bank cannot agree on an arbitrator, the Administrator of JAMS’ will appoint an arbitrator. None of Executive, Bancorp, the Bank or the arbitrator shall disclose the existence, content, or results of any arbitration hereunder without the prior written consent of all parties. The arbitration of such issues, including the determination of any amounts of damages suffered, shall be final and binding upon the parties to the maximum extent permitted by law. Any such judgement shall be subject to full appellate review by a court of law. The parties shall have rights to discovery as provided in Section 1283.05 of the California Code of Civil Procedure, including without limitation Section 1283.1 thereof. The arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the State of California, or federal law, or both, as applicable, and the arbitrator is without jurisdiction to apply any different substantive law. The arbitrator shall render an award and a written, reasoned opinion in support thereof. Judgment upon the award may be entered in any court having jurisdiction thereof. The parties shall each bear their own costs and attorneys’ fees incurred in conducting the arbitration and, except with respect to disputes where Executive asserts a claim under a state or federal statute prohibiting discrimination, harassment or retaliation in employment, a violation of public policy, the failure to pay wages or unless required otherwise by applicable law (collectively referred to as a “Statutory Claim”), shall split equally the fees and administrative costs charged by the arbitrator and the applicable arbitration service. In disputes where Executive asserts a Statutory Claim against Bancorp or the Bank, or where otherwise required by law, Executive shall be required to pay only the applicable arbitration service filing fee to the extent such filing fee does not exceed the fee to file a complaint in state or federal court. Bancorp and the Bank shall pay the balance of the arbitrator’s fees and administrative costs. To the extent permissible under applicable law, however, and following the arbitrator’s ruling on the matter, the arbitrator may rule that the arbitrator’s fees and costs be distributed in an alternative manner, which in the case of a Statutory Claim shall be permitted only to the extent that such fee or cost award is permitted by the underlying statute upon which the Statutory Claim is based. In any arbitration brought under this Section, and only to the extent permissible under applicable law, including the law upon which the claim is based, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and costs. The arbitrator shall apply the same standard with respect to the awarding of fees and costs, including whether such award is permitted, and against which party, as would be awarded if such claim had been asserted in state or federal court. This Paragraph G.9 is intended to be the exclusive method for resolving any and all claims by the parties against each other related to any disagreement, dispute, controversy or claim arising out of or relating to this Agreement or the interpretation of this Agreement or any arrangements relating to this Agreement or contemplated in this Agreement or the breach, termination or invalidity thereof; provided, however, that Executive shall retain the right to file administrative charges with or seek relief through any government agency of competent jurisdiction, and to participate in any government investigation, including but not limited to (a) claims for workers’ compensation, state disability insurance or unemployment insurance; (b) claims for unpaid wages or waiting time penalties brought before the California Division of Labor Standards Enforcement; provided, however, that any appeal from an award or from denial of an award of wages and/or waiting time penalties shall be arbitrated pursuant to the terms of this Paragraph G.9; and (c) claims for administrative relief from the United States Equal Employment Opportunity Commission and/or the California Department of Fair Employment and Housing (or any similar agency in any applicable jurisdiction other than California). Notwithstanding the foregoing, this Paragraph G.9 shall not limit any party’s right to obtain any provisional remedy, including, without limitation, injunctive or similar relief, from any court of competent jurisdiction as may be necessary to protect their rights and interests pending the outcome of arbitration, including without limitation injunctive relief, in any court of competent jurisdiction pursuant to California Code of Civil Procedure § 1281.8 or any similar statute of an applicable jurisdiction, including, without limitation, Bancorp’s and the Bank’s rights to enforce Executive’s obligations under this Agreement to the extent the Bancorp and the Bank is entitled to seek specific performance thereunder. Seeking any such relief shall not be deemed to be a waiver of such party’s right to compel arbitration. Each of Executive and the Bank hereby expressly waive their right to a jury trial.
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10. Entire Agreement. Except for stock option agreements, restricted stock agreements, and participation in other compensation, bonus, supplemental executive retirement agreement, salary continuation or severance plans and agreements or benefit arrangements which may be entered into by and between Bancorp, the Bank and Executive, employment and operating policies of Bancorp and/ the Bank and the Employee Proprietary and Confidential Information and Assignment or Employee Invention Agreement as it may be amended, modified or revised from time to time, this Agreement contains the entire agreement of the parties and supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to the employment of Executive by Bancorp and the Bank. Each party to this Agreement acknowledges that no representations, inducements, promises, or agreements, oral or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied herein, and that no other agreement, statement, or promise not contained in this Agreement, or in any stock option agreement or other compensation, bonus, supplemental executive retirement agreement, salary continuation or severance agreement or benefit arrangement, shall be valid or binding.
11. Amendments and Waivers. This Agreement may not be modified or amended by oral agreement, but only by an agreement in writing signed by Bancorp, the Bank and Executive. Any waiver of any provision of this Agreement shall be effective only if in writing and signed by the parties hereto. Any waiver of a breach of any provision hereof shall not operate as or be construed as a waiver of any subsequent breach of the same provision or any other provision hereof.
12. Interpretation. If any claim is made by any party hereto relating to any conflict, omission or ambiguity of this Agreement, no presumption or burden of proof or persuasion shall be implied by reason of the fact that this Agreement was prepared by or at the request of any particular party hereto or such party’s counsel.
13. Executive Acknowledgment. Executive acknowledges that he has had the opportunity to consult legal counsel in regard to this Agreement, that he has read and understands this Agreement, that he is fully aware of its legal effect, and that he has entered into it freely and voluntarily and based on his own judgment and not on any representations or promises other than those contained in this Agreement.
14. Counterparts. This Agreement may be executed in one or more counterparts, any of which may be executed and transmitted by facsimile or electronic transmission or other electronic method, and each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
15. Section 409A of the Code. Notwithstanding anything contained in this Agreement to the contrary, to the maximum extent permitted by applicable law, amounts payable to Executive pursuant to this Agreement shall be made in reliance upon Treas. Reg. Section 1.409A-1(b)(9) (Separation Pay Plans) or Treas. Reg. Section 1.409A-1(b)(4) (Short-Term Deferrals). This Agreement is intended to be written, administered, interpreted and construed in a manner such that no payment or benefits provided under the Agreement become subject to (a) the gross income inclusion set forth within Code Section 409A(a)(1)(A) or (b) the interest and additional tax set forth within Code Section 409A(a)(1)(B) (together, referred to herein as the “Section 409A Penalties”), including, where appropriate, the construction of defined terms to have meanings that would not cause the imposition of Section 409A Penalties. To the extent that any amount payable to Executive pursuant to this Agreement is subject to Section 409A of the Code, and Executive or the Bank reasonably believes, at any time, that such amount payable does not comply with Section 409A of the Code, it will promptly advise the other and each party hereby agrees to negotiate reasonably and in good faith to amend the terms of this Agreement such that it so complies. For purposes of this Agreement, all references to Executive’s “termination of employment” shall mean Executive’s Separation from Service. For purposes of Section 409A of the Code (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), each payment that Executive may be eligible to receive under this Agreement shall be treated as a separate and distinct payment. Notwithstanding anything to the contrary in this Agreement, in-kind benefits and reimbursements provided under this Agreement during any tax year of Executive shall not affect in-kind benefits or reimbursements to be provided in any other tax year of Executive and are not subject to liquidation or exchange for another benefit. Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by Executive and, if timely submitted, reimbursement payments shall be made to Executive as soon as administratively practicable following such submission, but in no event later than the last day of Executive’s taxable year following the taxable year in which the expense was incurred. In no event shall Executive be entitled to any reimbursement payments after the last day of Executive’s taxable year following the taxable year in which the expense was incurred. This section shall only apply to in-kind benefits and reimbursements that would result in taxable compensation income to Executive.
Signature page immediately follows
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In Witness Whereof, the parties hereto have executed this Agreement as of the day and year first above written.
| STEVEN E. SHELTON | SOUTHERN CALIFORNIA BANCORP | ||
| By: | /s/ David I. Rainer | ||
| /s/ Steven E. Shelton | Name: | David I. Rainer | |
| Title: | Chief Executive Officer | ||
| BANK OF SOUTHERN CALIFORNIA, N.A. | ||
| By: | /s/ David I. Rainer | |
| Name: | David I. Rainer | |
| Title: | Chief Executive Officer | |
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EXHIBIT A
EMPLOYMENT AGREEMENT
This employment agreement (the “Agreement”) entered into as of the 7th day of May, 2018 (the “Effective Date”), by and between CALIFORNIA BANK of COMMERCE, a California Banking corporation (the “Bank”), and Steven E. Shelton (“Employee”).
In consideration of the mutual covenants and promises contained herein and for the parties hereto agree as follows:
1. Position and Duties. Employee will be employed as the Bank’s President and Chief Executive Officer (“CEO”). In that role, he shall have the duties and responsibilities set forth in this Agreement and in the By-Laws of the Bank, subject to the direction of the Board of Directors of the Bank (“Board”).
Employee will devote substantially all his professional time, attention, and energy to the business of the Bank. Employee agrees to perform his duties conscientiously, efficiently and to the best of his ability. Except with the prior consent of the Bank’s Board of Directors, Employee will not, during the term of this Agreement, engage directly or indirectly, in any other business activity that is or may be competitive with or might place him in a competing position to that of the Bank or any company affiliated with the Bank.
In addition to such other duties as may be assigned him, Employee shall be responsible for the overall day-to-day operation and administration of the Bank and shall assume responsibility for and oversee the development and implementation of the strategic plan, budget, forecast/outlook, policies and procedures for the Bank. As the Bank’s President and Chief Executive Officer, Employee will:
(a) Serve on the Board or Directors of the Bank and be a member of all committees of the Bank and the Board except the Audit Committee of the Board; and
(b) Operate the Bank safely and soundly, at the direction of the Board and in conformity with applicable policies and regulations, submit to the Board for its approval appropriate budgets and plans, and operate the Bank in substantial accordance with its strategic objectives; and
(c) Oversee the accounting and finance functions of the Bank as they relate to all of the constituencies with an interest in the Bank, including but not limited to bank regulators, tax authorities, the public, the Bank’s shareholders and employees; and
(d) Exercise prudence with respect to the Bank’s expenditures; and
(e) Promote the pursuit of the broad objectives of the Bank to build franchise value and, in partnership with key members of management, be responsible for product development, strategic planning and budgeting: and
(f) In partnership with senior management, be responsible for recruiting and developing staff in a manner consistent with the Bank’s immediate needs and strategic goals; and
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(g) Oversee the loan, deposit, investment, marketing, compliance, operations, and information technology functions of the Bank, together with related policies and procedures.
2. Term. The term of this Agreement shall be seven years from the Effective Date (“Term”), or earlier terminated by either party as set forth herein. Upon the termination of his employment, neither Employee nor the Bank will have any further obligation to the other under this Agreement, except for those provisions intended by the parties to survive termination of Employee’s employment as set forth in Paragraphs 12-35.
3. Base Salary. For the term of this Agreement while he is an employee, the Bank will pay Employee a base salary at a rate of $375,000 per year (“Base Salary”), subject to an annual compensation review by the Compensation Committee of the Bank’s board of directors during the term of this Agreement. Base Salary will be paid in accordance with the Bank’s normal payroll procedures, but in any case, no less frequently than monthly. Base Salary may be increased but will not be decreased during the term of this Agreement, except in connection with a temporary reduction for cost savings that equally affects all executives of the Bank.
4. Stock Awards. As of the Effective Date, the Bank will grant stock-based awards to Employee with a fair market value at grant equal to $500,000. The awards will be split between restricted stock with a fair market value at grant of $250,000 and incentive stock options with a fair market value at grant of $250,000 (collectively, the “Stock Awards”), with the number of restricted shares and incentive stock options to be determined at the time of grant, based on the closing price of the Bank’s stock on the Effective Date. Both Stock Awards will vest ratably over seven years from the date of grant, and will be governed by the terms and conditions set forth in the applicable award agreements and plan documents. From time to time, at the sole discretion of the Board of Directors, additional stock-based awards may be granted to Employee.
5. Bonuses. Employee shall be eligible for an annual bonus pursuant to the executive incentive plan developed each year by the Board. In order to earn an annual bonus, Employee must meet the goals set forth in the executive incentive plan and must be employed through December 31 of the applicable bonus year. Employee’s bonus for 2018 will take into account the dual roles he held in 2018.
6. Automobile Allowance. During the term of this Agreement, the Bank will pay Employee a $900 monthly auto allowance and will reimburse him for his gasoline expenses, as submitted on the Bank’s standard Expense Reimbursement form. Employee will be personally responsible for all of his other automobile expenses.
7. Executive Retirement Plan. The parties agree to work together in good faith to institute a supplemental executive retirement plan providing for post-termination payments to Employee, in an amount to be determined by the Board consistent with applicable law. Such deferred compensation benefits shall be in addition to any retirement benefits under any tax qualified benefit plan of the Bank. During the six-month period immediately following execution of this Agreement, the parties agree to work together in good faith to assess the feasibility of a split-dollar life insurance policy that includes a post-employment benefit for Employee, with the final decision regarding whether to provide such a benefit subject to the discretion of the Bank.
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8. Health Benefits. The Bank will provide health benefits to Employee and his family with options and coverage consistent with those of the Bank’s group medical plans as in effect from time to time for the Bank’s other executives and will pay all related insurance premiums unless waived in writing by Employee.
9. Group Term Life Insurance. The Bank will provide group term life insurance to Employee to the same extent the Bank provides group term life insurance to its other full time employees; and Employee will designate the beneficiaries thereof. Upon Employee’s termination of employment for any reason his group term life insurance will cease and be of no further effect.
10. Disability Insurance. The Bank will provide long term disability insurance to Employee to the same extent the Bank provides such disability insurance to its senior executives generally.
11. Vacation. During the term of this Agreement, Employee will be eligible for unlimited vacation commencing as of the Effective Date.
12. Withholding of Taxes. Bank may withhold from any amounts payable to Employee under this Agreement all federal, state, city or other taxes and withholdings as shall be required pursuant to any applicable law, rule or regulation.
13. Disability and Death. If, during the term of this Agreement, Employee is unable to performing the essential functions of his job, with or without reasonable accommodation, then, to the extent permitted by applicable law, Employee’s employment shall terminate (“Termination by Reason of Disability”) on a date that is at the end of the period of paid administrative leave, as defined in this paragraph 13. If Employee is unable to perform the essential functions of his job with reasonable accommodation, the Bank shall place Employee on paid administrative leave, with continuation of full Base Salary and all employee benefits, for a period that ends upon the completion of the waiting period under the Bank’s long term disability insurance (‘‘LTD Plan”) if Employee qualifies for LTD Plan benefits or, if earlier, three months from the date that he is placed on paid administrative leave. The end of the period of paid administrative leave is called the “Determination Date”. As of the Determination Date or upon Employee’s death, the Bank will pay to Employee or his estate the Accrued Obligations as defined in paragraph 15.
14. Termination of Agreement; Employee Resignation. Each party has the right to terminate Employee’s employment with the Bank at any time prior to the end of the term specified in paragraph 2, with or without Cause. For purposes of this Agreement, termination shall mean separation from service as defined by Treasury Regulation§ l.409A-l(h). If Employee decides to terminate his employment under this Agreement, Employee will provide the Bank with two weeks’ advance written notice; provided however that after receiving such notice the Bank, at any time prior to the end of the notice period, may terminate Employee’s employment immediately and pay Employee for the period that the notice otherwise would have run, in addition to all other amounts and benefits then due under this Agreement. Except in the case of termination for Good Reason, any voluntary termination or resignation by Employee pursuant to this paragraph shall be deemed for purposes of Employee’s compensation to be treated as if it were a Termination for Cause and Employee shall only be entitled to the Accrued Obligations.
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15. Termination for Cause. Termination for Cause is defined as (i) willfully breaching Bank policies or Banking regulations, (ii) habitually neglecting the duties required to be performed under this Agreement, (iii) committing an intentional act that has a material detrimental effect on the reputation or business of the Bank, including without limitation an act of sexual harassment in violation of Company policy, (iv) conviction of a felony or committing any such act of dishonesty, fraud, intentional misrepresentation or moral turpitude as would prevent effective performance of his duties under this Agreement, (v) repeatedly or willfully disregarding or failing to comply with a lawful directive of the Board of Directors or (vi) the Bank receiving a written finding, order or directive from any state or federal banking regulator with jurisdiction over the Bank ordering the removal of Employee as an executive officer of the Bank (‘‘Cause”). If the Bank decides to terminate Employee’s employment for Cause, the Bank will provide Employee with a written statement stating the grounds for termination. Upon termination of Employee’s employment for Cause, Employee will not be entitled to any further amounts or benefits from the Bank except for accrued Base Salary, any annual bonus earned for the prior year but not yet paid, incurred and not reimbursed business expenses, and any and all other benefits earned through Employee’s last day of employment (“Accrued Obligations”), except as otherwise required by law.
16. Termination without Cause or Termination for Good Reason. Employee’s employment under this Agreement may also be terminated prior to the end of the Term by the Bank without Cause or by the Employee for Good Reason. For purposes of this Agreement, “Good Reason” shall mean that one or more of the following has occurred without the Employee’s written consent:
| (i) | a material negative change in the nature or scope of the Employee’s responsibilities, duties or authority as set forth in paragraph 1; |
| (ii) | a material reduction in the Employee’s Base Salary in violation of this Agreement; |
| (iii) | Employee ‘s required re-location to a worksite location which is more than 25 miles from Employee’s then current principal worksite without Employee’s consent, or; |
| (iv) | the Bank’s material breach of this Agreement. |
provided that, in any such case, the Employee provides written notice to the Bank that the event giving rise to such claim of Good Reason has occurred within 60 days after the first occurrence of such event, and such Good Reason remains uncured by the Bank 30 days after the Employee has provided such written notice; provided further that any resignation of the Employee’s employment for “Good Reason” occurs no later than 60 days following the expiration of such cure period.
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If during the Term the Bank terminates Employee’s employment without Cause or the Employee terminates for Good Reason, the Bank shall pay Employee the Accrued Obligations, and in addition, as full and final severance, the Bank will provide to Employee: (A) within fifteen business days of effective date of Employee’s release of claims, a lump sum payment in an amount equal to the sum of his then-current annual Base Salary plus the average of the three (3) most recent annual bonuses previously paid to Employee (collectively, the “Standard Severance”); and (B) commencing within fifteen business days of effective date of Employee’s release of claims, an amount each month that is equal to the monthly cost of COBRA premium for equivalent health insurance coverage, as in effect at the date of termination, for a period equal to the lesser of (x) 18 months, (y) the number of months between the date of Employee’s termination and the date on which Employee becomes eligible to begin receiving benefits pursuant to Medicare, or (z) if Employee accepts new employment, the number of months between the date of Employee’s termination and the date on which Employee becomes eligible to begin receiving benefits under the new employer’s health care plan (“COBRA Severance Benefits”).
17. Release Agreement; Director Resignation.
(a) In the event of Termination without Cause by the Bank or a Termination for Good Reason by the Employee, the Employee shall be eligible for the termination benefits and payments provided for in paragraphs 16 and 18 of this Agreement only if he first enters into a form of release agreement in the form of Exhibit C to this Agreement releasing the Bank from any and all claims, known and unknown, related to Employee’s employment with the Bank and he allows such release to become effective (except for the Accrued Obligations) within 60 days of termination of the Employee’s employment. Further provided that, if such termination benefits and payments are made by the Bank, and if the 60 day period spans two calendar years, regardless of when such release is executed by the Employee, such severance payment must be made in the subsequent taxable year. This condition precedent requiring execution and non-revocation of a release agreement does not apply to payment of the Accrued Obligations.
(b) If Employee’s employment terminates at any time and for any reason, such termination of employment shall be deemed to be an automatic and immediate resignation by Employee from all committees or other positions held with the Bank, effective as of the last date of his employment.
18. Change of Control. If during the Term the Bank undergoes a Change of Control, and within 1 year following such Change of Control Employee terminates his employment for Good Reason or Employee’s services are terminated without Cause, then the Bank shall pay Employee the Accrued Obligations and, in addition, as full and final change of control severance, the Bank will provide to Employee: (i) within 60 days of the date of termination, a lump sum payment in an amount equal to the two times the sum of (A) his then-current annual Base Salary and (B) the average of the three (3) most recent annual bonuses previously paid to Employee (collectively, the “Change of Control Severance”); (ii) the acceleration of the vesting of all outstanding and unvested Stock Awards previously granted to Employee (“Stock Acceleration”); and (iii) the COBRA Severance Benefits. If at any time that is less than six (6) months prior to a Change of Control the Bank terminates Employee without Cause or Employee terminates his employment for Good Reason, then such termination shall be treated as though it were a termination without Cause occurring within one year following a Change of Control and the Bank shall provide to Employee if and when the Change of Control takes effect (i) the Stock Acceleration and (ii) the Change of Control Severance minus any Standard Severance previously paid under paragraph 16. Any payments made to Employee under this paragraph 18 will be made within fifteen business days of the effective date of Employee’s release of claims. For purposes of this Agreement, a “Change of Control” occurs when an event within the meaning of Treasury Regulation § L409A-3(i)(5) with respect to the Bank and its Board occurs.
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19. Indemnification by the Bank. To the maximum extent permitted by and consistent with Section 317 of the California Corporations Code (“Section 317”) and the Articles of Incorporation and the Bylaws of the Bank, the Bank shall defend and indemnify Employee for expenses, judgments, fines, settlements and other amounts actually incurred by Employee in connection with any proceeding to which Employee is a party by reason of the fact that Employee is or was an agent of the Bank (as defined in Section 317). The Bank shall advance on behalf of Employee all costs, including attorneys’ fees, as necessary with respect to any such proceeding. In the event any applicable law shall require the issuance of an undertaking by Employee, such shall be acceptable without bond, collateral, or any other security being given by Employee in connection therewith. This provision shall survive the termination of this Agreement for any reason. The Bank hereby covenants and agrees that it will not alter its Articles of Incorporation or Bylaws such as to make them any less favorable for Employee regarding such indemnification.
20. Purchase or Return of Bank Property. Upon termination of Employee’s employment, Employee shall return all items of Bank property in his possession or under his control, provided that Employee may upon written notice to the Bank, elect to purchase any or all of his mobile phone, iPad and notebook computer at their then respective depreciated value, subject to Bank removing any Bank property or data or that of its customers.
21. Reimbursement of Business Expenses. During the term of this Agreement, Employee will be reimbursed by the Bank for his ordinary, reasonable and necessary business expenses incurred by Employee in the performance of his duties and in furthering the Bank’s interests, including the costs of a cell phone using Bank designated equipment and service provider. Employee will be diligent in observing the expense policies of the Bank. He will at all times be prudent and use good judgment in balancing the Bank’s objectives of minimizing expenses while at the same time aggressively seeking new business opportunities and a position in the community. He will prepare and promptly submit expense reports with substantially adequate records and other documentary evidence as required by the Bank’s policies or by federal and state statutes and regulations with respect to the substantiation of such expenditures as deductible business expenses of the Bank. The Bank shall reimburse Employee for all such expenses within 30 days of Employee’s written notice to Bank of such expenses.
22. Confidential and Proprietary Information and Trade Secrets. All records of the accounts of customers, and any other records and books relating in any manner whatsoever to the customers of the Bank, and all other files, books and records and other materials owned by the Bank or used by it in connection with the conduct of its business, whether prepared by Employee or otherwise coming into Employee’s possession, shall be the exclusive property of the Bank regardless of who actually prepared the original material, book or record. All such books and records and other materials shall be immediately returned to the Bank by Employee upon the end of his employment for any reason. Employee agrees that all information, including but not limited to that which is directly or indirectly related to the Bank’s financial status, profitability, deposit base, portfolio size and quality as well as its customers and prospective customers, is confidential and proprietary to the Bank and that he will maintain such information as confidential. Employee agrees that as a condition of employment he will execute such form of confidentiality agreement as the Bank may adopt from time to time for senior officers of the Bank.
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During the term of employment Employee shall have access to and become acquainted with trade secrets of the Bank, including the names of customers and clients, their financial condition and financial needs, financial information regarding the Bank and other information relating to the Bank’s products, services and methods of doing business. Employee agrees not to disclose any of the Bank’s trade secrets, directly or indirectly, or use them in any way, either during the term of employment (except as required in the course of employment with the Bank) or at any time thereafter.
23. Unsecured General Creditor. Neither Employee nor any other person or entity shall have any legal right or equitable rights, interests or claims in or to any property or assets of the Bank under the provisions of this Agreement. No assets of the Bank shall be held under any trust for the benefit of Employee or any other person or entity or held in any way as security for the fulfilling of the obligations of the Bank under this Agreement. All of the Bank’s assets shall be and remain the general, unpledged, unrestricted assets of the Bank. The Bank’s obligations under this Agreement are unfunded and unsecured promises, and to the extent such promises involve the payment of money, they are promises to pay money in the future. Employee and any person or entity claiming through him shall be unsecured general creditors with respect to any rights or benefits hereunder.
24. Excise Tax Provision. Notwithstanding anything elsewhere in this Agreement to the contrary, if any of the payments or benefits provided for in this Agreement, together with any other payments or benefits (the “Payment”) which Employee has the right to receive from the Bank (or its affiliated companies), would constitute an “excess parachute payment” within the meaning of Section 280G of the Internal Revenue Code (the “Code”) and be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), such Payment shall be reduced to the least extent necessary so that no portion of the Payment shall be subject to the Excise Tax, but only if, by reason of such reduction, the net after-tax benefit received by the Employee as a result of such reduction will exceed the net after-tax benefit that would have been received by the Employee if no such reduction were made. The Payment shall be reduced, if applicable, by the Bank in the following order of priority: (A) reduction of any cash severance payments otherwise payable to the Employee that are exempt from Section 409A of the Code; (B) reduction of any other cash payments or benefits otherwise payable to the Employee that are exempt from Section 409A of the Code, but excluding any payments attributable to any acceleration of vesting or payments with respect to any equity award that are exempt from Section 409A of the Code; (C) reduction of any payments attributable to any acceleration of vesting or payments with respect to any equity award that are exempt from Section 409A of the Code, in each case beginning with payments that would otherwise be made last in time; and (D) reduction of any other payments or benefits otherwise payable to the Employee on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payments attributable to any acceleration of vesting and payments with respect to any equity award that are exempt from Section 409A of the Code. If, however, such Payment is not reduced as described above, then such Payment shall be paid in full to the Employee and the Employee shall be responsible for payment of any Excise Taxes relating to the Payment,
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25. Adjustment of Severance Payment Amounts to Accommodate Internal Revenue Code Section 409A Limitation. It is the intention of the Bank and Employee that all payments made in connection with a termination of employment under this Agreement either be exempt from, or otherwise comply with, Section 409A of the Code. Notwithstanding any other term or provision of this Agreement, to the extent that any provision of this Agreement is determined by the Bank with the advice of its independent accounting firm or other tax advisors to be subject to and not in compliance with Section 409A of the Code, including, without limitation, the definition of “change in control” or “disability,” the timing of commencement and completion of severance and/or other benefit payments to Employee hereunder, or the amount of any such payments, such provisions shall be interpreted in the manner required to comply with Section 409A. The Bank and Employee acknowledge and agree that such interpretation could, among other matters, (i) limit the circumstances or events that constitute a “change in control” or “disability,” (ii) delay for a period of six (6) months or more, or otherwise modify the commencement of severance and/or other benefit payments, and/or (iii) modify the completion date of severance and/or other benefit payments. The parties agree, however, that if the date of payment called for by this Agreement is altered pursuant to the requirements of Section 409A, then the timing of such payment shall be adjusted to the earliest practicable date, but the amount of such payment will not be adjusted, thus insuring the payment in full of all payments promised hereunder. In addition, each payment hereunder is intended to constitute a separate payment from each other payment for purposes of Treasury Regulation § l.409A-2(b)(2).
Notwithstanding the above, the Bank and Employee further acknowledge and agree that if, in the judgment of the Bank and its independent accounting firm or other tax advisors, amendment of this Agreement is necessary to comply with Section 409A, the Bank and Employee will negotiate reasonably and in good faith to amend the terms of this Agreement to the extent necessary so that it complies with Section 409A of the Code.
26. Regulatory Restrictions. The parties understand and agree that if at the time any payment would otherwise be made or benefit provided under paragraphs 16, 18 or 19 depending on the facts and circumstances existing at such time, the satisfaction of such obligations by the Bank may be deemed by a regulatory authority to be illegal, an unsafe and unsound practice, or for some other reason not properly due or payable by the Bank. Among other restrictions, the regulations at 12 C.F.R., Part 30, Appendix A promulgated pursuant to Section 39(a) of the Federal Deposit Insurance Act, and at 12 C.F.R. Part 359, or similar regulations or regulatory action following similar principles may apply at such time. The parties understand, acknowledge and agree that, notwithstanding any other provision of this Agreement, the Bank shall not be obligated to make any payment or provide any benefit under paragraphs 16, 18 or 19 where an appropriate regulatory authority disapproves or does not acquiesce as required, if required, and the authority’s disapproval or non-acquiescence is documented in a writing from the authority a copy of which is actually provided by the authority or the Bank to Employee.
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27. No Conflicting Agreements. Employee represents that his performance of all of the terms of this Agreement and any service to be rendered as an employee of the Bank does not and will not breach any fiduciary or other duty or any covenant, agreement or understanding, including without limitation any agreement relating to any proprietary information, knowledge or data acquired by Employee in confidence, trust or otherwise prior to Employee’s employment by the Bank to which Employee is a party or by the terms of which Employee may be bound. Employee covenants and agrees that he will not disclose to the Bank, or induce the Bank to use, any proprietary information, knowledge or data, belonging to any previous employer or others and that Employee will disclose to the Bank the term and subject of any prior confidentiality agreement or agreements Employee has entered into. Employee further covenants and agrees not to enter into any agreement or understanding, either written or oral, in conflict with the provisions of this Agreement.
28. Successors and Assigns. This Agreement will inure to the benefit of and be binding upon the Bank and any of its successors and assigns. In view of the personal nature of the services to be performed under this Agreement by Employee, he will not have the right to assign or transfer any of his rights, obligations or benefits under this Agreement, except as may be required by the surviving entity in a Change of Control.
29. Governing Law. This Agreement will at all times and in all respects be governed by the laws of the State of California applicable to transactions wholly performed in California between California residents, except to the extent governed by the laws of’ the United States of America in which case federal laws shall govern.
30. Arbitration. All claims, disputes and other matters in question arising out of or relating to the employment relationship or its termination shall be resolved by binding arbitration before a representative member, selected by the mutual agreement of parties, of the Judicial Arbitration and Mediation Services, Inc. (“JAMS”), in accordance with the rules and procedures of JAMS then in effect. In the event JAMS is unable or unwilling to conduct such arbitration, or has discontinued its business, the Bank and Employee agree that a representative member, selected by the mutual agreement of the parties, of the American Arbitration Association (“AAA”), shall conduct such binding arbitration in accordance with the rules and procedures of the AAA then in effect.
Notice of the demand for arbitration shall be filed in writing with the other party to this Agreement and with JAMS (or AAA, if necessary). In no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations. Any award rendered by JAMS or AAA shall be final and binding upon the parties, and as applicable, their representative heirs, beneficiaries, legal representatives, agents, successors and assigns, and may be entered in any court having jurisdiction thereof. The obligation of the parties to arbitrate pursuant to this paragraph 30 shall be specifically enforceable in accordance with, and shall be conducted consistently with, the provisions of Title 9 of Part 3 of the California Code of Civil Procedure. Either party may seek preliminary injunctive or equitable relief from a court in furtherance of the arbitration. Any arbitration hereunder shall be conducted in Alameda County, California, unless otherwise agreed to by the parties.
| A-9 |
31. Advice to Seek Counsel. Employee acknowledges that he has been advised by the Bank that this Agreement imposes legal obligations upon him and to consult with legal counsel with regard to this Agreement. Employee acknowledges that he has been afforded the opportunity to obtain legal counseling with regard to this Agreement.
32. Notices. Any notice required to be given hereunder will be sufficient if in writing and sent by certified or registered mail, return receipt requested, first-class-postage-paid, and sent, in the case of Employee, to Employee’s address as shown on the Bank’s records and, in the case of the Bank, to its principal office, addressed to the Chairman of the Board. Notices will be deemed given when actually received, or three days after mailing, whichever is earlier. E-mail will also be sufficient and may be relied upon by the sender if and only if the latter has received e-mail or written confirmation from the party to whom such e-mail was sent.
33. Entire Agreement; Modification; Severability. This Agreement and any attachments hereto contain the entire agreement and understanding by and between the Bank and Employee with respect to the subject matter herein, and no representation, promise, agreement or understanding, written or oral, not herein contained will be of any force or effect. No modification hereof will be valid or binding unless in writing and signed by the party intended to be bound. No waiver of any provision of this Agreement will be valid unless in writing and signed by the party against whom such waiver is sought to be enforced. No valid waiver of any provision of this Agreement at any time will be deemed a waiver of any other provision of this Agreement, or will be deemed a valid waiver of any of such provision at any other time. If any provision of this Agreement is held by a court of competent jurisdiction or an arbitration body to be invalid, void or unenforceable, the remaining provisions of this Agreement will, nonetheless, continue in full force without being impaired or invalidated in any way.
34. Non-Competition, Non-Solicitation. During the term of Employment, Employee will not directly or indirectly engage in or prepare to engage in any banking or financial products business, loan origination or deposit taking business or any other business competitive with the Bank. During the term of Employment and for a period of eighteen (18) months thereafter, Employee shall not directly or indirectly induce or solicit, or attempt to induce or solicit, any employee, contractor or consultant of the Bank to terminate his/her employment or relationship with the Bank or otherwise interfere with the employment or service relationship between the Bank and its employees, contractors or consultants.
35. Regulatory Approval. In the event that any regulatory authority with jurisdiction over the Bank will disapprove any provision of this Agreement, then the parties hereto will use their best efforts, acting in good faith, to amend the Agreement in a manner that will be acceptable to the parties and to the regulatory authorities.
36. Counterparts. This Agreement may be executed in one or more counterparts, all of which together shall constitute a single agreement and each of which shall be an original for all purposes.
| A-10 |
In witness whereof, the Bank and Employee have duly executed both counterparts of this Agreement and it is effective as of the Effective Date.
| CALIFORNIA BANK OF COMMERCE | ||
| By: | /s/ Stephen A. Cortese | |
| Name: | Stephen A. Cortese | |
| Title: | Chairman of the Board | |
| EMPLOYEE | ||
| /s/ Steven E. Shelton | ||
| Steven E. Shelton | ||
| A-11 |
EXHIBIT C
RELEASE AGREEMENT
California Bank of Commerce (‘‘Bank”) and Steven E. Shelton (“Employee”) hereby enter into this Release Agreement (the “Agreement”). The parties agree as follows:
1. Consideration for Release. In consideration for the releases and covenants contained in this Agreement, Bank shall pay to Employee the sums described in paragraphs 16 or 18, as applicable, of the Employment Agreement entered into as of May 7, 2018 between Bank and Employee (the “Employment Agreement”). Employee acknowledges that the payment of such sums provides good, sufficient and valuable consideration for Employee’s covenants, waivers, and releases contained in this Agreement. Employee understands that Bank’s willingness to pay such sums is contingent upon Employee’s fulfillment of his obligations contained herein. If Employee revokes this Agreement as described in Section 5 below, Bank shall be released from its obligations under this Agreement and paragraph 16 or 18, as applicable, of the Employment Agreement.
2. General Mutual Release. In exchange for the consideration described in this Agreement the adequacy of which is hereby acknowledged, each party hereto, on behalf of himself or itself and his or its heirs, successors and assigns, hereby fully releases and forever discharges the other party hereto, including each of their officers, directors, agents, employees, attorneys, parents, affiliates and/or subsidiaries, from any and all claims, actions and liabilities of any kind or character whatsoever, arising at law or in equity, known or unknown, suspected or unsuspected, that such party has ever had, now has or may now have against the other party, including, without limitation, all claims directly or indirectly related to or arising out of Employee’s employment by Bank, the performance of his duties during that employment, and/or the termination of or his resignation from that employment. This waiver and release specifically includes, but is not limited to, all claims, if any, whether arising in tort or in contract, related to Employee’s employment, including any and all claims for wrongful discharge or wrongful termination; claims for alleged violation of public policy or breach of implied covenant of good faith and fair dealing; claims for breach of fiduciary duty; claims for negligent or intentional infliction of emotional distress; claims arising in connection with Employee’s compensation, benefits, warrants and/or stock options; claims for breach of express or implied contract or for further monetary compensation by way of additional salary or bonus allegedly due Employee by reason of his employment with Bank; and all other claims, based on common law or federal or state statute, including claims for discrimination based on age arising under state statute or the federal Age Discrimination in Employment Act, the Older Workers’ Benefits Protection Act, or any similar federal or state law prohibiting age discrimination. Notwithstanding the foregoing, the claims released in this Section do not include any intentional acts by Employee that are outside the course and scope of Employee’s employment with Bank. This Agreement will not affect Employee’s entitlement to benefits described in the Employment Agreement (including Employee’s right to continued healthcare under the Employment Agreement and/or COBRA), or any non-waivable benefits under California’s unemployment or worker’s compensation laws, nor shall this Agreement constitute a release of any claims for breach of the Employment Agreement by Bank.
| C-1 |
3. Waiver of Unknown Claims or Rights. Employee acknowledges that he is waiving unknown claims pursuant to California Code of Civil Procedure Section 1542, and he expressly waives such rights as quoted below:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE; WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETI’LEMENT WITH THE DEBTOR.
Employee hereby expressly waives any rights he may have under any other statute or common law principles of similar effect.
4. Knowing and Voluntary Agreement. Employee acknowledges he is freely and voluntarily entering into this Agreement based on his own judgment and not as a result of any representations or promises made by Bank, other than those contained in this Agreement. Employee also acknowledges that he has been given a full opportunity to review this Agreement with an attorney, and has signed it only after full reflection and analysis of its provisions.
5. Review Period, Acceptance, ADEA Waiver, Waiting and Revocation Period. Employee acknowledges and understands that the release of claims under the Age Discrimination in Employment Act (“ADEA’’), 29 U.S.C. Sections 621-634, is subject to special waiver protections under 29 U.S.C. Section 626(f). In accordance with the ADEA and the Older Workers benefits Protection Act (“OWBPA”), Employee specifically agrees that he is knowingly and voluntarily releasing and waiving any rights or claims of age discrimination under the ADEA. In particular he acknowledges that he understands that:
(i) he is not waiving any claims for age discrimination under the ADEA that may arise after the date he signs this Agreement and he is not waiving vested benefits if any;
(ii) he is waiving rights or claims for age discrimination under the ADEA in exchange for payments described above, which are in addition to anything of value to which he is already entitled; and
(iii) he is advised to consult with and has had an opportunity to consult with an attorney before signing this Agreement.
Employee understands and agrees that he has up to 21 days to review this Agreement. This Agreement is revocable by Employee for seven days following his signing of this Agreement (“Revocation Period”). This Agreement automatically becomes enforceable and effective on the eighth (8th) day after the Agreement is signed by Employee, provided there has been no timely revocation.
6. Non-Execution or Revocation of Agreement. In the event that Employee does not execute this Agreement or revokes it within the time provided, he shall not be entitled to receive the payment described in Section 1 of this Agreement.
| C-2 |
7. Warranties. Employee warrants and represents that there are no liens or claims of lien or assignments in law or equity or otherwise on or against any potential claims or causes of action released herein, and, further, that Employee is fully entitled and duly authorized to give this complete and final general release and discharge. Employee warrants that he has not filed any lawsuits or administrative claims against Bank, and he is not aware of any claims, filed by him against Bank in any forum, that are pending.
The parties have read and understand the terms of this Agreement, have had an opportunity to consult with an attorney, and hereby voluntarily and knowingly agree to its terms.
| Date: | |||
| Steven E. Shelton | |||
| CALIFORNIA BANK OF COMMERCE | |||
| By: | Date: | ||
| Its: | Chairman of the Board | ||
| C-3 |
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This First Amendment to Employment Agreement (this “Amendment”) is entered into as of the 28th day of April, 2022, by and between CALIFORNIA BANK OF COMMERCE, a California banking corporation (the “Bank”), and Steven E. Shelton (“Employee”).
WHEREAS, Employee and the Bank are parties to that certain Employment Agreement dated as of May 7, 2018 (the “Agreement”); and
WHEREAS, the parties desire to amend the Agreement as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants and representations set forth in this Agreement, Employee and the Bank agree as follows:
1. Amendment. Each reference in paragraph 1 of the Agreement to “President and Chief Executive Officer” is hereby deleted and replaced with “Chief Executive Officer.”
2. Terms of Agreement. Except as expressly modified hereby, all terms, conditions and provisions of the Agreement shall continue in full force and effect.
3. Conflicting Terms. In the event of any inconsistency or conflict between the Agreement and this Amendment, the terms, conditions and provisions of this Amendment shall govern and control.
4. Entire Agreement. This Amendment and the Agreement constitute the entire and exclusive agreement between the parties with respect to the subject matter hereof. All previous discussions and agreements with respect to this subject matter are superseded by the Agreement and this Amendment. This Amendment may be executed in one or more counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument. Facsimile counterparts shall be deemed to be originals.
IN WITNESS WHEREOF, each of the parties hereto has executed this Amendment as of the date first set forth above.
| CALIFORNIA BANK OF COMMERCE | ||
| By: | ||
| Name: | Stephen A. Cortese | |
| Title: | Chairman of the Board | |
| EMPLOYEE | ||
| Steven E. Shelton | ||
| C-4 |
EXHIBIT B
RELEASE AGREEMENT
This RELEASE AGREEMENT (the “Agreement”), is entered into and effective by and among Southern California Bancorp, a California corporation (“Bancorp”), Bank of Southern California, N.A., a national banking association (the “Bank”) and _____________, an individual resident of the state of California (the “Executive”), with reference to the following:
RECITALS
WHEREAS, Executive, Bancorp and the Bank entered into an Employment Agreement effective as of ________________ (the “Employment Agreement”); and
WHEREAS, the Executive acknowledges that Executive will receive a [Payment or Severance Payment] as defined in the Employment Agreement under certain conditions;
NOW, THEREFORE, in consideration of these Recitals and the mutual promises, agreements, and covenants contained herein, and for good and valuable consideration, the receipt and sufficiency of which are expressly acknowledged, Executive, Bancorp and the Bank agree as follows:
AGREEMENT
1. Release and Waiver
a. In full consideration for the [Payment or Severance Payment] (as that term is defined in the Employment Agreement), Executive hereby knowingly and voluntarily, fully and finally releases, acquits, and forever discharges Bancorp and the Bank and their respective parent, subsidiaries and affiliated corporations, and each of their respective present and future officers, directors, members, shareholders, employees, agents, consultants, insurance companies, and attorneys, and the successors or assigns of said persons and entities (the “Released Parties”), from any and all claims, charges, complaints, causes of action, obligations, promises, agreements, controversies, liens, demands, attorneys’ fees, damages and liabilities of any nature, whatsoever, known or unknown, suspected or unsuspected, which Executive or Executive’s executors, administrators, successors or assigns ever had, now have, or may hereafter claim to have against any of the Released Parties from the beginning of time through the date the Executive executes this Agreement (the “Claims”) including, without limitation, any Claims associated with Executive’s employment with Bancorp and the Bank, and to the fullest extent permitted by law.
b. Executive’s general release specifically extends to, without limitation, Claims for wrongful termination, discrimination, retaliation, impairment of ability to compete in the open labor market, breach of an express or implied contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, fraud, misrepresentation, defamation, slander, infliction of emotional distress, disputed wages and related penalties, loss of future earnings, and any Claims under the California constitution, the United States Constitution, or applicable state and federal fair employment laws, federal equal employment opportunity laws, and federal and state labor statutes and regulations, including, without limitation, the Age Discrimination in Employment Act (42 U.S.C. § 621-634) (age discrimination), as amended, the Civil Rights Act of 1964, as amended, , the Americans With Disabilities Act of 1990, as amended, the Rehabilitation Act of 1973, as amended, the Family Medical Leave Act of 1993, as amended, the Executive Retirement Income Security Act of 1967, as amended, the California Fair Employment and Housing Act, as amended, the California Family Rights Act, as amended, the California Whistleblower Protection Act, as amended, California Labor Code section 6310 et seq., and Claims pursuant to any other local, state and federal laws and regulations relating to employment to the fullest extent permitted by law.
| B-1 |
c. The only Claims that are not being released by Executive are: (i) Executive’s right, if any, to COBRA health benefits; (ii) vested rights Executive has with respect to any benefit or equity or stock plan or agreement, including, without limitation, the Bank’s 401(k) Plan; (iii) Executive’s rights to indemnification for work for Bancorp and the Bank; (iv) Executive’s coverage under the Bank’s insurance policies, including, without limitation, Directors and Officers Insurance; (v) social security, unemployment, and/or state disability insurance benefits pursuant to the terms of applicable law; (vi) rights Executive may have under the Age Discrimination in Employment Act which arise after the date Executive signs and dates this Agreement; (vii) Claims for events/acts after this Agreement is executed; (viii) workers’ compensation insurance benefits under the terms of any workers’ compensation insurance policy of the Bank; or (ix) any other rights or Claims which are not subject to waiver or are not subject to an unsupervised waiver as a matter of law. Moreover, this Agreement does not limit any party’s right, where applicable, to file a complaint or charge with or participate in any investigative proceeding of any federal, state, or local governmental agency. Notwithstanding the foregoing, Executive agrees and hereby waives Executive’s right to recover monetary damages in such proceeding and in no event shall Executive be entitled to receive a payment as a result of any proceeding initiated by or on Executive’s behalf with respect to the Claims released herein. Additionally, this Agreement does not limit any party from instituting legal action for the purpose of enforcing this Agreement. Finally, this Agreement shall not preclude Executive from bringing a charge or suit to challenge the validity or enforceability of this Agreement under the Age Discrimination in Employment Act as amended by the Older Workers Benefit Protection Act.
d. Executive expressly waives all rights afforded by Section 1542 of the Civil Code of the State of California (“Section 1542”) with respect to the Released Parties. Section 1542 states as follows:
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.”
| B-2 |
e. Notwithstanding the provisions of Section 1542, and for the purpose of implementing a full and complete release, Executive understands and agrees that this Agreement is intended to include and does include all Claims if any, which Executive may have and which Executive does not now know or suspect to exist in Executive’s favor against the Released Parties, and this Agreement extinguishes those Claims.
f. Executive acknowledges and agrees that, except for any legal action to determine the validity of the Age Discrimination in Employment Act release provisions of this Agreement, this Agreement may be pled as a complete bar to any action or suit before any court or adjudicative body or tribunal with respect to any of the released Claims. Executive further represents and agrees that Executive has not commenced or joined in any litigation, claim, charge, action, demand, grievance, administrative proceeding, arbitration or other legal proceeding against the Released Parties arising out of or relating in any way to the Claims released by this Agreement.
g. To the extent that Executive is identified as a putative or actual member of a class action or a representative, collective, or multi-party action seeking recovery based on one or more released Claims, Executive must opt-out of the class action lawsuit when first given an opportunity to do so and/or must otherwise decline to participate in a representative, collective, or multi-party action.
h. Executive acknowledges that before signing this Agreement, Executive is advised to and has been encouraged by Bancorp and the Bank to consult with an attorney about this Agreement’s terms, and Executive understands that whether or not to do so is Executive’s sole decision. If Executive does consult an attorney, Executive agrees to pay attorneys’ fees and costs, if any, arising out of or in connection with this Agreement or its subject matter.
i. By signing this Agreement, Executive is knowingly and voluntarily releasing and waiving any rights or Claims Executive has or may have of discrimination under the Age Discrimination in Employment Act in exchange for the Payment or Severance Payments described above, to which Executive would not otherwise be entitled.
2. Review Period
Executive has twenty-one (21) days from receipt of this Agreement to consider the waiver of any Claims Executive has or may have under law, including any rights under the Age Discrimination in Employment Act. Although the deadline for signing and dating this Agreement is twenty-one (21) days from the date of receipt, Executive may sign, date, and return the Agreement sooner. The Executive has seven (7) days from the date this Agreement is signed to revoke Executive’s signature. Any payment which is due will not be made until after the seven (7) day period has expired without revocation by Executive and then only in accordance with the terms of the Employment Agreement.
| B-3 |
3. Non-Admission of Liability
Nothing in this Agreement shall be construed as an admission of liability by any party; rather, Bancorp, the Bank and Executive are resolving all outstanding matters between them and Bancorp and the Bank specifically deny any wrongdoing in connection with Executive’s employment.
4. Governing Law
This Agreement shall be governed by and construed and enforced pursuant to the laws of the State of California, without regard to its conflict of laws rules.
5. Counterparts, Electronic Signatures, and Use of Copies in Lieu of Originals
This Agreement may be executed in two or more counterparts, either by original signature or electronic signature, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. The parties also agree that, so long as all of the parties execute this Agreement, copies of this Agreement, including photocopies or facsimile copies (including copies generated by scanning this Agreement to a portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document), including signed counterparts, shall be deemed to constitute an original and may be used in lieu of an original for any purpose, and shall be fully enforceable against a signing party.
6. Voluntary Agreement; No Inducements
Executive represents that Executive: (a) has fully and carefully read this Agreement prior to signing it; (b) has been, or has had the opportunity to be, advised by independent legal counsel of Executive’s own choice as to the legal effect and meaning of each of the terms and conditions of this Agreement; and (c) is signing and entering into this Agreement as a free and voluntary act without duress or undue pressure or influence of any kind or nature whatsoever and has not relied on any promises, representations or warranties regarding the subject matter hereof other than as set forth in this Agreement.
7. Attorney Fees for Enforcement
Except for any legal action to determine the validity of the Age Discrimination in Employment Act release provisions of this Agreement, for which no attorney fees will be awarded, if Executive, Bancorp, the Bank, or any of the Released Parties, bring any claim, action, or suit or initiate any arbitration relating to or arising out of this Agreement or any alleged breach of this Agreement (including one seeking to recover based on any released Claim), the prevailing party shall be entitled to reimbursement from the non-prevailing party for his, her, or its costs, expenses, and reasonable attorneys’ fees incurred in such claim, suit, action, or arbitration, as well as all other remedies.
| B-4 |
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the dates indicated below.
| Southern California Bancorp | Executive |
|||
| By: | ||||
| Name: | ||||
| Title: | ||||
| Date | Date: | |||
Bank of Southern California, N.A.
| By: | ||
| Name: | ||
| Title: | ||
| Date |
| B-5 |
Exhibit 10.3
Exhibit 99.1
 |
 |
SOUTHERN CALIFORNIA BANCORP AND CALIFORNIA BANCORP ANNOUNCE A MERGER OF EQUALS TO CREATE A PREMIER CALIFORNIA BUSINESS BANK
San Diego and Oakland, Calif., January 30, 2024 – Southern California Bancorp (NASDAQ: BCAL), the holding company for Bank of Southern California, N.A., and California BanCorp (NASDAQ: CALB), the holding company for California Bank of Commerce, jointly announce the execution of a definitive merger agreement, pursuant to which the companies will combine in an all-stock merger valued at approximately $233.6 million, or $26.54 per share of California BanCorp, based on the closing price of Southern California Bancorp on January 29, 2024.
Transaction Highlights
| ● | Creates a premier California financial institution with approximately $4.6 billion in assets by combining two high performing franchises with footprints in the state’s two best markets for mid-market business banking | |
| ● | True merger of equals uniting top talent of two institutions with shared vision, values, and client-centric focus | |
| ● | Enhanced scale allows further investment in technology to better manage risk, increase efficiency and enhance the client experience | |
| ● | Adds complementary business lines and diversified lending verticals to each client base |
“This merger of equals brings together two premier California business banks to create a franchise with a footprint that covers the two most attractive markets in California,” said David Rainer, Chairman and CEO of Southern California Bancorp. “Our two companies share the same vision and values with a customer-centric focus on providing outstanding service to mid-market businesses. We believe this combination, resulting in increased size and scale, will drive improved profitability and increase shareholder value. It also offers customers increased product offerings and lending limits, as well as access to branches in both Northern and Southern California. The merger will also provide employees of both companies with increased career opportunities. I am very excited to work with Steven Shelton and his impressive team to build what we believe will be the premier business banking franchise in California.”
“The expanded scale and capabilities we will have as a result of this merger will enhance our ability to continue adding attractive full banking relationships with commercial clients that provide operating deposit accounts and high quality lending opportunities, as well as enabling us to move up market and work with larger businesses,” said Steven Shelton, Chief Executive Officer of California BanCorp. “This merger is bringing together two highly compatible institutions with similar cultures, a relationship-based approach and commercial banking expertise, with strong deposit bases that will offer opportunities for growth in various lending verticals. With our combined capabilities, we believe that we will be well positioned to consistently generate profitable growth and further enhance the value of our franchise in the years to come.”
| 1 |
“We believe this merger will benefit all our constituents, including shareholders, employees, and the clients that we serve,” said Stephen Cortese, Chairman of California BanCorp. “Over the past several years, we have made investments in talent and technology that strengthened our franchise and led to the strong growth we have seen in our client base, increased efficiencies, and improved profitability. This merger will accelerate the growth of our franchise and further improve our ability to create long-term value for shareholders.”
Transaction Details
Under the terms of the definitive agreement, which has been unanimously approved by the boards of directors of Southern California Bancorp and California BanCorp, each outstanding share of California BanCorp common stock will be exchanged for the right to receive 1.590 shares of Southern California Bancorp common stock. As a result of the transaction, Southern California Bancorp shareholders will own approximately 57.1% of the outstanding shares of the combined company and California BanCorp shareholders will own approximately 42.9% of the outstanding shares of the combined company.
Name, Branding Headquarters and Markets
The companies will evaluate rebranding with new names and logos for the combined company and bank at the close of the transaction. The combined company’s common stock will continue to trade on the Nasdaq Capital Market.
Corporate headquarters will be located in San Diego, Calif.
The combined company’s Southern California footprint will include Bank of Southern California’s 13 branches that serve Los Angeles, Orange, San Diego, and Ventura counties, and the Inland Empire. The combined company’s Northern California footprint will include the California Bank of Commerce branch in Contra Costa County and its four loan production offices serving Alameda, Contra Costa, Sacramento, and Santa Clara counties.
Governance and Leadership
The combined company’s Board of Directors will consist of six directors from Southern California Bancorp, inclusive of Mr. Rainer, and six directors from California BanCorp, inclusive of Mr. Shelton. A lead independent director will be appointed after closing.
| 2 |
David Rainer, Chairman of Southern California Bancorp, will serve as Executive Chairman of the combined company, bank and boards.
Steven Shelton, Chief Executive Officer of California BanCorp, will serve as Chief Executive Officer and director of the combined company and the combined bank.
Richard Hernandez, President of Southern California Bancorp, will serve as President of the combined company and combined bank.
Thomas Sa, President, Chief Financial Officer and Chief Operating Officer of California BanCorp will serve as Chief Operating Officer of the combined company and combined bank.
Thomas Dolan, Chief Financial Officer and Chief Operating Officer of Southern California Bancorp will serve as Chief Financial Officer of the combined company and Chief Strategy Officer of the combined bank.
Timing and Approvals
The transaction is expected to close in the third quarter of 2024, subject to satisfaction of customary closing conditions, including receipt of required regulatory approvals and approvals from Southern California Bancorp and California BanCorp shareholders.
Members of the board of directors of each of Southern California Bancorp and California BanCorp have entered into agreements pursuant to which they have committed to vote their shares of common stock in favor of the merger of California BanCorp with and into Southern California Bancorp.
For additional information about the proposed merger of California BanCorp with and into Southern California Bancorp, shareholders are encouraged to carefully read the definitive agreement that will be filed with the Securities and Exchange Commission (“SEC”).
Advisors
MJC Partners acted as financial advisor to Southern California Bancorp and delivered a fairness opinion to their Board of Directors. Stuart Moore Staub acted as legal counsel to Southern California Bancorp. Keefe, Bruyette and Woods, A Stifel Company acted as financial advisor to California BanCorp and delivered a fairness opinion to their Board of Directors. Sheppard, Mullin, Richter & Hampton LLP served as legal counsel to California BanCorp.
Investor Presentation Details
A presentation regarding the merger announcement has been filed with the SEC and can be accessed at www.banksocal.com through the “investor relations” link.
| 3 |
ABOUT SOUTHERN CALIFORNIA BANCORP AND BANK OF SOUTHERN CALIFORNIA, N.A.
Southern California Bancorp (NASDAQ: BCAL) is a registered bank holding company headquartered in San Diego, California. Bank of Southern California, N.A., a national banking association chartered under the laws of the United States (the “Bank”) and regulated by the Office of Comptroller of the Currency, is a wholly owned subsidiary of Southern California Bancorp. Established in 2001 and headquartered in San Diego, California, the Bank offers a range of financial products and services to individuals, professionals, and small- to medium-sized businesses through its 13 branch offices serving Orange, Los Angeles, Riverside, San Diego, and Ventura counties, as well as the Inland Empire. The Bank’s solutions-driven, relationship-based approach to banking provides accessibility to decision makers and enhances value through strong partnerships with its clients. Additional information is available at www.banksocal.com.
ABOUT CALIFORNIA BANCORP AND CALIFORNIA BANK OF COMMERCE
California BanCorp, the parent company for California Bank of Commerce, offers a broad range of commercial banking services to closely held businesses and professionals located throughout Northern California. The Company’s common stock trades on the Nasdaq Global Select marketplace under the symbol CALB. For more information on California BanCorp, please visit our website at www.californiabankofcommerce.com.
FORWARD-LOOKING STATEMENTS
This communication may contain certain forward-looking statements, including but not limited to certain plans, expectations, projections and statements about the benefits of the proposed merger (the “Merger”) of Southern California Bancorp (“SCB”) and California BanCorp (“CBC”), the timing of completion of the Merger, and other statements that are not historical facts. Such statements are subject to numerous assumptions, risks, and uncertainties. All statements other than statements of historical fact, including statements about beliefs and expectations, are forward-looking statements. Forward-looking statements may be identified by words such as “expect,” “anticipate,” “believe,” “intend,” “estimate,” “plan,” “target,” “goal,” or similar expressions, or future or conditional verbs such as “will,” “may,” “might,” “should,” “would,” “could,” or similar variations. The forward-looking statements are intended to be subject to the safe harbor provided by the Private Securities Litigation Reform Act of 1995.
Factors that could cause or contribute to results differing from those in or implied in the forward-looking statements include but are not limited to the occurrence of any event, change or other circumstances that could give rise to the right of SCB or CBC to terminate their agreement with respect to the Merger; the outcome of any legal proceedings that may be instituted against SCB or CBC; delays in completing the Merger; the failure to obtain necessary regulatory approvals (and the risk that such approvals impose conditions that could adversely affect the combined company or the expected benefits of the Merger); the failure to obtain shareholder approvals or to satisfy any of the other conditions to the Merger on a timely basis or at all; the ability to complete the Merger and integration of SCB and CBC successfully; costs being greater than anticipated; cost savings being less than anticipated; changes in economic conditions; the risk that the Merger disrupts the business of SCB, CBC or both; difficulties in retaining senior management, employees or customers; the impact of bank failures or other adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks; and other factors that may affect the future results of SCB and CBC. Additional factors that could cause results to differ materially from those described above can be found in SCB’s amended Registration Statement on Form 10 filed on April 24, 2023, which is on file with the Securities and Exchange Commission (the “SEC”) and is available in the “Investor Relations” section of SCB’s website, www.banksocal.com, in CBC’s Annual Report on Form 10-K for the year ended December 31, 2022 which is on file with the SEC and is available in the “Investor Relations” section of CBC’s website, www.californiabankofcommerce.com, and in other documents that SCB and CBC file with the SEC. Investors may obtain free copies of these documents and other documents filed with the SEC on its website at www.sec.gov.
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All forward-looking statements speak only as of the date they are made and are based on information available at that time. Neither SCB nor CBC assumes any obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with the Merger, SCB will file with the SEC a Registration Statement on Form S-4 that will include a joint proxy statement of SCB and CBC and a prospectus of SCB, as well as other relevant documents concerning the proposed transaction. Certain matters in respect of the Merger will be submitted to SCB’s and CBC’s shareholders for their consideration. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
Investors and shareholders are urged to read the registration statement and the joint proxy statement/prospectus regarding the Merger when they become available and any other relevant documents filed with the SEC in connection with the Merger because they will contain important information.
Investors will be able to obtain a free copy of the definitive joint proxy statement/prospectus, as well as other filings containing information about SCB and CBC, without charge, at the SEC’s website, www.sec.gov. Copies of the joint proxy statement/prospectus and the filings with the SEC that will be incorporated by reference in the joint proxy statement/prospectus can also be obtained, without charge, in the “Investor Relations” section of SCB’s website at www.banksocal.com (for SCB’s filings) and in the “Investor Relations” section of CBC’s website, www.californiabankofcommerce.com (for CBC’s filings).
PARTICIPANTS IN THE SOLICITATION
SCB, CBC and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of SCB and CBC in connection with the Merger. Information regarding SCB’s directors and executive officers and their ownership of SCB common stock is available in SCB’s definitive proxy statement for its 2023 annual meeting of shareholders filed with the SEC on June 13, 2023 and other documents filed by SCB with the SEC. Information regarding CBC’s directors and executive officers and their ownership of CBC common stock is available in CBC’s definitive proxy statement for its 2023 annual meeting of shareholders filed with the SEC on April 20, 2023 and other documents filed by CBC with the SEC. Other information regarding the participants in the proxy solicitation and their ownership of common stock will be contained in the joint proxy statement/prospectus relating to the Merger. Free copies of these documents may be obtained as described in the preceding paragraph.
INVESTOR RELATIONS CONTACT
Kevin Mc Cabe
Bank of Southern California
kmccabe@banksocal.com
818.637.7065
Thomas A. Sa
California BanCorp
tsa@bankcbc.com
510.457.3775
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Exhibit 99.2
