PACWEST BANCORP

 

STOCK PURCHASE AGREEMENT

 

This Stock Purchase Agreement (this “ Agreement ”) is made as of August 29, 2008, by and between PacWest Bancorp, a Delaware corporation (the “ Company ”), and CapGen Capital Group II LP, a Delaware limited partnership (“ Purchaser ”).

 

RECITALS

 

WHEREAS , the Company desires to issue and sell and Purchaser desires to purchase certain shares of the Company’s common stock, par value $0.01 per share (the “ Company Common Stock ”), on the terms set forth herein;

 

WHEREAS , Purchaser is or will be on or prior to the Closing Date (as defined below) a registered bank holding company and, following consummation of the Transaction (as defined below), will be a registered bank holding company with respect to the Company’s subsidiary bank; and

 

WHEREAS , the Company has authorized, and shall prepare and file under the terms set forth herein, a registration statement on Form S-3 under the Securities Act of 1933, as amended (the “ Act ”), with respect to the Shares (as defined below).

 

NOW, THEREFORE , in consideration of the foregoing recitals and the mutual promises hereinafter set forth, the parties hereto agree as follows:

 

SECTION 1

 

Agreement to Sell and Purchase

 

Subject to the terms and conditions hereof, Purchaser agrees to purchase from the Company, on the Closing Date, 3,846,153 (three million eight hundred forty-six thousand one hundred fifty-four) shares (the “ Shares ”) of Company Common Stock, and the Company agrees to issue and sell such Shares to Purchaser, at a price of $26.00 per share for an aggregate purchase price (the “ Purchase Price ”) equal to $99,999,978 (ninety nine million nine hundred ninety nine thousand nine hundred seventy eight dollars) (such issuance, sale and purchase of the Shares, along with the other commitments by each party to the other set forth in this Agreement, the “ Transaction ”).

 

SECTION 2

 

Closing, Delivery and Payment

 

2.1           Closing .  The closing (the “ Closing ”) of the purchase and sale of the Shares shall take place at the offices of the Company, at 10:00 a.m., local time on (i) the first Business Day (as defined below) following the last to be waived or fulfilled of the conditions set forth in Section 8 (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of those conditions) or (ii) such other date and time as the parties hereto may mutually agree.  The date on which the Closing occurs is referred to herein as the “ Closing Date .”  For purposes of this Agreement, a “ Business Day ” shall mean any day that is not a Saturday, Sunday or other day in which banks in the State of California or New York are authorized or required by law to be closed.

 

 

2.2           Delivery .  At the Closing, subject to the terms and conditions hereof, the Company will deliver to Purchaser the Shares in certificate form or via uncertificated book-entry form pursuant to instructions of Purchaser provided to the Company at least five (5) Business Days in advance of the Closing Date, free and clear of any liens or other encumbrances (other than those placed thereon by or on behalf of any Purchaser) and subject to any restrictions on resale in accordance with applicable law prior to the effectiveness of any registration statement registering such resale, and Purchaser will make payment to the Company of the Purchase Price, by wire transfer of immediately available funds to an account designated by the Company and set forth in Schedule 2.2(a) hereto.  Purchaser and the Company shall execute a cross receipt acknowledging receipt of the Shares and the Purchase Price, respectively.

 

2.3           Anti-Dilution .  If, between the date of this Agreement and the Closing Date, the outstanding shares of Company Common Stock shall have been changed into or exchanged for a different number or kind of shares or securities as a result of any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other substantially similar transaction, an appropriate and proportionate adjustment shall be made to the number of Shares and the Purchase Price, as the case may be, for the Shares.

 

SECTION 3

 

Representations and Warranties of the Company

 

Except as disclosed in reasonable detail in the Company Reports (as defined below) furnished or filed prior to the date of this Agreement (excluding any risk factor disclosures contained in such documents under the heading “Risk Factors” and any disclosures of risks included in any “forward-looking statements” disclaimer or other statements made that are similarly non-specific and are predictive or forward-looking in nature), the Company hereby represents and warrants to Purchaser as follows:

 

3.1           Organization and Standing .   (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.  The Company is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership or operation of its assets or properties or conduct of its business requires such qualification, except where the failure to be so qualified or in good standing is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect (as defined below). As used in this Agreement, a “ Material Adverse Effect ” means any effect, circumstance, occurrence or change that is material and adverse to the business, assets, results of operations or financial condition of the Company and Company Subsidiaries (as defined below), taken as a whole; provided , however , that Material Adverse Effect shall not be deemed to include (A) any effects, circumstances, occurrences or changes generally affecting the commercial banking industry, the economy, or the financial, real estate, securities or credit markets in the United States or

 

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elsewhere in the world, including effects on such industry, economy or markets resulting from any regulatory or political conditions or developments, or any outbreak or escalation of hostilities, declared or undeclared acts of war or terrorism, (B) changes or proposed changes in generally accepted accounting principles in the United States (“ GAAP ”), (C) changes or proposed changes in laws governing financial institutions and laws of general applicability or related policies or interpretations of any Governmental Authority), (in the case of each of clause (A), (B) and (C), other than effects, circumstances, occurrences or changes that arise after the date of this Agreement but before the Closing to the extent that such effects, circumstances, occurrences or changes have a materially disproportionate adverse affect on the Company and Company Subsidiaries relative to other companies in the commercial banking industry), or (D) changes in the market price or trading volume of Company Common Stock (it being understood and agreed that the exception set forth in this clause (D) does not apply to the underlying reason or cause giving rise to or contributing to any such change).

 

(b)           Each Company Subsidiary is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization or incorporation.  Each Company Subsidiary is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership or operation of its assets or properties or conduct of its business requires such qualification, except where the failure to be so qualified or in good standing is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect.

 

3.2           Company Capital Stock .   As of the date hereof, the authorized capital stock of the Company consists solely of 50,000,000 shares of Company Common Stock, of which 27,196,853 shares are issued and outstanding (excluding 969,410 shares of unvested time-based restricted stock and performance-based restricted stock), and 5,000,000 shares of preferred stock, par value $0.01 per share, none of which are issued and outstanding.  As of the date hereof, 1,312 shares of Company Common Stock are issuable upon the exercise of outstanding options to acquire such shares and there are 969,410 outstanding shares of unvested time-based and performance-based restricted stock.  The outstanding shares of Company Common Stock have been duly authorized and are validly issued, fully paid and nonassessable, and are not subject to preemptive rights (and were not issued in violation of any preemptive rights).  The Shares will be, as of the Closing, duly authorized by all necessary corporate action on the part of the Company and, when issued and delivered as provided in this Agreement, will be duly and validly issued, fully paid and nonassessable, and the issuance thereof will not be subject to any preemptive rights.  As of the date of this Agreement, neither the Company nor any Company Subsidiary has and is not bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of, or securities or rights convertible into or exchangeable for, any shares of capital stock of the Company or any securities representing the right to purchase or otherwise receive any shares of capital stock of the Company (including any rights plan or agreement).

 

3.3           Corporate Power .   The Company and each Company Subsidiary has all requisite power and authority (corporate and other) to carry on its business as it is now being conducted and to own, lease or operate all its properties and assets; and the Company has all requisite corporate power and authority and has taken all corporate action necessary in order to execute, deliver and perform its obligations under this Agreement and to consummate the Transaction.

 

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3.4           Corporate Authority .   This Agreement and the Transaction have been duly authorized by all necessary corporate action of the Company and the board of directors of the Company (the “ Company Board ”).  This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery of this Agreement by Purchaser, this Agreement is a valid and legally binding agreement of the Company, enforceable against the Company 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.

 

3.5           Regulatory Approvals; No Violations . (a) No consents, approvals, permits, orders, authorizations of, exemptions, reviews or waivers by, or notices, reports, filings, declarations or registrations with, any federal, state or local court, governmental, legislative, judicial, administrative or regulatory authority, agency, commission, body or other governmental entity or self regulatory organization (each, a “ Governmental Authority ”) or with any third party are required to be made or obtained by the Company or any Company Subsidiary in connection with the execution, delivery and performance by the Company of this Agreement or the consummation of the purchase of the Shares or any other aspect of the Transaction except for (A) the filings contemplated by Section 5.3, (B) those already obtained or made, (C) any securities or “blue sky” filings of any state and (D) any notices, filings, declarations or registrations in connection with the applications of the Purchaser as set forth in Section 5.3.  As used in this Agreement, “ Company Subsidiary ” means any person of which at least a majority of the securities or ownership interests having by their terms ordinary voting power to elect a majority of the board of directors or other persons performing similar functions is directly or indirectly owned or controlled by the Company or by one or more of its Company Subsidiaries; and “ person ” means an individual, corporation, limited liability company, partnership, association, trust, unincorporated organization, other entity or group (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)).

 

(b)           The execution, delivery and performance of this Agreement by the Company does not, and the consummation by the Company of the Transaction will not, (A) constitute or result in a breach or violation of, or a default under, the acceleration of any obligations or penalties or the creation of any charge, mortgage, pledge, security interest, restriction, claim, lien, equity, encumbrance or any other encumbrance or exception to title of any kind on the assets of the Company or any Company Subsidiaries (with or without notice, lapse of time, or both) pursuant to, agreements binding upon the Company or any Company Subsidiary or to which the Company or any Company Subsidiary or any of their respective properties is subject or bound or any law, regulation, judgment or governmental or non-governmental permit or license to which the Company or any Company Subsidiary or any of their respective properties is subject, (B) constitute or result in a breach or violation of, or a default under, the certificate of incorporation of the Company, as amended, or the bylaws of the Company or (C) require any consent or approval or notice or other filing under any such agreement, law, regulation, judgment, governmental or non-governmental permit or license, except, in the case of clauses (A) or (C) above, for any breach, violation, default, acceleration, creation, change, consent or approval that, individually or in the aggregate, is not reasonably likely to have a Material Adverse Effect.

 

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3.6           No Brokers .   Neither the Company nor any Company Subsidiary nor any of their respective officers, directors, employees, agents or representatives has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders or similar fees in connection with the Transaction.

 

3.7           Company Reports; Financial Statements .   (a) The Company, and each Company Subsidiary has filed or furnished, as applicable, on a timely basis all forms, filings, registrations, submissions, statements, certifications, reports and documents required to be filed or furnished by it with the U.S. Securities and Exchange Commission (the “ SEC ”) under the Exchange Act or the Act since December 31, 2006 (the forms, statements, reports and documents filed or furnished since December 31, 2006 and through the date hereof, including any amendments thereto, the “ Company Reports ”).  Each of the Company Reports, at the time of its filing or being furnished complied, or if not yet filed or furnished, will comply, in all material respects with the applicable requirements of the Act and the Exchange Act, and any rules and regulations promulgated thereunder applicable to the Company Reports.   As of their respective dates (or, if amended prior to the date hereof, as of the date of such amendment), the Company Reports did not, and any Company Reports filed or furnished with the SEC subsequent to the date hereof will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading.

 

(b)           The Company’s consolidated financial statements (including, in each case, any notes thereto) contained in the Company Reports, were or will be prepared (i) in accordance with GAAP applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto or, in the case of interim consolidated financial statements, where information and footnotes contained in such financial statements are not required under the rules of the SEC to be in compliance with GAAP) and (ii) to comply as to form, as of their respective date 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 in each case such consolidated financial statements fairly presented, in all material respects, the consolidated financial position, results of operations, changes in stockholder equity and cash flows of the Company and the consolidated Company Subsidiaries as of the respective dates thereof and for the respective periods covered thereby (subject, in the case of unaudited statements, to normal year-end adjustments which were not and which are not expected to be, individually or in the aggregate, material to the Company and its consolidated Company Subsidiaries taken as a whole).

 

(c)           The Company is in compliance in all material respects with the applicable listing and corporate governance rules and regulations of The Nasdaq Stock Market, LLC (the “Nasdaq Stock Market”).

 

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(d)           The Company maintains disclosure controls and procedures required by Rule 13a-15 or 15d-15 under the Exchange Act.  Such disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company is recorded and reported on a timely basis to the individuals responsible for the preparation of the Company’s filings with the SEC and other public disclosure documents.  The Company maintains internal control over financial reporting (as defined in Rule 13a-15 or 15d-15, as applicable, under the Exchange Act).  Such internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on its financial statements.

 

(e)           The Company has disclosed, based on the most recent evaluation of its chief executive officer and its chief financial officer prior to the date hereof, to the Company’s auditors and the audit committee of the Company Board (A) any significant deficiencies and material weaknesses in the design or operation of its internal control over financial reporting that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information and has identified for the Company’s auditors and audit committee of the Company Board any material weaknesses in internal control over financial reporting and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.  Since December 31, 2006, no material complaints, allegation, assertion or claim, whether written or oral from any source regarding accounting, internal accounting controls or auditing matters, and no concerns from the Company employees regarding questionable accounting or auditing matters, have been received by the Company.  No attorney representing the Company or any Company Subsidiary, whether or not employed by the Company or any Company Subsidiary, has reported evidence of a violation of securities laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Company’s chief legal officer, audit committee (or other committee designated for the purpose) of the Company Board or the Company Board pursuant to the rules adopted pursuant to Section 307 of the Sarbanes-Oxley Act.

 

(f)            The Company and Company Subsidiaries have timely filed all reports and statements, together with any amendments required to be made with respect thereto, that they were required to file since December 31, 2007 with the Board of Governors of the Federal Reserve System (the “ FRB ”), the Federal Deposit Insurance Corporation (the “ FDIC ”), the California Department of Financial Institutions (the “ DFI ”) or any other Governmental Authority having jurisdiction over its business or any of its assets or properties (each a “ Regulatory Authority ”), and all other material reports and statements required to be filed by it since December 31, 2007, including, without limitation, the rules and regulations of the FDIC, the DFI or any other Regulatory Authority, and has paid all fees and assessments due and payable in connection therewith.  As of their respective dates, such reports and statements complied in all material respects with all the laws, rules and regulations of the applicable Regulatory Authority with which they were filed.

 

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3.8           Absence of Certain Changes .  Since December 31, 2007 until the date hereof, (1) the Company and Company Subsidiaries have conducted their respective businesses in all material respects in the ordinary course, consistent with prior practice, and (2) no event or events have occurred that have had or would be reasonably likely to have, individually or in the aggregate, a Material Adverse Effect.

 

3.9           Commitments and Contracts . The Company has publicly disclosed in the Company Reports filed with the SEC since January 1, 2008 and prior to the date of this Agreement or provided (by hard copy, electronic data room or otherwise) to Purchaser or its representatives true, correct and complete copies of, any contract or agreement to which the Company or any Company Subsidiary is a party or by which the Company or any Company Subsidiary or any of their respective properties or assets are bound which limits or purports to limit the freedom of the Company or any Company Subsidiary or any of their respective Affiliates to compete in any material line of business or any geographic area to which the Company or any Company Subsidiary is a party or subject.

 

3.10         Litigation .   (i) No civil, criminal or administrative litigation, claim, action, suit, hearing, arbitration, investigation or other proceeding before any Governmental Authority or arbitrator is pending or, to the actual knowledge of any of the executive officers of the Company, threatened against the Company or any Company Subsidiary, (ii) neither the Company or any Company Subsidiary is subject to any order, judgment or decree, and (iii) there are no facts or circumstances that could result in any claims against, or obligations or liabilities of, the Company or any Company Subsidiary, except with respect to (i), (ii) and (iii) for those that are not, individually or in the aggregate, reasonably likely to have a Material Adverse Effect.

 

SECTION 4

 

Representations and Warranties of Purchaser

 

Purchaser hereby represents and warrants to the Company as follows:

 

4.1           Institutional Accredited Investor; Experience .   Purchaser is an “accredited investor” (as defined in Rule 501 under the Act) and is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests.

 

4.2           Investment .  Purchaser is acquiring the Shares for investment for its own account for investment purposes, and not with the view to, or for resale in connection with, any distribution thereof that would require the issuance of the Shares pursuant to this Agreement to be registered under the Act.  As used in this Agreement, “ Affiliate ” means, with respect to any person, any other person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such person, and the term “ control ” (including the terms “ controlled by ” and “ under common control with ”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through ownership of voting securities, by contract or otherwise.

 

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4.3           No Reliance .  Purchaser has relied upon the representations and warranties set forth herein and its own investigations and diligence, including a review of the Company Reports filed with the SEC and including with respect to the tax consequences of this investment and the Transaction, and not upon any other information provided by or on behalf of the Company in making the decision to purchase the Shares.  Purchaser understands and acknowledges that neither the Company nor any of the Company’s representatives, agents or attorneys is making or has made at any time any warranties or representations of any kind or character, express or implied, with respect to any matter or the Company Common Stock, except as expressly set forth herein.

 

4.4           Organization and Standing .   Purchaser is duly organized, validly existing and in good standing under the laws of the State of Delaware.  Purchaser is duly qualified to do business and is in good standing as a foreign entity in each jurisdiction where the ownership or operation of its assets or properties or conduct of its business requires such qualification, except where the failure to be so qualified or in good standing is not reasonably likely to have, individually or in the aggregate, a material adverse effect on the ability of Purchaser to timely consummate the Transaction.

 

4.5           Bank Holding Company Status .  Prior to Closing, Purchaser will be a registered bank holding company under the Bank Holding Company Act of 1956, as amended (the “ BHCA ”), and has received, or will have received prior to the Closing Date, all necessary approvals and authority from federal and state banking regulators to acquire the Shares as contemplated herein.

 

4.6           No Cross Support .   Purchaser is not a bank holding company for any other entity, and neither it nor the Company nor any Company Subsidiary or Affiliate of the Company will be looked to as a source of strength for any other entity partially or wholly owned, controlled by or affiliated with Purchaser.

 

4.7           Limited Partnership Power .   Purchaser has all requisite limited partnership power and authority and has taken all limited partnership action necessary in order to execute, deliver and perform its obligations under this Agreement and to consummate the Transaction.

 

4.8           Limited Partner Authority .   This Agreement and the Transaction have been duly authorized by all necessary limited partnership action of Purchaser.  This Agreement has been duly executed and delivered by Purchaser, and, assuming the due authorization, execution and delivery of this Agreement by the Company, this Agreement is a valid and legally binding agreement of Purchaser, enforceable against Purchaser 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.

 

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4.9           Regulatory Approvals; No Violations .  (a) No consents, approvals, permits, order or authorizations of, exemptions, reviews or waivers by, or notices, reports, filings or registrations with any Governmental Authority or with any other third party are required to be made or obtained by Purchaser or any of its Affiliates or any of their respective officers, directors or employees in connection with the execution, delivery and performance by Purchaser of this Agreement or the consummation of the Transaction except for (A) the approval of the California Commissioner of Financial Institutions under Section 701 of the California Financial Code and filing of the related application, (B) the approval of the FRB under Section 3 of the BHCA and the filing of the related application, (C) those already obtained or made and (D) any securities or “blue sky” filings of any state.

 

(b)           The execution, delivery, and performance of this Agreement by Purchaser does not, and the consummation by Purchaser of the Transaction will not, (A) constitute or result in a breach or violation of, or a default under, or the acceleration or creation of any obligations, penalties or the creation of any charge, mortgage, pledge, security interest, restriction, claim, lien or equity, encumbrance or any other encumbrance or exception to title of any kind on the assets or properties of Purchaser (with or without notice, lapse of time, or both) pursuant to agreements binding upon Purchaser or to which Purchaser or any of its properties is subject or bound or any law, regulation, judgment or governmental or non-governmental permit or license to which Purchaser or any of its properties is subject, (B) constitute or result in a breach or violation of, or a default under, the limited partnership agreement or other organizational documents of Purchaser or (C) require any consent or approval under any such agreement, law, regulation, judgment, governmental or non-governmental permit or license (other than those contemplated by (4.9(a)), except, in the case of clauses (A) or (C) above, for any breach, violation, default, acceleration, creation, change, consent or approval that, individually or in the aggregate, is not reasonably likely to have a material adverse effect on the ability of Purchaser to timely consummate the Transaction.

 

4.10         Available Funds .   Purchaser has or at Closing will have available to it all funds necessary for the payment to the Company of the aggregate Purchase Price.

 

SECTION 5

 

Pre-Closing Covenants

 

5.1           Reasonable Best Efforts .   Subject to the terms and conditions of this Agreement, each of the Company and Purchaser agrees to cooperate with the other and use its reasonable best efforts in good faith to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper, desirable, or advisable on its part under this Agreement or under applicable laws to consummate and make effective the Transaction as promptly as practicable, including the satisfaction of the conditions set forth in Section 8 hereof.

 

5.2           Press Releases.   The initial press release issued by the Company and Purchaser concerning the Transaction and this Agreement shall be a joint press release, and thereafter the Company and Purchaser shall consult with each other before issuing any press release with respect to the Transaction or this Agreement and shall not issue any such press release or make any such public statements without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, however, that a

 

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party may, without the prior consent of the other party (but after such consultation, to the extent practicable in the circumstances), issue such press release or make such public statements as may upon the advice of outside counsel be required by law or the rules or regulations of the Nasdaq Stock Market or the SEC or any other applicable regulation.

 

5.3           Bank Regulatory Applications .   (a)  Without limiting the generality of Section 5.1, Purchaser shall use its reasonable best efforts to prepare and file on behalf of it and any of its subsidiaries or Affiliates, and, to the extent necessary, the Company shall use its reasonable best efforts to prepare and file on behalf of it or any Company Subsidiary or Affiliate, all documentation to effect all necessary notices, reports and other filings and to obtain all permits, consents, approvals and authorizations necessary or advisable to be obtained from any third parties and/or Governmental Authorities in order to consummate the Transaction, including, without limitation, any application or other filing required under Section 701 of the California Financial Code or Section 3 of the BHCA or, in each case, any applicable regulations thereunder and the Company shall reasonably cooperate with Purchaser in connection with the foregoing; and any initial filings with Governmental Authorities shall be made by Purchaser as soon as reasonably practicable after the date hereof and in any event by September 30, 2008.  Subject to applicable laws relating to the exchange of information, Purchaser and the Company shall have the right to review in advance, and to the extent practicable each shall consult with the other on, all material written information submitted to any third party and/or any Governmental Authority in connection with the Transaction.  In exercising the foregoing right, each of the parties agrees to act reasonably and as promptly as practicable.  Each party hereto agrees that it shall to the extent legally permissible and practicable consult with the other with respect to the obtaining of all material permits, consents, approvals and authorizations of all third parties and/or Governmental Authorities necessary or advisable to consummate the Transaction and each party shall to the extent legally permissible and practicable keep the other party apprised of the status of material matters relating to completion of the Transaction (including to the extent legally permissible and practicable (i) promptly furnishing the other with copies of notices or other communications received by Purchaser or the Company, as the case may be, from any third party and/or Governmental Authority with respect to the Transaction and the establishment of any bank holding company for purposes of the Transaction, and as otherwise contemplated by this Agreement and, to the extent permitted by law, and (ii) providing descriptions of any oral communications from such persons).

 

(b)           Each party agrees, upon request, to furnish the other party with all information concerning itself, its subsidiaries, directors, officers and stockholders or shareholders, as applicable, other than any information concerning each party’s officers, principals, directors and stockholders or shareholders the disclosing party reasonably determines to be confidential, 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 to any third party and/or Governmental Authority.

 

5.4           Board Seat .

 

(a)           Prior to the Closing Date, upon satisfactory completion of a Directors & Officers questionnaire and provision of other background information as may be reasonably requested by the Company, the Company shall cause Mr. John Rose or

 

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Mr. Robert Goldstein, at Purchaser’s option, as a representative of Purchaser (the “Board Representative”), to be appointed to the Company Board and commence serving on the Company Board immediately following the Closing Date.  Prior to the Closing Date, the Company shall also cause the Board Representative to be appointed to the Executive Committee of the Company Board (or any successor committee thereto).

 

(b)           The Company shall include the Board Representative in the Company’s slate of director nominees recommended by the Company Board to be voted on by stockholders of the Company at the 2009 Annual Meeting of Stockholders (the “ 2009 Meeting ”), subject to satisfaction of all legal and governance requirements applicable to all board members regarding service as a director of the Company (including the approval of the Compensation, Nominating and Governance Committee of the Company Board) and the Company shall also cause the Board Representative to be re-appointed to the Executive Committee of the Company Board (or any successor committee thereto), provided that (i) through the date of the 2009 Meeting, Purchaser shall hold shares of Company Common Stock representing at least ten percent (10%) of the outstanding shares of Company Common Stock; and (ii) the Board Representative shall remain “independent” (as such term is defined in the listing standards of the Nasdaq Stock Market).

 

(c)           Through the 2009 Meeting and, assuming the conditions in the proviso in Section 5.4(b) are satisfied and the Board Representative is re-elected at the 2009 Meeting by the stockholders of the Company, through the 2010 Annual Meeting of Stockholders, Purchaser shall have the power to designate the Board Representative’s replacement upon the death, resignation, retirement, disqualification or removal from office of such director, subject to satisfaction of all legal and governance requirements applicable to all board members regarding service as a director of the Company (including the approval of the Compensation, Nominating and Governance Committee of the Company Board) and provided that any such replacement shall be “independent” (as such term is defined in the listing standards of the Nasdaq Stock Market).

 

5.5           Conduct of Business Prior to the Closing .  Except as otherwise expressly contemplated or permitted by this Agreement or with the prior written consent of Purchaser (which consent shall not be unreasonably withheld or delayed), during the period from the date of this Agreement to the Closing Date, the Company shall, and shall cause each Company Subsidiary to, (i) conduct its business only in the usual, regular and ordinary course consistent with past practice and (ii) take no action which would reasonably be expected to adversely affect or delay (x) the receipt of any approvals of any Governmental Authority required to consummate the transactions contemplated hereby or (y) the consummation of the transactions contemplated hereby.

 

5.6           Company Forbearances .  Except as expressly contemplated or permitted by this Agreement or as set forth in Schedule 5.6, during the period from the date of this Agreement to the Closing, the Company shall not, and shall not permit any Company Subsidiary to, without the prior written consent of Purchaser (which consent shall not be unreasonably withheld or delayed):

 

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(a)            set any record or payment dates for the payment of any dividends or distributions on its capital stock or other equity interest or make, declare or pay any dividend or make any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its capital stock or other equity interest or any securities or obligations convertible into or exchangeable for any shares of its capital stock or other equity interest or stock appreciation rights or grant any person any right to acquire any shares of its capital stock or other equity interest, other than (A) regular quarterly cash dividends on Company Common Stock equal to the rate paid during the fiscal quarter immediately preceding the date hereof with record and payment dates consistent with past practice; and (B) dividends paid by any of Company Subsidiaries so long as such dividends are only paid to the Company or any of its other wholly owned Subsidiaries; provided that no such dividend shall cause any bank Company Subsidiary to cease to qualify as a “well capitalized” institution under the prompt corrective action provisions of the Federal Deposit Insurance Corporation Improvement Act of 1991, as amended, and the applicable regulations thereunder;

 

(b)            or issue or commit to issue any additional shares of capital stock or other equity interest (except (i) options, restricted stock or other equity grants approved by the Company Board or the Compensation, Nominating and Governance Committee of the Company Board under the Company’s equity incentive plan) or (ii) pursuant to the exercise of Company options or vesting of restricted stock or other equity grants that were or are approved by the Company Board or the Compensation, Nominating and Governance Committee of the Company Board under the Company’s equity incentive plan), or any securities convertible into or exercisable for, or any rights, warrants or options to acquire, any additional shares of capital stock or other equity interest (except (i) options, restricted stock or other equity grants approved by the Company Board or the Compensation, Nominating and Governance Committee of the Company Board under the Company’s equity incentive plan or (ii) pursuant to the exercise of Company options or vesting of restricted stock or other equity grants that were or are approved by the Company Board or the Compensation,