Item 1.01. Entry into a Material Definitive Agreement.
On March 22, 2021, Banc of California, Inc., a Maryland corporation ("Banc of
California"), entered into an Agreement and Plan of Merger (the "Merger
Agreement"), with Pacific Mercantile Bancorp, a California corporation ("PMB"),
pursuant to which PMB will merge (the "Merger") with and into Banc of
California, with Banc of California as the surviving corporation. The Merger
Agreement also provides that promptly after the Merger, Pacific Mercantile Bank,
a California state-chartered bank and a wholly owned subsidiary of PMB, will
merge (the "Bank Merger") with and into Banc of California, National
Association, a national banking association and wholly owned subsidiary of Banc
of California ("BoC Bank"), with BoC Bank as the surviving bank.
Subject to the terms and conditions of the Merger Agreement, upon consummation
of the Merger, each outstanding share of PMB common stock, no par value per
share, and PMB non-voting common stock, no par value per share (collectively,
"PMB Common Stock"), excluding certain specified shares, will be converted into
the right to receive 0.50 (the "Exchange Ratio") of a share of Banc of
California common stock, par value $0.01 per share ("BANC Common Stock" and such
consideration, the "Merger Consideration").
In addition, as a result of the Merger, at the effective time of the Merger
(i) each outstanding option to acquire PMB Common Stock, whether vested or
unvested, will be cancelled and will be cashed out based on the product of
(y) the total number of shares of PMB Common Stock subject to such option and
(z) the excess of (A) the per share value of the merger consideration (based on
an average BANC Common Stock price for a 20 day trading period prior to the
closing of the Merger) (the "Cashout Price") over (B) the exercise price per PMB
share of such option (less applicable taxes required to be withheld with respect
to such payment), (ii) each outstanding PMB restricted stock award will become
fully vested and will be exchanged for the Cashout Price (less applicable taxes
required to be withheld with respect to such vesting), and (iii) each
outstanding PMB restricted stock unit will become fully vested and will be
exchanged for the Cashout Price (less applicable taxes required to be withheld
with respect to such vesting).
Banc of California and PMB have made customary representations, warranties and
covenants in the Merger Agreement for a transaction of this nature. Subject to
certain exceptions, each of PMB and Banc of California have agreed, among other
things, to covenants relating to (i) the conduct of Banc of California's and
PMB's respective businesses during the interim period between the execution of
the Merger Agreement and the consummation of the Merger and (ii) the use of
reasonable best efforts to obtain governmental and regulatory approvals. In
addition, PMB has agreed, among other things, to covenants relating to
(x) obligations to facilitate PMB's shareholders' consideration of, and voting
upon, the approval of the principal terms of the Merger Agreement and certain
related matters as applicable, (y) the recommendations by the board of directors
of PMB in favor of the approval by PMB's shareholders of the principal terms of
the Merger Agreement and certain related matters as applicable, and
(z) non-solicitation obligations relating to alternative business combination
transactions. In addition, Banc of California has agreed, among other things, to
covenants relating to (x) obligations to facilitate Banc of California's
shareholders' consideration of, and voting upon, the approval of the Merger and
the issuance of shares of BANC Common Stock in connection with the Merger as
contemplated by the Merger Agreement and (y) the recommendations by the board of
directors of Banc of California in favor of the approval by Banc of California's
shareholders of the Merger and the issuance of shares of BANC Common Stock in
connection with the Merger as contemplated by the Merger Agreement, and
(z) appointing two members of the PMB board of directors to the Banc of
California board of directors effective upon the closing of the Merger.
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Completion of the Merger is subject to certain customary conditions, including
(i) approval by PMB's shareholders, (ii) approval by Banc of California's
shareholders, (iii) the absence of any governmental order or law prohibiting the
consummation of the Merger, and (iv) effectiveness of the registration statement
for the BANC Common Stock to be issued as consideration in the Merger. The
obligation of each party to consummate the Merger is also conditioned upon
(a) subject to certain exceptions, the accuracy of the representations and
warranties of the other party, (b) performance in all material respects by the
other party of its obligations under the Merger Agreement, (c) receipt by each
party 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, and (d) the absence of a material adverse effect with
respect to the other party since the date of the Merger Agreement. The
obligation of Banc of California to consummate the Merger is also conditioned
upon (w) the sum of the adjusted shareholders' equity of PMB and PMB's allowance
for loan losses being in excess of a specified level as of the date specified in
the Merger Agreement, and (x) the receipt of required regulatory approvals and
such approvals not containing materially burdensome regulatory conditions. The
obligation of PMB to consummate the Merger is also conditioned upon the receipt
of certain required regulatory approvals.
The Merger Agreement contains certain termination rights for both Banc of
California and PMB, including if (i) the Merger is not consummated by
December 31, 2021 (as it may be extended to March 31, 2022 under certain
circumstances, the "End Date"), (ii) the required regulatory approvals are not
obtained, (iii) the approval of Banc of California's or PMB'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. In
addition, in certain circumstances, Banc of California may terminate the Merger
Agreement prior to PMB's shareholder approval of the Merger in the event that
(A) PMB materially breaches its non-solicitation obligations relating to
alternative business combination transactions, (B) PMB's board withdraws or
adversely modifies its recommendation to shareholders or fails to affirm its
recommendation within the required time period after an acquisition proposal is
made or (C) PMB's board recommends a tender offer or fails to recommend against
such tender offer within ten business days after commencement. The Merger
Agreement also provides that PMB will be obligated to pay a termination fee of
$8.5 million to Banc of California if the Merger Agreement (i) is terminated by
Banc of California in the circumstances described in the preceding sentence or
(ii) (A) if an acquisition proposal is made to PMB or to its shareholders
publicly, (B) the Merger Agreement is terminated for failure to consummate the
Merger by the End Date, for failure to obtain the approval of PMB's shareholders
at the PMB shareholder meeting or for failure to obtain the approval of Banc of
California's stockholders at the Banc of California stockholder meeting and, in
each case, the approval of PMB's shareholders has not been obtained and (C) PMB
enters into a definitive agreement with respect to or consummates certain
acquisition proposals within 12 months of termination of the Merger Agreement.
The Merger Agreement and the above description of the Merger Agreement have been
included to provide investors and security holders with information regarding
the terms of the Merger Agreement. The Merger Agreement and the above
description are not intended to provide any other factual information about Banc
of California, PMB, or their respective subsidiaries or affiliates. The
representations, warranties and covenants contained in the Merger Agreement were
made only for purposes of the Merger Agreement and as of specific dates, were
solely for the benefit of the parties to the Merger Agreement, may be subject to
limitations agreed upon by the parties, including being qualified by
confidential disclosures made by each contracting party to the other for the
purposes of allocating contractual risk between them rather than 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.
Investors should not rely on the representations, warranties and covenants or
any description thereof as characterizations of the actual state of facts or
condition of Banc of California, PMB or any of their respective subsidiaries,
affiliates or businesses. Moreover, information concerning the subject matter of
the representations, warranties and covenants may change after the date of the
Merger Agreement, which
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subsequent information may or may not be fully reflected in public disclosures
by Banc of California or PMB. Accordingly, investors should read the
representations and warranties in the Merger Agreement not in isolation but only
in conjunction with the other information about Banc of California or PMB and
their respective subsidiaries that the respective companies include in reports,
. . .
Item 8.01. Other Events.
On March 22, 2021, Banc of California and PMB issued a joint press release
announcing that they had entered into the Merger Agreement, a copy of which is
attached hereto as Exhibit 99.3 and incorporated herein by reference. In
addition, Banc of California and PMB will be providing supplemental information
regarding the Merger in connection with a presentation to investors. The slides
to be used in connection with this investor presentation are attached hereto as
Exhibit 99.4 and are incorporated herein by reference.
Forward-Looking Statements
This communication includes forward-looking statements within the meaning of the
"Safe-Harbor" provisions of the Private Securities Litigation Reform Act of
1995. These statements are necessarily subject to risk and uncertainty and
actual results could differ materially from those anticipated due to various
factors, including those set forth from time to time in the documents filed or
furnished by Banc of California, Inc. and PMB with the SEC. The following
factors, among others, could cause actual results to differ from those set forth
in the forward-looking statements: (i) the possibility that the merger does not
close when expected or at all because required regulatory, shareholder or other
approvals, financial tests or other conditions to closing are not received or
satisfied on a timely basis or at all; (ii) changes in Banc of California's or
PMB's stock price before closing, including as a result of its financial
performance prior to closing, or more generally due to broader stock market
movements, and the performance of financial companies and peer group companies;
(iii) the risk that the benefits from the transaction may not be fully realized
or may take longer to realize than expected, including as a result of changes in
general economic and market conditions, interest and exchange rates, monetary
policy, laws and regulations and their enforcement, and the degree of
competition in the geographic and business areas in which Banc of California and
PMB operate; (iv) the ability to promptly and effectively integrate the
businesses of Banc of California and PMB; (v) the reaction to the transaction of
the companies' clients, employees and
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counterparties; (vi) diversion of management time on merger-related issues;
(vii) lower than expected revenues, credit quality deterioration or a reduction
in real estate values or a reduction in net earnings; and (viii) other risks
that are described in Banc of California's and PMB's public filings with the
SEC. You should not place undue reliance on forward-looking statements and Banc
of California and PMB undertake no obligation to update any such statements to
reflect circumstances or events that occur after the date on which the
forward-looking statement is made.
Additional Information About the Merger and Where to Find It
Investors and security holders are urged to carefully review and consider each
of Banc of California's and PMB's public filings with the SEC, including but not
limited to their Annual Reports on Form 10-K, their proxy statements, their
Current Reports on Form 8-K and their Quarterly Reports on Form 10-Q. The
documents filed by Banc of California with the SEC may be obtained free of
charge at our website at www.bancofcal.com or at the SEC's website at
www.sec.gov. These documents may also be obtained free of charge from Banc of
California by requesting them in writing to Banc of California, Inc., 3
MacArthur Place, Santa Ana, CA 92707; Attention: Investor Relations, by
submitting an email request to ir@bancofcal.com or by telephone at (855)
361-2262.
The documents filed by PMB with the SEC may be obtained free of charge at PMB's
website at www.pmbank.com or at the SEC's website at www.sec.gov. These
documents may also be obtained free of charge from PMB by requesting them in
writing to Pacific Mercantile Bancorp, 949 South Coast Drive, Suite 300, Costa
Mesa, CA 92626; Attention: Investor Relations, or by telephone at 714-438-2500.
Banc of California intends to file a registration statement with the SEC, which
will include a joint proxy statement of Banc of California and PMB and a
prospectus of Banc of California, and each party will file other documents
regarding the proposed transaction with the SEC. Before making any voting or
investment decision, investors and security holders of Banc of California and
PMB are urged to carefully read the entire registration statement and joint
proxy statement/prospectus, when they become available, as well as any
amendments or supplements to these documents, because they will contain
important information about the proposed transaction. A definitive joint proxy
statement/prospectus will be sent to the shareholders of Banc of California and
PMB seeking any required shareholder approvals. Investors and security holders
will be able to obtain the registration statement and the joint proxy
statement/prospectus free of charge from the SEC's website or from Banc of
California or PMB by writing to the addresses provided for each company set
forth in the paragraphs above.
Banc of California, PMB, their directors, executive officers and certain other
persons may be deemed to be participants in the solicitation of proxies from
Banc of California and PMB shareholders in favor of the approval of the
transaction. Information about the directors and executive officers of Banc of
California and their ownership of Banc of California common stock is set forth
in the proxy statement for Banc of California's 2020 annual meeting of
stockholders, as previously filed with the SEC. Information about the directors
and executive officers of PMB and their ownership of PMB common stock is set
forth in the proxy statement for PMB's 2020 annual meeting of shareholders, as
previously filed with the SEC. Shareholders may obtain additional information
regarding the interests of such participants by reading the registration
statement and the joint proxy statement/prospectus when they become available.
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Item 9.01. Financial Statements and Exhibits
(d) Exhibits
Exhibit
Number Description
2.1 Agreement and Plan of Merger, dated March 22, 2021, between Banc of
California and PMB.*
99.1 Form of Voting Agreement, dated March 22, 2021, between Banc of
California and certain shareholders of PMB.
99.2 Form of Non-Solicitation Agreement, dated March 22, 2021, between
Banc of California and certain executive officers of PMB.
99.3 Joint Press Release, dated March 22, 2021.
99.4 Investor Presentation, dated March 22, 2021.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
* Schedules and exhibits omitted pursuant to Item 601(a)(5) of Regulation S-K.
Banc of California agrees to furnish a copy of any omitted schedule or exhibit
to the SEC upon request.
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