Note on Proxy Contests Clause Samples

Note on Proxy Contests. If Co▇▇▇▇▇ ▇eclines to accept Crescent’s proposal or if the Board executes the Settlement Agreement and then terminates the agreement, there will be a proxy contest. Cr▇▇▇▇▇▇ ▇s confident that, not only will it win the proxy contest, but more than 50% of the non-Crescent shares voting in the election (a total of 65% of the outstanding shares) will support Crescent’s proposed slate of directors. Cr▇▇▇▇▇▇ ▇elieves it already represents the majority of Cowlitz shareholders, and this vote will confirm that representation. If Crescent is successful, a proxy contest could cost Co▇▇▇▇▇’▇ shareholders an estimated $3 million, comprised of Cowlitz’s proxy expenses, Crescent’s proxy expenses, and the change of control payments due senior management. A $3 million reduction in Cowlitz’s capital could threaten Co▇▇▇▇▇’▇ status as being “well capitalized” and is hardly in the shareholders’ interests. A proxy contest will offer shareholders a choice between nominees recommended by a 30% shareholder and an existing Board who own 0.5% of the stock and have the following record: · Shareholders reject stock option plan (2006) o Response: Board adopts a stock appreciation plan for executives · Board amends senior executive employment agreements to pay executives $2.1 million if Crescent’s ownership exceeds 30% of Cowlitz · Two most senior executives sell all of their stock in late February 2009 o Their only equity interest in Cowlitz are out-of-the-money stock options o Cowlitz stock price promptly drops 40% o The board takes no action to resolve this mis-alignment of management’s interest with shareholder’s interests · Board, including current incumbents, presides over the following: o Destruction of shareholder capital of $6.8 million in 2008. o Before tax losses in 2007 and 2008 totaling over $14 million. o Loan losses in last 3 years of $18 million (up 1,964% in 3 years) o Nonperforming assets, foreclosed real estate and 90 day delinquent loans grow from $1.8 million to $26.8 million (up 1,422% in just 2 years) o During 2006 and 2007, management increases its exposure to real estate construction and other loans from 17% to 24.5% of total loans even while market indicators were showing a decline in the real estate market Letter to Mr. ▇▇▇▇▇▇▇ ▇. Rowley April 9, 2009 o Diminished bank capital § In the last 3 years, Total Risk Based Capital declined from 18.89% (well above the 10% threshold to be considered “well capitalized”) to 11.47% (a 39% decline) o Significant deterior...