AGREEMENT AND PLAN OF MERGER Between FRONTIER FINANCIAL CORPORATION and FRONTIER BANK and WASHINGTON BANKING COMPANY and WHIDBEY ISLAND BANK
Exhibit
2.1
______________________________________________
AGREEMENT
AND PLAN OF MERGER
Between
FRONTIER
FINANCIAL CORPORATION
and
FRONTIER
BANK
and
WASHINGTON
BANKING COMPANY
and
WHIDBEY
ISLAND BANK
______________________________________________
Dated
as of September 26, 2007
TABLE
OF CONTENTS
|
RECITALS
|
1
|
|
|
DEFINITIONS
|
1
|
|
|
ARTICLE
I.
|
THE
MERGER
|
7
|
|
1.1
|
THE
CORPORATE MERGER
|
7
|
|
1.2
|
THE
BANK MERGER
|
7
|
|
1.3
|
CONVERSION
OF WBC COMMON STOCK
|
8
|
|
1.4
|
ELECTION
PROCEDURES
|
9
|
|
1.5
|
WBC
OPTIONS
|
12
|
|
1.6
|
DISSENTING
SHARES
|
12
|
|
1.7
|
TAX
CONSEQUENCES
|
13
|
|
ARTICLE
II.
|
EXCHANGE
OF SHARES
|
13
|
|
2.1
|
FRONTIER
TO MAKE SHARES AND CASH AVAILABLE
|
13
|
|
2.2
|
EXCHANGE
OF SHARES
|
13
|
|
ARTICLE
III.
|
ACTIONS
PENDING CLOSING
|
15
|
|
3.1
|
ORDINARY
COURSE
|
15
|
|
3.2
|
CAPITAL
STOCK
|
15
|
|
3.3
|
DIVIDENDS,
ETC.
|
15
|
|
3.4
|
INDEBTEDNESS;
LIABILITIES
|
15
|
|
3.5
|
OPERATING
PROCEDURES; CAPITAL EXPENDITURES; ETC.
|
15
|
|
3.7
|
CONTINUANCE
OF BUSINESS
|
16
|
|
3.7
|
SUBSIDIARIES
|
16
|
|
3.8
|
COMPENSATION;
EMPLOYMENT AGREEMENTS
|
16
|
|
3.9
|
HIRING
|
16
|
|
3.1
|
BENEFIT
PLANS
|
16
|
|
3.11
|
CLAIMS
|
16
|
|
3.12
|
AMENDMENTS
|
16
|
|
3.13
|
CONTRACTS
|
16
|
|
3.14
|
LOANS
|
17
|
|
3.15
|
AGREEMENTS
|
17
|
|
ARTICLE
IV.
|
FRONTIER
FORBEARANCES
|
17
|
|
4.1
|
AMENDMENTS
|
17
|
|
4.2
|
REORGANIZATION
|
17
|
|
4.3
|
CONDITIONS
|
17
|
|
4.4
|
AGREEMENTS
|
17
|
|
4.5
|
CERTAIN
ACTIONS
|
17
|
|
ARTICLE
V
|
REPRESENTATIONS
AND WARRANTIES
|
17
|
|
5.1
|
WBC
AND WHIDBEY ISLAND BANK REPRESENTATIONS AND WARRANTIES
|
17
|
|
5.2
|
FRONTIER
AND FRONTIER BANK REPRESENTATIONS AND WARRANTIES
|
29
|
|
ARTICLE
VI.
|
COVENANTS
|
34
|
|
6.1
|
BEST
EFFORTS
|
34
|
|
6.2
|
PROXY
STATEMENT; MEETING
|
34
|
|
6.3
|
REGISTRATION
STATEMENT COMPLIANCE WITH SECURITIES LAWS
|
35
|
|
6.4
|
PUBLICITY;
PRESS RELEASES
|
35
|
|
6.5
|
ACCESS;
INFORMATION
|
35
|
|
6.6
|
AFFILIATE
AGREEMENTS
|
36
|
|
6.7
|
STATE
TAKEOVER LAWS
|
36
|
|
6.8
|
NO
RIGHTS TRIGGERED
|
36
|
|
6.9
|
SHARES
LISTED
|
36
|
|
6.1
|
REGULATORY
APPLICATIONS
|
36
|
|
6.11
|
INSURANCE
|
37
|
|
6.12
|
CERTAIN
ACTIONS
|
37
|
|
6.13
|
ESTOPPEL
LETTERS
|
37
|
|
ARTICLE
VII.
|
CONDITIONS
PRECEDENT
|
37
|
|
7.1
|
CONDITIONS
TO EACH PARTY’S OBLIGATIONS
|
37
|
|
7.2
|
CONDITIONS
TO OBLIGATIONS OF FRONTIER
|
38
|
|
7.3
|
CONDITIONS
TO OBLIGATIONS OF WBC
|
40
|
|
ARTICLE
VIII.
|
TERMINATION
AND AMENDMENT
|
41
|
|
8.1
|
TERMINATION
|
41
|
|
8.2
|
EFFECT
OF TERMINATION
|
43
|
|
8.3
|
AMENDMENT
|
44
|
|
8.4
|
EXTENSION;
WAIVER
|
44
|
|
ARTICLE
IX
|
ADDITIONAL
AGREEMENTS
|
44
|
|
9.1
|
ADDITIONAL
AGREEMENTS
|
44
|
|
9.2
|
BENEFIT
PLANS
|
44
|
|
9.3
|
CERTAIN
ACTIONS
|
45
|
|
9.4
|
EMPLOYMENT
AND CHANGE OF CONTROL AGREEMENTS
|
46
|
|
9.5
|
DIRECTORS
OF WBC
|
46
|
|
9.6
|
WBC
MANAGEMENT
|
46
|
|
9.7
|
AT-WILL
EMPLOYEES
|
47
|
|
ARTICLE
X.
|
GENERAL
PROVISIONS
|
47
|
|
10.1
|
CLOSING;
EFFECTIVE TIME
|
47
|
|
10.2
|
SURVIVAL
|
47
|
|
10.3
|
COUNTERPARTS
|
47
|
|
10.4
|
GOVERNING
LAW; VENUE
|
47
|
|
10.5
|
EXPENSES
|
47
|
|
10.6
|
NOTICES
|
47
|
|
10.7
|
ENTIRE
UNDERSTANDING
|
48
|
|
10.8
|
ENFORCEMENT
PROCEEDINGS
|
48
|
|
10.9
|
HEADINGS
|
48
|
|
10.1
|
ENFORCEMENT
OF CONFIDENTIALITY AGREEMENT
|
48
|
|
10.11
|
SEVERABILITY
|
49
|
|
10.12
|
ASSIGNMENT;
NO THIRD PARTY BENEFICIARIES
|
49
|
AGREEMENT
AND PLAN OF MERGER
This
AGREEMENT AND PLAN OF MERGER, dated as of the 26th day of September, 2007 (this
“Agreement”), is by and among FRONTIER FINANCIAL CORPORATION (“Frontier”),
FRONTIER BANK (“Frontier Bank”), WASHINGTON BANKING COMPANY (“WBC”) and WHIDBEY
ISLAND BANK (“Whidbey Island Bank”).
RECITALS
(A) FRONTIER.
Frontier is a corporation duly organized and existing under the laws of the
State of Washington, with its principal executive offices located in Everett,
Washington. Frontier is a registered financial holding company.
(B) FRONTIER
BANK. Frontier Bank is a Washington state-chartered commercial bank duly
organized and existing under the laws of the State of Washington.
(C) WASHINGTON
BANKING COMPANY. Washington Banking Company is a corporation duly organized
and existing under the laws of the State of Washington, with its principal
executive offices located in Oak Harbor, Washington. WBC is a registered
financial holding company.
(D) WHIDBEY
ISLAND BANK. Whidbey Island Bank is a Washington state-chartered commercial
bank duly organized and existing under the laws of the State of Washington.
Whidbey Island Bank operates twenty-one Washington branches and loan production
offices (each a “WBC Office”) under the trade names, trademarks and logos of
Whidbey Island Bank.
(E) VOTING,
DIRECTORS’ AND NONCOMPETITION AGREEMENTS. As a condition and an inducement
to Frontier’s and Frontier Bank’s willingness to enter into this Agreement, (x)
the directors and certain Executive Officers of WBC have entered into agreements
in the form attached to this Agreement as Exhibit A, pursuant to which,
among other things, each such individual has agreed to vote his or her shares
of
WBC Common Stock in favor of approval of the actions contemplated by this
Agreement at the Meeting (as defined below), (y) each director of WBC has
entered into an agreement in the form attached to this Agreement as Exhibit
B pursuant to which each such individual has agreed to refrain from
competing with or soliciting the employees or customers of Frontier and Frontier
Bank, and (z) certain Executive Officers of WBC have entered into agreements
in
the forms attached to this Agreement as Exhibits C-1 through C-4 pursuant
to which each such individual has agreed to refrain from competing with or
soliciting the employees or customers of Frontier and Frontier
Bank.
In
consideration of their mutual promises and obligations, the parties further
agree as follows:
DEFINITIONS
(A) DEFINITIONS.
Certain capitalized terms used in this Agreement have the following
meanings:
“Acquisition
Agreement” has the meaning assigned to such term in Section 8.1(F).
“Acquisition
Proposal” has the meaning assigned to such term in Section 9.3(D).
“Aggregate
Consideration” has the meaning assigned to such term in Section
1.3(A).
“Agreement”
means this Agreement and Plan of Merger, together with all Exhibits and
Schedules annexed to, and incorporated by specific reference as a part of,
this
Agreement.
“Appraisal
Laws” has the meaning assigned to such term in Section 1.6.
“Business
Day” means any day other than a Saturday, Sunday, or legal holiday in the
State of Washington.
“Certificate”
has the meaning assigned to such term in Section 1.3(C).
“Closing”
has the meaning assigned to such term in Section 10.1.
“Code”
has the meaning assigned to such term in Section 1.7.
“Compensation
and Benefit Plans” has the meaning assigned to such term in Section 5.1(P)(1).
“Confidentiality
Agreement” has the meaning assigned to such term in Section 6.5(B).
“Control”
with respect to any Person 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 the ownership of voting interests, by contract, or
otherwise.
“Daily
Sales Price” for any Trading Day means the closing price per share of
Frontier Common Stock as reported by Nasdaq.
“Department”
means the Department of Financial Institutions of the State of
Washington.
“Derivatives
Contract” means an exchange-traded or over-the-counter swap, forward,
future, option, cap, floor or collar financial contract or any other contract
that: (1) is not included on the balance sheet of the WBC Financial Statements
or the Frontier Financial Statements, as the case may be, and (2) is a
derivative contract (including various combinations thereof).
“Determination
Date” means the fifth business day immediately prior to the Effective
Time.
“Dissenting
Shares” means the shares of WBC Common Stock held by those shareholders of
WBC who have timely and properly exercised their dissenters’ rights in
accordance with the Appraisal Laws.
“Effective
Time” has the meaning assigned to such term in Section 10.1.
“Employment
Agreements” shall mean the agreements with certain officers of WBC described
in Section 9.4.
“Environmental
Law” means (1) any federal, state, and/or local law, statute, ordinance,
rule, regulation, code, license, permit, order, authorization, approval,
consent, judgment, decree, injunction, requirement or agreement with any
governmental entity, relating to (a) the protection, preservation or restoration
of the environment (including air, surface water, groundwater, drinking water
supply, surface land, subsurface land) or to human health or safety, or (b)
the
exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of
Hazardous
Material, in each case as amended and as now in effect, including the Federal
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
the Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act of 1972, the Federal Clean Air Act, the Federal Clean Water Act,
the
Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous
and Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the
Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, and the Federal Occupational Safety and Health Act of 1970,
and
(2) any common law or equitable doctrine (including injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict liability) that
would reasonably be expected to impose liability or obligations for injuries
or
damages due to, or threatened as a result of, the presence of or exposure to
any
Hazardous Material.
“ERISA”
has the meaning assigned to such term in Section 5.1(P)(2).
“ERISA
Affiliate” has the meaning assigned to such term in Section
5.1(P)(3).
“ERISA
Plans” has the meaning assigned to such term in Section
5.1(P)(2).
“Exchange
Act” means the Securities Exchange Act of 1934, as amended, together with
the rules and regulations promulgated under such statute.
“Exchange
Agent” has the meaning assigned to such term in Section 2.1.
“Exchange
Fund” has the meaning assigned to such term in Section 2.1.
“Exchange
Ratio” has the meaning assigned to such term in Section 1.5(A).
“Execution
Date” means the last date on which this Agreement is executed by each of the
parties hereto.
“Executive
Officer” has the meaning set forth in Rule 405 of Regulation C under the
Securities Act.
“FDIC”
means the Federal Deposit Insurance Corporation.
“Federal
Reserve Board” means the Board of Governors of the Federal Reserve
System.
“Frontier”
has the meaning assigned in the introductory paragraph to this
Agreement.
“Frontier
Average Share Price” means the price equal to the average (rounded to the
nearest ten-thousandth) of each Daily Sales Price of Frontier Common Stock
for
the twenty (20) Trading Days immediately preceding the Determination
Date.
“Frontier
Bank” has the meaning assigned in the introductory paragraph to this
Agreement.
“Frontier
Common Stock” has the meaning assigned to such term in Section
5.2(B)(2).
“Frontier
Financial Statements” has the meaning assigned to such term in Section 5.2(G)(1).
“Frontier
Securities Documents” has the meaning assigned to such term in Section 5.2(G)(2).
“Frontier
Transaction” means: (1) a merger, consolidation or similar transaction
involving Frontier, where Frontier is not the corporation surviving such
transaction or where a change of control of Frontier is otherwise effected,
(2)
the disposition, by sale, lease, exchange or otherwise, of assets or deposits
of
Frontier or any of its significant Subsidiaries representing in either case
25%
or more of the consolidated assets or deposits of Frontier and its Subsidiaries,
or (3) the issuance, sale or other disposition (including by way of merger,
consolidation, share exchange or any similar transaction) of securities
representing 25% or more of the voting power of Frontier or any of its
significant Subsidiaries other than the issuance of Frontier Common Stock upon
the exercise of outstanding options or the conversion of outstanding convertible
securities of Frontier.
“GAAP”
means generally accepted accounting principles consistently applied in the
United States.
“Governmental
Authority” means any federal, state or local court, administrative agency or
commission or other governmental authority or instrumentality or self-regulatory
organization having jurisdiction over the Person to whom the term is
applied.
“Hazardous
Material” means any substance presently listed, defined, designated or
classified as hazardous, toxic, radioactive or dangerous, under any
Environmental Law, whether by type or quantity, including any oil or other
petroleum product, toxic waste, pollutant, contaminant, hazardous substance,
toxic substance, hazardous waste, special waste or petroleum or any derivative
or by-product thereof, radon, radioactive material, asbestos, asbestos
containing material, urea formaldehyde foam insulation, lead and polychlorinated
biphenyl.
“Intellectual
Property” has the meaning assigned to such term in Section 5.1(Z).
“Knowledge”
or words of similar meaning means the actual conscious knowledge as of the
Execution Date, without any duty of inquiry, of any officer, director or manager
of the Person to whom the term applies.
“Loan/Fiduciary
Property” means any property owned or controlled by a party or any of its
Subsidiaries or in which such party or any of its Subsidiaries holds a security
or other interest, and, where required by the context, includes any such
property where such party or any of its Subsidiaries constitutes the owner
or
operator of such property, but only with respect to such property.
“Material
Adverse Effect” means, with respect to any party to this Agreement, an
event, occurrence or circumstance that (a) has or is reasonably likely to have
a
material adverse effect on the financial condition, results of operations,
business or prospects of such party and its Subsidiaries, taken as a whole,
or
(b) would materially impair such party’s ability to perform its obligations
under this Agreement or the consummation of any of the transactions contemplated
by this Agreement.
“Measurement
Period” has the meaning assigned to such term in Section
8.1(G).
“Meeting”
has the meaning assigned to such term in Section 6.2(A).
“Merger”
means (i) the merger of WBC with and into Frontier pursuant to Section 1.1
in
exchange for cash and Frontier Common Stock as set forth in Section 1.3, and
(ii) the merger of Whidbey Island Bank with and into Frontier Bank pursuant
to
Section 1.2.
“Merger
Consideration” has the meaning assigned to such term in Section
1.3(A).
“Multiemployer
Plans” has the meaning assigned to such term in Section
5.1(P)(2).
“Nasdaq”
means the Nasdaq Global Select Market™.
“Noncompetition
Agreements” has the meaning assigned to such term in Section 7.2(K).
“Participation
Facility” means any building or other facility in which a party or any of
its Subsidiaries participates in the management and, where required by the
context, includes the owner or operator of such facility.
“Pension
Plan” has the meaning assigned to such term in Section
5.1(P)(2).
“Per
Share Cash Consideration” has the meaning assigned to such term in Section
1.3(A).
“Per
Share Consideration” has the meaning assigned to such term in Section
1.3(A).
“Per
Share Stock Consideration” has the meaning assigned to such term in Section
1.3(A).
“Person”
means any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, governmental body, or
other entity.
“Previously
Disclosed” means information that is either (i) disclosed by a party in a
Schedule that is delivered by that party to the other party contemporaneously
with the Execution Date, or (ii) disclosed in, or filed or furnished as an
exhibit to, the WBC Securities Documents (in the case of WBC) or the Frontier
Securities Documents (in the case of Frontier).
“Prospectus/Proxy
Statement” has the meaning assigned to such term in Section 6.2.
“RCW”
means the Revised Code of Washington, as amended.
“Registration
Statement” has the meaning assigned to such term in Section 6.2.
“Regulatory
Agreement” has the meaning assigned to such term in Section
5.1(K).
“Regulatory
Authorities” means federal or state governmental agencies, authorities or
departments charged with the supervision or regulation of depository
institutions or engaged in the insurance of deposits.
“Resulting
Bank” has the meaning assigned to such term in Section 1.2(A).
“Rights”
has the meaning assigned to such term in Section 5.1(B).
“Securities
Act” means the Securities Act of 1933, as amended, together with the rules
and regulations promulgated under such statute.
“SEC”
means the Securities and Exchange Commission.
“Subsidiary”
means, with respect to any entity, each partnership, limited liability company,
or corporation the majority of the outstanding partnership interests, membership
interests, capital stock or voting power of which is (or upon the exercise
of
all outstanding warrants, options and other rights would be) owned, directly
or
indirectly, at the time in question by such entity.
“Superior
Proposal” has the meaning assigned to such term in Section 9.3.
“Surviving
Corporation” has the meaning assigned to such term in Section
1.1(A).
“Taxes”
means federal, state or local income, gross receipts, sales, use, license,
excise, franchise, employment, withholding or similar taxes imposed on the
income, properties or operations of the respective party or its Subsidiaries,
together with any interest, additions, or penalties with respect thereto and
any
interest in respect of such additions or penalties.
“Termination
Fee Amount” has the meaning assigned to such term in Section 8.2(B).
“Third
Party” means a person within the meaning of Sections 3(a)(9) and 13(d)(3) of
the Exchange Act, excluding: (1) WBC, Whidbey Island Bank or any other
Subsidiary of WBC, and (2) Frontier, Frontier Bank or any other Subsidiary
of
Frontier.
“Total
Cash Amount” has the meaning assigned to such term in Section
1.3(A).
“Total
Stock Consideration” has the meaning assigned to such term in
Section 1.3(A).
“Trading
Day” means a day that Frontier Common Stock is traded on
Nasdaq.
“WBC”
has the meaning assigned in the introductory paragraph to this
Agreement.
“WBC
Common Stock” has the meaning assigned to such term in Section
5.1(B).
“WBC
Contract” has the meaning assigned to such term in Section 5.1(M).
“WBC
Financial Statements” has the meaning assigned to such term in Section 5.1(G).
“WBC
Office” has the meaning assigned to such term in Recital (D).
“WBC
Option” has the meaning assigned to such term in Section
5.1(B)(4).
“WBC
Stock Option Plans” has the meaning assigned to such term in Section
1.5(C).
“WBC
Securities Documents” has the meaning assigned to such term in Section
5.1(G)(2).
“WBC
Tax Returns” has the meaning assigned to such term in Section 5.1(V).
“Whidbey
Island Bank” has the meaning assigned in the introductory paragraph to this
Agreement.
“Whidbey
Island Bank Common Stock” has the meaning assigned to such term in Section
5.1(B).
(B) GENERAL
INTERPRETATION. Except as otherwise expressly provided in this Agreement or
unless the context clearly requires otherwise, the terms defined in this
Agreement include the plural as well as the singular; the words “hereof,”
“herein,” “hereunder,” “in this Agreement” and other words of similar import
refer to this Agreement as a whole and not to any particular Article, Section
or
other subdivision; and references in this Agreement to Articles, Sections,
Schedules and Exhibits refer to Articles and Sections of and Schedules and
Exhibits to this Agreement. Unless otherwise stated, references to Subsections
refer to the Subsections of the Section in which the reference appears. General
references to a “party” hereunder, unless the context requires otherwise, shall
be construed to relate to Frontier and its Subsidiaries, on the one hand, and
WBC and its Subsidiaries, on the other hand. All pronouns used in this Agreement
include the masculine, feminine and neuter gender, as the context requires.
All
accounting terms used in this Agreement that are not expressly defined in this
Agreement have the respective meanings given to them in accordance with
GAAP.
ARTICLE
I. THE MERGER
1.1 THE
CORPORATE MERGER. Subject to the provisions of
this Agreement, at the Effective Time:
(A) SURVIVING
CORPORATION. WBC shall be merged with and into Frontier pursuant to the
terms and conditions set forth herein (the “Corporate Merger”). Upon
consummation of the Corporate Merger, the separate existence of WBC shall cease
and Frontier shall continue as the surviving corporation within the meaning
of
RCW 23B.11.010(2)(a) (the “Surviving Corporation”).
(B) ARTICLES,
BYLAWS, DIRECTORS, OFFICERS. The Articles of Incorporation and Bylaws of the
Surviving Corporation shall be those of Frontier, as in effect immediately
prior
to the Effective Time. Except as set forth in Section 9.5, the directors and
officers of Frontier in office immediately prior to the Effective Time shall
be
the directors and officers of the Surviving Corporation, together with such
additional directors and officers as may thereafter be elected, who shall hold
office until such time as their successors are elected and
qualified.
(C) RIGHTS
OF SURVIVING CORPORATION. Frontier, as the Surviving Corporation, shall
thereupon and thereafter possess all of the rights, privileges, immunities
and
franchises, of a public as well as of a private nature, of each of the
corporations so merged; and all property, real, personal and mixed, and all
debts due on whatever account, and all and every other interest, of or belonging
to or due to each of the corporations so merged, shall be deemed to be vested
in
the Surviving Corporation without further act or deed; and the title to any
real
estate or any interest therein, vested in each of such corporations, shall
not
revert or be in any way impaired by reason of the Corporate Merger.
(D) ASSUMPTION
OF LIABILITIES. The Surviving Corporation shall become and be liable for all
debts, liabilities, obligations and contracts of Frontier as well as those
of
WBC, whether the same shall be matured or unmatured; whether accrued, absolute,
contingent or otherwise; and whether or not reflected or reserved against in
the
balance sheets, other financial statements, books of account or records of
Frontier or WBC.
1.2 THE
BANK MERGER. Subject to the provisions of this
Agreement, at the Effective Time:
(A) RESULTING
BANK. Whidbey Island Bank shall be merged with and into Frontier Bank
pursuant to the terms and conditions set forth herein. Upon consummation of
the
Bank Merger, the separate existence of Whidbey Island Bank shall cease and
Frontier Bank shall continue as the resulting bank for purposes of RCW 30.49.010
(the “Resulting Bank”).
(B) ARTICLES,
BYLAWS, DIRECTORS, OFFICERS. The Articles of Incorporation and Bylaws of the
Resulting Bank shall be those of Frontier Bank, as in effect immediately prior
to the Effective Time. The directors and officers of Frontier Bank in office
immediately prior to the Effective Time shall be the directors and officers
of
the Resulting Bank, together with such additional directors and officers as
may
thereafter be elected, who shall hold office until such time as their successors
are elected and qualified.
(C) RIGHTS
OF RESULTING BANK. Frontier Bank, as the Resulting Bank, shall thereupon and
thereafter possess all of the rights, privileges, immunities and franchises,
of
a public as well as of a private nature, of each of the institutions so merged;
and all property, real, personal and mixed, and all debts due on whatever
account, and all and every other interest, of or belonging to or due to each
of
the institutions so merged, shall be deemed to be vested in the Resulting Bank
without further act or deed; and the title to any real estate or any interest
therein, vested in each of such institutions, shall not revert or be in any
way
impaired by reason of the Bank Merger.
(D) ASSUMPTION
OF LIABILITIES. The Resulting Bank shall become and be liable for all debts,
liabilities, obligations and contracts of Frontier Bank as well as those of
Whidbey Island Bank, whether the same shall be matured or unmatured; whether
accrued, absolute, contingent or otherwise; and whether or not reflected or
reserved against in the balance sheets, other financial statements, books of
account, or records of Frontier Bank or Whidbey Island Bank.
1.3 CONVERSION
OF WBC COMMON STOCK. Subject to the provisions of
this Agreement, at the Effective Time:
(A) OUTSTANDING
WBC COMMON STOCK. Each share of WBC Common Stock issued and outstanding at
the Effective Time shall, by virtue of the Merger, automatically and without
any
action on the part of the holder of such share, cease to be outstanding and
shall then and thereafter be converted into and exchangeable for the right
to
receive, at the election of the holder thereof as provided in and subject to
the
provisions of Section 1.4, either: (1) a number of shares of Frontier Common
Stock equal to the Per Share Stock Consideration; or (2) cash in an amount
equal
to the Per Share Consideration (the “Per Share Cash Consideration”). The Per
Share Stock Consideration and the Per Share Cash Consideration are referred
to
herein collectively as the “Merger Consideration.” Shares of WBC Common Stock
held by Frontier immediately prior to the Effective Time shall be deemed
canceled and retired without additional consideration and shall be excluded
from
any calculation based upon the number of shares of WBC Common Stock outstanding
pursuant to this Section and excluded from the election and exchange procedures
set forth in Section 1.4.
For
purposes of this Section 1.3(A):
“Aggregate
Consideration” shall mean the sum, expressed as a dollar amount, of (x) the
Total Stock Consideration and (y) the Total Cash Amount.
“Per
Share Consideration” shall mean the quotient, expressed as a dollar amount and
rounded to the nearest tenth-thousandth, obtained by dividing the Aggregate
Consideration by the total number of shares of WBC Common Stock outstanding
as
of the close of business on the Execution Date.
“Per
Share Stock Consideration” shall mean the quotient, rounded to the nearest
ten-thousandth, obtained by dividing the Per Share Consideration by the Frontier
Average Share Price
“Per
Share Cash Consideration” shall mean the quotient, expressed as a dollar amount
and rounded to the nearest ten-thousandth, obtained by dividing the Aggregate
Consideration by the total number of shares of WBC Common Stock outstanding as
of the close of business on the Execution Date.
“Total
Cash Amount” shall mean an amount equal to $42,864,003 subject to the following
paragraph defining the Total Stock Amount.
“Total
Stock Amount” shall mean 5,916,430 shares of Frontier Common Stock plus the
product of 0.90 times the increase in the number of shares of WBC Common Stock
outstanding by virtue of the exercise of any stock option, warrant, or other
derivative security between the Execution Date and the Effective Time (the
“Base
Stock Amount”); provided, however, that (i) if the Frontier Average Share Price
is less than $21.00 then the number of shares of Frontier Common Stock and/or
the Total Cash Amount may (under the circumstances and subject to the
limitations set forth in Section 8.1(G) only) be increased by Frontier so that
the Merger Consideration is not less than $19.41 (and only to the extent
necessary), and (ii) if the Frontier Average Share Price is more than $27.00
then the number of shares of Frontier Common Stock shall equal the Base Stock
Amount multiplied by the quotient of $27.00 as the numerator and the Frontier
Average Share Price as the denominator so that the Merger Consideration is
not
more than $23.54 (and only to the extent necessary). An illustration of the
calculations of the Merger Consideration and the Aggregate Consideration and
the
effect of the foregoing “Collar” is attached as Exhibit F to this
Agreement.
“Total
Stock Consideration” shall mean the product, expressed as a dollar amount,
obtained by multiplying (x) the Total Stock Amount and (y) the Frontier Average
Share Price.
(B) Notwithstanding
Section 1.3(A) above, at least fifty percent (50%) of the Aggregate
Consideration shall be paid in Frontier Common Stock. If and to the extent
that
such limitation would not otherwise be satisfied, then a portion of the amount
otherwise payable under Section 1.3(A) shall instead be paid to such holders
on
a pro rata basis in Frontier Common Stock (based on the Frontier Average
Share Price).
(C) All
of the shares of WBC Common Stock converted into the Merger Consideration
pursuant to this ARTICLE I shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each holder of a
certificate (each a “Certificate”) previously representing any such shares of
WBC Common Stock shall thereafter cease to have any rights with respect to
such
securities, except the right to receive (1) the Merger Consideration, (2) any
dividends and
other
distributions in accordance with Section 2.2(B) hereof, and (3) any cash to
be
paid in lieu of any fractional share of Frontier Common Stock in accordance
with
Section 2.2(E) hereof.
(D) The
calculations required by Section 1.3(A)
shall be prepared jointly by Frontier
and WBC prior to the Effective Time.
1.4 ELECTION
PROCEDURES.
(A) An
election form and other appropriate and customary transmittal materials (which
shall specify that delivery shall be effected, and risk of loss and title to
the
Certificates theretofore representing shares of WBC Common Stock shall pass,
only upon proper delivery of such Certificates, or customary affidavits and
indemnification regarding the loss or destruction of such certificates, to
the
Exchange Agent) in such form as WBC and Frontier shall mutually agree (the
“Election Form”) shall be mailed with the Proxy Statement on the date of mailing
of the Proxy Statement or on such other date as Frontier and WBC shall mutually
agree (the “Mailing Date”) to each holder of record of WBC Common Stock as of
the close of business on the fifth business day prior to the Mailing Date (the
“Election Form Record Date”).
(B) Each
Election Form shall permit the holder (or the beneficial owner through
appropriate and customary documentation and instructions) to (x) elect to
receive (1) the Per Share Stock Consideration in respect of all of such holder’s
WBC Common Stock (“Stock Election Shares”); (2) the Per Share Cash
Consideration in respect of all of such holder’s WBC Common Stock (“Cash
Election Shares”); or (3) the Per Share Stock Consideration in respect of that
portion to such holder’s shares of WBC Common Stock equal to the Stock
Percentage (as defined below), rounded to the nearest whole share (the “Mixed
Stock Shares”), and the Per Share Cash Consideration in respect of that portion
of such holder’s shares of WBC Common Stock equal to the Cash Percentage (as
defined below), rounded to the nearest whole share (the “Mixed Cash Shares,” and
together with the Mixed Stock Shares, the “Mixed Election Shares”); or (y) to
make no election with respect to such holder’s WBC Common Stock (“No Election
Shares”). Any WBC Common Stock with respect to which the Exchange Agent has not
received an effective, properly completed Election Form on or before 5:00 p.m.,
Pacific Time, on the date prior to the Determination Date (or such other time
and date as Frontier and WBC may mutually agree) (the “Election Deadline”) shall
also be deemed to be “No Election Shares.” The term “Cash Percentage” shall mean
the quotient, rounded to the nearest thousandth, obtained by dividing (x) the
quotient obtained by dividing the Total Cash Amount by the Per Share
Consideration, by (y) the total number of shares of WBC Common Stock outstanding
as of the close of business on the Determination Date. “Stock Percentage” shall
mean the amount equal to one (1) minus the Cash Percentage.
(C) Frontier
shall make available one or more Election Forms as may reasonably be requested
from time to time by all persons who become holders (or beneficial owners)
of
WBC Common Stock between the Election Form Record Date and the close of business
on the business day prior to the Election Deadline, and WBC shall provide to
the
Exchange Agent all information reasonably necessary for it to perform as
specified herein.
(D) Any
such election shall have been properly made only if the Exchange Agent shall
have actually received a properly completed Election Form by the Election
Deadline. An Election Form shall be deemed properly completed only if
accompanied by one or more certificates (or customary affidavits and
indemnification regarding the loss or destruction of such certificates or the
guaranteed delivery of such certificates) representing all shares of WBC Common
Stock covered by such Election Form, together with duly executed transmittal
materials included in the Election Form. Any Election Form may be revoked or
changed by the person submitting such Election Form at or prior to the
Election
Deadline.
In the event an Election Form is revoked prior to the Election Deadline, the
shares of WBC Common Stock represented by such Election Form shall become No
Election Shares and Frontier shall cause the certificates representing WBC
Common Stock to be promptly returned without charge to the Person submitting
the
Election Form upon written request to that effect from the holder who submitted
the Election Form. Subject to the terms of this Agreement and of the Election
Form, the Exchange Agent shall have reasonable discretion to determine whether
any election, revocation or change has been properly or timely made and to
disregard immaterial defects in the Election Forms, and any good faith decisions
of Frontier regarding such matters shall be binding and conclusive.
(E) Within
ten (10) business days after the Election Deadline, unless the Effective Time
has not yet occurred, in which case as soon thereafter as practicable, Frontier
shall cause the Exchange Agent to effect the allocation among the holders of
WBC
Common Stock of rights to receive Frontier Common Stock or cash in the Merger
as
follows:
(1) Cash
Election Shares Plus Mixed Cash Shares More Than Total Cash Amount. If the
aggregate cash amount that would be paid upon the conversion in the Merger
for
the Cash Election Shares and the Mixed Cash Shares is greater than the Total
Cash Amount, then:
(i) all
Stock Election Shares, Mixed Stock Shares and No Election Shares shall be
converted into the right to receive the Per Share Stock
Consideration;
(ii) the
Exchange Agent shall then select first from among the Cash Election Shares
and
then (if necessary) from the Mixed Cash Election Shares, by a pro rata selection
process, a sufficient number of shares (“Stock Designated Shares”) such that the
aggregate cash amount that will be paid in the Merger equals as closely as
practicable, but in no event less than, the Total Cash Amount, and all Stock
Designated Shares shall be converted into the right to receive the Per Share
Stock Consideration; and
(iii) the
Cash Election Shares and Mixed Cash Shares that are not Stock Designated Shares
will be converted into the right to receive the Per Share Cash
Consideration.
(2) Cash
Election Shares Plus Mixed Cash Shares Less Than Total Cash Amount. If the
aggregate cash amount that would be paid upon the conversion in the Merger
for
the Cash Election Shares and the Mixed Cash Shares is less than the Total Cash
Amount, then:
(i) all
Cash Election Shares and Mixed Cash Shares shall be converted into the right
to
receive the Per Share Cash Consideration;
(ii) the
Exchange Agent shall then select first from among the No Election Shares and
second (if necessary) from among the Stock Election Shares and finally (if
necessary) from the Mixed Stock Election Shares, by a pro rata selection
process, a sufficient number of shares (“Cash Designated Shares”) such that the
aggregate cash amount that will be paid in the Merger equals as closely as
practicable the Total Cash Amount, and all Cash Designated Shares shall be
converted into the right to receive the Per Share Cash Consideration;
and
(iii) the
Stock Election Shares, No Election Shares and Mixed Stock Shares that are not
Cash Designated Shares shall be converted into the right to receive the Per
Share Stock Consideration.
(3) Cash
Election Shares Plus Mixed Cash Shares Equal to Total Cash Amount. If the
aggregate cash amount that would be paid upon conversion in the Merger for
the
Cash Election Shares and the Mixed Cash Shares is equal or nearly equal (as
determined by the Exchange Agent) to the Total Cash Amount, then subparagraphs
(1) and (2) above shall not apply, and all Cash Election Shares and Mixed Cash
Shares shall be converted into the right to receive the Per Share Cash
Consideration, and all Stock Election Shares, Mixed Stock Shares, and No
Election Shares shall be converted into the right to receive the Per Share
Stock
Consideration.
(F) The
pro rata selection process to be used by the Exchange Agent shall consist of
such equitable pro ration processes as shall be determined by Frontier and
reasonably satisfactory to WBC.
1.5 WBC
OPTIONS. Notwithstanding anything to the
contrary in this Agreement, and in addition to the Aggregate
Consideration:
(A) Unexercised
Options.
(1) At
the Effective Time, each WBC Option that is unexercised by the Effective Time
shall be converted into a fully vested option to acquire a number of shares
of
Frontier Common Stock equal to the product (rounded down to the nearest whole
number) of (x) the number of shares of WBC Common Stock subject to the WBC
Option immediately prior to the Effective Time and (y) the Exchange Ratio
(defined below), at an exercise price per share (rounded up to the nearest
whole
cent) equal to (A) the exercise price per share of WBC Common Stock of such
WBC
Option immediately prior to the Effective Time divided by (B) the Exchange
Ratio; provided, however, that the exercise price and the number of shares
of
Frontier Common Stock purchasable pursuant to the WBC Options shall be
determined in a manner consistent with the requirements of Section 409A of
the
Code; provided, further, that in the case of any WBC Option to which Section
422
of the Code applies, the exercise price and the number of shares of Frontier
Common Stock purchasable pursuant to such option shall be determined in
accordance with the foregoing, subject to such adjustments as are necessary
in
order to satisfy the requirements of Section 424(a) of the Code. Except as
specifically provided above, following the Effective Time, each WBC Option
shall
continue to be governed by the same terms and conditions as were applicable
under such WBC Option immediately prior to the Effective Time. For purposes
of
this Agreement, the “Exchange Ratio” shall be equal to the fraction having a
numerator equal to the Per Share Consideration and having a denominator equal
to
the Frontier Average Share Price.
(2) As
soon as practicable after the Effective Time, Frontier will prepare and file
with the SEC a Registration Statement on Form S-8 covering shares of Frontier
Common Stock to be issued upon the exercise of stock options assumed by Frontier
pursuant to this Section 1.5(A).
(3) At
or prior to the Effective Time, WBC, the WBC Board and the compensation
committee of the WBC Board, as applicable, shall adopt any resolutions and
take
any actions which are necessary to effectuate the provisions of this Section
1.5(A). WBC shall take all actions necessary to ensure that, from and after
the
Effective Time, Frontier will not be required to deliver WBC Common Stock or
other capital stock of WBC to any Person pursuant to or in settlement of WBC
Options.
(B) The
names of the holders, dates of issuance and expiration, the number of shares
subject to each such option, and the exercise price for all WBC Options as
of
the Execution Date are set forth in Schedule 1.5(B).
All such WBC Options shall be
100% vested and exercisable at the Effective Time pursuant to the 2005 Stock
Incentive Plan, the 1998 Stock Option and Restricted Stock Award Plan, the
1993
Director Stock Option Plan and the 1992 Stock Option Plan (collectively, the
“WBC Stock Option Plans”).
1.6 DISSENTING
SHARES. Notwithstanding anything to the contrary in this Agreement,
each Dissenting Share whose holder, as of the Effective Time of the Merger,
has
not effectively withdrawn or lost his or her dissenters’ rights under Ch. 23B.13
RCW (the “Appraisal Laws”) shall not be converted into or represent a right to
receive the Per Share Cash Consideration or Frontier Common Stock, but the
holder of such Dissenting Share shall be entitled only to such rights as are
granted by the Appraisal Laws, unless and until such holder shall have failed
to
perfect or shall have effectively withdrawn or lost the right to payment under
the Appraisal Laws, in which case each such share shall be deemed to have been
converted at the Effective Time into the right to receive cash and/or Frontier
Common Stock (based on the Per Share Stock Consideration defined in
Section 1.3(A)) without any interest
thereon, in the same proportions determined under Section 1.5(A) with respect
to
WBC Options that are unexercised by the Effective Time. Each holder of
Dissenting Shares who becomes entitled to payment for his WBC Common Stock
pursuant to the provisions of the Appraisal Laws shall receive payment for
such
Dissenting Shares from Frontier (but only after the amount thereof shall have
been agreed upon or finally determined pursuant to the Appraisal
Laws).
1.7 TAX
CONSEQUENCES. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code
of 1986, as amended (the “Code”) and that this Agreement shall constitute a plan
of reorganization for the purposes of Section 368 of the Code.
ARTICLE
II. EXCHANGE OF SHARES
2.1 FRONTIER
TO MAKE SHARES AND CASH AVAILABLE. On or before
the Effective Time, Frontier shall deposit, or shall cause to be deposited,
with
American Stock Transfer & Trust Company (the “Exchange Agent”), for the
benefit of the holders of WBC Common Stock as of the Effective Time, for
exchange in accordance with this ARTICLE
II: (A) certificates or electronic indicia of ownership representing the
shares of Frontier Common Stock to be issued pursuant to Section 1.3 and Section 2.2(A)
in exchange for outstanding shares of
WBC Common Stock; (B) cash in the amount of the Total Cash Consideration;
and (C) the cash in lieu of fractional shares to be paid in
accordance with Section 2.2(E). Such cash
and shares of Frontier Common Stock, together with any dividends or
distributions with respect to such Frontier Common Stock, are hereinafter
referred to as the “Exchange Fund.”
2.2 EXCHANGE
OF SHARES.
(A) As
soon as practicable after the Effective Time, and in no event more than five
(5)
business days thereafter, the Exchange Agent shall mail to each holder of record
of a Certificate or Certificates who theretofore has not submitted such holder’s
Certificate or Certificates with an Election Form, a form letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title
to the Certificates shall pass, only upon delivery of the Certificates or
customary affidavits and indemnification regarding the loss or destruction
of
such certificates or the guaranteed delivery of such certificates to the
Exchange Agent) and instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. After completion of
the
allocation procedure set forth in Section 1.4 and upon surrender of a Certificate
or
Certificates for exchange and cancellation to the Exchange Agent, together
with
a properly executed letter of transmittal or Election Form, as the case may
be,
the holder of such Certificate or Certificates shall be entitled to receive
in
exchange therefor (x) a certificate representing that number of whole shares
of
Frontier Common Stock which such holder of WBC Common Stock became entitled
to
receive pursuant to the provisions of ARTICLE
I hereof and/or (y) a check representing the aggregate Per Share Cash
Consideration and/or the amount of cash in lieu of fractional shares, if any,
which such holder has the right to receive in respect of the Certificate or
Certificates surrendered pursuant to the provisions of ARTICLE I, and the Certificate or
Certificates so surrendered shall forthwith be canceled. No interest will be
paid or accrued on the Per Share Cash Consideration, the cash in lieu of
fractional shares or the unpaid dividends and distributions, if any, payable
to
holders of Certificates.
(B) No
dividends or other distributions declared after the Effective Time
with respect to Frontier Common Stock and payable to the holders of
record thereof shall be paid to the holder of any unsurrendered Certificate
until the holder thereof shall surrender such Certificate in accordance with
this ARTICLE II. After the surrender of a
Certificate in accordance with this ARTICLE
II, the record holder thereof shall be entitled to receive any such
dividends or other distributions, without any interest thereon, which
theretofore has become payable with respect to shares of Frontier Common Stock
represented by such Certificate.
(C) If
any certificate representing shares of Frontier Common Stock is to be issued
in
a name other than that in which the Certificate surrendered in exchange therefor
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 shall pay to the Exchange Agent
in
advance any transfer or other taxes required by reason of the issuance of a
certificate representing shares of Frontier Common Stock in any name other
than
that of the registered holder of the Certificate surrendered, or required for
any other reason, or shall establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
(D) After
the Effective Time, there shall be no transfers on the stock transfer books
of
WBC of the shares of WBC Common Stock which were issued and outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates representing such shares are presented for transfer to the Exchange
Agent, they shall be canceled and exchanged for certificates representing shares
of Frontier Common Stock or cash or both, as provided in this ARTICLE II.
(E) Notwithstanding
anything to the contrary contained herein, no certificates or scrip representing
fractional shares of Frontier Common Stock shall be issued upon the surrender
for
exchange
of Certificates, no dividend or distribution with respect to Frontier Common
Stock shall be payable on or with respect to any fractional share, and such
fractional share interests shall not entitle the owner thereof to vote or to
any
other rights of a shareholder of Frontier. In lieu of the issuance of any such
fractional share, Frontier shall pay to each former shareholder of WBC who
otherwise would be entitled to receive a fractional share of Frontier Common
Stock an amount in cash determined by multiplying (1) the Frontier Average
Share
Price by (2) the fraction of a share of Frontier Common Stock which such holder
would otherwise be entitled to receive pursuant to Section 1.3 hereof.
(F) Frontier
(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 WBC Common Stock such amounts as Frontier is required under
the Code or any state, local or foreign tax law or regulation there under to
deduct and withhold with respect to the making of such payment. Any amounts
so
withheld shall be treated for all purposes of this Agreement as having been
paid
to the holder of WBC Common Stock in respect of which such deduction and
withholding was made by Frontier.
(G) Any
portion of the Exchange Fund that remains unclaimed by the shareholders of
WBC
for twelve (12) months after the Effective Time shall be paid to Frontier.
Any
shareholders of WBC who have not theretofore complied with this ARTICLE II shall thereafter look only to
Frontier for payment of the Merger Consideration, the cash in lieu of fractional
shares and/or the unpaid dividends and distributions on the Frontier Common
Stock deliverable in respect of each share of WBC Common Stock such shareholder
holds as determined pursuant to this Agreement, in each case, without any
interest thereon. Notwithstanding the foregoing, none of Frontier, Frontier
Bank, WBC, Whidbey Island Bank, the Exchange Agent or any other person shall
be
liable to any former holder of shares of WBC Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(H) 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 Frontier, the posting by such
person of a bond in such reasonable amount as Frontier may direct 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 Merger Consideration deliverable in respect thereof pursuant
to
this Agreement.
ARTICLE
III. ACTIONS PENDING CLOSING
Following
the Execution Date until the Effective Time, WBC and Whidbey Island Bank shall
not, without the prior written consent of Frontier:
3.1 ORDINARY
COURSE. Conduct its business other than in the
ordinary and usual course consistent with past practice or fail to use
reasonable best efforts to preserve its business organization, keep available
the present services of its employees and preserve for itself and Frontier
the
goodwill of the customers of WBC and its Subsidiaries and others with whom
business relations exist.
3.2 CAPITAL
STOCK. Except for the exercise of outstanding WBC
Options, or as disclosed in Schedule 5.1(B), issue, sell or otherwise
permit to become outstanding any additional shares of capital stock of WBC,
or
any Rights with respect thereto, or enter into any agreement with respect to
the
foregoing, or permit any additional shares of WBC Common Stock to become subject
to grants of stock options, warrants, stock appreciation rights, or any other
stock-based employee compensation rights.
3.3 DIVIDENDS.
Make, declare or pay any dividend on or in respect of, or declare
or
make any distribution on, or directly or indirectly combine, split, subdivide,
redeem, reclassify, purchase or otherwise acquire, any shares of its capital
stock or, other than as permitted in or contemplated by this Agreement (and
except for the payment of regular quarterly cash dividends of not more than
6¢
per share through the calendar quarter in which the Effective Time occurs and
which shall in lieu of a quarterly dividend from Frontier with respect to such
calendar quarter), authorize the creation or issuance of, or issue, any
additional shares of its capital stock or any Rights with respect thereto.
This
Section 3.3 shall not preclude dividends from Whidbey Island Bank to WBC made
in
the ordinary course of business and consistent with past practice.
3.4 INDEBTEDNESS;
LIABILITIES. Other than in the ordinary course of
business consistent with past practice, incur any indebtedness for borrowed
money, assume, guarantee, endorse or otherwise as an accommodation become
responsible or liable for the obligations of any other individual, corporation
or other entity.
3.5 OPERATING
PROCEDURES; CAPITAL EXPENDITURES. Except as may be
directed by any Governmental Authority, (A) change its lending, investment,
underwriting, pricing, servicing, risk and asset liability management or other
material banking policies in any material respect, or (B) commit to incur any
further capital expenditures exceeding $50,000 individually or $100,000 in
the
aggregate, except budgeted items disclosed in Schedule 3.5, or (C) change
the manner in which its investment securities or loan portfolio is classified
or
reported; or invest in any mortgage-backed or mortgage-related security that
would be considered “high risk” under applicable regulatory guidance; or file
any application or enter into any contract with respect to the opening,
relocating or closing of, or open, relocate or close, any WBC
Office.
3.6 CONTINUANCE
OF BUSINESS. Except for budgeted items Previously
Disclosed in Schedule 3.5, dispose of or discontinue any portion of its
assets, business or properties that exceeds $50,000 individually or $100,000
in
the aggregate in value or is otherwise material to WBC’s business, or merge or
consolidate with, or acquire all or any portion of, the business or property
of
any other entity that exceeds $50,000 individually or $100,000 in the aggregate
in value or is otherwise material to WBC (except foreclosures or acquisitions
by
WBC in its fiduciary capacity and loan participations, in each case in the
ordinary course of business consistent with past practice).
3.7 SUBSIDIARIES.
Organize or acquire, directly or indirectly, any
Subsidiaries.
3.8 COMPENSATION;
EMPLOYMENT AGREEMENTS. Except as set forth in
Schedule 3.8, and for salary increase and bonuses
Previously Disclosed to
go into effect on or about January 1, 2008, enter into or amend any employment,
severance or similar agreement or arrangement with any of its directors,
officers or employees, or grant any salary or wage increase, amend the terms
of
any WBC Option or increase any employee benefit (including incentive or bonus
payments), except normal individual increases in regular compensation to
employees in the ordinary course of business consistent with past practice,
and
provided, however, that an automatic rollover or extension of term of an
Employment Agreement described in Section 9.4 shall not be deemed an amendment
for purposes of this Section 3.8.
3.9 HIRING. Hire
any person as an employee of WBC or any of its Subsidiaries or promote any
employee, except (i) to satisfy contractual obligations existing as of the
date hereof and set forth on Schedule 3.8 and (ii) persons
hired to fill any vacancies existing or arising after the date hereof
and
whose
employment is terminable at the will WBC or a Subsidiary of WBC, as applicable,
and who are not subject to or eligible for any severance or similar benefits
or
payments
3.10 BENEFIT
PLANS. Except as set forth in Schedule
3.10, enter into or modify (except as may be required by Section 409A of the
Code) any pension, retirement, stock option, stock purchase, savings, profit
sharing, deferred compensation, consulting, bonus, group insurance or other
employee benefit, incentive or welfare contract, plan or arrangement, or any
trust agreement related thereto, in respect of any of its directors, officers
or
other employees, including taking any action that accelerates the vesting or
exercise of any benefits payable there under.
3.11 CLAIMS.
Settle any claim, litigation, action or proceeding involving any
liability for money damages in excess of $50,000 or material restrictions upon
the operations of WBC.
3.12 AMENDMENTS.
Amend its Articles of Incorporation or Bylaws.
3.13 CONTRACTS.
Except as set forth on Schedule 3.13, enter into, renew,
terminate or make any change in any WBC Contract involving future payments
in
excess of $50,000, except in the ordinary course of business consistent with
past practice with respect to contracts, agreements and leases that are
terminable by it without penalty on no more than 30 days’ prior written notice.
Further, WBC shall not enter into, renew, terminate or make any change in any
information technology, third-party service, lease or other contract involving
payments of more than $50,000 or that is material to WBC’s operations or the
integration and conversion process of Frontier, without the consent of
Frontier.
3.14 LOANS.
Extend credit or account for loans and leases other than in accordance
with existing lending policies and accounting practices or, without prior notice
to and consultation with Frontier’s chief executive officer or chief credit
officer, (i) make any new loan or renew or extend any existing loan in a
principal amount in excess of $1,500,000, (ii) restructure the payments or
amount of any loan or release any collateral or guaranty with respect to any
loan, other than in the ordinary course of business, or (iii) enter into any
loan securitization or create any special purpose funding entity. During the
term of this Agreement, WBC will provide a schedule of all new or renewed loans
of more than $50,000 for the previous month to Frontier’s chief credit officer
within fifteen (15) days after the end of the
3.15 AGREEMENTS.
Agree to, or make any commitment to, take any of the actions prohibited by
this
ARTICLE III.
ARTICLE
IV. FRONTIER FORBEARANCES
Following
the Execution Date until the Effective Time, Frontier and Frontier Bank shall
not, without the prior written consent of WBC:
4.1 AMENDMENTS.
Amend, repeal or otherwise modify any provision of Frontier’s articles of
incorporation or bylaws in a manner that would adversely affect WBC, Whidbey
Island Bank or the transactions contemplated by this Agreement.
4.2 REORGANIZATION.
Take any action, or knowingly fail to take any action, which action or failure
to act is reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
4.3 CONDITIONS.
Take any action that is intended or may reasonably be expected to result in
any
of the conditions to the Merger set forth in ARTICLE VII not being
satisfied.
4.4 AGREEMENTS.
Agree to take, make any commitment to take, or adopt any resolutions of its
board of directors in support of, any of the actions prohibited by this ARTICLE
IV. Subject to the foregoing limitations, it is understood that Frontier is
not
prohibited from pursuing or completing acquisitions of other banks and financial
institutions during the term of this Agreement.
4.5 CERTAIN
ACTIONS. Take any action that would cause any
of Frontier’s representations, warranties or covenants contained hereto be
invalid or inaccurate in any material respect, other than representations,
warranties and covenants of Frontier that speak only as of a particular date
or
period, under circumstances which would not cause a material failure of such
representations, warranties or covenants as of such dates or during such
periods.
ARTICLE
V. REPRESENTATIONS AND WARRANTIES
5.1 WBC
AND WHIDBEY ISLAND BANK REPRESENTATIONS AND WARRANTIES.
WBC and Whidbey Island Bank, jointly and severally,
hereby represent
and warrant to Frontier and Frontier Bank as follows:
(A) ORGANIZATION,
QUALIFICATION AND AUTHORITY. Each of WBC and Whidbey Island Bank is duly
qualified to do business in each state of the United States where the failure
to
be duly qualified is reasonably likely to have a Material Adverse Effect on
WBC
or Whidbey Island Bank. Each of WBC and Whidbey Island Bank has in effect all
federal, state and local governmental authorizations necessary for it to own
or
lease its properties and assets and to carry on its business as it is now
conducted, the absence of which, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect on WBC or Whidbey Island Bank. Whidbey
Island Bank is an “insured depository institution” as defined in the Federal
Deposit Insurance Act, as amended, and applicable regulations under such
statute, and its deposits are insured by the Bank Insurance Fund of the FDIC
to
the fullest extent permitted by law and all premiums and assessments required
to
be paid in connection therewith have been paid.
(B) SHARES;
OPTIONS.
(1) As
of the Execution Date, (1) the outstanding shares of WBC’s capital stock are
validly issued and outstanding, fully paid and non-assessable, and subject
to no
preemptive rights, and (2) except as set forth on Schedule 5.1(B),
there are no shares of capital
stock or other equity securities of WBC outstanding and no securities
convertible into or exchangeable for, or giving any Person any right to
subscribe for or acquire, or any options, warrants, calls or commitments with
respect thereto (collectively, “Rights”).
(2) As
of the Execution Date, WBC has 13,679,757 authorized shares of common stock,
no
par value (“WBC Common Stock”), of which 9,391,159 shares are issued and
outstanding, and 20,000 authorized shares of preferred stock, no par value,
of
which none are issued and outstanding, no other class of capital stock being
authorized.
(3) As
of the Execution Date, Whidbey Island Bank has 18,640 authorized shares of
common stock, $20 par value per share (“Whidbey Island Bank Common Stock”) (no
other
class
of capital stock being authorized), of which 18,640 shares are issued and
outstanding, all of which are owned by WBC.
(4) As
of the Execution Date, WBC has 287,717 shares of WBC Common Stock reserved
for
issuance under the WBC Stock Option Plans pursuant to which options covering
255,391 shares of WBC Common Stock are outstanding, at a weighted average
exercise price of $8.41 per share, and pursuant to which 17,815 restricted
stock
units are outstanding (collectively “WBC Options”). As of the Execution date WBC
has outstanding common stock equivalents under equity compensation arrangements
other than the WBC Options as described in Schedule 5.1(B). All WBC
Options were granted at “fair market value” as of the date of the grant, within
the meaning of the regulations promulgated under Section 409A of the Code,
or
are exempt from the application of Section 409A.
(C) WBC
AND WHIDBEY ISLAND BANK SUBSIDIARIES. WBC has no Subsidiaries other than
Whidbey Island Bank, which has no Subsidiaries. Except as disclosed in
Schedule 5.1(C),
WBC and Whidbey Island Bank do
not own beneficially, directly or indirectly, any shares of any equity
securities of any corporation, bank, partnership, joint venture, business trust,
association or other organization, other than shares held as trustee or nominee
or shares held as collateral.
(D) CORPORATE
AUTHORITY. Subject to any necessary receipt of approval by its shareholders
referred to in Section 7.1(A), WBC and
Whidbey Island Bank have corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Boards of Directors of WBC and Whidbey Island Bank. This Agreement has been
duly
and validly executed and delivered by WBC and Whidbey Island Bank and (assuming
due authorization, execution and delivery by Frontier and Frontier Bank)
constitutes the valid and binding obligation of WBC and Whidbey Island Bank,
enforceable against WBC and Whidbey Island Bank in accordance with its terms
(except as may be limited by bankruptcy, insolvency, moratorium, reorganization
or similar laws affecting the rights of creditors generally and subject to
general principles of equity).
(E) CORPORATE
MINUTES. The minute books of WBC and Whidbey Island Bank Previously
Disclosed to Frontier contain true, complete and correct records of all meetings
and other corporate actions held or taken since December 31, 2002 of WBC’s and
Whidbey Island Bank’s shareholders and Boards of Directors (including committees
of their Boards of Directors).
(F) NO
DEFAULTS. Subject to the approval by their shareholders referred to in
Section 7.1(A), the required regulatory
approvals referred to in Section 7.1(B),
and the required filings under federal and state securities laws, and except
as
set forth on Schedule 5.1(F),
the execution, delivery and
performance of this Agreement and the consummation by WBC and Whidbey Island
Bank of the transactions contemplated by this Agreement will not, as of the
Effective Time (1) constitute a breach or violation of, or a default under,
any
law, rule or regulation or any judgment, decree, order, governmental permit
or
license, or any WBC Contract, which breach, violation or default is reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect
on
WBC or Whidbey Island Bank, (2) constitute a breach or violation of, or a
default under, their Articles of Incorporation or Bylaws, or (3) require any
consent or approval under any such law, rule, regulation, judgment, decree,
order, governmental permit or license or the consent or approval of any other
party to any such WBC Contract, other than any such consent or approval that,
if
not obtained, would not be reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect on WBC or Whidbey Island Bank.
(G) FINANCIAL
REPORTS AND SECURITIES DOCUMENTS.
(1) Except
as disclosed in Schedule 5.1(G), WBC’s audited consolidated balance sheet
as of December 31 for the fiscal years 2005 and 2006, and the related statements
of income, changes in shareholders’ equity and cash flows for the fiscal years
ended 2004 through 2006, inclusive, as reported in WBC’s Annual Report on Form
10-K for the fiscal year ended December 31, 2006, filed with the SEC under
the
Exchange Act, and subsequent annual and quarterly financial statements of WBC
presented in the WBC Securities Documents filed with the SEC after December
31,
2006, present fairly as of the dates and during the periods covered thereby
the
information purported to be presented therein, are in conformity with GAAP
as in
effect on the date of such financial statements, and comply in all material
respects with the regulations of the SEC relating to such financial statements
as of the dates and during the periods covered thereby. References in this
Agreement to the term “WBC Financial Statements” shall mean the audited
consolidated balance sheet of WBC and Subsidiaries as of December 31, 2005
and
2006, the audited consolidated statements of operations, cash flows, and changes
in shareholder equity for the fiscal years then ended, the unaudited
consolidated balance sheets of WBC dated June 30, 2007 and 2006, the unaudited
consolidated statements of operations, cash flows, and changes in shareholder
equity for the six month periods then ended, and subsequent annual and quarterly
financial statements in each case as presented (and as and to the extent amended
or restated) in the WBC Securities Documents.
(2) WBC’s
Annual Report on Form 10-K for the year ended December 31, 2006 and all other
reports, registration statements, definitive proxy statements or information
statements filed by WBC subsequent to December 31, 2003 under the Securities
Act
or under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act in the form
filed with the SEC (collectively, “WBC Securities Documents”), as of the date
filed and as amended prior to the date hereof, (A) complied in all material
respects as to form with the applicable regulations of the SEC, and (B) did
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 therein,
in
the light of the circumstances under which they were made, not misleading.
WBC
has filed all forms, reports, statements, certifications and other documents
(including all exhibits, amendments and supplements thereto) required to be
filed by it with the SEC since December 31, 2003. Whidbey Island Bank is not
required to file periodic reports with the SEC pursuant to the Exchange Act.
WBC
has Previously Disclosed to Frontier true, correct and complete copies of all
written correspondence between the SEC, WBC or Whidbey Island Bank, occurring
since December 31, 2003. As of the date of this Agreement, there are no
outstanding or unresolved comments in comment letters received from the SEC
staff with respect to the WBC Securities Documents. To WBC’s Knowledge, none of
the WBC Securities Documents is the subject of ongoing SEC review.
(3) Since
the enactment of the Xxxxxxxx-Xxxxx Act, neither WBC nor any of its Subsidiaries
nor, to the knowledge of WBC, any director, officer, employee, auditor,
accountant or representative of WBC 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 of WBC or any of its
Subsidiaries or their respective internal accounting controls, including any
material complaint, allegation, assertion or claim that WBC or any of its
Subsidiaries has engaged in questionable accounting or auditing
practices.
(H) ABSENCE
OF UNDISCLOSED LIABILITIES. Except as set forth on Schedule 5.1(H),
neither WBC nor Whidbey Island
Bank has any obligation or liability (contingent or otherwise) that,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on the business of WBC or Whidbey Island Bank, except (1) as
reflected in the WBC Financial Statements prior to the Execution Date, and
(2)
for commitments and obligations made, or liabilities incurred, in the ordinary
course of business consistent with past practice. Except as disclosed on
Schedule 5.1(H),
since December 31, 2006,
neither WBC nor Whidbey Island Bank has incurred or paid any obligation or
liability (including any obligation or liability incurred in connection with
any
acquisitions in which any form of direct financial assistance of the federal
government or any agency thereof has been provided to WBC and Whidbey Island
Bank) that, individually or in the aggregate, is reasonably likely to have
a
Material Adverse Effect on it.
(I) ABSENCE
OF CERTAIN CHANGES OR EVENTS. Except for salary increases and bonuses
Previously Disclosed to go into effect on or about January 1, 2008, or as set
forth in Schedule 5.1(I), since December 31, 2006, except for (A) normal
increases for non-executive officer employees made in the ordinary course of
business consistent with past practice, or (B) as required by applicable law,
increased the wages, salaries, compensation, pension, or other fringe benefits
or perquisites payable to any executive officer, employee, or director from
the
amount thereof in effect as of December 31, 2006 (which amounts have been
Previously Disclosed to Frontier), WBC and Whidbey Island Bank have not (i)
granted any severance or termination pay, entered into any contract to make
or
grant any severance or termination pay (except as required under the terms
of
the Employment Agreements), or paid any bonus other than the customary year-end
bonuses in amounts consistent with past practice, (ii) granted any options
to
purchase shares of WBC Common Stock, any restricted shares of WBC Common Stock
or any right to acquire any shares of its capital stock to any executive
officer, director or employee other than grants to employees made in the
ordinary course of business consistent with past practice under WBC’s Stock
Option Plans, (iii) except pursuant to AICPA, FCAOTS or SEC guidance, made,
changed or revoked any material Tax election or changed any Tax or financial
accounting methods, principles or practices of WBC or Whidbey Island Bank
affecting their assets, liabilities or businesses, including any reserving,
renewal or residual method, practice or policy, or (iv) suffered any strike,
work stoppage, slow-down, or other labor disturbance.
(J) PROPERTIES.
Except as reserved against in the WBC Financial Statements, and as disclosed
in
title insurance policies held by WBC and Whidbey Island Bank, WBC and Whidbey
Island Bank each has good and marketable title, free and clear of all liens,
encumbrances, charges, defaults, or equities of any character (each an
“Encumbrance”), to all of the properties and assets, tangible and intangible,
reflected in the WBC Financial Statements as being owned by WBC or Whidbey
Island Bank as of the dates thereof other than those Encumbrances that,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect on WBC or Whidbey Island Bank and except those Encumbrances
of
record. All buildings and all material fixtures, equipment, and other property
and assets that are held under leases, subleases or licenses by WBC and Whidbey
Island Bank are held under valid leases, subleases or licenses enforceable
in
accordance with their respective terms, other than any such exceptions to
validity or enforceability that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on WBC or Whidbey Island
Bank.
(K) LITIGATION;
REGULATORY ACTION. Except as disclosed in Schedule 5.1(K),
no litigation, proceeding or
controversy before any court or governmental agency is pending that,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on WBC or Whidbey Island Bank, and to the Knowledge of WBC,
no
such litigation, proceeding or
controversy
has been threatened. Neither WBC nor Whidbey Island Bank is subject to any
cease-and-desist or other order 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 is a recipient of any extraordinary supervisory letter
from,
or has adopted any board resolutions at the request of (each a “Regulatory
Agreement”), any Regulatory Authority that restricts the conduct of its business
or that in any manner relates to its capital adequacy, its credit policies,
its
management or its business, nor has WBC or Whidbey Island Bank been advised
by
any Regulatory Authority that it is considering issuing or requesting any
Regulatory Agreement.
(L) COMPLIANCE
WITH LAWS. Except as disclosed in Schedule 5.1(L),
and except as would not
reasonably be expected to have a Material Adverse Effect, each of WBC and
Whidbey Island Bank:
(1) Is
and at all times since December 31, 2003 has been in material compliance
with all applicable federal, state, local and foreign statutes, laws, codes,
regulations, ordinances, rules, judgments, injunctions, orders, decrees of
any
Governmental Authority applicable to the operation of its business or to the
employees conducting such businesses, including, without limitation,
Sections 23A and 23B of the Federal Reserve Act and FRB regulations
pursuant thereto, the Equal Credit Opportunity Act, the Fair Housing Act, the
Community Reinvestment Act, the Home Mortgage Disclosure Act, the Bank Secrecy
Act, the USA Patriot Act, all other applicable fair lending laws and other
laws
relating to discriminatory business practices and Environmental Laws and all
written policies of WBC and its Subsidiaries related to customer data, privacy
and security;
(2) Has
all permits, licenses, authorizations, orders and approvals of, and has made
all
filings, applications and registrations with, all Regulatory Authorities that
are required in order to permit it to operate its businesses as presently
conducted and that are material to its business; all such permits, licenses,
certificates of authority, orders and approvals are in full force and effect
and, to the Knowledge of WBC, no suspension or cancellation of any of them
is
threatened; and all such filings, applications and registrations are
current;
(3) Has
received no notification or communication from any Regulatory Authority or
the
staff thereof (a) asserting that WBC or Whidbey Island Bank is not in compliance
with any of the statutes, regulations or ordinances which such Regulatory
Authority enforces, which, as a result of such noncompliance in any such
instance, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect on WBC or Whidbey Island Bank, (b) threatening to revoke
any license, franchise, permit or governmental authorization, which revocation,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on WBC or Whidbey Island Bank, or (c) requiring WBC or Whidbey
Island Bank (or any of their officers, directors or controlling persons) to
enter into a cease and desist order, agreement or memorandum of understanding
(or requiring the board of directors thereof to adopt any resolution or
policy).
(4) Has
devised and maintained systems of internal accounting controls sufficient to
provide reasonable assurances that (1) all material transactions are
executed in accordance with management’s general or specific authorization,
(2) all material transactions are recorded as necessary to permit the
preparation of financial statements in conformity with GAAP, and to maintain
proper accountability for items, (3) access to the material property and
assets of WBC and Whidbey Island Bank is permitted only in accordance with
management’s general or specific authorization, and (4) the recorded
accountability for items is compared with
the
actual levels at reasonable intervals and appropriate action is taken with
respect to any differences.
(5) All
offers and sales of WBC Common Stock by WBC were at all relevant times exempt
from or complied with the registration requirements of the Securities
Act.
(6) Neither
WBC, none of WBC’s Subsidiaries, nor, to WBC’s knowledge, (a) any director or
executive officer of WBC or of a WBC Subsidiary, (b) any person related to
any
such director or officer by blood, marriage or adoption and residing in the
same
household and (c) any person who has been knowingly provided material nonpublic
information by any one or more of these persons, has purchased or sold, or
caused to be purchased or sold, any shares of WBC Common Stock or other
securities issued by WBC (i) during any period when such Person was in
possession of material nonpublic information or (ii) in violation of any
applicable provision of the Exchange Act or the rules and regulations of the
SEC
there under.
(7) Except
as has not had and would not reasonably be expected to have, individually or
in
the aggregate, a Material Adverse Effect on WBC or Whidbey Island Bank: Whidbey
Island Bank has 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, applicable state and
federal law and regulation and common law; and none of WBC or Whidbey Island
Bank, or any director, officer or employee of WBC or Whidbey Island Bank 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
and correct and accurately reflect the assets of such fiduciary
account.
(8) As
of June 30, 2007, WBC and Whidbey Island Bank are “well capitalized” and “well
managed” as a matter of federal banking law. Whidbey Island Bank has at least a
“satisfactory” rating under the Community Reinvestment Act.
(M) MATERIAL
CONTRACTS.
(1) Except
as Previously Disclosed, or as set forth in Schedule 5.1(M),
WBC is not a party to or bound
by any contract (whether written or oral), including but not limited to any
Compensation and Benefit Plan, (A) with respect to the employment of any
directors, officers, employees or consultants, (B) which, upon the consummation
of the transactions contemplated by this Agreement, will (either alone or upon
the occurrence of any additional acts or events) result in any payment or
benefits (whether of severance pay or otherwise) becoming due or increasing
in
amount, or the acceleration or vesting of any rights to any payment or benefits,
from Frontier, WBC, the Surviving Corporation, the Resulting Bank or any of
their respective Subsidiaries to any officer, director, employee or consultant
of WBC or Whidbey Island Bank, (C) which is a material contract (as defined
in
Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the
Execution Date and is not a Loan, (D) which is a consulting agreement (including
data processing, software programming and licensing contracts) not terminable
on
30 days or less notice involving the payment of more than $50,000, or (E) which
materially restricts the conduct of any line of business by WBC or Whidbey
Island Bank. Each contract, arrangement, commitment or understanding of the
type
described in this Section 5.1(M),
whether or not set forth in Schedule
5.1(M),
is referred to herein as a “WBC
Contract.”
(2) Except
as set forth in Schedule 5.1(M),
to the Knowledge of WBC (i) each
WBC Contract is valid and binding and in full force and effect, (ii) WBC and
Whidbey Island Bank have performed all obligations required to be performed
by
them to date under each WBC Contract, except where such noncompliance,
individually or in the aggregate, would not have a Material Adverse Effect,
(iii) no event or condition exists which constitutes or, after notice or lapse
of time or both, would constitute, a default on the part of WBC or Whidbey
Island Bank under any WBC Contract, and (iv) no other party to any WBC Contract
is in default in any respect there under.
(N) REGULATORY
REPORTS. Since January 1, 2003, WBC and Whidbey Island Bank have filed all
reports and statements, together with any amendments required to be made with
respect thereto, that they were required to file with (1) the Department, (2)
the Federal Reserve Board or (3) the FDIC. As of their respective dates (and
without giving effect to any amendments or modifications filed after the
Execution Date with respect to reports and documents filed before the Execution
Date), each of such reports and documents, including the financial statements,
exhibits and schedules thereto, complied as to form, and were timely filed
with
the Regulatory Authority with which they were filed.
(O) BROKERS
AND FINDERS. Neither WBC, Whidbey Island Bank nor any
of their respective officers or directors has employed any broker or finder
or
incurred any liability for any broker’s fees, commissions or finder’s fees in
connection with any of the transactions contemplated by this Agreement, except
that WBC has engaged, and will pay a fee or commission to, RBC Xxxx Xxxxxxxx,
Incorporated and Sandler X’Xxxxx & Partners, LP in accordance with the
terms of their respective letter agreements between such firms and WBC, true
and
correct copies of which has been Previously Disclosed by WBC to
Frontier.
(P) EMPLOYEE
BENEFIT PLANS.
(1) Schedule
5.1(P)(1)
contains a complete list of all
bonus, deferred compensation, pension, retirement, profit-sharing, thrift
savings, employee stock ownership, stock bonus, stock purchase, restricted
stock
and stock option plans, all employment or severance contracts, all medical,
dental, health and life insurance plans, all other employee benefit plans,
contracts or arrangements and any applicable “change of control” or similar
provisions in any plan, contract or arrangement maintained or contributed to
by
WBC or Whidbey Island Bank for the benefit of employees, former employees,
directors, former directors or their beneficiaries (the “Compensation and
Benefit Plans”). True and complete copies of all Compensation and Benefit Plans
of WBC and Whidbey Island Bank, including any trust instruments and/or insurance
contracts, if any, forming a part thereof, and all amendments thereto, have
been
provided to Frontier.
(2) All
“employee benefit plans” within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), other than
“multiemployer plans” within the meaning of Section 3(37) of ERISA
(“Multiemployer Plans”), covering employees or former employees of WBC or
Whidbey Island Bank (the “ERISA Plans”), to the extent subject to ERISA, are in
substantial compliance with ERISA. Except as Previously Disclosed in Schedule
5.1(P)(2)
each ERISA Plan which
is an “employee pension benefit plan” within the meaning of Section 3(2) of
ERISA (“Pension Plan”) and which is intended to be qualified under the Code has
received a favorable determination letter from the Internal Revenue Service
(or
has applied for a favorable determination letter and is waiting for a response,
or
utilizes
a prototype that allows for reliance on the opinion letter of the sponsor of
the
prototype or volume submitter document), and it is not aware of any
circumstances reasonably likely to result in the revocation or denial of any
such favorable determination letter or the inability to receive such a favorable
determination letter. There is no material pending or, to its knowledge,
threatened litigation relating to the ERISA Plans. Neither WBC nor Whidbey
Island Bank has engaged in a transaction with respect to any ERISA Plan that
could subject WBC or Whidbey Island Bank to a tax or penalty imposed by either
Section 4975 of the Code or Section 502(i) of ERISA in an amount which would
be
material.
(3) No
liability under Subtitle C or D of Title IV of ERISA has been or is expected
to
be incurred by WBC or Whidbey Island Bank with respect to any ongoing, frozen
or
terminated “single-employer plan,” within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by any of them, or the single-employer
plan of any entity which is considered one employer with WBC or Whidbey Island
Bank under Section 4001(a)(14) of ERISA or Section 414 of the Code (a “ERISA
Affiliate”). Neither WBC nor Whidbey Island Bank presently contributes to a
Multiemployer Plan and they have not contributed to such a plan within the
past
five calendar years. No notice of a “reportable event,” within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Pension Plan or by any ERISA
Affiliate within the past 12-month period.
(4) All
contributions required to be made under the terms of any ERISA Plan have been
timely made. Neither any Pension Plan nor any single-employer plan of a ERISA
Affiliate has an “accumulated funding deficiency”(whether or not waived) within
the meaning of Section 412 of the Code or Section 302 of ERISA. WBC and Whidbey
Island Bank have not provided and are not required to provide, security to
any
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant
to
Section 401(a)(29) of the Code.
(5) Under
each Pension Plan which is a single-employer plan, as of the last day of the
most recent plan year, the actuarially determined present value of all “benefit
liabilities,” within the meaning of Section 4001(a)(16) of ERISA (as determined
on the basis of the actuarial assumptions contained in the plan’s most recent
actuarial valuation) did not exceed the then current value of the assets of
such
plan, and there has been no material change in the financial condition of such
plan since the last day of the most recent plan year.
(6) WBC
and Whidbey Island Bank have no obligations for retiree health and life benefits
under any plan, except as set forth in Schedule 5.1(P)(6),
or as required by law
pursuant to COBRA continuation requirements. There are no restrictions on the
rights of WBC or Whidbey Island Bank to amend or terminate any such plan without
incurring any liability there under.
(Q) LABOR
AGREEMENTS. Neither WBC nor Whidbey Island Bank is a party to or bound by
any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor is WBC or Whidbey
Island Bank the subject of a proceeding asserting that it has committed an
unfair labor practice (within the meaning of the National Labor Relations Act)
or seeking to compel it to bargain with any labor organization as to wages
and
conditions of employment, nor is there any strike or other labor dispute
involving it pending nor, to WBC’s or Whidbey Island Bank’s Knowledge, is there
any activity involving its employees seeking to certify a collective bargaining
unit or engaging in any other organization activity.
(R) LOAN
PORTFOLIO.
(1) Except
as Previously Disclosed or as set forth in Schedule 5.1(R),
neither WBC nor Whidbey Island
Bank is a party to any written or oral (i) loan agreement, note or borrowing
arrangement (including, without limitation, leases, credit enhancements,
commitments, guarantees and interest-bearing assets) (collectively, “Loans”),
other than Loans the unpaid principal balance of which does not exceed $50,000,
under the terms of which the obligor was, as of June 30, 2007, over 90 days
delinquent in payment of principal or interest or in default of any other
provision, or (ii) Loan with any director, executive officer or 5% or greater
shareholder of WBC or Whidbey Island Bank, or to the Knowledge of WBC or Whidbey
Island Bank, any person, corporation or enterprise controlling, controlled
by or
under common control with any of the foregoing. Schedule 5.1(R)
sets forth (x) all of the Loans
of WBC and Whidbey Island Bank that as of June 30, 2007, were classified by
any
bank examiner (whether regulatory or internal) as “Other Loans Specially
Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,”
“Criticized,” “Credit Risk Assets,” “Concerned Loans,” or “Watch List”, together
with the principal amount of and accrued and unpaid interest on each such Loan,
the identity of the borrower there under, the aggregate principal amount of
such
Loans by category (e.g., commercial real estate, consumer, C&I) and the
amount of specific reserves with respect to each such category of Loan and
the
amount of reserves with respect to each such category of Loans, and (y) each
asset of WBC or Whidbey Island Bank that as of June 30, 2007, was classified
as
“Other Real Estate Owned” and the book value thereof.
(2) Except
where failure would not have a Material Adverse Effect on such Loan, each Loan
in original principal amount in excess of $50,000 (i) is evidenced by notes,
agreements or other evidences of indebtedness, (ii) to the extent secured,
has
been secured by valid liens and security interests which have been perfected
against the relevant borrower or guarantor and (iii) is the legal, valid and
binding obligation of the obligor named therein, enforceable in accordance
with
its terms, subject to bankruptcy, insolvency, fraudulent conveyance and other
laws of general applicability relating to or affecting creditors’ rights and to
general equity principles.
(3) Except
as would not reasonably be expected to have, individually or in the aggregate,
a
Material Adverse Effect on WBC or Whidbey Island Bank, all Loans originated
by
WBC and Whidbey Island Bank, and all such Loans purchased, administered or
serviced by WBC or Whidbey Island Bank (including Loans held for resale to
investors), were made or purchased and are administered or serviced, as
applicable, in accordance with customary lending standards of WBC or Whidbey
Island Bank and in accordance with applicable federal, state and local laws,
regulations and rules. All such Loans (and any related guarantees) and payments
due thereunder are, and on the Closing Date will be, free and clear of any
lien,
pledge, charge, security interest or other similar encumbrance, and WBC and
Whidbey Island Bank have complied in all material respects, and on the Closing
Date will have complied in all material respects, with all lending laws and
regulations relating to such Loans.
(4) Except
as set forth in Schedule 5.1(R)(4), no agreement pursuant to which any
Loans or other assets have been sold by WBC or its Subsidiaries entitled the
buyer of such Loans or other assets, unless there is material breach of a
representation or covenant by WBC or its Subsidiaries, to cause WBC or Whidbey
Island Bank to repurchase such loan or
other
asset or the buyer to pursue any other form of recourse against WBC or Whidbey
Island Bank.
(5) Neither
WBC nor Whidbey Island Bank is now nor has it ever been since January 1, 2003
subject to any material fine, suspension, settlement or other agreement or
other
administrative agreement or sanction by, or any material reduction in any loan
purchase commitment from any federal or state agency relating to the
origination, sale or servicing of mortgage or consumer Loans. WBC and Whidbey
Island Bank have not received any notice, and to WBC’s and Whidbey Island Bank’s
Knowledge, no Agency proposes to limit or terminate the underwriting authority
of WBC or Whidbey Island Bank or to increase the guarantee fees payable to
any
such Agency.
(6) Schedule
5.1(R)(6) sets forth, as of the date hereof, a schedule of all officers and
directors of WBC and Whidbey Island Bank who have outstanding loans from WBC
or
Whidbey Island Bank, and there has been no default on, or forgiveness or waiver
of, in whole or in part, any such loan during the two (2) years immediately
preceding the date hereof.
(S) INSURANCE.
WBC and Whidbey Island Bank have taken all requisite action (including the
making of claims and the giving of notices) pursuant to its directors’ and
officers’ liability insurance policy or policies in order to preserve all rights
there under with respect to all matters that are Known to WBC or Whidbey Island
Bank, except for such matters that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on WBC or Whidbey Island
Bank. Set forth in Schedule 5.1(S)
is a list of all insurance
policies maintained by WBC and Whidbey Island Bank.
(T) STATE
TAKEOVER LAWS; ARTICLES OF INCORPORATION; BYLAWS. WBC has taken all
necessary action to exempt this Agreement and the transactions contemplated
by
this Agreement from, (1) any applicable state takeover laws, including but
not
limited to RCW Ch. 23B.19, as amended, and (2) any takeover related provisions
of the Articles of Incorporation or Bylaws of WBC.
(U) ENVIRONMENTAL
MATTERS.
(1) To
the Knowledge of WBC and Whidbey Island Bank, the Participation Facilities
and
the Loan/Fiduciary Properties are, and have been, in compliance with all
Environmental Laws, except for instances of noncompliance that are not
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect on WBC or Whidbey Island Bank.
(2) There
is no proceeding pending or, to the Knowledge of WBC and Whidbey Island Bank,
threatened before any court, governmental agency or board or other forum in
which WBC, Whidbey Island Bank or any Participation Facility has been, or with
respect to threatened proceedings, reasonably would be expected to be, named
as
a defendant or potentially responsible party (a) for alleged noncompliance
(including by any predecessor) with any Environmental Law, or (b) relating
to
the release or threatened release into the environment of any Hazardous
Material, whether or not occurring at or on a site owned, leased or operated
by
WBC, Whidbey Island Bank or any Participation Facility, except for such
proceedings pending or threatened that are not reasonably likely, individually
or in the aggregate, to have a Material Adverse Effect on WBC, Whidbey Island
Bank or have been disclosed in Schedule 5.1(U)(2).
(3) There
is no proceeding pending or, to the Knowledge of WBC and Whidbey Island Bank,
threatened before any court, Governmental Authority in which any
Loan/Fiduciary
Property (or WBC or Whidbey Island Bank in respect of any Loan/Fiduciary
Property) has been, or with respect to threatened proceedings, reasonably would
be expected to be, named as a defendant or potentially responsible party (a)
for
alleged noncompliance (including by any predecessor) with any Environmental
Law,
or (b) relating to the release or threatened release into the environment of
any
Hazardous Material, whether or not occurring at or on a Loan/Fiduciary Property,
except for such proceedings pending or threatened that are not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect
on
WBC or Whidbey Island Bank or have been disclosed in Schedule 5.1(U)(3).
(4) To
the Knowledge of WBC and Whidbey Island Bank, there is no reasonable basis
for
any proceeding of a type described in subparagraph (2) or (3) of this
paragraph (U), except as has been Previously Disclosed or as set forth in
Schedule 5.1(U)(4).
(5) To
the Knowledge of WBC and Whidbey Island Bank, during the period of (a) ownership
or operation by WBC or Whidbey Island Bank of any of its current properties,
(b)
participation in the management of any Participation Facility by WBC or Whidbey
Island Bank, or (c) holding of a security or other interest in a Loan/Fiduciary
Property by WBC or Whidbey Island Bank, there have been no releases of Hazardous
Material in, on, under or affecting any such property, Participation Facility
or
Loan/Fiduciary Property, except for such releases that are not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect
on
WBC or Whidbey Island Bank or have been Previously Disclosed in Schedule
5.1(U)(5).
(6) To
the Knowledge of WBC and Whidbey Island Bank, prior to the period of (a)
ownership or operation by WBC or Whidbey Island Bank of any of its current
properties, (b) participation in the management of any Participation Facility
by
WBC or Whidbey Island Bank, or (c) holding of a security or other interest
in a
Loan/Fiduciary Property by WBC or Whidbey Island Bank, there were no releases
of
Hazardous Material in, on, under or affecting any such property, Participation
Facility or Loan) Fiduciary Property, except for such releases that are not
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect on WBC or Whidbey Island Bank or have been Previously Disclosed in
Schedule 5.1(U)(6).
(V) TAX
REPORTS. Except as Previously Disclosed or as set forth in Schedule
5.1(V),
(1) all federal and state
reports and returns and, to the Knowledge of WBC, all other reports and returns
with respect to Taxes that are required to be filed by or with respect to WBC
or
Whidbey Island Bank, including federal income tax returns of WBC and Whidbey
Island Bank (collectively, the “WBC Tax Returns”), have been duly filed, or
requests for extensions have been timely filed and have not expired, for periods
ended on or prior to the most recent fiscal year-end, except to the extent
all
such failures to file, taken together, are not reasonably likely to have a
Material Adverse Effect on WBC or Whidbey Island Bank, and such WBC Tax Returns
were true, complete and accurate in all material respects, (2) all Taxes shown
to be due on the WBC Tax Returns have been paid in full, (3) all Taxes due
with
respect to completed and settled examinations have been paid in full, (4) no
issues have been raised by the relevant taxing authority in connection with
the
examination of any of the WBC Tax Returns which are reasonably likely,
individually or in the aggregate, to result in a determination that would have
a
Material Adverse Effect on WBC or Whidbey Island Bank, except as reserved
against in the WBC Financial Statements, and (5) no waivers of statutes of
limitations (excluding such statutes that relate to years under examination
by
the Internal Revenue Service) have been given by or requested with respect
to
any Taxes of WBC or Whidbey Island Bank.
(W) ACCURACY
OF INFORMATION. The statements with respect to WBC and Whidbey Island Bank
contained in this Agreement, the Schedules and any other written documents
executed and delivered by or on behalf of WBC and Whidbey Island Bank pursuant
to the terms of or relating to this Agreement are true and correct in all
material respects, and such statements and documents do not omit any material
fact necessary to make the statements contained therein, in light of the
circumstances under which they were made, not
misleading.
(X) DERIVATIVES
CONTRACTS. Neither WBC nor Whidbey Island Bank is a party to or has agreed
to enter into a Derivatives Contract or owns securities that are referred to
as
“structured notes” except for those Derivatives Contracts and structured notes
Previously Disclosed in Schedule 5.1(X). Schedule 5.1(X) includes
a list of any assets of WBC or Whidbey Island Bank that are pledged as security
for each such Derivatives Contract.
(Y) INVESTMENT
SECURITIES.
(1) WBC
and Whidbey Island Bank have good title to all securities owned by them (except
those sold under repurchase agreements or held in any fiduciary or agency
capacity as set forth in Schedule 5.1(Y)), free and clear of any lien,
pledge, charge, security interest or similar encumbrance, except to the extent
such securities are pledged in the ordinary course of business to secure
obligations of WBC or Whidbey Island Bank or as set forth in Schedule
5.1(Y). Such securities are valued on the books of WBC and Whidbey Island
Bank in accordance with GAAP in all material respects.
(2) WBC
and Whidbey Island Bank employ investment, securities, risk management and
other
policies, practices and procedures which they believe are prudent and reasonable
in the context of their business. Prior to the date hereof, WBC and Whidbey
Island Bank have made available to Frontier in writing the material policies,
practices and procedures.
(Z) INTELLECTUAL
PROPERTY. Except as set forth in Schedule 5.1(Z) and except as would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on WBC or Whidbey Island Bank, (a) each of WBC and Whidbey Island
Bank owns, or is licensed to use (in each case, free and clear of any lien,
pledge, charge, security interest or similar encumbrance), all Intellectual
Property used in or necessary for the conduct of its business as currently
conducted; (b) the use of any Intellectual Property by WBC or Whidbey Island
Bank does not, to the Knowledge of WBC or Whidbey Island Bank, infringe on
or
otherwise violate the rights of any person and is in accordance with any
applicable license pursuant to which WBC or Whidbey Island Bank acquired the
right to use any Intellectual Property; (c) to the Knowledge of WBC or Whidbey
Island Bank, no person is challenging, infringing on or otherwise violating
any
right of WBC or Whidbey Island Bank with respect to any Intellectual Property
owned by and/or licensed to WBC or Whidbey Island Bank; (d) WBC and Whidbey
Island Bank have not received any written notice of any pending claim with
respect to any Intellectual Property used by WBC or Whidbey Island Bank and
no
Intellectual Property owned and/or licensed by WBC or Whidbey Island Bank is
being used or enforced in a manner that would be expected to result in the
abandonment, cancellation or enforceability of such Intellectual Property.
For
purposes of this Agreement, “Intellectual Property” means any material
trademarks, service marks, brand names, certification marks, trade dress or
other indications of origin, the goodwill associated with the foregoing 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), and any renewals, extensions
or
reissues
thereof,
in any jurisdiction; trade secrets and registrations or applications for
registration of copyrights in any jurisdiction, and any renewals or extensions
thereof.
(AA) FAIRNESS
OPINION. Prior to the Execution Date, WBC has received an opinion from Sandler
X’Xxxxx & Partners, LP to the effect that as of the date thereof and based
upon and subject to the matters set forth therein, the Merger Consideration
to
be received by the shareholders of WBC is fair to such shareholders from a
financial point of view. Such opinion has not been amended or rescinded as
of
the Execution Date.
5.2 FRONTIER
AND FRONTIER BANK REPRESENTATIONS AND WARRANTIES.
Frontier and Frontier Bank each hereby represent
and warrant to WBC and
Whidbey Island Bank as follows:
(A) ORGANIZATION,
QUALIFICATION AND AUTHORITY. Each of Frontier and Frontier Bank is duly
qualified to do business and is in good standing in the States of the United
States and foreign jurisdictions where the failure to be duly qualified,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on it. Each of Frontier and its Subsidiaries has in effect all
federal state, local, and foreign governmental authorizations necessary for
it
to own or lease its properties and assets and to carry on its business as it
is
now conducted, the absence of which, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on Frontier. Frontier Bank
is an “insured depository institution” as defined in the Federal Deposit
Insurance Act, as amended, and applicable regulations under such statute, and
its deposits are insured by the Bank Insurance Fund of the FDIC to the fullest
extent permitted by law, and all premiums and assessments required to be paid
in
connection therewith have been paid.
(B) SHARES.
(1) The
outstanding shares of Frontier’s capital stock are validly issued and
outstanding, fully paid and non-assessable, and subject to no preemptive rights.
Except as disclosed in Schedule 5.2(B),
there are no shares of capital
stock or other equity securities of it or its Subsidiaries outstanding and
no
outstanding securities convertible into or exchangeable for, or giving any
Person any right to subscribe for or acquire, or any options, warrants, calls
or
commitments with respect thereto as of the Execution Date.
(2) As
of the Execution Date, Frontier has 100,000,000 authorized shares of common
stock, no par value per share (“Frontier Common Stock”), of which approximately
44,506,185 shares of Frontier Common Stock are issued and outstanding, and
10,000,000 shares of preferred stock, no par value per share, of which no shares
are issued and outstanding.
(3) As
of the Execution Date, Frontier Bank has 83,029 authorized shares of common
stock, $37.50 par value per share (no other class of capital stock being
authorized), of which 72,600 shares are issued and outstanding and owned by
Frontier, the sole shareholder of Frontier Bank.
(C) FRONTIER
SUBSIDIARIES. Schedule 5.2(C)
sets forth a list of all of
Frontier’s and Frontier Bank’s Subsidiaries. Each of Frontier’s Subsidiaries
that is a bank is an “insured depository institution” as defined in the Federal
Deposit Insurance Act, as amended, and applicable regulations under such
statute, and the deposits of such Subsidiaries are insured by the Bank Insurance
Fund of the FDIC. There are no contract or commitments, understandings or
arrangements by which any of its Subsidiaries is or may be bound to sell or
otherwise issue any shares of such Subsidiary’s capital stock, and there are no
contracts, commitments, understandings or arrangements relating to the rights
of
Frontier
or its Subsidiaries, as applicable to vote or to dispose of such shares. All
of
the shares of capital stock of each of its Subsidiaries held by Frontier or
one
of its Subsidiaries are fully paid and non-assessable and are owned by Frontier
or one of its Subsidiaries free and clear of any charge, mortgage, pledge,
security interest, restriction, claim, lien or encumbrance. Each of its
Subsidiaries is duly organized and existing under the laws of the jurisdiction
in which it is incorporated or organized, and is duly qualified to do business
in the jurisdictions where the failure to be duly qualified is reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect
on
it. Except as set forth in Schedule 5.2(C),
Frontier does not own
beneficially, directly or indirectly, any shares of any equity securities or
similar interests of any corporation, bank, partnership, joint venture, business
trust, association or other organization, other than shares held as trustee
or
nominee or share held as collateral.
(D) CORPORATE
AUTHORITY. Frontier and Frontier Bank have full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
and
validly approved by the Board of Directors of Frontier and Frontier Bank. This
Agreement has been authorized by all necessary corporate action of Frontier
and
Frontier Bank, and has been duly and validly executed and delivered by Frontier
and Frontier Bank and (assuming due authorization, execution and delivery by
WBC
and Whidbey Island Bank) constitutes the valid and binding obligation of
Frontier and Frontier Bank, enforceable against Frontier and Frontier Bank
in
accordance with its terms (except as may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity).
(E) CORPORATE
MINUTES. The minute books of Frontier and Frontier Bank Previously Disclosed
to WBC contain true, complete and correct records of all meetings and other
corporate actions held or taken since December 31, 2002 of Frontier’s and
Frontier Bank’s shareholders and Boards of Directors (including committees of
their Boards of Directors).
(F) NO
DEFAULTS. Subject to receipt of the required regulatory approvals referred
to in Section 7.1(B), and the required
filings under federal and state securities laws, and except as set forth in
Schedule 5.2(F), the
execution, delivery and performance of its obligation under this Agreement
and
the consummation by Frontier and each of its Subsidiaries of the transactions
contemplated by this Agreement do not and will not (1) constitute a breach
or
violation of, or a default under, any law, rule or regulation or any judgment,
decree, order, governmental permit or license, or agreement, indenture or
instrument of Frontier or of any of its Subsidiaries or to which Frontier or
any
of its Subsidiaries or its or their properties is subject or bound, which
breach, violation or default is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on Frontier, (2) constitute a
breach or violation of, or a default under, the Articles of Incorporation or
Bylaws of Frontier or any of its Subsidiaries, or (3) require any consent or
approval under any such law, rule, regulation, judgment, decree, order,
governmental permit or license or the consent or approval of any other party
to
any such agreement, indenture or instrument, other than any such consent or
approval that, if not obtained, would not be reasonably likely, individually
or
in the aggregate, to have a Material Adverse Effect on Frontier.
(G) FINANCIAL
REPORTS AND SECURITIES DOCUMENTS.
(1) Except
as disclosed in Schedule 5.2(G), Frontier’s audited
consolidated balance sheet as of December 31 for the fiscal years 2005 and
2006,
and the related statements of income, changes in shareholders’ equity and cash
flows for the fiscal years ended 2004 through 2006, inclusive, as reported
in
Frontier’s Annual Report on Form 10-K for the fiscal year ended December 31,
2006, filed with the SEC under the Exchange Act, and subsequent annual
and
quarterly
financial statements of Frontier presented in the Frontier Securities Documents
filed with the SEC after December 31, 2006, present fairly as of the dates
and
during the periods covered thereby the information purported to be presented
therein, are in conformity with GAAP as in effect on the date of such financial
statements, and comply in all material respects with the regulations of the
SEC
relating to such financial statements as of the dates and during the periods
covered thereby. References in this Agreement to the term “Frontier Financial
Statements” shall mean the audited consolidated balance sheet of Frontier and
Subsidiaries as of December 31, 2005 and 2006, the audited consolidated
statements of operations, cash flows, and changes in shareholder equity for
the
fiscal years then ended, the unaudited consolidated balance sheets of Frontier
dated June 30, 2007 and 2006, the unaudited consolidated statements of
operations, cash flows, and changes in shareholder equity for the six month
periods then ended, and subsequent annual and quarterly financial statements
in
each case as presented (and as and to the extent amended or restated) in the
Frontier Securities Documents.
(2) Frontier’s
Annual Report on Form 10-K for the year ended December 31, 2006 and all other
reports, registration statements, definitive proxy statements or information
statements filed by it subsequent to December 31, 2003 under the Securities
Act
or under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act in the form
filed or to be filed with the SEC (collectively, “Frontier Securities
Documents”), as of the date filed and as amended prior to the date hereof, (A)
complied or will comply in all material respects as to form with the applicable
regulations of the SEC, as the case may be, and (B) did 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 therein, in the light of
the
circumstances under which they were made, not misleading. Frontier has filed
all
forms, reports, statements, certifications and other documents (including all
exhibits, amendments and supplements thereto) required to be filed by it with
the SEC since December 31, 2003. None of Frontier’s Subsidiaries is required to
file periodic reports with the SEC pursuant to the Exchange Act. Frontier has
Previously Disclosed to WBC true, correct and complete copies of all written
correspondence between the SEC, on the one hand, and Frontier and any of its
Subsidiaries, on the other hand, occurring since December 31, 2003. As of the
date of this Agreement, there are no outstanding or unresolved comments in
comment letters received from the SEC staff with respect to the Frontier
Securities Documents. To Frontier’s Knowledge, none of the Frontier Securities
Documents is the subject of ongoing SEC review or outstanding SEC
comment.
(3) Since
June 30, 2007, no event has occurred or circumstances arisen that, individually
or taken together with all other facts, circumstances and events (described
in
any paragraph of this Section 5.2 or otherwise), is reasonably likely to have
a
Material Adverse Effect with respect to Frontier.
(H) ABSENCE
OF UNDISCLOSED LIABILITIES. Except as disclosed on Schedule 5.2(H),
Frontier has no obligation or
liability (contingent or otherwise) that, individually or in the aggregate,
is
reasonably likely to have a Material Adverse Effect on it, except (1) as
reflected in the Frontier Financial Statements prior to the Execution Date,
and
(2) for commitments and obligations made, or liabilities incurred, in the
ordinary course of business consistent with past practice. Except as disclosed
on Schedule 5.2(H),
since December 31, 2006,
Frontier has not incurred or paid any obligation or liability (including any
obligation or liability incurred in connection with any acquisitions in which
any form of direct financial assistance of the federal government or any agency
thereof has been provided to Frontier) that, individually or in the aggregate,
is reasonably likely to have a Material Adverse Effect on Frontier.
(I) LITIGATION;
REGULATORY ACTION. Except as disclosed in Schedule 5.2(I) no litigation,
proceeding or controversy before any court or governmental agency is pending
that, individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on Frontier or its Subsidiaries, and, to the Knowledge of
Frontier, no such litigation, proceeding or controversy has been threatened.
Neither Frontier nor any of its Subsidiaries is subject to any cease-and-desist
or other order issued by, or is a party to any Regulatory Agreement, or is
subject to any order or directive by, or is a recipient of any extraordinary
supervisory letter from, or has adopted any board resolutions at the request
of
any Regulatory Authority that restricts the conduct of its business or that
in
any manner related to its capital adequacy, its credit policies, its management
or its business, nor has Frontier or any of its Subsidiaries been advised by
any
Regulatory Authority that is considering issuing or requesting any Regulatory
Agreement.
(J) COMPLIANCE
WITH LAWS. Except as set forth in Schedule 5.2(J), each
of Frontier,
Frontier Bank and their Subsidiaries:
(1) Is
and at all times since December 31, 2003 has been in material compliance with
all applicable federal, state, local and foreign statutes, laws, codes,
regulations, ordinances, rules, judgments, injunctions, orders, or decrees
of
any Governmental Authority applicable to the operation of its business or to
the
employees conducting such businesses, including, without limitation, Sections
23A and 23B of the Federal Reserve Act and FRB regulations pursuant thereto,
the
Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment
Act, the Home Mortgage Disclosure Act, the Bank Secrecy Act, the USA Patriot
Act, all other applicable fair lending laws and other laws relating to
discriminatory business practices and Environmental Laws and all posted and
internal policies of Frontier and its Subsidiaries related to customer data,
privacy and security;
(2) Has
all permits, licenses, authorizations, orders and approvals of, and has made
all
filings, applications and registrations with, all Regulatory Authorities that
are required in order to permit it to own its businesses presently conducted
and
that are material to the business of it and its Subsidiaries taken as a whole;
all such permits, licenses, certificates of authority, orders and approvals
are
in full force and effect and, to the Knowledge of Frontier, no suspension or
cancellation of any of them is threatened; and all such filings, applications
and registrations are current;
(3) Has
received no notification or communication from any Regulatory Authority or
the
staff thereof (a) asserting that Frontier or any of its Subsidiaries is not
in
compliance with any of the statutes, regulations or ordinances which such
Regulatory Authority enforces, which, as a result of such noncompliance in
any
such instance, individually or in the aggregate, is reasonably likely to have
a
Material Adverse Effect on Frontier or its Subsidiaries, (b) threatening to
revoke any license, franchise, permit or governmental authorization, which
revocation, individually or in the aggregate, is reasonably likely to have
a
Material Adverse Effect on Frontier or its Subsidiaries, or (c) requiring any
of
Frontier or its Subsidiaries (or any of its or their officers, directors or
controlling persons) to enter into a cease and desist order, agreement or
memorandum of understanding (or requiring the board of directors thereof to
adopt any resolution or policy); and
(4) Has
devised and maintained systems of internal accounting controls sufficient to
provide reasonable assurances that (1) all material transactions are
executed in
accordance
with management’s general or specific authorization, (2) all material
transactions are recorded as necessary to permit the preparation of financial
statements in conformity with GAAP, and to maintain proper accountability for
items, (3) access to the material property and assets of Frontier and
Frontier Bank is permitted only in accordance with management’s general or
specific authorization, and (4) the recorded accountability for items is
compared with the actual levels at reasonable intervals and appropriate action
is taken with respect to any differences.
(5) As
of June 30, 2007, Frontier and Frontier Bank are “well capitalized” and “well
managed” as a matter of federal banking law. Frontier Bank has at least a
“satisfactory” rating under the Community Reinvestment Act.
(K) REGULATORY
REPORTS. Since January 1, 2003, each of Frontier and its Subsidiaries has
filed all reports and statements, together with any amendments required to
be
made with respect thereto, that it was required to file with (1) the FDIC,
(2)
the Department, and (3) the Federal Reserve Board. As of their respective dates
(and without giving effect to any amendments or modifications filed after the
Execution Date with respect to reports and documents filed before the Execution
Date), each of such reports and documents, including the financial statements,
exhibits and schedules thereto, complied in all material respects with all
of
the statutes, rules and regulations enforced or promulgated by the Regulatory
Authority with which they were filed.
(L) BROKERS
AND FINDERS. Neither Frontier, nor Frontier Bank nor any of their respective
officers or directors has employed any broker or finder or incurred any
liability for any broker’s fees, commissions or finder’s fees in connection with
any of the transactions contemplated by this Agreement.
(M) STATE
TAKEOVER LAWS; ARTICLES OF INCORPORATION; BYLAWS. Frontier has taken all
necessary action to exempt this Agreement and the transactions contemplated
by
this Agreement from, (1) any applicable state takeover laws, including but
not
limited to RCW Ch. 23B.19, as amended, and (2) any takeover related provisions
of the Articles of Incorporation or Bylaws of Frontier.
(N) ACCURACY
OF INFORMATION. The statements with respect to Frontier and its Subsidiaries
contained in this Agreement, the Schedules and any other written documents
executed and delivered by or on behalf of Frontier pursuant to the terms of
or
relating to this Agreement are true and correct in all material respects, and
such statements and documents do not omit any material fact necessary to make
the statements contained therein, in light of the circumstances under which
they
were made, not misleading.
ARTICLE
VI. COVENANTS
Each
of WBC and Whidbey Island Bank hereby covenants to Frontier and Frontier Bank,
and each of Frontier and Frontier Bank hereby covenants to WBC and Whidbey
Island Bank, that:
6.1 BEST
EFFORTS. Subject to the terms and conditions of
this Agreement and, in the case of WBC, to the exercise by its Board of
Directors of such board’s fiduciary duties, each party shall 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 or desirable, or advisable
under applicable laws, so as to permit consummation of the Merger and the
consummation of the other transactions contemplated by this
Agreement
as soon as practicable, and in any event by June 30, 2008, and shall
cooperate fully with the other parties to that end.
6.2 PROXY
STATEMENT; MEETING.
(A) WBC
shall take all steps necessary to duly call, give notice of, convene and hold
a
meeting (the “Meeting”) of the holders of WBC Common Stock to be held as soon as
practicable after the date on which the Registration Statement becomes
effective, for purposes of voting upon the approval of this Agreement and the
consummation of the transactions contemplated hereby. WBC shall, promptly and
in
any event no later than thirty (30) days following the date of this Agreement,
advise Frontier of the date on which the Meeting is to be convened, which date
shall be reasonably acceptable to Frontier and shall not be more than ten (10)
days prior to the intended Effective Date. WBC shall take such actions as
Frontier may reasonably request to adjust the scheduled date of the Meeting
to
accommodate any delays inherent in the process for filing the Registration
Statement and having the same declared effective pursuant to Section 6.2(B)
below. Subject to the exercise of its fiduciary duties, the Board of Directors
of WBC shall recommend approval of this Agreement and the transactions
contemplated hereby and such other matters as may be submitted to its
shareholders in connection with this Agreement and, unless this Agreement has
been terminated as provided herein, WBC shall use its reasonable best efforts
to
solicit and obtain votes of the holders of WBC Common Stock in favor of the
approval of this Agreement and the transactions contemplated by this
Agreement.
(B) Frontier
shall prepare a prospectus/proxy statement (the “Prospectus/Proxy Statement”) to
be included in a Registration Statement on Form S-4 (the “Registration
Statement”) which taken together satisfy the requirements of Form S-4 under the
Securities Act, shall file the Registration Statement with the SEC and shall
manage the response to comments, if any, received from the SEC prior to the
time
the Registration Statement is declared effective. Without limiting the
generality of the foregoing, Frontier shall file such amendments and supplements
as may be required, and shall take such other actions as may be reasonably
necessary to cause the Registration Statement to be declared effective not
later
than the thirty-fifth day prior to the date established for the Meeting pursuant
to Section 6.2(A).
Promptly after the Registration
Statement is declared effective, Frontier shall cause the Prospectus/Proxy
Statement to be mailed (in final form) to the holders of WBC Common Stock in
connection with the transactions contemplated by this Agreement. WBC shall
take
such actions as may reasonably be requested by Frontier to assist in the
preparation, revision, filing, and amendment of the Registration Statement
and
the mailing and, if required, the supplementing of the Prospectus/Proxy
Statement.
(C) Frontier
will advise WBC, promptly after Frontier 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 the Frontier Common Stock for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such
purpose, and of any comment or request by the SEC for the amendment or
supplement of the Registration Statement or for additional
information.
6.3 REGISTRATION
STATEMENT COMPLIANCE WITH SECURITIES LAWS. When
the Registration Statement or any post-effective amendment or supplement thereto
shall become effective, and at all times subsequent to such effectiveness,
up to
and including the date of the Meeting, such Registration Statement, and all
amendments or supplements thereto, with respect to all information set forth
therein furnished or to be furnished by or on behalf of WBC or Whidbey Island
Bank relating to WBC or Whidbey Island Bank and by or on behalf of Frontier
relating to Frontier or its Subsidiaries, 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 contained therein not misleading;
provided, however, in no
event
shall any party be liable for any untrue statement of a material fact or
omission to state a material fact in the Registration Statement made in reliance
upon, and in conformity with, written information concerning another party
furnished by or on behalf of such other party specifically for use in the
Registration Statement. Frontier shall take such actions as may be required
from
time to time, in connection with the preparation, amendment, supplementing
and
filing of the Registration Statement and the delivery of the Prospectus/Proxy
Statement, to assure that each such document will comply in all material
respects with the provisions of the Securities Act and any other applicable
statutory or regulatory requirements, including without limitation any and
all
Blue Sky laws.
6.4 PUBLICITY;
PRESS RELEASES. Except as expressly permitted by
this Agreement or otherwise required by law or the rules of Nasdaq, so long
as
this Agreement is in effect, neither Frontier nor WBC shall, nor shall either
of
them permit any of their respective Subsidiaries to, issue or cause the
publication of any press release or other public announcement with respect
to,
or otherwise make any public statement concerning, the transactions contemplated
by this Agreement without the consent of the other party, which consent shall
not be unreasonably withheld.
6.5 ACCESS;
INFORMATION.
(A) Upon
reasonable notice and subject to applicable laws relating to the exchange of
information, each party shall, and shall cause each of its Subsidiaries to,
afford to the officers, employees, accountants, counsel 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, records, officers, employees, accountants, counsel and other
representatives and, during such period, it shall, and shall cause its
Subsidiaries to, make available to the other party all information concerning
its business, properties and personnel as the other party may reasonably
request. Unless otherwise specifically requested by the receiving party, or
unless the disclosing party otherwise notifies the receiving party of the
impracticality of electronic delivery, information provided pursuant to this
Section 6.5(A) shall be delivered by posting the same on the electronic data
site maintained by the parties for the disclosure and review of information
related to the Merger and the transactions connected therewith. Neither party
nor any of its Subsidiaries shall be required to provide access to or to
disclose information where such access or disclosure would violate or prejudice
the rights of its customers, jeopardize any attorney-client privilege or
contravene any law, rule, regulation, order, judgment, decree, fiduciary duty
or
binding agreement entered into prior to the Execution Date. The parties hereto
shall make appropriate substitute disclosure arrangements under circumstances
in
which the restrictions of the preceding sentence apply.
(B) During
the period from the Execution Date to the Effective Time, each of WBC, Whidbey
Island Bank, Frontier and Frontier Bank shall, and shall cause its
representatives to, confer on a regular and frequent basis with representatives
of the other.
(C) Each
of WBC and Frontier shall promptly notify the other of (1) any material change
in the business or operations of it or its Subsidiaries, (2) any material
complaints, investigations or hearings (or communications indicating that the
same may be contemplated) of any Regulatory Authority relating to it or its
Subsidiaries, (3) the initiation or threat of material litigation involving
or
relating to it or its Subsidiaries, or (4) any event or condition that might
reasonably be expected to cause any of its or its Subsidiaries’ representations
or warranties set forth in this Agreement not to be true and correct in all
material respects as of the Effective Time or prevent it or its Subsidiaries
from fulfilling its or their obligations under this Agreement.
(D) All
information furnished to Frontier or WBC by the other party hereto pursuant
to
Section 6.5(A)
shall be subject to, and the parties
shall hold all such information in confidence in accordance with, the provisions
of the confidentiality agreement, dated June 7, 2007 (the “Confidentiality
Agreement”), between Frontier and WBC.
6.6 AFFILIATE
AGREEMENTS. WBC will use its best efforts to
induce each person who may be deemed to be an “affiliate” of WBC for purposes of
Rule 145 under the Securities Act, to execute and deliver to Frontier on or
before the mailing of the Proxy Statement for the Meeting, an agreement in
the
form attached hereto as Exhibit D restricting the disposition of the
shares of Frontier Common Stock to be received by such person in exchange for
such person’s shares of WBC Common Stock. Frontier agrees to use its best
efforts to maintain the availability of Rule 145 for use by such
“affiliates.”
6.7 STATE
TAKEOVER LAWS. No party shall take any action that
would cause the transactions contemplated by this Agreement to be subject to
any
applicable state takeover statute, and each party shall take all necessary
steps
to exempt (or ensure the continued exemption of) the transactions contemplated
by this Agreement from, or, if necessary, challenge the validity or
applicability of, any applicable state takeover law.
6.8 NO
RIGHTS TRIGGERED. Except for those consents of
Third Parties identified on Schedule 5.1(F), WBC and Whidbey Island
Bank
shall take all necessary steps to ensure that the entering into of this
Agreement and the consummation of the transactions contemplated by this
Agreement (including the Merger) and any other action or combination of actions
contemplated by this Agreement, do not and will not (A) result in the grant
of
any rights to any Person under the Articles of Incorporation or Bylaws of WBC
or
Whidbey Island Bank or under any agreement to which WBC, Whidbey Island Bank
or
any of their Subsidiaries is a party (other than rights pursuant to agreements
or arrangements listed or described on Schedules 3.8 and 9.4), or
(B) restrict or impair in any way the ability of Frontier or Frontier Bank
to exercise the rights granted under this Agreement.
6.9 SHARES
LISTED. Frontier shall cause to be listed, prior
to the Effective Time, on the Nasdaq upon official notice of issuance of the
Frontier Common Stock included in the Merger Consideration.
6.10 REGULATORY
APPLICATIONS. Frontier and Frontier Bank shall (A)
promptly prepare and submit all necessary notices and applications to the
appropriate Regulatory Authorities for approval of the Corporate Merger, the
Bank Merger and other transactions contemplated by this Agreement, and (B)
promptly make all other appropriate filings to secure all other approvals,
consents and rulings that are necessary for the consummation of the Corporate
Merger, the Bank Merger and other transactions contemplated by this
Agreement.
6.11 INSURANCE. Frontier
will cause the persons serving as officers and directors of WBC and Whidbey
Island Bank immediately prior to the Effective Time to be covered for a period
of three (3) years after the Effective Time by the current policies of directors
and officers liability insurance maintained by WBC and Whidbey Island Bank
(or
at Frontier’s option, under comparable policies maintained by Frontier) with
respect to acts or omissions of officers and directors, in their capacity as
such, occurring on or prior to the Effective Time.
6.12 CERTAIN
ACTIONS. Neither WBC nor Frontier nor any of their affiliates shall
take any action that will adversely affect the federal income tax treatment
of
the Merger to the shareholders of WBC, including, but not limited to, any
actions that could reasonably be expected to prevent the Merger from qualifying
as a reorganization under Section 368(a) of the Code.
6.13 ESTOPPEL
LETTERS. WBC shall use its commercially reasonable
efforts to obtain and deliver to Frontier at the Closing with respect to all
real estate (i) owned by WBC or its Subsidiaries, an estoppel letter from all
tenants dated as of the Closing in the form to be provided by Frontier and
its
counsel and (ii) leased by WBC or its Subsidiaries, an estoppel letter from
all
lessors dated as of the Closing in the form to be provided by Frontier and
its
counsel.
ARTICLE
VII. CONDITIONS PRECEDENT
7.1 CONDITIONS
TO EACH PARTY’S OBLIGATIONS. The obligation of
each party to consummate the transactions contemplated hereby shall be subject
to the fulfillment, at or prior to the Effective Time, of the following
conditions:
(A) SHAREHOLDER
VOTE. This Agreement and the transactions contemplated hereby shall have
been duly approved by the requisite vote of WBC’s shareholders.
(B) REGULATORY
APPROVALS. The parties shall have procured all necessary regulatory consents
and approvals by the appropriate Regulatory Authorities, and any waiting periods
relating thereto shall have expired; provided, however, that no such
approval or consent shall have imposed any condition or requirement not normally
imposed in such transactions that, in the reasonable opinion of Frontier, would
deprive Frontier of the material economic or business benefits of the
transactions contemplated by this Agreement.
(C) NO
PENDING OR THREATENED CLAIMS. No claim, action, suit, investigation or other
proceeding shall be pending before any court or governmental agency which
presents a risk of the restraint or the prohibition of the transactions
contemplated by this Agreement or the obtaining of material damages or other
relief in connection therewith.
(D) NO
INJUNCTION. There shall not be in effect any order, decree or injunction of
any court or agency of competent jurisdiction that enjoins or prohibits
consummation of any of the transactions contemplated by this
Agreement.
(E) EFFECTIVE
REGISTRATION STATEMENT. The Registration Statement shall have become
effective 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 or threatened by the SEC or any other Regulatory
Authority.
(F) TAX
OPINION. Frontier and WBC shall have received an opinion from Xxxxxx
Xxxxxxxx L.L.P. (“Frontier’s Counsel”) in the form of Exhibit E-3 dated
the Effective Time, substantially to the effect that on the basis of facts,
representations and assumptions set forth in such opinion which are consistent
with the state of facts existing at the Effective Time, the Corporate Merger
will be treated as a reorganization within the meaning of Section 368(a) of
the
Code. In rendering such opinion, Frontier’s Counsel may require and rely upon
representations and covenants, including those contained in
certificates
of officers of Frontier, WBC and others, reasonably satisfactory in form and
substance to such counsel.
(G) NASDAQ
LISTING. The shares of Frontier Common Stock to be issued pursuant to this
Agreement shall have been approved for listing on the Nasdaq Global Select
Market subject only to official notice of issuance.
7.2 CONDITIONS
TO OBLIGATIONS OF FRONTIER. Unless waived in
writing by Frontier and Frontier Bank, the obligations of Frontier and Frontier
Bank to consummate the transactions contemplated by this Agreement are subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(A) PERFORMANCE.
Each of the material acts, covenants and undertakings of WBC and Whidbey Island
Bank to be performed at or before the Effective Time shall have been duly
performed in all material respects.
(B) REPRESENTATIONS
AND WARRANTIES. The representations and warranties of WBC and Whidbey Island
Bank contained in this Agreement shall be true and correct on and as of the
Effective Time with the same effect as though made on and at the Effective
Time,
except for any such representations and warranties that specifically relate
to
an earlier date, which shall be true and correct as of such earlier date;
provided in each case that any such failure to be true and correct, individually
or in the aggregate, would have no Material Adverse Effect on WBC or Whidbey
Island Bank.
(C) OFFICER’S
CERTIFICATE. In addition to the documents described elsewhere in this
Agreement, Frontier and Frontier Bank shall have received the following
documents and instruments:
(1) Certificates
signed by the secretary or assistant secretary of WBC and Whidbey Island Bank
certifying that: (i) WBC’s and Whidbey Island Bank’s Boards of Directors and
shareholders have duly adopted resolutions (copies of which shall be attached
to
such certificate) approving this Agreement and authorizing the consummation
of
the transactions contemplated by this Agreement and certifying that such
resolutions have not been amended and remain in full force and effect; (ii)
each
person executing this Agreement on behalf of WBC and Whidbey Island Bank was,
as
of the Execution Date, an officer of WBC and Whidbey Island Bank, holding the
office or offices specified therein, with full power and authority to execute
this Agreement and any and all other documents in connection with the Agreement,
and certifying that the signature of each person on such documents is his or
her
genuine signature; and (iii) the Articles of Incorporation and Bylaws of WBC
and
Whidbey Island Bank (copies of which shall be attached to such certificate)
remain in full force and effect; and
(2) Certificates
signed by the president and Chief Financial Officer of WBC and the president,
chief financial officer, and chief lending officer of Whidbey Island Bank dated
the Effective Time stating that the conditions set forth in Sections 7.2(A);
7.2(B),
7.2(E),
7.2(F),
7.2(H),
and 7.2(L) of this Agreement have been
satisfied as of the Effective Time.
(D) LEGAL
OPINION. Frontier shall have received a legal opinion, dated the Effective
Time, from Xxxxx Xxxxxx Xxxxxxxx LLP, substantially in the form of Exhibit
E-2.
(E) NO
MATERIAL ADVERSE CHANGE. During the period from the Execution Date to the
Effective Time, there shall have occurred or be threatened no change relative
to
the business, property, assets (including loan portfolios), liabilities (whether
absolute, contingent or otherwise), prospects, operations, liquidity, income
or
condition (financial or otherwise) of WBC and/or its Subsidiaries which is
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect on WBC and/or its Subsidiaries, other than any such effect attributable
to or resulting from (1) (i) any change in banking or similar laws, rules or
regulations of general applicability or interpretations thereof by courts or
governmental authorities, (ii) any change in GAAP (as defined herein) or
regulatory accounting principles applicable to banks or their holding companies
generally, (iii) changes attributable to or resulting from changes in general
economic conditions, including changes in the prevailing level of interest
rates, (iv) any action or omission of WBC or Frontier or any Subsidiary of
either of them taken with the prior written consent of the other party hereto,
or (v) any expenses incurred by such party in connection with this Agreement
or
the transactions contemplated hereby; or (2) the ability of WBC or Whidbey
Island Bank to consummate the transaction contemplated hereby.
(F) OTHER
BUSINESS COMBINATIONS, ETC. Other than as contemplated hereunder, subsequent
to the Execution Date, neither WBC nor Whidbey Island Bank has entered into
any
agreement, letter of intent, understanding or other arrangement pursuant to
which WBC or Whidbey Island Bank would merge, consolidate with, effect a
business combination with, or sell any substantial part of WBC’s or Whidbey
Island Bank’s assets; acquire a significant part of the shares or assets of any
other person or entity (financial or otherwise); or adopt any “poison pill” or
other type of anti-takeover arrangement, any shareholder rights provision,
or
any “golden parachute” or similar program which would have the effect of
materially decreasing the value of WBC or Whidbey Island Bank or the benefits
of
acquiring WBC Common Stock.
(G) RECEIPT
OF AFFILIATE AGREEMENTS. Frontier shall have received from each affiliate of
WBC the agreement referred to in Section 6.6.
(H) DISSENTERS’
RIGHTS. The number of shares of WBC Common Stock for which dissenters’
rights have been effectively preserved as of the Effective Time shall not
exceed
in the aggregate ten percent (10%) of the outstanding shares of WBC Common
Stock.
(I) VOTING
AGREEMENT. Frontier shall have received from each director and certain
Executive Officers of WBC, the Voting Agreement in substantially the same form
set forth as Exhibit A.
(J) DIRECTOR’S
AGREEMENT. Frontier shall have received from each director of WBC the
Director’s Agreement in substantially the same form set forth as Exhibit
B.
(K) NONCOMPETITION
AGREEMENTS. Frontier shall have received the noncompetition and
nonsolicitation agreements from Xxxxxx X. Xxxx, Xxxxxxx X. Xxxxxxx, Xxxx X.
Xxxxxx and Xxxxxx X. Xxxxxx, with Frontier and Frontier Bank to be effective
as
of the Closing (the “Noncompetition Agreements”) substantially in the form of
Exhibits C-1 through C-4.
(L) TRANSACTION
EXPENSES. WBC shall not have incurred expenses in connection with the
transactions contemplated by this Agreement that exceed $5,200,000 in the
aggregate. This figure includes change of control payments, legal and accounting
fees, the investment banking fee paid to RBC Xxxx Xxxxxxxx, Incorporated and
the
fairness opinion fee paid to Sandler
X’Xxxxx &
Partners, LP at closing. Certain costs or expenses that may be incurred in
conjunction with the closing of the Merger, such as conforming to accounting
adjustments in connection with Closing or the Corporate Merger, are not
included.
7.3 CONDITIONS
TO OBLIGATIONS OF WBC. Unless waived in writing by
WBC and Whidbey Island Bank, the obligations of WBC and Whidbey Island Bank
to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction at or prior to the Effective Time of the following
conditions:
(A) PERFORMANCE.
Each of the material acts, covenants and undertakings of Frontier and Frontier
Bank to be performed at or before the Effective Time shall have been duly
performed in all material respects.
(B) REPRESENTATIONS
AND WARRANTIES. The representations and warranties of Frontier and Frontier
Bank contained in this Agreement shall be true and correct on and as of the
Effective Time with the same effect as though made on and at the Effective
Time,
except for any such representations and warranties that specifically relate
to
an earlier date, which shall be true and correct as of such earlier date;
provided in each case that any such failure to be true and correct, individually
or in the aggregate, would have a Material Adverse Effect on
Frontier.
(C) OFFICER’S
CERTIFICATE. In addition to the documents described elsewhere in this
Agreement, WBC and Whidbey Island Bank shall have received the following
documents and instruments:
(1) A
certificate signed by the secretary or assistant secretary of Frontier and
Frontier Bank certifying that: (i) the Board of Directors of each of Frontier
and Frontier Bank has duly adopted resolutions (copies of which shall be
attached to such certificate) approving this Agreement and authorizing the
consummation of the transactions contemplated by this Agreement and certifying
that such resolutions have not been amended and remain in full force and effect;
(ii) each person executing this Agreement on behalf of Frontier or Frontier
Bank
was, as of the Execution Date, an officer of Frontier or Frontier Bank,
respectively, holding the office or offices specified therein, with full power
and authority to execute this Agreement and any and all other documents in
connection with the Agreement, and the signature of each person on such
documents is his or her genuine signature; and (iii) the Articles of
Incorporation and Bylaws of Frontier and Frontier Bank (copies of which shall
be
attached to such certificate) remain in full force and effect; and
(2) A
certificate signed by the President, Chief Financial Officer and Chief Lending
Officer of Frontier and the President and Chief Financial Officer of Frontier
Bank dated the Effective Time stating that the conditions set forth in Sections
7.3(A);
7.3(B)
and 7.3(E)
of this Agreement have been satisfied
as of the Effective Time.
(D) LEGAL
OPINION. WBC shall have received a legal opinion, dated the Effective Time,
from Xxxxxx Xxxxxxxx L.L.P. in substantially the form of Exhibit
E-1.
(E) NO
MATERIAL ADVERSE CHANGE. During the period from the Execution Date to the
Effective Time, there shall have occurred or be threatened no change relative
to
the business, property, assets (including loan portfolios), liabilities (whether
absolute, contingent or otherwise), prospects, operations, liquidity, income
or
condition (financial or otherwise) of Frontier and/or its Subsidiaries which
is
reasonably likely, individually or in the aggregate to have a Material Adverse
Effect
on
Frontier and/or its Subsidiaries, other than any such effect attributable to
or
resulting from (i) any change in banking or similar laws, rules or regulations
of general applicability or interpretations thereof by courts or governmental
authorities, (ii) any change in GAAP (as defined herein) or regulatory
accounting principles applicable to banks, thrifts or their holding companies
generally, (iii) changes attributable to or resulting from changes in general
economic conditions, including changes in the prevailing level of interest
rates, (iv) any action or omission of WBC or Frontier or any Subsidiary of
either of them taken with the prior written consent of the other party hereto,
or (v) any expenses incurred by such party in connection with this Agreement
or
the transactions contemplated hereby.
(F) REORGANIZATION.
Nothing shall have come to WBC’s attention to cause it to have the reasonable
belief, after consultation with its legal advisors, that the Corporate Merger
will not be treated as a reorganization within the meaning of Section 368(a)
of
the Code.
(G) FAIRNESS
OPINION. WBC’s financial advisor, Sandler X’Xxxxx & Partners, LP,
shall not have confirmed its fairness opinion described in Section 5.1(Y), upon request by WBC prior to
mailing of the Prospectus/Proxy Statement.
ARTICLE
VIII. TERMINATION AND AMENDMENT
8.1 TERMINATION.
This Agreement may be terminated at any time prior to the Effective
Time, before or after approval of the matters presented in connection with
the
Merger by the holders of WBC Common Stock, under each of the following
conditions:
(A) MUTUAL
CONSENT. By the mutual consent of Frontier and WBC, if the Board of
Directors of each so determines by vote of a majority of the members of its
entire board.
(B) DELAY.
By Frontier or WBC in the event the Merger is not consummated by June 30,
2008, unless the failure of the consummation of the transactions to occur shall
be due to the failure of the party seeking to terminate this Agreement to
perform its obligations hereunder in a timely manner; provided,
however, that a party may not terminate the Agreement pursuant to this
Section 8.1(B)
if it is in material breach of any of
the provisions of the Agreement; provided, further, that Frontier may
not terminate this Agreement pursuant to this Section 8.1(B), if such delay
results from amendments to the Registration Statement or a resolicitation of
proxies as a consequence of a Frontier Transaction, or any other acquisition
or
sale transaction, or any offering of securities, in which Frontier is
involved.
(C) NO
REGULATORY APPROVALS. By Frontier or WBC, in the event that any of the
required regulatory approvals set forth in Section 7.1(B) are denied (or should any such
required approval be conditioned upon a material deviation from the transactions
contemplated); provided however, that either party may extend the term
of this Agreement for a sixty (60) day period to prosecute diligently and
overturn such denial provided that such denial has been appealed within fourteen
(14) business days of the receipt thereof.
(D) BREACH
OF WARRANTY. By Frontier or WBC (provided that the terminating party is not
then in material breach of any representation, warranty, covenant or other
agreement contained herein) if there shall have been a material breach of any
of
the representations or warranties set forth in this Agreement on the part of
the
other party, which breach is not cured within thirty days following written
notice to the party committing such breach, or which breach, by its nature,
cannot be cured prior to the Effective Time; provided, however, that
neither party shall have the right to terminate this Agreement pursuant to
this
Section 8.1(D)
unless the breach of representation or
warranty, together with all other such breaches, would entitle the party
receiving such representation not to consummate the
transactions
contemplated hereby under Section 7.2(B)
(in the case of a breach of representation or warranty by WBC or Whidbey Island
Bank) or Section 7.3(B) (in the case of
a breach of representation or warranty by Frontier or Frontier
Bank).
(E) BREACH
OF COVENANT. By either Frontier or WBC (provided that the terminating party
is not then in material breach of any representation, warranty, covenant or
other agreement contained herein) if there shall have been a material breach
of
any of the covenants or agreements set forth in this Agreement on the part
of
the other party, which breach shall not have been cured within thirty days
following receipt by the breaching party of written notice of such breach from
the other party hereto, or which breach, by its nature, cannot be cured prior
to
the Effective Time.
(F) SUPERIOR
PROPOSAL. By WBC, in the event that the Board of Directors of WBC determines
in good faith, after consultation with its financial adviser and outside
counsel, that in light of a Superior Proposal (as defined in Section 9.3) it would not be consistent with its
fiduciary duties to WBC and to WBC 's shareholders under applicable law to
continue with the transactions contemplated under this Agreement; provided,
however, that the Board of Directors of WBC may terminate this Agreement
pursuant to this Section 8.1(F)
solely in order to concurrently enter
into a letter of intent, agreement in principle, acquisition agreement or other
similar agreement (each, an “Acquisition Agreement”) related to a Superior
Proposal; provided further, however, that this Agreement may be terminated
pursuant to this Section 8.1(F)
only after the fifth day following
Frontier’s receipt of written notice advising Frontier that the Board of
Directors of WBC is prepared to accept a Superior Proposal, and only if, during
such five-day period, if Frontier so elects, WBC and its advisors shall have
negotiated in good faith with Frontier to make such adjustments in the terms
and
conditions of this Agreement as would enable Frontier to proceed with the
transactions contemplated herein on such adjusted terms.
(G) WALK-AWAY.
By WBC upon its written notice to Frontier promptly before, but in no event
later than five (5) Business Days prior to, the commencement of the Meeting,
in
the event that the Frontier Average Share Price is less than $21.00 at any
time
during the Measurement Period; provided, however, that this Agreement
may be terminated by WBC pursuant to this Section 8.1(G) only if, after receipt
of written notice advising Frontier that the Board of Directors of WBC is
prepared to terminate this Agreement, Frontier does not, at least one day prior
to the Meeting, agree to increase the Total Stock Amount and/or the Total Cash
Amount if and to the extent necessary based on the Frontier Average Share Price
as of the Effective Time, and consummate the Corporate Merger in a manner that
would yield Aggregate Merger Consideration, on a per-share basis using the
Frontier Average Share Price measured as of the Effective Time, of not less
than
$19.41. For purposes of this Section 8.1(G), the “Measurement Period” means that
ten (10) Business Day period ending on the sixth Business Day prior to the
date
on which the Meeting is scheduled to occur. If either party declares or effects
a stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares or similar transaction between the Execution Date and the
Determination Date, the prices for the Frontier Common Stock shall be
appropriately adjusted for purposes of applying this Section
8.1(G).
(H) SHAREHOLDER
APPROVAL. By either Frontier or WBC if the approval of the shareholders of
WBC required for the consummation of the Corporate Merger shall not have been
obtained by reason of the failure to obtain the required vote at a duly held
meeting of such shareholders or at any adjournment or postponement
thereof.
(I) FRONTIER
CONDITIONS PRECEDENT. By Frontier as a result of (1) a Material Adverse
Change in WBC as set forth in Section 7.2(E), or (2) the Dissenting Shares exceed
10% of the WBC Common Stock.
(J) WBC
CONDITIONS PRECEDENT. By WBC as a result of a Material Adverse Change in
Frontier as set forth in Section 7.3(E),
or if the condition set forth in Section 7.3(F) cannot be satisfied.
(K) NO
FAIRNESS OPINION. By WBC in the event the fairness opinion described in
Section 7.3(G) is not confirmed at the time referenced in such
Section.
8.2 EFFECT
OF TERMINATION.
(A) In
the event of termination of this Agreement by either Frontier or WBC as provided
in Section 8.1, this Agreement shall
forthwith become void and have no effect except (1) Sections 6.5(D), 8.1(F),
8.2 and 9.3
shall survive any termination of this
Agreement, and (2) that, notwithstanding anything to the contrary contained
in
this Agreement, no party shall be relieved or released from any liabilities
or
damages arising out of its willful breach of any provision of this
Agreement.
(B) If
WBC terminates this Agreement pursuant to Section 8.1(F), WBC shall pay to Frontier a
termination fee equal to $7,500,000 (the “Termination Fee Amount”) by wire
transfer of same day funds on the date of termination. The Termination Fee
Amount shall also be payable by WBC under the circumstances set forth in Section
8.2(C).
(C) In
the event that an Acquisition Proposal with respect to WBC shall have been
made
known to WBC and shall have been publicly announced or otherwise become public,
or shall have been made to the shareholders of WBC, and thereafter (1) this
Agreement is terminated by either Frontier or WBC pursuant to either (i) Section
8.1(B) hereof and prior to such
termination the shareholders of WBC shall not have previously approved the
Merger, or (ii) Section 8.1(H) hereof as
a result of the failure of the shareholders of WBC to approve the Merger and
(2)
within twenty-four (24) months of such termination WBC enters into any
Acquisition Agreement providing for any transaction described in clause (1)
or
clause (2) of Section 9.3(D), then upon
the first occurrence of an event contemplated by this clause (2) WBC shall
pay
Frontier the Termination Fee Amount.
(D) If
WBC terminates this Agreement pursuant to Section 8.1(D) or Section 8.1(E),
Frontier shall pay to WBC a
termination fee equal to $5,000,000 by wire transfer of same day funds on the
date of termination.
(E) If
Frontier terminates this Agreement pursuant to Section 8.1(D) or Section 8.1(E),
WBC shall pay to Frontier a
termination fee equal to $5,000,000 by wire transfer of same day funds on the
date of the termination.
(F) The
parties agree that the agreements contained in Sections 8.2(B),
8.2(C),
8.2(D)
and 8.2(E) above are integral parts of the
transactions contemplated by this Agreement and constitute liquidated damages
and not a penalty.
(G) The
Termination Fee Amount is intended to be triggered, if at all, no more than
one
(1) time, irrespective of any subsequent actions by WBC or any Third Party.
The
Termination Fee Amount is intended as an alternative to, and shall not be in
addition to, the amount payable, if at all, under Section 8.2(E).
8.3 AMENDMENT.
Subject to compliance with applicable law, this Agreement may be amended by
the
parties hereto, by action taken or authorized by their respective Boards of
Directors, at any date before or after approval of the matters presented in
connection with the Merger by the shareholders of WBC; provided,
however, that after any approval of the transactions contemplated by this
Agreement by WBC 's shareholders, there may not be, without further approval
of
such shareholders, any amendment of this Agreement which reduces the amount
or
changes the form of the consideration to be delivered to WBC shareholders
hereunder other than as contemplated by this Agreement. This Agreement may
not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.4 EXTENSION;
WAIVER. At any time prior to the Effective Time,
by action taken or authorized by its Board of Directors, WBC or Frontier 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 or its Subsidiaries hereto,
(B)
waive any inaccuracies in the representations and warranties of the other party
or its Subsidiaries contained herein or in any document delivered pursuant
hereto, and (C) waive compliance with any of the agreements or conditions of
the
other party contained herein. Any agreement on the part of a party hereto to
any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party or its Subsidiaries, but such
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver
of,
or estoppel with respect to, any subsequent or other failure.
ARTICLE
IX. ADDITIONAL AGREEMENTS
9.1 ADDITIONAL
AGREEMENTS. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation or Resulting
Bank with full title to all properties, assets, rights, approvals, immunities
and franchise of any of the parties to the Merger, the proper officers and
directors of each party to this Agreement and their respective Subsidiaries
shall take all such necessary action as may be reasonably requested by the
other
party.
9.2 BENEFIT
PLANS.
(A) Upon
consummation of the Merger, except as provided in the Employment Agreements,
entered into with certain officers of WBC and Whidbey Island Bank, all employees
of WBC and its Subsidiaries shall be deemed to be at-will employees of Frontier
and its Subsidiaries. From and after the Effective Time, employees of WBC and
its Subsidiaries shall be entitled to participate in the pension, employee
benefit and similar plans (including stock option, bonus or other incentive
plans) on substantially the same terms and conditions as similarly situated
employees of Frontier and its Subsidiaries. For the purpose of determining
eligibility to participate in such plans and the vesting and related
calculations of benefits under such plans (but not for the vesting under
Frontier’s 2006 Stock Incentive Plan or accrual of benefits under any such
plan), Frontier shall give effect to years of service with WBC and its
Subsidiaries as if such service were with Frontier and its Subsidiaries.
(B) As
of or prior to the Effective Time, WBC shall adopt the relevant resolutions
of
its Board of Directors necessary to terminate the WBC 401(k) Plan (the “WBC
401(k) Plan”). In connection with such termination, the WBC 401(k) Plan shall be
submitted to the Internal Revenue
Service
for a determination regarding its qualification upon termination and, upon
receipt of a favorable determination letter, distributions shall be made to
participants in accordance with ERISA, the Code, and the WBC 401(k) Plan as
soon
as practicable after the receipt of the determination letter. Neither Frontier,
nor Frontier Bank, shall have any obligation to make contributions to the WBC
401(k) Plan after the Effective Time. Participants in the WBC 401(k) Plan who
become employees of Frontier or its Subsidiaries will be permitted, subject
to
the terms of the WBC 401(k) Plan, to rollover such distributions to Frontier’s
401(k) Plan.
(C) As
of or prior to the Effective Time, WBC shall terminate and, if applicable,
distribute all benefits under the Annual Incentive Compensation Plan, Commercial
Loan Officer Annual Incentive and Executive Deferred Compensation Plan, and
all
related agreements. WBC will file any required IRS/DOL notices and reports
with
respect to the termination and distribution of such plans.
9.3 CERTAIN
ACTIONS.
(A) Except
with respect to this Agreement and the transactions contemplated hereby, neither
WBC, Whidbey Island Bank nor any of their directors, officers, agents,
affiliates (as such term is used in Rule 12b-2 under the Exchange Act) or
representatives (collectively, “Representatives”) shall, directly or indirectly,
initiate, solicit, encourage or facilitate (including by way of furnishing
information) any inquiries with respect to or the making of any Acquisition
Proposal (as defined below).
(B) Notwithstanding
anything herein to the contrary, WBC and its Board of Directors shall be
permitted (i) to comply with Rule 14d-9 and Rule 14e-2 promulgated under the
Exchange Act with regard to an Acquisition Proposal, (ii) to engage in any
discussions or negotiations with, or provide any information to, any person
in
response to an unsolicited bona fide written Acquisition Proposal by any such
person, if and only to the extent that (a) WBC’s Board of Directors concludes in
good faith and consistent with its fiduciary duties to WBC’s shareholders under
applicable law that such Acquisition Proposal may result in a Superior Proposal
(as defined below), (b) prior to providing any information or data to any person
in connection with an Acquisition Proposal by any such person, WBC’s Board of
Directors receives from such person an executed confidentiality agreement
containing terms at least as stringent as those contained in the Confidentiality
Agreement, and (c) prior to providing any information or data to any person
or
entering into discussions or negotiations with any person, WBC’s Board of
Directors notifies Frontier promptly of such inquiries, proposals, or offers
received by, any such information requested from, or any such discussions or
negotiations sought to be initiated or continued with, any of its
Representatives.
(C) WBC
and Whidbey Island Bank each agrees that it will, and will cause its
Representatives to, immediately cease and cause to be terminated any activities,
discussions, or negotiations existing as of the Execution Date with any parties
conducted heretofore with respect to any Acquisition Proposal, and shall use
reasonable best efforts to cause all persons other than Frontier who have been
furnished confidential information regarding WBC or Whidbey Island Bank in
connection with the solicitation of or discussions regarding an Acquisition
Proposal within the 12 months prior to the date hereof promptly to return or
destroy such information. WBC and Whidbey Island Bank agree not to release
any
third party from the confidentiality and standstill provisions of any agreement
to which WBC or Whidbey Island Bank is or may become a party, and shall
immediately take all steps necessary to terminate any approval that may have
been heretofore given under any such provisions authorizing any person to make
an Acquisition Proposal.
(D) For
purposes of this Section 9.3:
(1) The
term “Acquisition Proposal” means any tender offer or exchange offer or any
proposal for a merger, reorganization, consolidation, share exchange,
recapitalization, liquidation, dissolution or other business combination
involving WBC or Whidbey Island Bank or any proposal or offer to acquire a
substantial equity interest in (other than as part of a public offering to
raise
capital that does not require shareholder approval), or (other than in the
ordinary course of business) a substantial portion of the assets of, WBC or
Whidbey Island Bank, other than the transaction contemplated or permitted by
this Agreement.
(2) The
term “Superior Proposal” means, with respect to WBC or Whidbey Island Bank, any
written Acquisition Proposal made by a person other than Frontier which is
for
(i) (a) a merger, reorganization, consolidation, share exchange, business
combination, recapitalization or similar transaction involving WBC or Whidbey
Island Bank, (b) a sale, lease, exchange, transfer, or other disposition of
at
least 25% of the assets of WBC or Whidbey Island Bank, taken as a whole, in
a
single transaction or a series of related transactions, or (c) the acquisition,
directly or indirectly, by a person of beneficial ownership of 25% or more
of
the WBC Common Stock or Whidbey Island Bank Common Stock whether by merger,
consolidation, share exchange, business combination, tender, or exchange offer
or otherwise, and (ii) which is otherwise on terms which the Board of Directors
of WBC in good faith concludes (after consultation with its financial advisors
and outside counsel), taking into account, among other things, all legal,
financial, regulatory, and other aspects of the proposal and the person making
the proposal, (a) would, if consummated, result in a transaction that is more
favorable to its shareholders (in their capacities as shareholders), from a
financial point of view, than the transactions contemplated by this Agreement,
and (b) is reasonably capable of being completed.
9.4 EMPLOYMENT
AND CHANGE OF CONTROL AGREEMENTS. As of the
Effective Time, Frontier shall assume and honor and shall cause Frontier Bank
to
assume and to honor in accordance with their terms the change of control
provisions of WBC’s and Whidbey Island Bank’s employment and severance
agreements with Xxxxxx X. Xxxx, Xxxxxxx X. Xxxxxxx, Xxxx X. Xxxxxx, Xxxxxx
X.
Xxxxxx, Xxxx Xxxxxxxx, Xxxxx Xxxxx, Xxxxxx Xxxxx, Xxxxx XxXxxxxx and Xxxx Xxxxx,
as described in Schedule 9.4 and as may be amended as of the Closing by
the Noncompetition/Nonsolicitation Agreement, (collectively, the “Employment
Agreements”). Frontier acknowledges and agrees that the Merger will
constitute a merger, sale or a change in control of WBC and Whidbey Island
Bank
for all purposes under such Employment Agreements.
9.5 DIRECTORS
OF WBC. After the
Effective Time, one current director of WBC (as determined by Frontier) shall
be
appointed to the Frontier board of directors until the next shareholders’
meeting, at which time such appointee will, subject to the Frontier board’s
fiduciary obligations, stand for election for a two-year term expiring in 2010.
The composition of Frontier’s board of directors will be increased by one and
will not be decreased in a manner that would limit Frontier’s ability to
accommodate the WBC representative so designated. Compensation for such director
(including compensation for committee assignments and like duties) will be
consistent with Frontier’s compensation practices for other similarly situated
directors of Frontier.
9.6 WBC
MANAGEMENT. After the Effective Time, WBC’s chief
executive officer will serve as the regional manager of the division of Frontier
that serves such branches of WBC and Frontier as will be determined by
Frontier’s chief executive officer, most of which are expected to be in
the
current
WBC market. The regional manager will execute a Noncompetition/Nonsolicitation
Agreement with Frontier that will continue until the later of the termination
of
the regional manager’s employment with Frontier or the second anniversary of the
Effective Time. The salary, reporting and remaining terms of his employment
will
be mutually agreed upon by the parties; however, there will be no employment
contract and the regional manager will be an at-will employee and serve at
the
pleasure of Frontier’s senior officers and board of directors.
9.7 AT-WILL
EMPLOYEES. After the Effective Time, a substantial
majority of the employees of WBC will have the opportunity to continue their
at-will employment with Frontier, if and to the extent that mutually suitable
job opportunities are available. WBC employees whose positions are eliminated
as
a result of the Merger, and who remain employees of WBC through Closing or,
where required by Frontier for post-merger systems integration and conversion
activities (“conversion”), through conversion, will be eligible to receive upon
Closing or conversion severance pay and/or stay bonuses. The specific terms
and
conditions and personnel of the stay bonus/severance program will be determined
by Frontier prior to closing, in consultation with WBC’s senior
management.
ARTICLE
. GENERAL PROVISIONS
10.1 CLOSING;
EFFECTIVE TIME. Subject to the terms and
conditions of this Agreement, the closing of the Merger (the “Closing”) will
take place at 10:00 a.m. on the first day which is at least one business day
after the satisfaction or waiver (subject to applicable law) of the latest
to
occur of the conditions set forth in ARTICLE
VII (other than those conditions which relate to actions to be taken at the
Closing) (the “Effective Time”), at the offices of Xxxxxx Xxxxxxxx L.L.P.,
unless another time, date or place is agreed to in writing by the parties
hereto. On the Effective Time, a certificate of merger will be issued by the
Department of Financial Institutions of the State of Washington in accordance
with applicable law.
10.2 SURVIVAL.
Only those agreements and covenants in this Agreement that by their
express terms apply in whole or in part after the Effective Time shall survive
the Effective Time. All other representations, warranties, and covenants shall
be deemed only to be conditions of the Merger and shall not survive the
Effective Time.
10.3 COUNTERPARTS.
This Agreement may be executed in one or more facsimile counterparts,
each of which shall be deemed to constitute an original. This Agreement shall
become effective when one counterpart has been signed by each
party.
10.4 GOVERNING
LAW; VENUE. This Agreement shall be governed by,
and interpreted in accordance with, the laws of the State of Washington, without
regard to any applicable conflict of law, and venue of any legal action or
proceeding between the parties related to this Agreement shall be in Seattle,
Washington.
10.5 EXPENSES.
Each party will bear all expenses incurred by it in connection with
this Agreement and the transactions contemplated by this Agreement.
10.6 NOTICES.
All notices, requests and other communications hereunder to a “party”
shall be in writing and shall be deemed to have been duly given when
delivered
by hand, telegram, certified or registered mail, overnight courier, telecopy
or
telex (confirmed in writing) to such party at its address set forth below or
such other address as such party may specify by notice to the
parties.
If
to Frontier or Frontier Bank to:
FRONTIER
FINANCIAL
CORPORATION
000
X.X. Xxxxxxx Xxxx Xxx
X.X.
Xxx 0000
Xxxxxxx,
XX 00000
Telephone:
(000) 000-0000
Fax:
(000) 000-0000
Attn:
Xxxx X. Xxxxxxx, President and CEO
With
a copy
to: Xxxxxx
Xxxxxxxx L.L.P.
0000
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx,
XX 00000-0000
Telephone:
(000) 000-0000
Fax:
(000) 000-0000
Attn:
Xxxxxx X. Xxxxxxx
If
to WBC or Whidbey Island Bank, to:
WASHINGTON
BANKING
COMPANY
000
X.X. Xxxxxxxx Xxxxx
Xxx
Xxxxxx, XX 00000
Telephone: (000)
000-0000
Fax: (000)
000-0000
Attn:
Xxxxxx X. Xxxx, President and CEO
With
a copy
to: Xxxxx
Xxxxxx Xxxxxxxx
0000
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx,
XX 00000
Telephone:
(000) 000-0000
Fax: (000)
000-0000
Attn:
Xxxxxx X. Xxxxxxxx
10.7 ENTIRE
UNDERSTANDING. This Agreement (which includes the
Exhibits and Schedules thereto) represents the entire understanding of the
parties with reference to transactions contemplated by this Agreement and
supersedes any and all other oral or written agreements previously made, other
than the Confidentiality Agreement between Frontier and WBC.
10.8 ENFORCEMENT
PROCEEDINGS. In any action or proceeding in
connection with the enforcement of this Agreement, the prevailing party will
be
entitled to reimbursement of its reasonable attorneys’ fees and expenses from
the non-prevailing party.
10.9 HEADINGS.
The headings contained in this Agreement are for reference purposes
only and are not part of this Agreement.
10.10 ENFORCEMENT
OF CONFIDENTIALITY AGREEMENT. The parties hereto
agree that irreparable damage would occur in the event that the provisions
contained in Section 6.5(B) of this
Agreement were not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of Section 6.5(B) of this Agreement and to enforce
specifically the terms and provisions thereof in any court
of
the United States or any state having jurisdiction, this being in addition
to
any other remedy to which they are entitled at law or in equity.
10.11 SEVERABILITY.
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 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.
10.12 ASSIGNMENT;
NO THIRD PARTY BENEFICIARIES. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and
be
enforceable by the parties and their respective successors and assigns. Except
as otherwise expressly provided herein, this Agreement (including the documents
and instruments referred to herein) is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
IN
WITNESS WHEREOF, the parties have caused this instrument to be executed in
counterparts by their duly authorized officers, all as of the day and year
first
above written.
FRONTIER
FINANCIAL CORPORATION
By: /s/
Xxxx X.
Xxxxxxx
Xxxx
X. Xxxxxxx
President
and Chief Executive
Officer
FRONTIER
BANK
By: /s/
Xxxx X. Xxxxxxx
Xxxx
X. Xxxxxxx
Chief
Executive Officer
WASHINGTON
BANKING COMPANY
By:/s/
Xxxxxx X. Xxxx
Xxxxxx
X. Xxxx
President
and Chief Executive
Officer
WHIDBEY
ISLAND BANK
By:/s/
Xxxx Xxxxxx
Xxxx
Xxxxxx
President
and Chief Executive
Officer
EXHIBITS
Exhibit
A Voting
Agreement
Exhibit
B Director’s
Agreement
Exhibit
C Noncompetition/Nonsolicitation
Agreement
Exhibit
D Affiliate
Agreement
Exhibit
E (1) Legal
Opinion of Xxxxxx Xxxxxxxx L.L.P.
(2) Legal
Opinion of Xxxxx
Xxxxxx Xxxxxxxx L.L.P.
(3) Tax
Opinion of Xxxxxx
Xxxxxxxx L.L.P.
Exhibit
F Illustrative
Calculations of Merger Consideration
SCHEDULES
|
|
WBC
and Whidbey Island Bank
Disclosures
|
|
Schedule
1.5(D)
|
WBC
Options
|
|
Schedule
3.5
|
Changes
to Line of Business, Operating Procedures,
etc.
|
|
Schedule
3.8
|
Changes
in Compensation; Employment
Agreements
|
|
Schedule
3.13
|
New
or Changes to Material Contracts
|
|
Schedule
5.1(B)
|
Shares
Outstanding
|
|
Schedule
5.1(C)
|
WBC
Subsidiaries
|
|
Schedule
5.1(F)
|
No
Defaults - Agreements Requiring Third Party
Consent
|
|
Schedule
5.1(G)
|
WBC
Financial Statements
|
|
Schedule
5.1(H)
|
Undisclosed
Liabilities
|
|
Schedule
5.1(I)
|
No
Events Causing Material Adverse
Effect
|
|
Schedule
5.1(K)
|
Litigation,
Regulatory Action
|
|
Schedule
5.1(L)
|
Compliance
with Laws
|
|
Schedule
5.1(M)
|
Material
Contracts
|
|
Schedule
5.1(P)(1)
|
List
of Employee Benefit Plans
|
|
Schedule
5.1(P)(2)
|
Employee
Benefit Plans Not Qualified Under
ERISA
|
|
Schedule
5.1(P)(6)
|
Obligations
for Retiree Health and Life
Benefits
|
|
Schedule
5.1(R)
|
Loan
Portfolio
|
|
Schedule
5.1(R)(4)
|
Loan
Repurchase Obligations
|
|
Schedule
5.1(R)(6)
|
Loans
to Officers and Directors
|
|
Schedule
5.1(S)
|
Insurance
|
|
Schedule
5.1(U)(2)
|
Pending
Proceedings with Respect to Environmental
Matters
|
|
Schedule
5.1(U)(3)
|
Pending
Proceedings with Respect to Environmental Matters Involving Loan/Fiduciary
Property
|
|
Schedule
5.1(U)(4)
|
Pending
Proceedings with Respect to Environmental Matters Listed in Sections
5.1(U)(2) or (3)
|
|
Schedule
5.1(U)(5)
|
Actions
During Ownership Which Could Have Material Adverse Effect with Respect
to
Environmental Matters
|
|
Schedule
5.1(U)(6)
|
Actions
Prior to Ownership Which could Have Material Adverse Effect with
Respect
to Environmental Matters
|
|
Schedule
5.1(V)
|
Tax
Report Matters
|
|
Schedule
5.1(X)
|
Derivative
Contracts, including a list of any assets pledged as security for
such
Derivative Contracts
|
|
Schedule
5.1(Y)
|
Investment
Securities
|
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Schedule
5.1(Z)
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Intellectual
Property
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Frontier
and Frontier Bank Disclosures
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Schedule
5.2(B)
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Shares
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Schedule
5.2(C)
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Frontier
Subsidiaries
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Schedule
5.2(F)
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No
Defaults
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Schedule
5.2(G)
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Frontier
Financial Statements
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Schedule
5.2(H)
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Absence
of Undisclosed Liabilities
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Schedule
5.2(I)
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Litigations,
Regulatory Action
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Schedule
5.2(J)
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Compliance
with Laws
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Schedule
9.4
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Employment
and Change of Control Agreements
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EXHIBIT
A
VOTING
AGREEMENT
Frontier
Financial Corporation
000
X.X. Xxxxxxx Xxxx Way
P.O.
Box 2215
Xxxxxxx,
XX 00000
Gentlemen:
As
a material inducement to your entry into an Agreement and Plan of Merger (the
“Merger Agreement”) dated of even date herewith by and among Frontier Financial
Corporation (“Frontier”), Frontier Bank, Washington Banking Company (“WBC”) and
Whidbey Island Bank, the undersigned, for himself, his heirs and legal
representatives, hereby agrees, represents, warrants and covenants with and
to
Frontier as follows:
1. The
undersigned beneficially owns*
the shares of common stock of WBC (“WBC Common Stock”) set forth beneath the
undersigned’s name below and no other shares of WBC Common Stock. Such shares
are owned free and clear of any lien, right or encumbrance whatsoever, except
for any pledge of such shares to secure a loan to the undersigned, and no proxy
has been granted with respect thereto and the undersigned has full capacity,
power and authority to vote such shares without the consent or approval of
any
other party in the absence of a default under any such loan secured by such
shares. If any of such shares are currently pledged to secure a loan to the
undersigned, the undersigned (i) represents and warrants that such loan is
not
in default and no event or condition exists that with notice, lapse of time
or
both would constitute such a default, and (ii) agrees to take all such action
as
may be necessary to prevent any such default, event or condition to exist in
order to prevent the lender from taking title to such shares and to continue
to
enable the undersigned to vote such shares as hereinafter set
forth.
2. The
undersigned hereby agrees to vote the undersigned's shares in favor of approval
of the Merger Agreement unless the Merger Agreement has been terminated prior
to
the Meeting (as defined in the Merger Agreement).
3. The
undersigned covenants that, until the earlier of the consummation of the Merger
or the termination of the Merger Agreement, the undersigned will not sell,
permit a lien or other encumbrance to exist with respect to (except as
hereinabove provided), or grant any proxy in respect of (except as hereinabove
provided and for proxies solicited by the Board of Directors of WBC in
connection with the Meeting to vote on the approval of the Merger Agreement),
the shares of WBC Common Stock set forth below, unless all the other parties
to
any such sale or other transaction enter into an agreement in form and substance
satisfactory to Frontier embodying the benefits and rights contained
herein.
4. The
undersigned covenants that, unless the Merger Agreement is terminated in
accordance with the provisions thereof, the undersigned will not: (i) make
any
public announcement with respect to the Merger; (ii) submit or seek any other
person or entity to submit a proposal for a tender offer, merger or similar
transaction with WBC; or (iii) vote the shares owned or controlled by the
undersigned in favor of, solicit proxies or seek another person or entity to
solicit proxies on behalf of, a proposal, the purpose of which is to oppose
or
nullify the Merger.
Very
truly yours,
Print
Name:
NUMBER
OF
SHARES:_________ Dated: ____________________,
2007
*
Beneficial ownership
is defined by SEC rules, to include WBC shares held by the undersigned, his
spouse and dependents and their controlled trusts and other entities over
which
the undersigned has voting or investment power with respect to the WBC Common
Stock.
EXHIBIT
B
DIRECTOR’S
AGREEMENT
This
Director’s Agreement (this “Agreement”), dated as of __________________, 2007,
is between FRONTIER FINANCIAL CORPORATION, a Washington corporation
(“Frontier”), FRONTIER BANK, a Washington state chartered bank (“Frontier
Bank”), and _________________________ (“Director”), a director of WASHINGTON
BANKING COMPANY, a Washington corporation (“WBC”) and/or WHIDBEY ISLAND
BANK.
Recitals
1. Pursuant
to the terms of the Agreement and Plan of Merger dated as of September _____,
2007 (the “Merger Agreement”), between Frontier, Frontier Bank, WBC and Whidbey
Island Bank (“WBC Bank”), WBC will be merged into Frontier, with Frontier as the
surviving corporation, and WBC Bank will be merged into Frontier Bank, with
Frontier Bank as the continuing corporation.
2. As
material inducement to Frontier and Frontier Bank to enter into the Merger
Agreement, Frontier has required each Director of WBC and WBC Bank to enter
into
an agreement providing for a covenant not to compete with the business of
Frontier or Frontier Bank and a covenant not to solicit any employees of
Frontier or Frontier Bank following the consummation of the transactions
contemplated by the Merger Agreement, in each case as specified
herein.
3. In
light of the foregoing recitals, Director has agreed to be bound by the terms
of
this Agreement.
Agreement
In
consideration of Frontier’s and Frontier Bank’s performance under the Merger
Agreement, Director agrees that for a period of two (2) years after the
effective time of the Merger (the “Effective Time”), Director will not, without
Frontier or Frontier Bank’s prior written consent, directly or indirectly, (i)
become involved in, as a principal shareholder, director, officer, founder,
employee, consultant or other agent (each of the foregoing relationships,
hereinafter referred to as an “Affiliate”) of any Financial Institution (as
defined below) in any the Washington State counties of Island, San Xxxx, Skagit,
Snohomish and Whatcom (the “Counties”), or (ii) have any responsibility for a
Financial Institution’s organization or operation within any of the Counties;
provided, however, that Director may acquire and passively own an interest
not
exceeding 2% of the total equity interest in any Financial Institution in any
of
the Counties that is traded on NASDAQ or another U.S. stock
exchange.
Director
also agrees that for a period of two (2) years after the Effective Date,
Director will not, directly or indirectly, (a) solicit or attempt to solicit
(i)
any employee of Frontier, Frontier Bank, or any of their subsidiaries
(including, but not limited to, any employees of WBC or WBC Bank who became
an
employee of Frontier as a result of the Merger), to leave their employment
or
(ii) any customers of Frontier, Frontier Bank, or any of their subsidiaries
(including, but not limited to, any customer of WBC or WBC Bank who became
a
customer of
Frontier
or Frontier Bank as a result of the Merger) to remove or transfer any of their
business from Frontier, Frontier Bank, or any of their subsidiaries, or (b)
otherwise materially interfere with or impair the relationship, contractual
or
otherwise, between Frontier, Frontier Bank, or any of their subsidiaries and
any
of their customers or employees. The foregoing sentence is not, however,
intended to limit Director’s discretion to allocate his own personal investments
as he chooses so long as such allocation is not made for the purpose of
providing material support to a competitor of Frontier. Solicitation prohibited
under this section includes solicitation by any means, including, without
limitation, meetings, telephone calls, letters or other mailings, electronic
communication of any kind, and Internet communications; provided, however,
that
solicitation prohibited under this paragraph does not include solicitation
through general advertising that is not specifically directed to or targeting
the employees of Frontier or Frontier Bank.
Further,
anything to the contrary herein notwithstanding, neither Director nor any firm,
company, trust or other entity of which Director is an affiliate (as defined
by
SEC rules) shall ever (i) use, register or claim any right or interest in any
Intellectual Property or Confidential Information of Frontier, Frontier Bank,
or
their subsidiaries, including but not limited to the Intellectual Property
and
Confidential Information of WBC and WBC Bank acquired pursuant to the Merger
Agreement, or (ii) use the trade name “Washington Banking Company,” “Whidbey
Island Bank,” or any similar name or derivation thereof, in connection with the
banking, financial, lending or mortgage industries.
For
purposes of this Agreement, the term “Confidential Information” includes,
without limitation, any information in whatever form that Frontier considers
to
be confidential, proprietary, information and that is not publicly or generally
available relating to Frontier’s: trade secrets (as defined by the Uniform Trade
Secrets Act); know-how; concepts; methods; research and development; product,
content and technology development plans; marketing plans; databases;
inventions; research data and mechanisms; software (including functional
specifications, source code and object code); procedures; engineering;
purchasing; accounting; marketing; sales; customer lists; advertisers; joint
venture partners; financial status; contracts or employees. Confidential
Information includes information developed by Director, alone or with others,
or
entrusted to Frontier by its customers or others.
For
purposes of this Agreement, the term “Financial Institution” means any bank
holding company or financial holding company, state or national bank, state
or
federal savings and loan association, mutual savings bank, or state or federal
credit union, trust company or mortgage company (including without limitation,
any organizing entity of any such financial institution) located in any of
the
Counties.
For
purposes of this Agreement, the term “Intellectual Property” means any material
trademarks, service marks, brand names, certification marks, trade dress or
other indications of origin, the goodwill associated with the foregoing 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), and any renewals, extensions
or
reissues thereof, in any
jurisdiction;
trade secrets and registrations or applications for registration of copyrights
in any jurisdiction, and any renewals or extensions thereof.
Director
recognizes and agrees that any breach of this Agreement by Director will entitle
Frontier, Frontier Bank and their successors or assigns to injunctive relief,
as
well as any other legal or equitable remedies to which such entities may
otherwise be entitled, including, but not limited to damages.
If
the Merger Agreement expires or is terminated for any reason before the
consummation of the transactions contemplated there under, this Agreement will
automatically terminate and be of no further force and effect.
In
any action or proceeding in connection with the enforcement of this Agreement,
the prevailing party will be entitled to reimbursement of its reasonable
attorneys’ fees and expenses from the non-prevailing party. Exclusive
jurisdiction and venue shall lie with the competent state or federal court
in
Washington State.
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FRONTIER
FINANCIAL CORPORATION
By:
Xxxx
X. Xxxxxxx, President/CEO
|
DIRECTOR
Print
Name:
|
|
FRONTIER
BANK
By:
Xxxx
X. Xxxxxxx, President/CEO
|
EXHIBIT
C-1
NONCOMPETITION/NONSOLICITATION
AGREEMENT
This
Noncompetition/Nonsolicitation Agreement dated September _____, 2007 (this
“Agreement”) is entered into by and between FRONTIER FINANCIAL CORPORATION,
FRONTIER BANK and their subsidiaries (collectively, “Frontier”), and XXXXXX X.
XXXX (“Executive”).
WHEREAS,
Frontier, Washington Banking Company (“WBC”) and Whidbey Island Bank (“WBC
Bank”) are entering into an Agreement and Plan of Merger (“the Merger
Agreement”), pursuant to which WBC will be merged into Frontier Financial
Corporation and WBC Bank will be merged into Frontier Bank (the “Merger”);
and
WHEREAS,
Executive is currently employed as President and Chief Executive Officer of
WBC
and/or WBC Bank and has knowledge of certain Confidential Information of WBC,
and Frontier Financial Corporation and Frontier Bank are executing the Merger
Agreement conditioned upon Executive’s agreement not to compete with Frontier in
any county in which WBC Bank has branch offices or loan production offices,
and
not to solicit employees and customers of Frontier (including the employees
and
customers of WBC who become employees and customers of Frontier following the
Merger), for a specified period of time following the Merger, all as further
described below; and
NOW,
THEREFORE, Frontier and Executive agree as follows:
1. Effective
Time. This Agreement shall become effective at the effective time
of the Merger (the “Effective Time”), as set forth in the Merger
Agreement.
2. Noncompetition,
Nonsolicitation and Nondisparagement. In
consideration for this Agreement and to protect the business and goodwill
purchased by Frontier pursuant to the Merger Agreement, Executive agrees that
he
will not, directly or indirectly, do any of the following:
2.1 For
a one-year period commencing on the first day after the effective time of the
Merger (the “Effective Time”), (a) become involved in, as a principal
shareholder, director, officer, founder, employee, consultant or other agent
(each of the foregoing relationships, hereinafter referred to as an “Affiliate”)
of any Financial Institution (as defined below) in any of the Washington state
counties of Island, San Xxxx, Skagit, Snohomish and Whatcom (individually and
collectively, the “Counties”), or (b) have any responsibility for a Financial
Institution’s organization or operation in any of the Counties; provided,
however, that Executive may acquire and passively own an interest not exceeding
2% of the total equity interest in any Financial Institution in any of the
Counties that is traded on NASDAQ or another U.S. stock exchange. For purposes
of this Agreement, the term “Financial Institution” means any bank holding
company or financial holding company, state or national bank, state or federal
savings and loan association, mutual savings bank, or state or federal credit
union, trust company or mortgage company (including without limitation, any
organizing entity of any such Financial Institution) located in any of the
Counties.
2.2 For
a two-year period commencing on the first day after the effective time of the
Merger (the “Effective Time”), (a) solicit or attempt to solicit (i) any
employees of Frontier to leave their employment, or (ii) any customers of
Frontier to remove or transfer any of their business from Frontier, or (b)
otherwise interfere with, disrupt or attempt to disrupt the relationship,
contractual or otherwise, between Frontier and any of Frontier’s customers or
employees. Solicitation prohibited under this section includes solicitation
by
any means, including, without limitation, meetings, letters or other mailings,
electronic communications of any kind, and Internet communications; provided,
however, that solicitation prohibited under this paragraph does not include
solicitation through general advertising that is not specifically directed
to or
targeting the employees of Frontier or Frontier Bank.
3. Nondisparagement.
Executive shall not, during the term or after the termination or
expiration of this Agreement or Executive’s employment, make disparaging
statements, in any form, about Frontier or its officers, directors, agents,
employees, products or services.
4. Intellectual
Property/Confidential Information. Further, anything to the
contrary herein notwithstanding, neither Executive nor any firm, company, trust
or other entity of which Executive is an Affiliate shall, during the term or
after the termination or expiration of this Agreement, (i) use, register or
claim any right or interest in any Intellectual Property or Confidential
Information of Frontier, including but not limited to the Intellectual Property
and Confidential Information of WBC acquired pursuant to the Merger Agreement,
or (ii) use the trade name “Washington Banking Company,” “Whidbey Island Bank,”
or any similar name or derivation thereof, in connection with the banking,
financial, lending or mortgage industries.
5. No
Employee Contract Rights. Nothing contained in this Agreement shall
be construed to abrogate, limit or affect the powers, rights and privileges
of
Frontier to remove Executive as an employee of Frontier, with or without
cause.
6. Enforcement
of Covenants.
6.1 Frontier
and Executive stipulate that, in light of all of the facts and circumstances
of
the relationship between Frontier and Executive, the covenants referred to
in
Sections 2, 3 and 4 (including without limitation their scope, duration and
geographic extent) are fair and reasonably necessary for the protection of
Frontier’s Confidential Information (as defined below), goodwill and other
protectable interests. If a court of competent jurisdiction should decline
to
enforce any of those covenants and agreements, Frontier and Executive request
the court to reform these provisions to restrict Executive’s use of Confidential
Information and Executive’s ability to compete with Frontier to the maximum
extent, in time, scope of activities and geography, that the court finds
enforceable.
6.2 Executive
acknowledges that Frontier will suffer immediate and irreparable harm that
will
not be compensable by damages alone, if Executive repudiates or breaches any
of
the provisions of Sections 2, 3 or 4. For this reason, under these
circumstances, Frontier, in addition to and without limitation of any other
rights, remedies or damages available
to
it at law or in equity, will be entitled to obtain temporary, preliminary and
permanent injunctions in order to prevent or restrain the breach, and Frontier
will not be required to post a bond as a condition for the granting of this
relief.
6.3 In
the event Executive breaches this Agreement, which breach is not corrected
within 15 days of notice by Frontier to Executive of such breach, Executive
shall in addition to the remedies available to Frontier under Section 6.2,
forfeit all right to receive all benefits or other payments remaining unpaid
from Frontier pursuant to Section 8.2 or otherwise on the date of any such
breach.
7. Adequate
Consideration. Executive specifically acknowledges the receipt of
adequate consideration for the covenants contained in Sections 2, 3 and 4 above
and that Frontier is entitled to require him to comply with said Sections 2,
3
and 4, which Sections will survive termination of this Agreement.
8. Employment
Agreement Superseded. Executive’s Employment Agreement with WBC
dated as of May 6, 2005 (the “Employment Agreement”) is terminated, superseded
and replaced as of the Effective Time by the following provisions:
8.1 Definitions.
The following definitions shall govern and be controlling for purposes of this
Agreement:
8.1.1 “Cause”
shall include termination because Executive: (i) materially breached this
Agreement; (ii) willfully breached or habitually neglected or breached the
duties which he was required to perform under the terms of his employment with
Frontier or the policies of Frontier; (iii) commits act(s) of dishonesty, theft,
embezzlement, fraud or misrepresentation against Frontier or its subsidiaries;
(iv) willfully and continually failed to comply with any law, rule, or
regulation (other than traffic violations or similar offenses) or final cease
and desist order of a regulatory agency having jurisdiction over Frontier;
(v)
fails to follow the reasonable directions of Frontier’s board of directors,
which failure is not corrected within thirty (30) days after receipt by
Executive of written notice outlining the corrective action required; or (vi)
knowingly provides misleading or false information to shareholders, the board
of
directors, auditors, accountants, or regulatory authorities.
8.1.2 “Change
of Control” means the Merger.
8.1.3 “Confidential
Information” includes, without limitation, any information in whatever form that
Frontier considers to be confidential, proprietary, information and that is
not
publicly or generally available relating to Frontier’s: trade secrets (as
defined by the Uniform Trade Secrets Act); know-how; concepts; methods; research
and development; product, content and technology development plans; marketing
plans; databases; inventions; research data and mechanisms; software (including
functional specifications, source code and object code); procedures;
engineering; purchasing; accounting; marketing; sales; customer lists;
advertisers; joint venture partners; financial status; contracts or employees.
Confidential Information includes information developed by Executive, alone
or
with others, or entrusted to Frontier by its customers or others.
8.1.4 “Good
Reason” shall include, but not be limited to: (i) a material reduction in
Executive’s compensation defined as a reduction equal to or greater than five
percent (5%) of Executive’s then annual base salary, which reduction is not of
general application to substantially all employees of Frontier, (ii) a material
reduction in Executive’s duties, responsibilities, or reporting relationship,
but not merely a change in title, or (iii) relocation of Executive’s primary
workplace from Oak Harbor to a location outside Island, San Xxxx, Snohomish,
Skagit or Whatcom counties.
8.1.5 “Intellectual
Property” means any material trademarks, service marks, brand names,
certification marks, trade dress or other indications of origin, the goodwill
associated with the foregoing 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),
and
any renewals, extensions or reissues thereof, in any jurisdiction; trade secrets
and registrations or applications for registration of copyrights in any
jurisdiction, and any renewals or extensions thereof.
8.1.6 “Limitation
Amount” means an amount equal to two times the lesser of (i) Executive’s
annualized compensation based upon the annual rate of pay for services provided
to Frontier for his taxable year preceding his taxable year in which his
employment with Frontier terminates (adjusted for any increase during that
year
that was expected to continue indefinitely if his employment did not terminate);
or (ii) the maximum amount that may be taken into account under a qualified
plan
pursuant to section 401(a)(17) of the Code for the year in which Executive’s
employment terminates. For 2007, such maximum amount is two times $225,000
(adjusted annually for increases in the cost of living) or
$450,000.
8.2 Payment
Obligations.
8.2.1 If
Executive is an employee of WBC at the Effective Time and is retained by
Frontier as an employee after the Effective Time, (i) Frontier will pay
Executive 50% of his Severance Benefit (calculated pursuant to section 5 of
his
Employment Agreement), less statutory payroll deductions, in cash upon Closing
of the Merger; and (ii) if Executive remains an employee of Frontier on the
first anniversary of the Effective Time or within 12 months after the Change
of
Control, Frontier terminates Executive’s employment other than termination for
Cause, or Executive terminates his employment with Frontier for Good Reason,
Executive shall receive the balance of his Severance Benefit, less statutory
payroll deductions, within 30 days following such anniversary date or the date
of termination of employment; provided, however, that any amount
in excess of the Limitation Amount, will be paid to him no sooner than the
first
day of the seventh calendar month following the termination of his
employment.
8.2.2 If
Executive is an employee of WBC at the Effective Time but is not retained by
Frontier as an employee after the Effective Time, Frontier will pay Executive
100% of his Severance Benefit (calculated pursuant to section 5 of his
Employment Agreement), less statutory payroll deductions, in cash upon Closing
of the Merger; provided, however, that any
amount
in excess of the Limitation Amount, will be paid to him no sooner than the
first
day of the seventh calendar month following the termination of his
employment.
8.3 Notwithstanding
anything in this Agreement to the contrary, if it is determined by legal counsel
(or other tax advisor to Executive) that the total of the Severance Benefit,
together with any other payments or benefits paid by Frontier to Executive,
would constitute an “excess parachute payment” within the meaning of section
280G of the Internal Revenue Code of 1986 (the “Code”), as amended, and the net
after-tax amount that Executive would realize from such compensation,
considering Executive’s federal and state income tax brackets and the excise
tax, would be greater if the compensation payable hereunder were limited, then
the compensation payable hereunder shall be limited in the manner determined
by
such counsel or advisor, to maximize Executive’s net after-tax
income.
8.4 Where
required, the provisions of this Agreement are intended to comply with the
requirements of section 409A of the Code. Notwithstanding any other provision
of
this Agreement, this Agreement shall be interpreted and administered in
accordance with the requirements of section 409A of the Code.
8.5 Any
payment to Executive under Section 8.2 hereof shall be conditioned upon receipt
by Frontier of an executed release of all claims against Frontier, satisfactory
to Frontier and its counsel.
9. Miscellaneous
Provisions.
9.1 Independent
Legal Counsel. Executive acknowledges that he has had the opportunity to
review and consult with his own personal legal counsel regarding this
Agreement.
9.2 Binding
Effect. This Agreement will bind and inure to the benefit of Frontier’s and
Executive’s heirs, legal representatives, successors and assigns.
9.3 Costs
of Legal Actions and Proceedings. In any dispute between the parties arising
out of or under this Agreement, whether or not a lawsuit is commenced, the
nonprevailing party shall pay the prevailing party’s reasonable attorneys’ fees
and costs.
9.4 Governing
Law. This Agreement shall be construed in accordance with and governed and
enforced in all respects by the laws of the state of Washington. The parties
agree that venue of any legal action between the parties arising out of or
in
connection with this Agreement shall be with the competent state or federal
court in Washington State, unless otherwise elected by Frontier, its
successors or assigns.
9.5 Entire
Agreement. This Agreement contains the entire agreement of the parties with
respect to its subject matter, and supersedes all prior representations and
understandings, whether oral or written. It may be changed only by an agreement
in writing signed by the party against whom enforcement of any waiver,
amendment, modification, extension or discharge is sought.
9.6 Waiver. No
waiver of any term, condition or provision shall be effective for any purpose
whatsoever unless such waiver is in writing and signed by the
parties.
9.7 Severability.
The provisions of this Agreement are severable. The invalidity of any provision
will not affect the validity of other provisions of this Agreement.
9.8 Notice.
Any notice to be delivered under this Agreement shall be given in writing and
delivered personally or by certified mail, postage prepaid, addressed to
Frontier or to Executive at their last known address.
9.9 Counterparts.
This Agreement may be executed in one or more counterparts, each of which will
be deemed an original, but all of which taken together will constitute one
and
the same instrument.
IN
WITNESS WHEREOF, the undersigned have set their hands as of the date first
written above.
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FRONTIER
FINANCIAL CORPORATION
By:
Xxxx
X. Xxxxxxx, President and CEO
|
EXECUTIVE
Name:
Xxxxxx X. Xxxx
|
|
FRONTIER
BANK
By:
Name:
Title:
|
EXHIBIT
C-2
NONCOMPETITION/NONSOLICITATION
AGREEMENT
This
Noncompetition/Nonsolicitation Agreement dated September _____, 2007 (this
“Agreement”) is entered into by and between FRONTIER FINANCIAL CORPORATION,
FRONTIER BANK and their subsidiaries (collectively, “Frontier”), and XXXX X.
XXXXXX (“Executive”).
WHEREAS,
Frontier, Washington Banking Company (“WBC”) and Whidbey Island Bank (“WBC
Bank”) are entering into an Agreement and Plan of Merger (“the Merger
Agreement”), pursuant to which WBC will be merged into Frontier Financial
Corporation and WBC Bank will be merged into Frontier Bank (the “Merger”);
and
WHEREAS,
Executive is currently employed as Executive Vice President and Chief Operating
Officer of WBC and/or WBC Bank and has knowledge of certain Confidential
Information of WBC, and Frontier Financial Corporation and Frontier Bank are
executing the Merger Agreement conditioned upon Executive’s agreement not to
compete with Frontier in any county in which WBC Bank has branch offices or
loan
production offices, and not to solicit employees and customers of Frontier
(including the employees and customers of WBC who become employees and customers
of Frontier following the Merger), for a specified period of time following
the
Merger, all as further described below; and
NOW,
THEREFORE, Frontier and Executive agree as follows:
1. Effective
Time. This Agreement shall become effective at the effective time
of the Merger (the “Effective Time”), as set forth in the Merger
Agreement.
2. Noncompetition,
Nonsolicitation and Nondisparagement. In
consideration for this Agreement and to protect the business and goodwill
purchased by Frontier pursuant to the Merger Agreement, Executive agrees that
he
will not, directly or indirectly, do any of the following:
2.1 For
a one-year period commencing on the first day after the effective time of the
Merger (the “Effective Time”), (a) become involved in, as a principal
shareholder, director, officer, founder, employee, consultant or other agent
(each of the foregoing relationships, hereinafter referred to as an “Affiliate”)
of any Financial Institution (as defined below) in any of the Washington state
counties of Island, San Xxxx, Skagit, Snohomish and Whatcom (individually and
collectively, the “Counties”), or (b) have any responsibility for a Financial
Institution’s organization or operation in any of the Counties; provided,
however, that Executive may acquire and passively own an interest not exceeding
2% of the total equity interest in any Financial Institution in any of the
Counties that is traded on NASDAQ or another U.S. stock exchange. For purposes
of this Agreement, the term “Financial Institution” means any bank holding
company or financial holding company, state or national bank, state or federal
savings and loan association, mutual savings bank, or state or federal credit
union, trust company or mortgage company (including without limitation, any
organizing entity of any such Financial Institution) located in any of the
Counties.
2.2 For
an 18-month period commencing on the first day after the effective time of
the
Merger (the “Effective Time”), (a) solicit or attempt to solicit (i) any
employees of Frontier to leave their employment, or (ii) any customers of
Frontier to remove or transfer any of their business from Frontier, or (b)
otherwise interfere with, disrupt or attempt to disrupt the relationship,
contractual or otherwise, between Frontier and any of Frontier’s customers or
employees. Solicitation prohibited under this section includes solicitation
by
any means, including, without limitation, meetings, letters or other mailings,
electronic communications of any kind, and Internet communications; provided,
however, that solicitation prohibited under this paragraph does not include
solicitation through general advertising that is not specifically directed
to or
targeting the employees of Frontier or Frontier Bank.
3. Nondisparagement.
Executive shall not, during the term or after the termination or
expiration of this Agreement or Executive’s employment, make disparaging
statements, in any form, about Frontier or its officers, directors, agents,
employees, products or services.
4. Intellectual
Property/Confidential Information. Further, anything to the
contrary herein notwithstanding, neither Executive nor any firm, company, trust
or other entity of which Executive is an Affiliate shall, during the term or
after the termination or expiration of this Agreement, (i) use, register or
claim any right or interest in any Intellectual Property or Confidential
Information of Frontier, including but not limited to the Intellectual Property
and Confidential Information of WBC acquired pursuant to the Merger Agreement,
or (ii) use the trade name “Washington Banking Company,” “Whidbey Island Bank,”
or any similar name or derivation thereof, in connection with the banking,
financial, lending or mortgage industries.
5. No
Employee Contract Rights. Nothing contained in this Agreement shall
be construed to abrogate, limit or affect the powers, rights and privileges
of
Frontier to remove Executive as an employee of Frontier, with or without
cause.
6. Enforcement
of Covenants.
6.1 Frontier
and Executive stipulate that, in light of all of the facts and circumstances
of
the relationship between Frontier and Executive, the covenants referred to
in
Sections 2, 3 and 4 (including without limitation their scope, duration and
geographic extent) are fair and reasonably necessary for the protection of
Frontier’s Confidential Information (as defined below), goodwill and other
protectable interests. If a court of competent jurisdiction should decline
to
enforce any of those covenants and agreements, Frontier and Executive request
the court to reform these provisions to restrict Executive’s use of Confidential
Information and Executive’s ability to compete with Frontier to the maximum
extent, in time, scope of activities and geography, that the court finds
enforceable.
6.2 Executive
acknowledges that Frontier will suffer immediate and irreparable harm that
will
not be compensable by damages alone, if Executive repudiates or breaches any
of
the provisions of Sections 2, 3 or 4. For this reason, under these
circumstances, Frontier, in addition to and without limitation of any other
rights, remedies or damages available
to
it at law or in equity, will be entitled to obtain temporary, preliminary and
permanent injunctions in order to prevent or restrain the breach, and Frontier
will not be required to post a bond as a condition for the granting of this
relief.
6.3 In
the event Executive breaches this Agreement, which breach is not corrected
within 15 days of notice by Frontier to Executive of such breach, Executive
shall in addition to the remedies available to Frontier under Section 6.2,
forfeit all right to receive all benefits or other payments remaining unpaid
from Frontier pursuant to Section 8.2 or otherwise on the date of any such
breach.
7. Adequate
Consideration. Executive specifically acknowledges the receipt of
adequate consideration for the covenants contained in Sections 2, 3 and 4 above
and that Frontier is entitled to require him to comply with said Sections 2,
3
and 4, which Sections will survive termination of this Agreement.
8. Employment
Agreement Superseded. Executive’s Employment Agreement with WBC
dated as of May 6, 2005 (the “Employment Agreement”) is terminated, superseded
and replaced as of the Effective Time by the following provisions:
8.1 Definitions.
The following definitions shall govern and be controlling for purposes of this
Agreement:
8.1.1 “Cause”
shall include termination because Executive: (i) materially breached this
Agreement; (ii) willfully breached or habitually neglected or breached the
duties which he was required to perform under the terms of his employment with
Frontier or the policies of Frontier; (iii) commits act(s) of dishonesty, theft,
embezzlement, fraud or misrepresentation against Frontier or its subsidiaries;
(iv) willfully and continually failed to comply with any law, rule, or
regulation (other than traffic violations or similar offenses) or final cease
and desist order of a regulatory agency having jurisdiction over Frontier;
(v)
fails to follow the reasonable directions of Frontier’s board of directors,
which failure is not corrected within thirty (30) days after receipt by
Executive of written notice outlining the corrective action required; or (vi)
knowingly provides misleading or false information to shareholders, the board
of
directors, auditors, accountants, or regulatory authorities.
8.1.2 “Change
of Control” means the Merger.
8.1.3 “Confidential
Information” includes, without limitation, any information in whatever form that
Frontier considers to be confidential, proprietary, information and that is
not
publicly or generally available relating to Frontier’s: trade secrets (as
defined by the Uniform Trade Secrets Act); know-how; concepts; methods; research
and development; product, content and technology development plans; marketing
plans; databases; inventions; research data and mechanisms; software (including
functional specifications, source code and object code); procedures;
engineering; purchasing; accounting; marketing; sales; customer lists;
advertisers; joint venture partners; financial status; contracts or employees.
Confidential Information includes information developed by Executive, alone
or
with others, or entrusted to Frontier by its customers or others.
8.1.4 “Good
Reason” shall include, but not be limited to: (i) a material reduction in
Executive’s compensation defined as a reduction equal to or greater than five
percent (5%) of Executive’s then annual base salary, which reduction is not of
general application to substantially all employees of Frontier, (ii) a material
reduction in Executive’s duties, responsibilities, or reporting relationship,
but not merely a change in title, or (iii) relocation of Executive’s primary
workplace from Oak Harbor to a location outside Island, San Xxxx, Snohomish,
Skagit or Whatcom counties.
8.1.5 “Intellectual
Property” means any material trademarks, service marks, brand names,
certification marks, trade dress or other indications of origin, the goodwill
associated with the foregoing 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),
and
any renewals, extensions or reissues thereof, in any jurisdiction; trade secrets
and registrations or applications for registration of copyrights in any
jurisdiction, and any renewals or extensions thereof.
8.1.6 “Limitation
Amount” means an amount equal to two times the lesser of (i) Executive’s
annualized compensation based upon the annual rate of pay for services provided
to Frontier for his taxable year preceding his taxable year in which his
employment with Frontier terminates (adjusted for any increase during that
year
that was expected to continue indefinitely if his employment did not terminate);
or (ii) the maximum amount that may be taken into account under a qualified
plan
pursuant to section 401(a)(17) of the Code for the year in which Executive’s
employment terminates. For 2007, such maximum amount is two times $225,000
(adjusted annually for increases in the cost of living) or
$450,000.
8.2 Payment
Obligations.
8.2.1 If
Executive is an employee of WBC at the Effective Time and is retained by
Frontier as an employee after the Effective Time, (i) Frontier will pay
Executive 50% of his Severance Benefit (calculated pursuant to section 5 of
his
Employment Agreement), less statutory payroll deductions, in cash upon Closing
of the Merger; and (ii) if Executive remains an employee of Frontier on the
first anniversary of the Effective Time or within 12 months after the Change
of
Control, Frontier terminates Executive’s employment other than termination for
Cause, or Executive terminates his employment with Frontier for Good Reason,
Executive shall receive the balance of his Severance Benefit, less statutory
payroll deductions, within 30 days following such anniversary date or the date
of termination of employment; provided, however, that any amount
in excess of the Limitation Amount, will be paid to him no sooner than the
first
day of the seventh calendar month following the termination of his
employment.
8.2.2 If
Executive is an employee of WBC at the Effective Time but is not retained by
Frontier as an employee after the Effective Time, Frontier will pay Executive
100% of his Severance Benefit (calculated pursuant to section 5 of his
Employment Agreement), less statutory payroll deductions, in cash upon Closing
of the Merger; provided, however, that any
amount
in excess of the Limitation Amount, will be paid to him no sooner than the
first
day of the seventh calendar month following the termination of his
employment.
8.3 Notwithstanding
anything in this Agreement to the contrary, if it is determined by legal counsel
(or other tax advisor to Executive) that the total of the Severance Benefit,
together with any other payments or benefits paid by Frontier to Executive,
would constitute an “excess parachute payment” within the meaning of section
280G of the Internal Revenue Code of 1986 (the “Code”), as amended, and the net
after-tax amount that Executive would realize from such compensation,
considering Executive’s federal and state income tax brackets and the excise
tax, would be greater if the compensation payable hereunder were limited, then
the compensation payable hereunder shall be limited in the manner determined
by
such counsel or advisor, to maximize Executive’s net after-tax
income.
8.4 Where
required, the provisions of this Agreement are intended to comply with the
requirements of section 409A of the Code. Notwithstanding any other provision
of
this Agreement, this Agreement shall be interpreted and administered in
accordance with the requirements of section 409A of the Code.
8.5 Any
payment to Executive under Section 8.2 hereof shall be conditioned upon receipt
by Frontier of an executed release of all claims against Frontier, satisfactory
to Frontier and its counsel.
9. Miscellaneous
Provisions.
9.1 Independent
Legal Counsel. Executive acknowledges that he has had the opportunity to
review and consult with his own personal legal counsel regarding this
Agreement.
9.2 Binding
Effect. This Agreement will bind and inure to the benefit of Frontier’s and
Executive’s heirs, legal representatives, successors and assigns.
9.3 Costs
of Legal Actions and Proceedings. In any dispute between the parties arising
out of or under this Agreement, whether or not a lawsuit is commenced, the
nonprevailing party shall pay the prevailing party’s reasonable attorneys’ fees
and costs.
9.4 Governing
Law. This Agreement shall be construed in accordance with and governed and
enforced in all respects by the laws of the state of Washington. The parties
agree that venue of any legal action between the parties arising out of or
in
connection with this Agreement shall be with the competent state or federal
court in Washington State, unless otherwise elected by Frontier, its
successors or assigns.
9.5 Entire
Agreement. This Agreement contains the entire agreement of the parties with
respect to its subject matter, and supersedes all prior representations and
understandings, whether oral or written. It may be changed only by an agreement
in writing signed by the party against whom enforcement of any waiver,
amendment, modification, extension or discharge is sought.
9.6 Waiver. No
waiver of any term, condition or provision shall be effective for any purpose
whatsoever unless such waiver is in writing and signed by the
parties.
9.7 Severability.
The provisions of this Agreement are severable. The invalidity of any provision
will not affect the validity of other provisions of this Agreement.
9.8 Notice.
Any notice to be delivered under this Agreement shall be given in writing and
delivered personally or by certified mail, postage prepaid, addressed to
Frontier or to Executive at their last known address.
9.9 Counterparts.
This Agreement may be executed in one or more counterparts, each of which will
be deemed an original, but all of which taken together will constitute one
and
the same instrument.
IN
WITNESS WHEREOF, the undersigned have set their hands as of the date first
written above.
|
FRONTIER
FINANCIAL CORPORATION
By:
Xxxx
X. Xxxxxxx, President and CEO
|
EXECUTIVE
Name:
Xxxx X. Xxxxxx
|
|
FRONTIER
BANK
By:
Name:
Title:
|
EXHIBIT
C-3
NONCOMPETITION/NONSOLICITATION
AGREEMENT
This
Noncompetition/Nonsolicitation Agreement dated September _____, 2007 (this
“Agreement”) is entered into by and between FRONTIER FINANCIAL CORPORATION,
FRONTIER BANK and their subsidiaries (collectively, “Frontier”), and XXXXXXX X.
XXXXXXX (“Executive”).
WHEREAS,
Frontier, Washington Banking Company (“WBC”) and Whidbey Island Bank (“WBC
Bank”) are entering into an Agreement and Plan of Merger (“the Merger
Agreement”), pursuant to which WBC will be merged into Frontier Financial
Corporation and WBC Bank will be merged into Frontier Bank (the “Merger”);
and
WHEREAS,
Executive is currently employed as Executive Vice President and Chief Financial
Officer of WBC and/or WBC Bank and has knowledge of certain Confidential
Information of WBC, and Frontier Financial Corporation and Frontier Bank are
executing the Merger Agreement conditioned upon Executive’s agreement not to
compete with Frontier in any county in which WBC Bank has branch offices or
loan
production offices, and not to solicit employees and customers of Frontier
(including the employees and customers of WBC who become employees and customers
of Frontier following the Merger), for a specified period of time following
the
Merger, all as further described below; and
NOW,
THEREFORE, Frontier and Executive agree as follows:
1. Effective
Time. This Agreement shall become effective at the effective time
of the Merger (the “Effective Time”), as set forth in the Merger
Agreement.
2. Noncompetition,
Nonsolicitation and Nondisparagement. In
consideration for this Agreement and to protect the business and goodwill
purchased by Frontier pursuant to the Merger Agreement, Executive agrees that
he
will not, directly or indirectly, do any of the following:
2.1 For
a one-year period commencing on the first day after the effective time of the
Merger (the “Effective Time”), (a) become involved in, as a principal
shareholder, director, officer, founder, employee, consultant or other agent
(each of the foregoing relationships, hereinafter referred to as an “Affiliate”)
of any Financial Institution (as defined below) in any of the Washington state
counties of Island, San Xxxx, Skagit, Snohomish and Whatcom (individually and
collectively, the “Counties”), or (b) have any responsibility for a Financial
Institution’s organization or operation in any of the Counties; provided,
however, that Executive may acquire and passively own an interest not exceeding
2% of the total equity interest in any Financial Institution in any of the
Counties that is traded on NASDAQ or another U.S. stock exchange. For purposes
of this Agreement, the term “Financial Institution” means any bank holding
company or financial holding company, state or national bank, state or federal
savings and loan association, mutual savings bank, or state or federal credit
union, trust company or mortgage company (including without limitation, any
organizing entity of any such Financial Institution) located in any of the
Counties.
2.2 For
an 18-month period commencing on the first day after the effective time of
the
Merger (the “Effective Time”), (a) solicit or attempt to solicit (i) any
employees of Frontier to leave their employment, or (ii) any customers of
Frontier to remove or transfer any of their business from Frontier, or (b)
otherwise interfere with, disrupt or attempt to disrupt the relationship,
contractual or otherwise, between Frontier and any of Frontier’s customers or
employees. Solicitation prohibited under this section includes solicitation
by
any means, including, without limitation, meetings, letters or other mailings,
electronic communications of any kind, and Internet communications; provided,
however, that solicitation prohibited under this paragraph does not include
solicitation through general advertising that is not specifically directed
to or
targeting the employees of Frontier or Frontier Bank.
3. Nondisparagement.
Executive shall not, during the term or after the termination or
expiration of this Agreement or Executive’s employment, make disparaging
statements, in any form, about Frontier or its officers, directors, agents,
employees, products or services.
4. Intellectual
Property/Confidential Information. Further, anything to the
contrary herein notwithstanding, neither Executive nor any firm, company, trust
or other entity of which Executive is an Affiliate shall, during the term or
after the termination or expiration of this Agreement, (i) use, register or
claim any right or interest in any Intellectual Property or Confidential
Information of Frontier, including but not limited to the Intellectual Property
and Confidential Information of WBC acquired pursuant to the Merger Agreement,
or (ii) use the trade name “Washington Banking Company,” “Whidbey Island Bank,”
or any similar name or derivation thereof, in connection with the banking,
financial, lending or mortgage industries.
5. No
Employee Contract Rights. Nothing contained in this Agreement shall
be construed to abrogate, limit or affect the powers, rights and privileges
of
Frontier to remove Executive as an employee of Frontier, with or without
cause.
6. Enforcement
of Covenants.
6.1 Frontier
and Executive stipulate that, in light of all of the facts and circumstances
of
the relationship between Frontier and Executive, the covenants referred to
in
Sections 2, 3 and 4 (including without limitation their scope, duration and
geographic extent) are fair and reasonably necessary for the protection of
Frontier’s Confidential Information (as defined below), goodwill and other
protectable interests. If a court of competent jurisdiction should decline
to
enforce any of those covenants and agreements, Frontier and Executive request
the court to reform these provisions to restrict Executive’s use of Confidential
Information and Executive’s ability to compete with Frontier to the maximum
extent, in time, scope of activities and geography, that the court finds
enforceable.
6.2 Executive
acknowledges that Frontier will suffer immediate and irreparable harm that
will
not be compensable by damages alone, if Executive repudiates or breaches any
of
the provisions of Sections 2, 3 or 4. For this reason, under these
circumstances, Frontier, in addition to and without limitation of any other
rights, remedies or damages available
to
it at law or in equity, will be entitled to obtain temporary, preliminary and
permanent injunctions in order to prevent or restrain the breach, and Frontier
will not be required to post a bond as a condition for the granting of this
relief.
6.3 In
the event Executive breaches this Agreement, which breach is not corrected
within 15 days of notice by Frontier to Executive of such breach, Executive
shall in addition to the remedies available to Frontier under Section 6.2,
forfeit all right to receive all benefits or other payments remaining unpaid
from Frontier pursuant to Section 8.2 or otherwise on the date of any such
breach.
7. Adequate
Consideration. Executive specifically acknowledges the receipt of
adequate consideration for the covenants contained in Sections 2, 3 and 4 above
and that Frontier is entitled to require him to comply with said Sections 2,
3
and 4, which Sections will survive termination of this Agreement.
8. Employment
Agreement Superseded. Executive’s Employment Agreement with WBC
dated as of May 6, 2005 (the “Employment Agreement”) is terminated, superseded
and replaced as of the Effective Time by the following provisions:
8.1 Definitions.
The following definitions shall govern and be controlling for purposes of this
Agreement:
8.1.1 “Cause”
shall include termination because Executive: (i) materially breached this
Agreement; (ii) willfully breached or habitually neglected or breached the
duties which he was required to perform under the terms of his employment with
Frontier or the policies of Frontier; (iii) commits act(s) of dishonesty, theft,
embezzlement, fraud or misrepresentation against Frontier or its subsidiaries;
(iv) willfully and continually failed to comply with any law, rule, or
regulation (other than traffic violations or similar offenses) or final cease
and desist order of a regulatory agency having jurisdiction over Frontier;
(v)
fails to follow the reasonable directions of Frontier’s board of directors,
which failure is not corrected within thirty (30) days after receipt by
Executive of written notice outlining the corrective action required; or (vi)
knowingly provides misleading or false information to shareholders, the board
of
directors, auditors, accountants, or regulatory authorities.
8.1.2 “Change
of Control” means the Merger.
8.1.3 “Confidential
Information” includes, without limitation, any information in whatever form that
Frontier considers to be confidential, proprietary, information and that is
not
publicly or generally available relating to Frontier’s: trade secrets (as
defined by the Uniform Trade Secrets Act); know-how; concepts; methods; research
and development; product, content and technology development plans; marketing
plans; databases; inventions; research data and mechanisms; software (including
functional specifications, source code and object code); procedures;
engineering; purchasing; accounting; marketing; sales; customer lists;
advertisers; joint venture partners; financial status; contracts or employees.
Confidential Information includes information developed by Executive, alone
or
with others, or entrusted to Frontier by its customers or others.
8.1.4 “Good
Reason” shall include, but not be limited to: (i) a material reduction in
Executive’s compensation defined as a reduction equal to or greater than five
percent (5%) of Executive’s then annual base salary, which reduction is not of
general application to substantially all employees of Frontier, (ii) a material
reduction in Executive’s duties, responsibilities, or reporting relationship,
but not merely a change in title, or (iii) relocation of Executive’s primary
workplace from Oak Harbor to a location outside Island, San Xxxx, Snohomish,
Skagit or Whatcom counties.
8.1.5 “Intellectual
Property” means any material trademarks, service marks, brand names,
certification marks, trade dress or other indications of origin, the goodwill
associated with the foregoing 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),
and
any renewals, extensions or reissues thereof, in any jurisdiction; trade secrets
and registrations or applications for registration of copyrights in any
jurisdiction, and any renewals or extensions thereof.
8.1.6 “Limitation
Amount” means an amount equal to two times the lesser of (i) Executive’s
annualized compensation based upon the annual rate of pay for services provided
to Frontier for his taxable year preceding his taxable year in which his
employment with Frontier terminates (adjusted for any increase during that
year
that was expected to continue indefinitely if his employment did not terminate);
or (ii) the maximum amount that may be taken into account under a qualified
plan
pursuant to section 401(a)(17) of the Code for the year in which Executive’s
employment terminates. For 2007, such maximum amount is two times $225,000
(adjusted annually for increases in the cost of living) or
$450,000.
8.2 Payment
Obligations.
8.2.1 If
Executive is an employee of WBC at the Effective Time and is retained by
Frontier as an employee after the Effective Time, (i) Frontier will pay
Executive 50% of his Severance Benefit (calculated pursuant to section 5 of
his
Employment Agreement), less statutory payroll deductions, in cash upon Closing
of the Merger; and (ii) if Executive remains an employee of Frontier on the
first anniversary of the Effective Time or within 12 months after the Change
of
Control, Frontier terminates Executive’s employment other than termination for
Cause, or Executive terminates his employment with Frontier for Good Reason,
Executive shall receive the balance of his Severance Benefit, less statutory
payroll deductions, within 30 days following such anniversary date or the date
of termination of employment; provided, however, that any amount
in excess of the Limitation Amount, will be paid to him no sooner than the
first
day of the seventh calendar month following the termination of his
employment.
8.2.2 If
Executive is an employee of WBC at the Effective Time but is not retained by
Frontier as an employee after the Effective Time, Frontier will pay Executive
100% of his Severance Benefit (calculated pursuant to section 5 of his
Employment Agreement), less statutory payroll deductions, in cash upon Closing
of the Merger; provided, however, that any
amount
in excess of the Limitation Amount, will be paid to him no sooner than the
first
day of the seventh calendar month following the termination of his
employment.
8.3 Notwithstanding
anything in this Agreement to the contrary, if it is determined by legal counsel
(or other tax advisor to Executive) that the total of the Severance Benefit,
together with any other payments or benefits paid by Frontier to Executive,
would constitute an “excess parachute payment” within the meaning of section
280G of the Internal Revenue Code of 1986 (the “Code”), as amended, and the net
after-tax amount that Executive would realize from such compensation,
considering Executive’s federal and state income tax brackets and the excise
tax, would be greater if the compensation payable hereunder were limited, then
the compensation payable hereunder shall be limited in the manner determined
by
such counsel or advisor, to maximize Executive’s net after-tax
income.
8.4 Where
required, the provisions of this Agreement are intended to comply with the
requirements of section 409A of the Code. Notwithstanding any other provision
of
this Agreement, this Agreement shall be interpreted and administered in
accordance with the requirements of section 409A of the Code.
8.5 Any
payment to Executive under Section 8.2 hereof shall be conditioned upon receipt
by Frontier of an executed release of all claims against Frontier, satisfactory
to Frontier and its counsel.
9. Miscellaneous
Provisions.
9.1 Independent
Legal Counsel. Executive acknowledges that he has had the opportunity to
review and consult with his own personal legal counsel regarding this
Agreement.
9.2 Binding
Effect. This Agreement will bind and inure to the benefit of Frontier’s and
Executive’s heirs, legal representatives, successors and assigns.
9.3 Costs
of Legal Actions and Proceedings. In any dispute between the parties arising
out of or under this Agreement, whether or not a lawsuit is commenced, the
nonprevailing party shall pay the prevailing party’s reasonable attorneys’ fees
and costs.
9.4 Governing
Law. This Agreement shall be construed in accordance with and governed and
enforced in all respects by the laws of the state of Washington. The parties
agree that venue of any legal action between the parties arising out of or
in
connection with this Agreement shall be with the competent state or federal
court in Washington State, unless otherwise elected by Frontier, its
successors or assigns.
9.5 Entire
Agreement. This Agreement contains the entire agreement of the parties with
respect to its subject matter, and supersedes all prior representations and
understandings, whether oral or written. It may be changed only by an agreement
in writing signed by the party against whom enforcement of any waiver,
amendment, modification, extension or discharge is sought.
9.6 Waiver. No
waiver of any term, condition or provision shall be effective for any purpose
whatsoever unless such waiver is in writing and signed by the
parties.
9.7 Severability.
The provisions of this Agreement are severable. The invalidity of any provision
will not affect the validity of other provisions of this Agreement.
9.8 Notice.
Any notice to be delivered under this Agreement shall be given in writing and
delivered personally or by certified mail, postage prepaid, addressed to
Frontier or to Executive at their last known address.
9.9 Counterparts.
This Agreement may be executed in one or more counterparts, each of which will
be deemed an original, but all of which taken together will constitute one
and
the same instrument.
IN
WITNESS WHEREOF, the undersigned have set their hands as of the date first
written above.
|
FRONTIER
FINANCIAL CORPORATION
By:
Xxxx
X. Xxxxxxx, President and CEO
|
EXECUTIVE
Name:
Xxxxxxx X. Xxxxxxx
|
|
FRONTIER
BANK
By:
Name:
Title:
|
EXHIBIT
C-4
NONCOMPETITION/NONSOLICITATION
AGREEMENT
This
Noncompetition/Nonsolicitation Agreement dated September _____, 2007 (this
“Agreement”) is entered into by and between FRONTIER FINANCIAL CORPORATION,
FRONTIER BANK and their subsidiaries (collectively, “Frontier”), and XXXXXX X.
XXXXXX (“Executive”).
WHEREAS,
Frontier, Washington Banking Company (“WBC”) and Whidbey Island Bank (“WBC
Bank”) are entering into an Agreement and Plan of Merger (“the Merger
Agreement”), pursuant to which WBC will be merged into Frontier Financial
Corporation and WBC Bank will be merged into Frontier Bank (the “Merger”);
and
WHEREAS,
Executive is currently employed as Executive Vice President and Chief Credit
Officer of WBC and/or WBC Bank and has knowledge of certain Confidential
Information of WBC, and Frontier Financial Corporation and Frontier Bank are
executing the Merger Agreement conditioned upon Executive’s agreement not to
compete with Frontier in any county in which WBC Bank has branch offices or
loan
production offices, and not to solicit employees and customers of Frontier
(including the employees and customers of WBC who become employees and customers
of Frontier following the Merger), for a specified period of time following
the
Merger, all as further described below; and
NOW,
THEREFORE, Frontier and Executive agree as follows:
1. Effective
Time. This Agreement shall become effective at the effective time
of the Merger (the “Effective Time”), as set forth in the Merger
Agreement.
2. Noncompetition,
Nonsolicitation and Nondisparagement. In
consideration for this Agreement and to protect the business and goodwill
purchased by Frontier pursuant to the Merger Agreement, Executive agrees that
he
will not, directly or indirectly, do any of the following:
2.1 For
a one-year period commencing on the first day after the effective time of the
Merger (the “Effective Time”), (a) become involved in, as a principal
shareholder, director, officer, founder, employee, consultant or other agent
(each of the foregoing relationships, hereinafter referred to as an “Affiliate”)
of any Financial Institution (as defined below) in any of the Washington state
counties of Island, San Xxxx, Skagit, Snohomish and Whatcom (individually and
collectively, the “Counties”), or (b) have any responsibility for a Financial
Institution’s organization or operation in any of the Counties; provided,
however, that Executive may acquire and passively own an interest not exceeding
2% of the total equity interest in any Financial Institution in any of the
Counties that is traded on NASDAQ or another U.S. stock exchange. For purposes
of this Agreement, the term “Financial Institution” means any bank holding
company or financial holding company, state or national bank, state or federal
savings and loan association, mutual savings bank, or state or federal credit
union, trust company or mortgage company (including without limitation, any
organizing entity of any such Financial Institution) located in any of the
Counties.
2.2 For
an 18-month period commencing on the first day after the effective time of
the
Merger (the “Effective Time”), (a) solicit or attempt to solicit (i) any
employees of Frontier to leave their employment, or (ii) any customers of
Frontier to remove or transfer any of their business from Frontier, or (b)
otherwise interfere with, disrupt or attempt to disrupt the relationship,
contractual or otherwise, between Frontier and any of Frontier’s customers or
employees. Solicitation prohibited under this section includes solicitation
by
any means, including, without limitation, meetings, letters or other mailings,
electronic communications of any kind, and Internet communications; provided,
however, that solicitation prohibited under this paragraph does not include
solicitation through general advertising that is not specifically directed
to or
targeting the employees of Frontier or Frontier Bank.
3. Nondisparagement.
Executive shall not, during the term or after the termination or
expiration of this Agreement or Executive’s employment, make disparaging
statements, in any form, about Frontier or its officers, directors, agents,
employees, products or services.
4. Intellectual
Property/Confidential Information. Further, anything to the
contrary herein notwithstanding, neither Executive nor any firm, company, trust
or other entity of which Executive is an Affiliate shall, during the term or
after the termination or expiration of this Agreement, (i) use, register or
claim any right or interest in any Intellectual Property or Confidential
Information of Frontier, including but not limited to the Intellectual Property
and Confidential Information of WBC acquired pursuant to the Merger Agreement,
or (ii) use the trade name “Washington Banking Company,” “Whidbey Island Bank,”
or any similar name or derivation thereof, in connection with the banking,
financial, lending or mortgage industries.
5. No
Employee Contract Rights. Nothing contained in this Agreement shall
be construed to abrogate, limit or affect the powers, rights and privileges
of
Frontier to remove Executive as an employee of Frontier, with or without
cause.
6. Enforcement
of Covenants.
6.1 Frontier
and Executive stipulate that, in light of all of the facts and circumstances
of
the relationship between Frontier and Executive, the covenants referred to
in
Sections 2, 3 and 4 (including without limitation their scope, duration and
geographic extent) are fair and reasonably necessary for the protection of
Frontier’s Confidential Information (as defined below), goodwill and other
protectable interests. If a court of competent jurisdiction should decline
to
enforce any of those covenants and agreements, Frontier and Executive request
the court to reform these provisions to restrict Executive’s use of Confidential
Information and Executive’s ability to compete with Frontier to the maximum
extent, in time, scope of activities and geography, that the court finds
enforceable.
6.2 Executive
acknowledges that Frontier will suffer immediate and irreparable harm that
will
not be compensable by damages alone, if Executive repudiates or breaches any
of
the provisions of Sections 2, 3 or 4. For this reason, under these
circumstances, Frontier, in addition to and without limitation of any other
rights, remedies or damages available
to
it at law or in equity, will be entitled to obtain temporary, preliminary and
permanent injunctions in order to prevent or restrain the breach, and Frontier
will not be required to post a bond as a condition for the granting of this
relief.
6.3 In
the event Executive breaches this Agreement, which breach is not corrected
within 15 days of notice by Frontier to Executive of such breach, Executive
shall in addition to the remedies available to Frontier under Section 6.2,
forfeit all right to receive all benefits or other payments remaining unpaid
from Frontier pursuant to Section 8.2 or otherwise on the date of any such
breach.
7. Adequate
Consideration. Executive specifically acknowledges the receipt of
adequate consideration for the covenants contained in Sections 2, 3 and 4 above
and that Frontier is entitled to require him to comply with said Sections 2,
3
and 4, which Sections will survive termination of this Agreement.
8. Employment
Agreement Superseded. Executive’s Employment Agreement with WBC
dated as of September 28, 2005 (the “Employment Agreement”) is terminated,
superseded and replaced as of the Effective Time by the following
provisions:
8.1 Definitions.
The following definitions shall govern and be controlling for purposes of this
Agreement:
8.1.1 “Cause”
shall include termination because Executive: (i) materially breached this
Agreement; (ii) willfully breached or habitually neglected or breached the
duties which he was required to perform under the terms of his employment with
Frontier or the policies of Frontier; (iii) commits act(s) of dishonesty, theft,
embezzlement, fraud or misrepresentation against Frontier or its subsidiaries;
(iv) willfully and continually failed to comply with any law, rule, or
regulation (other than traffic violations or similar offenses) or final cease
and desist order of a regulatory agency having jurisdiction over Frontier;
(v)
fails to follow the reasonable directions of Frontier’s board of directors,
which failure is not corrected within thirty (30) days after receipt by
Executive of written notice outlining the corrective action required; or (vi)
knowingly provides misleading or false information to shareholders, the board
of
directors, auditors, accountants, or regulatory authorities.
8.1.2 “Change
of Control” means the Merger.
8.1.3 “Confidential
Information” includes, without limitation, any information in whatever form that
Frontier considers to be confidential, proprietary, information and that is
not
publicly or generally available relating to Frontier’s: trade secrets (as
defined by the Uniform Trade Secrets Act); know-how; concepts; methods; research
and development; product, content and technology development plans; marketing
plans; databases; inventions; research data and mechanisms; software (including
functional specifications, source code and object code); procedures;
engineering; purchasing; accounting; marketing; sales; customer lists;
advertisers; joint venture partners; financial status; contracts or employees.
Confidential Information includes information developed by Executive, alone
or
with others, or entrusted to Frontier by its customers or others.
8.1.4 “Good
Reason” shall include, but not be limited to: (i) a material reduction in
Executive’s compensation defined as a reduction equal to or greater than five
percent (5%) of Executive’s then annual base salary, which reduction is not of
general application to substantially all employees of Frontier, (ii) a material
reduction in Executive’s duties, responsibilities, or reporting relationship,
but not merely a change in title, or (iii) relocation of Executive’s primary
workplace from Oak Harbor to a location outside Island, San Xxxx, Snohomish,
Skagit or Whatcom counties.
8.1.5 “Intellectual
Property” means any material trademarks, service marks, brand names,
certification marks, trade dress or other indications of origin, the goodwill
associated with the foregoing 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),
and
any renewals, extensions or reissues thereof, in any jurisdiction; trade secrets
and registrations or applications for registration of copyrights in any
jurisdiction, and any renewals or extensions thereof.
8.1.6 “Limitation
Amount” means an amount equal to two times the lesser of (i) Executive’s
annualized compensation based upon the annual rate of pay for services provided
to Frontier for his taxable year preceding his taxable year in which his
employment with Frontier terminates (adjusted for any increase during that
year
that was expected to continue indefinitely if his employment did not terminate);
or (ii) the maximum amount that may be taken into account under a qualified
plan
pursuant to section 401(a)(17) of the Code for the year in which Executive’s
employment terminates. For 2007, such maximum amount is two times $225,000
(adjusted annually for increases in the cost of living) or
$450,000.
8.2 Payment
Obligations.
8.2.1 If
Executive is an employee of WBC at the Effective Time and is retained by
Frontier as an employee after the Effective Time, (i) Frontier will pay
Executive 50% of his Severance Benefit (calculated pursuant to section 5 of
his
Employment Agreement), less statutory payroll deductions, in cash upon Closing
of the Merger; and (ii) if Executive remains an employee of Frontier on the
first anniversary of the Effective Time or within 12 months after the Change
of
Control, Frontier terminates Executive’s employment other than termination for
Cause, or Executive terminates his employment with Frontier for Good Reason,
Executive shall receive the balance of his Severance Benefit, less statutory
payroll deductions, within 30 days following such anniversary date or the date
of termination of employment; provided, however, that any amount
in excess of the Limitation Amount, will be paid to him no sooner than the
first
day of the seventh calendar month following the termination of his
employment.
8.2.2 If
Executive is an employee of WBC at the Effective Time but is not retained by
Frontier as an employee after the Effective Time, Frontier will pay Executive
100% of his Severance Benefit (calculated pursuant to section 5 of his
Employment Agreement), less statutory payroll deductions, in cash upon Closing
of the Merger; provided, however, that any
amount
in excess of the Limitation Amount, will be paid to him no sooner than the
first
day of the seventh calendar month following the termination of his
employment.
8.3 Notwithstanding
anything in this Agreement to the contrary, if it is determined by legal counsel
(or other tax advisor to Executive) that the total of the Severance Benefit,
together with any other payments or benefits paid by Frontier to Executive,
would constitute an “excess parachute payment” within the meaning of section
280G of the Internal Revenue Code of 1986 (the “Code”), as amended, and the net
after-tax amount that Executive would realize from such compensation,
considering Executive’s federal and state income tax brackets and the excise
tax, would be greater if the compensation payable hereunder were limited, then
the compensation payable hereunder shall be limited in the manner determined
by
such counsel or advisor, to maximize Executive’s net after-tax
income.
8.4 Where
required, the provisions of this Agreement are intended to comply with the
requirements of section 409A of the Code. Notwithstanding any other provision
of
this Agreement, this Agreement shall be interpreted and administered in
accordance with the requirements of section 409A of the Code.
8.5 Any
payment to Executive under Section 8.2 hereof shall be conditioned upon receipt
by Frontier of an executed release of all claims against Frontier, satisfactory
to Frontier and its counsel.
9. Miscellaneous
Provisions.
9.1 Independent
Legal Counsel. Executive acknowledges that he has had the opportunity to
review and consult with his own personal legal counsel regarding this
Agreement.
9.2 Binding
Effect. This Agreement will bind and inure to the benefit of Frontier’s and
Executive’s heirs, legal representatives, successors and assigns.
9.3 Costs
of Legal Actions and Proceedings. In any dispute between the parties arising
out of or under this Agreement, whether or not a lawsuit is commenced, the
nonprevailing party shall pay the prevailing party’s reasonable attorneys’ fees
and costs.
9.4 Governing
Law. This Agreement shall be construed in accordance with and governed and
enforced in all respects by the laws of the state of Washington. The parties
agree that venue of any legal action between the parties arising out of or
in
connection with this Agreement shall be with the competent state or federal
court in Washington state, unless otherwise elected by Frontier, its successors
or assigns.
9.5 Entire
Agreement. This Agreement contains the entire agreement of the parties with
respect to its subject matter, and supersedes all prior representations and
understandings, whether oral or written. It may be changed only by an agreement
in writing signed by the party against whom enforcement of any waiver,
amendment, modification, extension or discharge is sought.
9.6 Waiver. No
waiver of any term, condition or provision shall be effective for any purpose
whatsoever unless such waiver is in writing and signed by the
parties.
9.7 Severability.
The provisions of this Agreement are severable. The invalidity of any provision
will not affect the validity of other provisions of this Agreement.
9.8 Notice.
Any notice to be delivered under this Agreement shall be given in writing and
delivered personally or by certified mail, postage prepaid, addressed to
Frontier or to Executive at their last known address.
9.9 Counterparts.
This Agreement may be executed in one or more counterparts, each of which will
be deemed an original, but all of which taken together will constitute one
and
the same instrument.
IN
WITNESS WHEREOF, the undersigned have set their hands as of the date first
written above.
|
FRONTIER
FINANCIAL CORPORATION
By:
Xxxx
X. Xxxxxxx, President and CEO
|
EXECUTIVE
Name:
Xxxxxx X. Xxxxxx
|
|
FRONTIER
BANK
By:
Name:
Title:
|
EXHIBIT
D
_______________,
2007
Frontier
Financial Corporation
000
X.X. Xxxxxxx Xxxx Way
P.O.
Box 2215
Xxxxxxx,
XX 00000
Ladies
and Gentlemen:
I
have been advised that as of the date hereof I may be deemed an “affiliate” of
Washington Banking Company (“WBC”), as the term “affiliate” is defined for
purposes of paragraphs (c) and (d) of Rule 145 of the rules and regulations
(the
“Rules and Regulations”) under the Securities Act of 1933, as amended (the
“Act”). Pursuant to the terms of the Agreement and Plan of Merger among Frontier
Financial Corporation (“Frontier”), Frontier, WBC and Whidbey Island Bank (the
“Agreement”), WBC will be merged into Frontier (the “Merger”). As a result of
the Merger, I will receive shares of common stock of Frontier (“Frontier Common
Stock”) in exchange for shares of common stock of WBC (“WBC Common Stock”) owned
by me.
In
connection with the above, I represent and warrant to Frontier and agree
that:
A. I
will not make any sale, transfer or other disposition of the shares of Frontier
Common Stock that I receive in the Merger in violation of the Act or the Rules
and Regulations.
B. I
have no present plan or intent to dispose of Frontier Common Stock acquired
by
me pursuant to the Merger.
C. I
have been advised that the issuance of shares of Frontier Common Stock to me
pursuant to the Merger has been or will be registered with the Securities and
Exchange Commission under the Act on Form S-4. I have also been advised,
however, that since I may be deemed to be an affiliate of WBC at the time the
Agreement is submitted for a vote of the shareholders of WBC, I may not sell,
transfer or otherwise dispose of the shares of Frontier Common Stock issued
to
me in the Merger unless (i) such sale, transfer or other disposition has been
registered under the Act, (ii) such sale, transfer or other disposition is
made
in conformity with the volume and other limitations of Rule 145 under the Act,
or (iii) in the opinion of counsel acceptable to Frontier, some other exemption
from registration under the Act is available with respect to any such proposed
sale, transfer or other disposition of the shares of Frontier Common
Stock.
D. I
have carefully read this letter and the Agreement and have discussed their
requirements and other applicable limitations upon my ability to sell, transfer
or otherwise dispose of the shares of Frontier Common Stock, to the extent
I
felt necessary, with my counsel or counsel for WBC.
E. I
understand that Frontier is under no obligation to register the shares of
Frontier Common Stock for sale, transfer or other disposition by me or on my
behalf under the Act or to take any other action necessary in order to make
compliance with an exemption from registration available, except that Frontier
has agreed to use its best efforts to maintain the availability of Rule 145
for
use by affiliates such as me.
F. I
understand that stop transfer instructions will be given to the registrar of
the
certificates for the shares of Frontier Common Stock and there will be placed
on
the certificates for the shares of Frontier Common Stock, or any substitutions
therefore, legends stating in substance:
The
shares represented by this certificate were issued in a merger (the acquisition
of Washington Banking Company) to which Rule 145 promulgated under the
Securities Act of 1933, as amended (the “Act”), applies and may be sold or
otherwise transferred only in compliance with the limitation of such Rule 145,
or upon receipt by Frontier of an opinion of counsel acceptable to it that
some
other exemption from registration under the Act is available, or pursuant to
a
registration statement under the Act.
G. I
hereby agree that, for a period of one (1) year following the effective date
of
the Merger, I will obtain an agreement similar to this agreement from each
transferee of the shares of Frontier Common Stock sold or otherwise transferred
by me, but only if such transfer is effected other than in a merger involving
a
registered public offering or as a sale pursuant to Rule 145.
It
is understood and agreed the legend set forth in Paragraph F above will be
removed by delivery of substitute certificates without such legend if such
legend is not required for purposes of the Act or this Agreement. It is
understood that such legend and stop order referred to above will be removed
if
(i) one year shall have elapsed from the date the undersigned acquired Frontier
Common Stock received in the Merger and the provisions of Rule 145(d)(2) are
then available to the undersigned; (ii) two years shall have elapsed from the
date the undersigned acquired Frontier Common Stock received in the Merger
and
the provisions of Rule 145(d)(3) are then available to the undersigned; or
(iii)
Frontier has received either an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to Frontier, or a “no action” letter obtained
by the undersigned from the staff of the Securities and Exchange Commission,
to
the effect that the restrictions imposed by Rule 145 under the Act no longer
apply to the undersigned.
This
letter agreement shall be binding on my heirs, legal representatives and
successors.
Very
truly yours,
Print
Name:
Accepted
this ____ day of ________________, 2007:
FRONTIER
FINANCIAL CORPORATION
By:
Xxxx
X. Xxxxxxx, President/CEO
Law
Offices Of
Xxxxxx
Xxxxxxxx l.l.p.
A Professional Limited Liability Partnership
_______________,
2007
Washington
Banking Company
Whidbey
Island Bank
000
XX Xxxxxxxx Xxxxx
Xxx
Xxxxxx, XX 00000
Ladies
and Gentlemen:
We
have acted as counsel to Frontier Financial Corporation (“Frontier”) and its
subsidiaries (collectively “Frontier”), in connection with the Agreement and
Plan of Merger (the “Agreement”), dated as of September _____, 2007, between
Frontier, Frontier Bank, Washington Banking Company and Whidbey Island Bank,
and
the transactions contemplated by the Agreement.
This
firm has represented Frontier and Frontier Bank in connection with the
negotiation of the Agreement and matters related to such negotiation and with
respect to certain limited matters as to which we have been consulted by them.
We are familiar with the corporate proceedings taken by Frontier and Frontier
Bank in connection with the Agreement, and we are rendering this opinion
pursuant to Section 7.3(D) of the Agreement. Capitalized terms used, but not
defined, in this opinion letter shall have the meanings assigned to them in
the
Agreement.
In
rendering the opinions expressed below, we have examined and relied upon such
records, documents, instruments, certificates of public officials and
certificates of officers and employees of and accountants for Frontier and
Frontier Bank as we have deemed appropriate, including:
|
A.
|
The
Articles of Incorporation and Bylaws of Frontier and Frontier Bank,
as
amended through the date of this opinion
letter;
|
|
B.
|
Minutes
of meetings of the Boards of Directors and shareholders of Frontier
and
Frontier Bank;
|
|
C.
|
The
Agreement, including the representations, warranties and covenants
made by
Frontier and Frontier Bank in the
Agreement;
|
|
D.
|
The
Proxy Statement; and
|
|
E.
|
Certificate
of existence or authorization dated _______________, 2007, issued
by the
Washington Secretary of State with respect to Frontier, and certificate
of
|
existence
or authorization dated ______________, 2007, issued by the Washington Department
of Financial Institutions with respect to Frontier Bank.
Whenever
any statement in this opinion letter is qualified by the phrase “to our
knowledge” or “known to us” or similar phrases, it is intended to indicate that,
during the course of our representation of Frontier in connection with the
transactions contemplated by the Agreement, no information that would give
us
actual knowledge of the inaccuracy of such statement has come to the attention
of the attorneys presently in this firm who are actively engaged in the
representation of Frontier. We have not undertaken any independent investigation
or review (including any investigation or review of our files) in connection
with any such matters to determine the accuracy of any such statement, and
any
limited inquiry undertaken by us during the preparation of this opinion letter
should not be regarded as such investigation or review.
In
conducting our examination, we have assumed, without investigation, the
genuineness of all signatures, the legal capacity of natural persons, the
correctness of all certificates, the authenticity of all documents and
instruments submitted to us as originals, the conformity to original documents
and instruments of all such documents and instruments submitted to us as
certified or photostatic or facsimile copies and the authenticity of the
originals of such copies, and the accuracy and completeness of all records
made
available to us by Frontier. We also have assumed, without investigation, that
(i) each party to such documents and instruments has the power and capacity
to
execute, deliver and perform all of its obligations under the documents and
instruments, has duly authorized the execution, delivery and performance of
its
obligations under the Agreement, and has duly executed and delivered the
documents and instruments; (ii) all terms, provisions, and conditions of, or
relating to, the Agreement are correctly and completely reflected in the
Agreement, and all statements, representations, and warranties as to factual
matters made by officers and employees of and accountants for, Frontier and
by
public officials are accurate; and (iii) the Agreement is binding upon and
enforceable in accordance with its terms against Washington Banking Company
and
Whidbey Island Bank.
The
opinions expressed below are subject to the following
qualifications:
A. Our
opinion as to the legal, valid and binding nature of the Agreement and the
enforceability of the Agreement in paragraphs 4, 5 and 6 below is subject to
the
following: (i) the effect of applicable bankruptcy, insolvency, reorganization,
receivership, fraudulent conveyance, moratorium or other similar laws affecting
the rights of creditors generally, including without limitation such laws and/or
regulations specifically applicable to institutions the deposits of which are
insured by the Federal Deposit Insurance Corporation (“Insured Institutions”),
now or subsequently in effect; (ii) limitations imposed by laws and judicial
decisions relating to or affecting creditors of Insured Institutions, or by
general principles of equity (regardless of whether enforcement is considered
in
proceedings at law or in equity), upon the provisions of the Agreement and/or
the other related documents or upon the availability of injunctive relief or
other equitable remedies; and (iii) our assumption that Washington Banking
Company and Whidbey Island Bank and any of their successors in interest will
seek to enforce any of its rights
in
connection with the Agreement only in circumstances and in a manner in which
it
is commercially reasonable to do so.
B. We
express no opinion as to: (i) the enforceability of any provision or
accumulation of provisions that may be deemed to be unconscionable; (ii) any
antitrust, securities or tax laws; (iii) provisions that purport to establish
evidentiary standards; (iv) provisions relating to venue, jurisdiction,
governing law, waiver of remedies (or the delay or omission of enforcement
of
such provisions), or disclaimers or liability limitations with respect to third
parties; (v) the enforceability of any requirement in the Agreement or related
documents specifying that provisions of such documents may only be waived in
writing, to the extent that an oral agreement or an implied agreement by trade
practice or course of conduct has been created modifying any provision of the
Agreement; (vi) provisions for payment or reimbursement of costs and expenses
(including, without limitation, attorneys fees) in excess of statutory limits
or
amounts determined to be reasonable by any court or other tribunal, and any
provision for payment of attorneys fees other than to the prevailing party;
(vii) severability and indemnification provisions; (viii) availability of
equitable remedies; and (ix) any reservation of the right to pursue inconsistent
or cumulative remedies.
C. Our
opinions below are limited to the matters expressly set forth in this opinion
letter, and no opinion is to be implied or may be inferred beyond the matters
expressly so stated.
D. We
disclaim any obligation to update this opinion letter for events occurring
after
the date of this opinion letter.
E. Our
opinions below are limited to the effect of the laws of the United States of
America and the State of Washington. We express no opinion with respect to
the
effect of the laws of any other jurisdiction on the transactions contemplated
by
the Agreement.
F. A
Washington court, or federal court applying Washington law, may consider
extrinsic evidence or the circumstances surrounding the making of the Agreement
to ascertain the intent of the parties using the language employed in the
Agreement, regardless of whether or not the language used is plain and
unambiguous on its face, and may incorporate additional or supplementary terms
into the Agreement.
Based
upon and subject to the foregoing, we are of the opinion that:
1. Frontier
is a corporation validly existing under the laws of the State of Washington
and
has the corporate power to own or lease its properties and assets and to carry
on its business as such properties, assets and business are described in the
Proxy Statement.
2. Frontier
Bank is a banking corporation validly existing under the laws of the State
of
Washington and has the corporate power to own or lease its properties and assets
and to carry on its business as such properties, assets and business are
described in the Proxy Statement.
3. The
execution and delivery of the Agreement and the consummation of the Merger
have
been duly and validly authorized by the Boards of Directors of Frontier and
Frontier Bank.
4. The
Agreement constitutes a valid and binding obligation of Frontier and Frontier
Bank, enforceable against Frontier and Frontier Bank in accordance with its
terms.
5. No
consent or approval that has not already been obtained from any federal or
state
regulatory authority is required for the execution and delivery by Frontier
and
Frontier Bank of the Agreement or any of the documents to be executed and
delivered by Frontier and Frontier Bank in connection with the Agreement or
for
the consummation of the Merger.
6. Neither
the execution delivery or performance of the Agreement by Frontier and Frontier
Bank nor the consummation of the Merger will: (a) violate any provision of
the
articles or bylaws of Frontier or Frontier Bank; or (b) to our knowledge,
violate any order, judgment or decree to which Frontier or Frontier Bank is
a
party or by which any of its properties or assets is bound.
7. The
shares of Frontier Common Stock to be issued pursuant to the Agreement to the
shareholders of Washington Banking Company will, upon issuance in accordance
with the Agreement, be duly authorized, validly issued, fully paid and
non-assessable and issued in compliance with all registration requirements
or
exemptions there from under applicable federal and state securities
laws.
8. The
Registration Statement registering the shares of Frontier Common Stock to be
issued to shareholders of Washington Banking Company pursuant to the Agreement
has become effective under the Securities Act of 1933, as amended (the
“Securities Act”), and, to our knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and, to our
knowledge, no proceedings for that purpose have been instituted or are pending
or contemplated by the Securities and Exchange Commission or any state
securities or other regulatory authority.
9. To
our knowledge there is no suit, action, investigation or proceeding, legal,
quasi-judicial, administrative or otherwise, pending or threatened against,
or
affecting Frontier or Frontier Bank or any of their directors, officers,
employees or agents, acting in their capacities as such, that is seeking
equitable relief or damages against Frontier or Frontier Bank or any of their
directors, officers, employees or agents acting in their capacities that would
materially affect the ability of Frontier or Frontier Bank to consummate the
transactions contemplated by the Agreement or that seeks to enjoin consummation
of the transactions contemplated by the Agreement.
In
the course of the preparation of the Proxy Statement, we have considered the
information set forth in the Proxy Statement, and have participated in
conferences with officers and other representatives of Frontier and Frontier
Bank, during the course of which the contents of the Proxy Statement and related
matters were discussed. We have not independently checked the accuracy or
completeness of, or otherwise verified, and accordingly are not passing upon,
and do not assume any responsibility for, the accuracy, completeness or fairness
of the statements contained in the Proxy Statement. We have relied as to
materiality upon the judgment of officers and representatives of Frontier and
Frontier Bank. On the basis of the foregoing, we confirm that nothing has come
to our attention that would lead us to believe that the Proxy Statement, insofar
as it relates to Frontier and Frontier Bank, on the mailing date of the Proxy
Statement, contained any statement that, at the time and in light of the
circumstances in which it was made, was false or misleading with respect to
any
material fact or omitted to state any material fact necessary to make such
statements not false or misleading. We make no statement with respect to (a)
material in the Proxy Statement insofar as it includes or reflects any
information relating to or supplied by entities other than Frontier and Frontier
Bank, or (b) any financial statements or other financial or accounting data
contained in the Proxy Statement.
The
foregoing is rendered solely for your benefit in connection with the
above-described transactions. You may not, without our prior express written
approval, deliver copies of this letter or extracts from it to any other person,
and no one other than you is entitled to rely upon this opinion
letter.
Very
truly yours,
XXXXXX
XXXXXXXX L.L.P.
Subject
to Review and Approval by the DWT Opinion
Committee
EXHIBIT
E-2
_______________,
2007
Frontier
Financial Corporation
Frontier
Bank
000
X.X. Xxxxxxx Xxxx Way
P.O.
Box 2215
Xxxxxxx,
XX 00000
Ladies
and Gentlemen:
We
have acted as counsel to Washington Banking Company and Whidbey Island Bank
(collectively “WBC”) in connection with the Agreement and Plan of Merger dated
as of September _____, 2007 (the “Agreement”), between Frontier Financial
Corporation, Frontier Bank, WBC and Whidbey Island Bank (“WBC Bank”), and the
transactions contemplated by the Agreement. This opinion is rendered to you
pursuant to Section 7.2(D) of the Agreement. Capitalized terms used, but not
defined in this opinion letter, shall have the meanings assigned to them in
the
Agreement.
The
law covered by the opinions expressed herein is limited to the laws of the
State
of Washington and the federal laws of the United States of America. We express
no opinion with respect to the effect of the laws of any other jurisdiction
on
the transactions contemplated by the Agreement.
This
opinion letter is to be interpreted in accordance with the Guidelines for the
Preparation of Closing Opinions issued by the Committee on Legal Opinions of
the
American Bar Association’s Business Law Section as published in 57 Business
Lawyer 875 (February 2002).
A. Documents
and Matters Examined
|
In
connection with this opinion letter, we have examined originals,
or copies
certified or otherwise identified to our satisfaction, of such documents,
records, certificates and statements of government officials, officers
and
other representatives of the persons referred to therein, and such
other
documents, as we have deemed relevant or necessary as the basis for
the
opinions herein expressed, including the
following:
|
|
|
A-1
|
The
Articles of Incorporation and Bylaws of WBC and WBC Bank, as amended
through the date of this opinion
letter;
|
|
|
A-2
|
Minutes
of meetings of the Boards of Directors and shareholders of WBC and
WBC
Bank;
|
|
|
A-3
|
The
Agreement, including the representations, warranties and covenants
of WBC
and WBC Bank contained in the Agreement, and including all exhibits
and
schedules thereto;
|
A-4 The
Proxy Statement;
|
|
A-5
|
Certificate
of existence or authorization dated ____________, 2007, issued by
the
Washington Secretary of State with respect to WBC, certificate of
existence or authorization dated ____________, 2007, issued by the
Washington Department of Financial Institutions with respect to WBC
Bank,
and certification of WBC Bank as an insured depository institution
under
the Federal Deposit Insurance Act, from the Federal Deposit Insurance
Corporation dated ____________, 2007;
and
|
|
|
A-6
|
Certificates
of Officers of WBC and WBC Bank dated ____________, 2007, as to certain
factual matters contained in the
opinion.
|
B. Assumptions
For
purposes of this opinion letter, we have relied on the following
assumptions:
|
|
B–1
|
All
conditions precedent to the Closing have been satisfied or waived
and all
the representations and warranties contained in the Agreement are
accurate.
|
|
|
B–2
|
Our
opinions in C-1 and C-2 as to the valid existence and good standing
of WBC
and WBC Bank are based exclusively on certificates of public
officials.
|
|
|
B–3
|
Our
opinion in C-7 are based upon, and assume the accuracy of, WBC’s and WBC
Bank’s representations contained in the Agreement and of the books and
records of WBC and WBC Bank supplied to us, including, without limitation,
the stock ledger, options ledger, and minutes of meetings (or consents
in
lieu of minutes) of the directors and shareholders of WBC and WBC
Bank. We acknowledge, with your concurrence, that we have not
been requested to conduct an independent investigation of the books
and
records of WBC and WBC Bank with respect to our
opinions.
|
|
|
B–4
|
Our
opinions in C-7 relating to the fully paid status of the issued and
outstanding shares of capital stock of WBC and WBC Bank and of the
common
stock are based, without independent verification by us, on the
certificate of the Chief Executive Officer of WBC and WBC Bank (the
“Opinion Certificate”), to the effect that WBC and WBC Bank has received
the consideration approved by its
|
Board
of Directors for all of the issued shares of capital stock of WBC and WBC
Bank.
Whenever
any statement in this opinion letter is qualified by the phrase “to our
knowledge” or “known to us” or similar phrases, it is intended to indicate that,
during the course of our representation of WBC in connection with the
transactions contemplated by the Agreement, no information that would give
us
actual knowledge of the inaccuracy of such statement has come to the attention
of Xxxxxx X. Xxxxxxxx, Xxxxx Xxxxxxxxx-Xxxxxx, Xxxxx Xxxxxxx or Ame Xxxxx.
We
have not undertaken any independent investigation or review (including any
investigation or review of our files) in connection with any such matters to
determine the accuracy of any such statement, and any limited inquiry undertaken
by us during the preparation of this opinion letter should not be regarded
as
such investigation or review.
In
conducting our examination, we have assumed, without investigation, the
genuineness of all signatures, the legal capacity of natural persons, the
correctness of all certificates, the authenticity of all documents and
instruments submitted to us as originals, the conformity to original documents
and instruments of all such documents and instruments submitted to us as
certified or photostatic or facsimile copies and the authenticity of the
originals of such copies, and the accuracy and completeness of all records
made
available to us by WBC. We also have assumed, without investigation, that
(i) each party to such documents and instruments has the power and capacity
to execute, deliver and perform all of its obligations under the documents
and
instruments, has duly authorized the execution, delivery and performance of
its
obligations under the Agreement, and has duly executed and delivered such
documents and instruments; (ii) all terms, provisions, and conditions of,
or relating to, the Agreement are correctly and completely reflected in the
Agreement, and all statements, representations, and warranties as to factual
matters made by officers and employees of, and accountants for, WBC and by
public officials are accurate, and (iii) the Agreement is binding upon and
enforceable in accordance with its terms against Frontier and Frontier
Bank.
C. Opinions
Based
upon and subject to the foregoing, we are of the opinion that:
|
|
C-1
|
WBC
is a corporation validly existing under the laws of the State of
Washington and has the corporate power to own or lease its properties
and
assets and to carry on its business as such properties, assets and
business are described in the Proxy
Statement.
|
|
|
C-2
|
WBC
Bank is a banking corporation validly existing under the laws of
the State
of Washington and has the corporate power to own or lease its properties
and assets and to carry on its business as such properties, assets
and
business are described in the Proxy
Statement.
|
|
|
C-3
|
The
execution and delivery of the Agreement and the consummation of the
Merger
have been duly and validly authorized by the Boards of Directors
and the
shareholders of WBC and WBC Bank.
|
|
|
C-4
|
The
Agreement constitutes a valid and binding obligation of WBC and WBC
Bank,
enforceable against WBC and WBC Bank in accordance with the terms
of the
Agreement.
|
|
|
C-5
|
No
consent or approval from any federal regulatory authority that has
not
already been obtained is required for the execution and delivery
by WBC or
WBC Bank of any of the documents to be executed and delivered by
WBC or
WBC Bank in connection with the Agreement or for the consummation
of the
Merger.
|
|
|
C-6
|
Neither
the execution, delivery or performance of the Agreement by WBC and
WBC
Bank nor the consummation of the Merger will (a) violate any provision
of
the Articles of Incorporation or Bylaws of WBC or WBC Bank, or (b)
to our
knowledge, violate any order, judgment or decree to which WBC or
WBC Bank
are parties or by which they or any of their properties or assets
are
bound.
|
|
|
C-7
|
The
issued and outstanding shares of common stock of WBC and WBC Bank
have
been duly authorized and validly issued and are fully paid and
nonassessable.
|
|
|
C-8
|
To
our knowledge there is no suit, action, investigation or proceeding,
legal, quasi-judicial, administrative or otherwise, pending or threatened
against, or affecting WBC or WBC Bank, that is seeking equitable
relief or
damages against WBC or WBC Bank that would materially affect the
ability
of WBC or WBC Bank to consummate the transactions contemplated by
the
Agreement or that seeks to enjoin consummation of the transactions
contemplated by the Agreement.
|
D. Qualifications
The
opinions expressed above are subject to the following
qualifications:
|
|
D-1
|
Our
opinion as to the legal, valid and binding nature and the enforceability
of the Agreement in paragraphs 3, 4 and 5 above is subject to the
following: (i) the effect of applicable bankruptcy, insolvency,
reorganization, receivership, fraudulent conveyance, moratorium or
other
similar laws affecting the rights of creditors generally, including
without limitation such laws and/or regulations specifically applicable
to
institutions the deposits of which are insured by the Federal Deposit
Insurance Corporation (“Insured Institutions”), now or subsequently in
effect; (ii) limitations imposed by laws and judicial decisions
relating to or affecting creditors of Insured Institutions, or by
general
principles of equity (regardless of
|
whether
enforcement is considered in proceedings at law or in equity), upon the
provisions of the Agreement and/or the other related documents or upon the
availability of injunctive relief or other equitable remedies; and
(iii) our assumption that Frontier, Frontier Bank and any of their
successors in interest will seek to enforce any of its rights in connection
with
the Agreement only in circumstances and in a manner in which it is commercially
reasonable to do so.
|
|
D-2
|
We
express no opinion as to: (i) the enforceability of any provision or
accumulation of provisions that may be deemed to be unconscionable;
(ii) any antitrust, securities or tax laws; (iii) provisions
that purport to establish evidentiary standards; (iv) provisions
relating to venue, jurisdiction, governing law, waiver of remedies
(or the
delay or omission of enforcement of such provisions), or disclaimers
or
liability limitations with respect to third parties; (v) the
enforceability of any requirement in the Agreement or related documents
specifying that provisions of such documents may only be waived in
writing, to the extent that an oral agreement or an implied agreement
by
trade practice or course of conduct has been created modifying any
provision of the Agreement; (vi) provisions for payment or
reimbursement of costs and expenses (including, without limitation,
attorneys fees) in excess of statutory limits or amounts determined
to be
reasonable by any court or other tribunal, and any provision for
payment
of attorneys fees other than to the prevailing party;
(vii) severability and indemnification provisions;
(viii) availability of equitable remedies; and (ix) any
reservation of the right to pursue inconsistent or cumulative
remedies.
|
|
|
D-3
|
Our
opinions below are limited to the matters expressly set forth in
this
opinion letter, and no opinion is to be implied or may be inferred
beyond
the matters expressly so stated.
|
|
|
D-4
|
We
disclaim any obligation to update this opinion letter for events
occurring
after the date of this opinion
letter.
|
|
|
D-5
|
A
Washington court, or federal court applying Washington law, may consider
extrinsic evidence of the circumstances surrounding the making of
the
Agreement to ascertain the intent of the parties using the language
employed in the Agreement, regardless of whether or not the language
used
is plain and unambiguous on its face, and may incorporate additional
or
supplementary terms into the
Agreement.
|
E. Certain
Factual Matters
In
the course of the preparation of the Proxy Statement, we have considered the
information set forth in the Proxy Statement, and have participated in
conferences with officers and other representatives of WBC and WBC Bank, during
the course of which the contents of the Proxy
Statement
and related matters were discussed; however, we were not directed to establish,
and we did not independently establish, matters of fact.
The
preparation of the Proxy Statement involved many determinations of fact, points
of information or other non-legal matters, and we did not independently verify,
and do not assume any responsibility for, the accuracy, completeness or fairness
of the Proxy Statement. As used in this Part E, when a statement is qualified
by
the term “material,” such statements involve judgments and opinions as to
the materiality or lack of materiality of any matter related to WBC’s or WBC
Bank’s business, assets, results of operations or financial condition that are
entirely those of WBC, WBC Bank and its officers, after having been advised
by
us as to the legal effect and consequences of such matters, and such opinions
and judgments are not known to us to be incorrect. We offer no assurance that
the actions taken in connection with the preparation and review of the Proxy
Statement were sufficient to cause the Proxy Statement to be accurate, complete
or fair.
Based
upon our procedures identified above (relying as to matters of fact to a large
extent on statements of officers and other representatives of WBC and WBC Bank)
and without expressing an opinion thereon, nothing has come to our attention
that has caused us to conclude that the Proxy Statement (as of the time it
was
declared effective), 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 not misleading. We make no statement with
respect to (a) material in the Proxy Statement insofar as it includes or
reflects any information relating to or supplied by entities other than WBC
or
WBC Bank, or (b) any financial statements or other financial or accounting
data
contained in the Proxy Statement.
The
foregoing is rendered solely for your benefit in connection with the
above-described transactions. You may not, without our prior express written
approval, deliver copies of this letter or extracts from this letter to any
other person, and no one other than you is entitled to rely upon the opinions
set forth above.
Very
truly yours,
XXXXX
XXXXXX XXXXXXXX LLP
Law
Offices Of
Xxxxxx
Xxxxxxxx l.l.p.
A
Professional Limited Liability Partnership
EXHIBIT
E-3
[To
be included in Proxy Statement]
_______________,
2007
|
Frontier
Financial Corporation
Frontier
Bank
000
X.X. Xxxxxxx Xxxx Way
P.O.
Box 2215
Xxxxxxx,
XX 00000
|
Washington
Banking Company
Whidbey
Island Bank
000
XX Xxxxxxxx Xxxxx
Xxx
Xxxxxx, XX 00000
|
|
|
Re:
|
Corporate
Merger/Tax Consequences
|
We
have acted as legal counsel to Frontier in connection with the Merger. In acting
as counsel to Frontier in connection with the Merger, we have, in preparing
our
opinion, as hereinafter set forth, participated in the preparation of the Merger
Agreement and the preparation and filing of the Registration Statement. For
the
purpose of rendering this opinion, we have examined and relied upon originals,
certified copies, or copies otherwise identified to our satisfaction as being
true copies of the originals of the following documents, including all exhibits
and schedules attached to them:
|
1.
|
The
Agreement and Plan of Merger dated as of September _____, 0000, xxxxxxx
Xxxxxxxx, Xxxxxxxx Xxxx, XXX and Whidbey Island Bank (the “Merger
Agreement”).
|
|
2.
|
Form S-4
Registration Statement and Prospectus of Frontier filed with the
Securities and Exchange Commission on or about _______________,
2007.
|
|
3.
|
The
Proxy Statement of WBC (included as part of the Registration
Statement).
|
|
4.
|
Such
other documents, instruments, records and information pertaining
to the
Merger as we have deemed necessary for rendering our
opinion.
|
We
have assumed, without independent investigation or review, the accuracy and
completeness of the facts and representations and warranties contained in those
documents or otherwise made known to us through the Effective Date of the
Merger, and that the Merger will be effected in accordance with the terms of
the
Merger Agreement.
Our
opinion is based on the Internal Revenue Code of 1986, as amended (the “Code”),
Treasury Regulations, administrative interpretations, and judicial precedents
as
of the date hereof. If there is any subsequent change in the applicable law
or
regulations, or if there are subsequently any new applicable administrative
or
judicial interpretations of the law or regulations, or if there are any changes
in the facts or circumstances surrounding the Merger, the opinion expressed
herein may become inapplicable.
Based
upon our review of the facts described above and our analysis of the law, and
subject to the qualifications and limitations set forth herein, and the
completion of the transactions described in the manner contemplated by the
Merger Agreement, it is our opinion that:
A. The
Merger will be treated as a reorganization under Section 368(a)(1)(A) of the
Code and Frontier and WBC will each be a party to that reorganization within
the
meaning of Section 368(b) of the Code; provided, however, that at least fifty
percent (50%) of the sum of (1) the Aggregate Consideration (as defined in
section 1.3(A) of the Merger Agreement) payable in cash and Frontier common
stock to the WBC shareholders in the Merger and (2) any additional cash paid
to
holders of dissenting shares pursuant to Section 1.6 of the Merger Agreement,
is
paid in Frontier common stock.
B. Provided
the Merger satisfies the condition in the foregoing paragraph that at least
50%
of the total consideration for the Merger is paid in Frontier common stock,
it
is further our opinion that the material federal income tax consequences of
the
Merger will be:
1. Parties.
No gain or loss will be recognized by Frontier or WBC as a result of the
Merger.
2. Shareholders
of WBC. We hereby confirm our opinion set forth in the discussion contained
in the Registration Statement under the caption “The Merger – Certain Federal
Income Tax Consequences”.
We
express our opinion herein only as to those matters specifically set forth
above
and no opinion should be inferred as to the tax consequences of the Merger
under
any state, local or foreign law, or with respect to other areas of United States
federal taxation. We are members of
the
Bar of the State of Washington, and we do not express any opinion herein
concerning any law other than the federal law of the United States.
Our
opinion is intended solely for the benefit of Frontier and WBC, and their
respective shareholders, and may not be relied upon for any other purpose or
by
any other person or entity or made available to any other person or entity
without our prior written consent.
We
hereby consent to the filing of this opinion as an exhibit to the Registration
Statement and the reference to us in the Proxy Statement/Prospectus under the
heading “The Merger – Certain Federal Income Tax Consequences” and “Legal
Opinions.” By giving the foregoing consent, we do not admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission there under.
Sincerely,
XXXXXX
XXXXXXXX L.L.P.
EXHIBIT
F
| Frontier | Per Share | Per Share | Total | Frontier | Total | ||||||||||
| Average | Aggregate | Per Share | Cash | Stock | Cash | Merger | Stock | ||||||||
| Share | Consideration | Consideration | Consideration | Consideration | Amount | Shares | Consideration | ||||||||
| Price | ($) | ($) | ($) | (x) | ($) | (shares) | ($) | ||||||||
| $21.00 | $167,109,037 | $19.41 | $19.41 | 0.9244x | $42,864,003 | 5,916,430 | $124,245,034 | INCL. OPTIONS | |||||||
| $22.00 | $173,025,467 | $20.10 | $20.10 | 0.9136x | $42,864,003 | 5,916,430 | $130,161,464 | ||||||||
| $23.00 | $178,941,897 | $20.79 | $20.79 | 0.9038x | $42,864,003 | 5,916,430 | $136,077,894 | ||||||||
| $24.00 | $184,858,327 | $21.47 | $21.47 | 0.8947x | $42,864,003 | 5,916,430 | $141,994,324 | ||||||||
| $25.00 | $190,774,758 | $22.16 | $22.16 | 0.8864x | $42,864,003 | 5,916,430 | $147,910,754 | Shares Oustanding | 9,391,159 | ||||||
| $26.00 | $196,691,188 | $22.85 | $22.85 | 0.8788x | $42,864,003 | 5,916,430 | $153,827,184 | Less: Frontier Owned | (782,506) | ||||||
| $27.00 | $202,607,618 | $23.54 | $23.54 | 0.8717x | $42,864,003 | 5,916,430 | $159,743,615 | Excl. Frontier Owned | 8,608,653 | ||||||
| $28.00 | $202,607,618 | $23.54 | $23.54 | 0.8405x | $42,864,003 | 5,705,129 | $159,743,615 | ||||||||
| $29.00 | $202,607,618 | $23.54 | $23.54 | 0.8116x | $42,864,003 | 5,508,401 | $159,743,615 | ||||||||
