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As filed with the Securities and Exchange Commission on
September 9, 2009
Registration
No. 333-161250
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
AMENDMENT NO. 1
TO
Form S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
SP ACQUISITION HOLDINGS,
INC.
(Exact name of registrant as
specified in its charter)
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Delaware
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6770
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20-8523583
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(State or other jurisdiction
of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification No.)
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SP Acquisition Holdings,
Inc.
590 Madison Avenue
32nd Floor
New York, New York
10022
(212) 520-2300
(Address, including zip code,
and telephone number, including area code, of registrants
principal executive offices)
Warren G. Lichtenstein
Chairman, President and Chief
Executive Officer
SP Acquisition Holdings,
Inc.
590 Madison Avenue
32nd Floor
New York, New York
10022
(212) 520-2300
Fax:
(212) 520-2343
(Name, address, including zip
code, and telephone number, including area code, of agent for
service)
Copies to:
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Steven Wolosky
Kenneth A. Schlesinger
Olshan Grundman Frome
Rosenzweig & Wolosky LLP
Park Avenue Tower
65 East 55th Street
New York, New York 10022
(212) 451-2300
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Douglas S. Ellenoff
Stuart Neuhauser
Asim Grabowski-Shaikh
Ellenoff Grossman & Schole LLP
150 East 42nd Street
New York, New York 10017
(212) 370-1300
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Glen P. Garrison
Thomas A. Sterken
Keller Rohrback LLP
1201 Third Avenue, Suite 3200
Seattle, Washington 98101-3052
(206) 623-1900
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Approximate date of commencement of proposed sale to the
public: As soon as practicable after this
registration statement becomes effective and all other
conditions to the merger contemplated by the merger agreement
described in the included proxy statement/prospectus have been
satisfied or waived.
If the securities being registered on this Form are to be
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check
the following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2 of the Exchange Act. (Check one):
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Large
accelerated
filer o
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Accelerated
filer þ
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Non-accelerated
filer o
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Smaller reporting
company o
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(Do not check if a smaller
reporting company)
If applicable, place an X in the box to designate the
appropriate rule provision relied upon in conducting this
transaction:
Exchange Act
Rule 13e-4(i)
(Cross-Border Issuer Tender
Offer) o
Exchange Act
Rule 14d-1(d)
(Cross-Border Third-Party Tender
Offer) o
CALCULATION
OF REGISTRATION FEE
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Proposed Maximum
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Proposed Maximum
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Amount of
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Title of Each Class of
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Amount to be
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Offering
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Aggregate
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Registration
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Securities to be Registered
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Registered(1)
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Price per Security(2)
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Offering Price(2)
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Fee(2)
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Common Stock, $0.001 par value
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2,512,000
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N/A
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$34,591,055.11(2)
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$1,930.18(2)(4)
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Warrants to purchase shares of Common Stock
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2,512,000
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N/A
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(3)
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(3)
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(1)
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Based upon the maximum number of
shares of common stock of SP Acquisition Holdings, Inc. that may
be issued in exchange for shares of common stock of Frontier
Financial Corporation pursuant to the merger described in the
joint proxy statement/prospectus which is a part of this
registration statement. Pursuant to Rule 416, this
registration statement also covers an indeterminate number of
shares of common stock as may become issuable as a result of
stock splits, stock dividends, or similar transactions.
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(2)
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Estimated solely for the purpose of
calculating the registration fee required by Section 6(b)
of the Securities Act of 1933, as amended. The proposed maximum
aggregate offering price for SP Acquisition Holdings,
Inc.s common stock was calculated based upon the market
value of shares of Frontier Financial Corporation common stock
(the securities being cancelled in the merger) in accordance
with Rules 457(c) and (f) of the Securities Act as follows:
the product of (x) $0.73, the average of the high and low
sales prices of Frontier Financial Corporation common stock, as
reported on the NASDAQ Global Select Market, on
September 1, 2009, and (y) 47,385,007, the estimated
maximum number of shares of Frontier Financial Corporation
common stock that may be exchanged for shares of common stock of
SP Acquisition Holdings, Inc., including 253,154 shares of
Frontier Financial Corporation restricted stock which will vest
upon consummation of the merger.
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(3)
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The registration fee is calculated
in accordance with footnote 2 above. For each share of common
stock of Frontier Financial Corporation exchanged in the merger,
the holder thereof will be entitled to receive
0.0530 shares of common stock of SP Acquisition Holdings,
Inc. and 0.0530 warrants to purchase common stock of SP
Acquisition Holdings, Inc.
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(4)
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$1,722.62 of the registration fee
was previously paid on August 11, 2009.
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The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
SP
ACQUISITION HOLDINGS, INC.
590 Madison Avenue
32nd Floor
New York, New York 10022
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
To Be Held on
[ ],
2009
To the Stockholders of SP Acquisition Holdings, Inc.:
Notice is hereby given that a special meeting of the
stockholders of SP Acquisition Holdings, Inc. (SPAH)
will be held on
[ ],
[ ],
2009 at [ ]:00 [ ].m., local time, at
[ ]. The special meeting is being
called for the following purposes:
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(1)
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To consider and vote upon a proposal to adopt an amendment to
the amended and restated certificate of incorporation of SPAH
(the SPAH Certificate of Incorporation) to eliminate
the requirement that the fair market value of the target
business equal at least 80% of the balance of SPAHs trust
account, to be effective immediately prior to the consummation
of the merger described below
(Proposal No. 1)
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(2)
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To consider and vote upon a proposal to adopt an amendment to
the SPAH Certificate of Incorporation to provide that SPAH
cannot consummate the merger unless up to at least 10% (minus
one share) but no more than 30% (minus one share) of SPAH public
stockholders are able to exercise their conversion rights, to be
effective immediately prior to the consummation of the merger
described below (Proposal No. 2 and,
together with Proposal No. 1, the Initial Charter
Amendments);
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(3)
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To consider and vote upon a proposal to adopt the Agreement and
Plan of Merger, dated as of July 30, 2009, by and between
SPAH and Frontier Financial Corporation (Frontier),
as amended by Amendment No. 1 to Agreement and Plan of
Merger, dated as of August 10, 2009, pursuant to which
Frontier will merge with and into SPAH, as described in more
detail in the accompanying joint proxy statement/prospectus;
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(4)
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To consider and vote upon a proposal to adopt an amendment to
the SPAH Certificate of Incorporation to change SPAHs
corporate name to Frontier Financial Corporation, to
be effective upon consummation of the merger (the Name
Change Proposal);
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(5)
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To consider and vote upon a proposal to adopt an amendment to
the SPAH Certificate of Incorporation to permit SPAHs
continued existence after October 10, 2009, to be effective
upon consummation of the merger (the Continued Existence
Proposal);
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(6)
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To consider and vote upon a proposal to adopt an amendment to
the SPAH Certificate of Incorporation to create a new class of
common stock of SPAH (Non-Voting Common Stock) to have economic
rights but no voting rights, to be effective upon consummation
of the merger (the New Class Proposal and,
together with the Name Change Proposal and the Continued
Existence Proposal, the Subsequent Charter
Amendments); and
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(7)
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To consider and vote upon a proposal to elect to the Board of
Directors of SPAH, Warren G. Lichtenstein, who will serve as
Chairman of the Board, and, if the merger is consummated, four
directors from Frontier, comprised of Patrick M. Fahey, Lucy
DeYoung, Mark O. Zenger and David M. Cuthill, each of whom
currently serve on the Board of Directors of Frontier, in each
case to serve until the next annual meeting of SPAH and until
their successors shall have been elected and qualified.
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At the special meeting, we may transact such other business as
may properly come before the meeting and any adjournments or
postponements thereof.
The SPAH Certificate of Incorporation purports to prohibit
amendments to certain of its provisions, including the proposed
Initial Charter Amendments, without the unanimous consent of the
holders of all of SPAHs outstanding shares of common
stock. However, SPAH believes, and has received an opinion from
its special
Delaware counsel that while the matter has not been settled as
a matter of Delaware law and, accordingly, is not entirely free
from doubt, the Initial Charter Amendments, if duly approved by
a majority of the shares of SPAHs outstanding common stock
entitled to vote at the special meeting, will be valid under
Delaware law.
Since SPAHs initial public offering prospectus did not
disclose that SPAH would seek approval of the Initial Charter
Amendments and the New Class Proposal, among other things,
each SPAH stockholder at the time of the merger that purchased
shares in, or subsequent to, SPAHs initial public offering
up to and until the record date, may have securities law claims
against SPAH for rescission or damages. See The Merger and
the Merger Agreement Rescission Rights for
additional information.
Immediately prior to the special meeting of stockholders, SPAH
has scheduled a special meeting of warrantholders to consider
and vote upon a proposal to amend certain terms of the warrant
agreement that governs the terms of SPAHs outstanding
warrants to purchase common stock, as more fully described in
the accompanying joint proxy statement/prospectus. If the
requisite approval is received, the Initial Charter Amendments
will be filed with the Delaware Secretary of State immediately
upon its approval and prior to the stockholders
consideration of the merger proposal at the special meeting of
stockholders. Accordingly, the proposal to adopt the merger
agreement will only be presented for a vote at the special
meeting if (i) the Initial Charter Amendments are adopted
by SPAH stockholders and (ii) the proposal to amend the
warrant agreement is approved by SPAH warrantholders. The
Subsequent Charter Amendments and the election of the Frontier
nominees will only be effected in the event and at the time the
merger with Frontier is consummated, although approval of the
Subsequent Charter Amendments is a condition to closing the
merger. The election of Mr. Lichtenstein does not require
the approval of any other proposals to be effective.
SPAH has fixed the close of business on September 17, 2009
as the record date for determining those stockholders entitled
to notice of, and to vote at, the special meeting and any
adjournments or postponements thereof.
If you hold shares of common stock issued in SPAHs initial
public offering (whether such shares were acquired pursuant to
such initial public offering or afterwards up to and until the
record date), then you have the right to vote against the merger
proposal and demand that SPAH convert such shares into cash
equal to a pro rata share of the aggregate amount then on
deposit in the trust account in which a substantial portion of
the net proceeds of SPAHs initial public offering are
held. For more information regarding your conversion rights, see
the discussion under the heading The Merger and the Merger
Agreement Conversion Rights of SPAH
Stockholders of the accompanying joint proxy
statement/prospectus.
Whether or not you plan to attend the special meeting in person,
please complete, date, sign and return the enclosed proxy card
as promptly as possible. SPAH has enclosed a postage prepaid
envelope for that purpose. Any SPAH stockholder may revoke his
or her proxy by following the instructions in the joint proxy
statement/prospectus at any time before the proxy has been voted
at the special meeting. Even if you have given your proxy, you
may still vote in person if you attend the special meeting.
SPAH encourages you to vote on these very important matters. The
Board of Directors of SPAH unanimously recommends that SPAH
stockholders vote FOR each of the proposals above.
By Order of the Board of Directors,
Chairman, President and Chief Executive
Officer
[ ],
2009
Important
Notice Regarding the Availability of Proxy Materials for the
Special Meeting of Stockholders to Be Held on
[ ],
2009. This Proxy Statement is available electronically at
[ ].
SP
ACQUISITION HOLDINGS, INC.
590 Madison Avenue
32nd Floor
New York, New York 10022
PROXY STATEMENT FOR SPECIAL
MEETING OF STOCKHOLDERS
To Be Held on
[ ],
2009
To the Stockholders of SP Acquisition Holdings, Inc.:
You are cordially invited to attend a special meeting of the
stockholders of SP Acquisition Holdings, Inc.
(SPAH). The special meeting will be held on
[ ],
[ ],
2009 at [ ]:00 [ ].m., local time, at
[ ].
At the special meeting, you will be asked to consider and vote
on:
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(1)
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a proposal to adopt an amendment to the amended and restated
certificate of incorporation of SPAH (the SPAH Certificate
of Incorporation) to eliminate the requirement that the
fair market value of the target business equal at least 80% of
the balance of SPAHs trust account, effective immediately
prior to the consummation of the merger described below (the
Proposal No. 1);
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(2)
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a proposal to adopt an amendment to the SPAH Certificate of
Incorporation to provide that SPAH cannot consummate the merger
unless up to at least 10% (minus one share) but no more than 30%
(minus one share) of SPAH public stockholders are able to
exercise their conversion rights, to be effective immediately
prior to the consummation of the merger described below
(Proposal No. 2 and, together with
Proposal No. 1, the Initial Charter
Amendments);
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(3)
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a proposal to adopt the Agreement and Plan of Merger, dated as
of July 30, 2009, by and between SPAH and Frontier
Financial Corporation (Frontier), as amended by
Amendment No. 1 to Agreement and Plan of Merger, dated as
of August 10, 2009, pursuant to which Frontier will merge
with and into SPAH (the Merger Proposal);
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(4)
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a proposal to adopt an amendment to the SPAH Certificate of
Incorporation to change SPAHs corporate name to
Frontier Financial Corporation, to be effective upon
consummation of the merger (the Name Change
Proposal);
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(5)
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a proposal to adopt an amendment to the SPAH Certificate of
Incorporation to permit SPAHs continued existence after
October 10, 2009, to be effective upon consummation of the
merger (the Continued Existence Proposal);
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(6)
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a proposal to adopt an amendment to the SPAH Certificate of
Incorporation to create a new class of common stock of SPAH
(Non-Voting Common Stock) to have economic rights but no voting
rights, to be effective upon consummation of the merger (the
New Class Proposal and, together with the Name
Change Proposal and the Continued Existence Proposal, the
Subsequent Charter Amendments);
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(7)
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a proposal to elect to the Board of Directors of SPAH, Warren G.
Lichtenstein, who will serve as Chairman of the Board, and, if
the merger is consummated, four directors from Frontier,
comprised of Patrick M. Fahey, Lucy DeYoung, Mark O. Zenger and
David M. Cuthill, each of whom currently serve on the Board of
Directors of Frontier, in each case to serve until the next
annual meeting of SPAH and until their successors shall have
been elected and qualified; and
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(8)
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any other matters that may properly come before the special
meeting or any adjournments or postponements thereof.
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The SPAH Certificate of Incorporation purports to prohibit
amendments to certain of its provisions, including the proposed
Initial Charter Amendments, without the unanimous consent of the
holders of all of SPAHs outstanding shares of common
stock. However, SPAH believes, and has received an opinion from
its special Delaware counsel that while the matter has not been
settled as a matter of Delaware law and, accordingly, is not
entirely free from doubt, the Initial Charter Amendments, if
duly approved by a majority of the shares of SPAHs
outstanding common stock entitled to vote at the special
meeting, will be valid under Delaware law.
Adoption of the merger agreement requires the affirmative vote
of the holders of a majority of the outstanding shares of SPAH
common stock entitled to vote at the special meeting. The SPAH
Certificate of Incorporation also requires that the holders of a
majority of SPAHs outstanding shares of common stock
issued in SPAHs initial public offering are voted, in
person or by proxy, in favor of the merger and that such SPAH
public stockholders owning no more than 30% (minus one share) of
the shares sold in SPAHs initial public offering vote
against the merger and thereafter exercise their conversion
rights as described below. If Proposal No. 2 is
approved and adopted, it is a condition to closing the merger
agreement that holders of no more than 10% of the shares (minus
one share) sold in SPAHs initial public offering vote
against the merger and exercise their conversion rights,
although at SPAHs discretion, this closing condition may
be waived in order to consummate the merger. Accordingly, SPAH
may not consummate the merger if 10% or more of the holders of
shares sold in or subsequent to SPAHs initial public
offering elect to exercise their conversion rights. If SPAH
elects to waive this closing condition, it may raise the
conversion threshold to anywhere between 10% to 30% (minus one
share). SPAH does not believe it will raise the conversion
threshold and currently intends only to raise the conversion
threshold if it believes that the combined entity will have
sufficient Tier 1 capital to return to compliance levels.
Adoption of the Subsequent Charter Amendments requires the
affirmative vote of a majority of the shares of SPAHs
outstanding common stock entitled to vote at the special
meeting. Directors will be elected by a plurality of the votes
cast by stockholders present in person or represented by proxy
and entitled to vote at the special meeting.
Since SPAHs initial public offering prospectus did not
disclose that SPAH would seek approval of the Initial Charter
Amendments and the New Class Proposal, among other things,
each SPAH stockholder at the time of the merger that purchased
shares in, or subsequent to, SPAHs initial public offering
up to and until the record date, may have securities law claims
against SPAH for rescission or damages. See The Merger and
the Merger Agreement Rescission Rights for
additional information.
Immediately prior to the special meeting of stockholders, SPAH
has scheduled a special meeting of warrantholders to consider
and vote upon a proposal to amend certain terms of the warrant
agreement that governs the terms of SPAHs outstanding
warrants to purchase common stock, as more fully described in
the accompanying joint proxy statement/prospectus. If the
requisite approval is received, the Initial Charter Amendments
will be filed with the Delaware Secretary of State immediately
upon its approval and prior to the stockholders
consideration of the merger proposal at the special meeting of
stockholders. Accordingly, the proposal to adopt the merger
agreement will only be presented for a vote at the special
meeting if (i) the Initial Charter Amendments are adopted
by SPAH stockholders and (ii) the proposal to amend the
warrant agreement is approved by SPAH warrantholders. The
Subsequent Charter Amendments and the election of the Frontier
nominees will only be effected in the event and at the time the
merger with Frontier is consummated, although approval of the
Subsequent Charter Amendments is a condition to closing the
merger. The election of Mr. Lichtenstein does not require
the approval of any other proposals to be effective.
Only holders of record of SPAH common stock at the close of
business on September 17, 2009 are entitled to notice of
the special meeting and to vote and have their votes counted at
the special meeting and any adjournments or postponements
thereof.
If you hold shares of common stock issued in SPAHs initial
public offering (whether such shares were acquired pursuant to
such initial public offering or afterwards up to and until the
record date for the special meeting), then you have the right to
vote against the merger proposal and demand that SPAH convert
such shares into cash equal to a pro rata share of the aggregate
amount then on deposit in the trust account in which a
substantial portion of the net proceeds of SPAHs initial
public offering are held (before payment of deferred
underwriting discounts and commissions and including interest
earned on their pro rata portion of the trust account, net of
income taxes payable on such interest and net of interest income
of $3.5 million on the trust account balance previously
released to SPAH to fund its working capital requirements). As
of September 17, 2009, there was
$[ ] in the trust account,
including accrued interest on the funds in the trust account, or
approximately $[ ] per share issued
in the initial public offering. The actual conversion price will
differ from the $[ ] per share due
to any interest earned on the funds in the trust account since
September 17, 2009, and any taxes payable in respect of
interest earned thereon.
If you wish to exercise your conversion rights, you must:
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affirmatively vote against the merger proposal in person or by
submitting your proxy card before the vote on the merger
proposal and checking the box that states Against
for the Merger Proposal; and
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check the box that states I HEREBY EXERCISE MY CONVERSION
RIGHTS on the proxy card; or
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send a letter to SPAHs transfer agent, Continental Stock
Transfer & Trust Company, at 17 Battery Place,
8th Floor, New York, NY 10004, attn: Mark Zimkind, stating
that you are exercising your conversion rights and demanding
your shares of SPAH common stock be converted into cash; and
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physically tender, or if you hold your shares of SPAH common
stock in street name, cause your broker to
physically tender, your stock certificates representing shares
of SPAH common stock to SPAHs transfer agent; or
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deliver your shares electronically using the Depository
Trust Companys DWAC (Deposit/Withdrawal At Custodian)
System, to SPAHs transfer agent, in either case by
[ ],
2009 or such other later date if the special meeting of SPAH
stockholders is adjourned or postponed.
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Accordingly, a SPAH stockholder would have from the time we send
out this joint proxy statement/prospectus through the vote on
the merger to deliver his or her shares if he or she wishes to
seek to exercise his or her conversion rights. See Summary
Term Sheet The Merger and the Merger
Agreement SPAH Conversion Rights and The
Merger and the Merger Agreement Conversion Rights of
SPAH Stockholders.
Prior to exercising your conversion rights, you should verify
the market price of SPAHs common stock, as you may receive
higher proceeds from the sale of your common stock in the public
market than from exercising your conversion rights. Shares of
SPAHs common stock are currently quoted on the NYSE AMEX
LLC under the symbol DSP. On September 17,
2009, the record date for the special meeting of stockholders,
the last sale price of SPAHs common stock was
$[ ]. Your shares will only be
converted if the merger is consummated and you voted against the
merger and properly demanded conversion rights according to the
instructions in this letter and the joint proxy
statement/prospectus.
Each of SP Acq LLC, Steel Partners II, L.P. (SP II)
and Anthony Bergamo, Ronald LaBow, Howard M. Lorber, Leonard
Toboroff and S. Nicholas Walker, each a director of SPAH, or
their permitted transferees (collectively, the SPAH
insiders), previously agreed to vote their
10,822,400 shares of SPAH common stock acquired prior to
SPAHs initial public offering (which constitute
approximately 20% of SPAHs outstanding shares of common
stock), either for or against the Merger Proposal consistent
with the majority of the votes cast on the merger by the holders
of the shares of common stock issued in, or subsequent to,
SPAHs initial public offering. To the extent any SPAH
insider or officer or director of SPAH has acquired shares of
SPAH common stock in, or subsequent to, SPAHs initial
public offering, it, he or she has agreed to vote these acquired
shares in favor of the Merger Proposal. As of the date hereof,
none of the SPAH insiders or officers or directors of SPAH own
any shares sold in, or subsequent to, SPAHs initial public
offering. The SPAH insiders have further indicated that they
will vote all of their shares in favor of the adoption of the
amendments to the SPAH Certificate of Incorporation and for the
election of each director nominee to the Board of Directors of
SPAH. Pursuant to a plan of reorganization, SP II has
contributed certain assets, including its shares of SPAH common
stock and warrants, to a liquidating trust. The trust has agreed
to assume all of SP IIs rights and obligations with
respect to these shares and warrants, including to vote in
accordance with the foregoing.
Upon consummation of the merger, SP Acq LLC and
Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have
agreed to forfeit an aggregate of 9,453,412 shares
purchased prior to SPAHs initial public offering,
constituting approximately 17.5% of SPAHs outstanding
shares of common stock as of the record date.
The Board of Directors of SPAH has unanimously determined that
the proposals and the transactions contemplated thereby are fair
to and in the best interests of SPAH and its stockholders. The
Board of Directors of SPAH recommends that you vote, or give
instruction to vote, FOR the adoption of each of the
proposals and that you vote in favor of each of the director
nominees.
The accompanying joint proxy statement/prospectus contains
detailed information concerning the Merger Proposal and the
transactions contemplated by the merger agreement, as well as
detailed information concerning each of the proposals. We urge
you to read the joint proxy statement/prospectus and attached
annexes carefully.
Your vote is important. Whether or not you plan to attend the
special meeting in person, please sign, date and return the
enclosed proxy card as soon as possible in the envelope provided.
I look forward to seeing you at the meeting.
By Order of the Board of Directors,
Chairman, President and Chief Executive
Officer
TAKING ANY ACTION THAT DOES NOT INCLUDE AN AFFIRMATIVE VOTE
AGAINST THE MERGER, INCLUDING ABSTAINING FROM VOTING ON THE
MERGER PROPOSAL, WILL PREVENT YOU FROM EXERCISING YOUR
CONVERSION RIGHTS. YOU MUST AFFIRMATIVELY VOTE AGAINST THE
MERGER PROPOSAL IN PERSON OR BY SUBMITTING YOUR PROXY CARD
BEFORE THE VOTE ON THE MERGER PROPOSAL TO EXERCISE YOUR
CONVERSION RIGHTS. IN ORDER TO CONVERT YOUR SHARES, YOU MUST
ALSO EITHER PHYSICALLY TENDER, OR IF YOU HOLD YOUR
SHARES OF SPAH COMMON STOCK IN STREET NAME,
CAUSE YOUR BROKER TO PHYSICALLY TENDER, YOUR STOCK CERTIFICATES
REPRESENTING SHARES OF SPAH COMMON STOCK TO SPAHS
TRANSFER AGENT OR DELIVER YOUR SHARES ELECTRONICALLY USING
THE DEPOSITORY TRUST COMPANYS DWAC SYSTEM, TO
SPAHS TRANSFER AGENT BY
[ ],
2009 OR SUCH OTHER LATER DATE IF THE SPECIAL MEETING OF SPAH
STOCKHOLDERS IS ADJOURNED OR POSTPONED. FAILURE TO MEET THESE
REQUIREMENTS WILL CAUSE YOUR CONVERSION DEMAND TO BE REJECTED.
SEE THE SECTIONS ENTITLED SUMMARY TERM
SHEET THE MERGER AND THE MERGER
AGREEMENT SPAH CONVERSION RIGHTS AND THE
MERGER AND THE MERGER AGREEMENT CONVERSION RIGHTS OF
SPAH STOCKHOLDERS FOR MORE SPECIFIC INSTRUCTIONS.
SP
ACQUISITION HOLDINGS, INC.
590 Madison Avenue
32nd Floor
New York, New York 10022
NOTICE OF SPECIAL MEETING OF
WARRANTHOLDERS
To Be Held on
[ ],
2009
To the Warrantholders of SP Acquisition Holdings, Inc.:
Notice is hereby given that a special meeting of the
warrantholders of SP Acquisition Holdings, Inc.
(SPAH) will be held on
[ ],
[ ],
2009 at [ ]:00 [ ].m.,
local time, at [ ]. The special
meeting is being called to consider and vote upon a proposal to
amend certain terms of the Amended and Restated Warrant
Agreement, dated as of October 4, 2007, by and between SPAH
and Continental Stock Transfer & Trust Company,
which governs the terms of SPAHs outstanding warrants to
purchase common stock (the Warrant Agreement), in
connection with the consummation of the transactions
contemplated by the Agreement and Plan of Merger, dated as of
July 30, 2009, by and between SPAH and Frontier Financial
Corporation (Frontier), as amended by Amendment
No. 1 to Agreement and Plan of Merger, dated as of
August 10, 2009, which, among other things, provides for
the merger of Frontier with and into SPAH, with SPAH being the
surviving entity.
The proposed amendment to the Warrant Agreement, to become
effective upon consummation of the merger, will:
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increase the exercise price of the warrants from $7.50 per share
to $11.50 per share of SPAH common stock;
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amend the warrant exercise period to (i) eliminate the
requirement that the initial founders warrants owned by
the SPAH insiders become exercisable only after the consummation
of an initial business combination if and when the last sales
price of SPAH common stock exceeds $14.25 per share for any 20
trading days within a 30 trading day period beginning
90 days after such business combination and
(ii) extend the expiration date of the warrants to the
earlier of (x) seven years from the consummation of the
merger or (y) the date fixed for redemption of the warrants
set forth in the warrant agreement;
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provide for the mandatory downward adjustment of the exercise
price for each warrant to reflect any cash dividends paid with
respect to the outstanding common stock of SPAH;
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provide that, in the event an effective registration statement
is not in place on the date the warrants are set to expire, the
warrants will remain outstanding until 90 days after an
effective registration statement is filed, provided, that if
SPAH has not filed an effective registration statement within
90 days after the expiration date, the warrants shall
become exercisable for cash consideration;
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provide that no adjustment in the number of shares issuable upon
exercise of each warrant will be made as a result of the
issuance of SPAH shares and warrants to the shareholders of
Frontier upon consummation of the merger agreement; and
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provide that each warrant will entitle the holder thereof to
purchase, in its sole discretion, either one share of voting
common stock or one share of non-voting common stock.
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At the special meeting, we may transact such other business as
may properly come before the special meeting or any adjournments
or postponements thereof.
The merger and the transactions contemplated by the merger, as
well as the amendment to the Warrant Agreement, are described in
the accompanying joint proxy statement/prospectus, which you are
encouraged to read in its entirety before voting. Only holders
of record of SPAH warrants at the close of business on
September 17, 2009 are entitled to notice of the special
meeting and to vote and have their votes counted at the special
meeting and any adjournments or postponements thereof. The
approval of the warrant amendment proposal is a condition to the
consummation of the merger discussed above.
After careful consideration, SPAHs Board of Directors has
determined that the proposals are fair to and in the best
interests of SPAH and its warrantholders and unanimously
recommends that you vote or give instruction to vote
FOR the approval of the amendment proposal.
All SPAH warrantholders are cordially invited to attend the
special meeting in person. To ensure your representation at the
special meeting, however, you are urged to complete, sign, date
and return the enclosed proxy card as soon as possible. If you
are a warrantholder of record of SPAH, you may also cast your
vote in person at the special meeting. If your warrants are held
in an account at a brokerage firm or bank, you must instruct
your broker or bank on how to vote your warrants or, if you wish
to attend the meeting and vote in person, obtain a proxy from
your broker or bank. If you do not vote or do not instruct your
broker or bank how to vote, it will have the same effect as
voting against the amendment proposal.
Your vote is important regardless of the number of warrants you
own. Whether you plan to attend the special meeting or not,
please sign, date and return the enclosed proxy card as soon as
possible in the envelope provided. If your warrants are held in
street name or are in a margin or similar account,
you should contact your broker to ensure that votes related to
the warrants you beneficially own are properly counted.
Thank you for your participation. We look forward to
your continued support.
By Order of the Board of Directors,
Chairman, President and Chief Executive
Officer
[ ],
2009
Important Notice Regarding the Availability of Proxy
Materials for the Special Meeting of Warrantholders to Be Held
on
[ ],
2009. This Proxy Statement is available electronically at
[ ].
SP
ACQUISITION HOLDINGS, INC.
590 Madison Avenue
32nd Floor
New York, New York 10022
PROXY STATEMENT FOR SPECIAL
MEETING OF WARRANTHOLDERS
To Be Held on
[ ],
2009
To the Warrantholders of SP Acquisition Holdings, Inc.:
You are cordially invited to attend a special meeting of the
warrantholders of SP Acquisition Holdings, Inc.
(SPAH). The special meeting will be held on
[ ],
[ ],
2009 at [ ]:00 [ ].m.,
local time, at [ ].
The special meeting is being called to consider and vote upon a
proposal to amend certain terms of the Amended and Restated
Warrant Agreement, dated as of October 4, 2007, by and
between SPAH and Continental Stock Transfer &
Trust Company (the Warrant Agreement), which
governs the terms of SPAHs outstanding warrants to
purchase common stock, in connection with the consummation of
the transactions contemplated by the Agreement and Plan of
Merger, dated as of July 30, 2009, by and between SPAH and
Frontier Financial Corporation (Frontier), as
amended by Amendment No. 1 to Agreement and Plan of Merger,
dated as of August 10, 2009, which provides for the merger
of Frontier with and into SPAH, with SPAH being the surviving
entity, and for each holder of Frontier common stock to receive
0.0530 shares of common stock and 0.0530 warrants.
The proposed amendment to the Warrant Agreement, to become
effective upon consummation of the merger, will:
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increase the exercise price of the warrants from $7.50 per share
to $11.50 per share of SPAH common stock;
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amend the warrant exercise period to (i) eliminate the
requirement that the initial founders warrants owned by
the SPAH insiders become exercisable only after the consummation
of an initial business combination if and when the last sales
price of SPAH common stock exceeds $14.25 per share for any 20
trading days within a 30 trading day period beginning
90 days after such business combination and
(ii) extend the expiration date of the warrants to the
earlier of (x) seven years from the consummation of the
merger or (y) the date fixed for redemption of the warrants
set forth in the warrant agreement;
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provide for the mandatory downward adjustment of the exercise
price for each warrant to reflect any cash dividends paid with
respect to the outstanding common stock of SPAH;
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provide that, in the event an effective registration statement
is not in place on the date the warrants are set to expire, the
warrants will remain outstanding until 90 days after an
effective registration statement is filed, provided, that if
SPAH has not filed an effective registration statement within
90 days after the expiration date, the warrants shall
become exercisable for cash consideration;
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provide that no adjustment in the number of shares issuable upon
exercise of each warrant will be made as a result of the
issuance of SPAH shares and warrants to the shareholders of
Frontier upon consummation of the merger agreement; and
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provide that each warrant will entitle the holder thereof to
purchase, in its sole discretion, either one share of voting
common stock or one share of non-voting common stock.
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At the special meeting, we may transact such other business as
may properly come before the special meeting or any adjournments
or postponements thereof. Only holders of record of SPAH
warrants at the close of business on September 17, 2009 are
entitled to notice of the special meeting and to vote and have
their votes counted at the special meeting and any adjournments
or postponements thereof. Adoption of the amendment to the
Warrant Agreement requires the affirmative vote of a majority of
the warrantholders outstanding and entitled to vote at the
special meeting. The Warrant Agreement also requires that the
holders of a majority of SPAHs outstanding warrants issued
in, or subsequent to, SPAHs initial public offering, are
voted in favor of the warrant amendment. Each of SPAHs
directors and founding stockholders, including SP Acq LLC and
Steel Partners II, L.P., or their permitted transferees (the
SPAH insiders), which own, in the aggregate,
17,822,400 warrants issued prior to
consummation of SPAHs initial public offering, or
approximately 29.2% of the total warrants outstanding as of
September 17, 2009, intend to vote in favor of the warrant
amendment proposal.
The approval of the warrant amendment proposal is a condition to
the consummation of the merger discussed above. If the merger is
consummated, Frontier shareholders will receive approximately
2,512,000 newly issued warrants on the same terms and conditions
as the publicly traded warrants, after giving effect to the
warrant amendment proposal.
After careful consideration, SPAHs Board of Directors has
determined that the proposals are fair to and in the best
interests of SPAH and its warrantholders and unanimously
recommends that you vote or give instruction to vote
FOR the approval of the amendment proposal.
Enclosed is the joint proxy statement/prospectus containing
detailed information concerning the amendment proposal, the
merger and the transactions contemplated by the merger
agreement. We urge you to read the joint proxy
statement/prospectus and attached annexes carefully.
Thank you for your participation. We look forward to your
continued support.
By Order of the Board of Directors,
Chairman, President and Chief Executive
Officer
IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW
YOU WISH TO VOTE, YOUR WARRANTS WILL BE VOTED IN FAVOR OF THE
WARRANT AMENDMENT PROPOSAL. IF THE MERGER IS NOT COMPLETED AND
SPAH DOES NOT COMPLETE AN INITIAL BUSINESS COMBINATION PRIOR TO
OCTOBER 10, 2009, THE WARRANTS WILL EXPIRE WORTHLESS.
FRONTIER
FINANCIAL CORPORATION
332 S.W. Everett Mall Way
P. O. Box 2215
Everett, Washington 98213
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
To Be Held on
[ ],
2009
To the Shareholders of Frontier Financial Corporation:
Notice is hereby given that a special meeting of the
shareholders of Frontier Financial Corporation
(Frontier) will be held on
[ ],
[ ],
2009 at [ ]:00 [ ].m.,
local time, at [ ]. The special
meeting is being called to consider and vote upon a proposal to
adopt the Agreement and Plan of Merger, dated as of
July 30, 2009, by and between Frontier and SP Acquisition
Holdings, Inc. (SPAH), as amended by Amendment
No. 1 to Agreement and Plan of Merger, dated as of
August 10, 2009, pursuant to which Frontier will merge with
and into SPAH, as described in more detail in the accompanying
joint proxy statement/prospectus. At the special meeting, we may
transact such other business as may properly come before the
special meeting and any adjournments or postponements thereof.
Frontier has fixed the close of business on September 17,
2009 as the record date for determining those shareholders
entitled to notice of, and to vote at, the special meeting and
any adjournments or postponements thereof.
Frontier shareholders have the right to dissent from the merger
and obtain payment of the fair value of their Frontier shares
under Washington law. A copy of the applicable Washington
statutory provisions regarding dissenters rights is
attached as Annex F to the accompanying joint proxy
statement/prospectus. For details of your dissenters
rights and applicable procedures, please see the discussion
under the heading The Merger and the Merger
Agreement Frontier Dissenters
Rights of the attached joint proxy statement/prospectus.
Whether or not you plan to attend the special meeting in person,
please complete, date, sign and return the enclosed proxy card
as promptly as possible. Frontier has enclosed a postage prepaid
envelope for that purpose. Any Frontier shareholder may revoke
his or her proxy by following the instructions in the joint
proxy statement/prospectus at any time before the proxy has been
voted at the special meeting. Even if you have given your proxy,
you may still vote in person if you attend the special meeting.
Please do not send any share certificates to Frontier at this
time.
Frontier encourages you to vote on this very important matter.
The Board of Directors of Frontier unanimously recommends that
Frontier shareholders vote FOR the proposals above.
By Order of the Board of Directors,
Chairman and Chief Executive Officer
[ ],
2009
Important Notice Regarding the Availability of Proxy
Materials for the Special Meeting of Shareholders to Be Held on
[ ],
2009. This Proxy Statement is available electronically at
www.frontierbank.com.
FRONTIER
FINANCIAL CORPORATION
332 S.W. Everett Mall Way
P. O. Box 2215
Everett, Washington 98213
PROXY STATEMENT FOR SPECIAL
MEETING OF STOCKHOLDERS
To Be Held on
[ ],
2009
To the Shareholders of Frontier Financial Corporation:
You are cordially invited to attend a special meeting of the
shareholders of Frontier Financial Corporation
(Frontier). The special meeting will be held on
[ ],
[ ],
2009 at [ ]:00
[ ].m., local time, at
[ ].
At the special meeting, you will be asked to consider and vote
on (i) a proposal to adopt the Agreement and Plan of
Merger, dated as of July 30, 2009, by and between Frontier
and SP Acquisition Holdings, Inc. (SPAH), as amended
by Amendment No. 1 to Agreement and Plan of Merger, dated
as of August 10, 2009; and (ii) any other matters that
may properly come before the special meeting and any
adjournments or postponements thereof.
Only holders of record of Frontier common stock at the close of
business on September 17, 2009 are entitled to notice of
the special meeting and to vote and have their votes counted at
the special meeting and any adjournments or postponements
thereof. Adoption of the merger agreement requires the
affirmative vote of at least two-thirds of the outstanding
shares of Frontiers outstanding common stock entitled to
vote at the special meeting.
If the proposed merger is completed, Frontier shareholders will
receive 0.0530 newly issued shares of SPAH common stock and
0.0530 newly issued warrants to purchase SPAH common stock for
each share of Frontier common stock they own. Contemporaneously
with the Frontier special meeting of stockholders, SPAH has
scheduled a special meeting of warrantholders to consider and
vote upon a proposal to amend certain terms of the warrant
agreement that governs the terms of SPAHs outstanding
warrants, as more fully described in the accompanying joint
proxy statement/prospectus. If the merger is consummated,
Frontier shareholders will receive newly issued warrants on the
same terms and conditions as the publicly traded warrants, after
giving effect to the warrant amendment proposal. On
July 30, 2009, the day before the public announcement of
the merger agreement, the closing price of SPAHs common
stock on the NYSE AMEX LLC was $9.75 per share.
Each of Frontiers insiders (including all of
Frontiers executive officers and directors) has agreed to
vote their 3,103,451 shares of Frontier common stock (which
constitute 6.56% of Frontiers outstanding shares of common
stock), FOR the merger proposal.
The Frontier Board has unanimously determined that the proposals
and the transactions contemplated thereby are fair to and in the
best interests of Frontier and its shareholders. The Board
recommends that you vote, or give instruction to vote,
FOR the adoption of the merger proposal.
Frontier shareholders have the right to dissent from the merger
and obtain payment of the fair value of their Frontier shares
under Washington law. A copy of the applicable Washington
statutory provisions regarding dissenters rights is
attached as Annex F to the accompanying joint proxy
statement/prospectus. For details of your dissenters
rights and applicable procedures, please see the discussion
under the heading The Merger and the Merger
Agreement Frontier Dissenters Rights of
the attached joint proxy statement/prospectus.
Enclosed is a notice of special meeting and the joint proxy
statement/prospectus containing detailed information concerning
the merger proposal and the transactions contemplated by the
merger agreement. We urge you to read the joint proxy
statement/prospectus and attached annexes carefully.
Your vote is important. Because approval of the merger proposal
requires the affirmative vote of at least two-thirds of the
outstanding shares entitled to vote at the Frontier special
meeting, abstaining from voting (including by way of a broker
non-vote), either in person or by proxy, will have the same
effect as a vote against approval of the merger agreement.
Whether or not you plan to attend the special meeting in person,
please sign, date and return the enclosed proxy card as soon as
possible in the envelope provided. We look forward to seeing you
at the special meeting, and we appreciate your continued loyalty
and support. I look forward to seeing you at the meeting.
By Order of the Board of Directors,
Chairman and Chief Executive Officer
The
information in this joint proxy statement/prospectus is not
complete and may be changed. We may not issue these securities
until the registration statement filed with the Securities and
Exchange Commission is effective. This joint proxy
statement/prospectus is not an offer to sell these securities
and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
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SUBJECT
TO AMENDMENT AND COMPLETION, DATED SEPTEMBER 9, 2009
PROXY
STATEMENT FOR THE SPECIAL MEETINGS OF STOCKHOLDERS AND
WARRANTHOLDERS OF SP ACQUISITION HOLDINGS, INC.
PROXY STATEMENT FOR THE SPECIAL MEETING OF SHAREHOLDERS
OF FRONTIER FINANCIAL CORPORATION
PROSPECTUS FOR UP TO 2,512,000
SHARES OF COMMON STOCK AND
UP TO 2,512,000 WARRANTS TO
PURCHASE COMMON STOCK
OF SP ACQUISITION HOLDINGS,
INC.
The Boards of Directors of SP Acquisition Holdings, Inc., a
blank check company organized under the laws of the State of
Delaware (SPAH), and Frontier Financial Corporation,
a Washington corporation (Frontier), have
unanimously agreed to a merger of our companies. If the proposed
merger is completed, Frontier shareholders will receive
0.0530 shares of SPAH common stock and 0.0530 warrants to
purchase common stock of SPAH for each share of Frontier common
stock they own. This 0.0530 multiple is referred to as the
exchange ratio.
SPAH was formed for the purpose of acquiring, through a merger,
capital stock exchange, asset acquisition or similar business
combination, one or more businesses or assets. Its common stock
and warrants are listed on the NYSE AMEX LLC under the symbols
DSP and DSP.W, respectively. Frontier is
a bank holding company that directly owns 100% of Frontier Bank,
a Washington state chartered commercial bank. Frontiers
common stock is quoted on the NASDAQ Stock Market LLC under the
symbol FTBK. Frontiers common stock will no
longer be traded following the consummation of the merger. The
parties intend to seek to have the common stock and warrants of
SPAH listed on the NYSE AMEX LLC following consummation of the
merger under the symbol
[ ].
However, there is no assurance that the common stock and
warrants will be listed on any exchange following consummation
of the merger.
Based on the closing price of SPAHs common stock and
warrants on September 17, 2009 of
$[ ] and
$[ ], respectively, Frontier
shareholders will receive approximately
$[ ] worth of SPAHs common
stock and $[ ] worth of SPAHs
warrants for each share of Frontier stock they own. The actual
value of the SPAH common stock and warrants received by Frontier
shareholders in the merger will depend on the market value of
SPAH common stock and warrants at the time of closing.
We expect that the Frontier shareholders will hold approximately
2,512,000 or 5.0% of the outstanding shares of SPAH common stock
and approximately 2,512,000 or 3.8% of the outstanding warrants
of SPAH on a fully diluted basis immediately following the
consummation of the merger, based on the number of shares of
SPAH common stock outstanding as of September 17, 2009,
after giving effect to the forfeiture of 9,453,412 shares
of common stock by certain insiders of SPAH and the
co-investment by an affiliate of Steel Partners II, L.P. to
purchase 3,000,000 units, each consisting of one share of
common stock and one warrant it previously agreed to purchase at
$10.00 per unit ($30.0 million in the aggregate) in a
private placement that will occur immediately prior to the
consummation of the merger. This private placement is referred
to as the co-investment.
This joint proxy statement/prospectus provides detailed
information about the merger, the special meeting of SPAH
stockholders, the special meeting of SPAH warrantholders and the
special meeting of Frontier shareholders. At the SPAH and
Frontier stockholders meetings, stockholders are being asked to
consider and vote upon a proposal to adopt the Agreement and
Plan of Merger, dated as of July 30, 2009, by and between
Frontier and SPAH, as amended by Amendment No. 1 to
Agreement and Plan of Merger, dated as of August 10, 2009,
pursuant to which Frontier will merge with and into SPAH (the
merger proposal). SPAH is also asking its
stockholders to approve other matters in connection with the
merger, that are described in this joint proxy
statement/prospectus, including certain amendments to
SPAHs Amended and Restated Certificate of Incorporation
(the SPAH Certificate of Incorporation) and the
election of directors to the Board of Directors of SPAH. SPAH is
asking its stockholders to approve certain amendments to the
SPAH Certificate of Incorporation because in its current form,
the SPAH Certificate of Incorporation does not allow for SPAH to
complete the proposed merger. At the SPAH warrantholders
meeting, warrantholders are being asked to amend certain terms
of the Amended and Restated Warrant Agreement, which governs the
terms of SPAHs outstanding warrants. If the merger is
consummated, Frontier shareholders will receive warrants on the
same terms and conditions as the publicly traded warrants, after
giving effect to the warrant amendment proposal. Each SPAH
public stockholder may have securities law claims against SPAH
for rescission or damages on the basis that SPAH is seeking to
take certain
action that may be inconsistent with the disclosure provided in
its initial public offering prospectus. See The Merger and
the Merger Agreement Rescission Rights for
additional information.
As described in this joint proxy statement/prospectus, we cannot
complete the merger unless SPAH stockholders approve the
amendments to the SPAH Certificate of Incorporation, holders of
no more than 10% of the shares (minus one share) sold in
SPAHs initial public offering vote against the merger and
exercise their conversion rights (unless SPAH waives this
condition), stockholders of both SPAH and Frontier approve the
merger proposal, SPAH warrantholders approve the warrant
amendment proposal, SPAHs application to become a bank
holding company is approved, and we obtain the necessary
government approvals, among other things.
The businesses and operations of Frontier and its subsidiary,
Frontier Bank, are currently subject to several regulatory
actions. Frontiers management believes it has addressed
many of the concerns and is in compliance with most of the
regulatory requirements, other than to increase its Tier 1
capital. However, Frontier may not be able to satisfy all
regulatory requirements prior to the consummation of the merger,
which could limit Frontiers growth and adversely affect
its earnings, businesses and operations. In addition, failure to
comply with these regulatory actions or any future actions could
result in further regulatory actions or restrictions, including
monetary penalties and the potential closure of Frontier Bank.
Please carefully review and consider this joint proxy
statement/prospectus which explains the merger proposal in
detail, including the discussion under the heading Risk
Factors beginning on page 33. It is important
that your shares are represented at your stockholders or
warrantholders meeting, whether or not you plan to attend.
Accordingly, please complete, date, sign, and return promptly
your proxy card in the enclosed envelope. You may attend the
meeting and vote your shares in person if you wish, even if you
have previously returned your proxy.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved the securities
to be issued under this joint proxy statement/prospectus or
determined if this joint proxy statement/prospectus is truthful
or complete. Any representation to the contrary is a criminal
offense.
SPAH consummated its initial public offering on
October 16, 2007. UBS Investment Bank, Ladenburg
Thalmann & Co. Inc. and Jefferies & Company,
the underwriters of SPAHs initial public offering, may
provide assistance to SPAH, Frontier and their respective
directors and executive officers, and may be deemed to be
participants in the solicitation of proxies. Approximately
$17.3 million of the underwriters discounts and
commissions relating to SPAHs initial public offering were
deferred pending stockholder approval of SPAHs initial
business combination and will be released to the underwriters
upon consummation of the merger. SPAH is in negotiation with its
underwriters regarding the amount and form of payment of such
deferred underwriting fees from SPAHs initial public
offering. As of the date hereof, SPAH believes that the
underwriting fees will be reduced by approximately
$3.65 million and SPAH will continue to negotiate a further
reduction of such fees until a mutual settlement can be reached.
The results of these negotiations are uncertain since the
underwriters can discontinue negotiations with SPAH at any time
and require the full amount of their fees payable upon
consummation of the merger. If the merger is not consummated and
SPAH is required to be liquidated, the underwriters will not
receive any of such fees. Stockholders are advised that the
underwriters have a financial interest in the successful outcome
of the proxy solicitation. In addition, Frontier engaged Sandler
ONeill & Partners, L.P. (Sandler
ONeill) as a financial advisor to assist Frontier in
pursuing all strategic alternatives. As part of such engagement,
Sandler ONeill has provided, and Frontier expects that
Sandler ONeill will continue to provide, financial
advisory services to Frontier in connection with the proposed
merger. Therefore, Sandler ONeill may be deemed to be a
participant in the solicitation of proxies. Sandler ONeill
has received a fee of $500,000 and upon consummation of the
merger, will receive $9.5 million payable at the closing of
the merger. Stockholders are advised that Sandler ONeill
has a financial interest in the successful outcome of the
merger.
This joint proxy statement/prospectus is dated
September [ ], 2009 and is first being mailed to
SPAH and Frontier stockholders and SPAH warrantholders on or
about September [ ], 2009.
Table
of Contents
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5
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16
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19
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22
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33
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33
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39
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50
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55
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56
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56
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57
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58
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61
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62
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62
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66
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67
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68
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iii
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Annex A
|
|
Agreement and Plan of Merger, dated as of July 30, 2009, as
amended by Amendment No. 1 to Agreement and Plan of Merger,
dated as of August 10, 2009.
|
Annex B
|
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Form of Certificate of Amendment to Amended and Restated
Certificate of Incorporation of SP Acquisition Holdings, Inc.
|
Annex C
|
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Form of Second Amended and Restated Certificate of Incorporation
of SP Acquisition Holdings, Inc.
|
Annex D
|
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Form of Supplement and Amendment to Amended and Restated Warrant
Agreement
|
Annex E
|
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Fairness Opinion of Keefe, Bruyette & Woods, Inc.
|
Annex F
|
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Excerpt of Washington Law on Dissenters Rights
|
Annex G
|
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Opinion of Morris James LLP
|
Annex H
|
|
Form of Proxy for SP Acquisition Holdings, Inc. Special Meeting
of Stockholders
|
Annex I
|
|
Form of Proxy for SP Acquisition Holdings, Inc. Special Meeting
of Warrantholders
|
Annex J
|
|
Form of Proxy for Frontier Financial Corporation Special Meeting
of Shareholders
|
iv
In this joint proxy statement/prospectus, except as otherwise
indicated herein, or as the context may otherwise require,
(i) all references to SPAH refer to SP
Acquisition Holdings, Inc., (ii) all references to
Frontier refer to Frontier Financial Corporation
together with its subsidiary, Frontier Bank, (iii) all
references to the SPAH Board refer to the Board of
Directors of SPAH, (iv) all references to the
Frontier Board refer to the Board of Directors of
Frontier, (v) all references to SP II refer to
Steel Partners II, L.P., (vi) all references to the
Steel Trust refer to Steel Partners II
Liquidating Series Trust Series F, a
liquidating trust established for the purpose of effecting the
orderly liquidation of certain assets of SP II, (vii) all
references to the SPAH insiders refer to SP Acq LLC,
SP II, Anthony Bergamo, Ronald LaBow, Howard M. Lorber, Leonard
Toboroff and S. Nicholas Walker or each of their permitted
transferees, (viii) all references to the SPAH public
stockholders refer to purchasers of SPAHs securities
by persons other than SPAHs insiders in, or subsequent to,
SPAHs initial public offering, (ix) all references to
the SPAH Certificate of Incorporation refer to the
Amended and Restated Certificate of Incorporation of SPAH,
(x) all references to the merger agreement
refer to the Agreement and Plan of Merger, dated as of
July 30, 2009, by and between SPAH and Frontier, as amended
by Amendment No. 1 to Agreement and Plan of Merger, dated
as of August 10, 2009, (xi) all references to the
merger refer to the merger of SPAH and Frontier
pursuant to the terms and conditions of the merger agreement,
and (xii) all references to the Frontier
insiders refer to all of Frontiers officers,
directors and stockholders beneficially owning 5% or more of
Frontiers outstanding common stock (other than
Barclays Global Investors, State Street Bank and
Trust Company and other institutional investors).
GENERAL
QUESTIONS AND ANSWERS
|
|
|
Q: |
|
Why am I receiving this joint proxy statement/prospectus? |
|
A: |
|
SPAH and Frontier have agreed to combine their businesses under
the terms of a merger agreement that is described in this joint
proxy statement/prospectus. A copy of the merger agreement is
attached to this joint proxy statement/prospectus as
Annex A. |
|
|
|
|
|
In order to complete the merger, SPAH must register the shares
of SPAH common stock and SPAH warrants to be issued in the
merger, and both SPAH stockholders and Frontier shareholders
must adopt the merger agreement, among other things. SPAH will
hold a special meeting of its stockholders and Frontier will
hold a special meeting of its shareholders to obtain these
approvals. SPAH is also asking its stockholders to approve other
matters at the SPAH special meeting of stockholders that are
described in this joint proxy statement/prospectus, including
certain amendments to the SPAH Certificate of Incorporation, and
the election of directors to the SPAH Board. |
|
|
|
|
|
SPAH warrantholders are being asked to consider and vote upon a
proposal to amend certain terms of the Amended and Restated
Warrant Agreement, dated as of October 4, 2007, by and
between SPAH and Continental Stock Transfer &
Trust Company (the Warrant Agreement). Upon
consummation of the merger, Frontier shareholders will receive
warrants on the same terms and conditions as the publicly traded
warrants, after giving effect to the warrant amendment proposal. |
|
|
|
|
|
This joint proxy statement/prospectus contains important
information about the merger and the special meetings of each of
SPAH and Frontier, and we recommend you read it carefully. |
|
Q: |
|
Why is Frontier merging with and into SPAH? |
|
A: |
|
SPAH is proposing to acquire Frontier pursuant to the merger
agreement. SPAH believes that Frontier, a registered bank
holding company, is positioned for significant growth in its
current and expected future markets and believes that a business
combination with Frontier will provide SPAH stockholders with an
opportunity to participate in a company with significant
potential. The Frontier Board believes the merger provides
Frontier shareholders with the potential to participate in a
newly-capitalized company with the ability to take advantage of
growth opportunities. |
|
|
|
If the merger proposal and related proposals are approved by the
stockholders of SPAH and Frontier and the other conditions to
completion of the merger are satisfied, including receipt of all
necessary government approvals, Frontier will merge with and
into SPAH, and SPAH will survive the merger. |
1
|
|
|
|
|
Frontier is a Washington corporation which was incorporated in
1983 and is registered as a bank holding company under the Bank
Holding Company Act of 1956 (the BHC Act). Frontier
has one operating subsidiary, Frontier Bank, which is engaged in
a general banking business and in businesses related to banking.
Frontier is headquartered in Everett, Snohomish County,
Washington. Frontier Bank was founded in September 1978, by
Robert J. Dickson and local business persons and is an
insured bank as defined in the Federal Deposit
Insurance Act. Frontier engages in general banking business in
Washington and Oregon, including the acceptance of demand,
savings and time deposits and the origination of loans. As of
June 30, 2009, Frontier serves its customers from fifty-one
branches (with the downtown Poulsbo branch scheduled to close in
October). Frontier had deposits of approximately
$3.2 billion, net loans of $3.3 billion, assets of
$4.0 billion and equity of $269.5 million, at
June 30, 2009. |
|
|
|
|
|
SPAH is a blank check company organized to effect an
acquisition, through a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or other similar
business combination, of one or more businesses or assets. SPAH
consummated its initial public offering on October 16,
2007, generating gross proceeds of approximately $439,896,000
from its initial public offering and sale of warrants (the
additional founders warrants) in a private
transaction to SP Acq LLC immediately prior to the initial
public offering. SP Acq LLC, which is controlled by Warren G.
Lichtenstein, SPAHs Chairman, President, and Chief
Executive Officer, is a holding company founded to
form SPAH and hold an investment in SPAHs units
issued prior to SPAHs initial public offering (the
founders units), consisting of shares of
common stock (the founders shares) and
warrants (the initial founders warrants). SP
Acq LLC has sold a total of 500,000 founders units to
Anthony Bergamo, Ronald LaBow, Howard M. Lorber, Leonard
Toboroff and S. Nicholas Walker, each a director of SPAH, and
has sold 668,988 founders units to SP II, an affiliate of
SP Acq LLC. |
|
|
|
|
|
Net proceeds of approximately $425,909,120 were deposited into a
trust account, which SPAH intends to use to complete the merger
and make payment of the deferred underwriting commissions and
discounts. In the event SPAH is unable to complete the merger or
another business combination by October 10, 2009, the funds
in the trust account will be distributed to the SPAH public
stockholders. As of September 17, 2009, the balance in the
trust account was approximately
$[ ] million, including
approximately $17.3 million of deferred underwriting
discounts and commissions. SPAH is in negotiation with its
underwriters regarding the amount and form of payment of such
deferred underwriting fees from SPAHs initial public
offering. As of the date hereof, SPAH believes that the
underwriting fees will be reduced by approximately
$3.65 million and SPAH will continue to negotiate a further
reduction of such fees until a mutual settlement can be reached.
The results of these negotiations are uncertain since the
underwriters can discontinue negotiations with SPAH at any time
and require the full amount of their fees payable upon
consummation of the merger. |
|
|
|
|
|
In connection with the initial public offering, SP II previously
agreed to purchase an aggregate of 3,000,000 units (the
co-investment units) at $10.00 per unit
($30.0 million in the aggregate) in a private placement
that will occur immediately prior to the consummation of the
merger. Pursuant to a plan of reorganization, SP II has
contributed certain assets to the Steel Trust, a liquidating
trust established for the purpose of effecting the orderly
liquidation of such assets. As a result, all of the
founders shares and initial founders warrants owned
by SP II have been transferred to the Steel Trust in a private
transaction exempt from registration under the Securities Act of
1933, as amended (the Securities Act). The Steel
Trust has agreed to assume all of SP IIs rights and
obligations with respect to the founders shares and
initial founders warrants, as more fully described
elsewhere in this joint proxy statement/prospectus, including
the obligation to purchase the co-investment units. The proceeds
from the sale of the co-investment units will provide us with
additional equity capital to fund the merger. |
|
|
|
Q: |
|
How do the Board of Directors of each of SPAH and Frontier
recommend that I vote on the merger? |
|
A: |
|
You are being asked to vote FOR the approval
of the merger of Frontier with and into SPAH pursuant to the
terms of the merger agreement. The Board of Directors of each of
SPAH and Frontier has unanimously determined that the proposed
merger is in the best interests of its stockholders, unanimously
approved the merger agreement and unanimously recommend that its
stockholders vote FOR the approval of the
merger. |
2
|
|
|
Q: |
|
When do you expect to complete the merger? |
|
|
|
A: |
|
We presently expect to complete the merger in the fourth quarter
of 2009. However, we cannot assure you when or if the merger
will occur. We must first obtain the approval of SPAH and
Frontier stockholders at the special meetings, and receive the
necessary regulatory approvals, among other things. Pursuant to
the SPAH Certificate of Incorporation, if SPAH does not
consummate an initial business combination by October 10,
2009, SPAH will be required to liquidate and dissolve and the
SPAH public stockholders would be entitled to participate in
liquidation distributions from SPAHs trust account with
respect to their shares. |
|
|
|
Q: |
|
What should I do now? |
|
A: |
|
After you have carefully read this joint proxy
statement/prospectus, please indicate on your proxy card how you
want to vote, and then date, sign and mail your proxy card in
the enclosed envelope as soon as possible so that your shares
will be represented at the meeting. If you date, sign and send
in a proxy card but do not indicate how you want to vote, your
proxy will be voted in favor of the merger proposal. |
|
Q: |
|
If my shares are held in street name by my
broker, will my broker vote my shares for me? |
|
A: |
|
It depends. A broker holding your shares in street
name must vote those shares according to any specific
instructions it receives from you. You should instruct your
broker how to vote your shares following the directions your
broker provides. If specific instructions are not received, in
certain limited circumstances your broker may vote your shares
in its discretion. On certain routine matters,
brokers have authority to vote their customers shares if
their customers do not provide voting instructions. When brokers
vote their customers shares on a routine matter without
receiving voting instructions, these shares are counted both for
establishing a quorum to conduct business at the meeting and in
determining the number of shares voted FOR or
AGAINST the routine matter. On
non-routine matters, brokers cannot vote the shares
on that proposal if they have not received voting instructions
from the beneficial owner of such shares. If you hold your
shares in street name, you can either obtain
physical delivery of the shares into your name, and then vote
your shares yourself, or request a legal proxy
directly from your broker and bring it to the special meeting,
and then vote your shares yourself. In order to obtain shares
directly into your name, you must contact your brokerage house
representative. Brokerage firms may assess a fee for your
conversion; the amount of such fee varies from firm to firm. |
|
|
|
SPAH. If you do not provide your broker with
voting instructions, your broker may vote your shares at its
discretion with regard to the election of directors to the SPAH
Board, since these matters are routine. However, your broker may
not vote your shares, unless you provide voting instructions,
with regard to adoption of the merger agreement, or the adoption
of the amendments to the SPAH Certificate of Incorporation,
since these matters are not routine. Failure to instruct your
broker how to vote your shares will have the same effect as a
vote against the adoption of the merger agreement and the
adoption of the amendments to the SPAH Certificate of
Incorporation, but will have no effect on the election of
directors to the SPAH Board. |
|
|
|
Frontier. Your broker may not vote your
shares, unless you provide voting instructions, with regard to
approval of the merger proposal, since this matter is not
routine. Failure to instruct your broker how to vote your shares
will have the same effect as a vote against the merger proposal. |
|
Q: |
|
Can I change my vote after I have submitted my proxy? |
|
A: |
|
Yes. There are a number of ways you can change your vote. First,
you may send a written notice to the person to whom you
submitted your proxy stating that you would like to revoke your
proxy. Second, you may complete and submit a later-dated proxy
with new voting instructions. The latest vote actually received
by SPAH or Frontier prior to the special meetings will be your
vote. Any earlier votes will be revoked. Third, you may attend
the special meeting and vote in person. Any earlier votes will
be revoked. Simply attending the special meeting without voting,
however, will not revoke your proxy. If you have instructed a
broker to vote your shares, you must follow the directions you
will receive from your broker to change or revoke your proxy. |
3
|
|
|
Q: |
|
What should I do if I receive more than one set of voting
materials? |
|
A: |
|
You may receive more than one set of voting materials, including
multiple copies of this joint proxy statement/prospectus and
multiple proxy cards or voting instruction cards. For example,
if you hold your shares or warrants in more than one brokerage
account, you will receive a separate voting instruction card for
each brokerage account in which you hold shares or warrants. If
you are a holder of record and your shares or warrants are
registered in more than one name, you will receive more than one
proxy card. Please complete, sign, date and return each proxy
card and voting instruction card that you receive in order to
cast your vote with respect to all of your shares and/or
warrants. |
|
Q: |
|
Whom should I contact with questions about the merger? |
|
A: |
|
If you want additional copies of this joint proxy
statement/prospectus, or if you want to ask questions about the
merger or the transactions contemplated by the merger agreement,
you should contact: |
|
|
|
SP Acquisition Holdings, Inc.
590 Madison Avenue
32nd Floor
New York, New York 10022
Attn: John McNamara
(212) 520-2300
|
|
Frontier Financial Corporation
332 S.W. Everett Mall Way
P. O. Box 2215
Everett, Washington 98213
Attn: Carol E. Wheeler
Chief Financial Officer
(425) 514-0700
|
4
QUESTIONS
AND ANSWERS FOR SPAH STOCKHOLDERS
|
|
|
Q: |
|
When and where is the SPAH special meeting of
stockholders? |
|
A: |
|
The special meeting of SPAH stockholders will be held on
[ ],
[ ],
2009 at [ ]:00 [ ].m., local time, at
[ ]. |
|
Q: |
|
How can I attend the SPAH special meeting? |
|
|
|
A: |
|
SPAH stockholders as of the close of business on
September 17, 2009, and those who hold a valid proxy for
the special meeting are entitled to attend the SPAH special
meeting. SPAH stockholders should be prepared to present photo
identification for admittance. In addition, names of record
holders will be verified against the list of record holders on
the record date prior to being admitted to the meeting. SPAH
stockholders who are not record holders but who hold shares
through a broker or nominee (i.e., in street name), should
provide proof of beneficial ownership on the record date, such
as a most recent account statement prior to September 17,
2009, or other similar evidence of ownership. If SPAH
stockholders do not provide photo identification or comply with
the other procedures outlined above upon request, they will not
be admitted to the SPAH special meeting. |
|
|
|
|
|
The SPAH special meeting will begin promptly at [ ]
[ ].m., local time. Check-in will begin at
[ ] [ ].m., local time, and you should
allow ample time for the check-in procedures. |
|
Q: |
|
What is being proposed, other than the merger, to be voted on
at the SPAH special meeting? |
|
|
|
A: |
|
SPAHs stockholders are being asked to: |
|
|
|
|
|
adopt an amendment to the SPAH Certificate of
Incorporation to eliminate the requirement that the fair market
value of the target business equal at least 80% of the balance
of SPAHs trust account, (excluding underwriting discounts
and commissions) plus the proceeds of the co-investment, to be
effective immediately prior to the consummation of the merger to
be effective immediately prior to the consummation of the merger
described below (Proposal No. 1);
|
|
|
|
|
|
adopt an amendment to the SPAH Certificate of
Incorporation to provide that SPAH cannot consummate the merger
unless up to at least 10% (minus one share) but no more than 30%
(minus one share) of SPAH public stockholders are able to
exercise their conversion rights, to be effective immediately
prior to the consummation of the merger described below
(Proposal No. 2 and, together with
Proposal No. 1, the Initial Charter
Amendments);
|
|
|
|
|
|
adopt an amendment to the SPAH Certificate of
Incorporation to change SPAHs corporate name to
Frontier Financial Corporation, to be effective upon
consummation of the merger (the Name Change
Proposal);
|
|
|
|
|
|
adopt an amendment to the SPAH Certificate of
Incorporation to permit SPAHs continued existence after
October 10, 2009, to be effective upon consummation of the
merger (the Continued Existence Proposal);
|
|
|
|
|
|
adopt an amendment to the SPAH Certificate of
Incorporation to create a new class of common stock of SPAH (the
Non-Voting Common Stock), which will have economic
rights but no voting rights, to be effective upon consummation
of the merger (the New Class Proposal and,
together with the Name Change Proposal and the Continued
Existence Proposal, the Subsequent Charter
Amendments); and
|
|
|
|
|
|
elect to the SPAH Board, Warren G. Lichtenstein, who
will serve as Chairman of the Board, and, if the merger is
consummated, four directors from Frontier, comprised of Patrick
M. Fahey, Lucy DeYoung, Mark O. Zenger and David M. Cuthill,
each of whom currently serve on the Frontier Board, in each case
to serve until the next annual meeting of SPAH and until their
successors shall have been elected and qualified.
|
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|
At the special meeting, SPAH may also transact such other
business as may properly come before the special meeting or any
adjournments or postponements thereof. |
|
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|
|
The SPAH Certificate of Incorporation purports to prohibit
amendments to certain of its provisions, including the proposed
Initial Charter Amendments, without the unanimous consent of the
holders of all of SPAHs outstanding shares of common
stock. However, SPAH believes, and has received an opinion from
its special Delaware counsel that while the matter has not been
settled as a matter of Delaware law and, accordingly, is not |
5
|
|
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|
|
entirely free from doubt, the Initial Charter Amendments, if
duly approved by a majority of the shares of SPAHs
outstanding common stock entitled to vote at the special
meeting, will be valid under Delaware law. |
|
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|
|
Since SPAHs initial public offering prospectus did not
disclose that SPAH would seek approval of the Initial Charter
Amendments and the New Class Proposal, among other things,
each SPAH stockholder at the time of the merger that purchased
shares in, or subsequent to, SPAHs initial public offering
up to and until the record date, may have securities law claims
against SPAH for rescission or damages. See The Merger and
the Merger Agreement Rescission Rights for
additional information. |
|
|
|
Q: |
|
Are the proposals conditioned on one another? |
|
|
|
A: |
|
Yes. Unless SPAH and Frontier agree otherwise, the merger
proposal will only be presented for a vote at the special
meeting if (i) the Initial Charter Amendments are approved
by SPAH stockholders and (ii) the proposal to amend
SPAHs Warrant Agreement is approved at the special meeting
of SPAH warrantholders to be held immediately prior to the
special meeting of SPAH stockholders. The Subsequent Charter
Amendments and the election of the Frontier nominees will only
be effected in the event and at the time the merger with
Frontier is consummated, although approval of the Subsequent
Charter Amendments is a condition to closing the merger. The
election of Mr. Lichtenstein does not require the approval
of any other proposals to be effective. |
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Q: |
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Why is SPAH proposing the Initial Charter Amendments? |
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A: |
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SPAH is proposing Proposal No. 1 to amend the
definition of an initial business combination to
eliminate the requirement that the fair market value of the
target business equal at least 80% of the balance of SPAHs
trust account (excluding underwriting discounts and commissions)
plus the proceeds of the co-investment. Because the fair market
value of Frontier on the date of the merger will be less than
80% of the balance of the trust account (excluding underwriting
discounts and commissions) plus the proceeds of the co-
investment, the proposed merger does not meet the fair market
value requirement. Accordingly, SPAH must amend the SPAH
Certificate of Incorporation immediately prior to presenting the
merger proposal for a vote at the special meeting of
stockholders to provide SPAH stockholders the opportunity to
vote on the merger. |
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SPAH is proposing Proposal No. 2 to amend the SPAH
Certificate of Incorporation to provide that SPAH cannot
consummate the merger unless up to at least 10% (minus one
share) but no more than 30% (minus one share) of SPAH public
stockholders are able to exercise their conversion rights. The
SPAH Certificate of Incorporation in its current form prohibits
SPAH from consummating an initial business combination in which
SPAH public stockholders owning less than 30% (minus one share)
are unable to elect conversion. However, SPAH has made it a
condition to closing the merger agreement that holders of no
more than 10% of the shares (minus one share) sold in
SPAHs initial public offering vote against the merger and
exercise their conversion rights in order to ensure that the
combined company immediately following the consummation of the
merger has sufficient Tier 1 capital to return to
compliance levels. Accordingly, SPAH must amend the SPAH
Certificate of Incorporation immediately prior to presenting the
merger proposal for a vote at the special meeting of
stockholders to provide for this closing condition. |
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SPAH believes that the proposed merger is an extremely
attractive opportunity in the current market environment and
therefore, SPAH public stockholders should be given the
opportunity to consider the business combination. In considering
the Initial Charter Amendments, the SPAH Board came to the
conclusion that the potential benefits of the proposed merger
with Frontier to SPAH and its stockholders outweighed the
possibility of any liability described below as a result of this
amendment being approved. SPAH is offering holders of up to 10%
(minus one share) sold in SPAHs initial public offering,
the ability to affirmatively vote such shares against the merger
proposal and demand that such shares be converted into a pro
rata portion of the trust account. Accordingly, SPAH believes
that the Initial Charter Amendments are consistent with the
spirit in which SPAH offered its securities to the public. If
the requisite approval is received, the Initial Charter
Amendments will be filed with the Delaware Secretary of State
immediately upon their approval and prior to the
stockholders consideration of the merger proposal at the
special meeting of stockholders. |
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The SPAH Certificate of Incorporation purports to prohibit
amendments to certain of its provisions, including the proposed
Initial Charter Amendments, without the unanimous consent of the
holders of all of SPAHs outstanding shares of common
stock. However, SPAH believes, and has received an opinion from
its special |
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Delaware counsel that while the matter has not been settled as
a matter of Delaware law and, accordingly, is not entirely free
from doubt, the Initial Charter Amendments, if duly approved by
a majority of the shares of SPAHs outstanding common stock
entitled to vote at the special meeting, will be valid under
Delaware law. |
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Because the SPAH Certificate of Incorporation in its current
form does not allow for SPAH to complete the proposed merger and
SPAH is seeking to take certain action that may be inconsistent
with the disclosure provided in its initial public offering
prospectus, each SPAH public stockholder at the time of the
merger who purchased his or her shares in the initial public
offering or afterwards up to and until the record date, may have
securities law claims against SPAH for rescission (under which a
successful claimant has the right to receive the total amount
paid for his or her securities pursuant to an allegedly
deficient prospectus, plus interest and less any income earned
on the securities, in exchange for surrender of the securities)
or damages (compensation for loss on an investment caused by
alleged material misrepresentations or omissions in the sale of
a security). See The Merger and the Merger
Agreement Rescission Rights for additional
information. |
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Q: |
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Why is SPAH proposing the Subsequent Charter Amendments? |
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A: |
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If the merger agreement is approved and adopted by SPAH
stockholders, SPAH is proposing to amend the SPAH Certificate of
Incorporation to (i) change SPAHs corporate name from
SP Acquisition Holdings, Inc. to Frontier
Financial Corporation, (ii) permit SPAHs
continued corporate existence after October 10, 2009 and
(iii) create a new class of common stock of SPAH which will
have economic rights but no voting rights. SPAH is proposing the
Name Change Proposal because, in the event of a merger with
Frontier, SPAHs current name will not accurately reflect
its business operations. SPAH is proposing the Continued
Existence Proposal because under the SPAH Certificate of
Incorporation, SPAH must submit a proposal to amend the SPAH
Certificate of Incorporation to permit SPAHs continued
corporate existence at the same time SPAH submits a proposal to
stockholders to approve an initial business combination. SPAH
also believes continued existence is the usual period of
existence for most corporations. |
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SPAH is proposing the New Class Proposal to create a new
class of common stock, the Non-Voting Common Stock, that may be
issued to stockholders and/or warrantholders, following the
consummation of the merger, so that a stockholder or
warrantholder, in its election, may, for example, remain below
the ownership threshold which would subject them to regulation
as a bank holding company as described below. The terms of the
Non-Voting Common Stock are identical to the terms of
SPAHs voting common stock except that the Non-Voting
Common Stock has no voting rights and holders of such Non-Voting
Common Stock may convert their shares into an equal number of
shares of voting common stock, under certain circumstances. In
connection with the creation of the new class of Non-Voting
Common Stock, the SPAH Certificate of Incorporation would also
be amended so that holders of voting common stock may convert
their shares into shares of Non-Voting Common Stock without
limitation. |
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Under the BHC Act, a company that directly or indirectly owns,
controls or has the power to vote 25% or more of a class of
voting stock of a bank or a bank holding company is a bank
holding company for purposes of the BHC Act and is subject to
regulation as a bank holding company as described in the section
entitled Regulation and Supervision Federal
Bank Holding Company Regulation. In addition, a company
that directly or indirectly owns, controls or has the power to
vote 10% or more, but less than 25%, of a class of voting stock
of a bank or a bank holding company may be presumed to control
the bank and/or bank holding company. If the presumption of
control is not rebutted, the company is subject to the
regulation as a bank holding company as described in the section
entitled Regulation and Supervision Federal
Bank Holding Company Regulation. The presumption of
control may be rebutted by entering into a passivity agreement
with the Federal Reserve, which contains specific terms to limit
the ability to control the management and policies of the bank
and/or bank holding company. A company that owns, controls or
has the power to vote 10% or more, but less than 25%, of a class
of voting stock of a bank or a bank holding company and that
enters into a passivity agreement generally is not subject to
regulation as a bank holding company. A company that directly or
indirectly owns, controls or has the power to vote less than 10%
of any class of voting stock of a bank or a bank holding company
generally is not subject to regulation as a bank holding company. |
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Given these considerations, in order to permit investor
flexibility, SPAH is also requesting warrantholder approval at a
special meeting of warrantholders to amend the terms of the
Warrant Agreement, and intends to |
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amend certain agreements entered into with the SPAH insiders,
which govern the terms and conditions of the initial
founders warrants and additional founders warrants
(the Founders Agreements), to provide
warrantholders with the option to receive either voting shares
of SPAH common stock or shares of Non-Voting Common Stock in
certain situations. Amending the Warrant Agreement and
Founders Agreements will require the prior written consent
of the underwriters in SPAHs initial public offering,
which SPAH anticipates receiving prior to the closing of the
merger. |
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This Subsequent Charter Amendment is being proposed for the
benefit of SP Acq LLC and its affiliates, including the Steel
Trust, who otherwise would acquire more than 10% of the voting
securities of SPAH upon the exercise of their initial
founders warrants, additional founders warrants and
co-investment warrants following the consummation of the merger.
However, all stockholders and/or warrantholders will be
permitted to receive Non-Voting Common Stock at their election.
SP Acq LLC and the Steel Trust have separately agreed, pursuant
to letter agreements with SPAH, to receive Non-Voting Common
Stock upon exercise of their initial founders warrants,
additional founders warrants and co-investment warrants
following the consummation of the merger, as necessary in order
to maintain an ownership level of voting common stock below 5%
of the total outstanding shares of voting common stock. At their
discretion, SP Acq LLC and/or the Steel Trust will convert such
shares into voting common stock in accordance with the SPAH
Certificate of Incorporation, as amended by the Subsequent
Charter Amendments and upon a distribution of the shares by
Steel Trust to its beneficiaries, such shares will also be
converted into voting common stock in accordance with the SPAH
Certificate of Incorporation, as amended by the Subsequent
Charter Amendments. |
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Q: |
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What vote is needed to adopt the merger agreement and to
approve the other matters at the special meeting? |
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A: |
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Adoption of the merger agreement requires the affirmative vote
of the holders of a majority of the outstanding shares of SPAH
common stock entitled to vote at the special meeting. The SPAH
Certificate of Incorporation also requires that the holders of a
majority of SPAHs outstanding shares of common stock
issued in SPAHs initial public offering are voted, in
person or by proxy, in favor of the merger and that such SPAH
public stockholders owning no more than 30% (minus one share) of
the shares sold in SPAHs initial public offering vote
against the merger and thereafter exercise their conversion
rights as described below. If Proposal No. 2 is
approved and adopted, it is a condition to closing the merger
agreement that holders of no more than 10% of the shares (minus
one share) sold in SPAHs initial public offering vote
against the merger and exercise their conversion rights,
although at SPAHs discretion, this closing condition may
be waived in order to consummate the merger. Accordingly, SPAH
may not consummate the merger if 10% or more of the holders of
shares sold in or subsequent to SPAHs initial public
offering elect to exercise their conversion rights. If SPAH
elects to waive this closing condition, it may raise the
conversion threshold to anywhere between 10% to 30% (minus one
share). SPAH does not believe it will raise the conversion
threshold and currently intends only to raise the conversion
threshold if it believes that the combined entity will have
sufficient Tier 1 capital to return to compliance levels. |
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The SPAH Certificate of Incorporation purports to prohibit
amendments to certain of its provisions, including the proposed
Initial Charter Amendments, without the unanimous consent of the
holders of all of SPAHs outstanding shares of common
stock. However, SPAH believes, and has received an opinion from
its special Delaware counsel that while the matter has not been
settled as a matter of Delaware law and, accordingly, is not
entirely free from doubt, the Initial Charter Amendments, if
duly approved by a majority of the shares of SPAHs
outstanding common stock entitled to vote at the special
meeting, will be valid under Delaware law. |
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Adoption of the Subsequent Charter Amendments requires the
affirmative vote of a majority of the shares of SPAHs
outstanding common stock entitled to vote at the special
meeting. Directors will be elected by a plurality of the votes
cast by stockholders present in person or represented by proxy
and entitled to vote at the special meeting. |
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Q: |
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How do the SPAH insiders intend to vote their shares? |
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A: |
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The SPAH insiders have agreed to vote all of their 10,822,400
founders shares, which constitutes approximately 20% of
SPAHs outstanding shares of common stock, either for or
against the merger proposal |
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consistent with the majority of the votes cast on the merger by
the SPAH public stockholders. To the extent any SPAH insider or
officer of director of SPAH has acquired shares of SPAH common
stock in, or subsequent to, SPAHs initial public offering,
it, he or she has agreed to vote these acquired shares in favor
of the merger proposal. As of the date hereof, none of the SPAH
insiders or officers of directors of SPAH own any shares sold
in, or subsequent to, the SPAH initial public offering. The SPAH
insiders have further indicated that they will vote all of their
shares in favor of the adoption of the amendments to the SPAH
Certificate of Incorporation and for the election of each of the
director nominees to the SPAH Board. While the founders
shares voted by the SPAH insiders will count towards the voting
and quorum requirements under Delaware law, they will not count
towards the voting requirement under the SPAH Certificate of
Incorporation because the founders shares were not issued
in SPAHs initial public offering. As described below,
pursuant to a plan of reorganization, SP II has contributed
certain assets, including its shares of SPAH common stock and
warrants, to the Steel Trust. The trust has agreed to assume all
of SP IIs rights and obligations with respect to these
shares and warrants, including to vote in accordance with the
foregoing. |
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Upon consummation of the merger, SP Acq LLC has agreed to
forfeit 8,987,883 of its founders shares and
Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have
agreed to forfeit an aggregate of 465,530 of their
founders shares. |
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Q: |
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What will SPAH stockholders receive in the proposed
merger? |
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A: |
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SPAH stockholders will receive nothing in the merger. SPAH
stockholders will continue to hold the same number of shares of
SPAHs common stock that they owned prior to the merger,
except that upon consummation of the merger, SP Acq LLC has
agreed to forfeit 8,987,883 of its founders shares and
Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have
agreed to forfeit an aggregate of 465,530 of their
founders shares. |
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SPAH stockholders do not have appraisal rights in connection
with the merger under applicable Delaware law, but do have
conversion rights as described below. |
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Q: |
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What is the co-investment? |
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A: |
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In connection with the initial public offering, SP II previously
agreed to purchase an aggregate of 3,000,000
co-investment
units at $10.00 per unit ($30.0 million in the aggregate)
in a private placement that will occur immediately prior to the
consummation of the merger. Pursuant to a plan of
reorganization, SP II has contributed certain assets to the
Steel Trust, a liquidating trust established for the purpose of
effecting the orderly liquidation of such assets. As a result,
all of the founders shares and initial founders
warrants owned by SP II have been transferred to the Steel Trust
in a private transaction exempt from registration under the
Securities Act. The Steel Trust has agreed to assume all of SP
IIs rights and obligations with respect to the
founders shares and initial founders warrants, as
more fully described elsewhere in this joint proxy
statement/prospectus, including the obligation to purchase the
co-investment units. Since the agreement governing the
co-investment
and SPAHs initial public offering prospectus disclosed
that only SP II or SP Acq LLC may purchase the co-investment
units, SPAH will need the prior written consent of the
underwriters in its initial public offering to permit the Steel
Trust to make the co-investment. SPAH anticipates receiving this
consent prior to the closing of the merger. In addition, SPAH
public stockholders may have a securities law claim against SPAH
for rescission (under which a successful claimant has the right
to receive the total amount paid for his or her securities
pursuant to an allegedly deficient prospectus, plus interest and
less any income earned on the securities, in exchange for
surrender of the securities) or damages (compensation for loss
on an investment caused by alleged material misrepresentations
or omissions in the sale of a security), as described more fully
under The Merger and the Merger Agreement
Rescission Rights. |
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The units purchased in the co-investment will be identical to
the units sold in SPAHs initial public offering, except
that they will be subject to certain transfer restrictions. The
proceeds from the sale of the co-investment units will not be
received by SPAH until immediately prior to the consummation of
the merger. The proceeds from the sale of the co-investment
units will provide SPAH with additional equity capital to fund
the merger. If the merger is not consummated, the Steel Trust
will not purchase the co-investment units and no proceeds will
deposited into SPAHs trust account or available for
distribution to SPAHs stockholders in the event of a
liquidating distribution. |
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Q: |
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How much of SPAHs common stock will existing SPAH
stockholders own upon completion of the merger and
co-investment? |
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It depends. The percentage of SPAHs common stock (whether
voting or non-voting) that existing SPAH stockholders will own
after the merger and co-investment will vary depending on
whether: |
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any Frontier shareholder exercises
dissenters rights;
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any of SPAHs 66,624,000 outstanding
warrants (after reflecting the co-investment and merger) are
exercised; and
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any SPAH public stockholder exercises their
right to convert their shares into cash equal to a pro rata
portion of the SPAH trust account.
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Depending on the scenario, existing SPAH stockholders will own
from 94.5% to 96.1% of SPAHs common stock after the merger
and co-investment. |
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In addition to the foregoing, the percentage of SPAHs
voting common stock that existing SPAH stockholders will own
after the merger and co-investment will depend on whether: |
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any SPAH stockholder converts its voting
common stock into Non-Voting Common Stock; and
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any SPAH warrantholder elects to receive
shares of Non-Voting Common Stock in lieu of voting common stock
upon exercise of their warrants.
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SP Acq LLC and the Steel Trust have agreed to receive Non-Voting
Common Stock as necessary in order to maintain an ownership
level of voting common stock below 5% of the total outstanding
shares of voting. As a result, SPAH stockholders will hold from
94.3% to 95.3% of the voting interests of SPAH depending on
whether any Frontier shareholder exercises dissenters
rights, any of SPAHs warrants are exercised and whether
any SPAH public stockholders exercise their conversion rights.
At their discretion, SP Acq LLC and/or the Steel Trust will
convert such shares into voting common stock in accordance with
the SPAH Certificate of Incorporation, as amended by the
Subsequent Charter Amendments and, upon a distribution of the
shares by Steel Trust to its beneficiaries, such shares will
also be converted into voting common stock in accordance with
the SPAH Certificate of Incorporation, as amended by the
Subsequent Charter Amendments. |
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In addition, SPAH, the SPAH insiders, and/or certain of their
respective affiliates may negotiate arrangements to provide for
the purchase of shares from SPAH public stockholders who
indicate their intention to vote against the merger and seek
conversion or who otherwise wish to sell their shares. As a
result, SPAH stockholders voting interests may be further
increased or decreased accordingly in order for SP Acq LLC and
the Steel Trust to maintain an ownership level of voting common
stock below 5% of the total outstanding shares of voting common
stock. |
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For a table outlining the effect of the various scenarios on the
percentage of SPAHs common stock and voting interests that
existing SPAH stockholders will own after the merger with
Frontier is completed, see The Merger and the Merger
Agreement Stock Ownership of Existing SPAH and
Frontier Stockholders After the Merger. |
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Q: |
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Do the SPAH stockholders have conversion rights? |
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Generally, yes. If you hold shares of common stock issued in
SPAHs initial public offering (whether such shares were
acquired pursuant to such initial public offering or afterwards
up to and until the record date), then you have the right to
vote against the merger proposal and demand that SPAH convert
such shares into cash equal to a pro rata share of the aggregate
amount then on deposit in the trust account in which a
substantial portion of the net proceeds of SPAHs initial
public offering are held (before payment of deferred
underwriting discounts and commissions and including interest
earned on their pro rata portion of the trust account, net of
income taxes payable on such interest and net of interest income
of $3.5 million on the trust account balance previously
released to SPAH to fund its working capital requirements). We
sometimes refer to these rights to vote against the merger
proposal and demand conversion of the shares into a pro rata
portion of the SPAH trust account as conversion rights. |
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The SPAH Certificate of Incorporation in its current form
requires that no more than 30% (minus one share) of the SPAH
public stockholders vote against the merger and thereafter
exercise their conversion rights. If Proposal No. 2 is
approved and adopted, it is a condition to closing the merger
agreement that no more than 10% (minus one share) of the shares
held by SPAH public stockholders vote against the merger and
exercise their conversion rights, although at SPAHs
discretion, this closing condition may be waived in order to
consummate the merger. Accordingly, SPAH may not consummate the
merger if 10% or more of the holders of shares sold in or
subsequent to SPAHs initial public offering elect to
exercise their conversion rights. If SPAH elects to waive this
closing condition, it may raise the conversion threshold to
anywhere between 10% to 30% (minus one share). SPAH does not
believe it will raise the conversion threshold and currently
intends only to raise the conversion threshold if it believes
that the combined entity will have sufficient Tier 1
capital to return to compliance levels. If the merger is not
consummated and SPAH does not consummate a business combination
by October 10, 2009, SPAH will be required to dissolve and
liquidate and SPAH public stockholders voting against the merger
proposal who elected to exercise their conversion rights would
not be entitled to convert their shares. However, all SPAH
public stockholders would be entitled to participate in pro-rata
liquidation distributions from SPAHs trust account with
respect to their shares. |
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Q: |
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If I am a SPAH stockholder and have conversion rights, how do
I exercise them? |
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A: |
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If you wish to exercise your conversion rights, you must: |
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affirmatively vote against the merger
proposal in person or by submitting your proxy card before the
vote on the merger proposal and checking the box that states
Against for the merger proposal; and
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check the box that states I
HEREBY EXERCISE MY CONVERSION RIGHTS on the proxy card; or |
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send a letter to SPAHs
transfer agent, Continental Stock Transfer &
Trust Company, at 17 Battery Place, 8th Floor, New York, NY
10004, attn: Mark Zimkind, stating that you are exercising your
conversion rights and demanding your shares of SPAH common stock
be converted into cash; and
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either:
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physically tender, or if you hold
your shares of SPAH common stock in street name,
cause your broker to physically tender, your stock certificates
representing shares of SPAH common stock to SPAHs transfer
agent; or
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deliver your shares
electronically using the Depository Trust Companys
DWAC (Deposit/Withdrawal At Custodian) System, to SPAHs
transfer agent, in either case by
[ ],
2009 or such other later date if the special meeting of SPAH
stockholders is adjourned or postponed.
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Accordingly, a SPAH stockholder would have from the time we send
out this joint proxy statement/prospectus through the vote on
the merger to deliver his or her shares if he or she wishes to
seek to exercise his or her conversion rights. |
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Taking any action that does not include an affirmative vote
against the merger, including abstaining from voting on the
merger proposal, will prevent you from exercising your
conversion rights. However, voting against the merger proposal
does not obligate you to exercise your conversion rights. If the
merger is not consummated, no shares will be converted to cash
through the exercise of conversion rights. For more information,
see Summary Term Sheet The Merger and the
Merger Agreement SPAH Conversion Rights and
The Merger and the Merger Agreement Conversion
Rights of SPAH Stockholders. |
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Q: |
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Why has SPAH made it a condition to closing the merger
agreement and proposed to amend the SPAH Certificate of
Incorporation to provide that holders of no more than 10% of the
shares (minus one share) sold in SPAHs initial public
offering vote against the merger and exercise their conversion
rights when the threshold in the current form of the SPAH
Certificate of Incorporation requires no more than 30% (minus
one share)? |
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A: |
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SPAH has made it a condition to closing the merger agreement and
has proposed to amend the SPAH Certificate of Incorporation to
provide that holders of no more than 10% of the shares (minus
one share) sold in SPAHs initial public offering vote
against the merger and exercise their conversion rights in order
to ensure that the combined company immediately following the
consummation of the merger has sufficient Tier 1 capital to
return to compliance levels. Pursuant to the terms of the FDIC
Order, Frontier Bank is required to increase its Tier 1
capital in such an amount as to equal or exceed 10% of Frontier
Banks total assets by July 29, 2009 and to maintain
such capital level thereafter. If 10% or greater of SPAHs
public stockholders were to vote their shares against the merger
and demand that SPAH convert such shares into cash equal to a
pro rata share of the aggregate amount then on deposit in the
trust account, the funds remaining may not be sufficient to meet
Frontier Banks capital requirements. Accordingly, SPAH may
not consummate the merger if 10% or more of the holders of
shares sold in or subsequent to SPAHs initial public
offering elect to exercise their conversion rights. However, in
SPAHs sole discretion, this closing condition may be
waived in order to consummate the merger. If SPAH elects to
waive this closing condition, it may raise the conversion
threshold to anywhere between 10% to 30% (minus one share). SPAH
does not believe it will raise the conversion threshold and
currently intends only to raise the conversion threshold if it
believes that the combined entity will have sufficient
Tier 1 capital to return to compliance levels. SPAH has no
agreements or understandings regarding a minimum amount of funds
that must remain in the trust account upon closing of the
merger. SPAH and Frontier are currently in discussions with the
FDIC to determine appropriate capital levels. SPAH currently
intends to use cash from the trust fund to increase the capital
of Frontier Bank to a well capitalized bank after
payment (i) to SPAH public stockholders who properly
exercise their conversion rights, (ii) for deferred
underwriting fees, to the extent paid in cash, (iii) of
transaction fees and expenses associated with the merger, and
(iv) of working capital and general corporate expenses of
the combined company following the merger. In addition, the
funds released from the trust account may be used to purchase
shares held by SPAH public stockholders who intend to vote
against the merger and seek conversion or who otherwise wish to
sell their shares, provided, that such purchases will only be
made if sufficient Tier 1 capital will remain to return to
compliance levels. |
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The SPAH Certificate of Incorporation purports to prohibit
amendments to certain of its provisions, including
Proposal No. 2, without the unanimous consent of the
holders of all of SPAHs outstanding shares of common
stock. However, SPAH believes, and has received an opinion from
its special Delaware counsel that while the matter has not been
settled as a matter of Delaware law and, accordingly, is not
entirely free from doubt, the Initial Charter Amendments, if
duly approved by a majority of the shares of SPAHs
outstanding common stock entitled to vote at the special
meeting, will be valid under Delaware law. |
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Since SPAHs initial public offering prospectus did not
disclose that SPAH would seek approval of
Proposal No. 2, each SPAH stockholder at the time of
the merger that purchased shares in, or subsequent to,
SPAHs initial public offering up to and until the record
date, may have securities law claims against SPAH for rescission
or damages. See The Merger and the Merger
Agreement Rescission Rights for additional
information. |
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Q: |
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What are the federal income tax consequences of exercising my
conversion rights? |
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A: |
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SPAH stockholders who exercise their conversion rights and
convert their shares of SPAH common stock into the right to
receive cash from the trust account, will generally be required
to treat the transaction as a sale of the shares and to
recognize gain or loss upon the conversion. Such gain should be
capital gain or loss if such shares were held as a capital asset
on the date of the conversion, and will be measured by the
difference between the amount of cash received and the tax basis
of the shares of SPAH common stock converted. A
stockholders tax basis in its shares of SPAH common stock
generally will equal the cost of such shares. A stockholder who
purchased SPAH units will have to allocate the cost between the
shares of common stock and the warrants comprising the units
based on their relative fair market values at the time of the
purchase. See Material U.S. Federal Income Tax
Consequences Certain Federal Tax Consequences
to SPAH Stockholders. |
12
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Q: |
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Will I lose my warrants or will they be converted to shares
of common stock if the merger is consummated or if I exercise my
conversion rights? |
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A: |
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No. Neither consummation of the merger with Frontier nor
exercise of your conversion rights will result in the loss of
your warrants. Your warrants will continue to be outstanding
following consummation of the merger whether or not you exercise
your conversion rights. However, in the event that SPAH does not
consummate the merger with Frontier by October 10, 2009,
SPAH will be required to liquidate and any SPAH warrants you own
will expire without value. |
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Q: |
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What happens to the funds deposited in the SPAH trust account
after completion of the merger? |
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A: |
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Upon consummation of the merger, the funds deposited in the SPAH
trust account will be released (i) to pay SPAH public
stockholders who properly exercise their conversion rights,
(ii) to the underwriters in SPAHs initial public
offering who are entitled to receive approximately
$17.3 million of deferred underwriting discounts and
commissions currently held in SPAHs trust account, to the
extent paid in cash, provided, however, that SPAH
is in negotiation with its underwriters regarding the amount and
form of payment of such deferred underwriting fees from
SPAHs initial public offering and, as of the date hereof,
SPAH believes that the underwriting fees will be reduced by
approximately $3.65 million and SPAH will continue to
negotiate a further reduction of such fees until a mutual
settlement can be reached, (iii) to pay transaction fees
and expenses associated with the merger, and (iv) for
working capital and general corporate purposes of the combined
company following the merger. In addition, the funds released
from the trust account may be used to purchase shares held by
SPAH public stockholders who intend to vote against the merger
and seek conversion or who otherwise wish to sell their shares,
provided, that such purchases will only be made if sufficient
Tier 1 capital will remain to return to compliance levels. |
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Q: |
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What happens if the merger is not consummated or is
terminated? |
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A: |
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If SPAH does not effect the merger with Frontier by
October 10, 2009, SPAH must dissolve and liquidate. In any
liquidation, the funds held in the trust account, plus any
interest earned thereon (less any taxes due on such interest),
together with any remaining net assets not held in trust, will
be distributed pro rata to the SPAH public stockholders. The
SPAH insiders have waived their right to participate in any
liquidation distribution with respect to their shares.
Additionally, if we do not complete an initial business
combination and the trustee must distribute the balance of the
trust account, the underwriters have agreed to forfeit any
rights or claims to their deferred underwriting discounts and
commissions then in the trust account, and those funds will be
included in the pro rata liquidation distribution to the SPAH
public stockholders. |
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SPAH expects that all costs and expenses associated with
implementing a plan of distribution, as well as payments to any
creditors, will be funded from amounts remaining out of the
$100,000 of proceeds held outside the trust account and from the
$3.5 million in interest income on the balance of the trust
account that was released to SPAH to fund working capital
requirements. However, if those funds are not sufficient to
cover the costs and expenses associated with implementing a plan
of distribution, to the extent that there is any interest
accrued in the trust account not required to pay income taxes on
interest income earned on the trust account balance, SPAH may
request that the trustee release to it an additional amount of
up to $75,000 of such accrued interest to pay those costs and
expenses. |
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In addition, if the merger is not consummated, the SPAH
Certificate of Incorporation will not be amended pursuant to the
proposals to adopt the amendments to the SPAH Certificate of
Incorporation, the four (4) director nominees from Frontier
will not be appointed to the SPAH Board and the Steel Trust will
not purchase the co-investment units. |
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Frontier will pay to SPAH, an amount equal to $2,500,000 if the
merger agreement is terminated under certain circumstances,
including, but not limited to, if (i) SPAH terminates the
merger agreement due to a breach by Frontier, (ii) either
party terminates due to the failure of Frontier to obtain
stockholder approval, (iii) either party terminates due to
the failure to consummate the merger by December 31, 2009,
in the event SPAH extends its corporate life beyond
October 10, 2009, and, in the case of a termination under
clause (ii) or (iii) above, (x) there has been
publicly announced and not withdrawn another acquisition
proposal relating to Frontier or (y) Frontier has failed to
perform and comply in all material respects with any of its
obligations, agreements or covenants |
13
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required by the merger agreement, and within 12 months of
such termination Frontier either consummates another acquisition
transaction or enters into a definitive agreement with respect
to an acquisition transaction, (iv) SPAH terminates the
merger agreement due to the Frontier Board failing to support
the merger proposal or recommending any acquisition transaction
other than the merger. |
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Q: |
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Since SPAHs initial public offering prospectus
contained certain differences in what is being proposed at the
special meeting, what are my legal rights? |
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A: |
|
You should be aware that because SPAHs initial public
offering prospectus did not disclose that (i) SPAH may seek
to amend the SPAH Certificate of Incorporation prior to the
consummation of a business combination to amend the definition
of initial business combination to eliminate the
requirement that the fair market value of the target business
equal at least 80% of the balance of SPAHs trust account
(excluding underwriting discounts and commissions) plus the
proceeds of the co-investment, (ii) SPAH may seek to amend
the SPAH Certificate of Incorporation prior to the consummation
of a business combination to provide that holders of no more
than 10% of the shares (minus one share) sold in SPAHs
initial public offering vote against the merger and exercise
their conversion rights when the threshold in the current form
of the SPAH Certificate of Incorporation requires no more than
30% (minus one share), (iii) SPAH may seek to amend the
Warrant Agreement upon consummation of the merger to eliminate
the requirement that the initial founders warrants owned
by certain SPAH insiders become exercisable only after the
consummation of an initial business combination if and when the
last sales price of SPAH common stock exceeds $14.25 per share
for any 20 trading days within a 30 trading day period beginning
90 days after such business combination, (iv) funds in
its trust account might be used, directly or indirectly, to
purchase shares following the consummation of the merger from
SPAH public stockholders in order to secure the approval of the
merger, (v) that SPAH may seek to amend the terms of the
Warrant Agreement to increase the exercise price and extend the
exercise period, among other things, upon consummation of the
merger, and (vi) that a party other than SP II or SP Acq
LLC may purchase the co-investment units, each SPAH public
stockholder at the time of the merger that purchased shares in,
or subsequent to, SPAHs initial public offering up to and
until the record date, may have securities law claims against
SPAH for rescission (under which a successful claimant has the
right to receive the total amount paid for his or her securities
pursuant to an allegedly deficient prospectus, plus interest and
less any income earned on the securities, in exchange for
surrender of the securities) or damages (compensation for loss
on an investment caused by alleged material misrepresentations
or omissions in the sale of a security). Such claims may entitle
stockholders asserting them to up to $10.00 per share, based on
the initial offering price of the units, each comprised of one
share of common stock and a warrant exercisable for an
additional share of common stock, less any amount received from
the sale of the original warrants purchased with them, plus
interest from the date of SPAHs initial public offering
(which, in the case of SPAH public stockholders, may be more
than the pro rata share of the trust account to which they are
entitled if they exercise their conversion rights or if SPAH
liquidates). See The Merger and the Merger
Agreement Actions That May Be Taken to Secure
Approval of SPAH Stockholders, and The Merger and
the Merger Agreement Rescission Rights for
additional information. |
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Q: |
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What will happen if I abstain from voting or fail to vote at
the special meeting? |
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A: |
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SPAH will count a properly executed proxy marked
ABSTAIN with respect to a particular proposal as
present for purposes of determining whether a quorum is present.
For purposes of approval, an abstention or failure to vote on
the merger will have the same effect as a vote
AGAINST the proposal but will preclude you from
having your shares converted into a pro rata portion of the
trust account. In order to exercise your conversion rights, you
must cast a vote against the merger, make an election on the
proxy card to convert such shares of common stock or submit a
request in writing to SPAHs transfer agent at the address
listed on page 104, and deliver your shares to SPAHs
transfer agent physically or electronically through DTC prior to
the special meeting. |
14
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An abstention from voting on the amendments to the SPAH
Certificate of Incorporation will have the same effect as a vote
AGAINST the proposals. Abstentions will not count
either in favor of, or against, election of a director nominee. |
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Q: |
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What will happen if I sign and return my proxy card without
indicating how I wish to vote? |
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A: |
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Signed and dated proxies received by SPAH without an indication
of how the stockholder intends to vote on a proposal will be
voted in favor of each proposal presented to the stockholders,
as the case may be. |
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Stockholders will not be entitled to exercise their conversion
rights if such stockholders return proxy cards to SPAH without
an indication of how they desire to vote with respect to the
merger proposal or, for stockholders holding their shares in
street name, if such stockholders fail to provide
voting instructions to their banks, brokers or other nominees. |
15
QUESTIONS
AND ANSWERS FOR SPAH WARRANTHOLDERS
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Q: |
|
When and where is the SPAH special meeting of
warrantholders? |
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A: |
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The special meeting of SPAH warrantholders will be held on
[ ],
[ ],
2009 at [ ]:00 [ ].m., local time, at
[ ]. |
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Q: |
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How can I attend the special meeting? |
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A: |
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Warrantholders as of the close of business on September 17,
2009, and those who hold a valid proxy for the special meeting
are entitled to attend the special meeting. Warrantholders
should be prepared to present photo identification for
admittance. In addition, names of record holders will be
verified against the list of record holders on the record date
prior to being admitted to the meeting. Warrantholders who are
not record holders but who hold shares through a broker or
nominee (i.e., in street name), should provide proof of
beneficial ownership on the record date, such as a most recent
account statement prior to
[ ],
2009, or other similar evidence of ownership. If warrantholders
do not provide photo identification or comply with the other
procedures outlined above upon request, they will not be
admitted to the special meeting. |
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The special meeting of warrantholders will begin promptly at
[ ] [ ].m., local time.
Check-in will begin at [ ] [ ].m., local
time, and you should allow ample time for the check-in
procedures. |
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Q: |
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What am I being asked to vote upon? |
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A: |
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At the special meeting, warrantholders will consider and vote
upon a proposal to amend certain terms of the Warrant Agreement,
in connection with the consummation of the transactions
contemplated by the merger agreement, which provides for the
merger of Frontier with and into SPAH, with SPAH being the
surviving entity. Immediately following the consummation of the
merger, SPAH will change its name to Frontier Financial
Corporation and be headquartered in Everett, Washington. |
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The proposed amendment to the Warrant Agreement, to become
effective upon consummation of the merger, will: |
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increase the exercise price of the warrants
from $7.50 per share to $11.50 per share of SPAH common stock;
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amend the warrant exercise period to
(i) eliminate the requirement that the initial
founders warrants owned by the SPAH insiders become
exercisable only after the consummation of an initial business
combination if and when the last sales price of SPAH common
stock exceeds $14.25 per share for any 20 trading days within a
30 trading day period beginning 90 days after such business
combination and (ii) extend the expiration date of the
warrants to the earlier of (x) seven years from the
consummation of the merger or (y) the date fixed for
redemption of the warrants set forth in the warrant agreement;
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provide for the mandatory downward adjustment
of the exercise price for each warrant to reflect any cash
dividends paid with respect to the outstanding common stock of
SPAH;
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provide that, in the event an effective
registration statement is not in place on the date the warrants
are set to expire, the warrants will remain outstanding until
90 days after an effective registration statement is filed,
provided, that if SPAH has not filed an effective registration
statement within 90 days after the expiration date, the
warrants shall become exercisable for cash consideration;
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provide that no adjustment in the number of
shares issuable upon exercise of each warrant will be made as a
result of the issuance of SPAH shares and warrants to the
shareholders of Frontier upon consummation of the merger
agreement; and
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provide that each warrant will entitle the
holder thereof to purchase, in its sole discretion, either one
share of voting common stock or one share of Non-Voting Common
Stock.
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At the special meeting, we may transact such other business as
may properly come before the special meeting or any adjournments
or postponements thereof. |
16
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Q: |
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Why is SPAH amending the warrants? |
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A: |
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SPAH believes increasing the exercise price, extending the
expiration date, providing for a mandatory downward adjustment
of the exercise price under certain circumstances, extending the
expiration date if an effective registration statement is not in
place and providing that no adjustment in the number of shares
issuable upon exercise of the warrants will be made upon
consummation of the merger, is appropriate given the change in
structure of SPAH following completion of the merger. In
addition, SPAH is proposing to amend the warrant exercise period
to eliminate the requirement that the initial founders
warrants owned by the SPAH insiders become exercisable only
after the consummation of an initial business combination if and
when the last sales price of SPAH common stock exceeds $14.25
per share for any 20 trading days within a 30 trading day period
beginning 90 days after such business combination, in light
of the forfeiture of 9,453,412 founders shares by SP Acq
LLC and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker
upon consummation of the merger. As a result, if the warrant
amendment is approved, the initial founders warrants will
become exercisable upon consummation of the merger, but the sale
of such warrants or the shares underlying the warrants will
still be subject to a one-year
lock-up from
the date we consummate the merger. This amendment will require
the prior written consent of the underwriters in SPAHs
initial public offering, which SPAH anticipates receiving prior
to the closing of the merger. We are further requesting
warrantholder approval at the special meeting to provide
warrantholders with the option to receive, in their sole
discretion, upon exercise of their warrants, either voting
shares of SPAH common stock or shares of Non-Voting Common
Stock, such that the holder thereof would not exceed the
ownership threshold which would make it subject to the
regulation as a bank holding company as described in the section
entitled Supervision and Regulation Federal
Bank Holding Company Regulation. SP Acq LLC and the Steel
Trust have separately agreed, pursuant to letter agreements with
SPAH, to receive Non-Voting Common Stock upon exercise of their
initial founders warrants, additional founders
warrants and co-investment warrants following the consummation
of the merger, as necessary in order to maintain an ownership
level of voting common stock below 5% of the total outstanding
shares of voting common stock. At their discretion, SP Acq LLC
and/or the Steel Trust will convert such shares into voting
common stock in accordance with the SPAH Certificate of
Incorporation, as amended by the Subsequent Charter Amendments
and upon a distribution of the shares by Steel Trust to its
beneficiaries, such shares will also be converted into voting
common stock in accordance with the SPAH Certificate of
Incorporation, as amended by the Subsequent Charter Amendments. |
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If the merger is not consummated and SPAH does not complete a
different business combination by October 10, 2009, the
warrants will expire worthless. If the warrant amendment
proposal is approved, all other terms of SPAHs warrants
will remain the same. The approval of the warrant amendment
proposal is a condition to the consummation of the merger. |
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Q: |
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What vote is required to approve the amendment? |
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A: |
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On the record date, there were 61,112,000 warrants of SPAH
outstanding, including 3,982,016 warrants forming part of units
of SPAH. You will have one vote at the meeting for each warrant
of SPAH stock you owned on the record date. Adoption of the
amendment to the Warrant Agreement requires the affirmative vote
of a majority of the warrantholders outstanding and entitled to
vote at the special meeting. The Warrant Agreement also requires
that the holders of a majority of SPAHs outstanding
warrants issued in, or subsequent to, SPAHs initial public
offering (43,789,600 warrants), are voted in favor of the
warrant amendment. The approval of the amendment proposal is
also a condition to the consummation of the merger discussed
above. |
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Q: |
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How do the holders of the initial founders warrants and
additional founders warrants intend to vote their
warrants? |
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A: |
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The SPAH insiders intend to vote their initial founders
warrants and additional founders warrants in favor of the
warrant amendment proposal. While the warrants voted by the SPAH
insiders will count towards the voting and quorum requirements
under Delaware law, they will not count towards the voting
requirement under the Warrant Agreement, which requires that the
holders of a majority of SPAHs outstanding warrants issued
in, or subsequent to, SPAHs initial public offering, are
voted in favor of the warrant amendment, because the initial
founders warrants and additional founders warrants
were not issued in SPAHs initial public offering. |
17
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Q: |
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What happens if the merger is not consummated or is
terminated? |
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A: |
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If the merger is not consummated or terminated, the Warrant
Agreement will not be amended as contemplated by the warrant
amendment proposal and the Steel Trust will not purchase the
co-investment units. If SPAH does not effect the merger with
Frontier by October 10, 2009, SPAH must dissolve and
liquidate. If SPAH must liquidate, there will be no distribution
from the trust account with respect to any of the warrants and
the warrants will expire worthless. |
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Q: |
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What are the U.S. federal income tax consequences of the
amendment? |
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A: |
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For U.S. federal income tax purposes, if the terms of the
warrants are amended, a warrantholder will be treated as
exchanging his or her old warrants for
new warrants in connection with the consummation of
the transactions contemplated by the merger agreement. We expect
the merger to qualify as a reorganization for U.S. federal
income tax purposes. If the merger qualifies as a reorganization
for U.S. federal income tax purposes, a warrantholder will not
recognize any gain or loss on the deemed exchange of his or her
old warrants for new warrants as a result of the amendment. |
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Q: |
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What will happen if I abstain from voting or fail to vote at
the special meeting? |
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A: |
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SPAH will count a properly executed proxy marked
ABSTAIN with respect to the warrant amendment
proposal present for purposes of determining whether a quorum is
present. For purposes of approval, an abstention or failure to
vote on the warrant amendment proposal will have the same effect
as a vote AGAINST the proposal. |
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Q: |
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What will happen if I sign and return my proxy card without
indicating how I wish to vote? |
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A: |
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Signed and dated proxies received by SPAH without an indication
of how the warrantholder intends to vote on the warrant
amendment proposal will be voted in favor of the proposal. |
18
QUESTIONS
AND ANSWERS FOR FRONTIER SHAREHOLDERS
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Q: |
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When and where is the Frontier special meeting of
shareholders? |
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A: |
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The special meeting of Frontier shareholders will be held on
[ ],
[ ],
2009 at [ ]:00
[ ].m., local time, at
[ ]. |
|
Q: |
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How can I attend the Frontier special meeting? |
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A: |
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Frontier shareholders as of the close of business on
September 17, 2009, and those who hold a valid proxy for
the special meeting are entitled to attend the Frontier special
meeting. Frontier shareholders should be prepared to present
photo identification for admittance. In addition, names of
record holders will be verified against the list of record
holders on the record date prior to being admitted to the
meeting. Frontier shareholders who are not record holders but
who hold shares through a broker or nominee (i.e., in street
name), should provide proof of beneficial ownership on the
record date, such as a most recent account statement prior to
[ ],
2009, or other similar evidence of ownership. If Frontier
shareholders do not provide photo identification or comply with
the other procedures outlined above upon request, they will not
be admitted to the Frontier special meeting. |
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The Frontier special meeting will begin promptly at
[ ]
[ ].m., local time. Check-in will
begin at [ ]
[ ].m., local time, and you should
allow ample time for the check-in procedures. |
|
Q: |
|
What am I being asked to vote upon? |
|
A: |
|
The Frontier special meeting is being called to consider and
vote upon a proposal to adopt the merger agreement pursuant to
which Frontier will merge with and into SPAH, with SPAH being
the surviving entity. Immediately following the consummation of
the merger, SPAH will change its name to Frontier Financial
Corporation and be headquartered in Everett, Washington. At the
special meeting, we may transact such other business as may
properly come before the special meeting or any adjournments or
postponements thereof. |
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Q: |
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What vote is required to approve the merger? |
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A: |
|
Approval of the merger agreement requires the affirmative vote
of at least two-thirds of the outstanding shares of
Frontiers common stock. As of the record date, there were
[ ] shares
of Frontier common stock outstanding. Because at least
two-thirds of all outstanding shares is required to approve the
merger, your failure to vote will have the same effect as a vote
against the merger proposal. |
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Q: |
|
What will Frontier shareholders receive in the merger? |
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A: |
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Each issued and outstanding share of Frontier common stock you
own will be converted into 0.0530 newly issued shares of SPAH
common stock and 0.0530 newly issued warrants. Based on the
closing price of SPAHs common stock on July 28, 2009
of $9.73, which was the last trading day prior to the date of
the signing of the merger agreement, Keefe Bruyette calculated
an implied consideration of $0.51569 per share of Frontier
common stock. However, based on current market prices, the
implied consideration may be less than the market price of
Frontier common stock. |
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Contemporaneously with the Frontier special meeting of
stockholders, SPAH has scheduled a special meeting of
warrantholders to consider and vote upon a proposal to amend
certain terms of the Warrant Agreement that governs the terms of
SPAHs outstanding warrants, as more fully described in
The Special Meeting of SPAH Warrantholders and the Warrant
Amendment Proposal. If the merger is consummated, Frontier
shareholders will receive newly issued warrants on the same
terms and conditions as the publicly traded warrants, after
giving effect to the warrant amendment proposal. |
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No fractional shares of SPAH common stock or warrants will be
issued to any holder of Frontier common stock in the merger. If
a holder of shares of Frontier common stock exchanged pursuant
to the merger would be entitled to receive a fractional interest
of a share of SPAH common stock or warrant, SPAH will round up
or down the number of common stock of SPAH or warrants to be
issued to the Frontier shareholder to the nearest whole number
of shares of common stock. |
19
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Q: |
|
What if I have Frontier stock options, restricted stock or
stock appreciation rights? |
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A: |
|
Upon completion of the merger, each award, option, or other
right to purchase or acquire shares of Frontier common stock
pursuant to stock options, stock appreciation rights, or stock
awards granted by Frontier under Frontiers stock incentive
plans, equity compensation plans and stock option plans, which
are outstanding immediately prior to the merger, whether or not
vested, will be cancelled. As of September 17, 2009, there
were 253,154 shares of Frontier restricted stock
outstanding, with an aggregate value of
$[ ], each of which will vest at
the time of the merger, and be converted into and become rights
with respect to SPAH common stock. Frontiers directors,
executive officers and their affiliates own 1,879 shares of
such restricted stock. |
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Q: |
|
Will Frontier shareholders be taxed on the SPAH common stock
and SPAH warrants that they receive in exchange for their
Frontier shares? |
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A: |
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No. We expect the merger to qualify as a reorganization for
U.S. federal income tax purposes. If the merger qualifies as a
reorganization for U.S. federal income tax purposes, Frontier
shareholders will not recognize any gain or loss to the extent
Frontier shareholders receive SPAH common stock and SPAH
warrants in exchange for their Frontier shares. We recommend
that Frontier shareholders carefully read the complete
explanation of the material U.S. federal income tax consequences
of the merger as set forth under Material U.S. Federal
Income Tax Consequences, and that Frontier shareholders
consult their tax advisors for a full understanding of the tax
consequences of their participation in the merger. |
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Q: |
|
How much of SPAHs common stock will Frontier
shareholders own upon completion of the merger and
co-investment? |
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A: |
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It depends. The percentage of Frontiers common stock
(whether voting or non-voting) that existing Frontier
shareholders will own after the merger and co-investment will
vary depending on whether: |
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any Frontier shareholder exercises
dissenters rights;
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any of SPAHs 66,624,000 outstanding
warrants (after reflecting the co-investment and merger) are
exercised; and
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any SPAH public stockholder exercises their
right to convert their shares into cash equal to a pro rata
portion of the SPAH trust account.
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Depending on the scenario, the existing Frontier shareholders
will own from 3.9% to 5.5% of SPAHs common stock after the
merger and co-investment. |
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In addition to the foregoing, the percentage of SPAHs
voting common stock that existing Frontier shareholders will own
after the merger and co-investment will depend on whether: |
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any SPAH stockholder converts its voting
common stock into Non-Voting Common Stock; and
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any SPAH warrantholder elects to receive
shares of Non-Voting Common Stock in lieu of voting common stock
upon exercise of their warrants.
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SP Acq LLC and the Steel Trust have agreed to receive Non-Voting
Common Stock as necessary in order to maintain an ownership
level of voting common stock below 5% of the total outstanding
shares of voting. As a result, Frontier shareholders will hold
from 4.7% to 5.7% of the voting interests of SPAH depending on
whether any Frontier shareholder exercises dissenters
rights, any of SPAHs warrants are exercised and whether
any SPAH public stockholders exercise their conversion rights.
In addition, SPAH, the SPAH insiders, and/or certain of their
respective affiliates may negotiate arrangements to provide for
the purchase of shares from SPAH public stockholders who
indicate their intention to vote against the merger and seek
conversion or who otherwise wish to sell their shares. As a
result, Frontier shareholders voting interests may be
further increased or decreased accordingly in order for SP Acq
LLC and the Steel Trust to maintain an ownership level of voting
common stock below 5% of the total outstanding shares of voting
common stock. |
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For a table outlining the effect of the various scenarios on the
percentage of SPAHs common stock and voting interests that
existing Frontier shareholders will own after the merger with
Frontier is completed, see The |
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Merger and the Merger Agreement Stock Ownership of
Existing SPAH and Frontier Stockholders After the Merger. |
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Do I have dissenters rights in respect of the
merger? |
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Yes. If you (i) do not vote in favor of the adoption of the
merger agreement and (ii) deliver to Frontier before the
special meeting a written notice of dissent and otherwise comply
with the requirements of Washington law, you will be entitled to
assert dissenters rights. A shareholder electing to
dissent from the merger must strictly comply with all procedures
required under Washington law. These procedures are described
more fully under the heading The Merger and the Merger
Agreement Frontier Dissenters Rights,
and a copy of the relevant Washington statutory provisions
regarding dissenters rights is included in this joint
proxy statement/prospectus as Annex F. |
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What are the U.S. federal income tax consequences of
exercising my dissenters rights? |
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The payment of cash to a Frontier shareholder, who exercises his
or her dissenters rights with respect to such
shareholders shares of Frontier, will give rise to capital
gain or loss equal to the difference between such
shareholders tax basis in those shares and the amount of
cash received in exchange for those shares. |
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How do the Frontier insiders intend to vote their shares? |
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Each of the Frontiers insiders has agreed to vote their
3,103,451 shares of Frontier common stock (which constitute
6.56% of Frontiers outstanding shares of common stock),
FOR the merger proposal. |
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Should I send in my share certificates now? |
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No. You should not send in your share certificates at this
time. Promptly after the effective time of the merger, you will
receive transmittal materials with instructions for surrendering
your Frontier shares. You should follow the instructions in the
post-closing letter of transmittal regarding how and when to
surrender your stock certificates. |
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What will happen if I abstain from voting or fail to vote at
the special meeting? |
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Frontier will count a properly executed proxy marked
ABSTAIN with respect to the merger proposal as
present for purposes of determining whether a quorum is present.
For purposes of approval, an abstention or failure to vote on
the merger will have the same effect as a vote
AGAINST the proposal but will preclude you from
exercising your dissenter rights. In order to exercise
your dissenters rights, you must cast a vote against the
merger, deliver to Frontier before the special meeting a written
notice of dissent and otherwise comply with the requirements of
Washington law. |
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What will happen if I sign and return my proxy card without
indicating how I wish to vote? |
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Signed and dated proxies received by Frontier without an
indication of how the shareholder intends to vote on the merger
proposal will be voted in favor of the merger. |
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Shareholders will not be entitled to exercise their
dissenters rights if such shareholders return proxy cards
to Frontier without an indication of how they desire to vote
with respect to the merger proposal or, for shareholders holding
their shares in street name, if such shareholders
fail to provide voting instructions to their banks, brokers or
other nominees. |
21
SUMMARY
TERM SHEET
This summary highlights selected information from this joint
proxy statement/prospectus. It does not contain all of the
information that you should consider before deciding how to vote
on any of the proposals described herein. You should read
carefully the more detailed information set forth under
Risk Factors and the other information included in
this proxy statement/prospectus.
The
Companies (pages 118 and 143)
SPAH.
SPAH is a blank check company organized under the laws of the
State of Delaware on February 14, 2007 to effect an
acquisition, through a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or other similar
business combination, of one or more businesses or assets.
SPAHs units, common stock and warrants are currently
quoted on the NYSE AMEX LLC under the symbols DSP.U,
DSP, and DSP.W, respectively.
SPAHs principal executive office is located at 590 Madison
Avenue, 32nd Floor, New York, New York 10022, and its
telephone number is
(212) 520-2300.
Frontier.
Frontier is a Washington corporation which was incorporated in
1983 and is registered as a bank holding company under the BHC
Act. Frontier has one operating subsidiary, Frontier Bank, which
is engaged in a general banking business and in businesses
related to banking. Frontier common stock is quoted on the
NASDAQ Stock Market LLC under the symbol FTBK.
Frontiers principal executive offices are located at 332
S.W. Everett Mall Way, P.O. Box 2215, Everett,
Washington 98213 and its telephone number is
(425) 347-0600.
Recent
Developments (page 155)
Frontier. On March 20, 2009, Frontier
Bank entered into a Stipulation and Consent to the Issuance of
an Order to Cease and Desist (the FDIC Order) with
the Federal Deposit Insurance Corporation (the FDIC)
and the Washington Department of Financial Institutions (the
Washington DFI). The regulators alleged that
Frontier Bank had engaged in unsafe or unsound banking practices
by operating with inadequate management and board supervision;
engaging in unsatisfactory lending and collection practices;
operating with inadequate capital in relation to the kind and
quality of assets held at Frontier Bank; operating with an
inadequate loan valuation reserve; operating with a large volume
of poor quality loans; operating in such a manner as to produce
low earnings and operating with inadequate provisions for
liquidity. By consenting to the FDIC Order, Frontier Bank
neither admitted nor denied the alleged charges.
Under the terms of the FDIC Order, Frontier Bank cannot declare
dividends or pay any management, consulting or other fees or
funds to Frontier, without the prior written approval of the
FDIC and the Washington DFI. Other material provisions of the
FDIC Order require Frontier Bank to: (1) review the
qualifications of Frontier Banks management,
(2) provide the FDIC with 30 days written notice prior
to adding any individual to the Board of Directors of Frontier
Bank (the Frontier Bank Board) or employing any
individual as a senior executive officer, (3) increase
director participation and supervision of Frontier Bank affairs,
(4) improve Frontier Banks lending and collection
policies and procedures, particularly with respect to the
origination and monitoring of real estate construction and land
development loans, (5) develop a capital plan and increase
Tier 1 leverage capital to 10% of Frontier Banks
total assets by July 29, 2009, and maintain that capital
level, in addition to maintaining a fully funded allowance for
loan losses satisfactory to the regulators, (6) implement a
comprehensive policy for determining the adequacy of the
allowance for loan losses and limiting concentrations in
commercial real estate and acquisition, development and
construction loans, (7) formulate a written plan to reduce
Frontier Banks risk exposure to adversely classified loans
and nonperforming assets, (8) refrain from extending
additional credit with respect to loans charged-off or
classified as loss and uncollected, (9) refrain
from extending additional credit with respect to other adversely
classified loans without collecting all past due interest,
without the prior approval of a majority of the directors on the
Frontier Bank Board or its loan committee, (10) develop a
plan to control overhead and other expenses to restore
profitability, (11) implement a liquidity and funds
management policy to reduce Frontier Banks reliance on
brokered deposits and other non-core funding sources, and
(12) prepare and submit
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progress reports to the FDIC and the Washington DFI. The FDIC
Order will remain in effect until modified or terminated by the
FDIC and the Washington DFI.
The FDIC Order does not restrict Frontier Bank from transacting
its normal banking business. Frontier Bank will continue to
serve its customers in all areas including making loans,
establishing lines of credit, accepting deposits and processing
banking transactions. Customer deposits remain fully insured to
the highest limits set by FDIC. The FDIC and Washington DFI did
not impose any monetary penalties in connection with the FDIC
Order.
In addition, on July 2, 2009, Frontier entered into a
Written Agreement (the FRB Written Agreement) with
the Federal Reserve Bank of San Francisco (the
FRB). Under the terms of the FRB Written Agreement,
Frontier has agreed to: (i) refrain from declaring or
paying any dividends without prior written consent of the FRB;
(ii) refrain from taking dividends or any other form of
payment that represents a reduction in capital from Frontier
Bank without prior written consent of the FRB;
(iii) refrain from making any distributions of interest or
principal on subordinated debentures or trust preferred
securities without prior written consent of the FRB;
(iv) refrain from incurring, increasing or guaranteeing any
debt without prior written consent of the FRB; (v) refrain
from purchasing or redeeming any shares of its stock without
prior written consent of the FRB; (vi) implement a capital
plan and maintain sufficient capital; (vii) comply with
notice and approval requirements established by the FRB relating
to the appointment of directors and senior executive officers as
well as any change in the responsibility of any current senior
executive officer; (viii) not pay or agree to pay any
indemnification and severance payments except under certain
circumstances, and with the prior approval of the FRB; and
(ix) provide quarterly progress reports to the FRB.
Frontier Bank and the Frontier Bank Board also entered into an
informal supervisory agreement, called a memorandum of
understanding (Memorandum of Understanding) with the
FDIC dated August 20, 2008 relating to the correction of
certain violations of applicable consumer protection and fair
lending laws and regulations, principally including the failure
to provide certain notices to consumers pursuant to the Flood
Disaster Protection Act of 1973, and certain violations of the
Truth in Lending Act and Regulation Z.
The Memorandum of Understanding requires Frontier Bank and the
Frontier Bank Board to (i) correct all violations found and
implement procedures to prevent their recurrence;
(ii) increase oversight of the Frontier Bank Boards
compliance function, including monthly reports from Frontier
Banks compliance officer to the Frontier Bank Board
detailing actions taken to comply with the Memorandum of
Understanding; (iii) review its compliance policies and
procedures and develop and implement detailed operating
procedures and controls, where necessary, to ensure compliance
with all consumer protection laws and regulations;
(iv) establish monitoring procedures to ensure compliance
with all consumer protection laws and regulations (including
flood insurance), including the documentation and reporting of
all exceptions to the Frontier Bank Board and its audit
committee; (v) review, expand and improve the quality of
such compliance with the frequency of compliance audits to be
reviewed and approved annually by the Frontier Bank Board or
audit committee, with a goal of auditing compliance at least
annually; (vi) ensure that Frontier Banks compliance
management function has adequate staff, resources, training and
authority for the size and structure of Frontier Bank;
(vii) establish flood insurance monitoring procedures to
ensure loans are not closed without flood insurance and prior
notices to customers required by law, that lapses of flood
insurance do not occur, and to develop methods to ensure that
adequate amounts of flood insurance are provided, with Frontier
Bank agreeing to force place flood insurance when
necessary; (viii) provide additional training for all
Frontier Bank personnel, including the Frontier Bank Board and
audit and compliance staff for applicable laws and regulations;
and (ix) furnish quarterly progress reports to the Regional
Director of the FDIC detailing the actions taken to secure
compliance with the Memorandum of Understanding until the
Regional Director has released the institution, in writing, from
submitting further reports. Frontier Bank was assessed civil
monetary penalties of $48,895 for flood insurance violations and
required to pay $10,974 in restitution to customers for certain
violations of the Truth in Lending Act and Regulation Z.
Frontier has been actively engaged in responding to the concerns
raised in the FDIC Order, the FRB Agreement and the Memorandum
of Understanding and believes it has addressed all the
regulators requirements and that it is in compliance with
all the terms of these regulatory actions, with the exception of
increasing Tier 1 leverage capital to 10% of the
Banks total assets. As of June 30, 2009,
Frontiers Tier 1 leverage capital ratio was 6.49%.
With the consummation of the merger, Frontier believes it can
increase its Tier 1 capital to compliance levels.
Frontiers
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efforts to raise additional capital began in the third quarter
of 2008, when the Frontier Board retained Sandler
ONeill & Partners, L.P. (Sandler
ONeill) to assist in raising capital and
deleveraging Frontiers balance sheet. Frontiers
ability to raise additional capital has been adversely affected
by unfavorable conditions in the capital markets and
Frontiers financial performance, and Frontier has not been
able to raise additional capital to date. If Frontier cannot
raise additional capital, continue to shrink its balance sheet
and/or enter
into a strategic merger or sale, Frontier may not be able to
sustain further deterioration in its financial condition and
further regulatory actions or restrictions may be taken against
Frontier, including monetary penalties and the potential closure
of Frontier Bank.
These regulatory actions may adversely affect Frontiers
ability to obtain regulatory approval for future initiatives
requiring regulatory action, such as acquisitions. The
regulatory actions will remain in effect until modified or
terminated by the regulators.
It is a condition to closing the merger that each of
(i) the FDIC Order, (ii) the FRB Written Agreement,
and (iii) Memorandum of Understanding, will have to be
modified in a manner reasonably acceptable to SPAH, including
the elimination of certain provisions and consequences related
thereto. Although no final decisions have been made as to the
specific provisions that must be modified, it is anticipated
that SPAH would seek relief from limitations in the FDIC Order
on the ability of Frontier Bank to pay dividends to Frontier,
and similarly, relief from the FRB Written Agreement on the
ability of Frontier to pay dividends to its shareholders. In
addition, SPAH would anticipate seeking relief from the FDIC and
the FRB requirements to seek prior approval for changes in
senior officers and directors of Frontier Bank and Frontier,
respectively. SPAH also anticipates seeking relief from
restrictions in the FDIC Order on Frontier Banks ability
to extend additional credit with respect to borrowers whose
loans are adversely classified or classified as a loss and
uncollected. Additional modifications may be sought depending
upon further discussions with the regulatory agencies. At the
present time, Frontier has not received any indication from any
of the regulatory agencies that such modifications will be
forthcoming and does not have any agreements, formal or
otherwise, regarding the consequences of failing to consummate
the merger with SPAH.
Following the consummation of the merger, as part of the
analysis performed in conjunction with the acquisition method of
accounting based on SFAS 141(R), SPAH intends to write down
approximately $200 million of Frontier non-performing loans.
The
Merger and the Merger Agreement (page 62)
SPAH and Frontier have agreed to combine their businesses under
the terms of the merger agreement that is described in this
joint proxy statement/prospectus. A copy of the merger agreement
is attached to this joint proxy statement/prospectus as
Annex A. Under the terms of the merger agreement, each
share of Frontier common stock issued and outstanding at the
effective time of the merger will be converted into
0.0530 shares of newly issued SPAH common stock and 0.0530
newly issued warrants of SPAH, having the same terms and
conditions as the publicly traded SPAH warrants immediately
prior to the effective time of the merger, after giving effect
to the warrant amendment proposal. Based on the closing price of
SPAHs common stock on July 28, 2009 of $9.73, which
was the last trading day prior to the date of the signing of the
merger agreement, Keefe Bruyette calculated an implied
consideration of $0.51569 per share of Frontier common stock.
However, based on current market prices, the implied
consideration may be less than the market price of Frontier
common stock.
SPAH stockholders will continue to own their existing shares of
SPAH common stock after the merger, except that upon
consummation of the merger, SP Acq LLC has agreed to forfeit
8,987,883 of its founders shares and Messrs. Bergamo,
LaBow, Lorber, Toboroff and Walker have agreed to forfeit an
aggregate of 465,530 of their founders shares.
We cannot complete the merger unless, among other things, we
obtain the necessary government approvals, SPAHs
application to become a bank holding company is approved, the
stockholders of each of SPAH and Frontier approve the merger
proposal, SPAH stockholders approve the amendments to
SPAHs Amended and Restated Certificate of Incorporation,
and SPAHs warrantholders approve the amendment to the
Warrant Agreement.
Upon consummation of the merger with Frontier, the funds
currently held in SPAHs trust account (less any amounts
paid to stockholders who exercise their conversion rights,
released as deferred underwriting compensation
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and/or used
to purchase shares held by SPAH public stockholders who intend
to vote against the merger and seek conversion or who otherwise
wish to sell their shares) and proceeds from the co-investment
will be released to SPAH. SPAH intends to pay any additional
expenses related to the merger and hold the remaining funds as
capital pending use for general corporate and strategic
purposes. Such purposes could include increasing the capital of
Frontier Bank, making additional loans, future mergers and
acquisitions, branch construction, asset purchases, payment of
dividends, repurchases of shares of SPAH common stock and
general corporate purposes. Until such capital is fully
leveraged or deployed, SPAH may not be able to successfully
deploy such capital and SPAHs return on equity could be
negatively impacted.
Reasons
for the Merger (pages 66 and 73)
SPAH. In reaching its decision to approve the
merger agreement and recommend the merger to its stockholders,
the SPAH Board reviewed various financial data, due diligence
materials and other information. In addition, in reaching its
decision to approve the merger agreement, the SPAH Board
considered a number of factors, both positive and negative,
including, among others:
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financial condition and results of operations of Frontier,
including a tangible book value of $268.8 million, gross
loans of $3.4 billion and total assets of $4.0 billion
as of June 30, 2009;
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the growth potential associated with Frontier, including
potential for loan growth, enhanced operating margins and
operating efficiencies;
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the balance sheet
make-up and
product mix, including the loan and deposit mix of Frontier;
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the experience and skill of Frontiers management,
including Patrick M. Fahey, the current Chairman and Chief
Executive Officer of Frontier who will become Chief Executive
Officer of SPAH in the merger;
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the interests of certain officers, directors and affiliates of
SPAH;
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the issuance of the FDIC Order and the Memorandum of
Understanding;
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the issuance of the FRB Written Agreement; and
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the deterioration of Frontiers loan portfolio, centered in
its real estate construction and land development loans,
including approximately $764.6 million in nonperforming
loans predominately existing in construction real estate loans
and land development and $98.6 million in loan loss
reserves as of June 30, 2009.
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These factors and others are more fully discussed under the
heading The Merger and the Merger Agreement
Reasons of SPAH for the Merger beginning on page 66.
After reviewing all of these factors, the SPAH Board unanimously
determined that the merger proposal and the transactions
contemplated thereby are in the best interests of SPAH and
unanimously recommended that SPAHs stockholders vote at
the special meeting to adopt the merger agreement.
Frontier. In reaching its determination to
adopt the merger agreement, the Frontier Board consulted with
Frontiers management and its financial and legal advisors,
and considered a number of factors, including, among others:
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the ability of the merger to recapitalize and revitalize
Frontier, restore its regulatory capital to well-capitalized
levels, and achieve compliance with bank regulatory requirements;
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the Frontier Boards assessment of the financial condition
of SPAH and of the business, operations, capital level, asset
quality, financial condition and earnings of the combined
company on a pro forma basis. This assessment was based in part
on presentations by Sandler ONeill, Frontiers
financial advisor, and Keefe, Bruyette & Woods, Inc.
(Keefe Bruyette), whom Frontier retained solely to
render a fairness opinion, and Frontiers management and
the results of the due diligence investigation of SPAH conducted
by Frontiers management and financial and legal advisors;
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the financial and growth prospects for Frontier and its
shareholders of a business combination with SPAH as compared to
continuing to operate as a stand-alone entity;
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the information presented by Sandler ONeill to the
Frontier Board with respect to the merger and the opinion of
Keefe Bruyette that, as of the date of that opinion, the merger
consideration is fair from a financial point of view to the
holders of Frontier common stock (see Opinion
of Keefe Bruyette below);
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the current and prospective economic, regulatory and competitive
environment facing the financial services industry generally,
and Frontier in particular, including the continued rapid
consolidation in the financial services industry and the
competitive effects of the increased consolidation on smaller
financial institutions such as Frontier;
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the fact that SPAH has agreed to: (i) employ Patrick M.
Fahey as Chief Executive Officer of the combined company, and
(ii) appoint Mr. Fahey and three other member of the
Frontier Board as directors of SPAH and Frontier Bank, which are
expected to provide a degree of continuity and involvement by
Frontier constituencies following the merger, in furtherance of
the interests of Frontiers shareholders, customers and
employees;
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current conditions in the U.S. capital markets, including
the unavailability of other sources of capital, strategic or
other merger partners to Frontier;
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that directors and officers of Frontier have interests in the
merger in addition to their interests generally as Frontier
shareholders, including change of control agreements for five of
its current executive officers;
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the effect of a termination fee of up to $2.5 million in
favor of SPAH, including the risk that the termination fee might
discourage third parties from offering to acquire Frontier by
increasing the cost of a third party acquisition and, while SPAH
has not agreed to pay Frontier any termination fee, Frontier was
required to waive any claims against the trust account, if, for
example, SPAH breaches the merger agreement;
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the risk to Frontier and its shareholders that SPAH may not be
able to obtain required regulatory approvals, or necessary
modifications to the FDIC Order, the FRB Agreement and the
Memorandum of Understanding, and the risk of failing to
consummate the transaction;
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the SPAH stock and SPAH warrants to be received in exchange for
Frontier common stock pursuant to the merger agreement and
resulting pro forma ownership levels in relation to the
historical trading prices of Frontier common stock, as compared
to other possible scenarios in the view of the Frontier
Boards financial advisor;
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the current condition of Frontier and the future prospects of
the business in light of the current economic environment and
the likelihood that Frontier would need to raise capital in
order to protect against future loan losses and achieve
compliance with the FDIC Order and the FRB Agreement;
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the fact that Frontiers existing capital resources were
limiting managements ability to effectively manage certain
problem credits;
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uncertainty about how much of SPAHs trust account will be
available for working capital after closing; and
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the pending regulatory actions against Frontier, Frontiers
noncompliance with the capital requirement imposed by the FDIC
Order, and their potential adverse impact on the profitability,
operations and deposits of Frontier Bank, and the risk of
further regulatory action and penalties, including the potential
closure of Frontier Bank.
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These factors and others are more fully discussed under the
heading The Merger and the Merger Agreement
Reasons of Frontier for the Merger beginning on
page 73. After reviewing all of these factors, the Frontier
Board unanimously determined that the merger and the
transactions contemplated thereby are in the best interests of
Frontier and Frontiers shareholders and unanimously
recommended that Frontiers shareholders vote at the
Frontier special meeting to approve the merger agreement.
26
Frontier
Obtained an Opinion that the Merger Proposal Consideration
is Fair to Frontiers Shareholders from a Financial Point
of View (page 75)
Keefe Bruyette was retained by Frontier solely to render an
opinion to the Frontier Board with respect to the fairness, from
a financial point of view, of the merger proposal consideration.
Keefe Bruyette rendered an opinion to the Frontier Board that,
as of July 29, 2009, the date the Frontier Board voted on
the merger proposal, the consideration to be received in the
transaction was fair to Frontiers shareholders from a
financial point of view. A copy of the opinion delivered by
Keefe Bruyette is attached to this joint proxy
statement/prospectus as Annex E. Frontiers
shareholders should read the opinion completely to understand
the assumptions made, matters considered, limitations and
qualifications of the review undertaken by Keefe Bruyette in
providing its opinion.
Regulatory
Approvals (page 88)
SPAH and Frontier have agreed to obtain all regulatory approvals
required to consummate the transactions contemplated by the
merger agreement, which include approval from the Board of
Governors of the Federal Reserve System (Federal
Reserve) and the Washington DFI, each as detailed below.
The merger cannot proceed in the absence of these regulatory
approvals. Any approval granted by these federal and state bank
regulatory agencies may include terms and conditions more
onerous than SPAHs management contemplates, and approval
may not be granted in the timeframes desired by SPAH and
Frontier. Regulatory approvals, if granted, may contain terms
that relate to deteriorating economic conditions both nationally
and in Washington; bank regulatory supervisory reactions to the
current economic difficulties may not be specific to Bank or
SPAH. Although SPAH and Frontier expect to obtain the timely
required regulatory approvals, there can be no assurance as to
if or when these regulatory approvals will be obtained, or the
terms and conditions on which the approvals may be granted.
As noted, the merger is subject to the prior approval of the
Federal Reserve. SPAH filed an application with the Federal
Reserve on August 12, 2009. In evaluating the merger, the
Federal Reserve is required to consider, among other factors,
(1) the financial condition, managerial resources and
future prospects of the institutions involved in the
transaction; and (2) the convenience and needs of the
communities to be served, and the record of performance under
the Community Reinvestment Act (the CRA). The BHC
Act, and Regulation Y promulgated thereunder by the Federal
Reserve (Regulation Y), prohibit the Federal
Reserve from approving the merger if:
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it would result in a monopoly or be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize
the business of banking in any part of the United States; or
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its effect in any area of the country could be to substantially
lessen competition or to tend to create a monopoly, or if it
would result in a restraint of trade in any other manner, unless
the Federal Reserve should find that any anti-competitive
effects are outweighed clearly by the public interest and the
probable effect of the merger in meeting the convenience and
needs of the communities to be served.
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The merger may not be consummated any earlier than the
15th day (or the 5th day if expedited processing is
granted by the Federal Reserve) following the date of approval
of SPAHs bank holding company application by the Federal
Reserve, during which time the United States Department of
Justice is afforded the opportunity to challenge the merger on
antitrust grounds. The commencement of any antitrust action
would stay the effectiveness of the approval of the Federal
Reserve, unless a court of competent jurisdiction were to
specifically order otherwise.
The merger also is subject to the prior approval of the
Washington DFI. SPAH filed an application with the Washington
DFI on August 14, 2009. The Washington DFI may disapprove a
change of control of a state bank within 60 days of the
filing of a complete application (or for an extended period not
exceeding an additional 15 days) if it determines that the
transaction is not in the public interest and for other reasons
specified under Washington law.
Expected
Tax Treatment as a Result of the Merger
(page 191)
We have structured the merger so that it will be considered a
reorganization for U.S. federal income tax purposes. If the
merger is a reorganization for U.S. federal income tax
purposes, Frontiers shareholders generally will not
recognize any gain or loss on the exchange of shares of Frontier
common stock for shares of SPAH common stock and SPAH warrants.
Determining the actual tax consequences of the merger to a
Frontier shareholder may be
27
complex. These tax consequences will depend on each
stockholders specific situation and on factors not within
our control. Frontiers shareholders should consult their
own tax advisors for a full understanding of the tax
consequences of their participation in the merger.
If you are a SPAH stockholder and exercise your conversion
rights or if you are a Frontier shareholder and exercise your
dissenters rights, you will generally be required to treat
the exchange of your shares for cash as a sale of the shares and
recognize gain or loss in connection with such sale.
In conjunction with the merger, SPAH warrantholders will vote on
whether to amend the terms of their warrants. If the terms of
the warrants are amended, a warrantholder will be treated as
exchanging his or her old warrants for
new warrants in connection with the consummation of
the transactions contemplated by the merger agreement. We expect
the merger to qualify as a reorganization for U.S. federal
income tax purposes. If the merger qualifies as a reorganization
for U.S. federal income tax purposes, a warrantholder will
not recognize any gain or loss on the deemed exchange of his or
her old warrants for new warrants as a result of the amendment.
Accounting
Treatment (page 88)
The merger will be accounted for using the acquisition method of
accounting, with SPAH being treated as the acquiring entity for
accounting purposes pursuant to the provisions Statement of
Financial Accounting Standards No. 141R (SFAS 141R).
Pursuant to the requirements of SFAS 141R, SPAH is expected
to be the acquirer for accounting purposes because SPAH is
expected to own a majority interest upon consummation of the
merger and the co-investment. Determination of control places
emphasis on the stockholder group that retains the majority of
voting rights in the combined entity. If the accounting acquirer
cannot be determined based upon relative voting interests, other
indicators of control are considered in the determination of the
accounting acquirer, including: control of the combined
entitys board of directors, the existence of large
organized minority groups, and senior management of the combined
entity.
SFAS 141R requires, among other things, that most assets
acquired and liabilities assumed be recognized at their fair
values as of the merger date. In addition,
SFAS No. 141R establishes that the consideration
transferred include the fair value of any contingent
consideration arrangements and any equity or assets exchanged
are measured at the closing date of the merger at the
then-current market price.
The
SPAH Board After the Merger (page 86)
Under the terms of the merger agreement, SPAH will recommend for
stockholder approval the election of Warren G. Lichtenstein and,
if the merger is consummated, four directors from Frontier,
comprised of Patrick M. Fahey, Lucy DeYoung, Mark O. Zenger and
David M. Cuthill, each of whom currently serve on the Frontier
Board, in each case to serve until the next annual meeting of
SPAH and until their successors shall have been elected and
qualified. Upon the election of the Frontier nominees to the
SPAH Board and, upon consummation of the merger, the SPAH Board
will consist of five (5) members, with
Mr. Lichtenstein serving as the Chairman of the Board.
The
Frontier Bank Board After the Merger
(page 86)
Under the terms of the merger agreement, upon consummation of
the merger, the Frontier Bank Board will consist of five
(5) directors, comprised of SPAHs designee, John
McNamara, to serve as Chairman of the Board, and four
(4) directors from Frontier, comprised of Patrick M. Fahey,
and three (3) other existing members of the Frontier Bank
Board.
Management
and Operations After the Merger (page 87)
Each of the current executive officers of SPAH will resign upon
consummation of the merger, other than Warren G. Lichtenstein
who will continue to serve as Chairman of the Board, although he
will resign as President and Chief Executive Officer of SPAH.
The existing management team of Frontier will manage the
business of the combined company following the merger.
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Completion
of the Merger is Subject to Certain Conditions (page
96)
Completion of the merger is subject to the satisfaction or
waiver of a number of conditions, including the following:
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the adoption of the Initial Charter Amendments and the
Subsequent Charter Amendments;
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the adoption of the warrant amendment proposal by SPAH
warrantholders;
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the adoption of the merger agreement by SPAH and Frontier
stockholders;
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no more than 10% (minus one share) of SPAH public stockholders
vote against the merger agreement and thereafter exercise their
conversion rights;
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no more than 10% of the holders of Frontier common stock
entitled to vote on the merger exercise their dissenters
rights;
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the approval of SPAHs application to become a bank holding
company;
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receipt of all required regulatory approvals, including the
approval of the Federal Reserve and the Washington DFI; and
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each of (i) the FDIC Order, (ii) the FRB Written
Agreement, and (iii) the Memorandum of Understanding, will
have been modified in a manner reasonably acceptable to SPAH,
including by the elimination of certain provisions and
consequences related thereto.
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These conditions and others are more fully discussed under the
heading The Merger and the Merger Agreement
The Merger Agreement Conditions to the Closing of
the Merger. Some of these closing conditions, including
the closing condition that no more than 10% (minus one share) of
SPAH public stockholders may vote against the merger agreement
and thereafter exercise their conversion rights, may be waived
by SPAH.
Termination
of the Merger Agreement (page 97)
Notwithstanding the approval of the merger proposal by SPAH and
Frontier stockholders, we can mutually agree at any time to
terminate the merger agreement at any time prior to the
effective time:
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By mutual written agreement of SPAH and Frontier;
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By either party if the other party is in breach of any of its
representations, warranties or covenants under the merger
agreement which cannot be or has not been cured within
5 days after the giving of written notice by the
non-breaching party to the breaching party of such breach;
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By either party in the event (i) any consent of any
regulatory authority required for consummation of the merger and
the other transactions contemplated hereby shall have been
denied by final nonappealable action of such authority or if any
action taken by such authority is not appealed within the time
limit for appeal, (ii) any law or order permanently
restraining, enjoining or otherwise prohibiting the consummation
of the merger shall have become final and nonappealable,
(iii) the stockholders of SPAH or Frontier fail to vote
their approval of the matters relating to the merger agreement
and the transactions contemplated thereby at SPAHs special
meeting of stockholders or Frontiers special meeting of
shareholders, respectively, where such matters were presented to
such stockholders for approval and voted upon, or (iv) if
applicable, holders of 10% or more of the shares sold in
SPAHs initial public offering vote against the merger and
exercise their conversion rights;
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By either party in the event that the merger shall not have been
consummated by December 31, 2009, in the event SPAH extends
its corporate life beyond October 10, 2009;
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By either party if the other partys board of directors
fails to reaffirm its approval upon the other partys
request for such reaffirmation of the merger or if such other
partys board of directors resolves not to reaffirm the
merger;
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By either party if the other partys board of directors
fails to include in the joint proxy statement/prospectus its
recommendation, without modification or qualification, that the
stockholders approve the merger or if the partys board of
directors withdraws, qualifies, modifies, proposes publicly to
withdraw, qualify, or modify, in a manner adverse to the other
party, the recommendation that the stockholders approve the
merger;
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By either party if the other partys board of directors
affirms, recommends, or authorizes entering into any acquisition
transaction other than the merger or, within 10 business days
after commencement of any tender or exchange offer for any
shares of its common stock, the other partys board of
directors fails to recommend against acceptance of such tender
or exchange offer or takes no position with respect to such
tender or exchange offer;
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By either party if the other partys board of directors
negotiates or authorizes the conduct of negotiations (and five
business days have elapsed without such negotiations being
discontinued) with a third party regarding an acquisition
proposal other than the merger; or
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By either party if the party terminating is not in material
breach of any representation, warranty, or covenant, or other
agreement in the merger agreement, and prior to the adoption of
the merger proposal by the stockholders, the other partys
board of directors has (1) withdrawn or modified or changed
its recommendation of approval of the merger agreement in a
manner adverse to the terminating party in order to approve and
permit the other party to accept a superior proposal and
(2) determined, after consultation with, and the receipt of
advice from outside legal counsel to the other party, that the
failure to take such action as described in the preceding
clause (1) would be likely to result in a breach of the
board of directors fiduciary duties under applicable law,
provided, however, that at least five business days prior to any
such termination, the terminating party shall, and shall cause
its advisors to, negotiate with the other party, if such party
elects to do so, to make such adjustments in the terms and
conditions of the merger agreement as would enable the other
party to proceed with the merger on the adjusted terms.
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Interests
of SPAHs Directors and Officers and Others in the Merger
(page 68)
When considering the recommendations of the SPAH Board, you
should be aware that some of SPAHs directors and officers
and other have interests in the merger proposal that may differ
from the interests of other stockholders:
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Warren G. Lichtenstein will serve as the Chairman of the SPAH
Board following the consummation of the merger;
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John McNamara will serve as Chairman of the Frontier Bank Board
following the consummation of the merger;
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if the merger is not approved and SPAH is required to liquidate,
all the shares of common stock and all the warrants held by the
SPAH insiders (including SP Acq LLC and SP II), which, as of the
record date, for the shares, were worth approximately
$[ ] per share and approximately
$[ ] in the aggregate and, for the
warrants, were worth approximately
$[ ] per warrant and approximately
$[ ] in the aggregate, will be
worthless. Since Mr. Lichtenstein, SPAHs Chairman of
the Board, President and Chief Executive Officer, may be deemed
the beneficial owner of shares held by SP Acq LLC and SP II, he
may also have a conflict of interest in determining whether a
particular target business is appropriate for SPAH and its
stockholders. However, upon consummation of the merger, SP Acq
LLC has agreed to forfeit 8,987,883 of its founders shares
and Anthony Bergamo, Ronald LaBow, Howard M. Lorber, Leonard
Toboroff and S. Nicholas Walker have agreed to forfeit an
aggregate of 465,530 of their founders shares;
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if SPAH liquidates prior to the consummation of a business
combination, SP Acq LLC and Mr. Lichtenstein will be
personally liable if and to the extent any claims by a third
party for services rendered or products sold, or by a
prospective business target, reduce the amounts in the trust
account available for distribution to SPAH stockholders in the
event of a dissolution and liquidation; and
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unless SPAH consummates an initial business combination, its
officers and directors, its employees, and affiliates of SP Acq
LLC and their employees will not receive reimbursement for any
out-of-pocket
expenses incurred by them to the extent that such expenses
exceed the amount of available proceeds not deposited in
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the trust account and the $3.5 million in interest income
on the balance of the trust account that has been released to
SPAH to fund its working capital requirements.
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Each board member was aware of these and other interests and
considered them before approving and adopting the merger
agreement. Additionally, upon consummation of the merger, the
underwriters in SPAHs initial public offering will be
entitled to receive approximately $17.3 million of deferred
underwriting discounts and commissions currently held in
SPAHs trust account. SPAH is in negotiation with its
underwriters regarding the amount and form of payment of such
deferred underwriting fees from SPAHs initial public
offering. As of the date hereof, SPAH believes that the
underwriting fees will be reduced by approximately
$3.65 million and SPAH will continue to negotiate a further
reduction of such fees until a mutual settlement can be reached.
The results of these negotiations are uncertain since the
underwriters can discontinue negotiations with SPAH at any time
and require the full amount of their fees payable upon
consummation of the merger. If the merger is not consummated and
SPAH is required to liquidate, the underwriters have agreed to
forfeit any rights or claims to their deferred underwriting
discounts and commissions then in the trust account, and those
funds will be included in the pro rata liquidation distribution
to the SPAH public stockholders.
Certain
Benefits of Directors and Officers of Frontier (page
81)
When considering the recommendations of the Frontier Board, you
should be aware that some directors and officers have interests
in the merger proposal that differ from the interests of other
shareholders, including the following:
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Stock Ownership. The directors, executive
officers and principal shareholders of Frontier, together with
their affiliates, beneficially owned, as of the record date for
the special meeting, a total of 3,103,451 shares of
Frontier common stock, including 253,154 shares of
restricted stock that has or will be vested at the time of the
merger, representing 6.56% of the total outstanding shares of
Frontier common stock;
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Change of Control Agreements. Frontier is a
party to change of control agreements with five of its current
executive officers, John J. Dickson, Carol E. Wheeler, R. James
Mathison, Robert W. Robinson and Lyle E. Ryan. These agreements
generally provide that in the event of a termination of
employment in connection with, or within 24 months after, a
change of control, for reasons other than cause, the executive
will receive a lump sum payment on the first day of the seventh
month after the termination of his or her employment in an
amount equal to two times the amount of his or her salary and
bonus for the twelve months prior to the effective date of the
change of control and will continue to be covered by applicable
medical and dental plans for 24 months following
termination of employment. In the event an executive, after
attaining age 60, voluntarily retires within 12 months
following a change of control, the executive will receive a lump
sum payment equal to one times the amount of his or her salary
and bonus, and will continue to be covered by applicable medical
and dental plans for 12 months following termination of
employment. The maximum aggregate amount of such payments (based
on two times their salaries and bonuses) due to
Messrs. Dickson, Mathison, Robinson and Ryan, and
Ms. Wheeler, upon such termination of their employment
would be $698,250, $419,250, $409,500, $518,020, and $368,250,
respectively.
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In addition, the vesting of restricted stock awards granted
under Frontiers 2006 Stock Option Plan will accelerate
upon the effective time of the merger.
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Insurance and Indemnification. SPAH has agreed
to use reasonable best efforts to maintain Frontiers
existing policies of directors and officers liability insurance
(or at SPAHs option, obtain comparable coverage under its
own insurance policies) for a period of six years after the
merger with respect to claims arising from facts or events which
occurred prior to the effective time of the merger, subject to a
maximum premium limit of $1,150,000. SPAH has also agreed to
continue to provide for the indemnification of the former and
current directors, officers, employees and agents of Frontier
for six years after the merger.
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Certain Employee Matters. The merger agreement
contains certain agreements of the parties with respect to
various employee matters.
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At and following the effective time of the merger, SPAH will
assume and honor certain Frontier severance and change of
control agreements that Frontier had with its officers and
directors on July 24, 2009.
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Transfer
Restrictions of SPAH Insiders and Frontier Insiders upon
Consummation of the Merger (pages 68 and 88)
SPAH Insiders. Upon consummation of the
merger, SP Acq LLC has agreed to forfeit 8,987,883 of the
9,653,412 founders shares it owns and
Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have
agreed to forfeit an aggregate of 465,530 of the 500,000
founders shares they own. The SPAH insiders previously
agreed not to sell or transfer their founders units and
the founders shares and initial founders warrants
comprising the founders units (including the common stock
to be issued upon the exercise of the initial founders
warrants) for a period of one year from the date the merger is
consummated, except in each case to permitted transferees who
agree to be subject to the same transfer restrictions. The Steel
Trust has agreed to be subject to these transfer restrictions.
SP II has previously agreed not to sell or transfer the
co-investment units, co-investment shares or co-investment
warrants (including the common stock to be issued upon exercise
of the co-investment warrants) until one year after SPAH
completes the merger except to permitted transferees who agree
to be bound by such transfer restrictions. The Steel Trust has
agreed to be subject to these transfer restrictions. We refer to
these agreements with the SPAH insiders and their permitted
transferees as
lock-up
agreements.
Frontier Insiders. The Frontier insiders have
agreed not sell, pledge, transfer or otherwise dispose of the
shares of SPAH common stock and SPAH warrants for a one year
period ending on the first anniversary of the consummation of
the merger.
Comparative
Rights of Stockholders (page 204)
The rights of SPAH stockholders are currently governed by
Delaware law, the SPAH Certificate of Incorporation and the
bylaws of SPAH (the SPAH Bylaws). The rights of
Frontiers shareholders are currently governed by
Washington law and Frontiers amended and restated articles
of incorporation (the Frontier Articles of
Incorporation) and 2003 restated bylaws (the
Frontier Bylaws). Upon consummation of the merger,
the stockholders of Frontier will become stockholders of SPAH
and the SPAH Certificate of Incorporation, as proposed to be
amended and restated, the SPAH Bylaws and Delaware law will
govern their rights. The SPAH Certificate of Incorporation and
SPAH Bylaws differ somewhat from those of Frontier. Material
differences include:
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The SPAH Bylaws provide that a director can be removed with or
without cause by a majority vote of the holders of the
outstanding shares then entitled to vote at an election of
directors; in comparison, the Frontier Articles of Incorporation
provide that a director may be removed only for cause by the
holders of not less than two-thirds of the shares entitled to
elect the director whose removal is sought.
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The Frontier Articles of Incorporation and Frontier Bylaws
divide the Frontier Board into three classes of directors, as
nearly equal as possible, with each class being elected to a
staggered three-year term; in comparison, SPAH does not have a
staggered board and each director is elected for a term that
expires at the next annual meeting of stockholders.
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SPAH has elected not to be governed by Section 203 of the
Delaware General Corporation Law (the DGCL), which
limits business combinations, including mergers, with an
interested stockholder; in comparison, under the
WBCA, Frontier is prohibited, with certain exceptions, from
engaging in certain significant business
transactions with a person or group of persons
beneficially owning 10% or more of its voting securities for a
period of five years after the acquisition of such securities,
unless the transaction or acquisition of shares is approved by a
majority of the members of the board of directors prior to the
date on which the acquiring person first obtained 10% share
ownership.
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After the merger with Frontier is completed, adoption of a
subsequent merger agreement or consolidation of SPAH with a
different entity will require the affirmative vote of the
holders of a majority of the outstanding shares of SPAH common
stock entitled to vote; in comparison, certain mergers and share
exchanges of Frontier must be approved by holders of at least
two-thirds of the outstanding shares entitled to vote thereon.
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For a more complete description of the difference between the
rights of the stockholders of SPAH and the rights of
shareholders of Frontier, please refer to the section entitled
Comparative Rights of SPAH and Frontier.
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RISK
FACTORS
You should carefully consider the following risk factors,
together with all of the other information included in this
joint proxy statement/prospectus, before you decide whether to
vote or instruct your vote to be cast to approve the proposals
described in this joint proxy statement/prospectus.
Risks
Related to the Business of Frontier
The
continued downturn in Frontiers real estate market areas
and weakness in the economy could adversely affect
Frontiers financial condition and
profitability.
The Washington and Oregon economies and real estate markets
experienced a significant, dramatic downturn in the past year,
and with significant declines in real estate values. Average
home sale prices declined by 16.1% year over year in Washington
as of June 30, 2009, and 13.4% year over year as of
December 31, 2008 and average home sale prices had declined
by 9.8% year over year in Oregon as of September 30, 2008,
according to data published by the National Association of
Realtors, while home sales slowed significantly declining by
19.8% and 15.2% in Washington and Oregon, respectively.
Unemployment increased by 3.8% to 9.1% in Washington over the
twelve months ended June 30, 2009, and by 5.6% to 11.9% in
Oregon over the same period, according to the National Bureau of
Labor Statistics, while according to RealtyTrac foreclosures
rose by 94% and 84% in Washington and Oregon, respectively.
Frontier is currently operating in a challenging and uncertain
economic environment, both nationally and locally. Like many
other financial institutions, Frontier is being affected by
sharp declines in the real estate market, constrained financial
markets and a weak economy. Continued declines in real estate
values and home sales and financial stress on borrowers as a
result of the uncertain economic environment, including job
losses, could have an adverse effect on Frontiers
borrowers or their customers and demand for Frontiers
products and services, which could adversely affect
Frontiers financial condition and earnings, increase loan
delinquencies, defaults and foreclosures, and significantly
impair the value of Frontiers collateral and its ability
to sell the collateral upon foreclosure.
Frontier
is experiencing deterioration in its loan portfolio, centered in
its residential construction and land development
loans.
As of June 30, 2009, approximately 85.4% of Frontiers
loan portfolio was comprised of loans secured by real estate. Of
this 85.4% of real estate loans, 35% are commercial real estate
loans, 21% are residential construction loans, 16% are land
development loans, 15% are term 1-4 family residential loans, 9%
are lot loans and 4% are commercial construction loans. Frontier
has been experiencing deterioration in its loan portfolio,
centered in its residential construction and land development
loans. Many of these loans are maturing and classified as
nonperforming assets while Frontier works with the borrowers to
maximize its recovery. If loan payments from borrowers are over
90 days past due, or sooner if normal repayment cannot
resume, the loans are placed on nonaccrual status, thereby
reducing
and/or
reversing previously accrued interest income. From third quarter
2008 to June 30, 2009, Frontiers nonperforming and
nonaccrual loans increased significantly, from
$205.2 million to $764.6 million, $513.2 million
of which were residential construction and land development
loans, which represent 43.1% of Frontiers residential
construction and land development loans. The contraction or
expansion of Frontiers nonaccrual loan portfolio and other
real estate owned (OREO) properties in future
periods will depend upon the companys ongoing collection
efforts and changes in market conditions. Frontier has a
dedicated a team of 38 employees focused on the management
of problem loans, but there is no guarantee that this team will
be able to effectively manage the amount of problem loans
Frontier may encounter in the future. Additional information
regarding credit risk is included in Information About
Frontier Managements Discussion and Analysis
of Financial Condition and Results of Operations
Loans.
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Frontiers
management believes that there is the potential for additional
loan losses beyond those recognized as of June 30, 2009,
particularly with respect to Frontier Banks construction
and land development portfolio, and these losses could be
significantly greater than management presently expects,
particularly if economic conditions deteriorate
further.
Frontier Banks loan portfolio and allowance for loan
losses are assessed each quarter by management, and were subject
to recent examinations by its federal and state regulators.
Further, in its efforts to refine Frontier Banks
assessment of inherent risk in Frontier Banks loan
portfolio, Frontier Bank has performed extensive reviews and
analyses. As a result of these reviews and analyses, assuming a
continuing weak economy, Frontier believes the potential for
additional deterioration in the Banks loan portfolio may
result in additional loan losses of approximately
$200 million, primarily as a result of decreased
residential and commercial real estate values, increased
financial stress on borrowers, bankruptcies and related expenses
of collection, foreclosure and OREO, and such losses can be
further increased if the adverse economic conditions become more
severe or continue longer than Frontier anticipates. Any such
additional loan losses, should they occur, would adversely
affect Frontiers financial condition and profitability.
Due to
unforeseen circumstances and/or changes in estimates,
Frontiers allowance for loan losses may not be adequate to
cover actual losses.
An essential element of Frontiers business is to make
loans. Frontier maintains an allowance for loan losses that it
believes is a reasonable estimate of known and inherent losses
within the loan portfolio. At June 30, 2009,
Frontiers allowance for loan losses was $98.6 million
or 2.89% of its total loans of $3.4 billion. The
determination of the appropriate level of loan loss allowance as
well as the appropriate amount of loan charge-offs (net of loan
recoveries) is an inherently difficult process and is based on
numerous assumptions and there may be a range of potential
estimates. The amount of future losses is susceptible to changes
in economic, operating and other conditions, including changes
in Frontiers real estate markets and interest rates that
are beyond Frontiers control. Frontiers underwriting
policies, credit monitoring processes and risk management
systems and controls may not prevent unexpected losses. In
addition, bank regulators periodically review Frontiers
allowance for loan losses and may require Frontier to increase
its provision for loan losses or recognize further loan
charge-offs.
While SPAH has reviewed Frontiers loan portfolio,
allowance for loan losses, loan charge-offs and loan recoveries,
there is no precise method for predicting credit losses since
any estimate of loan losses is necessarily subjective and the
accuracy depends on the outcome of future events. Upon
consummation of the merger, management of the combined company
will make its own independent evaluation of the loan portfolio
and make adjustments to the loan loss allowance as necessary.
The allowance for loan losses may be further changed upon the
continued review of bank regulators. Although SPAH believes,
based on its review of Frontiers loan portfolio, that upon
a post merger evaluation of the loan portfolio the combined
company will have sufficient capital following the consummation
of the merger to absorb potential increases in loan charge-offs,
while maintaining adequate capital ratios, there can be no
assurance that any revised allowance for loan losses will be
adequate to cover actual loan losses. Any significant increases
in the allowance for loan losses would adversely affect the
capital base and earnings of the combined company.
Defaults
and related losses in Frontiers residential construction
and land development loan portfolio could result in a
significant increase in OREO balances and the number of
properties to be disposed of, which would adversely affect
Frontiers financial results.
As part of Frontiers collection process for all
nonperforming real estate loans, the company may foreclose on
and take title to the property serving as collateral for the
loan. Real estate owned by Frontier and not used in the ordinary
course of its operations is referred to as other real estate
owned (OREO) property. Frontier expects to take additional
properties into OREO. Increased OREO balances lead to greater
expenses as the company incurs costs to manage and dispose of
the properties and, in certain cases, complete construction of
improvements prior to sale. Any decrease in sale prices on
properties may lead to OREO write-downs with a corresponding
expense in Frontiers income statement. Frontiers
management expects that earnings over the next several quarters
could be negatively affected by various expenses associated with
OREO, including personnel costs, insurance and taxes, completion
and repair costs, and other costs associated with property
ownership, as well as by the funding costs
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associated with assets that are tied up in real estate during
the period they are held in OREO. The management and oversight
of OREO is time consuming and can be complex and can require
significant resources of Frontiers management and
employees. Frontier will also be at risk of further declines in
real estate prices in the market areas in which the company
conducts its lending business.
Restrictions
imposed by regulatory actions could have an adverse effect on
Frontier and failure to comply with any of its provisions could
result in further regulatory action or
restrictions.
The businesses and operations of Frontier and its subsidiary,
Frontier Bank, are currently subject to regulatory actions,
including the FDIC Order and the FRB Written Agreement, which ,
for example, generally prohibit Frontier Bank from paying
dividends (effectively prohibiting any dividends by its holding
company, Frontier, because substantially all earnings of
Frontier are derived from Frontier Bank), repurchasing stock,
retaining new directors or senior managers or changing the
duties of senior management, paying management or consulting
fees or other funds to Frontier, and extending additional credit
with respect to nonperforming and adversely classified loans
which management believes, complicates the workout of troubled
loans. The FDIC Order also requires Frontier Bank to raise its
Tier 1 leverage capital ratio to a higher than normal level
of 10% of its assets, by July 29, 2009, and to maintain
that capital level, in addition to maintaining a fully funded
allowance for loan losses satisfactory to the FDIC and the
Washington DFI. These and other regulatory actions are described
in more detail in Information About Frontier
Managements Discussion and Analysis of Financial Condition
and Results of Operations Regulatory Actions.
The FDIC identified deficiencies in the management and
supervision of Frontier Bank that primarily relate to loan
underwriting, procedures and monitoring, excessive
concentrations in construction and land development loans, and
related concerns about Frontier Banks capital and
liquidity. Management believes it has addressed the concerns and
that it is in compliance with all the requirements of the FDIC
Order and the FRB Written Agreement, other than the Tier 1
capital requirement for Frontier Bank. Frontier believes it can
increase its Tier 1 capital to compliance levels with the
consummation of the merger. However, these regulatory actions
and any future actions could continue to limit Frontiers
growth and adversely affect its earnings, business and
operations. In addition, failure to comply with these regulatory
actions or any future actions could result in further regulatory
actions or restrictions, including monetary penalties and the
potential closure of Frontier Bank.
Frontiers
profitability and the value of stockholders investments
may suffer because of rapid and unpredictable changes in the
highly regulated environment in which Frontier
operates.
Frontier is subject to extensive supervision by several
governmental regulatory agencies at the federal and state levels
in the financial services area. See Supervision and
Regulation. Recently enacted, proposed and future
legislation and regulations have had, and will continue to have,
or may have a significant impact on the financial services
industry. These regulations, which are generally intended to
protect depositors and not stockholders, and the interpretation
and application of them by federal and state regulators, are
beyond Frontiers control, may change rapidly and
unpredictably and can be expected to influence earnings and
growth. For example, the FDIC and the Federal Reserve recently
issued joint Guidance on Concentrations in Commercial Real
Estate Lending, Sound Risk Management Practices that sets forth
supervisory criteria to assist bank examiners in identifying
banks with potentially significant commercial real estate loan
concentrations that may warrant greater supervisory scrutiny.
The Guidance applies to Frontier Bank, based on Frontiers
current loan portfolio, and Frontiers management expects
that the companys business and operations will be subject
to enhanced regulatory review for the foreseeable future.
Regulatory authorities have extensive discretion in their
supervisory and enforcement activities, including the imposition
of restrictions on operations, the classification of assets and
determination of the level of allowance for loan losses.
Frontiers success depends on Frontiers continued
ability to maintain compliance with these regulations. Increased
regulation and supervision of the banking and financial industry
as a result of the existing financial crisis. Such additional
regulation and supervision may increase our costs and limit our
ability to pursue business opportunities.
35
Market
and other constraints on Frontiers construction loan
origination volume are expected to lead to decreases in the
companys interest and fee income that are not expected to
be fully offset by reductions in its noninterest
expenses.
Due to existing conditions in housing markets in the areas where
Frontier operates, the recession and other factors, Frontier
projects the companys construction loan originations to be
materially constrained in 2009 and beyond. Additionally,
managements revised business plan will de-emphasize the
origination of construction loans. This will lower interest
income and fees generated from this part of Frontiers
business. Unless this revenue decline is offset by other areas
of Frontiers operations, the companys total revenues
may decline relative to its total noninterest expense. Frontier
expects that it will be difficult to find new revenue sources in
the near term to completely offset expected declines in the
companys interest income. In that regard, the adverse
economic conditions that began in 2007 and that have continued
into 2009 have significantly reduced Frontiers origination
of all new loans, and Frontiers management cannot assure
you that the companys total loans or assets will increase
or not decline in 2009.
Fluctuations
in interest rates could reduce Frontiers profitability and
affect the value of its assets.
Frontiers earnings and cash flows are largely dependent
upon the companys net interest income. Net interest income
is the difference between interest income earned on
interest-earning assets such as loans and securities and
interest expense paid on interest-bearing liabilities such as
deposits and borrowed funds. Interest rates are highly sensitive
to many factors that are beyond Frontiers control,
including but not limited to; general economic conditions and
policies of various governmental and regulatory agencies and, in
particular, the Federal Reserve. Changes in monetary policy,
including changes in interest rates, could influence not only
the amount of interest Frontier receives on loans and securities
and the amount of interest Frontier pay on deposits and
borrowings, but such changes could also affect the
companys ability to originate loans and obtain deposits as
well as the fair value of its financial assets and liabilities.
If the interest Frontier pays on deposits and other borrowings
increases at a faster rate than the interest it receives on
loans and other investments, Frontiers net interest
income, and therefore earnings, could be adversely effected.
Earnings could also be adversely affected if the interest
Frontier receives on loans and other investments fall more
quickly than the interest it pays on deposits and other
borrowings.
Concern
of customers over the safety of their deposits may cause a
decrease in deposits.
With recent increased concerns about bank failures, customers
increasingly are concerned about the safety of their deposits
and the extent to which their deposits are insured by the FDIC.
Customers may not believe Frontier is a safe place to keep their
deposit accounts and they may remove their deposit accounts.
Additionally, customers may withdraw deposits from Frontier Bank
in an effort to ensure that the amount they have on deposit at
Frontier Bank is fully insured. Decreases in deposits may
adversely affect Frontiers funding costs, liquidity and
net income. In addition, if the FDIC reduces the limit on FDIC
coverage to $100,000 per account after December 31, 2013,
customers may become increasingly more concerned about the
safety of their deposits.
Liquidity
risk could impair Frontiers ability to fund operations and
jeopardize the companys financial condition.
Liquidity is essential to Frontiers business. An inability
to raise funds through deposits, borrowings, the sale of loans
and other sources could have a substantial negative effect on
Frontiers liquidity. Frontiers access to funding
sources in amounts adequate to finance the companys
activities or the terms of which are acceptable to the company
could be impaired by factors that affect us specifically,
including our existing regulatory agreements, or the financial
services industry in general. Factors that could detrimentally
impact Frontiers access to liquidity sources include a
decrease in the level of the companys business activity as
a result of weak economic conditions in the western Washington
and Oregon markets in which Frontiers loans are
concentrated or additional adverse regulatory action against the
company. Frontiers ability to borrow could also be
impaired by factors that are not specific to Frontier, such as a
disruption in the financial markets or negative views and
expectations about the prospects for the financial services
industry in light of the turmoil currently faced by financial
institutions and the continued deterioration in credit markets
and the economy. Additional information regarding liquidity risk
is
36
included in Information About Frontier
Managements Discussion and Analysis of Financial Condition
and Results of Operations Liquidity Resources.
Strong
competition within its market areas may limit Frontiers
growth and adversely affect the companys operating
results.
The banking and financial services industry is highly
competitive. Frontier competes in its market areas with
commercial banks, savings institutions, mortgage brokerage
firms, credit unions, finance companies, mutual funds, insurance
companies, and brokerage and investment banking firms operating
locally and elsewhere. Some of these competitors have
substantially greater resources and lending limits than
Frontier, have greater name recognition and market presence that
benefit them in attracting business and deposits, and offer
certain services that Frontier does not or cannot provide. In
addition, larger competitors may be able to price loans and
deposits more aggressively than Frontier. Frontiers
results of operations depend upon the companys continued
ability to successfully compete in its market area. The greater
resources and deposit and loan products offered by some of
Frontiers competitors may limit the companys ability
to increase or maintain its interest earning assets.
Frontier
will be required to pay significantly higher FDIC premiums in
the future.
Recent insured institution failures, as well as deterioration in
banking and economic conditions, have significantly increased
FDIC loss provisions, resulting in a decline in the designated
reserve ratio to historical lows. The FDIC expects a higher rate
of insured institution failures in the next few years compared
to recent years; thus, the reserve ratio may continue to
decline. In addition, the FDIC temporarily increased the limit
on FDIC coverage to $250,000 through December 31, 2013.
These developments will cause the premiums assessed to us by the
FDIC to increase. Under the final rule adopted December 16,
2008, Frontier Banks assessment rate will increase from 5
to 7 basis points per $100 of deposits to approximately 31
to 38 basis points in 2009. The increased deposit insurance
premiums are expected to result in a significant increase in our
non-interest expense, which will have a material impact on our
results of operations beginning in 2009.
Frontier
continually encounters technological change.
The financial services industry is continually undergoing rapid
technological change with frequent introductions of new
technology-driven products and services. The effective use of
technology increases efficiency and enables financial
institutions to better serve customers and to reduce costs.
Frontiers future success depends, in part, upon the
companys ability to address the needs of its customers by
using technology to provide products and services that will
satisfy customer demands, as well as to create additional
efficiencies in the companys operations. Many of
Frontiers competitors have substantially greater resources
to invest in technological improvements. Frontier may not be
able to effectively implement new technology-driven products and
services or be successful in marketing these products and
services to the companys customers. Failure to
successfully keep pace with technological change affecting the
financial services industry could have a material adverse effect
on Frontiers financial condition and results of operations.
Frontier
is exposed to risk of environmental liabilities with respect to
properties to which it takes title.
Approximately 85.4% of Frontiers outstanding loan
portfolio at June 30, 2009 was secured by real estate. In
the course of its business, Frontier may foreclose and take
title to real estate, and could be subject to environmental
liabilities with respect to these properties. Frontier may be
held liable to a governmental entity or to third-parties for
property damage, personal injury, investigation and
clean-up
costs incurred by these parties in connection with environmental
contamination, or may be required to investigate or clean up
hazardous or toxic substances, or chemical releases at a
property. The costs associated with investigation or remediation
activities could be substantial. In addition, if Frontier is the
owner or former owner of a contaminated site, the company may be
subject to common law claims by third-parties based on damages
and costs resulting from environmental contamination emanating
from the property. If Frontier ever becomes subject to
significant environmental liabilities, the companys
business, financial condition, liquidity and results of
operations could be materially and adversely affected.
37
Frontier
depends on key personnel for success.
Frontiers operating results and ability to adequately
manage its growth and minimize loan and lease losses are highly
dependent on the services, managerial abilities and performance
of Frontiers current executive officers and other key
personnel. Frontier has an experienced management team that the
Board of Directors believes is capable of managing and growing
Frontiers operations. However, losses of or changes in
Frontiers current executive officers or other key
personnel and their responsibilities may disrupt Frontiers
business and could adversely affect financial condition, results
of operations and liquidity. Frontier may not be successful in
retaining its current executive officers or other key personnel.
The
merger agreement limits Frontiers ability to pursue other
transactions and provides for payment of termination fees if it
does.
While the merger agreement is in effect and subject to very
narrow exceptions, Frontier and its directors, officers and
agents are prohibited from initiating or encouraging inquiries
with respect to alternative acquisition proposals. The
prohibition limits Frontiers ability to seek offers from
other possible acquirers which may be superior from a financial
point of view, or otherwise more desirable. If Frontier receives
an unsolicited proposal from a third party that is superior from
a financial point of view to that made by SPAH and the merger
agreement is terminated, Frontier would be required to pay a
$2.5 million termination fee in most circumstances. This
fee makes it less likely that a third party would make an
alternative acquisition proposal.
If the
merger is not approved by shareholders or regulators or is
terminated for some other reason, Frontier may experience
adverse consequences.
Frontiers management has expended substantial time and
effort in negotiating the merger agreement and the related
arrangements connected with the transaction described in this
joint proxy statement/prospectus. Additionally, Frontier has, at
significant expense, engaged numerous outside consultants for
the specific purpose of evaluating and negotiating this
transaction. Moreover, the Frontier Board has agreed to certain
arrangements intended to avert any unsolicited attempt to gain
control of Frontier during the pendency of this transaction,
including certain breakup fees and expense reimbursements.
Additionally, the merger reflects a substantial aspect of
managements strategic planning for Frontiers future.
Were the merger not to be consummated, Frontier would be forced
to make substantial adjustments in its strategic plans, which
would require additional management time and effort and which
might not be successful. Therefore, if the merger is not
consummated, Frontier may experience adverse impacts on its
strategic direction and its operating capabilities, and these
impacts may be material. Finally, the termination or abandonment
of the merger would likely have an adverse impact upon
investors views as to the attractiveness of
Frontiers common stock and customers views of
Frontiers safety and soundness, which would likely result
in a reduced market price for Frontiers common stock and a
reduction in Frontiers future business prospects, and such
reductions may be material.
Directors
and officers of Frontier have interests in the merger that are
in addition to or different than the interests of other
shareholders.
When considering the recommendation of the Frontier Board, you
should be aware that some executive officers and directors of
Frontier have interests in the merger that are somewhat
different from your interests. For example, certain officers and
directors of Frontier have change of control agreements which
will be assumed by SPAH, and certain officers and directors of
Frontier will receive a portion of the merger consideration for
their shares of Frontier stock. In addition, all of the
executive management team of Frontier will continue to be
employed with similar title, role and responsibilities. Four
board members from the current Frontier Board and Frontier Bank
Board will be invited to become members of the new SPAH Board
and Frontier Bank Board, respectively, following the
consummation of the merger. These arrangements may create
potential conflicts of interest and may cause some of these
persons to view the proposed transaction differently than you
view it, as a shareholder. See The Merger and the Merger
Agreement Certain Benefits of Directors and Officers
of Frontier.
38
Risks
Related to the Merger
To
implement its operating strategy following the merger, SPAH must
successfully identify opportunities for expansion and
successfully integrate its new strategic initiatives into
Frontiers existing operating platform.
Following the merger, SPAH intends to further implement an
operating strategy that results in a more diversified earning
asset portfolio, lower cost funding base and expansion of
noninterest income channels. This strategy will be driven
largely by focused efforts in business and retail banking within
our existing footprint. This strategy will require the
development of new products and services. This strategy will
also require that Frontier penetrate customer segments that have
not historically been a focus for the company. If following the
merger, SPAH is unable to generate products and services that
are attractive to its target customers or successfully deliver
those products and services to customers, an important component
of its strategy may be lost. Additionally, it is anticipated
that SPAH will have substantial capital resources after the
merger. SPAH may not be able to produce sufficient organic
growth to profitably leverage the pro forma capital resources.
As part of its operating strategy SPAH intends to use its
capital resources to consider expansion and acquisition
opportunities. Any future expansion or acquisition efforts may
entail substantial costs and may not produce the revenue,
earnings or synergies that SPAH had anticipated. Any future
expansion or acquisitions that SPAH undertakes will involve
operational risks and uncertainties. Acquired companies may have
unforeseen liabilities, exposure to asset quality problems, key
employee and customer retention problems and other problems that
could negatively affect SPAH.
The
operations of Frontier may still be restricted by the FDIC Order
and the FRB Written Agreement after Frontier and Frontier Bank
are integrated with SPAH.
On March 20, 2009, Frontier Bank entered into the FDIC
Order with the FDIC and the Washington DFI. The regulators
alleged that Frontier Bank had engaged in unsafe or unsound
banking practices by operating with inadequate management and
board supervision; engaging in unsatisfactory lending and
collection practices; operating with inadequate capital in
relation to the kind and quality of assets held at Frontier
Bank; operating with an inadequate loan valuation reserve;
operating with a large volume of poor quality loans; operating
in such a manner as to produce low earnings and operating with
inadequate provisions for liquidity. By consenting to the FDIC
Order, Frontier Bank neither admitted nor denied the alleged
charges.
Under the terms of the FDIC Order, Frontier Bank cannot declare
dividends or pay any management, consulting or other fees or
funds to Frontier, without the prior written approval of the
FDIC and the Washington DFI. Other material provisions of the
FDIC Order require Frontier Bank to: (1) review the
qualifications of Frontier Banks management,
(2) provide the FDIC with 30 days written notice prior
to adding any individual to the Frontier Bank Board or employing
any individual as a senior executive officer, (3) increase
director participation and supervision of Frontier Bank affairs,
(4) improve Frontier Banks lending and collection
policies and procedures, particularly with respect to the
origination and monitoring of real estate construction and land
development loans, (5) develop a capital plan and increase
Tier 1 leverage capital to 10% of Frontier Banks
total assets by July 29, 2009, and maintain that capital
level, in addition to maintaining a fully funded allowance for
loan losses satisfactory to the regulators, (6) implement a
comprehensive policy for determining the adequacy of the
allowance for loan losses and limiting concentrations in
commercial real estate and acquisition, development and
construction loans, (7) formulate a written plan to reduce
Frontier Banks risk exposure to adversely classified loans
and nonperforming assets, (8) refrain from extending
additional credit with respect to loans charged-off or
classified as loss and uncollected, (9) refrain
from extending additional credit with respect to other adversely
classified loans without collecting all past due interest,
without the prior approval of a majority of the directors on the
Frontier Bank Board or its loan committee, (10) develop a
plan to control overhead and other expenses to restore
profitability, (11) implement a liquidity and funds
management policy to reduce Frontier Banks reliance on
brokered deposits and other non-core funding sources, and
(12) prepare and submit progress reports to the FDIC and
the Washington DFI. The FDIC Order will remain in effect until
modified or terminated by the FDIC and the Washington DFI.
In addition, on July 2, 2009, Frontier entered into a
written agreement with the FRB. Under the terms of the FRB
Written Agreement, Frontier has agreed to: (i) refrain from
declaring or paying any dividends without prior written consent
of the FRB; (ii) refrain from taking dividends or any other
form of payment that represents a
39
reduction in capital from Frontier Bank without prior written
consent of the FRB; (iii) refrain from making any
distributions of interest or principal on subordinated
debentures or trust preferred securities without prior written
consent of the FRB; (iv) refrain from incurring, increasing
or guaranteeing any debt without prior written consent of the
FRB; (v) refrain from purchasing or redeeming any shares of
its stock without prior written consent of the FRB;
(vi) implement a capital plan and maintain sufficient
capital; (vii) comply with notice and approval requirements
established by the FRB relating to the appointment of directors
and senior executive officers as well as any change in the
responsibility of any current senior executive officer;
(viii) not pay or agree to pay any indemnification and
severance payments except under certain circumstances, and with
the prior approval of the FRB; and (ix) provide quarterly
progress reports to the FRB.
The Frontier Bank Board also entered into the Memorandum of
Understanding with the FDIC dated August 20, 2008 relating
to the correction of certain violation of applicable consumer
protection and fair lending laws and regulations, principally
including the failure to provide certain notices to consumers
pursuant to the Flood Disaster Protection Act of 1973, and
certain violations of the Truth in Lending Act and
Regulation Z.
The Memorandum of Understanding requires the Frontier Bank Board
to (i) correct all violations found and implement
procedures to prevent their recurrence; (ii) increase
oversight of the Frontier Bank Boards compliance function,
including monthly reports from Frontier Banks compliance
officer to the Frontier Bank Board detailing actions taken to
comply with the Memorandum of Understanding; (iii) review
its compliance policies and procedures and develop and implement
detailed operating procedures and controls, where necessary, to
ensure compliance with all consumer protection laws and
regulations; (iv) establish monitoring procedures to ensure
compliance with all consumer protection laws and regulations
(including flood insurance), including the documentation and
reporting of all exceptions to the Frontier Bank Board and its
audit committee; (v) review, expand and improve the quality
of such compliance with the frequency of compliance audits to be
reviewed and approved annually by the Frontier Bank Board or
audit committee, with a goal of auditing compliance at least
annually; (vi) ensure that Frontier Banks compliance
management function has adequate staff, resources, training and
authority for the size and structure of Frontier Bank;
(vii) establish flood insurance monitoring procedures to
ensure loans are not closed without flood insurance and prior
notices to customers required by law, that lapses of flood
insurance do not occur, and to develop methods to ensure that
adequate amounts of flood insurance are provided, with Frontier
Bank agreeing to force place flood insurance when
necessary; (viii) provide additional training for all
Frontier Bank personnel, including the Frontier Bank Board and
audit and compliance staff for applicable laws and regulations;
and (ix) furnish quarterly progress reports to the Regional
Director of the FDIC detailing the actions taken to secure
compliance with the Memorandum of Understanding until the
Regional Director has released the institution, in writing, from
submitting further reports. Frontier Bank was assessed civil
monetary penalties of $48,895 for flood insurance violations and
required to pay $10,974 in restitution to customers for certain
violations of the Truth in Lending Act and Regulation Z.
The consummation of the merger is conditioned upon the
modification of the (i) FDIC Order, (ii) the FRB
Written Agreement, and (iii) the Memorandum of
Understanding, in a manner reasonably acceptable to SPAH,
including by the elimination of certain provisions and
consequences related thereto. Frontier has been actively engaged
in responding to the concerns raised in the FDIC Order. With the
consummation of the merger, Frontier believes it can increase
its Tier 1 capital to compliance levels.
If the FDIC Order and FRB Written Agreement are not
appropriately modified or dismissed, the FDIC Order and the FRB
Written Agreement will continue to restrict the payment of
dividends by Frontier Bank and restrict the business activities
of Frontier Bank as discussed above. The occurrence of either of
these events could adversely impact the future value of SPAH
common stock and warrants.
The
consummation of the merger does not provide for the introduction
of a new management team or new members on the SPAH Board or the
Frontier Bank Board post-merger with experience in the banking
industry or with troubled banks.
Immediately following the consummation of the merger,
Frontiers business will continue to be operated by
Frontiers existing senior management team, and four of the
five directors to serve on each of the SPAH Board and Frontier
Bank Board post- merger will consist of existing directors on
the current Frontier Board and the Frontier
40
Bank Board. While a former independent director, Patrick M.
Fahey, was recently appointed President and Chief Executive
Officer of Frontier in December 2008, the merger does not
include a new management team. In addition, it is anticipated
that Mr. Lichtenstein will become Chairman of the Board of
the SPAH Board and John McNamara will become Chairman of the
Board of Frontier Bank, post-merger. Although
Messrs. Lichtenstein and McNamara have significant
investment, restructuring and board experience with public
companies, neither have significant long-term experience in the
banking industry or with troubled banks. The lack of new senior
management and directors with significant long-term experience
in the banking industry or with troubled banks, could make it
more difficult for SPAH to comply with certain regulatory
actions or successfully develop and implement its new business
strategies and initiatives.
SPAHs
working capital could be reduced if SPAH stockholders exercise
their right to convert their shares into cash equal to a pro
rata portion of the SPAH trust account.
Pursuant to the SPAH Certificate of Incorporation, holders of
shares issued in SPAHs initial public offering may vote
against the merger and demand that SPAH convert their shares
into cash equal to a pro rata portion of the SPAH trust account.
Under the SPAH Certificate of Incorporation, SPAH will not
consummate the merger if holders of 30% or more of the shares of
common stock issued in its initial public offering exercise
these conversion rights. If Proposal No. 2 is approved
and adopted, it is a condition to closing the merger agreement
that holders of no more than 10% of the shares (minus one share)
sold in SPAHs initial public offering vote against the
merger and exercise their conversion rights, although at
SPAHs discretion, this closing condition may be waived in
order to consummate the merger. Accordingly, SPAH may not
consummate the merger if 10% or more of the holders of shares
sold in or subsequent to SPAHs initial public offering
elect to exercise their conversion rights. If SPAH elects to
waive this closing condition, it may raise the conversion
threshold to anywhere between 10% to 30% (minus one share). SPAH
does not believe it will raise the conversion threshold and
currently intends only to raise the conversion threshold if it
believes that the combined entity will have sufficient
Tier 1 capital to return to compliance levels. To the
extent the merger is consummated and holders of less than 10% of
the common stock issued in SPAHs initial public offering
have demanded to convert their shares, working capital available
to SPAH following the merger will be reduced by the amount paid
out of the trust to stockholders exercising their conversion
rights.
Additionally, if holders demand to convert their shares, there
may be a corresponding reduction in the value of each share of
common stock of SPAH. As of September 17, 2009, assuming
the merger proposal is adopted, the maximum amount of funds that
could be disbursed to the SPAH public stockholders upon the
exercise of the conversion rights would be approximately
$[ ], or approximately
[ ]% of the funds currently held in
trust as of the record date for the SPAH special meeting.
SPAH
has lowered the percentage of shares that can exercise
conversion rights below the level a typical blank check company
with a similar business plan as ours would permit.
SPAH has made it a condition to closing the merger agreement
that holders of no more than 10% of the shares (minus one share)
sold in SPAHs initial public offering vote against the
merger and exercise their conversion rights even though the SPAH
Certificate of Incorporation in its current form, provides that
our initial business combination may only be consummated if SPAH
public stockholders owning up to 30% of the shares sold in this
offering (minus one share) exercise their conversion rights.
SPAH is requesting its stockholders to approve
Proposal No. 2 to provide for this lower threshold.
Most blank check companies with similar business plans as ours
are structured so that their initial business combination may be
consummated if public stockholders owning up to 20% of the
shares sold in their initial public offering (minus one share)
exercise their conversion rights. SPAHs decreased
conversion threshold may prevent the merger from being approved
which would otherwise have been approved if SPAH kept its
original 30% (minus one share) conversion threshold as stated in
the SPAH Certificate of Incorporation and the prospectus for
SPAHs initial public offering. As a result, it is less
likely that SPAH will be able to consummate the proposed merger,
although at SPAHs discretion, this closing condition may
be waived in order to consummate the merger. If SPAH elects to
waive this closing condition, it may raise the conversion
threshold to anywhere between 10% to 30% (minus one share). SPAH
does not believe it will raise the conversion threshold and
currently intends only to raise the conversion threshold if it
believes that the combined entity will have sufficient
Tier 1 capital to return to compliance levels.
41
The
lowered percentage of shares with regard to which SPAH public
stockholders can exercise their conversion rights may deplete
substantially all of the funds held in SPAHs trust
account, and further deprive SPAH of working capital following
consummation of the merger.
Although the SPAH Certificate of Incorporation prohibits it from
pursuing an initial business combination in which holders of
more than 30% (minus one share) of the shares sold in
SPAHs initial public offering (up to and including the
record date) exercise their conversion rights, SPAH has made it
a closing condition to the merger agreement that if holders of
10% or more of SPAHs shares sold in its initial public
offering (up to and including the record date) elect to exercise
their conversion rights, SPAH may not consummate the merger.
Consequently, the lowered conversion threshold will make it more
difficult for SPAH to consummate the merger.
In order to secure the approval of the merger with SPAHs
public stockholders, SPAH may use the funds in the trust account
to purchase shares, following the consummation of the merger,
from such holders who have indicated an intention to vote
against the merger and thereafter exercise their conversion
rights. As a result of the lowered conversion threshold from 30%
(minus one share) to 10% (minus one share), and in order to
secure approval of the merger, SPAH may be forced to spend
additional funds from the trust account to purchase shares from
SPAH public stockholders who have indicated their intention to
vote against the merger and convert their shares. If SPAH spends
additional funds from the trust account to secure approval of
the merger, SPAH may deplete a significant portion of the trust
funds, and may not have sufficient working capital following the
merger to meet bank regulatory concerns, or successfully operate
its business.
The
amount of capital in the trust account may be insufficient to
satisfy banking regulatory concerns or allow Frontier to return
to profitability.
Frontier and its subsidiary, Frontier Bank, are subject to
various regulatory capital requirements administered by federal
and state banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if
undertaken, could have a material effect on Frontiers
financial statements and the financial statements of the
combined entity upon consummation of the merger. Under capital
adequacy guidelines and the regulatory framework for prompt
corrective action, Frontier must meet specific capital
guidelines that involve quantitative measures of assets,
liabilities and certain off-balance-sheet items as calculated
under regulatory accounting practices. The capital amounts and
classifications are also subject to qualitative judgments by the
regulators about components, risk weightings and other factors.
Upon consummation of the merger, the combined company will be
subject to these same regulatory capital requirements.
Regardless of how few SPAH public stockholders may elect to
convert their shares into a pro rata portion of the trust
account, there is no certainty that the combined company or
Frontier Bank will have sufficient capital to satisfy various
regulatory capital requirements administered by federal and
state banking agencies or to return to profitability.
SPAH,
the SPAH insiders and/or certain of their respective affiliates
may purchase additional shares of SPAH common stock from SPAH
public stockholders, which may give them greater influence over
the approval of the merger.
The ability of SPAH, SPAH insiders
and/or their
respective affiliates to acquire additional SPAH common stock,
vote such acquired shares as they desire and effectively reduce
the number of shares that other SPAH public stockholders may
elect to convert into a pro rata portion of the trust account
may allow SPAH and Frontier to consummate the merger even if it
would not have otherwise been approved but for such additional
purchases. Any privately negotiated transaction between SPAH,
the SPAH insiders
and/or
certain of their respective affiliates on the one hand, and
holders of SPAHs common stock on the other hand, which
holders would otherwise choose to vote against the merger, would
include a contractual acknowledgement that such stockholder,
although still the record holder of our shares is no longer the
beneficial owner thereof and therefore agrees to vote the
applicable shares of common stock as directed by the purchaser
of such securities. In the event that SPAH, the SPAH insiders
and/or
certain of their respective affiliates purchase shares in
privately negotiated transactions from SPAH public stockholders
who have already cast votes against the merger and requested
conversion of their shares, such selling stockholders would be
required to revoke their prior votes against the merger and to
revoke their prior elections to
42
convert their shares and to cast new votes in favor of the
merger. The revocation of prior negative votes and substitution
therefor of votes in favor of the proposed merger would have the
effect of reducing conversions and increasing votes in favor of
the proposed merger, thereby making it more likely that the
merger would be approved. Investors are cautioned that none of
SPAH, the SPAH insiders
and/or
certain of their respective affiliates or any third parties has
agreed to purchase any such shares, and the failure to so agree
at the applicable time could adversely impair our ability to
approve the merger. Moreover, even if SPAH, the SPAH insiders
and/or
certain of their respective affiliates were to undertake such
purchases, such purchases could be subject to limitations under
applicable securities laws and regulations, including
Regulation M and regulations regarding tender offers. The
inability of such persons to effect such purchases could
adversely impair our ability to effect the merger.
SPAH,
the SPAH insiders and/or certain of their respective affiliates
may diminish funds in the trust account for the purchase,
directly or indirectly, of shares held by the SPAH public
stockholders in order to secure the approval of the
merger.
After the payment of expenses associated with the merger,
including deferred underwriting commissions to the extent paid
in cash, the balance of funds in SPAHs trust account will
be available to SPAH for working capital and general corporate
purposes. However, a portion of the funds in the trust account
may be used to acquire shares held by SPAH public stockholders
following the consummation of the merger, either from holders
who indicate their intention to vote against the merger and seek
conversion or who otherwise wish to sell their shares, so that
such shares will be voted in favor of the merger and related
proposals. As a result, the amount of funds from SPAHs
trust account that will be released to SPAH following the merger
for working capital and general corporate purposes may be
diminished.
SPAHs
existing stockholders will incur immediate dilution of their
ownership and voting interests upon completion of the
merger.
SPAHs existing stockholders ownership would be
diluted from 100% to as little 94.5% or as much as 96.1% after
the merger, based on the number of shares of SPAH and Frontier
issued and outstanding as of the date of the merger agreement
and after reflecting the co-investment. This dilution may
adversely affect the then-prevailing market price for
SPAHs common stock. The percentage of SPAHs common
stock (whether voting or non-voting) that existing SPAH
stockholders will own after the merger and the co-investment is
completed will depend on whether (i) Frontier shareholders
exercise dissenters rights, (ii) SPAH public
stockholder exercise conversion rights, and (iii) any of
SPAHs 66,624,000 warrants are exercised (after reflecting
the co-investment and merger).
In addition to the foregoing, the percentage of SPAHs
voting common stock that existing SPAH stockholders will own
after the merger and co-investment will depend on whether
(i) any SPAH stockholder converts its voting common stock
into Non-Voting Common Stock, and (ii) any SPAH
warrantholder elects to receive shares of Non-Voting Common
Stock in lieu of voting common stock upon exercise of their
warrants. SP Acq LLC and the Steel Trust have agreed to receive
Non-Voting Common Stock as necessary in order to maintain an
ownership level of voting common stock below 5% of the total
outstanding shares of voting. As a result, SPAH stockholders
will hold from 94.3% to 95.3% of SPAHs voting interests
depending on whether any Frontier shareholder exercises
dissenters rights, any of SPAHs warrants are
exercised and whether any SPAH public stockholders exercise
their conversion rights. In addition, SPAH, the SPAH insiders,
and/or
certain of their respective affiliates may negotiate
arrangements to provide for the purchase of shares from SPAH
public stockholders who indicate their intention to vote against
the merger and seek conversion or who otherwise wish to sell
their shares. As a result, existing SPAH stockholders
voting interests may be further increased or decreased
accordingly in order for SP Acq LLC and the Steel Trust to
maintain an ownership level of voting common stock below 5% of
the total outstanding shares of voting common stock.
Also, after the merger, SPAH may issue additional shares of
common or preferred stock, including through convertible debt
securities, in subsequent public offerings or private placements
to acquire new assets or for other purposes. SPAH is not
required to offer any such shares to existing stockholders on a
preemptive basis. Therefore, it may not be possible for existing
SPAH stockholders to participate in such future share issuances,
which may dilute the existing stockholders interests in
SPAH. Moreover, the merger agreement contains certain agreements
of the parties with respect to various employee matters,
including an agreement by SPAH to adopt stock option or other
43
equity plans for officers and employees of Frontier as the SPAH
Board of the combined company deems appropriate.
For a table outlining the effect of the various scenarios on the
percentage of SPAHs common stock and voting interests that
existing SPAH stockholders will own after the merger with
Frontier is completed, see The Merger and the Merger
Agreement Stock Ownership of Existing SPAH and
Frontier Stockholders After the Merger.
A
substantial number of SPAHs shares and warrants will be
issued in the merger and will be eligible for future resale in
the public market after the merger, which could have an adverse
effect on the market price of those shares and
warrant.
If the merger is consummated, up to 2,512,000 shares of
SPAH common stock will be issued to the former shareholders of
Frontier common stock and 3,000,000 shares will be issued
to the Steel Trust in the co-investment. In addition,
outstanding warrants to purchase an aggregate of
66,624,000 shares of SPAH common stock (after adjusting for
the granting of 2,512,000 warrants to Frontier shareholders in
connection with the merger and 3,000,000 warrants in connection
with the co-investment) will be exercisable at $11.50 per share
on the date of the completion of the merger (if the warrant
amendment proposal is approved by SPAH warrantholders as
described elsewhere in this joint proxy statement/prospectus)
and the initial founders warrants to purchase an
additional 10,322,400 shares and the co-investment warrants
to purchase an additional 3,000,000 shares will be
exercisable following a one year
lock-up
period, all as described under Description of Securities
of SPAH. Thus, if the merger is consummated, SPAH will
have approximately 50,170,588 shares of common stock
outstanding (after adjusting for the co-investment and the
forfeiture of the 9,453,412 shares by SP Acq LLC and
Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker) and
outstanding warrants to purchase 66,624,000 shares of
common stock (after adjusting for the co-investment) will be
exercisable. This number of shares of SPAH common stock was
determined by adding the product of the exchange ratio of 0.0530
and 47,385,007, which is the maximum number of shares of
Frontier common stock that may be outstanding prior to the
effective time of the merger (including 253,154 shares of
restricted stock which will vest upon consummation of the
merger), to 54,112,000 and 3,000,000, the number of shares of
SPAH common stock outstanding on SPAHs record date and the
number of shares that will be issued to the Steel Trust in the
co-investment, respectively, minus the forfeiture of 9,453,412
founders shares by SP Acq LLC and Messrs. Bergamo,
LaBow, Lorber, Toboroff and Walker immediately following the
consummation of the merger. The number of warrants was
determined by adding the product of the exchange ratio of 0.0530
and 47,385,007, which is the maximum number of shares of
Frontier common stock that may be outstanding prior to the
effective time of the merger (including 253,154 shares of
restricted stock which will vest upon consummation of the
merger), to 61,112,000 and 3,000,000, the number of warrants
outstanding on SPAHs record date and the number of
warrants that will be issued to the Steel Trust in the
co-investment, respectively. Consequently, after completion of
the merger, a substantial number of additional shares of SPAH
common stock will be eligible for resale in the public market
and a substantial number of warrants will be exercisable into
shares of common stock which may be ultimately resold in the
public market. As long as warrants remain outstanding, there
will be a drag on any increase in the price of SPAHs
common stock in excess of $11.50 per share. To the extent such
warrants are exercised, additional shares of SPAH common stock
will be issued, which would dilute the ownership of existing
stockholders. Sales of substantial numbers of such shares in the
public market could adversely affect the market price of such
shares and of the warrants.
A
stockholder may make a securities law claim against SPAH for
taking actions inconsistent with its initial public offering
prospectus.
Stockholders who purchased shares in SPAHs initial public
offering or afterwards up to and until the record date, may have
securities law claims against SPAH for rescission (under which a
successful claimant has the right to receive the total amount
paid for his or her securities pursuant to an allegedly
deficient prospectus, plus interest and less any income earned
on the securities, in exchange for surrender of the securities)
or damages (compensation for loss on an investment caused by
alleged material misrepresentations or omissions in the sale of
a security) on the basis of, for example, SPAHs initial
public offering prospectus not disclosing that (i) SPAH may
seek to amend the SPAH Certificate of Incorporation prior to the
consummation of a business combination to amend the definition
of initial business combination to eliminate the
requirement that the fair market value of the target business
equal at
44
least 80% of the balance of SPAHs trust account
(excluding underwriting discounts and commissions) plus the
proceeds of the co-investment, (ii) SPAH may seek to amend
the SPAH Certificate of Incorporation prior to the consummation
of a business combination to provide that holders of no more
than 10% of the shares (minus one share) sold in SPAHs
initial public offering vote against the merger and exercise
their conversion rights when the threshold in the current form
of the SPAH Certificate of Incorporation requires no more than
30% (minus one share), (iii) the Warrant Agreement upon
consummation of the merger to eliminate the requirement that the
initial founders warrants owned by certain SPAH insiders
become exercisable only after the consummation of an initial
business combination if and when the last sales price of SPAH
common stock exceeds $14.25 per share for any 20 trading days
within a 30 trading day period beginning 90 days after such
business combination, (iv) funds in its trust account might
be used, directly or indirectly, to purchase shares following
the consummation of the merger from SPAH public stockholders in
order to secure approval of SPAHs stockholders on the
merger, (v) that SPAH may seek to amend the terms of the
Warrant Agreement to increase the exercise price and extend the
exercise period, among other things, upon consummation of the
merger, and (vi) that a party other than SP II or SP Acq
LLC may purchase the co-investment units.
Such claims may entitle stockholders asserting them to up to
$10.00 per share, based on the initial offering price of the
units sold in SPAHs initial public offering, each
comprised of one share of common stock and a warrant to purchase
an additional share of common stock, less any amount received
from the sale or fair market value of the original warrants
purchased as part of the units, plus interest from the date of
SPAHs initial public offering. In the case of SPAH public
stockholders, this amount may be more than the pro rata share of
the trust account to which they are entitled upon exercise of
their conversion rights or liquidation of SPAH.
The
SPAH Certificate of Incorporation purports to prohibit
amendments to certain of its provisions, including the proposed
Initial Charter Amendments, without the unanimous consent of the
holders of all of SPAHs outstanding shares of common
stock.
The SPAH Certificate of Incorporation purports to prohibit
amendments to certain of its provisions, including the proposed
Initial Charter Amendments, without the unanimous consent of the
holders of all of SPAHs outstanding shares of common
stock. SPAH believes, and has received an opinion from its
special Delaware counsel that while the matter has not been
settled as a matter of Delaware law and, accordingly, is not
entirely free from doubt, the Initial Charter Amendments, if
duly approved by a majority of the shares of SPAHs
outstanding common stock entitled to vote at the special
meeting, will be valid under Delaware law.
However, because the SPAH Certificate of Incorporation in its
current form requires unanimous consent to approve the Initial
Charter Amendment, if the Initial Charter Amendments are
approved with less than unanimous consent and the merger is
approved and consummated thereafter, each SPAH public
stockholder at the time of the merger who purchased his or her
shares in the initial public offering or afterwards up to and
until the record date, may have securities law claims against
SPAH for rescission (under which a successful claimant has the
right to receive the total amount paid for his or her securities
pursuant to an allegedly deficient prospectus, plus interest and
less any income earned on the securities, in exchange for
surrender of the securities) or damages (compensation for loss
on an investment caused by alleged material misrepresentations
or omissions in the sale of a security). Such claims may entitle
stockholders asserting them to up to $10.00 per share, based on
the initial offering price of the units sold in SPAHs
initial public offering, each comprised of one share of common
stock and a warrant to purchase an additional share of common
stock, less any amount received from the sale or fair market
value of the original warrants purchased as part of the units,
plus interest from the date of SPAHs initial public
offering. In the case of SPAH public stockholders, this amount
may be more than the pro rata share of the trust account to
which they are entitled upon exercise of their conversion rights
or liquidation of SPAH. Neither SPAH nor Frontier can predict
whether stockholders will bring such claims or whether such
claims would be successful.
Concentration
of ownership of SPAH common stock after the merger could delay
or prevent a change of control.
Following the consummation of the merger, the SPAH insiders will
beneficially own approximately 4,368,988 shares of SPAH
common stock (after giving effect to the forfeiture of 9,453,412
founders shares by SP Acq LLC and Messrs. Bergamo,
LaBow, Lorber, Toboroff and Walker and the co-investment) and
will have,
45
through the exercise of warrants, the right to acquire
20,822,400 additional shares of common stock (after giving
effect to the co-investment), under certain circumstances. As a
result, these stockholders, if acting together, have the ability
to significantly influence the outcome of corporate actions
requiring stockholder approval. The concentration of ownership
among the SPAH insiders may have the effect of delaying or
preventing a change in control in SPAH following the merger even
if such a change in control would be in the SPAH public
stockholders interest.
Completion
of the merger is subject to a number of
conditions.
The obligations of SPAH and Frontier to consummate the merger
are subject to the satisfaction or waiver of specified
conditions set forth in the merger agreement. Such conditions
include, but are not limited to, the adoption of the Initial
Charter Amendment, the adoption of the merger agreement by SPAH
and Frontier stockholders, the adoption of the warrant amendment
proposal by SPAH warrantholders, the approval of SPAHs
application to become a bank holding company, and receipt of all
required regulatory approvals, including the approval of the
Federal Reserve and Washington DFI. It is possible some or all
of these conditions will not be satisfied or waived by SPAH or
Frontier, as the case may be, and therefore, the merger may not
be consummated. See The Merger and the Merger
Agreement The Merger Agreement
Conditions to the Closing of the Merger. In the event the
merger is not consummated, SPAH will seek to effectuate an
alternative business combination. However, if SPAH does not
complete a business combination by October 10, 2009, it
will be forced to liquidate and dissolve.
The
fairness opinion obtained by Frontier from Keefe Bruyette will
not reflect changes in circumstances prior to the completion of
the merger.
Frontier obtained a fairness opinion dated as of July 29,
2009, from Keefe Bruyette in connection with the merger.
Frontier will not obtain an additional or updated fairness
opinion prior to completion of the merger. Changes in the
operations and prospects of SPAH or Frontier, general market and
economic conditions and other factors that may be beyond the
control of SPAH and Frontier, on which the fairness opinion was
based, may alter the value of SPAH or Frontier or the price of
shares of SPAH common stock or Frontier common stock by the time
the merger is completed. The fairness opinion by Keefe Bruyette
does not speak to any date other than the date of such opinion,
and as such, the opinion will not address the fairness of the
merger consideration, from a financial point of view, at any
date after the date of such opinion, including at the time the
merger is completed. For a description of the opinion that
Frontier received from Keefe Bruyette, please see The
Merger and the Merger Agreement Opinion of Keefe
Bruyette.
SPAHs
common stock or warrant price could fluctuate and could cause
stockholders and warrantholders to lose a significant part of
their investment.
Following consummation of the merger, the market price of
SPAHs securities may be influenced by many factors, some
of which are beyond its control, including those described in
other parts of this section and the following:
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fluctuations in its quarterly financial results or the quarterly
financial results of companies perceived to be similar to it;
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whether and when the FDIC Order and FRB Written Agreement are
ultimately dismissed;
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general economic conditions;
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changes in market valuations of similar companies;
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terrorist acts;
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changes in its capital structure, such as future issuances of
securities or the incurrence of additional debt;
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future sales of its common stock;
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regulatory and legislative developments in the United States,
foreign countries or both;
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46
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litigation involving SPAH, its subsidiaries or its general
industry; and
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additions or departures of key personnel at Frontier.
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If the
mergers benefits do not meet the expectations of financial
or industry analysts, the market price of SPAH common stock may
decline.
The market price of SPAH common stock may decline as a result of
the merger if:
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SPAH does not achieve the perceived benefits of the merger as
rapidly, or to the extent anticipated by, financial or industry
analysts; or
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the effect of the merger on SPAHs financial results is not
consistent with the expectations of financial or industry
analysts.
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Accordingly, investors may experience a loss as a result of a
decline in the market price of SPAH common stock following the
merger. A decline in the market price of SPAH common stock also
could adversely affect its ability to issue additional
securities and its ability to obtain additional financing in the
future.
Approval
of the warrant amendment proposal may negatively affect existing
SPAH stockholders and SPAH warrantholders.
If the SPAH warrantholders approve the warrant amendment
proposal, the exercise price of the warrants will increase from
$7.50 per share to $11.50 per share of common stock, which, at
either price, exceeds the current and recent market prices of
SPAHs common stock. If the market price of SPAHs
common stock does not exceed the exercise price of the warrants
during the period in which the warrants are exercisable, the
warrants may not have any value. By increasing the warrant
exercise price to $11.50 per share, it will be more difficult
for SPAH warrantholders to exercise the SPAH warrants.
The warrant amendment proposal also eliminates the requirement
that the initial founders warrants owned by the SPAH
insiders become exercisable only after the consummation of an
initial business combination if and when the last sales price of
SPAH common stock exceeds $14.25 per share for any 20 trading
days within a 30 trading day period beginning 90 days after
such business combination. The elimination of the restrictions
on exercisability will make it easier for SPAH insiders to
exercise their insider warrants, which could result in the
interests of our stockholders being diluted, notwithstanding the
higher warrant exercise price discussed above.
Certain
current directors and executive officers of SPAH own shares of
SPAH common stock and warrants that will be worthless if the
merger is not approved. Such interests may have influenced their
decision to approve the merger with SPAH.
Following the consummation of the merger, the current directors
and executive officers of SPAH will beneficially own
approximately 4,368,988 shares of SPAH common stock (after
giving effect to the forfeiture of 9,453,412 founders
shares by SP Acq LLC and Messrs. Bergamo, LaBow, Lorber,
Toboroff and Walker) and have the right to acquire an additional
20,822,400 shares through the exercise of warrants (after
giving effect to the
co-investment),
subject to certain limitations. Such persons are not entitled to
receive any of the cash proceeds that may be distributed upon
SPAHs liquidation with respect to shares they acquired
prior to its initial public offering. Therefore, if the merger
is not approved and SPAH does not consummate another business
combination by October 10, 2009 and is forced to liquidate,
such founders shares, initial founders warrants and
additional founders warrants held by such persons will be
worthless. As of September 17, 2009, the record date for
the special meeting, SPAHs current directors and executive
officers beneficially held $[ ] in
common stock (based on a market price of
$[ ]) and
$[ ] in warrants (based on a market
price of $[ ]). These financial
interests of SPAHs current directors and executive
officers may have influenced their decision to approve the
merger and to continue to pursue the merger. See The
Merger and the Merger Agreement Interests of
SPAHs Directors and Officers and Others in the
Merger.
47
The
exercise of SPAHs directors and officers
discretion in agreeing to changes or waivers in the terms of the
merger may result in a conflict of interest when determining
whether such changes to the terms of the merger or waivers of
conditions are appropriate and in SPAHs stockholders
best interest.
In the period leading up to the closing of the merger, events
may occur that, pursuant to the merger agreement, would cause
SPAH to agree to amend the merger agreement, to consent to
certain actions taken by Frontier or to waive rights that SPAH
is entitled to under the merger agreement. Such events could
arise because of a request by Frontier to undertake actions that
would otherwise be prohibited by the terms of the merger
agreement or the occurrence of other events that would have a
material adverse effect on Frontiers business and would
entitle SPAH to terminate the merger agreement. In any of such
circumstances, it would be discretionary on SPAH, acting through
its board of directors, to grant its consent or waive its
rights. The existence of the financial and personal interests of
the directors described in the preceding risk factor may result
in a conflict of interest on the part of one or more of the
directors between what he may believe is best for SPAH and what
he may believe is best for himself in determining whether or not
to take the requested action. As of the date of this joint proxy
statement/prospectus, SPAH does not believe there will be any
changes or waivers that its directors and officers would be
likely to make after stockholder approval of the merger proposal
has been obtained. Although certain changes could be made
without further stockholder approval, to the extent that SPAH
has determined that a change to a term to the transaction may
have a material effect on stockholders, SPAH will circulate a
new or amended joint proxy statement/prospectus and resolicit
its stockholders prior to the stockholder vote on the merger
proposal.
SPAH
officers and directors and others interests in
obtaining reimbursement for any
out-of-pocket
expenses incurred by them may have led to a conflict of interest
in determining whether the merger was an appropriate initial
business combination and in the public stockholders best
interest.
Unless SPAH consummates the merger or another initial business
combination, its officers and directors and affiliates of SP Acq
LLC and their employees will not receive reimbursement for any
out-of-pocket
expenses incurred by them to the extent that such expenses
exceed the amount of available proceeds not deposited in the
trust account and the amount of interest income from the trust
account up to a maximum of $3.5 million that may be
released to SPAH as working capital. As of September 17,
2009, the estimated
out-of-pocket
expenses incurred by SPAHs officers and directors and
affiliates of SP Acq LLC and their employees is minimal. While
SPAH has not finalized how much fees and expenses it will incur
relating to the investigation, structuring and negotiating the
transaction, it is unlikely that such fees and expenses would
exceed cash and cash equivalents on hand, which was
approximately $1.59 million, as of June 30, 2009, in which
event if a transaction is not consummated, SPAH believes it will
be able to negotiate with its third party vendors to ensure
that the amount of such fees and expenses will ultimately not
exceed its cash and cash equivalents. These amounts are based on
managements estimates of the funds needed to finance
SPAHs operations until the consummation of the merger or
another initial business combination and to pay expenses in
identifying and consummating such transaction. Those estimates
may prove to be inaccurate, especially if a portion of the
available proceeds is used to make a down payment in connection
with an initial business combination or pay exclusivity or
similar fees or if SPAH expends a significant portion in pursuit
of the merger or another initial business combination that is
not consummated. SPAHs officers and directors may, as part
of any business combination, negotiate the repayment of some or
all of any such expenses. If the target businesss owners
do not agree to such repayment, this could cause management to
view such potential business combination unfavorably, thereby
resulting in a conflict of interest. The financial interest of
SPAH officers and directors and SP Acq LLC could influence
SPAHs officers and directors motivation in
selecting a target business and therefore there may be a
conflict of interest when determining whether a particular
business combination is in SPAH stockholders best
interest. In addition, the proceeds SPAH will receive from the
co-investment (as well as the proceeds of the initial public
offering not being placed in the trust account or the income
interest earned on the trust account balance) may be used to
repay the expenses for which SPAHs directors may negotiate
repayment as part of its initial business combination.
If
SPAHs due diligence investigation of Frontier regarding
the merger fails to identify issues specific to Frontier or the
environment in which Frontier operates, SPAH may be required to
take write downs or write-offs, restructuring, and impairment or
other charges that could have a significant negative effect on
48
its financial condition, results of operations and stock
price, which could cause SPAH stockholders to lose some or all
of their investment.
In order to meet disclosure and financial reporting obligations
under the federal securities laws, and in order to develop and
seek to execute strategic plans for how SPAH can increase the
profitability of Frontier or capitalize on market opportunities,
SPAH was required to conduct a due diligence investigation of
Frontier. In July 2009, in anticipation of a possible
transaction, Frontier hired a third party loan specialist to
perform due diligence procedures on Frontier Banks loan
portfolio, including a review of loan documents, files,
appraisals, balances, payment history and other loan data of a
relevant sample of loans selected from a pool of approximately
$2.4 billion of approximately 10,206 commercial real
estate, land development, commercial and industrial,
construction, residential first lien, residential second lien,
home equity, letters of credit and consumer loans selected from
Frontier Banks $3.6 billion loan portfolio. SPAH
management participated in group meetings with the loan
specialist and reviewed its analysis, but ultimately performed
and relied upon its own diligence of Frontiers loan
portfolio, allowance for loan losses, loan charge-offs and loan
recoveries, in determining to proceed with a transaction with
Frontier.
While SPAH believes it has conducted a sufficient due diligence
on Frontiers operations, no assurance can be made that
this diligence has uncovered all material issues relating to
Frontier, or that factors outside of Frontiers business
and outside of SPAHs control will not later arise. If
SPAHs diligence fails to identify issues specific to
Frontier or the environment in which Frontier operates, SPAH may
be forced to write-down or write-off assets, restructure its
operations, or incur impairment or other charges that could
result in reporting losses. Even though these charges may be
non-cash items and not have an immediate impact on liquidity,
the fact that SPAH reports charges of this nature could
contribute to negative market perceptions about SPAH
and/or its
common stock. In addition, charges of this nature may cause SPAH
to violate net worth or other covenants to which it may be
subject as a result of assuming pre-existing debt held by
Frontier or by virtue of obtaining post-combination debt
financing.
The
SPAH Board did not obtain a fairness opinion or independent
valuation analysis of Frontier, or that the consideration being
paid to Frontier was fair to the stockholders of SPAH in
determining whether or not to proceed with the merger and, as a
result, the terms may not be fair from a financial point of view
to SPAHs public stockholders and you may not receive the
value of your investment.
The SPAH Board conducted due diligence on Frontiers
proposed business model and investment strategy but did not
obtain an opinion from an investment banking firm as to the fair
market value of Frontier or that the terms of the merger are
fair to the stockholders of SPAH. The SPAH Board believes that
because of the financial skills and background of its directors,
it was qualified to conclude that the merger was fair from a
financial perspective to its stockholders. An independent
analysis may not arrive at the same conclusion and the SPAH
Board may be incorrect in its assessment of the transaction. It
is possible that the actual value of Frontiers business is
lower than SPAH could realize on a sale of the combined company
or its assets. While the SPAH Board feels that its assessment
was reasonable, you may not realize the value of your
investment. See the section entitled The Merger and the
Merger Agreement Interests of SPAHs Directors
and Officers and Others in the Merger.
If the
merger is completed, a large portion of the funds in the trust
account established by SPAH in connection with its initial
public offering for the benefit of the SPAH public stockholders
may be used to pay converting stockholders or for the purchase,
directly or indirectly, of shares held by SPAH public
stockholders who intend to vote against the merger proposal. As
a consequence, if the merger is completed, the number of
beneficial holders of SPAHs securities may be reduced to a
number that may preclude the quotation, trading or listing of
SPAHs securities other than on an
Over-the-Counter
Bulletin Board.
Pursuant to the SPAH Certificate of Incorporation, public
stockholders may vote against the merger proposal and demand
that SPAH convert their shares into a pro rata share of the
trust account. As a consequence of such purchases, the number of
beneficial holders of SPAHs securities may be reduced,
which may make it difficult to maintain the quotation, listing
or trading of SPAHs securities on the NYSE AMEX LLC or any
other national securities exchange.
49
Risks
Related To SPAH
SPAH
may not be able to consummate the merger or another initial
business combination, in which case it would be forced to
dissolve and liquidate.
If SPAH fails to consummate a business combination prior to
October 10, 2009, SPAH will be forced to dissolve and
liquidate. SPAH may not be able to consummate the merger or find
another suitable target business within the required time frame.
In addition, its negotiating position and ability to conduct
adequate due diligence on Frontier or another potential target
business may be reduced as SPAH approaches the deadline for the
consummation of an initial business combination. Upon
liquidation and dissolution, SPAH stockholders would receive
less than $10.00 per share, the initial public offering purchase
price, because of the expenses of the initial public offering,
funds reserved to pay creditors or potential creditors, general
and administrative expenses and the costs of seeking an initial
business combination.
SPAH expects that all costs and expenses associated with
implementing a plan of distribution, as well as payments to any
creditors, will be funded from amounts remaining out of the
$100,000 of proceeds held outside the trust account and from the
$3.5 million in interest income on the balance of the trust
account that was released to SPAH to fund working capital
requirements. However, if those funds are not sufficient to
cover the costs and expenses associated with implementing a plan
of distribution, to the extent that there is any interest
accrued in the trust account not required to pay income taxes on
interest income earned on the trust account balance, SPAH may
request that the trustee release to it an additional amount of
up to $75,000 of such accrued interest to pay those costs and
expenses.
If
SPAH is unable to effect a business combination and is forced to
liquidate, its warrants will expire worthless.
If SPAH does not complete the merger or another business
combination by October 10, 2009, the SPAH Certificate of
Incorporation provides that its corporate existence will
automatically terminate and it will distribute to all holders of
its public shares, in proportion to the number of public shares
held by them, an aggregate sum equal to the amount in the trust
fund, inclusive of any interest plus any other net assets not
used for or reserved to pay obligations and claims or such other
corporate expenses relating to or arising from SPAHs plan
of dissolution and distribution, including costs of dissolving
and liquidating SPAH. In such event, there will be no
distribution with respect to SPAHs outstanding warrants.
Accordingly, the warrants will expire worthless.
If
SPAH liquidates, SPAHs stockholders may be held liable for
claims by third parties against SPAH to the extent of
distributions received by them.
The SPAH Certificate of Incorporation provides that SPAH will
continue in existence only until October 10, 2009. If SPAH
consummates the merger or another business combination prior to
that date, it will seek to amend this provision to permit its
continued existence. If SPAH has not completed the merger or
other business combination by that date, SPAHs corporate
existence will cease except for the purposes of winding up its
affairs and liquidating pursuant to Section 278 of the
DGCL. In this event, SPAH will automatically dissolve and as
promptly as practicable thereafter adopt a plan of distribution
in accordance with Section 281(b) of the DGCL, which
requires SPAH to pay or make reasonable provision for all
then-existing claims and obligations, including all contingent,
conditional, or unmatured contractual claims known to SPAH, and
to make such provision as will be reasonably likely to be
sufficient to provide compensation for any then-pending claims
and for claims that have not been made known or that have not
arisen but that, based on facts known at the time, are likely to
arise or to become known to SPAH within 10 years after the
date of dissolution. Under Section 281(b), the plan of
distribution must provide for all of such claims to be paid in
full or make provision for payments to be made in full, as
applicable, if there are sufficient assets. If there are
insufficient assets, the plan must provide that such claims and
obligations be paid or provided for according to their priority
and, among claims of equal priority, ratably to the extent of
legally available assets.
SP Acq LLC and Mr. Lichtenstein have agreed that they will
be liable to SPAH if and to the extent claims by third parties
reduce the amounts in the trust account available for payment to
its stockholders in the event of a liquidation and the claims
are made by a vendor for services rendered, or products sold, to
SPAH, or by a prospective
50
target business. To the extent that SP Acq LLC and
Mr. Lichtenstein refuse to indemnify SPAH for a claim it
believes should be indemnified, SPAHs officers and
directors by virtue of their fiduciary obligation will be
obligated to bring a claim against SP Acq LLC and
Mr. Lichtenstein to enforce such indemnification. SPAH
currently believes that SP Acq LLC and Mr. Lichtenstein are
capable of funding their indemnity obligations, even though SPAH
has not asked them to reserve for such an eventuality. SP Acq
LLC and Mr. Lichtenstein may not be able to satisfy those
obligations. Under Delaware law, creditors of a corporation have
a superior right to stockholders in the distribution of assets
upon liquidation. Consequently, if the trust account is
liquidated and paid out to SPAH public stockholders prior to
satisfaction of the claims of all of SPAH creditors, it is
possible that SPAH stockholders may be held liable for third
parties claims against it to the extent of the
distributions received by them. Accordingly, pursuant to
Section 280-282
of the DGCL, third parties may not seek to recover from
SPAHs stockholders amounts owed to them by SPAH.
However, if the corporation complies with certain procedures
intended to ensure that it makes reasonable provision for all
claims against it, the liability of stockholders with respect to
any claim against the corporation is limited to the lesser of
such stockholders pro rata share of the claim or the
amount distributed to the stockholder. In addition, if the
corporation undertakes additional specified procedures,
including a
60-day
notice period during which any third-party claims can be brought
against the corporation, a
90-day
period during which the corporation may reject any claims
brought, and an additional
150-day
waiting period before any liquidation distributions are made to
stockholders, any liability of stockholders would be barred with
respect to any claim on which an action, suit or proceeding is
not brought by the third anniversary of the dissolution (or such
longer period directed by the Delaware Court of Chancery). While
SPAH intends to adopt a plan of distribution making reasonable
provision for claims against the company in compliance with the
DGCL, it does not intend to comply with these additional
procedures, as it instead intends to distribute the balance in
the trust account to the SPAH public stockholders as promptly as
practicable following termination of its corporate existence.
Accordingly, any liability stockholders may have could extend
beyond the third anniversary of a dissolution. SPAH cannot make
assurances that any reserves for claims and liabilities that it
believes to be reasonably adequate when it adopts a plan of
dissolution and distribution will suffice. If such reserves are
insufficient, stockholders who receive liquidation distributions
may subsequently be held liable for claims by creditors of SPAH
to the extent of such distributions.
Furthermore, because SPAH intends to distribute the proceeds
held in the trust account to the SPAH public stockholders
promptly after October 10, 2009 if it has not completed a
business combination by such date, this may be viewed or
interpreted as giving preference to SPAHs public
stockholders over any potential creditors with respect to access
to or distributions from SPAHs assets. The SPAH Board may
be viewed as having breached their fiduciary duties to
SPAHs creditors
and/or
having acted in bad faith, thereby exposing itself and SPAH to
claims of punitive damages, by paying SPAH public stockholders
from the trust account prior to addressing the claims of
creditors. There can be no assurance that claims will not be
brought against SPAH for these reasons.
If
third parties bring claims against SPAH, or if SPAH goes
bankrupt, the proceeds held in trust could be reduced and the
per-share liquidation price received by SPAH stockholders will
be less than approximately $9.85 per share.
SPAHs placing of funds in the trust account may not
protect those funds from adverse third-party claims. Although
SPAH has and will seek to have all third parties (including any
vendors or other entities engaged) and any prospective target
businesses enter into valid and enforceable agreements with it
waiving any right, title, interest or claim of any kind in or to
any monies held in the trust account, there is no guarantee that
they will execute such agreements. It is possible that such
waiver agreements would be held unenforceable and there is no
guarantee that the third parties would not otherwise challenge
the agreements and later bring claims against the trust account
for monies owed to them. In addition, there is no guarantee that
such entities will agree to waive any claims they may have in
the future as a result of, or arising out of, any negotiations,
contracts or agreements with SPAH and will not seek recourse
against the trust account for any reason. Accordingly, the
proceeds held in trust could be subject to claims that would
take priority over the claims of SPAH public stockholders and,
as a result, the per-share liquidation price could be less than
approximately $9.85, the conversion price based upon restricted
amounts held in trust at June 30, 2009.
51
SP Acq LLC and Mr. Lichtenstein have agreed that they will
be liable to the company if and to the extent claims by third
parties reduce the amounts in the trust account available for
payment to stockholders in the event of a liquidation and the
claims are made by a vendor for services rendered, or products
sold, to SPAH or by a prospective business target. However, the
agreement entered into by SP Acq LLC and Mr. Lichtenstein
specifically provides for two exceptions to the indemnity given:
there will be no liability (1) as to any claimed amounts
owed to a third party who executed a legally enforceable waiver,
or (2) as to any claims under SPAHs indemnity of the
underwriters of the initial public offering against certain
liabilities, including liabilities under the Securities Act.
Furthermore, there could be claims from parties other than
vendors, third parties with which SPAH entered into a
contractual relationship or target businesses that would not be
covered by the indemnity from SP Acq LLC and
Mr. Lichtenstein, such as shareholders and other claimants
who are not parties in contract with SPAH who file a claim for
damages against SPAH. To the extent that SP Acq LLC and
Mr. Lichtenstein refuse to indemnify SPAH for a claim it
believes should be indemnified, SPAHs officers and
directors by virtue of their fiduciary obligations will be
obligated to bring a claim against SP Acq LLC and
Mr. Lichtenstein to enforce such indemnification. Based on
representations as to its status as an accredited investor (as
such term is defined in Regulation D under the Securities
Act), SPAH currently believes that SP Acq LLC and
Mr. Lichtenstein are capable of funding their indemnity
obligations, even though SPAH has not asked them to reserve for
such an eventuality. SP Acq LLC and Mr. Lichtenstein may
not be able to satisfy those obligations.
Additionally, if SPAH is forced to file a bankruptcy case or an
involuntary bankruptcy case is filed against it that is not
dismissed, the proceeds held in the trust account could be
subject to applicable bankruptcy law, and may be included in its
bankruptcy estate and subject to the claims of third parties
with priority over the claims of stockholders. To the extent any
bankruptcy claims deplete the trust account, SPAH cannot make
assurances that it will be able to return at least approximately
$9.85 per share to the public stockholders. In addition, any
distributions received by SPAH public stockholders could be
viewed under applicable debtor/creditor
and/or
bankruptcy laws as either a preferential transfer or
a fraudulent conveyance. As a result, a bankruptcy
court could seek to recover all amounts received by SPAHs
stockholders.
An
effective registration statement must be in place in order for a
warrantholder to be able to exercise the warrants.
No warrants will be exercisable and SPAH will not be obligated
to issue shares of common stock upon exercise of warrants by a
warrantholder unless, at the time of such exercise, SPAH has an
effective registration statement under the Securities Act
covering the shares of common stock issuable upon exercise of
the warrants and a current prospectus relating to them is
available. Although SPAH has undertaken in the Warrant
Agreement, and therefore has a contractual obligation, to use
its best efforts to have an effective registration statement
covering shares of common stock issuable upon exercise of the
warrants from the date the warrants become exercisable and to
maintain a current prospectus relating to that common stock
until the warrants expire or are redeemed, and SPAH intends to
comply with its undertaking, it cannot make assurances that it
will be able to do so. SPAHs initial founders
warrants are identical to the warrants sold in the initial
public offering except that (i) they only become
exercisable after consummation of an initial business
combination if and when the last sales price of SPAH common
stock exceeds $14.25 per share for any 20 trading days within a
30 trading day period beginning 90 days after such business
combination and (ii) they are non-redeemable. If
warrantholders approve the warrant amendment proposal at the
special meeting of warrantholders, SPAH will eliminate this
minimum price requirement to exercise the initial founders
warrants. SPAHs additional founders warrants are
identical to the warrants sold in the initial public offering
except that they are non-redeemable. SPAHs co-investment
warrants will be identical to the warrants sold in the initial
public offering except that they will be non-redeemable.
Warrantholders may not be able to exercise their warrants, the
market for the warrants may be limited and the warrants may be
deprived of any value if there is no effective registration
statement covering the shares of common stock issuable upon
exercise of the warrants or the prospectus relating to the
common stock issuable upon the exercise of the warrants is not
current. In such event, the holder of a unit will have paid the
entire unit purchase price for the common stock contained in the
unit as the warrant will be worthless.
52
An
investor will only be able to exercise a warrant if the issuance
of common stock upon such exercise has been registered or
qualified or is deemed exempt under the securities laws of the
state of residence of the warrantholder.
No warrants will be exercisable and SPAH will not be obligated
to issue shares of common stock unless the common stock issuable
upon such exercise has been registered or qualified or deemed to
be exempt under the securities laws of the state of residence of
the warrantholder. Because the exemptions from qualification in
certain states for resales of warrants and for issuances of
common stock by the issuer upon exercise of a warrant may be
different, a warrant may be held by a warrantholder in a state
where an exemption is not available for issuance of common stock
upon an exercise and the warrantholder will be precluded from
exercise of the warrant. Nevertheless, SPAH expects that resales
of the warrants as well as issuances of common stock by SPAH
upon exercise of a warrant may be made in every state because at
the time that the warrants become exercisable (following its
completion of the merger or another initial business
combination) SPAH expects they will continue to be listed on the
NYSE AMEX LLC or another national securities exchange, which
would provide an exemption from registration in every state, or
SPAH would register the warrants in every state (or seek another
exemption from registration in such states). To the extent an
exemption is not available, SPAH will use its best efforts to
register the underlying common stock in all states where the
warrantholders reside. Accordingly, SPAH believes warrantholders
in every state will be able to exercise their warrants as long
as the prospectus relating to the common stock issuable upon
exercise of the warrants is current. However, SPAH cannot make
assurances of this fact. As a result, the warrants may be
deprived of any value, the market for the warrants may be
limited and the warrantholders may not be able to exercise their
warrants and they may expire worthless if the common stock
issuable upon such exercise is not qualified or exempt from
qualification in the jurisdictions in which the warrantholders
reside.
Most
of SPAHs current directors and all of its current officers
will resign upon consummation of the merger or other business
combination.
SPAHs ability to effect the merger or other business
combination successfully will be largely dependent upon the
efforts of its officers and directors. However, each of the
current executive officers and directors of SPAH will resign
upon consummation of the merger, other than Warren G.
Lichtenstein who will continue to serve as the Chairman of the
Board, although he will resign as President and Chief Executive
Officer of SPAH.
SPAH
is requiring SPAH public stockholders who wish to convert their
shares in connection with a proposed business combination
to comply with specific requirements for conversion that may
make it more difficult for them to exercise their conversion
rights prior to the deadline for exercising their
rights.
SPAH is requiring SPAH public stockholders who wish to convert
their shares in connection with the merger to either tender
their certificates to SPAHs transfer agent at any time
prior to the vote taken at the special meeting of SPAH
stockholders or to deliver their shares to the transfer agent
electronically using the Depository Trust Companys
DWAC (Deposit/Withdrawal At Custodian) System. In order to
obtain a physical stock certificate, a stockholders broker
and/or
clearing broker, DTC and SPAHs transfer agent will need to
act to facilitate this request. It is SPAHs understanding
that stockholders should generally allot at least two weeks to
obtain physical certificates from the transfer agent. However,
because SPAH does not have any control over this process or over
the brokers or DTC, it may take significantly longer than two
weeks to obtain a physical stock certificate. While SPAH has
been advised that it takes a short time to deliver shares
through the DWAC System, SPAH cannot make assurances of this
fact. Accordingly, if it takes longer than anticipated for
stockholders to deliver their shares, stockholders who wish to
convert may be unable to meet the deadline for exercising their
conversion rights and thus may be unable to convert their
shares. In addition, there is a nominal cost associated with the
above-referenced tendering process and the act of certificating
the shares or delivering them through the DWAC system. The
transfer agent will typically charge the tendering broker $35
and it would be up to the broker whether or not to pass this
cost on to the converting holder.
53
SPAH
expects to rely upon access to investment professionals of
certain affiliates of SP Acq LLC in completing the merger or
another initial business combination.
SPAH expects that it will depend, to a significant extent, on
access to the investment professionals of certain affiliates of
SP Acq LLC and the information and deal flow generated by such
investment professionals in the course of their investment and
portfolio management activities to complete the merger or other
initial business combination. Consequently, the departure of a
significant number of these investment professionals could have
a material adverse effect on the ability to consummate the
merger or another initial business combination.
The
registration rights of the SPAH insiders may adversely affect
the market price of SPAH common stock.
Pursuant to an agreement SPAH has entered into, (i) the
SPAH insiders can demand that SPAH register the resale of the
founders units, the founders shares and the initial
founders warrants, and the shares of common stock issuable
upon exercise of the initial founders warrants,
(ii) SP Acq LLC and Messrs. Bergamo, LaBow, Lorber,
Toboroff and Walker can demand that SPAH register the additional
founders warrants and the shares of common stock issuable
upon exercise of the additional founders warrants and
(iii) SP II (or its permitted transferee, the Steel Trust)
can demand that SPAH register the resale of the co-investment
units, the co-investment shares and the
co-investment
warrants and the shares of common stock issuable upon exercise
of the co-investment warrants. The registration rights will be
exercisable with respect to the founders units, the
founders shares, the initial founders warrants and
shares of common stock issuable upon exercise of such warrants,
the co-investment units, the
co-investment
shares and co-investment warrants and shares of common stock
issuable upon exercise of such warrants at any time commencing
three months prior to the date on which the relevant securities
are no longer subject to transfer restrictions, and with respect
to the additional founders warrants and the underlying
shares of common stock at any time after the execution of a
definitive agreement for an initial business combination, which
includes the merger agreement. SPAH will bear the cost of
registering these securities. If the SPAH insiders exercise
their registration rights in full, there will be an additional
4,368,988 shares of common stock (including 3,000,000
co-investment shares and after the 9,453,412 shares subject
to forfeiture) and up to 20,822,400 shares (including
3,000,000 shares issuable upon the exercise of
co-investment warrants) of common stock issuable on exercise of
the warrants eligible for trading in the public market. The
registration and availability of such a significant number of
securities for trading in the public market may have an adverse
effect on the market price of SPAH common stock.
The
loss of Mr. Lichtenstein could adversely affect SPAHs
ability to complete the merger or another initial business
combination.
SPAHs ability to consummate a business combination is
dependent to a large degree upon Mr. Lichtenstein. SPAH
believe that its success depends on his continued service to
SPAH, at least until SPAH has consummated a business
combination. Due to his ownership of SP Acq LLC and his
relationship with SP II, Mr. Lichtenstein has incentives to
remain with SPAH. Nevertheless, SPAH does not have an employment
agreement with him, or key-man insurance on his life. He may
choose to devote his time to other affairs, or may become
unavailable for reasons beyond his control, such as death or
disability. The unexpected loss of his services for any reason
could have a detrimental effect on SPAH.
The
NYSE AMEX LLC may delist SPAHs securities, which could
limit investors ability to transact in its securities and
subject it to additional trading restrictions.
While SPAH securities are currently listed on the NYSE AMEX LLC,
it cannot assure investors that its securities will continue to
be listed. Additionally, the NYSE AMEX LLC may require SPAH to
file a new initial listing application and meet its initial
listing requirements, as opposed to its more lenient continued
listing requirements, at the time of the merger or other initial
business combination. SPAH cannot make assurances that it will
be able to meet those initial listing requirements at that time.
If the NYSE AMEX LLC delists its securities from trading, SPAH
could face significant consequences, including:
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a limited availability for market quotations for SPAH securities;
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reduced liquidity with respect to its securities;
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a determination that SPAH common stock is a penny
stock, which will require brokers trading in its common
stock to adhere to more stringent rules and possibly result in a
reduced level of trading activity in the secondary trading
market for the common stock;
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limited amount of news and analyst coverage for SPAH; and
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a decreased ability to issue additional securities or obtain
additional financing in the future.
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In addition, SPAH would no longer be subject to NYSE AMEX LLC
rules, including rules requiring it to have a certain number of
independent directors and to meet other corporate governance
standards.
FORWARD
LOOKING STATEMENTS
This joint proxy statement/prospectus contains forward-looking
statements with respect to the financial condition, results of
operations, plans, objectives, future performance, and business
of SPAH following the merger. These statements are preceded by,
followed by, or include the words believes,
expects, anticipates, or
estimates, or similar expressions. Many possible
events or factors could affect the future financial results and
performance of SPAH following the merger. This could cause the
results or performance of SPAH to differ materially from those
expressed in the forward-looking statements. You should consider
these important factors when you vote on the merger proposal.
Factors that may cause actual results to differ materially from
those contemplated by the forward-looking statements include the
following:
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we may experience delays in closing the merger whether due to
the inability to obtain stockholder or regulatory approval or
otherwise;
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we could lose key personnel or spend a greater amount of
resources attracting, retaining and motivating key personnel
than we have in the past;
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competition among depository and other financial institutions
may increase significantly;
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changes in the interest rate environment may reduce operating
margins;
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general economic conditions, either nationally or in Washington
and Oregon, may be less favorable than expected resulting in,
among other things, a deterioration in credit quality and an
increase in credit risk-related losses and expenses;
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loan losses may exceed the level of allowance for loan losses of
the surviving corporation;
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the rate of delinquencies and amount of charge-offs may be
greater than expected;
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the rates of loan growth and deposit growth may not increase as
expected;
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legislative or regulatory changes may adversely affect our
businesses;
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modification of pending regulatory actions against Frontier in a
manner reasonably acceptable to SPAH, including by the
elimination of certain provisions and consequences related
thereto;
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costs related to the merger may reduce SPAHs working
capital; and
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SPAH may fail to close the merger and may be forced to dissolve
and liquidate.
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The forward-looking statements are based on current expectations
about future events. Although SPAH believes that the
expectations reflected in the forward-looking statements are
reasonable, SPAH cannot guarantee you that these expectations
actually will be achieved. SPAH is under no duty to update any
of the forward-looking statements after the date of this joint
proxy statement/prospectus to conform those statements to actual
results. In evaluating these statements, you should consider
various factors, including the risks outlined in the section
entitled Risk Factors.
55
SELECTED
HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
Selected
Summary Historical Consolidated Financial Information of
Frontier
Frontier is providing the following selected historical
financial information to assist you in your analysis of the
financial aspects of the merger and co-investment.
The following selected historical consolidated financial
information of Frontier as of June 30, 2009 and for the six
months ended June 30, 2009 and 2008 are derived from
Frontiers unaudited financial statements, which are
included elsewhere in this joint proxy statement/prospectus. The
following selected historical consolidated financial information
of Frontier as of December 31, 2008 and 2007 and for the
years ended December 31, 2008, 2007 and 2006 are derived
from Frontiers audited financial statements, which are
included elsewhere in this joint proxy statement/prospectus. The
following selected historical consolidated financial information
of Frontier as of December 31, 2006, 2005 and 2004 and for
the years ended December 31, 2005 and 2004 are derived from
Frontiers audited financial statements, which are not
included elsewhere in this joint proxy statement/prospectus. The
results of operations for interim periods are not necessarily
indicative of the results of operations which might be expected
for the entire year.
The following information is only a summary and should be read
in conjunction with the unaudited interim consolidated financial
statements of Frontier for the six months ended June 30,
2009 and 2008 and the notes thereto and the audited consolidated
financial statements of Frontier for the years ended
December 31, 2008, 2007 and 2006 and the notes thereto and
Information about Frontier Managements
Discussion and Analysis of Financial Condition and Results of
Operations contained elsewhere in this joint proxy
statement/prospectus.
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|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
June 30,
|
|
|
Year Ended December 31,
|
|
(Dollars in thousands except per share amounts)
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
96,072
|
|
|
$
|
149,842
|
|
|
$
|
279,055
|
|
|
$
|
299,672
|
|
|
$
|
250,144
|
|
|
$
|
178,886
|
|
|
$
|
140,228
|
|
Interest expense
|
|
|
50,869
|
|
|
|
57,553
|
|
|
|
112,185
|
|
|
|
113,041
|
|
|
|
86,942
|
|
|
|
51,736
|
|
|
|
34,939
|
|
Net interest income
|
|
|
45,203
|
|
|
|
92,289
|
|
|
|
166,870
|
|
|
|
186,631
|
|
|
|
163,202
|
|
|
|
127,150
|
|
|
|
105,289
|
|
Securities gains (losses)
|
|
|
(102
|
)
|
|
|
2,468
|
|
|
|
4,570
|
|
|
|
(937
|
)
|
|
|
(25
|
)
|
|
|
(211
|
)
|
|
|
(44
|
)
|
Provision for loan losses
|
|
|
135,000
|
|
|
|
33,500
|
|
|
|
120,000
|
|
|
|
11,400
|
|
|
|
7,500
|
|
|
|
4,200
|
|
|
|
3,500
|
|
Net income (loss)
|
|
|
(83,805
|
)
|
|
|
17,575
|
|
|
|
(89,737
|
)
|
|
|
73,938
|
|
|
|
68,910
|
|
|
|
51,584
|
|
|
|
43,045
|
|
Basic earnings (loss) per share
|
|
$
|
(1.78
|
)
|
|
$
|
0.37
|
|
|
$
|
(1.91
|
)
|
|
$
|
1.63
|
|
|
$
|
1.53
|
|
|
$
|
1.21
|
|
|
$
|
1.03
|
|
Weighted average number of shares outstanding basic
|
|
|
47,127
|
|
|
|
47,297
|
|
|
|
46,992
|
|
|
|
45,266
|
|
|
|
45,010
|
|
|
|
42,482
|
|
|
|
41,927
|
|
Diluted earnings (loss) per share
|
|
$
|
(1.78
|
)
|
|
$
|
0.37
|
|
|
$
|
(1.91
|
)
|
|
$
|
1.62
|
|
|
$
|
1.52
|
|
|
$
|
1.21
|
|
|
$
|
1.02
|
|
Weighted average number of shares outstanding diluted
|
|
|
47,127
|
|
|
|
47,386
|
|
|
|
46,992
|
|
|
|
45,601
|
|
|
|
45,485
|
|
|
|
42,743
|
|
|
|
42,206
|
|
Cash dividends declared per common share
|
|
$
|
|
|
|
$
|
|
|
|
$
|
0.48
|
|
|
$
|
0.65
|
|
|
$
|
0.50
|
|
|
$
|
0.40
|
|
|
$
|
0.34
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
(Dollars in thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Consolidated Balance Sheet Data (at period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,987,403
|
|
|
$
|
4,104,445
|
|
|
$
|
3,995,689
|
|
|
$
|
3,238,464
|
|
|
$
|
2,640,275
|
|
|
$
|
2,243,396
|
|
Net loans
|
|
|
3,317,636
|
|
|
|
3,666,177
|
|
|
|
3,558,127
|
|
|
|
2,867,351
|
|
|
|
2,355,419
|
|
|
|
1,945,324
|
|
Securities
|
|
|
83,399
|
|
|
|
93,961
|
|
|
|
135,121
|
|
|
|
114,711
|
|
|
|
110,617
|
|
|
|
153,451
|
|
Deposits
|
|
|
3,249,133
|
|
|
|
3,275,165
|
|
|
|
2,943,236
|
|
|
|
2,453,632
|
|
|
|
2,061,380
|
|
|
|
1,795,842
|
|
Shareholders equity
|
|
|
269,486
|
|
|
|
352,043
|
|
|
|
459,612
|
|
|
|
395,283
|
|
|
|
296,097
|
|
|
|
254,230
|
|
Selected
Historical Financial Information of SPAH
SPAH is providing the following selected historical financial
information to assist you in your analysis of the financial
aspects of the merger and co-investment.
The following selected historical financial information of SPAH
as of June 30, 2009 and for the six months ended
June 30, 2009 and 2008 are derived from SPAHs
unaudited financial statements, which are included elsewhere in
this joint proxy statement/prospectus. The following selected
historical financial information of SPAH as of December 31,
2008 and 2007 and for the year ended December 31, 2008 and
for the period from February 14, 2007 (inception) through
December 31, 2007 are derived from SPAHs audited
financial statements, which are included elsewhere in this joint
proxy statement/prospectus. The results of operations for
interim periods are not necessarily indicative of the results of
operations which might be expected for the entire year.
The following information is only a summary and should be read
in conjunction with the unaudited interim financial statements
of SPAH for the six months ended June 30, 2009 and 2008 and
the notes thereto and the audited financial statements of SPAH
for the year ended December 31, 2008 for the period from
February 14, 2007 (inception) through December 31,
2007 and the notes thereto and Information about
SPAH Managements Discussion and Analysis
of Financial Condition and Results of Operations contained
elsewhere in this joint proxy statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
19,080,295
|
|
|
$
|
19,777,900
|
|
|
$
|
20,226,763
|
|
Total current liabilities
|
|
|
17,511,802
|
|
|
|
17,588,609
|
|
|
|
18,956,480
|
|
Total assets
|
|
|
428,804,996
|
|
|
|
429,776,214
|
|
|
|
428,945,449
|
|
Common stock subject to conversion, 12,986,879 shares at
conversion value
|
|
|
128,147,514
|
|
|
|
128,194,236
|
|
|
|
127,772,726
|
|
Common Stock, $0.0001 par value, authorized
200,000,000 shares; issued and outstanding 54,112,000 (less
12,986,879 subject to possible conversion)
|
|
|
41,125
|
|
|
|
41,125
|
|
|
|
41,125
|
|
Total stockholders equity
|
|
|
283,145,680
|
|
|
|
283,993,369
|
|
|
|
282,216,243
|
|
Total liabilities and stockholders equity
|
|
$
|
428,804,996
|
|
|
$
|
429,776,214
|
|
|
$
|
428,945,449
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Period from
|
|
|
|
|
|
|
|
|
|
|
|
|
February 14, 2007
|
|
|
|
For the Six Months Ended
|
|
|
For the Year
|
|
|
(Inception) through
|
|
|
|
June 30,
|
|
|
Ended December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
2007
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Operations Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs
|
|
$
|
678,261
|
|
|
$
|
499,229
|
|
|
$
|
1,052,648
|
|
|
$
|
264,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income Interest, net
|
|
|
265,709
|
|
|
|
4,341,829
|
|
|
|
6,407,849
|
|
|
|
2,941,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(894,411
|
)
|
|
|
1,685,378
|
|
|
|
1,777,126
|
|
|
|
1,466,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of trust account income relating to common stock
subject to possible conversion
|
|
|
46,722
|
|
|
|
(111,035
|
)
|
|
|
(421,510
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to other common stockholders
|
|
$
|
(847,689
|
)
|
|
$
|
1,574,343
|
|
|
$
|
1,777,126
|
|
|
$
|
1,466,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per share-basic and diluted
|
|
$
|
(0.02
|
)
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares subject to possible
conversion basic and diluted
|
|
|
41,125,121
|
|
|
|
45,125,121
|
|
|
|
41,125,121
|
|
|
|
17,245,726
|
|
Selected
Unaudited Condensed Combined Pro Forma Financial
Information
The selected unaudited condensed combined pro forma financial
information has been derived from, and should be read in
conjunction with, the unaudited condensed combined pro forma
financial information included elsewhere in this joint proxy
statement/prospectus.
The unaudited condensed combined pro forma statements of
operations for the six months ended June 30, 2009 and the
year ended December 31, 2008 give pro forma effect to the
merger and co-investment as if it had occurred on
January 1, 2008. The unaudited condensed combined pro forma
balance sheet as of June 30, 2009 gives pro forma effect to
the merger and co-investment as if they had occurred on such
date. The unaudited condensed combined pro forma statements of
operations and balance sheet are based on the historical
financial statements of Frontier and SPAH as of and for the six
months ended June 30, 2009 and the year ended
December 31, 2008.
The historical financial information has been adjusted to give
effect to pro forma events that are related
and/or
directly attributable to the merger and co-investment, are
factually supportable and, in the case of the unaudited pro
forma statement of operations data, are expected to have a
continuing impact on the combined results. The adjustments
presented on the unaudited condensed combined pro forma
financial information have been identified and presented in
Unaudited Condensed Combined Pro Forma Financial
Data to provide relevant information necessary for an
accurate understanding of the combined company upon consummation
of the merger and co-investment.
This information should be read together with the consolidated
financial statements of Frontier and the notes thereto, the
financial statements of SPAH and the notes thereto,
Unaudited Condensed Combined Pro Forma Financial
Data, Information about
Frontier Managements Discussion and
Analysis of Financial Condition and Results of Operations,
and Information about SPAH Managements
Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere in this joint proxy
statement/prospectus.
The unaudited condensed combined pro forma financial statements
have been prepared using the assumptions below with respect to
the number of outstanding shares of SPAH common stock:
|
|
|
|
|
Assuming Minimum Conversion: This presentation
assumes that no SPAH public stockholders exercise conversion
rights with respect to their shares of SPAH common stock into a
pro rata portion of the trust
|
58
|
|
|
|
|
account and that no Frontier stockholders exercise their right
to dissent and receive cash for the fair value of their Frontier
common stock;
|
|
|
|
|
|
Assuming 10 Percent Conversion: This
presentation assumes that SPAH public stockholders holding 10%
of the shares sold in or subsequently to SPAHs initial
public offering, less one share (4,328,959 shares),
exercise their conversion rights and that such shares were
converted into their pro rata share of the funds in the trust
account and that 10% of the Frontier stockholders entitled to
receive 251,200 shares of SPAH common stock in the merger
exercise their right to dissent and receive cash for the fair
value of their Frontier common stock; and
|
|
|
|
|
|
Assuming Maximum Conversion: This presentation
assumes that SPAH public stockholders holding 30% of the shares
sold in or subsequently to SPAHs initial public offering,
less one share (12,986,879 shares), exercise their
conversion rights and that such shares were converted into their
pro rata share of the funds in the trust account and that 33% of
the Frontier stockholders entitled to receive
828,960 shares of SPAH common stock in the merger exercise
their right to dissent and receive cash for the fair value of
their Frontier common stock.
|
The unaudited condensed combined pro forma financial statements
reflect the acquisition of Frontier being accounted for under
the acquisition method of accounting pursuant to the provisions
SFAS 141R. Pursuant to the requirements of SFAS 141R,
SPAH is expected to be the acquirer for accounting purposes
because SPAH is expected to own a majority interest upon
consummation of the merger and the co-investment. Determination
of control places emphasis on the shareholder group that retains
the majority of voting rights in the combined entity. If the
accounting acquirer cannot be determined based upon relative
voting interests, other indicators of control are considered in
the determination of the accounting acquirer, including: control
of the combined entitys board of directors, the existence
of large organized minority groups, and senior management of the
combined entity.
The unaudited condensed combined pro forma financial statements
are presented for informational purposes only and are subject to
a number of uncertainties and assumptions and do not purport to
represent what the companies actual performance or
financial position would have been had the transaction occurred
on the dates indicated and does not purport to indicate the
financial position or results of operations as of any future
date or for any future period.
SP
Acquisition Holdings, Inc and Subsidiaries
Selected
Unaudited Condensed Combined Pro Forma Statement of Operations
Data
For the
Six Months Ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined Pro
|
|
|
Combined Pro
|
|
|
Combined Pro
|
|
|
|
Forma
|
|
|
Forma
|
|
|
Forma
|
|
|
|
(Assuming
|
|
|
(Assuming
|
|
|
(Assuming
|
|
|
|
Minimum
|
|
|
10 Percent
|
|
|
Maximum
|
|
(In thousands, except per share amounts)
|
|
Conversion)
|
|
|
Conversion
|
|
|
Conversion)
|
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
90,547
|
|
|
$
|
90,520
|
|
|
$
|
90,467
|
|
Interest expense
|
|
|
48,107
|
|
|
|
48,107
|
|
|
|
48,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
42,440
|
|
|
|
42,413
|
|
|
|
42,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities (losses)
|
|
|
(102
|
)
|
|
|
(102
|
)
|
|
|
(102
|
)
|
Provision for loan losses
|
|
|
135,000
|
|
|
|
135,000
|
|
|
|
135,000
|
|
Net (loss)
|
|
|
(95,726
|
)
|
|
|
(95,744
|
)
|
|
|
(95,780
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
(1.91
|
)
|
|
$
|
(2.10
|
)
|
|
$
|
(2.63
|
)
|
Weighted average number of shares outstanding basic
and diluted
|
|
|
50,170
|
|
|
|
45,590
|
|
|
|
36,354
|
|
59
SP
Acquisition Holdings, Inc and Subsidiaries
Selected
Unaudited Condensed Combined Pro Forma Statement of Operations
Data
For the
Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined Pro
|
|
|
Combined Pro
|
|
|
Combined Pro
|
|
|
|
Forma
|
|
|
Forma
|
|
|
Forma
|
|
|
|
(Assuming
|
|
|
(Assuming
|
|
|
(Assuming
|
|
|
|
Minimum
|
|
|
10 Percent
|
|
|
Maximum
|
|
|
|
Conversion)
|
|
|
Conversion
|
|
|
Conversion)
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
273,882
|
|
|
$
|
273,241
|
|
|
$
|
271,959
|
|
Interest expense
|
|
|
106,661
|
|
|
|
106,661
|
|
|
|
106,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
167,221
|
|
|
|
166,580
|
|
|
|
165,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities (losses)
|
|
|
(6,430
|
)
|
|
|
(6,430
|
)
|
|
|
(6,430
|
)
|
Provision for loan losses
|
|
|
120,000
|
|
|
|
120,000
|
|
|
|
120,000
|
|
Net (loss)
|
|
|
(108,176
|
)
|
|
|
(108,786
|
)
|
|
|
(110,006
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share basic and diluted
|
|
$
|
(2.16
|
)
|
|
$
|
(2.39
|
)
|
|
$
|
(3.03
|
)
|
Weighted average number of shares outstanding basic
and diluted
|
|
|
50,170
|
|
|
|
45,590
|
|
|
|
36,354
|
|
SP
Acquisition Holdings, Inc. and Subsidiaries
Selected
Unaudited Consolidated Pro Forma Balance Sheet Data at
June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined Pro
|
|
|
Combined Pro
|
|
|
Combined Pro
|
|
|
|
Forma
|
|
|
Forma
|
|
|
Forma
|
|
|
|
(Assuming
|
|
|
(Assuming
|
|
|
(Assuming
|
|
|
|
Minimum
|
|
|
10 Percent
|
|
|
Maximum
|
|
|
|
Conversion)
|
|
|
Conversion
|
|
|
Conversion)
|
|
|
|
(Dollars in thousands)
|
|
|
Total assets
|
|
$
|
4,283,697
|
|
|
$
|
4,240,977
|
|
|
$
|
4,155,549
|
|
Net loans
|
|
|
3,116,327
|
|
|
|
3,116,327
|
|
|
|
3,116,327
|
|
Securities
|
|
|
83,344
|
|
|
|
83,344
|
|
|
|
83,344
|
|
Deposits
|
|
|
3,267,692
|
|
|
|
3,267,692
|
|
|
|
3,267,692
|
|
Total stockholders equity
|
|
$
|
544,766
|
|
|
$
|
497,956
|
|
|
$
|
403,120
|
|
60
COMPARATIVE
PER SHARE DATA
The following table sets forth selected historical equity
ownership information for SPAH and Frontier, and unaudited pro
forma combined per share ownership information after giving
effect to the merger and co-investment, assuming (i) that
no SPAH public stockholders exercise their conversion rights and
no Frontier shareholders exercise their right to dissent;
(ii) that holders of 10% of the shares (minus one share)
sold in or subsequently to SPAHs initial public offering
have exercised their conversion rights and that 10% of the
Frontier shareholders exercise their right to dissent; and
(iii) that holders of 30% of the shares (minus one share)
sold in or subsequently to SPAHs initial public offering
have exercised their conversion rights and that 33% of the
Frontier shareholders exercise their right to dissent. SPAH is
providing this information to aid you in your analysis of the
financial aspects of the merger and co-investment. The
historical information should be read in conjunction with
Selected Historical and Pro Forma Consolidated Financial
Data Selected Summary Historical Consolidated
Financial Information of Frontier and Selected
Historical Financial Information of SPAH included
elsewhere in this joint proxy statement/prospectus and the
historical consolidated and combined financial statements of
SPAH and Frontier and the related notes thereto included
elsewhere in this joint proxy statement/prospectus. The
unaudited pro forma per share information is derived from, and
should be read in conjunction with, the unaudited condensed
combined pro forma financial data and related notes included
elsewhere in this joint proxy statement/prospectus.
The unaudited pro forma consolidated per share information
reflects the acquisition of Frontier being accounted for under
the acquisition method of accounting pursuant to the provisions
SFAS 141R. Pursuant to the requirements of SFAS 141R,
SPAH is expected to be the acquirer for accounting purposes
because SPAH is expected to own a majority interest upon
consummation of the merger and co-investment. Determination of
control places emphasis on the shareholder group that retains
the majority of voting rights in the combined entity. If the
accounting acquirer cannot be determined based upon relative
voting interests, other indicators of control are considered in
the determination of the accounting acquirer, including: control
of the combined entitys board of directors, the existence
of large organized minority groups, and senior management of the
combined entity.
The unaudited pro forma consolidated per share information does
not purport to represent what the actual results of operations
of SPAH and Frontier would have been had the merger and
co-investment been completed or to project SPAHs or
Frontiers results of operations that may be achieved after
the merger and co-investment. The unaudited pro forma book value
per share information below does not purport to represent what
the value of SPAH and Frontier would have been had the merger
and co-investment been completed nor the book value per share
for any future date or period.
Unaudited
Pro Forma Consolidated Per Share Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
Assuming
|
|
|
Assuming
|
|
|
Assuming
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
|
10 Percent
|
|
|
Maximum
|
|
|
|
SPAH
|
|
|
Frontier
|
|
|
Conversions
|
|
|
Conversions
|
|
|
Conversions
|
|
|
Six Months ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
(0.02
|
)
|
|
$
|
(1.78
|
)
|
|
$
|
(1.91
|
)
|
|
$
|
(2.10
|
)
|
|
$
|
(2.63
|
)
|
Diluted earnings (loss) per share
|
|
$
|
(0.02
|
)
|
|
$
|
(1.78
|
)
|
|
$
|
(1.91
|
)
|
|
$
|
(2.10
|
)
|
|
$
|
(1.63
|
)
|
Cash dividends declared per share(2)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Book value per share at June 30, 2009(1)
|
|
$
|
7.60
|
|
|
$
|
5.72
|
|
|
$
|
10.86
|
|
|
$
|
10.92
|
|
|
$
|
11.09
|
|
Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
0.04
|
|
|
$
|
(1.91
|
)
|
|
$
|
(2.16
|
)
|
|
$
|
(2.39
|
)
|
|
$
|
(3.03
|
)
|
Diluted earnings (loss) per share
|
|
$
|
0.04
|
|
|
$
|
(1.91
|
)
|
|
$
|
(2.16
|
)
|
|
$
|
(2.39
|
)
|
|
$
|
(3.03
|
)
|
Cash dividends declared per share(2)
|
|
$
|
|
|
|
$
|
0.48
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
61
|
|
|
(1) |
|
Book value per share of SPAH is computed by dividing the sum of
total stockholders equity plus common stock subject to
possible conversion by the 54,112,000 shares outstanding at
the balance sheet date. Book value per share for the pro forma
columns is computed by dividing the sum of total
stockholders equity plus common stock subject to possible
conversion by the 54,112,000 shares outstanding plus the
additional shares issued in conjunction with the merger and
co-investment. |
|
|
|
(2) |
|
Frontier is currently restricted from paying cash dividends to
its shareholders pursuant to the FDIC Order. There can be no
assurance that this restriction will be removed upon completion
of the merger. Accordingly, no pro forma cash dividends per
share are presented. |
THE
MERGER AND THE MERGER AGREEMENT
The descriptions of the terms and conditions of the merger,
the merger agreement and any related documents in this joint
proxy statement/prospectus are qualified in their entirety by
reference to the copy of the merger agreement attached as
Annex A to this joint proxy statement/prospectus, to the
registration statement, of which this joint proxy
statement/prospectus is a part, and to the exhibits to the
registration statement.
Background
of the Merger
The terms of the merger agreement are the result of negotiations
between the representatives of SPAH and Frontier. The following
is a brief description of the background of these negotiations,
the merger and related transactions.
Transaction
Activities of SPAH Prior to Discussions with
Frontier
SPAH is a blank check company organized under the laws of the
State of Delaware on February 14, 2007. SPAH was formed for
the purpose of acquiring, through a merger, capital stock
exchange, asset acquisition or other similar business
combination, one or more businesses or assets.
A registration statement for SPAHs initial public offering
was declared effective on October 10, 2007. On
October 16, 2007, SPAH sold 40,000,000 units in its
initial public offering, and on October 31, 2007 the
underwriters for its initial public offering purchased an
additional 3,289,600 units pursuant to an over-allotment
option. Each of SPAHs units consists of one share of
common stock and one warrant. On November 2, 2007, the
warrants and common stock underlying SPAHs units began to
trade separately. Each warrant currently entitles the holder to
purchase one share of SPAHs common stock at a price of
$7.50 commencing on the consummation of a business combination,
provided that there is an effective registration statement
covering the shares of common stock underlying the warrants in
effect. The warrants currently expire on October 10, 2012,
unless earlier redeemed.
SPAH received gross proceeds of approximately $439,896,000 from
its initial public offering and sale of the additional
founders warrants to SP Acq LLC. Net proceeds of
approximately $425,909,120 were deposited into a trust account
and will be part of the funds distributed to the SPAH public
stockholders in the event SPAH is unable to complete the merger
or another business combination.
Prior to the consummation of its initial public offering,
neither SPAH, nor anyone on its behalf, contacted any
prospective target business or had any substantive discussions,
formal or otherwise, with respect to such a transaction with
Frontier.
Subsequent to the consummation of its initial public offering on
October 16, 2007, SPAH commenced consideration of potential
target companies with the objective of consummating a business
combination. SPAH compiled a list of potential targets and
updated and supplemented such list from time to time. SPAH
contacted several private equity firms, venture capital firms,
numerous other business relationships, investment bankers and
consulting firms, as well as, legal and accounting firms.
Through these efforts, SPAH identified and reviewed information
with respect to over 100 potential target companies. On several
occasions, SPAH engaged in meetings with potential targets,
including companies engaged in industrial equipment
manufacturing, energy production, oil and gas exploration,
mineral exploration, consumer and commercial banking, consumer
goods, investment banking, and gaming businesses. SPAH also
engaged in serious discussions with several companies and
negotiated (but did
62
not execute) a number of letters of intent over the
approximately 22 month period. The transactions
contemplated by these potential letters of intent included a
wide range of transaction structures, including the possibility
of a merger, capital stock exchange or asset purchase. SPAH did
not move forward with any of these transactions following its
preliminary diligence review, largely because preliminary
valuations were too high to proceed with a transaction.
Examination
of Strategic Alternatives by Frontier Prior to Discussions with
SPAH
At a strategic retreat on September 19, 2008, the Frontier
Board and management along with Sandler ONeill discussed
strategies to improve Frontiers capital position and the
relative impact on Frontiers capital position from
possible deterioration in Frontiers credit portfolio.
Strategies discussed included raising capital through the
issuance of capital securities, sale of existing loans and
securities, reducing growth, reducing expenses, reducing the
shareholders cash dividend and the possible sale of
branches, real estate
and/or
business lines.
In early October 2008, the Frontier Board and management
determined, in conjunction with the anticipated results from a
Joint Report of Examination, dated July 21, 2008 (but not
yet delivered to Frontier), by the FDIC and the Washington DFI,
that the losses in Frontier Banks loan portfolio made it
imperative that Frontier take immediate steps to substantially
increase its capital. Given the size of the potential capital
raise and the anticipated offering price of Frontier stock, the
Frontier Board believed it would be prudent to explore the
viability of a merger transaction with a strategic partner.
On October 8 and 9, 2008, representatives of Sandler
ONeill were onsite at Frontiers offices along with
other financial and legal advisors to conduct due diligence.
On October 9, 2008, the Frontier Board engaged Sandler
ONeill, as a financial advisor, to provide financial
advice and assist the Frontier Board and management in pursuing
all strategic alternatives. These included, but were not limited
to, the offering and sale of certain securities of Frontier in a
transaction to provide additional capital to Frontier or a
possible business combination.
On October 14, 2008, under the Troubled Asset Relief
Programs Capital Purchase Plan (TARP CPP), the
United States Treasury announced details regarding its proposed
investment of $250 billion in Tier 1 qualifying
capital into eligible FDIC insured depositories across the
United States.
On October 15, 2008, the Frontier Board met with Sandler
ONeill to discuss its available alternatives relative to
the TARP CPP.
On October 17, 2008 Frontier submitted its application for
participation in the TARP CPP.
On October 23, 2008, Frontier announced its third quarter
financial results including a quarterly net loss of
$18.0 million.
On November 16, 2008, Sandler ONeill began contacting
strategic partners and potential capital investors regarding
Frontier. Sandler ONeill contacted over 35 potential
financial investors and 10 financial institutions between
November 2008 and May 2009.
On November 17, 2008, Frontier established a virtual online
data room in which they made available to prospective investors
and strategic partners certain confidential financial,
operational and legal data regarding Frontier, and from which an
interested party could make an acquisition or investment
proposal.
On July 7, 2008, Frontier Bank retained a nationally
recognized independent consultant to review Frontiers loan
portfolio, the results of which were provided to interested
investors and strategic partners. The independent loan review
team began their onsite due diligence of the loan portfolio
during the week of December 8, 2008.
Between late November 2008 and mid-May 2009, 18 potential merger
partners
and/or
investors signed confidentiality agreements accessed the data
room or received confidential information regarding Frontier and
were provided the opportunity to ask questions of senior
management. During this period, Sandler ONeill regularly
addressed the Frontier Board to update them on the interest
level of the parties in the data room.
During the period from early December 2008 to early February
2009, of these 18 potential merger partners, there were four
strategic partners that conducted significant due diligence with
the goal of submitting a term sheet to
63
Frontier. None of the parties submitted a proposal because they
did not believe they could structure a transaction that was
financially feasible. Each of the four strategic partners cited
real estate credit exposure and the lack of a core deposit base
as primary reasons for not pursuing a transaction after
diligence.
In addition, during December 2008 and January 2009, there was
one financial partner that conducted significant due diligence
with the goal of submitting a term sheet to Frontier. They did
not submit a proposal because they did not believe they could
structure a transaction that was financially feasible. They also
cited real estate credit exposure as the primary reason for not
pursuing a transaction after diligence.
On December 2, 2008, members of Frontiers executive
management team and a representative of
Sandler ONeill met with the FDIC in
San Francisco to present Frontiers efforts to
preserve capital since the examination and to check on the
status of its TARP CPP application. The regulators indicated
that they were holding Frontiers application for TARP CPP
investment pending its efforts to raise matching equity.
On December 8, 2008, Frontier announced changes to its
management team, most notably that Patrick M. Fahey, a
director, would become the Chairman and Chief Executive Officer
of Frontier and that Michael J. Clementz would become President
of Frontier and Chief Executive Officer of Frontier Bank. As
part of the management change, Mr. Fahey announced that
Frontier would begin implementation of a new business plan
focused on core deposit funding and a diversified loan portfolio.
On December 19, 2008, Frontier announced the suspension of
the quarterly cash dividend paid to shareholders.
On January 29, 2009, Frontier announced its fourth quarter
financial results, including a loss of $89.5 million,
$77.0 million of which was a non-cash charge for impairment
of goodwill.
The process of exploring strategic alternatives continued
throughout the beginning of 2009. At the same time, on
March 24, 2009, the Frontier Board entered into an
agreement with the FDIC and the Washington DFI consenting to the
FDIC Order, which provided, among other things, that Frontier
Bank increase its Tier 1 capital in such an amount as to
equal or exceed 10% of Frontier Banks total assets by
July 29, 2009, and to maintain such capital level
thereafter. Frontier also announced publicly on March 24,
2009, that it had retained a financial advisor to help it
identify new sources of capital.
On April 23, 2009, Frontier announced its first quarter
financial results, which included a loss of $33.8 million.
Discussions
and Negotiations between SPAH and Frontier
On April 16, 2009, SPAH representatives had an initial
conference call with Sandler ONeill to discuss
possibilities of utilizing SPAH cash to recapitalize a bank.
SPAH was interested in pursuing a bank recapitalization because
it believed its cash could be used to allow a bank to make
significant risk adjusted returns given the current dislocation
in credit markets and to take advantage of the potential
opportunities that exist with respect to other banks that are
undercapitalized. A follow up meeting with Sandler ONeill
occurred on April 27, 2009 with further discussion on
potential transaction partners. At this meeting, Sandler
ONeill made a presentation to the SPAH representatives of
the financial review it had performed with respect to a group of
40 banks, 20 of which were discussed in detail at the meeting,
as SPAH was attempting to determine which banks had the most
attractive investment profile for SPAH. The group of banks
consisted of banks with tangible capital ratios of less than 8%,
market capitalization of between $250 million and $1 billion and
non-performing assets/total assets of greater than 2%. Of these
potential bank targets, SPAH engaged in further negotiations
with one bank other than Frontier and subsequently entered into
a confidentiality agreement with this bank. However, discussions
were terminated with this potential bank target following
SPAHs determination that the valuation was too high to
proceed with a transaction. SPAH representatives met again with
Sandler ONeill on May 1, 2009 to discuss Frontier.
Frontier was considered a viable transaction partner by SPAH
based on Frontiers financial condition and results of
operations, including a tangible book value of
$268.8 million, gross loans of $3.4 billion and total
assets of $4.0 billion as of June 30, 2009, among
other things. A confidentiality agreement was signed between
SPAH and Sandler ONeill as Frontiers authorized
representative on May 6, 2009. SPAH representatives met
with Frontiers management in Seattle, Washington on
May 27, 2009. Between early May and the end of June,
representatives of SPAH began conducting preliminary due
diligence on Frontier and made numerous visits to Frontier
headquarters in Everett,
64
Washington where they also met with Sandler ONeill and
bank management and began to formulate the parameters of an
offer to infuse capital into Frontier Bank.
On June 11, 2009 Frontier announced a workforce reduction
of approximately 6% of its staff.
On June 28, 2009, the SPAH Board held a Board meeting to
discuss a possible nonbinding Letter of Intent between SPAH and
Frontier. Members of management gave a presentation to the SPAH
Board which described the terms of the nonbinding Letter of
Intent and gave a background of Frontier and its business, loan
portfolio, potential performance, growth prospects, valuation,
and the fairness of the proposed transaction. SPAH management
outlined the rationale for the transaction, which included the
opportunity to recapitalize Frontier at a reasonable valuation,
resulting in the combined entity having the capital and
capabilities to take advantage of the dislocation in the current
credit markets. At the conclusion of its presentation, and after
discussions thereon, the SPAH Board authorized management to
enter into a nonbinding Letter of Intent with Frontier, subject
to additional changes agreed to by management, and to continue
doing due diligence and work toward a definitive merger
agreement. The non-binding Letter of Intent provided that the
consideration for the acquisition of Frontier would be an
aggregate of 4.9 million shares of newly issued SPAH common
stock (8.0% of the pro forma common shares outstanding of the
combined entity and an assumed implied ratio of 0.10495 of
Frontiers shares to SPAHs shares). In addition, it
provided that SPAH would have a 45 day exclusive period to
negotiate the terms of a definitive agreement with Frontier.
On June 29, 2009, Frontier Bank received a draft of a
proposed nonbinding Letter of Intent from SPAH setting forth the
terms of a proposed business combination. Following receipt of
the proposed Letter of Intent, management met with
representatives of Sandler ONeill and its outside legal
counsel, Keller Rohrback L.L.P. (Keller Rohrback),
to clarify terms of the proposal and a revised nonbinding Letter
of Intent was finalized on June 30, 2009, and circulated to
the Frontier Board.
On July 1, 2009, the Frontier Board met with
representatives of Sandler ONeill and Keller Rohrback and
reviewed the proposal in detail. On the same date, the Frontier
Board met with representatives of SPAH who answered questions
regarding the proposal and structure of SPAH. After making their
presentation, the representatives of SPAH were excused from the
meeting and the Frontier Board further considered the proposal.
After a lengthy discussion of the terms of the proposal, the
Frontier Board authorized management to execute the nonbinding
Letter of Intent. This authorization was based on the following
conclusions of the Frontier Board:
|
|
|
|
|
The proposed offer would provide sufficient capital for Frontier
to survive and continue to remain viable in the current economic
environment.
|
|
|
|
The proposed offer would give Frontier shareholders an
opportunity to have shares in the pro forma organization and
benefit in any increase in the stock price of the business going
forward.
|
|
|
|
A merger with SPAH and the infusion of significant capital would
likely expedite removal of the regulatory restrictions currently
facing Frontier and allow Frontier Bank to better serve its
customers.
|
|
|
|
Frontier does not presently have sufficient capital to meet the
capital requirements of the regulatory agencies through organic
resources. As of June 30, 2009, Frontier was no longer
considered well capitalized using the standard
regulatory criteria.
|
|
|
|
The proposed exchange ratio was reasonable in the context of the
current market environment and when compared to Frontiers
other possible alternatives.
|
|
|
|
Other efforts to raise capital over the past six months had
resulted in no actionable alternatives.
|
On July 1, 2009, SPAH and Frontier entered into the
nonbinding Letter of Intent.
On July 2, 2009, representatives of Frontier, SPAH, Keller
Rohrback and Sandler ONeill traveled to San Francisco
to meet with representatives from the FDIC, FRB and Washington
DFI to discuss the terms of the nonbinding Letter of Intent and
other aspects of the transaction in general.
During the weeks of July 6, 2009 and July 13, 2009,
SPAH continued financial and business due diligence and
commenced legal and regulatory due diligence on Frontier and
Olshan Grundman Frome Rosenzweig & Wolosky LLP
(Olshan), Sidley Austin LLP and SPAH prepared the
first draft of the merger agreement. Olshan circulated a
65
draft of the merger agreement to Frontier on July 18, 2009.
Discussions between the various parties and due diligence
continued throughout the week of July 20, 2009 and on
July 24, 2009, Olshan received Frontiers cumulative
comments to the merger agreement. Also during this time period
SPAH management met with Frontiers independent consultant
to discuss findings of the second loan review. During the next
several days, the various parties continued to negotiate the
terms and conditions of the merger agreement and Olshan
distributed revised drafts of the merger agreement on each of
July 27, 28 and 29, 2009.
On July 24, 2009, SPAHs Audit Committee met to review
SPAHs
Form 10-Q
for the six months ended June 30, 2009. SPAHs Audit
Committee was given an update on the status of the negotiations
with Frontier.
On July 29, 2009 the SPAH Board met. SPAH management made a
lengthy presentation regarding the terms and conditions of the
transactions, Frontiers current business and loan
portfolio, regulatory issues, timing of shareholder approval and
the fact that the acquisition of Frontier does not satisfy the
requirement that the fair market value of the target business
equals at least 80% of the balance of SPAHs trust account
(excluding underwriting discounts and commissions) plus the
proceeds of the co-investment. The SPAH Board approved the
transaction based on the strong capital position of the combined
entity, the solid franchise value of Frontier and the
opportunity for the recapitalized entity to take advantage of
the favorable market for making both loans and acquisitions. At
the conclusion of the meeting, the SPAH Board approved entering
into the merger agreement with Frontier subject to whatever
additional changes were agreed to by management. As part of this
approval, the SPAH Board also approved certain amendments to
SPAHs Warrant Agreement and Amended and Restated
Certificate of Incorporation (including a provision which would
eliminate the requirement that SPAH enter into a business
combination whereby the fair market value of the target business
equals at least 80% of the balance of SPAHs trust account
(excluding underwriting discounts and commissions) plus the
proceeds of the co-investment), subject to stockholder approval.
Members of the SPAH Board also agreed to forfeit an aggregate of
465,530 shares of SPAH common stock and SP Acq LLC agreed
to forfeit 8,987,883 shares of SPAH common stock, in order
to facilitate the approval of the merger by SPAH and Frontier
stockholders and to improve the per share valuation.
At a Frontier Board meeting held on July 29, 2009, after
reviewing presentations by Keller Rohrback and Sandler
ONeill, receiving a fairness opinion from Keefe Bruyette
and lengthy discussion of the terms and conditions of the
transaction and other possible alternatives, the Frontier Board
unanimously resolved to approve the merger transaction subject
to certain adjustments.
On July 30, 2009, representatives of Frontier and SPAH
negotiated a finalized, mutually agreeable merger agreement and
on such date, SPAH and Frontier executed the merger agreement.
Reasons
of SPAH for the Merger
In reaching its decision to approve the merger agreement and
recommend the merger to its stockholders, the SPAH Board
reviewed various financial data and due diligence and evaluation
materials and made an independent determination of fair market
value. The SPAH Board consulted with SPAH management,
SPAHs legal counsel regarding the legal terms of the
merger, and certain employees and certain affiliates of SP Acq
LLC regarding the strategic and financial aspects of the merger,
and the fairness, from a financial point of view, of the
exchange ratio to SPAH.
In addition, in reaching its decision to approve the merger
agreement, the SPAH Board considered a number of factors, both
positive and negative. It believes that the non-exhaustive list
of factors below strongly supports its determination to approve
the merger agreement and recommendation that its stockholders
adopt the merger agreement. The positive factors included:
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financial condition and results of operations of Frontier,
including a tangible book value of $268.8 million, gross
loans of $3.4 billion and total assets of $4.0 billion
as of June 30, 2009;
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the growth potential associated with Frontier, including
potential for enhanced operating margins and operating
efficiencies;
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the balance sheet
make-up and
product mix, including the loan and deposit mix of Frontier;
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opportunities to grow existing revenue streams and create new
revenue streams associated with Frontier;
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the competitive position of Frontier within its operating
markets;
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the industry dynamics, including barriers to entry;
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the experience and skill of Frontiers management,
including Patrick M. Fahey, the current Chairman and Chief
Executive Officer of Frontier who will become Chief Executive
Officer of SPAH in the merger;
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acquisition opportunities in the industry;
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the opportunity for further consolidation and cost savings in
the banking industry; and
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the valuation of comparable companies.
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Negative factors that the SPAH Board considered included:
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Frontiers depressed stock price may adversely affect
prevailing market prices for SPAHs common stock;
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the issuance of the FDIC Order and the Memorandum of
Understanding;
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the issuance of the FRB Written Agreement;
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the deterioration of Frontiers loan portfolio, centered in
its real estate construction and land development loans,
including approximately $764.6 million in nonperforming
loans predominately existing in construction real estate loans
and land development and $98.6 million in loan loss
reserves as of June 30, 2009;
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impact of new regulation in the banking industry; and
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the continued downturn in Frontiers real estate market
areas and the general weakness in the economy.
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The SPAH Board concluded, however, the potentially negative
factors associated with the merger were outweighed by the
potential benefits of the merger. The above discussion of the
material factors considered by the SPAH Board is not intended to
be exhaustive, but does set forth the principal factors
considered by the SPAH Board.
At a SPAH Board meeting held on July 29, 2009, the SPAH
Board collectively reached the unanimous conclusion to approve
the merger agreement and the merger in light of the various
factors described above and other factors that each member of
the SPAH Board felt were appropriate. In view of the wide
variety of factors considered by the SPAH Board in connection
with its evaluation of the merger and the complexity of these
matters, the SPAH Board did not consider it practical, and did
not attempt, to quantify, rank or otherwise assign relative
weights to the specific factors it considered in reaching its
decision. Rather, the SPAH Board made its recommendation based
on the totality of information presented to and the
investigation conducted by it. In considering the factors
discussed above, individual directors may have given different
weights to different factors.
Consequences
to SPAH if the Merger Proposal is Not Approved
If the merger proposal is not approved by either the SPAH
stockholders or the Frontier shareholders, if 10% or more of the
SPAH public stockholders properly elect to convert their shares
for cash equal to a pro rata portion of the SPAH trust account
(and this closing condition is not waived by SPAH), if required
regulatory approvals are denied or delayed, if the warrant
amendment proposal is not approved by the SPAH warrantholders or
certain other closing conditions are not met and are not waived,
the merger will not occur. In addition, if SPAH does not effect
the merger with Frontier or cannot complete an alternative
business combination by October 10, 2009, SPAH will
automatically dissolve and liquidate. In any liquidation, the
funds held in the trust account, plus any interest earned
thereon (less any taxes due on such interest and payment of
deferred underwriting discounts and commissions), together with
any remaining net assets not held in trust, will be distributed
pro rata to SPAH public stockholders and SPAH will be dissolved
in accordance with the SPAH Certificate of Incorporation. The
SPAH insiders have waived any right to any liquidation
distribution with respect to their shares acquired prior to the
initial public offering.
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Interests
of SPAHs Directors and Officers and Others in the
Merger
When considering the recommendations of the SPAH Board, you
should be aware that some of SPAHs directors, officers and
affiliates have interests in the merger proposal that differ
from the interests of other stockholders:
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Warren G. Lichtenstein will serve as the Chairman of the SPAH
Board following the consummation of the merger;
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John McNamara will serve as the Chairman of the Frontier Bank
Board following the consummation of the merger;
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if the merger is not approved and SPAH is required to liquidate,
all the shares of common stock and all the warrants held by the
SPAH insiders (including SP Acq LLC and the Steel Trust), which,
as of the record date, for the shares, were worth
$[ ]
per share and
$[ ]
in the aggregate and, for the warrants, were worth
$[ ]
per warrant and
$[ ]
in the aggregate, will be worthless. Since
Mr. Lichtenstein, SPAHs Chairman of the Board,
President and Chief Executive Officer, may be deemed the
beneficial owner of shares held by SP Acq LLC and the Steel
Trust, he may also have a conflict of interest in determining
whether a particular target business is appropriate for SPAH and
its stockholders. However, upon consummation of the merger, SP
Acq LLC has agreed to forfeit 8,987,883 of its founders
shares and Anthony Bergamo, Ronald LaBow, Howard M. Lorber,
Leonard Toboroff and S. Nicholas Walker have agreed to forfeit
an aggregate of 465,530 of their founders shares;
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if SPAH liquidates prior to the consummation of a business
combination, SP Acq LLC and Mr. Lichtenstein will be
personally liable if and to the extent any claims by a third
party for services rendered or products sold, or by a
prospective business target, reduce the amounts in the trust
account available for distribution to SPAH stockholders in the
event of a dissolution and liquidation; and
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unless SPAH consummates an initial business combination, its
officers and directors, its employees, and affiliates of SP Acq
LLC and their employees will not receive reimbursement for any
out-of-pocket
expenses incurred by them to the extent that such expenses
exceed the amount of available proceeds not deposited in the
trust account and the $3.5 million in interest income on
the balance of the trust account that has been released to SPAH
to fund its working capital requirements. SPAHs officers
and directors may tend to favor potential initial business
combinations with target businesses that offer to reimburse any
expenses that SPAH did not have the funds to reimburse itself.
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Each board member was aware of these and other interests and
considered them before approving and adopting the merger
agreement. Additionally, upon consummation of the merger, the
underwriters in SPAHs initial public offering will be
entitled to receive approximately $17.3 million of deferred
underwriting discounts and commissions currently held in
SPAHs trust account. SPAH is in negotiation with its
underwriters regarding the amount and form of payment of such
deferred underwriting fees from SPAHs initial public
offering. As of the date hereof, SPAH believes that the
underwriting fees will be reduced by approximately
$3.65 million and SPAH will continue to negotiate a further
reduction of such fees until a mutual settlement can be reached.
The results of these negotiations are uncertain since the
underwriters can discontinue negotiations with SPAH at any time
and require the full amount of their fees payable upon
consummation of the merger. If the merger is not consummated and
SPAH is required to liquidate, the underwriters have agreed to
forfeit any rights or claims to their deferred underwriting
discounts and commissions then in the trust account, and those
funds will be included in the pro rata liquidation distribution
to the SPAH public stockholders.
Upon consummation of the merger, SP Acq LLC has agreed to
forfeit 8,987,883 of the 9,653,412 founders shares it owns
and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker
have agreed to forfeit an aggregate of 465,530 of the 500,000
founders shares they own. The SPAH insiders previously
agreed not to sell or transfer their founders units and
the founders shares and initial founders warrants
comprising the founders units (including the common stock
to be issued upon the exercise of the initial founders
warrants) for a period of one year from the date
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the merger is consummated, except in each case to permitted
transferees who agree to be subject to the same transfer
restrictions. The Steel Trust has agreed to be bound by these
transfer restrictions.
SP II previously agreed not to sell or transfer the
co-investment units, co-investment shares or co-investment
warrants (including the common stock to be issued upon exercise
of the co-investment warrants) until one year after SPAH
completes the merger except to permitted transferees who agree
to be bound by such transfer restrictions. The Steel Trust has
agreed to be bound by these transfer restrictions.
The permitted transferees under the
lock-up
agreements are SPAHs officers, directors and employees and
other persons or entities associated or affiliated with SP II or
Steel Partners, Ltd. (other than, in the case of SP II and SP
Acq LLC, their respective limited partners or members in their
capacity as limited partners or members). Any transfer to a
permitted transferee will be in a private transaction exempt
from registration under the Securities Act, pursuant to
Section 4(i) thereof.
During the
lock-up
period, the SPAH insiders and any permitted transferees to whom
they transfer shares of common stock will retain all other
rights of holders of SPAH common stock, including, without
limitation, the right to vote their shares of common stock
(except to the extent they convert their voting common stock
into Non-Voting Common Stock or receive Non-Voting Common Stock
upon exercise of their warrants) and the right to receive cash
dividends, if declared. If dividends are declared and payable in
shares of common stock, such dividends will also be subject to
the lock-up
agreement. If SPAH is unable to effect the merger and
liquidates, the SPAH insiders have waived the right to receive
any portion of the liquidation proceeds with respect to the
founders shares. Any permitted transferees to whom the
founders shares are transferred will also agree to waive
that right.
If you hold shares of common stock issued in SPAHs initial
public offering (whether such shares were acquired pursuant to
such initial public offering or afterwards up to and until the
record date), then you have the right to vote against the merger
proposal and demand that SPAH convert such shares into cash
equal to a pro rata share of the aggregate amount then on
deposit in the trust account in which a substantial portion of
the net proceeds of SPAHs initial public offering are held
(before payment of deferred underwriting discounts and
commissions and including interest earned on their pro rata
portion of the trust account, net of income taxes payable on
such interest and net of interest income of $3.5 million on
the trust account balance previously released to SPAH to fund
its working capital requirements).
As of September 17, 2009, there was
$[ ] in SPAHs trust account,
including accrued interest on the funds in the trust account, or
approximately $[ ] per share issued
in the initial public offering. The actual per share conversion
price will differ from the $[ ] per
share due to any interest earned on the funds in the trust
account since September 17, 2009, and any taxes payable in
respect of interest earned thereon. The actual per share
conversion price will be calculated as of two business days
prior to the consummation of the merger, divided by the number
of shares sold in the initial public offering.
You may request conversion at any time after the mailing of this
joint proxy statement/prospectus and prior to the vote taken
with respect to the merger proposal at the special meeting, but
the request will not be granted unless you vote against the
merger and the merger is approved and completed. If the merger
is not consummated, no shares will be converted to cash through
the exercise of conversion rights. Prior to exercising your
conversion rights you should verify the market price of SPAH
common stock. You may receive higher proceeds from the sale of
your common stock in the public market than from exercising your
conversion rights, if the market price per share is higher than
the amount of cash that you would receive upon exercise of your
conversion rights.
If you wish to exercise your conversion rights, you must:
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affirmatively vote against the merger proposal in person or by
submitting your proxy card before the vote on the merger
proposal and checking the box that states Against
for the merger proposal;
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check the box that states I HEREBY EXERCISE MY CONVERSION
RIGHTS on the proxy card; or
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send a letter to SPAHs transfer agent, Continental Stock
Transfer & Trust Company, at 17 Battery Place,
8th Floor, New York, NY 10004, attn: Mark Zimkind, stating
that you are exercising your conversion rights and demanding
your shares of SPAH common stock be converted into cash; and
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physically tender, or if you hold your shares of SPAH common
stock in street name, cause your broker to
physically tender, your stock certificates representing shares
of SPAH common stock to SPAHs transfer agent; or
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deliver your shares electronically using the Depository
Trust Companys DWAC (Deposit/Withdrawal At Custodian)
System, to SPAHs transfer agent, in either case by
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2009 or such other later date if the special meeting of SPAH
stockholders is adjourned or postponed.
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Accordingly, a SPAH stockholder would have from the time we send
out this joint proxy statement/prospectus through the vote on
the merger to deliver his or her shares if he or she wishes to
seek to exercise his or her conversion rights.
The DWAC delivery process can be accomplished, whether you are a
record holder or your shares are held in street
name, within a day, by simply contacting the transfer
agent or your broker and requesting delivery of your shares
through the DWAC System. There is a nominal cost associated with
this tendering process and the act of certificating the shares
or delivering them through the DWAC system. The transfer agent
will typically charge the stockholder or the tendering broker
$35, and your broker may or may not pass this cost on to you.
Taking any action that does not include an affirmative vote
against the merger, including abstaining from voting on the
merger proposal, will prevent you from exercising your
conversion rights. However, voting against the merger proposal
does not obligate you to exercise your conversion rights. In
addition, if you do not properly exercise your conversion rights
(as outlined above), you will not be able to convert your shares
of common stock into cash at the conversion price.
Any request to exercise your conversion rights, once made, may
be withdrawn at any time up to immediately prior to the vote on
the merger proposal at the special meeting (or any adjournment
or postponement thereof). If you (1) initially vote for the
merger proposal but then wish to vote against it and exercise
your conversion rights or (2) initially vote against the
merger proposal and wish to exercise your conversion rights but
do not check the box on the proxy card providing for the
exercise of your conversion rights or do not send a written
request to SPAHs transfer agent to exercise your
conversion rights, or (3) initially vote against the merger
proposal but later wish to vote for it, you may request
SPAHs transfer agent to send you another proxy card on
which you may indicate your intended vote and, if that vote is
against the merger proposal, exercise your conversion rights by
checking the box provided for such purpose on the proxy card.
You may make such request by contacting Continental Stock
Transfer & Trust Company at 17 Battery Place,
8th Floor, New York, NY 10004, attn: Mark Zimkind. Any
corrected or changed proxy card or written demand of conversion
rights must be received by Continental Stock
Transfer & Trust Company prior to the special
meeting.
Please note, however, that once the vote on the merger proposal
is held at the special meeting, you may not withdraw your
request to exercise your conversion rights and request the
return of your shares. If the merger is not consummated, your
shares will be automatically returned to you.
In connection with the vote to approve the merger, SPAH
stockholders may elect to vote a portion of their shares for and
a portion of their shares against the merger. If the merger is
approved and consummated, SPAH stockholders who elected to
convert the portion of their shares voted against the merger
will receive the conversion price with respect to those shares
and may retain any other shares they own.
If you properly exercise your conversion rights, then you will
be exchanging your shares of SPAH common stock for cash equal to
a pro rata portion of the SPAH trust account and will no longer
own these shares. SPAH anticipates that the funds to be
distributed to SPAH stockholders entitled to convert their
shares who elect conversion will be distributed promptly after
completion of the merger. SPAH will not complete the merger if
SPAH stockholders owning 10% or more of the shares sold in
SPAHs initial public offering exercise their conversion
rights.
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If Proposal No. 2 is approved and adopted, SPAH has
made it a condition to closing the merger agreement that no more
than 10% of the shares (minus one share) sold in SPAHs
initial public offering vote against the merger and exercise
their conversion rights in order to ensure that the combined
company immediately following the consummation of the merger has
sufficient Tier 1 capital to return to compliance levels.
Pursuant to the terms of the FDIC Order, Frontier Bank is
required to increase its Tier 1 capital in such an amount
as to equal or exceed 10% of Frontier Banks total assets
by July 29, 2009 and to maintain such capital level
thereafter. If 10% or greater of SPAHs public stockholders
were to vote their shares against the merger and demand that
SPAH convert such shares into cash equal to a pro rata share of
the aggregate amount then on deposit in the trust account, the
funds remaining may not be sufficient to meet Frontier
Banks capital requirements. However, in SPAHs sole
discretion, this closing condition may be waived in order to
consummate the merger. If SPAH elects to waive this closing
condition, it may raise the conversion threshold to anywhere
between 10% to 30% (minus one share). SPAH does not believe it
will raise the conversion threshold and currently intends only
to raise the conversion threshold if it believes that the
combined entity will have sufficient Tier 1 capital to
return to compliance levels.
Actions
That May Be Taken to Secure Approval of SPAH
Stockholders
If Proposal No. 2 is approved at the SPAH special
meeting of stockholders, and greater than 10% (minus one share)
of SPAH public stockholders properly elect to convert their
shares for cash equal to a pro rata portion of the SPAH trust
account in accordance with the SPAH Certificate of
Incorporation, SPAH would not be permitted to consummate the
merger, even if the required vote for the merger proposal was
received. To preclude such possibility, SPAH, the SPAH insiders,
and/or
certain of their respective affiliates may negotiate
arrangements to provide for the purchase of such shares
following the consummation of the merger from certain holders
who indicate their intention to vote against the merger and seek
conversion or who otherwise wish to sell their shares. SPAH, the
SPAH insiders,
and/or
certain of their respective affiliates may also enter into
transactions with such holders and others to provide them with
incentives to acquire shares of SPAH and vote in favor of the
merger proposal.
Arrangements of such nature would only be entered into and
effected with the prior approval of Frontier (with respect to
shares purchased) in accordance with applicable law at a time
when SPAH, the SPAH insiders,
and/or
certain of their respective affiliates are not aware of any
material nonpublic information regarding SPAH and its securities
or pursuant to agreements between the buyer and seller of such
shares in a form that would not violate insider trading rules.
Definitive arrangements have not yet been determined but might
include:
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Agreements between SPAH and the SPAH public stockholders
pursuant to which SPAH would agree to purchase the shares from
such holders immediately after the closing of the merger for the
price and fees specified in the arrangements.
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Agreements with third parties to be identified pursuant to which
the third parties would purchase public shares during the period
beginning on the date that the registration statement of which
this joint proxy statement/prospectus is a part is declared
effective. Such arrangements would also provide for SPAH,
immediately after the closing of the merger, to purchase from
the third parties all of the public shares purchased by them for
the price and fees specified in the arrangements.
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Agreements with third parties pursuant to which SPAH would
borrow funds to make purchases of public shares for its own
account. SPAH would repay such borrowings with funds transferred
to it from SPAHs trust account upon closing of the merger.
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As a result of the purchases that may be effected through such
arrangements, it is likely that the number of shares of common
stock of SPAH in its public float will be reduced and that the
number of beneficial holders of SPAHs and SPAHs
securities also will be reduced from what it would have been if
SPAH did not purchase such securities in this manner. This may
inhibit SPAHs ability to list its common stock on the NYSE
AMEX LLC or any other national securities exchange due to
minimum holder requirements.
As of the date of this joint proxy statement/prospectus, no
arrangements to such effect have been entered into with any such
investor or holder. In the event that any purchases of
SPAHs common stock are made by SPAH, the SPAH insiders,
and certain of their respective affiliates after the mailing of
this joint proxy statement/prospectus to
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stockholders but prior to the special meeting of stockholders of
SPAH, SPAH will file a Current Report on
Form 8-K
within four business days of such purchases or otherwise prior
to the special meeting. Any such report will include
descriptions of the arrangements entered into or significant
purchases by any of the aforementioned persons. If members of
the SPAH Board or SPAHs officers make purchases pursuant
to such arrangements, they will be required to report these
purchases on beneficial ownership reports filed within two
business days of such transactions with the SEC.
Given the need to ensure that the combined company immediately
following the consummation of the merger has sufficient
Tier 1 capital to return to compliance levels, SPAH will
only negotiate these arrangements to the extent it will have
sufficient capital remaining in its trust account to satisfy
Frontiers Tier 1 capital requirements following the
consummation of the merger.
The purpose of such arrangements would be to increase the
likelihood of obtaining the required vote (a majority of the
shares of common stock voted by the SPAH public stockholders are
voted, in person or by proxy, in favor of the merger) and reduce
the likelihood that holders of 10% or more of the shares sold in
SPAHs initial public offering vote against the merger and
exercise their conversion rights. All shares purchased pursuant
to such arrangements would be voted in favor of the merger and
all other proposals presented at the special meeting of
stockholders of SPAH. Neither SPAH nor its officers and
directors purchasing shares would affect the fact that 10%
(minus one share) of the shares sold in SPAHs initial
public offering could be converted by SPAH public stockholders
without the merger being prohibited from closing because the
number of shares of the shares sold in SPAHs initial
public offering that may be converted without prohibiting the
consummation of the merger will be fixed in the SPAH Certificate
of Incorporation, as amended by Proposal No. 2, at one
share less than 10% of the shares sold in SPAHs initial
public offering. If the merger is not consummated, the
purchasers, other than SPAH and the SPAH insiders, would be
entitled to participate in liquidation distributions from
SPAHs trust account with respect to such shares.
Purchases pursuant to such arrangements ultimately paid for with
funds originating from SPAHs trust account would reduce
the funds available to SPAH after the merger for working capital
and general corporate purposes. Nevertheless, in all events
there will be sufficient funds available to SPAH from the trust
account to pay the SPAH public stockholders that are properly
converted.
If these arrangements are entered into, the consequence could be
that the merger would be approved when, without such
arrangements, the merger might not have otherwise been approved.
Purchases of shares by the persons described above would allow
them to exert more influence over the approval of the merger and
other proposals and would likely increase the chances that such
proposals would be approved. Moreover, any such purchases may
make it less likely that the holders of 10% or more of the
shares sold in SPAHs initial public offering will vote
against the merger and exercise their conversion rights.
Rescission
Rights
If you are a SPAH stockholder at the time of the merger and you
purchased your shares in SPAHs initial public offering or
afterwards up to and until the record date, you may have
securities law claims against SPAH for rescission (under which a
successful claimant has the right to receive the total amount
paid for his or her securities pursuant to an allegedly
deficient prospectus, plus interest and less any income earned
on the securities, in exchange for surrender of the securities)
or damages (compensation for loss on an investment caused by
alleged material misrepresentations or omissions in the sale of
a security) on the basis of, for example, SPAHs initial
public offering prospectus not disclosing that (i) SPAH may
seek to amend the SPAH Certificate of Incorporation prior to the
consummation of a business combination to amend the definition
of initial business combination to eliminate the
requirement that the fair market value of the target business
equal at least 80% of the balance of SPAHs trust account
(excluding underwriting discounts and commissions) plus the
proceeds of the co-investment, (ii) SPAH may seek to amend
the SPAH Certificate of Incorporation prior to the consummation
of a business combination to provide that holders of no more
than 10% of the shares (minus one share) sold in SPAHs
initial public offering vote against the merger and exercise
their conversion rights when the threshold in the current form
of the SPAH Certificate of Incorporation requires no more than
30% (minus one share), (iii) SPAH may seek to amend the
Warrant Agreement upon consummation of the merger to eliminate
the requirement that the initial founders
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warrants owned by certain SPAH insiders become exercisable only
after the consummation of an initial business combination if and
when the last sales price of SPAH common stock exceeds $14.25
per share for any 20 trading days within a 30 trading day period
beginning 90 days after such business combination,
(iv) funds in its trust account might be used, directly or
indirectly, to purchase shares following the consummation of the
merger from SPAH public stockholders in order to secure approval
of the merger, (v) that SPAH may seek to amend the terms of
the Warrant Agreement to increase the exercise price and extend
the exercise period, among other things, upon consummation of
the merger, and (vi) that a party other than SP II or SP
Acq LLC may purchase the co-investment units. The rescission
right and corresponding liability will continue against SPAH in
the event the merger is consummated.
Such claims may entitle stockholders asserting them to up to
$10.00 per share, based on the initial offering price of the
units sold in SPAHs initial public offering, each
comprised of one share of common stock and a warrant to purchase
an additional share of common stock, less any amount received
from the sale or fair market value of the original warrants
purchased as part of the units, plus interest from the date of
SPAHs initial public offering. In the case of SPAH public
stockholders, this amount may be more than the pro rata share of
the trust account to which they are entitled upon exercise of
their conversion rights or liquidation of SPAH.
In general, a person who contends that he or she purchased a
security pursuant to a prospectus which contains a material
misstatement or omission must make a claim for rescission within
the applicable statute of limitations period, which, for claims
made under Section 12 of the Securities Act and some state
statutes, is one year from the time the claimant discovered or
reasonably should have discovered the facts giving rise to the
claim, but not more than three years from the occurrence of the
event giving rise to the claim. A successful claimant for
damages under federal or state law could be awarded an amount to
compensate for the decrease in value of his or her shares caused
by the alleged violation (including, possibly, punitive
damages), together with interest, while retaining the shares.
Claims under the anti-fraud provisions of the federal securities
laws must generally be brought within two years of discovery,
but not more than five years after occurrence. Rescission and
damages claims would not necessarily be finally adjudicated by
the time the merger is completed, and such claims would not be
extinguished by consummation of that transaction.
Even if you do not pursue such claims, others, who may include
all other SPAH public stockholders, may do so. Neither SPAH nor
Frontier can predict whether stockholders will bring such claims
or whether such claims would be successful.
Reasons
of Frontier for the Merger
The Frontier Board believes the merger is in the best interests
of Frontier and the Frontier shareholders. The Frontier Board
unanimously recommends that Frontier shareholders vote for the
approval of the merger agreement and the consummation of the
transactions contemplated by that agreement.
In reaching its determination to adopt the merger agreement, the
Frontier Board consulted with Frontiers management and its
financial and legal advisors, and considered a number of
factors. The following is a description of the material factors
that the Frontier Board believes favor the merger:
|
|
|
|
|
the ability of the merger to recapitalize and revitalize
Frontier, restore its regulatory capital to well-capitalized
levels, and achieve compliance with bank regulatory requirements;
|
|
|
|
the Frontier Boards assessment of the financial condition
of SPAH, and of the business, operations, capital level, asset
quality, financial condition and earnings of the combined
company on a pro forma basis. This assessment was based in part
on presentations by Sandler ONeill, Frontiers
financial advisor, and Keefe Bruyette, whom Frontier retained
solely to render a fairness opinion, and Frontiers
management and the results of the due diligence investigation of
SPAH conducted by Frontiers management and financial and
legal advisors;
|
|
|
|
the financial and growth prospects for Frontier and its
shareholders of a business combination with SPAH as compared to
continuing to operate as a stand-alone entity;
|
73
|
|
|
|
|
the information presented by Sandler ONeill to the
Frontier Board with respect to the merger and the opinion of
Keefe Bruyette that, as of the date of that opinion, the merger
consideration is fair from a financial point of view to the
holders of Frontier common stock (see Opinion
of Keefe Bruyette below);
|
|
|
|
the current and prospective economic, regulatory and competitive
environment facing the financial services industry generally,
and Frontier in particular, including the continued rapid
consolidation in the financial services industry and the
competitive effects of the increased consolidation on smaller
financial institutions such as Frontier;
|
|
|
|
the fact that SPAH has agreed to: (i) employ Patrick M.
Fahey as Chief Executive Officer of the combined company, and
(ii) appoint Mr. Fahey and three other members of the
Frontier Board as directors of SPAH and Frontier Bank, which are
expected to provide a degree of continuity and involvement by
Frontier constituencies following the merger, in furtherance of
the interests of Frontiers shareholders, customers and
employees;
|
|
|
|
current conditions in the U.S. capital markets, including
the unavailability of other sources of capital, strategic or
other merger partners to Frontier;
|
|
|
|
the SPAH stock and SPAH warrants to be received in exchange for
Frontier common stock pursuant to the merger agreement and
resulting pro forma ownership levels in relation to the
historical trading prices of Frontier common stock, as compared
to other possible scenarios in the view of the Frontier
Boards financial advisor;
|
|
|
|
the current condition of Frontier and the future prospects of
the business in light of the current economic environment and
the likelihood that Frontier would need to raise capital in
order to protect against future loan losses and achieve
compliance with the FDIC Order and the FRB Agreement; and
|
|
|
|
the fact that Frontiers existing capital resources were
limiting managements ability to effectively manage certain
problem credits.
|
In the course of its deliberations regarding the merger, the
Frontier Board also considered the following information that
the Frontier Board determined did not outweigh the benefits to
Frontier and its shareholders expected to be generated by the
merger:
|
|
|
|
|
that directors and officers of Frontier have interests in the
merger in addition to their interests generally as Frontier
shareholders, including change of control agreements for five of
its executive officers;
|
|
|
|
the effect of a termination fee of up to $2.5 million in
favor of SPAH, including the risk that the termination fee might
discourage third parties from offering to acquire Frontier by
increasing the cost of a third party acquisition and, while SPAH
has not agreed to pay Frontier any termination fee, Frontier was
required to waive any claims against the trust account, if, for
example, SPAH breaches the merger agreement;
|
|
|
|
the risk to Frontier and its shareholders that SPAH may not be
able to obtain required regulatory approvals, or necessary
modifications to the FDIC Order, FRB Written Agreement and
Memorandum of Understanding, and the risk of failing to
consummate the transaction;
|
|
|
|
uncertainty about how much of SPAHs trust account will be
available for working capital after closing;
|
|
|
|
the adverse economic and regulatory environment; and
|
|
|
|
the pending regulatory actions against Frontier, Frontiers
noncompliance with the capital requirement imposed by the FDIC
Order, and their potential adverse impact on the profitability,
operations and deposits of Frontier Bank, and the risk of
further regulatory action and penalties, including the potential
closure of Frontier Bank.
|
The Frontier Board did not assign any relative or specific
weights to the factors considered in reaching that
determination, and individual directors may have given differing
weights to different factors.
74
Engagement
of Financial Advisors
In November 2008, Frontier engaged Sandler ONeill as a
financial advisor to assist Frontiers Board and management
in pursuing strategic alternatives. These services included, but
were not limited to, the offering and sale of certain securities
of Frontier in a transaction to provide additional capital to
Frontier or a possible business combination. Pursuant to its
engagement, Sandler ONeill acted as a financial advisor to
Frontiers board of directors in connection with the
negotiation of the merger agreement. In addition, Frontier
expects that Sandler ONeill will continue to provide
ongoing advisory services to Frontier in connection with the
merger, including arranging for presentations by Frontiers
management and preparing them for such presentations. Under the
terms of the engagement letter, as amended, between Sandler
ONeill and Frontier, Sandler ONeill has received a
fee of $500,000 and upon consummation of the merger, will
receive $9.5 million payable at the closing of the merger.
In addition, Sandler ONeill has a right of first refusal
for a period of 12 months following the closing of the
merger to act as a (i) a co-manager or co-placement agent
in any capital raising transaction entered into by Frontier and
(ii) financial advisor in any business combination entered
into by Frontier and a second party. As a result, stockholders
are advised that Sandler ONeill has a financial interest
in the successful outcome of the merger.
The Frontier Board has also retained Keefe Bruyette solely to
issue a fairness opinion for a fee of $500,000.
Opinion
of Keefe Bruyette
By letter dated July 28, 2009, Frontier retained Keefe
Bruyette to provide a fairness opinion to the Frontier Board in
connection with a possible business combination with SPAH. Keefe
Bruyette is a nationally recognized investment banking firm
whose principal business specialty is financial institutions. In
the ordinary course of its investment banking business, Keefe
Bruyette is regularly engaged in the valuation of financial
institutions and their securities in connection with mergers and
acquisitions and other corporate transactions.
At the July 29, 2009 meeting at which the Frontier Board
considered and approved the merger agreement, Keefe Bruyette
delivered to the Frontier Board its oral opinion, subsequently
confirmed in writing, that, as of such date, the exchange ratio
was fair to Frontiers shareholders from a financial point
of view. The full text of Keefe Bruyettes opinion is
attached as Annex E to this joint proxy
statement/prospectus. The opinion outlines the procedures
followed, assumptions made, matters considered and
qualifications and limitations on the review undertaken by Keefe
Bruyette in rendering its opinion. The description of the
opinion set forth below is qualified in its entirety by
reference to the opinion. Frontier shareholders are urged to
read the entire opinion carefully in connection with their
consideration of the proposed merger.
Keefe Bruyettes opinion speaks only as of the date of the
opinion. The opinion was directed to the Frontier Board and is
directed only to the fairness of the exchange ratio to Frontier
shareholders from a financial point of view. It does not address
the underlying business decision of Frontier to engage in the
merger or any other aspect of the merger, including the
likelihood or the ability of Frontier or SPAH to obtain the
necessary regulatory, contractual or other consents or approvals
of the merger or the relative merits of the merger as compared
to any other strategic alternative that may be available to
Frontier. Keefe Bruyettes opinion is not a recommendation
to any Frontier shareholder as to how such shareholder should
vote at the special meeting with respect to the merger or any
other matter.
In connection with rendering its opinion, Keefe Bruyette
reviewed and considered, among other things:
1. the merger agreement;
2. the Annual Report to Stockholders and Annual Report on
Form 10-K
for the three years ended December 31, 2008 of Frontier;
3. the Annual Report to Stockholders and Annual Report on
Form 10-K
for the period from February 14, 2007 through
December 31, 2007 and the year ended December 31, 2008
of;
4. certain interim reports to stockholders and quarterly
reports on
Form 10-Q
of Frontier and SPAH and certain other communications from
Frontier and SPAH to their respective shareholders;
75
5. the publicly reported historical price and trading
activity for Frontiers and SPAHs common stock,
including a comparison of certain financial and stock market
information for Frontier and SPAH with similar publicly
available information for certain other companies the securities
of which are publicly traded;
6. the financial terms of certain recent business
combinations in the banking industry, to the extent publicly
available;
7. the current market environment generally and the banking
environment in particular; and
8. such other information, financial studies, analyses and
investigations and financial, economic and market criteria as
they considered relevant.
Keefe Bruyette also discussed with certain members of senior
management of Frontier the past and current business, regulatory
relations, financial condition, results of operations and future
prospects of Frontier, including its liquidity and capital
position and funding sources and held similar discussions with
certain members of senior management of SPAH regarding the past
and current business, regulatory relations, financial condition,
results of operations and future prospects of SPAH, including
its liquidity and capital position and funding sources.
In performing its reviews and in rendering its opinion, Keefe
Bruyette assumed and relied upon the accuracy and completeness
of all the financial information, analyses and other information
that was publicly available or otherwise furnished to, reviewed
by or discussed with it and further relied on the assurances of
senior management of Frontier and SPAH that they were not aware
of any facts or circumstances that would make such information
inaccurate or misleading. Keefe Bruyette was not asked to and
did not independently verify the accuracy or completeness of any
of such information and they did not assume any responsibility
or liability for its accuracy or completeness. Keefe Bruyette
relied upon the management of Frontier and SPAH as to the
reasonableness and achievability of the financial and operating
forecasts and projections (and the assumptions and bases
therefore) provided to them, and assumed that such forecasts and
projections reflected the best currently available estimates and
judgments of such managements and that such forecasts and
projections will be realized in the amounts and in the time
periods estimated by such managements. Keefe Bruyette expressed
no opinion as to such financial projections or the assumptions
on which they were based. Keefe Bruyette did not make an
independent evaluation or appraisal of the assets or property,
the collateral securing assets or the liabilities, contingent or
otherwise, of Frontier or SPAH or any of their respective
subsidiaries, or the collectability of any such assets, nor was
it furnished with any such evaluations or appraisals. Keefe
Bruyette is not an expert in the evaluation of allowances for
loan and lease losses and it did not make an independent
evaluation of the adequacy of the allowance for loan or lease
losses of Frontier or the combined entity, nor did it review any
individual credit files relating to Frontier. With
Frontiers consent, Keefe Bruyette assumed that the
respective allowances for loan and lease losses for Frontier
were adequate to cover such losses and will be adequate on a pro
forma basis for the combined entity.
Keefe Bruyettes opinion was necessarily based upon market,
economic and other conditions as they existed on, and could be
evaluated as of, the date of the opinion. Keefe Bruyette
assumed, in all respects material to its analysis, that all of
the representations and warranties contained in the merger
agreement and all related agreements are true and correct, that
each party to such agreements will perform all of the covenants
required to be performed by such party under such agreements and
that the conditions precedent in the merger agreement are not
waived or modified. Keefe Bruyette also assumed, with
Frontiers consent, that there had been no material change
in Frontiers and SPAHs assets, financial condition,
results of operations, business or prospects since the date of
the last financial statements made available to them, that
Frontier and SPAH will remain as going concerns for all periods
relevant to its analyses, and that the merger will qualify as a
tax-free reorganization for federal income tax purposes. Keefe
Bruyette expresses no opinion as to legal, regulatory,
accounting and tax matters relating to the merger and the other
transactions contemplated by the merger agreement.
In rendering its July 29, 2009 opinion, Keefe Bruyette
performed a variety of financial analyses. The following is a
summary of the material analyses performed by Keefe Bruyette,
but is not a complete description of all the analyses underlying
Keefe Bruyettes opinion. The summary includes information
presented in tabular format. In order to fully understand the
financial analyses, these tables must be read together with the
accompanying text. The tables alone do not constitute a complete
description of the financial analyses. The preparation of a
fairness opinion is a complex process involving subjective
judgments as to the most appropriate and relevant methods of
financial
76
analysis and the application of those methods to the particular
circumstances. The process, therefore, is not necessarily
susceptible to a partial analysis or summary description. Keefe
Bruyette believes that its analyses must be considered as a
whole and that selecting portions of the factors and analyses
considered without considering all factors and analyses, or
attempting to ascribe relative weights to some or all such
factors and analyses, could create an incomplete view of the
evaluation process underlying its opinion. Also, no company
included in Keefe Bruyettes comparative analyses described
below is identical to Frontier or SPAH and no transaction is
identical to the merger. Accordingly, an analysis of comparable
companies or transactions involves complex considerations and
judgments concerning differences in financial and operating
characteristics of the companies and other factors that could
affect the public trading values or merger transaction values,
as the case may be, of Frontier or SPAH and the companies to
which they are being compared.
In performing its analyses, Keefe Bruyette also made numerous
assumptions with respect to industry performance, business and
economic conditions and various other matters, many of which
cannot be predicted and are beyond the control of Frontier, SPAH
and Keefe Bruyette. The analyses performed by Keefe Bruyette are
not necessarily indicative of actual values or future results,
which may be significantly more or less favorable than suggested
by such analyses. Keefe Bruyette prepared its analyses solely
for purposes of rendering its opinion and provided such analyses
to the Frontier Board at the July 29, 2009 meeting.
Accordingly, Keefe Bruyettes analyses do not necessarily
reflect the value of Frontiers common stock or SPAHs
common stock or the prices at which Frontiers or
SPAHs common stock may be sold at any time.
Summary of Proposal. Keefe Bruyette reviewed
the financial terms of the proposed transaction. SPAH is
offering shareholders of Frontier common stock (other than
shares to be excluded or cancelled) the right to receive
.0530 shares of newly issued SPAH common stock and .0530
newly issued SPAH warrants (the exchange ratio. Based upon the
closing price of SPAHs common stock on July 28, 2009
of $9.73, Keefe Bruyette calculated implied consideration of
$.51569 per share of Frontier common stock.
Based upon financial information for Frontier for the twelve
months ended June 30, 2009, Keefe Bruyette calculated the
following ratios:
Transaction
Ratios
|
|
|
|
|
Transaction price/last twelve months earnings per share
|
|
|
NM
|
x
|
Transaction price/mean First Call 2009 EPS estimates
|
|
|
NM
|
x
|
Transaction price/tangible book value per share
|
|
|
9.04
|
%
|
Transaction price/stated book value per share
|
|
|
9.02
|
%
|
Tangible book premium/core deposits(1)
|
|
|
(8.9
|
)%
|
Premium to market price(2)
|
|
|
(42.06
|
)%
|
|
|
|
(1) |
|
Core deposits exclude time deposits with balances greater than
$100,000. |
|
(2) |
|
Based on Frontiers trailing 20 day average closing
price of $.89 as of July 28, 2009. |
For purposes of Keefe Bruyettes analyses, earnings per
share were based on fully diluted earnings per share. The
aggregate transaction value was approximately
$24.31 million, based upon 47,131,853 shares of
Frontier common stock outstanding, including the intrinsic value
of options to purchase an aggregate of 1,271,272 shares
with a weighted average strike price of $16.73.
Comparable Company Analysis. Keefe Bruyette
used publicly available information to compare selected
financial and market trading information for Frontier and a
group of financial institutions headquartered in the
77
Pacific Northwest with total assets between $950 million
and $12.5 billion selected by Keefe Bruyette, or the
Frontier Peer Group. The Frontier Peer Group
consisted of the following publicly traded financial
institutions:
|
|
|
Cascade Financial Corp.
|
|
Pacific Continental Corp.
|
Columbia Bancorp*
|
|
Sterling Financial Corporation
|
Heritage Financial Corp.*
|
|
Glacier Bancorp, Inc.
|
Intermountain Community Bancorp*
|
|
PremierWest Bancorp*
|
City Bank*
|
|
Umpqua Holdings Corporation
|
West Coast Bancorp
|
|
Banner Corporation*
|
Cascade Bancorp*
|
|
Columbia Banking System, Inc.
|
AmericanWest Bancorporation*
|
|
Horizon Financial Corp.*
|
In the table above, * denotes financial data for the three
months ended March 31, 2009.
The analysis compared financial information for Frontier and the
median data for the financial institutions in the Frontier Peer
Group. The table below sets forth the comparative data as of and
for the three months ending June 30, 2009, with pricing
data as of July 28, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frontier Peer
|
|
|
|
|
|
|
Group
|
|
|
|
Frontier
|
|
|
Median
|
|
|
Total assets (in millions)
|
|
$
|
3,987
|
|
|
$
|
NM
|
|
Tangible equity/tangible assets
|
|
|
6.74
|
%
|
|
|
8.81
|
%
|
Tier 1 Risk Based Capital Ratio
|
|
|
8.15
|
%
|
|
|
10.79
|
%
|
Total Risk Based Capital Ratio
|
|
|
9.42
|
%
|
|
|
12.60
|
%
|
Return on average assets
|
|
|
(4.91
|
)%
|
|
|
(.95
|
)%
|
Return on average tangible equity
|
|
|
(75.6
|
)%
|
|
|
(13.4
|
)%
|
Net interest margin
|
|
|
2.21
|
%
|
|
|
3.68
|
%
|
Efficiency ratio
|
|
|
90.7
|
%
|
|
|
78.5
|
%
|
Transaction accounts/deposits
|
|
|
12.5
|
%
|
|
|
NA
|
%
|
Loan loss reserve/loans
|
|
|
2.89
|
%
|
|
|
2.35
|
%
|
Texas Ratio
|
|
|
222.9
|
%
|
|
|
100.4
|
%
|
Reserves / Non Performing Loans
|
|
|
12.9
|
%
|
|
|
33.2
|
%
|
Nonperforming assets/Loans & OREO
|
|
|
23.59
|
%
|
|
|
8.76
|
%
|
Price/tangible book value per share
|
|
|
20.2
|
%
|
|
|
30.0
|
%
|
Price/LTM EPS
|
|
|
(.28
|
)x
|
|
|
33.2
|
x
|
Price/estimated 2009 EPS
|
|
|
NM
|
x
|
|
|
NA
|
x
|
Price/estimated 2010 EPS
|
|
|
NM
|
x
|
|
|
NA
|
x
|
Dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Market capitalization (in millions)
|
|
$
|
54.2
|
|
|
$
|
NM
|
|
The publicly obtained comparative data above illustrates that
Frontiers operating metrics are of a poorer quality when
compared to its peers.
Stock Trading History. Keefe Bruyette reviewed
the history of the reported trading prices and volume of
Frontiers common stock and the relationship between the
movements in the prices of Frontiers common stock to
movements in certain stock indices, including the KBW Regional
Banking Index and the NASDAQ Bank Index,. During the one-year
period ended July 28, 2009, Frontiers common stock
underperformed each of the indices to which it was compared.
78
Frontiers
One-Year Stock Performance
|
|
|
|
|
|
|
Ending Value
|
|
|
|
July 28, 2009
|
|
|
Frontier
|
|
|
(88.0
|
)%
|
NASDAQ Bank Index
|
|
|
(22.9
|
)%
|
KBW Regional Banking Index
|
|
|
(26.9
|
)%
|
Net Present Value Analysis. Keefe Bruyette
also performed an analysis that estimated the present value of
the projected future stream of after-tax net income of Frontier
through 5 years of projected financials under various
circumstances, assuming that Frontier performed in accordance
with growth and operating assumptions and projections provided
by Frontiers management. Financial data for the quarter
ended June 30, 2009 was used to generate the projections. A
stress test was applied to common equity to reflect a charge off
scenario that would impact Frontiers balance sheet and
loan portfolio. A common equity raise of $250 million to
$500 million was assumed in the projections to offset the
stress scenario, newly raised common equity was risk weighted
100%.
Certain assumptions and performance targets were used throughout
this analysis, they include but are not limited to:
|
|
|
|
|
moderate balance sheet growth in years one and two with enhanced
growth in years three through five
|
|
|
|
year five target net interest margin of 4.75%
|
|
|
|
year five target return on assets of 1.35%
|
|
|
|
year five target efficiency ratio of 52%
|
|
|
|
year five target tangible common equity ratio of 10%
|
|
|
|
year five target total risk based capital of 15%
|
To approximate the terminal value of Frontier common stock after
5 years of projections, Keefe Bruyette applied price to
earnings multiple of 15x in year 5 of its analysis. The income
streams and terminal values were then discounted to present
values using a discount rate of 12.5%. As illustrated in the
following tables, this analysis indicated a range of net present
values available to current shareholders.
Net
Present Value to Current Shareholders Aggregate ($)
Offering Amount ($000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue Price $
|
|
$250,000
|
|
|
$300,000
|
|
|
$350,000
|
|
|
$400,000
|
|
|
$450,000
|
|
|
$500,000
|
|
|
$0.15
|
|
$
|
16.75
|
|
|
$
|
14.02
|
|
|
$
|
12.06
|
|
|
$
|
10.58
|
|
|
$
|
9.42
|
|
|
$
|
8.49
|
|
$0.25
|
|
$
|
27.41
|
|
|
$
|
23.01
|
|
|
$
|
19.83
|
|
|
$
|
17.42
|
|
|
$
|
15.54
|
|
|
$
|
14.02
|
|
$0.35
|
|
$
|
37.69
|
|
|
$
|
31.74
|
|
|
$
|
27.41
|
|
|
$
|
24.12
|
|
|
$
|
21.53
|
|
|
$
|
19.45
|
|
$0.45
|
|
$
|
47.62
|
|
|
$
|
40.21
|
|
|
$
|
34.79
|
|
|
$
|
30.66
|
|
|
$
|
27.41
|
|
|
$
|
24.78
|
|
$0.55
|
|
$
|
57.21
|
|
|
$
|
48.43
|
|
|
$
|
41.99
|
|
|
$
|
37.06
|
|
|
$
|
33.17
|
|
|
$
|
30.01
|
|
$0.65
|
|
$
|
66.47
|
|
|
$
|
56.42
|
|
|
$
|
49.01
|
|
|
$
|
43.32
|
|
|
$
|
38.81
|
|
|
$
|
35.16
|
|
$0.75
|
|
$
|
75.43
|
|
|
$
|
64.19
|
|
|
$
|
55.86
|
|
|
$
|
49.44
|
|
|
$
|
44.35
|
|
|
$
|
40.21
|
|
$0.85
|
|
$
|
84.10
|
|
|
$
|
71.74
|
|
|
$
|
62.54
|
|
|
$
|
55.43
|
|
|
$
|
49.78
|
|
|
$
|
45.17
|
|
$0.95
|
|
$
|
92.49
|
|
|
$
|
79.08
|
|
|
$
|
69.06
|
|
|
$
|
61.30
|
|
|
$
|
55.11
|
|
|
$
|
50.05
|
|
79
Net
Present Value to Current Shareholders Per Share ($)
Offering Amount ($000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue Price $
|
|
$250,000
|
|
|
$300,000
|
|
|
$350,000
|
|
|
$400,000
|
|
|
$450,000
|
|
|
$500,000
|
|
|
$0.15
|
|
$
|
0.36
|
|
|
$
|
0.30
|
|
|
$
|
0.26
|
|
|
$
|
0.22
|
|
|
$
|
0.20
|
|
|
$
|
0.18
|
|
$0.25
|
|
$
|
0.58
|
|
|
$
|
0.49
|
|
|
$
|
0.42
|
|
|
$
|
0.37
|
|
|
$
|
0.33
|
|
|
$
|
0.30
|
|
$0.35
|
|
$
|
0.80
|
|
|
$
|
0.67
|
|
|
$
|
0.58
|
|
|
$
|
0.51
|
|
|
$
|
0.46
|
|
|
$
|
0.41
|
|
$0.45
|
|
$
|
1.01
|
|
|
$
|
0.85
|
|
|
$
|
0.74
|
|
|
$
|
0.65
|
|
|
$
|
0.58
|
|
|
$
|
0.53
|
|
$0.55
|
|
$
|
1.21
|
|
|
$
|
1.03
|
|
|
$
|
0.89
|
|
|
$
|
0.79
|
|
|
$
|
0.70
|
|
|
$
|
0.64
|
|
$0.65
|
|
$
|
1.41
|
|
|
$
|
1.20
|
|
|
$
|
1.04
|
|
|
$
|
0.92
|
|
|
$
|
0.82
|
|
|
$
|
0.75
|
|
$0.75
|
|
$
|
1.60
|
|
|
$
|
1.36
|
|
|
$
|
1.19
|
|
|
$
|
1.05
|
|
|
$
|
0.94
|
|
|
$
|
0.85
|
|
$0.85
|
|
$
|
1.78
|
|
|
$
|
1.52
|
|
|
$
|
1.33
|
|
|
$
|
1.18
|
|
|
$
|
1.06
|
|
|
$
|
0.96
|
|
$0.95
|
|
$
|
1.96
|
|
|
$
|
1.68
|
|
|
$
|
1.47
|
|
|
$
|
1.30
|
|
|
$
|
1.17
|
|
|
$
|
1.06
|
|
Keefe Bruyette performed a sensitivity analysis which shows the
effects of different capital infusion amounts on Frontiers
capital levels. The table below reflects the previously
mentioned stress scenario and illustrates the effects of
different capital infusion amounts on the tangible common
equity, tier 1 and total risked based ratios.
Tang.
Common Equity/Tang. Assets (%)
Offering Amount ($000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$250,000
|
|
$300,000
|
|
$350,000
|
|
$400,000
|
|
$450,000
|
|
$500,000
|
|
6.35%
|
|
|
7.44
|
%
|
|
|
8.51
|
%
|
|
|
9.56
|
%
|
|
|
10.58
|
%
|
|
|
11.58
|
%
|
Tier 1 Risk Based Capital (%)
Offering Amount ($000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$250,000
|
|
$300,000
|
|
$350,000
|
|
$400,000
|
|
$450,000
|
|
$500,000
|
|
7.64%
|
|
|
8.93
|
%
|
|
|
10.17
|
%
|
|
|
11.38
|
%
|
|
|
12.56
|
%
|
|
|
13.71
|
%
|
Total
Risk Based Capital (%)
Offering
Amount ($000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$250,000
|
|
$300,000
|
|
$350,000
|
|
$400,000
|
|
$450,000
|
|
$500,000
|
|
8.89%
|
|
|
10.18
|
%
|
|
|
11.42
|
%
|
|
|
12.63
|
%
|
|
|
13.81
|
%
|
|
|
14.96
|
%
|
In connection with its analyses, Keefe Bruyette considered and
discussed with the Frontier Board how the present value analyses
would be affected by changes in the underlying assumptions,
Keefe Bruyette noted that the net present value analysis is a
widely used valuation methodology, but the results of such
methodology are highly dependent upon the numerous assumptions
that must be made, and the results thereof are not necessarily
indicative of actual values or future results.
The actual results achieved by the combined company may vary
from projected results and the variations may be material.
In connection with its analyses, Keefe Bruyette considered and
discussed with the Frontier Board how the pro forma analyses
would be affected by changes in the underlying assumptions,
including variations with respect to the growth rate of earnings
per share of each company. Keefe Bruyette noted that the actual
results achieved by the combined company may vary from projected
results and the variations may be material.
Frontier has agreed to pay Keefe Bruyette a fee of $500,000 in
connection with the rendering of this opinion, all of which was
paid upon Keefe Bruyettes delivery of the opinion.
Frontier has agreed to indemnify Keefe Bruyette and its
affiliates and their respective partners, directors, officers,
employees, agents, and controlling persons against certain
expenses and liabilities, including liabilities under securities
laws.
Keefe Bruyette may provide investment banking services to SPAH,
and receive compensation for, such services in the future,
including during the period prior to the closing of the merger.
In the ordinary course of its
80
business as a broker-dealer, Keefe Bruyette may purchase
securities from and sell securities to Frontier and SPAH and
their respective affiliates and may actively trade the debt
and/or
equity securities of Frontier and SPAH and their respective
affiliates for its own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position
in such securities.
Certain
Benefits of Directors and Officers of Frontier
When considering the recommendations of the Frontier Board, you
should be aware that some directors and officers have interests
in the merger proposal that differ from the interests of other
shareholders. The Frontier Board is aware of those interests and
considered them, among other matters, in approving the merger
agreement and the transactions contemplated thereby, including
the following:
|
|
|
|
|
Stock Ownership. The directors, executive
officers and principal shareholders of Frontier, together with
their affiliates, beneficially owned, as of the record date for
the special meeting, a total of 3,103,451 shares of
Frontier common stock, including 253,154 shares of
restricted stock that has or will be vested at the time of the
merger, representing 6.56% of the total outstanding shares of
Frontier common stock;
|
|
|
|
|
|
Change of Control Agreements. Frontier is a
party to change of control agreements with five of its current
executive officers, John J. Dickson, Carol E. Wheeler, R. James
Mathison, Robert W. Robinson and Lyle E. Ryan. These agreements
generally provide that in the event of a termination of
employment in connection with, or within 24 months after, a
change of control, for reasons other than cause, the executive
will receive a lump sum payment on the first day of the seventh
month after the termination of his or her employment in an
amount equal to two times the amount of his or her salary and
bonus for the twelve months prior to the effective date of the
change of control and will continue to be covered by applicable
medical and dental plans for 24 months following
termination of employment. In the event an executive, after
attaining age 60, voluntarily retires within 12 months
following a change of control, the executive will receive a lump
sum payment equal to one times the amount of his or her salary
and bonus, and will continue to be covered by applicable medical
and dental plans for 12 months following termination of
employment. The maximum aggregate amount of such payments (based
on two times their salaries and bonuses) due to
Messrs. Dickson, Mathison, Robinson and Ryan, and
Ms. Wheeler, upon such termination of their employment
would be $698,250, $419,250, $409,500, $518,020, and $368,250,
respectively.
|
In addition, the vesting of restricted stock awards granted
under Frontiers 2006 Stock Option Plan will accelerate
upon the effective time of the merger.
|
|
|
|
|
Insurance and Indemnification. SPAH has agreed
to use reasonable best efforts to maintain Frontiers
existing policies of directors and officers liability insurance
(or at SPAHs option, obtain comparable coverage under its
own insurance policies) for a period of six years after the
merger with respect to claims arising from facts or events which
occurred prior to the effective time of the merger, subject to a
maximum premium limit of $1,150,000. SPAH has also agreed to
continue to provide for the indemnification of the former and
current directors, officers, employees and agents of Frontier
for six years after the merger.
|
|
|
|
Certain Employee Matters. The merger agreement
contains certain agreements of the parties with respect to
various employee matters. Following the effective time of the
merger, SPAH will provide generally to the officers and
employees of Frontier employee benefits under employee benefit
and welfare plans, on terms and conditions which when taken as a
whole are comparable to or better than those currently provided
by Frontier to its similarly-situated employees. For purposes of
determining eligibility to participate in the vesting of
benefits and for all other purposes under the employee benefit
plans post-merger, the service of the Frontier employees prior
to the effective time of the merger will be treated as service
with SPAH participating in such employee benefit plan.
|
|
|
|
Stock Plans. Any Frontier shares issued with
respect to any Frontier options exercised prior to closing, and
restricted shares and stock awards, will be converted into the
merger consideration. All Frontier stock option and other
equity-based plans, agreements and awards, will be terminated
upon closing, as provided in the plans. Frontier will notify the
optionees and other employees of such termination prior to
closing. Following
|
81
|
|
|
|
|
the consummation of the merger, SPAH will adopt such stock
option or other equity plans for officers and employees of
Frontier as the SPAH Board of the combined company deems
appropriate.
|
|
|
|
|
|
Board. The SPAH Board following the merger
will be comprised of Warren G. Lichtenstein, who will serve as
Chairman of the SPAH Board, and four directors from Frontier,
comprised of Patrick M. Fahey, Lucy DeYoung, Mark O. Zenger and
David M. Cuthill, each of whom currently serve on the Frontier
Board. The Frontier Bank Board will consist of five
(5) directors, comprised of SPAHs designee, John
McNamara, to serve as Chairman of the Board, and four
(4) directors from Frontier, comprised of Patrick M. Fahey
and three (3) other existing members of the Frontier Bank
Board.
|
|
|
|
|
|
Officers. Following the merger, Mr. Fahey
will serve as the Chief Executive Officer of the combined
company, and the other officers and employees of Frontier are
expected to be retained in their current positions. Neither
Mr. Fahey nor any other employee will have an employment
contract with SPAH following the merger.
|
At and following the effective time of the merger, SPAH will
assume and honor certain Frontier severance and change of
control agreements that Frontier had with its officers and
directors on July 24, 2009.
Frontier
Dissenters Rights
In accordance with Chapter 13 of the Washington Business
Corporation Act (Chapter 23B.13 of the Revised Code of
Washington, the WBCA), Frontiers shareholders
have the right to dissent from the merger and to receive payment
in cash for the fair value of their Frontier common
stock.
Frontier shareholders electing to exercise dissenters
rights must comply with the provisions of Chapter 13 in
order to perfect their rights. Frontier and SPAH will require
strict compliance with the statutory procedures. The following
is intended as a brief summary of the material provisions of the
Washington statutory procedures required to be followed by a
Frontier shareholder in order to dissent from the merger and
perfect the shareholders dissenters rights. This
summary, however, is not a complete statement of all applicable
requirements and is qualified in its entirety by reference to
Chapter 13 of the WBCA, the full text of which is set forth
in Annex F.
A shareholder who wishes to assert dissenters rights must
(i) deliver to Frontier before the vote is taken by
Frontier shareholders notice of the shareholders intent to
demand payment for the shareholders shares if the merger
is effected, and (ii) not vote such shares in favor of the
merger. A shareholder wishing to deliver such notice should hand
deliver or mail such notice to Frontier at the following address
within the requisite time period:
Frontier
Financial Corporation
Attn: Corporate Secretary
332 S.W. Everett Mall Way
P.O. Box 2215
Everett, WA 98213
A shareholder who wishes to exercise dissenters rights
generally must dissent with respect to all the shares the
shareholder owns or over which the shareholder has power to
direct the vote. However, if a record shareholder is a nominee
for several beneficial shareholders some of whom wish to dissent
and some of whom do not, then the record holder may dissent with
respect to all the shares beneficially owned by any one person
by delivering to Frontier a notice of the name and address of
each person on whose behalf the record shareholder asserts
dissenters rights. A beneficial shareholder may assert
dissenters rights directly by submitting to Frontier the
record shareholders written consent and by dissenting with
respect to all the shares of which such shareholder is the
beneficial shareholder or over which such shareholder has power
to direct the vote.
A shareholder who does not deliver to Frontier prior to the vote
being taken by Frontier shareholders a notice of the
shareholders intent to demand payment for the fair
value of the shares will lose the right to exercise
dissenters rights. In addition, any shareholder electing
to exercise dissenters rights must either vote against the
merger agreement or abstain from voting. Submitting a properly
signed proxy card that is received prior to the vote at the
special meeting (and is not properly revoked) that does not
direct how the shares of Frontier common stock
82
represented by proxy are to be voted will constitute a vote in
favor of the merger agreement and a waiver of such
shareholders statutory dissenters rights.
If the merger is effected, SPAH as the surviving corporation
shall, within ten days after the effective date of the merger,
deliver a written notice to all shareholders who properly
perfected their dissenters rights in accordance with
Chapter 13 of the WBCA. Such notice will, among other
things: (i) state where the payment demand must be sent and
where and when certificates for certificated shares must be
deposited; (ii) inform holders of uncertificated shares to
what extent transfer of the shares will be restricted after the
payment demand is received; (iii) supply a form for
demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of
the proposed merger and requires that the person asserting
dissenters rights certify whether or not the person
acquired beneficial ownership of the shares before that date;
(iv) set a date by which SPAH must receive the payment
demand, which date will be between 30 and 60 days after
notice is delivered; and (v) be accompanied by a copy of
Chapter 23B.13 of the WBCA. A shareholder wishing to
exercise dissenters rights must timely file the payment
demand and deliver share certificates as required in the notice.
Failure to do so will cause such person to lose his or her
dissenters rights.
Within 30 days after the merger occurs or receipt of the
payment demand, whichever is later, SPAH shall pay each
dissenter with properly perfected dissenters rights
SPAHs estimate of the fair value of the
shareholders interest, plus accrued interest from the
effective date of the merger. The payment must be accompanied
by: (i) the corporations latest annual and quarterly
financial statements; (ii) an explanation of how SPAH
estimated the fair value of the shares; (iii) an
explanation of how the interest was calculated; (iv) a
statement of the dissenters right to demand payment under
Chapter 23B.13.280 of the WBCA; and (v) a copy of
Chapter 23B.13 of the WBCA. With respect to a dissenter who
did not beneficially own Frontier shares prior to the public
announcement of the merger, SPAH is required to make the payment
only after the dissenter has agreed to accept the payment in
full satisfaction of the dissenters demands. Fair
value means the value of the shares immediately before the
effective date of the merger, excluding any appreciation or
depreciation in anticipation of the merger unless such exclusion
would be inequitable. The rate of interest is generally required
to be the rate at which SPAH currently pays on its principal
bank loans.
A dissente