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EXHIBIT 2
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AGREEMENT AND PLAN OF MERGERS
BETWEEN
FRONTIER FINANCIAL CORPORATION
AND
FRONTIER BANK
AND
NORTHSTAR FINANCIAL CORPORATION
AND
NORTHSTAR BANK
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DATED AS OF SEPTEMBER 12, 2005
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TABLE OF CONTENTS
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RECITALS.................................................................
1
DEFINITIONS..............................................................
2
ARTICLE I.
MERGERS.......................................................
7
1.1 THE CORPORATE
MERGER........................................... 7
1.2 THE BANK
MERGER................................................ 8
1.3 DISSENTING
SHARES.............................................. 8
1.4 EFFECTIVE
DATE................................................. 9
ARTICLE II.
CONSIDERATION................................................
9
2.1 EXCHANGE
CONSIDERATION......................................... 9
2.2 FRACTIONAL
SHARES.............................................. 9
2.3 SHAREHOLDER RIGHTS;
STOCK TRANSFERS............................ 9
2.4 EXCHANGE
PROCEDURES............................................ 9
2.5 EXCHANGE RATIO/FRONTIER
AVERAGE DAILY CLOSING PRICE
ADJUSTMENTS.................................................
10
2.6
OPTIONS........................................................
10
ARTICLE III. ACTIONS PENDING
CONSUMMATION................................ 10
3.1 CAPITAL
STOCK..................................................
10
3.2 DIVIDENDS,
ETC................................................. 11
3.3 INDEBTEDNESS;
LIABILITIES; ETC................................. 11
3.4 OPERATING PROCEDURES;
CAPITAL EXPENDITURES; ETC................ 11
3.5 LIENS AND
ENCUMBRANCES......................................... 11
3.6 COMPENSATION;
EMPLOYMENT AGREEMENTS; ETC....................... 11
3.7 BENEFIT
PLANS..................................................
11
3.8 CONTINUANCE OF
BUSINESS........................................ 11
3.9
AMENDMENTS.....................................................
11
3.10
CLAIMS.........................................................
12
3.11
CONTRACTS......................................................
12
3.12
LOANS..........................................................
12
3.13 TRANSACTION
EXPENSES........................................... 12
ARTICLE IV. REPRESENTATIONS AND
WARRANTIES............................... 12
4.1 NORTHSTAR AND
NORTHSTAR BANK REPRESENTATIONS AND WARRANTIES.... 12
4.2 FRONTIER AND FRONTIER
BANK REPRESENTATIONS AND WARRANTIES...... 21
ARTICLE V.
COVENANTS.....................................................
25
5.1 BEST
EFFORTS...................................................
25
5.2 THE
PROXY......................................................
25
5.3 REGISTRATION STATEMENT
COMPLIANCE WITH SECURITIES LAWS......... 25
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5.4 REGISTRATION STATEMENT
EFFECTIVENESS........................... 25
5.5 PRESS
RELEASES.................................................
25
5.6 ACCESS;
INFORMATION............................................
26
5.7 REGISTRATION STATEMENT
PREPARATION; REGULATORY APPLICATIONS
PREPARATION.................................................
26
5.8 AFFILIATE
AGREEMENTS........................................... 26
5.9 CERTAIN POLICIES OF
NORTHSTAR AND NORTHSTAR BANK............... 26
5.10 STATE TAKEOVER
LAW............................................. 27
5.11 NO RIGHTS
TRIGGERED............................................ 27
5.12 SHARES
LISTED..................................................
27
5.13 REGULATORY
APPLICATIONS........................................ 27
5.14 REGULATORY
DIVESTITURES........................................ 27
5.15 CURRENT
INFORMATION............................................
27
5.16
INSURANCE......................................................
28
5.17 POST-MERGER
ACTIONS............................................ 28
5.18 CERTAIN
ACTIONS................................................
28
ARTICLE VI. CONDITIONS TO CONSUMMATION OF
THE MERGERS.................... 29
6.1 CONDITIONS TO EACH
PARTY'S OBLIGATIONS......................... 29
6.2 CONDITIONS TO
OBLIGATIONS OF FRONTIER.......................... 30
6.3 CONDITIONS TO
OBLIGATIONS OF NORTHSTAR AND NORTHSTAR BANK...... 31
ARTICLE VII.
TERMINATION.................................................
32
7.1
TERMINATION....................................................
32
7.2 EFFECT OF
TERMINATION.......................................... 35
ARTICLE VIII. OTHER
MATTERS.............................................. 36
8.1
SURVIVAL.......................................................
36
7.3
AMENDMENT......................................................
36
8.3 EXTENSION;
WAIVER.............................................. 36
8.4
COUNTERPARTS...................................................
36
8.5 GOVERNING
LAW.................................................. 36
8.6
EXPENSES.......................................................
36
8.7
CONFIDENTIALITY................................................
36
8.8
NOTICES........................................................
36
8.9 ENTIRE AGREEMENT; NO
THIRD PARTY BENEFICIARIES................. 37
8.10 BENEFIT
PLANS..................................................
37
8.11
HEADINGS.......................................................
37
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AGREEMENT AND PLAN OF MERGERS
AGREEMENT AND
PLAN OF MERGERS, dated as of the 12th day of September, 2005
(this "Agreement"), is between FRONTIER
FINANCIAL CORPORATION ("Frontier"),
FRONTIER BANK, NORTHSTAR FINANCIAL
CORPORATION ("NorthStar") and NORTHSTAR BANK.
RECITALS
(A) FRONTIER.
Frontier is a corporation duly organized and existing in good
standing under the laws of the State of
Washington, with its principal executive
offices located in Everett, Washington.
Frontier is a registered bank holding
company under the Bank Holding Company Act
of 1956, as amended. As of June 30,
2005, Frontier had capital of $273,551,560,
divided into common stock of
$128,241,650, comprehensive income of
$3,886,956, and retained earnings of
$141,422,954. As of the Execution Date,
Frontier has 100,000,000 authorized
shares of common stock, no par value per
share ("Frontier Common Stock"), of
which 24,409,918 shares of Frontier Common
Stock are issued and outstanding, and
has 10,000,000 authorized shares of
preferred stock, no par value per share, of
which no shares are issued and
outstanding.
(B) FRONTIER
BANK. Frontier Bank is a banking corporation duly organized
and existing in good standing under the
laws of the State of Washington. As of
the Execution Date, Frontier Bank has
83,029 authorized shares of common stock,
$37.50 par value per share ("Frontier Bank
Common Stock") (no other class of
capital stock being authorized), of which
72,600 shares are issued and
outstanding and owned by Frontier, the sole
shareholder of Frontier Bank.
(C) NORTHSTAR.
NorthStar is a corporation duly organized and existing in
good standing under the laws of the State
of Washington, with its principal
executive offices located in Seattle,
Washington. NorthStar is a registered bank
holding company under the Bank Holding
Company Act of 1956, as amended. As of
the Execution Date, NorthStar has 3,000,000
authorized shares of common stock,
no par value per share ("NorthStar Common
Stock"), of which 830,079 shares of
NorthStar Common Stock are issued and
outstanding, no other class of capital
stock being authorized. As of July 31,
2005, NorthStar had capital of
$14,127,531, divided into surplus of
$11,919,225, retained earnings of
$2,299,599, and accumulated other
comprehensive loss of $91,293. As of the
Execution Date, NorthStar has 175,854
shares of NorthStar Common Stock reserved
for issuance under Employee and Director
Stock Option Plans ("NorthStar
Options") pursuant to which options
covering 117,608 shares of NorthStar Common
Stock are outstanding.
(D) NORTHSTAR
BANK. NorthStar Bank is a banking corporation duly organized
and existing in good standing under the
laws of the State of Washington. As of
the Execution Date, NorthStar Bank has
3,000,000 authorized shares of common
stock, no par value per share ("NorthStar
Bank Common Stock") (no other class of
capital stock being authorized), of which
815,358 shares of NorthStar Bank
Common Stock are issued and outstanding.
All of the issued and outstanding
shares of NorthStar Bank Common Stock are
owned by NorthStar, the sole
shareholder of NorthStar Bank.
(E) VOTING AND
RELATED AGREEMENTS. As a condition and an inducement to
Frontier's and Frontier Bank's willingness
to enter into this Agreement, (i) the
directors and executive officers of
NorthStar Bank and NorthStar have entered
into agreements in the forms attached to
this Agreement as Exhibit A pursuant to
which, among other things, such individuals
have agreed to vote their shares of
NorthStar Common Stock in favor of approval
of the actions contemplated by this
Agreement at the Meeting (as defined
below), (ii) the outside directors of
NorthStar Bank and NorthStar have entered
into agreements in the forms attached
to this Agreement as Exhibit B, pursuant to
which,
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among other things, such individuals have
agreed to refrain from competing with
Frontier and Frontier Bank, and (iii) and
Ellen Sas and Duane Oord have entered
into agreements in the forms attached to
this Agreement as, respectively,
Exhibit E and Exhibit F, pursuant to which,
among other things, such individuals
have agreed to refrain from competing with
Frontier and Frontier Bank.
(F) RIGHTS, ETC.
Except as Previously Disclosed (as defined below) in
Schedule 4.1(C), or paragraphs (C) and (D)
of the Recitals to this Agreement, or
as authorized by this Agreement, there are
no shares of capital stock of
NorthStar or NorthStar Bank authorized and
reserved for issuance; neither
NorthStar nor NorthStar Bank has any Rights
(as defined below) issued or
outstanding; and neither NorthStar nor
NorthStar Bank has any commitment to
authorize, issue or sell any such shares or
any Rights. The term "Rights" means
securities or obligations convertible into
or exchangeable for, or giving any
Person any right to subscribe for or
acquire, or any options, calls or
commitments relating to, shares of capital
stock. There are no preemptive rights
with respect to NorthStar Common Stock.
(G) APPROVALS.
At meetings of the respective Boards of Directors of
NorthStar, NorthStar Bank, Frontier and
Frontier Bank, each such Board has
approved and authorized the execution of
this Agreement in counterparts.
In consideration
of their mutual promises and obligations, the Parties
further agree as follows:
DEFINITIONS
(A) DEFINITIONS.
Capitalized terms used in this Agreement have the
following meanings:
"Acquisition
Agreement" has the meaning assigned to such term in Section
7.1(G).
"Acquisition
Proposal" has the meaning assigned to such term in Section
5.18(D)(1).
"Adjustment
Triggers" has the meaning assigned to such term in Section
7.1(J)(i).
"Agreement"
means this Agreement and Plan of Mergers, together with all
Exhibits and Schedules annexed to, and
incorporated by specific reference, as a
part of this Agreement.
"Appraisal Laws"
has the meaning assigned to such term in Section 1.3.
"Asset
Classification" has the meaning assigned to such term in
Section
4.1(T).
"Bank Financial
Reports" has the meaning assigned to such term in Section
4.1(H).
"Bank Merger"
has the meaning assigned to such term in Section 1.2(A).
"Business Day"
means any day other than a Saturday, Sunday, or legal
holiday in the State of Washington.
"Code" has the
meaning assigned to such term in Section 4.1(Q)(2).
"Compensation
and Benefit Plans" has the meaning assigned to such term in
Section 4.1(Q)(1).
"Continuing
Corporation" has the meaning assigned to such term in Section
1.1(A).
"Corporate
Merger" has the meaning assigned to such term in Section
1.1(A).
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"Department"
means the Department of Financial Institutions of the State of
Washington.
"Derivatives
Contract" means an exchange-traded or over-the-counter swap,
forward, future, option, cap, floor or
collar financial contract or any other
contract that (1) is not included on the
balance sheet of the Holding Company
Financial Reports or the Frontier Financial
Reports, as the case may be, and (2)
is a derivative contract (including various
combinations thereof).
"Determination
Date" has the meaning assigned to such term in Section
7.1(J)(i).
"Determination
Period" has the meaning assigned to such term in Section
7.1(J)(i).
"Dissenting
Shares" means the shares of NorthStar Common Stock held by
those shareholders of NorthStar who have
timely and properly exercised their
dissenters' rights in accordance with the
Appraisal Laws.
"Effective Date"
has the meaning assigned to such term in Section 1.4.
"Eligible
NorthStar Common Stock" means shares of NorthStar Common Stock
other than Dissenting Shares.
"Environmental Law" means (1) any federal, state, and/or local
law,
statute, ordinance, rule, regulation, code,
license, permit, order, judgment,
decree, injunction or agreement with any
governmental entity, relating to (a)
the protection, preservation or restoration
of the environment (including air,
surface water, groundwater, drinking water
supply, surface land, subsurface
land, plant and animal life or any other
natural resource) or to human health or
safety, or (b) the exposure to, or the use,
storage, recycling, treatment,
generation, transportation, processing,
handling, labeling, production, release
or disposal of Hazardous Material, in each
case as amended and as now in effect,
including the Federal Comprehensive
Environmental Response, Compensation, and
Liability Act of 1980, the Superfund
Amendments and Reauthorization Act, the
Federal Water Pollution Control Act of
1972, the Federal Clean Air Act, the
Federal Clean Water Act, the Federal
Resource Conservation and Recovery Act of
1976 (including the Hazardous and Solid
Waste Amendments thereto), the Federal
Solid Waste Disposal and the Federal Toxic
Substances Control Act, and the
Federal Insecticide, Fungicide and
Rodenticide Act, the Federal Occupational
Safety and Health Act of 1970, and (2) any
common law or equitable doctrine
(including injunctive relief and tort
doctrines such as negligence, nuisance,
trespass and strict liability) that may
impose liability or obligations for
injuries or damages due to, or threatened
as a result of, the presence of or
exposure to any Hazardous Material.
"ERISA" has the
meaning assigned to such term in Section 4.1(Q)(2).
"ERISA
Affiliate" has the meaning assigned to such term in Section
4.1(Q)(3).
"ERISA Plans"
has the meaning assigned to such term in Section 4.1(Q)(2).
"Exchange Act"
means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations
promulgated under such statute.
"Exchange Agent"
has the meaning assigned to such term in Section 2.4.
"Exchange Ratio"
means 1.754 shares of Frontier Common Stock exchanged for
each share of NorthStar Common Stock
outstanding; provided, however, that if the
Adjustment Triggers in Section
3
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7.1(J) occur, the Exchange Ratio may, in
Frontier's sole discretion, be
increased as set forth in Section
7.1(J)(ii); and provided, further, that the
Exchange Ratio will be adjusted
proportionately for any stock split or other
change in the number of outstanding shares
of Frontier Common Stock pursuant to
Section 2.5.
"Execution Date"
means the last date on which this Agreement is executed by
each of the Parties hereto.
"Failure to
Recommend Shareholder Approval" has the meaning assigned to
such term in Section 7.2(B).
"FDIC" means the
Federal Deposit Insurance Corporation.
"Financial
Reports" has the meaning assigned to such term in Section
4.1(H).
"Federal Reserve
Board" means the Board of Governors of the Federal Reserve
System.
"Final Average
Price" has the meaning assigned to such term in Section
7.1(J)(i).
"Final Index
Price" has the meaning assigned to such term in Section
7.1(J)(i).
"Final Price"
has the meaning assigned to such term in Section 7.1(J)(i).
"Frontier" has
the meaning assigned to such term in the first paragraph of
this Agreement.
"Frontier
Average Closing Price" means the average closing price of
Frontier Common Stock (rounded to four
decimals) as reported on the website of
www.nasdaq.com for the twenty trading day
period through and including the third
trading day immediately preceding the
Effective Date.
"Frontier Bank
Common Stock" has the meaning assigned to such term in
paragraph (B) of the Recitals.
"Frontier Common
Stock" has the meaning assigned to such term in paragraph
(A) of the Recitals.
"Frontier
Financial Reports" has the meaning assigned to such term in
Section 4.2(H).
"Frontier
Option" has the meaning assigned to such term in Section 2.6.
"Frontier
Transaction" means: (1) a merger, consolidation or similar
transaction involving Frontier, where
Frontier is not the corporation surviving
such transaction or where a change of
control of Frontier is otherwise effected,
(2) the disposition, by sale, lease,
exchange or otherwise, of assets or
deposits of Frontier or any of its
significant subsidiaries representing in
either case 25% or more of the consolidated
assets or deposits of Frontier and
its subsidiaries, or (3) the issuance, sale
or other disposition (including by
way of merger, consolidation, share
exchange or any similar transaction) of
securities representing 25% or more of the
voting power of Frontier or any of
its significant subsidiaries other than the
issuance of Frontier Common Stock
upon the exercise of outstanding options or
the conversion of outstanding
convertible securities of Frontier.
"GAAP" means
generally accepted accounting principles consistently applied.
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"Hazardous
Material" means any substance presently listed, defined,
designated or classified as hazardous,
toxic, radioactive or dangerous under any
Environmental Law, whether by type or
quantity, including any oil or other
petroleum product, toxic waste, pollutant,
contaminant, hazardous substance,
toxic substance, hazardous waste or
petroleum or any derivative or by-product
thereof, radon, radioactive material,
asbestos, asbestos containing material,
urea formaldehyde foam insulation, lead and
polychlorinated biphenyl.
"Holding Company
Financial Reports" has the meaning assigned to such term
in Section 4.1(H).
"Index Group"
has the meaning assigned to such term in Section 7.1(J)(i).
"Initial Index
Price" has the meaning assigned to such term in Section
7.1(J)(i).
"Loan/Fiduciary
Property" means any property owned or controlled by
NorthStar or any of its Subsidiaries or in
which NorthStar or any of its
Subsidiaries holds a security or other
interest, and, where required by the
context, includes any such property where
NorthStar or any of its Subsidiaries
constitutes the owner or operator of such
property, but only with respect to
such property.
"Material
Adverse Effect" means, with respect to any Party to this
Agreement, an event, occurrence or
circumstance that (a) has or is reasonably
likely to have a material adverse effect on
the financial condition, results of
operations, business or prospects of such
Party and its Subsidiaries, taken as a
whole, or (b) would materially impair such
Party's ability to perform its
obligations under this Agreement or the
consummation of any of the transactions
contemplated by this Agreement.
"Meeting" has
the meaning assigned to such term in Section 5.2.
"Mergers" means
the merger of NorthStar with and into Frontier, and
NorthStar Bank with and into Frontier
Bank.
"Multiemployer
Plans" has the meaning assigned to such term in Section
4.1(Q)(2).
"NASDAQ" means
the National Association of Securities Dealers Automated
Quotations system.
"NorthStar Bank"
has the meaning assigned to such term in the first
paragraph of this Agreement.
"NorthStar Bank
Common Stock" has the meaning assigned to such term in
paragraph (D) of the Recitals.
"NorthStar
Common Stock" has the meaning assigned to such term in
paragraph
(C) of the Recitals.
"NorthStar
Option" has the meaning assigned to such term in paragraph (C)
of the Recitals.
"Participation
Facility" means any facility in which NorthStar or any of
its Subsidiaries participates in the
management and, where required by the
context, includes the owner or operator of
such facility.
"Party" means a
party to this Agreement.
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"Pension Plan"
has the meaning assigned to such term in Section 4.1(Q)(2).
"Person" means
any individual, corporation (including any non-profit
corporation), general or limited
partnership, limited liability company, joint
venture, estate, trust, association,
organization, labor union, governmental
body, or other entity.
"Previously
Disclosed" means information provided by a Party in a Schedule
that is delivered by that Party to the
other Party contemporaneously with the
execution of this Agreement.
"Proxy
Statement" has the meaning assigned to such term in Section
5.2.
"Registration
Statement" has the meaning assigned to such term in Section
5.2.
"Regulatory
Authorities" means federal or state governmental agencies,
authorities or departments charged with the
supervision or regulation of
depository institutions or engaged in the
insurance of deposits.
"Representatives" has the meaning assigned to such term in Section
5.18(A).
"RCW" means the
Revised Code of Washington, as amended.
"Rights" has the
meaning assigned to such term in paragraph (F) of the
Recitals to this Agreement.
"Sandler
O'Neill" has the meaning assigned to such term in Section
4.1(P).
"Securities Act"
means the Securities Act of 1933, as amended, together
with the rules and regulations promulgated
under such statute.
"SEC" means the
Securities and Exchange Commission.
"Subsidiary"
means, with respect to any entity, each partnership, limited
liability company, or corporation the
majority of the outstanding partnership
interests, membership interests, capital
stock or voting power of which is (or
upon the exercise of all outstanding
warrants, options and other rights would
be) owned, directly or indirectly, at the
time in question by such entity.
"Superior
Proposal" has the meaning assigned to such term in Section
5.18(D)(2).
"Tax Returns"
has the meaning assigned to such term in Section 4.1(AA).
"Taxes" means
federal, state, local or foreign income, gross receipts,
windfall profits, severance, property,
production, sales, use, license, excise,
franchise, employment, withholding or
similar taxes imposed on the income,
properties or operations of the respective
Party or its Subsidiaries, together
with any interest, additions, or penalties
with respect thereto and any interest
in respect of such additions or
penalties.
"Termination Fee
Amount" has the meaning assigned to such term in Section
7.2(B).
"Third Party"
means a person within the meaning of Sections 3(a)(9) and
13(d)(3) of the Exchange Act, excluding:
(1) NorthStar or any Subsidiary of
NorthStar, and (2) Frontier or any
Subsidiary of Frontier.
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(B) GENERAL
INTERPRETATION. Except as otherwise expressly provided in this
Agreement or unless the context clearly
requires otherwise, the terms defined in
this Agreement include the plural as well
as the singular; the words "hereof,"
"herein," "hereunder," "in this Agreement"
and other words of similar import
refer to this Agreement as a whole and not
to any particular Article, Section or
other subdivision; and references in this
Agreement to Articles, Sections,
Schedules, and Exhibits refer to Articles
and Sections of and Schedules and
Exhibits to this Agreement. Unless
otherwise stated, references to Subsections
refer to the Subsections of the Section in
which the reference appears. The
table of contents and headings contained in
this Agreement are for reference
purposes only and shall not affect in any
way the meaning or interpretation of
this Agreement. Whenever the words
"include," "includes" or "including" are used
in this Agreement, they shall be deemed to
be followed by the words "without
limitation." The words "stockholder" or
"stockholders" shall be deemed to
include the words "shareholder" or
"shareholders" and vice versa, and the word
"stock" shall be deemed to include the word
"share" or "shares" and vice versa.
All pronouns used in this Agreement include
the masculine, feminine and neuter
gender, as the context requires. All
accounting terms used in this Agreement
that are not expressly defined in this
Agreement have the respective meanings
given to them in accordance with GAAP. All
Parties will be considered drafters
of this Agreement and accordingly any
ambiguity shall not be construed against
any particular Party.
ARTICLE I. MERGERS
1.1 THE
CORPORATE MERGER. Subject to the provisions of this Agreement,
on
the Effective Date:
(A) CONTINUING
CORPORATION. NorthStar shall be merged with and into
Frontier pursuant to the terms and
conditions set forth herein (the "Corporate
Merger"). Upon consummation of the
Corporate Merger, the separate existence of
NorthStar shall cease and Frontier shall
continue as the continuing corporation
(the "Continuing Corporation").
(B) ARTICLES, BYLAWS, OFFICERS AND DIRECTORS. The Articles of
Incorporation and Bylaws of Frontier, in
effect immediately prior to the
Effective Date, shall become the Articles
of Incorporation and Bylaws of the
Continuing Corporation. The directors and
officers of Frontier in office
immediately prior to the Corporate Merger
becoming effective shall be the
directors and officers of the Continuing
Corporation, together with such
additional directors and officers as may
thereafter be elected, who shall hold
office until such time as their successors
are elected and qualified.
(C) RIGHTS, ETC. The Continuing Corporation shall thereupon and
thereafter possess all of the rights,
privileges, immunities and franchises of a
public as well as of a private nature of
each of the institutions so merged; and
all property, real, personal and mixed, and
all debts due on whatever account,
and all and every other interest, of or
belonging to or due to each of the
institutions so merged, shall be deemed to
be vested in the Continuing
Corporation without further act or deed;
and the title to any real estate or any
interest therein, vested in each of such
institutions, shall not revert or be in
any way impaired by reason of the Corporate
Merger.
(D) EFFECTS OF THE CORPORATE MERGER. The separate existence of
NorthStar shall cease, and NorthStar shall
be merged with and into Frontier
which, as the Continuing Corporation, shall
thereupon and thereafter possess all
of the assets, rights, privileges,
appointments, powers, licenses, permits and
franchises of the two merged corporations,
whether of a public or a private
nature, and shall be subject to all of the
liabilities, restrictions,
disabilities and duties of both Frontier
and NorthStar.
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(E) TRANSFER OF ASSETS. All rights, assets, licenses, permits,
franchises and interests of Frontier and
NorthStar in and to every type of
property, whether real, personal, or mixed,
whether tangible or intangible,
shall be deemed to be vested in Frontier as
the Continuing Corporation by virtue
of the Corporate Merger becoming effective
and without any deed or other
instrument or act of transfer
whatsoever.
(F) ASSUMPTION OF LIABILITIES. The Continuing Corporation shall
become
and be liable for all debts, liabilities,
obligations and contracts of Frontier
as well as those of NorthStar, whether the
same shall be matured or un-matured;
whether accrued, absolute, contingent or
otherwise; and whether or not reflected
or reserved against in the balance sheets,
other financial statements, books of
account or records of Frontier or
NorthStar.
1.2 THE BANK
MERGER. As soon as practicable following the Effective Date:
(A) CONTINUING BANK. NorthStar Bank shall be merged into Frontier
Bank
(the "Bank Merger"). Upon consummation of
the Bank Merger, the separate
existence of NorthStar Bank shall cease and
Frontier Bank shall survive as the
Continuing Bank.
(B) ARTICLES, BYLAWS, DIRECTORS, OFFICERS. The Articles and Bylaws
of
the Continuing Bank shall be those of
Frontier Bank, as in effect immediately
prior to the Bank Merger becoming
effective. The directors and officers of
Frontier Bank in office immediately prior
to the Bank Merger becoming effective
shall be the directors and officers of the
Continuing Bank, together with such
additional directors and officers as may
thereafter be elected, who shall hold
office until such time as their successors
are elected and qualified.
(C) EFFECTS OF THE BANK MERGER. The separate existence of
NorthStar
Bank shall cease, and NorthStar Bank shall
be merged with and into Frontier Bank
which, as the Continuing Bank, shall
thereupon and thereafter possess all of the
assets, rights, privileges, appointments,
powers, licenses, permits and
franchises of the two merged banks, whether
of a public or a private nature, and
shall be subject to all of the liabilities,
restrictions, disabilities and
duties of both Frontier Bank and NorthStar
Bank.
(D) RIGHTS, ETC. The Continuing Bank shall thereupon and
thereafter
possess all of the rights, privileges,
immunities and franchises, of a public as
well as of a private nature, of each of the
institutions so merged; and all
property, real, personal and mixed, and all
debts due on whatever account, and
all and every other interest, of or
belonging to or due to each of the
institutions so merged, shall be deemed to
be vested in the Continuing Bank
without further act or deed; and the title
to any real estate or any interest
therein, vested in each of such
institutions, shall not revert or be in any way
impaired by reason of the Bank Merger.
(E) TRANSFER OF ASSETS. All rights, assets, licenses, permits,
franchises and interests of Frontier Bank
and NorthStar Bank in and to every
type of property, whether real, personal,
or mixed, whether tangible or
intangible, shall be deemed to be vested in
Frontier Bank as the Continuing Bank
by virtue of the Bank Merger becoming
effective and without any deed or other
instrument or act of transfer
whatsoever.
1.3 DISSENTING
SHARES. Notwithstanding anything to the contrary in this
Agreement, each Dissenting Share whose
holder, as of the Effective Date of the
Corporate Merger, has not effectively
withdrawn or lost his dissenters' rights
under RCW 23B.13 (the "Appraisal Laws")
shall not be converted into or represent
a right to receive Frontier Common Stock,
but the holder of such
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Dissenting Share shall be entitled only to
such rights as are granted by the
Appraisal Laws, unless and until such
holder shall have failed to perfect or
shall have effectively withdrawn or lost
the right to payment under the
Appraisal Laws, in which case each such
share shall be deemed to have been
converted at the Effective Date into the
right to receive Frontier Common Stock
without any interest thereon. Each holder
of Dissenting Shares who becomes
entitled to payment for his NorthStar
Common Stock pursuant to the provisions of
the Appraisal Laws shall receive payment
for such Dissenting Shares from
Frontier (but only after the amount thereof
shall have been agreed upon or
finally determined pursuant to the
Appraisal Laws).
1.4 EFFECTIVE
DATE. Subject to the terms and conditions of this Agreement,
the closing of the Mergers will take place
at 10:00 a.m. on the first day which
is at least one Business Day after the
satisfaction or waiver (subject to
applicable law) of the latest to occur of
the conditions set forth in ARTICLE
VI. (other than those conditions which
relate to actions to be taken at the
closing) (the "Effective Date"), at the
offices of Keller Rohrback L.L.P.,
unless another time, date or place is
agreed to in writing by the parties
hereto. If the Corporate Merger is not
consummated in accordance with this
Agreement on or prior to March 31, 2006,
NorthStar or Frontier may terminate
this Agreement in accordance with ARTICLE
VII. On the Effective Date,
Certificates of Merger will be issued by
the Secretary of State, Corporations
Division, and the Department of Financial
Institutions of the State of
Washington in accordance with applicable
law.
ARTICLE II. CONSIDERATION
2.1 EXCHANGE
CONSIDERATION. Subject to the provisions of this Agreement, on
the Effective Date:
(A) OUTSTANDING FRONTIER COMMON STOCK. The shares of Frontier
Common
Stock issued and outstanding immediately
prior to the Effective Date shall, on
and after the Effective Date, remain as
issued and outstanding shares of
Frontier Common Stock.
(B) OUTSTANDING NORTHSTAR COMMON STOCK. Each share of Eligible
NorthStar Common Stock issued and
outstanding immediately prior to the Effective
Date shall, by virtue of the Merger,
automatically and without any action on the
part of the holder of such share, be
converted into the right to receive the
number of shares of Frontier Common Stock
determined pursuant to the Exchange
Ratio.
2.2 FRACTIONAL
SHARES. Notwithstanding any other provision of this
Agreement, no fractional shares of Frontier
Common Stock and no certificates,
scrip or other evidence of ownership of
fractional shares will be issued in the
Merger. Frontier shall pay to each holder
of NorthStar Common Stock who would
otherwise be entitled to a fractional share
an amount in cash determined by
multiplying such fraction by the Frontier
Average Closing Price.
2.3 SHAREHOLDER
RIGHTS; STOCK TRANSFERS. On the Effective Date, holders of
NorthStar Common Stock shall cease to be,
and shall have no rights as,
shareholders of NorthStar, other than to
receive the consideration provided
under this ARTICLE II. After the Effective
Date, there shall be no transfers on
the stock transfer books of NorthStar or
the Continuing Corporation of the
shares of NorthStar Common Stock that were
issued and outstanding immediately
prior to the Effective Date.
2.4 EXCHANGE
PROCEDURES. As promptly as practicable after the Effective
Date, Frontier shall send or cause to be
sent to each former shareholder of
NorthStar of record immediately prior to
the Effective Date transmittal
materials for use in exchanging such
shareholder's certificates for
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NorthStar Common Stock for the
consideration set forth in this ARTICLE II. The
certificates representing the shares of
Frontier Common Stock into which shares
of such shareholder's NorthStar Common
Stock are converted on the Effective
Date, any fractional share checks that such
shareholder shall be entitled to
receive, and any dividends paid on such
shares of Frontier Common Stock for
which the record date for determination of
shareholders entitled to such
dividends is on or after the Effective
Date, will be delivered to such
shareholder only upon delivery to
Frontier's exchange agent (the "Exchange
Agent") of the certificates representing
all of such shares of NorthStar Common
Stock (or indemnity satisfactory to
Frontier and the Exchange Agent, in their
judgment, if any of such certificates are
lost, stolen or destroyed). No
interest will be paid on any such
fractional share checks or dividends to which
the holder of such shares shall be entitled
to receive upon such delivery.
Certificates surrendered for exchange by
any person constituting an "affiliate"
of NorthStar for purposes of Rule 145 of
the Securities Act shall not be
exchanged for certificates representing
Frontier Common Stock until Frontier has
received a written agreement from such
person as specified in Section 5.8.
2.5 EXCHANGE
RATIO/FRONTIER AVERAGE CLOSING PRICE ADJUSTMENTS. In the event
Frontier changes the number of shares of
Frontier Common Stock issued and
outstanding prior to the Effective Date as
a result of a stock split, stock
dividend, recapitalization or similar
transaction with respect to the
outstanding Frontier Common Stock and the
record date therefor shall be prior to
the Effective Date, the Exchange Ratio
shall be adjusted proportionately.
2.6 OPTIONS. On
the Effective Date, by virtue of the Corporate Merger, each
outstanding and unexercised NorthStar
Option to purchase shares of NorthStar
Common Stock shall, without any action on
the part of the holder, be converted
into and become an option to purchase
Frontier Common Stock ("Frontier Option")
on the same terms and conditions as are in
effect with respect to NorthStar
Options immediately prior to the Effective
Date, except that (A) each such
Frontier Option may be exercised solely for
shares of Frontier Common Stock, (B)
the number of shares of Frontier Common
Stock subject to such Frontier Option
shall be equal to the number of shares of
NorthStar Common Stock subject to such
NorthStar Options immediately prior to the
Effective Date multiplied by the
Exchange Ratio, the product being rounded,
if necessary, up or down to the
nearest whole share, and (C) the per share
exercise price under each such
Frontier Option shall be adjusted by
dividing the per share exercise price of
NorthStar Options by the Exchange Ratio,
and rounding up or down to the nearest
cent. The number of shares of NorthStar
Common Stock that are issuable upon
exercise of NorthStar Options as of the
Execution Date are Previously Disclosed
in Schedule 2.6. Within fifteen (15) days
following the Effective Date, Frontier
will prepare and file with the SEC a
Registration Statement on Form S-8 covering
shares of Frontier Common Stock to be
issued upon the exercise of stock options
assumed by Frontier pursuant to this
Section 2.6.
ARTICLE III. ACTIONS PENDING CONSUMMATION
Unless otherwise
agreed to in writing by Frontier or Frontier Bank,
NorthStar and NorthStar Bank shall each
conduct its and each of its
Subsidiaries' business in the ordinary and
usual course consistent with past
practice and shall use its best efforts to
maintain and preserve its and each of
its Subsidiaries' business organization,
employees and advantageous business
relationships and retain the services of
its and each of its Subsidiaries'
officers and key employees identified by
Frontier Bank, and neither NorthStar
nor NorthStar Bank, without the prior
written consent of Frontier, will (or
cause or allow any of it Subsidiaries
to):
3.1 CAPITAL
STOCK. Except for the exercise of outstanding NorthStar
Options, or as Previously Disclosed in
Schedule 4.1(C), issue, sell or otherwise
permit to become outstanding any additional
shares of capital stock of
NorthStar, NorthStar Bank or any of their
Subsidiaries, or any Rights
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with respect thereto, or enter into any
agreement with respect to the foregoing,
or permit any additional shares of
NorthStar Common Stock to become subject to
grants of NorthStar Options, stock
appreciation rights or similar stock-based
employee compensation rights.
3.2 DIVIDENDS,
ETC. Make, declare or pay any dividend (other than as
necessary to pay NorthStar's general
operating expenses, including the
transaction fee expenses referred to in
Section 3.13 as well as distributions on
NorthStar's Subsidiaries' trust preferred
stock) on or in respect of, or declare
or make any distribution on, or directly or
indirectly combine, redeem,
reclassify, purchase or otherwise acquire,
any shares of its capital stock or,
other than as permitted in or contemplated
by this Agreement, authorize the
creation or issuance of, or issue, any
additional shares of its capital stock or
any Rights with respect thereto.
3.3
INDEBTEDNESS; LIABILITIES; ETC. Other than in the ordinary course
of
business consistent with past practice,
incur any indebtedness for borrowed
money, assume, guarantee, endorse or
otherwise as an accommodation become
responsible or liable for the obligations
of any other individual, corporation
or other entity.
3.4 OPERATING
PROCEDURES; CAPITAL EXPENDITURES; ETC. Except as may be
directed by any regulatory agency, (A)
change its lending, investment, liability
management or other material banking
policies in any material respect, except
such changes as are in accordance and in an
effort to comply with Section 5.9,
or (B) commit to incur any further capital
expenditures beyond those Previously
Disclosed in Schedule 3.4 other than in the
ordinary course of business and not
exceeding $50,000 individually.
3.5 LIENS AND
ENCUMBRANCES. Impose, or suffer the imposition, on any shares
of stock of any of its Subsidiaries, any
lien, charge or encumbrance, or permit
any such lien, charge or encumbrance to
exist.
3.6
COMPENSATION; EMPLOYMENT AGREEMENTS; ETC. Except as Previously
Disclosed in Schedule 3.6, enter into or
amend any employment, severance or
similar agreement or arrangement with any
of its directors, officers or
employees, or grant any salary or wage
increase, amend the terms of any
NorthStar Option or increase any employee
benefit (including incentive or bonus
payments), except normal individual
increases in regular compensation to
employees in the ordinary course of
business consistent with past practice.
3.7 BENEFIT
PLANS. Except as Previously Disclosed in Schedule 3.7, enter
into or modify (except as may be required
by applicable law) any pension,
retirement, stock option, stock purchase,
savings, profit sharing, deferred
compensation, consulting, bonus, group
insurance or other employee benefit,
incentive or welfare contract, plan or
arrangement, or any trust agreement
related thereto, in respect of any of its
directors, officers or other
employees, including taking any action that
accelerates the vesting or exercise
of any benefits payable thereunder.
3.8 CONTINUANCE
OF BUSINESS. Dispose of or discontinue any portion of its
assets, business or properties, that is
material to NorthStar and its
Subsidiaries taken as a whole, or merge or
consolidate with, or acquire all or
any portion of, the business or property of
any other entity that is material to
NorthStar and its Subsidiaries taken as a
whole (except foreclosures or
acquisitions by NorthStar Bank in its
fiduciary capacity, in each case in the
ordinary course of business consistent with
past practice).
3.9 AMENDMENTS. Amend
its Articles of Incorporation or Bylaws.
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3.10 CLAIMS.
Settle any claim, litigation, action or proceeding involving
any liability for material money damages or
restrictions upon the operations of
NorthStar or any of its Subsidiaries.
3.11 CONTRACTS.
Except as previously disclosed on Schedule 3.11, enter
into, renew, terminate or make any change
in any material contract, agreement or
lease (excluding agreements and loans
permitted under Section 3.12), except in
the ordinary course of business consistent
with past practice with respect to
contracts, agreements and leases that are
terminable by it without penalty on no
more than 60 days prior written notice.
3.12 LOANS.
Extend credit or account for loans and leases other than in
accordance with existing lending policies
and accounting practices, or make any
new loan, a loan extension or renewal in a
principal amount which exceeds
$500,000, other than in accordance with the
loan reporting process agreed to by
the Parties.
3.13 TRANSACTION
EXPENSES. Incur expenses in connection with the
transactions contemplated by this Agreement
that exceed $2.2-million in the
aggregate. This figure includes severance
benefits but does not include the
investment banking fee payable to Sandler
O'Neill at closing (estimated at
$550,000) and costs or expenses that may be
incurred in conjunction with the
closing of the Mergers, such as conforming
to accounting adjustments in
coordination with closing or the Mergers or
conversion and integration costs
incurred with respect to any data systems
conversion.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
4.1 NORTHSTAR
AND NORTHSTAR BANK REPRESENTATIONS AND WARRANTIES. NorthStar
and NorthStar Bank each hereby represent
and warrant to Frontier and Frontier
Bank as follows:
(A) RECITALS. The facts set forth in the Recitals of this
Agreement
with respect to NorthStar and its
Subsidiaries are true and correct.
(B)
ORGANIZATION, STANDING AND AUTHORITY. Each of NorthStar and its
Subsidiaries is duly qualified to do
business and is in good standing under the
laws of its state of incorporation or
organization and in such foreign
jurisdictions where the failure to be duly
qualified, individually or in the
aggregate, is reasonably likely to have a
Material Adverse Effect on it. Each of
NorthStar and its Subsidiaries has in
effect all federal state, local and
foreign governmental authorizations
necessary for it to own or lease its
properties and assets and to carry on its
business as it is now conducted, the
absence of which, individually or in the
aggregate, is reasonably likely to have
a Material Adverse Effect on it. NorthStar
Bank is an "insured depository
institution" as defined in the Federal
Deposit Insurance Act, as amended, and
applicable regulations under such statute,
and its deposits are insured by the
Bank Insurance Fund of the FDIC.
(C) SHARES. The outstanding shares of NorthStar and its
Subsidiaries'
capital stock are validly issued and
outstanding, fully paid and non-assessable,
and subject to no preemptive rights. Except
as Previously Disclosed in Schedule
4.1(C) and paragraphs (C) or (D) of the
Recitals, there are no shares of capital
stock or other equity securities of
NorthStar or its Subsidiaries outstanding
and no outstanding Rights with respect
thereto.
(D) NORTHSTAR SUBSIDIARIES. NorthStar has Previously Disclosed
in
Schedule 4.1(D) a list of all of its
Subsidiaries. Each of its Subsidiaries that
is a bank is an "insured depository
institution" as defined in the Federal
Deposit Insurance Act, as amended, and
applicable regulations under such
statute. No equity securities of any of its
Subsidiaries are or may become
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required to be issued (other than to
NorthStar or one of its Subsidiaries) by
reason of any Rights with respect thereto.
There are no contracts, commitments,
understandings or arrangements by which any
of its Subsidiaries is or may be
bound to sell or otherwise issue any shares
of such Subsidiary's capital stock,
and except as Previously Disclosed in
Schedule 4.1(D), there are no contracts,
commitments, understandings or arrangements
relating to the rights of NorthStar
or its Subsidiaries, as applicable, to vote
or to dispose of such shares. Except
as Previously Disclosed in Schedule 4.1(D),
all of the shares of capital stock
of each of its Subsidiaries held by
NorthStar or one of its Subsidiaries are
fully paid and non-assessable and are owned
by NorthStar or one of its
Subsidiaries free and clear of any charge,
mortgage, pledge, security interest,
restriction, claim, lien or encumbrance.
Each of its Subsidiaries is in good
standing under the laws of the jurisdiction
in which it is incorporated or
organized, and is duly qualified to do
business and in good standing in the
jurisdictions where the failure to be duly
qualified is reasonably likely,
individually or in the aggregate, to have a
Material Adverse Effect on it.
Except as Previously Disclosed in Schedule
4.1(D), NorthStar does not own
beneficially, directly or indirectly, any
shares of any equity securities or
similar interests of any corporation, bank,
partnership, joint venture, business
trust, association or other organization.
In the case of representations by
NorthStar, the deposits of its Subsidiaries
that are banks are insured by the
Bank Insurance Fund of the FDIC.
(E) CORPORATE POWER. Each of NorthStar and its Subsidiaries has
the
corporate power and authority to carry on
its business as it is now being
conducted and to own all its material
properties and assets.
(F) CORPORATE AUTHORITY. Subject to any necessary receipt of
approval
by its shareholders referred to in Section
6.1, this Agreement has been
authorized by all necessary corporate
action of NorthStar and each of its
Subsidiaries that is a Party, and each such
agreement is a valid and binding
agreement of NorthStar and such
Subsidiaries, enforceable against NorthStar and
such Subsidiaries in accordance with its
terms, subject to bankruptcy,
insolvency and other laws of general
applicability relating to or affecting
creditors' rights and to general equity
principles.
(G) NO DEFAULTS. Subject to the approval by its shareholders
referred
to in Section 6.1, the required regulatory
approvals referred to in Section 6.1,
and the required filings under federal and
state securities laws, and except as
Previously Disclosed in Schedule 4.1(G),
the execution, delivery and performance
of this Agreement and the consummation by
NorthStar and each of its Subsidiaries
that is a Party to the transactions
contemplated by this Agreement do not and
will not (1) constitute a breach or
violation of, or a default under, any law,
rule or regulation or any judgment, decree,
order, governmental permit or
license, or agreement, indenture or
instrument of NorthStar or of any of its
Subsidiaries or to which NorthStar or any
of its Subsidiaries or its or their
properties is subject or bound, which
breach, violation or default is reasonably
likely, individually or in the aggregate,
to have a Material Adverse Effect on
it, (2) constitute a breach or violation
of, or a default under, the Articles of
Incorporation, Charter or Bylaws of it or
any of its Subsidiaries, or (3)
require any consent or approval under any
such law, rule, regulation, judgment,
decree, order, governmental permit or
license or the consent or approval of any
other party to any such agreement,
indenture or instrument, other than any such
consent or approval that, if not obtained,
would not be reasonably likely,
individually or in the aggregate, to have a
Material Adverse Effect on it.
(H) FINANCIAL REPORTS. Except as Previously Disclosed in
Schedule
4.1(H), (1) as to NorthStar, its
consolidated balance sheet as of June 30, 2005
and the related statements of income,
changes in shareholders' equity and cash
flows for the fiscal year ended December
31, 2004 (collectively, the "Holding
Company Financial Reports"), and (2) as to
each of NorthStar's Subsidiaries that
is a bank, its call report for the fiscal
year ended December 31, 2004, and all
other financial reports filed or to be
filed subsequent to December 31, 2004, in
the form filed with the FDIC and the
Department
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(in each case, the "Bank Financial Reports"
and together with the Holding
Company Financial Reports, the "Financial
Reports") did not and will not contain
any untrue statement of a material fact or
omit to state a material fact
required to be stated therein or necessary
to make the statements made therein,
in light of the circumstances under which
they were made, not misleading; and
each of the balance sheets in or
incorporated by reference into the Financial
Reports (including the related notes and
schedules thereto) fairly presents and
will fairly present the financial position
of the entity or entities to which it
relates as of its date, and each of the
statements of income and changes in
shareholders' equity and cash flows or
equivalent statements in the Bank
Financial Reports (including any related
notes and schedules thereto) fairly
presents and will fairly present the
results of operations, changes in
shareholders' equity and cash flows, as the
case may be, of the entity or
entities to which it relates for the
periods set forth therein, in each case in
accordance with GAAP during the periods
involved, except in each case as may be
noted therein, subject to normal and
recurring year-end audit adjustments in the
case of unaudited statements.
(I) ABSENCE OF UNDISCLOSED LIABILITIES. Except as Previously
Disclosed
on Schedule 4.1(I), neither NorthStar nor
any of its Subsidiaries has any
obligation or liability (contingent or
otherwise) that, individually or in the
aggregate, is reasonably likely to have a
Material Adverse Effect on it, except
(1) as reflected in its Holding Company
Financial Reports prior to the Execution
Date, and (2) for commitments and
obligations made, or liabilities incurred, in
the ordinary course of business consistent
with past practice since December 31,
2004. Except as Previously Disclosed on
Schedule 4.1(I), since December 31,
2004, neither NorthStar nor any of its
Subsidiaries has incurred or paid any
obligation or liability (including any
obligation or liability incurred in
connection with any acquisitions in which
any form of direct financial
assistance of the federal government or any
agency thereof has been provided to
any Subsidiary) that, individually or in
the aggregate, is reasonably likely to
have a Material Adverse Effect on it.
(J) NO EVENTS. Except as Previously Disclosed on Schedule
4.1(J),
since December 31, 2004, no event has
occurred that, individually or in the
aggregate, is reasonably likely to have a
Material Adverse Effect on it.
(K) PROPERTIES. Except as reserved against in its Holding
Company
Financial Reports, NorthStar and each of
its Subsidiaries have good and
marketable title, free and clear of all
liens, encumbrances, charges, defaults,
or equities of any character, to all of the
properties and assets, tangible and
intangible, reflected in its Holding
Company Financial Reports as being owned by
NorthStar or its Subsidiaries as of the
dates thereof other than those that,
individually or in the aggregate, are not
reasonably likely to have a Material
Adverse Effect on it, except those sold or
otherwise disposed of in the ordinary
course of business. All buildings and all
material fixtures, equipment, and
other property and assets that are held
under leases or subleases by NorthStar
or any of its Subsidiaries are held under
valid leases or subleases enforceable
in accordance with their respective terms,
other than any such exceptions to
validity or enforceability that,
individually or in the aggregate, are not
reasonably likely to have a Material
Adverse Effect on it.
(L) LITIGATION; REGULATORY ACTION. Except as Previously Disclosed
in
Schedule 4.1(L), no litigation, proceeding
or controversy before any court or
governmental agency is pending that,
individually or in the aggregate, is
reasonably likely to have a Material
Adverse Effect on NorthStar or any of its
Subsidiaries or that alleges claims under
any fair lending law or other law
relating to discrimination, including the
Equal Credit Opportunity Act, the Fair
Housing Act, the Community Reinvestment Act
and the Home Mortgage Disclosure
Act, and, to the best of its knowledge, no
such litigation, proceeding or
controversy has been threatened; and except
as Previously Disclosed in Schedule
4.1(L), neither NorthStar nor any of its
Subsidiaries or any of its or their
material properties or
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their officers, directors or controlling
persons is a party to or is subject to
any order, decree, agreement, memorandum of
understanding or similar arrangement
with, or a commitment letter or similar
submission to, any Regulatory Authority,
and neither NorthStar nor any of its
Subsidiaries has been advised by any of
such Regulatory Authorities that such
authority is contemplating issuing or
requesting (or is considering the
appropriateness of issuing or requesting) any
such order, decree, agreement, memorandum
or understanding, commitment letter or
similar submission.
(M) COMPLIANCE WITH LAWS. Except as Previously Disclosed in
Schedule
4.1(M), each of NorthStar and its
Subsidiaries:
(1) Has all permits, licenses, authorizations, orders and
approvals of,
and has made all filings, applications and registrations
with, all
Regulatory Authorities that are required in order to permit it
to
own its
businesses presently conducted and that are material to the
business of it
and its Subsidiaries taken as a whole; all such permits,
licenses,
certificates of authority, orders and approvals are in full
force
and effect and,
to its best knowledge, no suspension or cancellation of any
of them is
threatened; and all such filings, applications and
registrations
are current;
(2) Has received no notification or communication from any
Regulatory
Authority or the staff thereof (a) asserting that NorthStar or
any of its
Subsidiaries is not in compliance with any of the statutes,
regulations or
ordinances which such Regulatory Authority enforces, which,
as a result of
such noncompliance in any such instance, individually or in
the aggregate,
is reasonably likely to have a Material Adverse Effect on
NorthStar or its
Subsidiaries, (b) threatening to revoke any license,
franchise,
permit or governmental authorization, which revocation,
individually or
in the aggregate, is reasonably likely to have a Material
Adverse Effect
on NorthStar or its Subsidiaries, or (c) requiring any of
NorthStar or its
Subsidiaries (or any of its or their officers, directors
or controlling
persons) to enter into a cease and desist order, agreement
or memorandum of
understanding (or requiring the board of directors thereof
to adopt any
resolution or policy);
(3) Is not required to give prior notice to any federal banking
or thrift agency
of the proposed addition of an individual to its board of
directors or the
employment of an individual as a senior executive; and
(4) Is in compliance in all material respects with all fair
lending laws or
other laws relating to discrimination, including the Equal
Credit
Opportunity Act, the Fair Housing Act, the Community
Reinvestment
Act and the Home
Mortgage Disclosure Act.
(N) MATERIAL CONTRACTS. Except as Previously Disclosed in
Schedule
4.1(N), none of NorthStar or its
Subsidiaries, nor any of their respective
assets, businesses or operations, is a
party to, or is bound or affected by, or
receives benefits under, any material
contract or agreement or amendment thereto
(excluding extensions of credit made in the
ordinary course of business).
Neither NorthStar nor any of its
Subsidiaries is in default under any contract,
agreement, commitment, arrangement, lease,
insurance policy or other instrument
to which it is a party, by which its
respective assets, business or operations
may be bound or affected or under which it
or any of its respective assets,
business or operations receives benefits,
which default, individually or in the
aggregate, is reasonably likely to have a
Material Adverse Effect on NorthStar
or its Subsidiaries, and there has not
occurred any event that, with the lapse
of time or the giving of notice or both,
would constitute such a default. Except
as Previously Disclosed in Schedule 4.1(N),
neither NorthStar nor any of its
Subsidiaries is subject to or bound by any
contract containing covenants that
limit the ability of NorthStar or any of
its Subsidiaries to
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compete in any line of business or with any
Person or that involve any
restriction of geographical area in which,
or method by which, NorthStar or any
of its Subsidiaries may carry on its
business (other than as may be required by
law or any applicable Regulatory
Authority).
(O) REPORTS. Since December 31, 2002, each of NorthStar and its
Subsidiaries has filed all reports and
statements, together with any amendments
required to be made with respect thereto,
that it was required to file with (1)
the Department, (2) the FDIC, (3) the
Federal Reserve Board, and (4) any other
Regulatory Authorities having jurisdiction
with respect to NorthStar and its
Subsidiaries. As of their respective dates
(and without giving effect to any
amendments or modifications filed after the
Execution Date with respect to
reports and documents filed before the
Execution Date), each of such reports and
documents, including the financial
statements, exhibits and schedules thereto,
complied in all material respects with all
of the statutes, rules and
regulations enforced or promulgated by the
Regulatory Authority with which they
were filed and did not contain any untrue
statement of a material fact or omit
to state any material fact necessary in
order to make the statements made
therein, in light of the circumstances
under which they were made, not
misleading.
(P) BROKERS OR FINDERS. No agent, broker, investment banker,
financial
advisor or other firm or person is or will
be entitled to any broker's or
finder's fee or any other similar
commission or fee in connection with any of
the transactions contemplated by this
Agreement, based upon arrangements made by
or on behalf of NorthStar or NorthStar
Bank, except that NorthStar has engaged,
and will pay a fee or commission to,
Sandler O'Neill & Partners, L.P. ("Sandler
O'Neill") in accordance with the terms of a
letter agreement between Sandler
O'Neill and NorthStar, a true and correct
copy of which has been previously made
available by NorthStar to Frontier.
(Q) EMPLOYEE BENEFIT PLANS.
(1) Schedule 4.1(Q)(1) contains a complete list of all bonus,
deferred
compensation, pension, retirement, profit-sharing, thrift
savings,
employee stock
ownership, stock bonus, stock purchase restricted stock and
stock option
plans, all employment or severance contracts, all medical,
dental, health
and life insurance plans, all other employee benefit plans,
contracts or
arrangements and any applicable "change of control" or similar
provisions in
any plan, contract or arrangement maintained or contributed
to by NorthStar
or any of its Subsidiaries for the benefit of employees,
former
employees, directors, former directors or their beneficiaries
(the
"Compensation
and Benefit Plans"). True and complete copies of all
Compensation and
Benefit Plans of NorthStar and its Subsidiaries, including
any trust
instruments and/or insurance contracts, if any, forming a part
thereof, and all
amendments thereto, have been supplied to the other
Parties.
(2) All "employee benefit plans" within the meaning of Section
3(3) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), other
than "multiemployer plans" within the meaning of Section
3(37) of ERISA
("Multiemployer Plans"), covering employees or former
employees of
NorthStar and its Subsidiaries (the "ERISA Plans"), to the
extent subject
to ERISA, are in substantial compliance with ERISA. Except
as Previously
Disclosed in Schedule 4.1(Q)(2) each ERISA Plan which is an
"employee
pension benefit plan" within the meaning of Section 3(2) of
ERISA
("Pension Plan")
and which is intended to be qualified under Section 401(a)
of the Internal
Revenue Code of 1986 (as amended, the "Code") has received
a favorable
determination letter from the Internal Revenue Service, and it
is not aware of
any circumstances reasonably likely to result in the
revocation or
denial of any such favorable determination letter or the
inability to
receive such a favorable determination letter. There is no
material pending
or, to its knowledge, threatened litigation relating to
the ERISA
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Plans. Neither
NorthStar nor any of its Subsidiaries has engaged in a
transaction with
respect to any ERISA Plan that could subject NorthStar or
any of its
Subsidiaries to a tax or penalty imposed by either Section 4975
of the Code or
Section 502(i) of ERISA in an amount which would be
material.
(3) No liability under Subtitle C or D of Title IV of ERISA has
been or is
expected to be incurred by NorthStar or any of its Subsidiaries
with respect to
any ongoing, frozen or terminated "single-employer plan,"
within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by
any of them, or the single-employer plan of any entity which
is considered
one employer with NorthStar under Section 4001(a)(15) of
ERISA or Section
414 of the Code (an "ERISA Affiliate"). Neither NorthStar
nor any of its
Subsidiaries presently contributes to a Multiemployer Plan,
nor have they
contributed to such a plan within the past five calendar
years. No notice
of a "reportable event," within the meaning of Section
4043 of ERISA
for which the 30-day reporting requirement has not been
waived, has been
required to be filed for any Pension Plan or by any ERISA
Affiliate within the past 12-month
period.
(4) All contributions required to be made under the terms of
any
ERISA Plan have
been timely made. Neither any Pension Plan nor any
single-employer
plan of an ERISA Affiliate has an "accumulated funding
deficiency"(whether or not waived) within the meaning of Section
412 of the
Code or Section
302 of ERISA. Neither NorthStar nor any of its Subsidiaries
has provided, or
is required to provide, security to any Pension Plan or to
any
single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of
the Code.
(5) Under each Pension Plan which is a single-employer plan, as
of the last day
of the most recent plan year, the actuarially determined
present value of
all "benefit liabilities," within the meaning of Section
4001(a)(16) of
ERISA (as determined on the basis of the actuarial
assumptions
contained in the plan's most recent actuarial valuation) did
not exceed the
then current value of the assets of such plan, and there has
been no material
change in the financial condition of such plan since the
last day of the
most recent plan year.
(6) Neither NorthStar nor any of its Subsidiaries has any
obligations for
retiree health and life benefits under any plan, except as
set forth in
Schedule 4.1(Q)(6). There are no restrictions on the rights of
NorthStar or any
of its Subsidiaries to amend or terminate any such plan
without
incurring any liability thereunder.
(7) Except as Previously Disclosed in Schedule 4.1(Q)(7),
neither
the execution
and delivery of this Agreement nor the consummation of the
transactions
contemplated by this Agreement will (a) result in any payment
(including
severance, unemployment compensation, golden parachute or
otherwise)
becoming due to any director or any employee of NorthStar or
any
of its
Subsidiaries under any Compensation and Benefit Plan or
otherwise
from NorthStar
or any of its Subsidiaries, (b) increase any benefits
otherwise
payable under any Compensation and Benefit Plan, or (c) result
in
any acceleration
of the time of payment or vesting of any such benefit.
(R) NO KNOWLEDGE. NorthStar and its Subsidiaries know of no reason
why
the regulatory approvals referred to in
Section 6.1 should not be obtained.
(S) LABOR AGREEMENTS. Neither NorthStar nor any of its Subsidiaries
is
a party to or is bound by any collective
bargaining agreement, contract or other
agreement or
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understanding with a labor union or labor
organization, nor is NorthStar or any
of its Subsidiaries the subject of a
proceeding asserting that it or any such
Subsidiary has committed an unfair labor
practice (within the meaning of the
National Labor Relations Act) or seeking to
compel it or such Subsidiary to
bargain with any labor organization as to
wages and conditions of employment,
nor is there any strike or other labor
dispute involving it or any of its
Subsidiaries pending or, to the best of its
knowledge, threatened, nor is it
aware of any activity involving its or any
of the Subsidiaries' employees
seeking to certify a collective bargaining
unit or engaging in any other
organization activity.
(T) ASSET CLASSIFICATION. NorthStar and its Subsidiaries have
Previously Disclosed in Schedule 4.1(T) a
list, accurate and complete in all
material respects, of the aggregate amounts
of loans, extensions of credit or
other assets of NorthStar and its
Subsidiaries that have been classified by it
as of August 15, 2005 (the "Asset
Classification"); and no amounts of loans,
extensions of credit or other assets that
have been classified as of August 15,
2005 by any regulatory examiner as "Other
Loans Specially Mentioned,"
"Substandard," "Doubtful" "Loss," or words
of similar import are excluded from
the amounts disclosed in the Asset
Classification, other than amounts of loans,
extensions of credit or other assets that
were charged off by NorthStar or any
Subsidiary prior to June 30, 2005.
(U) ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for
possible
loan losses shown on the consolidated
balance sheets in the December 31, 2004
Holding Company Financial Reports of
NorthStar was, and the allowance for
possible loan losses to be shown on
subsequent Holding Company Financial Reports
of NorthStar was and will be, adequate in
the opinion of the Board of Directors
of NorthStar to provide for possible
losses, net of recoveries relating to loans
previously charged off, on loans
outstanding (including accrued interest
receivable) as of the date thereof.
(V) INSURANCE. Each of NorthStar and its Subsidiaries has taken
all
requisite action (including the making of
claims and the giving of notices)
pursuant to its directors' and officers'
liability insurance policy or policies
in order to preserve all rights thereunder
with respect to all matters that are
known to NorthStar, except for such matters
that, individually or in the
aggregate, are not reasonably likely to
have a Material Adverse Effect on
NorthStar or its Subsidiaries. Set forth in
Schedule 4.1(V) is a list of all
insurance policies maintained by or for the
benefit of NorthStar or its
Subsidiaries or their respective directors,
officers, employees or agents.
(W) AFFILIATES. Except as Previously Disclosed in Schedule 4.1(W),
to
the best of NorthStar's knowledge, there is
no person who, as of the Execution
Date, may be deemed to be an "affiliate" of
NorthStar as that term is used in
Rule 145 under the Securities Act.
(X) STATE TAKEOVER LAWS, ARTICLES OF INCORPORATION. NorthStar and
its
Subsidiaries have taken all necessary
action to exempt this Agreement and the
transactions contemplated by this Agreement
from (1) any applicable state
takeover laws, including, but not limited
to, RCW Ch. 23B.19, as amended, and
(2) any takeover-related provisions of
NorthStar's and its Subsidiaries'
Articles of Incorporation.
(Y) NO FURTHER ACTION. NorthStar and its Subsidiaries have taken
all
action so that the entering into of this
Agreement and the consummation of the
transactions contemplated by this
Agreement, or any other action or combination
of actions, or any other transactions,
contemplated by this Agreement do not and
will not (1) require a vote of shareholders
(other than as set forth in Section
6.1), or (2) result in the grant of any
rights to any Person under the Articles
of Incorporation, Charter or Bylaws of
NorthStar or any of its Subsidiaries or
under any agreement to which NorthStar or
any such
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Subsidiaries is a party, or (iii) restrict
or impair in any way the ability of
the other Parties to exercise the rights
granted under this Agreement.
(Z) ENVIRONMENTAL MATTERS.
(1) To NorthStar's knowledge, it and each of its Subsidiaries,
the
Participation Facilities and the Loan/Fiduciary Properties are,
and
have been, in
compliance with all Environmental Laws, except for instances
of noncompliance
that are not reasonably likely, individually or in the
aggregate, to
have a Material Adverse Effect on NorthStar or its
Subsidiaries.
(2) There is no proceeding pending or, to NorthStar's
knowledge,
threatened
before any court or governmental agency or board in which
NorthStar or any
of its Subsidiaries or any Participation Facility has
been, or with
respect to threatened proceedings, reasonably would be
expected to be,
named as a defendant or potentially responsible party (a)
for alleged
noncompliance (including by any predecessor) with any
Environmental
Law, or (b) relating to the release or threatened release
into the
environment of any Hazardous Material, whether or not occurring
at
or on a site
owned, leased or operated by NorthStar or any of its
Subsidiaries or
any Participation Facility, except for such proceedings
pending or
threatened that are not reasonably likely, individually or in
the aggregate,
to have a Material Adverse Effect on NorthStar or its
Subsidiaries or
have been Previously Disclosed in Schedule 4.1(Z)(2).
(3) There is no proceeding pending or, to NorthStar's
knowledge,
threatened
before any court, governmental agency or board or other forum
in
which any
Loan/Fiduciary Property (or NorthStar or any of its
Subsidiaries
in respect of
any Loan/Fiduciary Property) has been, or with respect to
threatened
proceedings, reasonably would be expected to be, named as a
defendant or
potentially responsible party (a) for alleged noncompliance
(including by
any predecessor) with any Environmental Law, or (b) relating
to the release
or threatened release into the environment of any Hazardous
Material,
whether or not occurring at or on a Loan/Fiduciary Property,
except for such
proceedings pending or threatened that are not reasonably
likely,
individually or in the aggregate, to have a Material Adverse
Effect
on NorthStar or
have been Previously Disclosed in Schedule 4.1(Z)(3).
(4) To NorthStar's knowledge, there is no reasonable basis for
any proceeding
of a type described in subparagraph (2) or (3) of this
paragraph (Z), except as has been
Previously Disclosed in Schedule
4.1(Z)(4).
(5) To NorthStar's knowledge, during the period of (a)
ownership
or operation by
NorthStar or any of its Subsidiaries of any of their
respective
current properties, (b) participation in the management of any
Participation
Facility by NorthStar or any of its Subsidiaries, or (c)
holding of a
security or other interest in a Loan/Fiduciary Property by
NorthStar or any
of its Subsidiaries, there have been no releases of
Hazardous
Material in, on, under or affecting any such property,
Participation
Facility or Loan/Fiduciary Property, except for such releases
that are not
reasonably likely, individually or in the aggregate, to have a
Material Adverse
Effect on NorthStar or its Subsidiaries or have been
Previously
Disclosed in Schedule 4.1(Z)(5).
(6) To NorthStar's knowledge, prior to the period of (a)
ownership or
operation by NorthStar or any of its Subsidiaries of any of
their respective
current properties, (b) participation in the management of
any
Participation Facility by NorthStar or any of its
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Subsidiaries, or
(c) holding of a security or other interest in a
Loan/Fiduciary
Property by NorthStar or any of its Subsidiaries, there were
no releases of
Hazardous Material in, on, under or affecting any such
property,
Participation Facility or Loan/Fiduciary Property, except for
such releases
that are not reasonably likely, individually or in the
aggregate, to
have a Material Adverse Effect on NorthStar or its
Subsidiaries or
have been Previously Disclosed in Schedule 4.1(Z)(6).
(AA) TAX REPORTS. Except as Previously Disclosed in Schedule
4.1(AA),
(1) all reports and returns with respect to
Taxes that are required to be filed
by or with respect to NorthStar or its
Subsidiaries, including consolidated
federal income tax returns of NorthStar and
its Subsidiaries (collectively, the
"Tax Returns"), have been duly filed, or
requests for extensions have been
timely filed and have not expired, for
periods ended on or prior to the most
recent fiscal year-end, except to the
extent all such failures to file, taken
together, are not reasonably likely to have
a Material Adverse Effect on
NorthStar or its Subsidiaries, and such Tax
Returns were true, complete and
accurate in all material respects, (2) all
Taxes shown to be due on the Tax
Returns have been paid in full, (3) the Tax
Returns have been examined by the
Internal Revenue Service or the appropriate
state, local or foreign taxing
authority, or the period for assessment of
the Taxes in respect of which such
Tax Returns were required to be filed has
expired, (4) all Taxes due with
respect to completed and settled
examinations have been paid in full, (5) no
issues have been raised by the relevant
taxing authority in connection with the
examination of any of the Tax Returns which
are reasonably likely, individually
or in the aggregate, to result in a
determination that would have a Material
Adverse Effect on NorthStar or its
Subsidiaries, except as reserved against in
the Holding Company Financial Reports of
NorthStar, and (6) no waivers of
statutes of limitations (excluding such
statutes that relate to years under
examination by the Internal Revenue
Service) have been given by or requested
with respect to any Taxes of NorthStar or
its Subsidiaries.
(BB) ACCURACY OF INFORMATION. The statements with respect to
NorthStar
and its Subsidiaries contained in this
Agreement, the Schedules and any other
written documents executed and delivered by
or on behalf of NorthStar or any
other Party pursuant to the terms of or
relating to this Agreement are true and
correct in all material respects, and such
statements and documents do not omit
any material fact necessary to make the
statements contained therein, in light
of the circumstances under which they were
made, not misleading.
(CC) DERIVATIVES CONTRACTS. None of NorthStar or its Subsidiaries
is a
party to or has agreed to enter into a
Derivatives Contract or owns securities
that are referred to as "structured notes"
except for those Derivatives
Contracts and structured notes Previously
Disclosed in Schedule 4.1(CC).
Schedule 4.1(CC) includes a list of any
assets of NorthStar or its Subsidiaries
that are pledged as security for each such
Derivatives Contract.
(DD) ACCOUNTING CONTROLS. Each of NorthStar and its Subsidiaries
has
devised and maintained systems of internal
accounting controls sufficient to
provide reasonable assurances that (1) all
material transactions are executed in
accordance with management's general or
specific authorization, (2) all material
transactions are recorded as necessary to
permit the preparation of financial
statements in conformity with GAAP, and to
maintain proper accountability for
items, (3) access to the material property
and assets of NorthStar and its
Subsidiaries is permitted only in
accordance with management's general or
specific authorization, and (4) the
recorded accountability for items is
compared with the actual levels at
reasonable intervals and appropriate action
is taken with respect to any
differences.
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(EE) FAIRNESS OPINION. NorthStar has received an opinion from
Sandler
O'Neill dated as of the Execution Date to
the effect that as of the date thereof
and based upon and subject to the matters
set forth therein, the Exchange Ratio
is fair from a financial point of view to
the shareholders of NorthStar.
(FF) REORGANIZATION. As of the Execution Date, to NorthStar's
knowledge, there is no reason to believe
that the Mergers will fail to qualify
as a reorganization under Section 368(a) of
the Code.
(GG) COMMITMENTS AND CONTRACTS. Neither NorthStar nor any of
its
Subsidiaries is a party or subject to any
of the following (whether written or
oral, express or implied):
(1) except as Previously Disclosed in Schedule 4.1(GG)(1), any
employment
contract or understanding (including any understandings or
obligations with
respect to severance or termination pay liabilities or
fringe benefits)
with any present or former officer, director or employee
(other than
those which are terminable at will by NorthStar or any such
Subsidiary
without any obligation on the part of NorthStar or any such
Subsidiary to
make any payment in connection with such termination);
(2) except as Previously Disclosed in Schedule 4.1(GG)(2), any
real or personal
property lease with annual rental payments aggregating
$10,000 or more;
or
(3) except as Previously Disclosed in Schedule 4.1(GG)(3), any
material
contract with any affiliate.
4.2 FRONTIER AND
FRONTIER BANK REPRESENTATIONS AND WARRANTIES. Frontier and
Frontier Bank each hereby represent and
warrant to NorthStar and NorthStar Bank
as follows:
(A) RECITALS. The facts set forth in the Recitals of this
Agreement
with respect to Frontier and Frontier Bank
are true and correct.
(B) ORGANIZATION, STANDING AND AUTHORITY. Each of Frontier and
Frontier Bank is duly qualified to do
business and is in good standing in the
States of the United States and foreign
jurisdictions where the failure to be
duly qualified, individually or in the
aggregate, is reasonably likely to have a
Material Adverse Effect on it. Each of
Frontier and its Subsidiaries has in
effect all federal state, local, and
foreign governmental authorizations
necessary for it to own or lease its
properties and assets and to carry on its
business as it is now conducted, the
absence of which, individually or in the
aggregate, is reasonably likely to have a
Material Adverse Effect on Frontier.
(C) SHARES. The outstanding shares of Frontier's capital stock
are
validly issued and outstanding, fully paid
and non-assessable, and subject to no
preemptive rights. Except as Previously
Disclosed in Schedule 4.2(C), there are
no shares of capital stock or other equity
securities of it or its Subsidiaries
outstan
