The consolidated financial statements incorporated in this joint proxy statement/prospectus by reference from Columbias Annual Report on
Form 10-K for the year ended December 31, 2016, and the effectiveness of Columbias internal control over financial reporting have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated
in their reports, which are incorporated herein by reference. Such consolidated financial statements have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of Pacific Continental Corporation and subsidiaries as of December 31, 2016 and 2015 and for each
of the three years in the period ended December 31, 2016, appearing in Pacific Continentals Annual Report on Form 10-K for the year ended December 31, 2016, and the effectiveness of Pacific Continentals internal control
over financial reporting as of December 31, 2016, have been audited by Moss Adams LLP, an independent registered public accounting firm, as stated in their report thereon, and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing.
Columbia held its 2016 annual meeting of shareholders on April 27, 2016. Any shareholder nominations or proposals for other business
intended to be presented at Columbias next annual meeting must be submitted to Columbia as set forth below.
In order for a
shareholder proposal to be raised from the floor during next years annual meeting, or for a shareholder to nominate a person or persons as a director, written notice must be received by Columbia no earlier than the 150th day and no later than
the 120th day prior to the first anniversary of the 2016 annual meeting (meaning no earlier than November 28, 2016, and no later than December 28, 2016), and should contain such information as required under the Columbia bylaws. However,
if the date of the 2017 annual meeting is more than 30 days before or more than 60 days after the anniversary of the 2016 annual meeting, notice must be delivered no earlier than the 150th day and no later than the 120th day prior to the date of the
2017 annual meeting or, if the first public announcement of the 2017 annual meeting date is less than 100 days before the meeting date, notice must be delivered no later than the 10th day following the date of Columbias first public
announcement of the 2017 annual meeting date.
To be in proper form, a shareholders notice must include the specified information
concerning the proposal or director nominee as described by the Columbia bylaws. Columbia will not consider any proposal or nomination that is not timely or otherwise does not meet the requirements of the Columbia bylaws or the SEC for submitting a
proposal or nomination.
Notice of intention to present proposals at the 2017 annual meeting, or correspondence to obtain a copy of the
detailed procedures regarding notice requirements for proposals or director nominations, should be directed to Columbias Corporate Secretary, 1301 A Street, Tacoma, Washington 98402.
Pacific Continental intends to hold an annual meeting of shareholders in 2017 only if the mergers are not completed. In the event that the
mergers are not completed in 2017, or at all, any shareholder nominations or proposals intended to be presented at Pacific Continentals next annual meeting must be submitted a reasonable time prior to any such meeting to be considered timely.
If the mergers are completed, Pacific Continental shareholders will become shareholders of Columbia. Any shareholder nominations or
proposals which a shareholder wishes to have included in Columbias proxy statement and form of proxy relating to its 2017 annual meeting of shareholders must be received by the date, and must otherwise comply with the requirements, described
above in Columbia Annual Meeting Shareholder Proposals in this joint proxy statement/prospectus.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows Columbia and Pacific Continental to incorporate by reference information into this joint proxy
statement/prospectus, which means that the companies can disclose important information to you by referring you to another document filed separately by them with the SEC. The information incorporated by reference is deemed to be part of this joint
proxy statement/prospectus, except for any information superseded by any information in this joint proxy statement/prospectus.
This
document incorporates by reference the following documents that have previously been filed with the SEC by Columbia:
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Annual Report on Form 10-K, for the year ended December 31, 2016; and
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Current Reports on Form 8-K filed January 10, 2017, January 27, 2017 and February 23, 2017 (other than the portions of those documents deemed not to be filed).
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This document also incorporates by reference the following documents that have previously been filed with the SEC by Pacific Continental:
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Annual Report on Form 10-K for the year ended December 31, 2016; and
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Current Reports on Form 8-K filed January 10, 2017 (other than the portions of those documents deemed not to be filed).
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In addition, Columbia and Pacific Continental are incorporating by reference any documents they may file under Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this document and prior to the date of the respective special meetings of the Columbia shareholders and the Pacific Continental shareholders;
provided, however
, that Columbia and
Pacific Continental are not incorporating by reference any information furnished (but not filed), except as otherwise specified herein.
Both Columbia and Pacific Continental file annual, quarterly and special reports, proxy statements and other business and financial
information with the SEC. You may obtain the information incorporated by reference and any other materials Columbia or Pacific Continental file with the SEC without charge by following the instructions in the section entitled Where You Can
Find More Information in the forepart of this document.
Neither Columbia nor Pacific Continental has authorized anyone to give
any information or make any representation about the mergers or its companies that is different from, or in addition to, that contained in this document or in any of the materials that have been incorporated into this document. Therefore, if anyone
does give you information of this sort, you should not rely on it. If you are in a jurisdiction where offers to exchange or sell, or solicitations of offers to exchange or purchase, the securities offered by this document or the solicitation of
proxies is unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this document does not extend to you. The information contained in this document speaks only as of the date of this
document unless the information specifically indicates that another date applies.
-149-
Appendix A
AGREEMENT AND PLAN OF MERGER
by and between
COLUMBIA BANKING SYSTEM, INC.
AND
PACIFIC
CONTINENTAL CORPORATION
Dated as of January 9, 2017
TABLE OF CONTENTS
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Page
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ARTICLE I MERGERS
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A-2
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1.1
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The First Merger
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A-2
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1.2
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Effective Time
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A-2
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1.3
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Effects of the First Merger
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A-2
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1.4
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Conversion of Stock
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A-2
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1.5
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Company Restricted Stock Units
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A-4
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1.6
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Company Restricted Stock Awards
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A-4
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1.7
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Company Stock Options
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A-5
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1.8
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Company SARs
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A-5
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1.9
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Company Actions
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A-5
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1.10
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Articles of Incorporation and Bylaws
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A-5
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1.11
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Merger Sub Board Directors and Officers
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A-5
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1.12
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Parent Board of Directors and Officers
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A-6
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1.13
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Subsequent Merger
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A-6
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1.14
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Bank Merger
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A-6
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1.15
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Change in Structure
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A-6
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ARTICLE II DELIVERY OF MERGER CONSIDERATION
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A-6
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2.1
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Delivery of Merger Consideration
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A-6
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2.2
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Exchange Procedures
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A-6
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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A-9
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3.1
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Corporate Organization
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A-9
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3.2
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Capitalization
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A-10
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3.3
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Authority; No Violation
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A-11
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3.4
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Consents and Approvals
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A-12
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3.5
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Reports
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A-12
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3.6
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Financial Statements
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A-13
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3.7
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Brokers Fees
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A-14
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3.8
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Absence of Changes
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A-14
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3.9
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Compliance with Applicable Law
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A-14
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3.10
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State Takeover Laws
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A-15
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3.11
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Employee Benefit Plans
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A-15
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3.12
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Approvals
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A-18
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3.13
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Opinion
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A-18
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3.14
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Company Information
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A-18
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3.15
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Legal Proceedings
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A-18
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3.16
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Material Contracts
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A-18
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3.17
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Environmental Matters
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A-20
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3.18
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Taxes
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A-20
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3.19
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Reorganization
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A-22
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3.20
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Intellectual Property
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A-22
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3.21
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Properties
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A-23
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3.22
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Insurance
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A-24
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3.23
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Accounting and Internal Controls
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A-24
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3.24
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Derivatives
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A-25
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3.25
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Loan Matters
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A-25
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3.26
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Community Reinvestment Act Compliance
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A-27
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A-i
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3.27
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Investment Securities
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A-27
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3.28
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Related Party Transactions
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A-27
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3.29
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Labor
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A-27
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3.30
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Foundation Bancorp
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A-28
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3.31
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No Additional Representations
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A-28
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT
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A-29
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4.1
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Corporate Organization
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A-29
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4.2
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Capitalization
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A-29
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4.3
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Authority; No Violation
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A-30
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4.4
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Consents and Approvals
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A-31
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4.5
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Reports
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A-31
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4.6
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Financial Statements
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A-32
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4.7
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Brokers Fees
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A-32
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4.8
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Absence of Changes
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A-32
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4.9
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Compliance with Applicable Law
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A-32
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4.10
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Approvals
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A-33
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4.11
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Parent Information
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A-33
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4.12
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Legal Proceedings
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A-33
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4.13
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Accounting and Internal Controls.
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A-33
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4.14
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Related Party Transactions
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A-34
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4.15
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Reorganization
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A-34
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4.16
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No Additional Representations
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A-34
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ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS
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A-35
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5.1
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Conduct of Businesses Prior to the Effective Time
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A-35
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5.2
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Company Forbearances
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A-35
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5.3
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Parent Forbearances
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A-38
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ARTICLE VI ADDITIONAL AGREEMENTS
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A-38
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6.1
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Regulatory Matters
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A-38
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6.2
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Reasonable Best Efforts
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A-40
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6.3
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Access to Information
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A-40
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6.4
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Shareholder Approval
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A-40
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6.5
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Nasdaq Listing
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A-42
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6.6
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Employee Matters
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A-42
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6.7
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Indemnification; Directors and Officers Insurance
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A-43
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6.8
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Exemption from Liability Under Rule
16(b)-3
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A-44
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6.9
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No Solicitation; Change in Company Board Recommendation
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A-44
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6.10
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Takeover Laws
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A-46
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6.11
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Financial Statements and Other Current Information
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A-46
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6.12
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Notification of Certain Matters
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A-47
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6.13
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Parents Board of Directors
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A-47
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6.14
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Company Trust Preferred Securities, FHLB Borrowings and Subordinated Debentures
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A-47
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6.15
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Third-Party Agreements
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A-47
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6.16
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Transaction Expenses
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A-48
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6.17
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Certain Tax Matters
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A-49
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6.18
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Formation of Merger Sub; Accession
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A-49
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ARTICLE VII CONDITIONS PRECEDENT
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A-50
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7.1
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Conditions to Each Partys Obligation to Effect the First Merger
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A-50
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7.2
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Conditions to Obligations of Parent and Merger Sub
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A-50
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A-ii
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7.3
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Conditions to Obligations of Company
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A-51
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ARTICLE VIII TERMINATION AND AMENDMENT
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A-52
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8.1
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Termination
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A-52
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8.2
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Effect of Termination
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A-53
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8.3
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Fees and Expenses
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A-54
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8.4
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Amendment
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A-54
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8.5
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Extension; Waiver
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A-55
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ARTICLE IX GENERAL PROVISIONS
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A-55
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9.1
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Closing
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A-55
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9.2
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Non-survival
of Representations, Warranties and Agreements
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A-55
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9.3
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Notices
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A-55
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9.4
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Interpretation
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A-56
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9.5
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Counterparts
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A-56
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9.6
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Entire Agreement
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A-56
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9.7
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Governing Law; Jurisdiction
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A-56
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9.8
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Waiver of Jury Trial
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A-57
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9.9
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Publicity
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A-57
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9.10
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Assignment; Third-Party Beneficiaries
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A-57
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9.11
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Specific Performance
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A-57
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9.12
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Disclosure Schedule
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A-57
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Exhibit
A-1
Form of Pacific Continental Voting Agreement and
Non-Competition
Agreement
Exhibit
A-2
Form of Columbia Voting Agreement
A-iii
INDEX OF DEFINED TERMS
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Section
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Affiliate
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3.15
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Aggregate Merger Consideration
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1.4(g)(ii)
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Agreement
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Preamble
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Approvals
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6.1(b)
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Bank Merger
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Recitals
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Bankruptcy and Equity Exception
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3.3(a)
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BHC Act
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3.1(a)
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Book-Entry Share
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1.4(f)
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Business Day
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9.4
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Certificate
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1.4(f)
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Closing
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9.1
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Closing Date
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9.1
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Code
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Recitals
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Columbia Bank
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Recitals
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Columbia Bank Board
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6.13
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Columbia Voting Agreements
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Recitals
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Company
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Preamble
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Company Acquisition Proposal
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6.9(d)
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Company Adverse Change of Recommendation
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8.1(c)
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Company Articles
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3.1(b)
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Company Board
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Recitals
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Company Board Recommendation
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6.4(a)
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Company Bylaws
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3.1(b)
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Company Capitalization Date
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3.2(a)
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Company Common Stock
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3.2(a)
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Company Disclosure Schedule
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9.12(a)
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Company Equity Awards
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1.9
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Company Leased Properties
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3.21
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Company Licensed Intellectual Property
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3.20(e)(iii)
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Company Owned Intellectual Property
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3.20(e)(iv)
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Company Owned Properties
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3.21
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Company Preferred Stock
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3.2(a)
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Company Real Property
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3.21
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Company Record Date
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6.4(a)
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Company Restricted Share
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1.6
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Company RSU
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1.5
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Company SEC Reports
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3.5(b)
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Company Shareholder Approval
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3.3(a)
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Company Special Meeting
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3.4
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Company SAR
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1.8
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Company Stock Option
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1.7
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Company Stock Plan
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1.5
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Company Superior Proposal
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6.9(d)
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Company Termination Fee
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8.3(b)(i)
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Confidentiality Agreement
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6.3(b)
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Continuing Employee
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6.6(a)
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Controlled Group Liability
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3.11(g)
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D&O Insurance
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6.7(b)
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Determination Date
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1.4(e)
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A-iv
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Section
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Determination Period
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1.4(e)
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Effective Time
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1.2
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Employee Benefit Plan
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3.11(a)
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End Date
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8.1(b)(ii)
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Environmental Laws
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3.17
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Equity Award Cashout Price
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1.5
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ERISA
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3.11(a)
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ERISA Affiliate
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3.11(e)
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Exchange Act
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3.5(b)
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Exchange Agent
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2.1
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Exchange Agent Agreement
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2.1
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Exchange Fund
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2.1
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Exchange Ratio
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1.4(e)
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Exchanged Shares
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2.2(a)
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FDIC
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3.1(c)
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Federal Reserve
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|
3.4
|
Final Index Price
|
|
1.4(e)
|
Final Transaction Expenses Statement
|
|
6.16(a)
|
First Merger
|
|
Recitals
|
Foundation
|
|
3.30
|
Form
S-4
|
|
3.4
|
GAAP
|
|
3.6(a)
|
Governmental Entity
|
|
3.4
|
Indemnified Parties
|
|
6.7(a)
|
Index
|
|
1.4(e)
|
Index Ratio
|
|
1.4(e)
|
Initial Index Price
|
|
1.4(e)
|
Intellectual Property
|
|
3.20(e)(i)
|
Interim Transaction Expenses Statement
|
|
6.16(a)
|
IRS
|
|
3.18
|
IT Assets
|
|
3.20(e)(ii)
|
Joint Proxy Statement/Prospectus
|
|
3.4
|
Knowledge of Parent
|
|
9.4
|
Knowledge of the Company
|
|
9.4
|
Law
|
|
3.3(b)
|
Lease
|
|
3.21
|
Letter of Transmittal
|
|
2.2(a)
|
Liens
|
|
3.2(d)
|
Loans
|
|
3.25(a)
|
Material Adverse Effect
|
|
3.8
|
Material Contract
|
|
3.16(a)
|
Materially Burdensome Regulatory Condition
|
|
6.1(d)
|
Merger Consideration
|
|
1.4(a)
|
Merger Sub Articles
|
|
1.10
|
Merger Sub Bylaws
|
|
1.10
|
Mergers
|
|
Recitals
|
Multiemployer Plan
|
|
3.11(f)
|
Multiple Employer Plan
|
|
3.11(f)
|
Nasdaq
|
|
3.4
|
Notice of Superior Proposal
|
|
6.9(c)(ii)(B)
|
Oregon Merger Filings
|
|
1.2
|
A-v
|
|
|
|
|
Section
|
ORS
|
|
1.1
|
Oregon DCBS
|
|
4.4
|
Oregon Secretary
|
|
1.2
|
Pacific Continental Bank
|
|
Recitals
|
Pacific Continental Voting Agreements
|
|
Recitals
|
Parent
|
|
Preamble
|
Parent Articles
|
|
4.1(b)
|
Parent Average Closing Price
|
|
1.4(e)
|
Parent Board
|
|
Recitals
|
Parent Bylaws
|
|
4.1(b)
|
Parent Capitalization Date
|
|
4.2
|
Parent Common Stock
|
|
4.2
|
Parent Disclosure Schedule
|
|
9.12(b)
|
Parent Preferred Stock
|
|
4.2
|
Parent Record Date
|
|
6.4(b)
|
Parent SEC Reports
|
|
4.5(b)
|
Parent Shareholder Approval
|
|
4.3(a)
|
Parent Special Meeting
|
|
3.4
|
Parent Stock Plans
|
|
4.2
|
Parent Stock Price Ratio
|
|
1.4(e)
|
Permitted Encumbrances
|
|
3.21
|
Person
|
|
9.4
|
Previously Disclosed
|
|
9.12(c)
|
Reduction Amount
|
|
1.4(g)(ii)
|
Regulatory Agencies
|
|
3.5(a)
|
Regulatory Agreement
|
|
3.9(c)
|
Requisite Regulatory Approvals
|
|
7.2(c)
|
Sarbanes-Oxley Act
|
|
3.5(b)
|
SEC
|
|
3.4
|
Securities Act
|
|
3.2(b)
|
Series B Preferred Stock
|
|
4.2
|
Subsequent Merger
|
|
Recitals
|
Subsidiary
|
|
3.1(c)
|
Surviving Corporation
|
|
Recitals
|
Takeover Laws
|
|
3.10
|
Tax
|
|
3.18
|
Tax Return
|
|
3.18
|
Taxes
|
|
3.18
|
Threshold Amount
|
|
1.4(e)
|
Trade Secrets
|
|
3.20(e)(i)
|
Transaction Expenses
|
|
6.16(a)
|
Treasury Department
|
|
3.9(d)
|
Treasury Shares
|
|
1.4(b)
|
Voting Debt
|
|
3.2(b)
|
Washington Articles of Merger
|
|
1.2
|
Washington Secretary
|
|
3.4
|
Withdrawal Liability
|
|
3.11(f)
|
A-vi
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER
, dated as of January 9, 2017 (this
Agreement
), is by and among Columbia
Banking System, Inc., a Washington corporation (
Parent
), Pacific Continental Corporation, an Oregon corporation (the
Company
), and, from and after its accession to this Agreement in accordance with
Section 6.18, Coast Merger Sub, an Oregon corporation and a wholly owned subsidiary of Parent (
Merger Sub
).
RECITALS
A. The respective Boards of Directors of Parent and the Company have determined that it is in the best interests of
their respective companies and shareholders to consummate the strategic business combination transaction provided for in this Agreement and have adopted this Agreement.
B. On the terms and subject to the conditions set forth in this Agreement, Merger Sub will merge with and into the
Company (the
First Merger
), with the Company as the surviving corporation in the First Merger (sometimes hereinafter referred to as the
Surviving Corporation
).
C. Immediately following the First Merger and as part of a single integrated transaction, the Surviving Corporation
will merge with and into Parent (the
Subsequent Merger
), with Parent as the surviving entity.
D. Immediately following the Subsequent Merger, Pacific Continental Bank, an Oregon state-chartered bank and
wholly-owned subsidiary of the Company (
Pacific Continental Bank
), will merge with and into Columbia State Bank, a Washington state-chartered bank and wholly-owned subsidiary of Parent (
Columbia Bank
), with
Columbia Bank as the surviving bank (the
Bank Merger
, and together with the First Merger and the Subsequent Merger, the
Mergers
).
E. The parties intend that the First Merger and the Subsequent Merger, taken together, shall be treated as a single
integrated transaction and shall qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
Code
), and that this Agreement shall constitute a plan
of reorganization for purposes of Sections 354 and 361 of the Code.
F. As an inducement for Parent to
enter into this Agreement, each of the members of the board of directors of the Company (the
Company Board
) has simultaneously herewith entered into a Voting and
Non-Competition
Agreement
(collectively, the
Pacific Continental Voting Agreements
), each dated as of the date hereof and substantially in the form attached hereto as Exhibit
A-1.
G. As an inducement for Company to enter into this Agreement, each of the members of the board of directors of Parent
(the
Parent Board
) has simultaneously herewith entered into a Voting Agreement (collectively, the
Columbia Voting Agreements
), each dated as of the date hereof and substantially in the form attached hereto as
Exhibit
A-2.
H. The parties desire to make certain representations,
warranties and agreements in connection with the Mergers and also to prescribe certain conditions to the First Merger.
A-1
NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and
agreements contained in this Agreement, and intending to be legally bound hereby, the parties agree as follows:
ARTICLE I
MERGERS
1.1
The First Merger
. Subject to the terms and conditions of this Agreement, in accordance with the Oregon
Revised Statutes (the ORS) at the Effective Time, Merger Sub shall merge with and into the Company in the First Merger. The Company shall be the Surviving Corporation in the First Merger as a wholly owned Subsidiary of Parent and shall
continue its existence under the Laws of the State of Oregon. As of the Effective Time, the separate corporate existence of Merger Sub shall cease.
1.2
Effective Time
. Subject to the terms and conditions of this Agreement, on or before the Closing Date, the
parties will execute and cause articles of merger and a plan of merger (
Oregon Merger Filings
) relating to the First Merger to be filed with the Secretary of State of the State of Oregon (
Oregon Secretary
) as
provided in Section 60.494 of the ORS. The First Merger shall become effective at such time as such Oregon Merger Filings have been filed, or at such other time as may be specified therein. The term
Effective Time
shall be
the date and time when the First Merger becomes effective in accordance therewith.
1.3
Effects of the First
Merger
. At and after the Effective Time, the First Merger shall have the effects set forth in the applicable provisions of the ORS.
1.4
Conversion of Stock
At the Effective Time, by virtue of the First Merger and without any action on the part
of the Company, Merger Sub or Parent or the shareholders of any of the foregoing:
(a)
Company Common Stock
.
Each share of Company Common Stock excluding Treasury Shares, issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive a number of shares of Parent Common Stock equal to the Exchange Ratio, subject
to any adjustments pursuant to Section 1.4(g), Section 1.4(h) or Section 8.1(e) (the
Merger Consideration
) and subject to the payment of any cash in lieu of fractional shares pursuant to Section 2.2(f). At the Effective Time,
all shares of Company Common Stock shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist.
(b)
Cancellation of Treasury Shares
. Any shares of Company Common Stock owned by the Company as treasury stock
or owned, directly or indirectly, by Parent or the Company or any of their respective wholly-owned Subsidiaries (other than those held in a fiduciary capacity or as a result of debts previously contracted) (
Treasury Shares
), shall
automatically be cancelled and retired and shall cease to exist at the Effective Time of the First Merger and no consideration shall be issued in exchange therefor.
(c)
Outstanding Parent Stock
.
(i) Each share of Parent Common Stock issued and outstanding immediately prior to the Effective Time
shall remain an issued and outstanding share of Parent Common Stock and shall not be affected by the First Merger.
(ii) Each share of Parent Preferred Stock issued and outstanding immediately prior to the Effective Time
shall remain an issued and outstanding share of Parent Preferred Stock and shall not be affected by the First Merger.
(d)
Outstanding Merger Sub Common Stock
. Each share of common stock, par value $0.01 per share, of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock, par value $0.01 per share, of the Surviving Corporation, which shall constitute the only shares of capital stock of the Surviving
Corporation.
A-2
(e) For purposes of this Agreement:
Determination Date
means the fifth (5th) Business Day immediately prior to the Closing Date.
Determination Period
means the period beginning on the day that is twenty (20) consecutive Nasdaq trading days prior
to the Determination Date and ending on the Determination Date.
Exchange Ratio
means the following, subject to any
adjustments pursuant to Section 1.4(g), Section 1.4(h) or Section 8.1(e):
(A) If the Parent
Average Closing Price for the Determination Period is greater than or equal to $27.76 and less than or equal to $37.56, then the Exchange Ratio shall be 0.6430;
(B) If the Parent Average Closing Price for the Determination Period is greater than $37.56, and
(I) the quotient obtained by dividing the Parent Average Closing Price for the Determination Period by $32.66 (such quotient the
Parent Stock Price Ratio
) is greater than (II) the quotient obtained by dividing the Final
Index Price by the Initial Index Price (the
Index Ratio
) after adding 0.15 to the Index Ratio, then the Exchange Ratio shall be the quotient, rounded to the nearest
ten-thousandth,
obtained
by dividing (i) $24.151 by (ii) the Parent Average Closing Price for the Determination Period;
(C) If the Parent Average Closing Price for the Determination Period is greater than $37.56, and
(I) the Parent Stock Price Ratio is not greater than (II) the Index Ratio after adding 0.15 to the Index Ratio, then the Exchange Ratio shall be 0.6430;
(D) If the Parent Average Closing Price for the Determination Period is less than $27.76, and
(I) the Parent Stock Price Ratio is less than (II) the Index Ratio after subtracting 0.15 from the Index Ratio, then the Exchange Ratio shall be (x) the quotient, rounded to the nearest
ten-thousandth,
obtained by dividing $17.850 by the Parent Average Closing Price for the Determination Period if Parent does not choose to adjust the Merger Consideration in accordance with
Section 1.4(h), or (y) 0.6430 if Parent does choose to adjust the Merger Consideration as set forth therein;
(E) If the Parent Average Closing Price for the Determination Period is less than $27.76, and
(I) the Parent Stock Price Ratio is not less than (II) the Index Ratio after subtracting 0.15 from the Index Ratio, then the Exchange Ratio shall be 0.6430;
Final Index Price
means the average closing prices of the Index as quoted on Bloomberg.com (KRX:IND) during the
Determination Period.
Index
means the Keefe, Bruyette & Woods (KBW) Regional Banking Index.
Initial Index Price
means 86.68.
Parent Average Closing Price
means the average daily closing price of Parent Common Stock on Nasdaq during the relevant
period.
(f)
Effect of Conversion
. All of the shares of Company Common Stock converted into the right to
receive the Merger Consideration pursuant to this Article I shall no longer be outstanding and shall automatically be cancelled and shall cease to exist as of the Effective Time, and each certificate previously representing any such shares of
Company Common Stock (each, a
Certificate
) and each
non-certificated
share of Company Common Stock represented by book-entry (
Book-Entry Share
) shall thereafter represent
only the right to receive the Merger Consideration and/or cash in lieu of fractional shares, into which the shares of Company Common Stock represented by such Certificate or Book-Entry Share have been converted pursuant to this Section 1.4
and Section 2.2(f), as well as any dividends to which holders of Company Common Stock become entitled in accordance with Section 2.2(c).
A-3
(g)
Adjustments to Exchange Ratio
.
(i) If, between the date of this Agreement and the Effective Time, the outstanding shares of Parent
Common Stock shall have been increased, decreased, changed into or exchanged for a different number or kind of shares or securities as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split
or other similar change in capitalization, an appropriate and proportionate adjustment shall be made to the Exchange Ratio.
(ii) If, immediately prior to the Effective Time, the Transaction Expenses exceed the Threshold Amount,
there shall be an adjustment made to the Exchange Ratio such that the Exchange Ratio shall be equal to the product of (x) the Exchange Ratio as calculated pursuant to Section 1.4(e) and (y) the quotient obtained by dividing (1) the
Aggregate Merger Consideration minus the Reduction Amount, by (2) the Aggregate Merger Consideration. For the purposes hereof,
Threshold Amount
means $14.5 million,
Aggregate Merger Consideration
shall
equal $21.00 multiplied by the total number of shares of Company Common Stock issued and outstanding immediately prior to the Closing (other than Treasury Shares), and
Reduction Amount
shall mean, to the extent the Transaction
Expenses exceed the Threshold Amount, (a) the Transaction Expenses minus (b) the Threshold Amount, plus (c) any Tax benefits estimated to result from the Transaction Expenses exceeding the Threshold Amount, as reasonably estimated by
Parent;
provided
,
however
, that in the event of a transaction or series of related transactions in which a Person, or more than one Person acting as a group, acquires record or beneficial ownership of Parent Common Stock that, together
with stock held by such Person or group, constitutes greater than fifty percent (50%) of the outstanding shares of Parent Common Stock, the Reduction Amount shall be zero.
(h)
Adjustments to the Merger Consideration
. If the Parent Average Closing Price for the Determination Period is
less than $27.76, and (I) the Parent Stock Price Ratio is less than (II) the Index Ratio after subtracting 0.15 from the Index Ratio, Parent shall, at its option and in its sole discretion, within two (2) Business Days of the
Determination Date, adjust the Merger Consideration to include an amount in cash equal to (A) $17.850 minus (B)(x) 0.6430 multiplied by (y) the Parent Average Closing Price for the Determination Period.
1.5
Company Restricted Stock Units
. At the Effective Time, each outstanding Company restricted stock unit
granted under any Company Stock Plan (a
Company RSU
), whether vested or unvested, shall, automatically and without any action on the part of the holder thereof, be cancelled and shall only entitle the holder of such Company RSU to
receive (without interest), no later than the first payroll period following the Effective Time and in any event no later than thirty (30) calendar days following the Closing Date, an amount in cash equal to (x) the number of shares of
Company Common Stock subject to such Company RSU immediately prior to the Effective Time multiplied by (y) the Equity Award Cashout Price, less applicable Taxes required to be withheld with respect to such payment; provided, that, with respect
to any Company RSUs that constitute nonqualified deferred compensation subject to Section 409A of the Code and that are not permitted to be paid at the Effective Time without triggering a Tax or penalty under Section 409A of the Code, such
payment shall be made at the earliest time permitted under the applicable Company Stock Plan and award agreement that will not trigger a Tax or penalty under Section 409A of the Code.
For purposes of this Agreement,
Company Stock Plan
means the Pacific Continental Amended and Restated 2006 Stock Option and
Equity Compensation Plan, the Pacific Continental Amended 1999 Employee Stock Option Plan, the Pacific Continental Amended 1999 Director Stock Option Plan, the Northwest International Bank Employee Stock Option Plan and the Northwest International
Bank Director Stock Option Plan. For purposes of this Agreement, the term
Equity Award Cashout Price
means an amount equal to the product of (x) the Exchange Ratio multiplied by (y) the Parent Average Closing Price for
the Determination Period.
1.6
Company Restricted Stock Awards
. At the Effective Time, any vesting
conditions applicable to each outstanding restricted stock award (a
Company Restricted Share
) under the Company Stock Plans shall,
A-4
automatically and without any action on the part of the holder thereof, accelerate in full and shall be converted into, and become exchanged for the Merger Consideration (less applicable Taxes
required to be withheld with respect to such vesting), pursuant to Section 1.4.
1.7
Company Stock
Options
. At the Effective Time, each outstanding option to purchase shares of Company Common Stock (a
Company Stock Option
) granted under the Company Stock Plans, whether vested or unvested, shall, automatically and without
any action on the part of the holder thereof, be cancelled and shall only entitle the holder of such Company Stock Option to receive (without interest), no later than the first payroll period following the Effective Time and in any event no later
than thirty (30) calendar days following the Closing Date, an amount in cash equal to the product of (x) the number of shares of Company Common Stock subject to such Company Stock Option immediately prior to the Effective Time multiplied
by (y) the excess, if any, of (A) the Equity Award Cashout Price over (B) the exercise price per share of Company Common Stock of such Company Stock Option less applicable Taxes required to be withheld with respect to such payment.
For the avoidance of doubt, any Company Stock Option which has an exercise price per share of Company Common Stock that is greater than or equal to the Equity Award Cashout Price shall be cancelled at the Effective Time for no consideration or
payment.
1.8
Company SARs
. At the Effective Time, each outstanding Company stock appreciation right,
whether cash-settled or stock-settled (a
Company SAR
) granted under the Company Stock Plans, whether vested or unvested, shall, automatically and without any action on the part of the holder thereof, be cancelled and shall only
entitle the holder of such Company SAR to receive (without interest), no later than the first payroll period following the Effective Time and in any event no later than thirty (30) calendar days following the Closing Date, an amount in cash
equal to the product of (x) the number of shares of Company Common Stock subject to such Company SAR immediately prior to the Effective Time multiplied by (y) the excess, if any, of (A) the Equity Award Cashout Price over (B) the
reference price per share of Company Common Stock of such Company SAR less applicable Taxes required to be withheld with respect to such payment. For the avoidance of doubt, any Company SAR which has a reference price per share of Company Common
Stock that is greater than or equal to the Equity Award Cashout Price shall be cancelled at the Effective Time for no consideration or payment.
1.9
Company Actions
. Prior to the Effective Time, the Company, the Company Board and the compensation committee
of the Company Board, as applicable, shall adopt any resolutions and take any actions that are necessary to (x) effectuate the treatment of the Company RSUs, Company Restricted Shares, Company Stock Options and Company SARs (the
Company Equity Awards
) pursuant to Sections 1.5 through 1.8, including delivering written notice to each holder of a Company Equity Award of the treatment of such award pursuant to Sections 1.7 and 1.8 and obtaining each such
holders written acknowledgement and agreement of the treatment set forth in Section 1.7 or 1.8, as applicable, in each case not less than 60 days prior to the Closing and (y) cause the Company Stock Plans to terminate at or prior to
the Effective Time. The Company shall take all actions necessary to ensure that from and after the Effective Time neither Parent nor the Surviving Corporation will be required to deliver shares of Company Common Stock or other capital stock of the
Company to any Person pursuant to or in settlement of Company Equity Awards.
1.10
Articles of Incorporation and
Bylaws
. At the Effective Time, the Articles of Incorporation of Merger Sub, as amended (the
Merger Sub Articles
), as then in effect, will be the Articles of Incorporation of the Surviving Corporation, and the Bylaws of Merger
Sub (the
Merger Sub Bylaws
), as then in effect, will be the Bylaws of the Surviving Corporation.
1.11
Merger Sub Board Directors and Officers
. The directors of Merger Sub in office immediately prior to
the Effective Time shall serve as the directors of the Surviving Corporation from and after the Effective Time in accordance with the bylaws of the Surviving Corporation. The officers of Merger Sub in office immediately prior to the Effective
Time shall serve as the officers of the Surviving Corporation from and after the Effective Time in accordance with the bylaws of the Surviving Corporation. The parties shall take all actions necessary to effect the provisions of this
Section 1.11.
A-5
1.12
Parent Board of Directors and Officers
. From and after the
Effective Time, the Parent Board shall consist of the persons serving on the Board of Directors of Parent immediately prior to the Effective Time, plus the member of the Board of Directors of the Company selected pursuant to Section 6.13. From
and after the Effective Time, the officers of Parent shall be the officers of Parent immediately prior to the Effective Time, and such officers shall hold office until their respective successors are duly appointed and qualified, or their earlier
death, resignation or removal.
1.13
Subsequent Merger
. On the Closing Date and immediately following
the Effective Time, in accordance with the applicable Laws of Washington and the applicable Laws of Oregon, the Surviving Corporation will be merged with and into Parent with Parent surviving the Subsequent Merger and continuing its existence under
the Laws of the State of Washington, and the separate corporate existence of the Surviving Corporation ceasing as of the effective time of the Subsequent Merger.
1.14
Bank Merger
. On the Closing Date and immediately following the effective time of the Subsequent Merger, in
accordance with the applicable Laws of Washington and the applicable Laws of Oregon, Pacific Continental Bank will be merged with and into Columbia Bank in the Bank Merger, with Columbia Bank surviving the Bank Merger and continuing its existence
under the Laws of the State of Washington, and the separate corporate existence of Pacific Continental Bank ceasing as of the effective time of the Bank Merger. In furtherance of the foregoing, the parties shall execute and cause to be filed
applicable articles or certificates of merger and such other documents as are necessary to make the Bank Merger effective immediately following the Effective Time.
1.15
Change in Structure
. Subject to the proviso in the first sentence of Section 8.4, Parent and Merger
Sub may at any time, but with the prior written consent of the Company, which consent shall not be unreasonably withheld, change the method of effecting the combination contemplated by this Agreement; provided, however, that no such change shall
(i) alter or change the amount or kind of the Merger Consideration provided for in this Agreement, (ii) adversely affect the tax consequences to shareholders of the Company of the transactions contemplated by this Agreement or
(iii) impede or delay in any material respect consummation of the transactions contemplated by this Agreement.
ARTICLE II
DELIVERY OF MERGER CONSIDERATION
2.1
Delivery of Merger Consideration
. At or prior to the Effective Time, Parent shall deposit, or cause to be
deposited, with an exchange agent, which Person shall be a bank or trust company selected by Parent and reasonably acceptable to the Company (the
Exchange Agent
), pursuant to an agreement (the
Exchange Agent
Agreement
) entered into prior to the Effective Time, (a) shares of Parent Common Stock issuable pursuant to Section 1.4(a) and Section 1.6, plus, (b) to the extent then determinable, any cash payable in lieu of
fractional shares pursuant to Section 2.2(f) (such amount in cash and Parent Common Stock, the
Exchange Fund
).
2.2
Exchange Procedures
.
(a) As soon as reasonably practicable after the Effective Time, but in any event within five (5) Business Days
thereafter, the Exchange Agent shall mail to each holder of record of Certificate(s) or Book-Entry Shares which, immediately prior to the Effective Time, represented outstanding shares of Company Common Stock whose shares were converted into the
right to receive the Merger Consideration pursuant to Section 1.4 or Section 1.6 (
Exchanged Shares
), along with, in each case, any cash in lieu of fractional shares of Parent Common Stock to be issued or paid in
consideration therefor, (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to Certificate(s) or Book-Entry Shares shall pass, only upon delivery of Certificate(s) (or affidavits of loss
in lieu of such Certificate(s)) or Book-Entry Shares to the Exchange Agent and shall be substantially in such form and have such other provisions as shall be prescribed
A-6
by the Exchange Agent Agreement (the
Letter of Transmittal
)) and (ii) instructions for use in surrendering Certificate(s) or Book-Entry Shares in exchange for the Merger
Consideration, any cash in lieu of fractional shares of Parent Common Stock to be issued or paid in consideration therefor and any dividends or distributions to which such holder is entitled pursuant to Section 2.2(c).
(b) Upon surrender to the Exchange Agent of its Certificate(s) or Book-Entry Share(s) accompanied by a properly
completed Letter of Transmittal, a holder of Exchanged Shares will be entitled to receive promptly after such surrender, the Merger Consideration and any cash in lieu of fractional shares of Parent Common Stock to be issued or paid in consideration
therefor in respect of the Exchanged Shares represented by its Certificate(s) or Book-Entry Shares. Until so surrendered, each such Certificate or Book-Entry Share shall represent after the Effective Time, for all purposes, only the right to
receive, without interest, the Merger Consideration and any cash in lieu of fractional shares of Parent Common Stock to be issued or paid in consideration therefor upon surrender of such Certificate or Book-Entry Share, in accordance with, and any
dividends or distributions to which such holder is entitled pursuant to, this Article II.
(c) No dividends or
other distributions with respect to Parent Common Stock shall be paid to the holder of any unsurrendered Certificate or Book-Entry Shares with respect to the shares of Parent Common Stock represented thereby, in each case unless and until the
surrender of such Certificate or Book-Entry Share in accordance with this Article II. Subject to the effect of applicable abandoned property, escheat or similar Laws, following surrender of any such Certificate or Book-Entry Share in accordance with
this Article II, the record holder thereof shall be entitled to receive, without interest, (i) the amount of dividends or other distributions with a record date after the Effective Time theretofore payable with respect to the whole shares of
Parent Common Stock represented by such Certificate or Book-Entry Share and paid prior to such surrender date, and/or (ii) at the appropriate payment date, the amount of dividends or other distributions payable with respect to shares of Parent
Common Stock represented by such Certificate or Book-Entry Shares with a record date after the Effective Time (but before such surrender date) and with a payment date subsequent to the issuance of the Parent Common Stock issuable with respect to
such Certificate or Book-Entry Shares.
(d) In the event of a transfer of ownership of a Certificate or Book-Entry
Shares representing Exchanged Shares that are not registered in the stock transfer records of the Company, the shares of Parent Common Stock plus any cash in lieu of fractional shares of Parent Common Stock comprising the Merger Consideration shall
be issued or paid in exchange therefor to a Person other than the Person in whose name the Certificate or Book-Entry Shares so surrendered is registered if the Certificate or Book-Entry Shares formerly representing such Exchanged Shares shall be
properly endorsed or otherwise be in proper form for transfer and the Person requesting such payment or issuance shall pay any transfer or other similar taxes required by reason of the payment or issuance to a Person other than the registered holder
of the Certificate or Book-Entry Shares, or establish to the reasonable satisfaction of Parent that the tax has been paid or is not applicable. The Exchange Agent (or, subsequent to the earlier of (x) the
one-year
anniversary of the Effective Time and (y) the expiration or termination of the Exchange Agent Agreement, Parent or the Surviving Corporation) shall be entitled to deduct and withhold from any
cash otherwise payable pursuant to this Agreement to any holder of Exchanged Shares such amounts as the Exchange Agent, Parent or the Surviving Corporation, as the case may be, is required to deduct and withhold under the Code, or any provision of
state, local or foreign Tax Law, with respect to the making of such payment. If, prior to the Closing Date, the Exchange Agent or Parent determines that any such deduction or withholding is so required as of the Effective Time, the Exchange Agent or
Parent, as the case may be, shall notify the Company and the parties shall cooperate in good faith to reduce or eliminate such deduction or withholding. To the extent the amounts are so withheld by the Exchange Agent, Parent or the Surviving
Corporation, as the case may be, and timely paid over to the appropriate Governmental Entity, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Exchanged Shares in respect of whom such
deduction and withholding was made by the Exchange Agent or Parent, as the case may be.
(e) After the Effective
Time, there shall be no transfers on the stock transfer books of the Company of the shares of Company Common Stock that were issued and outstanding immediately prior to the Effective
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Time other than to settle transfers of such Company Common Stock that occurred prior to the Effective Time. If, after the Effective Time, Certificates or Book-Entry Shares representing any such
shares of Company Common Stock are presented for transfer to the Exchange Agent, they shall be cancelled and exchanged for the applicable Merger Consideration and any cash in lieu of fractional shares of Parent Common Stock to be issued or paid in
consideration therefor in accordance with the procedures set forth in this Article II.
(f) Notwithstanding
anything to the contrary contained in this Agreement, no fractional shares of Parent Common Stock shall be issued upon the surrender of Certificates or Book-Entry Shares for exchange, no dividend or distribution with respect to Parent Common Stock
shall be payable on or with respect to any fractional share, and such fractional share interests shall not entitle the owner thereof to vote or to any other rights of a shareholder of Parent. In lieu of the issuance of any such fractional share,
Parent shall pay to each former shareholder of the Company who otherwise would be entitled to receive such fractional share an amount in cash (rounded to the nearest cent) determined by multiplying (i) the Parent Average Closing Price for the
Determination Period by (ii) the fraction of a share (after taking into account all shares of Company Common Stock held by such holder at the Effective Time and rounded to the nearest thousandth when expressed in decimal form) of Parent Common
Stock to which such holder would otherwise be entitled to receive pursuant to Section 1.4.
(g) Any portion of
the Exchange Fund that remains unclaimed by the shareholders of the Company as of the one (1) year anniversary of the Effective Time will be transferred to Parent. In such event, any former shareholders of the Company who have not theretofore
complied with this Article II shall thereafter look only to Parent with respect to the Merger Consideration, any cash in lieu of any fractional shares, and any unpaid dividends and distributions on the Parent Common Stock deliverable in respect of
each share of Company Common Stock such shareholder holds as determined pursuant to this Agreement, in each case, without any interest thereon. Notwithstanding the foregoing, none of Parent, the Surviving Corporation, the Exchange Agent or any other
Person shall be liable to any former holder of shares of Company Common Stock for any amount delivered in good faith to a public official pursuant to applicable abandoned property, escheat or similar Laws.
(h) In the event that any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if reasonably required by Parent or the Exchange Agent, the posting by such Person of a bond in such amount as Parent may determine is reasonably necessary as
indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate, the applicable Merger Consideration deliverable in respect thereof
pursuant to this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
No representation or warranty of the Company contained in Article III (other than the representations and warranties in Sections 3.2 and
3.8, which shall be true and correct in all respects with respect to it) shall be deemed untrue or incorrect, and the Company shall not be deemed to have breached any representation or warranty, as a consequence of the existence or absence of any
fact, circumstance or event unless such fact, circumstance or event, individually or taken together with all other facts, circumstances or events inconsistent with such representation or warranty contained in Article III, would cause the
representation or warranty not to be true in all material respects. Subject to the foregoing, except as disclosed in any report, schedule, form or other document filed with or furnished to, the SEC by the Company prior to the date hereof which is
publicly available (without giving effect to any amendment thereof filed with or furnished to the SEC after the date hereof, but disregarding risk factor disclosures contained under the heading Risk Factors, or disclosure of risks set
forth in any forward-looking statements disclaimer or any other statements that are similarly
non-specific
or cautionary, predictive or forward-looking in nature) or as Previously Disclosed, the
Company hereby represents and warrants to Parent as follows:
3.1
Corporate Organization
.
(a)
Organization
. The
Company is a corporation duly incorporated, validly existing and in good standing
under the Laws of the State of Oregon. The Company has the requisite corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted and is duly licensed or qualified to do
business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary. The Company is duly registered as a
bank holding company under the Bank Holding Company Act of 1956 (
BHC Act
).
(b)
Articles and
Bylaws.
True, complete and correct copies of the Second Amended and Restated Articles of Incorporation of the Company (the
Company Articles
), and the Amended and Restated Bylaws of the Company (the
Company
Bylaws
), as in effect as of the date of this Agreement, have previously been publicly filed by the Company and made available to Parent. The Company Articles and Company Bylaws made available to Parent are in full force and effect.
(c)
Subsidiaries.
Section 3.1(c) of the Company Disclosure Schedule sets forth a list of all Subsidiaries
of the Company (which, for the avoidance of doubt, includes any Subsidiaries of such Subsidiaries), the ownership interest of the Company in each such Subsidiary, as well as the ownership interest of any other Person or Persons in each such
Subsidiary (other than with respect to the preferred securities of Pacific Continental Capital Trust I and Foundation Statutory Trust I), and a description of the business of each Subsidiary (or, in the case of a Subsidiary that the Company
considers to be inactive, a statement to that effect and a description of the business previously conducted by such Subsidiary). Each Subsidiary of the Company (i) is duly incorporated or duly formed, as applicable to each such
Subsidiary, and validly existing and in good standing under the Laws of its jurisdiction of organization and (ii) has the requisite corporate (or similar) power and authority to own or lease all of its properties and assets and to carry on its
business as it is now being conducted and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary. There are no restrictions on the ability of any Subsidiary of the Company to pay dividends or distributions to the Company, except, in the case of a Subsidiary that is a regulated entity, for restrictions
on dividends or distributions generally applicable to all such regulated entities. As used in this Agreement, the term
Subsidiary
has the meaning ascribed to it in Section 2(d) of the BHC Act, except that when such term is
used with respect to an entity that is not a bank holding company, the meaning shall nonetheless be deemed to apply to such entity. The deposit accounts of each of its Subsidiaries that is an insured depository institution are insured by the Federal
Deposit Insurance Corporation (the
FDIC
) through the Deposit
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Insurance Fund to the fullest extent permitted by Law, all premiums and assessments required to be paid in connection therewith have been paid when due, and no proceedings for the termination of
such insurance are pending or, to the Knowledge of the Company, threatened. True, complete and correct copies of the articles of incorporation, bylaws and similar governing documents of each Subsidiary of the Company as in full force and effect as
of the date of this Agreement have been provided to Parent. Other than the Subsidiaries of the Company, and shares or interests acquired pursuant to security interests owned by or in favor of a Subsidiary created in the ordinary course of business
thereof, the Company does not, directly or indirectly, beneficially own any equity securities or similar interests of any entity or any interests of any entity or any interest in a partnership or joint venture of any kind.
3.2
Capitalization
.
(a) The authorized capital stock of the Company consists of: (i) 50,000,000 shares of common stock, no par value
(the
Company Common Stock
), of which, as of January 5, 2017 (the
Company Capitalization
Date
), 22,613,208 shares were issued and outstanding and (ii) 20,000 shares of preferred stock, no par
value (the
Company Preferred Stock
), of which, as of the Company Capitalization Date, zero were issued and outstanding. As of the Company Capitalization Date, 750,473 shares of Company Common Stock were reserved for issuance in
connection with awards under the Company Stock Plans, of which (A) 377,409 shares were reserved and available for issuance upon exercise of outstanding Company Stock Options, (B) 301,808 shares were outstanding and issuable upon the vesting of
Company RSUs and (C) 71,984 shares were outstanding and issuable in respect of Company SARs.
(b) All of the issued
and outstanding shares of Company Common Stock have been duly authorized and validly issued and, are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. As of the date of this
Agreement, no bonds, debentures, notes or other indebtedness having the right to vote on any matters on which shareholders of the Company may vote (
Voting Debt
) are issued or outstanding. There are no contractual obligations of
the Company or any of its Subsidiaries (1) to repurchase, redeem or otherwise acquire any shares of capital stock of the Company or any equity security of the Company or its Subsidiaries or any securities representing the right to purchase or
otherwise receive any shares of capital stock or any other equity security of the Company or its Subsidiaries or (2) pursuant to which the Company or any of its Subsidiaries is or could be required to register shares of the capital stock or
other securities under the Securities Act of 1933, as amended (the
Securities Act
). Except for the Pacific Continental Voting Agreements, there are no voting trusts or other agreements or understandings to which the Company, any
Subsidiary of the Company or, to the Knowledge of the Company, any of their respective officers or directors, is a party with respect to the voting of any Company Common Stock, Voting Debt or other equity securities of the Company. Except as set
forth above in Section 3.1(a), the Company does not have and is not bound by any outstanding subscriptions, options, warrants, calls, rights, commitments or agreements of any character calling for the purchase or issuance of any shares of
Company Common Stock, Company Preferred Stock, Voting Debt of the Company or any other equity securities of the Company. Section 3.2(a) of the Company Disclosure Schedule sets forth a true and complete list of all Company Stock Options, Company
RSUs, Company SARs and Company Restricted Shares as of the Company Capitalization Date, specifying on a
holder-by-holder
basis (A) the name of such holder,
(B) the number of shares subject to each such award, or the number of Company Stock Options, Company RSUs, Company SARs or Company Restricted Shares held by such holder, (C) as applicable, the grant date of each such award, (D) as
applicable, the vesting schedule of each such award and (E) the exercise price for each such Company Stock Option and the reference price for each such Company SAR.
(c) Other than awards under the Company Stock Plans that are outstanding as of the Company Capitalization Date and
listed in Section 3.2(a) of the Company Disclosure Schedule, no other equity-based awards are outstanding as of the Company Capitalization Date. Since the Company Capitalization Date through the date hereof, the Company has not (i) issued
or repurchased any shares of Company Common Stock, Voting Debt or other equity securities of the Company, other than pursuant to Company Stock Options, Company RSUs, Company SARs and Company Restricted Shares in accordance with their terms that were
outstanding on the
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Company Capitalization Date or (ii) issued or awarded any options, stock appreciation rights, restricted shares, restricted stock units, deferred equity units, awards based on the value of
the Company capital stock or any other equity-based awards. With respect to each grant of Company Stock Options, Company RSUs, Company SARs and Company Restricted Shares, (1) each such grant was made in accordance with the terms of any Company
Stock Plan, the Exchange Act and all other applicable Laws and (2) each such grant was properly accounted for in accordance with GAAP in the financial statements (including the related notes) of the Company and disclosed in the Company SEC
Reports in accordance with the Exchange Act and all other applicable Laws. All Company Stock Options and Company SARs granted by the Company or any of its Subsidiaries have been granted with a per share exercise or reference price, as applicable, at
least equal to the fair market value of the underlying stock on the date of grant, within the meaning of Section 409A of the Code and associated Treasury Department guidance, and each Company Stock Option and Company SAR has a grant date
identical to or later than the date on which the Company Board or compensation committee of the Company Board approved such Company Stock Option or Company SAR, as applicable. Upon issuance of any Company Common Stock in accordance with the terms of
the applicable Company Stock Plan, such Company Common Stock will be duly authorized, validly issued, fully paid and nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. From January 1,
2016 through the date of this Agreement, neither the Company nor any of its Subsidiaries has (A) accelerated the vesting of or lapsing of restrictions with respect to any stock-based compensation awards or long-term incentive compensation
awards, (B) with respect to executive officers of the Company or its Subsidiaries, entered into or amended any employment, severance, change of control or similar agreement (including any agreement providing for the reimbursement of excise
taxes under Section 4999 of the Code) or (C) adopted or amended any Company Stock Plan.
(d) All of the
issued and outstanding shares of capital stock or other equity ownership interests of each Subsidiary of the Company are owned by the Company, directly or indirectly, free and clear of any liens, pledges, charges, claims and security interests and
similar encumbrances (
Liens
), and all of such shares or equity ownership interests are duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. No Subsidiary of the Company has or is
bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity security of such Subsidiary or any securities
representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of such Subsidiary.
3.3
Authority; No Violation
.
(a) The Company has full corporate power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly approved and this Agreement duly adopted by the Company Board. The Company Board
has determined that the First Merger, on the terms and conditions set forth in this Agreement, is in the best interests of the Company and its shareholders and has directed that this Agreement and the transactions contemplated hereby be submitted to
the Companys shareholders for approval at a duly held meeting of such shareholders and has adopted a resolution to the foregoing effect. Except for the approval of this Agreement by the affirmative vote of a majority of all the votes entitled
to be cast by holders of outstanding Company Common Stock (the
Company Shareholder Approval
), no other corporate proceedings on the part of the Company are necessary to approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and delivered by the Company and (assuming due authorization, execution and delivery by Parent) constitutes the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms (except as may be limited by bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or similar Laws of general applicability relating to or affecting the rights of creditors generally and
subject to general principles of equity (the
Bankruptcy and Equity Exception
)).
(b) Neither the
execution and delivery of this Agreement by the Company, nor the consummation by the Company of the Mergers or the other transactions contemplated hereby, nor compliance by the Company
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with any of the terms or provisions of this Agreement, will (i) violate any provision of the Company Articles, the Company Bylaws, or similar documents of the Companys Subsidiaries or
(ii) assuming that the consents, approvals and filings referred to in Section 3.4 are duly obtained and/or made, (A) violate any law, statute, rule, regulation, judgment, order, injunction or decree issued, promulgated or entered into
by or with any Governmental Entity (each, a
Law
) applicable to the Company, any of its Subsidiaries or any of their respective properties or assets or (B) violate, conflict with, result in a breach of any provision of or the
loss of any benefit under, constitute a default (or an event that, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any Lien upon any of the respective properties or assets of the Company or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, franchise, permit, agreement, bylaw or other instrument or obligation to which the Company or any of its Subsidiaries is a party or by which any of them or any of their respective properties or assets is bound.
3.4
Consents and Approvals
. Except for (a) any applicable filing with the Nasdaq Global Select Market (the
Nasdaq
), (b) the filing with the Securities and Exchange Commission (
SEC
) of a joint proxy statement/prospectus in definitive form (the
Joint Proxy Statement/Prospectus
) relating to the
special meeting of the Companys shareholders (the
Company Special Meeting
) and the special meeting of Parent Shareholders (the
Parent Special Meeting
), each contemplated by this Agreement and of a
registration statement on Form
S-4
(or such other applicable form) (the
Form
S-4
) in which the Joint Proxy Statement/Prospectus will be included, and
declaration of effectiveness of the Form
S-4,
(c) the filing of a notice to and/or an application with the Board of Governors of the Federal Reserve System (the
Federal Reserve
) pursuant to
the Bank Holding Company Act of 1956, as amended, or regulations promulgated by the Federal Reserve thereunder, (d) filings of applications, notices, plans and certificates to the Oregon DCBS in accordance with Section 711.130 of the ORS
and the Washington State Department of Financial Institutions pursuant to Sections 30.49.040, 30.49.125 and 30.04.405 of the Revised Code of Washington and approval of or
non-objection
to such
applications, filings, certificates and notices, (e) the filing of a bank merger application with the FDIC pursuant to the Bank Merger Act (12 U.S.C. Section 1828(c)), as amended, (f) the filing of the Oregon Merger Filings and the other
documents and filings required by Section 60.494 of the ORS with the Oregon Secretary in connection with the First Merger, (g) the filing of the articles of merger (the
Washington Articles of Merger
) and the other
documents and filings required by Section 23B.11.050 of the Revised Code of Washington with the Secretary of State of the State of Washington (
Washington Secretary
) and the filing of plans of merger and the other documents and
filings required by Section 60.494 of the ORS with the Oregon Secretary in connection with the Subsequent Merger, (h) the filing of the articles of merger and the other documents and filings required by Section 23B.11.050 of the Revised
Code of Washington with the Washington Secretary and the filing of plans of merger and the other documents and filings required by Section 60.494 of the ORS with the Oregon DCBS in connection with the Bank Merger and (i) such filings and
approvals as are required to be made or obtained under the securities or blue sky Laws of various states in connection with the issuance of the shares of Parent Common Stock pursuant to this Agreement, no consents or approvals of or
filings or registrations with any foreign, federal or state banking or other regulatory, self-regulatory or enforcement authorities or any courts, administrative agencies or commissions or other governmental authorities or instrumentalities (each a
Governmental Entity
), are necessary in connection with the consummation of the Mergers and the other transactions contemplated by this Agreement.
3.5
Reports
.
(a) The Company and each of its Subsidiaries have timely filed all reports, registrations, statements and
certifications, together with any amendments required to be made with respect thereto, that they were required to file since December 31, 2013 with (i) the Federal Reserve, (ii) the FDIC, (iii) the Oregon DCBS, the Washington
State Department of Financial Institutions, and any other state banking or other state regulatory authority, (iv) the SEC, (v) any foreign regulatory authority and (vi) any applicable industry self-regulatory organizations
(collectively,
Regulatory Agencies
) and with each other applicable Governmental Entity, and all
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other reports and statements required to be filed by them since December 31, 2013, including any report or statement required to be filed pursuant to the Laws, rules or regulations of the
United States, any state, any foreign entity, or any Regulatory Agency or other Governmental Entity, have paid all fees and assessments due and payable in connection therewith, and there are no violations or exceptions in any such report or
statement that are unresolved as of the date hereof.
(b) An accurate and complete copy of each final registration
statement, prospectus, report, schedule and definitive proxy statement filed with or furnished to the SEC by the Company or any of its Subsidiaries pursuant to the Securities Act or the Securities Exchange Act of 1934, as amended (the
Exchange Act
), since December 31, 2013 (
Company SEC Reports
) is publicly available. No such Company SEC Report, at the time filed, furnished or communicated (and, in the case of registration statements and
proxy statements, on the dates of effectiveness and the dates of the relevant meetings, respectively), contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances in which they were made, not misleading, except that information filed as of a later date (but before the date of this Agreement) shall be deemed to modify information as of an earlier
date. As of their respective dates, all Company SEC Reports complied as to form with the published rules and regulations of the SEC with respect thereto. As of the date of this Agreement, no executive officer of the Company has failed in any respect
to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act of 2002 (the
Sarbanes-Oxley Act
). As of the date hereof, there are no outstanding comments from or unresolved issues raised
by the SEC with respect to any of the Company SEC Reports. The Company has made available to Parent true, correct and complete copies of all written correspondence between the SEC and the Company and its Subsidiaries occurring since
December 31, 2013 and prior to the date hereof. None of the Companys Subsidiaries is required to file periodic reports with the SEC or any other Governmental Entity pursuant to Section 13 or 15(d) of the Exchange Act (other than Form
13F or 13H).
(c) The Company is in compliance in all respects with the applicable listing and corporate governance
rules and regulations of Nasdaq.
3.6
Financial Statements
.
(a) The financial statements of the Company and its Subsidiaries included (or incorporated by reference) in the Company
SEC Reports (including the related notes, where applicable) (i) have been prepared from, and are in accordance with, the books and records of the Company and its Subsidiaries, (ii) fairly present the consolidated statements of operations,
statements of comprehensive income, cash flows, changes in shareholders equity and consolidated financial position of the Company and its Subsidiaries for the fiscal periods or as of the respective dates therein set forth (subject in the case
of unaudited statements to recurring
year-end
audit adjustments normal in nature and amount), (iii) complied as to form, as of their respective dates of filing with the SEC, with applicable accounting
requirements and with the published rules and regulations of the SEC with respect thereto, and (iv) have been prepared in accordance with U.S. generally accepted accounting principles (
GAAP
) consistently applied during the
periods involved, except, in each case, as indicated in such statements or in the notes thereto. The books and records of Company and its Subsidiaries have been maintained in all material respects in accordance with GAAP and any other applicable
legal and accounting requirements and reflect only actual transactions. As of the date hereof, Moss-Adams LLP has not resigned (or informed the Company that it intends to resign) or been dismissed as independent public accountants of the Company as
a result of or in connection with any disagreements with the Company on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.
(b) Neither the Company nor any of its Subsidiaries has incurred or is subject to any liability or obligation of any
nature whatsoever (whether absolute, accrued, contingent, determined, determinable or otherwise and whether due or to become due), except for (i) those liabilities that are reflected or reserved against on the consolidated balance sheet of the
Company included in the Companys Annual Reports on Form
10-K
for
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the fiscal year ended December 31, 2015 (including any notes thereto), (ii) liabilities incurred in the ordinary course of business consistent with past practice since December 31,
2015 which have been Previously Disclosed, or (iii) in connection with this Agreement and the transactions contemplated hereby.
3.7
Brokers Fees
. Neither the Company nor any of its Subsidiaries nor any of their respective officers,
directors, employees or agents has utilized any broker, finder or financial advisor or incurred any liability for any brokers fees, commissions or finders fees in connection with the First Merger or any other transactions contemplated by
this Agreement, other than to D.A. Davidson & Co. pursuant to a letter agreement, a true, complete and correct copy of which has been previously delivered to Parent.
3.8
Absence of Changes
. Since December 31, 2015, and through the date of this Agreement: (1) the
Company and its Subsidiaries have conducted their respective businesses in all material respects in the ordinary and usual course of the businesses, and (2) no change or development or combination of changes or developments has occurred that
have had or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on the Company. As used in this Agreement, the term
Material Adverse Effect
means, with respect to any party, a
material adverse effect on (a) the business, assets or deposit liabilities, properties, operations, condition (financial or otherwise), or results of operations of such party and its Subsidiaries taken as a whole; provided, however, that, with
respect to this clause (a), a Material Adverse Effect shall not be deemed to include effects arising out of, relating to or resulting from (A) changes after the date hereof in applicable GAAP or regulatory accounting requirements generally
affecting other companies in the banking industries in which such party and its Subsidiaries operate, (B) changes after the date hereof in Laws of general applicability to companies of similar size in the banking industries in which such party
and its Subsidiaries operate or interpretations thereof, (C) changes after the date hereof in global, national or regional political conditions or general economic or market conditions (including changes in prevailing interest rates, credit
availability and liquidity, currency exchange rates, and price levels or trading volumes in the United States or foreign securities markets) affecting financial institutions generally, (D) changes after the date hereof in the credit markets,
any downgrades in the credit markets, or adverse credit events resulting in deterioration in the credit markets generally and not specifically relating to such party or its Subsidiaries, (E) a decline in the trading price of a partys
common stock or a failure, in and of itself, to meet earnings projections, but not, in either case, including any underlying causes thereof, (F) the entry into or announcement of this Agreement or the transactions contemplated hereby or the
consummation of the transactions contemplated hereby, (G) any outbreak or escalation of hostilities, declared or undeclared acts of war or terrorism, or (H) actions or omissions taken with the prior written consent of the other party or
expressly required by this Agreement except that effects attributable to or resulting from any of the changes, events, conditions or trends described in clauses (A), (B), (C), (D), (E) and (G) shall not be excluded to the extent of any
disproportionate impact they have on such party and its Subsidiaries, taken as a whole, as compared to other companies of similar size in the banking industry in which such party and its Subsidiaries operate; or (b) the ability of such party to
timely consummate the transactions contemplated by this Agreement.
3.9
Compliance with Applicable Law
.
(a) The Company and each of its Subsidiaries hold, and have at all times since December 31, 2013 held, all
licenses, franchises, permits and authorizations which are necessary for the lawful conduct of their respective businesses and ownership of their respective properties, rights and assets under and pursuant to applicable Law (and have paid all fees
and assessments due and payable in connection therewith) and, to the Knowledge of the Company, no suspension or cancellation of any such necessary license, franchise, permit or authorization is threatened in writing. The Company and each of its
Subsidiaries have complied with, and each are not in default or violation of, (i) any applicable Law, including all Laws related to data protection or privacy, the USA PATRIOT Act, the Bank Secrecy Act, the Equal Credit Opportunity Act and
Regulation B, the Fair Housing Act, the Community Reinvestment Act, the Fair Credit Reporting Act, the Truth in Lending Act and Regulation Z, the Home Mortgage Disclosure Act, the Fair Debt Collection Practices Act, the Electronic Fund Transfer Act,
the Dodd-Frank Wall Street Reform and Consumer Protection Act, any regulations promulgated by
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the Consumer Financial Protection Bureau, the Interagency Policy Statement on Retail Sales of Nondeposit Investment Products, the SAFE Mortgage Licensing Act of 2008, the Real Estate Settlement
Procedures Act and Regulation X, and any other Law relating to bank secrecy, discriminatory lending, financing or leasing practices, money laundering prevention, Sections 23A and 23B of the Federal Reserve Act, the Sarbanes-Oxley Act, and all
agency requirements relating to the origination, sale and servicing of mortgage and consumer loans, and (ii) any posted or internal privacy policies relating to data protection or privacy, including, the protection of personal information, and
neither the Company nor any of its Subsidiaries knows of, and none of the Company, or any of its Subsidiaries has received from a Governmental Entity since January 1, 2013, written notice of, any defaults or violations of any applicable Law
relating to Company or any of its Subsidiaries.
(b) The Company and each of its Subsidiaries have properly
administered all accounts for which it acts as a fiduciary, including accounts for which it serves or served as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in accordance with the terms of the
governing documents and applicable Law. None of the Company, any of its Subsidiaries or any of their respective directors, officers or employees has committed any breach of trust or fiduciary duty with respect to any such fiduciary account, and the
accountings for each such fiduciary account are true and correct and accurately reflect the assets of such fiduciary account.
(c) Neither the Company nor any of its Subsidiaries is subject to any
cease-and-desist
order or enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar
undertaking with, or is subject to any capital directive by, or since January 1, 2014 has adopted any board resolutions at the request of, any Governmental Entity (each a
Regulatory Agreement
), nor has the Company or any
Company Subsidiary been advised since January 1, 2014 and prior to the date hereof by any Governmental Entity that it is considering issuing, initiating, ordering or requesting any such Regulatory Agreement. The Company and each of its
Subsidiaries are in compliance with each Regulatory Agreement to which it is party or subject, and neither the Company nor any of its Subsidiaries has received any notice from any Governmental Entity indicating that either the Company or any of its
Subsidiaries is not in compliance with any such Regulatory Agreement.
(d) None of the Company, any of its
Subsidiaries, or, to the Knowledge of the Company, any of their respective directors, officers, agents, employees or any other Persons acting on their behalf, (i) has violated the Foreign Corrupt Practices Act, 15 U.S.C.
§ 78dd-1
et seq., as amended, or any other similar applicable foreign, federal or state legal requirement, (ii) has made or provided, or caused to be made or provided, directly or indirectly, any
payment or thing of value to a foreign official, foreign political party, candidate for office or any other Person while knowing or having a reasonable belief that the Person will pay or offer to pay the foreign official, party or candidate, for the
purpose of influencing a decision, inducing an official to violate their lawful duty, securing an improper advantage, or inducing a foreign official to use their influence to affect a governmental decision, (iii) has paid, accepted or received
any unlawful contributions, payments, expenditures or gifts, (iv) has violated or operated in noncompliance with any export restrictions, money laundering Law, anti-terrorism Law or regulation, anti-boycott regulations or embargo regulations or
(v) is currently subject to any United States sanctions administered by the Office of Foreign Assets Control of the United States Treasury Department (the
Treasury Department
).
3.10
State Takeover Laws
. No business combination, fair price, affiliate
transaction, moratorium, control share, takeover or interested shareholder Law or other similar anti-takeover statue or regulation (collectively, the
Takeover Laws
) is
applicable to this Agreement or the transactions contemplated hereby. The Company does not have any shareholder rights plan, poison pill or similar plan or arrangement in effect.
3.11
Employee Benefit Plans
.
(a) Section 3.11(a) of the Company Disclosure Schedule sets forth a true, complete and correct list of each
employee benefit plan, program, policy, practice, or other arrangement providing benefits to
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any current or former employee, officer or director of the Company or any of its Subsidiaries or any beneficiary or dependent thereof that is sponsored or maintained by the Company or any of its
Subsidiaries or to which the Company or any of its Subsidiaries contributes or is obligated to contribute, whether or not written, including, any employee welfare benefit plan within the meaning of Section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended (
ERISA
), any employee pension benefit plan within the meaning of Section 3(2) of ERISA (whether or not such plan is subject to ERISA) and any equity purchase plan, option, equity bonus,
phantom equity or other equity plan, profit sharing, bonus, retirement (including compensation, pension, health, medical or life insurance benefits), deferred compensation, excess benefit, incentive compensation, severance, change in control or
termination pay, hospitalization or other medical or dental, life or other insurance (including any self-insured arrangements), supplemental unemployment, salary continuation, sick leave or other leave of absence benefits, short- or long-term
disability, or vacation benefits plan or any other agreement or policy or other arrangement providing employee benefits, employment-related compensation, fringe benefits or other benefits (whether qualified or nonqualified, funded or unfunded) (each
an
Employee Benefit Plan
).
(b) With respect to each material Employee Benefit Plan, the Company
has delivered or made available to Parent a true, correct and complete copy of: (i) each writing constituting a part of such Employee Benefit Plan, including, all plan documents, benefit schedules and trust agreements; (ii) the most recent
Annual Report (Form 5500 Series) and accompanying schedule, if any; (iii) all investment policy statements or guidelines, delegations and charters related to any Employee Benefit Plan; (iv) each trust agreement, group annuity contract or
other funding mechanism relating to any Employee Benefit Plan, (v) the current summary plan description and any material modifications thereto, if any; (vi) the most recent annual financial report, if any; (vii) the most recent
actuarial report, if any; and (viii) the most recent determination letter or opinion letter from the IRS, if any. Except as specifically provided in the foregoing documents delivered or made available to Parent, there are no amendments to any
Employee Benefit Plan that have been adopted or approved nor has the Company or any of its Subsidiaries undertaken to make any such amendments or to adopt or approve any new Employee Benefit Plan. No Employee Benefit Plan is maintained outside the
jurisdiction of the United States, or covers any employee residing or working outside of the United States.
(c) Each Employee Benefit Plan intended to qualify under Section 401(a) of the Code and each related trust
intended to qualify under Section 501(a) of the Code has received a favorable determination or opinion letter from the IRS with respect to each such Employee Benefit Plan as to its qualified status under the Code, including all amendments to
the Code effected by the Tax Reform Act of 1986 and subsequent legislation for the most recent cycle applicable to such qualified plan pursuant to Revenue Procedure
2005-66
(as amended or otherwise revised by
subsequent IRS guidance), any such letter has not been revoked (nor has revocation been threatened) and, to the Knowledge of the Company, no fact or event has occurred since the date of such letter or letters from the IRS that could reasonably be
expected to adversely affect the qualified status of any such Employee Benefit Plan or the exempt status of any such trust.
(d) With respect to each Employee Benefit Plan, the Company and its Subsidiaries have complied in all material
respects, and are now in substantial compliance with all provisions of ERISA, the Code and all Laws and regulations applicable to such Employee Benefit Plans and each Employee Benefit Plan has been administered in all material respects in accordance
with its terms. Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, there is not now, nor, to the Knowledge of the Company, do any circumstances exist that could reasonably be expected to
give rise to, any requirement for the posting of security with respect to any Employee Benefit Plan or the imposition of any lien on the assets of the Company or any of its Subsidiaries under ERISA or the Code. None of the Company or any of its
Subsidiaries has engaged in a transaction with respect to any applicable Employee Benefit Plan that, assuming the taxable period of such transaction expired as of the date hereof, would be reasonably likely to subject the Company or any of its
Subsidiaries to a tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA.
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(e) All contributions required to be made to any Employee Benefit Plan by
applicable Law or regulation or by any plan document or other contractual undertaking, and all premiums due or payable with respect to insurance policies funding any Employee Benefit Plan, for any period through the date hereof have been timely made
or paid in full or, to the extent not required to be made or paid on or before the date hereof, have been accrued on the financial statements set forth in the Company SEC Reports to the extent required under GAAP. Each Employee Benefit Plan that is
an employee welfare benefit plan under Section 3(1) of ERISA is either (i) funded through an insurance company contract and is not a welfare benefit fund with the meaning of Section 419 of the Code or (ii) unfunded.
(f) (i) No Employee Benefit Plan is a multiemployer plan within the meaning of Section 3(37) or
4001(a)(3) of ERISA (a
Multiemployer Plan
) or a plan that has two or more contributing sponsors at least two of whom are not under common control, within the meaning of Section 4063 of ERISA (a
Multiple Employer
Plan
); (ii) none of the Company or its Subsidiaries nor any of their respective ERISA Affiliates has, at any time during the last six years, contributed to or been obligated to contribute to any Multiemployer Plan or Multiple Employer
Plan; (iii) none of the Company and its Subsidiaries nor any of their respective ERISA Affiliates has incurred any Withdrawal Liability that has not been satisfied in full; and (iv) no Employee Benefit Plan is subject to Title IV or
Section 302 of ERISA.
ERISA Affiliate
means, with respect to any entity, trade or business, any other entity, trade or business that is a member of a group described in Section 414(b), (m) or (o) of the Code or
Section 4001(b)(1) of ERISA that includes the first entity, trade or business, or that is a member of the same controlled group as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA.
Withdrawal Liability
means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as those terms are defined in Part I of Subtitle E of Title IV of ERISA.
(g) There does not exist, nor to the Knowledge of the Company, do any circumstances exist that could reasonably be
expected to result in, any Controlled Group Liability that would be a liability of the Company or its Subsidiaries or any of their respective ERISA Affiliates following the Closing. Without limiting the generality of the foregoing, neither the
Company nor any of its Subsidiaries nor any of their respective ERISA Affiliates, has engaged in any transaction described in Section 4069 or Section 4204 or 4212 of ERISA.
Controlled Group Liability
means any and all
liabilities (i) under Title IV of ERISA, (ii) under section 302 of ERISA, (iii) under sections 412 and 4971 of the Code, (iv) as a result of a failure to comply with the continuation coverage requirements of
section 601 et seq. of ERISA and section 4980B of the Code, and (v) under corresponding or similar provisions of foreign Laws or regulations.
(h) None of the Company and its Subsidiaries has any liability for life, health, medical or other welfare benefits to
former employees or beneficiaries or dependents thereof, except for health continuation coverage as required by Section 4980B of the Code or Part 6 of Title I of ERISA or other applicable Law and at no expense to the Company and its
Subsidiaries. The Company and each of its Subsidiaries has reserved the right to amend, terminate or modify at any time all plans or arrangements providing for post-retirement welfare benefits.
(i) Except as would not reasonably be expected to result in any liability to the Company or any of its Subsidiaries,
there are no pending or, to the Knowledge of the Company, threatened claims (other than routine claims for benefits in the ordinary course), lawsuits or arbitrations which have been asserted, threatened or instituted, or to the Knowledge of the
Company, no set of circumstances exists which may reasonably give rise to a claim or lawsuit against the Employee Benefit Plans, any fiduciaries thereof with respect to their duties to the Employee Benefit Plans or the assets of any of the trusts
under any of the Employee Benefit Plans. Neither the Company nor any of its Subsidiaries has taken corrective action or made a filing under any voluntary correction program of the IRS, the U.S. Department of Labor or any other Governmental Entity
with respect to any Employee Benefit Plan, and neither the Company nor any of its Subsidiaries has any knowledge of any plan defect that would qualify for correction under any such program. No audit or other proceeding by a Governmental Entity is
pending or threatened with respect to any Employee Benefit Plan.
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(j) Each Employee Benefit Plan that is or was a nonqualified
deferred compensation plan within the meaning of Section 409A of the Code and associated Treasury Department guidance has been operated in compliance with, and is in documentary compliance with Section 409A of the Code and IRS
regulations and guidance thereunder.
(k) None of the execution and delivery of this Agreement, the Company
Shareholder Approval, or the consummation of the transactions contemplated hereby, either alone or together with any other event or events, will (i) result in any payment (including, severance, golden parachute, forgiveness of indebtedness or
otherwise) becoming due under any Employee Benefit Plan, whether or not such payment is contingent, (ii) increase any payments or benefits otherwise payable under any Employee Benefit Plan, (iii) result in the acceleration of the time of
payment, vesting or funding of any benefits including, but not limited to, the acceleration of the vesting and exercisability of any equity awards, whether or not contingent, (iv) result in any limitation on the right of the Company or any of
its Subsidiaries to amend, merge, terminate or receive a reversion of assets from any Employee Benefit Plan or related trust, (v) require the funding of any trust or other funding vehicle, (vi) limit or restrict the right of the Company
or, after the consummation of the transactions contemplated hereby, the Surviving Corporation, to merge, amend or terminate any of the Employee Benefit Plans or (vii) result in the payment of any amount that could, individually or in
combination with any other such payment, constitute an excess parachute payment as defined in Section 280G(b)(1) of the Code. No Employee Benefit Plan provides for the
gross-up
or reimbursement of
Taxes under Section 4999 or 409A of the Code, or otherwise.
3.12
Approvals
. As of the date of this
Agreement, the Company knows of no reason relating to the Company why all regulatory approvals from any Governmental Entity required for the consummation of the transactions contemplated by this Agreement should not be obtained on a timely basis.
3.13
Opinion
. The Company Board has received the opinion of D.A. Davidson & Co. that, as of the
date of such opinion, and based upon and subject to the factors and assumptions set forth therein, the Merger Consideration to be paid to the holders of Company Common Stock in the First Merger is fair, from a financial point of view, to such
holders.
3.14
Company Information
. The information relating to the Company and its Subsidiaries that is
provided by the Company or its representatives for inclusion in the Joint Proxy Statement/Prospectus and Form
S-4,
or in any application, notification or other document filed with any other Regulatory Agency
or other Governmental Entity in connection with the transactions contemplated by this Agreement, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading. The portions of the Joint Proxy Statement/Prospectus relating to the Company and its Subsidiaries and other portions within the reasonable control of the Company and its Subsidiaries will comply
with the provisions of the Exchange Act and the rules and regulations thereunder.
3.15
Legal Proceedings
.
There is no suit, action, investigation, claim, proceeding or review pending, or to the Knowledge of the Company, threatened against or affecting it or any of its Subsidiaries or any of the current or former directors or executive officers of it or
any of its Subsidiaries and there are no facts or circumstances that would reasonably be expected to result in any claims against the Company or any of its Subsidiaries. There is no outstanding injunction, order, writ, award, judgment, settlement,
arbitration ruling, decree or regulatory restriction imposed upon or entered into by the Company, any of its Subsidiaries or the assets of it or any of its Subsidiaries (or that, upon consummation of the Mergers, would apply to Parent or any of its
Affiliates). For purposes of this Agreement,
Affiliate
means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control
with, such first Person.
3.16
Material Contracts
.
(a) Except for those agreements and other documents filed as exhibits or incorporated by reference to the Companys
Annual Report on Form
10-K
for the fiscal year ended December 31, 2015 or filed or
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incorporated in any of its other Company SEC Reports filed since January 1, 2014 and prior to the date hereof, neither the Company nor any of its Subsidiaries is a party to, bound by or
subject to any agreement, contract, arrangement, commitment or understanding (whether written or oral) (each, whether or not filed with the SEC, a
Material Contract
): (i) that is a material contract within the meaning
of Item 601(b)(10) of the SECs
Regulation S-K;
(ii) that contains a
non-compete
or client or customer
non-solicit
requirement or any other provisions that materially restricts the conduct of, or the manner or location of conducting, any line of business of the Company or any of its Affiliates (or, upon consummation of the Mergers, of Parent or any of its
Affiliates); (iii) that obligates the Company or any of its affiliates (or, upon consummation of the Mergers, Parent or any of its Affiliates) to conduct business with any third party on an exclusive or preferential basis; (iv) that requires
referrals of business or requires the Company or any of its Affiliates to make available investment opportunities to any Person on a priority or exclusive basis; (v) that relates to the incurrence of indebtedness by the Company or any of its
Subsidiaries (other than deposit liabilities, trade payables, federal funds purchased, advances and loans from the Federal Home Loan Bank and securities sold under agreements to repurchase, in each case incurred in the ordinary course of business
consistent with past practice) including any sale and leaseback transactions, capitalized leases and other similar financing transactions; (vi) that grants any right of first refusal, right of first offer or similar right with respect to any
assets, rights or properties of the Company or any of its Subsidiaries; (vii) that limits the payment of dividends by the Company or any of its Subsidiaries; (viii) that relates to a joint venture, partnership, limited liability company
agreement or other similar agreement or arrangement with any third party, or to the formation, creation or operation, management or control of any partnership or joint venture with any third party, except in each case that relates to merchant
banking investments by the Company or its Subsidiaries in the ordinary course of business; (ix) that relates to an acquisition, divestiture, merger or similar transaction and which contains representations, covenants, indemnities or other
obligations (including indemnification,
earn-out
or other contingent obligations) that are still in effect; (x) that provides for payments to be made by the Company or any of its Subsidiaries
upon a change in control thereof; (xi) that was not negotiated and entered into on an
arms-length
basis; (xii) that provides for indemnification by the Company or any of its Subsidiaries of any
Person, except for contracts entered into in the ordinary course of business providing for customary and immaterial indemnification and provisions of the Company Articles and the Company Bylaws providing for indemnification; (xiii) that is a
consulting agreement or data processing, software programming or licensing contract involving the payment of more than $90,000 per annum (other than any such contracts which are terminable by the Company or any of its Subsidiaries on 60 days or less
notice without any required payment or other conditions, other than the condition of notice); (xiv) that grants to a Person any right, license, covenant not to sue or other right in Company Owned Intellectual Property or grants to the Company or any
of its Subsidiaries a license or other right to any Company Licensed Intellectual Property (excluding licenses to shrink-wrap or click-wrap software), in each case that involves the payment of more than $90,000 per annum or is material to the
conduct of the businesses of the Company; (xv) to which any Affiliate, officer, director, employee or consultant of such party or any of its Subsidiaries is a party or beneficiary (except with respect to loans to, or deposit or asset management
accounts of, directors, officers and employees entered into in the ordinary course of business and in accordance with all applicable regulatory requirements with respect to it); (xvi) that would prevent, materially delay or materially impede the
Companys ability to consummate the First Merger, the Subsequent Merger, the Bank Merger or the other transactions contemplated hereby; (xvii) that contains a put, call or similar right pursuant to which the Company or any of its
Subsidiaries could be required to purchase or sell, as applicable, any equity interests of any Person or assets; (xviii) that is a lease of real or personal property providing for annual rentals of $50,000 or more; (xix) that contains a
standstill or similar agreement pursuant to which the Company or any of its Subsidiaries has agreed not to acquire assets or securities of another party or any of its Affiliates; (xx) that is between the Company or any of its Subsidiaries and
any director or officer of the Company or any Person beneficially owning five percent or more of the outstanding Company Common Stock; or (xxi) that is otherwise not entered into in the ordinary course of business or that is material to the
Company or any Subsidiary of the Company or their financial condition or results of operations. The Company has Previously Disclosed or made available to Parent prior to the date hereof true, correct and complete copies of each Material Contract.
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(b) (i) Each Material Contract is a valid and legally binding agreement of
the Company or one of its Subsidiaries, as applicable, and, to the Knowledge of the Company, the counterparty or counterparties thereto, is enforceable in accordance with its terms (subject to the Bankruptcy and Equity Exception) and is in full
force and effect, (ii) the Company and each of its Subsidiaries has duly performed all obligations required to be performed by it prior to the date hereof under each Material Contract, (iii) neither the Company nor any of its Subsidiaries,
and, to the Knowledge of the Company, any counterparty or counterparties, is in breach of any provision of any Material Contract, and (iv) no event or condition exists that constitutes, after notice or lapse of time or both, will constitute, a
breach, violation or default on the part of the Company or any of its Subsidiaries under any such Material Contract or provide any party thereto with the right to terminate such Material Contract. Section 3.16(b) of the Company Disclosure
Schedule sets forth a true and complete list of (x) all Material Contracts pursuant to which consents or waivers are or may be required and (y) all notices which are required to be given, in each case, prior to the performance by the
Company of this Agreement and the consummation of the First Merger, the Subsequent Merger, the Bank Merger and the other transactions contemplated hereby.
3.17
Environmental Matters
. (a) The Company and its Subsidiaries are in compliance, and have at all times
in the past complied, with any federal, state or local Law, regulation, order, decree, permit, authorization, common Law or agency requirement relating to: (i) the protection or restoration of the environment, health and safety as it relates to
hazardous substance handling or exposure or the protection of natural resources; (ii) the handling, use, presence, disposal, release or threatened release of, or exposure to, any hazardous substance; or (iii) wetlands, indoor air,
pollution, contamination or any injury to Persons or property from exposure to any hazardous substance (collectively,
Environmental Laws
); (b) there are no proceedings, claims, actions, or, to the Knowledge of the Company,
investigations of any kind, pending, or threatened, by any Person, court, agency, or other Governmental Entity or any arbitral body, against the Company or its Subsidiaries relating to liability under any Environmental Law and, to the Knowledge of
the Company, there is no reasonable basis for any such proceeding, claim, action or investigation; (c) there are no agreements, orders, judgments or decrees by or with any court, Regulatory Agency or other Governmental Entity, or any
agreements, indemnities or settlements with any Person that impose any liabilities or obligations under, relating to or in respect of any Environmental Law; (d) to the Knowledge of the Company, there are, and have been, no releases of any
harmful or hazardous substances or wastes at any property currently or formerly owned, operated or otherwise used by the Company or any of its Subsidiaries under circumstances which could reasonably be expected to result in liability to or claims
against the Company or its Subsidiaries relating to any Environmental Law; and (e) there are no reasonably anticipated future events, conditions, circumstances, practices, plans or legal requirements (in each case of the Company) that could
reasonably be expected to give rise to obligations or liabilities under any Environmental Law. Neither the Company nor any of its Subsidiaries has possession of or has conducted any environmental studies during the past five years with respect to
any properties owned by it or leased by it.
3.18
Taxes
.
(a) The Company and each of its Subsidiaries (i) have duly and timely filed (taking into account any extension of
time within which to file) all Tax Returns (as defined below) required to be filed by any of them and all such filed Tax Returns are complete and accurate; and (ii) have paid all Taxes (as defined below) that are due and payable or that the
Company or any of its Subsidiaries are obligated to withhold from amounts owing to any employee, creditor or third party, except with respect to matters contested in good faith and for which adequate reserves have been established and reflected on
the financial statements of the Company.
(b) None of the Tax Returns or matters described in paragraph
(a) above are currently under any audit, suit, proceeding, examination or assessment by the U.S. Internal Revenue Service (
IRS
) or the relevant state, local or foreign Tax authority and neither the Company nor any of its
Subsidiaries has received written notice from any Tax authority that an audit, suit, proceeding, examination or assessment in respect of such Tax Returns or matters pertaining to Taxes are pending or threatened.
(c) No deficiencies have been asserted or assessments made against the Company or any of its Subsidiaries that have not
been paid or resolved in full.
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(d) No claim has been made against the Company or any of its Subsidiaries
by any Tax authorities in a jurisdiction where the Company or its Subsidiaries does not file Tax Returns that the Company or its Subsidiaries is or may be subject to taxation by that jurisdiction.
(e) The Company is not, and during the past five years has never been, a United States real property holding
corporation within the meaning of Section 897 of the Code.
(f) No liens for Taxes exist with respect to
any of the assets of the Company or any of its Subsidiaries, except for liens for Permitted Encumbrances. Neither the Company nor any of its Subsidiaries has entered into any closing agreements, private letter rulings, technical advice memoranda or
similar agreement or rulings with any Tax authority, nor have any been issued by any Tax authority, in each case that have any continuing effect.
(g) Neither the Company nor any of its Subsidiaries (i) has ever been a member of an affiliated, combined,
consolidated or unitary Tax group for purposes of filing any Tax Return, other than, for purposes of filing, affiliated, combined, consolidated or unitary Tax Returns, a group of which the Company was the common parent, (ii) has any liability
for Taxes of any Person under Treasury Regulations
Section 1.1502-6
(or any similar provision of state, local or foreign law), (iii) is a party to or bound by any Tax sharing or allocation agreement
(other than any such agreement exclusively between or among the Company and its Subsidiaries) or to any other contract to indemnify any other Person with respect to Taxes (in each case, other than ancillary provisions in commercial agreements not
primarily related to Taxes), (iv) has, or has ever had, a permanent establishment in any country other than the country of its organization, or (v) has granted to any Person any power of attorney that is currently in force with respect to any
Tax matter.
(h) None of the Company or any of its Subsidiaries has agreed to or is required to make any
adjustments pursuant to Section 481(a) of the Code or any similar provisions of state, local or foreign Law by reason of a change in accounting method, has any knowledge that any taxing authority has proposed any such adjustment, or has any
application pending with any taxing authority requesting permission for any changes in accounting methods that relate to its business or operations.
(i) Neither the Company nor any of its Subsidiaries has participated in any listed transactions within the
meaning of Treasury Regulations
Section 1.6011-4(b).
(j) The Company
has made available to Parent true and correct copies of the United States federal consolidated income Tax Returns filed by the Company and its Subsidiaries for each of the fiscal years ended December 31, 2013, 2014 and 2015.
(k) None of the Company or its Subsidiaries has been a distributing corporation or controlled
corporation (i) in any distribution occurring during the last 30 months that was purported or intended to be governed by Section 355 of the Code (or any similar provision of state, local or foreign Law) or (ii) to the Knowledge of
the Company, in any distribution that could otherwise constitute part of a plan or series of related transactions (within the meaning of Section 355(e) of the Code) of which the Mergers are a part.
As used in this Agreement, (i) the term
Tax
(including, with correlative meaning, the term
Taxes
)
includes all United States federal, state, local and foreign income, profits, franchise, gross receipts, environmental, customs duty, capital stock, severances, stamp, payroll, sales, employment, unemployment, disability, use, property, withholding,
excise, production, value added, occupancy and other taxes, duties or assessments of any nature whatsoever, together with all interest, penalties and additions imposed with respect to such amounts and any interest in respect of such penalties and
additions, and (ii) the term
Tax Return
includes all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns) required to be supplied to a Tax authority relating to
Taxes.
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3.19
Reorganization
. The Company has not taken or agreed to take
any action, and is not aware of any fact or circumstance, that would prevent or impede, or could reasonably be expected to prevent or impede, the First Merger and the Subsequent Merger, taken together, from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
3.20
Intellectual Property
.
(a) Each of the Company and its Subsidiaries (A) solely owns (beneficially, and of record where applicable), free
and clear of all Liens, other than Permitted Encumbrances and
non-exclusive
licenses entered into in the ordinary course of business, all right, title and interest in and to its respective Company Owned
Intellectual Property, and (B) to the Knowledge of the Company, has valid and sufficient rights and licenses to all of the Company Licensed Intellectual Property. The Company Owned Intellectual Property is subsisting and, to the Knowledge of
the Company, valid and enforceable. Each of the Company and its Subsidiaries owns or has the right to use all Intellectual Property used in or necessary for the conduct each of their respective businesses as presently conducted and as currently
planned to be conducted.
(b) To the Knowledge of the Company, the operation of the Company and each of its
Subsidiaries respective businesses as presently conducted does not infringe, dilute, misappropriate or otherwise violate the Intellectual Property rights of any third Person, and no Person has asserted that the Company or any of its
Subsidiaries has infringed, diluted, misappropriated or otherwise violated any third Persons Intellectual Property rights. To the Knowledge of the Company, no third Person has infringed, diluted, misappropriated or otherwise violated any of
the Companys or any of its Subsidiarys rights in the Company Owned Intellectual Property.
(c) The
Company and each of its Subsidiaries has taken reasonable measures to protect (A) their rights in their respective Company Owned Intellectual Property and (B) the confidentiality of all Trade Secrets that are owned, used or held by the
Company or any of its Subsidiaries, and to the Knowledge of the Company, such Trade Secrets have not been used, disclosed to or discovered by any Person except pursuant to appropriate
non-disclosure
agreements
which have not been breached. To the Knowledge of the Company, no Person has gained unauthorized access to the Companys or its Subsidiaries IT Assets since December 31, 2013.
(d) The Companys and each of its Subsidiarys respective IT Assets operate and perform substantially as
required by the Company and each of its Subsidiaries in connection with their respective businesses and have not materially malfunctioned or failed within the past two years. The Company and each of its Subsidiaries have implemented reasonable
backup, security and disaster recovery technology and procedures consistent with industry practices. The Company and each of its Subsidiaries is compliant with all applicable Laws, rules and regulations, and their own privacy and security policies
and commitments to their respective customers, consumers and employees, concerning data protection and the privacy and security of personal data and the nonpublic personal information of their respective customers, consumers and employees.
(e) For purposes of this Agreement,
(i)
Intellectual Property
means any and all: (i) trademarks, service marks,
brand names, collective marks, Internet domain names, logos, symbols, slogans, designs and other indicia of origin, together with all translations, adaptations, derivations and combinations thereof, all applications, registrations and renewals for
the foregoing, and all goodwill associated therewith and symbolized thereby; (ii) patents and patentable inventions (whether or not reduced to practice), all improvements thereto, and all invention disclosures and applications therefor,
together with all divisions, continuations,
continuations-in-part,
revisions, renewals, extensions, reexaminations and reissues in connection therewith;
(iii) confidential proprietary business information, trade secrets and
know-how,
including processes, schematics, business and other methods, technologies, techniques, protocols, formulae, drawings,
prototypes, models, designs, unpatentable discoveries and inventions (
Trade Secrets
); (iv) copyrights in published and unpublished works of authorship (including databases and other compilations of information), and all
registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof; and (v) other intellectual property rights.
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(ii)
IT Assets
means, with respect to
any Person, the computers, computer software, firmware, middleware, servers, workstations, routers, hubs, switches, data, data communications lines, and all other information technology equipment, and all associated documentation owned by such
Person or such Persons Subsidiaries.
(iii)
Company Licensed Intellectual
Property
means the Intellectual Property owned by third Persons that is used in or necessary for the operation of the respective businesses of the Company and each of its Subsidiaries as presently conducted.
(iv)
Company Owned Intellectual Property
means Intellectual Property owned or
purported to be owned by the Company or any of its Subsidiaries.
3.21
Properties
. The Company or one of its
Subsidiaries (a) has good and insurable title to all the properties and assets owned by the Company or one of its Subsidiaries (the
Company Owned Properties
), free and clear of all Liens of any nature whatsoever, except
(i) statutory Liens securing payments not yet due, (ii) Liens for Taxes not yet due and payable or that are being contested in good faith and for which adequate reserves have been established and reflected on the financial statements of
the Company, (iii) easements, rights of way, and other similar encumbrances that do not adversely affect the value or affect the use of the properties or assets subject thereto or affected thereby or otherwise impair business operations at such
properties as bank facilities and (iv) such imperfections or irregularities of title or Liens as do not materially affect the use of the properties or assets subject thereto or affected thereby or otherwise materially impair business operations
at such properties (collectively,
Permitted Encumbrances
), and (b) is the lessee or subleassee of all properties and assets leased or subleased by the Company or one of its Subsidiaries (the
Company Leased
Properties
and, collectively with the Company Owned Properties, the
Company Real Property
), free and clear of all Liens of any nature whatsoever, except for Permitted Encumbrances, and is in possession of the properties
purported to be leased thereunder, and each such lease is valid without default thereunder by the lessee or subleassee or, to the Knowledge of the Company, the lessor. None of the Company or any of its Subsidiaries owns, and no such entity is in the
process of foreclosing (whether by judicial process or by power of sale) or otherwise in the process of acquiring title to, except pursuant to foreclosures which are pending in the ordinary course of business consistent with past practice, any real
property or premises on the date hereof in whole or in part. Section 3.21 of the Company Disclosure Schedule contains a complete and correct list of all Company Owned Properties. Section 3.21(b) of the Company Disclosure Schedule contains
a complete and correct list of all Company Leased Properties and together with a list of all applicable leases or subleases (each, a
Lease
) and the name of the lessor or sublessor.
(a) All buildings, structures, improvements and fixtures on the Company Real Property and the equipment located thereon
are in good operating condition and repair, ordinary wear and tear excepted, and conform to all applicable Laws.
(b) The buildings, driveways and all other structures and improvements upon the Company Owned Properties are all within
the boundary lines of such property or have the benefit of valid easements and there are no encroachments thereon that would affect the use thereof. There are no outstanding requirements or recommendations by any insurance company that has issued a
policy covering the Company Owned Properties, or by any board of fire underwriters or other body exercising similar functions, requiring or recommending any repairs or work to be done on any such property.
(c) Each of the leases for the Company Leased Property is valid and existing and in full force and effect, and no party
thereto is in default and no notice of a claim of default by any party has been delivered to the Company or any of its Subsidiaries, or is now pending, and there does not exist any event that with notice or the passing of time, or both, would
constitute a default or excuse performance by any party thereto, provided that with respect to matters relating to any party other than the Company or one of its Subsidiaries, the foregoing representation is based on the Knowledge of the Company.
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(d) As to the Company and its Subsidiaries, none of the Company Real
Property has been condemned or otherwise taken by any Governmental Entity and, to the Knowledge of the Company, no condemnation or taking is threatened or contemplated and none thereof is subject to any claim, contract or Law which might adversely
affect its use or value for the purposes now made of it. None of the premises or properties of the Company or any of its Subsidiaries is subject to any current interests of third parties or other restrictions or limitations that would impair or be
inconsistent with the current use of such property by the Company or such Subsidiary.
(e) The Company has
delivered to Parent true, accurate and complete copies of each of the following to the extent in the possession or control of the Company or its Subsidiaries and in any way related to any of the Company Real Property: (i) title commitments
together with legible copies of all underlying exceptions, (ii) title policies, (iii) environmental reports, (iv) zoning reports and zoning letters, and (v) licenses and permits.
3.22
Insurance
. (a) The Company and its Subsidiaries are insured with reputable insurers against such risks
and in such amounts as the management of the Company reasonably has determined to be prudent and consistent with industry practice, and the Company and its Subsidiaries are in compliance with their insurance policies and are not in default under any
of the terms thereof, (b) each such policy is outstanding and in full force and effect and, except for policies insuring against potential liabilities of officers, directors and employees of the Company and its Subsidiaries, the Company or the
relevant Subsidiary thereof is the sole beneficiary of such policies, and (c) all premiums and other payments due under any such policy have been paid, and all claims thereunder have been filed in due and timely fashion.
3.23
Accounting and Internal Controls
.
(a) The records, systems, controls, data and information of the Company and its Subsidiaries are recorded, stored,
maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of the Company or its Subsidiaries or accountants (including
all means of access thereto and therefrom). The Company and its Subsidiaries have devised and maintain internal control over financial reporting (within the meaning of Rules
13a-15(f)
and
15d-15(f)
under the Exchange Act). Such internal control over financial reporting is and has been effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements in accordance with GAAP and includes policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the
Company, (ii) provide reasonable assurance that transactions are and were recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are and were being made
only in accordance with authorizations of management and directors of the Company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that
could have a material effect on their respective financial statements. The Company has designed and implemented disclosure controls and procedures (within the meaning of Rules
13a-15(e)
and
15d-15(e)
of the Exchange Act) to ensure that material information relating to the Company and its Subsidiaries is or was, as the case may be, made known to its management by others within those entities as
appropriate to allow timely decisions regarding required disclosure and to make the certifications required by the Exchange Act and Sections 302 and 906 of the Sarbanes-Oxley Act and such disclosure controls and procedures are effective.
(b) The Companys management has completed an assessment of the effectiveness of its internal control over
financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act for the year ended December 31, 2015, and such assessment concluded that such controls were effective. The Company has previously disclosed,
based on its most recent evaluation prior to the date hereof, to its auditors and the audit committee of the Company Board: (A) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial
reporting and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in its internal controls over financial
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reporting. The Company has made available to Parent (i) a summary of any such disclosure made by management to the Companys auditors and audit committee since December 31, 2013
and (ii) any communication since December 31, 2013 made by management or the Companys auditors to the audit committee required or contemplated by listing standards of Nasdaq, the audit committees charter or professional
standards of the Public Company Accounting Oversight Board.
(c) Since January 1, 2014, (A) none of the
Company or any of its Subsidiaries or, to the Knowledge of the Company, any director, officer, auditor, accountant or representative of the Company or any of its Subsidiaries, has received or otherwise had or obtained knowledge of any material
complaint, allegation, assertion or written claim regarding the accounting or auditing practices, procedures, methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of the Company or any of its
Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or written claim that the Company or any of its Subsidiaries, as applicable, has engaged in questionable accounting or auditing
practices, and (B) no attorney representing the Company or any of its Subsidiaries, whether or not employed by the Company or any of its Subsidiaries, has reported evidence of a material violation of securities Laws, breach of fiduciary duty or
similar violation to the Company Board or any committee thereof or to any of its directors or officers. The Company has made available to Parent a summary of all complaints or concerns relating to other matters made since December 31, 2013
through the Companys whistleblower
hot-line
or equivalent system for receipt of Company employee concerns, as applicable regarding possible violations of Law.
3.24
Derivatives
. Neither the Company nor any of its Subsidiaries has or is a party to any swaps, caps, floors,
collars, option agreements, futures and forward contracts and other similar derivative transactions outstanding nor do any of them own any securities that (i) are referred to generically as structured notes, high risk mortgage
derivatives, capped floating rate notes or capped floating rate mortgage derivatives or (ii) could have changes in value as a result of interest or exchange rate changes that significantly exceed normal changes in
value attributable to interest or exchange rate changes.
3.25
Loan Matters
.
(a) Each loan, loan agreement, note or borrowing arrangement (including leases, credit enhancements, commitments,
guarantees and interest-bearing assets) in which the Company or any Subsidiary of the Company is a creditor (collectively,
Loans
) currently outstanding (i) is evidenced by notes, agreements or other evidences of indebtedness
that are true, genuine and what they purport to be, (ii) to the extent secured, has been secured by valid Liens which have been perfected and (iii) to the Knowledge of the Company, is a legal, valid and binding obligation of the obligor
named therein, enforceable in accordance with its terms (subject to the Bankruptcy and Equity Exception). The notes or other credit or security documents with respect to each such outstanding Loan were in compliance with all applicable Laws at the
time of origination or purchase by the Company or its Subsidiaries.
(b) Each outstanding Loan was solicited and
originated, and is and has been administered and, where applicable, serviced, and the relevant Loan files are being maintained in accordance with the relevant notes or other credit or security documents and the Companys written underwriting
standards, in each case, with all applicable requirements of applicable Law.
(c) None of the agreements pursuant
to which the Company or any of its Subsidiaries has sold or is servicing (i) Loans or pools of Loans or (ii) participations in Loans or pools of Loans contains any obligation to repurchase such Loans or interests therein or to pursue any
other form of recourse against the Company or any of its Subsidiaries solely on account of a payment default by the obligor on any such Loan.
(d) The Company has Previously Disclosed to Parent all claims for repurchases by the Company or any of its Subsidiaries
of home mortgage loans that were sold to third parties by the Company and its
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Subsidiaries that are outstanding or threatened (in writing), in each case, as of the date hereof and since December 31, 2013.
(e) Section 3.25(e) of the Company Disclosure Schedule sets forth a list of (i) each Loan that as of
December 31, 2016 (A) was contractually past due 90 days or more in the payment of principal and/or interest, (B) was on
non-accrual
status, (C) was classified as substandard,
doubtful, loss, classified, criticized, credit risk assets, concerned loans, watch list, impaired or special mention (or words of similar
import) by the Company, any of its Subsidiaries or any Governmental Entity (D) a specific reserve allocation existed in connection therewith, (E) was required to be accounted for as a troubled debt restructuring in accordance with ASC
310-40,
(ii) each Loan that, as of December 31, 2016, had a total outstanding balance and/or unfunded commitment of $250,000 or more and that, as of such date, (A) a reasonable doubt exists as to the
timely future collectability of principal and/or interest, whether or not interest is still accruing or the Loans are less than 90 days past due, (B) the interest rate terms have been reduced and/or the maturity dates have been extended
subsequent to the agreement under which the Loan was originally created due to concerns regarding the borrowers ability to pay in accordance with such initial terms, or (C) where a specific reserve allocation exists in connection
therewith, and (iii) each asset of the Company or any of its Subsidiaries that, as of December 31, 2016, was classified as other real estate owned, other repossessed assets or as an asset to satisfy Loans, and the
book value thereof as of such date. For each loan identified in accordance with the immediately preceding sentence, Section 3.25(e) of the Company Disclosure Schedule sets forth the outstanding balance, including accrued and unpaid interest, on
each such Loan and the identity of the borrower thereunder as of December 31, 2016.
(f) Section 3.25(f)
of the Company Disclosure Schedule sets forth a list of all Loans outstanding as of the date of this Agreement by the Company or any of its Subsidiaries to any directors, officers and principal shareholders (as such terms are defined in Regulation O
of the Federal Reserve Board (12 C.F.R. Part 215)) of the Company or any of its Subsidiaries. There are no employee, officer, director or other affiliate Loans on which the borrower is paying a rate other than that reflected in the note or other
relevant credit or security agreement or on which the borrower is paying a rate which was not in compliance with Regulation O, and all such Loans are and were originated in compliance with all applicable Laws.
(g) Neither the Company nor any of its Subsidiaries is now nor has it ever been since December 31, 2013 subject to
any fine, suspension, settlement or other contract or other administrative agreement or sanction by, or any reduction in any loan purchase commitment from, any Governmental Entity relating to the origination, sale or servicing of mortgage or
consumer Loans.
(h) Since December 31, 2012, the Company and each of its Subsidiaries has complied with, and
all documentation in connection with the origination, processing, underwriting and credit approval of any mortgage loan originated by the Company or any of its Subsidiaries satisfied: (1) all applicable Laws with respect to the origination,
insuring, purchase, sale, pooling, servicing, subservicing, loan modification, loss mitigation or filing of claims in connection with such mortgage loans, including, to the extent applicable, all Laws relating to real estate settlement procedures,
consumer credit protection, truth in lending Laws, usury limitations, fair housing, transfers of servicing, collection practices, equal credit opportunity and adjustable rate mortgages, in each case applicable as of the time of such origination,
processing, underwriting or credit approval; (2) the responsibilities and obligations relating to such mortgage loans set forth in any contract between the Company or any of its Subsidiaries, on the one hand, and any Governmental Entity, loan
investor or insurer, on the other hand; (3) the applicable rules, regulations, guidelines, handbooks and other requirements of any Governmental Entity, loan investor or insurer, in each case applicable as of the time of such origination,
processing, underwriting or credit approval; and (4) the terms and provisions of any mortgage or other collateral documents and other loan documents with respect to each such mortgage loan; in each case applicable as of the time of such
origination, processing, underwriting or credit approval.
(i) Since December 31, 2012, the Company and each
of its Subsidiaries have not engaged in, and, to the Knowledge of the Company, no third-party vendors (including outside law firms and other third-party
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foreclosure services providers used by the Company or by any of its Subsidiaries, as applicable) has engaged in, directly or indirectly, (1) any foreclosures in violation of any applicable
Law, including but not limited to the Servicemembers Civil Relief Act, or in breach of any binding Regulatory Agreement or (2) the conduct referred to as robo-signing or any other similar conduct of approving or notarizing documents
relating to mortgage loans that do not comply with any applicable Law.
(j) Since December 31, 2012, the
Company has not foreclosed upon, managed or taken a deed or title to, any real estate (other than single-family residential properties) without complying with all applicable FDIC environmental due diligence standards (including FDIC Bulletin
FIL-14-93,
and update
FIL-98-2006)
or foreclosed upon, managed or taken a deed or title to, any
such real estate if the environmental assessment indicates the liabilities under Environmental Laws are likely in excess of the assets value.
3.26
Community Reinvestment Act Compliance
. The Company and each of its Subsidiaries that is an insured
depositary institution is in compliance with the applicable provisions of the Community Reinvestment Act of 1977 and the regulations promulgated thereunder and has received a Community Reinvestment Act rating of at least satisfactory in
its most recently completed exam, and to the Knowledge of the Company, there does not exist any fact or circumstance or set of facts or circumstances which would reasonably be expected to result in the Company or any such Subsidiary having its
current rating lowered.
3.27
Investment Securities
.
(a) Each of the Company and its Subsidiaries has good and valid title to all securities held by it (except securities
sold under repurchase agreements or held in any fiduciary or agency capacity) free and clear of any Liens, except to the extent such securities are pledged in the ordinary course of business consistent with prudent business practices to secure
obligations of the Company or any of its Subsidiaries and except for such defects in title or Liens that would not be material to the Company and its Subsidiaries. Such securities are valued on the books of the Company and its Subsidiaries in
accordance with GAAP.
(b) The Company and its Subsidiaries and their respective businesses employ investment,
securities, commodities, risk management and other policies, practices and procedures that the Company believes are prudent and reasonable in the context of such businesses. Prior to the date of this Agreement, the Company has made available to
Parent each of such policies, practices and procedures.
3.28
Related Party Transactions
. Except for
ordinary course bank deposit, trust and asset management services on arms length terms, and compensation as used in Item 402 of the SECs Regulation
S-K,
there are no transactions or
series of related transactions, agreements, arrangements or understandings, nor are there any currently proposed transactions or series of related transactions, between the Company or any of its Subsidiaries, on the one hand, and any current or
former director or executive officer (as defined in Rule
3b-7
under the Exchange Act) of the Company or any of its Subsidiaries or any Person who beneficially owns (as defined in Rules
13d-3
and
13d-5
of the Exchange Act) 5% or more of the Company Common Stock (or any of such Persons immediate family members or Affiliates) (other than Subsidiaries of
the Company) on the other hand.
3.29
Labor
. Neither the Company nor any of its Subsidiaries is, nor at any
time since January 1, 2014 was, a party to or bound by any labor or collective bargaining agreement and to the Knowledge of the Company, there are no organizational campaigns, petitions or other activities or proceedings of any labor union,
workers council or labor organization seeking recognition of a collective bargaining unit with respect to, or otherwise attempting to represent, any of the employees of the Company or any of its Subsidiaries or compel the Company or any of its
Subsidiaries to bargain with any such labor union, workers council or labor organization. There are no labor related controversies, strikes, slowdowns, walkouts or other work stoppages pending or, to the Knowledge of the Company, threatened
(in writing) and neither the Company nor any of its Subsidiaries has experienced any such labor related controversy, strike, slowdown, walkout or other work stoppage since January 1, 2014. Neither the Company nor any of its Subsidiaries is a
party to, or otherwise bound by, any consent decree with, or citation by,
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any Governmental Entity relating to employees or employment practices. Each of the Company and its Subsidiaries is in material compliance with all applicable Laws relating to labor, employment,
termination of employment or similar matters, including but not limited to Laws relating to discrimination, disability, classification of workers, labor relations, hours of work, payment of wages and overtime wages, pay equity, immigration, workers
compensation, working conditions, employee scheduling, occupational safety and health, family and medical leave, and employee terminations, and has not engaged in any unfair labor practices or similar prohibited practices. There are no complaints,
lawsuits, arbitrations, administrative proceedings, or other proceedings of any nature pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries brought by or on behalf of any applicant for employment,
any current or former employee, any Person alleging to be a current or former employee, any class of the foregoing, or any Governmental Entity, relating to any such Law, or alleging breach of any express or implied contract of employment, wrongful
termination of employment, or alleging any other discriminatory, wrongful or tortious conduct in connection with the employment relationship.
3.30
Foundation Bancorp
. To the Knowledge of the Company: (i) at all times since December 31, 2013,
Foundation Bancorp, Inc. (
Foundation
) and its Subsidiaries held all licenses, franchises, permits and authorizations which were necessary for the lawful conduct of their respective businesses and ownership of their respective
properties, rights and assets under and pursuant to applicable Law; (ii) at all times since December 31, 2013, Foundation and each of its Subsidiaries complied with any applicable Law; and (iii) none of Foundation or any of its
Subsidiaries was, at the time of the Companys acquisition of Foundation, subject to any liability or obligation of any nature whatsoever (whether absolute, accrued, contingent, determined, determinable or otherwise and whether due or to become
due) except for (x) those liabilities that are reflected or reserved against on the consolidated balance sheet of the Company included in the Companys Quarterly Report on Form
10-Q
for the quarter
ended September 30, 2016 (including any notes thereto), (y) liabilities incurred in the ordinary course of business consistent with Foundations past practice and that are not or would not reasonably be expected to be, individually or in
the aggregate, material to the Company and its Subsidiaries, taken as a whole, or (z) incurred in connection with the acquisition of Foundation by the Company.
3.31
No Additional Representations
.
(a) Except for the representations and warranties made by the Company in this Article III and representations and
warranties contained in any certificates or other documents delivered pursuant to this Agreement, neither the Company nor any other Person makes any express or implied representation or warranty with respect to the Company, its Subsidiaries, or
their respective businesses, operations, assets, liabilities, conditions (financial or otherwise) or prospects, and the Company hereby disclaims any such other representations or warranties. In particular, without limiting the foregoing disclaimer,
neither the Company nor any other Person makes or has made any representation or warranty to Parent or any of its or their Affiliates or representatives with respect to (i) any financial projection, forecast, estimate, budget or prospect
information relating to the Company, any of its Subsidiaries or their respective businesses or (ii) except for the representations and warranties made by the Company in this Article III and representations and warranties contained in any
certificates or other documents delivered pursuant to this Agreement, any oral or written information presented to Parent or any of its Affiliates or representatives in the course of their due diligence investigation of the Company, the negotiation
of this Agreement or in the course of the transactions contemplated hereby. Notwithstanding the foregoing, nothing in this Section 3.31 shall limit Parents remedies with respect to claims of fraud arising from or relating to the express
representations and warranties made by the Company in this Article III.
(b) Notwithstanding anything contained in
this Agreement to the contrary, the Company acknowledges and agrees that none of Parent or any other Person has made or is making any representations or warranties relating to Parent whatsoever, express or implied, beyond those expressly given by
Parent in Article IV hereof and those contained in any certificates or other documents delivered pursuant to this Agreement, including any implied representation or warranty as to the accuracy of any information made available to the
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Company or any of its representatives. Without limiting the generality of the foregoing, the Company acknowledges that no representations or warranties are made with respect to any projections,
forecasts, estimates, budgets or prospect information that may have been made available to the Company or any of its representatives.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT
No representation or warranty of Parent contained in Article IV (other than the representations and warranties in Sections 4.2, 4.3(b)
and 4.8, which shall be true and correct in all respects with respect to them) shall be deemed untrue or incorrect, and Parent shall not be deemed to have breached any representation or warranty, as a consequence of the existence or absence of any
fact, circumstance or event unless such fact, circumstance or event, individually or taken together with all other facts, circumstances or events inconsistent with such representation or warranty contained in Article IV, would cause the
representation or warranty not to be true in all material respects. Subject to the foregoing, except as disclosed in any report, schedule, form or other document filed with, or furnished to, the SEC by Parent prior to the date hereof which is
publicly available (without giving effect to any amendment thereof filed with or furnished to the SEC after the date hereof, but disregarding risk factor disclosures contained under the heading Risk Factors, or disclosure of risks set
forth in any forward-looking statements disclaimer or any other statements that are similarly
non-specific
or cautionary, predictive or forward-looking in nature), Parent hereby represents and
warrants to the Company as follows:
4.1
Corporate Organization
.
(a) Parent is a corporation duly incorporated and validly existing under the Laws of the State of Washington. Columbia
Bank is a commercial bank duly formed and validly existing under the Laws of the State of Washington. Each of Parent and Columbia Bank has the requisite corporate power and authority to own or lease all of its properties and assets and to carry on
its business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it
makes such licensing or qualification necessary. Parent is duly registered as a bank holding company under the BHC Act.
(b) True, complete and correct copies of the Amended and Restated Articles of Incorporation of Parent (the
Parent Articles
), and the Amended and Restated Bylaws of Parent (the
Parent Bylaws
), as in effect as of the date of this Agreement, have previously been publicly filed by Parent and made available to the
Company. The Parent Articles and Parent Bylaws made available to the Company are in full force and effect.
4.2
Capitalization
.
(a) The authorized capital stock of Parent consists of (i) 115,000,000 shares of common stock, with no par value
per share (the
Parent Common Stock
), of which, as of January 4, 2017 (the
Parent Capitalization Date
), 58,042,663 were issued and outstanding, and (ii) 2,000,000 shares of preferred stock, no par value per
share (
Parent Preferred Stock
), of which, as of the Parent Capitalization Date, 76,898 were designated Fixed Rate Cumulative Perpetual Preferred Stock, Series A, none of which were issued and outstanding as of the Parent
Capitalization Date, and 8,782 of which were designated as Mandatorily Convertible Cumulative Participating Preferred Stock, Series B (the
Series B Preferred Stock
), all of which were issued and outstanding as of the Parent
Capitalization Date. As of the Parent Capitalization Date, 18,457 shares of Parent Common Stock were authorized for issuance upon exercise of options issued pursuant to employee and director stock plans of Parent or a Subsidiary of Parent in effect
as of the date of this Agreement (the
Parent Stock Plans
). All of the issued and outstanding shares of Parent Common Stock have been duly authorized and validly issued and, are fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof. Upon issuance of any Parent Common Stock in accordance with the terms of Parent Stock Plans, such stock will be
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duly authorized, validly issued, fully paid and nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. As of the date of this Agreement, no
Voting Debt of Parent is issued or outstanding. Except pursuant to this Agreement, the Series B Preferred Stock and the options described in this Section 4.2, Parent does not have and is not bound by any outstanding subscriptions, options,
warrants, calls, rights, commitments or agreements of any character calling for the purchase or issuance of any shares of Parent Common Stock, Parent Preferred Stock, Voting Debt of Parent or any other equity securities of Parent or any securities
representing the right to purchase or otherwise receive any shares of Parent Common Stock, Parent Preferred Stock, Voting Debt of Parent or other equity securities of Parent. There are no contractual obligations of Parent or any of its Subsidiaries
(i) to repurchase, redeem or otherwise acquire any shares of capital stock of Parent or any equity security of Parent or its Subsidiaries or any securities representing the right to purchase or otherwise receive any shares of capital stock or
any other equity security of Parent or its Subsidiaries or (ii) pursuant to which Parent or any of its Subsidiaries is or could be required to register shares of Parent capital stock or other securities under the Securities Act. Except for the
Columbia Voting Agreements, there are no voting trusts or other agreements or understandings to which Parent, any Subsidiary of Parent or, to the Knowledge of Parent, any of their respective officers or directors, is a party with respect to the
voting of any Parent Common Stock, Parent Preferred Stock, Voting Debt or other equity securities of Parent. The shares of Parent Common Stock to be issued pursuant to the First Merger will be duly authorized and validly issued and, at the Effective
Time, all such shares will be fully paid, nonassessable, and free of preemptive rights, with no personal liability attaching to the ownership thereof.
(b) Parent directly owns all of the outstanding stock of Columbia Bank.
(c) At the time of its incorporation and accession to this Agreement, all of the issued and outstanding shares of
capital stock or other equity ownership interests of Merger Sub will be owned by Parent, directly or indirectly, free and clear of any Liens, and all of such shares or equity ownership interests will be duly authorized and validly issued and will be
fully paid and nonassessable. At the time of its incorporation and accession to this Agreement, Merger Sub will not have or will not be bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character
calling for the purchase or issuance of any shares of capital stock or any other equity security of Merger Sub or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of
Merger Sub.
4.3
Authority; No Violation
.
(a) Parent has full corporate power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly, validly and unanimously approved and this Agreement duly adopted by the Parent Board, and the
Parent Board has determined that the First Merger, on the terms and conditions set forth in this Agreement, is in the best interests of Parent and its shareholders. Except for the approval of the issuance of Parent Common Stock pursuant to this
Agreement by votes cast favoring such issuance exceeding the votes cast opposing such issuance at a stockholders meeting duly called and held for such purpose (the
Parent Shareholder Approval
), no other corporate proceedings
on the part of Parent are necessary to approve this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Parent and (assuming due authorization, execution and delivery by
the Company and accession by Merger Sub) constitutes the valid and binding obligation of Parent, enforceable against Parent in accordance with its terms (subject to the Bankruptcy and Equity Exception).
(b) Neither the execution and delivery of this Agreement, nor the consummation by Parent of the Mergers or the other
transactions contemplated hereby, nor compliance with any of the terms or provisions of this Agreement, will (i) violate any provision of the Parent Articles, Parent Bylaws or similar documents of Parents Subsidiaries, or
(ii) assuming that the consents, approvals and filings referred to in Section 4.4 are duly obtained and/or made, (A) violate any Law applicable to Parent, any of its Subsidiaries or any of their respective properties or assets or
(B) violate, conflict with, result in a breach of any provision of or the loss of any benefit
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under, constitute a default (or an event that, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation
under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of Parent or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, franchise, permit, agreement, bylaw or other instrument or obligation to which Parent or any of its Subsidiaries is a party or by which any of them or any of their respective properties or assets is bound
except, with respect to clause (ii), for any such violation, conflict, breach, default, termination, cancellation, acceleration or creation as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on
Parent.
4.4
Consents and Approvals
. Except for (a) any applicable filing with Nasdaq, (b) the
filing with the SEC of the Joint Proxy Statement/Prospectus and the Form
S-4
in which the Joint Proxy Statement/Prospectus will be included, and declaration of effectiveness of the Form
S-4,
(c) the filing of a notice and/or an application with the Federal Reserve pursuant to the Bank Holding Company Act of 1956, as amended, or regulations promulgated by the Federal Reserve thereunder,
(d) filings of applications, notices, plans and certificates to the Oregon Department of Consumer Business Services (
Oregon DCBS
) in accordance with Section 711.130 of the ORS and the Washington State Department of
Financial Institutions pursuant to Sections 30.49.040, 30.49.125 and 30.04.405 of the Revised Code of Washington and approval of or
non-objection
to such applications, filings, certificates and notices,
(e) the filing of a bank merger application with the FDIC pursuant to the Bank Merger Act of 1960, as amended, (f) the filing of the Oregon Merger Filings and the other documents and filings required by Section 60.494 of the ORS with
the Oregon Secretary in connection with the First Merger, (g) the filing of the Washington Articles of Merger and the other documents and filings required by Section 23B.11.050 of the Revised Code of Washington with the Washington Secretary and
the filing of plans of merger and the other documents and filings required by Section 60.494 of the ORS with the Oregon Secretary in connection with the Subsequent Merger, (h) the filing of the articles of merger and the other documents
and filings required by Section 23B.11.050 of the Revised Code of Washington with the Washington Secretary and the filing of plans of merger and the other documents and filings required by Section 60.494 of the ORS with the Oregon DCBS in
connection with the Bank Merger and (i) such filings and approvals as are required to be made or obtained under the securities or blue sky Laws of various states in connection with the issuance of the shares of Parent Common Stock
pursuant to this Agreement, no consents or approvals of or filings or registrations with any Governmental Entity are necessary in connection with the consummation of the Mergers and the other transactions contemplated by this Agreement.
4.5
Reports
.
(a) Parent and each of its Subsidiaries have timely filed all reports, registration statements, proxy statements and
other materials, together with any amendments required to be made with respect thereto, that they were required to file since December 31, 2013 with the Regulatory Agencies and each other applicable Governmental Entity, and all other reports
and statements required to be filed by them since December 31, 2013, including any report or statement required to be filed pursuant to the Laws, rules or regulations of the United States, any state, any foreign entity, or any Regulatory Agency
or other Governmental Entity, and have paid all fees and assessments due and payable in connection therewith, and there are no violations or exceptions in any such report or statement that are unresolved as of the date hereof.
(b) An accurate and complete copy of each final registration statement, prospectus, report, schedule and definitive
proxy statement filed with or furnished to the SEC by Parent pursuant to the Securities Act or the Exchange Act since December 31, 2013 and prior to the date of this Agreement (the
Parent SEC Reports
) is publicly available.
No such Parent SEC Report, at the time filed, furnished or communicated (and, in the case of registration statements and proxy statements, on the dates of effectiveness and the dates of the relevant meetings, respectively), contained any untrue
statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances in which they were made, not misleading, except that
information filed as of a later date (but before the date of this
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Agreement) shall be deemed to modify information as of an earlier date. As of their respective dates, all Parent SEC Reports complied as to form with the published rules and regulations of the
SEC with respect thereto. As of the date of this Agreement, no executive officer of Parent has failed in any respect to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act. As of the date hereof,
there are no outstanding comments from or unresolved issues raised by the SEC with respect to any of the Parent SEC Reports. None of Parents Subsidiaries is required to file periodic reports with the SEC or any other Governmental Entity
pursuant to Section 13 or 15(d) of the Exchange Act (other than Form 13F).
(a) Parent is in compliance with
the applicable listing and corporate governance rules and regulations of Nasdaq.
4.6
Financial Statements
.
The financial statements of Parent and its Subsidiaries included (or incorporated by reference) in the Parent SEC Reports (including the related notes, where applicable) (i) have been prepared from, and are in accordance with, the books and
records of Parent and its Subsidiaries; (ii) fairly present the consolidated statements of income, cash flows, changes in shareholders equity and consolidated financial position of Parent and its Subsidiaries for the respective fiscal
periods or as of the respective dates therein set forth (subject in the case of unaudited statements to recurring
year-end
audit adjustments normal in nature and amount); (iii) complied as to form, as of their
respective dates of filing with the SEC, with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto; and (iv) have been prepared in accordance with GAAP consistently applied during the
periods involved, except, in each case, as indicated in such statements or in the notes thereto. The books and records of Parent and its Subsidiaries have been maintained in all material respects in accordance with GAAP and any other applicable
legal and accounting requirements and reflect only actual transactions. As of the date hereof, Deloitte & Touche LLP has not resigned (or informed Parent that it intends to resign) or been dismissed as independent public accountants of
Parent as a result of or in connection with any disagreements with Parent on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.
4.7
Brokers Fees
. None of Parent, any of its Subsidiaries or any of their respective officers or directors
have employed any broker, finder or financial advisor or incurred any liability for any brokers fees, commissions or finders fees in connection with the Mergers or any other transactions contemplated by this Agreement other than to
Keefe, Bruyette & Woods, Inc.
4.8
Absence of Changes
. Since December 31, 2015, and through
the date of this Agreement, no event or events has occurred that has had or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Parent.
4.9
Compliance with Applicable Law
. Parent and each of its Subsidiaries hold, and have at all times since
December 31, 2014 held, all licenses, franchises, permits and authorizations which are necessary for the lawful conduct of their respective businesses and ownership of their respective properties, rights and assets under and pursuant to
applicable Law (and have paid all fees and assessments due and payable in connection therewith) and, to the Knowledge of Parent, no suspension or cancellation of any such licenses, franchise, permit or authorization is threatened in writing. Parent
and each of its Subsidiaries has complied with, and are not in default or violation of, (i) any applicable Law, including all Laws related to data protection or privacy, the USA PATRIOT Act, the Bank Secrecy Act, the Equal Credit Opportunity
Act and Regulation B, the Fair Housing Act, the Community Reinvestment Act, the Fair Credit Reporting Act, the Truth in Lending Act and Regulation Z, the Home Mortgage Disclosure Act, the Fair Debt Collection Practices Act, the Electronic Fund
Transfer Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, any regulations promulgated by the Consumer Financial Protection Bureau, the Interagency Policy Statement on Retail Sales of Nondeposit Investment Products, the SAFE
Mortgage Licensing Act of 2008, the Real Estate Settlement Procedures Act and Regulation X, and any other Law relating to bank secrecy, discriminatory lending, financing or leasing practices, money laundering prevention, Sections 23A and 23B of the
Federal Reserve Act, the Sarbanes-Oxley Act, and all agency requirements relating to the origination, sale and servicing of mortgage and consumer loans, and (ii) any
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posted or internal privacy policies relating to data protection or privacy, including, the protection of personal information, and neither Parent nor any of its Subsidiaries knows of, and none of
Parent, or any of its Subsidiaries has received from a Governmental Entity since January 1, 2013, written notice of, any defaults or violations of any applicable Law relating to Parent or any of its Subsidiaries.
4.10
Approvals
. As of the date of this Agreement, Parent knows of no reason why all regulatory approvals from
any Governmental Entity required for the consummation of the transactions contemplated by this Agreement should not be obtained on a timely basis.
4.11
Parent Information
. The information relating to Parent and its Subsidiaries that is provided by Parent or
its representatives for inclusion in the Joint Proxy Statement/Prospectus and the Form
S-4,
or in any application, notification or other document filed with any other Regulatory Agency or other Governmental
Entity in connection with the transactions contemplated by this Agreement, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which
they are made, not misleading. The portions of the Joint Proxy Statement/Prospectus relating to Parent and its Subsidiaries and other portions within the reasonable control of Parent and its Subsidiaries will comply with the provisions of the
Securities Act and the Exchange Act and the rules and regulations thereunder. The Form
S-4
will comply with the provisions of the Securities Act and the rules and regulations thereunder.
4.12
Legal Proceedings
. There is no suit, action, investigation, claim, proceeding or review pending, or to the
Knowledge of Parent, threatened against or affecting it or any of its Subsidiaries or any of the current or former directors or executive officers of it or any of its Subsidiaries and there are no facts or circumstances that would reasonably be
expected to result in any claims against Parent or any of its Subsidiaries. There is no outstanding injunction, order, writ, award, judgment, settlement, arbitration ruling, decree or regulatory restriction imposed upon or entered into by Parent,
any of its Subsidiaries or the assets of it or any of its Subsidiaries.
4.13
Accounting and Internal
Controls
.
(a) The records, systems, controls, data and information of Parent and its Subsidiaries are
recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Parent or its Subsidiaries or accountants
(including all means of access thereto and therefrom). Parent and its Subsidiaries have devised and maintain internal control over financial reporting (within the meaning of Rules
13a-15(f)
and
15d-15(f)
under the Exchange Act). Such internal control over financial reporting is effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements in accordance with GAAP and includes policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of Parent,
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of Parent are being made only in accordance with
authorizations of management and directors of Parent, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Parents assets that could have a material effect on
its financial statements. Parent has designed and implemented disclosure controls and procedures (within the meaning of Rules
13a-15(e)
and
15d-15(e)
of the Exchange
Act) to ensure that material information relating to Parent and its Subsidiaries is made known to its management by others within those entities as appropriate to allow timely decisions regarding required disclosure and to make the certifications
required by the Exchange Act and Sections 302 and 906 of the Sarbanes-Oxley Act and such disclosure controls and procedures are effective.
(b) Parents management has completed an assessment of the effectiveness of its internal control over financial
reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act for the year
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ended December 31, 2015, and such assessment concluded that such controls were effective. Parent has previously disclosed, based on its most recent evaluation prior to the date hereof, to
its auditors and the audit committee of the Parent Board (A) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting and (B) any fraud, whether or not material, that
involves management or other employees who have a significant role in its internal controls over financial reporting.
(c) Since January 1, 2014, (A) neither Parent nor any of its Subsidiaries nor, to the Knowledge of Parent, any
director, officer, auditor, accountant or representative of it or any of its Subsidiaries has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or written claim regarding the accounting or auditing
practices, procedures, methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of Parent or any of its Subsidiaries or their respective internal accounting controls, including any material
complaint, allegation, assertion or written claim that Parent or any of its Subsidiaries has engaged in questionable accounting or auditing practices, and (B) no attorney representing Parent or any of its Subsidiaries, whether or not employed
by it or any of its Subsidiaries, has reported evidence of a material violation of securities Laws, breach of fiduciary duty or similar violation by it or any of its officers or directors to the Parent Board or any committee thereof or to any of its
directors or officers.
4.14
Related Party Transactions
. As of the date of this Agreement, there are no
transactions or series of related transactions, agreements, arrangements or understandings, nor are there any currently proposed transactions or series of related transactions, between Parent or any of its Subsidiaries, on the one hand, and any
current or former director or executive officer of Parent or any of its Subsidiaries or any person who beneficially owns (as defined in Rules
13d-3
and
13d-5
of the
Exchange Act) 5% or more of the Parent Common Stock (or any of such persons immediate family members or Affiliates) (other than Subsidiaries of Parent) on the other hand, that are required to be disclosed in a proxy statement pursuant to
Section 14 of the Exchange Act and are not so disclosed.
4.15
Reorganization
. None of Parent or any of
its Subsidiaries has taken or agreed to take any action, and is not aware of any fact or circumstance, that would prevent or impede, or could reasonably be expected to prevent or impede, the First Merger and the Subsequent Merger, taken together,
from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
4.16
No
Additional Representations
.
(a) Except for the representations and warranties made by Parent in this Article IV
and representations and warranties contained in any certificates or other documents delivered pursuant to this Agreement, Neither Parent nor any other Person makes any express or implied representation or warranty with respect to Parent, its
Subsidiaries or their respective businesses, operations, assets, liabilities, conditions (financial or otherwise) or prospects, and Parent hereby disclaims any such other representations or warranties. In particular, without limiting the foregoing
disclaimer, neither Parent nor any other Person makes or has made any representation or warranty to the Company or any of its Affiliates or representatives with respect to (i) any financial projection, forecast, estimate, budget or prospect
information relating to Parent, any of its Subsidiaries or their respective businesses or (ii) except for the representations and warranties made by Parent in this Article IV and representations and warranties contained in any certificates or
other documents delivered pursuant to this Agreement, any oral or written information presented to the Company or any of its Affiliates or representatives in the course of their due diligence investigation of Parent, the negotiation of this
Agreement or in the course of the transactions contemplated hereby. Notwithstanding the foregoing, nothing in this Section 4.16 shall limit the Companys remedies with respect to claims of fraud arising from or relating to the express
representations and warranties made by Parent in this Article IV.
(b) Notwithstanding anything contained in this
Agreement to the contrary, Parent acknowledges and agrees that neither the Company nor any other Person has made or is making any representations or warranties relating to the Company whatsoever, express or implied, beyond those expressly given by
the Company in
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Article III hereof and those contained in any certificates or other documents delivered pursuant to this Agreement, including any implied representation or warranty as to the accuracy available
to Parent or any of its representatives. Without limiting the generality of the foregoing, Parent acknowledges that no representations or warranties are made with respect to any projections, forecasts, estimates, budgets or prospect information that
may have been made available to Parent or any of its representatives.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1
Conduct of Businesses Prior to the Effective Time
. Except as Previously Disclosed, as expressly contemplated
by or permitted by this Agreement, as required by applicable Law, or with the prior written consent of Parent, during the period from the date of this Agreement to the Effective Time, (i) the Company shall, and shall cause each of its
Subsidiaries to, (a) conduct its business in the ordinary course consistent with past practice in all material respects, and (b) use commercially reasonable efforts to maintain and preserve intact its business organization and advantageous
business relationships, and goodwill with Governmental Entities, customers, suppliers, distributors, creditors, lessors, officers and employees and business associates and keep available the services of the Company and its Subsidiaries present
employees and agents and (ii) each of the Company and Parent shall, and shall cause each of its respective Subsidiaries to, take no action that is intended to or would reasonably be expected to adversely affect or materially delay the ability
of either the Company or Parent to obtain any necessary approvals of any Regulatory Agency or other Governmental Entity required for the transactions contemplated hereby or to perform its covenants and agreements under this Agreement or to
consummate the transactions contemplated hereby.
5.2
Company Forbearances
. During the period from the date
of this Agreement to the earlier of the Effective Time or the termination of this Agreement in accordance with Article VIII, except as Previously Disclosed, as expressly contemplated or permitted by this Agreement, or as required by applicable Law,
the Company shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of Parent (which shall not be unreasonably withheld):
(a) (i) issue, sell or otherwise permit to become outstanding, or dispose of or encumber or pledge, or authorize or
propose the creation of, any additional shares of its capital stock, or securities convertible or exchangeable into, or exercisable for, any shares of its capital stock, or any options, warrants or other rights of any kind to acquire any shares of
such capital stock or such convertible or exchangeable securities or receive a cash payment based on the value of any shares of such capital stock, or (ii) permit any additional shares of its capital stock, or securities convertible or
exchangeable into, or exercisable for, any shares of its capital stock, or any options, warrants or other rights of any kind to acquire any shares of such capital stock or such convertible or exchangeable securities or receive a cash payment based
on the value of any shares of such capital stock, to become subject to new grants, in each case except as required pursuant to the exercise or settlement of Company Stock Options, Company RSUs or Company SARs outstanding on the date hereof in
accordance with the terms of the applicable Company Stock Plan in effect on the date hereof.
(b) (i) Make,
declare, pay or set aside for payment any dividend on or in respect of, or declare or make any distribution on any shares of its stock (other than (A) authorized dividends from its wholly owned Subsidiaries to it or another of its wholly owned
Subsidiaries and (B) regular quarterly dividends on shares of Company Common Stock of $0.11 per share) or (ii) directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire, any shares of its stock.
(c) Amend or modify the terms of, waive, release or assign any rights under, terminate, renew or allow to renew
automatically, make any payment not then required under, knowingly violate the terms of or enter into (i) any Material Contract, Lease, Regulatory Agreement, any contract that would be a Material Contract if it were in existence on the date
hereof or other binding obligation that is material to the Company and its
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Subsidiaries, taken as a whole, (ii) any material restriction on the ability of the Company or its Subsidiaries to conduct its business as it is presently being conducted or (iii) any
contract governing the terms of the Company Common Stock or rights associated therewith or any other outstanding capital stock or any outstanding instrument of indebtedness.
(d) Sell, transfer, mortgage, lease, guarantee, encumber, license, let lapse, cancel, abandon or otherwise create any
Lien on or otherwise dispose of or discontinue any of its assets, deposits, business or properties (other than sales of loans and loan participations pursuant to Section 5.2(p), which Section 5.2(p) will exclusively govern such sales of
loans and loan participations hereunder), except for sales, transfers, mortgages, leases, guarantees, encumbrances, licenses, lapses, cancellations, abandonments or other dispositions or discontinuances in the ordinary course of business and in the
transaction that, together with other such transactions, is not material to it and its Subsidiaries, taken as a whole.
(e) Acquire (other than by way of foreclosures or acquisitions of control in a fiduciary or similar capacity or in
satisfaction of debts previously contracted in good faith, in each case in the ordinary course of business) all or any portion of the assets, business, deposits or properties of any other entity (other than purchases of loans and loan participations
pursuant to Section 5.2(p), which Section 5.2(p) will exclusively govern such purchases of loans and loan participations hereunder), except in the ordinary course of business and in a transaction that, together with other such
transactions, is not material to it and its Subsidiaries, taken as a whole, and would not reasonably be expected to present a material risk that the Closing Date will be materially delayed or that the Requisite Regulatory Approvals will be more
difficult to obtain.
(f) Amend the Company Articles or the Company Bylaws, or similar governing documents of any
of its Subsidiaries.
(g) Except as required under applicable Law or the terms of this Agreement or any Employee
Benefit Plan in effect as of the date hereof (i) increase in any manner the compensation, bonus or pension, welfare, severance or other benefits of any of the current or former directors, officers, employees or other service providers of the
Company or its Subsidiaries, except for ordinary course merit-based increases in the base salary and target bonus of employees (other than directors or executive officers of, or individuals who are party to an employment agreement or change of
control agreement with, the Company or its Subsidiaries) consistent with past practice, (ii) become a party to, establish, amend, commence participation in, terminate or commit itself to the adoption of any Employee Benefit Plan or plan that
would be an Employee Benefit Plan if in effect as of the date hereof, other than de minimis amendments in the ordinary course of business consistent with past practice, (iii) grant any new equity award, (iv) grant, pay or increase (or
commit to grant, pay or increase) any severance, retirement or termination pay, (v) accelerate the payment or vesting of, or lapsing of restrictions with respect to, any stock-based compensation, long-term incentive compensation or any bonus or
other incentive compensation, (vi) cause the funding of any rabbi trust or similar arrangement or take any action to fund or in any other way secure the payment of compensation or benefits under any Employee Benefit Plan, (vii) terminate
the employment or services of any officer or employee other than for cause, (viii) enter into any collective bargaining or other agreement with a labor organization, (ix) forgive or issue any loans to any current or former officer,
employee or director of the Company or its Subsidiaries or (x) hire any officer, employee or other service provider except in the ordinary course of business for
non-executive
officer positions for an
annual base salary not in excess of $150,000.
(h) Incur or guarantee any indebtedness for borrowed money, other
than in the ordinary course of business, or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other Person.
(i) Enter into any new line of business or materially change its lending, investment, underwriting, risk and asset
liability management and other banking and operating policies, except as required by Law or requested by a Regulatory Agency.
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(j) (i) Other than in accordance with the investment policies of the
Company or any of its Subsidiaries in effect on the date hereof or in securities transactions, as provided in (ii) below, make any investment either by contributions to capital, property transfers or purchase of any property or assets of any
Person or (ii) other than purchases of direct obligations of the United States of America or obligations of United States government agencies which are entitled to the full faith and credit of the United States of America, in any case with a
remaining maturity at the time of purchase of one year or less, purchase or acquire securities of any type; provided
,
however
,
that in the case of investment securities the Company may purchase investment securities if, within two
(2) Business Days after the Company requests in writing (which request shall describe in detail the investment securities to be purchased and the price thereof) that Parent consent to making of any such purchase, Parent has approved such
request in writing or has not responded in writing to such request.
(k) Enter into any settlement, compromise or
similar agreement with respect to, any action, suit, claim, proceeding, order or investigation to which the Company or any of its Subsidiaries is or becomes a party after the date of this Agreement, which settlement, compromise, agreement or action,
suit, claim, proceeding, order or investigation is settled in an amount and for consideration not in excess of $250,000 and that would not (i) impose any material restriction on the business of it or its Subsidiaries or (ii) create adverse
precedent for claims that are reasonably likely to be material to it or its Subsidiaries.
(l) Other than as
determined to be necessary or advisable by the Company in the good faith exercise of its discretion based on changes in market conditions, alter materially its interest rate or pricing fee or fee pricing policies with respect to depository accounts
of any of its Subsidiaries or waive any material fees with respect thereto.
(m) Except as required by applicable
Law or by a Regulatory Agency, (i) implement or adopt any material change in its interest rate and other risk management policies, procedures or practices or (ii) fail to follow in all material respects, the Companys or its
applicable Subsidiarys existing policies or practices with respect to managing its exposure to interest rate and other risk.
(n) Enter into any securitizations of any Loans or create any special purpose funding or variable interest entity other
than on behalf of clients.
(o) Invest in any mortgage-backed or mortgage related securities which would be
considered high-risk securities under applicable regulatory pronouncements.
(p) Except for Loans or
commitments for Loans that have been approved by the Company prior to the date of this Agreement, (i) make any Loan or Loan commitment to any Person which would, when aggregated with all outstanding Loans or Loan commitments or any renewals or
extensions thereof made to such Person and any Affiliate or immediate family member of such Person exceed $5,000,000 or (ii) purchase or sell any loan or loan participation in excess of $5,000,000, in each case, without first submitting a copy
of the loan write up containing the information customarily submitted to the Loan Committee of Pacific Continental Bank, to the chief credit officer of Parent two (2) full Business Days prior to taking such action; provided, that, if Parent
objects in writing to such loan or loan commitment or such purchase or sale within two (2) full Business Days after receiving such loan write up, the Company shall obtain the approval of a majority of the members of the Loan Committee of
Pacific Continental Bank prior to making such loan or loan commitment or such purchase or sale.
(q) Make
application for the opening, relocation or closing of any, or open, relocate or close any, branch office, loan production office or other significant office or operations facility.
(r) Make any capital expenditures other than capital expenditures in the ordinary and usual course of business
consistent with past practice in amounts not exceeding $50,000 individually or $150,000 in the aggregate.
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(s) Pay, loan or advance any amount to, or sell, transfer or lease any
properties, rights or assets (real, personal or mixed, tangible or intangible) to, or enter into any arrangement or agreement with, any of its officers or directors or any of their family members, or any Affiliates or associates (as defined under
the Exchange Act) of any of its officers or directors, other than Loans originated in the ordinary course of business and, in the case of any such arrangements or agreements relating to compensation, fringe benefits, severance or termination pay or
related matters, only as otherwise permitted pursuant to this Section 5.2.
(t) Take any action or omit to
take any action that is intended to or would reasonably be likely to result in (i) any of the Companys representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time at or prior to
the Effective Time, (ii) any of the conditions to the First Merger set forth in Article VII not being or becoming not capable of being satisfied or (iii) a material violation of any provision of this Agreement, except as may be required by
applicable Law.
(u) Make or change any Tax election, change or consent to any change in it or its
Subsidiaries method of accounting for Tax purposes (except as required by applicable Tax Law), settle or compromise any Tax liability, claim or assessment, in each case in a material amount, enter into any closing agreement, waive or extend
any statute of limitations with respect to Taxes, surrender any right to claim a refund for Taxes, or file any amended Tax Return.
(v) Agree to take, make any commitment to take, or adopt any resolutions of the Company Board in support of, any of the
actions prohibited by this Section 5.2.
5.3
Parent Forbearances
. Except as expressly permitted by this
Agreement or with the prior written consent of Company (which shall not be unreasonably withheld), during the period from the date of this Agreement to the earlier of the Effective Time and the termination of this Agreement in accordance with
Article VIII, Parent shall not, and shall not permit any of its Subsidiaries to, except as may be required by applicable Law or policies imposed by any Governmental Entity, (i) take any action that would reasonably be expected to prevent,
materially impede or materially delay the consummation of the transactions contemplated by this Agreement, or (ii) take, or omit to take, any action that is reasonably likely to result in any of the conditions to the First Merger set forth in
Article VII not being or becoming not being capable of being satisfied.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1
Regulatory Matters
.
(a) Parent and the Company shall reasonably promptly prepare and shall use their commercially reasonable efforts to file
with the SEC on or prior to February 23, 2017, and in any event as soon as reasonably practicable thereafter, the Form
S-4,
in which the Joint Proxy Statement/Prospectus will be included. Each of Parent
and the Company shall use its commercially reasonable efforts to have the Form
S-4
declared effective under the Securities Act as promptly as practicable after such filing, and the Company and Parent shall
thereafter mail or deliver the Joint Proxy Statement/Prospectus to their respective shareholders. Parent shall also use its reasonable best efforts to obtain all necessary state securities Law or blue sky permits and approvals required
to carry out the transactions contemplated by this Agreement, and the Company shall furnish all information concerning the Company and the holders of Company Common Stock as may be reasonably requested in connection with any such action.
(b) The parties shall reasonably cooperate with each other and use their respective commercially reasonable efforts to
promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and filings, to obtain as promptly as practicable all permits, consents, approvals and authorizations of all third parties and Governmental
Entities that are necessary or advisable to consummate the First Merger, the
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Subsequent Merger, the Bank Merger and the other transactions contemplated by this Agreement as soon as reasonably practicable, and to comply with the terms and conditions of all such permits,
consents, approvals, and authorizations of all such third parties or Governmental Entities. Parent shall use its commercially reasonable efforts to make all initial requisite regulatory filings on or before February 23, 2017, and in any event
as soon as reasonably practicable thereafter (other than any notice to the Federal Reserve under its regulations, which will be filed in accordance with the timing contemplated by such regulations). The Company and Parent shall have the right to
review in advance and, to the extent practicable, each will consult the other on, in each case subject to applicable Laws, all the
non-confidential
information relating to the Company or Parent (excluding any
confidential financial information relating to individuals), as the case may be, and any of their respective Subsidiaries, that appear in any filing made with, or written materials submitted to, any third party or any Governmental Entity in
connection with the transactions contemplated by this Agreement. In exercising the foregoing right, each of the parties shall act reasonably and as promptly as practicable. The parties shall consult with each other with respect to the obtaining of
all permits, consents, approvals and authorizations (collectively the
Approvals
) of all third parties and Governmental Entities necessary or advisable to consummate the First Merger, the Subsequent Merger, the Bank Merger and the
other transactions contemplated by this Agreement and each party will keep the other reasonably apprised of the status of matters relating to such Approvals and the completion of the First Merger, the Subsequent Merger, the Bank Merger and the other
transactions contemplated by this Agreement. Each party shall consult with the other in advance of any meeting or conference with any Governmental Entity in connection with the First Merger, the Subsequent Merger, the Bank Merger and the other
transactions contemplated by this Agreement.
(c) Each of Parent and the Company shall, upon request, furnish to
the other all information concerning itself, its Subsidiaries, directors, officers and shareholders and such other matters as may be reasonably necessary or advisable in connection with the Joint Proxy Statement/Prospectus, the Form
S-4
or any other statement, filing, notice or application made by or on behalf of Parent, the Company or any of their respective Subsidiaries to any Governmental Entity in connection with the First Merger, the
Subsequent Merger, the Bank Merger and the other transactions contemplated by this Agreement. Each of Parent and the Company agrees, as to itself and its Subsidiaries, that none of the information supplied or to be supplied by it for inclusion or
incorporation by reference in (i) the Form
S-4
will, at the time the Form
S-4
and each amendment or supplement thereto, if any, becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and (ii) the Joint Proxy Statement/Prospectus and any
amendment or supplement thereto will, at the date of mailing to the Companys and Parents shareholders and at the time of the Company Special Meeting and the Parent Special Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which such statements were made, not misleading. Each of Parent and the Company further agrees that if it
becomes aware that any information furnished by it would cause any of the statements in the Form
S-4
or the Joint Proxy Statement/Prospectus to be false or misleading with respect to any material fact, or to
omit to state any material fact necessary to make the statements therein not false or misleading, to promptly inform the other party thereof and to take appropriate steps to correct the Form
S-4
or the Joint
Proxy Statement/Prospectus, as applicable.
(d) Notwithstanding the foregoing, nothing contained herein shall be
deemed to require Parent or any of its Subsidiaries to take any action, or commit to take any action, or agree to any condition or restriction, in connection with obtaining the foregoing permits, consents, approvals and authorizations of
Governmental Entities that would reasonably be likely, in each case following the Effective Time (but regardless when the action, condition or restriction is to be taken or implemented), to have a Material Adverse Effect on Parent (measured on a
scale relative to the Company) or a Material Adverse Effect on the Company or materially restrict or impose a material burden on Parent or any of its Subsidiaries (including, after the Effective Time, the Company and its Subsidiaries) in connection
with the transactions contemplated hereby or with respect to the business or operation of Parent or any of its Subsidiaries (including, after the Effective Time, the Company and its Subsidiaries) (a
Materially Burdensome Regulatory
Condition
).
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(e) Each of Parent and the Company shall promptly advise the other upon
receiving any communication from any Governmental Entity the consent or approval of which is required for consummation of the First Merger, the Subsequent Merger, the Bank Merger and the other transactions contemplated by this Agreement that causes
such party to believe that there is a reasonable likelihood that any Requisite Regulatory Approval will not be obtained or that the receipt of any such approval may be materially delayed.
6.2
Reasonable Best Efforts
. Subject to the terms and conditions of this Agreement, each of the Company and
Parent agrees to cooperate with the other and use its reasonable best efforts in good faith to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or desirable, or advisable on its part under this
Agreement or under applicable Laws to consummate and make effective the Mergers, and the other transactions contemplated hereby as promptly as practicable, including the satisfaction of the conditions set forth in Article VII hereof.
6.3
Access to Information
.
(a) Upon reasonable notice and subject to applicable Laws, the Company shall, and shall cause each of its Subsidiaries
to, afford to the officers, employees, accountants, counsel, advisors, agents and other representatives of Parent, reasonable access, during normal business hours during the period prior to the Effective Time or the termination of this Agreement in
accordance with its terms, to all its properties, books, contracts, commitments, personnel and records, and, during such period, the Company shall, and shall cause its Subsidiaries to, make available to Parent (i) a copy of each report,
schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal securities Laws or federal or state banking Laws (other than reports or documents that the Company is not
permitted to disclose under applicable Law), (ii) all other information concerning its business, properties and personnel as Parent may reasonably request and (iii) access to the necessary information (including the Companys own good
faith estimates as available and third-party reports, if any, commissioned by the Company at Parents request) in order to prepare a good faith estimate of the potential impact of Sections 280G and 4999 of the Code with respect to amounts
potentially payable to senior executives of the Company in connection with the consummation of the transactions contemplated by this Agreement. Upon the reasonable request of the Company, Parent shall furnish such reasonable information about it and
its business as is reasonably relevant to the Company and its shareholders in connection with the First Merger, the Subsequent Merger, the Bank Merger and the other transactions contemplated by this Agreement. Neither the Company nor Parent, nor any
of their respective Subsidiaries shall be required to provide access to or to disclose information to the extent such access or disclosure would jeopardize the attorney-client privilege of such party or its Subsidiaries (after giving due
consideration to the existence of any common interest, joint defense or similar agreement between the parties) or contravene any Law or binding agreement entered into prior to the date of this Agreement. The parties shall make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply. In addition to the foregoing, on an every other week basis, the Company shall provide Parent with a listing of all new and renewed loans and loan
modifications, loan payoffs and loan purchases in the preceding two weeks.
(b) All nonpublic information and
materials provided pursuant to this Agreement shall be subject to the provisions of the Confidentiality Agreement entered into between the parties dated as of July 27, 2016 (the
Confidentiality Agreement
).
(c) No investigation by a party hereto or its representatives shall affect or be deemed to modify or waive any
representations, warranties or covenants of the other party set forth in this Agreement.
6.4
Shareholder
Approval
.
(a) The Company agrees to take, in accordance with applicable Law and the Company Articles and the
Company Bylaws, all action necessary to convene as soon as practicable after the Form
S-4
is declared
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effective (but in no event later than forty-five (45) days after the Form
S-4
is declared effective), the Company Special Meeting to consider and to
obtain the Company Shareholder Approval. Subject to Section 6.9(b) and (c), the Company Board shall at all times prior to and during such Company Special Meeting recommend such approval and shall use its reasonable best efforts to solicit such
approval by its shareholders (the
Company Board Recommendation
). Without limiting the generality of the foregoing, unless this Agreement has terminated in accordance with its terms, this Agreement and the First Merger shall be
submitted to the Companys shareholders at the Company Special Meeting whether or not (x) the Company Board shall have effected a Company Adverse Change of Recommendation or (y) any Company Acquisition Proposal shall have been
publicly proposed or announced or otherwise submitted to the Company or any of its advisors. The Company shall not, without the prior written consent of Parent, adjourn or postpone the Company Special Meeting; provided that the Company may, without
the prior written consent of Parent, adjourn or postpone the Company Special Meeting (A) if on the date on which the Company Special Meeting is originally scheduled, the Company has not received proxies representing a sufficient number of
shares of Company Common Stock to obtain the Company Shareholder Approval, the Company shall adjourn the Company Special Meeting until such date as shall be mutually agreed upon by the Company and Parent, which date shall not be less than five
(5) days nor more than ten (10) days after the date of adjournment, and subject to the terms and conditions of this Agreement shall continue to use all reasonable best efforts, together with its proxy solicitor, to assist in the
solicitation of proxies from shareholders relating to the Company Shareholder Approval, (B) after consultation with Parent, if the failure to adjourn or postpone the Company Special Meeting would reasonably be expected to be a violation of
applicable Law for the distribution of any required supplement or amendment to the Joint Proxy Statement/Prospectus, or (C) after consultation with Parent, for a single period not to exceed ten (10) Business Days, to solicit additional
proxies if necessary to obtain the Company Shareholder Approval. Parent may require the Company to adjourn, delay or postpone the Company Special Meeting once for a period not to exceed thirty (30) calendar days (but prior to the date that is
two (2) Business Days prior to the End Date) to solicit additional proxies necessary to obtain the Company Shareholder Approval. Once the Company has established the record date, in respect of the Company Special Meeting (the
Company
Record Date
), the Company shall not change such Company Record Date or establish a different Company Record Date for the Company Special Meeting without the prior written consent of Parent, unless required to do so by applicable Law or the
Company Articles or the Company Bylaws.
(b) Parent agrees to take, in accordance with applicable Law and the
Parent Articles and the Parent Bylaws, all action necessary to convene as soon as practicable after the Form
S-4
is declared effective (but in no event later than forty-five (45) days after the Form
S-4
is declared effective), the Parent Special Meeting to consider and to obtain the Parent Shareholder Approval. The Parent Board shall at all times prior to and during such Parent Special Meeting recommend such
approval and shall use its reasonable best efforts to solicit such approval by its shareholders. Parent shall not, without the prior written consent of the Company, adjourn or postpone the Parent Special Meeting; provided that Parent may, without
the prior written consent of the Company, adjourn or postpone the Parent Special Meeting (A) if on the date on which the Parent Special Meeting is originally scheduled, Parent has not received proxies representing a sufficient number of shares
of Parent Common Stock to obtain the Parent Shareholder Approval, Parent shall adjourn the Parent Special Meeting until such date as shall be mutually agreed upon by the Company and Parent, which date shall not be less than five (5) days nor
more than ten (10) days after the date of adjournment, and subject to the terms and conditions of this Agreement shall continue to use all reasonable best efforts, together with its proxy solicitor, to assist in the solicitation of proxies from
shareholders relating to the Parent Shareholder Approval, (B) after consultation with the Company, if the failure to adjourn or postpone the Parent Special Meeting would reasonably be expected to be a violation of applicable Law for the
distribution of any required supplement or amendment to the Joint Proxy Statement/Prospectus, or (C) after consultation with the Company, for a single period not to exceed ten (10) Business Days, to solicit additional proxies if necessary
to obtain the Parent Shareholder Approval. The Company may require Parent to adjourn, delay or postpone the Parent Special Meeting once for a period not to exceed thirty (30) calendar days (but prior to the date that is two (2) Business
Days prior to the End Date) to solicit additional proxies necessary to obtain the Parent Shareholder Approval. Once Parent has established the record date, in respect of the Parent Special Meeting (the
Parent Record Date
),
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Parent shall not change such Parent Record Date or establish a different Parent Record Date for the Parent Special Meeting without the prior written consent of the Company, unless required to do
so by applicable Law or the Company Articles or the Company Bylaws.
6.5
Nasdaq Listing
. Prior to the
Closing Date, Parent shall file with Nasdaq any required notices or forms with respect to the shares of Parent Common Stock to be issued in the First Merger.
6.6
Employee Matters
.
(a) During the period commencing at the Effective Time and ending on the eighteen (18) month anniversary of the
Effective Time, Parent shall, or shall cause the Surviving Corporation to, provide each employee who is actively employed by the Company and its Subsidiaries on the Closing Date (each, a
Continuing Employee
) while employed by
Parent or any of its Subsidiaries following the Effective Time with: (i) base salary no less favorable than the base salary provided to such Continuing Employees immediately prior to the Effective Time; (ii) annual cash bonus opportunities
no less favorable than annual cash bonus opportunities provided by Parent to similarly situated employees of Parent; and (iii) employee benefits which, in the aggregate, are no less favorable than employee benefits provided by Parent to
similarly situated employees of Parent;
provided
,
however
, that until such time as Parent shall cause Continuing Employees to participate in the benefit plans of Parent, a Continuing Employees continued participation in the
Employee Benefit Plans shall be deemed to satisfy the foregoing provision of this sentence (it being understood that participation in Parent benefit plans may commence at different times with respect to each Employee Benefit Plan).
From and after the Effective Time, Parent shall honor and make the payments provided for, as required by the terms of, all written employment
agreements and change in control agreements with employees of the Company or any of its Subsidiaries in effect immediately prior to the Closing Date, subject to any limitations imposed under applicable Law or by any regulatory authority. Without
limiting the generality of the foregoing, during the period commencing at the Effective Time and ending on the eighteen (18) month anniversary of the Effective Time, Parent shall, or shall cause the Surviving Company to provide each Continuing
Employee who is not party to an individual employment, severance or change of control agreement at the time of his or her termination of employment whose employment is involuntarily terminated (other than under circumstances that constitute a
termination for cause) with the severance payments and/or benefits, if any, to which the Continuing Employee is entitled under Section 6.6 of the Company Disclosure Schedule. Parent shall take, or shall cause the Surviving Company
to take, other actions in accordance with Section 6.6 of the Company Disclosure Schedule.
(b) Upon Continuing
Employees enrollment in Parents employee benefit plans, such Continuing Employees will, consistent with the provisions of Section 6.6(a) above, become participants in all Parents employee benefit plans, practices, and policies
on the same terms and conditions as similarly situated employees of Parent. Without limiting the generality of the foregoing, prior service credit for each of Continuing Employees service with the Company, except as expressly provided
otherwise herein, shall be given by Parent with respect to all Parents retirement plans, employee benefit plans, practices, and policies to the extent that such crediting of service does not result in duplication of benefits, but not for
accrual of benefits under any defined benefit. If any Continuing Employee becomes eligible to participate in any Parent employee benefit plan, practice, or policy that provides medical, hospitalization or dental benefits, Parent shall use
commercially reasonably best efforts to (a) cause any
pre-existing
condition limitations or eligibility waiting periods under such Parent benefit plan to be waived with respect to such Continuing Employee
and his or her covered dependents to the extent such limitation would have been waived or satisfied under the Employee Benefit Plan in which such Continuing Employee participated immediately prior to the Effective Time, and (b) recognize for
purposes of annual deductible and out-
of-pocket
limits under their health plans applicable to Continuing Employees, deductible and
out-of-pocket
expenses incurred by such Continuing Employee and his or her covered dependents under any Employee Benefit Plan on or prior to the Closing Date.
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(c) If requested in writing by Parent at least thirty (30) calendar
days prior to the Effective Time, the Company shall take (or cause to be taken) all actions reasonably determined by Parent to be necessary or appropriate to terminate, effective not later than the Business Day immediately prior to the Effective
Time, any Employee Benefit Plans that contain a cash or deferred arrangement intended to qualify under Section 401(k) of the Code. In the event that Parent requests that such plan(s) be terminated, the Company shall provide Parent with evidence
that such plan(s) has been terminated (the form and substance of which shall be subject to review and approval by Parent, approval of which shall not be unreasonably withheld) not later than the Business Day immediately preceding the Effective Time.
Effective as of the Effective Time, Parent shall have in effect a defined contribution plan that is qualified under Section 401(a) of the Code, which Plan shall accept the transfer of account balances (including promissory notes evidencing all
outstanding loans) of each participant in the Company savings plan as of the Closing Date.
(d) From and after the
date hereof, prior to making any written or oral communications to officers or employees of the Company or any of its Subsidiaries pertaining to compensation, benefit or other employment-related matters that are affected by the transactions
contemplated by this Agreement, the Company shall provide Parent with a copy of the intended communication or talking points, Parent shall have a reasonable period of time to review and comment on the communication, and Parent and the Company shall
cooperate in providing any such mutually agreeable communication.
(e) Nothing contained in this Agreement is
intended to (i) be treated as an amendment of any particular Employee Benefit Plan, (ii) prevent Parent, the Company or any of their Affiliates from amending or terminating any of their benefit plans in accordance their terms,
(iii) prevent Parent, the Company or any of their Affiliates, after the Effective Time, from terminating the employment of any Continuing Employee, or (iv) create any third-party beneficiary rights in any employee of the Company or any of
its Subsidiaries, any beneficiary or dependent thereof, or any collective bargaining representative thereof, with respect to the compensation, terms and conditions of employment and/or benefits that may be provided to any Continuing Employee by
Parent, the Company or any of their Affiliates or under any benefit plan which Parent, the Company or any of their Affiliates may maintain.
6.7
Indemnification; Directors and Officers Insurance
.
(a) From and after the Effective Time, each of Parent and the Surviving Corporation shall indemnify and hold harmless
each present and former director and officer of the Company and its Subsidiaries (in each case, when acting in such capacity) (collectively, the
Indemnified Parties
) against any costs or expenses (including reasonable documented
attorneys fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of actions or
omissions occurring at or prior to the Effective Time, including the transactions contemplated by this Agreement, to the extent they are indemnified by the Company or its Subsidiaries on the date hereof, to the fullest extent permitted under
applicable Law; and Parent and the Surviving Corporation shall also advance expenses as incurred to the fullest extent permitted under applicable Law; provided that the Indemnified Party to whom expenses are advanced provides an undertaking to repay
such advances if it is ultimately determined that such Indemnified Party is not entitled to indemnification.
(b) Subject to the following sentence, for a period of six (6) years following the Effective Time, Parent or the
Surviving Corporation will provide directors and officers liability insurance (
D&O Insurance
) that serves to reimburse the present and former officers and directors of the Company or any of its Subsidiaries
(determined as of the Effective Time) (providing only for the Side A coverage for Indemnified Parties where the existing policies also include Side B coverage for the Company) with respect to claims against such directors and officers arising from
facts or events occurring before the Effective Time (including the transactions contemplated by this Agreement), which insurance will contain at least the same coverage and amounts, and contain terms and conditions no less advantageous to the
Indemnified Party as that coverage currently provided by the Company; provided, however, that in no event shall the Parent or Surviving Corporation be required to expend in the
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aggregate for such six (6)-year period, an amount in excess of 200% of the aggregate annual premiums paid as of the date hereof by the Company for any such insurance; provided, further, that if
Parent or the Surviving Corporation are unable to maintain or obtain the D&O Insurance called for by this Section 6.7(b), Parent or the Surviving Corporation shall obtain as much comparable insurance as is available at a cost in the aggregate
for such six (6)-year period up to 200% of the current annual premium; provided,
further,
that officers and directors of the Company may be required to make application and provide customary representations and warranties to
Parents or the Surviving Corporations insurance carrier for the purpose of obtaining such D&O Insurance. Prior to the Effective Time and in lieu of the foregoing, the Company will use reasonable best efforts to purchase a six
(6)-year prepaid tail policy for directors and officers liability insurance on the terms described in the prior sentence and fully pay for such policy prior to the Effective Time, at an aggregate cost up to, but not exceeding
200% of the current annual premium for such insurance.
(c) Any Indemnified Party wishing to claim indemnification
under Section 6.7(a), upon learning of any claim, action, suit, proceeding or investigation described above, will promptly notify Parent or the Surviving Corporation thereof; provided that failure to so notify will not affect the obligations of
Parent or the Surviving Corporation under Section 6.7(a) unless and to the extent that Parent or the Surviving Corporation is actually and materially prejudiced as a consequence.
(d) In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) Parent or the Surviving Corporation shall have the right to assume the defense thereof and Parent and the Surviving Corporation shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that if Parent or the Surviving Corporation elects not to assume such defense or counsel for the Indemnified Parties advises that there are
issues which raise conflicts of interest between Parent or the Surviving Corporation and the Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to them, and Parent or the Surviving Corporation shall pay all reasonable
documented fees and expenses of such counsel for the Indemnified Parties promptly as statements therefor are received; provided, however, that Parent and the Surviving Corporation shall be obligated pursuant to this paragraph (d) to pay for
only one firm of counsel for all Indemnified Parties in any jurisdiction unless the use of one counsel for such Indemnified Parties would present such counsel with a conflict of interest; provided that the fewest number of counsels necessary to
avoid conflicts of interest shall be used, (ii) the Indemnified Parties will cooperate in the defense of any such matter and (iii) Parent and the Surviving Corporation shall not be liable for any settlement effected without their prior
written consent; and provided, further, that Parent and the Surviving Corporation shall not have any obligation hereunder to any Indemnified Party if and when a court of competent jurisdiction shall ultimately determine, and such determination shall
have become final, that the indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable Law.
6.8
Exemption from Liability Under Rule
16(b)-3
. Prior to the Effective
Time, Parent and the Company shall each take all such steps as may be necessary or appropriate to cause any disposition of shares of Company Common Stock or conversion of any derivative securities in respect of such shares of Company Common Stock in
connection with the consummation of the transactions contemplated by this Agreement to be exempt under Rule
16b-3
promulgated under the Exchange Act.
6.9
No Solicitation; Change in Company Board Recommendation
.
(a) The Company agrees that none of it or any of its Subsidiaries nor any of their respective officers, directors and
employees will, and will cause its and its Subsidiaries officers, directors, agents, representatives, advisors and Affiliates not to, initiate, solicit, encourage or knowingly facilitate any inquiries or the making of proposals with respect
to, or engage in any negotiations concerning, or provide any confidential or nonpublic information or data to, or have any discussions with, any Person relating to, any Company Acquisition Proposal or otherwise facilitate any effort to attempt or
make or implement a Company Acquisition Proposal.
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(b) Notwithstanding anything to the contrary contained in this Agreement,
if at any time after the date hereof and prior to, but not after, obtaining the Company Shareholder Approval the Company receives an unsolicited bona fide Company Acquisition Proposal and the Company Board concludes in good faith that such Company
Acquisition Proposal constitutes, or is reasonably expected to result in, a Company Superior Proposal, then the Company and the Company Board may, and may permit its Subsidiaries and its and its Subsidiaries representatives to, furnish or
cause to be furnished nonpublic information and participate in such negotiations or discussions to the extent that the Company Board concludes in good faith (after consultation with outside legal counsel) that failure to take such actions would
reasonably be expected to result in a violation of its fiduciary duties under applicable Law; provided that prior to providing any nonpublic information permitted to be provided pursuant to the foregoing proviso or engaging in any negotiations, it
shall have entered into a confidentiality agreement with such third party on terms no less restrictive in the aggregate to the counterparty than those contained in the Confidentiality Agreement and which expressly permits the Company to comply with
its obligations pursuant to this Section 6.9. Subject to the foregoing and Section 6.9(c) below, the Company will immediately cease and cause to be terminated any activities, discussions or negotiations conducted on or before the date of this
Agreement with any persons other than Parent with respect to any Company Acquisition Proposal and will use its reasonable best efforts, subject to applicable Law, to (i) enforce any confidentiality or similar agreement relating to a Company
Acquisition Proposal and (ii) within ten (10) Business Days after the date hereof, request and confirm the return or destruction of any confidential information provided to any Person (other than Parent and its Affiliates) pursuant to any
such confidentiality or similar agreement. The Company will promptly (and in any event within twenty-four (24) hours) advise Parent following receipt of any Company Acquisition Proposal, of any discussions or negotiations that are sought to be
initiated or continued or any request for nonpublic information or inquiry that would reasonably be expected to lead to any Company Acquisition Proposal and the substance thereof (including the identity of the Person making such Company Acquisition
Proposal), and will keep Parent promptly apprised of any related developments, discussions and negotiations (including the terms and conditions of any such request, inquiry or Company Acquisition Proposal, or all amendments or proposed amendments
thereto) on a current basis (it being understood that no such communications to Parent shall be deemed a Company Adverse Change of Recommendation). The Company agrees that it shall contemporaneously provide to Parent any confidential or nonpublic
information concerning the Company or any of its Subsidiaries that may be provided to any other Person in connection with any Company Acquisition Proposal which has not previously been provided to Parent.
(c) (i) None of the Company Board or any committee thereof shall: (A) except as expressly permitted by, and after
compliance with, Section 6.9(c)(ii)(B) hereof, make any Company Adverse Change of Recommendation; or (B) cause or permit the Company to enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement,
merger agreement or other agreement (other than a confidentiality agreement referred to in Section 6.9(b) entered into in compliance with Section 6.9(b)) relating to any Company Acquisition Proposal made to the Company.
(ii) Notwithstanding anything to the contrary contained in this Agreement, at any time prior to, but not
after, obtaining the Company Shareholder Approval, the Company Board may make a Company Adverse Change of Recommendation or terminate this Agreement pursuant to Section 8.1(d) if the Company receives a Company Acquisition Proposal that is not
withdrawn and the Company Board concludes in good faith that such Company Acquisition Proposal constitutes a Company Superior Proposal; provided that:
(A) the Company Board concludes in good faith (after consultation with outside legal counsel) that
failure to take such actions would reasonably be expected to result in a violation of its fiduciary duties under applicable Law;
(B) the Company provides Parent prior written notice at least five (5) Business Days prior to
taking such action, which notice shall state that the Company Board has received a Company Superior Proposal and, absent any revision to the terms and conditions of this Agreement, the Company Board has resolved to effect a Company Adverse Change of
Recommendation or to terminate this Agreement
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pursuant to Section 8.1(d), as applicable, which notice shall specify the basis for such Company Adverse Change of Recommendation or termination, including the material terms of the Company
Superior Proposal (a
Notice of Superior Proposal
) (it being understood that such Notice of Superior Proposal shall not be deemed a Company Adverse Change of Recommendation);
(C) during such five (5)-Business Day period, the Company negotiates in good faith with Parent (to the
extent that Parent wishes to negotiate) to enable Parent to make an improved offer that is at least as favorable to the shareholders of the Company so that such Company Acquisition Proposal would cease to constitute a Company Superior Proposal; and
(D) at the end of such five (5)-Business Day period (or such earlier time that Parent advises the
Company that it no longer wishes to negotiate to amend this Agreement), the Company Board, after taking into account any modifications to the terms of this Agreement and the First Merger agreed to by Parent after receipt of such notice, continues to
believe that such Company Acquisition Proposal constitutes a Company Superior Proposal.
(d) Nothing contained in
this Agreement shall prevent the Company or the Company Board from complying with Rule
14d-9
and Rule
14e-2
under the Exchange Act with respect to a Company Acquisition
Proposal; provided that such rules will in no way eliminate or modify the effect that any action pursuant to such rules would otherwise have under this Agreement. As used in this Agreement,
Company Acquisition Proposal
means a
tender or exchange offer, proposal for a merger, consolidation, sale of assets or other business combination involving the Company or any of its Subsidiaries or any proposal or offer to acquire in any manner more than 15% of the voting power in, or
more than 15% of the fair market value of the business, assets or deposits of, the Company or any of its Subsidiaries or any public announcement of a proposed plan or intention to do any of the foregoing or any agreements to engage in any of the
foregoing, other than the transactions contemplated by this Agreement and any sale of whole loans and securitizations in the ordinary course. As used in this Agreement,
Company Superior Proposal
means an unsolicited bona fide
written Company Acquisition Proposal that the Company Board concludes in good faith to be more favorable from a financial point of view to its shareholders than the First Merger and the other transactions contemplated hereby and to be reasonably
capable of being consummated on the terms proposed, (i) after receiving the advice of its financial advisors (who shall be a nationally recognized investment banking or financial advisory firm), (ii) after taking into account the likelihood of
consummation of such transaction on the terms set forth therein and (iii) after taking into account all legal (with the advice of counsel), financial (including the financing terms of any such proposal), regulatory and other aspects of such
proposal (including any expense reimbursement provisions and conditions to closing) and any other relevant factors permitted under applicable Law, and after taking into account any amendment or modification to this Agreement agreed to by Parent;
provided that for purposes of the definition of Company Superior Proposal, the references to more than 15% in the definition of Company Acquisition Proposal shall be deemed to be references to at least 50%.
6.10
Takeover Laws
. No party will take any action that would cause the transactions contemplated by this
Agreement to be subject to requirements imposed by any Takeover Law and each of them will take all necessary steps within its control to exempt (or ensure the continued exemption of) the transactions contemplated by this Agreement from, or if
necessary challenge the validity or applicability of, any applicable Takeover Law, as now or hereafter in effect. If any Takeover Laws become applicable to this Agreement or the transactions contemplated hereby or thereby, including the First
Merger, the parties shall take all reasonable action necessary to ensure that the transactions contemplated by this Agreement, including the First Merger, may be consummated as promptly as practicable on the terms contemplated hereby and otherwise
to minimize the effect of such Takeover Law on this Agreement or the transactions contemplated hereby, including the First Merger.
6.11
Financial Statements and Other Current Information
. As soon as reasonably practicable after they become
available, but in no event more than fifteen (15) days after the end of each calendar month ending after the date hereof, the Company will furnish to Parent, (a) consolidated financial statements (including balance sheets, statements of
operations and stockholders equity) of it and any of its Subsidiaries (to the extent available)
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as of and for such month then ended, (b) internal management reports showing actual financial performance against plan, and (c) to the extent permitted by applicable Law, any reports
provided to the Company Board or any committee thereof relating to the financial performance and risk management of it or any of its Subsidiaries.
6.12
Notification of Certain Matters
. The Company and Parent will give prompt notice to the other of any fact,
event or circumstance known to it that (a) is reasonably likely, individually or taken together with all other facts, events and circumstances known to it, to result in any Material Adverse Effect with respect to it or (b) would cause or
constitute a breach of any of its representations, warranties, covenants or agreements contained herein that reasonably could be expected to give rise, individually or in the aggregate, to a failure of a condition in Article VII.
6.13
Parents Board of Directors
. Prior to the Effective Time, Parents Nominating and Corporate
Governance Committee shall recommend to the Parent Board one Person from the Company Board to serve on the Parent Board effective at the Effective Time. Such Person shall have been an active member of the Company Board as of September 30, 2016
through the Effective Time, with personal connections to the local civic and business community of the Company, and shall be qualified as an independent director of Parent under applicable Nasdaq rules and otherwise meet any
qualifications under Parent Bylaws and applicable Laws. Upon approval of such Person by the Parent Board (such approval not to be unreasonably withheld), such director shall be invited to join the Parent Board and the board of directors of Columbia
Bank (the
Columbia Bank Board
) effective as of the Effective Time. Such director shall be entitled to compensation, indemnification and expense reimbursement in connection with his or her role as a director to the same extent as
other directors on the Parent Board and Columbia Bank Board. Upon Closing or promptly thereafter, Parent shall form an advisory board and invite all members of the Company Board, as of the date hereof to join such advisory board on further terms and
conditions to be determined by Parent prior to Closing.
6.14
Company Trust Preferred Securities, FHLB
Borrowings and Subordinated Debentures
. The Company will cooperate with Parent to effect the redemption or repayment, as applicable, of trust preferred securities under the indentures and guarantee agreements relating thereto issued or assumed
by the Company, and the discharge of Pacific Continental Banks FHLB borrowings, in each case subject to and contingent upon the occurrence of the Closing, and in each case, to the extent permitted by the terms of the governing indentures
and/or applicable governing documentation and subject to and in each case contingent upon regulatory approval. At the Effective Time, Parent agrees that it shall expressly assume all of the Companys obligations in connection with the
Companys issuance of $35,000,000 principal amount of its 5.875%
Fixed-to-Floating
Rate Subordinated Notes due June 30, 2026 (the
Subordinated
Debentures
) pursuant to the Indenture, dated as of June 27, 2016 (the
Indenture
), as supplemented by the First Supplemental Indenture, dated as of June 27, 2016, between the Company and Wells Fargo Bank,
National Association, as trustee (the
Trustee
) (including, without limitation, being substituted for the Company), and execute any and all documents, instruments and agreements, including any supplemental indentures, guarantees,
officers certificates, opinions of counsel and declarations of trust required by the Indenture, or as may reasonably be requested by the Trustee thereunder, and thereafter shall perform all of the Companys obligations with respect to the
Indenture.
6.15
Third-Party Agreements
.
(a) The parties shall use commercially reasonable efforts to obtain (i) the consents or waivers required to be
obtained from any third parties in connection with the First Merger, the Subsequent Merger, the Bank Merger and the other transactions contemplated hereby (in such form and content as mutually agreed by the parties) promptly after the date of this
Agreement and (ii) the cooperation of such third parties to effect a smooth transition in accordance with the parties timetable at or after the Effective Time, including those items set forth on Schedule 6.15(a). The Company shall
cooperate with Parent as requested by Parent in minimizing the extent to which any contracts to which the Company or any of its Subsidiaries are a party will continue in effect following the Effective Time, in addition to complying with the
prohibitions in Section 5.2.
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(b) Without limiting the generality of Section 6.15(a), the Company shall
use commercially reasonable efforts to provide data processing, item processing and other processing support or outside contractors to assist Parent in performing all tasks reasonably required to result in a successful conversion of the data and
other files and records of the Company and its Subsidiaries to Parents production environment, in such a manner sufficient to ensure that a successful conversion will occur at the time (on or after the Effective Time) mutually agreed by the
parties, subject to any applicable Laws, including Laws regarding the exchange of information and other Laws regarding competition. Among other things, the Company shall:
(i) reasonably cooperate with Parent to establish a mutually agreeable project plan to effectuate the
conversion;
(ii) use its commercially reasonable efforts to have the Companys outside
contractors continue to support both the conversion effort and its ongoing needs until the conversion can be established;
(iii) provide, or use its commercially reasonable efforts to obtain from any outside contractors, all
data or other files and layouts reasonably requested by Parent for use in planning the conversion, as soon as reasonably practicable;
(iv) provide reasonable access to the Companys personnel and facilities and, with the consent of
its outside contractors, its outside contractors personnel and facilities, to enable the conversion effort to be completed on schedule; and
(v) give notice of termination, conditioned upon the completion of the transactions contemplated by this
Section 6.15(b), of the contracts of outside data, item and other processing contractors or other third-party vendors to which the Company or any of its Subsidiaries are bound when directed to do so by Parent.
(c) Parent agrees that all actions taken pursuant to this Section 6.15 shall be taken in a manner intended to
minimize disruption to the customary business activities of the Company and its Subsidiaries.
(d) The Company
shall use its commercially reasonable efforts to obtain the consents to the termination of the Companys obligations from the agreements set forth in Section 6.15(d) of the Company Disclosure Schedule.
6.16
Transaction Expenses
.
(a) Not later than 15 days after each calendar
month-end
during the period from
the date of this Agreement until the Closing Date, the Company shall prepare in good faith and deliver to Parent an invoice of Transaction Expenses (each such statement, an
Interim Transaction Expenses Statement
), each of which
shall include (a) itemized Transaction Expenses incurred as of such calendar
month-end
and (b) itemized Transaction Expenses reasonably estimated to be incurred during the period from such calendar
month-end
and the date which the Company estimates in good faith to be the Closing Date as of such date.
Transaction Expenses
means professional advisory fees, filings fees, management
change-in-control
costs, D&O Insurance costs and any other transaction-related costs and expenses incurred or estimated to be incurred by the Company or any of its
Subsidiaries but excluding any termination costs relating to Material Contracts, any costs or expenses incurred or accrued by Company in connection with or arising out of the acceleration of unvested Company Equity Awards, conversion costs, fixed
asset write-offs and the employee severance pool amount set forth in Section 5.2(g) of the Company Disclosure Schedule, in each case, as reasonably determined by Parent and Company based on information provided in accordance with
Section 6.16.
(b) The Company will cause all third party advisors and vendors providing services relating to
the transactions contemplated by this Agreement to provide to the Company an invoice of their (a) transaction-related costs and expenses incurred as of such calendar
month-end
and (b) a reasonable
estimate of the transaction-related costs and expenses to be incurred during the period from such calendar
month-end
and the
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date which the Company estimates in good faith to be the Closing Date as of such date, each of which will be included in each Interim Transaction Expenses Statement. Each such Interim Transaction
Expenses Statement shall be certified by the chief financial officer of the Company. The Interim Transaction Expenses Statement delivered to Parent most immediately prior to the Closing Date shall be deemed the
Final Transaction Expenses
Statement
to be utilized for the calculation of the Transaction Expenses pursuant to Section 1.4(g)(ii).
(c) Subject to applicable Law and except with respect to documentation that is subject to attorney-client or other
applicable privilege, Parent shall have the right to review, and shall have reasonable access to, all relevant work papers, schedules, memoranda and other documents prepared by the Company or its third party advisors or vendors in connection with
the Companys preparation of the Interim Transaction Expenses Statements and the Final Transaction Expenses Statement, as well as to executive, finance and accounting personnel of the Company and any other information which Parent may
reasonably request in connection with its review of the Interim Transaction Expenses Statements and the Final Transaction Expenses Statement.
(d) In the event of any questions or disputes by Parent of any amount included in any Interim Transaction Expenses
Statement, the parties will discuss in good faith, and the Company will use reasonable efforts to obtain any additional information reasonably requested by Parent.
6.17
Certain Tax Matters
(a) Each of Parent and the Company acknowledge and agree that it intends for U.S. federal income tax purposes that the
First Merger and the Subsequent Merger, taken together, shall be treated as a single integrated transaction and shall qualify as a reorganization within the meaning of Section 368(a) of the Code. The parties hereto hereby adopt this
Agreement for purposes of Section 368(a) of the Code as a plan of reorganization within the meaning of Treasury Regulation Section
1.368-2(g).
(b) Notwithstanding any other provision in this Agreement, the Company Disclosure Schedule or the Parent Disclosure
Schedule to the contrary, none of the parties shall (and each Party shall cause its respective Subsidiaries not to) take or agree to take any action that would prevent or impede, or could reasonably be expected to prevent or impede, the First Merger
and the Subsequent Merger, taken together, from qualifying as a reorganization within the meaning of Section 368(a) of the Code. Each of the parties shall use its reasonable best efforts to cause the First Merger and the Subsequent
Merger, taken together, to qualify as a reorganization within the meaning of Section 368(a) of the Code, including by executing and delivering customary tax representation letters to the Companys and/or Parents counsel, as
applicable, in form and substance reasonably satisfactory to such counsel, in connection with (i) any tax opinion or description of the U.S. federal income tax consequences of the First Merger and the Subsequent Merger contained or set forth in
the Form
S-4
and (ii) the tax opinions referenced in Section 7.3(e) or Section 7.2(e). The parties intend to report and, except to the extent otherwise required, shall report, for U.S. federal income tax
purposes, the First Merger and the Subsequent Merger, taken together, as a reorganization within the mean of Section 368(a) of the Code.
(c) After the date of this Agreement and prior to the Effective Time, Parent and the Company shall cooperate in good
faith with respect to Tax matters relevant to integrating their respective Subsidiaries and operations.
6.18
Formation of Merger Sub; Accession
. Following the date hereof, Parent shall form Merger Sub as an Oregon
corporation and a wholly owned subsidiary of Parent. As of its incorporation, Merger Sub shall have 1,000 authorized shares of common stock, par value $0.01 per share, of which 1,000 shares shall be outstanding and none of which shall be held in the
treasury of Merger Sub. Promptly following the incorporation of Merger Sub, (a) Parent, as the sole shareholder of Merger Sub, shall approve this Agreement and (b) Parent shall cause Merger Sub to accede to this Agreement by executing a
signature page to this Agreement, after which time, Merger Sub shall be a party to this Agreement. Notwithstanding any provision herein to the contrary, the obligations of Merger Sub to perform its covenants hereunder shall commence only at the time
of its
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incorporation and accession to this Agreement. Prior to the Effective Time, Parent shall take such actions as are reasonably necessary to cause the Board of Directors of Merger Sub to unanimously
approve this Agreement. Prior to the Effective Time, Merger Sub shall not have carried on any business nor conducted any operations other than the execution of this Agreement, the performance of its obligations hereunder and matters ancillary
thereto.
ARTICLE VII
CONDITIONS PRECEDENT
7.1
Conditions to Each Partys Obligation to Effect the First Merger
. The respective obligations of the
parties to effect the First Merger shall be subject to the satisfaction at or prior to the Effective Time of the following conditions:
(a)
Shareholder Approval
. The Company Shareholder Approval and the Parent Shareholder Approval shall have been
obtained.
(b)
Form
S-4
. The Form
S-4
shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Form
S-4
shall have been issued and no proceedings for
that purpose shall have been initiated or threatened by the SEC.
(c)
No Injunctions or Restraints;
Illegality
. No order, injunction or decree issued by any court or agency of competent jurisdiction or other Law preventing or making illegal the consummation of the Mergers or any of the other transactions contemplated by this Agreement shall be
in effect.
7.2
Conditions to Obligations of Parent and Merger Sub
. The obligation of Parent and Merger Sub
to effect the First Merger is also subject to the satisfaction, or waiver by Parent, at or prior to the Effective Time, of the following conditions:
(a)
Representations and Warranties
. The representations and warranties of the Company set forth in this
Agreement shall be true and correct as of the date of this Agreement and as of the Effective Time as though made on and as of the Effective Time (except that representations and warranties that by their terms speak specifically as of the date of
this Agreement or another date shall be true and correct as of such date); provided, however, that no representation or warranty of the Company (other than the representations and warranties set forth in (i) Section 3.2(a), which shall be
true and correct except to a de minimis extent (relative to Section 3.2(a) taken as a whole), (ii) Sections 3.1(a), 3.2(c), 3.3(a), 3.3(b), 3.7 and 3.10, which shall be true and correct in all material respects, and
(iii) Section 3.8, which shall be true and correct in all respects) shall be deemed untrue or incorrect for purposes hereunder as a consequence of the existence of any fact, event or circumstance inconsistent with such representation or
warranty, unless such fact, event or circumstance, individually or taken together with all other facts, events or circumstances inconsistent with any representation or warranty of the Company has had or would reasonably be expected to result in a
Material Adverse Effect on the Company; provided, further, that for purposes of determining whether a representation or warranty is true and correct for purposes of this Section 7.2(a) any qualification or exception for, or reference to,
materiality (including the terms material, materially, in all material respects, Material Adverse Effect or similar terms or phrases) in any such representation or warranty shall be disregarded; and
Parent shall have received a certificate signed on behalf of the Company by the Chief Executive Officer or the Chief Financial Officer of the Company to the foregoing effect.
(b)
Performance of Obligations of Company
. The Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to the Effective Time; and Parent and Merger Sub shall have received a certificate signed on behalf of the Company by the Chief Executive Officer or the Chief Financial
Officer of the Company to such effect.
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(c)
Regulatory Approvals
. (i) All consents, registrations,
approvals, permits and authorizations required to be obtained prior to and in order to effect the consummation of the First Merger, the Subsequent Merger and the Bank Merger by the Company, Parent, Merger Sub or any of their respective Subsidiaries
from the Federal Reserve, the FDIC, the Oregon DCBS and the Washington State Department of Financial Institutions and (ii) any other regulatory approvals set forth in Sections 3.4 and 4.4 the failure of which to be obtained would
reasonably be expected to have a Material Adverse Effect on Parent or the Company, in each case required to consummate the transactions contemplated by this Agreement, including the First Merger, the Subsequent Merger and the Bank Merger, shall have
been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired (all such approvals and the expiration of all such waiting periods being referred to as the
Requisite Regulatory
Approvals
), and none of such consents, registrations, approvals, permits and authorizations shall contain any Materially Burdensome Regulatory Condition.
(d)
No Material Adverse Effect
. Since the date hereof, no event shall have occurred or circumstance arisen that,
individually or taken together with all other facts, circumstances or events, has had or is reasonably likely to have a Material Adverse Effect with respect to the Company.
(e)
Tax Opinion
. Parent shall have received an opinion of Sullivan & Cromwell LLP, counsel to Parent,
in form and substance reasonably satisfactory to Parent, dated as of the date of the First Merger, to the effect that, on the basis of certain facts, representations and assumptions described or referred to in such opinion, for U.S. federal income
tax purposes, the First Merger and the Subsequent Merger, taken together, will qualify as a reorganization within the meaning of Section 368(a) of the Code.
7.3
Conditions to Obligations of Company
. The obligation of the Company to effect the First Merger is also
subject to the satisfaction or waiver by the Company at or prior to the Effective Time of the following conditions:
(a)
Representations and Warranties
. The representations and warranties of Parent set forth in this Agreement
shall be true and correct as of the date of this Agreement and as of the Effective Time as though made on and as of the Effective Time (except that representations and warranties that by their terms speak specifically as of the date of this
Agreement or another date shall be true and correct as of such date); provided, however, that no representation or warranty of Parent (other than the representations and warranties set forth in (i) Section 4.2(a), which shall be true and
correct except to a
de
minimis
extent (relative to Section 4.2(a) taken as a whole), (ii) Sections 4.1(a), 4.3(a), 4.3(b) and 4.7, which shall be true and correct in all material respects, and
(iii) Section 4.8, which shall be true and correct in all respects) shall be deemed untrue or incorrect for purposes hereunder as a consequence of the existence of any fact, event or circumstance inconsistent with such representation or
warranty, unless such fact, event or circumstance, individually or taken together with all other facts, events or circumstances inconsistent with any representation or warranty of Parent has had or would reasonably be expected to result in a
Material Adverse Effect on Parent; provided, further, that for purposes of determining whether a representation or warranty is true and correct for purposes of this Section 7.3(a), any qualification or exception for, or reference to,
materiality (including the terms material, materially, in all material respects, Material Adverse Effect or similar terms or phrases) in any such representation or warranty shall be disregarded; and
the Company shall have received a certificate signed on behalf of Parent by the Chief Executive Officer or the Chief Financial Officer of Parent to the foregoing effect.
(b)
Performance of Obligations of Parent and Merger Sub
. Parent and Merger Sub shall have performed in all
material respects all obligations required to be performed by it under this Agreement at or prior to the Effective Time, and the Company shall have received a certificate signed on behalf of Parent by the Chief Executive Officer or the Chief
Financial Officer of Parent to such effect.
(c)
Regulatory Approvals
. All Requisite Regulatory Approvals
shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired.
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(d)
No Material Adverse Effect
. Since the date hereof, no event
shall have occurred or circumstance arisen that, individually or taken together with all other facts, circumstances or events, has had or is reasonably likely to have a Material Adverse Effect with respect to Parent.
(e)
Tax Opinion
. The Company shall have received an opinion of Pillsbury Winthrop Shaw Pittman LLP, counsel to
the Company, in form and substance reasonably satisfactory to the Company, dated as of the date of the First Merger, to the effect that, on the basis of certain facts, representations and assumptions described or referred to in such opinion, for
U.S. federal income tax purposes, the First Merger and the Subsequent Merger, taken together, will qualify as a reorganization within the meaning of Section 368(a) of the Code.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1
Termination
. This Agreement may be terminated at any time prior to the Effective Time, whether before or
after approval of the matters presented in connection with the First Merger by the shareholders of the Company or Parent (except as otherwise set forth below):
(a)
Mutual Consent
by mutual consent of the Company and Parent in a written instrument authorized by the
Company Board and the Parent Board;
(b)
Either Party
by either the Company or Parent;
(i)
No Regulatory Approval
if any Governmental Entity that must grant a Requisite
Regulatory Approval has denied approval of the First Merger, the Subsequent Merger or the Bank Merger and such denial has become final and nonappealable or any Governmental Entity of competent jurisdiction shall have issued a final and nonappealable
order, injunction or decree permanently enjoining or otherwise prohibiting or making illegal the consummation of the transactions contemplated by this Agreement;
(ii)
Delay
if the First Merger shall not have been consummated on or before
November 9, 2017 (the
End Date
); provided, that the End Date may be extended to January 9, 2018 by either Parent or the Company by written notice to the other party if the Closing shall not have occurred by such date,
and on such date the conditions set forth in Section 7.2(c) have not been satisfied or waived and each of the other conditions to consummation of the First Merger set forth in Article VII has been satisfied, waived or remains capable of being
satisfied;
provided
,
further
, that the right to terminate this Agreement pursuant to this Section 8.1(b)(ii) shall not be available to any party whose failure to perform or observe the covenants and agreements of such party set
forth in this Agreement resulted in the failure of the First Merger to be consummated by the End Date;
(iii)
Breach
if there shall have been a breach of any of the covenants or agreements or
any of the representations or warranties set forth in this Agreement on the part of the Company, in the case of a termination by Parent or Merger Sub, or on the part of Parent or Merger Sub, in the case of a termination by the Company, which breach,
either individually or in the aggregate with other breaches by such party, would result in, if occurring or continuing on the Closing Date, the failure of the conditions set forth in Section 7.2 or 7.3, as the case may be, and which is not
cured within thirty (30) days following written notice to the party committing such breach or by its nature or timing cannot be cured within such time period (provided that the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained herein); or
(iv)
No Shareholder
Approval
(A) if the Company Shareholder Approval shall not have been obtained at the Company Special Meeting duly convened therefor or at any adjournment or postponement thereof, or (B) if the Parent Shareholder Approval shall not
have been obtained at the Parent Special Meeting duly convened therefor or at any adjournment or postponement thereof; provided, however, that no party may terminate this Agreement pursuant to this Section 8.1(b)(iv) if such party has breached
in any material respect any of its obligations under this Agreement, in each case in a manner that caused the failure
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to obtain the Company Shareholder Approval at the Company Special Meeting, or at any adjournment or postponement thereof, or the Parent Shareholder Approval at the Parent Special Meeting, or at
any adjournment or postponement thereof, as applicable;
(c)
No Company Recommendation
by Parent, at
any time prior to such time as the Company Shareholder Approval is obtained, in the event (i) the Company shall have breached in any material respect Section 6.9; (ii) the Company or the Company Board shall have submitted this Agreement to
its shareholders without a recommendation for approval, or otherwise withdraws or materially and adversely modifies (or discloses its intention to withdraw or materially and adversely modify) its recommendation as contemplated by
Section 6.9(c), or recommends to its shareholders a Company Acquisition Proposal other than the First Merger (a
Company Adverse Change of Recommendation
); (iii) at any time after the end of five (5) Business Days
following receipt of a Company Acquisition Proposal, the Company Board shall have failed to reaffirm its Company Board Recommendation as promptly as practicable (but in any event within five (5) Business Days) after receipt of any written
request to do so by Parent; or (iv) a tender offer or exchange offer for outstanding shares of Company Common Stock shall have been publicly disclosed (other than by Parent or an Affiliate of Parent) and the Company Board recommends that its
shareholders tender their shares in such tender or exchange offer or, within ten (10) Business Days after the commencement of such tender or exchange offer, the Company Board fails to recommend unequivocally against acceptance of such offer;
(d)
Company Superior Proposal
- by the Company, prior to such time as the Company Shareholder Approval is
obtained, in order to enter into a definitive agreement providing for a Company Superior Proposal; provided that (i) the Company is not in material breach of any of the terms of this Agreement, and (ii) the Company Termination Fee is paid
to Parent in advance of or concurrently with such termination in accordance with Section 8.3(b);
(e)
Parent Average Closing Price Decline
by either Parent or the Company immediately following the
Determination Date, in the event the Parent Average Closing Price, for the Determination Period is less than $26.13 (with a proportionate adjustment in the event that outstanding shares of Parent Common Stock shall be changed into a different number
of shares by reason of any stock dividend, reclassification, recapitalization,
split-up,
combination, exchange of shares or similar transaction between the date of this Agreement and the Determination Date);
provided, however, if Parent elects to exercise its termination right pursuant to this Section 8.1(e), it shall give prompt written notice thereof to the Company, and the Company shall, for a period of two (2) Business Days after its receipt of
such notice, have the option of reinstating the First Merger and the transactions contemplated hereby by adjusting the Exchange Ratio to 0.6430 as may be adjusted pursuant to Section 1.4(g)(ii) and adding to the Merger Consideration an amount in
cash equal to $1.048. If within such one (1) Business Day period, the Company delivers written notice to Parent that it intends to reinstate the First Merger and the transactions contemplated hereby, as contemplated by the preceding sentence,
then no termination shall occur pursuant to this Section 8.1(e) and this Agreement shall remain in full force and effect in accordance with its terms (except for the modifications to the Merger Consideration and the Exchange Ratio set forth in the
preceding sentence);
8.2
Effect of Termination
. In the event of termination of this Agreement by either the
Company or Parent as provided in Section 8.1, this Agreement shall forthwith become void and have no effect, and none of the Company, Parent, Merger Sub, any of their respective Subsidiaries or any of the officers or directors of any of them
shall have any liability of any nature whatsoever under this Agreement, or in connection with the transactions contemplated by this Agreement, except that (i) Sections 6.3(b), 8.2, 8.3, and 9.3 through 9.11 shall survive any termination of
this Agreement, and (ii) neither the Company nor Parent shall be relieved or released from any liabilities or damages arising out of its knowing breach of any provision of this Agreement (which, in the case of the Company, shall include the
loss to the Companys shareholders of the economic benefits of the First Merger).
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8.3
Fees and Expenses
.
(a) All fees and expenses incurred in connection with the Mergers, this Agreement, and the transactions contemplated by
this Agreement (including costs and expenses of printing and mailing the Joint Proxy Statement/Prospectus) shall be paid by the party incurring such fees or expenses, whether or not the First Merger is consummated, except as otherwise provided in
Section 8.3(b).
(b)
Company Termination Fee
.
(i) In the event that this Agreement is terminated by the Company pursuant to Section 8.1(d)
(Company Superior Proposal) or Parent pursuant to Section 8.1(c) (No Company Recommendation), then the Company shall pay Parent a fee, in immediately available funds, in the amount of $18,750,000 (the
Company Termination Fee
)
by wire transfer to an account specified by Parent promptly, but in any event prior to or concurrently with a termination pursuant to Section 8.1(d) or no later than two (2) Business Days after the date of termination pursuant to
Section 8.1(c).
(ii) In the event that any Person shall have made a Company Acquisition
Proposal, which proposal has been publicly announced, disclosed or proposed and not withdrawn, and:
(1) thereafter this Agreement is terminated:
(a) by either party pursuant to Section 8.1(b)(ii) (Delay), or Section 8.1(b)(iv)(A) (No
Shareholder Approval); or
(b) by Parent pursuant to Section 8.1(b)(iii) (Breach); and
(2) within twelve (12) months after such termination of this Agreement, a Company Acquisition
Proposal shall have been consummated or any definitive agreement with respect to a Company Acquisition Proposal shall have been entered into (provided that for purposes of the foregoing, the term Company Acquisition Proposal shall have
the meaning assigned to such term in Section 6.9(d) except that the references to more than 15% in the definition of Company Acquisition Proposal shall be deemed to be references to at least 50%);
then the Company shall pay Parent the Company Termination Fee by wire transfer
to an account specified by Parent prior to the earlier of the execution of a definitive agreement with respect to, or the consummation of, such Company Acquisition Proposal. In no event shall the Company be obligated to pay Parent the Company
Termination Fee on more than one occasion.
(c)
Liquidated Damages
. The Company and Parent and acknowledge
that the agreements contained in this Section 8.3 are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, none of the parties would enter into this Agreement. The amounts payable by the
Company pursuant to Section 8.3(b) constitute liquidated damages and not a penalty and shall be the sole monetary remedy of Parent in the event of termination of this Agreement under such applicable section. In the event that the Company fails
to pay when due any amounts payable under this Section 8.3, then (i) the Company shall reimburse Parent for all costs and expenses (including disbursements and reasonable fees of counsel) incurred in connection with the collection of such
overdue amount, and (ii) the Company shall pay to Parent interest on such overdue amount (for the period commencing as of the date that such overdue amount was originally required to be paid and ending on the date that such overdue amount is
actually paid in full) at a rate per annum equal to the prime rate published in
The Wall Street Journal
on the date such payment was required to be made.
8.4
Amendment
. This Agreement may be amended by the parties, by action taken or authorized by their respective
Boards of Directors, at any time before or after approval of the matters presented in connection with the First Merger by the shareholders of the Company or Parent; provided, however, that after any approval of the transactions contemplated by this
Agreement by such shareholders, there may not be, without further approval of such shareholders, any amendment of this Agreement that requires further approval under applicable Law. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
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8.5
Extension; Waiver
. At any time prior to the Effective Time, the
parties, by action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other party, (b) waive any
inaccuracies in the representations and warranties contained in this Agreement or (c) waive compliance with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in a written instrument signed on behalf of such party, but such extension or waiver or failure to insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1
Closing
. On the terms and subject to conditions set forth in this Agreement, the closing of the First Merger
(the
Closing
) shall take place at 10:00 a.m., Pacific Time, at the offices of Sullivan & Cromwell LLP, counsel to Parent, on the first Business Day of the first calendar month that follows the month in which the last to
be satisfied of the conditions set forth in Article VII is satisfied (other than those conditions that by their nature are to be satisfied or waived at the Closing but subject to the satisfaction or waiver of those conditions), unless extended by
mutual agreement of the parties (the
Closing Date
).
9.2
Non-survival
of Representations, Warranties and Agreements
. This
Article IX and the agreements of the Company, Parent and Merger Sub contained in Section 6.6 and Section 6.7 shall survive the consummation of the Mergers. All other representations, warranties, covenants and agreements set forth in this
Agreement shall not survive the consummation of the Mergers.
9.3
Notices
. All notices and other
communications in connection with this Agreement shall be in writing and shall be deemed given if delivered personally, sent via facsimile (with confirmation), mailed by registered or certified mail (return receipt requested) or delivered by an
express courier (with confirmation) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
(a) if to Parent and Merger Sub, to:
Columbia Banking System, Inc.
1301 A Street
Tacoma, WA 98402-4200
Attention: Melanie J. Dressel, President & Chief Executive Officer
Facsimile: (253)
272-2601
with a copy (which shall not constitute notice) to:
Sullivan & Cromwell LLP
1888 Century Park East, Suite 2100
Los Angeles, CA 90067
Attention: Patrick S. Brown
Facsimile: (310)
712-8800
and
Sullivan & Cromwell LLP
125 Broad Street
New York, NY 10004
Attention: Mark J. Menting
Facsimile: (212)
558-3588
(b) if to the Company, to:
Pacific Continental Corporation
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111 West 7th Avenue
Eugene, OR 97401
Attention: Mr. Roger Busse and Mr. Casey Hogan
Facsimile: (541)
344-2807
with a copy (which shall not constitute notice) to:
Pillsbury Winthrop Shaw Pittman LLP
Four Embarcadero Center, 22
nd
Floor
San Francisco, CA 94111
Attention: Patricia F. Young
Facsimile: (415)
983-1200
9.4
Interpretation
. When a reference is made in this Agreement to Articles, Sections, Exhibits or Schedules,
such reference shall be to an Article or Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. 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.
References to the date hereof shall mean the date of this Agreement. As used in this Agreement, the phrase
to the Knowledge of the Company
means the actual knowledge, after reasonable inquiry, of any of the
Companys officers listed on Section 9.4 of the Company Disclosure Schedule, and the phrase
to the Knowledge of Parent
means the actual knowledge, after reasonable inquiry, of the Chief Executive Officer and Chief
Financial Officer of Parent. As used in this Agreement,
Person
or
Persons
means any individual, bank, corporation (including
not-for-profit),
joint-stock company, general or limited partnership, limited liability company, joint venture, estate, business trust, trust, association, organization,
Governmental Entity or other entity of any kind or nature. All schedules and exhibits hereto shall be deemed part of this Agreement and included in any reference to this Agreement. As used in this Agreement,
Business Day
means
Monday through Friday of each week, except a legal holiday recognized as such by the United States federal government or any day on which banking institutions in the State of Washington or the State of Oregon are authorized or obligated to close. If
any term, provision, covenant or restriction contained in this Agreement is held by a court or a federal or state Regulatory Agency of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions and covenants
and restrictions contained in this Agreement shall remain in full force and effect, and shall in no way be affected, impaired or invalidated. If for any reason such court or Regulatory Agency determines that any provision, covenant or restriction is
invalid, void or unenforceable, it is the express intention of the parties that such provision, covenant or restriction be enforced to the maximum extent permitted.
9.5
Counterparts
. This Agreement may be executed in two or more counterparts (including by facsimile or other
electronic means), all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other party, it being understood that each party need not sign
the same counterpart.
9.6
Entire Agreement
. This Agreement (including the documents and the instruments
referred to in this Agreement), together with the Confidentiality Agreement, constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter of
this Agreement, other than the Confidentiality Agreement.
9.7
Governing Law; Jurisdiction
. This Agreement
shall be governed by and construed in accordance with the Laws of the State of Washington, without giving effect to its principles of conflicts of Laws; provided, that the laws of the State of Oregon shall apply to the extent mandatorily applicable
with respect to any of the Mergers. The parties hereto agree that any suit, action or proceeding brought by either party to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions
contemplated hereby shall be brought in any federal or state court located in the State of Washington. Each of the
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parties hereto submits to the jurisdiction of any such court in any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of, or in connection with,
this Agreement or the transactions contemplated hereby and hereby irrevocably waives the benefit of jurisdiction derived from present or future domicile or otherwise in such action or proceeding. Each party hereto irrevocably waives, to the fullest
extent permitted by Law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
9.8
Waiver of Jury Trial
. Each party hereto acknowledges and agrees that any
controversy that may arise under this Agreement, and in respect of the transactions contemplated hereby, is likely to involve complicated and difficult issues, and therefore each party hereby irrevocably and unconditionally waives any right such
party may have to a trial by jury in respect of any legal action, directly or indirectly, arising out of, or relating to, this Agreement or any documents referred to in this Agreement, or the transactions contemplated by this Agreement. Each party
certifies and acknowledges that (a) no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver,
(b) each party understands and has considered the implications of this waiver, (c) each party makes this waiver voluntarily, and (d) each party has been induced to enter into this Agreement by, among other things, the mutual waivers
and certifications in this Section 9.8.
9.9
Publicity
. None of the Company, Parent or Merger Sub
shall, and the Company, Parent and Merger Sub shall not permit any of their respective Subsidiaries to, issue or cause the publication of any press release or other public announcement with respect to, or otherwise make any public statement, or,
except as otherwise specifically provided in this Agreement, any disclosure of nonpublic information to a third party, concerning, the transactions contemplated by this Agreement without the prior consent (which shall not be unreasonably withheld or
delayed) of Parent, in the case of a proposed announcement, statement or disclosure by the Company, or the Company, in the case of a proposed announcement, statement or disclosure by Parent; provided, however, that either Parent or the Company may,
without the prior consent of the other party (but after prior consultation with the other party to the extent practicable under the circumstances) issue or cause the publication of any press release or other public announcement to the extent
required by Law or by the rules and regulations of the Nasdaq.
9.10
Assignment; Third-Party Beneficiaries
.
Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned by either of the parties (whether by operation of Law or otherwise) without the prior written consent of the other party (which shall not
be unreasonably withheld or delayed). Any purported assignment in contravention hereof shall be null and void. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of and be enforceable by each of the parties
and their respective successors and permitted assigns. Except for Section 6.7, which is intended to benefit each Indemnified Party and his or her heirs and representatives, nothing in this Agreement, expressed or implied, is intended to confer
upon any person, other than the parties hereto or their respective successors, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
9.11
Specific Performance
. The parties agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that the parties shall be entitled to seek specific performance of the terms hereof, this being in addition to any other remedies to
which they are entitled at Law or equity.
9.12
Disclosure Schedule
.
(a) Before entry into this Agreement, the Company delivered to Parent a schedule (the
Company Disclosure
Schedule
) which sets forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more
representations or warranties contained in Article III or to one or more covenants contained herein; provided, however, that notwithstanding anything in this Agreement to the contrary, the mere
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inclusion of an item as an exception to a representation or warranty shall not be deemed an admission that such item represents a material exception or material fact, event or circumstance or
that such item has had or would be reasonably likely to have a Material Adverse Effect.
(b) (a) Before entry into
this Agreement, the Parent delivered to Company a schedule (the
Parent Disclosure Schedule
) which sets forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express
disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in Article IV or to one or more covenants contained herein; provided, however, that notwithstanding anything in this
Agreement to the contrary, the mere inclusion of an item as an exception to a representation or warranty shall not be deemed an admission that such item represents a material exception or material fact, event or circumstance or that such item has
had or would be reasonably likely to have a Material Adverse Effect.
(c) For purposes of this Agreement,
Previously Disclosed
means information set forth by the Company in the applicable paragraph of the Company Disclosure Schedule or any other paragraph of its Company Disclosure Schedule (so long as it is reasonably clear from the
context that the disclosure in such other paragraph of its Company Disclosure Schedule is also applicable to the section of this Agreement in question).
[
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF
, the parties have caused this Agreement to be executed by their
respective officers thereunto duly authorized as of the date first above written.
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Columbia Banking System, Inc.
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By:
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/s/ Melanie J. Dressel
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Name:
|
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Melanie J. Dressel
|
Title:
|
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President & Chief Executive Officer
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Pacific Continental Corporation
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By:
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/s/ Roger S. Busse
|
Name:
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Roger S. Busse
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Title:
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Chief Executive Officer
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Appendix B
FORM OF VOTING AND
NON-COMPETITION
AGREEMENT
This Voting and
Non-Competition
Agreement (the
Agreement
), dated as of
January 9, 2017, is entered into by and among Coast, a Washington corporation (
Parent
), Pool, an Oregon corporation (the
Company
), and the member of the board of directors of the Company (the
Company Board
) whose name appears on the signature page hereto (the
Director
).
RECITALS
A.
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Pursuant to the terms of the Agreement and Plan of Merger (as the same may be amended or supplemented, the
Merger Agreement
), dated as of the date hereof, among Parent, the Company, and from and after
its accession to the Merger Agreement in accordance with the terms thereof, Merger Sub, an Oregon corporation and wholly owned subsidiary of Parent (
Merger Sub
), Merger Sub will merge with and into the Company (the
First
Merger
), with the Company as the surviving corporation in the First Merger (sometimes hereafter referred to as the
Surviving Corporation
). Immediately following the First Merger, the Surviving Corporation will merge with
and into Parent (the
Subsequent Merger
), with Parent as the surviving entity, and immediately following the Subsequent Merger, Pool Bank, an Oregon state-chartered bank and wholly-owned subsidiary of the Company (
Pool
Bank
), will merge with and into Coast Bank, a Washington state-chartered bank and wholly-owned subsidiary of Parent (
Coast Bank
) with Coast Bank as the surviving bank (together with the Merger and Subsequent Merger, the
Mergers
).
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B.
|
The parties to this Agreement believe that the future success and profitability of Parent and its Subsidiaries following the Mergers (the
Combined Company
) requires that the Director be subject to the
restrictions set forth herein with respect to competitive activities following the Effective Time as set forth herein.
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C.
|
As an inducement and a condition to Parent entering into the Merger Agreement, Parent has required that the Director, in his or her capacity as a shareholder of the Company, enter into this Agreement to make more likely
the approval of the Merger Agreement by the requisite vote of the Companys shareholders, to minimize the risk that Parent will lose the benefit of the goodwill and other assets being acquired by it, and to protect the trade secrets and other
confidential and proprietary information of the Company known to the Director and being acquired by Parent.
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AGREEMENT
In consideration of each of Parents and the Companys performance under the Merger Agreement, the Director hereby agrees as follows:
1.
Definitions
. Capitalized terms not defined in this Agreement have the meaning assigned to those terms in the
Merger Agreement. The following definitions also apply to this Agreement:
(a)
Competing Business
.
Competing Business
means any depository, wealth management or trust business company or holding company thereof (including without limitation, any
start-up
bank or bank in formation)
operating anywhere within the Covered Area.
(b)
Covered Area
.
Covered Area
means the
State of Washington and the State of Oregon.
(c)
Term
.
Term
means the period of time
beginning on the Effective Time and ending two (2) years after the Effective Time.
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2.
Effectiveness
. If the Merger Agreement is terminated for any
reason in accordance with its terms, this Agreement (other than Sections 5 and 6 and Sections 17 through 24) shall automatically terminate and be null and void and of no effect.
3.
No
Solicitation
. During the Term, the Director will not, directly or indirectly, either for him/her
self or any other Person, (a) solicit or induce, or attempt to solicit or induce (i) any employees or independent contractors (or any former employees or independent contractors who were employees or independent contractors of Parent, the
Company or the Combined Company within the six months preceding such solicitation) of Parent, the Company or the Combined Company to participate, as an employee or otherwise, in any manner in a Competing Business, (ii) any customers, business
partners or joint venturers of Parent, the Company or the Combined Company to transfer their business to a Competing Business or to reduce their business or cease conducting business with Parent, the Company or the Combined Company, or
(iii) the termination of an employment or contractual relationship between Parent, the Company or the Combined Company and any employee, independent contractor, customer, business partner or joint venturer, (b) hire any Person then
employed by the Combined Company, or who was employed by Parent, the Company, the Combined Company or any of their respective Subsidiaries at any time prior to the Effective Time or during the Term;
provided
,
however
, the Director
shall not be prohibited from, directly or indirectly, hiring (or engaging as an independent contractor) for him/her self and not in contravention of Section 4 of this Agreement, former employees of the Company, Parent or the Combined Company if
such employees were terminated by Parent, the Company or the Combined Company, a period of
one-hundred
twenty (120) days from the date of such former employees termination has passed and whom
neither the Director nor any Person acting on behalf of the Director, directly or indirectly solicited following the date hereof or (c) in any other way interfere with or disrupt the Combined Companys relationship with any of its
employees, independent contractors, customers, business partners or joint venturers. Solicitation prohibited under this Section 3 includes solicitation by any means, including, without limitation, meetings, letters or other mailings, electronic
communications of any kind, and internet communications but shall not include general solicitations of any kind which are not specifically targeted at any Persons described in clauses (a)(i), (ii) and (iii), above.
4.
Participation
in
Competing
Business
. Except as provided in Section 7 and
Section 8, during the Term, the Director will not become involved with a Competing Business or serve, directly or indirectly, a Competing Business in any manner, including without limitation as a shareholder, member, partner, director, officer,
manager, investor, organizer, founder, trustee, employee, advisor, consultant, agent, or representative, or otherwise become involved in any manner in the organization,
pre-opening
phases, or the formation of
a Competing Business; provided that, for the avoidance of doubt, the restrictions set forth herein shall not prevent the Director from utilizing the services of any Competing Business.
5.
Confidential
Information
. From and after the date of this Agreement, the Director shall not at any
time, directly or indirectly, divulge, reveal or communicate any Confidential Information of Parent, the Company or their respective Subsidiaries obtained by such Person while serving as a director of the Company or Pool Bank to any Person, or use
any Confidential Information for his or her own benefit or for the benefit of any other Person except in accordance with a judicial or other governmental order in compliance with Section 6. For purposes of this Agreement,
Confidential
Information
shall include (a) all secrets and other confidential information, ideas, knowledge, knowhow, techniques, secret processes, improvements, discoveries, methods, inventions, sales, financial information, customers, lists of
customers and prospective customers, broker lists, potential brokers, rate sheets, plans, concepts, strategies or products, as well as all documents, reports, drawings, designs, plans, and proposals otherwise pertaining to same, with respect to
Parent, the Company, the Combined Company or their respective Subsidiaries, plus any
non-public
personal information on any present or past customer or client of the Company, Pool Bank or the Combined Company.
For purposes of this Agreement, Confidential Information does not include (a) information that is or becomes generally available to the public other than as a result of an unauthorized disclosure by the Director;
(b) information that was in the Directors possession prior to serving as a director or information received by the Director from another Person without any limitations on disclosure, but only if the Director had no reason to believe that
the other Person was prohibited
B-2
from using or disclosing the information by a contractual or fiduciary obligation; or (c) information that was independently developed by the Director without using any Confidential
Information of Parent, the Company, the Combined Company or their respective Subsidiaries.
6.
Legally
Required
Disclosure
. If the Director is requested or required by any tribunal or government agency (by oral questions, interrogatories, requests for information or documents in legal proceedings, subpoena, civil investigative demand or
other similar process), to disclose any Confidential Information that would violate the other provisions of this Agreement, the Director shall provide Parent with prompt notice of any such request or requirement and shall provide, at Parents
expense, such reasonable cooperation as Parent may request so that Parent may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement as it would apply to such requested or required
disclosure. If, in the absence of a protective order or other remedy or the receipt of a written waiver from Parent, the Director is nonetheless legally compelled to disclose Confidential Information to any tribunal or government agency, the
Director may, without liability hereunder, disclose to such tribunal or government agency only that portion of Confidential Information which is legally required to be disclosed; provided that the Director exercises his or her reasonable efforts to
preserve the confidentiality of such Confidential Information, including, without limitation, by reasonably cooperating with Parent, at Parents expense, to obtain an appropriate protective order or other reliable assurance that confidential
treatment will be accorded to such Confidential Information by such tribunal or government agency.
7.
Outside
Covered
Area;
Requests
for
Waivers
or
Permission
.
Nothing in this Agreement prevents the Director from becoming involved with, as a shareholder, member, partner, director, officer, manager, investor, organizer, founder, trustee, employee, consultant, agent, representative, or otherwise, with a
Competing Business that has no places of business or other operations in the Covered Area. Prior to engaging in any manner in a Competing Business, the Director may request in writing that Parent waive the restrictions set forth in this Agreement
with respect to a particular proposed activity. If Parent determines, in its sole discretion, that such activity is acceptable, Parent shall provide the Director with a written consent to engage in such activity, and such activity shall thereafter
not be a Competing Business.
8.
Passive
Interest
. Nothing in this Agreement prevents the Director
from passively owning, directly or indirectly, individually or in the aggregate (including without limitation by being a member of a group within the meaning of Rule
13d-5
under the Exchange Act), 3% or less
of any class of security of a Competing Business or securities of any Competing Business that has a class of securities registered pursuant to the Exchange Act.
9.
Reasonableness
of
Restrictions
. The Director acknowledges and represents that the covenants set
forth above represent only a limited restraint and allow the Director to pursue his or her occupation without unreasonable or unfair restrictions. The Director acknowledges that the limitations of length of time, geography and scope of activity
agreed to in this Agreement are reasonable because, among other things: (A) the Company and Parent are engaged in a highly competitive industry, (B) the Director has had unique access to the trade secrets and
know-how
of the Company and Parent, including the plans and strategy (and, in particular, the competitive strategy) of the Combined Company, and (C) this Agreement provides no more protection than is
necessary to protect Parents interests in the Companys goodwill, trade secrets and Confidential Information.
10.
Voting
Agreement
. From the date hereof until the earlier of (i) the Effective Time and
(ii) the termination of the Merger Agreement in accordance with its terms (such period, the
Support Period
), the Director agrees that at any shareholder meeting of the Company to approve the Merger Agreement or any related
transaction, or any adjournment or postponement thereof, the Director shall be present (in person or by proxy) and shall vote (or cause to be voted) all shares of capital stock of the Company, owned of record or beneficially, directly or indirectly,
by the Director, entitled to vote at such meeting (together,
Owned Shares
): (a) in favor of approval of (1) the Merger Agreement and the transactions contemplated thereby, (2) any other matter that is required to
facilitate the transactions contemplated by the Merger Agreement and (3) any proposal to adjourn or postpone such meeting to a later date if there are not sufficient votes to approve the Merger Agreement; and (b) against any action or
agreement submitted for approval to the shareholders of the Company that would
B-3
(1) result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement, (2) result in any of the conditions to
the consummation of the First Merger under the Merger Agreement not being fulfilled, (3) be in competition with or opposition to the Merger Agreement or the First Merger, (4) be a Company Acquisition Proposal, or (5) impair the
ability of Parent to complete the First Merger, the ability of the Company to complete the Merger, or that would otherwise be inconsistent with, prevent, impede or delay the consummation of the transactions contemplated by the Merger Agreement;
provided
, that the foregoing applies solely to the Director in his or her capacity as a shareholder of the Company, and nothing in this Agreement shall prevent the Director from discharging his or her fiduciary duties with respect to his or
her role on the Company Board.
11.
Director
Representations
and
Warranties
. The
Director hereby represents, covenants and agrees that, except for this Agreement, he or she (i) has not entered into, and shall not enter during the Support Period, any pledge, voting agreement or voting trust with respect to any Owned Shares,
(ii) has not granted, and shall not grant during the Support Period, a proxy, consent or power of attorney with respect to any Owned Shares except any proxy to carry out the intent of this Agreement, and (iii) has not taken and shall not
take any action that would have the effect of preventing or disabling the Director from performing any of his or her obligations under this Agreement. The Director hereby represents that he or she (1) owns beneficially (as such term is defined
in Rule
13d-3
under the Exchange Act) the Owned Shares and has good and valid title thereto free and clear of all Liens (other than restrictions on transfer under applicable securities laws), (2) has sole
voting power, sole power of disposition and sole power to agree to all of the matters set forth in this Agreement, with no limitations, qualifications or restrictions on such rights, subject to applicable federal securities laws, community property
laws and the terms of this Agreement; and (3) has all requisite power, authority and legal capacity to execute and deliver this Agreement and to perform his or her obligations hereunder. This Agreement has been duly and validly executed and
delivered by the Director and, assuming due authorization, execution and delivery by the other parties hereto, constitutes a legal, valid and binding obligation of the Director, enforceable against the Director in accordance with its terms, except
as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors rights generally. The Director further represents and warrants that the execution, delivery and performance of
this Agreement and the compliance with the provisions hereof do not and will not (x) constitute or result in a breach or violation of, a default (or event which, with notice or lapse of time or both, would become a default) under, give to any
Person any rights of termination, amendment, acceleration or cancellation of, or result in the creation of any Lien on any property or asset of the Director pursuant to any agreement, indenture, instrument, law, rule or regulation, judgment, decree,
order, governmental permit, writ, injunction, or applicable license, to which the Director is a party or by which the Director or any property or asset of the Director is bound or affected, or (y) require any permit, authorization, consent or
approval under any such law, rule, regulation, judgment, decree, order, governmental permit or license, agreement, indenture or instrument.
12.
Transfer
Restrictions
Prior
to
First
Merger
. The Director will not,
directly or indirectly, during the Support Period, except in respect of the First Merger and receiving the Merger Consideration: (i) sell, transfer, gift, assign, tender in any tender or exchange offer, pledge, encumber, hypothecate or
similarly dispose of (by merger, by testamentary disposition, by operation of law or otherwise), either voluntarily or involuntarily, enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic or
voting consequences of ownership of, enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, lien, hypothecation or other disposition of (by merger, by testamentary disposition,
by operation of law or otherwise) or otherwise convey or dispose of, any of the Owned Shares, or any interest therein, including the right to vote any Owned Shares, as applicable (each a
Transfer
), (ii) grant any proxies, or enter
into any contract, arrangement or understanding with respect to a Transfer of the Owned Shares, as applicable, or (iii) take any other action, that would materially restrict, limit or interfere with the performance of the Directors
obligations hereunder; provided that nothing herein shall prohibit the Director from (a) Transfers for estate planning or philanthropic purposes so long as the transferee, prior to the date of Transfer, agrees in a signed writing to be bound by
and comply with the provisions of this Agreement or (b) disposing of or surrendering Owned Shares to the Company in connection with the vesting, settlement or
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exercise of Company Stock Options, Company RSUs, Company Restricted Shares or Company SARs for the payment of taxes thereon or, in respect of Company Stock Options or Company SARs, the exercise
or reference price thereon.
13.
Resignation
from
the
Company
and
Pool
Bank
Boards
of
Directors
. The Director hereby tenders his or her resignation from the Company Board and of board of directors of Pool Bank subject to and effective upon the Effective Time.
14.
Expenses
. Except as otherwise may be agreed in writing or otherwise set forth in this Agreement, all costs,
fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring or required to incur such costs, fees and expenses.
15.
Entire
Agreement
. This Agreement is irrevocable. The recitals are incorporated as a part of this
Agreement. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among the parties with respect to the subject
matter hereof.
16.
Assignment;
Third
Party
Beneficiaries
. Nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. This Agreement shall not be assigned or otherwise transferred by operation of law or
otherwise without the prior written consent of the other parties hereto and any attempt to so assign or otherwise transfer this Agreement without such consent shall be void and of no effect;
provided
,
however
, that the rights under
this Agreement are assignable by Parent to a majority-owned affiliate or any
successor-in-interest
in an internal reorganization or similar transaction. This Agreement
shall be binding upon the respective heirs, successors, legal representatives and permitted assigns of the parties hereto.
17.
Remedies/Specific
Enforcement
. Each of the parties hereto agrees that this Agreement is intended to
be legally binding and specifically enforceable pursuant to its terms and that Parent would be irreparably harmed if any of the provisions of this Agreement are not performed in accordance with their specific terms and that monetary damages would
not provide adequate remedy in such event. Accordingly, in the event of any breach or threatened breach by the Director of any covenant or obligation contained in this Agreement, in addition to any other remedy to which Parent may be entitled
(including monetary damages), Parent shall be entitled to injunctive relief to prevent breaches of this Agreement and to specifically enforce the terms and provisions hereof. The Director further agrees that neither Parent nor any other Person or
entity shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this paragraph, and the Director irrevocably waives any right he or she may have to
require the obtaining, furnishing or posting of any such bond or similar instrument.
18.
Governing
Law;
Venue
. This Agreement shall be governed by and construed in accordance with the laws of the State of Washington applicable to contracts made and performed entirely within such state, without giving effect to its principles of
conflicts of laws. The parties hereto agree that any suit, action or proceeding brought by either party to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby
shall be brought in any federal or state court located in the State of Washington. Each of the parties hereto submits to the jurisdiction of any such court in any suit, action or proceeding seeking to enforce any provision of, or based on any matter
arising out of, or in connection with, this Agreement or the transactions contemplated hereby and hereby irrevocably waives the benefit of jurisdiction derived from present or future domicile or otherwise in such action or proceeding. Each party
hereto irrevocably waives, to the fullest extent permitted by law, any objection that he, she or it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
19.
WAIVER
OF
JURY
TRIAL
. EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
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COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION, DIRECTLY OR
INDIRECTLY, ARISING OUT OF, OR RELATING TO, THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND
(D) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19.
20.
Reformation
. If any court determines that the restrictions set forth in Section 3 or Section 4 of
this Agreement are unenforceable, then the parties request such court to reform those provisions to the maximum restrictions, term, scope or geographic area that such court finds enforceable.
21.
Severability
. Whenever possible, each provision or portion of any provision of this Agreement, including
Section 3 and Section 4, will be interpreted in such manner as to be effective and valid under applicable law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any
respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.
22.
Amendments;
Waivers
. Any provision of this Agreement may be amended or waived if, and only if, such
amendment or waiver is in writing and signed (i) in the case of an amendment, by Parent and the Director to be bound by such amendment, and (ii) in the case of a waiver, by the party against whom the waiver is to be effective. No failure
or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power
or privilege.
23.
Counterparts
. The parties may execute this Agreement in one or more counterparts,
including by facsimile or other electronic signature. All the counterparts will be construed together and will constitute one Agreement.
24.
Section
Headings
. The article and section headings of this Agreement are for convenience of reference
only and are not to be considered in construing this Agreement.
[signature pages follow]
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SIGNED as of the date first set forth above:
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Pacific Continental Corporation
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Columbia Banking System, Inc.
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By
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By
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President & Chief Executive Officer
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President & Chief Executive Officer
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