On April 4, 2014, Washington Banking
Company (“Washington Banking”), its directors and Heritage Financial Corporation (“Heritage”)
entered into a Memorandum of Understanding (the “MOU”) with the plaintiffs regarding the settlement of
the putative shareholder class action lawsuit captioned In Re Washington Banking Company Shareholder
Litigation, Lead Case No. 13-2-38689-5 SEA, pending before the Superior Court of the State of Washington in and
for King County (the “Action”).
As described in greater detail in the Proxy
Statement of Washington Banking filed with the Securities and Exchange Commission (the “SEC”) on March 17, 2014 (the
“Proxy Statement”), the Action alleges that Washington Banking’s directors breached their fiduciary duties to
Washington Banking and its shareholders in connection with the transactions contemplated by the Agreement and Plan of Merger, dated
October 23, 2013 (the “Merger Agreement”), under which Washington Banking and Heritage will combine their organizations
in a strategic combination, with Washington Banking merging with and into Heritage (the “Merger”). The Action also
alleges that the disclosures in connection with the Merger are misleading in various respects.
Under the terms of the MOU, Washington Banking,
its directors, Heritage and the plaintiffs have reached an agreement in principle to settle the Action. Under the terms of the
MOU, plaintiffs’ counsel also has reserved the right to seek an award of attorneys’ fees and costs. If the Court approves
the settlement contemplated by the MOU, the lawsuit will be dismissed with prejudice. There can be no assurance, however, that
the parties will ultimately enter into a definitive settlement agreement or that the Court will approve the settlement even if
the parties enter into such an agreement. In the absence of either event, the proposed settlement as contemplated by the
MOU may be terminated.
The settlement of the Action will not affect
the Merger consideration to be paid to Washington Banking’s shareholders in connection with the proposed Merger or the timing
of the special meeting of Washington Banking’s shareholders, scheduled for April 15, 2014 in Oak Harbor, Washington, to vote
upon a proposal to approve the Merger Agreement.
Washington Banking, its directors and Heritage continue to believe that the Action is without merit, have
vigorously denied, and continue to vigorously deny, all of the allegations of wrongful or actionable conduct asserted in the Action,
and Washington Banking its directors and Heritage vigorously maintain that they have diligently and scrupulously complied with
all applicable fiduciary duties, that the Proxy Statement is complete and accurate in all material respects and that no further
disclosure is required under applicable law. Washington Banking, its directors and Heritage are entering into the MOU and
the contemplated settlement solely to eliminate the costs, risks, burden, distraction and expense of further litigation and to
put the claims that were or could have been asserted to rest. Nothing in the MOU, any settlement agreement or any public
filing, including this Current Report on Form 8-K, shall be deemed an admission of the legal necessity of filing or the materiality
under applicable laws of any of the additional information contained herein or in any public filing associated with the proposed
settlement of the Action.
SUPPLEMENT TO PROXY STATEMENT
Pursuant to the MOU, Washington Banking
has agreed to provide the additional information set forth below. This information should be read in conjunction with the Proxy
Statement and the documents incorporated therein.
Background of the Merger
The following disclosure supplements the
section of the Proxy Statement entitled “Background of the Merger” on page 46. The following disclosure is inserted
in place of the last sentence of the fourth full paragraph.
“Mr. Wagner informed board members of
the pending meeting with Mr. Vance. The board informally approved the meeting and asked Mr. Wagner to report back regarding the
meeting.”
The following disclosure supplements the
section of the Proxy Statement entitled “Background of the Merger” on page 46. The following disclosure is inserted
after the fifth full paragraph.
“Prior to August 2013, Washington Banking
had been preliminarily consulting with Sandler regarding strategic opportunities, but those consultations were in the preliminary,
business development phase and no engagement had yet been formalized. When the possibility of a transaction with Heritage arose
in August 2013, the Washington Banking and Sandler determined to enter a formal engagement. Due to negotiations, the engagement
letter was not executed until September 17, 2013. Washington Banking was impressed by Sandler’s advice, experience, and expertise
during preliminary consultations and did not consider retaining other or additional financial adviser(s).”
The following disclosure supplements the
section of the Proxy Statement entitled “Background of the Merger” on page 47. The following disclosure is inserted
as the ninth sentence in the fifth full paragraph.
“The Washington Banking board was aware
that negotiation of a transaction would require the companies to enter into a nondisclosure agreement and no formal resolution
was adopted.”
The following disclosure supplements the
section of the Proxy Statement entitled “Background of the Merger” on
|